Scotland: Transport and Agriculture Problems

HL Deb 24 February 1982 vol 427 cc973-1006

5.23 p.m.

Baroness Elliot of Harwood

rose to call attention to the problems arising in Scotland, in particular in relation to transport in the Highlands, agriculture and hill farming; and to move for Papers.

The noble Baroness said: My Lords, I have waited fairly patiently for more than a year for the luck of the draw, to be able to discuss this matter with your Lordships. I had nearly given up all hope, until one day I was suddenly offered this evening and I naturally jumped at it. I should like this debate to be a constructive debate, not based on party politics but based on what those of us who live in Scotland, in the areas which we are going to discuss, can suggest to help agriculture in what is termed—I think erroneously—the less favoured areas. To me, they are the most favoured areas. They are the areas that I love best—the Highlands and the Borders. I live in the Borders, but I know the Highlands very well, too.

I am grateful to the many noble Lords who have responded to this debate by putting down their names to speak. I shall talk of my own experience in agriculture, but I hope that other speakers will discuss, in whatever way they feel is best, the many subjects which have a bearing on what we are to discuss this evening.

For some years, the returns from farming and agriculture in the Highlands and Border areas have been getting worse. Ironically, land values have risen, but the return on stock and crops has continued to fall. The land was there, but the cash flow was not. I have just a few figures from the Scottish National Farmer's Union to prove my case. Between 1976 and 1980 income returns fell from £201.4 million to £33.1 million—a drop of 84 per cent. In the same period, bank overdrafts and loans increased from £204 million to £618 million, and in 1981 they rose further to £709 million—three and a half times the 1976 figure. To halt this decline and to save the industry is essential for everybody. Agriculture is the largest industry in Scotland and investment in agriculture will repay any Government, of any political party, in the real use of the land and of the people who live on it.

These facts are depressing, but there are signs of change. The EEC sheep régime has begun, and it has begun to show increased returns with lamb prices rising, although it is early days for lambs since they will not appear in the Highlands and the Borders until March and April. But the suckle calf prices are going up and, hopefully, store cattle prices are better this year than last. But, as I say, it is early days yet.

The first thing that would help farmers is a reduction in the bank rate. This applies to many industries. Anything the Government can do to urge the banks to lower their interest rates would be really helpful to the industry. Another cost which affects hill farming and the Highland areas is transport. The cost of diesel oil and petrol in remote areas can mean an extra 20p a gallon in the Highlands or Border areas compared, with the price in the urban areas. I know that, among noble Lords who will be speaking today, there are one or two who are very expert on transport problems and I should particularly like them to deal with this aspect. These transport costs affect so much of the farming industry, because in our areas we have to carry lime and fertiliser for miles and miles, as well as having to carry animals long distances to markets.

If we want to improve the land, so that we can get more sheep and cattle in those areas which are termed less favoured, we must be able to provide more lime and fertiliser and so on, to develop both the Highland and Lowland areas. There is a strong link between the Highlands and Border areas, which are producing store cattle and sheep, and those areas lower down which buy the cattle and sheep, and fatten them up so as to sell them to the abattoirs for meat. So one of our immediate needs is to increase lime application throughout Scotland. The lime subsidy has been very helpful and it should be continued.

We welcome the continuation of the compensating allowances for sheep and, also, the increase in the annual premium for ewes. I want to say these things, because I wish to encourage my noble friend Lord Mansfield, and to show that I am not only critical, but grateful. I regret that there are to be changes in the suckle calf improvement scheme. I read that a few days ago. The present rate of grant in the green pound, which is paid for by FEOGA funds, is 20 European currency units, or £12.37. According to the present ruling from the EEC, this is to be reduced to 15 ECUs, which equals only £97.30. Therefore, the contribution from national funds will have to rise. That is a small point but it is something which the Government ought to consider.

The continuation of the United Kingdom's variable premium scheme for beef is much to be welcomed. Considerable help has been given to farmers through the EEC and also through the Farm and Horticultural Development Scheme. May I say a word about the CAP and other matters relating to the European Community. I recommend critics to find out what we receive in return for our contributions to the CAP. It is not just a question of money being paid out and nothing being received in return. It is also a question of grants being received for important farm improvements.

My criticism of the EEC is that they take such a long time to make up their minds about what is going to happen next year or the year after that. These delays, these arguments, are very frustrating for farmers. We want to know one year or two years in advance (personally, I should like there to be a policy which lasted over a period of five years) what the needs of agriculture will be, and therefore whether one should encourage the production of more animals or of some other agricultural product. We want to know whether there is going to be a shortage or a surplus of sheep, cattle, pigs, poultry or whatever it may be. We should like the EEC to think not in terms of year to year but in terms of, say, three years or five years at a time. The problem is that once discussions finish it is too late for us to do anything in that year, because we have to plan nine months ahead. I realise that this is very difficult for our Minister of Agriculture. I should like to congratulate our Minister. He is a most active and persuasive person who is doing a fine job by standing up for us in the European Community. His stand against the devaluation of the green pound is excellent and I very much hope that he will be successful.

Finally, there is one vital policy which I should like our Government to support; namely, the agricultural development programme for the Highlands and Islands. We all know that this is a vast area. The distance from Argyll to the Shetlands is, I believe, 700 kilometres. The land area, I am told, is as big as Belgium while the total population is only 300,000. The people there, in particular the shepherds, are thought of as being tied up with oil production at Sullom Voe and all the other places that we read of. It is thought that that is the main employment. It may be so now, but agriculture is still the basis of employment in those areas. I believe that agriculture will last far longer than oil, for it is the mainstay of the economy of the Highlands and Islands. The development board has introduced many new schemes and many new plans with great success, but at the heart of the work and development of the area lies agriculture and forestry and the subsidiary industries which are so important to the area.

The EEC has encouraged assistance for less favoured areas in one or two parts of Europe. The Community has established agricultural development programmes in Ireland and a small development in the Western Hebrides, but it is a full-scale development programme which we seek for the whole area of the Highlands and Islands. I understand that the CAP is prepared to look favourably on such a scheme. Our Government need to press more strongly for this development. The CAP will grant-aid such a scheme. The Government can look upon this as capital investment from which the returns will be very good and of lasting value.

Only last week a deputation from the Highlands and Islands and the Scottish National Farmers' Union went to meet members of the European Parliament about this scheme. I believe that they had a very favourable reception and received much encouragement. Unless, however, our Secretary of State and the Ministers at the Scottish Office back the scheme wholeheartedly it will simply die of inertia. Any agricultural scheme ranks for grant aid from the CAP. This is investment, part of the capital for which is put up by the EEC. Do not let us miss this chance.

There is much more which I could say about the general needs of agriculture, but I shall leave it to the other noble Lords who are to contribute to the debate. We have the most efficient agricultural industry in Europe. We produce what the consumer wants, but we cannot go on producing at a loss. On the other hand, we realise that there is a difficult financial situation. Therefore, we do not want to ask for more than our fair share. But we do want our fair share. The area about which I have spoken will repay investment. The returns will benefit everyone. The Government have helped in many ways. All I ask is that the Government should continue to invest money in these difficult areas which I have described. Then the farmers and the others who live in those communities will respond wholeheartedly. I beg to move for Papers.

5.37 p.m.

Lord Mackie of Benshie

My Lords, the House is extremely grateful to the noble Baroness for raising this subject. She always raises relevant matters and always speaks about them with great commonsense. I want to deny the rumour that the large attendance of Scottish Peers is due to fear. It is entirely due to the respect and liking for both the noble Baroness and her subject.

May I speak about agriculture. My noble friend will talk about the related problems of transport and other subjects. It is true that every Government, even this one, are greatly concerned with the problems of the Highlands and the Borders—the upland areas of Scotland. That they have been a problem is obvious from the immense drain of people away from the Borders and the Highlands. The Highlands and Islands Development Board and many other bodies—such as the Crofters' Commission—the hill cow subsidy, the hill ewe subsidy and a whole host of matters have been put forward by various Governments with an immense amount of goodwill and have had a certain effect. It is true that factors like the Highlands and Islands Development Board, Government attitudes and the luck of the discovery of oil have largely arrested the depopulation of the Highlands. But immense problems remain. What the noble Baroness said in her speech is absolutely true: agriculture is still the main factor which is keeping 30 per cent. of the people (and more if you include the other associated industries) in the Highlands and the upland areas generally.

We are all interested in conservation. I am rather more interested in the conservation of people in the Highlands than I am in the fate of the "lesser blue crested swallow tailed tit", to say nothing of the sedge daisy which only grows in some peculiar form of peat which is to be found only in the middle of the domains of the noble Viscount, Lord Thurso. I would much rather see green spears end the desolation of which we have plenty in Scotland than the sedge daisy, or anything else. That is a much more beautiful sight for the visitor and for the farmer—and certainly a much more pleasing sight for the people who want to live, and for those who do live and work in the area. Therefore, we must accept that farming is the basis of the population of the Highlands and Islands and the uplands of Scotland, and that people will be kept there if farming is well done. As I said, we have had a lot of help, but that help has been very badly eroded.

I have just received this week the Farm Management Review from the economics division of the North of Scotland College for Agriculture, and it has some fascinating figures on the actual profitability over the years 1975–76 to 1979–80—a period of five years. It shows figures for the hill sheep farms. There were 23 hill sheep farms in the sample, and the people who co-operate and who are recorded in the sample are often the best. They have done relatively well, but only relatively against the others in the sample. On average they held £1,039 in the bank in 1975 and five years later they had £972 in the bank. So they have lost a few pounds and through inflation the money has become worth only about one-third of its former value. This is the best of the sample.

There were 33 upland farms in the sample. Certainly they made a profit, consisting largely of a rise in valuation. On paper, their capital nearly doubled, but the overdrafts for these 33 farms increased from £3,000 to £11,500 on average. That was hardly a prosperous five years. Then the sample showed 11 rearing with arable farms. Their overdrafts increased from £8,700 each to £26,300—not a picture of immense prosperity, which some of the inhabitants of our towns still imagine obtains in the countryside. In the case of dairy farms, which are often thought of as the most prosperous section of our industry in Scotland, the eight samples showed an average overdraft increasing from £8,700 in 1975 to £26,300 in 1979–80.

The only people who held their own were the part-time crofts, of whom 10 were in the sample costed. They had £1,000 in the bank in 1975 and in 1979–80 they each claimed to have £3,400 in the bank. So they held their own with inflation but there was not one penny return on capital, and the profit each year was only equivalent to the work put in by the part-time crofter and his wife. That is hardly a picture of tremendous prosperity, and it is one that we need to look at very closely purely in terms of inflation. Certainly no industry can prosper in that sort of situation unless it starts to make some profit. At the present time what we are getting is in fact a fall in farmers' incomes. It is a very severe fall and the fact is that, in real terms, incomes have halved over the past five years.

The Government have to be extremely courageous in doing something about this situation. A whole lot of things need to be done. Transport needs to be assisted in the Highlands and Islands. It is already assisted, I know, but we want to keep the price down. Co-operatives need to be helped to store winter food. We must have schemes of co-operation between forestry and farming. The farmers themselves ought to take up a certain amount of forestry whether they are tenants or owners because this is a system that works extraordinarily well in Scandinavia and other countries. We have to keep up the advisory services. In particular, our Scottish colleges have done an immense amount of good to agriculture and to the whole of the countryside. This was a point that the noble Baroness was making: without agriculture the countryside will further decline.

We also have to spend money on research and development. Above all, I believe that the country's general financial policy is also enormously important. One can see that the rise in overdrafts is self-generating, simply because of the enormous and ludicrous rates of interest which farmers have to pay on businesses which have never been high profit businesses and which are practically in a loss position. The Government may well be helped in their fight—and I agree that the Minister of Agriculture has done well. I obtained from the Ministry for our committee some figures which were extraordinarily interesting about the price of food. If I may, I should like to quote from those figures.

Since the end of 1978, retail food prices have risen 37 per cent. compared with 51 per cent. for all items in the retail price index. The interesting point is that of the 37 per cent. rise, roughly two-thirds—that is, 24 percentage points—was attributable to the rise in the costs of processing, packaging, distribution and retailing. Only one-third was related to the rise in the cost of basic food raw materials of all kinds and from all sources. When we hear of the terrible surpluses and of the appalling demands made by farmers, the Government might well use the agrument that two-thirds of price rises are due to the rising costs of the wholesale, retail and packaging trades.

I hope that the Government will follow the attitude taken by the French Government, although perhaps not in an illegal manner. The French Government looked at their farmers in the Massif Central and the other disadvantaged areas of France and they produced a subsidy for them last year of £400 million. They probably paid that entirely illegally, but I applaud their attitude and think it is sensible. If we are going to do what the noble Baroness wants and keep people in the countryside, then we have to pay a reasonable price. All we ask is a reasonable price for the food they produce; the production of food is what keeps people in the countryside and I trust that the noble Lord the Minister will make a great name for himself by backing the uplands as hard as he can.

5.47 p.m.

Lord Margadale

My Lords, I welcome the opportunity of taking part very briefly in this debate. I should like to congratulate the noble Baroness, Lady Elliot, for putting this Motion before the House. I must declare an interest in that I am responsible for farming affairs on an island in the Outer Hebrides. I should just like to say a word or two about farming. In fact, the noble Baroness has said very clearly what I was going to say in regard to the position of a great deal of farming in Scotland, particularly in the West Highlands, which is considerably indebted to the bank at the present time. That is one of the troubles with the recession. I am glad that the noble Baroness mentioned the subject of lime, which is an elementary but important matter. I agree with everything that the noble Baroness said and would like to support her very warmly.

I would also like to say a word or two about transport. Agricultural interests are concerned very greatly in transport. Evre since I was small enough to be put in a basket I have travelled on various ships owned by Messrs. MacBrayne, now Caledonian MacBrayne. The early ones, which were paddle wheel, were much easier to sleep on on a rough day than the present ones, because the early ones were not subject to rather loud canned music. But that is by the way. As I see it, that section of the community, the public as a whole, agriculture, and the distillery trade—with which I am in no way connected, except by having a casual nip occasionally, possibly like other noble Lords in this House—would be helped very considerably if the fares came down.

I have an idea of my own which has never yet been tried by the Scottish Office, though I have no doubt it has been considered: when granting a route to what-ever shipping company it may be, nearly always Caledonian MacBrayne's, the whole project could be put out to tender, either as a whole or in groups, with specified numbers of sailings per day at different times of the year. Though it sounds complicated, it might get a better result from the point of view of the tax-payer, and particularly those who want to travel by ship, and those who must travel by ship because they cannot afford air. Air transport is getting even more expensive than it has been through the years. It is just an idea.

Perhaps I could quote what boat transport means at the present time. I was on the telephone last night and somebody got short of winter feed for their cattle in the island of Jura, which is entirely dependent on the island of Islay for its transport; the roll-off roll-on ferries go from West Loch Tarbert to Islay, across the Sound of Islay to Jura. The cost of the lorry without the straw, which is the stable feed for cattle at this time of the year in that part of the world—though it is burned in other places, I am sorry to say—was £450. It makes one think. He had to have it to keep his cattle going for the rest of the winter. It is a small example, but I think an important one.

There is one other thing I would briefly like to mention. That is the damage done by geese. It is a small point but it affects quite a lot of the islands. When I see in the middle of The Times newspaper a picture of a couple of hundred Brent geese not far from the shore in Essex, and read that something is going to be done about it the next day by the Government, I think that some of the people who arrange that ought to come and see 5,000 geese; the top score is 27,000, though not at the moment. It is extraordinary how much damage can be done by them. I hope all concerned will take that to heart. I do not want to weary the House any longer as we are short for time, and I will conclude by thanking your Lordships for listening.

5.53 p.m.

Lord Taylor of Gryfe

My Lords, the House is indebted to the chairman of the Scottish Peers for introducing this debate on a Scottish theme. Perhaps I may offer two general comments. For a short debate the range of the discussion is rather widely spread; I would suggest that Scottish transport and Scottish agriculture, which are not necessarily related subjects, might have separate days. Indeed I might go further, and keeping in mind the excellent attendance of Scottish Peers here tonight, we might even copy the Members of another place who recently held a debate in Edinburgh on the affairs of Scotland. This attracted a good deal of press publicity and a great deal of interest. There were queues outside the Public Galleries hoping to listen to Members of Parliament debating Scottish affairs. Perhaps Scottish Peers might consider in future changing the venue for this kind of debate. This might bring great credit to Scottish Peers and even to the House of Lords.

I will resist the temptation of discussing the relative claims of sheep farming and forestry for good land use in the Scottish uplands. I am content simply to refer to the conclusion of the very excellent document prepared by the Centre for Agricultural Strategy, Strategy for the UK Forestry Industry, in which they argued, I think quite conclusively, that there was no real conflict between an expanding forestry programme and the reasonable maintenance of existing sheep stock. In fact it has been demonstrated on a number of occasions that you can support an increasing sheep stock with intelligent land use, some areas being utilised for forestry purposes, with shelter belts and better roads and so on. So I hope in future when we are looking at this subject we can assume, and I hope the Government assume, that forestry and sheep farming are not necessarily in conflict and in fact they can live happily together and be mutually beneficial.

I want to say a word or two about transport. Like the noble Lord, Lord Mackie, I have always believed that the Highlands should not be treated as interesting wilderness areas and that there should be opportunities for people to work and earn a living. That depends on proper communications between the people in the isolated areas and the main centres. Indeed, the whole economy depends on some reasonable communications between the Highlands and the centres of population and industry. I was encouraged in discussing with British Rail in Scotland the other day how they viewed the future of the Highlands in terms of their particular role in maintaining the Thurso-Inverness line and also the Highland railway. Your Lordships may be interested to know that if you look at the total network of British railways 30 per cent. of the rural railway lines are situated in Scotland.

I was delighted to learn from British Rail in Scotland that they are presently in discussions with the Highlands and Islands Development Board and the Highland Regional Council concerning integration of transport, and their whole discussion is based on the assumption that there is a strong financial, economic and social case for maintaining the present network. That is very reassuring in the light of publicity recently about the consequences of the strike on the finances of British Rail. There is a feeling, at least in the Scottish region of British Rail, that they have a continued commitment to maintain that service. It would be interesting if the Minister in winding up would also confirm his support for that proposition.

I was also interested the other day to receive from the Highlands and Islands Development Board their submissions to the Scottish Affairs Committee in the other place, which is presently discussing rural transport. It may be that once their deliberations are complete we might return to this subject. I was encouraged by the Highlands and Islands Development Board's endeavour to adjust their rural transport perspectives to the changing situation in transport. The growth of the private car, for example, means that you have a changed situation in planning transport needs, the car in the Highlands being no longer a luxury but a necessity, and that has implications for road programmes and so on.

I was also interested in their submission in connection with the tariffs for the ferries which, as the noble Lord, Lord Margadale, has just mentioned, are so important to the economy of some of the islands. The Highlands and Islands Development Board take the view that ferries are simply an extension of the highway and that the fares should be calculated on the same basis as you would calculate charges on the roads, on the basis of what is called a road equivalent tariff. They did suggest that the Secretary of State for Scotland had given some support to that idea in a Statement in July 1981 when he accepted the board's contention that an RET system of charges should be based on the running costs of vehicles.

It would be very interesting to hear the Minister's further comment on this contention, keeping in mind that the Scottish Transport Group who are, after all, responsible for running the ferries, take an entirely different view. The Group has voiced its misgivings about charging systems determined by reference to external factors (road vehicle operating costs) and therefore divorced from the costs of operating the shipping services. The Group also expressed concern, echoed by others, that least benefit and some disbenefit would result for the most distant islands", in the event of a change in the system such as is suggested by the HIDB. I would be very interested to hear the Minister's comment on the relative advantages of the STG pricing system and the tariff system proposed by the HIDB.

The Scottish Transport Group tries to operate efficiently. Inevitably, it requires subsidies and negotiates with local authorities the extent of local authority support particularly for the bus services. But the Scottish Transport Group operates as a business, with the inevitable cross-subsidisation from profitable routes to unprofitable routes and with advantages from some of its subsidiary operations in attracting revenue. This enables it to give a cheaper service than might normally be given based on the strict economics of a particular route being analysed. I think that this is a sensible idea and I would say to the noble Lord, Lord Margadale, who has suggested that certain routes should be put out to tender, that inevitably a few routes would attract private investment and would inevitably lead to the Scottish Transport Group being left with uneconomic routes. They would have to carry the burden of uneconomic services and there would be a danger of profitable services being hived off. Indeed, I go so far as to say that as regards school contract bus services in the Highlands sonic preference should be given to operators like the Scottish Transport Group which operate an entire system rather than simply giving contracts to the lowest tender.

I also want to compliment the Scottish Transport Group on the steps which it has taken in the last few years, in conjunction with the Post Office, in setting up the post bus service. It is always encouraging in the Highlands—as you can see it in Switzerland and Austria—to see the post bus taking parcels and people into the glens. In the Highlands there are now 126 routes served by the post bus service. That is a good thing and it has been encouraged by the existence of a special bus grant which I gather will disappear in 1984. I would like the Minister to comment on the consequences for the growth of this very economic and sensible service when the withdrawal of the new bus grant takes place in 1984.

The Scottish Transport Group suffers, like all nationalised industries, from two problems. First, it has local authority constraints on expenditure at present, with which we are all familiar. At the same time, in its capital development programme it is subject to the external financing limits laid down by the Government for all nationalised industries. It might be possible in this case to look at the possibility of the Scottish Transport Group, as a special case, having access to the market for financing some of its necessary capital expenditure in the construction of new ships, new piers, and so on. Indeed, the possibilities of leasing as a device for injecting private capital seems to me to be much more sensible than the proposition that you should sell off the nationalised industries to private enterprise. That would only result in the profitable services being sold off and the remainder would remain with the taxpayer.

In preparing for this debate I had a look at the annual accounts of the Scottish Transport Group and some of its reports. I must say that I am impressed by its increased efficiency. Flexible rostering is a subject much in people's minds at present. It has achieved flexible rostering in many of its ships and consequently has reduced the cost quite substantially. There is the question of double manning. There again it has set an example to British Railways in so far as it has achieved single manning on all of its bus services with consequent substantial saving on costs. This debate enables us not only to draw attention to some of the difficulties of the Highlands, but, I hope, to pay compliment to some of the services which are provided there.

6.8 p.m.

Earl Haig

My Lords, this short debate initiated by my noble friend Lady Elliot of Harwood is very welcome at this time of stagnation in the rural areas of the Highlands and the Borders. The noble Baroness and other noble Lords have mentioned the urgent need for farmers and for foresters to be able to increase their profits so that production can grow. In this way the rural economies will grow, the local contractors and tradesmen will find trade, the number of unemployed will decrease and the rural communities will start to flourish again.

I should like to refer to the problems and difficulties of some of the smaller estates in our area, particularly to estates who have no farms in hand and whose income is treated as unearned income. Many of these estates—of which I own one, and therefore I must declare an interest—have a long history and if nothing is done to help them we shall lose an important human element which is part of our Scottish heritage. The laird living on his property is able to care for and to understand his estate and the people connected with it in a way which is different from the visiting representative of some large investment company. It would be wrong to ask for privileges for anyone who is not motivated by a sense of duty towards his estate and to his community, and preferably landowners should learn their trade like anyone else and undergo some form of college training.

On many of these estates there is an ancestral home to keep up and no income is available for the proper painting of the house and buildings, nor even for the wage of an estate worker who is needed to repair stone dykes and other fences and to do odd jobs. These small estates need more income to provide at least one job for a general estate worker, and if the income from let farms was taxed as earned income as opposed to unearned income more money would be available for extra wage-earners. There would be a benefit to the unemployed as well as to the estates, which are hope- lessly understaffed and unable to cope with day-to-day work.

Let us take, for instance, a 1200-acre estate with two miles of stone dyke which needs rebuilding. Is it any wonder that the tenant farmer will want to replace it with a wire fence? The landowner's decision to rebuilt it might well have to be at his own expense. Let us take, for instance, the same estate with 80 acres of shelter belts which need thinning—the softwoods shading the hardwoods. Is he to call in an expensive contractor who will drive rackways through the narrow strips, or is he to ask his gardener—if he has one—to do the job in a proper manner; or is he just to neglect the woods so that he is left with a lot of whips and stunted hardwoods?

Let us take for instance a 400-acre farm with 8,000 yards of hedge to maintain. This maintenance is generally attended to annually on a half-and-half cost basis between landlord and tenant. I have heard it said that it now costs £1 per yard per year to maintain a good hedge. Is it any wonder that the tenant farmer will wish to root out as many hedges as he can to cut his half share of this £8,000 a year expenditure, gain extra acres and save tractor time?

What is the landlord to do, faced with such despoliation of the countryside which is contrary to all his instincts of conservation? The tenant's share of the expense is at least allowed against an earned income; the landlord's is costed against unearned income. Thus, the temptation to which the landlord is subjected is doubly strong. He will probably agree to the uprooting of the hedges because he cannot possibly continue to pay his share of the cost of upkeep out of the rent received for the farm. On a small estate he cannot afford the wage of the extra man, the cost of his house and the necessary mechanical equipment.

In spite of the temptations and because of their love of the landscape and a strong sense of responsibility to preserve the beautiful contryside that they have inherited, members of the CLA have conserved an estimated 100,000 miles of hedgerows at a cost which one can only describe as frightening. One wonders, as the private landowners are killed off by taxation, how many of the succeeding institutional landowners will be willing to continue this tradition of conservation at such a cost.

Legislation is needed to amend the present security of tenure laws which would make it possible, where there is a justifiable reason, for a farm to be taken back into the hands of an estate. In raising this matter I realise that I am touching on a controversial matter, but I do so with the best interests of farming at heart. It is because of the present security of tenure laws that so few landlords feel it safe to relet farms.

One of the recent recommendations in the Northfield Report was that temporary lets should be legal so that more farms would become available for letting. If the landowners' income problem and the shortage of vacant farm tenancies are—as I think they are—fairly widespread, then my remarks have a bearing on the farming, housing and employment prospects of many people and, indeed, on the future of the landlord-tenant system. Therefore, I ask my noble friend Lord Mansfield, when he replies at the end of the debate, whether the Government will respond to the recom- mendation in the Northfield Report about temporary letting of farms and whether they will consider tax concessions for landowners.

6.14 p.m.

Lord Stodart of Leaston

My Lords, I recall, when I first had the honour of addressing your Lordships' House, telling your Lordships why an episode in my youth had caused me to make a vow to speak only on subjects with which I was fairly well acquainted. Therefore, as all other noble Lords have said, I am most grateful to the noble Baroness for allowing us to have this debate. Noble Lords will, I am sure, forgive me if I, like one or two others, concentrate on agriculture.

I am bound to say that I find it extraordinarily difficult to paint a picture of the state of agriculture in Scotland that is credible. I would say that this year Scottish farmers have probably enjoyed the best harvest that they have ever had. I would not have believed it possible that on my own farm—which is an upland farm and, like every other farm, the most difficult farm in the country—I could have sold, at 14 per cent moisture content, 57 cwt. an acre of wheat grown at over 700 feet. if that has happened on my type of farm, it goes without saying that in the real arable areas the harvest has been immense. Prices of grain and stock are riding high, and yet I believe that this is in fact makeup on the face of farming which causes most people to think that everything in the garden is lovely. If you take off that makeup, I think that somewhat different features are revealed.

Some of your Lordships may remember a letter that was circulated last autumn by Mr. Duff Pennington, who is the convenor of the hill farming committee of the National Farmers' Union of Scotland. Many figures have been given today; but the example that appeared in his brief was perhaps even more sensational than some of the figures that have been mentioned today. The example was Upland Farm No. 3, as it was described, and it gave the audited accounts of a farm which had particular interest and reliability because of the almost static numbers of stock and acreage of grain grown within five years. In 1976 that farm had a gross output of £85,000; in 1980 the output had risen to £94,000. The costs of running it—and this does not have anything to do with capital expenditure—were £57,000 in 1976 and £103,000 in 1980. The overdraft in 1976 was £36,000 and by 1980 it was £97,000. That is very much in line—a multiplication of three—with many of the slightly smaller figures which the noble Lord, Lord Mackie, gave. The interest on overdraft charged through those farm accounts was £6,000 in 1976 and £17,000 in 1980.

The Agricultural Credit Corporation has for nearly 20 years been doing for farmers what the Small Loans Guarantee Scheme has just started doing for other industries. The experience of that corporation mirrors to a very accurate extent conditions under which farmers, and expecially tenant farmers, are operating. I have been chairman of that corporation for the last six years and I could quote many cases which confirm the story of that upland farm.

We then have the global figures from the recent White Paper. Twenty, or even 10, years ago I clearly remember that the output and the overdrafts in Scotland were a pretty steady and reliable 10 per cent. of those for the United Kingdom as a whole—not quite the Goschen formula of seven-eightieths, but not far away. Today, Scottish overdrafts, as the noble Baroness quoted, at £700 million, are one-fifth of the borrowings of the United Kingdom. The ratio has doubled. The reason is clear enough. The national farm income in Scotland was over 10 per cent, of that of the United Kingdom in 1977. It fell steadily through 1978–79 until it was only 2 per cent. of the United Kingdom income in 1980, and it has just started to recover in the last year. Why, one may ask, are farmers borrowing so much? With what I know from the credit corporation I could probably go further than my noble friend Lord Ferrers in a reply he gave last week, but I agree absolutely with him when he said that some of it may be in order just to keep going.

Hill farming has two particular burdens. The first one is that there is no alternative to it. When I took over my upland farm some 20 years ago it was almost solely a grass farm. It is now an arable farm. The bulk of its income comes from grain. This has been due largely to the new varieties of seed and mechanisation, and so on, which have made it possible to do that, but on the true hill farm there is no such alternative. Secondly, as many noble Lords have remarked, transport costs affect them most. I am bound to say that I shuddered this morning when I heard one of the many Budget forecasters who speak on the radio every morning, suggesting that the present drop in the price of petrol should give the Chancellor good grounds for putting up his duty.

Once you get a large overdraft like the one that I quoted for the upland farm, it really is almost impossible at present interest rates to make enough profit to get the overdraft down. You need first-class management and absolutely no bad luck at all. I believe that the solution to the problem—and it is a long-term one—is basically to conquer inflation and to get interest rates down. I believe that one wants to tackle with relentless vigour the closing of that time old gap, which has existed ever since I have been farming, between the results of the average farmer and of the best farmer. It is a very wide gap to this day. Thirdly, I am not at all sure that the time has not come when perhaps an examination ought to be made into whether it would not be of greater advantage now, when capital is so short, to substitute farm capital grants for the European system of cheaper credit in agriculture.

I know that my noble friend is very well aware of what I have suggested. I have noticed with the greatest pleasure his emphasis on urging the colleges to do what I have just suggested doing, and that is to concentrate on attempting to improve the efficiency and businesslike approach of the average farmer. It often astonishes me at ACC, when we ask our clients what interest they are paying at the bank, that hardly any of them know. They know what the cost of fertiliser is to a pound a tonne. They know the cost of feedingstuff. But they have not the least idea what interest they are paying. I get the impression that they would feel that to ask their bank manager what he was going to charge would be something as distasteful as asking the undertaker what it was going to cost to bury their wife. At any rate, I come back to wishing my noble friend good luck.

6.25 p.m.

Lady Saltoun

My Lords, like so many of your Lordships, I have been waiting for a year for the noble Baroness's debate, and I am very glad that she has been lucky in the lucky dip at last. I should like to say a few words about transport of people which will rather dovetail with what the noble Lord, Lord Taylor of Gryfe, has already said. Before the Beeching axe started to chop there were few places in Aberdeenshire and North-East Scotland which were more than about seven miles from the railway, because a network of railway lines spread north and west from Aberdeen like the sticks of a fan.

The services, however, were very slow and not very well timed. They missed every connection. Therefore, after the war, as soon as cars and petrol became readily available, people ceased to use the railway services and used their own wheels instead. The railways were axed on the grounds that nobody wanted them. We were told that we would never miss them because we were going to have such a wonderful bus service. Well, we did not get it. Now, to make matters worse, the bus company, which has a virtual monopoly of the bus services, has suddenly announced new timetables to rationalise the service.

This means that the more profitable routes are going to have faster services at the expense of the less profitable country routes. The regional council, although consulted about this almost a year ago, failed to consult the community councils and other interested parties, as other regional councils have done in a similar situation. Therefore, now, at a fortnight's notice, people in rural areas are faced with cuts in the bus service, and in some cases with loss of it altogether.

There are still in Scotland people who, for one reason or another, do not have a car or cannot drive. The high cost of petrol and maintenance has driven a number of cars off the road, and you frequently get a situation where the family has a car but the husband does not let the wife drive it, or the wife does not drive. What are they to do?—because some people rely on buses to get to work and some people rely on them for essential household shopping, particularly now that the price of petrol has driven many mobile shops and vans off the road. What will happen? I am afraid that what will happen is that people will leave the villages and the countryside and drift to the towns, and rural communities will die. Schools, pubs, churches, village shops will close and as a result farmers will be unable to get labour because there are no facilities for the families.

We really need some kind of overall transport policy. I feel strongly that we need co-ordination between bus services and our remaining train services, which I am most relieved to hear the noble Lord, Lord Taylor of Gryfe, tell us are probably not going to be done away with in the near future. For example, on the new bus timetable the last bus from Aberdeen to Fraserburgh will leave Aberdeen at 6.45 in the evening. The London day train arrives in Aberdeen at 7.30. Therefore, any-body who has not got a car will have to walk, or stay the night in Aberdeen, or take a taxi, which is very expensive.

Co-ordination between bus services in different regions is important, especially where they are run by different bus companies. More imagination is needed when considering how to provide services in rural areas more economically. I was glad to hear the noble Lord, Lord Taylor, mention postal buses, and they can be a great help in an up-and-down-the-glen situation. The use of smaller and mini-buses might be the answer in some rural areas where the demand is not big. It is not everywhere that a 50-seater bus is needed; there are places where a 20-seater or a smaller vehicle would do quite well. We desperately need more and better transport, not less and less. Who is to do the coordinating? I hope the Government will help in that connection, otherwise the outlook is very depressing, especially for those who cannot afford to travel by taxi.

Although the principal subject of the debate was, I think, intended by the noble Baroness to be agriculture and transport, I wish to comment on forestry, which is one of Scotland's most vital industries. According to my newspaper of a week or so ago, the Government announced that the Forestry Commisssion would take overall responsibility for forestry research but would not appoint a chief scientist to co-ordinate activities, as the Sherfield Report had recommended, nor would they be putting more cash into forestry research. That is sad news because this country desperately needs to produce more of its own timber and there are large areas of Scotland where forestry is one of the few industries and possible sources of employment. More money for research, better grants to encourage planting, and pulp mills to take thinnings are urgently required. I implore the Government to give those matters a very high priority.

6.33 p.m.

Lord Belhaven and Stenton

My Lords, I am grateful to my noble friend Lady Elliot for initiating this debate. It is certainly timely and I am sorry it has taken her so long to get the subject discussed in the House; but better late than never. I hope your Lordships will forgive me if I do not follow most noble Lords into the realms of agriculture. I was a farmer for 20 years, but that was some time ago, and my main interest for the last seven years has been as a hotel keeper in the Island of Islay. I hope noble Lords will forgive me if, in a limited debate, I confine myself to that small part of the Highlands, and I hope that a brief exposure of the difficulties being encountered in the Island of Islay may be helpful, as Islay's problems are not Islay's alone but reflect in miniature the very serious economic state of the many small and isolated communities in the Highlands and Islands of Scotland.

No one can live in an island for longer than a few days without discovering that the principal topic of conversation, which rivals even the weather, is transport by sea and air and its cost and availability. Most consumer goods cross the sea and most goods produced on the island have to do so as well; thus, both as consumers and producers, the inhabitants of an island, including farmers (who we hear are in difficulty, anyway, on the mainland) tend to operate at a double disadvantage, as what one buys is more expensive than it is on the mainland and what one sells has to take into account the added cost of transport.

In a recession such as the one we are now going through, it tends to mean that profit margins may not be just cut to the bone but frequently cease to exist at all. And to make matters worse, property tends to fall, and is falling, in value and may even become unsaleable, and I have come across cases of that. If your Lordships doubt me, I suggest you do a tour of the hotels in Islay, when you will find out which one of them is not for sale. They have long since given up advertising because they cannot afford it.

On the subject of transport by sea, the suggestion of my noble friend Lord Margadale was very good, but I will explain to the House why we are now saddled with Caledonian MacBrayne having a monopoly once more on the Islay route, which they lost for something in the region of 10 years. Until the mid '60s, David MacBrayne, as it then was, was the only sea carrier to Islay. It operated a side-loading boat which did the crossing in about three hours once a day. It took a long time to load and unload at each end, as your Lordships may imagine. It had a monopoly, was able to charge what it liked, and did so.

The intervention of a private company, Western Ferries, changed things dramatically. They came in with a drive-on drive-off boat and a quicker and more frequent service. They also cut the fares for freight and passengers by about half, and MacBrayne's was forced to follow suit and to convert its boats to drive-on drive-off. So far as I know, it cut its fares only on the Islay route, charging the same high rates on the routes on which it continued to have a monopoly. Western Ferries, having transformed the transport situation, proceeded to find themselves in difficulty. That was solely because MacBrayne's still continued to receive the whole subsidy for operating the Islay route. It is interesting to note that, even then, MacBrayne's failed to break even, whereas Western Ferries either broke even or made a profit, as indeed they were obliged to do.

In 1975 Western Ferries applied for a share of the subsidy for the Islay route, to which they were entitled by natural justice. The then Labour Government did not agree, their argument being that it would be uneconomic to split the subsidy, though how they arrived at that conclusion escapes me. Western Ferries then convincingly demonstrated that, with the amount of subsidy MacBrayne's was receiving, it could operate the route without charging passengers at all. No one in authority took the slightest notice. So the last and present Government have continued to pay the whole subsidy to MacBrayne's, with the result that Western Ferries have been forced off the route and MacBrayne's once more have the monopoly. I gather from reading the local paper today that MacBrayne's have undertaken not to raise their fares until the end of the year, which at least is optimistic, though I must say it surprises me.

The other method of crossing the sea is by air transport. The route was taken over four years ago from British Airways by Loganair, who run an excellent service with small aeroplanes, providing two flights a day and, in the height of summer, sometimes three flights a day. Loganair endeavour to arrange their flights so that people who wish to spend several hours at either end, in Glasgow or Islay, can do so and return on the same day. This worthy objective seems to be being obstructed at present by the Civil Airports Authority, and I will quote from a letter I have received from Captain McIntosh, managing director of Loganair: We timetable our flights to land at Islay as soon as the airfield opens in the morning, and to take off again at the last possible moment before it closes, in order to give our passengers the longest possible working day at either end. The CAA have a rule that they do not close the airfield immediately after the aircraft takes off but keep it open and fully staffed for 15 minutes. If the flight is held up by weather, air traffic delays or other circumstances totally outwith our control, and takes off only 14 minutes before their official closing time, we are then charged for a quarter of an hour's extension of airfield hours. This charge, when added to navigational service charges at Glasgow, landing fees, apron charges at Glasgow, passenger handling charges and Eurocontrol charges, can quite often absorb the whole passenger income from the flight". Surely something could be done about this absurd situation. I do not know why the Civil Airports Authority is doing what it is doing; perhaps it is union pressure, perhaps it is something else. But in a small community we really cannot afford it.

The facilities for tourists on the island have improved dramatically over the last seven years. There is now on the island one first-class hotel, with cottages attached, and up to international standards—something quite new for Islay. The smaller hotels have mostly been improved. But in spite of that, and in spite of considerable assistance by the HIDB, the tourist situation is very bad. In fact I was told last May by an official of the HIDB that not a single hotel in Islay had made a profit in 1980—and that was certainly true of my very small establishment. That kind of thing can be carried on for a year or two, but it cannot go on indefinitely. Ironically, Laker's collapse might help, since it had become so much cheaper to go abroad. The return air fare from London to Islay is now £162. I went on holiday from London to the Canary Islands (Las Palmas) in January for £135. Well, my Lords, which one are you going to choose?—and that is the kind of fact that Islay hotels have to struggle with. Frankly, I cannot see any answer.

Islay's principal claim to fame is its distilleries. Blended Scotch whisky is made up of varying amounts of Highland, Lowland and Islay whisky, and Islay whisky is an essential ingredient in all blends. The amount of revenue which the island brings in to the Excise is a continual cause of speculation and confusion—a situation which I suspect is very satisfactory to the Excise. Suffice it to say that the direct and indirect revenue which the Excise receives from Islay must be very considerable, as also must be Islay's contribution to exports and the balance of payments.

Despite that, the distilleries have been hit hard by the recession. One has closed down, one is, I believe, on the verge of closing down, and all of them put their workers on the dole for eight weeks last summer. They are also all on short-term working. Regrettably, the Government contribution to the situation has been swingeing increases in whisky tax in two successive Budgets. I understand that the Excise revenue actually dropped by some £60 million as a result of the first increase, and I imagine that something similar has happened in 1981. One is left speechless at the pointlessness of the whole exercise.

To sum up, I think one must conclude that the situation in Islay, and, by implication, in the other Hebridean islands, is serious, if not yet desperate. Let us hope that by sensible and constructive policies—which have often been absent in the past—the worst can be avoided and Islay can become the happy and prosperous island which it ought to be and which it deserves to be.

6.44 p.m.

Viscount Thurso

My Lords, I join in the general gratitude expressed to the noble Baroness, Lady Elliot of Harwood, for securing this debate for us and for setting its range so widely. As my noble colleague Lord Mackie of Benshie has already said, without farming the economy of the upland areas would collapse completely. But without everything else, the community life of the upland areas becomes hard even for the farmers to put up with, and I should like to take full advantage of the width and range which is given to us in the debate to talk about one or two things which have not so far been touched upon.

Two hundred years ago this year the last of the repressive measures designed to break the spirit of the Highlanders and to wreck the economy of the Highlands after the '54 was repealed. At no time in the two centuries which have passed since then have the Government at Westminster presided over such whole-sale devastation of the Highland economy as is taking place today. Two hundred years ago the destruction was deliberate. It was the cold, calculated repression of a rebellious subject nation by a distant, but nervous, Government. But today, in my view, Westminster is causing the destruction by carelessness, resulting from blindness and bigotry. Today Westminster is presiding over the scrapping of a quarter of a century of effort to solve once and for all the "Highland problem", and is throwing away the hard-won successes of those who, like myself, have devoted their lives to the development of the Highland economy. The destruction is beginning to gather the momentum of a falling line of dominoes. One by one the great milestones of success are crumbling to the dust.

The pulp mill at Corpach lies still, while piles of timber grow on the quayside at Inverness awaiting export to Scandinavia, there to be pulped and turned into newsprint, only to be sold back again to us in return for a profit on the value added. Meanwhile, the heart has been cut from the community at Fort William, with much the same result as the like process had on the victims of the Incas' sacrifices.

Another sacrifice has just taken place on the shores of the Beauly Firth to satisfy the bloodlust of the high priests of monetarism, and the death cries of the victims are still echoing through the glens of Ross and Sutherland. The smelter at Invergordon, hailed in 1968 by no less a person than the noble Lord, Lord Ross of Marnock, as a tremendous step which is really redressing the balance of history", has closed with little warning and indecent haste. Once again a carefully built up industrial community lies devasted. A dozen years of development lie wasted.

Even as the bloodstream of that victim congeals upon the altar, other victims are being prepared for sacrifice. The loss of traffic on the railway north of Inverness caused by the smelter closure brings threat of closure to the whole Highland line. In spite of what the noble Lord, Lord Taylor of Gryfe, has told us, it might be that British Rail does not want to lose the Highland line, but it might very well be forced to lose it if the traffic is not there to justify it. Indeed, with the added excuse of losses arising from the recent rail strike we are even having our minds prepared for the loss of the line from Perth northwards. The domino effect is starting to show.

"No matter", cry the high priests, "these sacrifices will propitiate the gods who dwell in their Olympian fastnesses around Threadneedle Street. It is good for you miserable peasants if a few of you get sacrificed and it will keep the rest of you out of mischief and busy with your traditional industries of farming and fishing, of cottage crafts and tourism ". But, my Lords, what has happened to the "traditional" pursuits? Our farming is now so highly modernised and mechanised and boasts such a high degree of productivity that it is incapable of supporting community life. All over Scotland rural schools and rural bus services are closing. Village halls, village shops and even village police stations are closing down because of the increased efficiency of Scottish farming. There are more sheep and cattle per acre, more tons of barley and potatoes grown per acre by fewer and fewer people per acre every year in response to the call from the rest of the country for more and cheaper food.

What then about our fishing industry? Indeed, my Lords, what then! I live a mere 20 yards from an ocean out of which my great great great grandfather boasted could be taken over 30 varieties of fish and seafood to grace his table, an ocean on which sailed and fished the great herring drifter fleets of my youth, an ocean on which sailed the inshore white fishing fleets which caught the haddock, cod and whiting in the 1950s and 1960s. What is there now? If I go down to Thurso Harbour to buy fish for my supper from the fish shop which occupies a corner of the great echoing empty fish market which was built just after the war, the chances are that the filleted haddock which I shall be offered will come out of a frozen box brought up from Aberdeen, 200-odd miles away. The fish market itself long since ceased to buy catches from Thurso fishermen, and even the market across the bay at Scrabster now buys only from stranger boats. The 'teens of seine netters which once fished out of Thurso and Scrabster fish no more.

"All right", you cry, "but there is tourism. Surely tourism can keep you all going. After all, look how beautiful your bens and glens are without any nasty people in them "; to which I would reply that a very quick way of going bust would be to set up an hotel in the Highlands and hope that the glens and the bens would fill it for you. Tourism is suffering both from its own in-built problem of a short season and from the modern problem of a diminishing rail and air service saddled with ever-increasing fares. You can add to that the rising cost of petrol and the fact that four-star petrol in Thurso costs 173p per gallon when in London it can be bought as low as 144p per gallon. Air travel is no better. You can fly to Miami for a holiday for less than you can fly to Wick. Going home, partly by train and partly by air, will cost me £120, which would give me a week's holiday in some places, air fare and all.

Then, if you do decide to holiday with us in the Highlands, what are you to do after the sun sets behind the ben and the darkness creeps over the clachan in the glen? What nightclubs and cinemas, restaurants and discos can afford to exist on a season consisting of half July and August? None, of course; so there are none, and you take quietly and gloomily to the bottle, like many a highlander does all the year round.

So there remains this Arcadian ideal of the little cottage industry—the loom clattering in the wee lean-to behind the picturesque but and ben; the potter at his wheel; the turner at his lathe. But what does the poor devil do about selling his product? There are no tourists to buy for three-quarters of the year, and how is he to find time for marketing his product, always assuming that he has the expertise, in between times of manufacturing it? No, my Lords; smaller industries stand no better chance intrinsically of success in the Highlands than do large ones. The mistaken idea that they do derives largely from the fact that a self-employed craftsman can usually be relied on to work longer hours for less pay than the same chap in a properly organised manufacturing firm. Once his bank manager discovers that he can no longer sell his goods for what it costs him to run the business and to live, that is the end of the matter and another potter lies broken on his wheel.

I paint a gloomy picture, but the scene which I survey is gloomy. There is no real ray of hope that I can see coming from the Government. That is the gloomy part about it: the apparent inability or else unwillingness on the part of Her Majesty's Government to support the Highlands and to support through temporarily difficult times the growth areas that have been carefully built up by their predecessors and by other dedicated people in the Highlands over the last 25 years. This fills me with gloom.

For instance, the Highlands are energy-rich. There is hydro-electricity, atomic electricity, oil and gas all available; and, indeed, now that the smelter is no more, there is a surplus of electrical power in the Highlands. There is wave power to be exploited and there is wind power to be exploited. Both the making of wood pulp for paper and the smelting of aluminium are highly appropriate industries for the Highland area. In the case of pulp, large forests have been and are being established which can supply the raw material for a pulp mill, and this raw material plus energy is what is needed for such an industry.

In the case of aluminium, the raw material in the shape of alumina is not present but the energy is, and my information is that the smelter design at Invergordon was excellent for its purpose. The medium and long-term outlook for an aluminum smelter is good. The problem is only in the short term, and in the complicated and possibly unsuitable deal which had been made about the supply and cost of electricity. It should still be possible to save the Invergordon smelter, and Sir Kenneth Alexander, late of the Highland Board, is on record as saying, "The aim of restarting the smelter is the right, indeed the only aim that can prevent 'the major disaster' to which the Secretary of State referred becoming an enduring feature of the area around Invergordon, with social blight compounding economic hardship".

The Government may have put themselves into a very difficult position by allowing British Aluminium to keep the land and buildings when they negotiated the settlement which allowed the closure. Certainly if they attempt to re-open the smelter in the hands of British Aluminium or of any other company a better arrangement over the sale of electrical power will need to be worked out. Possibly the addition of two hydro-schemes which have been shelved could help to provide a solution, or perhaps the intriguing solution of using Dounreay, which not only has a designed output equal to the smelter's designed demands but also has a transmission line from Caithness to Beauly.

Finally, Her Majesty's Government must really address themselves to a long-term solution of the Highland transport problem. We cannot live and develop with constant and recurring threats to our rail system. Not only should it be made secure but its services should be improved to meet the transport needs which exist. We in the Highlands are willing to use the rail, and for the tourist industry it is doubtful whether it would be possible to think of doing without it.

I therefore make what is intended to be a helpful suggestion. Why not treat the railway as though it was a trunk road? The main line up the centre of Scotland is an important trunk route which must not be placed under constantly recurring threat. The Government should therefore guarantee its upkeep and maintenance. I feel sure that such a guarantee would allow British Rail to offer a satisfactory and reliable service upon it.

Then, lastly under transport, it is quite wrong that, in a scattered area ill-served by public transport, petrol should cost nearly 20 per cent. more than it does in an area where there are masses of buses, tubes and trains. Especially does it seem unfair to us who look out upon the flares burning off the surplus gas from Beatrice and the Flotta terminal.

I am most grateful for the opportunity which the noble Baroness, Lady Elliot, has given us to debate in your Lordships' House these problems which face us in the upland areas of Scotland. In drawing the attention of your Lordships to those which particularly affect the Highlands, I seek no advantage over other areas and other parts; I seek only an equal chance with other parts of Scotland for that area in which I am particularly interested, that area where I live and that area which has so much to offer in return.

6.57 p.m.

Lord Burton

My Lords, I apologise to the two or three noble Lords whose speeches I missed when I was called out of the Chamber for a few minutes. I shall certainly read their speeches with interest. I, too, should like to add my very sincere thanks to my noble friend Lady Elliot for initiating this interesting debate; but unlike some of my noble friends, who said they regretted the delay, I should like to say that I rather welcome it at this time because I think this is a particularly opportune moment at which this debate should be held. So often different speakers talk on the same subject in these debates as they happen to be topical or perhaps because there has been a lobby document sent round to a number of your Lordships. As a result, I am trying to refrain from talking on the NFU circulars, but this does not mean that I do not agree with them. I think I agree with them in their entirety.

I have just given up after my two-year stint as a branch chairman of the Scottish National Farmers' Union, so I have had my thoughts fixed on the overall agricultural situation in Scotland. The first thing that has struck me is the failure to keep social aid separate from agricultural aid. Might it not help to settle the difficult problem of agricultural support in the EEC if these two different aspects were separated?

After all, my Lords, possibly the biggest problem is the milk surplus in Europe, and this appears to be entirely for the subsidising of what can perhaps be called "European crofters", to permit them to continue to exist in rural areas. In the Highlands, of course, we heavily subsidise crofters, and apart from pampering this small section of the community we pay out substantial sums each year to a Quango to look after them, in the shape of the Crofters' Commission. I am not arguing here the rights or wrongs of such payments, for it may well be socially right to do this and to retain the population in the rural areas.

There is no doubt that a magnificent piece of work has been done over the years by those who work the land, and I say that advisedly, for not only is it so of the farmers themselves but also of those who work for them. There is such a marked contrast between the factory worker knocking off when the hooter goes and the ploughman who will often stay on to finish a field. What a benefit it would be to the country as a whole if one had flexible rostering in other industries as we have in agriculture. I refer to the train drivers, guards and the baggage handlers at Heathrow. It therefore comes as a particularly bitter pill to the agricultural community that it has constantly increasing prices of commodities completely outwith its control: transport which cannot be modernised because of restrictive practices; electricity prices increased by Government policies and the 20 per cent. plus annual increases in rates which, in many cases, are subsidising the urban dweller.

We have a small caravan site we use to try to subsidise our farming enterprise. Last year, we had to pay £3,150 in rates on that caravan site—for which we get absolutely nothing. We have to provide our own water supply, drainage and we do all the scavenging ourselves, although five miles down the road the borough's own caravan site gets scavenged daily, has water and drainage laid on. I think it is important that this sort of thing is brought home to those who are advocating rating of agricultural ground. It should be borne in mind that we already pay very substantial rates and they are ever increasing at a terrifying rate.

In this respect, I should like to compliment my honourable friend the Secretary of State for Scotland who only last week turned down a planning application where our district council wanted to waste £1 million on building a golf course on good agricultural ground. The £1 million made no allowance for the annual maintenance outlay, which would also have to come off the rates. Another example of lack of regard by our local authorities for expenditure arose recently when a Dutch firm approached the Highland Region to consider reclaiming the Beauly Firth for agriculture. The cost of the sea walls and the pumping would be £33 million, which would be at least eight times the price per hectare for which you could buy land in the open market; and that was before one put in the farm buildings, internal drains, levelled the land and fenced it and all the other many costs of re- clamation. The total cost would probably be twice the total net profit of all the farms in Scotland in 1980. Despite this, the Highland Region have allocated £40,000 for further investigation of this project. The Government really must clamp down on this waste of public money. It may be possible to afford it in the South, but not in the North.

My Lords, we then had the question of fuel prices. As other noble Lords have said, surely something can be done to avoid the enormous discrepancy between the prices at which our rural garages are supplied by the petrol companies and those in the urban areas. Not only does this discrepancy hit those who wish to live in the country but it reduces the amount of fuel sold by rural garages, making their pricing extremely difficult. If they are left with full tanks, they must sell at a substantial loss, which only brings further hardship to the rural areas if these stations have to close. I know there are problems attached, and it may be that abuses would be found, but one of the biggest boosts the Government could give to rural areas would be to have various tax bands on fuel prices.

This would not only benefit those resident in the rural areas, who depend so much on their own transport (as there is no public transport) but also mean that there would be far greater incentive to those wishing to holiday in those areas. We have heard several noble Lords say what a desperate state tourism now is in. To put a further tax on petrol and diesel—and my noble friend suggested that this might happen—would be disastrous. It seems that a holiday for a fortnight in Greece or Tenerife, as several noble Lords have said, can be had at the same price as the London-Inverness air fare. A fortnight in the Aegean, with return flight and full board costs £163. The air fare London-Inverness return is £161. It just does not seem to add up. How can we expect anybody to holiday in the North when they can go off to guaranteed sun rather than coming perhaps to wind and rain in our part of the world? The Islay air services may have difficulties, but the Inverness-London service must be the Cinderella of all the British Airways services.

The collapse of the pulp mill at Fort William and of the smelter at Invergordon were not unexpected. The objectors to the smelter before it was built forecast the probability that it would not be viable; but then we had Professor Grieve, chairman of the Highland Development Board, talking about his "string of pearls" around the Moray Firth—and now the biggest pearl has broken the string. We hope that the Government have picked the right chairman on this occasion. At least, they have picked a businessman and I am sure we all wish well to Mr. Cowan and that he will be able to do something about revitalising the Highlands.

However, it must be borne in mind that agriculture is the backbone of all activity. It is one which will survive, it must do so; others, like oil, will go, or they will be exhausted. Our agricultural and forestry workers are paid far less than the most menial workers in either the pulp mill or the smelter. It may be of interest to note that car firms in the Invergordon area have their order books full at the moment as the smelter workers plan to "blow" their redundancy money so that their capital can be reduced to the level at which they can start drawing unemployment benefit. Why should the primary industry be kept on such a low level of subsistence when it has done so well for the country?

It would be churlish not to thank the Government for the help which we got last year—and my noble friend Lady Elliot has done so to some extent this evening—and, in particular, for the sheep compensatory allowances and the suckler cow premium and, indeed, for securing last year's price review settlement expeditiously early in the year. But suckler cow numbers are still falling and it is to be hoped that the Government (who are permitted to do this by the EEC) will further help this section of the industry. Further, it is important for us to know what prices we are to get for our products in 1982; and there is a real worry that this year's review is being used as a political pawn and that there will be long delay in reaching a settlement.

As my noble friend Lady Elliot has said, bank overdrafts are still rising at an alarming rate, probably 50 per cent. higher than in 1979. This has resulted in a massive drop in capital investment which bodes ill for the future. My noble friend Lord Ferrers recently told your Lordships that between May 1979 and December 1981 the retail price index rose by 43 per cent. Farm-gate prices rose by only 19 per cent. How can the farming industry meet that sort of competition? Many of our problems arise from the long distances over which we have to transport our materials and products to and from the area, as was forcefully brought out by the noble Lord, Lord Taylor of Gryfe.

I hope that the Government will bear in mind that it is vital to the Highlands that our infrastructure is maintained and, indeed, improved and that, when there is an opportunity of getting a large proportion of this paid by Europe in the form of an ADP, surely we should not miss the opportunity, even though Government money is tight at the present time.

I will end with an encouraging story. The north of Scotland can produce good malting barley. There is a limited home market for this and our market on the Continent was somewhat spolied by some merchants putting in bad barley two years ago. This autumn, a local grain co-operative and one of the merchants sent representatives out to meet German brewers. The co-operative representative spoke fluent German and they had considerable success. This sort of enterprise is to be highly commended, but I fear there is not enough of it. The noble Viscount, Lord Thurso, referred to the "rebellious subjects" from the North. I hope that my noble friend on the Front Bench will not consider that he and I are rebellious subjects requiring financial strangulation. Agriculture has done well, my Lords. Surely, we should invest in success.

7.10 p.m.

Lord Home of the Hirsel

My Lords, all of us have shared in the luck of my noble friend Lady Elliot in being successful in the draw for this debate and we are grateful for it. The only trouble when one follows my noble friend in her own pet subject of agriculture, is that there is virtually nothing left to be said. The noble Viscount, Lord Thurso, said it all with almost Churchillian rhetoric, only descending every now and again to a homely phrase like "going bust". The rest of your Lordships who spoke were able to make some points which I hope will be of use to the Minister of State when he considers future policy.

If I had to choose in the context of those measures which could best assist Scottish farmers in their business of the production of food, I have no doubt at all as to the priority. It is the same as that which was chosen by my noble friend Lady Elliot: it is the reduction of the rate of bank interest. That overall can do more good to the farming community than anything else. One noble Lord after another has made the point that the gap between prices and costs over the past 10 years has left the average farmer with too much leeway to make up and he cannot conceivably cover his expenses by the sale of his crops.

Borrowings of late—and the noble Lord, Lord Mackie of Benshie, and my noble friend Lord Stodart have both given figures which carry absolute conviction in this respect—by the farmer have not, I regret to say, been made in order to plough back capital into the land, but to cover the interest rates on previous loans. That is a very unhealthy situation indeed in which Scottish agriculture finds itself.

The point is well known to the Chancellor of the Exchequer and I shall not "flog" it. Although agriculture is a very large industry, very often its voice sounds small against the general industrial clamour. Although the price of livestock has improved this year—and that is good—it is important that this question of interest rates and their impact on food production in Scotland should be made plain again and again to the Government of the day.

My second point relates to the impact of Common Market policies on the stock rearing areas in Scotland—a point again made by my noble friend Lady Elliot. There can be no doubt that the sheep régime has come to the rescue of the lowland sheep farmer—and just in time. But there are other schemes of great merit. I personally, with a good many of my neighbours in the Borders of Scotland, have had experience of the Farm and Horticultural Development Scheme. It has certainly resulted in the injection of fresh capital into those funds to which it has been applied and it has significantly improved their productivity. It is a good scheme.

I have not had first hand experience of the agricultural development scheme which my noble friend suggested might be applied to the Highlands and about which some other noble Lords have spoken, but I have heard of its being well spoken of in Ireland, in areas comparable to the West of Scotland, the Western Highlands and other places. I have been told that there are procedural difficulties in its application to the Scottish Highlands, in that the European Commission will not disclose the details of their proposals until they know that the Secretary of State for Scotland will approve the scheme. The Scottish Office feel that they cannot give approval before it is officially given the relevant facts by the Commission. No doubt by my noble friend at some point, if not this evening, will be able to clear up that matter. To approve of the agricultural development schemes or to turn it down on its merits is one thing, but it should not be held up by some protocol procedural wrangle. If that is a fact I hope my noble friend will be able to cut through this red tape for the scheme should not be delayed in this way.

My final point has not so far been referred to by anybody. It is a minor one but I think that it is important. Now that the prospects for sheep are beginning to look better, it is more important than ever that our sheep flocks should be free of disease. There exist a good deal of scab and a lot of ticks. The clean areas in Scotland are getting very concerned that these diseases will spread to them. I think that there is a very strong case for the reintroduction of compulsory dipping. I hope that the Scottish Office will consider that.

I hope that my noble friend will be able to consider all the suggestions that have been made tonight. Perhaps particularly the noble Lord, Lord Ross of Marnock, will give some attention to the points which have been made about the Common Market and its impact on Scottish agriculture. I do not imagine that he has ever in his life been bound by a party manifesto mandate—he is far too wise a man. However, if his noble friends or those in another place attempted to pursue the policy of withdrawing Britain from the Common Market, I hope that he will give them some facts as to how the Market policy applies to Scotland in the context of agriculture. I echo what my noble friend Lady Elliot said about the Government having done well. It is one of the happy aspects of life, however, that it is always possible to do better.

7.17 p.m.

Lord Ross of Marnock

My Lords, this is the first general type of debate that we have had on Scotland since I arrived in this House about two and a half years ago. We have to congratulate the noble Baroness in having been fortunate enough to bring it to us. Her patience was not always that evident but her persistence certainly had to be admired. She certainly set the tone when she suggested that we should forget all about party politics; let us get down to the question of these matters. That is a very good idea. But occasionally when you have somebody like Lord Burton, party politics will out. I could hardly believe my ears when I was more or less being challenged by the noble Lord, Lord Home of the Hirsel, to forget something about some manifesto.

I was not going to quote very much from the National Farmers' Union; but for his benefit I shall quote this: Entry into the Community has exacerbated the problems of remoteness from the markets". This is one of the basic points that we have been talking about today. Scotland was remote from Westminster, but we are much more remote from Brussels.

I have not heard anything here to convince me that this gleam of hope that we have in the sheep régime clears the path. One person mentioned lime and the lime subsidy. Of course that was withdrawn because of the EEC and that was an important matter that I hope to come back to later. But I was very glad to hear that bloodthirsty speech of the noble Viscount, Lord Thurso. What poetic prose we had as he bludgeoned everyone and visioned Westminster looking upon these people in the Highlands as lowly peasants. It would be far better to quote Burns—the address of Beelzebub when he welcomed a Highland nobleman forward into Hell: … What right hae they, Tae meat or sleep or light o' day? Far less to riches, pow'r, or freedom, But what your Lordship likes to gie them. I was glad he broadened it out because I want to start with problems arising in Scotland. There is one particular problem at the present time and that is the background to everything that has been said: the problem of unemployment. Who would have thought we would see the day when there were 345,000 unemployed in Scotland? We have 22,000 school-leavers still on the register and about 40,000 doing what those on the other side of the House used to call "not real jobs", in training and youth opportunities. I shall not decry the youth opportunities—the position would be very much worse without them—but here we have a position where the Secretary of State is saying that we are going to have 100,000 places for young people in about two years' time; but when you look behind that fact you see that a few years ago, after they had finished the youth opportunities programme, 78 per cent. of them walked into jobs. The figure today is down to 29 per cent.

I am concerned about this. I am sure the noble Baroness read a report the other day in respect of careers in the Borders. There are fewer jobs in agriculture for the young, fewer jobs in textiles and, if that was not bad enough, the position is even worse when it comes to clerical jobs and jobs in electronics and engineering.

As regards the Highlands, questions have been raised time and time again. It is true that both parties have every reason to feel satisfied with what was created and established at Corpach, at the Moray Firth, at Invergordon and at Dounreay. Perhaps we should have had a few words from the noble Lord on that subject. It was said that the work of the Highlands and Islands Development Board had helped to turn the tide of depopulation. During the first 60 years of this century the Highlands lost a quarter of its population. We stopped the tide, and the tide was going the other way, but we have now got this growing resentment in the Highlands about what has happened.

Anyone who read the Scotsman today could see how cheaper power could wreck the smelter rescue—and I pay tribute to the civil servants who are now working hard to get a new operator in there. Now we discover that if they do get this formula for new powers we should get one equal to the other two power stations that were built about the same time. However, that very fact may allow BA to put a virtual veto on that new operator coming in because they own the smelter and the land, and whereas its break-up value was estimated at £5 million, by not striking the proper negotiating position at the time, officials have created the position that if a new operator is coming in it is suggested that the price will go up to even as high as £30 million, which would torpedo the whole operation. I will not quote the whole of that situation, but it is the kind of thing that rouses my anger, and which will raise anger in the Highlands areas.

What does that mean? It is all very well the noble Lord, Lord Taylor, saying that all is well in the railway field. I do not know when he talked to them, but the loss of £3 million worth of freight to the smelter frustrates all the capital expenditure they have been involved in.

Lord Taylor of Gryfe

My Lords, I am sorry to interrupt—

Lord Ross of Marnock

My Lords, I am sorry I have not got time. It is a short debate and I want to race on. That is a very serious point from the point of view of British Rail. That is one of the costs of the loss of the smelter. But it is not the only one. There is a cost in jobs, in benefits, in loss of taxation: that is about £9 million—and that is only the smelter jobs. If you take the knock-on effect which the noble Viscount, Lord Thurso, spoke about, it is very much higher than that. Then there is the loss to the local authority. I am sure the noble Lord, Lord Burton, will be very worried about his rates and how they are going to be affected. The loss of the smelter means a loss of £700,000 in rates to the local authority. These are serious matters, and in fact it has come back to what I and others have said before: that it is easier and cheaper to save jobs than it is to create new ones.

From the morale point of view, just think of Stirling University: there are 7,000 young people wanting to go to university and there are only 600 places. That is a problem arising in Scotland. We are going to have our best qualified and equipped young people with nothing to do; and from a social and morale point of view, that it is a serious thing. In respect of how we tackle this problem we should be thinking not about the next election but about the next generation. We should not grudge the money it would cost to get us out of this difficulty. I am very much concerned about the whole social position, the whole attitude and character of the Scotland of the future, if this kind of thing goes on.

It is true that the land will prevail—the land will still be there—but will the people be on it? That was a question raised by the noble Lord, Lord Mackie of Benshie. The figures are really staggering: the figures of borrowing, of income, of interest rates and debt. The debt is bad enough, but meeting it by borrowing is worse. There is no future in that, and yet here is an area which every Scot values, and not just for the Highlands and the scenery. May I say there are probably more Highland votes at stake in Hillhead than there are in Ross and Cromarty? Just look at the lists of policemen, teachers and other people—you have just got to look at me, where the Rosses came from. We still have that attachment and concern not just about places but to people in them. They demand a decent standard of life, and if they do not get that they will not stay there. The noble Lady, Lady Saltoun, suggested there will be a drift away from the villages if we do not face up to the problem.

The problem of transport is intractable. It has been put forward by the Highlands and Islands Development Board that there should be a road equivalent tariff. But that does not suit every area in the Highlands. We shall need to face up to the question of the actual cost of fuel. I wonder how many of your Lordships were in this House in the 1950s, when we had something called resale price maintenance, which was abandoned by the party opposite. The only thing we have left in the resale price maintenance field is the cost of a stamp: whether you are sending a letter from Glasgow to Edinburgh, Glasgow to London or Glasgow to the Highlands, it costs the same amount. So it has evened out in relation to the people who use it most. They pay for the remoteness in areas where density is so low. Resale price maintenance made sense from the point of view of the areas that we are talking about today. We shall need to return to something like that, if we are to make life possible.

The hill farmer in the less favoured areas, especially in the remote Highlands—this applies equally to the Borders—needs roads, but he does not have them. Much of his own farm road is his responsibility. By the way, I hope that the local authority maintain that road for which the noble Lord, Lord Burton, does not like to pay rates. I hope that they police it, too, for which he pays rates, and that they also provide an educational service for the people in the area. He simplified the rates problem no end. But the inputs have gone up in price, and they are further upped in price by transport.

I was very pleased to read in the paper about the need to try to increase the dairy numbers, particularly in the Islands. Fancy milk going from the mainland to the Islands, which used to have pride in their independence! You have no independence when you are dependent upon Glasgow for your milk, bread and so on, which is the position of some of the Islands, and we must have a little rethink in respect of that.

There is no doubt at all that the Highlands and Islands Development Board, the Highlands area and the Highlands farmers themselves, through their Farmers' Union, are quite right to draw attention to what is being done in the EEC in respect of Western Ireland, where they have an agricultural development programme worth £167.8 million. In Italy, they have £283.9 million for a beef project. If ever there was an area that fitted into the category of places that should he helped, it is the Highlands of Scotland and I am right behind the demands that this should be done.

I agree with the noble Lord that this is a silly wrangle, procedurally. The EEC say that the initiative must come from our Government here, and our Government say, "We cannot say whether we are for it, until we see what it will cost, and that depends on the programme." I think that the matter has now been accepted by the Agricultural Committee of the European Parliament, and I hope that from there we will get progress and will get something done in respect of a vital agricultural area. It may be that they will also look at transport, to ensure that some chance is given to retain a healthy agriculture in this area which means so much to men and to women. It is people who count and, from that point of view, this is the gloomy part of the debate. Depopulation may be with us again, if we ignore the challenge and the demands.

7.34 p.m.

The Minister of State, Scottish Office (The Earl of Mansfield)

My Lords, I should like to add my word of congratulation to my noble friend Lady Elliot for initiating a debate of very considerable importance and interest. If I have a complaint, it is that the Motion has been drawn in terms which are so wide that noble Lords have been tempted, and have succumbed to the temptation, to go a great deal broader than I think my noble friend intended the course of the debate to take. My second complaint is that in the time available I cannot possibly reply to this debate. I shall do my best, and I shall then have to write on individual points to those noble Lords whom I do not answer directly.

Of course, there is an enormous wealth of experience and expertise in this House on farming and related matters and, naturally, I have listened with considerable care to the contributions of all noble Lords, even when those contributions have consisted, sometimes in very elegant language, of more of a long catalogue of complaints and suggestions for spending of resources than actual practical and constructive suggestions by which the Government could help to ease the lot of the people living in the rural parts of Scotland.

I agree at once with those noble Lords who have stressed the importance of a healthy and viable agricultural industry to the social and economic well-being of a very large part of our country. The evidence of recent happenings shows that, as we seek to streamline and improve the efficiency of our manufacturing and service industries, agriculture assumes an even greater importance in the national economy. It has been a matter of considerable concern to me personally as a farmer—and I declare my interest—that, despite considerable efforts on the part of the Government, it has taken rather a long time to reverse the downward trend in farming incomes in Scotland, which was apparent when we came to office.

I cannot in the time available, and within the confines of this debate, hope to answer the points which the noble Viscount, Lord Thurso, made. All I do say to him is that I will not accept his strictures that this Government are in any way acting out of callousness. In all the matters for which my right honourable friend the Secretary of State is ultimately responsible, and all the matters which I see by virtue of my ministerial responsibility—which includes the co-ordination of Government policies towards the Highlands and Islands—whatever else we can be accused of, callousness is certainly not part of the charge sheet, if I may use that expression.

More effort and more money in real terms have gone into farming, fisheries and such statutory boards as the Highlands and Islands Development Board, the Scottish Tourist Board and the Scottish Development Agency than ever before. More efforts have been made by my department and by Ministers than ever before to deal with problems which the noble Lord, Lord Ross, himself described as intractable and which he found intractable when he was the distinguished holder of the office of Secretary of State for Scotland—and I pay him tribute for doing a lot to try to remedy them. The setting up of the Highlands and Islands Development Board was an imaginative gesture and, much more than that, it has contributed a tremendous amount to the well-being of the Highlands.

If we are to talk for a moment about depopulation, it should be acknowledged that, in the past few years—certainly in the last three—the downward drift of the population in the Highlands and Islands has been arrested and the number has gone up slightly. I should not like it to be thought that I am in any way complacent about it, but to say, in the midst of this extraordinarily severe and deep recession, that anything akin to the ancient clearances is going on is a gross exaggeration of the position.

I now turn back to agriculture. The annual review which has just been completed indicates that in farming terms we have turned the corner. Aggregate net farming income went up from £26 million in 1980 to £85 million in 1981, and, while I readily acknowledge that this is by no means satisfactory, I claim that the prospects look a little brighter then they have done for some time. We have to look for the reasons behind this. The rate of increase in farmers' input costs has fallen as we have got to grips with inflation—and I was very grateful indeed to my noble friend Lord Stodart of Leaston, who came to the rescue of the Government and, almost alone among your Lordships tonight, pointed out that the real problem which this Government are having to deal with is the problem of inflation. To the farmer and to the estate owner, if I may say so to my noble friend Lord Haig, and to the rural economy generally, inflation is the greatest enemy which can befall us. With better weather last year, the volume of feed purchases was down, and that helped farmers. On the input side, we had better crop yields and improved market prices. For instance, calf and lamb sales at the autumn sales showed a great improvement over 1980.

One should consider what the Government have done over the last three years. Almost three years ago when we came to office, producers were concerned, more than anything else, about the effect of negative MCAs so far as trade with other member states was concerned. These have been eliminated. We now have positive MCAs and a substantial improvement in our competitive position.

My noble friend Lord Home of the Hirsel made mention of the sheepmeat régime, which has been of very considerable benefit to Scottish farmers—and not only in the Lowlands. The farmers in the Highlands and Islands in particular have benefited from a new confidence. And the Highlands and Islands, so far as sheep are concerned, are of particular importance because that is where a substantial proportion of our breeding flock is to be found. The confidence among the finishers in the Lowlands has spread to the breeders in the hills and the uplands. We have a European Community suckler cow premium scheme which has helped our beef producers, and we have substantially improved the level of support for hill farmers through increases in hill livestock compensatory allowances. Between 1979 and the current year, the hill cow rate, may I remind your Lordships, has been increased from £29 to £44.50 and the hill sheep rate from £4.10 to £6.25.

Direct income support to Scottish livestock producers in 1979 amounted to about £24 million. In 1981, the combination of the suckler cow premium, the sheepmeat annual premium and the higher rates of hill livestock compensatory allowances has raised that support to £47 million. Aid for producers in the Highlands and Islands accounts for about £16 million, which again is very nearly double the sum paid in 1979. So on the production side, the provisional results of the December census give us some cause for cautious optimism. There is some evidence of stability in dairy cow and pig numbers after seven years of decline. The sheep flock is expanding. The decline in beef cow numbers is levelling off and there is a welcome increase in the number of beef heifers retained for breeding.

This is just a start. The level of farm income is still too low and is insufficient to generate the investment needed to maintain or, better still, to improve the level of home production or to make significant inroads into the high level of bank borrowing. But we are moving in the right direction, and that is to be welcomed. I also particularly welcomed what my noble friend Lord Stodart of Leaston said about the performance of farms and farmers. In the last two years or so since I have been going around Scotland, I have noticed the tremendous difference which there is between the efforts of the best farms and, much more importantly, the efforts of what I might call the bottom quarter so far as production and efficiency are concerned. That is where considerable efforts can be made by Government and by their agencies—and also by, for instance, the colleges of agriculture and the advisory services in general—to bring up the performance of farmers who, through no fault of their own in many cases, are unable to take advantage of the various grants and income aids which I have mentioned to give themselves a reasonable standard of living.

I have said enough about the Government's attempts to defeat inflation, which will, as success is achieved, bring down the rate of interest. That will benefit all farmers.

I was asked a question or two about taxation, in particular by my noble friend Lord Haig. I hope he has taken into account the effects of the Budgets which my right honourable friend the Chancellor of the Ex-chequer has introduced since this Government came to power. But even last year the measures introduced included for the first time relief on let land for capital transfer tax purposes, with the facility to pay the tax by interest-free instalments and with the previous upper limit on payment by instalments removed. I appreciate that the last budget made no significant changes to the income tax position of landowners, but I should remind my noble friend that tax concessions have to be considered as a whole. I cannot say any more tonight. However, I can assure my noble friend that the various representations which have been made, and which in many cases I have seen, by farming and land-owning interests in Scotland will be considered

Mention was made very briefly of the price proposals in Brussels and related issues. All I want to do—and that in a sentence—is to echo my right honourable friend the Minister of Agriculture. We as a Government are going to go into the negotiations with the firm objective of attaining a settlement which meets the legitimate needs of our producers, and any measures which discriminate unfairly against them will be opposed very strongly indeed. That includes the proposal for a 4 per cent. revaluation of the green pound which would result in farmers in this country obtaining price increases which would be thoroughly inadequate.

I want to say a word about the agricultural development programme for the Highlands and Islands which has been receiving quite a lot of publicity recently, in particular since the integrated development programme for the Western Isles has come near to fruition. A good case can be made for special assistance for the Highlands and Islands. That point was made in the discussions leading up to the agreement to proceed with agricultural development programmes in Italy and in the north and south of Ireland, and the integrated programmes, for the Lozére, the Luxembourg province of Belgium and, as I have mentioned, for the Western Isles of Scotland. I would not claim that that is the only area in the United Kingdom for which such a case could be made.

It is really a matter of priorities, because it is not only the Highlands and Islands which have their problems to face. Farming income in general has been declining for a number of years, particularly in the livestock sector. That started long before we took office. We have had to take measures to restrict public expenditure in our efforts to get the economy moving along the right lines. In the circumstances, therefore, we have had to apply such additional resources as we have been able to allocate to the farming industry—from what I have said I hope your Lordships will agree that they have not been inconsiderable—in a way which would do the most good. Most of the money has been spent on direct income aids for livestock production which is, after all, the agricultural activity which predominates in the Highlands and Islands.

There have been statements, some wilder than others, attributed to members of a delegation which recently went to the European Parliament. It was rumoured that the Community might be prepared to provide up to £100 million or so for a development programme for the Highlands and Islands. The point which has been made by more than one speaker tonight, and by my noble friend Lord Home of the Hirsel, is that the United Kingdom Government should not look such a gift horse in the face, if I may use that expression. But it does not need me to tell the House that it is not really as simple as that. It never is, so far as Europe is concerned. Offers of this nature always have strings attached to them.

May I just illustrate it in this way. The Community contribution to such schemes seldom exceeds 40 per cent. of the member state's costs. So it would require a development programme with a gross cost to the United Kingdom Government of £250 million to attract Community funding in the region of £100 million. The net cost to the United Kingdom Government would be well in excess of £150 million, and taking into account our contribution to the budget we could finish up net losers if the development programme for the Highlands and Islands led, as it might, to a proliferation of such measures for other areas in the Community.

I pointed out the difficulties of the substantial cost to the United Kingdom Exchequer, but I do not want to give any impression that there is no possibility at some time of an ADP for the Highlands and Islands. I have to remind your Lordships once again that we are in a difficult economic situation and we are unable to do what we would like to do. I have taken a careful note of what has been said and we shall give careful consideration to any proposals which are made to us.

I see that I have two minutes in which to cover forestry, transport, and a good many other things which I am not going to be able to embrace. I have concentrated on agriculture because I have regarded this debate, rightly or wrongly, as being in reality an agricultural debate. We have some way to go if we are to get profitability in farming to a satisfactory level. I consider that the Government have made a commendable start. Support for agriculture is not the end of the story. I could have told noble Lords, such as the noble Lord, Lord Belhaven and Stenton, of the efforts we have been making, and continue to make, to encourage and regenerate the tourist industry, particularly in the Highlands and Islands. I could have said a good deal on transport, not least on air transport, and why large numbers of tourists prefer to come to Scotland than go to the Canary Islands which is, perhaps, unbelievable to those who live in the Highlands. Those are matters which I shall have to deal with on another day.

Our objective is, and will continue to be, the maintenance of a healthy rural community. Naturally we shall consider very carefully when framing our future policies those matters which have been raised by noble Lords tonight. As I said at the beginning, I will write letters to all those who have raised specific points, and I only apologise for not being able to deal with them in the course of this debate.

7.52 p.m.

Baroness Elliot of Harwood

My Lords, in the half minute I have left, I should like to thank all noble Lords very much indeed for the part they have played in this debate. Whatever else one may say about it, the debate has been enormously constructive. I have learnt a great deal, as I am sure did the Minister, from the reactions which people have exhibited and the stories they have told. The experience has been very valuable indeed and I hope that the Government will pay attention. I am sorry that the debate could not have gone on longer because I enjoyed every moment of it. I want to thank all noble Lords very much indeed for taking part and I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.