ECC 10th Report: Guidelines for European Agriculture and the 1982–83

HL Deb 30 March 1982 vol 428 cc1338-75

7.23 p.m.

Lord Mottistonerose to move, That this House takes note of the report of the European Communities Committee on Guidelines for European Agriculture and the 1982–83 Farm Price Proposals (10th Report, 1981–82, H.L. 101).

The noble Lord said: My Lords, I am privileged to introduce the Motion standing in my name. At the outset I must remind your Lordships that I have to declare an interest, being in the employ of the Cake and Biscuit Alliance and the Cocoa, Chocolate and Confectionery Alliance, and thus have a bias in favour of food processors. I am indeed most grateful to our sub-committee chairman, the noble Lord, Lord Cledwyn, for inviting me to present the report to your Lordships on his behalf, because I had the privilege of chairing relevant meetings when we were taking evidence on which we wrote the report. I am also most grateful to my noble friend and the "usual channels" for facilitating the start of this debate just before dark. At one stage I thought I was going to be able to say well before dark, but we did not quite achieve that.

Our report considers guidelines for the improvement of the common agricultural policy which was issued by the Commission during 1981. It compares these with the price proposals for 1982–83 which were issued late in January 1982. We did not get the proposals in this House until well into February, and this gave us a very short time indeed to take the necessary evidence and to prepare the report. Indeed, though I think we got written evidence from all interested parties at—least, I hope so—we only took oral evidence from a selected few. However, all the evidence is published in vol. II of the report—which is not available today but will be shortly—and I can assure all those concerned that all the evidence, whether written or oral, and at whatever time, has been given due weight in the production of the report.

We also were only able to tackle four of the main product areas, though the price proposals cover another five sectors. There was no time to give them the scrutiny that they deserved. So once again—and we had to do this last year, and I think in pretty well every earlier year—we suggested to the Commission that these price proposals could well be submitted earlier. Just when, one cannot be sure, but clearly late January is not early enough, and we might suggest that they would consider making them before Christmas.

It would also be helpful—I do not know to whom I address these remarks; I rather suspect to the British Foreign Office—if, like many other organisations, but not parliamentary ones, when important papers of the sort of these proposals are issued by the Commission they could be got in some form or another to this House within days, and not in a week or two's time. I hope that my noble friend who will be replying for the Government will take the point that this is something which really is an administrative nonsense. It applies equally to his own department. They cannot get their papers as quickly as they should because they have to go through some process which is quite unnecessary, and yet we find that people who have offices in Brussels, as indeed the Government have, are able to get these papers the next day although official Ministeries, your Lordships' House and the other place, do not get them until some ridiculous machine has been made to work.

On a totally separate matter, the sub-committee fully appreciated that underlying the validity or otherwise of the price proposals was the wider discussion on the budget with its particular implications for this country. In view, however, of the timing of the budget decisions, the undesirability of speculating about them, and the need for an early report if the views of your Lordships' House were to have any impact on the decisions of agriculture Ministers who start their next meetings tomorrow, Sub-Committee D, which prepared the report, had to decide to stick to its last and concentrate on the proposals relating to agriculture and food.

In the interests of time I shall draw the attention of the House to only a limited number of major points in the report, and hope that my colleagues will fill the inevitable gaps. We start with Part II which discusses the guidelines, and those were generally welcomed by all giving evidence except the Dairy Trade Federation. The guidelines were thought by the Committee to be working in the right direction. Indeed, they followed many of the recommendations made by the Select Committee in its report on the common agricultural policy issued in February 1980. Sub-Committee D thus thought it reasonable to examine the price proposals against the background of the guidelines to see to what extent they had been progressed in those proposals.

In Part III the committee considers the guidelines and price proposals against the background of the current economic situstion in some detail. Though agriculture has suffered from the effects of inflation over past years, so have other industries, and it is suggested that agriculture should bear its share of the adverse circumstances. To inject at this point a personal thought, the difficulty seems to me to lie in the conflicting aims of Article 39 of the Treaty of Rome, which is repeated in the report to which I referred on the common agricultural policy in 1980.

I select particularly item (b) in paragraph 8 of the report, which refers to ensuring: a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture". and sub-paragraph (e), which in contrast refers to ensuring: that supplies reach consumers at reasonable prices". The problem is that the balance between those two points—incidentally, I note that Mr. Dalsager, the Agricultural Commissioner, in talking to the European Parliament, picked out those two as being the particular points which needed to be balanced—can be achieved only by giving due weight to the needs of all the consumers of agricultural raw materials as well as giving due weight to the producers of agricultural raw materials. And the Commission is not organised to do that. It has a very strong agricultural directorate-general in DG6, but it does not have anything comparable to look after the interests of the consumers or users of the raw materials. It needs to take a serious look at dealing with the problem.

In Part IV the committee turns its attention to a detailed assessment of the price proposals and notes that they recommend the highest increase yet made by the Commission. For those who have a copy of the report, a glance at the table at the end of paragraph 38 shows that the council has consistently added to the proposals in all the years since this country joined the Community. Not only are the price proposals inconsistent with the guidelines but they make no serious effort to contain the surpluses.

I divert briefly to draw attention to what I believe to have been the most irresponsible proposals made in the European Parliament last week, when, among other things, they called for a 14 per cent. increase in prices. We hope to hear a great deal more about that from the noble Lord, Lord John-Mackie, who kindly went to Strasbourg to attend the debates of that Parliament on behalf of the sub-committee. I would only say at this stage that those who are keen on the preservation of the Community—and one trusts that all the Members of the European Parliament, with the exception perhaps of a few Labour Members (I do not want to divert on to that) want to preserve the Community—really must (and this applies to the Commission's staff, too) take the point that if we go on overdoing the demand on Community resources for the CAP, the people of Europe will start to get fed-up—they are the consumers, after all—and say, "We have had enough of it". It is vital that those points are taken more seriously by those who are in a position to make decisions.

In Part V the committee consider the proposals for the four main product groups, but I will touch only briefly on those in the hope that my noble colleagues will tackle them in detail. The House might note in paragraph 44 of the report that support is given to the proposal for a lesser price increase for cereals than for livestock, thus introducing a welcome balance more favourable to livestock farmers. With regard to both sugar and milk, commented on in paragraphs 60 to 70, the proposals do nothing effective to contain surpluses and indeed pass on extra prices to the consumer. Particularly disappointing is the idea of a super levy specifically designed to discourage increased production, which has once again been discarded by the Commission. Concerning beef, the retention of the British variable premium scheme is welcomed and indeed is recommended as a permanent part of the beef régime.

In Part VI the committee give their view on the detailed effects on the United Kingdom in general and on Northern Ireland in particular, but I expect my noble friend Lord Brookeborough and the noble Lord, Lord Blease, to get their teeth into the latter subject. In the conclusions, in Part VII, the committee summarise the good points of the guidelines, welcoming particularly the concept of production objectives five years hence and the strong recommendation that the common policy should be for food as well as agriculture, on the lines recommended in the committee's 1980 report on the CAP, which is referred to earlier. In paragraph 83, the committee sums up its disappointment at the price proposals not carrying forward the imaginative suggestions in the guidelines.

The report concludes with a summary of the detailed point made by the committee. There are many nuggets of valuable information at the end of volume 1 of the report, in the tables, and I would draw your Lordships' attention particularly to table 9 and the two Ministry of Agriculture notes immediately following it. I believe those to be particularly valuable for general consumption. I suspect we may have two tables numbered 1; there is a table No. 1 at page XXX and another table No. 1, which I think should be No. 10, at page XLVI. That is the only mistake I have found, although I cannot claim to have read through the whole document completely thoroughly.

My noble friends who are gallant enough to take part in this delayed debate will appreciate that the more quickly we speak the more we shall be able to cover. have endeavoured desperately to keep to under 20 minutes; the noble Lord, Lord Mackie of Benshie, did not think I would make it in 15 minutes, and he was right, but I hope to do it in 20.

Lord Mackie of Benshie

Would the noble Lord give way?

Lord Mottistone

I hope the noble Lord will not stop me now, my Lords, because I have nearly finished and whatever the noble Lord wanted to say he will be able to say in a moment. It is sad that the first faltering steps in the guidelines towards rescuing the common agricultural policy from becoming the scapegoat of all the ills of the Community, whether real or imagined, seem to have been halted by this year's price proposals. My Lords, I beg to move.

Moved, That this House takes note of the report of the European Communities Committee on Guidelines for European Agriculture and the 1982–83 Farm Price Proposals (10th Report, 1981–82, H.L. 101).—(Lord Mottistone.)

7.37 p.m.

Lord Mackie of Benshie

My Lords, the noble Lord, Lord Mottistone, moved the Motion in a shorter time than he thought. Like many people outside agriculture, he missed the fact—he missed several facts, but he missed this one in particular—that the clock did not change, so he actually moved it in about three minutes less than the time he thought he would take. However, one expects farmers to be sharper than other people at noticing such matters. I wish at the outset to declare an interest, which is a total, strong and wholly subjective interest. Nothing I say will be fair. It will be directed wholly towards the farming industry because I regard that as the most important industry in the world, one which is in sad straits in many places.

I have been a member of the committee for some years and I have always tried to be objective. I have always thought that the greatest asset a farmer needs is not high but secure prices; he needs to know that he will get a certain price for his produce. He certainly needs, as a producer who takes two, three or four years in planning and producing his goods, to have some protection against the vagaries of the market. In that market, a 5 per cent. surplus can drop the price by 50 per cent., while a 5 per cent. shortage can raise it by 50 per cent., which is much to be desired. But taken as a whole, farmers have accepted that security is more important to production than high prices.

We are looking at the whole question of the CAP, which is what everyone is now doing. We are not discussing simply the price view. We are discussing the whole trend of the CAP, and when we do that we ought to look at the trend in the world. The prices in the world markets are set by two factors. One is the CAP's subsidised export policy. That is one of the major factors in reducing the world price. The other is that in the United States and Canada there are enormous areas of land and by the prodigal use of cheap energy—much cheaper than ours—they race over vast tracts to produce grain in particular at a price which is below the cost of production in Europe.

But how long that can last in a world in which there is a shortage of energy I do not know. I do not think that it can last very long, and certainly we are getting many signs that the world cost of food is going to rise. I believe that we ought to take this factor into account when we are talking about the future of the CAP. I also believe that we ought strongly to take into account what is happening in Europe today. The NFU and other farming bodies have produced masses of figures, which cannot be contradicted, about the state of the industry. I know that all industries are in a curious state; the recession and the high interest rates have seen to that. But in farming there has been a steady decline in real income and an enormous build-up in indebtedness, which in Denmark, with high rates of inflation, is now resulting in a flood of bankruptcies. One-and-a-half years ago there were between only 100 and 200 bankruptcies in Denmark among the farming community, but I think that last year the figure was in the region of 4,000. There has been this sudden onrush of difficulty, and of high interest rates; but it must also have something to do with low returns.

When we look at the CAP we must take into account the other factors as well. I agree that the consumer and the processor have to be taken into account. But in fact the farming industry is in a bad way. It has to its credit tremendous achievements in Europe in the supply of, and continuity of supply of, food and in the lowering of the world price of food. But such achievements will not continue if farming falls into a greater and greater state of indebtedness and suddenly large numbers of small farmers in Denmark and other countries not backed by a strong industrial base start to go bankrupt.

We have the special case of Northern Ireland, which I agree should be treated as a special case when one considers the energy and efficiency with which the livestock industry there was built up on the competent importing and unloading of grain. I agree, too, that we must consider the consumer. I say "consider the consumer"; of course we consider the consumer, we are producing for the consumer, the consumer is our customer. But I should like us to assess how the consumer is doing. There do not appear to be any figures in the report which actually give that information. There must be such figures, and I am sorry that I have not myself managed to dig them out. I should like to see figures relating to inside the Common Market for the consumer's proportion of income spent on food. Certainly as prosperity rose in the Community over the last 20 years the proportion has been going down; I think most people know that. But we really want to know whether the consumer is getting a fair deal. Of course the consumer always wants cheaper and cheaper food, particularly in this country, where there has been a tradition of cheap food from abroad. But I should like to have the actual figures. I think that our Committee might well look them out and try to do something towards showing whether the consumer is getting a fair deal, rather than merely leave it to the consumer to "beef" about general prosperity in agriculture, which is more imagined than real.

The noble Lord, Lord Mottistone, declared his interest with total frankness. I am always "rabbiting on" at him about the processors and how incompetent they are—in a joke, but not much of a joke. The Ministry of Agriculture has produced very interesting figures, which are given in the annex to the report. It is stated: Since the end of 1978 retail food prices have risen 37 per cent. compared with 51 per cent. for the all-items retail price index". That is a considerable difference; it is a very significant figure. But the really significant figure is that of the 37 per cent. rise roughly two-thirds…was attributable to the rise in the costs of processing, packaging, distribution and retailing", and only one-third was related to the miserable farmer who, it is traditionally claimed, is over-fed, over-rewarded and feather-bedded in this country. I think that your Lordships' House would do well to note these official figures. I think that the House should also note other figures, which are easy available, such as those relating to the rise in productivity in farming; and if in this country we had the same rise in industry, we would be way ahead of Germany, France and all the other countries of Europe.

As regards the detail, I have gone over the points and I think I have 10 "Yesses" to our Committee's proposal. One cannot expect a committee to be wholly unanimous in these matters, much though I respect many of our members. I wish briefly to make one or two points on some of the questions raised. Paragraph 85(iii) of the report states that An increase of 9 per cent. in institutional prices is too high, if not accompanied by realistic production objectives". I think that that is a very good point. We really must guarantee a price to farmers. I do not think that 9 per cent. is too high, but the figure must be tied in with some limit to production, and we cannot guarantee any given amount of increased production. The report of the committee also states: The interests of consumers and the food industry should be given greater weight in the formulation of a common policy for food…". I consider that that is not a correct statement. I think that the interests should be given proper weight, not greater weight than they merit. Proper weight at the time depends a little on what one thinks oneself.

With regard to cereal substitutes, although at present the import of manioc is valuable to Northern Ireland, which is a hard-hit area, we need to look at this question in relation to the common agricultural policy as a whole. The common agricultural policy is about producing and protecting the growth of cereals and other crops in this country. Why one should discriminate against the third world producer of barley in favour of the third world producer of manioc I do not know. It is not logical in any shape or form. Personally I disagreed whole heartedly with the committee on this point. Of course we must take account of the damage that has already been done to the economy of Thailand by the encouragement of this production, but we should realise that the situation is not logical.

I do not propose to speak for much longer. I believe that the Committee has done extremely valuable work. It does work that no one else does, and the report is extremely valuable. However we must be very careful that we do not suddenly find that we have knocked back a very competent and efficient industry and that it is then incapable of doing its job when the world trend in production of food might well go into reverse and we might again be short of food in the world.

7.50 p.m.

Lord John-Mackie

My Lords, I have often been thankful that my noble brother is about 12 years younger than me, which has shortened the period that I have had to play second fiddle to him. As the noble Lord, Lord Mottistone, said, on behalf of the subcommittee I was very lucky to be sent over to Strasbourg to listen to the two-day debate on this subject. He mentioned the difficulty of getting papers here. I can assure him that there was no difficulty over there. It was quite amazing how the report or any document one wanted was produced literally within minutes over there. Like him, I see no reason why it should take so long here, and I am glad he has put it to his Front Bench that they should do something about it.

In Strasbourg, the French farmers demonstrated outside the building. My French is not very good but I thought that I should go and try to speak to them to see if I could get anything out of them. The two I fell in with who were willing to speak to me were what I would call roughish sorts of chaps who were obviously a working farmer and a wine-grower from Montpellier, with whom the only thing I had in common was our liking for the stuff. I then pointed out to them that I was a farmer, and they immediately stood back and said, "Oh—a gentleman farmer!" I have always liked the occasional times when I have been called a gentleman, and after 55 years working I can hardly not be a farmer; but when the two are coupled together I cringe a bit. I had difficulty in explaining to them that I really was a working farmer.

I think this demonstration was very well conducted, and I think the French farmers have a case. Obviously their income has been falling very quickly indeed. I spoke to somebody from the Milk Marketing Board who had been at the Paris demonstration, and they said that was an extraordinary demonstration, very disciplined in every way and obviously one that was carried out not to create a furore but really to impress on the French Government the difficulties under which the French farmers suffer.

So far as the debate was concerned, and the set-up there, I was rather disappointed at the very few people who attended for this very important debate. Out of well over 400 MEPs there were roughly only 40 or 50 who were in the Chamber at any one time, until I discovered that every MEP has a room complete with a television set and a comfortable chair and that it is much easier to see and hear the debate there than in the Chamber. Even when the President of the Commission spoke, and other notables, at the small ceremony that there was at midday on the Thursday to mark the 25 years that the EEC has been in existence, there were less than 20 per cent. of the MEPs there. So I was rather disappointed in that.

I also found the debate very difficult to follow. No doubt many of your Lordships have been there, but it is a huge amphitheatre and it was difficult to place the various political categories as they spoke. The other thing was that although I would hand it to the interpreters in their interpretation, it was very difficult to look at a man speaking and listen to a woman's voice interpreting, and vice versa. But you did get used to it.

On a broad basis, I should like to make one or two points. One of the things that was raised was the question of green money, MCAs and the European monetary system. These were mentioned by many speakers, and it was pointed out that the EEC could never operate properly until MCAs and green money were done away with and every country, including Britain, joins the EMS. I trust that the noble Lord, Lord O'Hagan, will come back to this House and try again. We all know the many difficulties in getting rid of the MCAs and the green money and joining the EMS, but I think it is absolutely essential that we get over those difficulties as soon as possible.

Another point mentioned was inflation and the effect that it had on trying to arrange prices with countries with different levels of inflation. This difficulty was brought up by quite a few of the MEPs, and one can quite see, of course, that if you got inflation down to a common level, and a low level at that, then fixing prices would he much easier.

The other broad point I would wish to mention is that many MEPs mentioned the fact that unless the CAP was a success, as it was the cornerstone of the EEC things could go very wrong indeed. I am paraphrasing here, but, as we all know, in Article 39 the objective is to increase agricultural producion to give (1) an adequate supply of food at (2) reasonable prices to consumers and provide (3) a fair standard of living for the farming community. I am not sure that my noble brother would agree with the adjective "fair" when referring to the standard, but I think that is reasonable.

It was very forcefully pointed out by many members that (1)—that is to say, the production of food—had been achieved, but that (2)—the reasonable prices—was in doubt, and, in relation to (3), whatever standard had been achieved in the first 20 years in the last five it had been falling and falling rapidly. This was very strongly put, particularly by the French and the Italians.

At suitable times during the debate the President of the Commission, Mr. Thorn, and the President of the Council of Ministers and the Commissioner for Agriculture all made quite long and detailed speeches to members to try and get them to accept the Commission's proposals of 9 per cent. Of course, it was of no avail, but I should like to quote what M. Dalsager said at the end of his speech: In terms of expenditure alone, the figures are respectively"— that means for the rest of 1982 and then for a full year— about 800 and 1,600 MECU for a 14 per cent. rise in prices. Then: Our own proposal…would mean a net increase in expenditure of about 400 million ECU in 1982 and about 800 million ECU in a full 12 months". But the main point that he made—and I am quoting again—was: We consider that, with the economies that are still possible in the 1982 budget, it should be possible to finance this expenditure without a supplementray budget". I think that is a very important point that he made. However, as I say, their appeals were to no effect.

I shall try to keep it as short as possible, but perhaps I can give some of the main points that were made by the members. One was whether you could graduate prices in various ways in line with the level of inflation in particular countries. This was emphasised by one or two people, but one of the British members did not think that this would work, it would be far too difficult. I think he was probably right there. Of course, great stress was laid on what a 16 per cent. increase would do to the budget figures, which I have quoted. They were 14 per cent., and 16 per cent. would be more; and, of course, as the noble Lord, Lord Mottistone, has pointed out, in paragraph 28 of our report we show the figures indicating what would be the effect of a 9 per cent. increase.

There was a lot of discussion—my noble brother mentioned this—on how much effect each 1 per cent. increase would have on retail price increases to the consumer. One person mentioned what a burden this would be to food manufacturers, and I am sorry to say to the noble Lord, Lord Mottistone, that that was not received very well. There was also much discussion on the closing of the gap between the EEC prices and the world prices, particularly the USA cereal prices. It was very ably pointed out by one member how difficult this would be; that it would only be done by increasing world prices in various ways—increasing the price of the energy required to produce food in the world, and the various tremendous demands that there will be as countries develop and are able to pay for more food—because it would be very difficult indeed to actually reduce EEC prices. One member pointed out very ably that reducing cereal production would simply be cutting our own throats. This is quite right; we would simply have to import more, and the economy would be worse off.

There was a very interesting point made by a British member. As has often been pointed out, the small dairy farmer, particularly in Italy, in France and in Bavaria, has no method open to him other than the production of milk. This British MEP said that there was and I agree with him. Specialised beef production is a possibility in these small dairy farms and it should be encouraged. If this recession would recede, if I can use such a term, then the demand for food should increase, the demand for beef should increase and this would help the changeover from dairying. It should be pointed out that beef production makes for an easier life than milk production.

There was a voluable Greek who said that they were not able to sell their oranges. A lot of countries in the EEC were buying oranges from South Africa and elsewhere. He thought there should be far more emphasis on internal trade. He felt so hot about it that unless things improve, he said, then Greece should get out. I think that all I would say about the French Members is that they were all for the farmers. An Irish speaker made an emotional speech saying that the argument was not about prices but about people. I think there is a lot in what he said. We all know that a rise in farm prices affects the community, the whole community, in the countryside. We are inclined to be talking prices all the time and to forget about the effect on the rural community. He was very much against Britain buying from New Zealand and Australia and he was also against bureaucracy in the EEC, saying that more attention should be paid to the elected body in Strasbourg where he was speaking. He supported the demonstration outside and wanted the full 16 per cent.

Then I would refer to the only person who mentioned the question of reducing costs, which is a very important consideration in this argument. He pointed out that it was the continual increase in costs which caused the demands for increasing prices. He was an Italian MEP and his speech was well received. I think it should be given attention. There was a Dutch Member who felt that the farms were getting too big and, speaking at one time in my life from a large glasshouse myself, I would agree there, because we have got a situation where land is getting into too few hands and the farm family is not farm fully appreciated. Another Irish speaker was very annoyed at Britain. He said they had changed the rules twice. I am not sure which rules he referred to and I am not sure about twice, but he made the point hotly. He felt, too, that national aid should be used more to influence prices rather than on the produce.

A Danish Member, a man after my own heart, wanted all surpluses to be channelled to the people who need them in the developing countries. He admitted that there would be some difficulties with sugar which many developing countries produce; but he has a point. Somebody raised the point that perhaps providing food and advice to the developing countries would ultimately hurt our own farmers, but that was not too well received. One Member thought that we should use food exports, as do the Americans, as a weapon. The point was made that national aid was eroding the CAP and emphasised that national aid would need to be controlled very shortly.

The British Left tore into the farming lobby—and I do not need to tell your Lordships who did the tearing. There were strong pleas for the consumers and it was interesting that in the same Left-wing bloc in the Chamber, the French, Italian and to some extent the German Left took a different attitude, no doubt due to where their political support came from.

There was a proposal that a means test should be developed in order to provide direct aids to farms, but this was not well received. I should say that fvoting took place on 87 resolutions and that all of them, discussed separately, took the whole morning, from 9 a.m. till after 1 p.m. Your Lordships know the result. They voted for the 14 per cent. increase. The British Right voted for it.

On our report, which disagrees with this figure, there will be a lot of argument before the final figure is agreed. On the general principles of our conclusions, I agree; but I would add a rider to No. 4. If a reduction in farm incomes reduces production or creates bankruptcies as in Denmark, as my noble relative mentioned, we shall have a self-defeating exercise. Farm incomes do more than give a living to the farmer and his family. They have to provide for expansion and if the industry has not the resources to do this it will not achieve the objectives of Article 39 of the Treaty. That is all I have to say. I know that there is a lot to be filled in and I hope that some of my colleagues on the Committee will do so. I should like to congratulate the noble Lord, Lord Mottistone, on chairing most of the committee work which was done. I have sat under many chairmen but I have never met anybody better at slapping one down pleasantly, with no umbrage on either side. I should like to congratulate him on the way he did it and the speed with which he carried through this report.

8.7 p.m.

Lord Walston

My Lords, I should like to continue on the note on which the noble Lord, Lord John-Mackie, closed and to thank the noble Lord, Lord Mottistone, for his introduction of this debate and for his chairmanship of those meetings of Sub-Committee D which were largely instrumental in producing this report. I should like also to thank the chairman of the committee, the noble Lord, Lord Cledwyn, for the part he played in this, both in the background and in the foreground, and to express my disappointment that he is not taking part in this debate, not only as the chairman of Sub-Committee D but also as a former Minister of Agriculture and one of the most knowledgeable Members of this House in this whole vast, important subject.

My Lords, I go on, alas! with an apology. I am already overdue at a dinner meeting with the National Farmers' Union at which they wish to put to certain members of the Social Democratic Party their views about agriculture; I should already be there. I hope your Lordships will forgive me if I do not follow the correct—and my usual—practice of remaining until the end of the debate, but I feel it is important for me to move on. In particular, I apologise to the noble Earl for not being here to listen to his final comments. I can assure the House that I shall read in the Official Report not only what he has aid but what is said by all other participants in this debate.

In spite of the place where in due course I am going to take some light refreshment and in spite of the fact that I am a farmer myself, as I think some of your Lordships may remember, I want to make it clear that I am in no way a spokesman for the NFU. In fact, if they were to listen to what I am going to say they might be unhappy that they had invited me this evening. It is not that I do not think that there is strength in some of their arguments; but, as so often is the case in these matters, those arguments are somewhat overemphasised, whereas the other side of the arguments is glossed over.

I suggest that in any discussion on agricultural policy—and that includes of course the pricing mechanism—there are three outstanding points that must be borne in mind. The first of these—I have said this before, but I think it bears repeating—is that farmers have no God-given right to grow food and crops in any unlimited quantities according to what they wish to produce. They have no more right to be farmers than doctors have to cure the sick, than engine drivers have to drive engines or stockbrokers have to broke stocks. The only justification for doing these things is if the consumer wants the produce, if the patient wishes to he cured, if the passenger wishes to be driven in the train and if the investor wishes to have his stocks exchanged. So it is with farming. We can only justify our existence as farmers if we are producing what the consumer wants and, coupled with that, at a price that the consumer can afford.

The second point is that farming is becoming increasingly specialised. The days are past when the average farmer, the typical farmer, had a few acres of wheat, potatoes, turnips and sugar beet, and a few cows to be milked, a few chickens from which he collected eggs and a few pigs that he fattened. Those things are in the far distant past on almost every farm in the United Kingdom and a growing number of farms within the Community.

Farming is a highly specialised operation and a highly capital-intensive operation. You have to be a specialist grain producer, a specialist dairy farmer or a specialist pig producer. In order to be that, not only do you need the expertise—which takes many years to acquire—you also need very heavy capital investment. It follows from that that one cannot shift from one form of production to another, from one form of cultivation to another, depending on relatively minor alterations in the prices of the different commodities year by year. So it is hopeless to think that, by manipulating prices by the annual price review, or whatever one wishes to call it, that takes place in Brussels, one can significantly alter the pattern of agricultural production. That can only be done—and I shall revert to this later—by a long-term policy which people accept and believe in.

The third point that must be borne in mind is that while undoubtedly a decline in the profitability of farming hurts the farmer—he has less money to spend—provided that decline takes place somewhat slowly, he can in the main adjust himself and adjust his form of farming and adjust his way of life. He will not he able to have so good a life as he had when profits were high, but he can survive. In the long term, the real sufferer is the consumer, the nation. We have a vast investment in our agricultural land. If the fertility of that land declines—as undoubtedly it does in periods of declining farm profitability—if the equipment of that land is not renewed and maintained, if the research and development of all the ancillary industries, the geneticists, the plant breeders the cattle breeders, the agro-chemical research chemists and all the rest of them, and the machinery designers also, is not maintained, then eventually there will not be so much investment in all these essential aspects of modern and efficient farming. Therefore, sooner or later, after a period of 10 or 15 years, the efficiency of farming will decline, the cost of food will rise and the consumer will suffer.

It will cost hundreds of millions of pounds to redress that balance. As we experienced in the run-up to the war years, after years of decline of agriculture through the depression, the late 'twenties and 'thirties, the cost to this country of rehabilitating our land and agriculture was enormous. Those are the three factors which must be borne in mind in attempting to formulate an agricultural policy and even in attempting to come to reasonable prices for farmers and for consumers.

The noble Lord, Lord Mottistone, has rightly said that the guidelines produced by the Commission show signs of moving in the right direction and of accepting these points that I have made. They specially recognise the importance of the long-term nature of farming. A five-year rolling programme is the right way in which to start to achieve this, with the Commission saying how much of each of the major commodities it wishes to produce for the consumers within the Community, and basing the price proposals upon that long-term rolling programme. It is very sad indeed that, having said these brave words in the guidelines, today's price proposals make no mention of them whatsoever.

In so far as the Commission attempts to do this, it is in my opinion doing it in the wrong way. It does put forward some target for wheat production for the coming year—a target. But the target is higher than the present amount of wheat produced within the Community. Whatever may be happening in the years ahead—and I think that in the next 10 years we may well experience a great difference in the availability of wheat on world markets—there is no getting away from the fact that there is today a world surplus of wheat and that the price that is being paid to the Community producers is higher than the price that would have to be paid on the world markets. It surely would be right not to reduce the price of wheat but to reduce the target at which we are aiming, to reduce the standard quantity, in view of the world situation.

Similarly, we have a world surplus of sugar, yet there is no mention in the price proposals of reducing the quota that already exists for sugar. I know that it cannot be done until next year, but there is no indication that next year there will be any attempt to do this. With milk, we have the same situation: over-production of dairy products throughout the whole of the Community. Although there could be a super levy by which, in effect, the price received by the producer for milk would he reduced pro rata according to the amount by which the producer exceeded the standard quantity or quantum—whatever word one wishes to use—the price proposals have run away from even that step in the right direction.

It must be a fact that, once this quantum, this standard quantity, this objective—whatever one wishes to call it—has been fixed, it will be then very much easier to arrive at an appropriate price for the commodity in question. So far as I am concerned, I think that the target that they propose—an overall target of a 9 per cent. increase in price—would, given the situation as it is today with inflation of costs, be a perfectly reasonable one if the quantum that was to be produced and which was subject to this guaranteed price, was in fact a realistic one instead of being an increase on the present year.

I say that I would support a 9 per cent. increase in price because some facts that perhaps we do not appreciate enough are contained in this important little publication, The Annual Review of Agriculture 1982 from the Ministry of Agriculture. On page 12 is a table (Table 1) which shows that the annual average index number of the price of goods and services currently consumed in agriculture—in other words, the cost of inputs—where 1975 was 100, is now 203: that is, it has slightly more than doubled in the last six years, whereas the annual average index numbers of producer prices for consumer products during the same time have gone up only 75 per cent. I know that other industries are suffering the same squeeze and I am not complaining about it, but one must realise that this is happening and one must also realise, as the noble Lord, Lord Mackie of Benshie, rightly pointed out, that the prices received by the farmer within the Community have risen very much less than has the Retail Price Index or the general level of inflation.

It follows from this that the effect on retail food prices will he far less than the actual 9 per cent. rise and, on the Retail Price Index, even less than that—something of the order of 1 per cent., if as much as that. Therefore, I suggest most strongly that, in the long-term interests of consumers no less than in those of the producers, it is essential that farmers should have realistic and even generous prices for that quantity of their produce that the Community wishes them to produce. They should be free to produce as much as they like in excess of that but should not go to the Community for guaranteed prices, to take it into intervention, or to subsidise their exports. They must carry the can for anything that they produce which is surplus to these amounts.

These quantities and the prices should be set so far as possible within the five-year rolling programme and—this is a very important point—they must not be used as bargaining points within the EEC's discussions on other matters. I sincerely hope that in the discussions which are to take place shortly Her Majesty's Government will not use as a bargaining point in the overall discussion of the British contribution the matter of farm prices. It is too important to be used as a pawn in a matter of this sort.

Agriculture will never flourish and consumers will never be properly served if food production is used as a political football or as a means of bargaining between member states. It must not be influenced by the fact that there may be an election in France and the farm vote is important; that there is an election in Bavaria and the Government are losing ground; or that there is an election in this country and consumer prices must be kept down. These are not factors which should be borne in mind in arriving at decisions on matters which affect not the immediate future—they cannot affect that—but the future well-being of this country's and the Community's most important industry and the industry which provides the very means of livelihood to the whole of the population.

8.25 p.m.

Lord Stodart of Leaston

My Lords, I, like many others so far, must declare an interest. I am a farmer and I have no hesitation about saying that I am thus biased heavily—though I think not quite so heavily as the noble Lord, Lord Mackie of Benshie—in favour of food producers. But I do congratulate those who have produced a most interesting report—and I agree with the noble Lord who said, "with many nuggets of valuable information". However—and this is perhaps where I may become slightly irreverent—I am bound to say that I feel a certain wry amusement at the views which have been expressed in advance of this debate in material sent to us by the food producers (the National Farmers' Union), on the one hand, and, on the other, the food processors and distributors, who I think I might refer to as the FMF. My amusement extends also—I hope with not excessive irreverence—to the views of the Select Committee as expressed in one sentence in paragraph 83, which says: Last year the Committee recommended that guidelines should be based on a policy for food and agriculture combined. That remains the Committee's strongly held view". On at least five subjects, neither of the two organisations seems to agree at all. On cereals, if I may paraphrase, the NFU found it "totally unrealistic and unacceptable to reduce prices". The FMF said that prices should not be increased. On sugar, the NFU asked for an above-average increase and the FMF asked for a freeze on the present price. There is a certain amount of agreement on peas and beans, in that each organisation welcomes the intention to support for human consumption, but they fall out over the demand made by the NFU for a higher price. On milk, the NFU say: "Suspend or reduce the co-responsibility levy", and, "No discrimination to favour small farmers". On the other hand, the FMF call for the price mechanism to balance supply and demand. As for the green pound, the NFU say very firmly, "No revaluation", while the FMF say "Revalue at all costs". So there is hardly a point on which they seem to agree: yet these are the two arms of the food industry with which my noble friend the Minister of State for Agriculture and Food—forgetting about fisheries for a moment—has to deal. I suggest that the composure which my noble friend invariably shows is quite remarkable, although this is perhaps no particular surprise to those who know him well.

My wry amusement goes back to a conversation which I remember having, when I was in my noble friend's position at the Ministry of Agriculture about 12 years ago, with a leading figure in the supermarket world who came to see me to question a statement I had made at a public meeting. The statement was to the effect that, of every pound that the housewife spent, the farmer at that time, in the days of the old currency, received six shillings and eight pence. That figure was official then, and I am led to believe that the farmers' share now is down to nearer 25p than 33p. But this supermarket leader asked me, "Why cause a breach between farmers and distributors, because our interests are precisely the same?" My reply then, as it would be today, was, "Our interests are, in fact, diametrically opposed. You want to buy as cheaply as you can, given that you are given the highest quality. I want to sell for as high a price as I can get". Profit is not altogether an irrelevant barometer of efficiency, and farmers are continually, and very rightly, being urged to be more efficient. What is more, one thing in these days of very high interest rates that would make perhaps not a substantial contribution, but a very significant one to farmers' cashflow, would be if these big supermarkets, who are taking up more and more of the food supplies of this country and who seem, from what I observe of them, to draw vast sums from their consumers in cash, could help farmers and distributors who supply them by paying them a bit quicker.

The Food Manufacturers' Federation point to overproduction in certain commodities and they call for a freeze on prices, if not a reduction. I would defy anybody so to arrange things that there is neither a shortage nor a surplus of food produced in this country. It is not possible. Of the two, I am in no doubt that surplus is the better, provided that it is not too great. One may well ask why beef is costing so much today. In one West End store at the moment, fillet steak is being priced at over £6 a lb., and I think the indications are that beef is in very short supply. It is certainly true that every abattoir in the country is working under capacity, so far as beef is concerned. If you freeze prices, what happens to production in an industry whose income went down by half in real terms between 1976 and 1980, whose borrowing has doubled in the last three years and whose prices have risen by just over 30 per cent. in the last three years, compared with a rise in food prices of 37 per cent.—this figure has already been given—and a rise in the retail price index of 51 per cent.? Without doubt production would start falling and investment would tail off still more.

I totally agree with what the noble Lord, Lord Mackie of Benshie, said about farmers' desires for stable prices, and also with the noble Lord, Lord Walston, who spoke a few words, if I may paraphrase them, about the hopelessness of darting about out of one kind of production into another, trying desperately to follow the market. I did it once in the days of my youth before the war and it landed me in the most appalling mess.

I take the point made by the FMF about consumer resistance. I would only say that consumers have brought a tremendous lot on themselves, by demanding such things as convenience foods. I have no doubt there is a figure showing what that has done in sending up the prices that consumers have to pay. I agree that some farmers still take that old wartime attitude of saying "I have grown it and you bloody well buy it"—

The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers)

Order!

Lord Stodart of Leaston

"You jolly well buy it". This is why, while I think that the FMF is wrong to ask for no increase, I believe that the NFU goes too far. I think we have to share in the inflationary problems of others, and I am afraid—disagreeing with the Committee in this—that I think the 9 per cent. suggested by the Commission is not far wrong, provided that there is, as I am certain there will continue to be, an increase in productivity.

Of course, the CAP has many faults. It seems totally ludicrous that, apparently, serious thought is being given to paying higher prices for milk to farmers with five cows or even less. I cannot help wondering why note cannot be taken of the success of this country's agricultural policy in increasing the cow numbers in our herds and the higher productivity and lower costs that this has achieved. As I have many times told the House as a simple farmer: Oh! for some simplicity in the various jargon that the CAP uses. Ten years ago, all that was pretty impossible to understand were things called positive MCAs, supplements and abatements to target prices. But now we have not only positive MCAs but negative ones. We have the milk co-responsibility levies and proposals to modulate them, and grain weights quoted in kilogrammes per hectare-litre: and I defy any noble Lord to convert those into pounds per bushel, even with a pocket calculator. If only we could get some of the terms that are used in the Community changed, so that farmers could really understand them, it would be a tremendous blessing. I would say: Yes, by all means trim the fat and the flabbiness off the CAP. There is a tremendous lot of it there. Make it into a much more effective and a much more disciplined machine. But what experience I have had leads me to be a very strong supporter of a really healthy and highly productive home agriculture.

8.39 p.m.

Viscount Sidmouth

My Lords, 1982 has not only brought the 25th birthday of the European Community, but is also proving to be somewhat of a crisis year. By fairly common consent, this crisis arises from the predominance of the common agricultural policy in the affairs of the Community, even though it is only one of the subjects deemed in the Treaty of Rome to be in need of a common policy. This situation traces back to the political facts of life when the Community first came into being, in that, owing to the unfortunate absence of Britain at that time, the two countries whose interests had most importantly to be considered were Germany and France. Accordingly, a basic deal was struck, whereby Germany gained a great new free trade area for its manufactured goods and France the same for its agricultural produce. Thus, from the start, the advent of Britain with its efficient agriculture was bound to create problems, which have yet to be resolved.

The basic procedures of the CAP have seemed vulnerable, ever since they were first enunciated some 20 years ago, in their declared purpose of ensuring a fair return to the farmer at reasonable prices to the consumer. Several noble Lords have referred to this project which is, in any case, akin to squaring the circle. There are those who think that it can only be done by having an unlimited world market in foodstuffs, with the rules of competition being the final arbiter of prices. This is neither the time nor the occasion to examine why that policy is considered unworkable and has been rejected by the Community in favour of a managed régime within the economic boundaries of the Community itself. The doubt, I believe, has always been that the system of support and guaranteed prices which has been adopted would not in itself be sufficiently finely tuned to control the surpluses which were in some cases endemic when the Community came into being.

In the event, the machinery has worked rather better than might have been expected, though not without producing some well-publicised surpluses and throwing up the problem of the British balance of payments. The guidelines for European agriculture, produced last year by the Commission and referred to in paragraphs 7 and 8 of the report of the Select Committee, must be seen as going a considerable way towards better regulation of overall production, though hardly perhaps in themselves towards solving the British problem.

The report approves the guidelines in the main, with the exception of the "active export policy". It goes on, however, to touch on what is thought by many to lie at the root of the matter, which is political acceptance. In a speech last night the President of the Community referred to the increasing divergence of views between the member states which is rapidly creating a situation where policies, soundly based on economic and administrative sense, get lost or contorted in the political punch-up. He attributed these bad effects to General de Gaulle's concept of Europe des nations and the doctrine of unanimity, which in effect gives a veto to each member state in all policy matters that fall to be decided by the Council of Ministers. Further progress will probably only be assured when the Council is ready to proceed by way of voting, which is provided for in the Treaty of Rome, but that day does not at present seem to be in sight.

If I declare an interest, it would normally be as a horticulturist with strong farming connections. In fact, British horticulturists have only a marginal interest in the price proposals, since very little of their produce goes into intervention. Although we come within the common external tariff, most of the strongest competitors for our market are also within the Community and we are therefore exposed to the full blast of competition, having been until nine years ago an industry fairly strongly protected by national tariffs. As some of your Lordships will be aware—and I believe that this includes the noble Earl the Minister—we are battered but unbowed. We have recently suffered serious and unfair damage from the application of national aids, and proposals regarding the Dutch gas price for their glasshouse industry are still awaited. It is much to be hoped that they will be made known before this House comes to debate the forthcoming report of the Select Committee on National Aids.

Finally, I believe the report is right in drawing attention to the importance of realistic production objectives which should be a complement to the proposals on price. In this context, it may be that price increases averaging 9 per cent. across the board are too high, but so far as the British farmer is concerned this would come down to 5 per cent. if the revaluation of the green pound is put into effect. The combined result of both sets of proposals is well set out in Table 2 of the report, which indicates that after allowing for anticipated inflation the implied real price change for British agriculture would be minus 6 per cent. in the national currency. On this basis, no one could deny that farmers are being called upon to make great sacrifices at a time of economic recession.

8.45 p.m.

Lord Collison

My Lords, I was under the impression that this debate was going to take place very much later. I am glad that arrangements have been made to bring it on earlier, but because of that anticipation I went upstairs and the Writing Room is littered with paper which I have thrown away. Therefore, my speech may appear to be a bit staccato and I hope your Lordships will forgive me for that. There are one or two points that I want to make, although a few of them have already been mentioned.

First, may I thank the noble Lord, Lord Mottistone, for his chairmanship of the committee and for introducing the report. As has already been said, the noble Lord was a very able chairman. Under his leadership and guidance the committee made good progress and I believe that it has made a good report. As the noble Lord said, last year Committee B said that the Commission should publish its annual review proposals much earlier to give time for public discussion and debate before the Council of Ministers considered them. This year the proposals were issued at the end of January. The committee welcomed this. However, there was still very little time for proper examination. Therefore, the committee once again reiterated its view that the Commission should publish the price proposals before the end of the preceding year.

On the guidelines, the Commission's statement, After 20 years the CAP needs to be adapted to the new realities of general economic conditions and of the agricultural sector itself is to be welcomed. It shows a sense of realism and underlines the need for progressive change.

The evidence showed that the guidelines, although criticised in many directions, were generally seen to be a step forward. The committee also took that view and considers the guidelines as a serious and useful attempt to identify deficiencies of the CAP.

The committee welcomed the proposal to issue the guidelines for five years. We believe that this is an excellent proposal, but obviously it must be—and we clearly said so—on a rolling basis. One could not set prices, for example, for five years in advance or even for next year in advance. It has to be done on a rolling basis and I am sure that that point of view will be accepted. It is equally true that action will have to be pursued consistently over several years. I am sure noble Lords will agree that it is completely unrealistic to think it would be politically possible to introduce overnight comprehensive and radical change, since any such attempt could only be disastrous for agriculture and its associated industries. Nevertheless, it was seen as important that positive implementing action should be taken this year, and we hope that they have tried to take some action which is in the direction to which the guidelines point.

The question of prices is a matter, as we have already heard this evening, of considerable controversy. On the one hand, in their evidence the NFU argue that the proposed increases are too low. We have heard about what has been happening on the Continent. We were told by the NFU of the difficulties which British agriculture has faced and of the problems relating to real incomes in the light of the proposed changes. I do not need to go over all that again, because it has already been dealt with so ably by other noble Lords. On the other hand, others, including representatives of the food industry and the consumers, have taken the opposite view. They think that the prices are too high. This difference of opinion was to be expected. There are two interests which appeal to be clashing with each other in expressing their own particular points of view.

However, in the Commission's statement the point is made that taking the real world as it is, a case can be made on security of employment or balance of payments grounds for maintaining premiums on output, by fixing institutional support prices at a level that represents a percentage above that determined by market forces. Agriculture has a legitimate claim to be included, but there are risks involved—for example, the danger of the industry ceasing to improve its competitiveness by raising its productivity. We have stressed that premiums for agriculture should be geared to efficient production and rising productivity. This is particularly true for those commodities which are in surplus. There is a danger too that surpluses might be perpetuated (and this could apply to the export policy too) which the consumer has to subsidise, because the high intervention prices will encourage farmers to put their crops into intervention.

There are matters of general agreement. On green currency the committee endorses the view that adjustments should be made in accordance with their expected effect on member states, which would mean a much smaller adjustment or MCA for the United Kingdom. The NFU pointed out that the Commission's proposal would reduce the value of the proposed 9 per cent. price increase (if the figure is going to be 9 per cent.) to less than 4 per cent. On some individual points, there was strong support for the committee's views on basic and super co-responsibility levies. The Commission wishes the levy to remain at 2½ per cent. This levy was intended to be used to raise revenue for the disposal of surpluses, but the sum raised is much more than can be used for that purpose so that, as the consumer representatives say, the levy is really a tax on consumers and will tend to reduce consumption rather than increase it.

The Ministry of Agriculture has always opposed the basic levy on the grounds that it has done nothing to control the surplus but has simply transferred the cost of financing it to the consumer. I understand that since our report has been published, proposals have now been laid before the European Parliament which envisage a reduction in the co-responsibility levy from 2.5 per cent. to 1.5 per cent. on the first 60,000 kilogrammes of milk supplied. That does not alter the point which has been made. The Ministry has pointed out, as we have done, that there is a great hardship on the efficient British farmer and on their efficient farmers elsewhere, because of the method. The Committee regret that the idea of a "super levy" on production in excess of the approved level has not been taken up and if it is not, believes that the levy should be much reduced if not entirely removed. With regard to the proposed exemptions for the small producer, the Ministry of Agriculture has estimated that if the measures were applied to the first 30,000 kilogrammes, a quarter of EEC milk production would be exempted. The proportion would range from 10.5 per cent. in the United Kingdom compared to a maximum of one-third in Germany, so that the United Kingdom would be funding substantially more than the others, which would amount to a very significant discrimination against the more efficient producers in the Community.

The committee expressed sympathy with the objective of helping small farmers but felt this should be done by direct income payments via social and regional funds. The committee also felt that certain steps had been taken in the direction of the guidelines and while they appreciate that one cannot go too far or too fast towards totally implementing the proposals, they hoped that something more could have been done on this occasion. With regard to the arguments about the price level, I am convinced that it is important that agriculture should be healthy. I am equally convinced that consumer interests should be looked after and that the interest of the trade should be looked after too. I see no reason why these three interests should not be met without damage by one to the other. If a proper policy is evolved, and I hope that it will be after the guide lines have been properly implemented, we should experience no difficulty, and disputes in most fields will be resolved because there will be a common interest.

8.57 p.m.

Viscount Brookeborough

My Lords, I first wish to thank my noble friend Lord Mottistone for his very able introduction of this report and I also agree with other noble Lords in paying their compliments on his handling of the committee as its chairman. I would also like to join with the noble Lord who expressed his sorrow that the noble Lord, Lord Cledwyn of Penrhos, was not taking part in this debate because at the other meetings at which he has chaired the committee, we could not have been better chaired.

My noble friend Lord Mottistone was faced with a time factor and he certainly carried that through when it came to the revisions. I would like to pay special tribute to our specialist advisers, our clerks and our printers. Whipped on, as we were, by the noble Baroness, Lady White, to get the report through on time, the printers were faced with an unreasonable task and they have done a magnificent job. I would like that to be recorded. I should like to thank also the noble Lord, Lord Mackie of Benshie, for his support on those problems which affect Northern Ireland. I feel that my noble friend the Minister has really had quite an easy ride because I had understood that my noble friend Lord Mottistone was going to give him a slight roasting. I hope my noble friend the Minister will be able to answer some of the problems which we shall put to him.

I would like to draw the attention of this House, first, to paragraphs 78 and 79 in which, for the very first time, a separate paragraph for Northern Ireland and its special problems has been inserted. I should like to thank noble Lords on the sub-committee and on the whole of the Select Committee for their co-operation and sympathy in dealing with what is really a very special and difficult problem.

Agriculture is the most important industry in Northern Ireland. As, daily, other industries are hammered the position of agriculture becomes more dominant. Unemployment in our Province is running at twice the national average and so the importance of maintaining employment and of maintaining the social structure of Ulster becomes even greater. The noble Lord, Lord Stodart of Leaston, said that the income of farmers in the United Kingdom has gone down by 50 per cent. He may be using a different date on which to base that figure, but the figure I have for the United Kingdom for 1974 is 20.6 per cent. But, even if it is 50 per cent., when we compare the amount that the income for the farmers of Northern Ireland has dropped—85 per cent.—we can see what a catastrophic situation is facing agriculture. I am sure, therefore, that noble Lords are not surprised at the interest I take in this discussion of both the guidelines and the actual price review. I join with other noble Lords in declaring an interest. I do not believe that any noble Lord reading Hansard would be under any illusion that I am growing fat on the profits of the CAP, because our income has dropped by 85 per cent.

The brutal fact about the CAP is that, so far as Northern Ireland is concerned, it is a disastrous policy. Here we have an efficient and ingenious industry which is surviving now on national aids provided by Her Majesty's Government in Westminster. Each of these national aids is laboriously negotiated in Brussels, wasting a lot of time and a lot of negotiating room for manoeuvre. It cannot, in my view, be a long-term solution.

In paragraph 79, our committee suggested that special measures would be needed to redress the disadvantage just mentioned, and they say: The Commission has recognised that special circumstances affecting Northern Ireland justify special arrangements". This is because in the sheep régime special arrangements are being made. This paragraph was triggered off by the proposals in the guidelines and the price review to limit the importation of manioc from Thailand and maize gluten from the USA, and to put four times the duty, £40 a ton, on bran and wheat screenings. The Select Committee has made clear its opinion about the intention to do this in another report. If this action were taken by the Commission, I believe that the effect on our trading partners would be far more damaging than has been appreciated so far. The underdeveloped countries, such as Thailand, irrespective of what has happened in the past, would not trust us any more if we in the EEC encouraged another underdeveloped country to develop something else. I agree with the noble Lord, Lord Mackie, that it is difficult to justify bringing barley from a third world country under duty and not doing the same with manioc, but the fact is that the EEC encouraged the production of manioc and we cannot now duck our responsibilities.

So far as the United States of America is concerned, I do not believe for a moment that they would take kindly to limitation on their export of maize gluten. So what would we have? We should find ourselves able to hammer the weak, the underdeveloped, and unable to touch the strong in the shape of the United States of America. The effect of this—and I am now talking about Northern Ireland—would be to raise the price of compound feed in Northern Ireland. On accession, Ulster was denied access to the world market with a very efficient pork industry. The position today is that the pig industry is down by 40 per cent.; where we were killing 30,000 to 40,000 pigs a week, we are now killing about 17,000 pigs a week. But the industry—that is, the whole industry, the farmers and the millers—by ingenious use of manioc and other cereal substitutes has managed to stabilise itself. Now what happens? Once we have got the industry stabilised, the Common Market is about to change the rules, and change them, so far as I can see, without any reference to the damage it will do to Northern Ireland agriculture. Maybe they hope the Government at Westminster will provide more natonal aids to take us out.

I speak with the full authority of the industry when I say that any extra costs applied to Northern Ireland as a result of this decision must be compensated for. If any extra costs are not compensated, then we are going to halve the industry again; we are going to have 5,000 people on the dole at an expense to the Treasury of £25 million. We have suggested in our report that there shold be an incorporaton levy or subsidy, as happened with skimmed milk in days gone by. This would only cost about £3½ to £5 million, depending on the rate of the levy and other matters. Surely this must be the right thing to do in view of the appalling social consequences which would happen if we did not have a compensating subsidy.

I now turn to milk. As everyone else has said, we are all opposed to the co-responsibility levy. It is too high. It cannot be used for the purpose for which it was originally raised, for the promotion of the product. Here again, Northern Ireland has a special problem, and this is a result of a decision by Her Majesty's Governments of the past, because on accession it was decided that the method of determining the price for milk in the United Kingdom should be on the mix of liquid milk and manufactured milk in each of the Milk Marketing Board areas; that is, the Northern Ireland mix should be one thing and the Great Britain mix should be another. In Great Britain the amount of high-priced milk going into the mix is 50 per cent. of production; in Northern Ireland it is only 17 per cent. The result has been a significantly lower return to the Northern Ireland producers. This has been recognised by Her Majesty's Government and annually they have given national aid, but the result has always been a haggle with Brussels in which we have been uncertain whether we should in fact get Brussels' approval in the end. And it has been inadequate, The profit margin in Northern Ireland is 1p per litre. The profit margin in the rest of the United Kingdom is 2.3p per litre.

I should like to ask my noble friend, is the figure in Great Britain too high or is the figure in Northern Ireland too low?—because there are no extra advantages to producers in Northern Ireland. We may grow grass more easily, but our fertiliser prices are higher. I feel that the gap between our price and the Great Britain price is too large. The difference so far, which has been made up by the Government, has come out of the Northern Ireland budget and not out of the Treasury in the United Kingdom. I wonder whether, in budgeting, if they cost production in Scotland, the extra price that the Scottish milk producers get is charged to the Scottish budget. The super levy has been advocated by Great Britain. But in Northern Ireland terms the super levy would punish us too hard. Milk is the one product which we can expand in and in United Kingdom terms it is not in structural surplus.

The time is getting on and I feel that I must try to cut short what I had proposed to say. Everything that has happened in Northern Ireland in the form of national aids has been a short-term solution. I think that in our report we provide the key. The key lies in paragraph 24 of our report, where we say: In their report on the Budget Reform, the Committee drew attention to the inequity caused by the present structure of the Budget.… In the current world situation this inequity arises largely because:"— and I shall not bother about Nos. (i) and (ii)— because of its relatively advanced farm structure, the UK's receipts from the CAP are proportionately less than those of most other Member States". I think that that provides the key. Where I feel that the Government have not really played their part strongly enough or looked after Northern Ireland's case strongly enough, is in urgently pushing through a reform of the less favoured areas extension. That, if it were granted, would be an aide—to use the horrible word—communautaire that would be in accordance with the policy of the Community. It would not, therefore, be subject to constant review and constant haggling.

We are told that the Northern Ireland areas review—in fact it is now public—was carried out about two years ago, but the Northern Ireland case has still not been presented to the Commission. We were told that the whole United Kingdom case would be put in six weeks' time—that was some time at the end of November. It still has not been presented. The President of the Ulster Farmers' Union has told me himself that the Commission are anxiously waiting for the Northern Ireland case to be provided. Because it is a form of aid which is in accordance with the Community policy, they have promised to push it through extremely quickly. If Her Majesty's Government have the resolution, it is possible that the amount of money provided by the Community might go up beyond the level which is given at the moment. I press Her Majesty's Government to get on with the job. There would be less haggling; Ministers would suffer less wear and tear, and maybe our future would be assured.

9.11 p.m.

Lord Blease

My Lords, I should like to join in thanking the noble Lord, Lord Mottistone, for tabling this Motion which has enabled this House to debate and consider the important issues arising from the report. At this stage in the debate it is my intention to be brief. At the outset of my remarks I wish to indicate support for the points made by my fellow countryman the noble Viscount, Lord Brookeborough. Speaking as I do from these Benches, I should like also to say that I have every confidence in our Front Bench spokesmen on agricultural affairs. Their interest in Northern Ireland is well known. They have had ministerial responsibilities from time to time and, of course, my noble friend Lord Bishopston will be dealing in more detail with aspects which arise from the report.

My remarks are mainly directed to the position of agriculture in Northern Ireland. I find it encouraging that the Select Committee considered and reported in some detail on the particular and difficult problems of Northern Ireland's agriculture. Some of the problems, as has already been mentioned, are contained in paragraphs 78 and 79 of the report. At the same time, I must express disappointment that there is no direct reference to Northern Ireland in the summary of conclusions. I felt that, having justified two extensive paragraphs in considerable detail, at least they would have merited some consideration in the summary of conclusions.

Others have declared an interest in this particular debate. My working background and experience has largely been in trade unionism. It is from that background and experience that I can say that the agricultural and farming community is firmly integrated into all aspects of life in the Province. Manufacturing, commercial and business life in Northern Ireland is greatly influenced by the prosperity and buoyancy of the farming community. Trade unions and the Ulster Farmers' Union have very cordial working relationships. In the Province, where unemployment is at 20 per cent., as the noble Viscount has already mentioned, we depend a great deal on agriculture, which provides over 13 per cent. of the jobs. Much of the employment in the food processing industries is dependent on effective and efficient farming policies.

There are sound economic and social reasons for the United Kingdom Government and for the decision-makers in the European Economic Community to take urgent and appropriate action to ensure the revitalisation of Northern Ireland agriculture. In this connection, I should like to place on record the views expressed by the Ulster Farmers' Union in a statement issued on 4th March this year. They say: For social and security as well as economic reasons it is vital to maintain economic activity and employment in the Province. We believe therefore that at this time agriculture should be enabled to make its maximum contribution to the economy rather than being run down as has been the case in recent years. In 1980 the net income of Northern Ireland farmers in real terms was just 15% of the average for the years 1973 to 1978"— a point that has already been mentioned by the noble Viscount. That is a reduction in income of something like 85 per cent. The statement goes on to say: Bank borrowing by farmers increased from £98 million in 1978 to £186 million in 1981 mainly to keep farms going. Interest paid rose from £13½ million in 1978 to £29½ million in 1980 and £26½ million in 1981. Investment has been minimal and maintenance has been delayed. New tractor registrations were 2,421 in 1978 and 970 in 1981. The industry has been debilitated. A radical improvement in profitability is needed to restore vigour and confidence to our farming and to enable farmers to make a start on reducing indebtedness". That is an official statement from the Ulster Farmers' Union. It portrays to us the deplorable situation in which the farming community has been placed in Northern Ireland.

You cannot get productivity and you cannot get increases in output unless there is proper investment and proper financing in connection with the economics of the farming community. Therefore, the policies that have been carried out by this Government and by the EEC have been seriously impairing the effectiveness of the farming community in Northern Ireland.

It would be wrong of me to give an impression that the United Kingdom Government have not done anything to help, because they have given some aid within the last couple of years due to the extreme depression in Northern Ireland farming. The United Kingdom Government made available £10 million special aid for 1981 and have proposed £16 million for 1982. In this connection the Ulster Farmers Union states—and here I again quote from the statement of 4th March: If our farmers got the same returns for their produce as farmers in Great Britain and obtained their inputs, particularly feeding-stuffs, at comparable prices, the need for this special help would not arise. The effect of these disadvantages on the net income of Northern Ireland farmers varies from time to time. Within the recent past the effect amounted to £40 million per year". In other words, the statement indicates that, although they received £10 million in aid, they lost £40 million in any particular year—that is, a bad form of business if you are £35 million down, with the rate of inflation as it is at the present time.

Paragraph 21 of the report mentions that there are considerable differences between member states in the pattern of agricultural incomes. The report attempts to deal with some of the problems affecting farm incomes and especially mentions matters, such as agri-monetary measures, the cereal support prices, cereal substitutes and agricultural production targets. The report and the committee attempted in some way to deal with the detailed problems arising from these various issues. I believe that the committee noted the great disparity in farm incomes, not only between members countries but between farms within national boundaries. It is in that respect that I wish to follow the point made by the noble Viscount in dealing with the issue of the less favoured areas.

I may be wrong but nowhere do I find in the report that the Select Committee deals with this particular issue. Paragraph 48 deals with national aid, and hence perhaps there will be a future report dealing with this aspect of the problem, and paragraphs 15, 16 and 17 also skate around the issue of general economic conditions. But this is the most important factor so far as the Northern Ireland farming community is concerned, and has been highlighted by statements fom Ulster Farmers' Union and by their president within recent days.

The statement issued by the Ulster Farmers' Union in this connection—and I shall quote from it although it has been mentioned in considerable detail by the noble Viscount, Lord Brookeborough—indicates: A Government survey has shown that a substantial area of the Province which is not now in the less favoured area meets the criteria for inclusion. By definition conditions in areas which meet these criteria are such that the work in farming is hard and the income meagre. But in Northern Ireland even before the current economic depression, alternative employment was so scarce that families had little option but to remain on their farms". In other words, as Members will well know, most of the farms in Northern Ireland are simply one-man operated hereditaments, and they are not able to sustain the families of the particular farmers, who are expected to look for employment elsewhere. But in a situation of high unemployment, as it is in Northern Ireland, this is an extra burden that farmers have to bear. The hardship to farmers in these areas is a matter of serious concern to the Ulster Farmers' Union". The statement goes on to say: Government started a survey of marginal land three years ago, but have been inordinately slow in doing that work and preparing the case for the consideration of the Commission". And: Three Weeks ago the Minister said the submission would be made within a few weeks"; and the Ulster Farmers' Union are pressing the Commission and the United Kingdom Government to make an early decision in connection with this particular issue of the less favoured areas.

I should like to end by expressing gratitude for the amount of work that has been put into this particular report by the committee, and for the fact that Northern Ireland has been specially mentioned not only in the report but in this debate, and for the interest that has been shown by a number of noble Lords in this aspect of it. I would compliment the chairman for the forthright way in which he presented the report to this House this evening. I feel that it has been a worthwhile debate, but I would urge the Government to get down to some form of action arising from it.

9.24 p.m.

Lord Forester

My Lords, at this late hour I would only make three points. Our concern is about the inequity of our contribution to the common agricultural policy. I should like to take up the point raised by the noble Lord, Lord Collison, about variable co-responsibility levies and modulation. In fact, my noble friend Lord Stodart stopped short on the latest terminology—probably wisely—of the principle of progressivity. That means that, with the variable co-responsibility levy, 78 per cent. of our production in the United Kingdom is paid at a higher level compared with 23 per cent. in Germany and 24 per cent. in France.

Those figures are bad enough, but they introduce a dangerous precedent. If the Community decide in the future that the cost of disposing of extra production should be borne through co-responsibility levy, that principle of progressivity would mean that our contribution, instead of the current 17 per cent., would be at least 20 and possibly 25 per cent., when we produce only 16 per cent. of the milk. We are trying to resolve inequities from the past. We must be careful that the Commission are not introducing new ones even now. I believe in the wider context of the Common Market. If it is to be effective, we must solve the inequities now. We have had one bite at the cherry. We now try for a second bite, possibly for five years, a five-year agreement with the Commission. Surely we must resolve the problem in the long term, before the EEC is enlarged again and the problems become even more complex.

In volume terms, investment in 1981 was at its lowest level for over 20 years. We did not come out of the 1981 price review negotiations at all well because the realignment of the central currency rates allowed every country bar ourselves and Germany to devalue, thus increasing the prices to their farmers. It must be right, especially if we want increased investment to keep British agriculture where it is, to ensure that our farmers receive at least the average increase received by other European countries. I hope Her Majesty's Government will be able to achieve those points.

9.28 p.m.

Lord Bishopston

My Lords, I thank the noble Lord, Lord Mottistone, for introducing the debate, which covers the 1982–83 farm proposals and the guidelines for European agriculture. It has been the habit tonight for noble Lords to delcare their interests. Although my family has been associated with agriculture for several centuries, I am not particularly involved, although I can say with considerable pride that I am in touch with the grass roots, so to speak, and that is most important.

The whole House is grateful to the noble Lord, Lord Mottistone, and my noble friend Lord Cledwyn—and of course to the Select Committee—for the detailed work they put in on the report, especially as it was done at very short notice and therefore under great pressure. We are grateful to the individual members for a report of very high quality indeed, presented in a concise form. Such effort was essential to produce a topical report, up-to-date, as it is, with last-minute proceedings from Brussels, and we are all appreciative of their endeavours, for the comprehensivenesss of the report and the quality of its recommendations.

Like other noble Lords, I have read the report in some detail and of course considered the other relevant papers. During the debate noble Lords have detailed their views and I was particularly interested in the contribution of my noble friend Lord Blease who, as always, ensures that the voice of Northern Ireland is heard. The presence of the noble Viscount, Lord Brookeborough, reminds me of the visits which my noble friend Lord Peart and I made over a number of years to Northern Ireland when we were Ministers, and I assure the people of Northern Ireland of our continued interest and support. It was nice to hear the Irish accent after hearing the Gaelic accent of my other noble friends from north of the border.

After this long debate—

Lord Mackie of Benshie

My Lords, it is not Gaelic; it is an entirely different accent. Every accent that your Lordships have heard from Scotland has been that of the Lowland Scot.

Lord Bishopston

My Lords, I am grateful to my noble friend for scotching that rumour. After a long debate noble Lords have naturally touched on the main points of concern, and I do not wish to repeat them; I am sure that your Lordships will be grateful to hear that pledge. I am bound to say that I agree with the Committees' conclusions and its 15 points, and i shall refer to some of them which I think are of particular interest and merit. The report rightly says: The way in which agricultural policy develops is clearly of great significance to the budget". I consider that that claim is important because it should indicate the need to reform the common agricultural policy as soon as possible—if further discontent is not to grow—not only to get a reasonable budget, but to eliminate some of the quite unjustified farming and food policies on the way.

The Select Committee is to be praised for the way it did its job and for seeing the objectives so clearly. Guidelines are very important, as is the 5-year horizon, which will help towards longer-term planning. This is so essential to farming because we all know that confidence is the very basis of a successful agricultural industry. It is essential in this process to establish the guidelines with the CAP, as the report insists, adapted, as the report states, to the new realities of both general economic conditions and the agricultural sector itself, while re-examining all the time the circumstances which have changed rather radically in the past 20 years. The guidelines detailed in paragraphs 7 and 8 of the report are I think very realistic, but they need to take account of other factors, such as the conflicting interpretation of the common policies by individual member states.

Having made that personal speech note, I saw that the Select Committee came to the same conclusion, when in paragraph 10 it concluded that, The danger is that nothing acceptable will be achieved because it can never completely satisfy everyone". This is one of the real dilemmas of the Community, despite the fact that we all say that we have a common interest in making the Community work.

Going back to the claim that the general economic situation has changed, I would say that we must recognise the effects of inflation, which are still very high in the United Kingdom and in the Community as a whole. We are indebted to the Select Committee and to those who gave evidence, including many bodies which have great experience and knowledge of the industry and of CAP problems.

The last Labour Government were blamed on occasion for the difficulties that they faced through their constructively critical Common Market attitude. The present Government's relationship with the EEC is no better, and I think some would say, having read the tapes tonight, far worse, since the United Kingdom, like other member states, is rightly forced to fight for its own position. Therefore, one asks the question: where does the fault lie: I think that it lies basically in the structure of the CAP and in its objectives. The fact that over 70 per cent. of the overall EEC budget is represented by the agriculture and food sector of the EEC distorts it further. The 16.3 per cent. average increase in the Common Market farm prices this year is recommended by COPA. I was very pleased to see that although the Brussels Commission is recommending a 9 per cent. average increase, in Brussels on 15th and 16th February our Minister urged, I think quite rightly the need to have prudent price increases on products, especially those in surplus. I think that it is the high pricing policy which has contributed to surpluses.

The farm price proposals fail to deal adequately with the problem of costly surplus production in the Community. The problem of surpluses also stems from the CAP structure. Farmers are rightly guaranteed a minimum price for much of their produce, and in order to prevent the market price falling below this level, the EEC buys food and stores it until price rises justify it being again put on the market.

Much of the criticism of the CAP arises because of the surpluses and the intervention policies and so on, which are necessary at times, but which are also in some ways encouraging the wrong trend. If surpluses cannot be disposed of within the Community, then, of course, we know they can only be sold at a discount outside the Community, where, as we all know, the food prices are lower. So the Community consumers are subsidising the non-EEC consumers, who pay lower prices while the EEC consumer—and that, of course, includes the British housewife—has to pay much more for food. Then, of course, we also pay the levies when we import cheaper food from abroad, so the British housewife comes off badly in both instances.

Lord Mackie of Benshie

My Lords, would the noble Lord permit me to interrupt him: Would he suggest that the people of Poland are better off than the people of this country? Would he not think that the people of Poland might prefer to have surpluses?

Lord Bishopston

My Lords, I think I can comment on the noble Lord's view in a moment. The point is, of course, that we need some surpluses, but there are excesses which are an abomination to the Community policy itself.

The situation with milk needs review. As we all know, the United Kingdom has a very efficient milk production and distribution system, especially in herd size and in productivity; and, of course, the reprieve of the Milk Marketing Board a year or two ago shows that even the Community appreciates the productivity and efficiency of our milk producers. But the United Kingdom milk producer is being discriminated against, as the Committee claims, as the co-responsibility levy, which is supposed to discourage over-production, favours the small EEC farmer, as we know, to the United Kingdom's disadvantage. This underlines one of the grave defects of the CAP, which should be directed to the encouragement of the efficient producer in any sector and to the discouragement of the least efficient. If we do not do that, and if we have high prices, then, of course, we get the surpluses about which we complain. Paying high returns to keep the less efficient farmer in business only adds to the cost and creates the surpluses, as I say. The elimination of the less efficient producer is, of course, a matter for social budgets, and should not be a cost to the overall farm budget; and we have made this point many times with our European colleagues.

Recently, when we have been discussing agriculture, there has been some extensive publicity about EEC surpluses, including wine lakes, butter mountains and so on. I stress the point made by the noble Lord, Lord Mackie of Benshie, that we need reasonable food reserves, but there is no justification for excessive surpluses—and it is no good, on occasion, trying to explain that away. I think I would say very briefly on this that the making of molehills out of EEC butter mountains has helped to put the CAP on the slippery slope, and action is still needed to deal with this particular problem.

Import levies, as we know, raise the prices of imported foods to the higher EEC price levels, so let no one claim that the EEC food prices are unnecessarily high. As we can, as we know, produce only about 60 per cent. of our food, the United Kingdom depends on imported food. Our EEC budget contribution has been high as the number engaged in agriculture is relatively small, being, as we know, about 2.7 per cent., compared with the figure of over 9 per cent. in the rest of the EEC. So what we get in agricultural support is relatively lower but we have yet to give the United Kingdom farm-worker the kind of reward or return which is justified bearing in mind the way in which he has contributed to productivity. We often say that people should only be paid in relation to what they can produce. The farm-worker is one of the most productive workers in this country, and it is about time that we took that into account in making our proposals.

Of course, we need to support our own agricultural industry to ensure its efficiency and competitiveness. When we entered the Common Market we went through a period of transition. There were the problems connected with the beef sector. I think it was due to the initiative of my noble friend Lord Peart, who was the Minister of Agriculture at the time, that the EEC, after a long period of disagreement, established what became known as the Peart premium, now called the variable premium and referred to in our report. How right the Committee is to recommend, in Recommendation 15, that the United Kingdom variable premium for beef should be a permanent feature of the beef régime to keep down the price of beef to the consumer.

It should not be, as we know it is, a matter for annual bargaining in relation to the budget and price proposals. Having read the Hansard of another place, I can see there has been some misleading allegations about Labour's agricultural policy. It is as well to remember, as, indeed, do many farmers, that it was Tom Williams who, as Minister of Agriculture in the crusading post-war Labour Government, laid the foundations of British agriculture with the 1947 Agriculture Act. It is our intention to work for the continued efficiency, viability and prosperity of British agriculture and food production and of all who work in it as employees or employers with the main interest of the consumers very much in mind, regardless of our future with the EEC.

I was interested in the passing comment of the noble Lord, Lord Stodart, when he spoke about Euro-jargon. Sometimes we are in danger of not seeing the wood for the trees. We are confused with Euro-jargon, talk about MCAs, green currency, intervention and surpluses, export restitutions, sluice gate prices; we say with some truth that the world price plus the variable levy equals the threshold price, that the EEC price plus the export levy equals the world price. We cannot get away from these facts. I am not saying that these details do not matter but we must get them into perspective. Like agriculture and food production, they are but a means to an end and we must not lose sight of that fact.

The British agriculture industry has a great deal to contribute and as we go deeper into the micro-technological age and the era of biotechnology we must harness science to meet the needs of the millions who, the Brandt Report insists, desperately and urgently need what we can provide. The time has come when we must endeavour to lift the sights of the European Community to the wider horizons which must embrace the needs of a hungry world. There is no time to lose in that.

9.43 p.m.

Earl Ferrers

My Lords, I should like to go back to the beginning when my noble friend Lord Mottistone declared an interest as a food processor, the noble Lord, Lord Mackie of Benshie, declared an interest as a farmer, and I would declare an interest in the fact that I am a farmer and a consumer. I like to think that I produce some of the food and eat rather less of the food that is produced in this country. In this debate, we are all concerned to see that the right course is taken for British agriculture and European agriculture. I liked the final words of the noble Lord, Lord Bishopston. I liked a number of his words but particularly the final ones where he said that we must try to lift our sights above the problems immediately of Europe and think about those parts of the world which are less fortunate than we. In that way, British agriculture, expertise and technological know-how has a great part to play in helping other countries develop their own agriculture.

The debate is timely because it gives your Lordships the opportunity of giving your own advice and guidance as to how the Government might, could and should react in the common agricultural price fixing negotiations before they are determined and while they are, as they are, still in process of being negotiated. It has a somewhat inhibiting effect on a Minister replying to a debate because a negotiation is a negotiation and this means that results can emerge which are acceptable to all and which seek to meet the sometimes differing requirements of member states. But it is useful for us to get to know what your Lordships see as the negotiating stances and objectives and the things which ought to be done.

I was interested in the experiences of the noble Lord, Lord John-Mackie, with members of the European Parliament. He said that he wished we could do away with green pounds, MCAs and so on and that these ought to be irrelevant. In a totally organised situation they would be an irrelevance. They were only devised in order to take account of excessive movements. Of course, so long as currencies remain in a position or are apt to remain in a position of periodic turbulence, it is very difficult to see how they can be done away with.

I was sorry to hear my noble friend Lord Stodart attack the processors. He is normally such a reasoned person. I thought that momentarily his reason had left him—at least on that particular subject. He said the interests of the producers and processors were diametrically opposed. With the greatest of respect to my noble friend, I disagree. The interests of processors, consumers and producers are all the same though there may be different inflexions upon them. It is no different from buying a motor-car. The garage depends upon the driver and the driver upon the garage. If the garage does not do the work properly they will not have the driver's custom. If the driver has no use for the product of the garage, he will not make use of it.

I would go along with the noble Lord regarding the need for simpler language. That not only applies to the European Community but to a lot of other things. If my noble friend has ever gone through the disagreeable experience—and no doubt being a prudent man, he has—of making a will, he will know that he has not the slightest idea of what he has said once the lawyers have their hands on it. So it is with doctors, dentists and scientists. They have a precise jargon of their own which is totally indecipherable to anyone else who is not familiar with it. But I agree with him in his sympathies.

We have argued as a Government for some time—and indeed the European Commission have argued—that the Commission should produce medium-term projections of how production and consumption are likely to develop which could act as background to the annual price fixing. The Commission have adopted this approach in the guidelines and have made projections up to 1988. They have recommended a number of measures which should be taken to ensure that production is continued within reasonable limits, bearing in mind the likely growth of demand and other calls on Community production.

The Government support this approach because the time has clearly come when the Community must take action to contain the cost of support in surplus sectors and to indicate to producers that an unlimited guarantee is no longer possible. Despite the criticisms, the CAP are enabling British agriculture to make a growing and significant contribution to our own economy. The Annual Review White Paper shows that in 1980 the United Kingdom was 75 per cent. self-sufficient in those foodstuffs which we can grow here, as opposed to 61 per cent. just before our accession to the Community. More recently, our self-sufficiency for all foodstuffs increased from 53 per cent. in 1978 to 60 per cent. in 1980, and we calculate that this improvement was worth some £900 million extra to the balance of payments in 1980 alone. That is a very substantial improvement.

In 1979, of all the FEOGA guarantee expenditure the United Kingdom received back about 5 per cent. In 1981, this amount doubled, so we now receive back 10 per cent. For all these reasons, the Government believe that our aim should be to reform the common agricultural policy and to make it work even better.

The noble Lord, Lord Mackie, referred to the relationship between food prices and agricultural prices, and he was right to do so. I wonder whether I may put this in a different way because, during the period from December 1978 to December 1981, which is a three-year period, retail food prices rose, as the noble Lord, Lord Mackie, said, by 37 per cent. Some 24 per cent. of this was attributable to the rise in labour and other costs and the margin of processors, distributors and retailers. Only 13 per cent. was due to a rise in the cost of basic products in those three years. That is the measure of the effort which agriculture has made in the attack on inflation, and it is a measure of the benefit which housewives have received even from the processors as well, which the noble Lord, Lord Mackie, may be disappointed to hear. But the fact is that, while the retail price index has increased so much, the price of food has increased by less and the price of the actual article of food which goes into the product has increased by even less. When you consider that inflation and recession have been caused by energy and that agriculture is a source of energy as well as a product of it, that is a pretty remarkable achievement.

The noble Viscount, Lord Sidmouth, referred to the glasshouse industry and said he was worried about Dutch gas. I know the glasshouse industry has had a very difficult time and the horticultural industry has had one too. We are concerned to see the gas problem resolved properly and permanently and we have continued to press the Commission for a solution on this subject. It is hoped that they will shortly be able to find a permanent solution. Meanwhile assistance up to the value of £4 million is being provided in the current year. I accept, of course, the noble Viscount's desire for an early solution to that problem. That is what my right honourable friend the Minister of Agriculture is urgently doing with the agreement of his fellow Ministers in Europe.

The Commission's price proposals for 1982–83 recommend price increases averaging 9 per cent. and a 4.4 per cent. revaluation of the green pound. The Government believe that there should be lower increases for products which are in surplus, and that has been our line in Brussels. We have also made it clear that we reject the Commission's present proposal for a revaluation of the green pound—a proposal which would mean that the United Kingdom's support prices would go up by less than 4 per cent., with severe consequences for incomes and the future levels of agricultural production, while those of others in the Community would of course rise by nearly twice as much.

The Government have considered the price proposals in the light of the guidelines document, and this has been the sub-committee's approach too. Some aspects of the proposals clearly reflect the spirit of the guidelines, in particular the proposals for production thresholds for some of the main sectors and for lower relative price increases for cereals which follow naturally from the guidelines. The Government agree with the sub-committee that the Commission has not gone far enough, especially in its proposals for production thresholds.

My noble friend Lord Mottistone said that the Commission had provided increased prices every year since the United Kingdom joined the Community. I thought that was a somewhat unfair inference, because of course we joined the Community at the very moment when oil prices took off and when inflation took off—

Lord Mottistone

My Lords, I hope that my noble friend will forgive me. Perhaps on reflection he would agree that I did not say the Commission had produced increased prices every year since we joined the Community: I said that in every year since we joined the Community the Council of Ministers had added to what the Commission had produced—which is really slightly different.

Earl Ferrers

My Lords, I am grateful to my noble friend. I quite agree that I totally misheard my noble friend, and am glad to be corrected. We think there should be prudent price increases for products in surplus, and I would emphasise the word "prudent". We endorse much of what the sub-committee had to say on individual commodities. My noble friend Lord Mottistone—and I hope that I am not wrong again this time—said that there should be more of a feeling that it should be a food and agriculture policy as opposed to just an agriculture policy. But, of course, my right honourable friend has been pressing this point hard in the Council of Ministers to ensure that in fact prices do not rise out of all reason and thereby harm the consumers.

The cereals sector is expensive: it accounts for about 15.2 per cent. of FEOGA guarantee spending, or £1,209 million a year. The Commission's proposals aim to reduce this. For the second year running, support prices for cereals would go up by 2 to 2½ per cent. less than average, and the increases proposed less than cover inflation. In real terms, they represent not a freeze but a cut in prices for the second year running. The Commission proposes that, in future, support prices for cereals would be liable to reduction if the total quantity produced over-ran a pre-set target level of 119.5 million tonnes. These measures are designed to improve the balance between the cereals and livestock sectors, and to limit the cost to the Community budget of the cereals régime. We support the Commission's objectives, but have reservations about the details. In particular, we think that the proposed production threshold is too high.

We are opposed, also, to the Commission's proposal to increase the levy on brans. This would put up the cost of livestock feed, especially in Northern Ireland where, as we have been told only too clearly, grain prices are high and farmers rely on imported materials. It is not in the interests of the livestock sector or of the farming industry as a whole to reduce these imports or to put up their prices. We are, therefore, resisting moves to restrict these imports, except in the case of manioc, where we were very concerned about the budgetary implications of a high level of imports.

My noble friend Lord Brookeborough and the noble Lord, Lord Blease, quite rightly made special note of the position in Northern Ireland, which I recognise is a very difficult and a very delicate one. They both referred to the social problems which are connected with agriculture in Northern Ireland and with the high level of unemployment there at the moment. Since we took office, there has been agreement on a number of measures of specific assistance to agriculture in Northern Ireland, such as the agricultural development programme, which gives improved rates of grant in the less-favoured areas; enhanced aid for processing projects in the animal feed sector; doubling the suckler cow premium; the beef development programme; giving assistance with artificial insemination; beef performance testing; liming and first-time silage making.

These schemes qualify for assistance from Community funds, and further national funds were made available in 1981–82 which have helped to maintain jobs in the dairy and intensive livestock sectors. I do not say that these are all the answers that are required, but it is an indication of the fact that the Government are aware of the position in Northern Ireland. My right honourable friend the Secretary of State for Northern Ireland has also announced that he is making a further £6 million available in 1982–83, and we are in touch with the Commission on how that can be utilised. It is hoped that we shall shortly be able to give further details, and that this will further help the position in Northern Ireland. My noble friend Lord Brookeborough referred to the liquid milk position. Because only about 18 per cent. of milk in Northern Ireland goes into the liquid market, compared with about 50 per cent. in Great Britain, the higher returns from the liquid market do not help Northern Ireland producers as much as they assist producers in Great Britain. Northern Ireland producers are partially compensated for this disadvantage by a higher liquid price and this, in turn, is offset by a consumer subsidy which is approved by the Commission, and which ensures that the retail price in Northern Ireland does not exceed the retail price in England and Wales.

Both my noble friends Lord Brookeborough and the noble Lord, Lord Blease, referred to the application for the alteration in the less-favoured areas régime. They are quite rightly concerned to see this area extended in Northern Ireland. The work has been done and preparations are now being made to present these proposals to the Commission. I would only remind my noble friend that the Government have never entered into any commitment to make more money available for any increased area which might come about as a result of the new delineation of the less-favoured areas. But I accept the urgency for this to be done and we hope to do it as soon as possible.

Many noble Lords referred to the milk position and it is quite right—and I agree with the noble Lord, Lord Collison—that the surplus of milk in the Community means that a proper price policy and effective measures to tackle the surplus are essential. United Kingdom dairy farmers need some increase in the support price to offset the pressure on their incomes. The basic co-responsibility levy is certainly not the answer since it applies to all producers, regardless of whether they are adding to the surplus. It increases the price and it so reduces the consumption. The noble Lord, Lord Bishopston, my noble friend Lord Stodart of Leaston, the noble Lord, Lord Collison, and my noble friend Lord Forester, in a remarkably short speech which I would have wished to emulate but which unfortunately I am unable to emulate, said that they were concerned about the basic levy on the first 60,000 kilogrammes of milk. We are opposed to this proposal as it favours other member states whose herd sizes are smaller than our own and discriminates against the United Kingdom which has an efficient industry and a herd size almost four times the Community average. I agree with the noble Lord, Lord Bishopston, that there should not be penalties for efficient production.

Obviously the Government are concerned about the financial implications of the Commission's proposals. Agriculture's share of the Community budget has fallen from 80 per cent. in 1978 to 66 per cent. in 1981. We are anxious that this progress should be maintained. The Commission claim that their proposals will not lead to any increase in agriculture's share of the budget, but it is the Government's view that Community agricultural expenditure should grow more slowly than the Community's own resources in 1983. We wish to keep our eye closely on that.

The noble Lord, Lord Walston, said that he thought agriculture should not become a political football and that the decision on common agricultural price fixing should not necessarily be involved with the budgetary position. I would merely reiterate that throughout the discussions within the Community—on the mandate of 30th May—it has been agreed that work on all three chapters (the common agricultural policy, the development of our other Community policies and the budgetary problems) must go forward in parallel because all three chapters are interrelated. That, in our view, remains the position and that is why decisions on the common agricultural policy can be taken only in parallel with decisions on the budgetary problems.

I believe that the Government's approach to the guidelines and to the price proposals is very similar to the sub-committee's. We think the guidelines are on the right lines. Our main criticism of the price proposals is that they do not go far enough in implementing the principles which are set out in the guidelines. We have already developed this point at the Council of Agriculture Ministers in February, and again earlier this month, and we shall continue to do so, with a view to securing a settlement which meets the needs of our industry, consumers, processors and distributors.

Agriculture is a great industry which we wish to see succeed, not just for those engaged in it but for the nation as a whole. The sub-committee's report provides much welcome support for our negotiators. The Government are most grateful to the sub-committee for the work which they have done and to your Lordships this evening for the contributions which have been made. They will be taken very seriously into account because I know only too well of the conscientious diligence with which the sub-committee carry out their hard work.

10.4 p.m.

Lord Mottistone

My Lords, it only remains for me to thank all noble Lords who have taken part in the debate. I am most grateful to the members of the subcommittee—and also to those noble Lords who are not members of the sub-committee whose contributions have been particularly valuable and enlightening. My thanks go also to the many noble Lords who made nice remarks about me. I do not deserve it. But it was very kind of them to do so.

May I endorse my noble friend Lord Brookeborough's thanks to our clerk, to our specialist advisers and to the printers if not to the publishers (I am never quite sure about that). May I also thank the secretaries who worked very well for us in the background and also the shorthand writers who at times have been very hard pressed in taking down the evidence.

The hour is late and my noble friend the Minister has already commented on the points made by individual speakers. I should like to mention two points only. First, I entirely agree with the noble Lord, Lord Stodart of Leaston, on the need for jargon not to be used. We have done something about that in that we are providing a glossary in Volume II, which I hope the noble Lord will get in addition to Volume I. We would have liked to include it in Volume I, but printing pressures prevented that.

To the noble Lord, Lord Blease, I will say that there is no mention of Northern Ireland conclusions because your Lordships will notice that we took out Northern Ireland and the United Kingdom as being separate from the rest. We were trying to produce a report that would be of use to the Community as a whole. And we did not want to highlight national interests, as it were, except to pick out special points which have a lot of attention paid to them. I would like to suggest that the amount of time given over to Northern Ireland in the speech made by my noble friend the Minister was out of all proportion. I cannot say that—my wife would never forgive me. Of course I do not mean that my noble friend's remarks were out of all proportion to what Northern Ireland deserves. It is a real reflection of the great work which my noble friend Lord Brookeborough puts in to make sure that Sub-Committee D never forgets Northern Ireland.

My noble friend Lord Brookeborough rather ticked me off for not being brutal to the Minister. I do not think I needed to be brutal, and, of course, I never wanted to be brutal because, if I heard him aright, my noble friend the Minister endorsed a great deal of what was said in our report and indeed will use the report to advise his right honourable friend the Minister in how to fight the battle in Brussels. If I could pick out one thing from the general debate, it struck me that all of us—including the farmers—agree that 9 per cent. is about the maximum there ever should be. It was also noticeable that, on the whole, we did not talk about revaluation. I believe we would like the message to go to the Minister that 9 per cent. is the maximum—although some of us would like it to be less, it is true—and that revaluation, as my noble friend said, is not something that we would support. I hope that my noble friend will convey these messages. Perhaps this time, this year, with a little question mark in the table as to the Council of Ministers' response to the 9 per cent. proposal by the Commission, it will be equal to and not at least two percentage points above, as it has been in most previous years.

On Question, Motion agreed to.