HL Deb 26 July 1983 vol 443 cc1480-5

6.50 p.m.

Lord Belstead rose to move, That the draft scheme laid before the House on 30th June 1983 be approved.

The noble Lord said: My Lords, on 21st April this year, the Government announced their intention to make help available towards the cost of veterinary inspections in meat plants producing meat for export. It was made clear at that time that the necessary funds would be found from savings made elsewhere in the agriculture departments. The purpose of the two statutory instruments—if your Lordships will give leave, I shall speak to both of them at the same time—is to provide those funds by reducing, by 10 percentage points, the rates of grant for grain drying and storage facilities where the grain is to be sold or used off the farm.

The first of the two orders is the Agricultural and Horticultural Co-operation (Variation) Scheme 1983; this amends the Agricultural and Horticultural Co-operation Scheme, whose purpose is to encourage the formation of co-operative ventures for the production and marketing of agricultural produce. Under this variation scheme, the new rate for buildings, facilities or land improvements for co-operatives will be 22½ per cent; for new plant and equipment installed off-farm, it will be 15 per cent. and the rate for new plant and equipment installed on-farm will be 5 per cent.

The second order which, with leave, I am speaking to—the Agriculture and Horticulture Grant (Variation) (No. 2) Scheme 1983—amends the national grant scheme, which is familiar to farmers and the purpose of which is to encourage investment in the modernisation or upgrading of farm businesses, particularly when the farmer involved is not able to take advantage of the community scheme. The new aids in all areas for the scheme under this order will now be 12½ per cent.

I should also make it clear to your Lordships that the community scheme, which attracts grant at a higher rate than the national scheme, is also to be treated in the same way so that rates offered under the community unity scheme—the European Community Agriculture and Horticulture Development Scheme—will be in future 27½ per cent. for less favoured areas and 22½ per cent. elsewhere for cereals storage for sale off-farm. The regulations for this are, however, not subject to affirmative resolution by your Lordships' House. The new rates will also apply to existing development plans which may be varied to provide grain storage facilities.

Many of your Lordships will be aware of the circumstances which have led up to these changes. The pig industry has during the past few months been going through a severe cyclical price trough. Consumer demand for all meats has been weak during a time of plentiful supplies of pigmeat, and, with rising feed prices resulting from high prices for cereals, many pig producers have found that their operations have been bringing them considerable losses.

I am sure that your Lordships will recall the representations made to Parliament on 17th March of this year by the farmers' unions, when a list of requests for assistance for pig producers was presented. We have already taken action which I believe substantially meets those requests. This entailed negotiations in Brussels for assistance under the common agricultural policy.

The unions requested an increase in the level of export refunds, and a substantial increase of about 60 per cent. was achieved in Brussels on 18th April. The unions requested increases in the rates of private storage aid. These were agreed in Brussels from 1st June. The farmers' unions also requested aid for the pigmeat processing industry, and a special allocation of about £6 million from FEOGA funds under Regulation 355/77 was secured in the price fixing agreement in May. But one request, the only one wholly within the competence of the United Kingdom Government, asked the Government to take on board the costs of the special veterinary supervision required by European Community rules in connection with exports.

I am pleased to say that the industry has already improved its position in the home market, especially in the bacon sector. Of the bacon consumed in the United Kingdom, the proportion which is home produced has increased this year from around 41 per cent. to around 46 per cent. The industry now needs further to develop exports to the Community, whose 270 million consumers form the largest market for pigmeat in the world.

Veterinary supervisory charges, which in some circumstances could be as much as £2 per pig exported, are known to be a disincentive to the development of exports. It is known also that in other member states charges for these inspections are not made, or in many cases are considerably less than they are in the United Kingdom. The Government therefore decided to accept the pig industry's request and to pay the charges for the veterinary supervision of pigmeat in export-approved slaughterhouses.

However, in addition to pigs, most slaughterhouses also handle cattle and sheep. It is thus not possible to allocate the costs with any accuracy between the three species. Since exports are also very important to the well-being of those sectors, it was decided that cattle and sheep also should benefit from the relief from vetrerinary charges. At the same time, it was thought right that the poultry industry, which with the pig industry was equally hard-pressed, should be included in these arrangements as regards the veterinary costs in poultrymeat plants which are eligible to export. Therefore we announced on 21st April that the Government would pay these charge also on and from 1st June.

It is estimated that the cost of the significant aid to the pig industry and to the other industries which I have just mentioned will be £1.6 million in the remainder of this year and £2.5 million a year thereafter. The farming industry would of course like to have this increase without recourse to savings being made elsewhere, but it is Government policy to exercise firm constraint on public expenditure and we therefore looked for offsetting savings in other areas of agricultural support.

I do not suggest that this comparatively minor adjustment to the support given to the cereals sector represents a significant shift in the balance between cereals and livestock, but I do say that, given the problems of livestock producers, it is reasonable to look for the savings from the more buoyant cereals sector rather than other areas of support for livestock. In the special interests of livestock producers who have to have bulk storage for their feed grain, whether it is purchased or whether it is grown on their farm, we have drawn a distinction in this order between those who consume grain on the farm and those whose primary product is grain which is sold off the farm.

I should also mention that because the changes are being introduced some way into the current financial year the grant rate reduction will not provide sufficient funds to meet the expected costs this year. The shortfall of £0.9 million for this year alone has been found by a small reduction of 2 to 3 per cent. in the provision for aid to English drainage authorities for arterial drainage. In fact, in 1982–83 the provision for arterial drainage was underspent. The impact on the arterial drainage work which is planned for this year is therefore likely to be negligible. Legislation is not necessary for the savings in aid to the drainage authorities in England.

I hope your Lordships will agree that in all the circumstances it was right to give this extra assistance to the livestock sector to improve its export possibilities in line with the requests made to the Government on 17th March, and that it was also right to look to the cereals sector to find the savings. I commend both of these orders to your Lordships' House.

Moved, That the draft scheme laid before the House on 30th June 1983 be approved.—(Lord Belstead.)

6.59 p.m.

Lord John-Mackie

My Lords, again the noble Lord has given a very full and fair explanation of the Government's thinking about a section of the livestock sector which requires more help than the cereals sector. The noble Lord gave the figure of £1.6 million for the remaining portion of this financial year and the figure of £2.5 million for a full year. The noble Lord said that it is not a big figure. However, it is rather peculiar to choose the storage of grain as a subject for making cuts.

As the noble Lord knows, the three major surplus items in the country are cereals, milk products and sugar. There is no doubt that dairy products are giving both the European Community and this country the biggest headache. Grain is cheaply and easily stored. To cut hack support for the storage of grain might hurt small farmers who want to store their grain for a reasonably long period. Most big farms in the areas where cereal profits are the highest have grain stores, and I feel that for more grain storage not to be put up in smaller farms might hurt them more than meets the eye. However, the whole situation of the storage of surplus products is one that one could go into at some length, and I do not wish to do that now. I do believe that one should look at the question of which of the three products having the biggest surpluses should be dealt with. I should have thought that it would be much better and fairer to the whole farming community—leaving out the pig and poultry producers—to have spread it evenly and not just have fixed it on the cereal producers.

Lord Stanley of Alderley

My Lords, as this is my first opportunity, I should like to congratulate my noble friend Lord Belstead on his new job on the Front Bench. As he is a farmer, I am sure he will enjoy working with farmers. It is therefore rather sad for me to have to tell my noble friend that I am not very keen about this particular order and the way in which it has been introduced. No doubt it will not be the first time nor the last.

First, I believe that there is a need—as the noble Lord, Lord John-Mackie, said—for further improving our grain storage and handling facilities. My noble friend will know that most United Kingdom grain storage is on-farm, as opposed to the Continental grain storage, which takes the form of co-operative or off-farm stores. The result of this is that our Continental partners, if I may call them that, have an advantage over us, because they can grade their grain to a higher standard. This particularly affects our export markets. This could make us less competitive with our partners, and I am sure that my noble friend does not wish to see British agriculture made less competitive.

Secondly, this cut runs contrary to a very recent report by the Central Council in conjunction with Food From Britain. I am somewhat surprised that we have the left hand not knowing what the right hand is doing. Thirdly, and lastly, I fully accept that there may be a need for agricultural cuts in spending in the CAP and by our own national Government. But any cuts which are made should be made only after very careful thought and consultation. Here I support the remarks made by the noble Lord, Lord John-Mackie.

This particular cut seems to have been made with neither consultation nor long-term thought. When I read the discussion of this order in another place, I came to the same conclusion. I implore my noble friend to recognise that, if cuts are to be made the order of the day—and I accept that they must be made—a complete long-term package should be presented to farmers. The sooner this is done the better.

I cannot guarantee that farmers will like cuts; there may be just the odd one or two who will moan. What I can say is that farmers, by and large, do admire and appreciate people who come straight with them and who tell the long-term truth. This is what I am asking my noble friend and the Government to do, if we are to suffer cuts in the future.

7.4 p.m.

Lord Belstead

My Lords, I am grateful to the noble Lord, Lord John-Mackie, for his remarks about this order, which were thoughtful remarks, and to my noble friend Lord Stanley of Alderley for his kind welcome to me, even though he was not able to follow it up with support for the order I had introduced.

I do not believe there really is a conflict between the reduction in grant rates and the conclusion in the reports to which my noble friend Lord Stanley of Alderley referred concerning the cereals market and the view that was put in those reports. I believe I am right in saying that the grower needs to review the capacity and the state of the storage facilities which are available to the grower in order to satisfy the range of market requirements during the rest of the 1980s. I say this because it is clearly in the grower's own financial interest to improve his or her own storage, if the grower feels that is necessary,

Nevertheless, at reduced rates of Government grant assistance to storage projects, the assistance given will still be quite substantial. Both speakers will forgive me if I make the point that, on a 20,000-tonne store, grant aid to a co-operative would still, under the present proposals, amount to about £400,000 in cash—a very considerable incentive for a co-operative to continue to take grant aid in order to provide storage. I realise that the noble Lord, Lord John-Mackie, referred particularly to the small farm. Even in that case. there would continue to be the national scheme—it is true, with a 10 per cent. decrease in grant rates—and the European development scheme at the higher rates of grant which both noble Lords will remember are even now, under the present proposals, 22.5 per cent. and 27.5 per cent. for less favoured areas.

Finally, may I respond to my noble friend's point about needing to look ahead and to put forward proposals of this kind as a plan for the development of agriculture? I have to say that the representations which were made by the farmers' unions on 17th March brought home to any Member of either House of Parliament who had not already realised it that the livestock sector of farming in this country was in very great need of assistance. It was because of that that the Government in their turn brought strong views to bear in Brussels for improvements in the pig sector in particular, which I listed in my earlier remarks, and felt they had no option but to respond to the one particular point that was put by that lobby of farmers' unions on 17th March which fell precisely within the scope of national Government action—namely, whether the Government would do something about veterinary charges, which were said by the livestock sector to be such a disincentive to exports.

The Government felt that it was absolutely necessary to do that, and the only way to do it—as was made clear by my right honourable friend the former Minister of Agriculture—was to look for savings in other parts of the agriculture budget. Despite the fact that this has meant a reduction in grant aid for cereals storage provided those cereals are being sold off the farm, I hope that all sectors of the industry will appreciate the need for continuing investment if the benefits of better grain marketing are to be achieved.

On Question, Motion agreed to.