HL Deb 24 January 1985 vol 459 cc427-33

6.23 p.m.

Lord Belstead

; My Lords, I beg to move that the scheme laid before the House on 14th December 1984 be approved.

The scheme which is before your Lordships today has two important features. First, it is intended to achieve savings as part of agriculture's contribution to the reduction in public expenditure. Secondly, it takes a further step towards the integration of conservation and agricultural policies in the area of capital grants.

I should like to say a few words about the savings aspect. I appreciate that cost-cutting is never an easy or a palatable exercise; but your Lordships will know that the Government are determined to continue with their efforts to reduce public expenditure, and agriculture has to take a share in the national interest. However, in achieving the savings which are expected to flow from the changes set out in this order, the reductions in grant rates are designed so far as is possible to fall upon those areas which are best able to sustain them. But there is of course a problem. Previous savings exercises have also been concentrated upon these same areas of agriculture—essentially the cereals sector.

There is perhaps a level of grant rates below which it is not really cost-effective or productive to go. With the latest series of grant changes, we have reached the level of 15 per cent. for most grants in the lowlands, but this on its own would not produce anything like sufficient money for the savings we had to achieve. We had therefore to turn our attention to the uplands, the less favoured areas. It is also true to say that we did not want a too wide a differential between the lowland and upland rates of grant. Having said this, it is still the case that the less favoured area rates for land works and for grants beneficial to conservation are double those available in the lowlands, thus preserving the quite substantial differential which has existed for many years. It is also of interest that these changes have introduced new differentials for buildings and ancillary works such as gas and electricity supply, since the previous common rate of grant for these has been reduced in the lowlands but not in the uplands.

Noble Lords will no doubt have noticed the fairly substantial reductions which have been made to the rates of grant for drainage. This reduction was essential to the achievement of the necessary savings. In any case, drainage is an activity which the prudent farmer ought to undertake in the interests of good land management and returns a substantial benefit; it would have been impracticable to have left its comparatively high grant rates completely untouched. This change has, I know, caused concern not least in the drainage contracting industry; but in my view the worthwhileness of drainage will ensure its continuing to hold an important place in agricultural investment. Of course, the new less favoured areas now attract the higher rate of drainage grant.

In recent years, this Government have introduced grant packages to benefit certain sectors of the horticultural industry; namely, for the replanting of apple and pear orchards and for the replacement or improvement of existing glasshouses. I am pleased to say that we have been able to maintain this commitment to the horticultural industry, despite the financial pressures which have resulted in the changes which are before the House today.

I now turn to the other area where we have not only maintained our past commitments but have now improved upon them: I refer here mainly to conservation. Towards the end of 1983, as part of an exercise similar to the present one, we introduced enhanced rates of grant in the less favoured areas for the provision, replacement or improvement of hedges, traditional walls and shelter belts. As part of the present changes, we have taken the opportunity to extend this initiative to include hedges and traditional walls in the lowlands for higher grant. I hope that this will be a further incentive for well maintained and traditional field boundaries.

The other environmental change that we have made by this scheme will have at least as significant an effect as those that I have just described. The deleting of land clearance and reclamation works from the schedule of eligible operations in Great Britain means that the removal of stumps and other obstacles to conservation, land-levelling and grading in order to bring the land into agriculture is no longer eligible for grant aid.

Similarly, operations up to and including the deep ploughing of heath and moorland to convert it to pasture or arable cultivation will also no longer be eligible for grant aid will continue for the regeneration of existing grassland by shallow ploughing or surface treatment and the regeneration of heather by cutting or burning. When the new European Community Structures Directive is finally agreed, in implementing those new structures regulations, it is also our intention to look carefully at measures for helping conservation, in particular for encouraging farmers to diversify with non-farming enterprises.

Finally, I should like to say a few words about the reduction in the investment ceiling. Your Lordships will recall that, in response to criticism that the larger farm businesses were getting more than their fair share of the grant paid, this Government introduced a ceiling on the amount of expenditure which, over a rolling period of six years, could qualify for grant. This ceiling applied to certain claims under the Agriculture and Horticulture Grant Scheme received after 1st February 1980.

I would emphasise that only a proportion of the larger farm businesses have invested at a level which could exceed £50,000 over a six-year period, that being the figure to which we are now reducing the ceiling. I would ask: how many smaller farms maintain a regular investment on grant-aidable items of some £8,000 to £9,000 a year, which is what will still be allowed on the £50,000 ceiling? We decided, therefore, to reduce the ceiling for all businesses rather than to reduce grant rates even further—a change which would have hit middle and smaller size businesses more than larger ones.

The change is not retrospective; it applies in exactly the same way as grant rate changes or the deletion of items from the schedule. It affects only expenditure which was not legally committed before 12th December 1984. Some agricultural businesses will therefore be able to claim grant on expenditure in excess of £50,000 because the expenditure was committed before 12th December last year.

Having regard, however, to the reason for the introduction of the ceiling it would have been inequitable to the great majority of farm businesses to wipe the slate clean for all and start afresh with a new ceiling of £50,000. It would also have given rise to administrative problems. I really believe that this reduced farm ceiling is not going to hurt the vast majority of farm businesses, and it will in fact affect only the larger farms. I commend this order to the House.

Moved, That the scheme laid before the House on 14th December 1984 be approved.—(Lord Belstead.)

6.32 p.m.

Lord John-Mackie

My Lords, the Minister has given a full review of what the order means. He pointed out the two main items in it: the savings and the fact that it was doing something to integrate grants which would help the environment situation, which is much to the fore at the present moment. I make no point at all about the Government's policy on savings. It is the Minister's job, I suppose, to find something from agriculture, and they have done it by reducing these grants by, I think the estimate is, £40 million.

I hate to use my age in anything, but I have been farming since 1926. Since that time, and from before that—it started way back at the end of the last century—the infrastructure of agriculture has deteriorated. It deteriorated worst after the end of the 1914–18 war, and continued to deteriorate right through the recession up to the middle of the next decade, 1935 to 1940; and it was pathetic to see that deterioration.

This is not concerned with this order, but if I remember correctly the first grant was for liming, and that made a fantastic difference, if I may use the word, to the infrastructure of the land itself. From then on we had these grants to help farmers to improve the infrastructure of agriculture: the buildings, roads, fences—the lot, as shown in the schedule here, which gives all these things.

Here we have the situation that the infrastructure is something which few other countries have. The Minister made the point—and I appreciate it—that if a prudent farmer wants to do something to improve that infrastructure—his buildings, fences, roads, drains and so on—he should do it out of profits, and he would do it anyway if there was not a grant. My Lords, farmers are human beings like everybody else. There is no doubt that the attraction of a grant has led to this tremendous improvement in agriculture. However prudent you are, I do not think you will just sit down and spend money. The attraction of these grants has done the trick far better than anything else that I can think of. The Minister says that they have now got to a level where they cannot go much lower, Thank goodness for that; but a lot of them are pretty low now, and some have been removed altogether.

The Minister mentioned drainage. If I remember rightly, that was the next grant which came along after the liming grant. It alone has made a tremendous difference to our infrastructure in agriculture and the land. If you mention drainage to an environmentalist, he will immediately think of draining marshes and areas of special scientific interest, and so on, and not what we farmers think of as the normal job of draining our land and keeping it properly drained. I think the Minister would agree that an enormous amount of land is still to be properly drained in this country, and the drainage grant he mentioned is the one I would not have cut. I would have cut a lot of others but not that one, because it is so important.

I do not think that the 30 per cent. rise in relations to the hedges, walls and dykes built of traditional local material will have a lot of effect on the environment. I have always said—and I said it in the last debate—that I did not think that farmers had done all the harm to the environment that we hear of. I am not suggesting that there are not areas here and there; but, nevertheless, I doubt very much whether this will make a lot of difference. But, of course, it is there. I am sorry that the noble Lord, Lord Sandford, is not here. No doubt he would have had a word or two to say on this subject.

On the question of drainage, the Minister mentioned contractors. There is a lot of employment in drainage contracting work, and I hope that this cut in grant aid will not create more unemployment there. The other point is land reclamation. I know that in unfavoured areas it is not cut so badly, but nevertheless there are a lot of hill farmers and farmers in less favoured areas who rely on land improvement and on taking in more land to improve their financial position, and it would be a pity if the cut in grant stops that.

From there the Minister went to the ceiling. I think I would agree with him that larger farmers did have a big advantage in the high ceiling of spending that they could undertake to obtain a grant, and I do not think that the reduction to the £50,000 will have a great effect. It will certainly allow the class of farmer that he mentioned to carry on improving without losing anything there.

I should like the Minister to confirm the point that this is the last cut. He said that we had reached a stage where we cannot cut much more. With these few remarks on the subject, I would merely ask the Minister that question.

Lord Belstead

My Lords, I am grateful to the noble Lord, Lord John-Mackie, for responding to this order. I entirely take the point from the noble Lord's experience that the institution of capital grants had a rejuvenating effect upon British agriculture after the appalling years between the two world wars, and particularly following the terrible recession of the 1920s and early '30s. Both the noble Lord and I from my generation are familiar with that, because we both of us live in the area which today in the east of the country is thought of as having achieved considerable prosperity and made great contributions to the national economy through arable farming, but which was probably hit as hard as any part of the country during those terrible years to which the noble Lord refers.

It is in those few sentences of the reply that I venture to give to the noble Lord that there are the seeds of the reasons why we have felt it necessary for agriculture to bear its share of savings in public expenditure in this country. I do not need to go into any detail at all about the problems, which all the European countries face of the production of surpluses; the difficulties which we face because of the great successes which our agriculturists, farmers and horticulturists have achieved. But it has meant that the nation has looked to agriculture to bear its share. In order for agriculture to bear its share we have had to look at capital grants.

In responding to the noble Lord, I should also say that it is important for us to remember that when my right honourable friend the Minister was speaking in public on 11th December about these decisions on capital grants he made the point that we are maintaining a level of grant which will enable our agriculture industry to maintain its competitive strength and to be ready, when the structures negotiations in the European Community are completed, which we hope will be soon now, for us to have in being a continuing capital grant structure through which we shall be able to avail ourselves of the new arrangements under the new structures directive. It is important that I say that because it is, in part, an answer to the noble Lord's question about where do we go from here. We believe strongly that we still have, and must have, a proper capital grant system in operation and we believe that we still have that.

I am afraid that in answer to the noble Lord's last question I cannot give any undertaking about future financial arrangements which involve both my right honourable friend and the Treasury. I assure the noble Lord that we are committed to keeping a proper capital grants structure in being.

Incidentally we are also committed, as we have shown we are committed in this order, to keeping a proper differential between the less favoured areas and the lowlands. My right honourable friend also made it clear that for the future he was committed to considering the claims of conservation whenever making any changes in capital grants, particularly looking at the new arrangements we shall need under the new structures directive, and also giving particular consideration always to the livestock sector.

I should say one word about drainage which the noble Lord raised. I will not conceal that we needed to look at drainage because the field drainage grants have been accounting for a considerable share of the total capital grants bill. In addition to that we felt—and the noble Lord picked the point up in the fairest possible way—that drainage is an operation which any prudent farmer who needs to, will undertake, because the payback is usually so swift. We were also bearing in mind that we were not removing the drainage grant completely. Indeed not: it is still 15 per cent. in the lowlands and 30 per cent. still in the LFAs, with a considerable additional acreage able to claim the new LFA grant, having come into the new LFA intermediate areas.

Finally, on conservation: the noble Lord said that he felt that perhaps the increased grants for conservation both last year and this would not have very much effect. I beg to differ. The grant rate is 60 per cent. It is a very high grant rate in the less favoured areas for the planting of shelter belts, the building of traditional stone walls, and we have brought into the grant rates as well, as I said in my opening remarks, the building of walls and so forth in the lowlands.

Lord John-Mackie

My Lords, may I—

Lord Belstead

My Lords, if I may add one last thing before I give way to the noble Lord, there is the other side of the coin. By taking land reclamation out of grant eligibility, we are doing what conservationists have been asking for again and again for the last few years: that is to give Government support to enable woodland, for instance, having been felled, to be cleared with grant aid so that it can be ploughed up for agriculture. That is something which conservationists say they felt that the Government could not stand by any longer. Constantly eating into the high heathlands and moorlands, higher and ever higher, with grant aid meant eventually that somebody had to say, "This has gone far enough". For those reasons I will not conceal from the noble Lord that the land reclamation removal of grants will have those effects. But if any farmer wants to re-seed existing grassland, then, as the noble Lord has probably noticed from the schedule, that will still be eligible for grant aid.

Lord John-Mackie

My Lords, the noble Lord made the point about this 60 per cent. for the less favoured areas but only 30 per cent. for the lowlands in the new grants to affect the environment. But may I point out that it is in the lowlands that the great criticism is heard, not in the less favoured areas? I have heard little criticism about what is happening in the less favoured areas. All the criticism is in the areas such as the eastern counties where the grant has been increased only to 30 per cent, but it has been increased to 60 per cent. in the areas where there has been no criticism.

Lord Belstead

My Lords, I do not agree that that is entirely the picture. Because of where we live, the noble Lord and I are very much aware of the criticisms directed at those of us who farm in the eastern counties, but, as the noble Lord will remember well from the important Countryside Commission report on the uplands, remarks are made about the need to improve the uplands. We believed that by bringing in these comparatively high rates of grant for positive conservation operations in both the LFAs and the lowlands we were doing the right thing. I must beg to differ from the noble Lord in that we are also doing the right thing by keeping the differentiation that exists between the upland and the lowlands.

I hope that I have referred to all that the noble Lord has said on this order. I deliberately have not said "answered" because I realise, fair-minded though the noble Lord always is, that there are aspects of the order which I do not think he and I will agree on from the point of view of Government and Opposition. Nevertheless, I hope that the noble Lord will now allow the order to pass.

Baroness White

My Lords, may I reassure the Minister that there are some people who very much approve some of the conservation measures which he has been describing. I hope that at some time my noble friend might visit the North York Moors National Park, for example, and see places where heather moorland has been ploughed up in order to grow highly expensive and unwanted cereals. If he moved occasionally from the lowlands to the highlands he would see some of the areas about which some of us are concerned.

Lord Belstead

My Lords, I am grateful to the noble Baroness for her intervention.

On Question, Motion agreed to.