Agriculture Improvement Regulations 1985

HL Deb 30 July 1985 vol 467 cc223-48

7.33 p.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead) rose to move, That the draft regulations laid before the House on 8th July be approved. [29th Report from the Joint Committee.]

The noble Lord said: My Lords, I beg to move that the Agriculture Improvement Regulations 1985 be approved and, if I may, I will speak to the Agriculture Improvement Scheme 1985, which has also been laid before your Lordships' House.

The draft regulation to which the Motion refers will introduce new capital grant arrangements for the whole country. It might, however, be convenient for your Lordships if, as I said, we considered at the same time the Agriculture Improvement Scheme 1985. We are required to implement these documents by 1st October, so the first objective of these instruments is to meet that requirement.

Although the new European Community regulation imposes certain obligations on member states, it provides some scope for adjustment to national circumstances and it includes certain measures which are permissive and not obligatory. The Government wanted to implement the Community regulation, as far as possible, in a manner which reflects our current priorities. It is still important for us to have a secure agricultural industry on which we can depend for a reliable supply of food at reasonable prices. We need to encourage up-to-date practices, scientific advance and efficient production methods. Otherwise, the supply to the consumer will deteriorate and rural communities will decline. But we are not interested in increased production for its own sake. We want to ensure that farmers, through greater efficiency, can earn reasonable incomes, and we want to encourage production methods which contribute to the needs of the environment.

Last May, we issued a consultation paper to farmers, growers, contractors, environmentalists, farm workers and many others. One of the benefits of such a wide consultation is that it has encouraged us to introduce several totally new provisions. One of them is the enhanced grant which will be available to "young" farmers—that is, those aged under 40. We did not introduce this provision under previous Community directives because it was essentially designed to help those Continental farmers who inherit fragmented and barely viable holdings under the Napoleonic Code. But the representations we have received have convinced us that there is a place for this measure in the United Kingdom as well. We shall, therefore, be making extra resources available to many farmers who will be starting out on their first major farming venture. Provided they have taken over the farm within the last five years and are genuinely in charge of it—as tenant, owner or partner—they may qualify for a "bonus" of a quarter on the relevant grant rates.

The second innovation, which we have decided to put before Parliament, fulfils a promise we made some time ago to provide grants for farm tourism and craft industry. We intend to make available grants of 25 per cent. for these purposes in the less favoured areas. Provided a farmer is making some agricultural investments under an improvement plan, he will also be able to get these grants towards improving accommodation in the farmhouse for paying visitors; or converting a barn to light industrial or food processing premises; or providing facilities for caravanners or campers.

Until now, we have not been permitted to assist the poultry industry in any way with its investment. The new regulation also changes that. The regulation will permit us, at national expense, to pay grant where a poultry farmer is required by an environmental order to install new or improved waste disposal facilities. This third innovation is, therefore, to make available for this purpose grants under the Agriculture Improvement Scheme of 15 per cent. generally and 30 per cent. in the less favoured areas.

Farmers in other sectors will be eligible for waste disposal grants of 30 and 60 per cent. For pig farmers, we have extended eligibility to the larger units, provided that the improvement does not increase the number of pig places, and provided that the farmer can grow at least 35 per cent. of the feed requirements for his pigs on his own holding.

Proper waste disposal is an essential ingredient in protecting the environment, but we are grant-aiding other features of the countryside. For many years now, we have grant-aided hedge planting, the building of stone walls and the planting of shelter belts. We shall continue the current high grant rates of 30 and 60 per cent. for these items. In addition, we are extending the range to include hedgerow trees, protective fences, traditional banking, trees for shading stock and footbridges and stiles. The shelter belt grants are being extended to the lowlands and we shall aid the creation of farm ponds at 15 and 30 per cent. Most of these changes are in response to the comments we received on our consultation document.

Finally, in this category, we have not overlooked energy-saving measures. We are continuing the present ones and adding new ones including wind- and water-powered pumps and generators, solar panels and thermal insulation of agricultural buildings. The grant rates will be 15 per cent. generally and 30 per cent. in the less favoured areas.

These, then, are the innovatory and extended measures. But they are superimposed on top of the long-standing range of eligible items which will be continued. Grants of 15 per cent. and 30 per cent. will be available for drainage, building works, the laying down of pasture, provision of electricity, water and gas and for all the other familiar items, thus continuing the arrangements which were established under the Agriculture and Horticulture Grant Scheme last December.

We have not forgotten the special commitment that the Government made in 1983 to the horticulture sector. We have been compelled to make some changes by the terms of the new Community regulation. Where reductions have been necessary—such as in the ceilings on grant earning expenditure—we have sought to offset them, for example, by increasing the grant rate. Grants up to 50 per cent. will continue to be available until 1988 for glasshouse improvements and the grant for orchard replanting goes up to 35 per cent. In addition we hope to introduce greater flexibility into our administration by dropping some restrictions, such as the sufficient employment test.

For most non-horticulture works the investment ceiling will be £50,000, as it is under the present AHGS. This ceiling should be seen as part of a set of measures designed to direct grant more towards the small and medium sized farm than towards the larger holding. That also is why we are concentrating our resources on farmers with Community improvement plans. In the past, farmers unable to meet the Community criteria could collect grant on a full range of agricultural improvements under the national scheme. Now the Community criteria have been relaxed. Part-timers are eligible provided that they work their holding for 1,100 hours a year and earn 50 per cent. of their income from it. A planholder only has to achieve a lasting and substantial improvement in the holding rather than aiming for a specific income target.

In these circumstances we believe that we did not need to keep open a comprehensive national scheme. We felt that it would help only the very much larger holdings at one end of farming and the least viable holdings at the other. In doing so it would deflect available resources away from those most in need—the smaller farmers—and we felt that this was not sensible in times of financial stringency. We felt that we must therefore concentrate our resources in such a way as to achieve maximum impact. I believe that the new arrangements which I am introducing will do this and at the same time will provide the industry with a new basis of support which will enable it to prosper in an atmosphere of increasing sensitivity to environmental matters. I commend these instruments to your Lordships' House. I beg to move.

Moved, That the draft regulations laid before the House on 8th July be approved. [29th Report from the Joint Committee.]—(Lord Belstead.)

7.45 p.m.

Lord John-Mackie

My Lords, we are grateful to the Minister for putting these instruments in front of us and for the explanations he has given which in many ways welcome some of the changes. The noble Lord emphasised in the latter part of his speech the question of the environment, a subject with which my noble friend sitting behind me will want to deal. Some of the changes and improvements will be welcomed particularly by the top fruit growers who are getting help, by the glasshouse industry, which of course needs help, and by the young farmers. I have not read the scheme as closely as I should have done, but did I hear the noble Lord say that the younger farmer was somebody under 40? That seems to be the older farmer.

There was also the help for tourism and the craft industries. This is very welcome, but why is it to be only in the less favoured areas? After all, the people who are unemployed are not in far away places where we hope the craft industries will be employing extra labour. There is unemployment in the favoured areas. The changes would have been a great help to many smaller farmers. It is quite easy to fix a size in the favoured areas. The same applies to the help for tourism. After all, tourism happens not only in the Highlands of Scotland and Wales and in the Peak District. There is a good deal of tourism into East Anglia and other places. I am sure that small farmers there would have been glad of this help. I am sure it is a mistake not to give this to small farmers in other areas.

I turn now to the 60 per cent. grant to plant shelter belts in the less favoured areas and to the stipulation that 50 per cent. should be hardwood trees. This surely is a mistake. You will get some environmental improvement which you would have achieved with 5 per cent. around the edges of the shelter belt. The 50 per cent. stipulation will produce only scrub woodland and not hardwood trees. It has been estimated that hardwood will run out in this country in the next 40 years. I should have thought that the 60 per cent. grant should be given to the lowland areas to plant hardwood, with no stipulation about 50 per cent. The hardwood position in this country will be serious in a very short time. On the broadleaves scene I am sure that farmers in areas other than the less favoured ones would do a lot to help the hardwood situation if the grant was much higher than it is at the present moment. I am sure it is a mistake to insist on 50 per cent. of hardwood in the less favoured areas which generally speaking are in hill areas.

The noble Lord said that the Government had brought poultry in; but I gather there is not to be help regarding poultry effluent. That to me seems strange. In the EC document there is a question of water courses in Scotland getting help, but not those in England, although there are grants for some help. However, these are not specified. I am sure that many noble Lords here will look into the particulars of the schemes. I should like to take a look at the general picture. Although I am willing to be corrected here, I think that direct cuts of about £40 million have been made since 1983. With the general effect of the Finance Bill last year, there has been a savage cost to the industry. The Government promised that the support, which was cut down to that figure a year ago, or less than a year ago, would continue at about the same level. This is certainly not the case because the present cuts are going to alter that considerably. I shall leave the detail of this to other noble Lords. It is surely unfair arbitrarily to stop the old scheme at the beginning of this month when I am perfectly sure that many farmers had plans to go on with schemes and some were already in the middle of schemes. The Government should look at this again in order to satisfy farmers on that point.

I have made this point before and I make no excuse for repeating it. From the late 1930s but mostly from the end of the war, because of adequate grants that were made over these years, the infrastructure of British farming has been improved beyond all recognition. That has given us a considerable edge over many other developed agricultural countries which are in competition with us. That edge has been maintained by the grants as well.

I do not want to go into detail but I would put drainage at the top of the list and liming not far behind. One has been abolished, and the other has had its grants reduced from 60 to 15 per cent. It would be a real tragedy if the improved infrastructure of our agriculture were to deteriorate. I seriously appeal to the Government to look closely at the action they are taking. If deterioration should start to take place, it should be easy to find out from the amount being spent on major capital works, etc. If that should happen, I would ask the Government to change their policy of continual cutting of the grants which have done so much to help agriculture and to keep us competitive with other countries.

Although the regulations show some improvements, the cuts and reductions made are bad for agriculture. I hope that the Government will watch the situation very carefully indeed.

Lord Mackie of Benshie

My Lords, as usual, my noble kinsman has said much of what I should like to have said for myself. I too thank the Minister for many of the sentiments he produced when introducing these two orders. However, what all this shows is that the Government—along with many other people—do not really know what to do. If one studies the grants, all that has been done is to save money. One looks first at the consultative document and sees there a list of items for which national or EC grant can be paid. There is a very short list of the former but a very long list of the EC grants. This means that the Government are reluctant followers of the CAP in this matter, and that they are in the main doing only what they have to do.

I do not want to be ungracious. It is a good enough thing to give a small amount of help to young farmers. It is certainly a very good thing to have kept up to a considerable degree the grants to less favoured areas. That is right and proper. However, the fact is that agriculture is entering a period of extreme difficulty. Quite apart from the weather this year, every single farmer knows—as does anyone who has studied the situation—that the price of cereals is to be under extraordinary pressure. The national cut of 1.8 per cent. will be enormously exceeded by intervention standards and by other difficulties. One can see already in the forward price for feed wheat and feed barley that the whole market is extraordinarily apprehensive.

It is true that from the period when the policy was so successful, and when the brakes were so badly applied, we are now entering a period where there will be tremendous strains on agriculture. The Government could have done very much better in looking at the whole situation.

If one studies both the national and EC figures, one sees that there are 60 per cent. grants in the less favoured areas on items which the Government think are popular in the country—such as conservation and the building of walls. There are 30 per cent. grants for actual aids to agriculture. In the better areas for farming which actually produce the food and supply the real environment of the countryside, the grants are down to 15 per cent.

What will those 15 per cent. grants achieve? The whole point of 25 per cent. or 30 per cent. grants was that they influenced farmers to spend money to improve drainage, to put on lime, to build roads, and to improve buildings. Grants of that size actually influenced them to make such decisions. Grants of 15 per cent. will not influence anyone. If a farmer plans to make an improvement anyway and has obtained the majority of money from some other source, then the grant will serve as a sort of tip or bonus—and obviously people will take it. However, a grant of that size will not influence even one policy decision.

We are now entering a period when there will be extreme pressure on one of the major industries of this country. The Government seem to be saying that they will cut everything by as much as they can—that they saved £30 million in 1983 and £40 million in 1984. If I may say so to the noble Lord, Lord Middleton, there was a most excellent brief from the Country Landowners' Association detailing the money saved and the total cost to the industry.

The only idea in the Government's head seems to be, "We are in a new situation and we shall simply save money". It is still an immensely important industry. In my view, the Government should have thought to themselves, "We need to help marketing and research. In a competitive situation, money is required to breed better wheats, to give better advice and to increase training. We'll cut out the 15 per cent. grants altogether". That could have been more logical. At present, the Government are proposing to give 15 per cent. across the board, and I doubt whether many of those grants will do much good.

Marketing, research, plant breeding, training and advisory work are the areas in which money should have been put. It would have been logical also to have raised the hill cow subsidy, and so on, to the maximum permitted by the EC, but that has not been done. The Government have failed to produce a logical and comprehensive plan which would have given the farming industry something to bite on. The Government have saved some money. I do not believe that their approach is much use, but I shall not refuse the money. The orders will obviously go through but the Government have missed a tremendous chance to do something positive for the industry.

Lord Middleton

My Lords, my noble friend Lord Belstead has told the House that the Government do not wish to spend money on investment aid that might encourage more and more production. That seems highly sensible. Our own Government, alas, have been able to do very little about EC support prices which have led to surplus production, but in their efforts to reduce public expenditure they did economise, and are economising, on grant aid for investment.

The noble Lord, Lord John-Mackie, and his noble kinsman both referred to the cuts. In 1983, some £30 million per year was chopped by reducing the rate of grant. In 1984, only last December, the standard rate of grant under the Agriculture and Horticulture Development Scheme—the Community-aided scheme—was reduced from 50 per cent. to 32.5 per cent. Under the national scheme, which is funded entirely by our Treasury, the standard rate has been reduced from 20 per cent. to 15 per cent. This had the effect of reducing expenditure by a further £40 million per year.

8 p.m.

When last December's round of cuts in capital grants took effect, the Minister announced in a Written Reply dated 11th December that: When the new capital grant schemes are introduced in 1985 to implement the new EC farm structures policy currently being negotiated in Brussels, we are determined to maintain a level of capital investment support which will enable the industry to preserve its competitive strength."—[Officia! Report, Commons 11/12/84; col. 434.] If competitive strength means anything, it is the ability to maintain a competitive economic performance.

What is the effect of these 1985 schemes which my noble friend Lord Belstead has introduced? The major effect is, first, to lower the standard rate of the AHDS scheme from 32½ per cent. to 15 per cent. with a greatly reduced expenditure ceiling, and secondly, to abolish the national scheme except for a minority of items related to conservation and the environment As the noble Lord, Lord John-Mackie, has reminded us, abolished, too, is any grant aid for field drainage under the national scheme and the AHGS scheme. But as his noble kinsman has reminded us, under the AHDS scheme there is 15 per cent. grant available which is not a great incentive.

There is therefore a switch of emphasis in grant aid towards environmental projects and away from aid designed to improve economic performance. I must add that this is taking place alongside last year's staged reductions leading to elimination under the tax system of capital allowances on buildings, plant and machinery which are estimated to cost the industry another £165 million a year.

For what they are, I welcome the grants for environmentally positive investment and the continuing higher scale of rates for less favoured areas under the EC funding scheme. There is useful help for horticulturists, for young farmers, rural crafts and tourist projects. Some investment aids under the national scheme remain, but these are limited to certain environmentally positive schemes such as building walls, planting trees and energy-saving investment such as in water pumps and some horticultural items. These are splendid; but severe cuts in the EC funded scheme and the abolition of the national scheme—except for the items I have mentioned—appear to be a deliberate retreat on the part of the Government from a previous commitment to support economic development.

My first criticism therefore is that this is not in line with the Minister's December prediction, which I quoted. Surely it is in conflict with the MAFF discussion paper to which my noble friend Lord Belstead has referred and which declared that, Government support will continue at approximately the level established following the changes last December. My second criticism is the hiatus which exists between the sudden ending of the AHGS scheme on 8th July and the start of the new scheme on 1st October. I am sure that other noble Lords will refer to this difficulty. I believe I understand the administrative reason for doing this but I do not think it is a good one.

Having said that, may I briefly look a little wider at the matter of Government support to agriculture through investment aids? We last discussed this subject in this House when we debated the 1983 House of Lords Report on the European Communities Committee on Socio-Structural Policy and, in particular, the Guidance Fund. That report noted that the guarantee section of EC support received some 96 per cent. of expenditure while the guidance section received only 4 per cent. Of that 4 per cent. only a small fraction was spent on grant aid for modernisation.

One might have expected the committee to draw the conclusion that some of the 96 per cent. spent on support prices, intervention, and so on, might well be pruned and that some of the money saved might have been used to boost capital investment designed to promote efficiency in what would be a harsher and healthier business climate. It concluded quite differently, and the argument went something like this: because far too much was being spent on guaranteed prices for farm produce, leading to the surpluses which we all deplore, therefore there should be abolition of capital aid whether supported by national funds or by the EC. Capital grants, the report said, have now served their purpose. Farms are adequately equipped and the consequent increased productivity implies expansion of production and, therefore, surpluses. Incidentally, the report recommended retaining grants for field drainage.

I well remember taking issue with that line of argument when we debated the report in February 1983.1 was vigorously supported by the predecessor of my noble friend Lord Belstead, in the office of Minister of State, the noble Earl, Lord Ferrers. Speaking for the Government on that day, he said: To argue that capital grants should be ended as a disincentive to the production of surpluses is rather like saying that, instead of designing new and more efficient motor-cars in order to save fuel, we should simply put smaller engines in all existing cars so that they go slower". He went on to say that, in the modern world, we either adapt and innovate or we fail. We cannot simply stand still."—[Official Report, 21/2/83; cols. 539–40.] As market forces play a larger part in our farm economies—as they must if the Community is to survive the present crisis—it goes without saying that we can only survive and compete in Europe and in world markets through continuing adaptation and innovation. The report to which I have referred acknowledged that capital grants had been cost-effective and had raised technological and structural efficiency. The noble Lord, Lord John-Mackie, acknowledged that when he spoke. But the committee then took the astonishing step of concluding that they ought to be abolished. If my noble friend will forgive me, there appears to be an echo of that thinking in the Government's treatment of investment aid as illustrated by these measures.

British agriculture is once again on the threshold of change. That is nothing new. I have lived through many ups and downs in farming. If Government policy is to continue to give support to agriculture—not the lavish support advocated by European politicians but the kind of basic support that has been the policy of British Governments of both parties since 1947 and which is no more than that provided by every Western nation and some developing nations as well—I suggest that one of the most effective ways to do it is to encourage investment. Surely that must appeal to a Government which is dedicated to encouraging private businesses to stand on their own feet while pursuing policies which promote efficiency and competitiveness.

Any argument that modernisation should now be complete ignores the continuing evolution of new technology in farming, just as in every other industry. Grant aid need not be made available for schemes which would merely exacerbate the problem of surpluses. Plant and machinery in farming nowadays becomes obsolete and inefficient very quickly. There will be a need to provide capital for the utilisation of new crops and processes that may, for instance, provide alternatives to over-produced grain. There will always be a need for money for agricultural research and development and for the dissemination of knowledge, whether it be husbandry or marketing. There will be a need to improve our trading capability. We need a clear indication from the Government as distinct, if my noble friend will forgive me for saying so, from the rather shaky signal we are receiving today.

Lord Stanley of Alderley

My Lords, I am sorry to have to tell my noble friend Lord Belstead after a Parliamentary Session that I have spent admiring his work and being able to thank him for it, that this order comes to me as a black end of term. I am not surprised that he introduced it so quietly and, as I thought, sadly. Why do I not like these orders? First, it is for the reasons already stated, particularly by my noble friend Lord Middleton. I shall not drive those nails in any further—maybe I shall give them just a little tap—but I have to say that this order further disadvantages British farmers against their competitors, and particularly their continental ones. Despite what has been said in another place, a change in grant from 32½ per cent. to 15 per cent. is a cut, albeit if you are under 40 you may have that grant increased by 25 per cent., which will raise it to 18½ per cent. if my arithmetic is correct. It is not a great incentive for the young farmer.

Like the noble Lord, Lord Mackie of Benshie, I should not object to cuts as such—well, not too much—provided they were, as he said, constructive and provided that others, such as my French counterparts, received similar cuts; but I am not aware that the French or the Italian farmer is being similarly curtailed.

Moreover, I hate the bureaucracy that this new scheme will lead to. This scheme, as opposed to our own national scheme, entails a master plan similar to the old AHDS, and only a dedicated fiddler of forms was capable of mastering that. What hope is there for the small secretary-less farmer? Certainly, as the noble Lord, Lord Mackie of Benshie, said, these grants will not influence anyone anywhere.

I want to expand on the problem of no grant being in operation between 9th July and 1st October this year despite the fact that my honourable friend Mrs. Fenner is reported in col. 23 of Standing Committee in another place to have said on 17th July that the AHGS would remain in operation. I presume that she was incorrectly reported, but perhaps for the record my noble friend will confirm that only the AHDS will remain in operation during this period unless a firm commitment is made prior to the 9th July in respect of the AHGS—and I am sorry to use all these initials.

One of the excuses for having this gap when there is no grant is that very little improvement work is done in July, August and September. Obviously, whoever drew up this order only thought about the arable or cereal farmer. He was not aware that on livestock farms, particularly in the north and the west, these three months can be the only times possible, for obvious reasons—clearly they were not obvious to the person who drew up this order—when work on cattle yards or indeed bracken (which I shall talk to in a moment) can be done.

I suppose we all make mistakes—certainly I do—and only the fool never admits to it. So may I try to conclude in a constructive manner by asking my noble friend, not for the first time, to put right two matters, the first concerning bracken control and the second pollution control? The only time to control bracken effectively is in August, but this order gives no grant in August this year. Can my noble friend put this error right? I am sure that he is not keen to see bracken increase even faster than it does already, so causing, among other things, cruelty to animals through fly strike, the poisoning of those animals and now the latest scare, which I do not personally agree with, of cancer. To do nothing for one year is acting like a gardener who does nothing for a year about ground elder, and we all know what happens the following year.

8.15 p.m.

My noble friend will say that if the work were started or booked prior to the 9th July a 30 per cent. AHGS will be payable, as it would if the bracken were on a site of special scientific interest or in a national park. But what is the position of the farmer who has not booked or who has done what is normal in these areas and has said in passing to his merchant that he would probably spray some bracken this August but did not specify how much or why or when? Does such a conversation—it was perhaps in Welsh and in the "local"—constitute a contract and therefore make the Government liable to pay grant? I hope that my noble friend will say "yes". I do not want to see cases of breach of contract before the courts involving my right honourable friend the Minister of Agriculture, farmers and contractors.

My other specific worry concerns a problem in particular between the South West Water Authority and farmers in Devon. What is the position—and I ask my noble friend—of farmers who have been warned by the South West Water Authority, or indeed by any other water authority, that the effluent from their cattle yards is polluting, or may risk polluting, water courses? These yards are empty now; but they will be filled in October, so the work must be done in July, August and September, usually by farm labour. So there will be no contract prior to the 9th July.

Will my noble friend say that grant will be considered for these schemes and will be given should they be carried out between 9th July and 1st October? Or, despite the remarks of my honourable friend Mrs. Fenner in Standing Committee, and indeed my noble friend's remarks in introducing this order about proper waste disposal, do the Government not mind about polluting the Torridge or the Thames? My request is supported strongly by the pollution officer at the South West Water Authority, who last year, in conjunction with farmers, made great progress in controlling pollution from farms. They are most anxious, and he is most anxious, that this grant should be continued this year so that this progress—which I think reduced the number of possible cases of pollution from around 450 to 251 last year, which is an enormous drop—will not be impeded.

On a similar matter, I am also concerned about the position of the farmer in a national park—particularly I have in mind the Dales—who has, as they normally do, consulted unofficially with the park authorities on a scheme of work but who has not applied formally. Will he get grant during these three months? I very much hope so. If not, it will destroy the excellent co-operation which has existed between the national park authorities and farmers since the Rayner report. Such unofficial contact was very much encouraged at the time by the Government and everybody else, and I think it was known euphemistically as "tea party philosophy". Surely we want to continue to encourage this co-operation.

I have been critical. I think these orders have been badly drawn up; but I hope, as I always do, that my noble friend on the Front Bench will be able to answer the specific queries that I have raised.

Lord Sandford

My Lords, in common with almost all taxpayers, but not with the noble Lords who have spoken so far, I want to express a welcome to these measures: a welcome to the reduction in grants, which were tending to excess production and to harm the environment; and a welcome to the grants which have long been permissible under the Less Favoured Areas Directive (for 13 years, in fact) but which have not been implemented until now, to enable and assist diversification, especially in the hills and especially by young farmers.

I welcome, too, the provision of grant—and not before time—for environmental improvements. I believe that we now have to hand a tool or a set of tools to enable an enterprising farmer, especially a young enterprising farmer, and especially a young and enterprising farmer in the hills, to play a far fuller part in revitalising the rural economy, enhancing the rural scene and avoiding the worst effects on his livelihood of the impact of farm surpluses. I also welcome the retention of prior notification established in 1980; but in passing I say to my noble friend that we must see that retrospective payment of grant when prior notification has been overlooked, neglected or bypassed is firmly stopped when the new regime comes into force in October.

I have four questions for my noble friend. First, will the extension of prior notification envisaged by the introduction of the Landscape Areas Special Development Order throughout the national parks and beyond them, at least to the areas of outstanding natural beauty, coincide with the introduction of these schemes on 1st October? If not, what is the date for that extension?

Secondly, diversification by farmers into tourism and crafts will be subject to planning permission. Am I right in assuming that the grant will not be given for that diversification unless and until planning permission is granted? When planning permission is granted it will be given for an industrial or commercial use because British planning legislation does not use the rather more precise EC terms "tourism" and "crafts". Does the Ministry of Agriculture intend to withhold grant if the diversification, although permitted by United Kingdom planning permission, does not in its view conform to an EC definition of tourism and craft industry? I very much hope not.

Thirdly, why has no grant been given for woodlands on farms? That was mentioned by the noble Lord, Lord Mackie. I cannot be persuaded that the answer that grants from the Forestry Commission are just as good or better holds water. Woodlands on farms are a useful form of diversification and ought to be encouraged.

Fourthly, am I right in assuming that no grant will be payable for environmental improvements unless they have been subject to prior notification under the extended arrangements that are envisaged? Subject to satisfactory answers to those questions, I very much welcome these two measures.

Lord Mackie of Benshie

My Lords, does the noble Lord really mean to tell the House that it is a great opportunity for a young farmer starting to farm in the hills to get grants for environmental projects? Does he really think that spending such a grant will help the young farmer to have a prosperous future?

Lord Sandford

My Lords, the category of grant to which I was referring was those grants which would allow the farmer to diversify into tourism and craft industries. There is no money to be had from environmental improvements, but it is a good thing to be engaged in. Those grants ought to have been made available to farmers, young and old, in the hills when they were first permitted under the less favoured areas directive in 1972. It is a great shame for the farmers in question that they have not been available. Now that they are, they are to be welcomed. They are not of course available to farmers unless they are also in agriculture.

Baroness Nicol

My Lords, as my noble friend said, I should like to concentrate a little on the environmental side of the regulations. I am grateful to the noble Lord, Lord Sandford, for covering a number of the points that I would have wished to make. My welcome—for that is what it is—is a little more qualified than his. I think that there are gaps which need to be filled.

This is the first time that regulations have positively encouraged the protection of the environment, and as such we welcome them. This is the first time that there has been financial support for environmental developments on a farm. But implementation is in the hands of national Governments, and there are areas where our Government have not taken a sufficiently positive approach—for example, on environmental grants, which have just been mentioned. Grants for environmental developments are not high enough. They will not encourage young farmers, or indeed older and wealthier farmers, to take them up because they will not yield anything like the profits that they can get from other forms of investments.

In relation to improvement grants there is a provision at paragraph 15(1)(d) of the draft regulations which gives cause for worry. It gives one reason for refusing grant as: the carrying out of the work, facility or transaction towards the expenditure on which such grant is claimed has been effected in a way which appears to that Minister to have destroyed or damaged the natural beauty and amenity of the countryside to an extent which cannot be justified by any resulting agricultural benefit". But this is too late. The damage will have been done. Surely there should be prior notification and an assessment of possible damage before the work is undertaken. Can the Minister say whether improvement plans which harm the countryside will be amended, rejected or even looked at before work starts?

In company with the Council for National Parks, I welcome the shifts within the grant categories generally away from environmentally damaging activities and towards those which are more sympathetic to environmental needs. In particular, we welcome the removal of grant for land reclamation, including the infilling of ponds. The new approach is particularly important to the 10 national parks of England and Wales. These are nearly all in the less favoured areas and are all dependent on sensitive and thriving agricultural management for their beauty. We welcome the addition of new grants for environmentally positive investment, as a number of noble Lords have already done, particularly for hedges, trees, traditional walls, banks and dykes, waste disposal systems, shelter belts (with preference for broad leaved species), the regeneration of heather and bracken control. But, like the noble Lord, Lord Sandford, I am sorry that there is no grant for woodland development as such but merely for protective belts.

However, we share the concern of the Royal Society for the Protection of Birds that the grant for conversion of moorland will be available for a further three and a half years. Perhaps the Minister can confirm that that is so. The RSPB thinks that it is available for a further three and a half years under an extension of the old AHGS scheme. Perhaps I may quote briefly the recent moorland loss and damage.

The RSPB informs me that moorland loss has been dramatic. Wales lost over 40 per cent. of its freehold moorland between 1946 and 1981, and the current rate of loss is alarming, it says. I shall not give your Lordships details of the various types of bird that have suffered as a result, but I shall mention five sites in Wales that have been severely damaged: Llyn Mawr, two at Llanidloes, one at Plynlimon and one at Llanbrynmair—my apologies to Hansard; I shall put this in writing afterwards. I hope that I have pronounced the names correctly for the benefit of my Welsh friends. Those sites were all of special interest—not of special scientific interest but of special habitat interest, and I understand that they are now destroyed.

Finally, let me say just a word or two about environmentally sensitive areas. The Government are to be congratulated on their efforts in the Council of Ministers to win the protection of 4 per cent. of our farmland under this designation. Does the Minister really believe that 4 per cent. will be designated in the United Kingdom? Do the Government envisage any difficulty in getting the European Commission to agree to our list of proposed ESAs? Finally, and this time I mean finally, will the NCC be empowered to check farm improvement plans made under the agricultural improvement regulations within the environmentally sensitive areas? Subject again to satisfactory answers to some of those questions, I welcome the regulations.

8.30 p.m.

The Earl of Radnor

My Lords, I should like to thank my noble friend for bringing these regulations and this scheme before us. I cannot possibly say, however, that I am very pleased with them. On the second page of the regulations, it is stated that the regulations can be described as agricultural improvement regulations, whereas I would describe a large part of them, although I have no particular objection to this, as environment improvement regulations. I was brought up by the late Sir Frank Engledow, who described the object of agriculture as to make money subject to the welfare of the workforce and the heart of the land. This seems rather a long way from it.

If there is to be such a reduced amount of money available—and obviously there is, as we have heard from all quarters—and if farming is entering a very difficult period—as indeed it is—then it seems a little ridiculous, although I have spent most of my life trying to take care of the environment, to direct what meagre resources there are at hedges, trees and so on and so forth. I believe that there are better ways of using this money. If the money is used in those better ways, then, God willing, the farmers themselves will make a reasonable living and will be able to do those things which they are encouraged to do in a rather meagre monetary way in the regulations.

I should like to say a word or two on the practical aspects of these rather low grants. I am talking about the grants in the lower range, the 15 per cent. grants. This has been mentioned already to a certain extent in the context of being hardly worth while. However, it has been my experience in the past that even with grants at a higher level than this—and indeed quite a lot higher—the standards that are laid down by those who approve the final job that has been done are so high that sometimes it has been better to go into the job without any grant at all. When the grant gets down to the 15 per cent. level, the situation that I have described will be accentuated. Many people will simply not enter into it, because it will not be worth while.

In the same context, I agree very much with the thought thrown out by the noble Lord, Lord Mackie of Benshie, that, rather than these small amounts of money, there are better ways of using the cash available—perhaps, as he said, by breeding a better wheat or doing something in research and development that will improve the cutting edge of farmers in the market place in these difficult times.

I am disappointed—unless I have missed it—not to have seen one area of farming being encouraged. I refer to the whole scene of value added products. I may have missed it, but I do not think that I have seen anywhere anything that grant aids taking the primary product that the farmer produces a little closer to the product that will eventually be retailed. This is a great pity. There is scope here. It is especially a pity because it would generate employment. That is a matter that should always be examined at this time.

Practically everything else has been covered far better than I can cover it. I was intrigued by some of the more, if I may say so, way out suggestions of grant aiding wind power. It is a nice thought. Some of us have been into it. In fact, I believe that the average wind in the British Isles, wherever you are and throughout the year, is such a gentle zephyr as to be no good for anything at all. I believe that the same applies in the United States.

I have one question which I hope that my noble friend will forgive me for asking. I say that deliberately, because it has to do with fish farming. It is mentioned here. There appears to be an ambiguity in the regulations between page 27 and page 29. To work backwards from page 29, it is stated that facilities for the farming of freshwater fish can be grant aided at 5 per cent. or 10 per cent. according to the area you are in, whereas on page 27 it is stated that facilities for the storage, supply and distribution of water for agricultural purposes, including farm ponds, can be dealt with at a much more robust 15 per cent. or 30 per cent.

I think that I know which case I would argue. I would argue that fish farming is agriculture. I would argue that my fish farm ponds were farm ponds and I would go flat out for 15 per cent. and suggest that the 5 per cent. was perhaps unnecessary altogether. I may have got that wrong; but it does seem, at the least, a little difficult to understand.

The regulations are disappointing. I can appreciate the welcome extended to them by people who are keen on the environment. Indeed, if the regulations produce some beat up hedges and trees, I should be very delighted, but I do not believe that that will happen. I do not think that the regulations serve British agriculture at all well at this time.

Lord Monk Bretton

My Lords, I am also grateful to my noble friend the Minister for the manner in which he introduced the regulations and the scheme. I should also like to say how very much I have appreciated his helpfulness and his skill in connection with a great deal of other parliamentary business this Session. While there are some good innovations in this scheme, I must confess to being unhappy about the continued grant reductions. I am aware that some members of the public welcome them. It is therefore important to stress, as my noble friend Lord Middleton did, the view that I very much share that the guarantee fund of the EC has had too much and the guidance fund too little. I hope that our Ministers and the Government will continue to take that view.

I remember very well an eminent agriculturalist once being asked whether he would give a lecture on the subject of sources of agricultural risk capital. He refused because he said it is a very simple matter indeed. The sources of agricultural risk capital are patrimony, matrimony, or parsimony; it is small business without access to capital markets.

It is really for those reasons that grants have always been of some significance and importance. At times many of the grants have been in compensation for the difficulties posed by taxation. It is important that I should make that point. It is also most important to stress that we should watch most carefully the promotion of marketing. I am very well aware of the tremendous strength of the French agricultural industry in this direction through organisations such as Union Laitière and the remarkable way in which the vegetable production of Brittany is marketed. I think that we are well behind in these matters, and it is a most important point to watch. The possession of agricultural crops for industrial use will quite likely become very important, and in view of the size of our agricultural industry, it is most important to keep up competitive efficiency.

I should like to refer to the matter of drainage. We have made a very substantial investment in drainage over the past 20 or 30 years, and where the soil is stable I am convinced that this is a very important long-term investment. It is important for the long-term to keep an adequate area of land properly drained. Much of our very productive soil in these islands is a stubborn soil and needs draining. It is probably right that we do not want to expand drainage now simply in order to expand production; but it is most important to keep that investment on a good care and maintenance basis. We do not want what happened in the 1920s and the 1930s to happen again, when the ditches were allowed to grow in and the outfalls of the drainage systems were damaged, and so great damage took place in the drainage systems themselves. It was very regrettable that that happened.

It is for that reason that at the very least my noble friend should keep his eye on the importance of getting the ditches dug. Although this matter is raised in the Agriculture and Horticulture Development Scheme, I am sorry that in the national scheme there is nothing about digging ditches. That is the least of it because we need to maintain an area of well-drained land and also to maintain the skills and the abilities of those people who actually carry out the drainage.

Like my noble friend Lord Middleton, I should like to refer to the tax allowances on farm buildings having been reduced. I am sorry that we shall shortly lose the agricultural buildings allowance which we have had since I think 1946. This was always at the flat rate of 10 per cent. and was different from the allowance for mills and factories. There is a great difference in putting up a farm building in the wilds of Hereford and putting up a steel-framed building on the outskirts of Slough. It was for those reasons that the farming industry was allowed a different rate of capital grant. I maintain that there was great common sense in having that differentiation.

8.45 p.m.

Viscount Ingleby

My Lords, I should like to say how pleased I am to be taking part for the second time today in a discussion in which the noble Lord, Lord Belstead, is speaking. I must declare an interest in that I try to look after a number of hill farms on the North Yorkshire moors which have about 200 acres of inbye land with the right of stray for sheep on the open moor. I am not absolutely sure whether we are in a less favoured area, although anyone who has experience of our weather would be in no doubt at all.

Before the war times were so bad for hill farmers that my father waived the payment of any rent from his tenants for some years. Then came the war and the situation improved. I can remember a neighbour of ours, Sir Thomas Dugdale, as he then was—later he became Lord Crathorne, the father of the present Member of this House—telling my father that he had done a bit of good for the hill farmers. I believe that he was referring to the introduction of the first headage payment on moor sheep.

Since then Government support for hill farmers has been extended widely, and includes capital grants and the price support system. Some of these grants have now been abolished and the total amount appears to be reduced. However, there are some new ones which I personally welcome. I hope that this does not indicate a change of heart by the Government so far as their commitment to supporting hill farms is concerned. Up to now hill farmers have been encouraged to produce as much food as they can from the hills. If this is no longer to be the objective, I should like to ask the Minister what their objective should now be.

Turning to the actual scheme itself, I do not query the definition of a young farmer as someone under the age of 40.I have only two tenants of my own who fall into that age group. I welcome the introduction of the grant for wind pumps. If the noble Earl, Lord Radnor, lived where I do, I think that he might take a slightly different view in that respect. I also welcome the introduction of a grant for the provision, replacement or improvement of walls. We have some magnificent walls which, if well looked after, last a very considerable time. However, during the bad times some of them were allowed to fall down, so I very much welcome the introduction of this particular grant. Many of the walls have been replaced by wire, but I cannot help feeling that in the long-term that is uneconomic in that the wire lasts only between 10 and 15 years, whereas a good wall, if well looked after, will last 100 years or even longer.

I also welcome the introduction of a grant for gates, stiles and foot bridges because we have a considerable number of them. I welcome the grant for shelter belts. I wonder whether the noble Lord, Lord John-Mackie, was absolutely correct when he said, I think, that in order to get the high rate of grant on shelter belts one had to have 50 per cent. of hardwoods. According to page 25 of my schedule in the less favoured areas you get a grant of 60 per cent. irrespective of whether or not hardwood trees are included in it. Personally I always plant a few hardwoods in any case, and the good Lord adds quite a number of rowan and birch.

To turn to Lord Sandford's point about how he was disappointed that there was not a grant for woodlands on farms, I should have thought that a good many of them, in fact probably most, would qualify as shelter belts. I welcome the grant for burning heather. which is important in our area. Does this apply to the owner of the moorland as well as to the man who has sheep rights which he exercises on the moor, because the burning is beneficial both to the owner and his grouse shooting as well as to the sheep grazier?

I also welcome the grant on bracken control, which is important. Are any conditions attached to this grant? I also welcome the grant on sheep pens and for improving farm tourist accommodation. 1 was disturbed to hear from the noble Lord, Lord Monk Bretton, that the agricultural buildings allowance is going to end. I hope that this is not so as it is important. With these reservations I welcome in general this scheme. However, in conclusion I should like to ask the Minister whether the Government are still committed to supporting hill farms, and in particular to the price support system for beef and sheep.

Lord John-Mackie

My Lords, the noble Viscount is quite right that you get 60 per cent. for any other shelter belt, but it does not alter my argument that it is stupid to give 60 per cent. and insist on 50 per cent. of hardwood.

Lord Belstead

My Lords, some of your Lordships, notably the noble Lords, Lord Middleton and Lord Mackie of Benshie, earlier questioned fundamentally the thinking which has gone into the presentation of this new package of grants. I listened carefully to all your Lordships—and not least to those two noble Lords—because all your Lordships speak with experience, and those two particular noble Lords with great experience, of the industry.

At a time of financial stringency these new capital grants introduce certain new grants, to which I drew your Lordships' attention. They are a set of grants which make it easier for the small farmer to enter the European Community improvement scheme, and for part-time farmers to do the same. For the first time we shall be giving grants to young farmers; we shall also be expanding grant aid for operations which have particular environmental value.

I was grateful to my noble friend Lord Sandford for what he said in that respect, and I was interested in what the noble Viscount, Lord Ingleby, said at the end of our debate. The noble Viscount talked about the fine walls in his part of the world of Yorkshire, and made the point that in what he called the bad times some of the walls had fallen down. It is undeniable that our industry faces difficult times in the present period for European farming, and yet it is quite a thought that we are able to bring forward a package of measures which includes 60 per cent. grant rate in the less favoured areas for the building of traditional walls.

Hill farmers will, I say to the noble Viscount, continue to receive capital grants at broadly double the rate of grants outside the less favoured areas. We have done everything we possibly can in this new grant structure to continue to fulfil our pledge to give special assistance to horticulture. At a time of financial stringency that is a reasonable package of objectives, trying to put money where it is going to be the most use, at least as we see it.

My noble friend Lord Middleton spoke with considerable feeling, and I shall look carefully at all that he said. I would say to him that a scheme which is generally providing 30 per cent. rate of grant in the less favoured areas, which are the most needy, and also has the widest range of eligible investments which have ever been offered under capital grant schemes in the United Kingdom, and indeed several new measures, is surely trying—admittedly at a time of financial stringency—to encourage investment. At any rate that is what we are endeavouring to do.

My noble friend Lord Middleton said to the Government, in effect, how can the proposed arrangements provide support at the level established in December 1984, when reductions were made in grant rates by my right honourable friend? The new Community scheme that I am introducing this evening will have a wider coverage than the Agriculture and Horticulture Grant Scheme and will be open to at least as wide a potential clientele.

It will also ignore previously grant-aided expenditure, so allowing everyone to start with a clean sheet once extant development plans have been completed, because do not let us forget that the farmer was confined under the old Agriculture and Horticulture Development Scheme to two improvement plans in a six-year period, and after you had had them you could not have another plan.

It is true that the new national arrangements will be much smaller than the AHDS—I do not deny it—but against this has to be set the fact that farmers could have, as I said, only one development plan. About 37,000 farmers in this country have had their single development plan. I am sorry, but by a slip of the tongue earlier I said two development plants in six years. They could only ever have one development plan, but 37,000 farmers have in fact had their development plan, and less than 1,000 applications for new plans are received each year in the United Kingdom.

Therefore, the value of the AHDS to the industry would have declined steadily over the next few years even if it had been kept open. The combined effect of these changes will be that within the next few years the value of the new scheme should be approximately equivalent to the old at the lower rates of grant, but obviously this is all going to depend on the level of investment put in by the industry.

Your Lordships asked me a whole series of questions. May I try to get through several of them. My noble friend Lord Stanley, particularly tying his questions to spraying bracken, asked about the ending of grants, and the period between now and 1st October when these new grants will come into effect. It is the fact, as my noble friend said, that the AHGS is brought to an end, if your Lordships agree to these statutory instruments, for expenditure on or after 9th July unless a legally binding commitment to incur expenditure has been entered into or work has been started. My noble friend put his own interpretation on the reasons for bringing the AHGS to an end, but I say to him that to have left the scheme open for claims on new expenditure once we had published these statutory instruments would have resulted in a huge number of additional claims between now and 1st October.

9 p.m.

My noble friend went on to a different point and said, "How do you know if a contract has or has not been entered into, because it may have been entered into verbally?" If both parties to a contract are in no doubt on what was agreed, and this can be satisfactorily shown, grant will be paid. However, claims are received in our divisional offices well after a contract is made. We therefore suggest that oral acceptances ought to be confirmed in writing. In a national park, an SSSI or in the Norfolk Broads, if a farmer has notified the conservation authority before 9th July of work that he wishes to carry out this will be considered exceptionally to be a binding commitment for the purpose of the AHGS which is being closed.

My noble friend Lord Stanley asked what would happen if the farmer notified the water authority about improving effluent storage or disposal. The same rule applies. If there is no commitment before 9th July, the farmer will only be able to qualify under the AHDS; but, of course, most effluent and storage problems arise from poor management, and not usually from inadequate facilities. I would say to my noble friend that the published code of guidance on effluent and pollution, I think, would very much help to improve practices among the farming community in this particular matter.

Incidentally, the noble Lord, Lord John-Mackie, asked why there is no help for the disposal of poultry effluent. With respect, I think there is. There is a grant of 30 per cent. (and, indeed, 60 per cent. in the LFAs) available at national expense for facilities for the handling, storage and treatment of agricultural effluents and waste.

Lord Stanley of Alderley

My Lords, before my noble friend goes on, could he clear my mind on this point about notice prior to 9th July? If a conversation has taken place between a farmer and his merchant prior to 9th July that he wishes some bracken sprayed but it is not written down then, if now that merchant writes in to the Ministry to say that he accepted this as an undertaking, would the Ministry consider that to be a contract? I personally would. Is it all right if he writes now?

Lord Belstead

My Lords, that is not a question that I am going to answer. I think I should be very wise not to do so. I think I must say to my noble friend that I was as forthcoming as I could be in saying that if both parties to a contract are in no doubt on what was agreed, and this can be satisfactorily shown, then grant will be paid. My noble friend will forgive me if I go no further than that this evening.

Both the noble Lord, Lord Sandford, and the noble Baroness, Lady Nicol, have referred to the question of prior notification, my noble friend relating it particularly to the LASDO order which is out for consultation at the moment, and my noble friend referred to areas of outstanding natural beauty. I have to say to my noble friend that we do not intend to extend prior notification to AONBs, but all improvement plans will be scrutinised by my right honourable friend's Ministry and this will provide opportunity to consider both environmental and conservation points.

My noble friend asked: will prior notification so far as LASDO areas are concerned come into effect on 1st October? The answer to that, too, is: not necessarily, because this is a matter which is still out for consultation. It is when the consultations are over that it will (I trust) be brought into effect, but not necessarily on 1st October, as with the new grant rates. The noble Lord, Lord John-Mackie, talking of the uplands, asked: why pay tourism and craft industry grants only in the LFAs? The answer is very simple. It is because Community Regulation 797/85 restricts these grants to LFAs. The noble Lord will not mind my saying: let us remember that the less favoured areas now cover a very considerably wider area of the countryside than they have done before—something which I think pleases all of us. Therefore, the opportunities to be able to get these 25 per cent. grants are going to be quite widespread.

My noble friend Lord Sandford talked about the European Community definition of tourism and craft industry. With respect to my noble friend, I do not think there is that definition. That we have to clear our definition with the Commission is the advice that I have. My noble friend asked me what I think was an important point about planning consent for tourism and craft industry grants. Detailed administration of these grants is still a subject of consultation with tourist boards and with others. I expect that it will be a requirement that statutory provision, such as planning consents and building regulations, will have to be met as a condition of an improvement plan.

My noble friend Lord Sandford also spoke particularly about the forestry measures, which are under Article 20 of the new grant rates, and said that he did not approve of the argument that the Forestry Commission grants are better. But my advice is that they are. Even the highest permitted level of Article 20 grants (which could be up to 100 per cent. of the cost) would bring it up to a maximum eligible cost of £866 per hectare. At that rate, Article 20 grant would not reach the maximum available under the Forestry Commission grant scheme of £890 per hectare. Moreover, at the rates available for agricultural investment under the new capital grants scheme Article 20 grant would generally be inferior to Forestry Commission grants. Article 20 sets a limit of £25,000 on the amount of investment which can be grant-aided. There is no such limit under Forestry Commission schemes; and, for smaller woodlands, grants of up to 60 per cent. are available for the planting of shelter belts, trees in hedgerows and single trees for sheltering stock on farms. In addition, there are grants of up to 50 per cent. available from the Countryside Commission for small plantings.

The noble Lord, Lord John-Mackie, referred to the percentage of hard woods which are demanded in the planting on farms. Shelter belts consisting of 50 per cent. or more of broadleaves get 30 per cent. in the lowlands and 60 per cent. in the LFAs, and other shelter belts get 15 per cent. in the lowlands and 60 per cent. in the LFAs, broadleaves getting a higher rate in the lowlands. I will look carefully at what the noble Lord said on this particular subject. The noble Lord, in his previous capacity as chairman of the Forestry Commission, has almost unrivalled experience in this particular field.

The noble Lord, Lord Middleton, asked why there are no national grants for drainage. I have already attempted to say to your Lordships that access to the new community scheme will be easier than the present AHDS. It is very important that I should make this point, my Lords, because my noble friend Lord Stanley—quite understandably, and I do not blame him at all for doing so—talked about having to push tons of paper around and fill in innumerable forms if one went in for the Community scheme. I do not think the AHDS is like that; indeed, it has been very valuable indeed. But it is most important that I should underline that the new Community improvement scheme is both easier to gain access to and will be very much simpler to be able to fill in the qualifications for.

I am simply saying that the vast majority of farmers who currently qualify for national drainage grants will be eligible for improvement plans, which may include drainage; and grant rates will be on a par with those for other agricultural investments. I believe that this is reasonable, as drainage generally is a good economic investment and has been shown to be so. It has been shown to be by the rate of investment in drainage in both 1983 and 1984, despite the fact that there was—and I admit it quite openly—a cut in grant rates for drainage at the end of 1983.

If I may now bring my remarks to a conclusion, my noble friend——

Lord Sandford

My Lords, before my noble friend does that, I wonder whether I may draw him on the very important point that my noble friend Lord Radnor was making about food processing and adding value to the farm product. If it is sensible to give a grant for farmers to diversify beyond farming into tourism and crafts, surely it is sensible to encourage them to employ people to add value to the farm product before it leaves the farm gate. That could be possibly the most useful thing to do, both for the sake of the individual farmer and for the sake of the rural economy.

Lord Belstead

My Lords, we were precisely hoping that the craft industry grants would help so far as this was concerned——

Lord Sandford

Ah, but will they?

Lord Belstead

My Lords, that is our hope and the rate of grant is 25 per cent. On this particular line of thought, my noble friend Lord Radnor said that we should promote marketing generally; and he is absolutely right. But we do. Food from Britain is our national measure and also there is Community aid under Regulation No. 355/77, which is concerned with processing and marketing. In addition, there is some assistance under the co-operation scheme.

My noble friend Lord Radnor asked about fish farming. I admit that we wanted to give greater incentives in regard to farm ponds than 15 or 30 per cent.; incentives which could also serve conservation purposes. But so far as fish farming is concerned, I hope that my noble friend will not mind if I say that we have found, from the scheme as it has been running up to now, that there has been almost no uptake for grants for fish farming. Nevertheless we have kept the small grants in the schemes and of course we will look carefully to see how they progress——

The Earl of Radnor

My Lords, perhaps my noble friend would just make it quite clear that it is impossible to claim an agricultural pond, put fish in it and claim the higher rate of grant. That was really my question, because it is a farm pond, so why cannot one claim the higher rate of grant rather than the 5 per cent.? That is what I do not quite understand.

Lord Belstead

My Lords, I do apologise to my noble friend. I entirely take his point now. The trouble is that I do not know the answer. I should be rather surprised, I must say, if it was impossible to go down the road my noble friend has suggested, but I would just say that very great care always has to be taken by the claimant for a grant that the purpose for which the grant is given is fulfilled. I think that both my noble friend and I ought to look carefully at the point he has made and perhaps I might write to my noble friend and give him a definitive answer afterwards.

Perhaps I may answer one final question. The noble Baroness, Lady Nicol, mentioned the environmentally sensitive areas. I apologise to my noble friend Lord Monk Bretton for not having dealt with many of the interesting points which he made, but perhaps I may answer this final one from the noble Baroness. She asked specifically: what about the ceiling on the area which can be designated as environmentally sensitive? Is it 4 per cent.? The regulation finally came out that there was no limit on the area which may be designated. The Nature Conservancy Council and the Countryside Commission as the statutory conservation advisers to the Government are currently considering being consulted about areas to be designated. Indeed, I have also consulted voluntary bodies. I envisage that about half a dozen environmentally sensitive areas will be designated initially. Detailed administration has still to be considered, so we have not yet decided on any notifications.

I want finally to add that at a time when we are watching public expenditure very carefully, when surplus production needs to be reduced, and when the expenditure of supporting agricultural prices is a very controversial issue and remains very considerable indeed, we have been bound to look with care at the capital grants structure.

My noble friend Lord Middleton quoted from the report of the Select Committee of your Lordships' House and the debate which took place in your Lordships' House on that particular Select Committee report some three years or so ago. My noble friend quoted that Select Committee saying that capital grants have now served their purpose. I remember very well that, soon after I started working in the Ministry, the Select Committee produced yet another report. We debated it at exactly the moment that milk quotas were about to be imposed upon very reluctant Community countries. The Select Committee of your Lordships' House was very trenchant in the remarks that it delivered in its report at that time about spending on increasing surpluses yet again in the Community.

Despite those two reports of the Select Committee of your Lordships' House the Government have still retained a level of support under these new arrangements which offers considerable incentives to invest, including some completely new grants. I am sure that the farming community will make good use of these incentives.

On Question, Motion agreed to.