EC Food Surpluses: Policy

HL Deb 21 January 1987 vol 483 cc975-1009

5.59 p.m.

Lord John-Mackie rose to call attention to the attempts of successive Councils of Agricultural Ministers to deal with CAP surpluses and to the need to assure the farming industry that curtailment policies will not be introduced that would be socially and agriculturally unacceptable; and to move for Papers.

The noble Lord said: My Lords, we have put down the Motion standing in my name on the Order Paper because we appreciate that much more has to be done in the way of surpluses and so on, first, to get rid of the present huge surplus stocks and, secondly, to see that they do not accumulate again. We are fully aware that the situation is critical and I think that has been made fairly plain by the financial situation in the European Community. However, we are anxious that too-drastic action should not be taken that would seriously hurt the farming economy, which in turn would greatly affect the whole social structure of our country and of rural life.

I well remember the depression of the late 1920s and the early 1930s. Everyone in the countryside was touched by it: all the ancillary industries, the grocer, the butcher, the baker, even the doctor and, to a certain extent, the parson and many more. However, there is one difference that perhaps I should point out. We did not pay off men in those days. We simply reduced the wages until, by the early 1930s, in many cases wages were down to even below £1 cash per week. Many farmworkers of course had perquisites, such as houses (they were not very good ones, I am afraid), milk (at least it did not have antibiotics in it), potatoes, feed, fuel, and so on. However much that amounted to, it was a shockingly low standard of living.

Today, as things get bad we simply pay men off. Because of the uncertainty many large farmers are paying men off now in anticipation of the difficulties that are going to arise. I know of quite a few who are cutting down on labour, on buying machinery and on everything else. Unless farmers can get an assurance for the future, that trend will go on, along with the neglect of the infrastructure of the land, neglected hedges, ditches and drains, neglected fences and roads—not to mention run-down buildings and houses. That was the picture 55 to 60 years ago and I trust that nobody in this House or anywhere else wants to see that again.

Since surpluses began to appear 10 years ago, suggestions and advice as to what should be done have developed and have almost now reached a crescendo. Farmers do not know what to do. Over the past few years as the surpluses and the costs grew, Ministers from the Treasury, the Ministry of Agriculture, the Department of the Environment, the Department of Employment, the DTI and others have poured out suggestions, along with other politicans—Sir Richard Body, for one—and economists. One well-known agricultural writer and farmer, Anthony Rosen, produced a white paper of his own. The media have given vent to their ideas or lambasted farmers for doing what successive governments, as all your Lordships know, have been pleading with them to do ever since the end of the war.

The Prime Minister entered the lists on the 23rd November with her bid, according to The Times the following day: to slash the £8 billion food mountain. It is not quite clear whether the Prime Minister agrees with the 20 per cent. cut in land-use which was suggested in an article on the next page, headed "Food Monster Grew Out of Control". That was a strange remark in a world where we are told by the FAO that some 400 million people are starving. Then followed five articles in The Times on the subject that week which, if read by farmers—I do not know how many farmers read The Times—would give them, to say the very least, pretty cold comfort.

Let us look at what is happening and at the many suggestions made for the near future. We have milk quotas. They are to be cut by another 9½ per cent. in the next two years. There are changes in intervention buying for beef, with the addition of a premium of £ 16 for up to 50 head. We are paying £3.37 per tonne on all cereals we sell. This does not apply of course to farm-to-farm sales; and these are increasing greatly.

Nothing in the last two will affect beef or cereal production: the calves are all in the pipeline and most of next year's crops are sown. The decrease in the milk quota still leaves a large surplus of milk. So where do we go from here? Advice and suggestions are in good supply. Indeed, so far as I am concerned, they are in surplus on my desk. Fortunately, it has dawned on the "price-slashing lobby", if I may call them that, that the roll-on effect of these things on the rural community would be disastrous, and so far as cropping is concerned, farmers would simply try to increase their production to cover the cuts and thus exacerbate the situation.

It needs a big drop in farm prices before it affects the consumer's shopping bag. Wheat prices have come down considerably in the past three years, but bread has not got any cheaper. I can give other instances of a similar kind. It might be better if some people took a look at what happens to food after it leaves the farm gate before they complain about who might be creating what they think are high prices.

Levies, whether co-responsibility or not, are not the answer. Where is the cereal levy going? I have just paid slightly over £2,500. Where is that going? It is certainly not doing a great deal to get rid of present stocks, which is what it was supposed to do. As regards two-tier prices, certain quarters, if I might say so, got rather short shrift on that one, and I wonder whether there are long discussions between the two parts of the Alliance now, as there were over defence, as to whether the agricultural policy is not quite as acceptable as they would like it to be. I shall put it as kindly as that.

We then come to quotas. Quotas by quantity can really work only where the bulk of the produce goes through central marketing points like the MMB or the co-operatives in many parts of the European Community. It might be possible with beef, as most animals go through large slaughterhouses; but illicit slaughtering is not too difficult. However, with crops, and particularly cereals, which are marketed through many different channels, the administration would be almost impossible and I think it would be a fantastic headache to try to make it work.

This brings me to quotas by the acre—that is, the setting aside of land from growing anything that is in surplus. Suggestions of how to do this are legion and some are very intriguing. One is that the European Community and/or governments should buy up land as it becomes available, up to the acreage they think is required, in order to stop the surplus production and turn them into playgrounds for the urban population. That suggestion was put forward at Oxford by a member of the Mackie clan. Some of the papers said that he received rapturous applause for his suggestions, but I think that was a gross exaggeration. There was rapturous criticism as well. However, that is one suggestion.

Another suggestion is to allow farmers to sell off plots of 10 acres or so to people so that they can build houses there and keep a pony, or what-have-you. One hundred thousand of such plots would take out a million acres. I can see the noble Lord, Lord Sandford, is laughing at that suggestion, and I appreciate that some of his friends would be up in arms over it.

Then there is the tree-planting lobby. I am very much in favour of trees but apart from the very long-term nature of forestry I cannot see many trees being planted on good arable land where the surplus is coming from. Now we have the delightful plan, which I am sure will intrigue your Lordships, to pay about 8 per cent. of farmers to take a Sabbatical every 10 or 12 years. That would take something like 3 million acres out of production each year. That is something that would need to be thought over and I believe that a discussion of it might be better over coffee at dinnertime.

Then we have a lot of pressure for less intensive farming, reducing production overall to a level that would supply only the demand. Quite frankly, it would be virtually turning the whole country into an ESA—which some people might say is not too bad a thing if it is done on a proper basis. This would tie up with the many people who feel that a tax or the rationing of nitrogen would solve many of the problems. I have a feeling that they would create as many problems. But I understand that the noble Viscount, Lord Ridley, has ideas on this, and I look forward to hearing what he has to say.

One of the advantages of the less intensive plan is that the labour required would be the same. It would not affect the labour situation, and that is a good point in its favour. However, I think that the best plan is an across-the-board cut in the acreage for crops at a percentage required to cut the surplus, and all the figures suggest that this will vary from about 9 to 12 per cent. I should hate the thought that it would need the Prime Minister's 20 per cent.

One objection is that farmers will simply take out pieces of their worst land and it will make little or no difference to their production. But that could be got over by making it a mandatory rotation over the whole farm over the years. That would cope with that difficulty and would make for good farming. The advantage of this method is that the land is kept in good order by fallowing and can go back into production staight away if, or when, necessary. I have heard that there are some people who are predicting that surpluses may disappear much quicker than we think in a few years' time.

The Government are thought to be working, if the press is to be believed, on a package code named Alternative Land Use and the Rural Economy (ALURE). The Observer remarked about this. Everybody seems to know about it except Parliament. An Observer headline read: "Secret Plan Threatens the Countryside", while the Farmer's Weekly said: "Farmland Policy for Radical Shake-Up". As I said, I gather it is dealing with much of what I have been saying, but with the emphasis on what use the land taken out should be put to. Diversification is also being discussed and we look forward to getting more information. Perhaps we shall get some from the Minister tonight—who knows?

Presuming that the choice can only be between taking land out of production or going to "extensive"—if that is the right word—farming, how can this be done without creating the situation mentioned in the Motion of what is "socially and agriculturally unacceptable"? Taking the Chief Secretary to the Treasury's figures, which he gave at Oxford, the public expenditure on agriculture is approaching £3,000 million per year, of which £2,000 million is spent on all the aspects of dealing with surpluses. If you take about 2½ million to 3 million acres out of production to solve the problem, this means £800 per acre. A payment out of this to reimburse the farmer for the loss of profits per acre—and I am using a rather off-the-cuff figure of £80 per acre—would be a very handsome saving to the EC and to the Government.

I see the Government's spokesman looking a little worried at these figures. As I said, I got them from the Treasury and I worked out the figure by the acre. I should like to hear what he thinks of the point. If at the same time farmers were allowed to augment their incomes as well by all the various diversifications that have been mooted—I shall not go into them, because they have been well enough publicised—then we should have the minimum of upset, economically and farming-wise. The letting of redundant buildings would bring more people into the countryside—something which many people would like to see happen—and would enhance rural life.

But there are difficulties. We have 4½ million to 5 million acres in the green belt, and councils there are being very sticky about the situation. We had a short debate about this not very long ago and I do not think the situation has improved. But I hope that when the ALURE paper arrives it may have something to say about that.

I was paid this morning for the last of my 60th harvests. Over all these years, I never had any doubts about the next harvest. This year, along with my fellow farmers, I have grave doubts about the next one. These doubts are causing us to take actions detrimental to the rural scene. We are paying off men, we are not buying new tractors and machinery, which is a loss to industry, and, as I said earlier, we are starting to neglect the infrastructure of our farms. This will continue unless we get the assurance asked for in this Motion. My Lords, I beg to move for Papers.

6.15 p.m.

Viscount Ridley

My Lords, as this is an agricultural debate, I hope the House will agree that we should offer our congratulations to Sir Henry Plumb on being elected president of the European Parliament. He is not only the first British president but is also a distinguished agriculturalist. I am sure that under his presidency we shall see some solutions advanced to the dramatic problems which the noble Lord, Lord John-Mackie, has so well described. I apologise to my noble friend Lord Belstead because I may not be able to stay to the end of the debate owing to another engagement in connection wth the dockyards.

I am greatly intrigued by the wording of the Motion, but I have respect, as we all do, for the great experience that the noble Lord, Lord John-Mackie, has had in agricultural matters especially during the depression before the war. We are all grateful to the noble Lord for introducing the debate. We must all accept that there is a need now to introduce what he called curtailment policies to reduce the CAP surpluses. I am less happy that they can be, as he put it, in all respects, socially and agriculturally acceptable.

It is a sad fact that, as often happens, a small minority has damned the majority. In this case, some farmers have given the industry a reputation for greed and indifference to the environment. It is probably not deserved, but it exists. And the public are, perhaps rightly, no longer sympathetic to mountains and lakes of produce. We have all forgotten about the U-boats and the desperate shortages of food during the war of 40 years ago. But most farmers, if not all, now accept that something drastic must be done. The sooner this nettle is grasped and something is done, the more acceptable it will be. It probably means finding the least painful solution.

I want to concentrate my very few remarks on one solution to the problem which has not yet, I believe, received sufficient public attention and debate; that is, the limitation of nitrogen. I believe that this may be preferable to the set-aside which is being debated everywhere, although it could be complementary to it. I say this because I wonder whether it is any longer politically acceptable to pay British farmers very large sums of money to do absolutely nothing and to grow nothing at all.

I can see a violent reaction to the idea. Never mind that it might be cheaper to do it than to subsidise unwanted butter, never mind the fact that it has been happening in America for a very long time. I think it would make agriculture even less popular in the public mind than it is now, and we should see the return of that old scourge of the agricultural industry, Mr. Featherbed Evans and all his works.

Nitrogenous fertilisers are the chemicals which boost yields of crops and grass. Their excessive use can be held at least partly responsible for the overproduction of cereals, milk and beef. It therefore follows that yields will fall if nitrogen use can be reduced. The problem is how to do this. I make no pretence and I am quite certain that it is not easy. Indeed, I know that it bristles with all sorts of problems, administrative and otherwise. I am certain that we shall be told by my noble friend that this has been carefully considered. But it has perhaps been too easily rejected.

I should like to start by summarising the main disadvantages of this process. It is said that the rationing of nitrogen will be expensive to operate and difficult to enforce. Yet it worked very well during the war when all fertilisers had to be rationed because of the shortage of supply. And if a tax were to be levied as well, that could at least be made to cover the costs of the operation. It is said that black markets will develop, as to some extent they already have with milk quotas. But it is the total nitrogen applied that matters. Anything that increases the price theoretically discourages profligate use.

I have no doubt that farm profits will suffer if nitrogen is limited. But the farming industry will have to come to terms with and adjust to that under any conceivable new system now being debated. There is no way that food profits can remain intact. Nitrogen limitation may well be the least painful alternative, particularly if it is not introduced too suddenly. Any reduction in the current surpluses must affect profits. Nitrogen limitation may well be described as a blunt instrument, but I believe that production quotas, price reductions on any scale and compulsory set-aside policies or levies will be very much blunter.

It is said that there will be unemployment in fertilizer factories here and, I believe, in Norway. For a short period perhaps, the tax levied would help to compensate for this until the factories were able to adjust. Many things could be done with such a tax.

It is said that one must not un-invent technology. We have the technology to produce these very high yields; we must use all the available resources to achieve that and maximise the efficient use of our land and resources. If that principle is followed to its logical conclusion, there will, in a short time, be no small farmers, no hill farmers and very few agricultural workers left in the country. It is a major snag that anything of this kind must be done on a European scale, but this applies to any other solution as well.

I should like to turn to the advantages of the quota system. I believe that it would make farmers much more careful in using nitrogenous fertilizers. Some apply 200 to 300 units per acre as opposed to an average of about 100, one unit of nitrogen containing 1.12 pounds of ammonium nitrate. Almost alone among the farmer's costs, the cost of nitrogen has fallen in the last year or two from £3.30 per unit in July 1985 to £2.40 last month. We are talking about 1.5 billion tonnes of artificial nitrogen in one form or another used in the United Kingdom in 1984. The temptation to combat falling prices by the use of yet more nitrogen is only too obvious, thus creating yet more surpluses. Price reductions across the board in my opinion have no hope of coping with the problem on their own.

Any quota system could be designed to affect the larger farms most. Thus horticulturalists, smallholdings and hill farms which use relatively small amounts would be less affected, if at all. This must be "socially acceptable", in the words of the noble Lord, Lord John-Mackie. All farmers would receive a quota per acre based on past usage or something of the kind. The cost of the scheme, as I have said, would be met from charging the tonnage allotted. Taxation could be raised or lowered to discourage or encourage the use of fertilizer as the surpluses fell or rose in Europe.

To help smaller farmers, the threshold at which tax became payable would be variable. But taxation alone will not have any effect. It has been calculated that at least 100 per cent. and probably 200 per cent. tax would be necessary to have any effect on usage. I believe that Sweden has experience of this. We might look to that country. The growth of environmentally popular organic farming and cultivation of such things as peas and beans which need no nitrogen would be encouraged, as would mixed farming. Organic nitrogen from animal manure cannot be rationed or taxed but only what is known as the artificial bag nitrogen.

A further enormous advantage would be to limit pollution of water supplies by excessive nitrogen. Opinions differ as to the effect of this chemical on human health. However, no one denies the steady increase of nitrogen in water supplies which has shown itself as "eutriphication" of lakes and rivers. I believe that the Norfolk Broads are the most glaring example of what has happened. There is evidence that nitrogen now in our water was applied 20 years ago when much less was being used on the land.

What will things be like by the year 2000? If farmers are to be faced in the future with paying for cleaning up rivers on the "polluter pays" principle, which they should be, a nitrogen tax now would be seen as a very small price to pay. We should also look seriously at a voluntary ban on the use of nitrogen during the winter months.

The report of the Nitrate Co-ordination Group—a body of which I confess I had never heard—published by the Department of the Environment last November, said: Most groundwater sources in East and Central England will eventually have quite unacceptable nitrate levels unless agricultural practices are changed. Some sources already exceed the limit set by the European Community drinking-water directive.". It looks as though we may have to take some action to limit nitrogen in any case.

I have no time to continue further on the subject. I have already taken much longer than I should have done. I believe that there is support in Europe for mothballing nitrogen plants. Denmark has already decided to experiment with limiting supplies to farmers. A Mr. Rickard, speaking for himself but with the grand title of "Director of Economics Division" of the National Farmers' Union, said at a conference last September: The claim that nitrogen limitation would be impossible to administrate is a red herring used by opponents of the idea who want to see the subject swept under the carpet; it is up to the bureaucrats to make the system work.". Those are stirring words. I hope that he can justify them.

There is no solution to the problem of CAP surpluses that is totally easy. Someone will be hurt in the process. Farmers are the victims of their own extraordinary successes. I conclude by quoting Swift. Some of your Lordships will remember that Gulliver was told by the King of Brobdingnag: Whoever could make two ears of corn, or two blades of grass, to grow upon a spot of ground where one only grew before, would deserve better of mankind, and do more essential service to his country, than the whole race of politicians put together.". We now need the whole race of politicians to reverse this trend.

6.25 p.m.

Lord Walston

My Lords, I offer brief but sincere thanks to the noble Lord, Lord John-Mackie, for giving us an opportunity to discuss this vitally important subject and for the able way in which he introduced it. I shall speak as briefly as I can but quickly, so while there will be many points on which there ought to be greater elaboration, I hope that your Lordships will forgive me if I do not do so.

The problem of agriculture at present falls under three headings. Unless we separate those three headings clearly in our own minds, we shall never be able to come to a solution. The first heading is the disposal of existing surpluses. The second is the prevention of further surpluses and at the same time the containment of costs. The third heading is the prevention of hardship to rural communities—rural communities, not just farmers—and prevention of the dereliction of the countryside.

As regards the surpluses, I say briefly, and shall not expand upon it, that to my mind food aid is not a serious solution. By all means let us give as much as can be done reasonably in food aid, but it will by no means solve the problem. If one is honest about it, the cheapest way of dealing with the surpluses and the enormous storage costs that they entail is to dump them in the sea. That I do not put forward as a serious suggestion. It is morally repugnant, and I do not think that we could possibly contemplate it.

I suggest that we give away all that we possibly can. The EC has taken the lead in a very modest way in giving food to charitable organisations in the cold weather. That can be expanded. It need not be in this country or this continent only. I am sure that Mother Teresa and many other people doing that sort of work could use our surpluses if only they could be donated and no payment was required. The rest of it we could sell at the best possible price. Even though it goes to the Soviet Union, even though we lose money, we do not lose as much money as we would if we were to retain the surpluses. We should maintain something like a normal granary—as the late Lord Boyd-Orr christened it—for famine relief whenever it came up, and that should be an international and not simply an EC operation.

Moving on to the prevention of further surpluses, alas! it seems that the Government still pin some faith—although not as much as before—on the price mechanism. We have heard about the price mechanism for many years, yet the surpluses do not disappear and are still produced. The price mechanism alone cannot possibly achieve the results.

Then we have the quota for milk. It was hurriedly introduced, it is bureaucratic and cumbersome and, above all, it has been fixed so that, even if it operates, surpluses continue to be produced. Thus quotas as they are at present have not worked. Unless they are made much more stringent, they will not work in removing surpluses.

Now we come up with the new idea, borrowed from the United States, of the set-aside. I must say that I am frankly sceptical about this. There are particular areas which contribute most to our enormous surpluses, especially in cereals, but also in other commodities. These are areas such as the Basin of Paris, Lower Saxony and East Anglia. In those areas the set-aside is not really a starter. It will operate only in the smaller marginal areas where relatively little grain is produced. I shall be delighted if the noble Lord the Minister can give an indication of how much land he really expects to go out of cultivation, how much will have to be paid for it and how much the total cereal production will be reduced as a result.

The other suggestion (which I only mention to show that it is still in my mind, as I have spoken to your Lordships frequently about it) is the introduction of quantums on a national scale and on similar lines to those used for sugar beet. However, it should be much more stringently applied so that the actual quantum for which the guaranteed price is paid is no greater than what the Community wishes for itself.

On this particular heading, my final word is that no matter what method or series of methods is adopted, they must be part of a long term policy which is announced now. We have dallied far too long. That policy should be implemented gradually over the next five years so that farmers know what is expected of them and can take the appropriate action to meet new circumstances. To dilly and dally with a little bit of price mechanism, a little bit of quota and a little bit of set-aside when no one knows how long it will continue or when it will be implemented, is not fair on farmers and will not have the desired result.

The third point I should like to make concerns prevention of hardship. This is primarily a sociological matter. It is a matter not of economics but of society. I suggest that this matter must be separated completely from the common agricultural policy as such. I suggest that it should to a very large extent be renationalised. Each member country of the Community should have the responsibility of dealing with its own social problems which follow as a result of diminution of profits and which will inevitably affect, and are already affecting, farmers throughout the whole country.

The two advantages of that policy are, first, that each country has entirely different forms of bureaucracy, local administration and national administration. Something which is imposed to deal with social hardships by Brussels, while it might work in Greece, is unlikely to work in Germany; while it could work in Denmark, will not be applicable to Southern Italy, and so on. We need to give national governments the responsibility for working out the best methods.

The second reason for implementing this policy is that the standards of living in the different member countries vary enormously. Any form of social payment which would satisfy the Dutch farmer would give untold wealth (relatively speaking) to the Portuguese farmer; anything which was adequate for the Greek farmer would leave the Danish farmer in penury. For those reasons, the general process of administering social welfare in order to prevent rural damage should be done on a national scale, without in any way interfering with the overall beliefs in a common agricultural policy or in the Community.

A further point on this aspect of the matter is that some countries (including, I am glad to say, our own) set great store on the environment. We want to have a beautiful environment and we are prepared to pay for it. We want access to the environment; we want national parks, picnic sites and all the rest of it. We want to have areas where wildlife can be preserved. There are many areas which are now used for cultivation and food production where all these things could be achieved.

However, those matters are not of particular interest to some of our fellow members within the Community. We should be free to promote that type of good use of the land—use which the people of this country want and are prepared to pay for—without being hampered in any way by Community disagreements over it. In the same way, we should not impose our own views on this sort of thing upon those countries who are members of the Community and who do not wish to pay for any of those amenities.

This has been a brief and rapid run-through. When the Minister replies I hope we may get from him some indications, particularly of the amount of reduction which the set-aside programme will bring about, of the sort of payment which it is considered will be necessary in order to persuade farmers to set aside some land and meet the high overheads with which most farmers are faced and, failing that, what other long term proposals he has to make or believes should be made in order to solve this problem.

6.36 p.m.

The Earl of Onslow

My Lords, I must certainly thank the noble Lord, Lord John-Mackie, for introducing this debate. I think it is extremely important and opportune. We are dealing with the problems of success. As the noble Viscount, Lord Ridley, has said, we no longer remember the U-boats in the Channel. Only the slightly older Members of your Lordships' House will remember the rural deprivation of the 1920s and 1930s. None of us remember the rural deprivation of the 1870s.

I think it is also worth remembering that it is impossible for Europe to solve its own problems without bearing in mind what has happened in the rest of the world. There is a grain store in Kansas which can hold the whole of the UK annual wheat production. Over the last five years, 800 million Chinese peasants have doubled their food output. The Japanese have a method of making absolutely certain that nobody gets to their farming market. They protect their farmers in a way that only the Japanese can do; then they look the rest of the world in the face and sign GATT. To counter this, the Russians—thank God for the world grain market!—still have their agriculture in an unholy mess. I should like your Lordships to ponder how devastating it would be if the Russians actually made their grain and agricultural world as efficient as that of either the United States or the Chinese. Even poor benighted Africa has managed to reduce its food production by 1 per cent. per annum since independence; therefore, at least some of it can go there. I do not think it is possible to sort out European problems without looking at a much wider picture.

I wish now to suggest two methods, one of which I am almost certain would solve the milk lake problem. That is a very arrogant thing to say; several others have tried it. However, I suggest that we make all milk quotas completely negotiable throughout the whole of the European Community, in such a way that it would be possible for anyone here to buy a quota and lease it. In other words, it becomes like a stock and share. The bureaucrats in Brussels could buy in on the open market a sufficient number of quota over a sufficient number of years to allow the actual production to fall. Quota is being sold at the moment at a going rate, which I believe is about 30 pence per litre, with the Community paying 27 pence a litre. Surprise, surprise! it is not getting many takers.

If the Commuity were to buy straightforwardly in the open-market, and let that quota lapse, we would then have a system whereby after two to three years there would be no more milk surplus in the Community. This must then be allied to a further method of looking at the countryside. From 1939 until now we have tended to look at the countryside solely as a medium for producing food. The countryside is much more important than just that. It is a place of beauty and leisure. It is a place of craft and a place which is enormously important to the health of an urban population.

Some noble Lords, such as the noble Lord, Lord Kimball, and myself, like falling off horses when endeavouring to jump over hedges. In those circumstances it is important that we can keep hedges over which we can make fools of ourselves. There are some people many of them probably in your Lordships' House who like killing birds. Equally, there are some people, (again there are many in your Lordships' House) who like looking at birds. There are people who like to walk, or fish, and people who like to look at the countryside through all its varieties. We could change the Ministry of Agriculture into a Ministry of the Countryside; and note you well that I said "change the Ministry of Agriculture" rather than the Department of the Environment. Historically, once the Ministry of Agriculture has been given a brief it has carried out that brief extraordinarily well. Therefore, the environmental protection part of the Department of the Environment should be hived off to the Department of Agriculture. Consequently, the Ministry of Agriculture becomes a Department of the Countryside.

It is known that the subsidy on feed wheat, exported to the Middle East the other day, was £86 per tonne. Let us assume somebody grows 3 tonnes to the acre of feed wheat. This is not an enormously high yield; it is just above average. Let us also assume that instead of subsidising that gentleman (which we are to the tune of £240 an acre) we say to him, "Look, we will pay you to farm in an extensive way. We will pay you not to use so much nitrogen. We will pay you to produce two and a half ewes per acre as opposed to four ewes per acre. Also, you will have to cut and lay your hedges for the noble Lord, Lord Kimball and myself to fall over, and for the various birds to nest in and to make an attractive countryside. We will pay you to grow small hardwood copses at £100 an acre, where they can be put in a way to beautify the countryside and make it correct. We will pay you to rebuild your drystone walling." In other words, we are paying people to do things rather than not to do them.

The great fault in the Wildlife and Countryside Act is the fact that somebody is paid not to do something. I believe that there is one Member in another place who comes from a family of noble and long lineage which has not missed a trick for 300 years. It is reputed that that Member is being paid £40,000 not to cut down his best pheasant cover. I am jealous and full of admiration for somebody who can go to a Government who are prepared to offer him this trough. My Lords, he is a fool if he does not put his nose in that trough. It is much more to the point to say to people: "This is what we want. This is what we would like you to do. We would make it economically worth your while." There is so much money being spent on the Community agriculture that we have got the necessary money with which to do this.

Concerning the method of paying people to do things rather than not to do them I suggest that we should look at the subsidy payment for hill sheep. This is calculated on a headage basis. The temptation is to keep alive every old ewe who can stagger to the vet on the day before counting day. Surely it would be better to say, "We will pay you on an acreage basis, and if you cheat you pay back five times what you have been paid on subsidy." Then it is possible to pay people to farm in the way you want them to farm.

In summing up I should like to suggest we make milk quotas totally marketable and then they can be taken gradually off the market. We should turn my noble friend Lord Belstead into the chief gardener and gamekeeper of England. We should also make the Ministry of Agriculture a countryside Ministry and pay people to do things rather than encourage them in wheezes, namely being paid not to cut down their best pheasant covers.

6.45 p.m.

Baroness White

My Lords, I think all noble Lords have regarded this as a most welcome debate and we are all grateful to my noble friend for initiating it. It is a short debate, so we have only one ministerial speech. The noble Lord, Lord Belstead, can no doubt be alluring on occasion, but we shall have to wait to the end of the debate to hear what the Government have in mind about alternative land uses and the rural economy. We do not yet know how much will be revealed even when the Minister does speak.

Despite the most apposite comments of the noble Earl, Lord Onslow, I believe that it is too soon to discuss at any length the landscape, conservation and comparable aspects of possible forthcoming land-use changes. The major Countryside Commission report is not due out for a couple of weeks at least. The considered views of the Royal Society for Nature Conservation will not be available for a couple of months. However, an excellent discussion paper by Dr. Clive Potter of Wye College is currently in circulation, as indeed are some very valuable notes from the Royal Society for the Protection of Birds and other organisations. I hope that we may have an occasion, perhaps later in the spring, to discuss some of these aspects of the problem.

In the meantime many noble Lords are much concerned about the rumours of ministerial conclusions on planning. We understand that, while the London Green Belt is secure, elsewhere planning controls may be considerably relaxed. A few days ago the Housebuilders Federation claimed that with a proposed set-aside policy anything up to 4 million acres of farmland could become redundant over the next decade. Other estimates are somewhat lower at about 2½ million acres. Whichever estimate proves to be correct, undoubtedly enough green-field sites could be released for house building by the federation and its colleagues. Many of us believe some relaxation to be desirable, but certainly not on the scale that they suggest.

It is true that in common with other entrepreneurs the main hopes seem to be being pinned on the South-East and other flourishing areas. Here, as in parts of Germany, we are told, there is now an increasing trend to what the Germans call "die Flucht ins Grüne"—that is, the increasing trend of better-off families, and upwardly mobile young professionals to relocate themselves from urban life (some of which they find not very attractive) to new rural stockbroker belts, as we used to call them. Perhaps the Minister can tell us what the Government have in mind about planning and this possible trend.

I should like to turn to the very different picture presented in the more remote uplands and some of the coastal areas of for example, Cumbria, parts of Scotland and, of course, Wales. Here the changes in the CAP support régime can bring very real hardship unless they are most skilfully handled. Of course, we can no doubt provide land for careful additions to forestry, and for the golf courses and riding schools desired by the more affluent holidaymakers from across the border.

But these less favoured areas are really becoming fearful that the farmers on the better land elsewhere may take over a larger share of the dairying and stock-rearing on which the less favoured areas themselves depend almost absolutely. They fear that agricultural production, as they put it, may be moving downhill. The milk quota changes, soon to be reinforced, in many parts of West Wales in particular have been devastating. What worries them, I think, is not only the personal tragedies, of which some of us are aware, but also the longer term, possibly disastrous, demographic knock-on effects. Sixty years ago half the dairies in London were run by Welshmen. They sent money home and provided jobs for their relations. There were at least a dozen modern creameries in Wales 10 years ago. We now have six and, if the reinforced quotas come about as expected, it is almost inevitable that some of those creameries, which provide hundreds of jobs between them, will have to close. Tanker drivers, incidentally, will still be in full employment.

In these areas many older farmers will stay, but they will pull in their belts. This will cut local spending and employment because they will very much reduce, or give up altogether, the maintenance of farm buildings, the money spent on drainage, and so on. They will also reduce their personal expenditure, and that, too, has a knock-on effect on the local economy. We believe that a lot of young people will leave, many of them without skills or with skills which are not of much use in city life, to join the disillusioned urban youth. There are, therefore, many apprehensions in those parts of West and North-West Wales with which I am familiar.

Of course, we have glowing examples of entrepreneurial zeal and innovation. We receive admirable help from the Welsh Development Agency and Mid-Wales Development. CoSIRA, of course, does not operate in the Principality. I suppose that the jewels in the crown are the Laura Ashley factories—in particular the large one under construction in Newtown—but there are other very useful ones in other parts of Montgomeryshire. But obviously more is needed.

I read the excellent Country Landowners' Association booklet on rural diversification. It suggests everything from lupins to hang gliding, from snail farming to biomass. This booklet has its avid readers in Wales. We have very successful organic farming. We have excellent large-scale honey production, cheese production and so on. There are suggestions for growing blueberries and other exotica. But that is for a minority—in particular for those who are capable enough to latch on to large enterprises, mostly across the border, which organise transport and distribution. Without that type of organisation the remote areas can hardly make a success of innovative production. This is a particular aspect of possible rural regeneration which needs more attention than perhaps it has so far received.

We in Wales have an extra problem. The socio-demographic problems which are especially worrying to us in certain areas are in the Welsh-speaking areas of the Principality. We have maintained our language and traditions over the centuries, through bad times and good. With the kind of economic decline which could be envisaged over the next couple of decades—we are not pretending that it will be a dramatic once-off manifestation—some of us are apprehensive that we could see a serious deterioration in the social fabric in parts of Wales. These are areas where one is not concerned with building executive houses in undesirable places, or anything of that sort. We are concerned with the future of the very structure of local community life. That is one reason why we are anxious that in what are now the less favoured areas—and they do have certain special treatment—that special treatment is maintained even though various details of it may be modified in the light of CAP and other changes.

Unless one can deal with that sort of situation with imagination as well as practical remedies, and if we are not on the alert, in perhaps 15 to 20 years' time the social structure in some of these areas will be weakened to a point where we can do little but take refuge under an ever-spreading coniferous blanket which few of us wish to accept. We need people as well as trees and I hope that the Minister can give us some reassuring news.

6.56 p.m.

Lord Stodart of Leaston

My Lords, of one thing I am quite certain—the noble Lord, Lord John-Mackie, must be thoroughly satisfied with his good fortune in the ballot, because I find this a totally absorbing debate. It is a subject which needs grappling with and every contribution that we have had so far has thrown up at least one good idea. Like every other occasion when farmers gather together, unanimity is pretty well absent. The noble Lord said that farmers were getting rid of men and selling tractors. I am not getting rid of any men and I have just purchased a new tractor. I throw that remark into the pool.

Now that we have broken through the self-sufficiency barrier in practically every commodity, it seems to me to be unarguable that production must be cut back by some means. However, I urge on my noble friend that he should be cautious with the surgery, because I agree with my noble friend Lord Ridley that too severe a use of the price mechanism only will bring bankruptcies in its wake; but without severe use of the price mechanism we will not get the great reductions that are needed. Therefore, we must not depend on it alone. Moreover, I think one must remember what people often forget; that is, the line between plenty and shortage is not as broad as many people believe.

My approach therefore is that one must try to find a good use for land which is not needed. I believe—and I say this with great respect to my noble friend Lord Onslow—that land is basically there (I emphasise basically) for producing something that will grow on it. Having selected that, one channels public money into where it is needed. I believe I am right in thinking that everyone expects the countryside to be kept tidy. Therefore to take land out of production, full stop, is not a runner because it would mean the growing of dockens, thistles and so on. Land has to be managed.

I agree with the noble Baroness, Lady White, that these alternative crops exist, even with primroses, lupins, and so on, but I doubt whether they would grow on farms at the altitude to which she referred and which I farm. In any case, their effect would be absolutely minimal. Therefore one comes back to the suggestions about which one has read. For example, the land can be fallowed. The countryside would be kept tidy, and it is a traditional way of farming. I merely add that it has to be rotational fallowing and not permanent fallowing because I cannot believe that the farmworking population would be anything other than totally demoralised with simply maintaining fallow year after year.

Then there is recreation. The pleasure parks at Oxford were mentioned. I am not quite certain about the hunting of wild boar. I have a feeling that such a sport might run up against the animal welfare lobby. However, there is obviously great scope for recreation in certain parts of the country.

Thirdly, there is forestry, for which I think there is quite undeniable scope. I cannot believe that the saving on imports, on which we spend so much just now, would not be worth while. Forestry can fit in with recreation, though a lot of people seem to think otherwise. There are vociferous criticisms of the blocks of softwood trees to be found particularly in Scotland, about which the Forestry Commission has drawn a lot of flak.

However, let us give credit to the Forestry Commission. In Scotland the popularity of its log cabins and woodland walks is manifest by the number of cars to be seen in the car parks leading to the walks and by the heavy advance bookings for the log cabins. I feel that perhaps for too long—and this point has been made by other noble Lords—the blinds have been drawn on what we all know must be faced. It seems to me to be rather like the inevitable departure of a dear friend. It is inevitable but we really cannot bring ourselves to discuss it.

From what I have read recently in the press I am glad to note that the Minister has bitten the bullet and given us one or two facts and figures of which I for one am sadly in need. He has said that taking out 10 per cent. of the cereal land in the 30 to 35 hundredweight an acre category would produce the necessary 14 million tonne cut in the cereal mountain. That is a figure that rather interested me. The Minister also said that for grain going into intervention and staying there for five years the cost per acre at a 30 hundredweight yield would be £350 to £400; namely, £70 to £80 a year.

Obviously whatever the solution it will require public money and, with recollections of the Treasury's views on forestry, I have a shrewd suspicion that it will expect the saving in intervention costs to be put in its own pockets and will give nothing in exchange. Therefore I am quite certain that my noble friend will need all his strong powers of persuasion.

I end by saying that I feel a certain amount of guilt in taking part in this debate. I think back to the month of June 1970 when I first went into the Ministry of Agriculture with an import saving manifesto and an immediate minireview with a price rise for the farmers, while anguished and indignant protests from the Board of Trade were dismissed. What a truly delightful task for agriculture Ministers, all of whom were farmers!

Of course the response by farmers—this point has been made—has really been a productivity record as good as in Japanese industry. But, alas, as my noble friend has said, farmers are not pin-up boys. There is no praise or commendation from grateful consumers. Mountains of butter, meat and grain have labelled the farmers as anti-social and determined only to produce food which is not wanted, at considerable cost to the taxpayer. Therefore I express my penitence, perhaps belatedly, to my noble friend.

7.5 p.m.

Lord Houghton of Sowerby

My Lords, I cannot hope to make remarks of the value that have come from nearly all those who have spoken so far in the debate. I have no farming interests. I am merely a lover of the countryside, in which I was born and where I have mainly lived. I think that my noble friend Lord John-Mackie, to whom we are much obliged for introducing this debate, will have to widen the scope of such Motions in the future. We cannot hope to satisfy the agricultural industry alone in this matter. There is a great deal else involved here, and indeed the longer the debate continues the wider becomes the perspective of the whole problem.

I want to take the Minister back to where he left the discussion yesterday because I think that that is the more practical matter which we ought to explore. Yesterday at Question Time he was saying that very shortly further discussions would take place in the European Economic Community on the price factor in this matter. In col. 813 of yesterday's Official Report he is recorded as saying: There must be a two-pronged approach toward our problems. They cannot be solved by price alone. We shall be as tough as we possibly can be, and I hope that the Community will be tough too, so far as the price fixing is concerned. However, in the interests of both producers and consumers, there must be another plank to the platform of trying to reduce surpluses. That plank is involved in the answer that I gave to my noble friend's supplementary question when I said that we strongly welcomed the agreement on a diversion scheme or land where sectors are in surplus". That is Whitehall phraseology for saying that the second plank is that we shall take land out of agricultural use.

It seems to me therefore that if that is the immediate objective of the discussions in the EC, we must reconcile ourselves to the fact that the toughness on price will depend on a toughness throughout the Community, because I assume that "price" means a Community price. As regards the question of shedding land from agricultural production, again we shall not be complete masters in our own house. There will have to be European agreement about what will be the proportion of land shedding, and there are many complications about that. I think that a national solution is important in deciding the use we make of the land which may go out of agricultural production. There have been many ideas, some of them very exciting, but there are many worries about what we should do.

I have been looking at two articles that have appeared in the Independent newspaper. They are by Richard North, who was for a long time a writer on environmental matters for The Times. Unfortunately, the next article, which is to appear in tomorrow's issue of the paper, deals with the vision of the future. It would have been very useful to have had that contribution to the debate, too.

The Farmers Weekly, which I occasionally read, is giving some information about a piece of attractively named Government machinery called ALURE (alternative land use and the rural economy) of which I gather the Prime Minister is the chair person. It may be appropriate that she should be. Various ideas about what use may be made of land shed from agriculture are canvassed in the columns of the Farmers Weekly. We have had some exciting ideas from the noble Earl, Lord Onslow. I am all for paying people to make Britain a better and more pleasant land in which to live. That is one of the matters to which we could devote public resources, to the universal acclaim of people who are more conscious of environmental conditions today than ever before. There is no reason why all the land should be taken over for agricultural production.

It is many years since a Prime Minister said that the land belongs to the people, but it has never reached them. There should be much more access to the countryside than there is at present. We should like it more and we should use it more. One of the biggest problems we shall have to consider in the future is what we shall do with increased leisure.

Before we go too far with the programmes that flow from price and land shedding, which we are already discussing, we should take another and a critical look at the nature and shape of farming. What do we mean by farming these days? From my observation, in some cases it means large areas under cereal production with not an animal on the land. All the land is under the plough and the combine harvester. Farmers are all burning stubble at much the same time under the same unsuitable conditions.

Farmers are not what we understood to be farmers. What are we to call the people who have animals locked up in their intensive animal husbandry equipment—the battery hen, the veal calf, the pig and all the other animals that are kept in miserable captivity? We hear about intensive animal husbandry extending to sheep. We shall soon see no sheep around. They will all be enclosed as well. We have imprisoned our farm animals and gone in for cereal production.

If farming of the future is to be confined to those who are permitted to grow cereals and those who have animals shut up in sheds, huts and other enclosures used for intensive husbandry, what sentiment will there be for farming in the public mind? Where will the romance of the countryside be? We must pay much more close regard than we have so far to that aspect of agriculture.

There is no doubt that many farmers are disturbed by the treatment that their animals receive during transport, in slaughterhouses and often in the intensive conditions in which they are bred and kept. There is nothing elevating about the treatment of our farm animals today. We have converted them into the raw material of farming. We have mechanised cows linked to mechanised milking equipment. We have automatic feeding. They are all things which are prescribed for greater production at lower cost.

If that is farming of the future, the public will want to see something better before they pay out a great deal of money to farmers to go out of business or to become the countryside wardens of the future. That is one suggestion contained in a recent issue of the Farmers Weekly. I am all in favour of farmers being the wardens of the countryside of the future, but it must all be acceptable to people who want to see more of their ideas about the environment and the treatment of animals carried out, and who generally want to live a more civilised existence. All that must be satisfied.

I am not sure where one ultimately goes to find what is acceptable and what is unacceptable in a complex subject such as this. The treatment of animals is a subject upon which the public will have a firm idea by the time we have to solve the problem, probably at considerable public expense and even generosity to farmers who have to give up much of their livelihood in the interest of avoiding large food surpluses.

7.16 p.m.

Baroness Elliot of Harwood

My Lords, this has been an extremely interesting debate. Before I say anything that I have in my notes, I should like to assure the noble Lord, Lord Houghton, that on the Borders of Scotland, in the Highlands and our other areas of great beauty, all the animals are out of doors. They are not kept indoors. All my sheep lamb out of doors. In hill areas, nothing happens indoors. I know that a great deal of intensive farming goes on in other parts of the country and that there is a different kind of farming there, but there are thousands and thousands of acres upon which sheep and cattle graze. They never go inside.

I hope that your Lordships will not think that all farmers are cruel to their animals, because they are not. As far as I know there is no cruelty in the area that I have farmed now for 50 years. What is often cruel is that during lambing time there are too many foxes and they attack and eat the lambs. We shoot foxes because we do not want to lose a lamb. That is another matter. I am just saying this because I am anxious to assure the noble Lord that although some of what he said is no doubt correct, a great deal of it can be countered.

Lord Mackie of Benshie

My Lords, does the noble Baroness agree that some of those poor animals would rather have been inside during the recent bad weather?

Baroness Elliot of Harwood

My Lords, I daresay that is true. During the past fortnight I have been unable to get home because there has been so much snow. All my sheep are out in the snow, I only hope to goodness that the shepherds have been able to see that they did not starve and were not injured by the snow.

I shall not repeat much of what has been said, because I agree with a great deal of it. However, one or two things have not been sufficiently stressed. What about alternative agriculture production? On Monday, I asked a Question about deer farming in the Highlands and uplands. I received a satisfactory answer from the noble Lord, Lord Belstead, who will obviously encourage such activity.

One of the newest farming activities in the past few years has been fish farming. I believe that that is successful. I know two young farmers who are changing some of their farming activities. I know one dairy farmer who is now making great quantities of yoghourt and selling it to shops and townspeople. That is a great success. I do not know how many such changes there are, but, in the area I know, that is a new venture that is going well.

As we all know, there are areas where we grow great quantity of cereals. The farmers are now growing fruit and vegetables and encouraging what is called "pick your own". I know one farmer who lives in Gloucestershire not far from Bristol, in an area where it is possible for people to come to pick-your-own. That operation has been a great success. We should encourage change as much as possible. One cannot do that unless it is economic. In these cases it has been economic and noble Lords will know of pick-your-own areas in many parts of the country which are quite successful.

Again, as with anything to do with farming, it depends on the weather. Last year the pick-your-own people did not do too badly. The year before it was hopeless; it poured with rain in July and August and they lost a great deal of money. In farming one cannot plan ahead without reference to what the Almighty will produce in the way of weather. That makes an enormous difference and has to be borne in mind. One must remember that when talking about these enormous surpluses which we all know about. Although it may not affect cereals so much, very bad weather—a drought or some difficulty of that kind over which farmers have no control—could occur. That could reduce production enormously. We must have a reserve which will allow us to compete with those conditions should they occur.

One of my hobbyhorses—as the noble Lord, Lord Gallacher, knows all too well—is this. As farmers we are very good at production. Everyone knows that we have increased our production to 80 per cent. of what we consume. But we do not think enough about what the consumer wants to buy. This is a matter which none of us considers sufficiently. We have to find out what people want to buy and not produce masses that we cannot sell.

Some of your Lordships may remember the Royal Agricultural Show of two or three years ago. The noble Lord, Lord Sieff, was the chairman of the show. He invited me to the opening, which I attended with great interest. I listened to his opening remarks. I was enormously impressed by them. He was saying that we farmers must find out what the public want to buy. He instanced something called the Arctic lettuce, which Marks and Spencer had encouraged farmers in a certain area to grow. The lettuce had been so successful that they had put it into every single one of their great food stores. It was now a booming product in an area where people can grow vegetables.

I give this as one small incident but it shows that we ought to think more about what people want and try to grow it. We should not always think that what we want to grow or what we have always grown is what we can go on growing. Although this is a limited proposal, we should all think about it.

I am a farmer. I am always thinking about production. Luckily, I live in an area where there is no over-production at the moment. In the Borders of Scotland we produce thousands of store sheep and sell them to people with richer land where they fatten them to go to market. This has been the way in which we have used the land for years. It uses hill land to best advantage.

If giving up cereals means that a lot of people in other parts of the country will grow grass and they want that grass to be eaten—which naturally they will—so they go into sheep in a very large way, there will be an over-production of sheep. I am not saying that a quota system will necessarily be needed, but it is a matter which must be considered.

I am speaking as one who has very little arable land but 5000 acres of hill land. If I could not sell my sheep in the markets to be fattened and sold by people with richer land I should be a in a very poor way, as would hundreds of farmers in areas such as the Highlands, the West Country, Cumberland and Wales. These are all areas where this is vital to the arable farmer. I may be wrong and this may not happen, but I have been warned by my colleagues in the Borders that they are terrified that there will suddenly be a very large over-production of sheep—of mutton and lamb. I hope that that will not happen, but we have to think about it.

I agree very much with what noble Lords have said about the environment. It is extremely important that the environment should be safeguarded. If one does not graze the hill land or do anything with it, people will no longer be attracted to the hills. We are to have a debate in the near future on the very important subject of forestry. I live in the biggest forest area in Europe. One does not get any return on forestry, as one does from an ordinary farm. If one plants trees there is a small return in 10 or 15 years. One does not get a big return until one clear-fells. That is in 50 years. We are all dead by then. We are planting for the next generation. One has to remember that point when talking about forestry. If one is to grow a lot of hardwood trees on good land, which is a very good thing to do, one will have to consider the farmer getting some return in another way—a subsidy or something of that kind. Otherwise they cannot live on the return.

I agreed with the noble Earl, Lord Onslow, when he talked about the third world. When I think of all the people starving in the third world it gives me a bad conscience. In this country we have this colossal surplus—and not only here but also in America. Surely in the modern world we ought to find some way in which we can distribute this food so that people do not starve. That is extremely important.

I say no more. I hope that some of the suggestions we make may be of some help to the Minister. I do not envy him his task. The difficulties of the CAP are enormous. But we are all behind the effort to improve it and we are all anxious to help. It is a question of the best way to do it.

7.28 p.m.

Lord Wise

My Lords, it is evident that the farming industry is facing a difficult time. At the moment bank borrowings are probably at their highest point ever. Incomes are falling. It is becoming increasingly difficult to meet interest charges and well-nigh impossible to reduce overdrafts. This is a serious situation not only for farmers but for the rural community as a whole. Many people within the rural communities are absolutely dependent for their livelihood upon farmers and a flourishing agricultural industry.

Ancillary businesses are also bound to be hard hit. We can take one example which has been mentioned: the drainage business. Reduction of the drainage grant and falling profits have led to much less drainage and maintenance work taking place. This in turn has created difficulties for the contractors. Loss of work has caused expensive machinery to lie idle and men have obviously been laid off. This has a knock-on effect for the United Kingdom manufacturers. They are probably among the best in the world and are now experiencing little demand in the home market.

That is one illustration of the widespread effect of a declining agriculture, and the same applies to every other ancillary business. What is to be done about that? One must accept that there must be a cut in the production of certain commodities. Supply and demand have to be more evenly matched. Nevertheless, it is imperative that farmers be given a fair support price for the produce that consumers will take.

Many suggestions have been put forward as the best way of achieving these production costs. All have their merits, all have their disadvantages and all present considerable problems of administration. Farmers will obviously diversify and grow alternative crops wherever possible. However, there are dangers in this. Considerable expertise is needed in many of the alternative crops. They also need particularly favourable climatic conditions in order to ensure success, and some need considerable capital expenditure. In the present economic situation farmers must obviously be very wary of plunging in at the deep end without first seriously considering all the implications.

In the proximity of urban areas agricultural land could of course be used for other purposes: sports grounds, golf courses, etc. This would necessitate a new thinking by planning authorities and a relaxation of controls. It would also need a change of heart by urban dwellers, many of whom object very strongly to any change in the coutryside around them. There must also be planning rethinking to enable small-scale industries to be established in rural areas, making use of redundant farm buildings, etc. However, again I would stress that many of these businesses would be dependent upon a healthy agriculture industry, and without that they just will not materialise.

It is debatable whether or not tree planting an extensive area of good land is an economic project. There is scope for some, but it is very much a long-term investment. As my noble friend Lady Elliot has said, money would have to be found for annual payments to be made perhaps to offset against the eventual value of the mature timber. Obviously working farmers cannot wait 40 to 50 years or more to reap their harvest; and who can tell what the value of that timber will be in 40 years' time?

In the arable areas some system of set-aside programme must be introduced. I note my noble friend Lord Ridley's fear of a featherbedding accusation. However, more land could be rotationally fallowed. That is not exactly featherbedding because all fallow, properly done, needs a fair amount of work. Perhaps there could also be an increase in the acreage of beans and peas grown on suitable land, and this would decrease the necessity for such heavy nitrogen applications on the following crops, thereby to some small extent alleviating the environmental problem of the nitrate deposits. Within the predominantly grassland areas there is a case for an overall system, perhaps based on the present environmental sensitive areas project, which, given goodwill, could work for the benefit of all.

In all this farmers must be safeguarded and adequate payments must be made if they reduce their output to enable them to meet their overheads and living expenses. This will cost money, but surely far less than the vast sums now needed to purchase and store the present huge surpluses. The farm Ministers must get their act together. As the noble Lord, Lord Walston, said, they must produce a long-term realistic policy for agriculture. It will not be easy to achieve, but it must be done.

7.35 p.m.

The Earl of Radnor

My Lords, I, too, am very grateful to the noble Lord, Lord John-Mackie, for bringing this massive subject before us. It has caused a lot of trouble to a lot of people over quite a long period. Whether, in a short debate this evening, we shall be able to produce the ideas which will lead to its solution I am not quite sure, but I think it is excellent that we produce a few ideas.

The unreality of the situation is that my noble friend Lord Belstead may be impressed by what we say and may talk to his right honourable friend who may also be impressed. But there are Ministers in Brussels who must also pull together and think of some reasonable solution to an amazing situation in which more and more food is being produced in the world and, in a way, wasted. That has become completely unacceptable to a large proportion of the population in this country and, I imagine, elsewhere, although perhaps to a lesser extent in some European countries, notably Germany and France.

The debate has been excellent. If there is a fault, it is that we have talked a great deal about getting rid of surpluses and have perhaps been thinking in terms of what happens when they are got rid of, by whatever means. We are really saying that rural unemployment and bankruptcies in the country are at unacceptable levels. I do not envy my noble friend Lord Belstead in his task of trying to think up the answers. I am quite sure that the main plank to reducing surpluses must be the price mechanism. This will be most uncomfortable in this country, which is, in my opinion, populated by farmers who have been having an exciting time and who, in many cases, have borrowed heavily. Inevitably therefore, the price mechanism will have to come into the picture.

I am not in favour of a set-aside situation, partly for the reasons already given and partly because when something is set-aside it does not need anybody to work on it. And one of our considerations is unemployment.

My mind always moves towards lower input farming: some way of farming whereby the inputs are lowered but the labour input is maintained. The noble Lord, Lord John-Mackie, nods his head. He mentioned this. It is a splendid idea, because one can research the subject and practise it. However, the flaw is that when the going gets rough farmers almost invariably grow more to try to recover their costs and push up the inputs. They are like the Gadarene swine heading towards some awful financial cliff.

I return to the idea of the noble Viscount, Lord Ridley, of some form of limitation on nitrogen; some goal to force farmers, particularly larger farmers, to reduce their production and force crops which have recently been growing on land where they should not have been grown—winter wheat is grown all over the place these days—back to the more traditional areas. I have no figures on this—quite honestly, I am incapable of providing figures—but I think that there exists the capability to work it out. I suggest that the tax should be two-tier or even three-tier.

The difficulty of taxing nitrogen throughout the farming industry is that the small farmer who perhaps improves his acres through buying a bag of nitrogen will be put out of business. It is sensible that a certain tonnage should be absolutely free of impost. Thereafter, another block would be taxed reasonably severely. Then one would move into an area where nitrogen was taxed very severely indeed. This would tend to stop some people growing such heavy crops and at least start them thinking about maintaining their margins and making a profit, albeit a smaller one. We are all going to make smaller profits, I am certain about that. But, as the noble Lord, Lord John-Mackie said, at the same time, God willing, more or less the same number of people would be kept in work and crops would be back where they should be grown.

Another nibble I would take at the question is through forestry which has had scant attention in this debate. When forestry was first mentioned as an alternative crop—I heard it quite some time ago, as the noble Lord, Lord Gallacher, will know—I laughed to myself and thought it totally impractical. I am now beginning to change my mind, although I do not suggest that the matter is of any huge moment in relation to the problem before us.

If forestry were subsidised in the vital years of growth—about 25 or 30 years—until it starts making money, and if it were to be grown not on the good land but on the land that is better than it is grown on at the moment—in other words, grade 4 land—leaving the uplands for the environmentalists and the grouse, but perhaps squeezing the sheep back on to richer land and then squeezing the next crop on, this would create employment. It would create employment in awkward lumps, so to speak. The planting of trees requires quite a number of people, and labour is also needed when trees are being felled. There is rather a dull period—I admit that it is quite long—in between.

I am encouraged to mention forestry with more enthusiasm than other noble Lords and noble Baronesses because it is one of the few products that is not in surplus. It would seem from all the forecasts that it is a product for which there will be real need throughout the world for as far ahead as we can see.

As regards alternative crops, everything we can think of, so far as I can see, will alleviate a little the force of the price reductions. Alternative crops are extremely interesting. I am tempted, since my noble friend Lady Elliot mentioned it—and declaring my interest—to say that fish farming certainly is an alternative crop. My fish farm stretches over 54 acres on which I can honestly say that nobody used to be employed. I now employ 15 people. There are two lorry-drivers involved, and I am told that eight people are employed in the feed factory in Suffolk. On and off, I work at it a bit myself. I suggest to my noble friend Lord Belstead that if he should have an opportunity to talk to friends—if he has them—in the water authorities, a little more positive encouragement from that area might help to a certain extent.

I am coming up to my 10 minutes and one speaks ever more quickly. This is an extraordinarily difficult problem. I fear very much that there is going to be difficulty at the end of the day. I only hope that we are able to reach some sort of sensible solution for the countryside.

7.45 p.m.

Lord Mackie of Benshie

My Lords, I of course must thank my noble kinsman for introducing this debate. It is obvious from the interest shown, and the number of people who have spoken enormously sensibly about it, that it was a good debate to introduce. He did it extraordinarily well, and I shall draw him aside and explain about our need in the Alliance to look after the smaller farmers, whom obviously the Labour Party does not care for.

When we look at the situation today, we have to look at the past. For many years I, along with many other noble Lords, have been on Sub-Committee D of our EC Committee and we have been looking at the problem and recognising the problem for many years. The Motion actually says: To call attention to the attempts of successive Councils of Agricultural Ministers to deal with CAP surpluses". The fact is that successive Councils of Ministers have not dealt with them, and have ignored the problem altogether in favour of short-term political gains in their own countries. They have made nonsense of efforts to see that the agricultural population, the primary producer, get a fair deal; get the basic protection—I have said this time and time again—against the 5 per cent. surplus producing a 50 per cent. drop in price, with the result that now the kitty is empty. If it is not empty it is because it is constantly being refilled. The Commission have to resort to devices such as delaying payments, and all the things we know that in a private situation are the prelude to bankruptcy. The people who pay are now no longer willing to pay.

I think, and I fear, that the solution put forward by our EC Committee, mainly through Sub-Committee D, which was one of price restraint and forewarning farmers of price restraint anything up to five years ahead, is no longer possible on its own. Many people have said this.

It is interesting—and a number of noble Lords pointed this out, particularly the noble Earl, Lord Onslow—that all over the world people are getting better and better at producing food. He instanced China, and India is another one. I am sore afraid that Mr. Gorbachev is determined to introduce sensible policies into Russian agriculture, and without any doubt in the next few years we shall see an improvement there. Therefore, we are faced with a situation where export to other countries is no longer going to cope with the surpluses.

We are also faced with the situation where the surpluses are going to rise quickly in our patch, the EC. Already we have the figure of something like 6 million tonnes in store here, and 29 million tonnes there—one throws the millions of tonnes about as though they did not matter, but the figure is enormous—and given an average harvest next year it will go up again, and something has to be done about it.

We are also doing great harm in the third world and in the competent agricultural countries in the Commonwealth. I was recently in New Zealand, and they were going to enormous lengths to tighten their belts. They expect that 20 per cent. of the farmers there will not survive the squeeze. This was the figure given us by the federated farmers there. We visited a farm where the farmer was milking 150 cows, working hard himself, and his wife was doing it while he showed us round. He said that he had actually gone to the length of not topping his grass simply to save diesel fuel. That is entirely our fault. They are competent and efficient and while we may be right not to take their produce here, we are quite wrong to destroy their markets and the markets of poorer countries in the rest of the world. That is what we are doing.

The situation is urgent and something has to be done immediately. Many solutions have been put forward, all of them with some merit. The argument for 10 acres, a house and a horse is not a bad solution. After the first war I understand the solution was three acres and a cow. A neighbouring farmer to my father said that if that was the case he would have three acres and a bull. Seriously, sensible planning legislation has to be introduced so that people who want 10 acres in the countryside can build; but not to turn the countryside into a mass of nasty houses with 10 acres round them, for sensible planning could keep people in the countryside by adopting that suggestion.

We have heard of all kinds of mandatory rotations and about the need for the reduction of nitrogen. Although several very sensible people in this House have advocated it, we can only do it where it is a hazard to health. The same is true of pesticides. I cannot see that one can reduce competent and healthy efficiency by ordering people or taxing the root cause in order to reduce the food production. One can certainly do it where it is doing harm to the health of people, and that should be done.

I am in agreement with the noble Lord, Lord Houghton (though not with everything he said), that our intensive systems of production are not nice. They need looking into. They do not produce very tasty food, and we should encourage the production of more natural and better tasting food. I am afraid that the public will have to pay for it not only through the direct support of farmers but in a bigger price for food.

I do not have time to go through all the solutions. My noble friend Lord Walston pointed out that a quantum which you supported should be enough if that is how much you need. Many other people produced good and necessary steps for the Minister to take. But the one essential thing he has to do is to make up his mind that something has to be done and done now. I hope that he can put it over to his fellow members of the council.

We have an extraordinary situation now that exporters are asking the Government, who are holding surplus stocks in intervention stores, to pay them a subsidy of 140 ecus per tonne to export this grain. That is £100 a tonne. I understand that the Government have indignantly turned down this offer; but enormous sums of up to £80 or £90 per tonne are being paid not only in this country but in France and other countries, to export onto the world market. This is not a world market, it is a dump market. We can afford to use this money and we must use it. Taking the figure given by the noble Lord, Lord Stodart, of the £35 to £40 a hundredweight producer going out of business, one is talking of a figure approaching £150 to £200 an acre being available to put that farmer into a business that is good and maybe profitable for the country.

Also we have to go for forestry in a big way over the country. I do not think compulsory set-aside is on. We should use the money saved from bribing people to export to put people into other products. The tree is one of them. But it has to be done, as many people have said—the noble Lord, Lord Radnor, knows much about this and spoke sensibly about it—to cover the 25 years or longer when there is no income. One always has the trees as security for money being paid out, and one is doing something for the countryside and helping to keep people in the country.

Speakers have kept very well to their time and I intend to do so. I note that I have an extra minute or so, leaving the Minister and my following speaker plenty of time. We must not forget that farming is still needed for the economy of the country. The extra food we have produced in the past 10 years since we joined the Common Market has saved about £2 billion a year in imports. One cannot throw that away as so many people think we can. Farming will still be the basic industry in the countryside. However we do it—whether we have set-aside, whether we have compulsory rotations, or whether we drop the price—any quota system will drop the farmer's income.

We must get down to it quickly and give the farmer actual figures and give him direction. The scheme the Government have put up has some hope. I hope the Government will be able to assure us that they will be quickly able to tell us what they will do instead of saying like the rest of us that there are certain alternatives.

7.56 p.m.

Lord Gallacher

My Lords, we are all indebted to my noble friend Lord John-Mackie not merely for the way in which he introduced the debate but for persuading the official Opposition to have such a debate. The quality of the speeches this evening bears ample testimony to the fact that this is a subject of considerable interest to your Lordships. My noble friend is entitled to share in the credit for that.

The success of the common agricultural policy is based on guaranteed prices, an intervention system, improved technology plus farming skills. The CAP is another victim of its own success, and unfortunately for the CAP this success comes in a recessionary situation for manufacturers in the EC. From that we can only draw the lesson that it is more difficult to reduce surpluses than to generate them.

Only limited action has been taken so far because the Council of Agriculture Ministers as a body has been unwilling to face unpopular decisions with farmers in their respective member states. For example, a favourite excuse for doing nothing is that elections are due in particular member states and until those elections are over radical steps cannot be taken in particular directions. Similarly a favourite fall-back device when price changes are made is to use the price mechanisms which are a part of the common agricultural policy, notably the manipulation of green rates to avoid the full effect of price changes, again in particular member states.

The result of all that is a series of chronic structural surpluses which in themselves are harmful to the concept of the EC as such, and no one is more conscious of that than those of us who are members of the official Opposition.

The nature of intervention was well described in a series of articles in The Times of 24th November 1986. At that time an indication was given of stocks held throughout the Community. Grain amounted to 16,780,000 tonnes; butter was at 1,500,000 tonnes and one-third of farm spending at that time was going on the cost of storing butter. Milk powder had reached 1,100,000 tonnes; beef was 620,000 tonnes and—a dimension that has not been mentioned this evening—wine had reached 15 million hectolitres.

There is an awareness of this because the Government themselves—great credit is due to the UK Government for their attempts to tackle these problems—made a statement in your Lordships' House on 17th December 1986 about the steps taken on milk and beef. The Minister informed us—not much notice was taken of it—that a major programme of disposal for surpluses had been agreed upon at the same agricultural council. The object of the disposal programme was to reduce the surpluses to manageable levels by 1989. The cost of this programme of disposal was to be financed over four years beginning in 1989, and such is the magnitude of the problem that the burden of cost involved cannot even be taken on board until 1989.

In the days when I had a slight responsibility for disasters (not of this magnitude, I am happy to say) it was common wisdom that the first loss in stock matters was always the best one. Apparently, although that is recognised in the Community, the agricultural council cannot begin to meet the cost of the loss until 1989, and then it has to be phased over a period of four years. There is now a real danger of panic measures, which will have a serious effect on social life in rural areas. My noble friend Lord John-Mackie dealt with that in considerable detail.

We can all recite options or alternatives for the CAP in much the same way as we used to be able to recite the Catechism. I think the conclusion must be that there is no single solution to the problem. At heart, it seems to me the question is one of alternative land use. That is certainly the case in Britain. There must be a query, I think, as to whether these alternatives which have been canvassed this evening are in fact capable of being decided upon by the agriculture Ministers who are responsible for creating these surpluses. I say that because conditions are so vastly different in the 12 member states—a point which was very effectively brought out by the noble Lord, Lord Walston.

This is not a plea for repatriating the common agricultural policy, which has been raised by certain anti-marketeers in another place, but I think that in the measures which are now required it must be a point of substance that agriculture Ministers should regard this matter as being one where greater national control of these measures is the only effective way of achieving spectacular results without doing significant damage to the countryside. If there is a Community solution to this problem, I have yet to hear it. I have yet to see it seriously applied. I think that if a Community solution to the problem is attempted it will be costly and it may in the final analysis be ineffective.

Even if greater delegation takes place to member states, there are conflicting interests at all levels in the United Kingdom. Some of those have emerged, very politely but nevertheless quite definitely, in our discussion this evening. I think it is vital for Her Majesty's Government, at internal ministerial level, to reach some form of accord about land use, and I sincerely hope that the Minister will be able to say something positive about that tonight because it seems to me to be at the heart of the problem.

The emphasis so far in measures taken has been on the smaller farmer in poorer areas; for example, the outgoers scheme. However, the problem of surpluses lies more with large units in the best farming areas, and if those farmers are forced to do something significant about their problems there is a danger, which the noble Baroness, Lady Elliot, touched on, of diversion by them into other kinds of farming. Cereals into sheep were mentioned. I think there is an equal danger if, as a result of the measures which are contemplated, large and efficient farmers are in fact invited and encouraged by fiscal measures to start farming inefficiently.

Much consideration needs to be given to the position of farm workers, who, because of their special position, may suffer unduly under conditions of change—not merely through loss of employment but because, through tied houses and the like, they lack the mobility of other workers. There is a housing crisis in urban areas. After a life on the land they face the problem of adaptation to living in urban areas. This, too, must be a consideration in any reconstruction of the common agricultural policy.

I accept totally that Her Majesty's Government are more seized of the problem as a whole than many other member states in the Community. That is to their credit. I think it is equally to the credit of the Minister that during his presidency he tried to do so much to solve this particular problem. The Community's industrial export performance as a whole gives cause for concern. One of the questions which must be asked in this situation is whether the Community can carry the cost of the CAP and still compete in world markets as a manufacturer.

It is recognised that there are now dangers of retaliatory action if export markets in which the CAP has an interest are not brought under control. I think that eventually conflict in this particular area could undermine the General Agreement on Tariffs and Trade so that the dimension of the problem is not merely Community-wide but international and, indeed, national, and its effect is not merely on industry but on farming and the whole future of the Community itself.

The common agricultural policy reforms propounded thus far are at the margin of the problem. There is a need for more effective action on an urgent basis, but that must be combined with enlightened social and land use policies. To that extent we look forward to hearing the Minister. I echo the thanks of my noble friend Lord John-Mackie to those who have spoken in this debate.

8.6 p.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead)

My Lords, I should like to thank the noble Lord, Lord Gallacher, for the generous words that he spoke about my right honourable friend the Minister of Agriculture during the United Kingdom's presidency of the Council of Ministers, and also to join with your Lordships in thanking the noble Lord, Lord John-Mackie, for initiating today's debate.

In trying to reply to this enormously interesting debate that we have had this evening, I think it is essential for me on behalf of the Government to try to say why reform is necessary; what the changes already agreed entail; and why they constitute, we believe, the best foundation for the development of the common agricultural policy and agriculture in the long term.

My Lords, the scale of the measures adopted for the milk and beef sectors in Brussels in December reflects the scale of change that agriculture has been undergoing for many years, particularly in the United Kingdom since our accession to the European Community. Your Lordships have already made reference to this, and perhaps it was best summed up by my noble friend Lady Elliot, who made the simple point that while we have been members of the Community our ability to produce the temperate foods needed in the British market has improved by no less than 18 per cent., from 62 per cent. to a total of 80 per cent. But the problem is, as the noble Lord, Lord Mackie of Benshie, and my noble friend Lord Onslow said, that in the world there has been an increase in agricultural production to the point where the entire pattern of agricultural trade has been transformed. The surpluses which have emerged cannot be sold economically on what is now a saturated world market. Instead, they threaten to engulf the very policies that have helped to create them.

The noble Lord, Lord Gallacher, gave us some very interesting statistics of the build-up of surpluses in store. I should only add that in 1985 in the United Kingdom alone there was a cost of £1 million a week to store the butter and skimmed milk powder that we had in store. There are simply not the resources to finance that extra expenditure, even if the governments of the member states, leaving aside the views of Community taxpayers, could be convinced that it was justified—and it was these realities which brought the agriculture Ministers of the Community to take tough but necessary measures in the milk and beef sectors.

If your Lordships will forgive me, I will say very little about milk, because we went through this in the Statement on 17th December, except that—and I believe it is absolutely right—the 9.5 per cent. reductions in production which have to be faced in the Community over the next two years are to be balanced by sizeable financial compensation. I was very interested that my noble friend Lord Onslow made the point that he felt that quotas should be freely negotiable so that they could be bought in to help reduce over-production. To some extent this is, in effect, happening already. After all, the council agreed last month to increase the rate for the Community outgoers scheme with a view to meeting the quota cuts agreed in April 1986 through voluntary sales. And of course the temporary suspension of quota, also agreed last month, will be compensated for by generous payments to producers, as I have already mentioned. The link between quotas and land, however, is central to the system which the Community agreed on in 1984. Changing that fundamentally would cause huge problems, particularly in the tenanted sector, which is much more important here than in the rest of the Community.

Turning to beef, perhaps I can be very brief. As a matter of fact, your Lordships have not spoken about beef this evening though it has been much in the minds of the farming community. May I make just two simple points. I think it was quite obvious to anybody who thought about the beef market before the agreement was finally reached in December that what primarily was needed was to reduce the amount of beef going into intervention and not being eaten.

This is what the Community Ministers agreed to do; but of course you cannot cut expenditure on market support without having some effect on the market. However, because of the variable premium, United Kingdom producers have never been so heavily reliant on intervention as many other countries. Last year less than 5 per cent. of our production was taken into intervention, compared with, for instance, 25 per cent. in Ireland. The forthcoming reductions in buying-in prices will thus bear less heavily on the United Kingdom market. They will also be substantially offset by a combination of the green pound devaluation and the increase in steer buying-in prices, as these are harmonised with the intervention prices paid for young bulls in some other countries.

The other thing I wanted to say on behalf of the Government on beef, is that I believe that the major success in this difficult sector was to persuade other member states of the benefit of shifting to greater reliance on this type of support. And let us not forget that the new premium being offered to the other European farmers is going to be worth only about £16 a head, confined to the first 50 head in a herd and only on steers, whereas our variable beef premium scheme, which we have retained for a two-year period, is going to be worth about £45 a head on average, and of course paid beyond the limit of 50 in a herd. The National Farmers' Union, quite rightly, before the negotiations put very specific emphasis on trying to do something for the specialist beef producers, and I am delighted that the maximum possible rate of payment for the suckler cow premium has gone up.

Looking ahead, the December agreement forms the background to the negotiations in this year's price review. By the savings it brings on CAP market support—£750 million for this year—it makes a valuable contribution to the task of containing CAP expenditure. Clearly more needs to be done. I say that before the noble Lord, Lord Walston, says it to me and of course he would be quite right if he did say it. None the less, forecasts of expenditure requirements this year are still well in excess of the total resources available within the budget. However, I think we have put the CAP on the right course.

May I just say to the noble Lord, Lord John-Mackie, that when he spoke of the cost of our domestic market support, I thought his figures were rather on the high side. However, it does not alter the thrust of his speech, which was also a recognition that we need to stick to our guns so far as price is concerned.

Talking about price, my noble friend Lord Stodart made the point that we should be cautious about the price mechanism. The noble Lord, Lord Houghton, reminded me that I had ventured to say yesterday in your Lordships' House that we need a two-pronged approach. The noble Lord, Lord Mackie of Benshie, said very much the same. It is the Government's belief that our agricultural industry well recognises that the challenge is no longer simply to produce more, but to produce consistently and precisely what the consumer wants at prices which the consumer expects and in the quantities which meet demand.

Within the overall situation of surplus, I recognise that there is an important contribution for the Government to make to agriculture. Agricultural support is running at some £2 billion a year at the present time, but the surplus situation means that this support must be selectively applied. In particular we must also be prepared to complement the central policy of market realism to encourage some farmers to move land out of commodities in surplus.

Therefore I think it was significant that the council also agreed in December to develop a package of structural measures, one major aim of which is to reduce the pressure on the sectors in surplus. The measures under discussion include an early retirement scheme for some producers and measures to encourage more extensive farming—recommended by my noble friend Lord Onslow, among others. Of particular interest to the United Kingdom was the inclusion of a scheme for the diversion of land out of sectors in surplus. I very much hope that in this context we can develop the ideas on cereals land diversion which my right honourable friend put to his colleagues last September.

In this context the noble Lord, Lord John-Mackie, said in his speech that he wondered whether perhaps we ought not to keep surpluses in proportion and that in certain circumstances, such as drought and natural disasters, those surpluses could disappear. I have to say at this stage on behalf of the Government, that we have to recognise that really almost the reverse is the case. There is the very sobering forecast that if nothing is done we will have about 80 million tonnes of cereals in surplus in Europe in a few years. And of course while this happens, world markets are shrinking, other exporters are suffering and yields are increasing, as we know.

The noble Lord, Lord Walston, asked, "If the Government are going for the voluntary cereal set-aside, how is it to be done?" The September paper of my right honourable friend, which of course was for discussion, suggested that there should be payments of about £80 per acre; but the noble Lord will not need me to tell him that the price to be paid would need to be very carefully chosen in the context of prices for cereals, in order to see what would appeal to those in marginal production, coming out of production on some of their land.

I was most grateful to my noble friend Lord Stodart of Leaston for, in effect, giving the answers to the other questions asked by the noble Lord, Lord Walston. Therefore perhaps all I need say in answering the noble Lord in a portmanteau way, is that we know about 10 per cent. of cereals land in Europe needs to come out of production if a scheme of this kind is to succeed.

The Earl of Onslow

My Lords, if I may interrupt my noble friend very briefly, would it not be possible to pay different prices to different qualities of farmers? Presumably one also wants some of the grade A1 land producing between 3½ and 4½ tonnes of feed wheat per acre to come out as well; so those people presumably will have to be paid more not to farm on such land than those who are perhaps producing only about two tonnes per acre.

Lord Belstead

My Lords, if I may say so, I think that my noble friend has put his finger on a very important point. For a scheme of this kind to succeed what we would need to do is to make sure that those who are the more marginal producers will come out of production and will take enough out of production to reduce the size of the cereal mountain. My noble friend Lord Stodart gave the figuring so far as this is concerned, and what I am saying to my noble friend Lord Onslow is that I believe we can have this particular scheme without having to take any large quantities of the very best cereal land out of production.

My noble friend Lady Elliot spoke of alternatives; and while novel crops and unusual livestock enterprises offer new uses for some land, we believe that the most promising large-scale alternative land-use in current circumstances is forestry. That was the option mentioned by my noble friend Lord Radnor, my noble friend Lord Stodart and the noble Lord, Lord Mackie of Benshie. After all, we remain short of timber and will continue to be so for the foreseeable future. The Community as a whole produces only half of its timber requirements, so there is a huge market to be exploited. We should like to see some planting taking place further down the hill on rather better land than at present. That would help to reduce agricultural surpluses as well as increasing timber production in England and also in Scotland and Wales.

We should also like to see the development of farm woodland as a complement to conventional agriculture. We know that we do not have such a tradition in this country, but the Government believe that there is an opportunity here for generating a useful source both of farm income and employment in the countryside. It is, of course, for individual farmers throughout the United Kingdom to make the key decisions in running their businesses. An increasing number are showing an interest in diversification and this could provide alternative employment, also an issue to which the noble Lords, Lord John-Mackie and Lord Gallacher, drew attention.

I know that I do not need to remind your Lordships of the very useful part which diversification can play in sustaining farm incomes and helping to ease the problems of adjustment which the industry now faces. Your Lordships will recall the very warm welcome which the House gave to the amendment in last year's Agriculture Bill, in response to my noble friend Lord Peel and my noble friend Lord Sandford, which empowered agriculture Ministers to make orders providing for a grant scheme for ancillary farm-based businesses.

But grants are not the whole story. I listened very carefully to the warnings of my noble friend Lord Wise about the care needed before a farmer plunges into diversification. Advice to farmers on the oportunities open to them to diversify from their existing base can often prove just as valuable as financial assistance from the Government. ADAS is already playing a major role here, working in close co-ordination with other agencies concerned with the welfare of the countryside, and we are committed to continuing to provide such advice in this important sphere.

May I just say how much I agreed with my noble friend Lady Elliot about the worth of adding value and of expert marketing, in a situation where food supplies are more than adequate and farmers need to produce as high a quality as possible for a specific market. I listened with great care to what my noble friend Lord Ridley said about restrictions on nitrogen, but I join with the noble Lord, Lord Mackie of Benshie, in scepticism about these restrictions and I do so on one simple ground. They would be indiscriminate. They would be inequitable, I think, without regard to the different response rates of crops or indeed of what crops were needing nitrogen; and very much the same thing would happen if you had a fertiliser tax or levy. And, of course, on a Community-wide basis which would be a necessity, it would be an absolute administrative nightmare. Nonetheless my noble friend was speaking about an important matter.

He also referred to another very important matter when he talked about the Nitrate Co-ordination Group's Report. But here may I say that, so far as nitrates in water are concerned—yes, agriculture is a contributor, but so is industry and so is sewage—an integrated approach is needed in dealing with this matter. The Government are not insensitive to this problem and the issue is under very active consideration.

I also listened very carefully to what the noble Baroness, Lady White, said about planning. I think your Lordships will not expect me to comment on various reports in the media as to what the Government might have in mind about planning. But what I can say, and will say, is that the Government have repeatedly stressed their firm commitment to safeguarding the green belt. We are also firmly committed to preserving the best and most flexible land. This is an important asset if we are to respond to changes in the common agricultural policy while maintaining a healthy and efficient agricultural industry.

Finally, may I say that I felt that one of the things which showed the difficulty of the subject which we are addressing this evening—and I am grateful to the noble Lord, Lord John-Mackie—was the fact that my noble friend Lord Ridley, I think understandably, said what a good thing it would be if we now had more mixed farming instead of the single arable farms. Yet the noble Baroness, Lady White, and indeed my noble friend Lady Elliot of Harwood, both expressed the fears of some of the hill farmers that more people might go into livestock down the hill, and that their livelihoods in the hill would be endangered. My conclusion on that was how glad I was that this Government have stuck to supporting the hill farmers, and how glad I was that we had increased the size of the less favoured areas only two years ago.

For the last five years, the cost of the common agricultural policy has increased by some 15 per cent. every year. Something had to be done and it was done in December in the Council of Ministers. I do not pretend that the adjustments which agriculture now faces can be made overnight. But I believe that, with the same enterprise and dynamism that the industry has repeatedly shown in the past, it can continue to make its very important contribution to the national economy and to the wellbeing of our rural economy. The policies being pursued by the Government, which I have tried to set out in reply to this debate, are aimed towards that objective.

8.24 p.m.

Lord John-Mackie

My Lords, all I can say in winding-up the debate and in withdrawing the Motion is that it has shown very clearly that the problem is a critical one, as everybody who has spoken has agreed; and the Minister emphasised that in his final words. All I shall now do is thank everybody for taking part in this debate. We are very pleased that the Minister is seized of the problem and that he has well taken note of all we have said. My Lords, I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.