§ 8.41 p.m.
§ Baroness Trumpington rose to move, That the draft regulations laid before the House on 4th July be approved [31st Report from the Joint Committee].
§ The noble Baroness said: My Lords, I am assuming that the background to the introduction of the Community set-aside scheme is well known to the House—though I can give more details in my closing remarks if required. The timetable set by the Council for implementation by member states has been very tight. Rightly so, because farmers needed to know the details of the scheme as quickly as possible if it was to influence cropping decisions for the 1989 season. So we have had to act speedily to devise these regulations. But the United Kingdom is not alone. Although we were the first to submit a scheme formally to the Commission for approval, we have been closely followed by most of the other member states. Only Italy, Ireland and Denmark have yet to send their proposals to the Commission. So most member states look likely to have schemes in force by this autumn.
§ Turning now to the details of the measure, I should first say that much of what is contained in these regulations is set by the two EC regulations, Council Regulation 1094/88, the main obligations; and Commission Regulation 1272/88, the detailed rules. But we have tried, so far as possible within the constraints imposed by the EC legislation, to keep the scheme relatively simple and flexible for farmers.
§ Farmers who enter the scheme must undertake to set aside an area of land equivalent to at least 20 per cent. of the area used for production of the so-called "relevant arable crops"—that is supported crops—in the base year 1987–88. Together with the obligation to set aside a certain amount of land goes an obligation not to increase the area of land remaining in production of relevant arable crops. There are three main options for the use of land set aside: 342 fallow, woodland or non-agricultural use. I shall say a little about each one.
§ First, fallow: as is clear from a quick reading of the regulations, the word "fallow" does not quite equate with its traditional meaning. Farmers traditionally have thought of fallow as bare ground included in the arable rotation. However, under set-aside, the detailed rules for the management of fallow land include a requirement to establish and maintain a plant cover on the land left fallow. And fallow can be either rotational—in which case it attracts a payment of £180 per hectare (or £160 in the LFAs)—or permanent for the full five years of the scheme—in which case the payment is £200 per hectare (£180 in LFAs). Schedule 2 to the regulations sets out the statutory management rules designed to help ensure that land is kept in good condition and that there is no damage to the environment. The rules include, for example, prohibitions or restrictions on the use of fertilisers and pesticides, and on land improvement works; and there is also an obligation to maintain features—for example, hedges and trees—on or next to set-aside land. The conditions provide scope for farmers to obtain positive benefits for the environment. We shall also shortly be issuing advisory guidelines to help them.
§ The House will also be aware that we have decided not to take up the option allowed for in the EC legislation of extensive grazing of fallow land. I am glad to say that our decision on this has been widely welcomed by farmers, who were justifiably concerned that such an option could distort competition for existing livestock producers, particularly in the uplands. France, originally the main advocate of grazed fallow, has reached the same conclusion and will not be permitting it in her national scheme.
§ For the woodland option, these regulations provide the farmer with a choice of two alternatives. In both cases, eligibility is linked to obtaining a planting grant under the Forestry Commission's woodland grant scheme. Farmers wishing to plant trees can then either opt for the route of direct set-aside to woodland—in which case they will receive the same rates of payment as for permanent fallow but only for the five years of the set-aside scheme—or they can opt to enter the farm woodland scheme and receive the rate of payment appropriate to that scheme for the full term of up to 40 years, depending on the species mix. We felt that it was important that farmers should have the choice between the two routes because, as your Lordships are aware, the farm woodland scheme has specific rules, for example minimum and maximum areas planted to trees; and we wanted set-aside to woodland to be nonetheless available to farmers outside these limits. I should add that while farmers are waiting to begin planting trees they will be required to manage the land as fallow under the management rules.
§ For the non-agricultural use option, we have tried to keep the regulations as flexible as possible to allow farmers to use their entrepreneurial skills. For this reason we have not included a list of permitted nonagricultural uses. We have, however, specifically excluded from eligibility the use of set-aside land for mineral extraction—including opencast coal—and for permanent buildings related to use for industrial, 343 retail or residential purposes. The rate of payment for all non-agricultural uses is £150 per hectare (or £130 in the LFAs). The lower rate reflects the fact that an income could be expected from the non-agricultural enterprise. Of course, the set-aside scheme does not affect any requirement to obtain planning permission.
§ Turning briefly to eligibility, to enter the scheme an applicant must have been farming the holding for at least 12 months before the set-aside period begins. We hope that this will help to ensure that the scheme is only taken up by genuine farmers. Tenant farmers on a fixed term lease are eligible to apply provided that the lease has at least five years left to run. However, if tenants wish to take up the woodland or non-agricultural use options, they will be required to obtain the consent of their landlord. For the fallow option, they must notify their landlord. We believe that these requirements are in the best interests of tenants and landlords alike. In particular, they provide the tenant with the opportunity to explore with his landlord ways in which he may enter the scheme wihout incurring the risk of breaching his tenancy agreement.
§ In the interests of being concise I have given only the main outline of the regulations. I hope that this is sufficient as an introducton, and I shall try to deal with any other points that are raised in my concluding remarks. I should, however, like to say one further thing: that is to emphasise how important it is for arable farmers to register their 1987–88 cropping pattern with us this year even if they wish to defer a decision on whether or not actually to enter the set-aside scheme. The value of registration to farmers is that, if they apply for set-aside in a later year, they will not need to provide further evidence of the 1987–88 cropping pattern on land which has already been registered with us. If land has not been registered, independent evidence will need to be provided probably in the form of a certificate from a qualified surveyor. That may be difficult in some cases and will, in any case, involve further expense to applicants. I hope that arable farmers will see the advantages of registration and send in the shorter registration form to reach us by the end of September. I commend these regulations to the House.
§ Moved, That the draft regulations laid before the House on 4th July be approved [31st Report from the Joint Committee].—(Baroness Trumpington.)
§ 8.50 p.m.
§ Lord John-Mackie
My Lords, I believe that the noble Baroness has a difficult job tonight. She began well and has been concise. She emphasised that time was tight and I cannot agree more. Within the next two months farmers will be busy harvesting and their minds will not be too far ahead. I hope that they will be able to find time to look at the question of registering before the end of September. Time is tight and sometimes it takes farmers a fair time to make up their mind, particularly as regards such an important matter.
The main object of the scheme is to reduce cereal production and many other crops, particularly oil 344 seeds. We must look at the issue from that point of view. The noble Baroness suggested that there is scope within the scheme for diversification and so on. However, that is a side effect and we must look at the issue from a production point of view. I have my doubts about whether cereal production will be reduced.
Sub-committee D of the Select Committee on Agriculture made a comprehensive report. No fewer than five members of the committee will speak tonight. I shall leave it to them to pick out the salient points which the Government have ignored in their report and which I believe are important.
On Monday the Minister of Agriculture was interviewed on "The Farming Programme" and I listened with great interest. I was intrigued by the fact that he stressed most strongly that he wanted to concentrate on less-favoured areas where they should not be growing grain in any event. I doubt whether they should not be growing grain. I know that grain has been grown on some of the less-favoured areas for a long time. However, if he wishes to concentrate on such areas, believing that to be best, why offer the farmers £20 per hectare less than that offered to the other areas? To give the farmers £20 per hectare less than the more-favoured areas seems to be a curious way of stressing the point: that is unless the less-favoured areas are linked to the farm woodland scheme which the noble Baroness mentioned and which would help.
I spoke to a relation in Scotland about the matter. He farms two fairly large farms which were created by amalgamating smaller farms and which are in less-favoured areas. To join the scheme he is to take sufficient land out and plant trees on the farm on which he lives purely to shelter the house and buildings. He says that otherwise he has no interest in the scheme. He emphasised to me the fact that he had been talking to his neighbours, most of whom are still farming the smaller farms in less-favoured areas. They vary in size from 150 to 250 acres. The farmers have no interest because on a farm of that size one has the equipment to run it the way it is. There is probably only part-time labour and the farmer, or at most one worker. One cannot cut down on any of that and the scheme is not attractive to that type of farm. I shall be interested to hear what my noble kinsman has to say because it is probable that he has better knowledge of the areas than I.
The point is that these areas are not creating the surplus. What about the favoured areas? They are the large East Anglian farmers from where the surplus is coming. From the economic point of view, unless the 20 per cent. takes out enough to pay off a man, sell a combine and a tractor, probably leaving 1,000 tonnes of grain storage standing empty, it does not appear to be very attractive. I cannot see a 2,000 acre farmer taking out 400 acres from a fully-mechanised farm and doing just that; that is to say, reducing the staff by a man and selling a tractor and combine. I believe that the percentage should be graded downwards from the 20 per cent. in less-favoured areas to 10 per cent. on the best farms in the country. That may bring a bigger acreage into set-aside than at the moment. However, I give the noble Baroness that point which I believe is most valid.
345 I think that there are several minor points which may have made the scheme more attractive. It is a pity that the French dropped the fallow grazing scheme. I do not agree with the noble Baroness that on the whole farmers did not like it. I believe that it would not have made much difference to the traditional grazing areas. It would be fairly easy to police and I do not believe that many arable farmers would go to the trouble to fence fallow grazing to any great extent. If it were made clear that no nitrogen must be put on the land and that the stocking must be light, I believe it would have been of more value to the country than fallowing, either green or straight fallow.
The noble Lord, Lord Vinson, chairman of the Rural Development Commission, speaks strongly about the matter from an environmental point of view, apart from the economic point of view. The noble Baroness has previously emphasised the fact that this is an experiment. The scheme should be experimented with and it could be altered if it is believed to be hurting the traditional grazing areas.
I should like to ask the noble Baroness how much flexibility there will be. Can one change from one type of fallow to another in the middle of the three-year period? Can one change from grazing horses to a fallow cover, and so on? Are the Government satisfied, as the noble Baroness mentioned, that tenants will have the same rights as owner-occupiers? They must have their landlord's permission and cooperation and that may be difficult to obtain before the end of September. That is a matter which must be looked at urgently.
Why is there the large difference of £50 per hectare for non-agricultural use? I declare an interest in that in my area, which is 22 miles from here, we can let land for horse grazing. It is up to us to find clients and the Government have done nothing to help us to obtain that horse grazing. Why should we find £50 for being a little more progressive than our neighbours who are putting down a green fallow? I believe that that is rather hard. After all, we are taking land out of production, which is what the Government want, and we are going to suffer because we are dealing with it in a different way.
There is the question of plant cover. Apart from pasture the only plant that I can think of is mustard, and you cannot sow that in October. A list of plants is given which are not excluded and I have marked them in the list here. I do not know anything about lupins and the noble Baroness may be able to help. Can one plant lupins in October? The other one is fodder rape. October is rather too late to plant seed rape but I do not know about fodder rape. These questions have to be answered.
If the Government get their acreage, on which they are going to spend £16 million, I worked that out as being between 200 and 250,000 acres. Is there enough mustard seed and so on to plant that acreage in the time we have been given?
I should like to make one last point. We are not allowed to do any more drainage and we have to be careful about how much repairing and keeping up of drainage we do. Would that cover mole drainage? We 346 have to do a lot of that on my farm, as do a whole lot of other farmers. I hope that that is not to be tampered with in any way.
On the question of what will happen, I hope that we shall receive a report fairly regularly. I am sure that we could have a report one month after the end of the first year. It is only a case of adding up figures to see how the scheme is going. On the whole, we are anxious to help over the surpluses hut, as I said earlier, to use a Scottish phrase, "I hae me doots" about the particular scheme.
§ 9.2 p.m.
§ Lord Mackie of Benshie
My Lords, as usual I follow my noble kinsman knowing that large parts of what I was going to say will already have been said by him. However, I believe that this is a very important measure, not in itself but in what it is trying to do. There is the most enormous interest in it. We have all received literature from the Royal Society for the Protection of Birds, the Council for the Preservation of Rural England and the Consumers' Association, all of whom are experts on what should be done to improve the countryside from their particular angle.
I believe that the first thing to remember is that agriculture in this country is still a great business of enormous importance to the country, the biggest single saver of imports that we have, and that remains the basis on which any improvement or lack of improvement in the countryside will be carried out. It must be approached from that point of view.
I do not know how much the Government are hoping for and perhaps the Minister can tell us what is the estimate of the take-up of this scheme. Like my noble kinsman, I see great snags. It comes to £80 an acre, £200 a hectare—I am more used to working in acres, as I am sure is the noble Baroness. At £80 an acre it is wholly unattractive to any farm which is producing in a reasonable manner. I cannot think that it can be taken up by anybody who does his accounting, who is making a living out of farming and who has the normal overheads of a not too large overdraft or is paying a rent, and that sort of thing. I cannot see that it is attractive in any way at £80 an acre.
The experience of the experiment in Lower Saxony, where they were paying £160 an acre, was interesting and we should look at that. I have a paper on it and a speech by the Minister in the Federal Republic which states:Farmers' participation in the experiment was lower than hoped for in the first year. In total an area of 33,000 hectares at an average cost of 35 million deutschmark took part. The average green fallow acreage was 4.35 hectares. The participation was concentrated in areas with relatively poor quality land, that is particularly in the heath region which had 35.9 per cent. of total applicants".That lends some credence to the hope of the Minister of Agriculture that the scheme will take land out of production which should not be growing cereals at all. However, even there I doubt that it will have much effect. My noble kinsman has already cited the example of the family farm. If one takes out 20 per cent. at £80 an acre, I very much doubt if it is possible in the small farms, or farms which are not all that small but certainly big by continentnal standards. Farms between 100 and 200 acres on the east coast of 347 Scotland and upland areas cannot find it very attractive.
As regards the good ground farms and grain growing areas in East Anglia and East Scotland where I am myself, there is no way that I would look at it. I could not possibly look at 20 per cent. of the farm at £80 an acre and continue to be able to buy myself another gin. It would drop my income enormously. The only sort of people who can take it up are those who are doing extraordinarily well, are extraordinarily competent, with very good land and want to plant trees. They can do without the income because in the long run the new grants for trees may pay them to put in trees but in the short run they will lose the income off the farm, and £80 an acre will not cover that.
I believe that experience of this scheme would show that there is not enough money in it—and I have often quoted a figure in this House. If you save the export subsidy and the storage on 2 tonnes of barley, it comes to a great deal more than £80 an acre. In fact half of it comes to more than £80 an acre. If the German scheme did not work at double the money, I cannot see a great deal of hope that this scheme will have any real effect on the surpluses which are bedevilling the efficient farmers of this country and of Europe.
There are a number of points about the present scheme, particularly regarding slippage, about which we have heard a great deal from America. The fact is that one does not get a fall in production in proportion to the number of acres taken out of use. My noble friend Lord Hunt, who is mainly interested in the countryside as a pleasant place to be proud of, is concerned about this aspect and asked me to speak about it. It is simply this. Putting fallow down, particularly rotational fallow, is apt to raise production on the rest of the land.
My noble friend was also worried that we are not using grass as a cover crop from the conservation point of view. If an increase in the production of sheep and beef on a surplus area could be avoided, it is natural to conserve the countryside as a pleasant place rather than having acres of bare fallow.
Another point, again raised by my noble friend, relates to fallow in urban areas. We all know that one cannot put stock on fallow land in urban areas. If one farms too near a town there are problems with dogs and human vandals. It is impossible, therefore, to carry stock. If one has a lot of bare fallow, or land left to what is called natural regeneration, one has the most appalling eyesores. Natural regeneration means growing weeds, thistles, and so on, and the seeds are blown into everyone's gardens. Natural regeneration appears to be a total and complete nonsense.
As regards other uses, it is hoped that 2 million acres in this country will be taken out of production. All the farm shops, horses, nature trails, jumping grounds—however one cares to put the land into non-farming use—cannot possibly take up those 2 million acres. Therefore, we shall be looking at woodland and/or grazing. I put in a plea that the Government should now start examining extensification, which means lowering the amount of 348 fertiliser and the intensity of the farming of grass. To do that one gets back to a system which worked for a long time in my native county of Aberdeenshire.
Land is put down to grass for a number of years. At the end of three or four years one takes a very cheap crop of oats which needs no fertilising and then puts back the land under a cover crop of grass. If you are intensifying to the extent that we are doing today, it is possible that de-intensification, or a more extensive system of farming, would pay just as well and might also be healthier for the countryside than the various schemes we have at present. Therefore, I hope that the Minister will be able to tell the House that the Government are willing to examine such a scheme.
Even with the present scheme an enormous amount of inspection will be necessary. There will have to be an increase in the number of civil servants looking after affairs if we are to have any form of set-aside. The scheme must be policed properly, otherwise it will come into total disrepute. If that is to happen, I plead for further consideration of extensification. It is a ridiculous word but it means less intensive systems, which will be better for the countryside. A decent subsidy—I call it a subsidy—from the Government would pay farmers as well and keep the population in the countryside, which will look a great deal better. Apart from that, I believe it is an interesting experiment. Like my noble kinsman, I look forward, though I cannot see; I look in fear.
§ 9.13 p.m.
§ The Earl of Radnor
My Lords, I thank my noble friend for explaining these regulations so clearly. In point of fact they are, in essence, fairly simple. I discard the alternative uses of land as being of only fringe benefit so far as concerns the main objective, presumably, of this set-aside. The main objective—a laudable one—is to save money being spent on surpluses and to diminish those surpluses by taking land out of cultivation.
Then one gets down to the details—I shall be brief because they have all been mentioned already—of whether any land will be taken out of cultivation. When the noble Lord, Lord John-Mackie, mentioned that this might be an experiment, I saw my noble friend nod her head. I think that this is an experiment taken almost to the point of timidity, because there are two main streams here. First, the target is too small, which brings in the point of slippage which the noble Lord, Lord Mackie of Benshie, made. So in point of fact very little, if anything at all, will be accomplished in the way of reduction. I did not hear the noble Lord mention in the same breath as slippage advances in biotechnology, plant breeding and those sorts of matters which, if extrapolated from the past, mean that we shall all be growing more crops per acre or a heavier weight of crop per acre, which would therefore cancel out any small advantage that might have been gained.
Having said that, I do not think that set-aside is worthless in any way. It has to be looked at in the context of farm price reviews and stabilisers. Although I agree with the noble Lord, Lord Mackie of Benshie, that very few people would want to take 20 per cent. of their land out at the present time—he 349 gave some very good examples—if perchance stabilisers bit deeply and the percentage crop in price accumulated, or if for some other reason, such as a farm price review, prices were really reduced so that some of the smaller and not quite so efficient farmers were put in an awkward position, then they might see this set-aside scheme as an insurance policy, albeit a very poor one.
In that context—I hardly dare mention it since the scheme only runs for five years and people can opt out after three—I still secretly believe that any payment for doing something should be indexed, but I shall not press the point further than that.
At the moment the whole matter might prove to be much ado about nothing. This Government and all the other governments across Europe might conduct their experiments to see what happens; but it will be quite a long experiment if they want to change direction in a hurry.
The matter has been commented on in the press, and very widely in the farming press; but outside farming the whole matter of set-aside is of considerable interest to everybody. Perhaps, unlike me, people feel that large blocks of the English countryside are going to look rather different from the way they have looked in the recent past. Here, if I may make an excrutiating joke, I am a voice crying in the wilderness, because I believe that the proper way to have gone about this matter would have been to allow land to fall back to nature. On the whole, if a blade of grass grows, the Englishman wishes to cut it; if a bush grows, he wishes to clip it; or if a rose grows, he wishes to prune it. That seems to me to be rather a suburban attitude towards country life. If we have to take land out of cultivation, I should be much happier if it were left for God to do what he would with it.
I am sure that the environmentalists have missed a trick here. They seem to think that a fallow with many passes of the cultivator every year and possibly the spray boom, or the green fallow without any animals grazing on it, with the mower and the flail trimming it off, are going to be good for nature. I cannot see that that is good for birds, mammals, reptiles or lepidoptera. Most of us who were brought up in the country knew perfectly well where to go to find brown game and wild flowers. It was in just those messy places to which the noble Lord, Lord Mackie of Benshie, referred. The pheasant always sat in a clump of nettles and the rabbit, I am afraid, with him. Wild flowers grew (at any rate in my part of the world), and we knew exactly where to go to look for wild animals. They were not on the fallow ground. The fallow was huge in those days. Fallow ground had the skylarks, the green curlew and, sadly past, the stone curlew as well. I am sorry that this matter was not allowed. One could do it but I believe that one would be penalised. It would be quite possible and allowable to let land fall back—
§ Lord Mackie of Benshie
My Lords, the noble Earl knew when he was young where to go to find wild flowers and pastures which had been down for generations. However, we have interfered so much 350 with the land. We have sprayed all the natural flowers; and the weeds that grow now are the ones that have survived the sprays. If you leave for a generation land that has been cultivated, you will not get a very pleasant mixture such as the noble Earl remembers. That is my point.
§ The Earl of Radnor
My Lords, I take the point entirely; but in the same way the Government are having a little experiment, I should be quite prepared to have one too if I were given the opportunity.
If I wished to set anything aside on my farm (which I would not dream of doing) I could do it by allowing the land to fall back so that little bushes grew for the song birds, and so on. Then I would build a cheap and small bird-watching hide and charge a small sum for people to come and look at whatever had come to my green patch. I shall not pursue that matter further. The regulations are important as an insurance policy if something goes very wrong for the smaller and not so well-off farmers. It will be a rush for them to be organised for September, and difficult for them to realise that they must be organised by 30th September even to join the scheme in future years. Having said that, I give the regulations a qualified welcome.
§ 9.24 p.m.
§ Lord Walston
My Lords, perhaps I may settle any lingering doubts that the noble Baroness may have about my attitude towards the regulations by saying that I do not in any way oppose the proposals. Having said that, I cannot pretend that I give them a warm welcome, basically for the reasons that other noble Lords have already put forward. I do not believe that this will work. What is not sufficiently realised other than by farmers themselves is the very great financial burden they have in the form of fixed costs, whether for rent, for mortgage interest, for bank overdrafts or, to a certain extent, for wages. Those things go on year after year, whether one is farming 100 acres, 80 acres, 1,000 acres or 800 acres. Something in excess of £80 an acre on a normal efficient arable farm is a low figure for the actual fixed costs. If a farmer were offered £80 an acre for taking his land out of production he would be worse off than if he were farming that land and getting a low price for whatever he might have produced on it. It would certainly cover his variable costs.
So, while it may be that certain farmers on marginal land, or who wish for one reason or another to have life a bit easier, may be tempted by this, at the present proposed rates I cannot see that there will be any significant response to the scheme. I, may be proved wrong, and we shall see very quickly. However, it would surprise me very much if there were any significant reduction in the total production of the crops in question.
I say that because there is still another factor which I do not think has been mentioned on this occasion, although it has been raised in the past when discussing the matter. It is this. The farmer who is going to go into set-aside will not offer his best land; it will be his marginal land, his worst land. Therefore the average yield of his farm will be enhanced by 351 taking out the worst land. Thus, having rather more effort and time to spare for his remaining land, the chances are that the yields on that land will increase—I think it may be called "slippage" in technical jargon—and the total amount produced will not be anything like 20 per cent. less. For those reasons, I do not believe that this scheme will have any significant effect in solving the problem of overproduction and reducing the costs of the Common Market.
On the question of costs, I should be most grateful if the noble Baroness could give us some estimate of figures as to how much this scheme is expected to cost in the first year—and the second year if she has the figures—how much less of the crops in question will be produced and therefore how much will be saved in intervention, and so on.
My noble friend Lord Mackie of Benshie mentioned the Lower Saxony experiment. I should like to remind your Lordships of figures which were in fact printed in the Select Committee's most valuable report on set-aside of agricultural land, which was printed on 29th March of this year. According to the report, in the first year, that is 1986–87, in Lower Saxony the total cost of the scheme was £11.8 million. The reduction in output was 135,000 tonnes, which at a round figure of £100 a tonne means £13.5 million was saved provided the crop was completely destroyed immediately—if it was burnt. However, had it been sold at some lower price—say, 50 per cent. of the £100 which is the guaranteed price of the Community—the scheme would in fact have cost approximately £6.75 million.
I happily accept, as pointed out in the report, that the first year in Lower Saxony was disappointing but that it looks as if there will be a better response to it for the second year. But it does not necessarily follow if there is a better response that the cost of the scheme will be less. Therefore, if the noble Baroness can give us figures to show how much the scheme will cost and what the savings are expected to be, I think it will put us in a somewhat better position to assess its value.
I turn now to several minor points. It has already been made clear that opencast mining is not allowed on land which is set aside. But it would be interesting 352 to know if, for instance, it would be legitimate to use the land which is set aside for the provision of infill, for the making of roads or for building sites, as in certain areas there is a very considerable demand for infill. Could it be used for the excavation of pits into which town refuse could be put? One of the most valuable uses to which disused quarries or pits can be put is for the dumping of refuse. Will that be allowed on the land which has been set aside or will it be one of the prohibited uses? That is only a minor point, but it is of some interest.
I cannot help feeling—and here again my noble friend Lord Mackie of Benshie mentioned this point—that more emphasis should have been placed upon conservation and the environment in its widest sense. I know that some—dare I say?—lip service has been paid to that idea. However, many people would be far happier if instead of paying farmers what appear to the outside world to be substantial sums—even though, as I have explained, I do not believe that they will be sufficient to entice them to take part—to grow nothing on their land, they were paid sums to do certain approved jobs which would enhance the environment and give more pleasure to the urban population. Whether it is making land available for picnic sites, growing wild orchids, or doing a whole variety of things, the set-aside should be linked to specified projects agreed to by those authorities which have already been quoted, which will assure the population that the land which has been set aside will add to their pleasure rather than merely left to grow thistles, nettles and possibly a few wild flowers.
My final point is somewhat more philosophical. Surely it is a grave reflection on our so-called civilisation today, and on the form of the world economy as it exists today, that while one-third of the world's population suffers from malnutrition or starvation, we should be racking our brains and evolving all sorts of ingenious devices so that we can produce rather less. Is that the type of civilisation in which we want to live and of which we are proud? Can we not devote the ingenuity, of which there is plenty in Brussels and elsewhere, which is being used to discover the best means of growing less food to discovering how we can ensure that the food we do not want goes to the people who need it so sorely?
§ 9.33 p.m.
§ Lord Middleton
My Lords, whatever else it was, the Commission's set-aside scheme agreed by the European Council last February was never intended to be a major instrument for reform of the CAP, and hence its relatively small Community budget provision. At best, the Commission estimated that Community cereal production might be reduced by 2.3 million tonnes, which would just about balance the annual increase in corn yields attributable to improved production techniques.
It is clear that Her Majesty's Government took the view that the main instrument for reform was the new stabiliser regime, and of course that is right. They would therefore draw up a set-aside scheme which would need to conform with the Commission's guidelines, but which would cost the United Kingdom taxpayer as little as possible; would be as simple as possible to administer; but which would at the same time stand a chance of being taken up by farmers. As we have heard from the noble Baroness, most of the Commission's conditions are contained in the Great Britain scheme. When it comes to payment, the Commission prescribed a minimum of £65 per hectare and a maximum of £390 rising to £455 in certain conditions. Payments under these regulations, as we have heard tonight. range from £130 to £200 a hectare. I have to agree with many noble Lords who have spoken that this scale of payments will not be very attractive to British farmers.
The noble Lord, Lord Gallacher's Sub-committee D on which I have the great pleasure of serving, when taking evidence on the draft set-aside scheme, was told by the farming organisations that at least £300 a hectare would be needed just to cover the fixed costs on arable land. The Home Grown Cereals Authority thought that £260 might tempt farmers to participate.
Noble Lords have mentioned the green fallow programme in Lower Saxony. That programme was unable to stimulate much take-up until Saxon farmers had been offered compensation in the range of what amounts to £333 to £466 per hectare. A further disincentive is the proportion of a farmer's arable land to be withdrawn. I agree entirely with the noble Lord, Lord John-Mackie, and his noble kinsman that substantial cereal producers would be very unwilling to reduce their output by 20 per cent. Again, some farmers might have been tempted to participate, had they been allowed to put their set-aside land down to grass for grazing. This has been mentioned by noble Lords. It is allowed by the Commission under their regulations but not under these regulations. I think I understand the reasons for the Government's unwillingness to allow a "grazed fallow", but I too, with other noble Lords, am disappointed that this option was not adopted for Great Britain as we recommended in our Select Committee report.
I cannot believe that when livestock numbers are known through the returns which farmers make for various reasons, it will be impossible to administer more extensive grazing on set-aside land. There are also good environmental reasons for doing so, as noble Lords have pointed out.
354 Turning now to matters of detail and with regard to fallowing, I understand why the farmer is required to establish plant cover on the set-aside land. This is to prevent leaching of nitrates, soil erosion and so on. However, rotational fallow is to be allowed. This is a perfectly normal husbandry practice, especially on clay soils. On a portion of the farm, the stubble is left unploughed after harvest and then ploughed in the following May or June, before there has been much weed growth. The furrow slice will be broken up by cultivation during the late summer. That and the weather will achieve a tilth for September or October sowing, after a year's rest or fallow. In that case, a cover crop would be wholly inappropriate. On heavy land, ploughing in a green crop would turn in the tilth and what was turned up would not have time to form a seed bed.
Turning to Regulation 4(1), I do not see why the set-aside land has to be on adjacent fields if more than one field is to qualify. This might be difficult where rotational fallow is to be adopted. It seems to me to impose an unnecessary restraint. I am sure that there is a perfectly good reason for this which the noble Baroness will tell me. If I remember rightly, the council regulation required members states:to take necessary measures to keep land in good agricultural condition".Yet the plant cover under these regulations, as the noble Lord, Lord Mackie of Benshie, has said, may take the form of the regeneration of "naturally-occurring vegetation." That is precisely the language used by scientists employed. by the Nature Conservancy Council, of which I am a member, when they correct me after I have used the word "weeds". They say, "There are no such things as weeds. Those plants are naturally occurring vegetation."
The regulations require the plant cover to be cut at least once a year. But many a weed can spread its seed far and wide if mowing is mistimed. Indeed, under these regulations, a farmer may be excused from mowing his plant cover on the grounds of maintenance of wildlife habitat. That pleases me very much as a member of the Nature Conservancy Council. It certainly pleases my noble friend Lord Radnor. But it horrifies me as a farmer who is well aware of the damage done by rabbits. They certainly come under the heading of wildlife.
Under the requirements as regards the use of set-aside land for non-agricultural purposes, building works for certain purposes are forbidden. As far as I can see, all the set-aside land could be covered in concrete, provided that the use for those particular purposes was avoided. That would hardly be keeping the land in good agronomic condition; nor would some of the uses mentioned by the noble Lord, Lord Walston.
In my view it is necessary that our European farmland should be kept right and fit for food production in an emergency. Just now there is an urgent need to get land out of production. But anyone who failed to experience a frisson on learning of this year's drought in the United States must be shortsighted as well as unimaginative. The world's climate could change. All our land might then again be in demand for food production.
355 I feel that these regulations are not quite tight enough in requiring that set-aside land should be kept in good heart and condition. I know that the Explanatory Note states that that is the case, but that is not the same thing. Beneath the heading "Explanatory Note" on page 13 is stated:This note is not part of the Regulations".Finally, I do not see why a farmer should not renew his field drainage while the land is fallow. The noble Lord, Lord John-Mackie, mentioned mole draining. That would seem to me to be the obvious time to do it.
The Ministry of Agriculture, Fisheries and Food, in giving evidence to the Select Committee, said that a set-aside scheme could:accelerate the effect of action on prices by offering producers an alternative to production of cereals and help reduce the impact of lower prices on the incomes of those producers least able to adapt to them.That is a modest goal and this is a modest scheme. I am afraid that I join other noble Lords in not being very optimistic about the likely take-up.
§ 9.43 p.m.
§ Lord Stodart of Leaston
My Lords, I have always felt that I had a good deal in common with the noble Lord, Lord John-Mackie, as regards farming. We have known each other for a long time. It gave me a certain amount of satisfaction to learn that he and I evidently wake up at the same time in the morning and listen to the farming programme at a quarter-past six.
On Monday I listened to the programme. When the Minister and my right honourable friend were asked by Mr. Tim Finney who they were aiming the set-aside programme at, the reply was quite specifically:at the upland marginal cereal growersI am certainly one of those growers. I am a marginal grower indeed, because for years Leaston has been right at the very edge and on the wrong side when the hill subsidies were being offered. It was the last farm outside the hill farming area. So there is no question of the marginality of it.
I shall not detain the House for very long. However, I feel that the reaction of a marginal upland farmer may be useful to your Lordships. Leaston has been farmed on conservative lines of two years of grass followed by three years of grain, with almost equal acreages of the three varieties. The yields vary wildly. In 1981 the yield was 51 cwt. per acre overall, and it went down to 30 cwt. in the disastrous harvest of 1983. The average over the last five years has been almost exactly 2 tonnes an acre.
Much has been said about variable costs. I tend to get confused about which costs are variable and which are fixed. I believe that the expression "fixed costs" is one of the most ridiculous ones that has ever been invented. However, variable costs such as those for seeds, fertilisers and sprays, which are all reducible on a per acre basis, have averaged £79 per 356 acre over the past five years. In 1987 the costs were £84 per acre. It is interesting that the figure from the east of Scotland colleges for the less favoured area farms from 1984 to 1986 shows a variable cost of £79. It is also interesting that in another place Sir Charles Morrison quoted a figure of £80 as the variable cost for Wiltshire.
I am bound to say that tributes to my right honourable friend have been somewhat lacking this evening. But one thing that can be said is that he has done his sums with a good deal of care in arriving at a figure of £80 per acre. However, the cost of set-aside cannot coincide precisely with the figure of variable costs.The point has been made that if acreage is reduced, some of the fixed costs will inevitably rise per acre. I would not be able to save on labour and I cannot see that a large bill in depreciation will come down. When I say that there will be no saving in labour, I dare say that with 60 acres less I might save a bit on overtime, which would not be very popular with the farm staff. Therefore I must say to my right honourable friend that in handing us this cup he has not been able to fill it. It is not his fault; it is the old enemy, the Treasury, which is determined to see whether it can cheese-pare us a bit.
If I am farming outside the less favoured area, I am offered £80 per acre and if I am inside it, I am offered £72 per acre, provided I reduce my 300 acres to 240 acres. I must do that for at least three years and preferably for five. In any case, the figures will come down by £20 per acre if I work the fallow into my rotation. If I reduce down to 200 acres, which is a reduction of 30 per cent., I shall receive a bounty of £140 per year for 20 tonnes of grain being freed from the hated co-responsibility levy. That £140 would be far outweighed by the cost of sowing and tending a green crop on the fallow.
Am I attracted by the scheme? I fear not—and I think that my noble friend will have to face up to the fact that that is the answer coming from all sides. It is understandable perhaps from the National Farmers' Union but, significantly, it is also coming from the economic staff of at least one of the Scottish agricultural colleges—who are very, very good.
My right honourable friend has said—and I commend him for emphasising the point—that set-aside is a payment for managing land, keeping it in good condition and making it environmentally attractive; it is not a hand-out to farmers for doing nothing. I agree with him 100 per cent. that there would be a public outcry if payments were set much too high.
As I have said, my right honourable friend has been hard at work on his statistics. Therefore, surely he must know how many tonnes of grain he is aiming at not being produced. He must also know what kind of tonnage is produced by farms which yield, say, below the 2 tonne per acre range. I suspect that he has a pretty good idea because the statisticians in MAFF are very clever. He probably knows too the tonnage from farms which yield between 2 and 2½ tonnes an acre. Will he get his required tonnage from the marginal upland growers who are his prime target, even if they were all to stop growing grain? Perhaps my noble friend can tell us that. I very much doubt it.
357 Therefore, if my right honourable friend had to take in some of the low ground, his set-aside figures would have to be much higher. He made that point himself when he has said that rates in the less favoured areas are lower because yields are lower, ergo it is not illogical to say that they will be higher if he extends the scheme to areas where the yields are greater.
Finally, I have just two points. I think that £80 per acre is possibly just enough—and that is a guess on my part—to interest a 30 cwt. an acre grower. However, I cannot believe that enough grain is coming off that kind of land to give the result that is wanted. Secondly, as I understand it the runaway costs which are at the back of the scheme, the enormous expenditure on the common agricultural policy, are caused not by payments to farmers but by storing the grain in intervention. Set-aside is something totally new.
It is very difficult having been told "Grow more: you are a wonderful lot, your productivity is an example to the nation", all of a sudden to be told to go into reverse. Was it not Winston Churchill who said something to the effect that if one wants to put an express train into reverse and set it going in the other direction, one has to slow it down and stop it first? Therefore I think that to get a new venture of this kind off the ground one must pitch one's offer on the high side and then, if it proves a success, there will be the possibility of reducing it.
My noble friend will embark on what I think is fairly rough water when she replies to this debate. I am quite certain that she will calm the waves with her usual eloquence. But as it is, I am afraid that I must join other noble Lords in expressing what perhaps I might politely call a good deal of froideur about these proposals.
§ 9.55 p.m.
§ Lord Northbourne
My Lords, most of the points that I had intended to make have already been made. I too give a qualified welcome to these proposals. I must agree with earlier speakers that the amount of compensation that is being offered is probably totally inadequate. I should like in particular to support those noble Lords who have advocated the grazed fallow option or deplored the fact that grazed fallow is not included in the provisions.
If I may, I should like very briefly to speak about the environmental issues involved. The Government have introduced this set-aside proposal under Regulation 1094/88 of the Community. Unlike many other Governments in the Community, they have done so by the due date for the introduction of such regulations, for which they certainly deserve to be congratulated. Under the same regulation they will have to introduce within the next two years provisions for compensation for the extensification of farm operations as an alternative to set-aside. I suggest to your Lordships that extensification is of the greatest importance—possibly, indeed definitely, of much greater importance in the context of the countryside and environmental issues than set-aside.
358 In that context I should like to draw to your Lordships' attention the CPRE evidence which starts on page 107 of the excellent report from Sub-Committee D. Extensification undoubtedly has potential advantages over set-aside but it is fair to say that not all extensification is necessarily good for the countryside. Many noble Lords will remember the countryside in the 1920s and '30s when the gaps in hedges were blocked with bedsteads and when grazing fields were often rotten with ragwort and thistles which spread their seeds all over the fields.
The maximum benefits from an extensification scheme will only be obtained if there is a farm plan and payment under the scheme is conditional upon the observance of that farm plan. I suggest to noble Lords that the Government are making fairly heavy weather of the concept of the farm plan, but there is absolutely nothing new about having a farm plan in agriculture. Certainly when I was training as a land agent every tenancy agreement had clauses related to the way in which the land should be used. For example, there were restrictions on the sale of manure and straw off the farm and ploughing permanent pastures and very often provision for specific rotations. The object of all those provisions was to keep the land in good heart.
A single visit or, at most two visits, per year by the land agent responsible for running the property was quite sufficient to ensure that those covenants in the lease were broadly observed. I think that there could be greater difficulty in the specific case of the grazing density of cattle. There is a problem in relation to extensification and indeed in the grazed fallow option in relation to the control of the number of beef animals grazing on a particular property.
In the context of extensification, I ask the noble Baroness whether there is any prospect of the introduction of some experiments on the concept of extensification which could be carried out forthwith, most suitably perhaps on the experimental husbandry farms.
There are questions that need to be answered. Among them of course are questions relating to the practices which are most valuable from an environmental point of view and also acceptable from the point of view of production. An obvious example of a practice that is becoming accepted as most valuable in both contexts is the non-use of herbicides and insecticides on the headlands of cereal fields. However, there are some proposals which the CPRE has suggested in its evidence which I believe would not work and would lead to an infestation of noxious weeds. I am conscious of the fact that conservationists often seem to want to make two weeds grow where one grew before. However, there are weeds and weeds; and some of the more noxious weeds are not the most valuable from the point of view of wildlife.
Another question that we have to ask ourselves is this. What kind of countryside do we want? The Countryside Commission and the CPRE seem to prefer a patchwork of fields interspersed with hedgerows—a kind of countryside traditional in many parts of the country for the last 100 or 200 years but not always. Before the enclosures, the English 359 [LORD NORTHBOURNE.] countryside must have looked very different. Many of your Lordships will be familiar with, and love as I do, the countryside of northern France, where there is not a hedge to be seen and the poplar trees are planted in straight lines. Straight lines are anathema to the experts. The shelter belt planting scheme specifically excludes from the receipt of Government grant trees planted in straight lines. We are left with the question: what kind of countryside? Is there a danger of a bureaucrat's landscape or one drawn by a committee—a landscape in impeccably good taste but dreadfully dull?
Finally I should like to turn back to the set-aside scheme and discuss for a moment the question of access. Farmers were described by the Nature Conservancy Council in its evidence as custodians of the rural environment. We are all probably agreed that there is a need for long-term goodwill and cooperation between farmers and the public if access to the countryside is to work satisfactorily. In its evidence the CPRE refers to the provision of quiet access on foot to areas which are the subject of set-aside or extensification. Some other witnesses go much further and call for mandatory access to such areas. I think that many farmers would welcome quiet access on foot provided that it is for a purpose and subject to decent standards of behaviour. But how does one enforce decent standards of behaviour? The existing rights of way network gives us an example of the difficulty of doing so. The problem with the rights of way network is not its use but its abuse.
On the estate for which I am responsible, we have three examples of how access to the countryside can work. We have a scout camp which has been there for many years. In 25 years I do not think that we have ever had one single cause to complain about the occupation of that area by the scout camp. We allow the Pony Club to use some of the woods. Occasionally we have cause to complain but a telephone call to the secretary of the Pony Club usually puts the matter right. Finally, in the third example, we have for three or four months of the year gypsies who spend the winter in some of our woods. But, again, because the relationship is a permissive one, we get very little trouble from them.
How different this is from the problems that we have as a result of the rights of way running across some of our fields, which, due to sheep worrying, entirely prevent us from keeping or breeding sheep in those fields, and from the vandalism which is also associated with the right of way network. I think the difference lies in the fact that one right is conditional on reasonable behaviour and is given to a limited group of people; the other right is enjoyed as of right and is given to the public at large.
I would urge that if public access is to be a feature of set-aside, the Government should ensure that it is offered only subject to reasonable and enforceable conditions and to specific groups for a specific purpose. Only in this way can we hope to enlist and retain the co-operation of the farming community that is so important to the success of all the projects which we have, and which I wholly endorse, for the greater access to the countryside by the public.
§ 10.5 p.m.
§ Lord Carter
My Lords, this discussion of the regulations provides the only opportunity the House has had to debate the set-aside policy and to draw attention to the report on set-aside prepared by Sub-Committee D. It also provides an opportunity to pay a tribute to my noble friend Lord Gallacher who I believe finishes his term as chairman of the subcommittee at the end of this Session. Suffice it to say that I have never served anywhere under a better chairman whose combination of wit, firmness and courtesy has made membership of the committee a positive pleasure.
I do not propose to go through the report or the regulations in detail: but I should like to draw out just a few points from both. Before I do so, I shall repeat a point that I made when I asked a Starred Question on the set-aside policy because the Minister referred to landlord and tenant. I congratulated her on achieving what the Labour Party has been trying to do since it was formed: to end the private landlord in British agriculture. She will have to explain why the landlord, if a let farm returns to hand, should let it for a rent of, say, £35 or £45 an acre on a lifetime secured tenancy when all the landlord has to do is to plant it up with a cover crop and to draw the compensation of £80 an acre.
On the business of the grazed fallow and the grassland option referred to by a number of noble Lords, I too was disappointed that this was not included in the proposals. All of us who supported it and the EC regulations have recognised that if this is to be introduced there will have to be very strict controls on the stocking rate. I should include an absolute prohibition on any increase in the number of breeding animals on the grazed fallow which is in the set-aside scheme. It is obvious that the size of the national flock or herd and the growing animals is a function of the size of the national breeding herd or flock. If the arable farmer in the set-aside scheme could use the grazed fallow only for a very low stocking rate of store cattle or sheep, that would slightly increase the demand for store animals and would help the hill and upland farmer. He could let the grazing to sheep in winter and reduce the overgrazing on the uplands and moors.
It is an interesting statistic that if the national and the stocking rate of sheep and cattle was reduced or was de-intensified by a quarter of an acre per livestock unit nationally this would require an extra 3 million acres of grassland. A number of noble Lords referred to the extensification proposal which will have to be introduced. It will be interesting to see how the Ministry will deal with that when the proposals are introduced. It would also be interesting to know from the Minister when she thinks that those proposals might be introduced on the extensification scheme which has to be produced.
In the debate on set-aside in another place, the Minister, Mr. MacGregor, said that his mind was not closed on the grazed fallow option. It would be helpful if the Minister will repeat that assurance in this House.
I noticed the well-concealed glee with which the Minister pointed out that the French, who first 361 suggested the grazed fallow, had not included it in their set-aside scheme. I can only say that it is not only Albion that is perfidious. There is an important point of detail in the regulations which was referred to by my noble friend Lord John-Mackie and also by the noble Lord, Lord Middleton. although the technique that he described was what is called the bastard fallow, which I believe is the term.
I refer here to page 12, paragraph 1. It is clear that the cover crop that has to be planted under the terms of the set-aside scheme has to be sown in the autumn. It is made entirely clear that it is to be planted immediately after harvest. As was pointed out earlier, one of the commonest crops for cover or for green manure is mustard which is a spring sown crop. There is great difficulty in establishing a grass cover in a wet autumn. Almost all the listed crops in this list B are spring-grown crops. I should like to ask which are the autumn-sown cover crops that the Ministry is recommending that farmers should use to meet the conditions of Schedule 2, paragraph 1.
I have referred to list B. There is a curiosity that although it is listed in the schedule to the regulations, list B is not mentioned anywhere else in the regulations. It is a little curious why it should be there. An important point has been raised by the CPRE regarding the list of crops. It points out that there is a loophole in the regulations which will allow events to occur which are damaging to the environment and undermine the agricultural integrity of the scheme.
Under the regulations, farmers can extend their cropped area at the expense of wildlife habitat and landscape features while in receipt of set-aside money. That is because the requirement under Regulation 3(1), that a farmer must undertake not to increase the area of his relevant arable land, does not cover all arable crops. It is covered only by the EC regimes. Thus a farmer could increase his crop area by removing hedges, scrub or marshland, to compensate for land which is set-aside, and increase his area of forage crops under List B whilst receiving set-aside money as long as his relevant arable area has decreased by 20 per cent. or more. The result to the countryside will be a further loss of semi-natural habitat and landscaped features. How does the Ministry intend to ensure that farmers who participate in set-aside do not increase their area of forest production at the expense of semi-natural vegetation and landscaped features?
The Minister will know that there has been a lukewarm welcome to the scheme in this House and outside from farmers because of the level of compensation that has been offered. This is not the time of night to indulge in a seminar on marginal economics. However, I believe that the noble Lord, Lord Stodart of Leaston, was wrong when he referred to the variable costs as the cost of the set-aside. The farmer must consider the loss of the gross margin from the crop. It is the difference between the value of the output and the variable costs and will be in the region of £120 to £200 per acre depending on the yield of the crops.
The conservationists are disappointed because of the absence of the grassland option. I believe that the 362 Ministry and the Commission have missed other opportunities. For example, a number of the proposals in the report from Sub-committee D suggest a lower limit of 10 per cent. on arable land. That would encourage the larger arable farmers to join. It also suggests the use of the co-responsibility levy to increase the resources for set-aside and the use of a tendering procedure to set the level of compensation.
There is a widely held belief that all of this is a Machiavellian plot and that the Ministry have produced a set-aside scheme which they do not believe will have much uptake. It is hoping that other member states will produce set-aside schemes which work and which will help to solve the problem of services leaving our farmers better off. However, it would be unfair to ask the Minister to comment on that belief.
Like the farm woodland scheme, we wish this scheme well. It is an experiment and an attempt to reduce surplus production. However, like many other noble Lords who have spoken, I have doubts about its effectiveness.
§ 10.13 p.m.
§ The Duke of Somerset
My Lords, I apologise to the noble Baroness and to the House for not putting my name to the list of speakers at the correct time. I shall be brief.
A number of doubts have been expressed about the potential lack of take-up of the scheme due to the low figures of payment offered, especially in relation to the typical fixed costs or growth margins of genuine farmers. However, I have in mind one type of person who may be tempted and who appears to be specifically excluded. I refer to the landlord who has a farm come-back in hand. He may well be tempted as am I, to extensity his management along the lines so well expressed by the noble Lord, Lord Mackie of Benshie. The farm could be reorganised to include setting aside 25 per cent. of it to green fallow under the regulations, a further percentage to farm woodlands and the balance to some extensive operation such as hay production or horse grazing outside the scheme. All that would maintain the farmer's previous income and please his environmental instincts and those of others.
However, the set-aside element is precluded by the regulations, which demand one year's previous farming occupancy in order for the land to be eligible. I wonder about that point. Bearing in mind the object, which is the reduction of cereal surpluses, perhaps the Minister could explain the thinking behind it. Otherwise, I should like to extend a cautious welcome to the regulations.
§ 10.15 p.m.
§ Baroness Trumpington
My Lords, I have listened to your Lordships' speeches with great interest. Perhaps I may try to reply to the various questions which have been asked of me immediately. I should like to agree warmly with the noble Lord, Lord Carter, concerning his remarks on my noble friend Lord Gallacher. I should like to offer my best wishes, in which I am sure the noble Lord, Lord Carter, will 363 join, to my noble friend Lord Middleton who I believe takes the chair in his place.
A great many of your Lordships have wondered whether the scheme will be picked up. Nothing like this has been proposed before. We shall have to see what happens. I must tell my noble friend Lord Stodard of Leaston and others that the number of inquiries which we are receiving testify to the keen interest in the scheme, notwithstanding his misgivings.
I believe that rates of payment was one of the major issues which came up this evening. Setting an appropriate level of payment is most difficult in a novel scheme, and we gave it very careful thought. I can understand that to highly profitable farmers the rates may seem low, but we have to strike a balance. If the rates were set at a level attractive to farmers with the highest yields in the country, they would greatly overcompensate the less efficient. As my noble friend Lord Stodart of Leaston would agree, Members of this House and the general public would soon protest if we paid farmers too much. Whatever rate is offered, farmers are likely to set aside their least productive land first and to cut back the area of the crop which produced their lowest margins. We have taken that into account in determining the premium.
Similarly we must recognise that growers taking up set-aside would probably not only save on their variable costs but also on some fixed costs. I believe that if growers do their sums with those factors in mind, many will find set-aside well worth considering, and particularly so if their resources are currently stretched or their profits on some crops are marginal.
I should say to the noble Lord, Lord Walston, that the rate of payment can only be judged once the scheme is in operation. We shall be carefully monitoring take-up. It would be unwise to judge set-aside on take-up in the first year.
My noble friend Lord Radnor suggested that the target was too small. There is no target. We have made it quite clear that we are not aiming at any particular number of hectares to be taken out of production. It will depend on how farmers respond.
The noble Lord, Lord John-Mackie, asked why there should be a £50 cut for non-agricultural use. That is to take account of the fact that nonagricultural use should attract an income. EC rules require that to be reflected in the level of premium.
The noble Lord, Lord Walston, and my noble friend Lord Stodart of Leaston asked for a forecast of the costs and the savings. It is impossible to forecast uptake, as I have already said, particularly in view of the late date of launch. I assure your Lordships that for each hectare set aside, the savings on crops not grown should more than offset the cost of the premium.
The noble Lord, Lord Carter, asked about tendering. We considered that very carefully, but there are many technical problems. He will be interested to know that no member state has opted for it.
364 The noble Lord, Lord John-Mackie—I hope noble Lords will forgive me for skipping about, but I have tried to keep subjects together, although perhaps unsuccessfully—suggested that there should be a lower than 20 per cent. requirement for bigger farms. The EC rules require a 20 per cent. reduction in arable area. We do not have discretion on that point.
The noble Lord, Lord John-Mackie, also spoke about tenants and how difficult it was to obtain the landlord's consent between now and the end of September. I agree that that may be the case. As I made clear, the timetable is tight. Inevitably, because of the late date the Council agreed on the set-aside proposal, this year's uptake may be affected. However, tenants can still register, and should, and can apply for next year if they do not have time this year.
The noble Lord, Lord Carter, also spoke about the tenanted sector. In devising the rules for the United Kingdom set-aside scheme, close attention was paid to its implications for the tenanted sector—despite the noble Lord's naughty smiles at me. The possibility of having an upper limit on the proportion of the holding to be set-aside was considered and discussed with the Commission. However, it was felt that such a limit would be inconsistent with the main aim of the scheme to reduce surplus production. Therefore, we decided to include the requirement for an applicant to have farmed the land for at least one year by the date his set-aside obligation is to start in order to provide a disincentive to speculators or landlords wishing to resume let land without farming it. However, we did not favour a three-year rule as it would discriminate against bona fide farmers occupying land which had changed hands by sale, leasing or inheritance.
The noble Lord, Lord John-Mackie, asked whether mole drainage was permitted on fallow land. I must tell him that it is not for a new system, but routine maintenance of existing systems is permitted. The noble Lord also asked about plant cover. We will be issuing guidelines on plant cover, among other things. Grass, mustard, certain game cover crops, and naturally regenerated vegetation are all possibilities. The participant in the scheme is required to establish cover as soon as practicable after 1st October. I agree that it might not be worth planting a mustard crop, for example, at that time but a farmer could leave cereal stubble as a cover over the winter and then put in mustard in the spring.
I now come to the environment, which is a very important subject. The primary purpose of set-aside is to discourage surplus production. We have a further important aim—to protect the environment and, if possible, gain positive environmental benefit. First we must avoid environmental problems. The basic rules for the management of set-aside land address not only keeping it in good condition from an agricultural point of view but also preventing an adverse impact on the environment. A green crop cover must be maintained. That is important to avoid the land becoming an eyesore. It will also help to avoid erosion and minimise nitrate leaching.
Inorganic fertilisers are banned and organic fertilisers can be applied only with specific 365 authorisation to prevent soil erosion. I address these remarks to the noble Lord, Lord Northbourne, who was particularly interested in environmental aspects. Pesticides, apart from herbicides, are banned. Herbicides are permitted only on the specific authorisation of the Minister in order to deal with weed problems. Farmers are required to maintain existing hedges, trees and water courses on or next to set-aside land.
My noble friend Lord Radnor will understand that the scheme does not confine itself only to avoiding environmental damage. There are also opportunities for environmental improvements. For example, set-aside may be in the form of strips, providing opportunities for habitat creation or recreation. There is specific provision within the rules for the management of fallow land to encourage farmers who wish to develop wildlife habitats on the land to do so, and we jolly well hope that farmers will come forward with imaginative ideas. More generally, the department will be issuing advisory guidelines for farmers on how to select set-aside land with the greatest potential benefit for the environment and how to manage it to secure that benefit. The Nature Conservancy Council and the Countryside Commission, as well as ADAS, are helping in the preparation of these guidelines.
One noble Lord asked me about extra payments to do with specific management practices on set-aside land which would be of benefit to the landscape or to wild life conservation. My right honourable friend has already announced that within the Government we are considering the feasibility of such a scheme. However, extra payments for less intensive farming are not appropriate under set-aside and there will be a separate scheme for extensification.
Turning to extensification, which was mentioned by several noble Lords including the noble Lord, Lord Northbourne, work on the detailed rules is going on in Brussels. We are reflecting. However, there is a long way to go in sorting out the many practical problems which the scheme raises. Pilot schemes might well be one way forward if they can be accommodated within the EC rules, though they would be more suited to normal farms and not specialised experimental farms. I accept that there could be environmental benefits from extensification. I also maintain that there are environmental benefits from set-aside.
The noble Lord, Lord Mackie of Benshie, and my noble friend Lord Radnor raised various points which also came, I understand, from the noble Lord, Lord Hunt. He was concerned that a farmer participating in set-aside would intensify production on the rest of his holding. We have always accepted that some slippage will occur, by which I mean the percentage of land withdrawn will not be reflected in exact proportionate cuts in production. Inevitably we think that farmers will set aside their poorest land first. We cannot hold back the rate of technological change on the land remaining in production; but the scheme expressly prevents farmers from increasing the area remaining in arable production, so there will be no incentive to convert other land to arable.
366 On the point about use of grass as a cover crop, grass is permitted but under the rules of the scheme it cannot be grazed even by farm livestock already on the holding. Our decision not to introduce grazed fallow has been welcomed widely in Parliament and elsewhere. We always made it clear that one of our main objections to grazed fallow was the difficulty of control, which applies to existing livestock producers as well as to new ones. In any case the EC rules do not permit us to restrict the option to existing livestock producers only.
Before I leave that point, perhaps I might just mention my favourite subject, horses. The keeping of horses is permitted on set-aside land. It would count as non-agricultural use and the compensation payment would be the appropriate rate for that use. None of that would alter the treatment of horses for rating purposes. However, I should point out that if horses were to be treated as agriculture for rating purposes we should need to think again as to whether we would permit them on set-aside land.
One other point was raised jointly by the noble Lord, Lord Mackie of Benshie, and his absent noble friend. As far as set-aside on the urban fringes and in the green belt is concerned, my right honourable friend the Secretary of State for the Environment is responsible for policies relating to the control of development in the countryside. Those policies apply with special force in the green belt. Set-aside will not change that. Of course most development is specifically excluded on set-aside land.
My noble friend Lord Middleton said that cover crop was not appropriate for rotational fallow. It is a requirement of the EC scheme that there should be a plant cover. Farmers can choose the right plant cover to suit the soil. If they do not know what is best they must take advice. My noble friend said that set-aside must be on adjacent fields. This requirement is only for a minimum of one hectare, as set-aside can be either in a single field or in an adjacent field; for instance, in a single block. This is an EC requirement, but above one hectare this requirement does not apply.
The noble Lord, Lord Northbourne, talked about encouragement for better access to the countryside. I do not see the case for compulsory access to set-aside land. Nor would we be within the powers in the EC regulations if we provided for this. However, in our advisory guidelines we shall certainly be encouraging farmers to consider possibilities of better access.
Finally, with regard to fallow grazing, the Government will take a great deal of convincing that this would not simply transfer extra quantitites of livestock and problems to their sector. I think that in this stormy sea I shall rest my laurels on what I have said. If any noble Lord wishes me to write to him, I shall gladly do so as I pass into smoother waters.
§ Lord John-Mackie
My Lords, I think we should compliment the noble Baroness on the way she has replied to all our questions. I admire her immensely for that and we thank her for finishing on such a nice note.
§ On Question, Motion agreed to.