Agricultural Investment (Hansard, 21 July 1989)

§ The Parliamentary Under-Secretary of State, Ministry of Agriculture, Fisheries and Food (Baroness Trumpington)
My Lords, as the noble Lord is aware, the agricultural industry is going through a period of adjustment. In earlier years the emphasis in EC policy was upon increasing food production, but this went too far, although the UK Government consistently advocated a policy of restraint. Farmers are now responding to a situation in which the need to bring surpluses under control has at last been recognised in the common agricultural policy.

§ Lord Carter
My Lords, I thank the Minister for that reply, but is she aware that when her right honourable friend the Prime Minister opened the Royal Show about a fortnight ago she referred to the success of the Government's agricultural policies? If we bear in mind that agricultural investment in the 10 years of this Government has fallen by 40 per cent. in real terms, that we have lost 70,000 jobs and that farm incomes have declined by 50 per cent. in real terms, can she tell the House, if that is success, what the Government regard as failure?

§ Baroness Trumpington
My Lords, I consider it a success that we have increased home production for our daily needs between 60 per cent. and 80 per cent. compared with past years. I consider that a very real success. However, if the noble Lord is referring to a fall due to low farm incomes, many factors affect the level of investment in agriculture. Naturally, if farmers have less cash, they are likely to put off spending. Also, if farmers consider that investments will not give them a good return, they 1037 are not likely to make them. As regards job losses, employment on farms has been falling for many years and for traditional farming activities is likely to continue to fall. However, there will be substantial new opportunities for farmers in non-traditional activities.

§ Lord Mackie of Benshie
My Lords, will the Minister be a little more honest and instead of referring to agricultural adjustment say that there is an agricultural depression?

§ Baroness Trumpington
No, my Lords, because it depends which branch of farming one is in. For example, the dairy people are doing very nicely, thank you.

§ Lord John-Mackie
My Lords, is the Minister aware that in order to buy a new farm implement today one is forced to borrow money and that it is high interest rates that are creating the situation referred to by my noble friend Lord Carter?

§ Baroness Trumpington
My Lords, I appreciate that some farmers may be facing short-term difficulties, but farmers and agricultural investment would be damaged far more by a resurgence of high inflation than by a period of high interest rates.

§ Lord Cledwyn of Penrhos
My Lords, does not the noble Baroness agree that there is continuing public concern about the safety of agricultural produce? For example, I refer to the outbreaks of listeria, salmonella and other diseases which Members of this House know about only too well. In the circumstances, and given that we are approaching an important date, can the noble Baroness say how the Government justify reducing investment in research and development by 15 per cent. over the next three years?

§ Baroness Trumpington
My Lords, I should say to the noble Lord that we are not referring to R&D investment but to such items as tractors and farm machinery. However, if he is asking me whether under-investment, as he sees it, would weaken the UK position in 1992 from the point of view of the Question on the Order Paper, there is no evidence of under-investment in UK agriculture relative to other EC countries. UK farmers are responding to the market situation by investing less, but the asset structure of the industry remains healthy. The total liabilities of the industry are well under 20 per cent. of its assets and the amount of fixed capital on farms is higher in real terms than 10 years ago.

§ Lord Cledwyn of Penrhos
My Lords, I am very much obliged to the noble Baroness for all that useful information. But does she not agree that R&D is an essential component of agricultural investment?

§ Baroness Trumpington
My Lords, I have to be a little tough about this and say that that has nothing to do with the Question.

§ Lord Carter
My Lords, the Minister referred to the 20 per cent. of the total value of the agricultural industry that is borrowed. That figure includes the value of land. If she would be good enough to look at the borrowing figure against what is normally known as the tenants' capital in agriculture, she would find that the industry was extremely highly borrowed.
I return to the subject of 1992. I am sure that the Minister will grant that, with 1992, we have to sweep away the whole of the paraphernalia of the green currencies, the MCAs and the rest and that should provide an opportunity for British agriculture. Can she say how we can prepare for that if investment has declined by 40 per cent. and is still going down?

§ Baroness Trumpington
My Lords, in case the noble Lord has not seen it, I commend to him the record of farm incomes in the United Kingdom over this year. I believe that I replied to the noble Lord, Lord Cledwyn, as regards the 1992 situation. Farming in all European countries is a business like any other. You must cut your coat according to your cloth.

§ Lord Tordoff
My Lords, I wish to clear up a point. Is the noble Baroness saying that it is the Government's view that spending on research and development is not a form of investment? If that view applies to agriculture, can she say whether it also applies to industry?

§ Baroness Trumpington
My Lords, the Question refers to "agricultural investment in real terms". That has nothing to do with R&D in this context.

The Earl of Halsbury
My Lords, does the Minister not agree that there is no resale price for incomplete research and development and therefore it cannot appear on the balance sheet at the moment?

§ Baroness Trumpington
My Lords, I am grateful to the noble Earl.

§ Lord Mackie of Benshie
My Lords, the Minister referred to farmers preferring high interest rates to inflation. Is she aware that we now have both?

§ Baroness Trumpington
My Lords, may I ask the noble Lord to say that again, please?

§ Lord Mackie of Benshie
My Lords, I am satisfied that the House heard, but I shall repeat the question. Farming now suffers from both very high interest rates and a high rate of inflation.

§ Baroness Trumpington
My Lords, interest rates will remain as high as necessary for as long as necessary in order to reduce inflation. Farmers cannot be made a special case.