Common Agricultural Policy: ECC Report

HL Deb 17 October 1991 vol 531 cc1224-90

3.32 p.m.

Lord Middleton rose to move, That this House takes note of the report of the European Communities Committee on the Development and Future of the Common Agricultural Policy (16th Report, HL Paper 79).

The noble Lord said: My Lords, under the three-year rule I am due to hand over the chairmanship of Sub-Committee D at the end of this Session. Therefore, this will be the last of our reports that I shall ask your Lordships to consider, at any rate for the time being. I am especially happy that the report provides us with the opportunity to hear the noble Baroness, Lady O'Cathain, and the noble Lord, Lord Harding, for the first time.

There is nothing new in saying, as we do in our report on the future of the CAP, that there is urgent need for fundamental change. We said so in our last report on the CAP in 1985. Our recommendations now are similar and consistent with those in all the reports that we have made to this House since that time. The case for reform is very well known, so I shall put it as concisely as possible.

High guaranteed prices for farm produce lead to surplus production. Surplus production leads to costly intervention buying and costly export refunds. That leads to rapidly increasing European Community budgetary expenditure, now over 2 per cent. of the Community's gross domestic product. Yet, despite huge Community spending on the CAP, Community farmers are getting poorer, not richer. Lastly, subsidised exports, from whatever quarter, have an increasingly undesirable impact on world trade.

Since we debated the Commission's last serious proposals for reform, the European Community has let six years go by without grasping the nettle. The Commission, however, to its credit, produced last February a discussion paper on the CAP reform which I shall refer to as MacSarry Mark I, Mr. MacSharry being the European Commissioner for agriculture. These proposals, under the heading "A Reflections Paper of the Commission" are printed as Appendix 3 of the report, and are summarised in paragraphs 13 to 16. As soon as they were published, the sub-committee decided to evaluate them and also look at alternative ways to reform.

The committee began taking evidence on 6th March. Our specialist adviser was Mr. Ian Sturgess, director of the agricultural economics unit of the Department of Land Economy at Cambridge, whose advice was invaluable. Our deliberations, too, were greatly assisted by having my noble friend Lord Boardman seconded to us, together with the noble Lords, Lord Plumb and Lord Moran. We were devastated, in common with noble Lords on all sides of the House, by the death during our inquiry of Lord Walston whose work in this field was always so outstanding.

We received evidence in person from the Minister of Agriculture and from the Australian and New Zealand High Commissioners. We were disappointed that Mr. MacSharry was unable to meet us. We saw agricultural economists from the universities; Mr. Carey from the European Court of Auditors; representatives from farmers', landowners', consumers', conservationists' and food traders' organisations; and we received valuable assistance from the United States embassy in London. We received an immense weight of written evidence. All this, for which we are most grateful, is distilled into our evidence section comprising Parts 2 and 3 of the report. Our conclusions are written in Part 4.

I should say that we were always aware that the Commission was brooding over a revised set of proposals and these actually hatched on 9th July, the day before we were to deliberate on our final draft report. That paper, MacSharry Mark II, also appears in summary in Appendix 3. It proposes virtually identical policies, but differs from Mark I in giving specific figures. I am grateful to the members of the sub-committee and especially to our Clerk, for the extra work needed to revise our report in time for it to be presented to the Select Committee just before the Summer Recess. The report now before the House is therefore up to date and is based on the proposals at present being discussed by the Council of Ministers. These are summarised in paragraphs 17 to 27.

The Commission's proposals have the great merit of recognising that an end must be made of supporting farm products at a level well above world prices. The proposed support price reduction for cereals of 35 per cent., for example, is intended to do just that. However, it must be said that because the United States, the EFTA countries, the European Community, and especially Japan, all subsidise their farm output in varying degree, it is very difficult to determine what is a true world market price for any commodity. For example, the current world price for wheat tends to be that at which it is dumped by that country which gives the biggest subsidy to its exporters. There is a very illuminating Table 4 on page 58 of the report showing the extent of agricultural support worldwide. It will therefore be difficult, if European Community farmers are to be required to trade nearer to the market, to ensure a level playing field.

That leads me to refer to the GATT negotiations. One of our criticisms of the MacSharry papers is their parochial nature in view of the importance of the GATT Uruguay Round. Up to now, the Commission has been insisting that reform of the CAP is an internal matter unconnected to GATT and that the two sets of negotiations are proceeding in parallel. The MacSharry papers make no mention anywhere of GATT negotiations, though there is a reference in the February paper to the need, for the Community to continue to play an important role in the world market". It also says: This requires pursuit of a policy objective which guarantees the competitiveness of Community agriculture".

Obviously the Commission's proposals for reduction of price support for cereals is directly connected with the GATT negotiations. It is equally obvious that the results of both tracks of discussions have to be compatible in the end. We say in our report that CAP reform would be facilitated by the conclusion of an agreement in the GATT talks. But we are insistent that reform should be set in train irrespective of such an outcome. That we see as essential but with the proviso that in the event of a failure of the GATT negotiations or actions by its trading partners which threaten to destabilise Community markets, we recognise that the Community will need to take steps to secure its markets against unfair competition.

So we say, as we did in 1985, that support prices must be reduced progressively and to a set timescale. They must not be cut off so suddenly, as was done in New Zealand, as to give farmers no time to adjust. Until there is something approaching a level playing field, there must, as I have just said, be some guarantee against dumping from outside—perhaps some form of tariffication.

Reform through the price system will reduce the immense cost to the EC budget of intervention buying and export refunds. The reduction and eventual elimination of those will also eliminate most of the opportunities for fraud.

We agree with the Commission that an essential element of the CAP reform is to move agriculture closer to the market. Thereafter we part company. That is because the Commission qualifies its approach by proposing that some categories of farmers—essentially small farmers—should continue to be insulated from the market. Such support for the smallest units of production is not for economic reasons but for social reasons. We say that the proposals are seriously flawed in that they fail to distinguish between the proper objectives of agricultural policies and other social, economic and environmental objectives.

The Commission's social aims and its environmental objectives are laudable and indeed necessary. But we say that we cannot achieve them by policies which are a muddled amalgam of three categories of objectives which should be and can be targeted separately. They cannot effectively be achieved until that is done.

Social and other policies must be unfastened from agricultural policies. If farmers are to be exposed to the harsh winds of competition in a world market, then the need to promote efficiency must be paramount.

If there were but one message which I had to deliver to your Lordships, it would be that, in any reform measure, efficient production must be encouraged, not hindered. Our main criticism of the MacSharry proposals is that economical food production would inevitably be impeded were they to be implemented as they stand. They would certainly not, in the Commission's words, guarantee the competitiveness of Community Agriculture". They would do just the opposite.

We are critical too on five other issues. First, while we agree with Mr. MacSharry that some form of adjustment aid is essential to enable farming enterprises to restructure in order better to compete in a wider market, we disagree fundamentally with the way in which he proposes to do it. MacSharry Mark II proposes generous compensation payments, but those are geared, as I have just said, to give the maximum protection to the smallest units of production, be it of cereals, oil seeds, milk, beef or sheep. I say in parenthesis that nothing is proposed to deal with sugar nor with those products that are special to southern Europe.

We say that it is wrong to try to maintain through agricultural policies a particular settlement pattern of small and inefficient holdings. Under these proposals it is those farmers who are most productive and who produce most economically who would be penalised.

Secondly, the EC countries are so diverse one from another and within their own boundaries that greater flexibility must be allowed to member states to operate policies within broad guidelines from the centre. That applies especially to environmental policies to which I would like to refer later.

Thirdly, we are, as I said earlier, strongly critical of the Commission's parochial attitude. I have referred to the GATT. It is even more extraordinary that there is no mention whatever of the potential impact of the output from the countries of Eastern Europe once their agriculture becomes efficient—as it will.

Fourthly, the Commission proposes that one of the chief means of reducing surplus grain and oil seeds is to be set-aside. While we agree that as a very short-term measure that may be needed, compulsory set-aside penalises the efficient producer on land where food is grown most cheaply. It must not be a permanent feature of a new CAP.

Quotas too must eventually be phased out. To trim milk quotas, as proposed, while retaining a fairly high level of support price does not make for efficient production. Furthermore, under the Commission's proposals, the smallest milk producers are to receive the lion's share of any support. Our objection in principle to supply controls accompanied by price support leads us, I fear, to disagree with the ideas put forward to us by the National Farmers' Union in that they would tend to perpetuate the present disadvantages of the CAP.

Fifthly, however communautaire its inclinations, a UK committee can hardly fail to criticise proposals which discriminate, as these do, very unfairly against UK producers. Time does not allow me to give examples. They can be found on page 78 of the report. I am sure that those noble Lords who are farmers will have done their own sums. Those are our main criticisms. We try to be constructive as well.

As I have said, we agree that price support for EC farmers should be reduced firmly and progressively on a set timescale, subject to there being protection against dumping. We agree that compensatory measures will be essential. While we oppose those put forward by MacSharry, which, in addition to being very expensive, confuse economic with social aims, we describe two possible compensatory measures that were put to us and recommend one of them for further consideration. They can be found in paragraphs 109 to 118 of the evidence section and 166 to 176 in the opinion section.

We make recommendations for measures to protect the environment which we outline in paragraphs 181 and 182, 185 and 189. I shall summarise them by saying that they offer both the stick and the carrot. The stick would take the form of strong anti-pollution measures. Within that regulatory framework we recommend that positive management of the environment in certain ways should be recognised as a service to be paid for. That would be the carrot.

Such payments should be targeted on specific areas and on specific management practices. Probably they would best be removed from the agriculture budget and the principle of additionality should apply as laid down for the structural fund. We recommend the continuation of special help on the lines of HLCAs for those with permanent handicaps of climate and geography.

Finally, one of our strongest recommendations follows directly from our last year's report on The Future of Rural Society, which I brought before your Lordships in November last year. By far the best way to ensure a thriving countryside is to provide more jobs. Employment opportunities must be provided by such agencies as the Rural Development Commission to provide part-time work for small farmers and full-time work for agricultural workers and for workers from ancillary industries displaced—as they will be—by CAP reform.

Such policies were discussed last year in this House. We believe that money saved through reduction in price support is far better spent that way than in propping up inefficient holdings. I wish that CAP reform and the resolution of the GATT negotiations were as simple to achieve as was made out by the writer of The Times leaders on the subject which appeared during the summer. All that is needed, he said, was, to bring the farming barons to heel". The barons and those of higher rank on my sub-committee, to whom I am more than grateful for their assiduity, are only too aware of the complexities. I beg to move.

Moved, That this House takes note of the report of the European Communities Committee on the Development and Future of the Common Agricultural Policy (16th Report, H.L. Paper 79).— (Lord Middleton.)

3.50 p.m.

Lord Gallacher

My Lords, I begin by complimenting Sub-Committee D and its chairman on the excellent report placed before your Lordships' House this afternoon. If I am critical of certain aspects of the report it does not in any way diminish my admiration for the manner in which Sub-Committee D has approached a most difficult task.

The breadth of evidence taken and the well-structured nature of the document based upon that evidence, both written and oral, are a testimony to the efficient way in which the sub-committee system of the Select Committee on the European Communities operates in your Lordships' House. I also wish to say to the noble Lord, Lord Middleton, that no doubt like me he is not entirely displeased at the prospect of retiring under the three-year rule because, for my money, chairing Sub-Committee D is one of the more demanding jobs available to Members of your Lordships' House.

We also look forward this afternoon to both maiden speeches and I am grateful that advantage has been taken of this occasion for two new Members of the House to address us for the first time. I had thought of suggesting that in view of the nature of the subject there may be merit in asking the Government to speak earlier in the debate than is usual on occasions such as this. We normally recognise that if the Government are in a negotiating position in Brussels it would be both unfair and unwise to expect them to show their hand on sensitive subjects.

However, we are assured by the Minister that this document will not be rushed. Therefore, it would have been helpful to have known in some detail what the Government's alternative proposals are to MacSharry Mark II, as so described. My anticipation that this may have been a good idea has to some extent been met by the receipt, at 12 o'clock today, of a document from the Ministry giving its observations on the sub-committee's report. We are always grateful for documentation. I received the report in mid-August and was excused household chores on the grounds that I had important work to do. I was grateful for that. However, it has taken a rather long time from mid-August to mid-October to comment on the report. I notice, too, that the document is dated, as Civil Service documents frequently are, a long time ago—14th October. I presume that if it came from Whitehall Place East to the Palace of Westminster by pony express the pony must have developed a limp on the way.

At any rate, I apologise to the Minister for not being able to include much of what she had to say in the important document in the remarks I have to make this afternoon. I shall, however, listen to her, as always, with great attention. I shall check her delivery against the report to make sure that she does not deviate from it.

There is a feeling in the country that to some extent while the Minister's position on MacSharry Mark II is clear cut, and has been from the outset, we are greatly lacking in detail as to the alternative proposals which the Government intend to make. The Minister has made it clear, for example, that he will not rush things. In outline he said that his position is that he accepts the need for major change in the CAP and that it must be market oriented, but it must not at the same time penalise efficient farmers, particularly those in the UK. Nor must it in any way impede a successful conclusion to GATT negotiations. The Minister also said that any settlement should be environmentally sensitive.

I do not believe that anyone in this country disagrees with those proposals, but what we need is some flesh on the bones. In this, I am comforted by the knowledge that the National Farmers' Union is of the same mind. In a press release dated 8th October, following a fringe meeting, appropriately enough at the Conservative Party Conference, the President of the National Farmers' Union said: British farmers are very afraid that unless the Government proposes a coherent alternative, the MacSharry package will remain the basis for negotiation, and all the Government will be able to do is to achieve minor concessions. Farmers need to know what are the Government's alternatives —what it sees as the future role of the farming industry in Britain. I urge the Government to spell out its proposals for reform of the CAP without delay". Sub-Committee D's problem in reporting, as I see it, was to take account of pending resumed GATT negotiations, discussions between the Commission and the EFTA countries about extending the single market to include those countries, and of course future trade relations with East European states, to which the noble Lord, Lord Middleton, has rightly drawn attention.

The Community seems to be in doubt about the future with Eastern Europe on a trading basis. M. Delors suggested a broader common market and is said to favour that as a concept. On the other hand, France, through its powerful president, intends to press for some restriction on agricultural trade with Eastern Europe. So at a very important level in Community affairs we have a difference of view. The present CAP reforms relate to conditions which may not be relevant by the time the present member states reach agreement on them. That has been a major difficulty in compiling any document on the subject at this time.

Account has been taken of GATT by the sub-committee and we are grateful for that. For example, although the Commission does not officially recognise that GATT is a prime question in the MacSharry proposals, as has been said, there are severe reductions in price guarantees for cereals to bring these closer to world prices. However, if these prove insufficient to obtain agreement there may be even worse news for United Kingdom farmers. Thus, it may be wiser to put the question of total structural reform of the CAP on hold until the GATT discussions on agriculture and other outstanding issues have been settled. It depends on whether one prefers bad news by instalments or in a lump sum.

The Select Committee report helpfully includes Article 39 of the Treaty of Rome in its publication. The breadth of this article never fails to amaze me. Whether it can be narrowed somewhat in the light of a settlement on the MacSharry proposals, as now modulated, is an attractive thought. As treaty amendments are currently in the air, the United Kingdom could pursue a worse strategy than to seek changes to Article 39 and perhaps a better system of weighted voting reflecting net contributions to the Community budget. I say that because the more one looks at farming and food in the other 11 member states the more obvious it is that it is dominated by small farms. The noble Lord, Lord Middleton, acknowledged that. It follows that in any belt-tightening exercise, larger farms must suffer disproportionately, and the proposals mirror that. That is the problem for the United Kingdom with the MacSharry proposals. It was also, I suspect, the main problem for the sub-committee in dealing constructively with the proposals.

Thus, one regret I have with this fine report is that it is a shade too communautaire and fails in some respects to give enough weight to British interests. As we are major contributors to the CAP budget—that is the case now and will be the case post-MacSharry because it is acknowledged that his changes will not save money—it seems to me that we may have missed an opportunity here.

Is there no hope of repatriation on a commodity basis where there is not a general Community interest? Tobacco is a good example of that, though it is not mentioned in the report. Although MacSharry's proposals would restrict the growth and cost of the tobacco regime, they include a research programme to develop less toxic varieties of tobacco. Can we justify that as a Community obligation? After all, there is no regime—I pray there never will be —for potatoes. Yet the market manages well enough without one and United Kingdom consumers, at least, can afford and apparently enjoy even the more expensive variations of the humble spud such as potato crisps.

I shall mention only a few of the report's conclusions and recommendations as doubtless other speakers will wish to bring their specialised experience to bear on the recommendations. However, one point needs to be made about the concept of a rolling programme. If prices are geared at or near world prices—that is the likely outcome of GATT and indeed is part of the objective of the report—there will be greater volatility and uncertainty for growers than in the recent past. Sugar, for example, is a commodity whose world price can be very uncertain for many reasons. I regret also that the deficiency payment concept finds little favour in the report at a time when it is being reconsidered seriously in other places. Paragraph 203 of the report also rejects quotas and calls for their eventual phasing out although the special quota position as regards milk is acknowledged. The sale of his milk quota is in some ways the dairy farmer's passport to retirement. That should be recognised even if quotas themselves are reduced. One wonders what the future holds for African, Caribbean and Pacific countries as regards a new sugar regime.

Paragraph 205 pleads for the principle of tariffication. I wonder how far a GATT settlement will allow that. Paragraphs 208 to 212 on compensatory payments summarise the heart of the report. We should not set hopes high that the UK will look favourably on early or special state retirement pension schemes at a time when Her Majesty's Government are wrestling with the present disparity in age payment between men and women. That in itself is a consequence of a Community decision.

The report is notable for the differences in the evidence given by distinguished academics. I take heart from those differences. The sub-committee was obviously taken by Professor Tangermann's fixed redeemable bond and has called for further detailed examination of that. Will the noble Baroness say what the Government's attitude is on that matter? Would a bond of that kind, as proposed by the Commission, work in the dairy sector? A Government view on that matter would help the industry. The proposal for a fairly large increase in Community funding for rural development to accompany CAP reform is an example of the view that Brussels knows best and therefore Britain must pay most. What is the position of Her Majesty's Government on that?

The report steers a sensible course as regards agriculture and the environment. If bad times are just around the corner we must remember that people—in this case small British farmers and British farm workers—must share habitats with flora and fauna. We need to accept controlled flexibility in the countryside as suggested by the Rural Development Commission. The work of that body in this area is praiseworthy.

Like many other noble Lords I receive more post about the environment than I have time to read. When I travel by bus round the villages in East Kent and see the agricultural land in between the villages I get the impression that it is cared for and is in good heart. A depressed agricultural industry bodes ill for all of us here in Britain. If farmers are to receive payments for not farming—whatever form those payments may eventually take—farmers will also be obliged to make the countryside freely available for non-farming uses. Farmers will in particular have to make the countryside available to taxpayers or consumers.

However, it is the urban environment in this country which depresses me most of all. It is all a question of resources on the one hand and balance on the other. I do not understand why conditions in rural areas should not be the total responsibility of member states whether there are 12 member states as now, whether that figure increases to 18 with EFTA, or to 30 with the inclusion of Eastern European countries. In my opinion the number of member states in the Community is not relevant to the argument that environmental questions cannot normally or effectively be handled by Brussels. If they are handled by Brussels that will result in greater expense and member states will be less satisfied than would have been the case if they had handled the matter themselves in the first place.

I note that we have a long list of speakers, many of whom are specialists in various fields. I look forward to hearing their speeches and I again congratulate the sub-committee on the report, which is a first-class example of reporting on a policy that, unfortunately, is likely to be with us for many years to come.

4.6 p.m.

Lord Mackie of Benshie

My Lords, I must apologise to the Minister and to the House as I shall not be able to be present to hear the end of the debate. I did not expect to see a list of 23 speakers and I have arranged to catch a plane at 8.40 this evening. However, I hope that I shall be able to hear the majority of the speeches and I shall, of course, read the Minister's reply with enormous interest.

I must begin my speech by paying tribute to our retiring chairman. The clarity of his speech showed his qualities as a chairman. There are, however, some things about him that I do not like—for example, his habit in committee of putting me down with such a charming smile that I cannot protest. He was an admirable chairman during our dealings on this enormously difficult subject.

Most of us on the sub-committee are closely connected with agriculture in one way or another. We were obliged to tackle a subject which was very painful to us because it is obvious that the CAP must reform or bust. We accepted that that fact would cause pain to a great many people. We have tried to consider ways of alleviating the pain and I believe that we have made one or two reasonable suggestions.

In common with members of all committees I must admit that I did not always agree with everyone else. The first sentence of the section of the report headed "Summary of Conclusions and Recommendations" states: Reform of the CAP is imperative". The report further states: Member states must recognise that perpetuation of protectionism in agriculture … is neither in the interests of society as a whole nor of the taxpayers and consumers". We added to the phrase "perpetuation of protectionism" the words, as practised under the CAP". That made the sentence acceptable to the farmers on the sub-committee. We must accept that the history of primary producers around the world, whether in agricultural commodities or in other commodities, shows that they are subject to periods of boom and slump. They deserve protection from that phenomenon but they do not deserve a constant raising of prices. That factor has not done the industry a great deal of good.

The history of the CAP has been one of the Commission trying to make proposals to control the constant rise in cost but the Council—mainly composed of representatives from France and Germany—turning down those proposals usually for political reasons. The result is that now something must be done. The constant rise in prices has done agriculture little good. Incomes in agriculture are falling and the inputs into agriculture have increased enormously. I came out of the RAF a century ago, or was it only half a century ago? At that time, just after the war, my foreman, a very good man, was hired for the equivalent of 4 cwt. of barley a week. Today a good foreman is worth approximately 30 tonnes of barley; perhaps it is rather less than 30 tonnes. The difference is enormous. Thirty tonnes gives a very good wage but it is very different from 4 cwt. Similar changes have occurred in the prices of our inputs, of tractors and so on, and in the price of land. It is ludicrous, from a commercial point of view, that today bad land will fetch £1,000 an acre. Good land fetches infinitely more. There is no economic justification for that.

When one speaks of market prices one is not really considering market prices. As the chairman of the committee explained clearly, the market price is the price received by the person who is willing to pay the largest subsidy to dump a product on the world market. That problem needs to be looked at.

One must accept that the Cairns Group, which includes Australia and New Zealand, has a great deal to complain about. It is totally unjust that we should have said to New Zealand that we would take away its guaranteed butter market and that it must find new markets. New Zealand found new markets in Japan and 10 years later we were undercutting it with dumped produce in Japan. That cannot be good for our relations or for world trade. For that reason alone the committee accepted that the evil that was being caused by the system of subsidising exports must come to an end.

We agreed that one of the subjects for price reduction had to be cereals, because cereals are a natural subject for mechanised production. All of us of any age have seen the enormous improvements and the ease with which one can grow large acreages of cereals. A great many farmers in East Anglia and elsewhere have abandoned what used to be regarded as good agricultural practice for monoculture in cereals, and have prospered greatly as a result. However, even the barley barons of East Anglia find that their income is dropping, according to Mr. Murphy of Cambridge University.

When we considered what should be done we accepted that price reduction must play a major part. However, we accepted reluctantly that set-aside might be a useful step in removing land unsuitable for cereals from production, particularly if it was allied to an extensification programme under which the land could revert to pasture—which is what bad land should be. That might produce as good or better a return as growing poor crops of cereals.

The MacSharry proposals are deeply flawed as they relate to compensation for the small farmers in Europe. I have no objection to such compensation, but the proposals are permanent and therefore do nothing to solve the problem. In this country we recall that, for example, in the Dales of Yorkshire there used to be a large number of small dairy farms. In my arrogant youth I used to despise them and talk about them milking 10 cows at irregular intervals between 9 in the morning and 10 at night. Nevertheless, people received a living from the farms. In the period since the war they have either been driven out of existence or reorganised. Now one man milks and looks after anything up to 150 cows in an enormously efficient manner and the small farmers have gone.

There is no doubt in my mind that the small farmers of Europe must go or become part time. They cannot continue as they are. We were very attracted to the idea of the bond, under which they would be paid a bond over a period of 15 or 20 years in compensation and the farms phased out without personal distress. That it; a good idea which needs to be examined, but without doubt the administration would be enormous. Nevertheless, one has to accept that the small farmers must go.

The great flaw in the plan is in the new word "modulation". As I understand it, that means giving all the money to the small farmer and nothing to the big farmer. The proposals put forward in relation to modulation would mean very large areas, for example of grain farming, losing very substantial amounts of money. They are competent farmers and they deserve better than that. That is an enormous snag in the proposals as presently set out in MacSharry Mark II. Following the noble Lord, Lord Gallacher, I hope that the Government have solid alternative proposals rather than simply modifications to modulation, which can only run us into slightly less trouble. Happily, that is the Minister's problem. I wish her well with it.

The CAP has a very large income, a great deal of which is wasted on export subsidies. The proposal that we use it to improve the environment and increase the part the farmers play in maintaining and improving the environment is a good one. However, again, the committee was quite right in saying that that should not be coupled with any form of reduction in production. It must be a direct reward for work well done and not tied in any way to production. The two are entirely separate.

The whole subject bristles with difficulties. However, there is a proposal in the committee's report and in the MacSharry report which relates to support for the hills and uplands, areas where it is not possible to park factories or provide alternative work. That certainly applies to my own country of Scotland. Therefore, we must see that the hill compensatory allowances are retained on a basis which will improve the environment. I hope that the Government will say that they will pay the maximum allowed under the rules and regulations of the CAP to help those farmers because it makes a tremendous difference. I see no other way of keeping the environment in the hills as it is now and as people like to see it. The position is quite different in arable areas and in areas near towns where various bodies have done very good work in providing part-time and full-time work for people who are made redundant.

With that last remark, about which there is no difficulty, I sit down, like the noble Lord, Lord Gallacher, sure that the problem will continue for a long time. However, I believe that our report will be helpful in solving the problem.

4.18 p.m.

The Lord Bishop of Worcester

My Lords, I greatly welcome the report. There is much yet to be done but at least it takes steps to alter the present common agricultural policy, which in my view has come to the end of its useful life. I apologise to your Lordships. I shall have to leave the debate to get back to Worcester to catch the end of a meeting to which I have been committed for a long time.

I was brought up in Lincolnshire. I have seen the immense effectiveness of the large farms in that county. Now that I work in Worcestershire I see the importance of the crisis in family farms. I speak as one who is concerned that rural communities should be places where people work and where there is a wholeness of life. They should not be mere dormitories or places where people simply take their leisure. They become ineffective if no work is done there and the agricultural industry goes under.

I want to speak also about my concern for the third world and deal with European policies in the context of a wider scene. I wish to draw attention to the top priority of training and retraining, whatever may be done in the long run, as regards agriculture and rural communities. Whether we like it or not, fewer people will be involved in the agricultural industry and therefore those who must leave it require training for other opportunities.

The rural scene has always been a changing one. It is sheer romanticism to imagine that there is some form or pattern of rural life and village community which has dropped from heaven and that somehow we have to return to it. That is not so. The village community has always been shaped and moulded by the changing fortunes of the farm and agriculture.

However, the common agricultural policy as we have it has been unfair. I understand that about 80 per cent. of the funds go to 20 per cent. of the farmers. In some ways we are the victims of our success. Long ago we were told to dig for victory and we did so. Our agricultural industry has become successful. But that has caused the present crisis. Intensification has taken place and with the capacity to use chemicals such as nitrogen, we can obtain more and more from less and less land. There has been a hidden cost to the environment, as everyone knows. We have seen the disappearance of hedgerows and the appearance of extremely large prairie-like fields. In a dry March I have witnessed the topsoil blowing off the fields to fill the lanes around with drifts deeper than those of the snow in the winter. I am sure that everyone in this House welcomes endeavours to change the situation.

I do not wish to be an abolitionist. Rather I would be a reformer. One would expect an Anglican bishop to say that somewhere there must be a middle way between returning to the open market, which is completely free, and going for too much intervention. The free market in itself can be ruthless and as deterministic as anything of which Marx might have dreamt. It is not enough merely to bow down and worship the open market. If you take it as your god, it will shake you and make its own demands upon you. The results will not be for the benefit of all. Equally, interventionism by too many quotas and the like makes for inefficiency and not cost effectiveness. I hope that we can go for a managed market.

The Treaty of Rome sets out very well the ambition and the ideal that there should be work and fair rewards for all communities within the Common Market. Indeed, we have a right and a duty to aim for that kind of society which meets the needs of the greatest possible majority. Even then we have not done our duty until we have sought by every means possible to meet the needs of the poor. If we revel in the Christian culture and inheritance of Europe, we must surely want an economy and a society in which the strong have a mind for the weak and the rich have a practical concern for the poor. If we are merely hell bent on competition, we shall widen the gap between the haves and the have-nots, not only in Europe but in the whole world community, and as night follows day we shall pollute the one world that we have at our disposal.

Yet competition is important. The market is important. It is good that the Select Committee of your Lordships' House has seen the need to free British agriculture and, in the words of the noble Lord, Lord Middleton, move it nearer the market. At level pegging with others, British farming surely is well able to hold its own.

How then might we manage the market? To begin with we should modify the overwhelming weight of finance put on the production of food since the production of food has so far outstripped demand every year. As everyone knows—let us not dwell upon it—it has resulted in surpluses which are highly expensive for the taxpayer to maintain. That offers the temptation to dump them on the world market at less than world prices, thus undercutting the developing nations. We must remember that developing nations exist within Europe beyond the Twelve. Indeed, it may be in agriculture that they will find their only way back into the market. We must not obstruct them before they have even a chance to begin.

When we consider the so-called third world—what ought to be called the two-thirds world—we must remember that its export returns diminish by over 2 per cent. every year while the indebtedness of those countries rises to ever more astronomical heights. For example, the gross national product of 10 African countries does not equal the annual turnover of one large international company. The potential to destabilise must also be addressed by those planning a common agricultural policy for Europe. We must see Europe in its total setting. What is more, the day will come when we shall need their markets. We shall have to find ways to activate them if they have been totally depressed.

To return to plans for the new CAP, I ask whether, for example, 50 per cent. of the present sums of money available and being used could go to food producers, possibly granted on the basis of acreage under the plough rather than weight of grain produced. We have to keep together economy and ecology. Then 25 per cent. could go to small farmers to produce food, perhaps organically, or to develop their land environmentally. The remaining 25 per cent. could be used to revitalise other industries in the countryside and to promote social programmes.

We need a commission in Europe for rural affairs. I believe that in this country we should put together the Department of the Environment and the Ministry of Agriculture, Fisheries and Food to form a rural affairs department. Among the social programmes I suggest that foremost must be training for new employment or professional work. Training in the country is a top priority but it is not easy because of the distances involved. It may be necessary for some farmers to train for other occupations before they go bankrupt on their own farms.

The Rural Development Commission has shown the way. I am told that 1,800 new jobs have been produced with the expenditure of £1,000 per new job. I believe that at present we subsidise farmers to the tune of £10,000 per farm. Yet at this time we hear of rural colleges closing for want of funding. Much has been done in rural development areas such as the Forest of Dean and the Peak District National Park and more is waiting to be done elsewhere. It would be an indirect but potentially effective contribution to the boredom on some of our housing estates to make more of our British countryside for constructive and creative leisure. The choice is ours.

A common agricultural policy should be regional or national in basis. The character of rural communities over Europe changes so much. The big farms of northern France, the Netherlands, the East of England and northern Spain are very different from the hill farms of Wales, Scotland and elsewhere in Europe. Furthermore, 97 acres in one place may be a viable family farm; in another there have to be at least 300 acres.

I believe that many will welcome the report. Changes there must be in the way that the common agricultural policy is run. I believe that a middle way can be found between complete abandonment to the free market on the one hand and too much intervention and control by government on the other. In the present day agricultural revolution we do not want to make the mistakes of the Industrial Revolution of 250 years ago when some achieved inflated rewards and others were made terribly poor and dependent and the quality of their lives was diminished. Yet wealth has to be paid for and efficiency is a necessity. It is the duty of government, in this case of the European Community, not to obstruct the energetic and the enterprising but to channel and guide their enterprise for the benefit of all. Policies which follow the ideals set out in Article 39 of the Treaty of Rome with its concern for the wholeness of agricultural communities are policies which offer a true realpolitik. Is it not, the duty of government to cause self-interest to choose that which justice demands."?

4.33 p.m.

Lord Harding of Petherton

My Lords, like many others in this country I have never been enamoured of the common agricultural policy of the EC. Indeed in the early 1960s when Harold Macmillan was trying to persuade de Gaulle that Britain should join the Common Market, it seemed a high price to pay to join the club, but I could see that it was essential for general economic and political reasons.

My feelings against the CAP were reinforced on a personal level soon after I left the Army 23 years ago and went into pig farming on a small farm in Dorset. The CAP positively worked against pig farmers. The cost of pig food continued to rise due to the grain subsidy while the support price for pigs was always below the market price. Nor did the CAP do anything to help the price of cider apples—the other enterprise on the farm. I did not expect to be subsidised but, on the other hand, I had not bargained that my costs would be artificially inflated. The CAP has over the years reached absurd levels of distortion. A Somerset farmer tells me that he read that even some unsmokable tobacco grown in the Community is being supported.

However, when we joined the EC I, among many others. wholeheartedly supported our entry. We have all become used to the high price of food and perhaps because of our appalling record on inflation the CAP has not been singled out for blame by the public. The rise in the price of food has been hidden in rising prices in general over the past 20 years. However, the CAP now has, not for the first time, an internal budget crisis. A more serious factor is that it has become a threat to world trade. If there is no agreement on the Uruguay Round of the GATT negotiations, the world might become a series of economic blocs. Each bloc might put up barriers against the others. World trade, and therefore world prosperity, might suffer disastrously. As Britain's economic health depends on world trade more than most other countries, our prosperity and economic growth would suffer dreadfully.

The reform of the CAP is essential for agreement to be reached on the Uruguay Round. It is the way in which the CAP works that is so objectionable to the United States and other countries outside the EC. The massive surpluses which the CAP generates are dumped on the world markets sometimes to the detriment of cheaper production from those countries. I cannot see those countries led by the USA agreeing to the present proposals put forward at the GATT negotiations by the EC. A firm commitment by the European Community to reduce those surpluses will have to be made. That seems at last to be recognised by the German Government, as has been reported in the past few days.

The EC Commission has made an attempt at reform of the CAP in the MacSharry proposals. I agree with the general thrust of the Committee's report that they do not go far enough. In particular the Commission has taken little account of the international political and economic environment. I entirely agree that, The prime means of reform should be reductions in the levels of agricultural price support, progressively and to a set timescale towards market prices". That will take time to take effect. It is the only effective way to alter the massive distortion in world markets which the CAP at present produces.

Set-aside and quotas are a very bad way to try to bring production and consumption into line and to prevent the big surpluses of food products. Set-aside is also an environmental nonsense. Either large parts of the countryside will become wastelands of nettles and thistles or in effect farmers will be subsidised to produce other unwanted crops. I am told that a farmer in Wiltshire had to spend £100 per acre putting right land that had been set aside.

Quotas restrict entry into a particular branch of farming where expansion into a particular area may make economic sense. That applies already to dairy farming where quotas exist in my part of the world. The West Country has a particular advantage in milk production due to the very high yields of grass that can be grown in that area. It makes no sense that this natural advantage should not be used to the benefit of producers and consumers. If a freer market were to be introduced and milk were not so subsidised across the Community, milk production would be concentrated on land most suitable for it. In the past 10 years or more many farmers in the West Country have sold their dairy herds and have turned their land over to growing wheat and barley. In many cases that is totally uneconomic in real terms. I am told by a farming neighbour that the yield from cereals from his land is about a tonne per acre less than in East Anglia. Yet because of the cereal support price it still pays him to grow it.

Any reform of the CAP will hurt many farmers. That is inevitable. Farmers are worse off than they were a few years ago and any policy which reduces prices is bound to raise a crescendo of protest from the farming lobbies.

However, I have no wish to see farming in this country return to the condition in which it existed between the wars. Many senior Members of this House will remember better than me how bad that was. Every country in the world subsidises its agriculture to some extent. We do not want to put EC farmers at a disadvantage compared with others. Nor do we wish to put British farmers at a disadvantage compared with other EC farmers as the MacSharry proposals would do. The figures on page 78 of the Committee's report speak for themselves. To compensate farmers for price reductions, the Commission proposes payments to farmers on the basis of land farmed and headage of animals coupled with set-aside payments. Quite rightly, in my view, the committee does not support those direct payments, at least not in the form in which they are proposed. There is also bias towards the small farmers. That is grossly inequitable to farmers in this country whose farms are bigger than those on the Continent.

My view is that compensation, where necessary, should be organised by national governments from common agricultural policy money saved by cuts in storage costs and export restitution which price reductions would gradually bring about. National governments should draw up their own schemes which should be vetted by the European Commission. Each country in the Community has different land holdings, different crops and different priorities. It is not sensible to try to produce a Community-wide scheme acceptable to all member states.

4.40 p.m.

Lord Jay

My Lords, I am happy warmly to congratulate the noble Lord who has just spoken on his maiden speech. He has shown today that he will be a lucid contributor to our debates as well as an expert on agriculture. I noted his close familiarity with the County of Dorset and, as a lifelong lover of the West Country, I welcome him here all the more warmly for that. I also happen to agree with almost everything that he said.

This admirable report by the sub-committee will certainly be welcomed with enthusiasm by those of us who, for the past 15 or 20 years, have been calling for reform of the CAP system which has done enormous damage to the UK economy and living standards. Incidentally, nobody has mentioned that the system absorbs over £20 billion sterling annually of EC funds —64 per cent. of total EC expenditure. That has led to huge rising stocks of food now totalling 20 million tonnes of grain, 750,000 tonnes of beef and 900,000 tonnes of dairy produce according to the EC Agriculture Commissioner. Of course, as the right reverend Prelate said, of that £20 billion, 80 per cent. goes to something like 20 per cent. of the smaller farmers. In fact, much of it ends up in capital gains for the owners of the land because rising rents has been one effect of the policy. On top of that, massive fraud is still taking place in the administration of the policy.

In addition, the cost to the consumer, over and above that expenditure, through higher prices is something like another £25 billion sterling per year which amounts to a consumer tax on food averaging about 30 per cent. or £4 or £5 per week for every single EC consumer. Of course, that falls more heavily on those with the lowest incomes.

As has rightly been said by noble Lords today and recognised by the committee, the whole mischief arises from the fact that EC intervention prices are much too high. In a valuable table the report shows the ratio of EC prices to world prices, a comparison which the EC's own agricultural report suppresses. That makes it all the more valuable here. In the 1980s, EC prices for wheat have varied from 15 per cent. to 95 per cent. above world prices; sugar from 44 per cent. to 200 per cent. above world prices; and butter from 100 per cent. to 200 per cent. Those are enormous gaps between world and EC prices. Naturally, if wildly excessive prices are charged and enforced by shutting out imports, consumers consume less and producers produce more, so generating the notorious food mountains. It is somewhat misleading to call them surpluses because they are not surplus to the needs of the consumer but are merely surplus because the prices are too high for consumers to buy them. Such are the direct effects that the next step is that stocks have to be sold on the world market and so require export subsidies of 50 per cent. or more. As we all know, that damages exports for the world's most efficient producers. Australia is producing 30 per cent. less wheat than it was before the CAP was instituted.

The indirect effect of the extra £4 or £5 per week per head tax on food has been even more damaging. The working population in this country naturally defended itself by stepping up wage claims. That was a major factor in the price inflation of 1972 to 1976, the years in which the CAP prices were first foisted on this country. The resultant rising labour costs have contributed to the huge visible trade deficit within the EC which has only emerged since the early 1970s.

In addition to that, at present the CAP and protectionism of the EC generally has become, as several noble Lords have said, the main obstacle to the GATT Uruguay Round with all that success in that round could mean to world trade and living standards particularly in poorer countries, including East Europe. I should have thought that any UK government should have welcomed warmly, if broadly, the proposals of Mr. MacSharry, the EC Commissioner, for what is at last a serious and drastic attempt to reform the policy. Therefore, it is rather surprising to find the quotation at the beginning of the report by the Minister, Mr. Gummer, who states: We start by saying that we oppose Mr. MacSharry's proposals. We hate them. We condemn them". That was rather a sweeping reception.

Mr. Gummer—and I do not say this of the noble Baroness on the Front Bench—sometimes gives the impression of looking at matters through the narrowest of protectionist spectacles. No doubt the MacSharry proposals are not perfect but I agree emphatically with the Select Committee that the central reform must be a drastic cut in EC intervention prices, no doubt introduced over a few years. Without that, nothing serious will happen.

I hope, along with the noble Lord, Lord Harding, that we shall not go down the road of so-called set-aside to get out of the difficulties. I do not believe that it is a good principle for this or any other industry to pay people not to produce something so that there is then a privileged group rewarded for inactivity. However I hope that the Government—and on this the report seems to be neutral—will promote at least to some degree the policy of deficiency payments as a substitute for the present CAP. That is the middle way for which the right reverend Prelate was searching.

However, the system of deficiency payments will work only if the guaranteed prices are set at a low level. The reason for the outstanding success of our own deficiency payments enforced from 1947 to 1972 was that prices were kept low. That policy meant low prices for the consumer and reasonable support for the farmer, not separated entirely from the production. That was mainly due to prices being kept moderately low and not being wildly excessive, as are prices under the CAP. It may have had something to do with it that in those days the Treasury as well as the Minister of Agriculture used to conduct the negotiations whereas under the CAP it seems to be left entirely to respective Ministers of Agriculture.

As protectionism in the European Community generally and the CAP in particular has become the main obstacle to the success of the GATT Uruguay Round, as we all know, and to freer trade on a world scale, a simultaneous real reform of the CAP and a successful GATT round would surely be of enormous gain to almost everybody, and most of all to the United Kingdom.

It was reported last week that the German Government have at last decided to support a serious CAP reform, mainly on the lines of the MacSharry proposals. Therefore, it is surely crucial that our Government should seize this rare opportunity offered by the German decision, and by pressure from the United States and 14 other nations in the Uruguay Round, for serious reform of the CAP.

Can we be told what the Government are doing? There is no longer time for delay; time is running out on the GATT round. What exactly is happening? Do the Chancellor and the Secretary of State for Trade have a view on this matter or is it being left wholly to Mr. Gummer? If the Government fail to seize this opportunity, they will bear a very heavy responsibility indeed.

4.52 p.m.

Baroness O'Cathain

My Lords, like all new Members, I am both overawed and filled with trepidation; but, conscious of the great courtesy which pervades your Lordships' House, I have been given some courage to speak today. I felt a certain sense of inevitability when, just after I was introduced to this House, I saw the Motion for today's debate, a subject with which I have been closely involved for many years during my career with the food industry, the dairy industry, and not least as a member of the marketing advisory team to the Ministry of Agriculture, Fisheries and Food.

The common agricultural policy impinges on the lives of everyone in this country. Therefore, the development and future of that policy are of great importance to and have an impact on all citizens.

I have read and studied with great interest the subject -matter of the debate: the scholarly work which is the 16th Report of the Select Committee on the European Communities dealing with the development and future of the common agricultural policy. I recommend that report to everyone who has more than a passing interest in the subject—and that really should mean everybody. The report warrants a much larger circulation than I fear it will achieve, as more people need to have a greater understanding about the CAP before there is any reform. This does not mean that reform is not urgent. It is urgent and essential. But it is the nature of the reform which is so important. There will not be another chance to reform the CAP for many years so it is imperative that we get it right. Through change for change's sake lies chaos.

That is why I make a plea for a more detailed analysis of where we want the CAP to lead us before we embark on any change which appears to be motivated by one section or one sector of the European Community. We must take into account not only the needs of small farmers in the Community but of all farmers and all consumers in the United Kingdom, because that is where our national interest lies.

It is not fashionable to talk about the national interest when discussing Community matters, but although member states may not mouth the words "national interest", we know that those two words are always at the top of their agenda. Let us remember that only last month President Mitterrand blocked Polish veal exports to France to protect his beef industry. Was that in the national interest of France or not?

Our national interest is in no way contradictory to the overall aims and objectives of the European Community. It is not anti-communautaire to want to see a strong, thriving UK agricultural sector with farmers not only providing food but also acting as custodians of our glorious countryside; nor is it anti-communautaire to want to ensure that the UK consumer has a consistent supply of high quality, good value-for-money food; nor to wish to have a strong UK balance of trade in agricultural and food products.

It appalls me to think that when I was first involved as a marketing adviser in 1980 and played a part in the campaign which led to the establishment of Food From Britain, the deficit on the balance of trade in food products was some £3.5 billion. That figure is now nearer £6 billion. That is taking both figures at 1990 prices. I submit that part of that deterioration results from the distortions caused by the CAP. For example, our milk production has been cut, while the milk-surplus nations fill the gaps in our dairy product offering.

The CAP has not been a complete disaster. Much good has come from it, and it has been of benefit to farmers and to consumers alike. Obviously there have been nonsenses within the policy, but its objectives are as important now as they were when it was first drawn up. However, the world in which the CAP is operating has changed, and it has changed even more dramatically since the report was published. There is nothing to guarantee that the pace of change will ease with the advent of an inevitable extension of the European Community to the 24 members recently envisaged by Frans Andriessen. Therefore, it is fundamental that any reform should be the right reform, leading to a policy which can be extended to new members without hardship.

The five instruments for achieving reform are all unpalatable to a greater or lesser extent. This is to be expected because, as we are in a serious situation with regard to surpluses and cost, the cure is bound to be painful.

Price reduction, quotas, set-aside, extensification and input controls all have a social cost. Yet something must be done. Price reduction is the simplest to achieve; but with up to 100 farmers and farm workers per week in this country being forced to leave the industry because of pressure on farm incomes, I dread to contemplate what would happen to UK farmers if there were major price reductions. Major compensating social payments would have to be made.

There is no doubt whatsoever that farmers have a serious income problem. They have been known to moan and whinge before; but I honestly believe that now their complaints and anxieties are justified. I know that one should not generalise from the particular, and nor should one resort to anecdotal evidence, but one of our casual evening staff in the box office at the Barbican Centre is a farmer who has had to take a full-time job in London each week and then supplement that by casual-wages rate for three or four hours' box office work each evening. He then returns to his farm in Leicestershire every weekend to relieve his wife who has in turn been looking after the farm from Monday to Friday. He is a hard working farmer, who, through no fault of his own, is struggling manfully against the odds to maintain his farm. I suggest that that story is not unique.

The second instrument is quotas. I have first-hand experience of the anguish that was caused by the introduction of quotas in the milk sector in April 1984. After seven years of pain and grief, self-sufficiency in the European Community in butterfat which was 110 per cent. in 1984 is now 114 per cent.; and self-sufficiency in milk solids not fat has risen from 108 to 111 per cent.

In the United Kingdom, quotas have reduced both of those self-sufficiency ratios. As an aside, I would ask whether this is just one more example of the British playing the game by the rules while others manage to bend them? I acknowledge that the situation could have been worse without quotas, but they certainly have not achieved what they set out to do.

In short, there is no easy answer. I just hope that what I am saying today does not necessarily brand me as a reactionary who believes that there is no solution. There has to be a solution, and the report will greatly help in arriving at that solution.

The Americans have welcomed the MacSharry reform package put forward by the Commission. Of course they have done so because it is in their national interest to achieve the targets of the Uruguay Round in the GATT talks. But let us not fall into the trap of believing that because the United States has welcomed the proposals, they must necessarily be correct for the European Community. There is no nation on earth more protectionist than the United States when it come to agricultural and food products. I can say that having tried to sell English cheeses to the States.

It grieves me that the United Kingdom is being portrayed as the recalcitrant, protectionist protagonist of fortress Europe. I believe totally that this country is more free trade minded than many, and we certainly do not want to see still more restrictions on the free movement of goods within and from outside the European Community.

The cost of the common agricultural policy is estimated to be some £250 per head per annum. Those figures have already been quoted here today. That is a very high price to pay; but I fear that if the MacSharry proposals were imposed that cost could be significantly higher. I have seen a report that suggests that those costs could increase by more than 50 per cent. That would never be acceptable to taxpayers.

It is ridiculous to pretend that any reform is better than no reform, particularly if that is the level of price that might have to be paid. I am filled with foreboding and reminded of the comments of a learned professor who was asked to give his views on the milk regime prior to UK entry into the EC. After much deliberation, he stated, "I have a dreadful fear that these cows will come home to roost". We want to avoid any more of those poor cows coming home to roost.

Let us not forget that we are talking about a major industry, one on which we all depend. I have firm faith in the industry—food and agriculture—and believe that the inherent strength of United Kingdom agriculture is capable of taking on any competition. Competition leads to innovation and improved quality. One only has to look at the record of the supermarkets in this country to understand that point. The desires of farmers and consumers are not mutually exclusive, but they are not helped by an over-abundance of artificial controls.

In the course of this short maiden speech I had hoped to be able to convey to noble Lords my very strong views that the countryside and farmers do matter; that the UK consumers do matter; and above all, that the economic health and strength of this country matters. None of these will be best served by the wholesale adoption of the MacSharry proposals. I greatly welcomed the statement last week that Her Majesty's Government will be putting forward a blueprint for farming before the end of this year. I hope that that blueprint, together with the valuable analysis contained in the 16th Report of the European Communities Committee will give us a firm indication of how we should tackle the whole question of the development and future of the common agricultural policy. I thank noble Lords for their courteous attention.

5.1 p.m.

Lord Plumb

My Lords, it is a very great privilege to congratulate the noble Baroness, Lady O'Cathain, on what I believe to have been a magnificent speech. It was full of reason, wisdom and experience. More importantly, it was full of common sense. I agreed with every word of it. I thank the noble Baroness not only for that very sound contribution to this debate, but also for joining this House. It is a privilege for us to have the noble Baroness here. I do not believe that when the noble Baroness started in the milk industry that either she or I thought that we would be looking at each other across these Benches on this particular occasion. I again thank the noble Baroness on behalf of the whole House for the excellent contribution that she ho s made today.

Those of us who had the privilege of sitting in this Chamber yesterday and listening to excellent speeches in the debate on defence issues and Britain's Army for the 1990s, heard many contributions which came very much from the heart as we remembered the dark days of war. Noble Lords may wonder why I say this, but as I was listening last night to those great speeches I could not help but remember the history of agriculture. During this debate we might also remember those farming families who were digging for victory during those same dark days. We should remember the contribution that they made then and also the contribution that they are making towards the wealth and economy of the nation today.

If we make a quick read or a thorough study of the report of my noble friend Lord Middleton on the development and future of the common agricultural policy. it shows, as many have already said, how far we have come and the growing complexity within that policy of the current issues affecting both the food and agricultural industries. I had the great privilege to serve under my noble friend Lord Middleton on that Select Committee. I generally accept the conclusions. I wish to thank him for the way in which he conducted the business and dealt with the members of the committee. As he said himself, many people gave evidence to the committee and many also gave written evidence. They all concluded that there was a need for radical reform. Therefore, I believe that the report reflect the many and various recommendations that were made.

One turns immediately to the part headed, "Summary of Conclusions and Recommendations". Noble Lords will see there that it is very clearly stated that the perpetuation of protectionism, as practised under the present common agricultural policy, is neither in the interests of society as a whole nor of the taxpayer who funds the common agricultural policy. Perhaps I may add that neither is it in the interests of the farmers because they have not directly benefited from the input which has gone from the taxpayer into the common agricultural policy. It is equally stated that this reform must lead to a better distribution of resources and a better balance between supply and demand besides greater integration of economically sound farming and forestry. Naturally and understandably, because we are all talking about it at the moment, we must be environmentally responsible in our methods of production. There is also reference to conservation and the enhancement of the wildlife habitat and the landscape.

None of these things is achievable without a viable family farm which must be the first priority in producing food. As it is so often said it becomes a cliché that a neglected countryside is not a pretty sight. I have a neighbouring farmer who said to me fairly recently, "I know how to farm a farm" and he does. He also said, "I know how to rob a farm. If you get it wrong it will take me 10 years to rob it and then it will be of no use to anyone else". That is food for thought.

However, the impossible takes a bit longer. In my experience over the years, it has always been difficult to maintain a sensible balance between arable land and livestock or have a policy, even with deficiency payments, which is equally applicable for the large and the small farmer or those in between. It goes without saying that it is now more difficult to strike a balance which is suitable for both northern and southern Europe and also to face the increasing pressures that we are experiencing concerning products which are coming from east and central Europe and anywhere else.

So as we approach 1992 the world we live in is vastly different from that of yester year or even 30 to 40 years ago. The common agricultural policy has been arguably too successful. It has led to the costly storing of food surpluses. Clearly, the continuation of such a policy is not sustainable physically. The status quo cannot be maintained. Even with a 30 per cent. increase in the farm budget last year, farmers' incomes in all member states are set for further decline. Confidence is waning and still declining. As a major part of the present expenditure goes into export restitution, the farmer does not directly benefit.

I say to the noble Lord, Lord Jay, that it is the export restitutions and their level that have forced down the world market price. They have created a totally fictitious world market price that makes the figures that he used spurious in that context because they are false at both levels. There is no doubt that the countries of the world are subsidising against each other. The American subsidies are equally as high as the European subsidies. Therefore, in that context it is obviously in the interests of a GATT settlement that we get the situation onto more level terms. However, as we have heard, that policy has certainly not prevented a large number of farmers and farm workers leaving the land, as the noble Baroness said. The right reverend Prelate also reminded us that 80 per cent. of the resources benefited only 20 per cent. of the farmers because of the very system of the linkage of price support to food volume.

Much is said in the report, and has been said here also, in criticism of the paper and the proposals of the Commission in the name of Mr. MacSharry. They are discriminatory against efficient farming. They introduce new rigidities into Community agriculture by introducing what will in effect be compulsory set-aside for arable crops, and by linking the right to receive subsidies for cereals and sheep to existing farms and flocks. They would leave sectors like wine and olive oil untouched. They would increase the cost of the common agricultural policy. What nonsense it is to come forward with proposals that will increase the budget rather than try to control it: a tax on efficiency and a subsidy for inefficiency.

It is of course in the nature of the report to cover all the realistic options for reform, but in practice it will be necessary to define these specific objectives on the basis of which Her Majesty's Government can negotiate. Perhaps I may say something positive about one or two of the key elements, as I see them, in a reformed policy. They are the following. First, I think that price and market policy will remain an essential element of farm incomes. In my view that is acceptable to those who are involved in the GATT negotiations. Secondly, we need protection from the dumping of foods in the European Community, especially from Eastern Europe. That does not mean that we turn our backs on those who supply food—and that goes for the rest of the world —but it does mean making sensible arrangements. When I talk about dumping I mean sending the product in at a price which is well below the cost of production in its country of origin. I believe that British farmers can and will face competition provided it is fair; but will it be within the Community? And will it be from outside into the Community?

There has to be conformity within the European Community on food safety and animal welfare laws. That, of course, is a national issue of great importance: to protect the high status of the livestock industry in this country. One has to remember, too, that those export subsidies will be under tremendous pressure. Frankly, I have never quite understood, as regards the system that has operated over the years, why the policy has always put our high-quality product, beef in particular, into intervention, denying the consumer the high-quality product that we can produce.

Income supported through prices will no longer be guaranteed for unlimited quantities. I believe that efforts will be made to bring supply and demand more into line through a voluntary policy of supply management and production control. Voluntary set-aside will be expanded and made more responsive to environmental demands. The pilot extensification schemes will be extended. I think that quotas will continue for milk and sugar for the time being. I do not see them applied in respect of other commodities, particularly cereals and nitrogen. Each product sector therefore will be examined separately to determine the level at which external protection is set.

Over the years we have seen food manufacturing generate substantial product innovation, but for all of us market discipline has to be the key to the future, with a greater commitment through contracts from producer to consumer. That is beginning to happen and I am delighted to see it happening so much in this country. Political decisions will be taken in coming months which are likely to have a crucial impact on the future development of agriculture and the rural areas of this country. I do not believe that it is over-dramatic to say that positions which need to be reached on the reform of the common agricultural policy and on the European Community negotiating stance in GATT will cast a shadow forward well beyond the end of this century. The wrong answer will lead to lasting damage.

5.14 p.m.

Lord Boardman

My Lords, may I join in the congratulations to our two maiden speakers, each of whom brought to the debate a great deal of personal experience which is so valuable. I am sure that we shall value their speeches on many future occasions. I join too in the tributes paid to my noble friend Lord Middleton for his chairmanship of the sub-committee. My noble friend displayed his customary wisdom and experience in dealing with what I think we all recognise is an extremely difficult subject.

The problem with the CAP, as made clear by the speeches today and certainly in the report, is that it has no friends. It is said to be hated by most people, and I can well understand that to be so. The same is said of the proposals by Mr. MacSharry to amend it. It has so often been amended and messed about. I believe that the only course is to scrap it and start again with a clean sheet of paper. We should remember its origins. It was created when there were six countries with somewhat comparable agricultural conditions. It was created in order to safeguard supplies, to encourage production, to ensure self-sufficiency and to stabilise prices. Those were the conditions for the creation of the CAP.

Today, how different is the scene. There are now 12 nations, widely differing in their economic and agricultural circumstances, with increasing surpluses. The need today is not to increase but to reduce food production and to ease the social consequences. Today we have a hotch-potch of agricultural, economic, regional, political and social considerations being applied to 12 countries with completely disparate conditions. I suggest that it is a nonsense to try to amend the CAP and hope that by so doing we can make something sensible. It conflicts with the main philosophy behind the European Community. That philosophy, I understand, is largely the promotion of free trade, competition and so on. But what the CAP attempts is to bring about intensively managed markets and protection, with massive injections of cash from the taxpayer.

To add to a rather depressing picture, we now have East Germany as a member of the Community, which means further difficulties. Eastern Europe is understandably seeking markets to earn hard currency and what it can most easily export are agricultural products. The position is aggravated and then along comes Mr. MacSharry with proposals that would be disastrous to the United Kingdom.

A further depressing feature is the massive fraud and abuse that exists. I urge your Lordships to read the report of the Court of Auditors on the co-responsibility levy in 1989: I think it is page 77. The report shows that probably the only country in the Community which was paying its proper co-responsibility levy was the United Kingdom. Most other member states were avoiding payment of the majority of the levy. Germany paid 50 per cent. of its levy; Spain 25 per cent.; and Italy 35 per cent. That report, a pretty damning document, went to the Commission and so far as I am aware no action was taken upon it. In fact the Commission actually increased the levy, which the United Kingdom alone appears to be paying in full.

What is the impact of all this on the United Kingdom? I agree with the noble Lord, Lord Gallacher. We may have missed the opportunity in this report for underlining the consequences. The noble Baroness in an excellent maiden speech said that we have many achievements of which we can be proud and that we can complain about an awful lot of our treatment under the CAP. As the noble Lord, Lord Gallacher, said, we are a net contributor by several billion pounds to the CAP.

We are an importer—an importer from other member states —of foodstuffs that we can produce here. Something like 27 per cent. of foodstuffs that we can produce here are imported from other member states. It may be said that part of the reason is that we are not good at marketing. I cannot be a judge. However, as the noble Baroness said, certainly as regards dairy products, we have no choice because of a quota of 85 per cent. We have no choice but to import from other member states products which we are perfectly capable of producing here ourselves. Incidentally, MacSharry wishes to cut that quota.

United Kingdom farming is one of the most efficient businesses in Europe. Enormous investment has been made over the years by British farmers. I agree with my noble friend Lord Plumb that we should. and are able to, compete with the best in the world, given equal terms. There are some misconceptions in grained in the minds of the public. I hear them often. I am sorry that the right reverend Prelate has left the Chamber. I thought that his briefing departed somewhat from my experience on one or two matters. There s a general feeling that very few people are today employed in agriculture and on the land, so do they really matter? Of course, only about 2.2 per cent. of the working population are now employed on the land. However, there are whole areas of the country —great cities like Lincoln, York, Exeter and the rest —whose prosperity depends essentially upon there being a prosperous agricultural system. Woe betide anyone who suggests that we can afford to let United Kingdom agriculture become depressed and yet have a prosperous country. We certainly cannot.

There are also misconceptions about the price of food. Every time the price of food goes up there is an inclination to say that it is the farmer who is responsible. The Minister of Agriculture quoted in evidence to the committee the example of a loaf of bread costing 32p of which the farmers' share was 8.5p. A loaf of bread has just about doubled in price but the farmers' share is around the same amount, 8.5p or 9p. That is what has happened. Evidence from bodies such as the Food and Drink Federation tended to blame the farmer for the increased price of produce s. It was however in process and retail prices where the escalation occurred. No doubt the processing costs justified the increase; it was certainly not brought about by the farm gate price.

What should be done? The evidence to the committee was not helpful. At the start of my speech I said t lat we should tear up the present policy and start again with a clean sheet of paper. We should have certain guiding principles in creating new policies. First, we must have an assurance of reasonable safeguards against shortages, particularly in the case of emergencies. Secondly, we must have a prohibition against dumping either from member states or from states outside. Thirdly, we must get prices down towards true world prices. I agree with the noble Lord, Lord Plumb, that the prices quoted today are not true world prices. Strip out all the subsidies and support that come from other countries and we may get to a price which is not quite as frightening as has sometimes been forecast.

Next we need support for a viable and properly balanced agricultural industry. That may take the form of a deficiency payment, which has certain attractions, or possibly the producer entitlement guarantee referred to in the evidence. We need something to ease the transition and to keep farming viable and profitable. Some of that support should come from member states rather than from the Community. I believe in a sharing of support. The social problems that arise from the transition—and there will be some—should be met by the member states but with support from the Community Social Fund. Environmental expenditure, as the report stresses, should be decoupled from agriculture. It should be the responsibility of member states, but again with support from the Community.

I believe that United Kingdom agriculture can, as my noble friend Lord Plumb said, hold its own on level terms. We can develop a policy along lines which would make sense and which would avoid the problems we are having with GATT. We would not be handicapped by increasing quotas, large payments and increasing fraud. CAP, as we know it today, must go. We must prepare to meet the dramatically changed conditions of today and tomorrow.

5.25 p.m.

The Duke of Somerset

My Lords, many of your Lordships have drawn attention this afternoon to the shortcomings in Mr. MacSharry's "Reflections" Paper, and the 9th July details which followed upon that. I am declaring my interest as an owner of agricultural land. I agree, too, that sweeping changes are necessary in the CAP. However, the changes that were outlined by the commissioner will not be for the good of Europe. They target efficient agriculture as practised in the UK.

However, the Commission has recognised the ineffectiveness of the CAP achieving its objectives. These failures were well pointed out to our committee. The depressing fact is that vested political interest denies change for the better. The French attitude, as the EC's biggest farm producer, has already been illustrated to us this afternoon by the noble Baroness, Lady O'Cathain, in her excellent maiden speech. The Commission appears unable to think laterally or radically, but it must acknowledge that economic and political conditions have changed since the 1960s when the CAP started. The Commission is at the same time preoccupied with GATT and the Uruguay Round, but it does not seem to be able to make the connection between the two pressures, GATT and CAP.

Policies must surely be interrelated and interdependent; thus the link between protesting French farmers and the future of the world trading system is a political reality. The CAP must therefore he reorganised to benefit European consumers and eventually, I hope, its farmers and our friends outside like the long-suffering New Zealanders. Given the will these apparent contradictions can be resolved. I believe that this report points the way.

Other noble Lords have addressed many of the wherefores raised in the report so I shall mention only three aspects. To give consumers value for money, agricultural produce must be grown efficiently. The UK is one of the most efficient. That, for example, is highlighted in Table 7 of the report. However, Mr. MacSharry wants to hit the UK production hardest by arbitrarily advantaging the smaller, continental farm and discriminating against the UK. It would appear that mixed farms producing below the new ceilings will attract better compensation than a specialist cereal farm. Equally, a German part-timer gets compensation, whereas a farmer in the UK, perhaps supporting three generations, probably will not. Indeed, as we have heard, the excesses produced by the Mediterranean countries have not even been addressed in the MacSharry proposals at all. The sheep headage and milk quota proposals are further examples of discrimination.

Likewise, the set-aside plans target the larger farms, the very ones which are efficient and keep local employment and services going. I am glad to see that the report turns its face against set-aside because it is illogical and inefficient and does nothing for the environment or for farmers' psychology.

Perhaps I may highlight one of the conclusions of the report that to my mind is most important and with which the Government, in the reply we had this morning, appear to agree. That is the failure of the Commission to distinguish between the specific objectives of agricultural policy and other economic, social and environmental objectives. It is highlighted in paragraph 138. Agricultural policy is not the medium for social policy. It is only a link. Assistance for poor rural regions, which is certainly needed, should derive from specific instruments. Equally, policy for the environment should be separately thought out.

Unfortunately, in the United Kingdom the sheer number of different government-sponsored schemes for environmentally sensitive farming is confusing and offputting and discourages integrated initiatives. I should like to see all these schemes, for SSSIs, ESAs, farm woodlands and LFAs, brought together under one hat. I know that the Minister has indicated the difficulties of such an action. She has been very kind in placing a leaflet in the Library which summarises them. Noble Lords will find that most useful. I hope that the Minister will comment on paragraph 188 which highlights the apparent lack of importance afforded by Mr. MacSharry to the environment. It is allocated only 1.8 billion ecus of the reform programme's 39 billion budget; and forestry receives only 300 million ecus. We seem to prefer and expect other countries to grow our timber requirements more cheaply, while we make a better return selling our expertise in such areas as banking and financial services. We bemoan the state of the world's natural forests but we are not prepared to produce the timber ourselves. That is surely a self-indulgence that we cannot afford to perpetuate.

Perhaps I may spend a couple of minutes on the vexed question of additionality. It is mentioned in the report but rather in passing. The New Zealanders have discovered that most of the perceived subsidies to farmers did not end up in farmers' pockets. They were siphoned off by the people who serviced the farms, by transporting, processing and marketing the produce.

Much the same is happening to the payments made by Brussels to the United Kingdom. Whether it comes from the guidance or the guarantee section, the Treasury takes most or all of it from MAFF. CAP expenditure from the guarantee fund is for market support. It is compulsory and is 100 per cent. EC financed. Expenditure from the guidance fund, where the environmental moneys come from, is commonly voluntary and usually only a percentage is paid by Brussels. In the case of the United Kingdom, that is 25 per cent. However, under the Fontainebleau arrangements, the 25 per cent. reimbursement is reduced to only 7 per cent. net in the UK. So with the Government having to find 93 per cent., it is no wonder that the Treasury is reluctant to sanction voluntary schemes.

The corresponding reduction for compulsory guarantee schemes is down from 100 per cent. Brussels funding to 27 per cent. All this money goes straight to the Treasury, leaving MAFF to bid for all the cash needed for EC environmental schemes. The department gets no credit in the annual PES round. That is most unfair and means that there is no incentive to ask for additional money from Europe as the Treasury will deduct the equivalent amount from the department. I ask the Minister: what hope is there for decent environmental funds under this set-up? Does she not agree that it would be far better for such environmental schemes to be made obligatory and at a much higher level of FEOGA reimbursement? In a nutshell, if the United Kingdom is granted x million ecus for, say, a woodland scheme it must be on top of the amount the United Kingdom Government have earmarked for farm woodlands and not deducted from it.

I conclude by extending my thanks to our chairman, the noble Lord, Lord Middleton, for the marvellous way he conducted the inquiry, and also to our Clerk who has done a fabulous job.

5.35 p.m.

The Earl of Selborne

My Lords, I begin by echoing the final words of the previous speaker. As a new member of the committee I have been very impressed by the way the chairman marshalled our admittedly rather disparate thoughts. I am also very impressed by the wisdom with which we have come out at the end of the day.

It is remarkable that something as important to our lives as the common agricultural policy should by now be perceived with almost universal despair by the taxpayer, the consumer, the auditors, as my noble friend Lord Boardman reminded us, by our partners in GATT and by developing countries. Wherever one looks there is agreement that the very ambitious proposals of the common agricultural policy, as set out in Article 39 of the Treaty of Rome, are no longer being achieved, although we must recognise that some years ago the common agricultural policy was on target for achieving some results. It is easy for most people to see what should be done—reduce support and face the market—but it is not so easy for the producer.

In the United Kingdom especially, and elsewhere in Europe, we have had protection in one form or another since the war, and as a farming industry we have got used to it. We recognise that we built our businesses on the back of some extremely wide-embracing support systems. If, as is certainly the case, in spite of the very large cost of the support, producers in this country and elsewhere in Europe are facing declining incomes, producers must ask what will happen if that support is reduced. How will that help their declining incomes? This is the paradox which producers have to face at the moment: given that the £20 billion or more cost of the CAP is not delivering what was hoped under Article 39, how can they face the future with reduced support?

I speak from a position straddling both agriculture and horticulture. I am horticulturalist and a farmer of supported commodities such as cereals and dairy products. I make the simple observation that I am more confident about the unsupported crops that I grow within horticulture than I am about those commodities which have been supported for so long. That is not coincidence. The CAP has led us up a blind alley which we are finding extremely painful. If we as cereal farmers and dairy farmers can be reintroduced into tie market, however painful that will be—every speaker today has agreed that it will be extremely painful—at the end of the day we shall have a future. I do not have any confidence in relying for my living on the gratitude of taxpayers or of governments.

I find milk quotas an especially painful subject. By deciding that we would achieve social and political objectives by increasing the price of milk we then had to limit the production of milk. In this country we have been consigned to being net importers of milk while quotas last. As the noble Lord, Lord Gallacher, pointed out, quotas are a good mechanism if one wants to retire, but that is not a basis from which an industry can build. In fact, it is a disastrous and negative policy which is in danger of permeating agriculture in this country. The decision that producers have to face if they are to recognise that reform is due is whether they wish still to support some form of supply management, whether they wish to see quotas extended, whether they wish to continue to be isolated in one form or other from world markets and reliant on the European taxpayer and whether, as a result of that, they wish to recognise that they will be supplying an ever declining share of the world market —one must follow the other. The alternative is to move towards the liberalised trade which some would say is inevitable anyway if we recognise the political imperatives of GATT. "Liberalised trade prices" is perhaps a slightly more accurate way to describe the prices which we might be facing than "world prices" which, as my noble friend Lord Plumb, reminded us, is simply an expression of "dumped" products around the world and bears no relationship to the logical price of traded commodities.

The Select Committee suggests that we move towards liberalised trade prices. Such a move would entail much courage for producers in Europe and, indeed, courage in this country. To get nearer the market means that we have to harness entrepreneurial strength which, quite frankly, has been lacking in the industry in many aspects ever since protection embraced the industry in a cocoon of security.

I suppose that if one looks at the more marginal areas of Europe—for example, some of the EFTA countries like Norway or, indeed, some of our own areas of marginal farm production—the alternative of moving towards liberalised trade must be most unacceptable. It is inevitable that any reform of the common agricultural policy will have to recognise the very genuine anxieties of many small producers in Europe and elsewhere that they cannot exist without some degree of protection. But what must be established is a very clear definition of the objectives that a reformed common agricultural policy wishes to achieve. If it wishes to achieve food production at nearer liberalised trade prices then progressive cuts are inevitable. However, if, as will certainly be the case, socio-economic support is also desired in certain areas then, equally, that must be provided. It will not apply to all farmers: indeed, it should not apply to all farmers otherwise we would return to our present position with blanket support going in inappropriate directions.

Again, exactly the same concept applies in regard to environmental enhancement payments. As has already been said today, this is an opportunity to re-think what it is we wish to do with the support that might be available. Do we wish to have environmental enhancement and, if so, is there a way of achieving this, especially on a national basis? If it is illogical to have a common agricultural policy trying to straddle so many countries clearly, as has been said, it is totally impossible to have an environmental policy which recognises, for example, the need to keep olive groves in Greece or stone walls in Scotland.

Within a common agricultural policy I am very much in favor of an extension of the system which covers what we know as environmentally sensitive areas, giving considerable discretion to national governments to deploy those funds as they see fit. I believe that they fit in very easily with the concept of reduced food support. Moreover, I believe that they would present no problem to our colleagues negotiating round the GATT table. Indeed, as we reduce support for farmers so these environmental enhancement payments could become a very significant part of income.

I do not favour the proposals made by some environmental groups where, under the jargon called "cross-compliance", continued food price support would be given to those who complied with an environmental menu. I do not do so because I suspect that the payments should be directed to those who deliver the best services; in other words, it will be the case that in some areas there may not be large food production and there will be an enormous delivery of environmental services. That is what one might call "farmscape" rather than landscape—something which is cherished but which the market at present does not reflect though it certainly should do so in the future.

Therefore, I very nervously support the inevitability that we have to move further towards liberalised trade. I recognise that it will be extremely complicated. I do not follow the right reverend Prelate entirely in what he said. He suggested that what we call "efficient farming" has in some ways led us to unsound practices. I believe that it has always been the custom to point to farmers who have been stupid enough to lose their top soil. That is a totally absurd practice and one which has nothing to do with efficient farming. We are looking at the prospect of an increased technology base if we are to survive as farmers. We will have to redefine what we mean by "efficient farming". I say that because anyone who despoils the countryside does not deliver environmental enhancement qualities to the countryside and will not be an efficient farmer. The market must reflect that fact.

I am very alarmed by the fact that although we have so much going for us in this country—for example, we have proximity to markets, we have economy of scale and we have a good research and development base —we do not, nevertheless, compare favourably with some countries within the Community with which we should be on complete parity. I have in mind Holland, Denmark and France—countries that are not dissimilar to us in terms of climate and yet are all net exporters of agricultural products whereas we are net importers. The reasons for that are historic but, nevertheless, it is a damaging flaw in our industry. If we really have any confidence that we shall be able to compete —as I believe we should and can in the liberalised trade market—we must certainly, as an industry, get our marketing structures in place. The noble Baroness, Lady O'Cathain, in a marvellous maiden speech reminded us that Food from Britain has not delivered what was hoped by Peter Walker when he set up that organisation. The deficit is increasing, not diminishing.

The failure of the common agricultural policy—and it must be described as a failure by any criterion—is ultimately down to the Council of Ministers. Time and again, for political expediency or short-term reasons, the Council has failed to grasp the opportunity to deliver to the European Community, and to our competitors around the world, a policy which makes more sense. If the present proposals were to be implemented it would consign agriculture to units which ultimately can only be described as inefficient. That means that when it comes to trade around the world with the large blocs in the southern hemisphere—for example, North America and elsewhere—we will have tied one hand behind our backs. That has got to be nonsense. If we are to have a future for farming not just in this country but also in Europe we must recognise the fact that we must farm efficiently, that we must farm in competition with other people and that the common agricultural policy is about food production allied with responsible use of the countryside.

5.48 p.m.

Lord Stanley of Alderley

My Lords, I welcome the report of the Select Committee as an excellent academic study of the problem. As an excellent reference work it was badly needed and is most helpful. I accept that it is essential for CAP prices to come more in line with world prices. By "world prices" I do not mean uneconomic "dumped' prices—points which were made, first, by my noble friend Lord Middleton and then by my noble friends Lord Selborne, Lord Plumb and Lord Boardman and by the noble Lord, Lord Jay. I must admit that I may have misunderstood the latter. I believe that the figures he quoted were against world dumped prices. That is not acceptable in my opinion.

I believe that it is high time accurate estimates of what are food prices are made. I personally favour a minimum world trading price for agricultural goods. I think that that perhaps fits in slightly with what the noble Lord, Lord Gallacher, said. There is also the problem of the level field which in this country is daily made less level by our legislation which is churned out by the dustbin load. I believe that point was made by my noble friend Lord Boardman.

I do not think that the report spells out how we achieve such a situation and when it does spell it out, I fear that the suggestions would most certainly be unacceptable to the rest of the Community. However, the report dislikes the MacSharry plan. The MacSharry plan warrants more than dislike. It is expensive, soul destroying for the farmer and ludicrously shortsighted. Only a bunch of lunatics could have produced it. I am glad that the Government take a similar view, although perhaps not quite in the same words.

I sympathise with the RSPB's view that if the Select Committee's report is accepted, there could be grave consequences for the countryside. Unshepherded sheep and bullocks—the result of vicious price reductions—will destroy the environment, and in particular, banks, trees and hedges. They will do it far more quickly than a bulldozer. I also support the RSPB in its view that there should be some form of control of farm production, just as car manufacturers control the amount that they produce when they are in surplus and going above demand.

So as to avoid the criticism sometimes levelled at the Government that they have no answer to the problem—I have not changed my mind, and perhaps I cannot when I look at my family's motto in the window above me—I repeat my solution which I spelt out about a year ago when I moved a Motion somewhat similar to today's debate. The CAP must move towards getting our prices at world—non-dumped—prices—a point made by my noble friend Lord Plumb. To reach that position, we have no alternative but to control our output. In the short term, that can be done only by harsh, virtually compulsory, methods of environmentally acceptable set-aside or transferable quota which must be applied equally throughout the Community.

5.52 p.m.

Baroness Carnegy of Lour

My Lords, I join with other members of the committee in congratulating and thanking my noble friend Lord Middleton on the splendid way in which he chaired our committee through its complicated discussions. He played an enormous part in bringing about this report, assisted by the skill of our clerk. I wish to say a word about the report in its political context—the art of that which is possible in Europe at present—and then about one particular aspect of it—the section on compensation.

There is a saying in the Netherlands when a sailor does not know his destination, no wind is the right wind". That saying is not a bad comment on the European Community's problem in deciding what to do about its agriculture. Mr. MacSharry accepts, along with everyone else, that if the present policy is not rapidly changed the position will become untenable. At the same time, the Commission and the Community's Ministers are being buffeted from all sides. They are pressed by one vested interest to move in one direction and by another to move in the opposite direction. Rightly, they are trying to respond to as many conflicting interests as possible, but because they do not have a clear view of where they want the CAP to end up, there is a grave danger that they will not move forward at all. They are at sea; they must change course, but they have not clarified their destination and as a result no wind is the right wind.

The report starts from the premise that we cannot continue a system that sucks in a vast amount of taxpayers' money—which continues to rise—to produce a result which, as noble Lords made clear, suits almost no one. Difficult though the reconciling of conflicting interests may be, fundamental change must be settled upon and must be settled upon soon; and so must a clearly defined way of getting there.

I should like to agree with my noble friend Lord Boardman that we should start with a clean sheet, but I doubt whether that position is negotiable at present, and I doubt whether it is realistic. After hearing a great deal of evidence, the committee found it possible to recommend what should be a realistic way forward —a way that is politically possible, and one which would mean the end of crisis management, with Community spending clearly predictable for years ahead, and farmers able to make their own plans, based upon their own market assessment like any other business. It would also make it possible for farmers to supplement their incomes by doing environmental work in a de-coupled system, as the committee recommended.

The report's proposals would mean that the destination would be clear: the gradual reduction of price support to true world price levels; the phasing out of quotas, most of set-aside and other payments; and, should the GATT negotiations fail, measures to protect farmers against unfair competition. That approach to the GATT is perhaps better than the proposal of the noble Lord, Lord Gallacher, that the whole subject should go on hold until the GATT negotiations are completed.

An important point is that the committee's proposals would mean that the timetable and the means of arriving at the destination would be clear. The precise timetable for reductions of price support and production curbs; the known continuation of some existing aid schemes; restructuring grants; and a revised pension scheme, would be known, and the committee's view is that there should be an additional scheme for transitional help to enable farmers to respond more readily than they otherwise would to a rapidly changing scene. All that would be clear if those proposals were put into effect.

When considering what kind of additional transitional scheme would be most practical and effective to aid farmers, the committee was greatly helped by the evidence of Professor Marsh of the University of Reading who pointed out that, if possible, any additional scheme to help farmers adjust should meet a number of criteria. It should be transitional; it should not involve an open-ended commitment to make payments into the distant future; it should not be linked to price support in a way that would conflict with the GATT; it should not distort farmers' decisions, for example, about the type of farming they were to go for, whether to stay in farming and become more efficient, whether to go part-time, or whether to move to some occupation. Such a scheme should be fixed once and for all and not open to subsequent renegotiation.

The committee looked at two other possibilities. One is known as the PEG scheme and would be a way of continuing deficiency payments in a manner that would be less distorting to the markets than would other forms of such payments. That would however mean continuing into the future payments to farmers of unpredictable amounts. That does not meet Professor Marsh's criteria, and it is interesting to note that the Government have stated that in their view such a scheme is not negotiable.

The other proposal seemed more attractive to the committee. It originated in a paper by Professor Tangeemann of the University of Gottingen, written for the Land Use and Food Policy Inter-Group of the European Parliament. It is described briefly in Appendix 4 on page 79 of the report. This scheme would involve the issuing of bonds to farmers for amounts related to earlier farm income. The bonds would produce annual payments to a farmer of an amount known at the outset, over a known number of years—15 or 20 years —leaving him free to decide whether to retain the bond to supplement his income or to sell it to raise capital, for example, to help him to move to another to area, to start another business or perhaps to retrain, as the right reverend Prelate reminded us. That will be important.

Unlike the Commission's proposal—which it would replace —to give extra payments to farmers costing an unknown amount into the distant future for the first 50 hectares, 40 cows, 90 beef cattle and suchlike, this bond scheme would give rise to a total cost known from the outset. It would give certainty to farmers. It would encourage them to proceed with sensible decisions based on their own market predictions and it could be financed gradually from money saved on the rundown of price support. Noble Lords will find an illustration of possible costing on pages 79 and 80 of the report.

In their response to this section of the report, the Government state that the question of how compensation should be paid must be subordinate to whether compensation should be paid. Of course, that is correct, although the committee was doubtful whether the desired outcome is achievable without some additional incentive and help for farmers.

The Government also say that they consider that any compensatory payments that are made should be limited to the least viable producers and to aids to outgoers leading to structural improvements. In the light of that comment, I wish to ask my noble friend whether, in her reply to the debate, she can go a little further as regards the idea of the bond scheme.

The Government say in their response that the scheme is worthy of further examination. Does my noble friend see the bond scheme as applying only to the least viable producers? If she does, would it not be difficult to decide who would be the least viable, five, 10 or 15 years ahead? That would be a problem. I hope that the Government will not begin discussion of the bond scheme by insisting on criteria which rule it out. Could my noble friend enlarge a little on the Government's thinking about this?

There is urgent need for the end of tinkering with the existing CAP. There must soon be a clear decision and clear statement of where the Community wants to go and precisely how it will get there. I am sure that the whole House will wish the Government well in their negotiations.

6.3 p.m.

Lord Dunleath

My Lords, there is no doubt that there is a need for reform of the common agricultural policy—or uncommon agricultural policy, as it has often been termed. It was conceived in good faith at a time when Europe was not self-sufficient in food production. Memories of the wartime transatlantic convoys were then still fresh in our minds, but now things have changed. For many years we have been embarrassed by surpluses. That is the position with which we are now faced.

The policy has worked too well. The trouble is that in it there is a thin strand of the command economy. It has become more of a social than an agricultural policy. That is why the Commission has had to address the problems which are now before us and why communism has collapsed in Eastern Europe and is now collapsing in Russia. It sustained and subsidised inefficient enterprises at the expense of the efficient and economic ones.

Unfortunately, the MacSharry proposals would continue to contain an element of the command economy. It is a blunt instrument because not all small farmers are inefficient; they may lack capital. Not all large farmers are efficient, though they have heavy capital commitments and heavy overheads by comparison with the small family farm. Thus there is no determinate profitability in either small or large farms.

Some small farmers have additional incomes because they do other jobs. They may drive lorries, work for building contractors or something similar and they farm part-time. Should these people be supported by the economic community and the agricultural policy? Similarly, large farmers can have other sources of income. They may do contracting work. If they are lucky enough to have their land suitably zoned, they may be able to benefit from property development.

Thus there is no easy way of determining the different requirements between one farmer and another. I suggest that it is only the market that is sufficiently fine tuned to be able to discriminate between who will be efficient, who will be qualified and able to continue as a viable farmer and who will not. Therefore, I suggest that EC policy should be market-led, entirely geared towards the market economy.

Social considerations should also be treated and funded as a different issue. There should be a difference between agricultural and social policy. The noble Lord, Lord Jay, said that he thought it was wrong that farmers should be paid for producing nothing. I hesitate to agree with him. Far better that people should go out of production than be subsidised for producing surpluses which are a heavy cost to the community. Better still, the money should be put into the development of rural industry so that people living on the land could find alternative occupation.

I honestly think that subsidising inefficient, uneconomic farms in areas which will never be able to compete in the market is not a good investment. That is not to say that agriculture does not need support, but it should be directed where necessary to the basic elements of production rather than to end support. The problem with end support is that it is often lost along the way. Also, regrettably, it gives much opportunity for fraud.

Furthermore, it tends to increase the disparity between the price received by the producer and the price paid by the consumer. Therefore I respectfully suggest that a market-led policy is essential. However, the EC will have to provide support during what is bound to be a lengthy transitional period between our present situation and the arrival of a fully market orientated agricultural policy. The degree of support that is necessary should not be underestimated. In the meantime, I wish our negotiators the best of luck as they do not have an easy task.

6.10 p.m.

Lord Wade of Chorlton

My Lords, I congratulate my noble friend Lord Harding of Petherton on his maiden speech. I felt nostalgic when he said that he was once in the pig business as I too was once in the pig business. Perhaps now we could enter the non-pig keeping business. It might even be possible for us to obtain a grant that would enable us to carry out research into the best varieties of pig to keep on land that must not produce anything. We have arrived at a bizarre situation as regards the control and operation of the CAP. What we might have thought was impossible before in terms of farming might now be possible.

I w as also particularly pleased to be present to hear the maiden speech of the noble Baroness, Lady O'Cathain, who is sitting across the Chamber from me today The noble Baroness and I have sat on opposite sides of the table on many occasions in the past when she was the managing director of the Milk Marketing Board and I was a humble milk buyer. I greatly admire her for trying to bring about changes within the Milk Marketing Board. I use the word "tried" because, as we all know, change does not come easily to the Milk Marketing Board. However, I am glad to see that it is now acknowledged that some of the proposals the noble Baroness put forward should have been adopted many years ago.

I congratulate the noble Lord, Lord Middleton, and the sub-committee on producing a splendid report. My first reaction on reading the report was that the best thing that could happen in terms of the CAP would be for the noble Lord, Lord Middleton, and his sub-committee to be put in charge of it. That might well solve all our problems. The noble Lord has made us all realise that the present system is untenable and that change must be brought about. Every speaker has acknowledged that fact. I shall not go into those very sound arguments any further other than to say that that change will have an enormous impact on an agricultural industry that is suffering badly.

My family has been involved in the milk farming industry in Cheshire for many generations. Dairy farmers in Cheshire who belong to families who have had farms for the past 200 years now find that they have to leave their farms. Their sons are clearly determined not to enter the family business. My own son is desperate to farm but he is worried about what the future holds for him. That is an appalling situation and it has been brought about entirely by bureaucratic interference in an industry which would have fared far better had it been left alone. That is the case with all businesses. I do not altogether agree with those noble Lords who believe one can interfere to a small degree in the market place. The only way to achieve an efficient farming industry in Great Britain and in the whole of Europe is to get closer to a free market economy in farming. The Commission must move as rapidly as possible in that direction. I agree with the Comments of the noble Lord who has just spoken on that point.

As the report states, we need to encourage innovative and efficient agriculture. We also need to encourage an innovative and efficient food and drink industry. That industry has a high annual turnover and employs some 600,000 people. It uses about 70 per cent. of the products produced on our farms. Therefore, the food and drink industry is an important aspect: of the agricultural industry in this country. If we are to reduce support we must do so in a way that will maintain efficient production on the land which is in production. We must let the market decide much more effectively what land is put into production and what is not.

I do not agree with those who feel that a concern for the environment should be part of agricultural policy. We are not in the environmental business. I and everyone else who is involved in farming is in the business of food production. An environmental policy should be a separate policy and should be funded separately from a farming policy. In any event, the most environmentally friendly agriculture is a prosperous and efficient system of agriculture. An agricultural system that is poor and results in poor surroundings and low quality buildings will result in a poor environment generally. A concern for the environment and a concern for agriculture must be clearly separated.

Agriculture and its environment have been subject to dynamic change ever since agriculture began. It is not true that one system of agriculture is more environmentally friendly than another. We have all survived and grown as a nation and as people through the innovation and dynamism of our agricultural industry. We cannot cut it off at a certain point. Farming is either growing and developing or it is dying.

As may be evident to noble Lords, I am against set-aside and extensification but I believe strongly that we must maintain our powerful rural economy. We all accept that there will be cuts in agricultural production. That production has been the main source of wealth for rural areas. I agree with the remarks made by the right reverend Prelate on the subject. It is essential that the rural economy provides alternative employment to farming. Our Government and the Commission must consider that matter carefully. Many of us inside the House and academics outside it have anxieties about that matter. We have joined forces and have formed a group called the Rural Economy Group. The sole purpose of the group is to press home the fact that we need to maintain economically viable rural areas. That involves considering alternative uses of land and letting the market determine other uses of land. We must recognise that our agricultural land is a tremendous resource and can be used in many ways other than simply to produce food.

We must reconsider the position of the Rural Development Commission which has done much good work in this area but which could be encouraged to do even more, perhaps by setting up rural development areas—we have urban development areas—and encouraging more investment in those areas. The Rural Development Commission should allow farm buildings which have become redundant to be put to more effective uses. If we are to have part-time farmers —that has been referred to on many occasions—they must have some occupation and some means of earning money when they are not engaged in farming.

We must consider quotas. Some noble Lords have already referred to quotas. In the report the noble Lord, Lord Middleton, said quotas had been a disaster. I agree with that. Any system which seeks to control the efficient use of a business is bound to be disastrous. Anyone suggesting that we should pass a law which obliged a factory producing motor cars to cut down its output every year while maintaining its capital and the appearance of its factory would be laughed at. However, exactly the same argument applies to farms. How can we continue to employ people in agriculture and maintain a favourable environment when we are being asked to reduce output every year?

The noble Baroness, Lady O'Cathain, referred to the milk industry. That industry alone has a net deficit of £477 million in this country. Every 2 per cent. reduction in quota will cost this country £62 million more in net deficiency of production. It is said that if we carry on as we are under the present system we shall see a reduction in quota of some 7 per cent. or 8 per cent. over the next few years. Noble Lords will understand the impact that that will have on the costs of our imports. It is entirely unnecessary.

We cannot address this subject without considering how France sees its food industry. The reason we find it more difficult to impose our view on the CAP is the influence of France on these matters. To a Frenchman the food he eats, his food producer and his farmer are important to him. They are vital to his whole life. Therefore, any suggestion that a French Government would do anything to make life difficult for their farmers is immediately met by uproar, as we know. Unless we adopt that same strong political will, unless we say all the time that British food is best and that we can produce here the finest wines and foods in the whole world —and we produce some splendid wines —and unless we have a government which supports that approach at all levels it will be very difficult for us to bring about the changes which we all accept must take place.

The noble Baroness Lady O'Cathain mentioned exporting cheese to the United States, which is something I used to do. On one occasion I attended a fair in Washington with all the main cheese producers. We each received a fax saying that the EC had that day decided to double the export refunds on a certain variety of cheese for 24 hours. While we were busy in Washington it was impossible to put together a deal within 24 hours to make use of that refund. We subsequently found out that the French had negotiated that refund, knew in advance that the refund was coming and had set up all their deals some weeks earlier. On that day they made a killing and got rid of large surpluses of cheese which they had in their stores. Nobody else in the whole of Europe had an opportunity to do that. That was about five or six years ago.

That is an example of the kind of co-operation between the French Government and their producers that we have not seen in the United Kingdom. Such co-operation will be important if we are to beat them. We can only beat them by joining them and not by thinking that we can persuade them to change, because they never will.

I agreed very much with my noble friend Lady Carnegy in relation to the bond scheme. We must move from the existing system to a free market system in a given number of years. It may be 10 years or it may be 15, but we must make sure that support and production are no longer tied together. The bond scheme as proposed by Professor Marsh seems a very acceptable and sensible way of tackling that problem. We must encourage farmers to go out of the business and not work on the basis of keeping all farmers in business.

I believe that our Government can play a much more positive role in the argument in Europe. It is not for us to wait for somebody else to put forward ideas that we knock down. We should produce a policy—a strong, thoughtful policy—which encourages and is in the best interests of UK agriculture.

6.23 p.m.

Lord Lyell

My Lords, I have to declare my interest —just as the noble Duke, the Duke of Somerset, declared his interest—for better or worse, in many of the proposals, reflections and recommendations in this excellent report.

I should like to thank and congratulate my noble friend Lord Middleton and all the members of his committee for their very hard work in producing this very worthwhile and valuable report.

I wish to send my best wishes and those of all Members of your Lordships' House to one stalwart member of the committee, my noble friend Lady Elliot. I understand that she is on the mend. I am sure that she would have made a forthright contribution this evening.

I should like to reflect on Article 39 of the Treaty of Rome, which your Lordships will find in the report. It is a marvellous example of a panjandrum's solution to all our problems as agricultural producers throughout the Community. There is also much in Article 39 which could be applied to environmental payments.

I should like to consider the objectives of reform. Paragraph 146 suggests four objectives. The first is the sustainable development of an innovative and efficient agricultural sector. The remarks made by my noble friend Lord Wade have shown your Lordships that the agricultural and food production sector is efficient as well as innovative. Other objectives set out in paragraph 146 are to respond to the demands of consumers and integrating production throughout the Community into world markets without distortion. That point was put very well by my noble friend Lord Stanley. A consistent thread through the discussions this afternoon, as well as in the report, is that there should be no discrimination within the European Community. That dreadful word "modulation" seems to crop up time and again. There should be maximum value for money in any compensation payments to producers under whatever guise or in whatever direction.

We have discussed some aspects of how those objectives are to be achieved. Price cuts may be the most efficient method. Paragraph 83 of the report assesses the effect on consumers.

One of the methods which has already been tried, and which has been referred to in somewhat colourful terms, is curbs on production and quotas. The noble Baroness, Lady O'Cathain, made a particularly apt response to the problem of quotas. The noble Lord, Lord Dunleath, will remember how quotas hit the dairy industry in Northern Ireland. It is engraved on my memory, and many in Northern Ireland still refer to the result as: Minister, nil; lions, 2, still munching. I suffered considerably when trying to impose the quotas. However, possibly they were agreed to be best for the industry.

Thy MacSharry proposals refer to further milk quota cuts. If they were to come to pass one half of the reductions would apply to producers in the United Kingdom and the Netherlands. One third of the proposed cuts would be the responsibility of producers in the United Kingdom, including producers in Northern Ireland where the average size of dairy herds is far smaller. Further, in the report we find that in Portugal 80 per cent. of the milk produced comes from herds of three cows or less. In the United Kingdom the figure is 63 cows. Mr. MacSharry's proposals may be a rather blunt instrument for curbing production, but before one can start some of those discriminatory aspects must be ironed out.

The noble Lord, Lord Jay, referred to the enormous stocks of beef. The stocks in intervention stores in the Community seem to have fluctuated between 700,000 or 750,000 tonnes. I am concerned about how one can reduce such surpluses. Perhaps we had better not consider the cereal surpluses this evening. In the case of beef, do we opt for stocking limits or for extensification? My noble friend Lady Carnegy and my neighbour the noble Lord, Lord Mackie, will be aware of the scenario in my own county of Angus. That situation will vary all over Scotland and, indeed, the United Kingdom. It is not necessarily a problem of the stocking limit but rather one of employment. In our area of Angus there are family farms, but under the MacSharry proposals even those farms would be hit by the proposed new limits of 750 ewes. Some of the farms that I have in mind. which are not in less favoured areas, would have a limit for the premium of only 350 ewes.

The proposals that we have before us this evening are startling. Certainly my noble friend Lord Middleton and his committee have given us at least an insight into where we ought to start and the support that we ought to give to my right honourable friend the Minister in these negotiations.

My noble friend Lady Carnegy mentioned one of the systems of compensation; namely, the bond. I am sure that your Lordships and indeed the committee would agree that this is the most cost-effective method of compensating any farmers who would be affected by the proposals. I took a glance at the costs of the reforms as regards the European Community budget, which were referred to by my noble friend Lord Boardman. The figures produced by my noble friend at the Ministry of Agriculture for the costs from 1997 —when I understand these proposals might come into effect—are £1.6 billion sterling a year. The accompanying measures by 1997 would account for an additional £1 billion sterling a year. That makes £2.6 billion sterling every year on top of any other costs to enforce the proposals that are set forth in the report.

Certainly the report that we are discussing gives very valuable guidance on the problems, let alone any solutions for reform. However, the priorities for the United Kingdom agricultural sector are threefold. The first priority is to demand a level playing field throughout the Community. Secondly, one must at least restrict the evil discrimination of modulation that seems to run like a thread through all these proposals. Thirdly, we must insist on a drive for quality and improvement for everybody in agricultural production, selling into a market at realistic and achievable prices.

I believe that my noble friend on the Front Bench has a particular part to play in that. She knows, and I hope that noble Lords also will appreciate, that marketing of agricultural production tends to take place at very large international events. I am sure that many noble Lords will know about the enormous efforts made and above all the effectiveness of such events throughout the world. That is evident when my noble friend goes to food fairs—Food from Britain —both within the United Kingdom and abroad. What she does is much appreciated. I believe that the ministry and indeed Food from Britain are very lucky to have the support of my noble friend.

I hope that she and my right honourable friend the Minister will be able to iron out some of the discriminatory points in the MacSharry proposals. The report produced by my noble friend is a very valuable starting point. It covers many issues and for my part I am grateful to him and his committee for producing it.

6.33 p.m.

The Earl of Radnor

My Lords, I should like to congratulate my noble friend Lord Middleton and the committee on producing an excellent document. It explained to me many things which I had not perhaps properly understood before.

I first noticed—a matter referred to by the noble Lord, Lord Gallacher—that the common agricultural policy at the present time fulfils just about one subsection of Article 39 and nothing else whatsoever. In point of fact, the brave beginnings—we all know what those beginnings were—have turned into a mad horror story which compounds its madness as it goes along. I listened with great interest to all noble Lords who spoke and to the noble Baroness who made such an erudite speech. I am deeply impressed by their command of the figures and, I imagine, their command of economics, although they seemed to have varying degrees of skill and differing views on the latter. I am not good at figures, nor am I good at economics. For me it seems that the best way to tackle this whole matter is to simplify it as much as possible.

One of the major difficulties of the common agricultural policy which has led to frauds, among other things, is its complexity and its detailed worry of little subjects here and there. We all know that there is too much food in Europe. We know that the mountains of food, which are expensive to the taxpayer and the consumer, have to be prevented from growing any larger. For one thing it is almost immoral that they should go on being collected, and it is certainly becoming impossible. We also know—indeed, many people have made the point and it is of enormous importance—that world trade could be seriously disrupted if some kind of a gesture is not made by Europe toward the rest of the world. The GATT Round is not just a matter of agriculture although it might well founder on the rock of agriculture. In fact it deals with all kinds of liberalisations in other areas of trade, which I would not say are as important as agriculture but which are certainly important. That should be borne in mind.

In the whole of our thinking about agriculture worldwide there is an underlying difficulty. Europe cannot compete with the world for many agricultural products. I cannot speak for wine and tobacco; but as regards cereals, whether the price is a dumped price or a free liberalised price, I honestly believe that Great Britain, which has bigger farmers compared with the rest of Europe, would have the greatest difficulty in competing with wheat from, say, Western Australia, Saskatchewan or the province of Buenos Aires. I just do not think that we could do so.

The stark point of the whole "book" written by Sub-committee D was the "Reflections". I must admit that to me the word "reflections" did not imply any great urgency but perhaps the follow-up to the Mark 2 MacSharry rectified that. To start with, it looked to me quite encouraging—a price of about £70 for cereals and reductions for the other commodities, at least in the direction of world prices, which would very probably satisfy the GATT Round and keep world trade on its feet. But it would leave most of the farmers in Europe broke and most of the people who work for them out of a job. So there had to be compensation and that is where the trouble began.

The arrangement became more and more complicated, favouring as it did the small farmer all the time and therefore favouring the European farmer over the British farmer. That is a serious enough question in itself. But what horrified me was that it favoured the small family farm (whatever that is). I have a great deal of sympathy with that in a way; but it projected the inefficient into the foreseeable future so that one could see no light at the end of the tunnel. One could not see that one day Europe would have a competitive or near-competitive agriculture. Agriculture would just stagnate. That sort of Robin Hood attitude, passing quotas from the big fellow down to the smaller one and favouring the smaller cereal grower and not forcing him to have set-aside, may sound very good but in fact would lead to immense trouble which would continue almost for ever.

I believe that my noble friend Lady Carnegy was the first person seriously to mention the "bond" of Professor Tangermann or Professor Marsh. Compared with all the other suggestions in the MacSharry list, which I hate, it seemed simplicity itself. I am sure that it is not. But it seemed flexible. It seemed to be based on exactly the right premise—loss of gross income. It seemed flexible. It could be weighted towards the smaller farmer if that were needed. It could be extended in years far into the future or not so far.

I should like my noble friend on the Front Bench to suggest this country's negotiating position when we return to the table in Brussels. The MacSharry proposals have provided a skeleton which will be difficult to destroy. The Minister will have trouble in altering the position in our favour or improving it because he will be forced into arguing around peripheral matters rather than the heart of the question. I suggest that he strongly considers this idea of an exchangeable bond. I noted from questions that he viewed it favourably. The MacSharry proposals —except for the liberalisation aspect—can therefore be swept aside and we can put a new idea on the table, one that was invented in Gottingen and was approved by a committee chaired by Professor Marsh on behalf of the European Parliament. That is a good reference for any completely new idea. I should like to see Mr. MacSharry's proposals disposed of and those of Professor Tangermann taken on board.

I follow the comments of my noble friend Lord Wade in pointing out that whatever happens, people in the countryside will be a great deal worse off. Farmers will be worse off and farm workers will be out of work. As many noble Lords have said, real farm incomes have been decreasing for some time now. It is to my knowledge that farm workers are being put out of work now. I do not know whether or not their employers were efficient. But that situation will grow whatever happens. It is therefore important that the matter should be tackled more vigorously than at present. There is a feeling at present—and one must to a certain extent blame people who have moved from towns to live in the countryside—that the English countryside must be preserved in aspic, like a Stanley Anderson print, with horses, flowers, and not too much manure; but whatever happens, not a workshop down the road.

I am afraid that that attitude has to change. Human beings come in front of such considerations. It is just possible —using such foresight as I may—that a number of farm buildings will become redundant over the years. They will not be the little thatched Victorian barns suitable for a basketmaker or someone undertaking ironwork. They will be steel and asbestos buildings with storage for cereals. I have certain experience of industrial parks. There is no difference between such a building and one that might be found in an industrial or retail park. I hope that in the future planners will be aware that such buildings which are no longer of use for farming should be allowed to have a change of user. First, one hopes that that might encourage employment for the people who have been put out of farming and may encourage the farmers to start a subsidiary business or to let the building to someone else.

I reiterate that I hope that we can get rid of the MacSharry Mark II proposals except for the liberalisation of prices. I hope that we shall look very hard at the exchangeable bond.

6.45 p.m.

Lord Palmer

My Lords, I too welcome the opportunity to participate in this debate as I consider the reform of the CAP is perhaps one of the most serious problems facing Europe since the end of the last war.

It was also a great pleasure to listen to two such fine maiden speeches. I also should like to pay tribute to the noble Lord, Lord Middleton, and his committee. Three years in anything to do with agriculture is a very long lime indeed. However, I feel sorry for the noble Lord, Lord Mottistone, who follows me for two days running in a debate.

I must declare an interest as I try to farm. I say "try to farm" because I am finding it increasingly difficult to make ends meet especially as I have just sold my wheal for the same price that I obtained 10 years ago. Ten years ago, my Lords! It may interest your Lordships to know that a decade ago in Scotland the price of a standard loaf was just 37p. Today that same loaf costs 65p. If the price of wheat falls by Mr. MacSharry's proposed 25 per cent., I wonder how much the price of a loaf will fall. I would also hazard a guess that no European commissioner is receiving the same salary that he received 10 years ago.

I used to live and work in Belgium. Certainly at that time I was a staunch pro-marketeer. However, I have now become increasingly disillusioned. On page 9 of the report there is a reference that I should like to quote. It states: The time has now come to cease pretending that a single policy can be devised which will, in practice, meet the needs of different member states with diverse agricultural systems of varying environmental and social economic priorities". I consider that this is a polite way of asking, "How on earth can bureaucrats, well cushioned in Brussels, devise realistic policies for the inhabitants of the Greek Islands which, in turn, would suit the inhabitants of the Outer Hebrides?".

The noble Lord, Lord Boardman, called for a clean sheet of paper. That idea has much merit; but might not a large broom be more effective? Perhaps I may give a small example. Fifteen years ago my neighbour bought a typical moorland farm. By the late 1970s he was told by the EC that more food was required and he was financially encouraged to drain his moorland. Ten years later he is told to do the reverse: to set it all aside. This is financial madness and a prime example of the EC economic inefficiency. I wonder how future generations will view these past two decades.

Most non-farmers appear totally unaware of the importance of long-term planning in agriculture. Already 80 per cent. of next year's harvest is in the ground and growing. We have only an idea what that crop will yield. No farmer can begin to budget effectively if the goalposts are moved in the middle of the game.

I d o not believe that anyone outside farming can begin to realise how serious Mr. MacSharry's proposals are. My local NFU area has just conducted a survey on the effects of his proposals in our area. The results are shattering. In the Scottish borders alone, the drop in income to the farming community is estimated at a staggering £7 million. If one multiplies that throughout Scotland, let alone the whole of the UK, the effects of the proposed cuts are mind boggling. Surely we are now facing an agricultural and rural crisis which is more serious than at any other time in the history of this nation. It seems ironic that the reason is that we have done exactly what we were told to do.

When one thinks that 25 per cent. of the world's population is starving and that every day 40,000 children die from malnutrition, that is a very sorry state of affairs.

If the proposals go forward, surely it is not right that the UK should be so unfairly treated. I beg the Government to fight the proposals every millimetre of the way. After all, in another place the Minister has pledged his support for the UK agricultural industry. We must hope and pray to see even greater evidence of that support on 21st October.

6.51 p.m.

Lord Mottistone

My Lords, I thank the noble Lord, Lord Palmer, for saying that I may be sorry to succeed him in two successive debates. In fact, I am delighted and I agree with much of what he said. He is the son of a very old friend of mine who would have been delighted to hear his son make such forthright, useful, brief and to the point speeches. I congratulate him warmly on what he said both yesterday and today.

I must leave early this evening. I apologise in particular to the Minister of State. I may not be present to hear her wonderful summing up.

I was a member of Sub-Committee D in the 1970s and 1980s. My noble friend Lord Middleton allowed me to take part in some of the evidence-taking sessions on the subject which is under report. I had nothing to do with the report itself but I strongly support it, especially as regards the progressive reduction of price support to a set timetable as described in paragraph 197.

I should like to think that when the set timetable first came into Sub-Committee D's thinking it was the brainchild of our noble friend—and I put it that way —Lord Walston who sadly died during the course of the inquiry. He would have been delighted to see the report in its conclusion. Knowing him fairly well, I believe also that he was pleased to die in harness while in the middle of a report for Sub-Committee D. I miss him greatly as a friend.

As my noble friend Lord Middleton said, the main recommendations of the report are consistent with those given by the sub-committee over successive years, certainly over the past decade. Perhaps all that is new is that a solution on the lines of the sub-committee's recommendations is essential for an overall GATT agreement. I am sure that a GATT agreement is absolutely essential in the general interests of the country. We must have a conclusion which matches what that means.

Food processors in particular require not only a GATT agreement; they support the reduction in price support progressively to a set timetable. I should perhaps remind your Lordships that for many years I have been parliamentary adviser to the Biscuit, Cake, Chocolate and Confectionery Alliance in which I must declare an interest.

The set timetable was always intended to try to ease the strain on farmers. It seems to me that that is the key factor in these recommendations. However, I am appalled at the lack of determination by successive Councils of Agricultural Ministers to grasp that nettle or, indeed, to do anything useful to improve CAP over all those years. Their collective ability as a group of people has been minimal. Whether or not people like what MacSharry said and whether or not they like this report, I am sure that we shall obtain the lowest of lowest common denominators from that group of people yet again. It has happened time and time again. Although on earlier occasions I have not been as forceful, I remember saying something very similar when we debated the 1985 Select Committee report.

It is a sad world. I agree with the noble Lord, Lord Palmer. Over the years I have been an enthusiastic pro-Marketeer but I am becoming more and more disillusioned. I hope that before the European federalists go plunging on, trying to join us together in a hideous conglomeration of 24 states, they will pause for thought and consider how ineffective have been the collective managers—the Council of Agricultural Ministers—in managing two-thirds of the Community's expenditure. They have made such a mess of it over the past 25 years during which I have been associated with the matter. God help us if we have a central European governmental system to try and manage the rest of it. I hope to God we never get there at all.

6.57 p.m.

Lord Monk Bretton

My Lords, I begin by saying to the noble Lord, Lord Middleton, that I believe his sub-committee has done a profoundly good job in clarifying the thinking behind the issues, even if there is not much good cheer in the report for agriculturalists like me. I believe that the report will help the Minister in his negotiations where I hope he will be successful.

I am glad that the Select Committee report is critical of the MacSharry proposals. Suffice it to say that when applied to the United Kingdom, I believe they are grotesque. I am pleased that at this late stage of the debate I can use a word which has not been used already for the MacSharry proposals. However, I believe that it is appropriate. The Ministry of Agriculture summary on page 78 provides very adequate explanation of why the proposals are grotesque although I should have preferred that analysis to go further into the economic effects upon the UK farming industry and balance of payments.

We face a very serious agricultural situation. I have heard some bleak comment to the effect that up to one-third of existing farm enterprises in the UK could collapse within two years if the MacSharry proposals go through in their present form. Undoubtedly, the industry is fearful. If the proposals are bad news for British agriculture, they are certainly bad news for the British nation. I believe that the European Community will also find that to go forward with them largely unmodified would be the greatest possible mistake.

On a personal note, having spent much of my life building a reasonably efficient farming enterprise out of a number of smaller farms, I do not want to see that work undone. I recollect only too clearly that previously the cry had always been one of poverty, and that was in more affluent times than today.

I was brought up short by paragraph 148 on prices which says: Deeper cuts are required in order to transmit the appropriate signals to farmers". The general emphasis on price cuts set me wondering how hot the kitchen was going to get, how many people would be left in it, and what state it would be in when vacated. I find it all somewhat depressing.

The main consideration is that of world trade, in particular the trade in cereals which has long been a difficult subject. In the 17th century Gregory King's law on wheat was that if the crop diminished by 10 per cent. the price rose by 30 per cent. and if the crop diminished by 20 per cent. the price rose by 80 per cent. We were confronted with the situation, as always, of fluctuating supply and inelastic demand. Today we make a better job of production than we did, and it should be noted that north west European wheat yields are much more stable and reliable than anywhere else in the world.

Upward price excesses have been tempered over the years by developments in shipping and transportation, in greater international trade, in alternative supplies and greater competition. Food security has been assisted by the growth in international trade, but the corollary to Gregory King's law has unfortunately remained with us. I give an example. According to the International Institute of Agriculture, although world wheat production in the period 1920–1934—the great recession—did not exceed consumption by more than 2 per cent., world prices nevertheless fell from 115 shillings per quarter in 1920 to 23 shillings in 1934. Agriculture was in the direst trouble. It was widely considered essential at that time that somehow or other prices for primary products should be raised so that trade generally could recover.

Much of the foregoing has been taken from Paul de Hevesy's most comprehensive book entitled World Wheat Planning published by Oxford in 1940 which was required reading in my university days for those who studied international trade in agricultural products. I found it useful to read the book again. Although the details today are different, the fundamental problems are very much the same. The author was arguing for a further attempt at an international wheat agreement following the failure of the 1933 wheat agreement which he considered could have been better devised. He was involved in the negotiations, and at the time when the Argentine broke the contract I think he was in post as a diplomat there.

The historical context is that by 1936, after various efforts, we found that wheat prices had recovered somewhat, but thereafter prices fell again; acreage planted began rising menacingly and concern once more grew. As we know, this was solved by the less than satisfactory method of Hitler's war. Today, perhaps, de Hevesy's thinking is again appropriate, at a time when what he called a wheat armistice is once more in the air.

Those are matters which will be included in the GATT round: I hope that we shall get an acceptable package. It is very important that we should, and also that the many points with which de Hevesy dealt should be covered. At the same time we have to think about the problems in Eastern Europe and about the starving people in Africa.

De Hevesy's thinking on the matter—I will have to deal with it too briefly to do it justice—was that we had a problem over the capacity of farmers to plant more crops when prices fell; that gyrations in price were such that orderly investment to produce efficiently was impeded; and that autarkic solutions by national governments would be the outcome. By "autarkic" I mean national protectionism policies made in isolation, just like the common agricultural policy. He feared that those policies would make matters worse unless they were co-ordinated; hence the need for an international wheat agreement involving broad targets which nations could agree and then carry out in their own way. Of course, it is all more complicated than that, but it shows that the idea has been considered before, and proved successful with some commodities.

De Hevesy considered that intervention of some sort was the only way to get over the hump, as it were. It did not matter if the truce did not last for ever provided that it lasted long enough to achieve that. I hasten to say that I am sure those noble Lords who believe in the free market will be relieved that he favoured using methods other than strict acreage quotas to control acreages rationally. Coercion was the ward. I draw attention to the fact that that is virtually what the National Farmers' Union, together with COPA, suggest in their proposals.

According to de Hevesy, the proposals were used in the United States in the early 1930s, and I understand they have been resorted to there since. From that de Hevesy also developed a further two-group system of conformists and non-conformists in Czechoslovakia in 1936. His book contains a comprehensive encyclopaedia of devices of this kind, their history, and the results in practice.

I mention these matters in order to caution about excessive reliance on price alone. That is not to say that the question of price has no effect. I believe that it is absolutely vital, but a combination approach is necessary.

Perhaps I may conclude by talking briefly about consumers. First, I would point to the size of the agricultural industry all over the world. If it is put into recession by unremunerative prices the effect of the loss of its purchasing power is felt worldwide. Whether the price of its primary products is higher or lower has little bearing on the retail price of food. The well-being of the industry is of great concern, therefore, not only to farmers but, for example, to manufacturers in Manchester, to their employees and to all consumers who want a comfortable life and long-term job security.

7.10 p.m.

Lord Marlesford

My Lords, I feel I should start by declaring the prejudices and the fears of a medium-sized Suffolk farmer, part of whose livelihood depends upon the prosperity—perhaps I should say the survival—of agriculture. I should also like to say that as a member of the Countryside Commission I am an enthusiastic advocate of enhancing the beauty of our countryside, and as a member of the Rural Development Commission I am deeply concerned with trying to improve the social and economic viability of those who live and work in the countryside. I was very glad that my noble friend Lord Wade referred to his new group. I am hoping to take part in it. I think that one of its main jobs will be to try to reconcile things which are not always easy to reconcile.

This evening I should like, if I may, to relate the GATT controversy to the CAP reform. In doing so, I should like to focus particularly on the motives behind some of these things. The noble Baroness, Lady O'Cathain, in her excellent and fascinating speech, did well to remind us that these national motivations play a very important part when trying to understand why people behave as they do.

Perhaps your Lordships will allow me to digress a little into history. I think, first of all, that British agriculture faces the most gloomy prospect it has faced since the recession of the 1930s. Professor John Nix of Wye, for whom I have a lot of time, has shown that farm income per acre in real terms is well below half, in real terms, what it was in the mid-1960s, while national average earnings have risen by about a third in the same period.

During the 10 years 1980 to 1990 the net worth of United Kingdom agriculture, taking everything together, has fallen by some 40 per cent. Of course agricultural land has fallen dramatically and very rapidly; and quite rightly so. I would only say that my heart goes out to those farmers who were persuaded by their banks to borrow large sums of money on what were clearly wholly unrealistic prices of agricultural land in the early 1980s. Indeed I once had to tell my bankers, when they graciously told me they were prepared to consider the level of my overdraft, "Look; you do not have a problem on whether or not to lend money to me: I just have a problem as to whether to borrow it from you."

The depression which has now hit us is of really historic dimensions and, as I said earlier, I should like to look at some historical facts for a moment or two. During the Napoleonic wars there was a huge increase in the price of wheat and the peak occurred in 1812, when wheat reached £28 per ton. I am not making any adjustment for prices one way or the other, but that price was not reached again until 1953, when it reached £31 a ton. You can imagine what that really meant.

There have probably been four golden periods for British agriculture in the past 200 years or so. In the middle of the 19th century, interestingly after the abolition of the Corn laws, something happened which I believe to be quite relevant to today. The middle west of the United States was opened up by the coming of the railways. There were effects of that in Europe and in America. British wheat production fell by 60 per cent. between 1873 and 1894. By 1895–6 Britain was importing three-quarters of all its grain. However, something which was in a way more dramatic was happening in the United States and I believe that also is not irrelevant to us today.

On the eastern seaboard states of New England, which had been primarily agricultural for a couple of hundred years found that their agriculture disappeared almost overnight, certainly between about 1870 and 1910. In those magnificent woods which many of your Lordships will have visited to see the famous autumn colours in the fall there can still be seen nestling, if you fly low in a small aeroplane as I have done, the remains of the farmsteads and the walls of the farms which disappeared. They disappeared as a result of the opening up of the middle west, and its competition was totally unable to be sustained by that eastern agriculture.

I am not sure that it is in the interests of the people who live and work there—indeed I am sure it is not —or even in the interests of the countryside itself if much of Europe becomes covered with trees. The Americans would be perfectly happy to see them because I believe that much of their talk about GATT, free trade and third world markets is actually a form of protectionism and a method of seeking better markets for their own middle west. I do not blame them for that, because it is the job of governments to represent and protect their peoples. That is something that we too have to do. We must remember that the Americans are quite able to support their own agriculture in various quite cunning ways. It is not true to say that everything should be open to world prices. Noble Lords have referred in this debate to the bogusness of the world price, the so-called Chicago wheat price, which is really the price at which relatively small surpluses are traded. If those surpluses were to become relatively small deficits we might see very different prices.

Of course in Britain we enjoyed a boom in agriculture after the war, and I agree with the noble Lord, Lord Jay, that the pre-CAP regime worked rather well. The prosperity of British agriculture was, I believe, one of the major achievements of the Labour Government after the war. But then came the CAP boom, and that was too good to be true and certainly too good to last. Now we have Mr. MacSharry who is trying to put it right.

I suspect that Mr. MacSharry, like some others of his countrymen, is no great lover of the English. Indeed, I am told he has gone out of his way to reassure the Scots that they at least have nothing to fear from his proposals. This I think merely underlines the fundamental fallacy of his proposals, which is that money saved on production by the efficient should be handed as a form of permanent unemployment benefit to the inefficient.

I am quite keen on quotas. Certainly if you are going to take the approach that countries or blocks of countries such as the European Community must for their own reasons be allowed to produce a large proportion of the food they need, the quota is not a bad way of doing it. In fact dairy farmers are doing much better than many other farmers at the moment as a result of quotas. The quotas must of course be tradeable. That is crucial. I see no reason why quotas should not be extended to cereals. It would have to be done differently: it could not be done by quantity. It would have to be done by acreage, and we have quite useful precedents for doing that in both sugar and potatoes. Nowadays, with aerial surveying, it is possible to monitor and police a quota system but of course the monitoring and the policing—this again is something to which the noble Baroness referred—must be done equally throughout Europe. We cannot have a system, whether it comes out of MacSharry or anybody else, whereby we are playing cricket and the others are not.

I do not believe it is beyond the capability of modern investigative and supervisory methods to ensure that people do play fair. We are having a little exercise in that in Iraq at the present time. If it can be done in Iraq, I do not see why we cannot at least make an attempt to have some sort of international policing of whatever regime comes forward as a result of MacSharry.

I should like briefly to make a few remarks about the environmental and social aspects of the excellent report produced by the sub-committee of which the noble Lord, Lord Middleton, was chairman. The view of the Countryside Commission very much coincides with the theme in the report for separating measures for the protection of the environment which is best done through the regulatory role, and those which encourage the enhancement of the environment. The latter must mean paying people for doing things. I do not believe in compensating people for not being allowed to do what they had no intrinsic right to do. Equally, if you are asking people to behave in a non-commercial way then they should be compensated for it.

I abominate the sterile system of set aside. First, I do not believe in paying people for doing nothing. It is not the way to spend money. Secondly, the result is either an unattractive mess or an unattractive sterile pattern. The alternative which we in the Countryside Commission have put forward is what we call "conservation lands". These will be lands where the main objective is the enhancement of the landscape.

I wish to say a few words about the concerns of the Rural Development Commission. I know that my noble friend Lord Shuttleworth would be speaking if he were here, but at the moment he is leading that commission in a study of the problems of Cumbria. Farm diversification cannot of itself begin to meet the problem. The Minister of Agriculture, Mr. Gummer, got it right when he dismissed some of the rather more idealistic and fanciful alternatives as "Lupinitis". I do not believe that we can expect farmers to make up anything like the shortfall of income which will result from MacSharry.

What is needed is diversification of the rural economy into off-the-farm and off-the-land jobs. I very much agree with some of the suggestions made by other noble Lords about, for example, the need to convert redundant farm buildings to alternative uses. That can be of great value and produce new jobs extraordinarily cheaply. Above all, I do not believe that it is for Brussels to decide which areas of this country should receive such economic assistance. I hope that the Government will make clear that whatever comes from MacSharry, we shall keep that decision firmly in our own hands.

To sum up, I do not believe that we can allow the future of our agriculture, our rural economy or the beauty of our countryside, to be determined either by the Americans in their interests or by MacSharry with his desire to retain, at great financial cost, a European peasant economy. I believe in free trade, but it must be genuine freedom. There must be freedom for market forces to determine, within the requirements of an enlarged community, who can produce most cheaply the food that we do need. The saving of costs to the European budget should be used at least in part to diversify our rural economy and to enhance our landscape.

7.23 p.m.

The Earl of Balfour

My Lords, I believe that the Members of your Lordships' House who sat on the Select Committee on the development and future of the common agricultural policy produced a very good report. As a farmer, I record my thanks to them. Farming is a way of life; it is long term. We cannot change our policies quickly. I believe that was extremely well brought out by the noble Lord, Lord Palmer. Equally, I believe that because of the British climate farmers can expect, even with the best farming methods in the world, to lose money at least one year in seven.

My criticism of the European Commission is that it does not appear to differentiate between wheat, barley or other cereals with the exception of rice. Neither have I found any differentiation between the different kinds of wheat, barley, oats, etc. I believe that it is very unfair to put all cereals into the same basket. Although I am glad that Britain is a member of the EC, it is my opinion that British bread is far superior to European bread. I prefer wholemeal. British bakers prefer the hard North American wheat which is called "strong flour". It is high in gluten. It is a very sticky flour. British bakers prefer it because they can add a great deal more water to it. In other words, the baker can produce between 6 per cent. to 10 per cent. more bread per kilogramme of flour. Our British climate makes it difficult to produce this quality of flour.

In Scotland I can grow biscuit quality wheat which all goes for distilling. French bread is made from a much lighter type of flour. In France I quite enjoy eating it, but I get quickly tired of it. I find that a loaf that I have kept to the next day is inedible. British farmers manage to export a great deal of wheat to Italy and parts of the Mediterranean to make pastas and pizzas.

There needs to be a distinction between malting and feeding barley. Malting barley is very low in nitrogen at about 1.5 per cent. to 1.6 per cent. There is a big demand for the lager type beer which, if made from barley that is high in nitrogen, tends to go cloudy. Cloudiness is a natural result from yeast, as some noble Lords will have discovered from making home-made wines and beers. Even whisky can go cloudy when its barrel strength of, say, 90 per cent. alcohol is reduced by adding water to achieve a bottle strength of about 40 per cent. It is always filtered. Bottled or barrelled beer is also watered down and filtered. If it was made from high nitrogen barley it would go cloudy after the water had been added and would not sell. Because of soil types there are many farms which cannot produce malting quality barley.

In the wide range of evidence obtained for the report I am sorry that there was no specific mention of any evidence from the distillers' or brewers' associations. There is a strong feeling in Scotland that this Government have not really supported this important foreign currency earning industry. I shall give noble Lords one example. When Guinness plc took over United Distillers of Scotland it promised to establish its headquarters in Scotland. That has not happened. The EC also wants to increase the tax on spirits as against wines and beers.

We farmers fully realise that different areas and countries produce different crops. We are aware of our neighbours' problems. But it cannot be right for a farmer to be supported for growing tobacco for which there is little sale. Equally, it cannot be right for us to have to pay the full co-responsibility levy of about £7 per tonne when we sell oats when there is a shortage of oats.

In this country I enjoy a glass of milk, but in Italy or the south of France it tastes horrible. It is as though the milk had been boiled for a long time. It is wrong to put a dairy farmer in this country into the same category as a dairy farmer of, say, Spain. That point has been raised by my noble friend Lord Harding of Petherton in his excellent maiden speech. I should like to say, too, that I felt that the maiden speech by the noble Baroness, Lady O'Cathain, was absolutely superb. I support every word she said. If I may politely say so, for me that was the best speech this evening. She hit the nail on the head. Whatever may be said in the anti-discriminatory laws, we are not all the same. We like to have different types of food. In my opinion, the one-in-three part-time farmers in Europe cannot be put into the same category as a full-time British farmer. Many part-time farmers can do a full shift in a factory and get paid for it.

There is a remark in the report—I did not make a note of the exact page—which states: Deserted farmland becomes more attractive than a rusty steelworks". I totally disagree with that remark. Wherever a farm has been put wholly into set-aside it looks worse and worse as the years go by and appears to me—a man who has walked over such farms—to support less and less wildlife. That is one of the aspects that fascinated me. Any fool can plant a tree but unless that tree is carefully looked after in the first 16 years of its life its chances of surviving are very slim.

My noble friend Lord Marlesford made an excellent speech. Again, I entirely support what he said. One worry to me is that once a farm has been planted with trees it is right out of agriculture.

I have one last request if we are to think of the countryside. I very much hope that the Government will consider encouraging the growth of home grown timber and making the production of it a little more attractive by treating it as a farm crop; for example, zero-rating it for tax purposes rather than have the taxes that so often have been imposed in the past.

7.33 p.m.

Lord Carter

My Lords, like other noble Lords I thank the noble Lord, Lord Middleton, for introducing this report and for his firm and skilful chairmanship in leading his committee through a very complex subject to produce an excellent analysis of the problems of the reform of the common agricultural policy in this his last report as chairman of Sub-Committee D.

We have had an excellent and wide-ranging debate with many notable speeches and none was more notable than the maiden speeches of the noble Baroness, Lady O'Cathain, and the noble Lord, Lord Harding of Petherton. I know that I speak for the whole House when I say how much we look forward to their future contributions to our debates. As a humble milk producer I can remember extremely well the administrations of the noble Baroness when she was a senior executive of the Milk Marketing Board. I am sure that when we come to debate the future of the MMB—as no doubt we shall—her views on that subject will be well worth hearing.

When I consider the series of reflections, proposals, the inspired leaks in the farming community, and the documents which comprise the MacSharry process, I am reminded irresistibly of the old saying that bees are not nearly as busy as we think they are, they are just not able to buzz any slower.

The Select Committee, all its witnesses and everybody involved in agricultural policy agree on the need for wide-ranging and comprehensive reform of the CAP. What is more, they virtually agree on the manifest weaknesses of the MacSharry proposals combining, as they do, blatant discrimination against the efficient, professional farmer throughout Europe with increased cost to the European taxpayer, the increase in the possibility of fraud, no guarantee of price reductions for the consumer and, if the proposals as tabled are implemented, they are liable to produce a lifetime of Community-subsidised drudgery for hundreds of thousands of European farmers on small, inefficient and mainly part-time farms.

Mr. MacSharry has, however, performed one great service. He has finally begun to lay to rest the original and fundamental basis of the common agricultural policy; namely, that the way to protect farm incomes is through systems of price support, intervention buying and export restitutions. It is such a pity that in performing this service he has produced a policy—I use the word in its most generous interpretation—which is agriculturally obtuse, economically illiterate and politically unworkable.

A fundamental weakness in the whole MacSharry approach for the UK is this: if the proposals result in a reduction in food production in the United Kingdom then food consumption in the United Kingdom will not go down. If, as is likely to be the event, our Community partners adopt MacSharry with rather less enthusiasm or sophistication than the UK, the shortfall in UK production will be made up by imports from the Community or elsewhere. The present deficit on the food balance of trade could soar.

However, despite the universal agreement on the need for reform, everybody involved—like the committee—found it very hard to devise a straightforward and workable agricultural and rural policy for the Community. That is not surprising. The European Community stretches from just above North Africa to just below the Arctic and from the West of Ireland to Asia Minor with all the varying social and agricultural structures that such geography involves. For example, the small farmer, as defined by MacSharry, includes 1,240,000 farmers in Italy, 452,000 farmers in Greece, and 705,000 farmers in Spain. That is 2.4 million small farmers in just those three countries. I cannot help wondering how an aerial quota police, referred to by the noble Lord, Lord Marlesford, would fare with that little lot. In comparison, the number in the UK is 30,000.

I hold to what is perhaps a naively optimistic view that over time politics and policy tend to approximate towards the rational. In my view there will be increasing pressure over time to repatriate agricultural and rural policies to national governments and to move towards a Community of food trade policy. In all our thinking about the reform of the common agricultural policy we should bear that possibility very much in mind. It was a point that was touched on by my noble friend Lord Gallacher.

The point is often made that 80 per cent. of agricultural support goes to 20 per cent. of the farmers. That point was made by the right reverend Prelate the Bishop of Worcester and by my noble friend Lord Jay. That is hardly surprising if such support is based, as it has been, on the tonnes of wheat or the litres of milk produced. Twenty per cent. of farmers produce 80 per cent. of the output.

The noble Lord, Lord Middleton, mentioned that The Times newspaper has taken a curious semi pro-MacSharry stance when it referred recently to the rural barons who, the newspaper claimed, have done extremely well out of the CAP. As a rural baron who has been involved for over 30 years in detailed management accounting on some 60 to 70 farms—mainly in the South of England and the Midlands, with an average farm size of 13,000 acres—I was impelled to point out to The Times that in the five years from 1986 to 1990 the average return on tenants' capital on those farms was just over 9 per cent. If half the tenants' capital was borrowed the average return was about 4 per cent. and if the value of land was included the return on capital was barely noticeable.

The Select Committee's recommendations make the central point that agricultural policy mechanisms should be unfastened from those relating to regional, social, economic or environmental policies. Once that is done, repatriation can and will eventually follow. The committee pointed out the manifest weaknesses in export restitutions and intervention buying and flirted with pegs and bonds. The report describes extremely well the arguments for different types of environmental payments.

Perhaps I may say a few words on bonds. This is effectively the once and for all buy-out of agricultural support. However attractive that is as an intellectual concept—and it is attractive—it seems to me to have one major political disadvantage for the United Kingdom: it is a system crying out politically for modulation. Do we really think that the taxpayer would stand for the kind of individual payments that would be made, and to quite a large number of farmers in the United Kingdom, even after the 60 per cent. degression that has been recommended by Professor Tangermann? Has anyone attempted to work out how United Kingdom farmers would fare compared with other Community farmers under a bond scheme?

I repeat the words of my noble friend Lord Gallacher. It is a great shame that the Government have not produced their own proposals for CAP reform. The Minister, Mr. Gummer, when he gave evidence to the committee, seemed to regard an absence of policy as a positive virtue. That does seem to be a very curious negotiating stance towards proposals which are so obviously discriminating against our national interest. We know extremely well now what the Government are against, but I hope that the Minister will tell us what the Government are for. We are not asking the Minister to reveal the Government's negotiating position, but some idea of the principles on which they intend to work would be helpful.

Besides the interests of the farmer and the taxpayer there is a strong consumer interest in reform of the common agricultural policy. One of the biggest weaknesses in MacSharry, and in all proposals based on substantial reductions in producer prices, is the implied assumption that prices to the consumer will automatically fall. That is just not the case. There is no mechanism that will prevent a reduction in farm-gate prices being largely absorbed in increased margins in the processing, wholesaling and retail food chain. I believe I am correct in saying that the concentration of buying power on the other side of the farm gate is greater in the UK than in any other member state of the Community. Experience shows the effect of this. Producer prices have fallen by 50 per cent. in real terms in the past 10 years but in the same period retail prices have increased by 120 per cent.

Thy; other fallacy which lies behind much consideration of reform is the view that, if everyone stops subsidising their agriculture, world prices, however defined, will automatically increase. Where is the evidence for that? As Gertrude Stein might have said, 'A glut is a glut is a glut!". There is no guarantee that the dumping of agricultural produce will cease under any system of agricultural support. That is why, in my view, some degree of import protection, linked to the production costs of the efficient producer, will always be required. I was pleased to see that the Select Committee agreed with that. After all, if the forecast of increased world prices in the absence of subsidy is correct, import protection will not be needed. If the forecast is wrong, import protection will be there as a safety net.

I have criticised the Government for the absence of a policy for reform of the CAP. In the Labour Party we have made our position clear. We believe in, and will negotiate for, the repatriation of the common agricultural policy and work wholeheartedly towards a Community agriculture, food and trade policy to ensure the coming about of true free trade in agricultural products, both within the EC and outside it. We must reduce and eventually eliminate those subsidies which distort farm trade, and redirect support towards direct income aid and environmental protection within the GATT rules. We must emphasise, and re-emphasise, the importance of rural social policies and see that those policies are implemented through social funds and not through agricultural support policies. Above all, we must be proactive and not obtusely reactive in negotiating Community agricultural and rural policies.

In introducing the debate the noble Lord, Lord Middleton, referred to the parochial nature of the MacSharry proposals. We should perhaps have some regard to the world scene. One billion of the world's 5 billion people suffer from hunger. If world population growth continues as forecast, world agriculture will have to produce as much food in the next 30 years as has been produced in the past 10,000 years. That is an immense task and emphasises, if nothing else does, the urgent need for reform of the common agricultural policy, a need which has indeed been very well served by the report we have been considering today.

7.45 p.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Baroness Trumpington)

My Lords, it was getting to be a habit for me to congratulate my noble friend Lord Middleton and his committee on their reports so I was very sorry to learn that my noble friend will no longer be chairing that committee, a job that he has so ably performed. Nevertheless, we shall no doubt continue to have the benefit of his wisdom. I should like to wish very good luck to his successor.

The report on the reform of the CAP has provided the House with the opportunity for a timely and constructive debate—and once again my congratulations are very real. My congratulations also go to the noble Lord, Lord Harding of Petherton, and to the noble Baroness, Lady O'Cathain, on a brace of sparkling maiden speeches—really first class from both of them. My congratulations are, I should think, the most sincere I have ever given.

I am sorry that the noble Lord, Lord Gallacher, did not obtain a copy of my ministry's memo until today. There must have been a misunderstanding as I am assured that 25 copies were sent down to the Printed Paper Office on Tuesday 15th October. Either he was slow on his feet or the demand was so great that he just missed out. I am very sorry.

The European Communities Committee has undertaken a most valuable task in examining the Commission's "Reflections" paper published in February of this year and its subsequent proposals for CAP reform published in July. It has succeeded in distilling the evidence presented to it into a concise and eminently intelligible report.

Let me say at the outset that the Government welcome the overall conclusions drawn by the committee. The committee has reiterated the view it expressed six years ago on the occasion of its last report on this topic, that reform of the present system is imperative—a view which, as your Lordships will know, the Government have also long held. The Government also agree with the committee's view that the Commission's current proposals are not an acceptable basis for reform. I shall hope to change some of the opinions of the noble Lord, Lord Jay, as I seek to explain why.

Let me make it clear that I am not criticising the Commission for producing proposals for radical reform. On the contrary, we are delighted that it has at last grasped the nettle; but we are not happy with the package on offer. I particularly welcome, therefore, the committee's recognition that what is required is effective reform which will lead to a real improvement in agricultural efficiency and greater cost-effectiveness of the CAP through better targeting of resources. I welcome the committee's clear assessment that the Commission's proposals are a disincentive to efficiency, are inflationary and are discriminatory. These proposals do not constitute a blueprint for the development of an efficient agricultural industry throughout the European Community—indeed they would penalise those who have already made the effort to become efficient. Moreover, they would not reduce the excessive cost of the CAP; they would not bring about the close integration of agricultural and environmental policies which we need; and, by introducing new rigidities into Community agriculture, they would inhibit its development and its ability to become more responsive to market forces.

Furthermore, these proposals particularly penalise UK producers by discriminating against larger farmers. The Commission's proposals—which let us not forget are effectively talking of compulsory set-aside—would result in 14 per cent. of the UK total arable area having to be set-aside compared with an average of 9 per cent. in the rest of the Community; and of this area set aside, 60 per cent. would be uncompensated in the UK, compared with an average of around 30 per cent. in the rest of the Community. And the picture is very similar in the livestock sector —around 9,000 UK sheep farmers with 53% per cent. of the UK flock would be affected by the proposed new headage limits; 15% per cent. of eligible ewes would be excluded from premium, compared with less than 3 per cent. in the rest of the Community. Discrimination at this level is neither just nor economically defensible. We are resisting it strenuously.

The committee also rightly criticises the Commission for confusing agricultural and social objectives in its proposals for permanent compensation. The noble Lord, Lord Carter, also covered that point. I fully agree with what he said. The CAP was not designed to be, and must not become, a social policy with farmers paid simply because they are farmers. By following the thinking in the Commission's proposals, we would be retreating from the market-place, abandoning any hope of achieving competitiveness on the world market, and creating not a forward-looking industry with a viable long-term future, but an agricultural museum financed by ever increasing social payments. The burden on the budget could quickly become intolerable.

These proposals do not advocate that close integration of agricultural and environmental objectives to which this Government are committed. Indeed, the various commodity proposals show very little sign of environmental sensitivity. The proposals for what would in effect be compulsory set-aside, for example, could lead to large tracts of countryside being taken out of cultivation without any apparent safeguards. And while the proposals for an agri-environmental programme are welcome, they do not go far enough.

I have made clear what we think is wrong with the Commission proposals. But what is the right way to reform the CAP?

In his speech my noble friend, Lord Middleton, mentioned that the committee had concluded that the prime means of reform should be reductions in the levels of agricultural price support. We agree. This is a major plank of the Government's policy.

We are not implacably opposed to all types of assistance to farmers who find it difficult to adapt. But, as the committee says, any such aids must be adjustment aids, not permanent compensation; they must be focused on the most vulnerable, limited in time and degressive.

The noble Lord, Lord Gallacher, my noble friends Lady Carnegy of Lour and Lord Radnor, and a number of noble Lords, referred to the idea of income bonds. As my noble friend Lady Carnegy has already indicated, the Government share the committee's view on the potential merits of fixed redeemable bonds. However, I must reiterate that we do not believe that there is a case for universal compensation. Therefore, while income bonds may provide an efficient way of paying compensation, introducing them will not solve the problem of who, if anyone, should be compensated. I accept that if compensation is paid, decisions of that sort will not be easy. The Community's current income aid scheme provides some possible criteria.

Although reductions in support must play a central role, we agree with the committee that some controls on production may also be needed. We also agree that new production quotas are not the answer, although where quotas exist, as in the milk sector, they should be made use of to eliminate surplus production. But we do not accept the committee's dismissal of set-aside. Certainly set-aside should not be regarded as an alternative to price cuts; but price cuts on their own will not bring about the cuts in production that are so urgently needed. We continue to believe that set-aside, in conjunction with price cuts, can play a key role in bringing down production. Moreover, with changes to the rules and conditions it could also play a positive role in improving the environment, in bringing about a countryside that is more varied, more attractive and with more diverse flora and wildlife. However, set-aside should remain voluntary at the level of the individual, although it is essential that any scheme is applied effectively throughout the Community, perhaps through the introduction of national targets.

We must also ensure that whatever measures are taken to reform the CAP apply evenly to all producers, regardless of the size and type of their enterprise or its location. I have already welcomed the committee's recognition that the Commission's proposals discriminate markedly against UK producers. My colleagues and I are justly proud of the farmers in this country who, responding to the calls for improvements in efficiency, put major effort and resources into restructuring their enterprises and maximising their potential—we should not now be penalising them for having done just that. On the contrary, as we move towards a more open world market, we shall need efficient farmers who can stand on their own feet, respond to market forces and consumer demand, and are not hampered by restrictive rules and regulations. Furthermore, as the committee pointed out, and as my noble friend Lord Plumb reminded us, there is absolutely no reason why producers of olive oil, wine and sugar, for example, should be exempt from the burden of change, as the Commission proposes: all farmers should share that burden.

The committee endorsed the view that environmental issues should be, elevated to the first rank of those to be incorporated in the reform package", and regretted the inadequacy of the July proposals in this connection. Full integration of agricultural and environmental policies has long been the aim of this Government; we want to see all farmers playing their full part in protecting the environment, and environmental protection made a general condition of receipt of agricultural support. We also want to see agri-environmental measures presented as a range of targeted schemes specifically tailored to particular local circumstances.

My noble friend the Duke of Somerset thought that environmental schemes should be obligatory and that the level of FEOGA reimbursement should be higher. We understand that under the MacSharry proposals every member state would have to introduce a programme of environmental schemes based on the proposals. On the question of funding, we agree that environmental measures need to be adequately funded, but it is equally important that member states continue to contribute to the costs. Overall, the UK is looking for reductions in agricultural expenditure; but we are also looking for a shift in priorities from expenditure on market support to expenditure on environmental measures.

The committee criticised the high overall costs of the Commission's proposals. The Government agree that these proposals only partially address the problem of ensuring the efficient application of budgetary resources for agriculture. But we would go further. Surely it is self-evident that reform of the CAP should lead to savings for the Community budget, not an increase in costs. We are astonished that the proposals talk of an increase in the agricultural guideline, contrary to the decision reached by the Agricultural Council earlier this summer; any reform must respect the budget discipline arrangements agreed in 1988, and we remain firmly opposed to any increase in the guideline. I have already said that we see no need for the excessive expenditure proposed on compensation. We want to see a shift in the balance of expenditure away from spending on market and income support and towards environmental measures.

I turn now to deal with specific points that were raised in the debate. I fear that time will not allow me to mention all of them.

I was interested in the remarks of the right reverend Prelate and shall certainly bear in mind the various points that he made. I also appreciated the comparison made by my noble friend Lord Selborne between horticulture and agriculture, and, following that, the remarks about marketing made by my noble friend Lord Wade. My noble friend Lord Selborne and the noble Baroness, Lady O'Cathain, spoke about the trade gap. We are of course aware of the trade gap in food and drink. This shows that there is room for our agriculture and food industries to improve their performance and that is putting it mildly. The study by my honourable friend the Parliamentary Under-Secretary in another place has examined ways in which the Government could help them to do that, and my right honourable friend the Prime Minister will next month be launching a government initiative in that area.

The noble Lord, Lord Gallacher, asked for justification for the support of tobacco. We welcome the fact that Mr. MacSharry has proposed a reform of the tobacco regime, but those proposals do not go far enough. As I and my noble friend Lord Strathmore frequently say in the House, it is absurd that tobacco should be the most heavily subsidised CAP crop per hectare, especially when the EC has policies designed to discourage smoking. The Government have argued, and will continue to do so, for support to be phased out over time, with transitional protection for those dependent upon its production.

Although he has left the Chamber, the point made by the noble Lord, Lord Mackie of Benshie, about hill farming in the LFAs was important. I shall for once ignore the fact that he is not in his place and say that the Government recognise the pressures on farmers in upland and marginal areas, and agree with the committee that there is a case for the continuation of special payments to compensate such farmers for the permanent natural handicaps of those areas. With regard to hill livestock compensatory allowances, the Government have undertaken to examine how existing environmental benefits afforded by HLCAs can be made more specific. That work is in hand. Payment rates will be considered in the forthcoming annual review of the economic conditions of hill farming.

The noble Lord, Lord Harding of Petherton, and several other noble Lords, including my noble friend Lord Mottistone, asked about the GATT. The Government share the views of noble Lords on the importance of a GATT settlement and are actively working for it. If agreement is to be reached, all the negotiating partners, including the European Commission, would have to show flexibility so far as a relationship with CAP reform is concerned. It is true that significant changes to the CAP will be necessary to implement a GATT agreement, but the CAP reform proposals do not address the key issues of the round: import access and export subsidies. Agreement within the Community will not be reached quickly. The GATT settlement is likely to be reached first, and will provide the framework within which CAP reform will have to be negotiated.

The noble Duke, the Duke of Somerset, spoke about forestry. We support in principle the conversion of agricultural land to woodland as an attractive alternative land use. It is however for individual member states to decide upon the levels of incentive they wish to offer to bring that about. We are opposed in principle to additional Community measures. Community forest measures should also impose strict environmental standards for planting. Standards in the UK are already high and they should be matched elsewhere.

Eastern Europe is another important subject. My noble friend Lord Middleton and several other noble Lords spoke about the situation there. The European Community has recognised the importance of agriculture in the economies of Eastern European countries. That is why, in current negotiations for association agreements with Poland, Hungary and Czechoslovakia, EC ministers have agreed that additional liberalisation measures should be offered in products having a special importance in all the countries concerned. However, I can assure your Lordships that the Government are well aware of the sensitivities in all the sectors concerned and are ensuring that the interests of our farmers and processors are taken into account.

Although my noble friend Lord Wade did not mention it, I was glad that my noble friend Lord Marlesford spoke of my noble friend's rural economy group. I understand that he has brought together an experienced and authoritative group, and I look forward to its participation in the public and parliamentary debate upon the future of our rural areas. I am delighted that my noble friend Lord Marlesford is a member of the group.

The noble Lords, Lord Gallacher and Lord Carter, urged the Government to put forward the UK's proposals without delay. That would not be a sensible negotiating tactic. Only fools declare their negotiating tactics before they go in to argue them out; and that is not how the European Community operates. I am surprised that the two noble Lords did not realise that or perhaps they put forward the suggestion for different reasons. Only the Commission can produce formal proposals. It is more effective to join with like-minded member states to seek change. That is what we are doing.

This debate has provided a useful opportunity for the Government to set out the basis upon which they wish to see the CAP reformed. As we have made clear to our partners in the Community, we are seeking major changes to the Commission's proposals. My right honourable friend the Minister in another place never ceases to say what we want to secure; that is, a steady reduction in support to producers—in line with the EC's own offer to the GATT; measures that apply equally to all producers, whatever their size, farm type or location; any compensation paid on a horizontal basis, restricted to the most vulnerable producers, time-limited and degressive; policies that take account of the effect of farming on the environment and encourage farmers to care for the countryside; and policies that contain the cost of the CAP to the taxpayer.

We may not achieve all our objectives, but we are determined to achieve an outcome that establishes a viable, market-orientated basis for the future of European agriculture and enables our farmers to compete upon equal terms.

8.8 p.m.

Lord Middleton

My Lords, I thank noble Lords who have contributed to an especially well-informed debate, and one enhanced by two outstanding maiden speeches. It is not the practice of the House that the mover of a Motion on a report of this kind should systematically pick up points that have arisen in the debate and reply to them, much as I should like to. I merely congratulate my noble friend Lord Lyell on putting his finger on paragraph 146 which is the key paragraph in the report. That has been dealt with admirably in the reply by my noble friend the Minister.

I am grateful to my noble friend for giving us the Government's reaction to the report with such clarity. It was with great interest that I heard how closely her ministry's views correspond to the Select Committee's conclusions. Having heard them, I believe I can say that we have sympathy with and confidence in my right honourable friend the Minister as he tackles the formidable task of negotiating CAP reform in the Council of Ministers.

I am also grateful for the kind but quite undeserved remarks made about me by noble Lords. If our sub-committee work has been useful, then it is due in large part to the expertise and hard work of its members. The noble Lord, Lord Mackie of Benshie, recalled that I had on occasion in committee put him down, albeit politely. The sheer magnitude of the task is such that I can barely contemplate it. If he needed keeping in order—and I am sure he did not—I can say that without his knowledge and wisdom over many years, the work of the Select Committee would have been much less effective.

I cannot end my work on Sub-Committee D without paying tribute to our clerk, Mr. 011ard. A committee chairman is in perhaps a unique position to know how much he depends on his clerk and I am truly grateful to him. I commend the Motion to the House.

On Question, Motion agreed to.