HL Deb 09 July 1992 vol 538 cc1386-410

11.12 p.m.

Lord Wade of Chorlton rose to ask Her Majesty's Government what impact the recent CAP agreement will have on the rural economy; and whether they consider that the bond scheme proposed by Professor Marsh and Professor Tangermann would be a good way of helping the agricultural industry to adjust.

The noble Lord said: My Lords, I should like to thank all noble Lords who are taking part in the debate for their support at this hour. I thank especially my noble friend Lord Hamilton for choosing this occasion to make his maiden speech which we all look forward to hearing. I am grateful to my noble friend the Minister who has agreed to reply to the debate.

The reform of the CAP will result in a reduction of some 16 per cent. in farm incomes over the next four years. By the third year of the reform, 14 per cent. of land in the United Kingdom now used for cereals will be entered into set-aside. The purpose of the reform is to reduce production, and yet the UK is already a net importer of food, and so will become more heavily dependent upon imported food, which will create extra cost.

The reform will not reduce the cost of the CAP, which is still expected to rise in the short term. While the reform seeks to reduce the level of production on the one hand, on the other it seeks to make direct payments to farmers for perceived benefits which bear no relation to the known market demand.

There is no acknowledgement in the proposals of the fact that the CAP in itself has done enormous harm to the rural economy by creating high prices for food, followed by high prices for land and other farming costs, and has placed an enormous burden on the European taxpayer through the cost of the bureaucracy and controls of the CAP, but it has not put any money into the farmers' hands

There is no acknowledgement of the fact that the problem is not overproduction but production at too high a price. The proper solution to the crisis in European agriculture brought about by the central planning and restrictive practices of the CAP is a return to the free market, utilising and encouraging the use of the great resources the UK has in land, skills, livestock, cereals, with the new varieties, and technology, all supported by the most efficient and up-to-date food industry in the world to produce the safest and finest foodstuffs at the lowest possible prices.

Aiming for world market prices for agricultural products over a period of time—say 10 years—rather than trying to maintain a high priced regime in Europe would, in my view, bring far-reaching benefits to all consumers and ultimately all producers. Such a change would also have an impact, of course, on the rural economy as the agricultural production adapted to a free market regime and a very competitive environment.

The right way to deal with those changes would be to allow a much greater flexibility of opportunity in the rural areas so that the entrepreneurial spirit among farmers and landowners is encouraged and a proper balance obtained between the use of land for agricultural production, for business in rural areas, for leisure, for the commercial encouragement of sites of special scientific interest or special ecological importance, for national parks, for forestry and for access to and enjoyment of the countryside by the population.

It is only by allowing the marketplace to create the right balance between all these factors and appreciating the costs and returns for each that we shall offer a proper way forward for the rural areas of Europe for the future. It is the planning and controls that create the tensions, with one pressure group demanding what the other pressure group refuses and expecting the Government and the EC to find a compromise, which is disliked by everyone. On a visit to Skipton only this week I heard of a rural village in a national park where the villagers are strongly resisting the park planning rules which are working against the interests and the requirements of the local people. They have no way of changing the rules.

The proposals for the reform of CAP take a very important and positive step by reducing intervention prices and introducing direct payments. That is a policy which I applaud. The principle, if taken forward correctly, could be the precursor of the changes in the industry that are necessary. But rather than being direct and simple in their application, by bringing in the concept of taking land out of production into set-aside and actually paying farmers for not producing, the reform has been turned into a nonsense.

The various attempts to force farmers into uneconomic use of land resources is fundamentally against the interests of every person who lives in our country. It will turn out to be a policy which will be looked back upon with ridicule and derision.

An alternative view is to take a positive free market line which everyone, and particularly our own Government, must realise is the only sensible approach. However, it has to be accepted that the present high level of food prices in EC countries was imposed by politicians for their own political purposes and never because it was in the public's and producers' interest.

If, for political reasons, it is now necessary to reform CAP and bring EC food prices more in line with world prices, then there will be a cost of managing that change, just as there have been massive costs of change in the European coal and steel industries and no doubt there will soon be in the rail transport industry.

The way to deal with that cost of change would be to pay for it in the form of a bond to each farmer in Europe which would represent the payment of an annual sum of money over, say, 10 years, which would compensate producers for the loss of income and capital value over that period of time. By the end of the 10 years, farm prices would be assumed to be at world levels.

That is the essence of the bond scheme proposed by Professor Tangermann and Professor Marsh. The scheme encourages efficiency and the maximum use of our resources, which is surely one of the tenets of Conservative thinking. The bond scheme would encourage innovative ideas of food production and land use: the present proposals for the reform of CAP discourage such initiatives. The bond scheme would encourage the production of food in Europe for those areas of the world that need it at a price they could afford: the reform proposals discourage it. The bond scheme would encourage a fairer balance between all uses of land which would bring rewards to everyone. The reform proposals establish the need for more controls and bureaucracy and offer less choice for consumers.

CAP reforms as now proposed will result in further stresses and imbalances in our rural economy with continuing problems of a lack of job opportunities, declining standards of living, growing frustration with government and a constant fight between those who want to do something and those who want to stop them. It will hinder the completion of GATT which is so important for economic development in the world and it will make Great Britain a poorer place. I look forward to hearing the reply from my noble friend the Minister.

11.20 p.m.

Lord Palmer

My Lords, once again your Lordships' House must be grateful to the noble Lord, Lord Wade of Chorlton, for bringing this all-important subject of agriculture to your Lordships' attention. But how tragic it is to discuss this before such an empty House and so late at night.

The noble Lord has, as always, pinpointed many vital issues and I naturally look forward as well to the Minister's reply, especially as to the bond situation, although I personally think for the moment that is purely academic. Every time I have spoken in your Lordships' House on the subject of agriculture, I have been prone to hark back as to why we are in this situation. With the greatest possible respect to civil servants, low and high ranking Eurocrats and politicians, we are in one hell of a mess. It is vitally important that we examine why. Twelve years ago we were told that more food was required. We were told, "Drain the wetlands and here is a grant to do so. Oh, and by the way, your bank manager will lend you the shortfall". Now today we are told, "Stop. Set it all aside".

Travelling as I do up and down the east coast railway line twice weekly, the effects of set-aside are, for the lack of a better word, revolting. I dread to think what the countryside will look like in five years' time when there will be so much more land set aside. How ironic the lines of "Jerusalem" will sound in England's green and pleasant land. I wonder how many of your Lordships have been watching recently on television the effects of the famine in Africa. There was a school of thought that we must teach the Africans how to farm and not just dump our surpluses on them. For some time I subscribed to that school of thought but how, for example, can one grow anything in Zambia when one has had no water for years?

I am aware that I am slightly straying from the Question of the noble Lord, Lord Wade, but I find it difficult to balance the equation with Europe sitting on mountains of unwanted food. At the end of May the European Community had in stock 211,000 tonnes of butter, 284,000 tonnes of skimmed milk powder, 627,000 tonnes of beef and an unbelievably outrageous 20,358,000 tonnes of cereals. Then one thinks that yesterday 36,000 children died; 36,000 will die today and 36,000 more will die tomorrow. It does not take a genius to work out that that is more than thirteen and a quarter million children a year—over 13 million—and here we are discussing how to produce less.

For anyone to die of starvation in the late twentieth century is an international scandal, and one which we ought to be bitterly ashamed of. At this point I should like to add my congratulations on the way the United Kingdom's negotiating team were able to return, perhaps not exactly in triumph, but certainly holding their heads high, after the latest talks on the reform of the CAP. However, I still do not understand how, in realistic terms, bureaucrats, well cushioned in Brussels, can dream up sets of rules that are to apply to the Greek islands and at the same time to the Outer Hebrides. Surely that simply is not practical. We have recently seen the Soviet republics break their union and now we are proffering a union with the rest of Europe while French trawlermen cut our fishing nets. However, we must all eagerly await the implementing texts, especially as many of us have been longing to finalise our cropping plans for next year and, indeed, order seed. In the 14 years since I have been trying to farm, I have never not had everything ordered and finalised by the middle of June, and living in Scotland of course, our season is a good deal later, especially bearing in mind that the combines are rolling already in southern England.

I am sure that the noble Earl, being a farmer himself, realises how very great is our sense of urgency. All the information currently available in the arable sector is worthless unless we know the make-up of regions in the UK, responsibility for which Brussels has delegated to individual governments, and indeed to learn what the base years are going to be. I have seen at first hand parts of the huge Brussels bureaucratic machinery and how it works when I represented Scotland on the European Landowning Organisation—and, yes, I have seen attractive dolly birds straight out of Madrid university, drafting in pencil ideas, for example, to stop farmers shooting crows. How can this make realistic sense?

There has, and rightly so, been much talk of diversification into non-farming activities as a result of the reform of the CAP, but there is a limit to the number of golf courses that can be built. In East Lothian, for example, one of the richest agricultural areas, there are already 16 golf courses and plans for a further six.

At this stage it is extremely difficult to know what the effects are going to be, especially as there is so much uncertainty around. This in itself has a major effect and is a constant source of worry to all those in the farming industry. I use those words most carefully, as at the end of June 1991 there were still some 79,000 holdings in the UK engaged in cereal farming. If one adds all the ancillary trades such as machinery suppliers, fertiliser manufacturers, advisers, etc., there are many hundreds of thousands of people involved in this all-important industry and I fear that there will be heavy redundancies in all these fields as a result of this CAP reform.

When I made biscuits, we knew how much we could sell a packet for. But today, even with the harvest under way, no farmer has any idea what his income is likely to be. I do, however, believe that there must be a glimmer of light, and I see that light in the form of bio-fuels. I feel certain that, long term and with careful genetic engineering, arable crops will be able to help with the world's fuel crisis; and here I would urge the Government to allocate funds to help research into the future of bio-fuels. I think too that we ought to pay tribute to the farming community for behaving in such a responsible manner, particularly if one looks across the Channel.

Survival is the name of the game. And it does seem ironic that farmers are the victims of their own success. However, I suppose we must take heart from the green aspect of the reforms and let us hope that, with sufficient funding from the Treasury, the colour green does not turn a sickly yellow when in six months' time there is no money. What firm assurance can the Minister give that there will be funds available for new environmentally friendly farming systems starting later this year?

11.29 p.m.

Lord Hamilton of Dalzell

My Lords, I am grateful to the noble Lord, Lord Wade, for calling this debate and giving me the opportunity to make my maiden speech, although I did not think it was going to be an after-dinner speech. When I was contemplating making it, for some reason or other the thought came to me of what was voiced on Founder's Day at Eton, when we used to praise famous men and our fathers that begat us. At a time when so many noble Lords have joined this House on their own merits, it suddenly came home to me what those words meant. I certainly praise my father, in whose shoes I stand and whose wish it was that one day I should perform in your Lordships' House.

I farm a substantial acreage and have a number of tenant farmers. I echo the words of the noble Lord, Lord Palmer. One's tenant farmers are the yeomen of England. They have coped marvellously well with the problems that they have encountered over the past years and have behaved amazingly well compared with their fellows in France.

The failure of the common agricultural policy is a failure of over-production. I agree with the instincts of the noble Lord, Lord Wade, in wishing for a freer market. But I see the political problems. It would be easy enough to reverse the increases in production caused by too high prices over so many years by a return to a free market. But I also understand that that is likely to be politically impossible to achieve. The result is that we are left with a situation in which we have to rely upon set-aside.

If set-aside at 16 per cent were going to restore the balance of the market in the same way that too high prices caused an increase in production, a balanced market itself ought to produce higher prices. I should have thought that were one to argue that, as a result of the latest measures, prices would continue to bump along on their support levels, the answer would be that set-aside and the whole basis on which the revisions in the common agricultural policy are based must have failed.

That brings me to the matter of the bond. The bond must involve some element of price. It would be very interesting to hear the Minister's view on how to price a bond over 10 years. It would involve the Government taking the view that prices would either remain on their support levels or would not. It is interesting to note that two years ago the price of wheat in May and at the end of the selling season rose to some £140 a tonne for feed wheat and higher for miller's wheat—levels which were way above the intervention prices. It is clearly possible, in a market that is balanced, for prices to go up and down. It would therefore be interesting to hear the Minister's view on how a bond, if it were to be launched, should be priced.

One might have two other reservations about the bond. I understand that it is likely to provide a lower rate for large farmers than for smaller ones. I hope that the Minister of Agriculture will return to Europe to argue the case that that should not be so, as he has clone with such success in other cases. The second thing that would unnerve one would be that with tenant farmers it would conceivably be possible for the tenant to sell his bond and quit the land, leaving the landowner with no subsidy for any future tenant who might come in. Those two points ought to be looked into if this bond comes into existence.

Like the noble Lord, Lord Palmer, I too had planned a little diversion, because the noble Lord, Lord Forester, and I have a share in a farm in Zimbabwe. The whole thing has now been devastated by the fearful drought which they are experiencing. The Government there is under a certain amount of criticism. They abolished the two years' supply of food, which used to be held in the country against such emergencies, and lowered the price given for maize to a level at which the minimum was produced. We tend to despair about third world governments and how they get on. We shrug our shoulders and say, "There it is". I should like to ask the Minister whether he can tell me what is the difference of principle between the policies of Mr Mugabe and Mr MacSharry.

11.34 p.m.

The Earl of Radnor

My Lords, it is my duty and pleasure to congratulate the noble Lord, Lord Hamilton of Dalzell, on a splendid maiden speech, which he delivered with great clarity and common sense. I think that it was also non-controversial - a tradition of this House which seems to be broken more frequently than it is followed—but it was not lacking in interest.

I wish to thank the noble Lord, Lord Wade of Chorlton, for introducing this important Question on what impact the CAP agreement will have on the rural economy and whether the Marsh/Tangermann bond scheme may help. One must consider the CAP agreement and its importance. The CAP is immensely important to this country, to Europe and to the world. It has been argued about for a long time. It has become evident that, rightly or wrongly, the GATT Round depends upon some sensible resolution. I am therefore surprised that such a debate should begin after 11 o'clock at night at a time when one could describe the parliamentary programme in your Lordships' House as slow to dull.

We should consider the CAP agreement as it now stands. I cannot remember the precise date when Mr. Gummer returned from Brussels and said that we could stand tall in the company of the world because we were going to please them, the GATT Round would go forward and so on. I would call the package that he brought back skeletal because it has not been fleshed out in any way. Masses of details are missing. As the noble Lord, Lord Palmer, made perfectly clear, for an industry which should plan in years rather than in months to be reduced to planning in weeks, or even days so far as I can see, for major decisions is an almost impossible situation and can only lead to inefficiency.

We also have the compulsory set-asides. To me that is bad news. I shall return to the broader aspects of the rural economy, but restrictions such as set-asides and limiting headage payments on sheep, suckler cows and so on must mean less labour. Therefore a problem is created.

On the other hand, the Minister returned with a reasonable package of money for the farmers. He also did well in that he got rid of much of the discrimination against this country. But he did not bring back any concept of the whole of Europe, or indeed this country, becoming more efficient so that one day in the future we can compete in world markets. Surely we do not expect to continue for ever bolstering up farmers in Europe. In 20 years surely we should be able to compete even with the low wages in South America and the rolling plains of milling wheat in Saskatchewan and so on.

Furthermore, the CAP arrangement is now complicated to a degree. It will be difficult for farmers and the people in MAFF to understand. The arrangement will need a tremendous amount of resourcing. When MAFF has the resources to compete in a situation that is already obviously behind schedule, I suspect that it will have considerable difficulty in getting the right people together in the right places to undertake the multifarious tasks to ensure that people are not cheating. We know that the European Court of Auditors disliked the system immensely because of the possibilities for fraud.

That is where we stand at present. We have a rather unsatisfactory situation with regard to the farmers, although the money may be right. On the world stage there remains an unsatisfactory situation as regards the GATT Round. I do not believe that the Americans will consider it good enough to allow that situation to go forward, which is most important.

I appreciate the difficulties with tenanted land, although I do not concede that they are impossible to overcome. However, the bond scheme is completely straightforward. It depends on certain difficult political decisions. There must be a reference from which the loss of profit to the farmer is made up. It must be decided whether to penalise the large farmer. The length of the bond must also be decided upon. The scheme will not be as expensive as the present arrangement, nor will it be so open to abuse. There is a feeling that what is to be arranged—or what is two-thirds arranged at the moment—is so complicated that it probably will be unworkable. It is also felt that if the arrangement comes to fruition its life will not be that long. If that situation arises—and I think that it well might—the bond scheme should be put forward as a practical answer.

As regards the rural economy, no one has as yet followed up the fact that there will be a great many unemployed farm workers. In that respect I wish to make two points. I am aware that through some memorandum the Government have exhorted the planners to view kindly change-of-user provisions on barns and so forth. Will my noble friend ensure that that is followed up and is seen to work? If 15 per cent. of the land comes out of cereal production it will not merely be a matter of old Victorian barns being converted for ironwork and basketwork businesses. There will be perfectly good asbestos and steel factory units for some clean industry or other scattered throughout the countryside. I regret to say that I heard of one district council which shall be nameless which was pleased that the barns would be empty. It considered that they were a blot on the landscape and wanted them pulled down. Surely planning must be fixed to provide as much employment as possible in these circumstances.

My second and final point is that the Rural Development Commission should be used in a stronger way. It is a powerful agency because it is extremely well run and does a good job. Its duties should be extended beyond the advice that it now gives and its powers to purchase factories and small workshops and to lend money to people who are trying to set up in business. Those powers should be extended to retraining. The commission should be funded in a more robust way.

11.44 p.m.

Lord Middleton

My Lords, it is unconventional for those who speak after the one who follows a maiden speaker also to offer their congratulations. Nevertheless, I do so wholeheartedly, remembering the great affection and respect in which I held the father of the noble Lord, Lord Hamilton, when we served together. I too am grateful to my noble friend Lord Wade for providing an opportunity to take a quick look at the recent CAP agreement. However, a rapid glance is all that is appropriate at a time when a close examination of the scheme is not possible while the details have still to be worked out.

Having presented the Select Committee's report on CAP reform to your Lordships last October, the temptation to speak in depth about the reform scheme is extremely great. However, even at a more civilised hour it would be better to leave to a later date a discussion on the merits or otherwise of the scheme, how it differs from earlier proposals and how far it falls short of the kind of reforms that we felt were needed —and fall short it does.

Other noble Lords have referred to the many questions which must be answered on how the scheme will work out in practice. Obviously the Ministry of Agriculture is now under considerable pressure to present farmers with the rules of the game in a matter of days rather than weeks.

I turn to the first part of my noble friend's Question in which, again, I have an interest, having presented the Select Committee's 1990 report on the future of rural society. I do not know how the Minister, when he replies, will assess the impact of CAP reform on the rural economy. Perhaps his reply may be that the compensatory measures contained in the reform package will soften the impact on farmers of reduced price support and that they are intending to allow farmers to carry on making the necessary adjustments to their businesses to ensure efficient production and a reasonable standard of living in the future. He may say that if a healthy rural economy depends largely on a viable agricultural industry, then the impact of CAP reform should, at any rate in the short term, be neutral.

However, in our rural society report we concluded: Agricultural policies alone can no longer be assured to provide widespread benefits to the rural economy and society as a whole". We said that because there are deep-seated problems for the rural areas and they will remain to be resolved, whatever the impact of CAP reform: problems arising from the changing social balance in the countryside; a lack of job opportunities; a relatively poor infrastructure and bad access to basic services; severe unemployment in the fringe areas; and, above all, lack of affordable rural housing.

If the effect of the reform package is malign so that farming continues its present slide into depression, those problems in the rural areas will become worse. If the effect of CAP reform is benign so that farmers can carry on in business without too much hardship, all those problems will still remain to be tackled. In either case, CAP reform must result in structural change in agriculture leading to an increase in the size of farm units and fewer farmers and farm workers being required. That effect in itself will exacerbate existing housing and employment problems in rural areas.

In the second part of my noble friend's Question, he asks whether the bond scheme will help the agricultural industry to adjust. Without going into details, the Select Committee looked at that scheme very carefully when considering CAP reform. We said: The Commission and the Member States should evaluate more fully the mechanics of providing all compensatory payments to farmers by means of such a Bond". As some noble Lords have said, the new arrangement provides for a very different and expensive system of compensatory payments which seem to exclude any place for the kind of fixed redeemable bond as proposed by Professor Tangermann.

We do not know how long the new compensatory payments are to continue. With my noble friend Lord Radnor I take the view that the scheme's durability is extremely limited. It seems to have a short shelf-life built into it. Whereas expenditure on the elaborate structure of intervention prices, threshold prices, export refunds, green money and the whole complex and convoluted CAP machinery was notoriously difficult to control, nothing can be simpler than to cut compensatory payments. If politics demand it, cut they will be.

The tax-paying public are unlikely to see much reduction in food prices after CAP reform, but they will see acres of brambles and thistles in the countryside which they must pay for. The time must come—some people think it will come quite quickly —when under economic and political pressure not merely the level of the compensatory payments to farmers but the whole reform package will come to be reviewed. That is when a scheme such as that of Professor Tangermann may well provide an acceptable alternative solution should one be needed.

Any alternative scheme for compensation should be transitional; it should be acceptable under GATT and de-coupled from production support. It should be fixed and not renegotiable. Those criteria would be satisfied by the professor's bond scheme. However, it presents some difficulty of a practical nature; hence the need to begin working on it as soon as the new CAP reform arrangements are finalised.

It is for that reason I believe the Question of my noble friend Lord Wade is extremely relevant. It will soon be time to start evaluating a different form of adjustment aid to that in the CAP package.

11.52 p.m.

Lord Marlesford

My Lords, the rather natural gloom that we may all have felt in debating this useful subject introduced by my noble friend Lord Wade at such an untimely hour was enlivened by the pleasure we had in hearing my noble friend Lord Hamilton of Dalzell make a fascinating maiden speech. It made all those present realise how much we shall look forward to hearing him frequently in the future.

The CAP has always been the Achilles heel of Europe. First, it has been a bottomless pit for the taxpayer; secondly, it has kept agriculture in Europe in a form more suited to the Middle Ages than the 20th century; and, thirdly, as the Marxists would say, it has been full of internal contradictions in the sense that even where there has been prosperity it has been profoundly destabilising. I need only refer to the way in which the prosperity of certain parts of England led to absurd price levels for land, which lured institutional investors to buy farms. They installed managers to obtain a totally unreal return and they massacred the landscape in so doing. Incidentally, many smaller farmers became extremely unsoundly borrowed during a period when there was far too much money being offered by too many money lenders.

No Brussels policy has been more widely criticised by both governments and voters alike. It has probably done more than anything else to alienate people from the Europe envisaged by the founding fathers which was to be one in which prosperity and economic growth were to come from free trade.

For many months Mr. MacSharry has been attempting to reform the system. But his whole framework for reform has been largely on the basis of perpetuating some of these iniquities. That is illustrated by his blatant attempt to discriminate against some of the most efficient farmers in the Community—the British. Mr. MacSharry lost that particular battle and we should all salute my right honourable friend the Minister of Agriculture for his part in preventing that specific discrimination.

That is my last bouquet of the evening. I want to say a word about three of the criticisms already referred to by others.

First, timing and administration; secondly, the economic effect; and thirdly, the environmental impact. As regards timing and administration, it is completely unacceptable that business people, which is what farmers are, should have fundamental changes imposed on them, not at short notice, not at no notice, but in effect, retrospectively. We have a scheme which came into force on 1st July—a week ago—yet we still have none of the detailed, crucial regulations under which it is to be administered. Farmers went through all this 10 years ago when milk quotas were introduced. But the Bourbons of Brussels learned nothing from that experience.

So here is a scheme with no regulations to implement it. We have heard about the nonsense over feed wheat. We have heard something about the process by which the system is to be under a series of inspectors. This could mean agriculture being administered by bureaucrats as intensively as soviet agriculture was in the worst periods of collectivisation. There are many crucial questions to be decided: for example, what is an agricultural holding? Nobody yet knows.

May I say a word about the economy? Until the recent recession much of the countryside had in recent years prospered. Ten years ago the Rural Development Commission, to which my noble friend Lord Radnor made a kind reference, designated 27 areas which were the least favoured in England and Wales as rural development areas. The employment in those areas has become very healthy. Indeed, as recently as January of this year only five of them had unemployment above England's average. But the picture may now have changed. There is some reason to believe that over the next few years, there could be as many as 100,000 jobs lost from agriculture out of a total of about 640,000, and half as many jobs again upstream and downstream.

There could also be a serious impact on the rural economy from the rundown of the forces, and particularly from closure of the American bases in East Anglia. As we all know, Britain's population has been remarkably stable over the past decade but the rural population has increased rapidly. That is largely because people want to live and work in the countryside. There are very real problems of housing which are being gradually dealt with by housing associations. I am afraid that the situation was accentuated by the sale of council houses.

There have been many problems connected with supplying sufficient workspace. David Keeble, the Cambridge geographer, has drawn attention to the way economic development in the countryside is being held back by a lack of workspace. We therefore welcome the way in which the Government are now taking a more sensible attitude towards development in the countryside. The DoE PPG 7 directive does give a better chance for factories and workspace to be provided.

The environmental impact of the MacSharry proposals is very disappointing. Compulsory annual set-aside will do little for the countryside. It will damage and erode the big advances which have been made recently by the Countryside Premium Scheme and the Countryside Stewardship Scheme. As far as we know at the moment these are not going to count against the 15 per cent. set-aside. That is quite wrong. There is a danger that about half of the 17,000 acres which has been carefully nurtured as premium land may be lost to the new annual set-aside scheme. It is unclear what financial help will be provided for the environmental advantage which is referred to. There are no details and, as I understand it, there will be no details for a year after the scheme comes into force, as to how these environment measures will work. How can one possibly operate in that kind of situation?

In a couple of minutes perhaps I may say what would have been the right way to reform the CAP. Clearly, I believe that the downward pressure on prices was the right way to do it. It is only when one gets supply and demand in balance through the price mechanism that one has a sensible level of production. My noble friend Lord Hamilton referred to the bogus nature of some of these world price concepts. The so-called world price, we are always told, is too high. In the case of wheat it is the price at which small surpluses are traded in Chicago. If those small surpluses are turned into deficits there would be very different prices. I am quite certain of that. We must also remember that, for all their pious statements and their criticisms under GATT, the Americans are and have always been extremely clever at subsidising their own agriculture in various ways.

I believe that the most useful thing that we could do is to take a lesson from what happened with milk quotas. They only worked because they were freely tradeable from the beginning. So it would be desirable for set-aside to be traded between farmers. That would make the best use of market forces for the allocation of set-aside. Of course, the 15 per cent. would have to be increased, but it will almost certainly have to be increased any way. The European surplus of cereals is said to be some 35 million tonnes which is about 19 per cent. of the 180 million tonnes of cereals that are produced in Europe. To get a balance, I would guess that with the set-aside of worst land it would probably have to be much closer to 30 per cent.

I do not believe that the scheme which has emerged will achieve its objectives either of removing surpluses or of saving taxpayers' money. I do not believe that it will be administrable or enforceable - and unenforceable law is bad law and corrupts. Furthermore, the environmental results of the package will outrage those who love the countryside. Fortunately, for all those reasons, I believe that the life of Mr. MacSharry's baby will be shorter than its period of gestation.

12.1 a.m.

Lord Stanley of Alderley

My Lords, while I, in common with 99 per cent. of working farmers and my noble friend Lord Marlesford, was amazed—I think that that is the word—by the success of my right honourable friend Mr. Gummer in ensuring that the efficient farmer was not sacrificed on the altar of the inefficient peasant, I have yet to meet anyone who believes that the details of the CAP reforms will work. They are a bureaucratic nightmare which will be abused and exploited either legally or illegally. Moreover, even if it was possible to adjust them to make them work, they would not reduce the surpluses which I in my naivety thought was one of their objectives.

I hope that my noble friend Lord Howe will accept these flaws in the CAP reforms and admit that, as my noble friend Lord Middleton mentioned, they cannot possibly last. We need now to start thinking about how we will make them work and this Unstarred Question poses exactly that question and suggests a way forward. Like the farming industry, I am greatly indebted to my noble friend Lord Wade of Chorlton for posing that question this evening and for explaining it so carefully to your Lordships. I very much hope that he will get a positive and constructive reply because, as I have said, we shall. I know, be in great trouble in a year or two if we do not have a plan to put forward.

As far as the first part of my noble friend's Question is concerned, I follow a similar but slightly different line from my noble friend Lord Radnor. I would ask my noble friend Lord Howe what impact set-aside (at 15 per cent. to start with, and, as I explained the other day to your Lordships, it will have to increase) will have on the landscape, so alienating the urban public that it will inevitably cause further rural impoverishment. I would also ask my noble friend whether he can say what this loss of production will be and what effect it will have on our balance of payments. I hope that he can assure me that the farming industry will not be criticised yet again as a result of this enforced cut for allowing foreign imports of food to take over what we could easily and economically produce at home.

Bearing in mind these problems, I would also ask my noble friend to look very carefully at the bond system suggested by my noble friend Lord Wade. Does he agree that it would require far less bureaucracy? It would be no more expensive, it would reduce uneconomic surpluses, it would result in efficient, unsubsidised production, removing, as has already been mentioned, one of the main GATT stumbling blocks, and of course it would eliminate that most horrible of all things, set-aside.

Given that the bond scheme would cause a reduction in land prices and rents, which I as a farmer would welcome, and provided that the larger British farm received a bond that did not penalise it—a point made very forcefully in the most eloquent speech of my noble friend Lord Hamilton, which to me, wearing a tenant's hat, was not quite as non-controversial as he liked to make out, which I am delighted to note—I am sure that the best British farmers would flourish.

12.6 a.m.

Lord Forester

My Lords, I congratulate my noble friend and neighbour Lord Hamilton of Dalzell on his excellent maiden speech. I hope that we shall hear from him frequently in your Lordships' House.

Like other noble Lords, I should like to thank my noble friend Lord Wade for introducing this important subject at such a relevant moment. In view of the hour, I am not sure that that is any longer right, and I shall therefore be as brief as possible.

It is quite clear that changes in the common agricultural policy are already and will increasingly have a serious impact on employment opportunities, particularly in lowland livestock producing areas such as my county of Shropshire, through reducing prices, reducing quotas, extensification and the aim of reduced output.

I wish to make three points. The first concerns structural funds. I was fortunate enough to meet Philip Lowe, of DG VI of the European Commission, earlier this year. He told me that, in parallel to the proposed changes in the CAP, the Commission is examining how support to rural development may need to be adapted to reflect agricultural changes and to help to create a wider, more solid base for the rural economy. That is splendid. But there is a catch, obscurely known in Eurospeak as the "Fontainebleau mechanism" which creates monstrous anomalies for rural areas.

The original treaty of accession to the EC placed unfair burdens on the United Kingdom in terms of the amount we contributed to expenditure elsewhere in the Community. To limit this the UK negotiated a new arrangement which shielded us from having to contribute so much to spending in other member states. The price we paid was in effect a downward adjustment to the amount of any EC contributions coming to the United Kingdom rural areas. Farming prices come under the guarantee fund and additionality is forced on the Treasury. But it is a very different case with the guidance fund, the main source of grants for structural policies and the rural economy. Fontainebleau meant that, while other member states received from Europe 25 per cent. of the cost of guidance grant, the United Kingdom received in practice only 7 per cent. Only this week, I am told, DG VI is crying out for people to take up money for agro-environmental schemes. It is time we put right these serious anomalies and started to receive equal structural funds with our partners.

Secondly, I come to forestry. New woodland planting in Britain is at its lowest level for 20 years. Ten per cent. of Britain is afforested compared to the European average of 25 per cent. Almost 90 per cent. of Britain's forest products are imported at a current cost of some £7 billion. We have 15 per cent. less woodland than the European average--equivalent to our total set-aside requirement. Yet, we are not allowed to plant trees on our set-aside. It is unbelievable.

The reduction in planting was originally due to the 1988 Finance Act. But I was intending to do some planting last winter—until I discovered that the Farm Woodland Grant Scheme was being replaced by the Farm Woodland Premium Scheme which was much better. Therefore, I cancelled all my planting and thought that I would do it this year. However, I now find that I cannot use this year's planting for set-aside so 1 have postponed it all again until next year when, as I understand the rules, I probably can use it as set-aside. Forestry is a vital part of our rural economy —but by our stupidity we have lost two years' planting. I hope that we can put that right as soon as possible.

Thirdly—and my noble friend Lord Marlesford has already briefly covered this ground—we must be told the rules of the common agricultural policy in time to plan our businesses. We must be told the set-aside rules in detail; we must be told about environmental set-aside; and we must be told about hedgerow grants. We must also know if British feed wheat is acceptable into intervention. I asked my noble friend the Minister that Question on June 24th. He said: We have made it very clear that feed wheat must continue to be eligible for intervention".—[Official Report, 24/6/92; col. 440.] I was delighted to hear that. But on 3rd July I read in the Farming News that, Ray MacSharry has given a major hint that feed wheat will be excluded from intervention". I am now told that a decision was made on 30th June; but it was only a decision that a decision would be made in the future by Ministers as to the quality standards for wheat. I am led to understand that it will probably be October before we learn of the ruling. I am dumbfounded because most of our wheat will be planted by then.

In summary, we need policies which pursue sustainable development, which will encourage agriculture to provide energy from renewable resources and other products for industry and leisure —rather than 15 per cent. of land wasted. We must encourage planning attitudes which look to the future and encourage rather than constrain initiatives. PPG7 is fine if all planning officers translate it in the same way, but they do not.

We must attract more youth back into the countryside. We have to broaden the economic base of our rural areas using every European and United Kingdom government initiative available. We must have a level playing field. To achieve that we must reorganise our structural funds. We must also have a realistic forestry policy. Finally, we must have up-to-date information. If we can get those points right—and if we cannot achieve that during our presidency we never will—I feel that there are enormous opportunities for the rural economy.

12.15 a.m.

Lord Gallacher

My Lords, perhaps I may first tell the noble Lord, Lord Hamilton of Dalzell, that the best compliment I can pay him is to say that I did not think his speech sounded at all like a maiden speech. We look forward to hearing him many times in your Lordships' House.

We on this side of the House are grateful to the noble Lord, Lord Wade of Chorlton, for asking this Question, although the addition of bond schemes complicates the answer. However, I hope to say a brief word later about Professor Tangermann. As we see it, there are three basics in answering the Question. First, Commissioner MacSharry's original proposal; secondly, the Select Committee report on the future of the CAP (No. 16 in the 1990–91 Session); and, thirdly, the settlement by the Agricultural Council on Commissioner MacSharry's proposals, detailed in the MAFF press notice of 22nd May.

Settlement was a success for Britain. The Minister is entitled to credit for what he achieved, although it is necessary to say that a number of deals had to be done in order to achieve that settlement. He was helped by majority voting. The settlement gives United Kingdom farmers a better deal than the one Commissioner MacSharry proposed originally. It is radical, but whether radical enough to form the basis of a GATT settlement, we do not yet know. Indeed, it seems to us that there is a danger that, having shown our hand in this matter, the United States and the Cairns Group of countries will ask for even more from the European Community.

We are now all worried—the speeches tonight have indicated noble Lords' worries—about the detailed implementation of the scheme which goes to the heart of the Question asked by the noble Lord, Lord Wade. A Written Answer in House of Lords Hansard of 6th July gives some idea of the problems, even before we have the Commission's tables implementing regulations for adoption. For cereals, the time factor for the 1992–93 season is serious. The noble Lord, Lord Palmer, commented upon that matter. Sowing and set-aside areas cannot easily be decided in advance of regulations. What to sow is equally vital. For example, which quality of wheat will be eligible for intervention —milling or feed wheat? The NFU naturally says feed wheat, but millers are saying milling wheat. When will that decision be made known?

The general effect of the settlement is not the saving of money overall, but a change from direct payments to farmers to a combination of direct and indirect payments. Consumers should, in consequence, pay less for food; but taxpayers will pay more. Is the consumer/taxpayer distinction here not more apparent than real, especially where food is concerned? There are few taxpayers who do not eat; and there are few consumers who do not pay tax. How much, for example, will the change reduce, say, the cost of a standard loaf of bread?

Millers and bakers in Britain are now largely one and the same, with certain companies having a large share of the flour and bread trades. The new Director General of Fair Trading has been reported in the press recently as seeing his role as one of a bloodhound rather than a watchdog. He may care to keep watch on those commodity prices which should be lower, however slightly, between 1993 and 1995 as a result of the CAP settlement and the restructuring flowing from it.

A 15 per cent. set-aside of cereal-growing land, whether permanent or rotational, will change the appearance of cereal farms. Quota sales of ewe and beef premia, when added to those of milk, could also mean farming changes. As has been pointed out, the environmental impact of the consequential changes could be significant. The numbers employed in agriculture seem likely to continue to fall, a point made by the noble Earl, Lord Radnor. Early retirement is hardly an option for many farm workers, whose pensions are likely to be state-derived and so inflexible. Farm work is not well paid and, as the Health and Safety Executive's reports show, it can also be dangerous. It seems unfair that, in comparison with many other workers, the farm labour force is not well off and is likely to lose jobs under CAP changes.

A contracting farm industry also means a need for even greater diversification. Many noble Lords have made that point this evening. We have seen some diversification in recent years, but more will undoubtedly be necessary. That of course places a considerable onus on planning authorities, as has been said. The Minister of Agriculture's awareness of that need was made clear in a speech he made on 24th June at a conference on the countryside and the rural economy. Planning policy guidance note No. 7, published in January last, which has been referred to, is germane to all this. The Rural Development Commission faces an even greater challenge as a result of the CAP restructuring. We believe that it needs to be closer to the Ministry of Agriculture, Fisheries and Food. During legislative changes in the House, we endeavoured to bring about that change. We had little encouragement from the Government's then spokesman on agriculture. Nevertheless, we feel that the need is still there. I wonder whether in replying tonight the noble Earl can tell us how close the Rural Development Commission still is to the Ministry of Agriculture.

Farmers must be relieved to see the changes to Commissioner MacSharry's original ideas. Nevertheless, they must now live with the new common agriculture policy regime, even if only for a few years. Until the GATT negotiations on agriculture are resolved, however, the full nature of the change and its effect on the economics of running a farm business cannot be established. The trend to larger farms in Britain seems likely to continue. High interest rates do not help farmers. Cheaper agricultural credit ought to figure more largely in National Farmers Union, Country Landowners' Association and tenant farmers' submissions to government. Projections about the impact of the settlement on the incomes of British farmers cannot be divorced from the cost of borrowing, except perhaps for an affluent few.

The Select Committee report on the future of the common agricultural policy was not unsympathetic to the concept of bond schemes as the medium for buying out the guarantee payments system. The notion of a bond which farmers can cash annually or for a lump sum, with costs being met out of annual savings on CAP payments, would operate better if each member state had power to devise its own scheme. As things are, bonds, apart from being used to compensate for future cuts in milk quotas, have been overtaken for now by what has been agreed by way of restructuring the CAP. Even the proponents of bond schemes acknowledge that bond values would have to take account of GATT negotiations. Sharing bond values, including tapers for larger farms, between landlord and tenant, seems to me to present major problems, despite experience with selling dairy quotas. Nevertheless Professor Tangermann's thinking is still with us. 1 agree with the noble Lord, Lord Middleton: I do not believe that it will go away.

The answer therefore to the Question of the noble Lord, Lord Wade, must be that it is too soon to assess the rural impact, but that we are grateful to him for the interim report which I feel sure the noble Earl will give us.

12.22 a.m.

The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe)

My Lords, this has been an interesting debate and as usual when we discuss the common agricultural policy there has been no shortage of views for the Minister to consider. I am grateful to all noble Lords who have spoken, but I should particularly like to thank my noble friend Lord Wade for giving us the opportunity to discuss these important and topical subjects. I should also like to congratulate my noble friend Lord Hamilton of Dalzell on his most stimulating and well argued maiden speech. It was well worth while staying up until this late hour to hear him.

I must confess at the outset that it is not possible for me to answer all the questions that have been asked or to give a full assessment of the effects that these CAP reforms will have. At the Agriculture Council last week agreement was reached on the regulations giving legal force to the agreement reached in principle in May. Your Lordships may like to know that a brief in question and answer form, together with a more detailed leaflet on the new arrangements for the arable sector, have been placed in the Library of the House. Copies are available in the Printed Paper Office.

However, there are a good many details which have yet to be settled. This will be done in further implementing regulations. Those regulations will be discussed by representatives of the member states in the various commodity management committees and the ministry will of course consult interested parties about them. As your Lordships will appreciate, until all the detailed regulations are in place it will not be possible to give comprehensive information about the new regimes or to make a complete assessment of their implications.

There is a further difficulty in assessing the impact that CAP reform will have on the rural economy. Not only do we not yet have precise details of the new arrangements. We do not know how farmers will change their production practices and patterns in response to them. It is undeniable that, if the basis of current production patterns and practices were maintained, the reform package would cause producer revenues to be lower than they would otherwise have been, although by significantly less than under the Commission's original discriminatory proposals. But even on these unrealistic assumptions the effects of CAP reform would not be uniformly felt: indeed, some farmers would be better off.

In reality farmers are resourceful and will adjust to the reforms, changing the way they farm and manage their businesses. Such adjustments will have favourable effects on incomes. Overall, I would not be surprised if by the end of the reform period the effect of the reforms on aggregate farm income was broadly neutral. But again the aggregate figure would disguise larger variations as regards individuals.

An important element in the reformed CAP, and one that will help farmers to adjust to lower price levels, is the introduction of direct payments. My noble friend Lord Wade has suggested that these should take the form of income bonds. I agree with my noble friend that the concept of income bonds, as proposed by Professors Marsh and Tangermann, has a good deal to commend it, although implementing a bond scheme would pose some practical problems. How, for example,—this question was raised by my noble friend Lord Hamilton of Dalzell—could bonds be apportioned between landlord and tenant? We see advantages in the bond scheme. Many of those advantages were mentioned by noble Lords tonight. However, the Agriculture Council has agreed a different scheme. Indeed the features that commend income bonds to us in this country are the very ones that deterred those member states seeking, for example, permanent and full compensation for all price cuts. The final compromise is not perfect, but it provides for a workable scheme, with levels of compensatory aid fixed over three years. In the longer term it remains our view—as it is of my noble friend Lord Radnor—that these compensatory payments should be phased out.

Under the reformed CAP farming will continue to play a key role in the rural economy. That goes without saying. An essential feature of the new CAP is that the role of price support and of intervention is reduced and farmers will need to rely more on returns from the market. By providing the framework for an efficient and competitive agriculture, geared more to the demands of the market and less reliant on artificial support mechanisms, the agreement creates the right conditions for farming to go forward into the next century. Of course farming will not return to the dominant position it held in the rural economy 40 years ago. The number of full-time farmers will continue to decline. These changes are, I fear, inevitable. As your Lordships' European Communities Select Committee pointed out in its report last autumn on the original Commission proposals, the declining economic importance of agriculture, and, indeed, of all primary industries, is a feature of all developed economies. This is not something that can be changed through agricultural subsidies. I must agree with my noble friend Lord Wade that the attempts by the European Community over the past 30 years to deal with deep rooted economic and social problems via agricultural support policies lie at the heart of the failure of the CAP in its current form.

The decline in the economic significance of agricultural production has been coupled in recent years with increasing recognition of the importance of agriculture for the maintenance of the countryside and the environment. This is acknowledged in the CAP reform package, which includes, as some noble Lords have mentioned, an agri-environmental action plan. This builds on the success of schemes such as the UK inspired environmentally sensitive areas scheme and requires all member states to introduce suitable schemes to encourage environmentally friendly farming practices. These schemes will reward farmers who take positive steps to conserve the countryside; at our insistence, management of land for public access and recreation is one of the activities eligible for aid.

There is no doubt that agricultural change will continue to have an impact on many rural areas. How are local communities and governments to respond? As the Select Committee in its report two years ago on the future of rural society showed, there is no single answer. But one thing is clear; farmers themselves have an important role to play. They can and must exploit new market opportunities. A recent survey by one of the major banks has shown that over 50 per cent. of farmers already have some form of farm based non-agricultural activity. But there is scope for more. Farmers have to consider all the business opportunities which they can exploit and most importantly they must learn to market their products and services. In that regard they are no different from any other businessmen. The Government recognise that effective marketing structures are a necessary component of a more market oriented agricultural and horticultural sector. We are actively promoting the creation of large, professionally-managed groups through the group marketing grant, which came on stream in April. We are also keen to bring about an environment where those active at the various stages of the food production, processing and distribution chain talk to one another about their requirements and how to meet them.

Throughout the Community, tourist authorities see rural tourism as one of the major growth areas in the next 10 years. In the United Kingdom we are already helping farmers to diversify their enterprises and exploit opportunities in this and other areas, such as food processing, through the provision of free advice from our technical agencies and through grants to help with capital and consultancy costs. We have helped farmers to collaborate to set up the Farm Holiday Bureau which markets over 1,000 separate farm businesses offering accommodation on farms. know that there are moves afoot to set up a similar body for farm attractions.

In all of this the Ministry, of course, co-operates with the other rural development agencies and authorities. We are anxious to ensure, for example, that due attention is paid to the need for economic development in planning policies. The recent Planning Policy Guidance note 7 on the "Countryside and the Rural Economy" reminds planning authorities of the need to take a balanced approach to rural development and conservation. It makes it clear that the countryside can accommodate many forms of development without detriment if the location and design are handled sensitively. We must defeat the insidious idea that economic development is the enemy of the countryside. Nowadays, many commercial and light manufacturing activities can be carried on in rural areas without causing unacceptable disturbance. In reality, maintaining a healthy rural economy is one of the best ways of protecting and improving the countryside that we all know and love. My noble friend Lord Radnor mentioned the Rural Development Commission. The RDC is the Government's main agent for diversifying the rural economy. The commission provides workspace, directly or in partnership with local authorities, grants for the conversion of redundant buildings and technical and financial advice to small rural business. The noble Lord, Lord Gallacher, will be pleased to hear that we have been working closely with the commission and others in programmes such as the two European Community LEADER programmes in Devon and Cornwall.

We have also worked with the commission on its new countryside employment programme, which aims to help those rural areas which are particularly vulnerable to the structural changes in agriculture. The scheme, covering parts of Lincolnshire, the English/Welsh border and the Cotswolds, will establish partnerships with local organisations and introduce a programme of action to encourage new types of business and new jobs.

These programmes recognise the fact that the future of the rural economy cannot be based solely on agriculture and its associated industries. If rural areas are to thrive they will have to look for economic development in other sectors as well. Resources freed from agricultural production need to be channelled into other economic activities in the countryside.

One such activity—rightly stressed by my noble friend Lord Forester—could be forestry. Forestry has an important place in the rural economy and the Government wish to see more trees planted, on farmland in particular. As well as offering a productive alternative use for agricultural land, farm woodlands provide significant environmental benefits. The experimental farm woodland scheme was introduced in 1988 and resulted in applications to plant over 14,000 hectares. Although that was less than we hoped for, that area does represent well over 20 million trees. We regarded that as an encouraging start, given that growing trees represents a significant new departure for many farmers.

Last year we conducted a thorough review of that scheme and we have now introduced a successor scheme—the farm woodland premium scheme. The main changes are that it offers improved financial incentives to farmers and is a much easier scheme to understand and administer. A great deal of interest has been shown in the new scheme and I hope very much that it will prompt many farmers to give serious consideration to planting and managing woodland as part of their farm business. My own view is that once farmers have been persuaded to overcome their initial hesitation about planting trees they may well go on to plant more trees in the future.

Most diversification measures will be of benefit not just to farmers but to the general public as a whole. In order to encourage the creation of new woodlands close to towns and cities which will be of value for public recreation, the Forestry Commission now pays a community woodland supplement under its Woodland Grant Scheme. One of the conditions of this supplement is that there should be free access to the public. I hope that that will create opportunities for public appreciation of the countryside as well as contributing to the rural economy.

I shall attempt to answer one or two of the further questions that have been raised in this debate, although, as I explained earlier, my answers may unavoidably he incomplete. To those noble Lords whose questions I do not have time to answer I apologise in advance.

The noble Lord, Lord Palmer, and my noble friend Lord Forester, as well as the noble Lord, Lord Gallacher, were understandably worried about intervention standards for wheat and asked when an announcement would be made. The UK is pressing very hard indeed for an urgent resolution of the present uncertainty. I repeat my assurance of the other day that we fully agree that feed wheat should be eligible for intervention. We are making that view known at every opportunity.

The noble Lord, Lord Palmer, mentioned bio-fuels. Bio-fuels may have useful environmental characteristics in terms of emissions and MAFF has considerable expertise on the subject. Without wishing to dismiss the concept of bio-fuels, I would say that unsubsidised bio-fuel production is not economically viable. It costs approximately two and a half times as much as mineral diesel to produce. Perhaps more fundamentally the energy derivable from a litre of bio-fuel is roughly equivalent to the energy required to produce it. So one has to think very hard before going into bio-fuels at this stage in a major way.

The noble Lord, Lord Palmer, asked for an assurance that the agri-environmental programme would be adequately funded. I cannot give any details of the level of funding at this stage. Member states have a year to draw up appropriate schemes. But member states are required to introduce such schemes and to ensure that they are properly funded.

My noble friend Lord Radnor asked whether MAFF has sufficient resources to implement the new schemes. Clearly the new schemes will require additional resources; and equally clearly MAFF does not currently have substantial spare capacity. However, I can assure your Lordships that the new schemes will be properly administered. Once implementing regulations are adopted in Brussels, we intend to move rapidly to finalise the details of the schemes in the UK.

My noble friend Lord Marlesford and the noble Lord, Lord Gallacher, mentioned the decline in agricultural employment. It is well known that agricultural employment has declined in recent years and that trend is likely to continue. In the light of my earlier remarks, it is impossible at this stage to say how the CAP reform package will affect agricultural employment trends. It is similarly too early to assess what the employment consequences will be on a sectoral basis.

A number of noble Lords expressed dismay at the renewed arrival of set aside. I can do no better than to quote the words of my right honourable friend Mr Gummer. In a speech that he made in the CAP reform debate on 12th June, he said: I know that there are many in the House who dislike set aside on principle. I acknowledge that it does have many disadvantages. Given time, there are much better ways of bringing supply and demand into better balance. But time is what we do not have. With the current level of Community production and the prospect of surpluses of perhaps 30 million tonnes after this year's harvest, only an effective European-wide set aside programme can tackle overproduction rapidly enough". My noble friend Lord Middleton mentioned low cost rural housing. The Government recognise that provision of affordable housing is a serious issue in rural areas and are determined to meet that challenge. We have made clear in planning policy guidance note 3 on housing that the need for affordable housing is a material planning consideration. Where there is a demonstrable lack of affordable housing, local planning authorities may seek to negotiate with developers for the inclusion of an element of affordable housing in new development both on sites allocated to housing in development plans and on other sites.

My noble friends Lord Marlesford and Lord Stanley of Alderley were worried about the bureaucracy that might arise from the CAP settlement. CAP reform measures are to be accompanied by an integrated administrative and control system which is still under discussion. The measure will seek to ensure that the reform measures are implemented evenly and effectively across all member states and that mechanisms are in place to deter fraudulent practices. The new control system and the various CAP sectoral schemes will inevitably involve form filling by farmers. However, the Government are determined to keep that to the minimum necessary for proper operation of the scheme. We are consulting the NFU and other interested bodies to that end.

My noble friend Lord Marlesford asked about the future of the countryside premium scheme. It appears that the agri-environmental programme provides for something similar to the countryside premium scheme. That is one of the options that we shall consider. We shall consult widely about it.

My noble friend Lord Forester referred to the Fontainebleau Agreement. I cannot agree with the slant that he put on that agreement. The UK's overall contribution to the budget is reduced by the abatement, and reduced by a very substantial sum of money—£2.366 billion in 1991/92. That sum cannot realistically be allocated to any particular part of the budget such as grant funding.

Again, I thank all noble Lords for the considered views which they have expressed this evening. The rural economy is a topic to which I have no doubt we shall return on many occasions in the future. It is my hope and belief that the challenge to the agricultural sector will be energetically met and that the opportunities which are there to be seized will over the next few years generate the prosperity in our rural communities which all of us wish to see maintained.