EC Budget: Tobacco (Hansard, 4 May 1993)

The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe)
My Lords, the costs of supporting the tobacco sector, as for other agricultural products covered by the common agricultural policy, are financed from the 595 EAGGF (European Agricultural Guidance and Guarantee Fund) section of the EC's general budget. Funds allocated to each commodity are set annually by the Council at a level estimated to meet the expenditure requirements of the Council's policy objectives.

Lord Bruce of Donington
My Lords, is the noble Earl aware that in each of the years in question the sum spent on tobacco subsidies, premium and storage has amounted to over £1 billion, of which the taxpayers of this country bear £240 million? Can the noble Earl explain why, when it has been known in the Community, in Brussels and in other circles for years that those payments are the subject of wholesale corruption, those items go through ECOFIN on the nod every year without query from Her Majesty's Government?

Earl Howe
My Lords, as I am sure the noble Lord is aware, important changes were made to the tobacco regime in last year's CAP reform which should reduce expenditure appreciably in the years ahead. There is a new quota system whereby only tobacco under quota will now be supported, intervention and export refunds have been removed and producers are being encouraged to convert to low tar tobacco and other crops. The Commission estimates that those measures will reduce annual expenditure by over 25 per cent. between 1994 and 1997. There will be another review in 1996 when the British Government will press for further reductions in subsidy.

§ Lord Boyd-Carpenter
My Lords, is it not a fact that the British taxpayer is contributing—and has done so for several years—a large sum to the production of this product and at the same time is contributing money to propaganda urging people not to smoke? Is that not the most complete economic nonsense? Is it not up to Her Majesty's Government to say firmly to the EC that we shall not continue to pay on those lines?

Earl Howe
My Lords, the policy of the Government is in no way inconsistent. We believe that it is right for the prevalence of smoking to be reduced, and we have seen considerable success in that area over the past few years. We also believe that it is right for subsidies to tobacco growers to be reduced. Again, as I have just explained, we have seen similar success in the CAP reform agreement.

§ Lord Stoddart of Swindon
My Lords, is it not incongruous that the bureaucrats of British Rail should be trying to stop people smoking while the bureaucrats in Brussels are paying subsidies to continental farmers to grow tobacco? Surely nothing could be more stupid than that.

Earl Howe
My Lords, as the noble Lord will know, the Treaty of Rome provides for tobacco to be eligible for support under the CAP. That is a fact. It is an important crop in many areas of the Community because, particularly in southern member states, it is the only viable economic activity. Seven of the 12 596 member states grow tobacco and it is estimated that 200,000 families are involved directly and four times that number indirectly in producing tobacco.

§ Lord Clark of Kempston
My Lords, if tobacco is an important crop for the Community why does the Community say that the advertising of tobacco should cease?

Earl Howe
My Lords, the Community is indeed proposing that advertising of tobacco should cease. We are not convinced that the EC directive to ban advertising is necessary to complete the internal market. The Government continue to believe that the best way to control tobacco advertising is through the voluntary agreements which we have with the tobacco industry.

§ Lord Gallacher
My Lords, can the noble Earl tell the House how much notice his right honourable friend the Minister takes of representative submissions made to him by organisations during the annual price review, which includes tobacco? For example, for 1993–94 the Consumers in the European Community Group, a very representative body and one which I believe is still funded by Her Majesty's Government, has suggested that tobacco quotas should be reduced to phase out support over the next five years. Can the noble Earl tell the House whether his right honourable friend will take notice of that suggestion and attempt to give some effect to it during negotiations on prices?

Earl Howe
My Lords, of course we take notice of representations made to us. Over many years we have campaigned consistently for reductions in EC subsidies for tobacco, but with limited support from other member states, many of which, as I explained, have a direct interest in the matter. The difficulty with any suggestion that the regime should be unwound altogether is that, because of the natural conditions which pertain in various member states, there are simply no alternatives to tobacco as a means for the local population to earn a living.

§ Lord Mackay of Ardbrecknish
My Lords, is it not simply silly that the common agricultural policy is subsidising tobacco growing to create a product which is extremely damaging not only to the health of those people who use it but also to the health of the rest of us who have to breathe in the fumes? While I fully appreciate the problem of those farmers who do not seem to have an alternative crop, could that argument not be used also to justify the growing of crops such as marijuana? Would it not be far better to use the money currently spent on subsidies to find ways of encouraging those farmers either to go to set aside or to find alternative crops, and the sooner the better?

Earl Howe
My Lords, as I have explained, we have to take the facts as we find them. While the levels of support have undoubtedly encouraged greater production over the years, the CAP reform settlement will put that upward trend into sharp reverse, which I am sure my noble friend will welcome.

Lord Bruce of Donington
My Lords, in his reply the noble Earl has not dealt with the subject of fraud, to 597 which I referred specifically in my first supplementary question. Is the House to assume that the Government are entirely unaware of what has been happening in that field? Furthermore, the noble Earl said that the Government have been pressing for expenditure on this item to be reduced. Does he agree that the pressure seems to have been futile and that the Treasury officials on ECOFIN have been inadequate to the task of protecting the British taxpayer?

Earl Howe
My Lords, I do not believe that there are any official figures specifically on recent fraud in the tobacco sector. However, positive steps have been taken to prevent fraud. I shall mention two. First, the main producer member states are now required to establish control agencies and those agencies will oversee the payment of premiums, the administration of the quota system and contractual arrangements between growers and suppliers. That should reduce the opportunity for fraud. Secondly, the new division of tobacco varieties into groups will also reduce the opportunity for fraud because in future the same level of premium will be paid for all varieties.

§ Baroness Seear
My Lords, is the noble Earl really satisfied that there are no alternatives to growing tobacco or that with a little more research effort alternatives could not be found? In such regions one has observed tobacco growing surrounded by other crops. It may be that there is something peculiar about that particular piece of land, but maize, sunflowers and all sorts of crops grow within a stone's throw of the tobacco. Is growing tobacco really the only way people in those areas can live?

Earl Howe
My Lords, I too questioned that assertion and I am told categorically that in some parts of the EC because of the terrain, the soil and climatic conditions there are indeed no alternatives to growing tobacco.

§ Lord Orr-Ewing
My Lords, is my noble friend aware that there is a further illogicality about the set-up in that the tobacco grown in the southern countries of Europe has a very high tar content, cannot be sold in the markets of Western Europe and is therefore all exported to Africa and other areas to spread any danger which may arise? Is it not true that in such areas earnings are mainly from tourism and not from tobacco? Is it not wrong to pretend that a great deal of employment in the southern European countries depends on tobacco? Does my noble friend agree that their economies are built on tourism?

Earl Howe
My Lords, I agree that tourism plays an important part in the economies of southern member states. However, the reforms agreed last year provide for a three-year compensation package for farmers who succeed in converting to other crops or to lower tar varieties of tobacco instead of problem varieties for which there is less demand.

§ Lord Campbell of Alloway
My Lords, would the Government be prepared to reconsider the whole 598 question of providing those massive subsidies? The explanation given that that is the only crop seems open to most serious questions.

Earl Howe
My Lords, I am sure my noble friend will agree that the recent reforms are at least a step in the right direction. We shall look for further reductions in EC subsidies when the reforms are reviewed again in 1996.