Apple Growers

HL Deb 29 April 1994 vol 554 cc984-1002

3.36 p.m.

Lord Carter rose to ask Her Majesty's Government whether apple growers in the United Kingdom are making substantial losses; if so, how extensive those losses are; and what proposals they have to prevent a surplus of apples in the European Union.

The noble Lord said: My Lords, the Question standing in my name on the Order Paper seeks to draw attention to a very serious situation in the UK dessert apple industry and to ask the Government what proposals they have to deal with the problem.

The first point to consider is whether the current problem which we shall be discussing in the debate is merely a feature of the normal seasonal surplus and deficit that we all face in agriculture and horticulture —for example, one good year, followed by several bad years and, to some extent, a. self-correcting mechanism —or whether what we are seeing is the result of a deep-seated structural problem in apple production in this country, the European Union and the non-member countries who supply the European market. I strongly believe that it is the latter; namely, a structural problem. I shall attempt to show the House why and to suggest means of dealing with the problem. I shall also seek the Government's views on what proposals they have to deal with such a serious situation.

Perhaps I may put the matter into context. The UK produces annually about 210,000 tonnes of dessert apples, and about 140,000 tonnes of cooking apples, with seasonal variations in the yield. That represents about 30 per cent. of the total UK apple consumption. So, obviously, we are a major importer of dessert apples. Ours is about 4 per cent. of the total European Union production of some 8 million to 9 million tonnes per annum. In recent years, the UK has been responsible for rather less than 2 per cent. of EU intervention. The current forward projections of the EU apple production suggest a total production in the order of 10 million tonnes per annum by 1996 with a range of 8.5 million to 11 million tonnes. The same forecast suggests a world surplus of 3 million to 4 million tonnes per annum. If that is not a structural surplus, I do not know what is.

Some figures produced by industry sources (including home-grown fruits) indicate the range of packhouse prices to the grower now of about 3 pence to 5 pence a pound, with slightly higher figures for cox apples, against growing costs of 8 pence to 12 pence a pound. That situation has proved to be the norm over the past two years and is likely to continue into the next season unless action is taken.

Substantial efficient growers have experienced losses in the past two years which have wiped out previous profits. They are now facing a third successive year of heavy loss, unless something is done and done quickly. The industry employs in total about 100,000 people. That includes those in the orchards both upstream and downstream, those in the packing houses and also part-time employees. A serious problem which will have to be dealt with as regards apple orchards is top fruit. As we know, top fruit is not part of the arable aid system. There are no alternative arable crops which can be grown on the land as a part of the arable aid system and it is not eligible for set-aside. That means that if growers are forced to take the land out of apple production, it is extremely hard for them to know what they can do with it. That has resulted in a situation where land with apple orchards is now virtually unsaleable.

What has happened with the EU apple regime to create such a situation? First, I believe, it is the failure of intervention. Intervention was intended to deal with the occasional seasonal surplus so as to take such surplus off the market. Instead, it has become a permanent feature of the regime. Indeed, some growers in other member states deliberately grow for intervention. The system is rife for fraud. Secondly, there is also the comparative failure of the previous schemes for grubbing up. A substantial proportion of the funds available on the most recent scheme went to East Germany (which was not considered as a recipient when the scheme was set up) and has obviously distorted the whole picture. Thirdly, there is the predatory pricing by some member states of the EU, especially Holland; and, finally, the problem of low-priced imports from the southern hemisphere.

What proposals does the European Commission have to deal with the problem? Does the Commission recognise the urgency of the situation? Apparently not. The Secretary-General of the COPA/COGECA wrote to the Director-General of DG VI of the Commission on 6th December 1993 describing the seriousness of the situation. That followed a deputation in July 1993 which also described the very urgent problem. There was no reply to the letter sent in December for two-and-a-half months. Mr. Christopher Jackson, a Member of the European Parliament, then wrote and, finally, on 7th April—that is, nine months after the problem was first described by the deputation to the Commission—Mr. Steichen, the Commissioner, replied, very unhelpfully. He said that he regretted the failure of the previous grubbing-up schemes and that he looked forward, "with some apprehension", to the results of the increased planting—he was certainly entitled to do so—and then referred vaguely to, measures for the reform of the common organisation of the market in fruit and vegetables which is now under active consideration".

The letter completely failed to distinguish between the problems which face the British grower and those which face growers in other member states. That was either deliberate or it was the result of some very careless drafting. But we all know what it means for the horticultural sector to wait for the review; it is a further delay while apple growers get into deeper trouble. There are times when I believe that the speed of response of the European Commission makes the average tortoise look like a gazelle.

The proposals made by COPA/COGECA in advance of the horticultural review being undertaken by the Commission have two main features. The first relates to grubbing up grants for an area of the European Union. The original area suggested was 33,000 hectares. That has since been increased to 50,000 hectares because the situation has worsened. There have been substantial changes in the intervention system to penalise the varieties which are consistently intervened. I was not surprised to learn that Golden Delicious is consistently intervened. If ever a variety were misnamed, that one was!

As regards the proposals for grubbing-up grants, the important point is that the one-off capital costs could be met within three years by savings in intervention. That is an important point with regard to the effects on the European budget.

As part of the COPA/COGECA proposals, there has been an imaginative set of proposals from the National Farmers' Union, supported by the apple industry. It has proposed a policy package comprising changes to the intervention system with a reduction in the intervention price and its eventual phasing out; effective use of the reference price system to prevent the dumping of apples by third countries; improvements in the marketing and promotion of British fruit (a good deal has been done by the industry itself in that respect); means of pressing the UK Government to ensure that other member states of the European Union do not unfairly aid their growers and that there is the level playing field with which we are all familiar; and other proposals regarding production, marketing and plant health. Clearly, there is no shortage of policy proposals.

A further problem arises from the GATT settlement. Already the European Commission has formulated a draft agreement with Chile which goes beyond the GATT settlement. Will the Minister say whether that agreement is a proposal from the Commission or an agreement by the Council of Ministers? Under GATT rules it opens a door for other countries to seek identical agreements. New Zealand has made clear that it will seek identical terms. Such agreements could substantially increase the volume of low-priced imports from non-member states which in recent years have increased their productive capacity without any consideration of the market available. It is extremely unfair on the European Union grower if the increase in capacity in the non-member states is dealt with by agreements such as that with Chile, which gets it out of a problem it has created itself. I ask the Minister what stance the Government are taking as regards the proposed agreement with Chile and other similar agreements which may be reached in the future. Have the Government expressed a view? If so, it would be extremely helpful to the House to know what it is.

The proposals for grubbing-up grants and changes to the intervention system that I have described are now on the table. They are urgently required to deal with the problem for the coming season. What view do the Government take? Do they support the proposals? Do they agree with the description that I have given as regards the seriousness of the situation? In the light of that, what concrete proposals do the Government have for action before the 1994–95 season and beyond?

What alternative use of the land, now used for apples, do the Government envisage, if we bear in mind the problems to which I have already referred, because that land is not a part of the arable aid system? I sympathise with those who are having to grapple with the problem because they are entitled to ask what will happen to the land if the orchards are grubbed-up. It seems to me that there will have to be an attempt to bring such land into the system of support or set-aside or that alternative use will have to be allowed, for example, as woodland or as a source of crops for industrial fuel or whatever. All those matters need to be considered but they will have to be thought through extremely carefully. What will happen to the land if grubbing up, which I believe is essential, is undertaken?

Although in recent years the industry has had a good record of self-help, it is essential that the Government should now step in. This morning I received a press release from the Ministry regarding the Agricultural Council held earlier this week. We hoped that help for the apple industry would be discussed by Ministers at the meeting but that apparently was not the case or, at least, it is not mentioned in the press release. Will the Minister say whether or not the problem was discussed at the Council, and if so, what conclusions were reached?

I know that other speakers in the debate will cover a number of aspects of this matter. I understand that following the Napoleonic wars, excessive imports from France caused a desperate situation for English apples, which moved Lord Torrington to observe: The sooner Kent is without an apple tree, the better".

We must all hope that Lord Torrington's fears for Kent in the 19th century do not become the actual experience of apple growers throughout the United Kingdom as a result of inaction by the European Commission, abetted by our own Government.

3.50 p.m.

Lord Cornwallis

My Lords, I am very grateful to the noble Lord, Lord Carter, for tabling this Unstarred Question. Perhaps I may add some background to the questions which he asked so pertinently.

For 46 years I have been involved in the top fruit. industry. I was a grower, a co-operative founder and director, chairman of a co-ordinating organisation and, perhaps more importantly in the context of the Question, for 12 years until 1986 I was the horticultural co-operative's representative in Brussels. I am therefore: very well aware of the dilatoriness and prevarications of the Commission, and the frustrations of trying to get it to do anything—that is, anything you want. I most sincerely hope that we are not going to suffer the same frustrations from our own Ministry.

In all my 46 years I have not known a crisis among fruit growers of anything like the present situation; nor have I known such unity of purpose. For once that unity of purpose is the same across the whole of the EC. There is now an unrivalled opportunity to achieve some progress in sorting out the European apple surplus.

Let us be clear about the magnitude of the problem. The European surplus this year was in excess of 1 million tonnes. But that is only Europe. The worldwide surplus was probably over 2 million, and growing. Much of this world wide production is targeted at us here. There is nowhere else for it to go. While there is a surplus on the Continent, it should be remembered that there is no surplus in the United Kingdom. We supply only 30 per cent. of our market, but the United Kingdom Treasury is paying its percentage of the millions paid to continental producers for intervention.

As long ago as 13th October I led a deputation of the fruit industry to meet the Minister of State. We put forward a united plan to help ameliorate the overall problems both of our own and the Community. This plan was later agreed in principle by the Minister in writing, and has since been confirmed. Most, but not all, of this plan is acceptable to our European fruit growing colleagues. There is need—urgent need—for some of the things to be implemented as soon as possible. The Commission is conducting an overall review of horticulture. So, we are told, we must wait for this. Waiting for the Commission's reviews is a fine way of doing nothing. They take years and are always late.

Part of the package put to the Minister of State was for a grubbing grant; a grubbing grant with a replanting prohibition for 15 years. Our European colleagues are lobbying for this to the tune of removing 50,000 hectares of apples from the market. If this were done, our contribution to the cost of intervention would drop considerably because the Treasury is paying for French and Italian intervention, not British. We hardly use it and would like it to go. The cost to the Treasury of their share of the grant would equate to approximately one-and-a-half years' saving in payments to intervention—money which is not benefiting this country. May I ask the Minister whether he knows if anyone in the Treasury understands investment and expenditure to bring forth future rewards? I do not really expect him to answer.

However, the Minister of State has accepted our whole plan. We have told our European colleagues this. They have informed their own governments. But, firstly, apparently our Government will only support the whole plan—and that awaits the never never land of the Commission's review—and, secondly, because of that, they will not support the united call at the Council of Ministers for an urgent part of it. Our European colleagues do not understand how we are able to say that our Ministry is right behind us when they see no visible signs of it across the water.

I cannot over-emphasise the urgency of this matter. Fruit growers have had two disastrous years, not of their making. The banks have a red alert on the fruit growing enterprises, with a similar view taken by estate agents. This is not an industry crying in its soup for a great rescue hand out. It is an industry that has done more to help itself than any other in the country. It survived and reorganised in the 70s, losing 50 per cent. of its hectarage to become leaner and fitter to compete with Europe's new challenges.

The industry has organised its marketing and is continuing to change and develop. It has raised £1.5 million per annum to promote its product; half of the total promotion money raised by the whole of horticulture. Additionally, it has extracted £1.25 million from European schemes over the past three years, the only horticultural industry to do so. It receives practically no financial support from the Government or Europe. Compare that with the millions paid to livestock and cereal farmers. It is disadvantaged over IACS—a point which the Minister may care to address. Horticulture as a whole costs only 5 per cent. of the total cost of the CAP.

I therefore ask the Minister for an assurance that at the next Council of Ministers the United Kingdom will support the European request for the urgent introduction of a grubbing grant. There are growers anxious to retire from the industry altogether who are seeing their hard-earned gains disappear and the value of their holdings rapidly diminish. At present they can only retire by being put out of business by the banks—a prospect that comes nearer with every day of inactivity.

We hear a great deal from the Ministry about consumer choice. If some action is not taken soon one choice which consumers will not have is to buy English apples. Over the past two years producers have received back about half the cost of producing fruit in spite of the splendid co-operation that we have had from all the supermarkets.

We also hear that the last grubbing grants did not achieve their expected result. That may be a Treasury argument, but the Ministry of Agriculture knows full well that the first grubbing grant coincided with the unexpected collapse of the Berlin Wall, to which the noble Lord, Lord Carter, referred, and mostly went to East Germany. The second coincided with a freak short year which was therefore relatively profitable for those few who happened to have a crop.

Our request is backed not only by growers and their organisations but also by the Fresh Fruit and Vegetable Information Bureau and by wholesalers both here and in Europe. They have committed their support to paper.

Our European friends—and they are indeed friends —do not understand what is going on. For years our representatives have been calling for this type of action and been frustrated by French, Italian and other opposition. Now, when everyone is agreed and seeking part of that which the British have always wanted, our Government have failed to give us public—and I emphasise "public"—support. No wonder they think that we are mad.

I also ask the Minister for an assurance that when —and I shall show confidence by not saying "if"—the Government and the Commission act to assist themselves—yes, themselves—and us, whether in grants, schemes or through GATT, the Ministry will use its best endeavours to make sure that the Commission enforces its own regulation. We are worried particularly by GATT. The Commission has a very bad record on either acting in time or for that matter acting at all. Our worst fears have already been fuelled by the recent compromise draft agreement with Chile.

There is no point in doing anything at all if the only result of our combined efforts is to make a hole in the European market for a further flood of imported fruit from third countries. Perhaps it was not very encouraging at a recent meeting with the Secretary of State to hear him say at the conclusion that inflation and cheap food were our top priorities. In the context of cheap food, I question the value of the help that we may think we are giving to eastern Europe by purchasing its produce when we are paying its producers substantially less than the cost of production.

It may be thought that the advent of the GATT agreement will alleviate the import problem, but I seriously doubt whether that will be so. The Commission, by its dithering and indecision in the face of mounting protests over the years at the quantity of imports, has in fact already sold the pass. That cannot be laid at the door of our own Ministry. But the truth is that the basic import quotas, above which GATT duties would be leviable, have been allowed to establish themselves at a very high level due to the Commission's past inactivity.

To demonstrate the overall change in supply the following figures may serve to emphasise both the dimensions of the problem and its seriousness. Over the past six years imports into the United Kingdom have doubled, rising from 95,000 tonnes to 190,000 tonnes. Imports here are increasing at a rate faster than the overall rate of increase into the Community as a whole. If my memory is right—and it is my memory upon which I call—when I first went to Brussels we were fighting the Commission over a figure of about 200,000 tonnes of imports a year and trying to reduce that figure to about 180,000 tonnes. Today we are fighting over 650,000 tonnes of imports.

To conclude, perhaps I may ask the Minister to review the IACS situation in order to make it easier for growers to use their land for other than fruit growing. Perhaps I may also ask that the discussions currently in hand to provide a unified information service throughout the industry be pushed on urgently so that that service is in place for the coming season. Purchasers, packers, growers and storers all need reliable crop and stock figures. At present there are conflicting sources of information collected by four different criteria and causing confusion as to the state of the market, both present and future.

But, most importantly, I must return to the urgent call for a grubbing grant to remove hectarage across the Community. In the UK we would aim to remove some 2,500 hectares of fruit—5 per cent. of the figure for which our European colleagues are calling. My information is that we use 2 per cent. of the Community's intervention and the Treasury pays for 12 per cent. of the total European costs. Therefore, 85 per cent. of our money goes to pay for Continental apples to be thrown away. Investment—yes, investment—in a grubbing grant would recoup that expenditure within two years and bring that money home to the British taxpayer. Surely even the dead hand of the Treasury must understand the benefit of doing that—or can they see no further than next Budget day?

For once we have unity of purpose between the whole of the top fruit growers of the Community in seeking part, if not all, of that which we have agreed and for which we have been working for years. Please do not now let our Government's voice be either silent or dissenting.

I ask again therefore for an assurance from the Minister that the British voice will be heard loud, clear and forcefully in support of our industry and of our European colleagues who, in some places, are worse hit than ourselves. I hope that the four voices here this afternoon are not just crying in the wilderness, a wilderness that our fruit growing industry may well become—perhaps comparable to the desert that is your Lordships' House on a bank holiday Friday afternoon.

4.4 p.m.

The Earl of Selborne

My Lords, perhaps I may say a word in this desert. I begin by saying how grateful I am to the noble Lord, Lord Carter, for drawing attention to the dilemma in which the top fruit growing industry in this country and throughout Europe finds itself. I should declare my involvement in the industry. I am a fruit grower. I chair the Strathclyde Marketing Initiative for the tree fruit sector. I wish to return to that subject in a moment. I also farm arable and dairy crops. However, I have always said that I feel much happier in the long term in the unsupported sector of horticulture. It means that we have to live in the real world with market pressures, but at least to a certain extent we are masters of our own fortunes.

'Therefore, it would be hypocritical of me, to say the least, if I were to say now that we require subventions and payments from the Government. I do not think that that is the long-term solution. We must do what we always said we wanted to do and live on our own resources.

However, the problem arises that in the misguided policies of the European Community over the past 20 years or more, under the common agricultural policy the Government have intervened massively in the form of interventions and have prevented market forces operating. As has been pointed out so clearly by both the noble Lord, Lord Carter, and the noble Lord, Lord Cornwallis, we now have a situation of chronic surplus, positively encouraged by the procedure of intervention and buying in products which do not meet market prices. We know well that the lower cost production systems, particularly in southern Europe, are able to meet their marginal costs. There is no inducement to remove surplus production, and intervention has therefore accentuated the problem. That is why we have a problem which is immediate and which is driving a large number of producers, both in this country and in Europe, into bankruptcy. I think that that is not in dispute. The figures are clear and we have heard enough already today to understand the nature of the problem.

Having said all that, I believe that it is very much for the United Kingdom apple industry to demonstrate what it can do itself to help resolve the problems it finds itself in. That does not mean that Government do not have a role. But the Government are entitled to hear from the industry just what measures it proposes to take in order to meet some of the difficulties.

The first and foremost requirement is for the industry to protect its brands. Its great success, probably unique in all agricultural and horticultural marketing, has been to promote its brands. The average UK consumer knows very well about the English Cox and the English Bramley. They are held in high regard. It is probably a classic story of the promotion of a brand which is owned by a large number of different people.

But it is a vulnerable situation. Things go wrong— and let us admit it, the past year was not the easiest for us growers, and early in the season at least we produced some Coxes which damaged the brand. That is not to say that it continued throughout the season, nor that it was universal throughout the season. Nevertheless, we have a responsibility to ensure that we try, as we clearly must, to sell apples at a premium and we must make sure that we produce a premium product.

The way in which we do that is to ensure that we keep our costs as low as possible, but not at the expense of packaging, promotion or the links with the marketing chain. We need to develop alternative markets for apple juice, again branded by Coxes and Bramleys. There is an enormous market for single strength apple juices, but it needs all the links in the chain—the producer, the processor, marketing and retailers—to collaborate. That is precisely where the Strathclyde Marketing Initiative, and other marketing initiatives can and will make a contribution.

I know that the Ministry of Agriculture's marketing task force is also looking carefully at the problem, as is, the president of the NFU, David Naish, with a marketing group reporting to the Prime Minister. They and others are looking at the opportunities and they all agree that the United Kingdom top fruit industry has had more successes than failures in the past. It dealt with the Golden Delicious onslaught of 1979–1980; it established a premium in the market. What we are now seeing is that premium being eroded, mainly because of the chronic surpluses throughout the world. Those surpluses arose not just with the commodity price but the premium prices which are required by UK apple growers.

If anyone is in any doubt—and with this select number of noble Lords present no one can be in any doubt—about why United Kingdom apple producers need a premium price, it is simply because they will never grow the yields of southern Europe. The closer you are to the limit of apple growing, the lower your yields and the higher the flavour. It is a simple correlation. We must make it quite clear that we must always look for high value, almost niche varieties, of which Cox is the best known in the country.

So much for the role of the industry. I do not think that anyone who has spoken so far would deny that it is for the United Kingdom industry to contribute to resolving this great problem before the haemorrhage drives a large part of the industry out of business. But there is a role for government. It is important to stress, as did two previous speakers, the serious concerns caused by the IACS regulations that growers have no collateral when they come to sell, which of course acts as little inducement to grub. That is a serious concern.

Above all, there is a simple and urgent necessity to resolve the EC's own follies. The EC has been encouraging the retention of structural surpluses by misguided intervention schemes. That must be resolved immediately by a grubbing scheme allied to an effective ban on replanting. The two must go together. And there must ultimately be elimination of the intervention scheme. I would like to see that happen sooner rather than later. I am told that that is unrealistic. There would be too many howls of protest from other member states. Well, so be it. But let us be quite clear that intervention has served this country to no purpose whatsoever. As I do not belong to a co-operative I do not qualify for the scheme anyway. That is why I have little regard for intervention.

Turning to the role of government, if government accept, as I am sure my noble friend the Minister does, that growers are prepared to help themselves—indeed, I know that the Minister of State is taking a great deal of interest in this matter and has consulted, and will continue to consult, growers—we could ask the Ministry of Agriculture if it would look at the opportunities that exist, which MAFF particularly is able to implement, to promote the industry.

One of the great strengths of the industry is the national fruit collections at Brogdale. It is the largest collection of top fruit in the world. It is a unique resource, and it demonstrates just what an enormous diversity of varieties there is in this country. It is owned by the Ministry of Agriculture and is managed by the Brogdale Horticultural Trust, of which I must declare that I am the chairman, along with Wye College, which looks after the scientific remit. But that will not solve the immediate problems, though if we are looking at the long term we have to exploit that resource more successfully. I believe that the Ministry of Agriculture could consider sponsoring a demonstration orchard with a number of other varieties—a number of different russet varieties, not necessarily the ones that are known at the moment, but a number of the old-fashioned varieties, a number of traditional regional varieties. Let us put those into a demonstration orchard and get them sponsored also by other sectors of industry. I am sure that some of the multiples which have been so supportive, as the noble Lord, Lord Cornwallis, reminded us, would also help.

That is the sort of way in which we shall be able to demonstrate to the English public that an English apple is so different from the competition apples from overseas. It is not a commodity article. It is something that they will recognise as unique. There is no way that the English consumer, if he were aware of the predicament and the danger of the loss of English apples, would tolerate the loss of this valuable asset. It is part of the shopping basket. Perhaps in my capacity as chairman of the trust I might write to the Minister later about that idea.

I should like to end on the note that the industry is not finished. It is clearly having an extremely hard time. It has had a hard time before and has been resilient. It will remain positive. It has ideas as to how it can improve its position in the market. But there is a short-term crisis, and that crisis is, I believe, for the Council of Ministers to resolve.

4.14 p.m.

Lord Wise

My Lords, I am in no way involved with the apple-growing industry. I do not have to declare an interest because I have only four apple trees in my garden and, alas, the deer that come over the fence have barked those completely. It looks as though they are going to die and will have to be grubbed up anyway. However, I have friends within the industry and I have a great deal of concern for its future.

As the noble Lord, Lord Carter, said, we in this country produce only some 30 per cent. of our consumption. The imports that we need are shared in approximately equal proportions between those from North America, the southern hemisphere and the European Community. Although it is obvious from that that the United Kingdom industry itself is not in structural surplus, it is indeed part of a structural surplus within the United Kingdom. The resultant overproduction of that surplus seriously affects our growers owing to the on-going supplies of under-priced fruit in the home market, both from the European Union and the southern hemisphere.

One worrying aspect of the situation is that in 1982–84 the average incomes for fruit farmers were higher than those for 1989–93. Over that decade market share was lost to imports from other European states and third countries. The result has been that the returns of the United Kingdom dessert apple growers have been well short of production costs for the past two years or so. The seriousness of the situation facing apple growers cannot be overemphasised. They are facing major cumulative losses from which many, including the most efficient, may not be able to recover.

How do we address the problem? What policies do we adopt? Unless some action is taken quickly, the consequences for the United Kingdom's industry could be catastrophic.

Following the two years of surplus in the European Union, there are reports of significant plantings shortly to come on stream on the Continent. That must exacerbate the unfavourable supply situation because the demand probably remains fairly static.

The view of the National Farmers Union is that the intervention payment system, as has already been explained, is to a large extent responsible for the structural surplus. The system has moved away from its original objective of intervening when there is the occasional surplus to become a permanent feature, breeding dependency. The National Farmers Union would like to improve the intervention system by making it unattractive to produce uncommercial varieties and to reduce intervention prices for all varieties below the cost of production, making them unattractive to growers for intervention.

The British Government appear to support the National Farmers Union on that issue. But we should like them to take a more forceful position. I shall be happy to hear the observations of my noble friend the Minister on that matter. Persistently intervened varieties must be penalised by a reduction in their intervention prices.

But the most pressing policy that all farming organisations in the European Union have advocated is the grubbing up scheme. COPA/COGECA proposed that growers should be grant-aided to grub up orchards in order to reduce the apple area within the European Union to bring production capacity into line with demand. If that policy is implemented, steps need to be taken to ensure that the land taken out of apple production is not utilised in such a way as to increase surpluses in other products that may already be in over-supply. As the noble Lord, Lord Carter, said, it would be worth while if it could be incorporated into the set-aside system or something similar.

As has already been stated, and I can only endorse what has been said, the policy on third country imports is a major concern. The industry is alarmed about the recent agreement between the European Union and Chile in which the European Union made significant concessions beyond those agreed in the GATT. As has been said, the New Zealanders say that they will seek identical terms to those obtained by the Chilians. And why not? They have a powerful argument. GATT specifies that bilateral agreements between GATT signatories must not prejudice trade between the signatories of the bilateral agreement and other GATT signatories. Therefore we urge the British Government to object strongly to the agreement between the EU and Chile.

There are other means of encouraging the production and marketing of our apples. But that is not for me to discuss because I am not an expert. However, I look forward to hearing what the Minister says in that respect, and I thank the noble Lord, Lord Carter, for raising what is a vitally important issue for our home producers.

4.21 p.m.

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

My Lords, like other noble Lords who have spoken, I am most grateful to the noble Lord, Lord Carter, for initiating what has been a stimulating discussion on this most important issue. The apple sector is a major employer and occupies a special position in the rural economy in certain parts of the country.

I regret that we do not have economic information on the profits or losses of apple growers per se. Our data are collected on a more aggregated basis. In part that is because it is unlikely that many growers' incomes would be dependent solely on apples. Most grow a range of fruit and even other crops as well. But the information I do have for specialist fruit growers indicates that, following substantial increases in income for each year from 1988–89 to 1991–92, there was a marked decrease in 1992.93. Figures for 1993–94 are not yet available.

What I can say is that my right honourable friend the Minister and my honourable friend the Minister of State met apple growers regularly throughout the season and know from their discussions that the last two years have been difficult ones for them. We recognise that growers are very worried and that there is deep concern about the market and indeed about the future of apple growing in this country. Although incomes on all other major faun types increased, average farm incomes on specialist fruit and other horticultural holdings fell in 1992–93. The value of apple output marketed in the UK is estimated to have decreased by 6 per cent. in the calendar year 1993 compared with increases for fruit as a whole and almost all other major agricultural outputs except pigs. That is not to say that all individual apple growers necessarily made losses in those years. Their trading performance will have depended on the quality of their product and their marketing skills. Those who can offer both will have done substantially better than those who cannot.

Of course the apple sector, like all parts of the industry which are reliant on weather conditions., is highly volatile and a certain amount of price fluctuation year on year is to be expected. Looking back to 1991 our apple growers enjoyed an excellent season when freak weather conditions, especially in France in the spring, led to a short crop in Europe. Even last year when prices were generally very depressed for dessert apples, shortages of Bramley apples in Northern Ireland meant that Bramley growers in England did rather better than their dessert growing colleagues. But that is not in any way to trivialise the difficulties of the sector, nor to suggest that these problems are entirely weather related.

The principal cause of the low prices in 1992 and 1993 was the very large crop in Europe which led to considerable oversupply within the Community. We believe that that oversupply is exacerbated by the Community's regime for fruit and vegetables. That regime provides for intervention arrangements which encourage some growers to ignore market signals and to continue producing apples for which there is no market in the sure knowledge that they will have an outlet for their surplus.

This regime is overdue for reform and the Government have consistently been pressing the Commission to come forward with proposals. These were promised for the late spring, and I hope we will see proposals very soon. I sympathise with the frustration of growers at the Commission's delay. In the meantime, I can assure the noble Lords, Lord Carter and Lord Cornwallis, that the Government have taken every opportunity to make clear to the Commission the shape of the revised regime which we would wish to see and to impress upon it the importance of early reform. We have done so in the Council of Ministers, in direct bilaterals and in management committee.

We are determined that this reform should bring supply and demand on the EC market into better balance. As my noble friend Lord Selborne emphasised, a radical overhaul of the intervention system will need to be at the heart of this. That view is entirely supported by the growers. Such a reform will benefit both growers and in the longer term consumers as well, as they will continue to have available the excellent home-grown product which we all so much enjoy. Ideally, we should like to see intervention abolished altogether, which would allow a truly market driven sector. However, we recognise that this will not be achievable immediately because the social and political consequences of an abrupt end to the existing support system would be unacceptable.

As a first step, picking up a point made by my noble friend Lord Wise, we are looking for changes which will target those varieties which are currently withdrawn the most. In the apple sector, for example, it is notable that certain varieties form the bulk of withdrawn produce and we should like to see prices set to discourage this. We should also like to see a tightening up of the stabiliser mechanism which reduces levels of aid when a certain threshold has been breached. This mechanism is designed to limit the level of expenditure on intervention but it clearly is not working as effectively as it should. We shall also seek to ensure that any measures introduced are not over-regulatory or burdensome on business. The last thing the apple industry needs is more red tape.

I know that some growers would also like to see the immediate introduction of an orchard grubbing scheme for apple growers. All speakers today have advocated such a scheme. This is something which needs to be considered very carefully. Some member states, particularly the Netherlands, have asked at recent Councils for a scheme to be introduced ahead of the wider reform package. But we have to remember that the earlier scheme was not successful in reducing surplus production. We would not want to see another costly and ineffective scheme introduced in isolation.

However, we have indicated to the Commission that we accept that there may well have to be certain compensating measures to go along with reduction in the levels of support for intervention. No grower can be expected to cope with a sudden reduction in a long-standing form of support. That is certainly true for growers in the UK, where in 1992–93 around 6 per cent. of the apple crop was withdrawn from the market. It is even more true in France, where withdrawals apply to 35 per cent. of the apple crop. In Greece the situation was even more dramatic—in 1992–93, 76 per cent. of the nectarine crop and 61 per cent. of the peach crop were withdrawn.

We have therefore told the Commission that we could accept an apple grubbing scheme with the proviso that it is firmly linked to an overhaul of the intervention arrangements. This is a line which we have made clear in the Agriculture Council. My honourable friend the Minister of State agreed with key growers during his visit to Brogdale on Tuesday that early discussions would be appropriate to consider what form the scheme should take. We need to avoid the problems associated with earlier schemes. For example, we need to consider very carefully how to prevent grubbed up apple trees being replaced by production on other holdings.

We have also indicated to the Commission that we could accept other measures such as schemes designed to encourage consumption which will benefit not just our growers but also consumers. On average the UK has one of the lowest levels of consumption of fruit and vegetables in the whole of Europe. The Health Education Authority's campaign for healthy eating is a useful step in this respect, but I am sure we could do more to encourage greater consumption of fruit and vegetables. As my right honourable friend the Minister said in another place recently, if every consumer ate only one more of our excellent Cox apples each week, our growers would be in a much stronger position. I commend her advice to your Lordships.

Furthermore, we have told the Commission that we are prepared to consider grants to improve the facilities for storage of apples provided these could be shown to be cost effective.

I hope I have made it clear that there are a number of ways the reform of the fruit and vegetable régime could improve the structure of the industry. But we must get the balance of the package right, and this has to be based in the first instance on reducing intervention.

Lord Carter

My Lords, what the Minister is saying is extremely helpful and encouraging. But it is not clear whether the measures which the Government are proposing will be in advance of the review which is taking place in the Commission of the whole fruit and vegetable sector. Do the Government see the proposals which they are pressing as being dealt with in advance of the review or do we have to wait for the whole review?

Earl Howe

We are pressing for these measures to be brought in as speedily as possible and, if possible, in advance of the wider review, but realistically they may coincide. The noble Lord, Lord Cornwallis, pointed to the over-supply of apples in Europe and said that the United Kingdom, taken on its own, is not in surplus. That latter statement, though true, misses one of the key points of concern; namely, the fact that the consumer wants more than one variety of apple to choose from. He wants choice. The success of South Africa and New Zealand in marketing apples is based on high quality, on branding and on a great deal of variety. Even France offers a range of varieties. To replicate that kind of marketing success requires better organisation within the industry itself. I shall come to that area in a moment.

The noble Lords, Lord Carter and Lord Cornwallis, and my noble friend Lord Wise also referred to the world supply. The impact of world surpluses should not of course be discounted, especially when we look at countries such as Chile which have substantially increased their plantings and whose market organisation is weak. I believe that, subject to Commission proposals, the GATT should prove helpful in this context. But to a degree it is for our trade to persuade others of the merits of orderly marketing. It is not helpful to think of import bans. The Government support liberalised trade.

The noble Lord, Lord Carter, mentioned that the NFU was pressing for effective use of the reference price system. The GATT will of course replace that system by a more transparent one which should avoid the anomalies of the existing arrangements.

The noble Lord also referred to the agreement between the Community and Chile. Chile has agreed to drop its GATT panel on the Community's third country trade arrangements. That is good news because the effects of an unfavourable panel, as my noble friend the Minister made clear in the recent Council, could have been very damaging. In return, the Commission has agreed, subject to approval by the Council, to make certain amendments to the existing trade arrangements and to the Community's GATT offer. That will enable third countries to have somewhat easier access to Community markets. It is difficult to say whether that will lead to greater levels of imports from third countries.

The noble Lord, Lord Carter, asked about realistic alternatives for land which has been grubbed up. I do not know what terms and conditions might be applied to any grubbing-up scheme, but I agree that this is an area which needs very careful thought. However, the last scheme had no restrictions other than a ban on the replanting of apple trees. In those circumstances growers would be free to choose alternative uses. As the noble Lord mentioned, one possible solution would be crops for non-food use such as short-rotation coppice.

I have so far talked only about the difficulties of the sector, but there is much that is positive as well. We have a wealth of interesting and flavoursome varieties of applies. Coxes orange, our premier variety, is second to none. Properly marketed, they should still command a premium from consumers. I wholly agree with my noble friend Lord Selborne about the crucial importance of protecting the brand.

The apple industry has worked very hard at promoting its product through television advertising and other media campaigns and through several other events designed to raise public awareness of British apples. I am thinking here particularly of Apple Day and Bramley Week and the publicity linked to those events. In addition there were several shows and exhibitions which demonstrated the fine quality of our apples. Ministers are always pleased to support such events where possible: for example, my honourable friend the Minister of State launched the main English apple season in October last year.

Organisations such as English Apples and Pears have made remarkable efforts in promoting the product. Here I would like to pay tribute to the noble Lord, Lord Cornwallis, who has just completed such an excellent job as its chairman. But I recognise that there is still a great deal which needs to be done. As I said a moment ago, I am told that we feature towards the bottom of the Euro-league for consumption of fresh fruit. I find this very difficult to believe given the high quality of our home produce, but clearly this is an area where progress needs to be made. Even within the low consumption figures, during the home season only about half that demand is sourced from this country. There must be market opportunities here to be grasped.

The industry has not of course been stagnant; it has been moving ahead with new ideas and developments. Varietal apple juices based on varieties such as Cox, Bramley and Russet are now finding their way on to the market. These make a delicious soft drink as I know myself and I would certainly commend them to the House. The export potential of the Bramley apple is another area which is only starting to be explored. The Bramley really is unrivalled as a cooking apple; it remains for us to draw this fact more to the attention of our EC partners.

Retailers too are doing their bit to help. Some of the multiples have made a point of stocking some of the lesser known traditional varieties of apples such as Blenheim Orange, Beauty of Bath and Ribston Pippin; and many, I know, made considerable efforts over the last season to market the unexpectedly high volume of English Coxes which were available.

Additionally, my honourable friend the Minister of State has been leading a horticultural project to investigate ways in which the whole horticultural industry might address some of the problems that it is facing. This project is nearing completion. I know that my honourable friend has made a particular point of talking to as many apple growers as possible in the course of his research. Indeed, only last. Tuesday, as I said earlier, he was at Brogdale Horticultural Trust where he met a number of growers.

One of the initiatives which has grown out of the project is a seminar for growers themselves to discuss the future of the English apple industry. This will take place on 12th May and will bring together some of the key growers and apple marketing groups to discuss the problems which the industry is facing. This will give key members of the industry the chance to have a frank discussion in an informal atmosphere, and to identify the ways forward for the industry. This is a format which we have found to work well in other sectors. My honourable friend the Minister of State will be opening the seminar and leading the discussion.

I know that many growers feel that their competitors in other member states are given unfair support and that this must be illegal. I must stress that there is nothing illegal about national aids provided they are approved by the Commission. Indeed, we have been offering national aids in the UK for many years. For example, over a five-year period between May 1989 and March this year we offered substantial grants for replanting orchards with more marketable varieties. A recent evaluation indicated that these grants were taken up by virtually all of our target population.

One area of concern to the Government is that British growers remain in marketing terms poorly organised and fragmented. This leads to high marketing costs and potential difficulties with supply. We have, therefore, introduced first the group marketing grants and will shortly be launching the marketing development scheme which will offer grants of up to £150,000 to improve marketing and marketing structures in horticulture and agriculture.

We are also spending nearly £2 million every year on apple research and development. We are targeting our research specifically at improving the industry's ability to meet the key market demands for better quality and flavour, reduced energy and chemical inputs, improved storage and shelf life as well as producing new commercially desirable varieties. Part of our new investment in a new molecular biology programme is devoted to using those innovative techniques to bring about important improvements in British dessert apples.

A sound and healthy scientific research and development base is one of the essential elements of ensuring the future viability of the UK top fruit industry. The £2 million that we are spending in this area underpins the applied research worth £300,000 per annum undertaken by the industry's levy funded body, the Apple and Pear Research Council. Together, we ensure that the necessary R&D is provided for the UK top fruit industry. Earlier this week my honourable friend the Minister of State met the chairman of the Apple and Pear Research Council, Professor Sir Colin Spedding, to discuss these joint research and development programmes and how best they can help the industry to success in the future.

I know that some growers, as well as my noble friend Lord Selborne, have ideas for developing the role of Brogdale. My colleagues and I will be very happy to listen to what they have in mind and I look forward to hearing from my noble friend in that respect.

Perhaps I may qualify a remark that I made earlier about grubbing grants and the timing of such a measure. I intended to say that any such measure would have to be part of a package, but it could be implemented before the rest of the package.

Lord Carter

My Lords, I am extremely pleased to hear the Minister say that. I have never before experienced a policy that was stated and changed within four minutes—but there we are.

Earl Howe

My Lords, in summary, there is no doubt that the current position of the apple sector is a difficult one. But the industry itself recognises that action must be taken and is organising itself to face the challenges. This is done with every encouragement and assistance from the Government, who fully appreciate the need for a strong and viable British apple sector.

Lord Cornwallis

My Lords, before the Minister sits down, I wish to ask him to deal with the subject of information, which I raised. At present, there are four different acreage criteria for measurement and several different schemes for assessing information. It is desperately important for the coming season that the Ministry, which I am sure is willing, the organisations and the growers, should come together to produce one source of reliable information for the industry, the consumers and the purchasers.

Earl Howe

My Lords, the noble Lord may like to note that MAFF and representatives of the industry—English Apples and Pears and the NFU—are meeting on 16th May to determine an improved information flow within the industry. I hope that that meeting will yield positive results.

Lord Wise

My Lords, are there any top fruit-producing countries which are placing restrictions on imports of top fruit? If so, that is restricting our European export capabilities. Should not some retaliatory measures be implemented against those countries?

Earl Howe

My Lords, I must reflect on my noble friend's question. Perhaps it is appropriate to mention the plant health requirements imposed by the United States. Their impact has long been a matter of concern to the EC Commission. In 1992 the Commission started a series of bilateral discussions with the United States aimed at proposing modifications to the US requirements. There is still a considerable way to go on this issue but we shall continue to press the Commission to maintain progress with the US authorities.

House adjourned at seventeen minutes before five o'clock.