Fresh Fruit and Vegetable Regime: ECC Report

HL Deb 18 March 1996 vol 570 cc1087-112

3.55 p.m.

Lord Middleton rose to move, That this House takes note of the Report of the European Communities Committee on the Reform of the EC Fresh Fruit and Vegetable Regime (First Report, HL Paper 18).

The noble Lord said: My Lords, Sub-Committee D had a very short time in which to receive evidence and produce its report on the European Commission's proposal for reform of the fresh fruit and vegetable regime. We were told that the Spanish presidency intended to have the scheme put to the Agriculture Council for a vote on 18th December last. The sub-committee had to work on a draft text received at the end of October. We did not see an official text until the end of November. However, we were able to send a draft copy of our report to the Minister on 14th December.

That kind of delay in supplying documents from Brussels does not make it easy for the European committees of this House to perform their duty of parliamentary scrutiny. I am grateful to the Minister for taking up the matter with the Agriculture Commissioner, who has apologised. As it turned out, the proposed reforms were not considered in December. They are likely to come before the Agriculture Council for a vote next month. If, despite having been produced under pressure, our report has any merit, it is due to the help that we received from our witnesses—not least from MAFF—at short notice. I am grateful, too, for the work and support of my colleagues on the sub-committee and for the assistance of its specialist adviser, Mr. David Green.

The Agriculture Committee of another place carried out a most useful investigation into the fruit and vegetable sector last summer. That was before the reform proposals were adopted by the Commission in October. So our report starts where that one left off.

I have had the privilege of serving on Sub-Committee D for more than 10 years now. I do not believe that in that time it has produced a report for this House on a European common agriculture regime in terms so sharply critical as this one; nor one so unenthusiastic about reform proposals.

I turn to the regime as it is now. The Community is the world's biggest producer of fruit. The regime covers all fruit and vegetables grown in the Community except potatoes, bananas, wine grapes and peas and beans grown for fodder. The regime was introduced in 1966. It was not reformed with the other regimes in 1992.

As regimes go, it is not the most expensive in budget terms. However, in 1994, it cost 1.5 billion ecus, 92 per cent. of all that expenditure being paid to Greece, Spain, France and Italy. That came to 1.4 billion ecus. I do not have to remind noble Lords that an ecu is worth between 80p and 85p. The external mechanisms provide protection of EU growers, first, by means of minimum import prices and, secondly, by export refunds. Internally, there are common quality standards and there is intervention in the form of payments for withdrawal of sound produce from the market. It is that withdrawal system and the way in which it is operated that attract our strongest criticism.

In the past two years, withdrawals have become the most expensive support measure. In 1993, 46 per cent. of the cost of the regime was spent on paying growers to take surplus produce off the market, chiefly citrus, peaches, apples and nectarines.

Withdrawal payments were originally intended to be a safety net in times of glut; but, lately, producers have seen it as a lucrative alternative market. As an example, which we quote, in 1993, 77 per cent. of all Greek nectarines and 62 per cent. of their peaches went for destruction—and were paid for.

The withdrawal system is condemned in the 1994 Court of Auditors' report in these words: the present costly system of withdrawals and destruction of surpluses, relieving the market of excess production and ensuring a minimum income for producers, encourages over-production, pollutes the environment and has a negative effect on public opinion".

Under the current regime it is the producer organisations who operate the system. They may withdraw their members' produce from the market and receive financial compensation from the Community at a price which is fixed as a percentage of the basic price. The quality and packaging of the produce withdrawn are also taken into account. Produce withdrawn may be disposed of to charities, hospitals, schools and in other ways. In practice most is destroyed.

The Commission's reform proposals are largely concerned with the structure and role of producer organisations and, to that end, they propose a complicated web of regulations and rules. The proposed reforms are described in paragraphs 9 to 13 of our report. Perhaps I may summarise them briefly: producer organisations would be given a much more prominent role in the organisation of the fresh fruit and vegetable market. Intervention payments would remain contingent upon membership of a producer organisation but the rules for membership are tightened. A producer must commit 90 per cent. of his whole produce to a producer organisation. Non-members could be compelled to market their produce through producer organisations. Each producer organisation would be required to contribute to and to set up an operational fund to finance an operational programme. Such a fund could even be used to extend the scope of withdrawal. Compensation payments are to be subject to a price reduction of 15 per cent. over five years. The quantity of produce that may be withdrawn would also be reduced over five years from 50 per cent. of a producer organisation's total production to 10 per cent. in year five.

The intention behind the Commission's proposal is no doubt admirable and, in an ideal world, the reforms might work. However, the suggested reforms are brought forward in the full knowledge on the part of the Commission that the current regime is not working satisfactorily in a far from ideal world.

Our view as to their likely effectiveness was coloured by two reports. First, by the Commission's own 1994 report on supervising the application of the Community rules in the fruit and vegetable sector, which was highly critical of the way in which the withdrawal system was monitored. That report describes the controls on withdrawal of produce, particularly in the southern Mediterranean member states, as excessively tolerant and negligent. To quote from its report: It can be said that the essential role of many of the Producer Organisations in certain Community regions (particularly Greece and Italy) is not that ascribed to them by Community rules". We were influenced, secondly, by the 1994 Court of Auditors' report, which confirmed a picture of mismanagement and fraud.

We give our opinion on the detailed matters proposed in Part 4 of the report. In particular, and regretfully, we cannot see how a proposed corps of inspectors is going to perform satisfactorily in the current climate of muddle and dishonesty. We say that the regime can best be reformed by ending a withdrawal system which pays farmers to grow surplus produce for destruction. The sooner fruit and vegetable growing becomes progressively exposed to market forces, as it is in the UK, the better. That would take care of quality standards and consumers would benefit.

We have to conclude that if the current system is not workable, we cannot see how a more complicated one, as proposed, can work any better. There would simply be more regulations to be misunderstood and probably disregarded. That opinion of the Commission's proposals for reform of the fruit and vegetable regime is summarised in the last two paragraphs of the report under the heading "Fraud". As one of the members of the sub-committee said during our deliberations: "No doubt the farmers in the poorer Mediterranean countries need support; but, if they do, this is not the way to do it." I beg to move.

Moved, That this House takes note of the Report of the European Communities Committee on the Reform of the EC Fresh Fruit and Vegetable Regime [First Report, HL Paper 18].—(Lord Middleton.)

4.6 p.m.

Lord Barber of Tewkesbury

My Lords, as a member of Sub-Committee D I should like, first, to pay tribute to the noble Lord, Lord Middleton, for the skilful way in which he manages our sessions and brings us all, like horses to the trough, to produce totally unambiguous and agreed reports. It is appropriate too on this occasion to thank our Clerk, who has the most extraordinary skill for disciplining enormous quantities of paper so that we have easier reading.

As, I hope, an objective observer of the European scene and as an occasional player in the past, I view the reforms of the EC fresh fruit and vegetable regime with a sense of despair; and, belonging to a country which is the second highest net contributor to EC funding, my despair is compounded by a profound feeling of irritation, if not anger. How can it be otherwise when, included in our report at paragraph 33, we record—I shall produce additional quotes to those given by the noble Lord, Lord Middleton, which are even more damning— These proposals will merely penalise the efficient producer, act against the interest of the consumer and continue to serve the interests of those who already produce the largest surpluses". I must mention the topic of fraud again, in addition to what has already been said. Under the "Fraud" heading in our report, in reference to previous reports we say: Together, these two reports reveal a depressing catalogue of failure to carry out quality controls and of fraudulent application of coefficients, so that producers are wrongly paid to withdraw produce at the expense of the Community". That was in the past, yet currently our committee has this to say: The Committee has no confidence that any fruit and vegetable regime of the nature proposed can be monitored effectively". It all adds up to suggesting that it would surely be difficult to find a harsher indictment—one which was clearly shared by many of the witnesses who attended to give evidence to us. The only faint praise of the damning kind was confined to suggestions that the proposals were a step in the right direction, akin, one might say, to Nero approving the design of a new fire engine as the city went on burning.

As with similar CAP reform proposals, there is often a strange strand of naivety running through, as though somehow the realities of life had escaped the policy makers. The producer organisations are to be instruments for co-operative sharing of expertise in production and marketing. But nowhere is there acknowledgement that the reality is that, in northern member states at least, large and successful entrepreneurs in the highly competitive cut-throat vegetable production field would as soon share their tax returns as the technical and marketing expertise which are their secret weapons for achieving market gain. No amount of bludgeoning or carrot dangling will force them to market 90 per cent. of their produce through the producer organisations. And what an extraordinary proposal it is that those producer organisations will be allowed to use the operational fund to withdraw produce not presently covered by the intervention arrangements; and what a deafening silence on the subject of the destruction of withdrawn produce.

One of the areas which the committee found shrouded in mystery was the reasons why such a minuscule amount of the millions of tonnes of produce withdrawn for destruction found its way into the worthy hands of charities, schools and the deserving. Whether the main reason was lack of purposive interest, lack of resources or the logistics of moving high volume perishable produce was impossible to determine. It was quite extraordinary that the amount came to only 1 or 2 per cent. of this enormous quantity of material.

But it is on the wider view that I wish to make a contribution to the debate because there seem to be so many core issues which need bringing out and hammering home. I recall being taken to task by a senior Brussels official on an occasion when I had expressed concern about what I regarded as a deliberate distortion of the regulations to allow preferential treatment to certain member states. I was told very briskly that I had failed to understand the delicate nuances of the Brussels policy machinery which, apart from its primary overt purposes, had additional uses as discrete channels down which funding could travel to those who were deemed less prosperous than others: a kind of Robin Hood philosophy which, he told me, led to stability, balance, cohesion, more comfortable relationships between rich and poor, north and south, and so on. The CAP was one of a number of vehicles which enabled the local rural economies to be shored up and a raft put under the more struggling communities and individuals. And not just in agriculture; bankrupt national airlines and inefficient steel mills somehow had to be kept going as long as possible to avoid domestic difficulties.

So in the CAP field all those crops of tomatoes, peaches and nectarines grown specifically to be withdrawn from the market and interred to rot in a trench in the ground to the detriment of the local drainage system had a use far beyond my unenlightened comprehension. It is worth pointing out in that respect that 90 per cent. of the expenditure on the regime goes to Greece, Spain, Italy and France. It was the same official, too, who introduced me to the term "politically undeliverable" to describe sensible food policies which could not be adopted because the effect would inescapably be unacceptable tyre burning on the roads around Paris or Palermo.

So there surely is the crux of the matter of which these proposals are a small part: a failure to take adequate steps soon enough to ready the broad spectrum of European food production for the freer, and perhaps savage, trading world of the post-GATT era to come. The eventual price to be paid for muddling social and rural economy objectives with farm policy for too long may indeed be a heavy one.

It is all too easy to criticise, and many political constraints are formidable. I readily accept that. But it can he argued that the proposals do represent a first step to a more market-oriented economy. Further steps in due course, it might be assumed, will take us closer still to market realities. But somehow there is an absence of rigorous purpose, particularly in the failure to signal that the withdrawal system has a limited finite life. It all seems a bit late in the day for gentle pottering with an outdated system associated with the EC's leisurely attitude to fraud, corruption and other financial irregularities which have been such an integral blemish on so much of CAP history.

These fresh fruit and vegetable regime proposals to many of us add up as another example of a tacit acceptance of the deeply embedded culture of untidy, slack housekeeping and general profligacy which has become the hallmark of so much European policy making, with seemingly little acknowledgement that real change is needed as the outside world goes on changing extremely rapidly.

Too much of the CAP gravy train trundles along in its cosy old way, its instincts still inward looking and still protectionist. Lamentably, pussyfooting goes on and on and on as the chosen order of march, as these proposals so amply demonstrate.

4.14 p.m.

Lord Stanley of Alderley

My Lords, I suppose I have to declare an interest in that I am, with my son, a fruit and vegetable grower, and wearing that hat I should like to thank Sub-Committee D for its report and say that I consider this EC regime to be unrealistic, impractical and, as my noble friend Lord Middleton said, impossible to police. Apart from that, I suppose it must have some merit, but I have yet to find it.

I rise to speak for probably the same reason as the noble Lord, Lord Barber. I fear that the regime is an example of the path that the CAP is taking which will lead to real chaos in the 21st century. I am prepared to accept that at the moment most farmers. are not doing too badly out of the CAP due to relatively high commodity prices and inflated subsidies. For instance, my subsidies on the Welsh farm exceed my total surplus, which worries me greatly. The reason for my concern is that the CAP and this regime rely on protectionism of one kind or another—intervention, quotas, set asides and export and import manipulation—and that cannot—indeed, should not—go on forever. The European Union and the UK in particular cannot isolate themselves from world prices and competition which is what this fruit and vegetable regime tries, in my opinion hopelessly, to do.

I realise that my philosophy poses considerable social and political problems for it will encourage the efficient producer, which means that many inefficient producers will go to the wall. The noble Lord, Lord Barber, called it the Robin Hood approach. Mine is the opposite of the Robin Hood approach, so I suppose that I am the Sheriff of Nottingham. But I do not mind wearing that hat on this occasion. I accept that to alter the regime along those lines would cause problems in the Mediterranean countries which, as has been said, are the main beneficiaries under the scheme. Surely the essential requirement is to get European agriculture in a fit state to meet international pressure in the next century, producing, as my noble friend said, for the market and not, as this regime does, for subsidised withdrawal from the market, relying on its outdated producer organisation which failed to realise, among other things, that producers are specialists—we certainly are—in particular crops.

Surely, as the report states, this money would be better directed to product development and marketing. I believe that if the scheme could be restructured along market oriented lines, giving the necessary protection against dumped or subsidised produce, it might be possible to include such crops as potatoes to prevent distortions in that crop by national governments, in line with the concerns expressed by your Lordships—the noble Lord, Lord Carter, will remember this—during the passage of the Agriculture Bill.

Your Lordships' sub-committee has rightly pointed out the deficiencies—if one can use such a kind word—in the regime and I hope the Government will support the sub-committee. What worries me is that time and again—I look at the noble Lord, Lord Mackie—Sub-Committee D has warned of forthcoming dangers. When I was a member in the early 1980s I remember the sub-committee's views on surpluses. However, despite repeated warnings and often government support, the CAP does not seem to take any notice, let alone action. I suggest that unless the EU takes action, the whole CAP, and perhaps the European Union, will collapse in an unholy muddle. That is not in anyone's best interests.

4.19 p.m.

Lord Brain

My Lords, as a Member of Sub-Committee D, I can endorse all that the noble Lord, Lord Barber, has already said about the chairmanship of the noble Lord, Lord Middleton; our Clerk's excellent support of the committee at a very difficult time of changeover when he was moving from one occupation to another, and when he got us through the work remarkably efficiently; and our professional adviser.

The noble Lord, Lord Middleton, brought out a broad part of this report. The noble Lord, Lord Barber, has said much of what I had planned to say and I shall not be repeating all his remarks. I was going to be just as critical as he has been about the basic ideas of producer organisations, their operation and management. I am going to produce a few straws where, because the Government are going to have to negotiate on this regime, one might say that there are some words deep down in the draft document that might be rescued.

I turn initially to Article 11.1 (a) which states that the producer organisations are required, to promote the use of cultivation practices, production techniques, waste-management practices that are environmentally sound, in particular to protect the quality of water, soil and landscape and … biodiversity". A little later on the same article states that the producer organisations are required to, provide their producer members with technical assistance in using environmentally sound cultivation practices", and so forth.

In his reply, the Minister, Mr. Hogg, was a little hurt that we had suggested that destruction was a means of disposal of surpluses and particularly our concern about disposing of them in an environmentally friendly manner. I have two points to make about that. At the moment all the evidence is that the producer organisations have no idea how to develop the markets for surplus produce. The transition period starts with 50 per cent. withdrawal. Over five years it drops down to 10 per cent., but there is going to be a great deal destroyed.

I also take up a point a little further down in Article 11(b) which states that the producers must market all their produce—I repeat, all their produce—through a producer organisation. Only quality products can receive subsidy. They must meet certain standards and quite correctly. What happens to the amount of material when 60 per cent. of the produce does not meet the standards? I believe that we have evidence from the audit report, which accepted 75 per cent. of the produce offered on one day before the audit people visited the operation, and only 15 per cent. when they were there. Is that returned to the producer for him to put on the market in some subversive manner or—and I believe that this is the way it should be done—withdrawn totally and destroyed? That is where I believe the committee may be at odds with the Government in their reply to our report.

I now move to Article 15 and another matter of some anxiety. I believe that the financial operation of these funds is reasonably sensible in that just about the majority; namely, 50 per cent. is funded by the EU; 40 per cent. by the government of the country and 10 per cent. by the producers themselves, so they have an interest in achieving efficiency. The levies on the member producers are directly proportionate to the quantity of fruit and vegetables actually marketed by them. Do the words "actually marketed" mean submitted to the producer organisation or do they really mean what the producer organisation sells of its products and the withdrawal part—which is 65 per cent. in Greece—is ignored?

I now come to Article 15.2(a) and (b) Strangely enough, the operational funds shall be used first to finance market withdrawals; and, secondly, to finance an operational programme to be submitted to competent authorities and approved by them. Surely, in the way of this country, if someone says that A and B have to be done, one does A first and B is less important. I believe that the situation here is wrong. The operational programme, marketing, disposal and the organisation of good cultivation and matters of that kind, should come under A and B is the withdrawal of what they have not managed to persuade the producers not to produce.

We certainly had a great deal of evidence on the point next touched on by the noble Lord, Lord Barber; namely, that all the production from one holding goes out through one producer organisation. The method of marketing raspberries is different from marketing apples and pears and is certainly different from marketing cauliflowers. In this country some goes to a place such as Covent Garden; but a great deal goes to specialist buyers in supermarket chains or specialist canning factories. Again, there is a need to look at the producer organisations, if they are going to be used, to see if they can be matched more closely to the problems of the UK.

I too believe that there is a lot to be done before a sensible fruit and vegetable regime can come forth and be approved by this Government. I wish them well in all the behind-the-scenes work they have to do in Brussels.

4.27 p.m.

Lord Wade of Chorlton

My Lords, I too speak as a member of Sub-Committee D. It was my good fortune to be a new member on that committee. I am most grateful to the Lord Chairman who led us, as the noble Lord, Lord Barber, said, through an intricate period of evidence to bringing together what was the unanimous view of the committee. I was enormously impressed by the fact that all the people who gave evidence believed that this suggested regime was going to be detrimental, most particularly to our own producers and consumers. The evidence that we took from the consumer associations I expected to at least mellow their views with the thought that the intervention and withdrawal systems would encourage more fruit into the market place and probably give the consumer a wider variety of fruits. But in fact they thought just the opposite and were strongly of the view, as were the members of the committee, that this regime is against the interests of the UK consumer. It will probably upset many consumers who will want other products.

There was a concern that there would not be a local attitude towards consumers and that products produced for local consumers might not fit in with the regime. There was also telling evidence and concern over the concept of setting up producer organisations as not one likely to be used by many UK producers and therefore we shall miss out on those issues to which the noble Lord, Lord Brain, just referred; namely, the benefits of having a large producer organisation which can put money into the system and then create all the environmental and other benefits, including research into new varieties. That will apply to those who have producer organisations, but not to those areas which prefer to work with individual producers and marketing organisations; namely, "the independents" if one may so describe them. The view of our industry was that most produce in this country would be likely to come from independents rather than producer organisations.

I endorse all of the comments that have been made by the members of the committee who have spoken so far. There is little that I can add to their condemnation of this principle. The complicated way in which it has been put together will encourage fraud rather than provide the opportunity to do away with it, as can so easily be done. We are to have a corps of inspectors. It is not quite clear how they will operate or how many there will be. However, if we take as an example the inspectors that are already in operation, they can easily be seduced by the needs of poorer producers in the southern states of Europe so that they look at the matter in their terms rather than those of the European taxpayer as a whole. I do not believe that the complications of the system are appreciated by those who are putting it together.

Of more concern in the short term is the fact that the Commission has not seized the opportunity to create a new regime for fruit and vegetables, to see it in the light of the changing global market and the need to review the running of the CAP and other systems. In view of the discussions that are now taking place in the European Commission about possible changes in the CAP, I would have thought that at least it would have taken this opportunity to say that, if there is a need to he more market oriented and that the system of support is a matter of moving wealth from the north to the south of Europe, this would be a way of changing the system to make it fairer, with less coupling of support on the one hand and the needs of producers on the other.

When one looks at the long-term implications, this system bodes ill for a proper revision of the CAP which is so badly needed. Clearly, the demand for and supply of food will be dominated not by what we want to do in Europe, but by world demand. That will happen much more rapidly than the Commission and many others appear to appreciate. If Britain is to take advantage of that there is a greater need for a market-oriented system, which allows the consumer and supplier to understand each other's needs a little more, and a lesser need for the CAP system in the middle.

I hope that the comments of the committee chaired by the noble Lord, Lord Middleton, with which the Government agree apart from the one exception mentioned by the noble Lord, Lord Brain, will be considered very carefully. I hope that they will gain the support of this House, and that the Commission will realise that, if it looks to the future, it must use them as an example of a much more market oriented system and move away from continual interference, which is the most inefficient way to deal with what the producer and consumer really want.

4.33 p.m.

The Duke of Somerset

My Lords, I am also a member of Sub-Committee D which produced this report back in December of last year. I am also a farm owner, though neither I nor my tenant farmers is in fruit and vegetable production. The overall impression given by the report is one of unanimity among the witnesses. That is shared largely by the sub-committee and also the Government, judging from the Minister's written response of a few days ago.

The target of the criticism is the Commission itself. It is the same message as ever from the sub-committee to the EU: disappointment at weak attempts to reform all or a part of the CAP. In this case, the aim is to end withdrawal, fraud and waste. Under this regime alone the budget for 1994 was 1,500 million ecu. It was not one of the sectors subject to reform in 1992. However, the sector is typical of what needs to be done with the CAP, and sooner rather than later; otherwise, members will find themselves pressurised into hurried changes. Late in the decade pressures of the World Trade Organisation, enlargement of the Union and the budget will all combine to force a hurried change.

As members of the EU, how can we contemplate the continuation of a policy that will allow over 2 million kilos of fresh fruit and vegetables to he withdrawn and destroyed per annum, as happened in 1994–95? The answer is that the political will to change is not present in many other member countries. It is not a coincidence that the greatest producers of fruit are—and thus the greatest withdrawals take place in—Greece, Spain, Italy and France. The United Kingdom also made use of this. We destroyed some apples, cauliflowers and 17 tonnes of pears. That is small fry in comparison with other countries. Greece withdrew over 597,000 tonnes of peaches in 1992–93. One can imagine what that represents in five-tonne farm trailer loads.

The folly is that the new proposals will not end the abuse. They may reduce the volume taken into intervention over a five-year transition period but it is not enough, and it is not fast enough either. One concern relates to the rules which allow destruction. My other concern is the resultant widespread fraud. The report details flagrant examples, discovered by both the Court of Auditors and the Commission itself, of large quantities of unworthy fruit for which fraudulent claims have been made. It makes for amazing reading. Yet this system is set to perpetuate, with producer organisations continuing as the primary checkers of quality and quantity. A corps of inspectors is proposed, but neither I nor the witnesses—or other noble Lords who have spoken—expect the flawed system to be changed by a few men who will be working under extreme pressure as they physically check the loads in front of the producer organisers. One of our witnesses, the NFU, sensibly suggested the phased end of the intervention system. That must be the short-term aim to end this madness. Combined with it is the immediate imposition of security deposits to be put up by producer organisations against discovered misappropriations of public funds.

In my view, the whole regime is flawed, but some of the details are wrong, too. I am particularly concerned that the steamroller approach will obliterate regional varieties and local products. These proposals allow for derogations from quality standards in some circumstances. However, one of our witnesses, the Consumers in Europe Group, was not satisfied that this exemption would preserve the vitality of local markets. I also worry about this. I would welcome reassurance from the Minister that the precise meaning of the derogation was clear and that the rapidly disappearing local apple or potato varieties would be allowed to continue. They seem to taste so much better than the bland volume produce that clogs supermarket shelves. I would like to see them actively encouraged.

Much of my native Devon landscape has been changed by the grubbing of apple orchards. I am told that there is an EU grant to grub these out, but that a grant can also be obtained to plant fresh orchards. I do not know whether the Minister can confirm that this odd contradiction exists. Another of my concerns is the environmental consequence of the dumping of fruit. Such vast tonnages tipped in localised areas must create severe pollution. There appears to be no control. I share the desire to eradicate dumping, but while it is permitted it must surely be controlled. Rather like the noble Lord, Lord Brain, I do not quite understand the Minister's written reply. He seems to be advocating a "no-win" recommendation. He does not want controls on the environmental aspects of dumping, but he must still permit it. I wonder whether the Minister feels that that issue should be addressed a little further.

Linked to that issue is the question of other means of disposal. It does not seem that those other means have been sufficiently used. They include distribution to charities and schools, or perhaps use as animal feed. I should like to see a greater emphasis on that type of disposal in the regulations.

I believe that we are all agreed that the CAP needs reforming. Indeed, the Commission talks about it. Therefore I, too, am profoundly disappointed that these recent proposals for change in an important sector show such little desire to effect that change. I am amazed that popular opinion is not more vociferous in demanding it. Perhaps the report will encourage clamour, if it receives any publicity. I trust, and I am sure, that the Government will continue to press hard for real movement, and will take the forthcoming opportunity when these proposals come before the Council to press hard for change.

4.41 p.m.

Lord Pearson of Rannoch

My Lords, perhaps I may start by joining other noble Lords in congratulating my noble friend Lord Middleton and other members of Sub-Committee D on producing such a lucid and hard-hitting report. I have to confess that I think it is the best report from your Lordships' Select Committee on European Communities that I have ever had the privilege to read.

I fear that those congratulations may be particularly deserved because, as my noble friend Lord Middleton mentioned in his opening remarks and as the committee reveals in its introduction, the scope of its inquiry was restricted by the late receipt from Brussels of both the provisional and the final text of the proposed reform. That left little parliamentary time to examine the detailed reforms.

Late receipt of Community documents was a growing problem during the four years which I had the honour to serve on your Lordships' Select Committee on the European Communities. It was pretty clear to me that as the Commission grows in arrogance and disdain towards national parliaments, so its deposition of documents grows more dilatory. As paragraph 4 of your Lordships' committee's introduction to the report puts it so well: This is by no means the first time that the Committee has faced this problem…which must be addressed if scrutiny of European legislation is to continue to be carried out effectively". I know that the Government are keen to achieve a minimum period for national parliaments to scrutinise Community documents and legislation—I learn that from page 15 of their recent White Paper entitled A Partnership of Nations—and of course one wishes them luck in their endeavours to achieve this at the forthcoming IGC; but can my noble friend the Minister give any indication of the likely support for that initiative from other member countries? In other words, with what confidence can we hope that the Commission may be required to obey even the existing rules in this regard? I fear not much.

Other noble Lords have dealt with the detail of this report with depressing accuracy. So the briefest of summaries from me will suffice. The fruit and vegetable regime, like the common agricultural policy itself and the common fisheries policy, is hopelessly bureaucratic. It also wastes huge quantities of food; it costs the taxpayer and the consumer vast sums of money; it excludes eastern Europe and the third world; it is damaging to the environment; and it is riddled with fraud and corruption.

The trouble is that many of those accusations can be safely levelled against most, if not all, of the policies which owe their existence to the Treaty of Rome, as it now stands. But this is perhaps not the moment to debate that.

However, there are one or two wider questions raised by this report, which I should like to put to my noble friend the Minister. Before raising those, could I ask him whether any calculation has been made as to how much of the more than £1,000 million which appears to be wasted annually on the Community's fruit and vegetable regime is contributed by British taxpayers? Bearing in mind that we receive only 0.3 per cent. of Community expenditure on this absurd nonsense, how much did we contribute?

Coming then to the wider questions, can my noble friend give us any idea of the level of confidence which the Government may have that we should be able radically to change this policy?

Even if we have only Greece, Spain, Italy and France (which the report mentions are the grateful recipients of more than 90 per cent. of this munificence), presumably against us, and as they have 33 qualified majority votes among them, surely that is comfortably more than the 26 votes required to constitute a blocking minority. If Portugal were to join them, that would raise their blocking minority to 38, which is more than adequate.

I raise this question on the fruit and vegetable regime, which is a manifest absurdity, but the same problem applies to reform of the CFP which is even more crazy, and which requires unanimity in the Council of Ministers before it can be changed.

I do not know whether noble Lords noticed that the UK was honoured yesterday by a visit from Signora Bonino, the European Fisheries Commissioner. As she so succinctly put it yesterday in Newlyn: there is the possibility of improving the common fisheries policy. The problem is how, within the EU framework". Last night on the BBC's "The Money Programme" she went on to make the point that I am putting to my noble friend the Minister even more forcefully. She said: We are taking account of local interests"— that is us, the UK, if you please— as far as possible, but I am in charge of EU fisheries in an EU framework. That is what the UK agreed to when it came into the European Union". Quite so, but it is that sort of comment—supported, alas, as it undoubtedly is by the text of the treaty we have unfortunately signed—which makes some of us wonder whether we want to stay there.

So I return to the fruit and vegetable regime and to the CAP itself, where we find ourselves in much the same trap. I think that my noble friend the Minister will agree that the Government, and also the opposition parties in this country, and indeed most conventional wisdom in Europe, say that widening of the Community is an absolute priority. But the same conventional wisdom rightly points out that, first, the CAP will have to be reformed. So can I ask my noble friend the Minister how much confidence the Government have that such reform is possible? If it is not possible, is widening possible?

I understand that the Foreign Office believes that the necessary reform to the CAP could be carried through on a qualified majority vote rather than on unanimity. That is a complex matter; but can my noble friend tell us what confidence the Government have that the necessary qualified majority could ever be achieved, if that were to be sufficient? What possibility is there that the recipient countries under the CAP would agree to share such largesse with our eastern European neighbours? Not much, I submit; but I shall be interested to hear my noble friend's reply.

Certainly, signs of the necessary generosity are few and far between. Let us take, for instance, the earnest pleading from Bulgaria that it might be allowed to increase its exports of jam to the Community among other things. I understand that the Commission looked long and hard at that request, and that it has decided that Bulgaria may now import three lorry loads of jam into the Community, whereas before it was allowed only two.

Coming on top of the questions I have posed, it is that kind of attitude which makes some of us fear that the problems of the fruit and vegetable regime, or of any other similar policy stemming from the Treaty of Rome, are too deep-seated to be changed just because the British Government think that they ought to be. And, in turn, it is that situation which makes some of us wonder whether we should not start lo take a much harder and deeper look at the advantages we are supposed to derive from our adherence to the Treaty of Rome itself.

4.50 p.m.

Lord Reay

My Lords, first, I declare an interest as an owner of apple and pear orchards in the Netherlands, which are rented to fruit growers. Secondly, I wish to add my name to those who have thanked my noble friend Lord Middleton for his outstanding chairmanship of our sub-committee.

It is perhaps easier to wax indignant about outrageous subsidies and disgraceful frauds when the beneficiaries and perpetrators are the inhabitants of distant countries. However, that is no reason to refrain altogether from doing so. It must also be said that the sub-committee received no direct evidence about the workings of producer organisations in other member states, although it is among those that the heart of the problem is to be found. The evidence which reveals the nature, if not definitively the scale, of the problem is to be found in the publications of the Commission and the Court of Auditors, from which noble Lords have quoted.

According to the Commission's figures, in the 1994–95 marketing year the total produce withdrawn amounted to 2.2 million tonnes, of which 46 per cent. was withdrawn in Greece, 29 per cent. in France and 10 per cent. in Spain and Italy. The proportion of each crop withdrawn and then destroyed—35 per cent. of apples in France, 59 per cent. of peaches and 77 per cent. of nectarines in Greece and so forth—was described by even so sober a witness as our man from MAFF as staggering.

Commission checks in 1992 led the Commission to conclude that the essential role of many producer organisations in certain regions was simply to help place products into intervention. The Court of Auditors described producer organisations in Greece as acting mainly as a conduit for claiming European Community funds. Moreover, the Commission's spot checks revealed that such produce is regularly accepted for withdrawal even though it fails to come up to the minimum standards required for intervention. In Campania, for example: at least one producer organisation was shamelessly exploiting intervention as a means of obtaining funds by selling rejects and leaves". In that case, it was the leaves of cauliflowers. In Germany, by contrast, according to the Commission the organisation of withdrawals seems free from irregularity. It was stated: the low tonnages commonly presented for intervention support this theory". In other words, high tonnages presented for withdrawal create a presumption of irregularity.

The Commission considered that the producer organisations enjoy too much room for manoeuvre in carrying out withdrawals; are unduly pressured by their members; and are inadequately controlled by their national authorities. The Commission's proposals on intervention were generally represented to us as a small step in the right direction. The compensation price would be reduced by 15 per cent. over five years and the proportion of a producer organisation's output which could be withdrawn would be reduced to 10 per cent., although not to zero. That could still leave large quantities to be compensated. Whether the price reduction would have an effect on quantities offered for withdrawal would depend on the cost of production, on the grower's alternatives and, of course, on eliminating the abuse practised by producer organisations.

Yet, under these proposals the powers of the producer organisations are to be enhanced. In future, members will have to market 90 per cent. of their produce through their producer organisations. The producer organisations will receive funds which will enable them to supplement withdrawal either by extending it to other products or by raising the compensation for existing products. It seems to me that that largely negates what the Commission is doing to reduce withdrawals and accords the producer organisations an additional power and discretion which they have in no way demonstrated they are fit to receive.

Quality standards, which effectively remain unchanged under the proposals, were much disliked by several of our witnesses. Without intervention, which we would like to see phased out altogether, there would be no need for them. Surely, quality is something to be decided between consumer and competing producers in the market place, as with any other product in which there is free trade.

One disadvantage of the current regime which was brought to our attention was the way in which small apples are now unobtainable, only large, so-called top quality, fruit being allowed on the market. Until standards can be abolished I, like the noble Duke, hope that the Government will at least be able to insist that a substantial percentage of production is excluded from quality controls for the purpose of local sales in local shops and markets.

The consumer and the taxpayers are also harmed by trade restrictions. Imports of fruit and vegetables are discouraged by import levies. For instance, it appears to be the case that fresh apples from the southern hemisphere are effectively kept out for many months in order to preserve the market for cold stored EC produce, although that falls off in quality as time progresses. In addition, some 220 million ecu a year are spent on export refunds.

Trying to achieve a greater measure of reform than that proposed by the Commission would undoubtedly produce resistance from southern European member states. Fruit is one of their products and in their eyes it deserves subsidies and protection in the same way as cereals, sugar, dairy products and beef receive them to the benefit of farmers in northern Europe. So I certainly do not imagine that serious reform, still less abolition, of the fruit and vegetable regime will occur while we have the common agriculture policy in its present form.

Nevertheless, the proposals perpetuate much too much of the existing regime, which is palpably mismanaged apart from being wasteful, expensive and in restraint of trade. I sincerely hope that in the negotiations ahead the Government will set out pugnaciously to secure a better deal for Europe's consumers and taxpayers.

4.57 p.m.

Lord Mackie of Benshie

My Lords, I have greatly enjoyed the discussion. I too admired the chairmanship of the noble Lord, Lord Middleton, under whom I have sat (if that is the correct expression) in the past. We heard some glorious figures about the destruction of millions of tonnes of produce. I believe that the noble Duke was wrong in giving the figure of 2 million kilos. I believe that 2 million tonnes of fruit was destroyed in Europe. There is no question but that those are scandalous figures. It is a waste of money and time. It is not an entire waste of money because it goes to poor farmers—perhaps they are not so poor—or to some farmers, which I applaud. One of the worst aspects is that such figures give ammunition to opponents of the concept of a prosperous agriculture. I even enjoyed the speech of the noble Lord, Lord Pearson. He gave a few indications that he did not approve of European policy in any shape or form. He certainly seized on the opportunity to expand into issues not entirely connected with fruit and vegetables.

We are talking about the mess that we have made in southern Europe. We have all made it because it has been going on for 30 years. Italy and Greece have a different concept of the common agriculture policy because they regard it as something to be milked. They milk it successfully and it is extraordinarily stupid of us in the rest of Europe to allow that to continue without any real benefit to the farming community as a whole or without social benefit to the countryside. That must be wrong. It is wrong. We all know it is wrong. Everyone has quoted the figures.

I was delighted by the restraint shown by the committee at paragraph 39 of the report: We conclude that the only satisfactory solution is a clear signal from the Commission that, over a defined period, the withdrawal system will end". That is absolutely clear and right. The whole history shows how wrong that system is, and that applies also in relation to other aspects.

Some years ago I chaired Sub-Committee D when it looked at the production of olive oil. We had a glorious example of corruption in Italy. It was advantageous for a larger figure to be put on home consumption, and we found that when home consumption for Italy was calculated, it would entail the producers drinking about one quart of olive oil per day in order to justify the figure that had been given. That was very funny but it cannot be allowed to continue.

I do not propose to give more figures or to comment very much on the proposals. However, paragraph 43, which the committee endorses, refers to the entry price system. I must declare an interest in this regard. As regards the raspberry crop, long before any entry price formula could be produced the damage was done.

Marketing has changed completely. We must look at that. We must look at the practical examples of marketing in this country. Just after the war the raspberry producers of Angus had a lovely time. During the war the price of pulp rose to a very profitable figure and, therefore, the producers stopped altogether marketing fresh fruit. They simply sold to the jam makers and neglected the market. After the war the price started to drop and the jam makers and so on took advantage of that. We then started a co-operative to market the fruit. In no time at all the price rose. We made a great mistake in our co-operative because we did not make it compulsory to market the fruit through the co-operative. A new co-operative in north Angus has been enormously successful because the Grampian Growers, as they are called, insist that members market their produce through the co-operative. The producers are not allowed to sell wherever they can get an extra bob. So successful has that co-operative been that it sells daffodil bulbs to Holland. I believe that that is an excellent indication of what can be done.

We must recognise that marketing has changed completely. The fruit markets in Glasgow, Birmingham, London and elsewhere are not the main avenues. You can now have contracts with the supermarkets to supply fruit, and supply it over a period. That gives a background of constant marketing and fall-back for producers. We should pursue that system.

Producer organisations in Europe ate not marketing but are receiving government money for destroying fruit. Those organisations are not suitable subjects for marketing and proper organisation. They have been set up purely to take advantage of intervention. A great deal needs to be done to make them genuine, dynamic organisations which can market in a modern manner. That is where the future should lie. The Government should be pressing that intervention as we know it now should cease as quickly as possible. They should back proper co-operatives and/or companies which will market the fruit and vegetables in a modern manner. They should urge that intervention is no longer necessary in such a situation.

In growing fruit and/or vegetables there always comes a time when you may have to plough down your cabbages or something like that. But if you have a background of good marketing for the rest of the year, you can bear that. Certainly intervention and the buying and destroying of produce are not answers to the problem. I hope that the Government will assure us that they will pursue with all vigour the proper encouragement of marketing in agriculture and do away as quickly as possible with the present withdrawal system.

5.6 p.m.

Lord Carter

My Lords, I join other noble Lords in congratulating the noble Lord, Lord Middleton, and his committee on producing a first-class report. I agree immediately with the noble Lord in the remark that he made at the beginning of his speech about the late receipt of documents from the Commission. I remember from my own time on Sub-Committee D that that was a continuous complaint. I seem to remember that some time in the past 18 months, there was a proposal that member governments would refuse to comment in any way on documents, draft regulations, proposals or whatever unless they were received in sufficient time. If that is possible, it should certainly be followed.

The EC fresh fruit and vegetable regime and the current proposals for its reform sum up all that is wrong with the CAP: it is wasteful; it is detached from the market; and it is riddled with fraud and mismanagement. From what has been said in the debate this afternoon, I believe that we all agree that the Commission's proposals for reform do not go nearly far enough. I thought that the committee was remarkably restrained in its conclusions, although anyone reading between the lines and reading Hansard of today's debate would have little doubt about the committee's opinions.

The conclusion was summed up in paragraph 33 when commenting on the Commission's aim of the proposal; namely, to: consolidate the positive aspects of the existing organisation, simplify it and correct the perceived weaknesses". That is real Eurocrat-speak. The committee says that, it finds little in the proposals for the fresh fruit and vegetable sector to suggest that that aim has been achieved". Those proposals will merely penalise the efficient producer, act against the interests of the consumer and continue to serve the interests of those who already produce the largest surpluses.

Most of the points of detail have been well aired in this short debate so I shall try not to repeat those which have already been made extremely well. I turn first to the role of producer organisations. I should declare an interest immediately as chairman of the United Kingdom Co-operative Council which is the single representative body for all sectors of the co-operative movement in the United Kingdom and includes in its membership the Federation of Agricultural Co-operatives. I am also the director of a farmers' co-operative but not, I hasten to add, in the horticultural sector. Therefore, I am well aware of the strengths and weaknesses of producer organisations, whether they are structured as co-operatives or otherwise.

The proposals for the enhanced role of the producer organisations and the control over the percentage of the members' produce reminds me that for many years there has been a rule in certain areas of France whereby once a co-operative has—I think it is—75 per cent. of the relevant produce under its control, all producers in its area have to join. I seem to remember that cauliflowers from Brittany are one example of such a scheme and I believe that there are others. In French, that is called extension des règles, or extension of the rules.

I can well remember that such ideas were mooted in the early 1970s to improve the marketing of British agricultural products, thus avoiding the rigidities of the marketing board approach but providing a degree of discipline in marketing procedures. I am not suggesting that I support the proposal, but I am just reflecting on the fact that, if one is concerned with the making or the consideration of agricultural policy and one stands in the same place, the proposals seem to come round again every 10 or 15 years.

There is one point that the committee does not address—although it may be that I have misunderstood the proposals—and that relates to the 10 per cent. funding of producer organisations required from member governments. Is that mandatory? I am afraid that the Government have something of a record in not always providing the matching funds required to generate EC funding. Are the Government bound to provide the 10 per cent. funding for the producer organisations? If they are not, and they do not, what happens? The decommissioning of the fishing fleet is a good example where insufficient funds have been provided by the home government as regards matching funds from the EC.

I would argue that there is nothing wrong in principle in levying producers through their organisations to provide funds for development and market management. The fragmented nature of the agricultural and horticultural industries means that there must be some means of levying all producers on the basis that all should pay for the benefits which derive from joint action. Indeed, I have long been a supporter of the development council approach in both agriculture and horticulture. It would be interesting to know if a combination of the development council approach through the use of the Industrial Organisation and Development Act 1947 and the Commission's reform proposals would perhaps best suit the situation in the UK which, as we have heard during the debate, is rather different from that in other member states. I am not sure from the report or the evidence that such an approach was considered by the committee.

The size of the problem was graphically summarised in yesterday's edition of the Sunday Times. Incidentally, it is not often that one of our debates is trailed in the Sunday newspapers. I cannot believe that even our own Select Committee on the European Communities is now in the hands of the spin-doctors. However, the article in the Sunday Times gave a very graphic example of the size of the problem. As we know, the figures make startling reading. Indeed, we have heard about the destruction of 2.5 million tonnes of fresh fruit and vegetables to keep prices high; the payment of some £500 million to farmers for that ridiculous process with 75 per cent. of the money going to only two member states—that is, Greece and France; and the pollution of the water table in certain areas as a result of excessive dumping. It really is perversity beyond imagination that such costly waste is encouraged while low income families and other suitable beneficiaries are denied access to perfectly good produce. A policy that requires the deliberate destruction of good food can only be described as a disgraceful failure.

The NFU has made a good point in emphasising that there must be flexibility in adapting the proposals for producer organisations to suit the legal forms and the capital base in the different member states. I refer back to the remarks that I made about the use of the development council approach in that respect. We all believe that it is essential that the discredited intervention system is not strengthened or widened by adding crops and increasing the maximum level of intervention as proposed by the Agriculture Committee of the European Parliament. It would be interesting to know what part the southern European countries played in the deliberations of that particular committee.

The remark by the Consumers in Europe Group that the Commission's proposals involve an increase in market rigging is quite true. It is interesting to speculate what effect the Commission's proposals will have on the remarkable figures for fruit consumption which have been quoted by that group. It points out that families in the upper income Band A with four children eat 98.51 ounces of fruit per person per week, compared with only 7.54 ounces per person in a four-child family in the lower income Bands D/E2. Moreover, in families with only one child, the respective intakes for high and low income are 40.52 ounces compared with 14.85 ounces. That is just an example of the direct effect of the deliberately high price for fruit which results from the regime and the effect that it has on families in different income brackets.

An area where I believe the committee is perhaps a little too optimistic is where it assumes that the larger and more sophisticated producers in the UK will necessarily he attracted to membership of a producers' organisation to get access to the proposed operational funding. Withdrawal via intervention is not nearly as significant in the UK as in some other member states. I do wonder how the larger and more efficient UK producers will react to the proposed increase in the role of producer organisations.

As always, the committee has done an excellent job in collecting evidence, sifting it and, as I said, producing a first-class report. Indeed, there is little to quarrel with in its conclusions. If producer organisations are to have the increased role that the Commission recommends, then there must be the sort of changes in their operation, especially regarding the commitment of the eligible crops that the committee recommends. Intervention must be phased out as quickly as possible and much quicker than the Commission proposes and the destruction of good food is unacceptable. Moreover, as we have heard, it could be environmentally damaging. It is disgraceful that the Commission is silent on that scandal.

Finally, the committee is correct in all that it says about fraud. I had the honour of serving on the ad hoc committee of this House which looked at fraud in the European Community under the chairmanship of the noble Baroness, Lady Robson of Kiddington, some five years ago. That experience was an eye opener. Nothing that has happened since has changed the view that fraud and mismanagement are endemic in large sections of the CAP. Nowhere is that more apparent than in the fruit and vegetable regime.

The noble Lord, Lord Mackie, said that he supposed that such money went to poor farmers. I should like to know whether there is any evidence to show that that money ever gets to them. I remember—and this is a serious point—that in the committee on fraud, on which I served and to which I referred, we were told that a proportion of the money which resulted from fraud in the CAP ended up in the hands of the Mafia and in the laundering of money from drugs. It is a serious problem. When the Minister replies, I hope that he will be able to assure the House that the Government intend to take a thoroughly robust stance on the matter. If they do, they certainly have a first-class report with practical and sensible conclusions to assist them. Indeed, we on these Benches are in total solidarity with the Government and I therefore conclude by repeating the last phrase of the Minister's letter in response to the Committee's report: I am happy to accept the Committee's report and recommendations, which have provided a most welcome and constructive contribution to the debate on this important subject".

5.18 p.m.

Lord Lucas

My Lords, I, too, should like to congratulate my noble friend Lord Middleton and his committee on the thoroughness of their examination of the proposals of the European Commission for the reform of the fresh fruit and vegetable regime which was achieved despite the unacceptable delay in producing the proposals. My noble friend Lord Pearson of Rannoch said it was the hest ever report that he had read. I suspect that he means the rudest. To follow his alliterative example, I believe that, a rampant Rannoch revels in rude report reviling wretched regime, would summarise what he said.

Many noble Lords drew our attention to the deficiencies in the common agricultural policy both in this regime and in the Commission's proposals for reforming it in general. As I am sure the House knows, we share many of those concerns, if hot all of them. In particular, I was most concerned by the remarks made by the noble Lord, Lord Barber of Tewkesbury, about the Commission justifying the fraud on the basis that it was transferring money from wealthy to needy countries. A more inefficient and more corrupt way of doing so would be hard to devise. Indeed it would be possible to justify the whole trade in drugs on the same basis. I think it is a totally unacceptable and disreputable justification, and I hope that it is not one the Commission will ever try publicly to use. My noble friend Lord Wade of Chorlton and the noble Lord, Lord Carter, mentioned the effect on consumers. This is a regime which has a deleterious effect on them, as it does on farming. But although the proposals produced are ones of insufficient change, at least we think that they may prove to be—if we are able successfully to conclude the negotiations—ones which are worthwhile.

My noble friend Lord Middleton and I have had the pleasure of discussing one of Sub-Committee D's reports before, and I hope we may discuss many more. I thought it might interest him to know that looking last week through my grandmother's scrapbook I discovered that Lord Lucas and Lord Middleton had been at it before. On 19th July 1912 Lord Middleton, as President of the Royal Agricultural Society, and Lord Lucas, representing the Ministry of Agriculture, were present at the inaugural meeting of the International Association of Poultry Instructors and Investigators. The mind boggles at trying to think of what they did, but whatever it was I am sure it was more worthwhile than the common agricultural policy fruit and vegetable regime. I can also perhaps give some comfort to the noble Lord, Lord Carter, when I say that my noble forebear was also involved in financing a co-operative bacon factory in Hitchin. Therefore the cross-party agreement that we find today was present then.

Lord Carter

My Lords, I am not sure, but I think it went broke.

Lord Lucas

My Lords, judging from the family's finances, I can believe it!

The Government welcome this wide-ranging report, and particularly its strong endorsement of the line which the Government have already been taking in the discussions in Brussels on the reform of the regime. My right honourable friend the Minister of Agriculture is even now discussing these very proposals with his fellow European Ministers at the Agriculture Council. There is a general consensus between industry and the Government that this regime is overdue for reform, and on the direction that that reform should take. The committee's report can only serve to strengthen my right honourable friend's hand in negotiations on the reform proposals, especially given the high regard in which such reports are held by our European colleagues. I do not intend to go into detail on the Commission's proposals. Instead, I would prefer to focus on those areas to which the committee addressed its comments in the report.

On the subject of producer organisations, the Government fully accept the committee's conclusions concerning producer organisations. It is imperative that any proposals must not disadvantage UK producers. I am pleased to say that discussions in Brussels have indicated that producer groupings in the UK should, if they so wish, be able to satisfy the detailed eligibility criteria for the operating fund, and therefore have access to the money for market development.

We are pleased that under the current proposals producer organisations should have to raise 50 per cent. of their funds themselves, and that national governments should also have to contribute. I can tell the noble Lord, Lord Carter, that they will have to contribute. That could prove to be an effective brake on abuse. However, as many noble Lords—in particular the noble Lords, Lord Brain and Lord Reay—have pointed out, it will require the detail to be right for that to happen. The instinct of those producer organisations who have been misbehaving to date will be to find ways of continuing to do so. As the noble Lord, Lord Carter, pointed out, some producer organisations are not well set up at present to become marketing development organisations. There is a lot to be looked at in terms of the detail.

Our key concern, however, in respect of producer organisations is the Commission's insistence that virtually all output from a producer must be channelled through just one producer organisation. This is patently nonsense. The noble Lord, Lord Mackie of Benshie, said that the discipline produced by having to sell one's produce through a single producer organisation was well worthwhile. We agree with that. But the structure of our industry is not such that we can use a single producer organisation for all the output of one farm. We are pressing hard with support from other member states such as France, Germany and the Netherlands—I am pleased to say—to allow producer organisations to specialise in those areas where their expertise lies and to permit growers to choose their own marketing requirements for each product.

The noble Lord, Lord Brain, raised the subject of growers selling direct to supermarkets. Indeed that would apply to those running large pick-your-own operations and at the same time producing for the market as a whole. We see no good reason why such growers should have to change their present practices or miss out on the benefits of market development support. We shall be pressing to make sure that they do not.

On the question of the withdrawal system, the Government also agree with the conclusions that the committee has drawn concerning this. The Commission has stated that a key objective of the reform is to make the horticultural sector far more market-orientated. Yet this laudable objective cannot be fully achieved while the spectre of intervention remains to encourage over-production of goods for which there is no market. This helps no one, least of all the growers. It is expensive and wasteful and leads to the unacceptable destruction of food. In the discussions on the reform we have suggested that the proposed phased reductions in the maximum permitted volumes and values of withdrawals are but a step in the right direction. However, the proposed reforms are not to be sneezed at. The intervention limit of 10 per cent. of production for each product for each producer organisation will bite hard on the major areas of abuse. Greek nectarines have been mentioned several times. Over 70 per cent. are going into intervention. A reduction of that to 10 per cent. should have some salutary effect. That was mentioned by my noble friend Lord Middleton and indeed by the noble Duke, the Duke of Somerset, who asked what that amount of nectarines would look like loaded into five tonne trailers. My mathematics may be shaky, but I reckon that one could probably park the trailers at 20 yard intervals round the entire coastline of Great Britain and not have any gaps.

The proposed price reductions, however inadequate, are welcome too, but the Commission should go further and signal a complete end to this iniquitous system. In this context it is bizarre therefore that the Commission is also suggesting extending intervention to new products via the operating fund. I have to accept the suggestion from my noble friend Lord Stanley of Alderley that it should be extended to potatoes. We fully concur with the committee that this is not the most appropriate use of funding which would be better used to improve the market responsiveness of the industry. We are thankful, though, that its effects should be limited to 10 per cent. of the producer organisation's funds.

Many member states are opposed to the scale of the proposed reductions in intervention, although most understand the need for substantial reform. We want to see an end to intervention, but we recognise that this may not be realistically negotiable, at least in the short term. We may instead need to focus our efforts on ensuring that there is no dilution of the Commission's current proposals.

Lord Mackie of Benshie

My Lords, does the Minister mean that he will accept the ridiculously small reduction of 15 per cent. over five years? That will do no good at all. Will the Government press for a reduction of 15 per cent. a year, which would be much more effective?

Lord Lucas

My Lords, I do not disagree at all with the noble Lord, Lord Mackie of Benshie, in saying that 15 per cent. is far too little, but at least it is something. I think we have to recognise that we shall have to settle for the best that we can get. At the moment we are not optimistic that we shall be able to do better than the 15 per cent. that is currently on the table.

On the destruction of produce, this is an inevitable consequence of the present system. As we attack the root causes of the malaise, this unpleasant system will reduce. The committee has recommended that the Commission's proposals should be redrafted to address the environmental consequences of destruction but we are uneasy about pressing for such a provision to be included. Our position—one shared by the committee—is that the destruction of intervened produce with compensation from public funds should be avoided, and that, should the intervention system remain in place, it should be limited to levels which can be disposed of in more acceptable ways. Therefore, the Government are reluctant to propose anything which might weaken our stance on this fundamental point, particularly as the draft regulation already provides that the disposal of produce withdrawn from the market should respect the environment. Listening to the statistics quoted today, it immediately occurs to one that there ought to be a market for peach-fed pork. However, I suspect the problem is that the peaches which are being destroyed are not of a quality which pigs would deign to eat.

I turn to quality standards. The Government share the view expressed by the committee that quality standards are worthy of continued support as a means of ensuring freedom of trade provided that they are simple, reflect the needs of the marketplace and permit innovation. It is, therefore, essential for a degree of flexibility to be built into the standards. We believe that the proposed adoption of the UNECE standards by the European Union will be a worthwhile change in this regard.

The committee has suggested that in the context of whether or not there should be derogations from the need to observe quality standards, the reference to, products traditionally consumed locally should be clarified with a view to establishing that this should simply mean any product which is locally produced for consumption in a specified area. That is something we have been attempting to clarify further in discussions and it appears that the view of the Commission is very similar to that of your Lordships. I hope that that gives some comfort to the noble Lord, Lord Wade, the noble Duke, the Duke of Somerset, and my noble friend Lord Reay who mentioned that problem. The saving grace in this part of the Commission's proposals is, I believe, the inclusion of a provision for all such derogations to be approved by management committee procedure.

I turn to the question of trade which exercised the noble Lord, Lord Mackie of Benshie. The Commission's reform proposals do little more than consolidate the existing GATT/Third Country Trade agreements into the draft framework regulation. One particular aspect of these agreements is the entry price system, which progressively succeeded the old reference price system from 1st January last year.

The committee has recommended that imports of soft Fruit from Eastern European countries should also be subject to an entry price system since this would provide more flexible control on imports than a system of reference prices. The Government have previously said that they would support such an approach, although this is something to be pursued in the context of the current negotiations between the Community and the countries concerned, rather than as part of the reform of the fruit and vegetables regime. The committee has also recommended that the reductions in volume and value of export refunds under the GATT should signal the phasing out of this form of subsidy. This is something with which the Government wholeheartedly concur. But I must say that this is a view shared by very few other member states.

Lastly, I turn to the question of fraud. I think that. "fraud" is rather an inadequate word for what is going on; I think that "pillage" might be a better description. Clearly, where the disbursement of public funds is concerned it is essential that there are adequate controls in place to reduce the potential for abuse and to ensure proper compliance with rules.

The recent European Court of Auditors report highlighted, to put it mildly, serious shortcomings in the financial controls operated within the Community under the existing regime. It is for these reason that we share the committee's support for the appointment of a corps of inspectors, and welcome its endorsement of our proposal that producer organisations should be required to pay a security in respect of any advance funding they receive via the operational fund, and that they should be required to contribute to that fund. This will help guarantee rather more stringent financial controls across the whole Community—something which has, I regret to say, not always been a feature of the regime in the past.

I am grateful to the noble Lord, Lord Middleton, and to those other noble Lords who have spoken during the debate. These contributions, together with your Lordships' committee's effective and thorough analysis of the regime, will assist us greatly in discussions on the reform of the regime, and serve as a point of reference during the subsequent discussions on the precise implementing regulations.

If, in the 15 minutes that I have allowed myself, I have not answered all the questions raised today, I shall read Hansard and write to noble Lords concerned.

5.34 p.m.

Lord Middleton

My Lords, I, too, am grateful to noble Lords who have taken part in the debate, a debate which has been notable for a high degree of unanimity on all sides of the House. I very much appreciate the remarks of my noble friend Lord Lucas in giving the Government's response to our report, and the way in which the report has been received by the Government.

I, too, was fascinated by the picture painted by the noble Duke, the Duke of Somerset, of the magnitude of the fruit surplus in Greece. I remember in my extreme youth having to learn about the piling of Mount Pelion on Mount Ossa; and now we have to contemplate the piling of a peach mountain on top of that: heap.

It is not appropriate at this stage of the debate to introduce fresh material. However, I noted that no speakers, except, briefly, the noble Lord, Lord Carter, referred to last month's report of the European Parliament on the proposed reform of the fruit and vegetables sector. I merely add as a footnote to the debate that among the recommendations of the European Parliament, so far from phasing out the intervention system, were that additional crops should be eligible, that the maximum level of intervention that a producer organisation is allowed should, be raised, and that the European Community should pick up a larger share of the bill. Like other noble Lords who have spoken, I fear that the way to the reform of the common agricultural policy will not be a smooth one.

On Question, Motion agreed to.