Agriculture

HL Deb 09 December 1998 vol 595 cc937-79

3.7 p.m.

Lord Kimball rose to call attention to the future of the agricultural industry against the background of falls in farm income and in output; and to move for Papers.

The noble Lord said: My Lords, I can still hear the words of that great Master of Trinity College, Cambridge, G. M. Treveleyan, from his English Social History, which he said to me on leaving the college some 50 years ago: Beware a town-bred electorate indifferent to the decay of rural life". Those who no longer have a job in the rural economy do not stand outside the factory gates. They are not there for everybody to see. In the previous agricultural depression, and in the present unhappiness, they move away from the countryside and find work elsewhere, even abroad. However, this time round, there is a new factor which is even more worrying: there appears to be no desire among the children on so many of our small livestock holdings to carry on in the family farm.

The decay of the rural communities can be halted only by hope and enthusiasm for the future. It is not the purpose of this debate to hark backwards, but rather to look at the stark economic factors revealed by the catastrophic drop in farm income of some 33 per cent. in the past year. That figure was published last week.

The extent of the current crisis is well documented. The £120 million aid package announced last week will help some farmers' cash flow, but the industry is not looking for a quick fix. To restore confidence, the industry needs to know the future shape of the common agricultural policy, due to be agreed next year; the outcome of the negotiations of the World Trade Organisation, due to begin in January, and the effect of the further enlargement of the European Union with the first major countries joining in 2003.

I think we also need to reflect most carefully on the effect of the constitutional changes in the United Kingdom with regard to the Welsh, Scottish and Northern Ireland assemblies. Agriculture is a delegated responsibility to each one of these assemblies. We must have a coherent United Kingdom policy with no distortion of competition or preferential treatment with regard to the delegated authorities.

The object must be to ensure that farmers are encouraged to farm productive land to its optimum potential while taking all reasonable measures to protect the rural and social environment. The real problem that faces us today is that of the so aptly named less favoured areas. There is a national desire to maintain a rural infrastructure in the hills. Therefore sheep and beef farming must remain viable. However, under today's circumstances they cannot survive by means of the market alone. The present system of headage payments for mature livestock merely encourages overstocking. Viable numbers of people are needed in the hills—farming, working and living—to maintain the infrastructure. There is merit in considering a "per working person" grant, to include the farmer and his wife and those who run the village shop and post office. We have the model in the environmentally sensitive area forms of contract. That is the kind of support on which we shall have to build to maintain these less favoured areas.

It has to be recognised that it is impossible to draw a definite line between the less favoured areas and the productive lowland. A scheme of halfway support is necessary for these grey areas. As deputy president of the Countryside Alliance, I know that that organisation will be at the forefront of addressing the problems of rural people, particularly in the areas I have just mentioned.

The present uncertainty highlights the contribution that country sports and game rearing make to the agricultural environment. They are an essential part of the rural economy. The annual direct expenditure on country sports in any one year now exceeds £3.8 billion flowing into the rural economy. Fox-hunting alone delivers 15,895 full-time jobs with an expenditure of £243 million, as recorded by the Cobham research consultants. Particularly in the less favoured areas, those who live in the countryside need a diversity of business to cushion them from the present economic shocks. The value of the game market alone has grown from £12 million to some £18 million in the past year. The rural areas now sell £9 million-worth of venison. Alas and alack, the amount of fish that is sold commercially is extremely small, some £650,000-worth. We shall have to tackle that matter at a later stage.

If the remaining productive land is to meet its full potential, we must accept that the current CAP is protectionist. It seeks to preserve an outdated and costly farm structure. We should look carefully at the American example. Their Freedom to Farm Act phases out subsidies and leaves the individual farmer to run his own business. We need the same system here. We need a system that is simpler and less bureaucratic and a system in which modulation has no part to play. All producers should be treated equally without discrimination with regard to size.

Animal welfare considerations should be based solely on the best scientific advice that is available and should not be unilaterally imposed on the industry. The present lurch towards green policies must be curbed and watched. The new consultation process on better protection for SSSIs must not be used to impede economic agricultural development. A flexible funding package must be made available to encourage positive management of SSSIs. The regulatory burden grows. I refer to high vehicle taxation, fuel duties, meat inspection costs and now the danger of a pesticide tax being introduced. Farmers receive too small a proportion of the final selling price of the food they produce. A better return is the key to the success of the industry.

We need to keep as many people farming as possible. Those people should be entitled to a reasonable standard of living. It follows that we need to make British agriculture as profitable as possible. That is why the catastrophic drop in farm income at the beginning of this month is of such concern. I am certain that the revised figures to be issued at the end of January will reveal an even greater drop in farm income. We need to put on record what Agenda 2000 should state in March on behalf of the industry. The Government must ensure that negotiations move in the right direction. Adequate funding must be made available for the transitional phase. A new system must be financed fairly within the European Union. It must also incorporate the need to develop non-food production uses of land; diversification is one of the most important elements in the countryside.

This debate is being held 25 years after we joined the European Economic Community. What has happened in the countryside in those 25 years? Dairy cow numbers have fallen by 22 per cent. We now kill one-quarter less of clean sheep. The figure was 20.6 million 25 years ago and it is 16 million now. The figure for beef slaughtering is down by one third from what it used to be. What is worst of all, 15 per cent. of our arable land is now set-aside. All these figures represent lost production and lost profits to the farming community. Today's debate occurs almost a year after the start of the campaign, "Keep Britain Farming". The farmers are not alone in their concern for the future of the countryside. They have the unqualified support of your Lordships' House. I am certain that the debate will show that. I beg to move for Papers.

3.17 p.m.

Lord Davies of Coity

My Lords, I appreciate that there are a large number of noble Lords in this House who know more about the agriculture industry than I do. However, I venture to say that there is no one in this House who is not conscious and indeed concerned about the crisis and the difficulties which face those involved in agriculture in this country today. Some sectors are perhaps more fortunate than others, although I dare say that all sectors face difficulty.

This consciousness, understanding and concern are shared by the Labour Government. That is demonstrated by the efforts they are making to offset as far as possible the difficulties that agriculture faces today. As regards what the Government have to do, and what they are expected to do, I ask noble Lords to consider that this Government have been in office just 18 months, whereas the previous government were in office for 18 years. Certainly the previous government had to face difficulties in agriculture during their time in office.

The Labour Government have not brought about the present difficulties. Mad cow disease, BSE, has been a national disaster. By the year 2001 the United Kingdom will have spent close to £4 billion on measures to combat the disease and to ensure that British beef is among the safest beef in the world to eat. The Labour Government have shown their concern, which has resulted in getting the ban lifted in Europe. Now it is hoped that farmers will be able to increase their sales abroad and perhaps move into a much better position than for some considerable time, certainly a lot longer than the 18 months during which Labour have been in power.

There are numerous reasons for the difficulties that are now faced by the agricultural industry. The matter of beef has been widely canvassed in this House, in the other place and in the press over many years. There is over-production in pig farming. The collapse in Russia has had an effect. Now we have far too many pigs and prices have dropped. The same is true of sheep. The poultry industry is reasonably stable. Although it has its difficulties, the situation is not as bad as the other areas I have mentioned; nor is the situation as regards milk.

What have the Labour Government done? It should be acknowledged that over 18 months they have done a considerable amount. They have put £150 million into farming over the past 12 months. In addition, there is the further recently announced £120 million for hill farmers. The hill livestock compensatory allowance will account for £60 million; agri-monetary compensation £48.3 million; and the calf processing aid scheme will be extended until the end of the financial year, in March next year. The lifting of the beef ban was a marvellous achievement. For the Government to have succeeded in that took a lot of hard work. We have debated the matter previously.

A matter that causes me some concern is the demand for the ban on beef on the bone to be lifted, despite scientific evidence indicating that consumers will be at risk. It is somewhat irresponsible to call for the lifting of the ban at a time when scientists who are aware of the circumstances are saying that it still presents a danger.

Although farming is recognised as difficult and farmers will be at the sharp end, it is not only farmers who feel the impact of difficulties in the industry. My union represented people in food manufacture in areas where pies, sausages and cooked meats were being produced. All those industries are affected and, consequently, job losses occur. A chain of difficulty arises right across the board. I well remember in the 1980s representing milk workers who were employed in processing plants, milk-bottling, creameries and doorstep delivery (which we do not see too much of today). I remember when a big battle took place over the question of milk imports. We were worried about the health of people in this country. We did not feel that safety standards in milk production in Europe were as good as our own. The unions, in partnership with the Dairy Trades Federation, as it was known at that time, went to visit Commissioners in Europe, who were then my noble friend Lord Richard and the noble Lord, Lord Tugendhat. I received much more sympathy for my plea and that of the industry from my noble friend than I did from the noble Lord—who told me that there was nothing wrong with continental milk; his children were drinking it. That response still rings in my ears. The milk that was coming into this country was not being sold on the doorstep; it was discounted through supermarkets and could be bought at a discounted price. That damaged doorstep deliveries. People consumed much more milk when it was delivered to the door than when they collected it from supermarkets.

As a result, and partly as a consequence of other policies, British milk processors decided that they wished to sell more milk to supermarkets and the doorstep delivery almost disappeared. What then happened was that liquid milk consumption in this country was dramatically reduced. As a result, herds became smaller since there was no longer the same demand. Large numbers of people who had delivered milk to British housewives the length and breadth of the country lost their jobs. The milk industry has since recovered slightly.

Another element has caused difficulty in the industry; namely, the break-up of the Milk Marketing Board. I am not saying that the situation should not have been changed—had the change been brought about in a sensible, stable manner. I regret the way in which it was introduced. It was the result of an obsession with deregulation rather than concern about practical transformation. Difficulties now seem to be arising, and the Monopolies and Mergers Commission is examining the question of what is essentially a farmers' co-operative in the dairy industry.

I ask all noble Lords to have some measure of sympathy with what is happening and recognise the Government's attempts to offset those difficulties. I have no time to talk about reform of the CAP, but the Government are certainly tackling the issue. They wish to see the CAP reformed, to the benefit of the British farmer, and will do everything in their power to bring that about.

3.26 p.m.

Lord Beaumont of Whitley

My Lords, we are all grateful to the noble Lord, Lord Kimball, for introducing the debate. I go along with the noble Lord in almost all that he said. I did not necessarily follow him into the deepest recesses of his arguments. I received the slight impression that life would be improved if packs of foxhounds were allowed to roam over SSSIs. The main argument that he makes for the countryside and the strength of the agriculture industry is one that we must all support.

Last week, your Lordships were all enjoying yourselves, so that when I finally surfaced here on Thursday all my friends kept saying to me: "Tell me what has been going on in the House of Lords". I am afraid that I was not able to tell them. Not only was I not privy to the peculiar things that were happening in the Conservative Party, but I was not here. I was attending a conference in Rome—largely due to the generosity of the noble Lord, Lord Mackie, who allowed me to go when he might have gone there himself. I went as one of your Lordships' IPU delegates to a conference of the FAO on the subject of feeding the world in the future in a sustainable way. It was a heartening and interesting experience. When I returned, possibly I had not learnt a great many new things, but what I had learnt in the past had been greatly reinforced together with the feeling I had in my bones, having been brought up in a period when farming in this country was important and those of us who were brought up on farms were doing something really worth while.

All the contributors to the conference were more or less unanimous—with the possible exception of the Americans. There were only two Americans there so far as I could discover. There was an American delegate who was a member of Congress, who attended for half a day, and there was a keynote speaker. The keynote speaker was very optimistic. He said that we could feed the world quite easily; there were no problems at all; it was just a question of delivering in the right way. He did not necessarily produce the machinery for doing that, but said there was no problem.

It is true that there is enough food for the world at present, but there are threats to food production all over the world. I strongly believe that at the heart of this debate is not so much what we should be doing in the rural parts of the country but that we should concentrate on the fact that it is up to every country to produce enough food to feed itself as far as it can and not to import more than it has to over large numbers of air-miles, thus depleting the world's resources and causing pollution. Food security is extremely important. I hope that as a result of this debate the Government will take to heart the necessity of understanding this basic truth about food and agriculture and its relationship to the countryside.

There is far too much talk about the necessity to restructure the agricultural industry. What does restructuring suggest to an agricultural community that is already in the depths of crisis? It suggests what the steelworkers, the coal-miners and the shipbuilders all experienced under Thatcherism. It means that this Government's mind-set is to allow a significant proportion of traditional family farming throughout the UK to disappear. If they allow it to go to the wall people will retreat from the land. Family farms will be sold. There will be more amalgamations and more agribusinesses. We shall not have the families there who, for generation on generation, have looked after these areas, be it in Cornwall, Devon, Somerset, the Highlands or rural Wales. If that happens, then the great irony is that the very objectives on which there is all-party consensus in terms of CAP reform—that more funds should go into rural development, diversification, conservation and management of the habitat—will not be met and we shall not be able to develop the post-CAP reform to which the Government pay lip service.

There is a need to concentrate on support for agriculture. If we once manage to get that into our heads, and the Government manage to get it into their hearts and souls, there are some Members of your Lordships' House who sit on the Government Benches who understand all this and whom we can trust entirely. I very much look forward to hearing the noble Lord, Lord Carter, respond to the debate, not just because he will tell us what the Government have to say—which I look forward to hearing with interest but not necessarily a great deal of hope—but because I know that he himself cares passionately for the countryside and knows a great deal about it.

Farmers need to produce food and other products of cultivation, to care for the landscape and its wildlife, to provide a sound economic base and core employment for the rural economy and to form a stable backbone in the rural community. That can in part be done by supporting smallholders and small farmers. At present 80 per cent. of subsidies go to 20 per cent. of farmers. It is not sensible to give very large subsidies to very large farmers. I concede that all farmers need subsidies these days, but they should be tapered according to scale of production. Subsidies should be more equitably and usefully distributed among the farming community so that it is not too hard-pressed economically but able to produce good quality food in a civilised way. A much higher proportion of subsidies should be for environmental activities.

If we want healthy, home-grown food, a flourishing rural economy and an attractive landscape, complete with wildlife, family farmers will produce that as long as there is a profit to be made from producing food. They will produce the rural infrastructure which is needed if the countryside is to have services, such as post offices, shops and rural transport. The existence of those services requires that there be a countryside population which is able to afford what is offered and which can go on living in the countryside and that the sons and daughters of that population will go on living there—a point stressed by the noble Lord, Lord Kimball.

It is not any particular reform that is needed, although I have no doubt that my noble friend Lord Mackie and others will talk about reforms. The need is to try to get the Government to understand that agriculture is the heart of the countryside and that we cannot for ever rely on trade from abroad, which may produce food for our people but which at the same time ruins our farming industry and the countryside. If we can instil that feeling in the Government's heart, this debate will have been worthwhile.

3.35 p.m.

Lord Palmer

My Lords, it is perhaps worth pointing out that 11 of the speakers this afternoon are hereditary Peers who care passionately about the countryside and those who live and work in it.

It is exactly three weeks since we last cantered over the problems facing this country's agricultural industry. It was generally agreed in that debate that Britain's farmers are facing the worst crisis in living memory. Some of my neighbours have yet to finish their wheat harvest—and we are now under two inches of snow. That is grim, my Lords, grim. I thank the noble Lord, Lord Kimball, for introducing the debate and I agree with him that it is to the future that we must now look.

I must declare an interest as someone who tries to farm in the Scottish Borders. In the previous debate I made a plea for further investment into research and development for alternative crops, particularly those that can be used for bio-fuels. The noble Lord, Lord Donoughue, told the House that £420,000 was currently being spent on research and development. I am afraid I believe that that sum is ridiculously low, especially as North Sea oil will not last for ever. Many valuable renewable resources can be derived from agricultural crops. Some sectors of the European chemicals and energy industries increasingly rely on vegetable oils, fibres, starch, cellulose and sugars derived from established and novel agricultural crops. Increasing the use of these renewable raw materials will help to reduce the consumption of finite resources of mineral origin and benefit the environment by reducing greenhouse-gas emissions. It will also improve the overall carbon balance.

It is imperative that non-food crops are available. For this, a framework must be introduced which ensures that non-food crops are a viable option for agricultural businesses, processors and consumers. Until recently the key driver for the growth of non-food crops was set-aside. Over the past 10 years there has been considerable public funding, coupled with private funding, running into millions of ecus, of projects which have improved the economic and environmental performance of non-food crops and their derivatives.

The European Renewable Raw Materials Association estimates that 5 per cent. of arable land in Europe is used for producing crops for industrial markets. Set-aside has not been the only driver which has encouraged the development of non-food crops, but it has certainly boosted the speed with which the sector has developed. However, the CAP reform proposals published by the European Commission ignore this successful development and have cast doubt over the whole future of set-aside. This doubt has been felt throughout the industry as further investment in plant, machinery and multi-annual crops is now very much in question. This suggests that set-aside is an unsatisfactory basis for support as the rate varies annually.

Naturally, this does not inspire confidence, particularly when planting multi-annual crops such as short rotation coppice. Its long term future is indeed uncertain. Agenda 2000 makes no provision whatsoever for the development of non-food crops on land which is not eligible under the arable area payments scheme. Surely this is a terrible oversight. It is vital, therefore, to consider a new support regime to provide long-term, robust measures which could qualify for WTO green-box status.

A new approach to the development of a non-food crops industry is a must, driven by a recognition of the economic, environmental and social benefits of this sector rather than dependence on set-aside production. The development of a robust industry which will deliver high quality and tailor-made raw materials for use by industry and the energy sector will clearly help the European Union to develop in a sustainable way. Non-food crops will make a strong contribution to the objective of sustainable development by creating employment and revenue opportunities in rural locations and providing obvious environmental benefits by reducing greenhouse gas emissions and increasing biodiversity in the rural landscape.

As Agenda 2000 fails to make specific provision for non-food crops it will not be profitable to plant new species for non-food use and biomass crops. If this is the case the European Union's agricultural, chemical and biomass industry will lose the market share that it has built up successfully over the past decade. Considerable investment will be wasted or, worse still, handed to our third world country competitors to capitalise on Europe's short-sightedness. Surely it must be madness.

To ensure that Europe can continue to benefit from the industry that it has developed we need a policy framework specifically designed for industrial and energy crop advancement in the long term which will allow non-food crops to compete with mainstream supported crops, provide a level of support that reflects the range of environmental and social benefits associated with non-food crop production, encourage a focused and co-ordinated approach between different departments within the European Commission and, finally, encourage investment and growth and enhance the competitive strength of the European Union in renewable production, research, technology and application.

Last March Commissioner Fischler said that, when we talk about agriculture as a supplier of raw materials for industry, particularly for energy production, this means above all an opportunity to replace non-renewable resources with renewable agricultural products". I believe passionately that he is right. More must be done, and urgently. We surely owe it to future generations, not only of farmers but to future inhabitants of this country and indeed of the European Union as a whole.

3.43 p.m.

Lord Jopling

My Lords, I begin by thanking the noble Lord, Lord Kimball, for introducing this debate in such an admirable way. I declare an interest as a farmer in arable and lowland beef farming in the north of England. I share entirely the concerns that have been expressed in your Lordships' House over the past few weeks about the current plight of agriculture. It is by far the most serious situation that I have ever known in the industry and it affects almost everybody within it. However, I should like to concentrate this afternoon on one group of farmers who cause me especially great anxiety. I refer to the smaller farmers, mostly tenants, who occupy land that is within the less favoured area or others whose land is slightly too good to qualify for assistance under the Hill Livestock Compensatory Allowances. In the north of England we call them "dales farmers". When I use that phrase I intend it to embrace similar farmers in the west of England, Wales and other parts of the country.

Generally speaking, these farmers do not have the buffer enjoyed by owner occupiers; they have rent to pay. Most of them rely on farming for the vast majority of their income. I believe that they are in need of particular help and the sympathy of the Government. I suggest to the Government three matters that I believe deserve their sympathy. First, I should like the Government to have another look at extending the area of land that is covered by the environmentally sensitive area scheme. I have raised this in your Lordships' House previously and I hope that I shall be forgiven for raising it again. I was the instigator of that scheme about 12 years ago. It is tailor-made for those remote dales farmers who now face the greatest difficulty.

The scheme has three great advantages. It is already accepted by Brussels, so there is no need for a lot of new legislation to extend it. It is environmentally sensitive, prohibiting the use of pesticides and chemicals and ensuring that stone walls and barns are maintained. It also ensures that wild flowers in hay meadows can seed before the hay crop is cut. Above all, it does not encourage further oversupply and thus add to the surpluses that have bedevilled our agriculture. I hope that the Government will look again at this matter.

Secondly, I hope that the Government will not make matters worse by changing what is already working well. After I left the department in 1987, I spoke in the other place on agriculture very rarely, but on one occasion I seriously questioned the actions of the previous government in scrapping the powers of the Milk Marketing Board. I have a good deal of sympathy with the comments of the noble Lord, Lord Davies of Coity, on this topic. I came of that generation which always saw the Milk Marketing Board as the saviour of the dales milk producers who were being beaten into the ground by the big dairies in the 1930s. The policy of the Milk Marketing Board was to adopt a universal price regardless of transport costs, but that is all behind us. The universal price remains, but the MMB does not. We now have the successor organisation Milk Marque, albeit with less powers than its predecessor, to which the noble Lord, Lord Davies, referred. That, too, is being picked over by the Director-General of Fair Trading. I hope that the Government will not allow further changes to the arrangements for marketing milk that may drive out more and more of the smaller remote milk producers in the dales. They are the first ones to go if the present arrangements for marketing milk are drastically changed.

The third point I raise concerns me very much. I refer to the effect of the Government's proposals to relax milk quotas by 4 per cent. after 2000 and to abolish them by 2006. Noble Lords will recall that when milk quotas were introduced in 1984 there was a huge amount of anguish. At that time, the anguish was directed as much at me as anyone else. Unlike most of my colleagues in Europe, I had the good fortune never to have anything thrown at me. I believe that the German Minister was burnt seven times in effigy! It was an extremely uncomfortable time. But the fact is that milk quotas have been invaluable. First, they have given milk producers a valuable asset. Secondly, by their very nature they have curtailed the creation of more and more unsaleable and unmarketable surpluses. Thirdly, and above all, they have allowed milk producers to get a fair price and therefore have not encouraged a number of highly efficient, large producers to continue to expand and create more and more unsaleable and uneatable surpluses.

I take some pride in the fact that milk quotas have been so successful. In 1984 farmers hated them, but now I believe that they like them very much. Sometimes I wish that they had said so at the time. I am told that as regards our New Zealand arrangements, the United Kingdom is currently 5 per cent. over-supplied with milk. I can only believe that the abolition of milk quotas will again encourage greater and greater surpluses and, most frightening, will put intolerable burdens on the small milk producers on marginal land who, as I have explained, caused me the greatest anxiety. There are bleak times ahead for the small tenants in the dales and on the hills. I hope that the Government will take note of this danger and that they will not make a bad situation infinitely worse.

3.51 p.m.

Lord Inglewood

My Lords, like my noble friend Lord Jopling, I begin by thanking my noble friend Lord Kimball, for introducing this debate and to declare an interest. I am a farmer in Cumbria—although I understand that it is customary to declare an interest where one is making money.

It is agreed throughout the Chamber that in the past 18 months we have seen agriculture in a parlous condition. The reasons for that are varied. I believe that some of the reasons can be laid at the door of the previous government, of which I was proud to be a member; undoubtedly, some of the reasons should be laid at the door of the present Government on the Benches opposite; some of it is to do with the weather, and some is simply "events, dear boy".

Perhaps I may point out two particular matters that bear thinking about. First, the Government's policy about exchanges has had a very damaging impact on agricultural prices. That has come at a time when the other factors—some of which we have heard about already this afternoon—have been militating against farming. The attitude towards exchanges has been driven by the Treasury's wish to save money. I dare say that it may find at the end of the day that, in terms of tax forgone and tax repaid, it may well now be worse off than it would have been had the prices been adjusted. That is of small consolation in rural Britain.

Secondly, it is important that, in the face of the setbacks that British agriculture has experienced, in future we make every effort to regain markets which have been lost. It is always easier to lose markets than it is to get them back. I believe that on my upland farm we have been successful with our cull ewes this year. We sold them for £2.90 each. That was before one deducts auctioneer's commission and transport. That is a measure of the kinds of difficulties that are being faced in the uplands.

In my opening comments I focused on some points of detail and, of course, detail is important. But it is also at least as important, in the context of the world that we are now in, that we also look at the wider picture. After all, what is the point of farming at the end of the 20th century? What is the point of the countryside? I believe that it is necessary to be clear about that because it is only by doing so that we can have a policy framework that will enable us to have the kind of fanning and countryside that we want in the next millennium.

It is quite interesting to turn to Article 39 of the Treaty of Rome, which is the text on which the entire common agriculture policy is written. The common agricultural policy is quite rightly widely derided, but Article 39—I do not propose to bore your Lordships by quoting it—spells out in terms what is the purpose of the policy and why. Against that background it has been an effective basis for a policy albeit one which, in my opinion, is now out of date and, in a number of material respects, misguided.

I am sure that there is agreement throughout the House that in such areas it is not the Government's business to run agriculture in any kind of hands-on manner. But at the same time, because of our history and the circumstances of the world in which we live, agricultural policy impacts very heavily on farmers and agricultural practice. I do not believe that that is going to go away, not merely because it is the way in which things are done now, but because the nature of the linkages that exist between the aspirations of all kinds of people and what goes on in the countryside and on farms are such that without some kind of government involvement we shall not achieve the kind of things that I am sure everyone in this Chamber would like to see.

For many years the framework of the politics in which agriculture operates has not been national politics. We have only to go back to the great burning issues associated with the Corn Laws to appreciate that British agriculture cannot be isolated from events outside these islands. That has merely been underscored by our membership of the Community. When one looks at recent developments in the Community and the reform process that is under way of the common agricultural policy, it seems to me that there is a very strong case for saying that the Agenda 2000 initiative and the World Trade Organisation talks are as much symptoms of what is happening in the wider world as being themselves engines for change.

We are living in a world which is changing very fast. It is different from what we have been used to. Society is changing and it is different from what we are used to. Technology is changing and enables things to be done which were completely unthinkable a few years ago. After all, is agriculture any more primarily about food production? I personally believe that it should be. It is particularly regrettable that, for example, certain aspects of the quota system have meant that as regards milk production the capacity for milk processing has had to close because it has not been possible to acquire milk because of the corset put on the milk supply by the existence of quota, in order to produce products for which there was a market in the wider world, but for which the basic raw materials cannot be obtained.

There is general agreement that the environment plays an important part in agricultural policy. But how does one implement that? Should there be cross-compliance? How does one deal with farms which have SSSIs on them? There must be severe restraints put on husbanding that particular land. What about forestry? Those of us who live in the countryside are encouraged, on the one hand, to plant trees and on the other there is enormous opposition at the same time against planting large-scale coniferous forests, which we are told by those who want to buy the timber, is probably the timber for which there is the greatest market and which can underpin the largest number of jobs. I could go on, but I do not see any particular point in adding to these illustrations.

I was extremely pleased to hear my noble friend Lord Jopling comment about the plight facing the small farmer. I would like to add my name to the points that he made. But the crux of much of what is happening in the context of farming at present seems to me to hinge on that and the important point made by my noble friend Lord Kimball about modulation. The inevitable economic response to agricultural policy and prices that we have at the moment is for small farms to be subsumed into large farms. It is an essential part of the policy proposed by the Commission that the economic benefits of that, which is the only basis on which such farms can survive, will be eroded by the application of the principles of modulation. It is economic nonsense and it is discriminatory against this country.

When thinking about the remarks that I wished to make today, I suddenly realised that in one sense I might have started in the wrong place. As we all know, most of the population in this country live in towns. They are the taxpayers. Through their taxes they help to support farming in the countryside. In looking forward to the next millennium, and the kind of agriculture that we shall have then, it is important to take into account what those who pay many of the bills of the countryside would like to see.

We must address two important issues. First, what kind of farming industry and countryside do we wish to see in the next century? Secondly, we must concentrate on how we achieve that. Bankrupt farmers, be they owner-occupiers or tenants, cannot deliver. In this country we tend to sneer at poor peasant farmers on the Continent. If the politics of agriculture create a standard of living in the farming community that puts our farmers on a par with them, not merely does it not sound to me to be consistent with general policies enunciated by the Government about the level at which wages should be, it also seems a guarantee that they will not be able to deliver. We must ensure that the farming industry's personnel has a standard of living equitable with that of the rest of society.

4.1 p.m.

Lord Stanley of Alderley

My Lords, I am pleased that my noble friend's Motion draws our attention to the future of the farming industry. There is a tendency—I am guilty of it—to concentrate on the miseries of today. That is helpful only if such examination, like Advent, leads us to look constructively to the future. To that end I have a shopping list of questions that I, as a farmer, wish the Minister to try to answer.

The overriding question is similar to that asked by my noble friends Lord Kimball and Lord Inglewood. What are we, as farmers, trying to achieve? Should we aim to have an efficient farming industry capable of competing in the world market? If, as I hope, the answer is yes, there are a number of problems to be faced. The first is the hardy perennial of a level playing field, which I accept cannot truly ever exist. But when the Americans tried to compete worldwide through "freedom to farm", they had to bale their farmers out to the tune of 8 billion dollars. It poses a problem. I hope that the Minister will agree that that problem is his to solve, not mine as a farmer.

Secondly, the Government must accept that to aim for efficient agriculture is by no means universally accepted. Many people have idyllic ideas of small family farms with buttercups and daisies. I am sorry to have to inform them that such a view cannot lie side by side with an efficient agriculture. I and farmers must adapt for the future. A farm of 1,000 ewes and 100 beef cattle, let us say, is not a large enough unit to survive.

My answer is somewhat different from that of the noble Lord, Lord Beaumont, but somewhat parallel to the remarks of my noble friend Lord Jopling on marketing. If we co-operate on both selling and working, and accept that such units must be part-time, there is a future. I am much encouraged by the efforts of the noble Lord, Lord Donoughue, in that direction. I hope that he will be more successful than I have been in trying to encourage my neighbours in that direction. Sad to say, I found it very much easier to achieve on the larger farms in Oxfordshire than in the smaller units in Anglesey where the need is far greater. However, putting that into action rests primarily on the farmers and not necessarily the Government.

If we are to have efficient agriculture, the Government must be careful not to make us less competitive by imposing punitive regulations and taxes—for instance, on health and safety, the environment, protection as regards nitrate zones, bird and pest destruction and a possible pesticide tax. That is the quid pro quo of cheap food, which the housewife wants, efficient farming and coming into line with the GATT regulations. However, it is inevitable that if we go down the efficiency path some farmers will never be able to be viable however hard they try.

I would have liked the Tangemann plan, as I know would my noble friend Lord Middleton. But some form of retirement plan is essential. I hope that the Minister—I know that he has thought about such a scheme—will encourage his colleagues to consider it again. I know that the Conservatives disliked it, but, as the noble Lord, Lord Carter, will remember, I did not always agree with everything that my party did on agriculture.

As patron of the Agricultural Secretaries and Administrators I wish to draw to the Minister's attention the difficulty of getting colleges to find sufficient places, mainly because of lack of local authority funding, to train those people despite the fact that the demand for the finished product (if I may call them that) far outweighs the supply. I hope that the Minister will allow me to send him a full brief on the subject.

Finally, I am confident that British farmers will survive the present cut prices. Short-term payouts are not what I really want, happy though I was to receive some as a gesture, as being less favoured. But I am very much aware of the saying that you should live as though you were to die tomorrow and yet farm as though you would live forever. I wish to know—not necessarily for myself but for those who follow after me—where we are going; and that the Government will ensure that the playing field is not made up of totally unnecessarily rutted fields by ignoring the points that I and other noble Lords have raised.

4.7 p.m.

Lord Middleton

My Lords, I, too, am grateful to my noble friend Lord Kimball for initiating the debate and for his thoughtful speech. I declare an interest as one who has been for a long time closely involved in farming. I do not need to be reminded that the current agricultural recession is painful.

The problems facing UK farmers received a good airing only three weeks ago in the debate so ably led by the noble Lord, Lord Palmer. There is little new, other than official figures released underlining the concern shown in November. We are told that there has been a fall in farmers' incomes over the past two years of 63 per cent. There has also been a drop in the average income of hill farmers this year to £2,400. I do not have to remind noble Lords that a farm worker's minimum annual wage currently at the lowest grade is £8,600.

I do not think that the Government need reminding of that. On top of other measures described in November by the noble Lord, Lord Donoughue, and by the noble Lord, Lord Davies, today, the Government have produced the £120 million aid package slanted, quite rightly, towards the hill farmers. They are trying to lift the BSE restrictions and are understandably making slow headway in the face of an EC protective wall.

My remarks, therefore, are directed with diffidence towards my fellow farmers. There have always been ups and downs in farm profitability. But those fluctuations have occurred in a steady downward trend in incomes in real terms over the past 25 years. The causes are well known in the industry. Farmers are well aware, too, that an acceleration of that long-term downward trend was inevitable once the EC took the road, far too late in my opinion, towards reform of the CAP. Farmers have seen Agenda 2000 on the horizon and the eventual WTO-led and enlargement-led future reduction, or at best retargeting, of subsidies.

It is now more than seven years since sub-committee D, which I had the great privilege to chair for six years, produced its report on the MacSharry CAP reform proposals. Our conclusions have stood the test of time very well. I should find it difficult to improve on this extract from the advice we gave seven years ago: Reform of our price system will mean that farmers will have to increase their efficiency. Some measure of adjustment aid is essential. Such aid must be transitional; acceptable under GATT; fixed in quantum; not re-negotiable; and simple to administer". Any farmer who considers that the direct compensatory payments that we have received since the 1992 CAP reform are anything other than adjustment aid and other than ephemeral in nature is short-sighted.

Farmers are well aware of the long-term trend and are adjusting. What has taken them aback has been the sudden combination of the shrinkage of world markets, BSE, low prices and the state of the pound, coupled with very bad weather which has led to the current downturn.

What does one say to UK farmers who see in the future a kind of Darwinian struggle for survival—the survival of the fittest? Perhaps one should remind them that Darwin understood that natural selection could operate only because of the inherent variability of individual organisms and the inheritable nature of those variations. Just as useful variations in nature may give a competitive edge in the battle for survival, variations in farming attitudes and methods may be needed to do likewise.

Farm units will need to be bigger to be viable. Already, four out of every 10 farmers are part-timers. If smaller occupiers are to stay on their farms—and that is an extremely desirable social objective—then more of them must look for other sources of income. Therefore, as has been said so often, it is all the more important that non-farming economic activity in rural areas should be encouraged. That is something which can be facilitated through EC policies and by our own government policies.

In these days of food security and more affluent consumers, there is, as was pointed out in this year's Massey Ferguson lecture, a changing pattern of demand for high quality, safe, convenient and attractively-processed food. At present, food processing doubles the value of produce at the farm gate. That is before the costs of distribution and sales. Are there perhaps opportunities there for farmers to process their own products further down the food chain? If so, that could perhaps be performed by producer groups.

Farmers are not good at marketing and there is huge room for improvement in that field and for co-operative quality control and selling.

There must also be a drive for markets abroad. I wonder what happened to Food for Britain which was established by the noble Lord, Lord Walker of Worcester, when he was a Minister. Perhaps the noble Lord, Lord Carter, will remind us about Food for Britain and the point that it has reached.

It is perhaps significant that the most successful marketing initiatives have been in relation to products which are outside any CAP regime; for example, fruit, vegetable and poultry. One is tempted to speculate as to how much better would have been our marketing performance had their been no CAP support for the other commodities over the past 20 years.

As the noble Lord, Lord Palmer, reminded us, there is scope, too, for the non-farm use of farmland, whether it is for bed and breakfast, crops for industrial use, wind farms or whatever. Finally, it is plain that not all farmers are situated so that they can evolve and diversify. The purists will say that they will be eliminated under the harsh laws of economics. If that is so, there must be some kind of safety net for those failing in the struggle for survival.

If the rug is pulled out too sharply, the social costs will be heavy. In that regard, I find myself, as is very often the case, in agreement with the noble Lord, Lord Mackie of Benshie. For example, as was urged by my noble friend Lord Wade in the November debate, there must be devised policies and methods whereby farmers can purchase their retirement to ease their passage. Time does not allow me to discuss various schemes which have been mooted. Support, preferably outside the farm budget, must be available for farmers, particularly in the uplands, who would otherwise leave the land. The public are well aware of strong social and environmental reasons for keeping a cared-for countryside and they must be prepared to pay for it.

The UK industry is well placed to flourish again, as it has after every downturn that I can remember. My fellow farmers have the wit to adapt and survive. They just need to use it and use it I am sure they will.

4.15 p.m.

Lord Cooke of Islandreagh

My Lords, after hearing the noble Lord, Lord Kimball, this afternoon, I felt that I could go home. He said all that I wanted to say and said it so much better than I could. Therefore, I shall not go over that ground again.

I was pleased to see that the debate refers to "the agricultural industry" because it is now an industry with far greater tentacles than a business. There is the processing industry, and village and rural life is totally dependent on farming. It is now a very complex industry which needs to be treated with care.

I must report that in Northern Ireland there is an even more disastrous situation than elsewhere in Great Britain, for a very simple reason. The agricultural industry was weakened by the BSE crisis and the embargo on exports because in Northern Ireland 60 per cent. of the beef was exported outside the UK whereas the figure for Great Britain was about 9 per cent. Therefore, that embargo weakened the industry and left us less able to withstand the disaster in relation to sheep and pig prices about which your Lordships will know.

The result of that is that the industry in Northern Ireland is in a parlous state. Small farmers have amassed a vast amount of debt—approximately £500 million with the banks at the moment, which is all against their land values. They have an extremely large indebtedness to their feed suppliers. There are many in the pig industry whose indebtedness to their feed suppliers is as much as the value of their stock.

We have another problem in Northern Ireland; namely, that the average age of farmers is over 50. It looks as though their children, their sons, will not go into farming. They have all been well educated; they are ambitious; and they just do not see a future in farming. We may be faced with a rural desert with all the consequences which would flow from that. That is unthinkable because, as we all know, we must have agriculture. It would be quite ridiculous to have a wasteland, perhaps even in trees. We must do something about it.

I have not yet heard that there has been any attempt to think through the position that farming is in now or how it should be developed in the future. That is an extremely difficult and complex matter but some attempt must be made in different ways. For instance, it may be that some farms have no chance of success. But there should be a scheme whereby farmers can retire without going bankrupt. Their present option is to go bankrupt and then retire in poverty.

Some thought should be given to how the industry has been distorted over the years by the various grant systems, the CAP and so forth, which have led to great trouble. Also, are we being sensible as a nation to impose standards of husbandry on farmers when the same standards do not apply abroad? For instance, the cost of rearing a pig has been increased by around £5 a head through the various measures introduced to husbandry. The measures are commendable but they are not in place in any other country. I understand that the Armed Forces import foreign pigs for bacon. I wonder what difference £5 a head would make to their acquiring food from abroad which is not raised under the same standards.

We must consider all these matters very seriously if we are to make any sense of the future. We must find a way forward in helping agriculture to thrive. I believe it can thrive, but not with all the distortions, extra costs and other problems which have arisen.

4.21 p.m.

Lord Monkbretton

My Lords, I, too, should like to say how grateful I am to my noble friend Lord Kimball for timing this debate so well.

I understand that net farm incomes—according to the NFU's figures—fell 49 per cent. last year. That figure excludes the cost of family labour whereas the Ministry figure includes it. It is perhaps more graphic to look at what has happened over the past two years. I understand that we are likely to find that net farm incomes have actually gone down by 80 per cent. One may well ask in those circumstances where we are going.

Agricultural output is falling. Bearing in mind agriculture's import-saving role, sooner or later that will impact on our balance of payments, as indeed will falling manufactures. The noble Lord, Lord Cooke, was absolutely right in saying that the young in particular are being forced off the land. That bodes ill for the future. If we are not careful we will be heading towards the abandonment of land and with it damage to the farming infrastructure. That will also badly affect the environment. Not all is lost yet but the situation is becoming extremely serious. There is an urgency about short-term measures and also about medium and long-term measures.

As my noble friend, Lord Inglewood, said, the most urgent requirement relates to interest rates and the high pound. That is problem enough for manufacturers but it is worse for British agriculture, which has to compete against lower priced imports and the fall in value of European Union aid. I must express criticism in relation to the interest rate policies since May 1997. Was it necessary to increase interest rates so much? Only the United States grasped and acted upon the need to fight off depression by reducing interest rates. The Bundesbank—I noticed that yesterday in The Times it was castigated and referred to as the "Blundersbank"—and Europe together generally did nothing to help those objectives. But we actually increased our rates, which was even worse. We must find a way of reducing interest rates or manufacturing industry will rust and agriculture will abandon land to weeds.

Perhaps I may turn to other more specific urgent agricultural matters. The need for an equal footing was mentioned by my noble friend Lord Stanley and I applaud that. We ought to apply UK standards to imported production. At the moment that is often not the case. And of course we should end the ban on beef on the bone.

The Government might consider whether they should be taking steps to try to halt the rapid demise of livestock auction marts. My noble friend Lord Jopling referred to the poorer agricultural areas not quite within "less favoured areas". That may apply to areas such as the Sussex high Weald. It is in such areas that the shoe will pinch badly.

Perhaps I should declare at this stage that I come from Sussex and that, although I am partially retired, I still have some interest in farming. I hope the Government will bend their efforts to fund the Countryside Commission's high Weald land management initiative among other cases of that kind. I believe it will help. Also, in relation to Sussex, there would be a great deal of virtue in improving the environmentally sensitive area payments to retain grazing on the Sussex Downs and other sensitive landscape habitats.

In relation to medium and long-term objectives—I hardly dare mention this—I should like to say a word about milk, with which I have always been involved. The number of farmers ceasing milk production last year was 6 per cent. That is a high figure when we consider that the norm is somewhere between 3 per cent. and 4 per cent. I understand that we are the only country where farm gate prices have actually fallen recently. It is not only the high pound that caused that. While producer prices fell, the dairies increased their profits by 40 per cent or so. UK farm gate prices are now so low that some farming industry experts feel that milk production may well contract.

I wish to draw attention to the notoriously large difference between UK farm gate and retail prices and the fact that it is again on the increase. Action is required to find ways to equalise the imbalance in bargaining power between primary producers and the buyers and retailers. That applies not only in dairying. It may be that British dairying cannot compete against New Zealand; but we can compete extremely well with the rest. The opportunity to do this should not, I feel quite sure, be lost. We could do it if we do not make a mess of it, and I sincerely hope that we do our best. We do not want to lose this opportunity.

There are many other matters I could mention, but I shall leave them to others. I hope that they do raise them and that the few points I have made have been constructive.

4.30 p.m.

Lord Plumb

My Lords, I welcome the opportunity to speak in this debate and to add my congratulations to the noble Lord, Lord Kimball, for his initiation of the debate and also for the excellent way in which he opened it.

Everyone has recognised—it is so throughout the whole country—that the dramatic fall in farm income is estimated, as my noble friend has just said, to be over 70 per cent. in real terms over the past two years. It has been described as the worst situation since the 1930s, and we all know that the morale among many farming families is particularly low, especially among those small farmers who were mentioned by my noble friend Lord Jopling.

I, too, declare an interest as a farmer and as an ex-farmer leader. As your Lordships can imagine, during my 20 years in the European Parliament I have been fairly close to the development of the common agricultural policy. I would say to my noble friend Lord Jopling that, yes, I look back to the days when we were together in 1984 and the difficulty we had in the presentation to farmers of a very radical change at that time moving towards milk quotas. He rightly said that they had been difficult to accept, but nevertheless they had been the saviour of many smaller farmers who at least had something to latch on to. It sounds rather like a cliché, when we are in the middle of this debate, to say that British agriculture is such an extremely important industry both nationally and internationally. We know that, but it is important in terms of food security, both in quantity and quality.

Food security is something of which we hear little these days. I was delighted that the noble Lord, Lord Beaumont, mentioned it himself when he recognised that we have been through difficult times and it is therefore important to emphasise it. It is also important for the part that it plays in maintaining our rural and national wellbeing and also for the key role that agriculture plays in the conservation of the countryside and its environment. If the environment is to be conserved then it is essential that we have a thriving farming business. We all know that a depressed agriculture cannot carry out its traditional role of caring for the countryside. A neighbouring farmer friend of mine some years ago used to say quite often to me, "I know how to farm a farm and I know how to rob a farm; and if I start to rob it it will take me 10 years to do it". I hope to God that we are not in that position today and see the start of a run-down of our rural areas.

The facts themselves are well rehearsed. Financial pressure is forcing the industry to seek significantly lower cost structures. Yet we import so many of our products: 83 per cent. of our seeds that we put back into our farms; 66 per cent. of our machinery; and 44 per cent. of our fertilisers, to name but a few of the inputs, at a cost which is much higher than that of our competing producers in other countries. Yet that market, as we know, has been virtually wiped out because of the distortion of currency values and the volatile world market as a whole—together of course with the disastrous BSE crisis. That has cost us over £4 billion, £1.42 billion of which has come from the European Union.

Of course I acknowledge the enormous problems facing Ministers and I appreciate the recent injection to help the pig industry and to help some of the farmers in the hills and uplands who have falling livestock prices. I am sure that is a point which will be well emphasised by the noble Lord, Lord Carter. However, Government have a very crucial role to play if farming is to be competitive. That can be achieved by avoiding the imposition of costs that have no justification in logic or science; by reducing external costs where possible; by minimising unfair competition by insisting on standards of welfare and food safety that apply in the United Kingdom applying equally in the countries from which we import; by requiring retailers to give consumers freedom of choice through clear labelling and by stimulating the development and acceptance of science and technology, including biotechnology.

The Government also have the responsibility for claiming from Europe our entitlement under agri-monetary arrangements. Therefore I ask Ministers why we failed to obtain the full recompense in 1997 and 1998. In 1997 under the European rules we would have been allowed to take £420 million to compensate United Kingdom farmers against the strength of the pound. This year the amount available has been £280 million and next year it will be £140 million. Half—I repeat half—of all this financial assistance has been available from the European Budget and, I stress, without the need for the United Kingdom to contribute one single penny—and that at a time when our industry faces insurmountable difficulties, with farm incomes at their lowest for many a year. And all the Government had to do was ask.

Over the past two years the Government have only required £67 million of EU agri-money assistance and yet £350 million has been available. I know that the noble Lord, Lord Carter, will tell me that of course we have to pay the rebate, but if he disputes my figures I would ask him to go to Brussels with me tomorrow and meet the Commissioner who emphasised this and gave me those figures only yesterday. So let us take whatever is available; let us take advantage of it. Are Ministers aware of the history of agri-money compensation to the United Kingdom? The United Kingdom is the only country that has not fully subscribed to EU assistance when the need was so great and so obvious. It gets worse. In 1997 and 1998 United Kingdom farmers have been eligible for £158 million of compensation for loss of earnings from direct payments. The Government have only asked for £11.5 million of that amount of money: that is a short-fall of £146.5 million. In 1999 £70 million of additional EU agri-money will be available to United Kingdom farmers. Some would say that it is far too little, far too late; but farmers need it and they deserve it. So are the Government going to ask for it?

I should like to finish by asking: how are we to face up to the reality of 11 countries deciding that their money should be in parallel—countries that are just on the outside of this great country of ours? As we know, United Kingdom farmers are facing this crisis. They may not be concerned either way as to what happens, but will the Government's failure to allow payment in euros to those who want it from the 1st January next year inhibit the commercial influence in the European Union and perhaps more widely? Are we to be further marginalised on the fringe of Europe? How will that impact therefore on an already traumatised agricultural industry?

Changes in the common agricultural policy and in the agri-money system will all add to the pressures on United Kingdom farmers and, of course, the impact of the European Monetary Union could be greater on agri-business than on other economic sectors due to our dependence on the European Union for financial support. Surely, therefore, our collective aims should be to improve the position of British farmers and to put agriculture at the forefront of civilised and acceptable progress.

4.40 p.m.

Lord Christopher

My Lords, I acknowledge the courtesy of congratulating the noble Lord, Lord Kimball, but I am less sure that I am as grateful to him as some other noble Lords because, when, back in the summer, I thought that agriculture would be something to which I could turn my attention, I had not bargained for how I would feel on the first occasion when I rose to speak upon it. My qualifications for speaking are very limited and I shall not dwell upon them. However, I hope that my remarks will be seen in a modest way as complementary to the extremely good speeches of the noble Lords, Lord Inglewood and Lord Cooke.

Eighteen years ago I deliberately moved back into the countryside to the heart of a village surrounded by four large farms. It is interesting to study what has happened to them over the past years. One is now substantially set-aside or part of the Countryside Stewardship Scheme, with a lot of birds but hardly anything else. Another has been, in industrial terms, asset stripped. I do not complain about the farmer in that respect; indeed, that is what the market told him to do. The land and the woodlands were sold off separately; the farmhouse was sold off separately; the farm cottages and buildings were sold off separately, including a magnificent Victorian Shire stud stables; and a pedigree Jersey herd (which had not bought in any stock for 30 years) was sold off as, indeed, was the milk quota. It seems to me that that process is being repeated throughout the country and, in effect, a fine farm is no more a farm. A pedigree Sussex suckler herd has gone from a neighbouring farm—I cannot bring myself to ask where—and it is now dedicated to horse grazing. Indeed, only one of the four farms is still functioning as a farm.

As I see the general situation, it seems to me that the root cause of a great deal of this is in fact the CAP. It is consuming a half of the European Union budget and the best thing that can be said about it at present is that at least the flaws in it are now being recognised by almost everyone. I begin to wonder whether in fact we might be better off without it. There are damaging consequences involved. Of the 25 million farmers in the original six member states who farmed, only six million are left. In the UK, the number of farmers has halved over the same period. A good example of the causes of this was the conversion of milk quotas into a commodity. That has brought about exactly the same effect upon farmers as the effect upon British motor and truck-tyre manufacturers when tyres became a commodity.

To the extent that I understand it, the agri-environmental measures under Agenda 2000 will certainly not replace the CAP. One economist has put them as representing no more than 5 per cent. of the budget. I would be interested to know how far 5 per cent. could be expanded to avoid—and I hesitate in these times to use this phrase—"level playing field charges".

However, what modest solutions might there be? One speaker has already referred to marketing. A Farmers Weekly leader recently put it very bluntly, stating: UK farmers can no longer afford to be an industry that buys retail and sells wholesale". Three leading supermarkets control more than half of all the food and drink sold in this country. The Office of Fair Trading is reviewing what has happened, but the Meat and Livestock Commission says that the margins since 1995 have pretty well doubled in favour of the retailers.

I believe that farmers must seriously explore the opportunities for collaborative marketing. A good example is to he found in Lincolnshire with the Lincolnshire Quality Beef and Lamb Marketing Group. It goes for quality but not quality in terms of washed carrots and clingfilm-wrapped beef; it is getting an average market premium of 12 per cent.

Another older example which was, incidentally, introduced by an Australian in 1920, is the Kent Wool Growers. There were 75 farmers in 1920 with 25,000 fleeces. Today, it has 4,000 members, half a million fleeces and a £6 million turnover. Again, the emphasis is on quality—grading 150 grades from 1.5 million tonnes of wool. It has now diversified around 20 ranges of products which it sells.

When we look at the regeneration of the countryside and the joint proposal from the Ministry of Agriculture and the Department of the Environment, we can see what a mountain there is to climb. A recent report from the Cheltenham and Gloucester College is utterly disturbing. It shows a picture of a divided Wiltshire—of all counties! In one village, 40 per cent. of the households' income is more than £40,000, but the income of another 40 per cent. is less than £8,000. Around the town of Pewsey, 25 per cent. of households are living at or near the poverty level. Over the whole county, 14 per cent. still do not have any central heating.

What other solutions might there be? Like farmers, I recognise that they are obliged to look to government to set core national objectives. I know that the present Ministers are as concerned about these matters as farmers most certainly are. But I would ask farmers to look at themselves, consider their image, and ask, "Am I right that it has gone down hill well beyond the old jokes?". I believe that it has. They will need public support if they want to get the things that they need. They need to be less reactive and more proactive. They need to explain and educate; and the Government could help in that direction. They need seriously to consider, and not simply dismiss, those things which the public say about farmers' methods of production. I need not list them because noble Lords will know what I mean.

However, perhaps I may just illustrate one of them; namely, the Farmers' Ferry. I can understand why some farmers felt driven to do it. They claim to have exported half a million sheep, although I doubt that figure. However, in PR terms, it was a real shot in the foot. It is not just the ferry and the lorry journeys: it is what happens to the stock when it gets to Italy, Spain and Greece. The general public hold all farmers responsible for such happenings.

I say to farmers: open up your farms to the people. A while ago Sainsbury's was asked by a television company whether it could film one of its pig farms. Sainsbury's said no; the television company trespassed and was found guilty of doing so. Why? If there is nothing to hide, why should the public not know how farms are run and what is happening on them? I should declare an interest here because I do some consultancy work for them, but perhaps I may just refer to the outgoing approach of British Nuclear Fuels with its visitors' centre. It is one of the leading places for people to visit when they take a holiday in Cumbria.

When the Government set the core objectives, I advise them to give the NFU more authority and encourage it to bring forward policies over, I suggest, a seven-year period. That is what will be required to get farming back to where it should be, especially when one considers that there are more than 15 or 20 categories of farming. Collective support should be given to the NFU if it includes some proposals that will he unpopular with some farmers but popular with the people and government.

This is a world where realpolitik and the global economy will not be at all comfortable when organising the future. That was certainly my experience in the trade union world. Indeed, I am bound to say that I could call upon quite a number of witnesses in this House to that fact. I hardly ever obtained what I sought. Three months ago, I asked the Industry Forum, which I have supported from the very beginning, why farming is not seen by it as an industry. I am pleased to say that farming is now being seen as an industry and it is to be hoped that a study by it will be produced before too long.

I do not expect my noble friend the Minister to reply to everything that I have said, but I would certainly urge the Government, first, to find a means of serious financial backing for farmers for joint collaborations and marketing; and, secondly, to revisit the ADAS issue. If we want farmers to change and prosper, they need the best advice, and I believe that that should be free.

4.50 p.m.

The Earl of Radnor

My Lords, I, too would like to thank my noble friend Lord Kimball for tabling this debate at such a very apt time—although it is quite an unfortunate time after two bad years for the farming community.

Perhaps I may declare an interest in that I am chairman of a farming company engaged in the roles of what I would like to call orthodox farming, fish farming and forestry. In such an erudite debate as this, with contributions from people who know a great deal about the land, I am not quite sure that I will be able to fill my nine minutes, but I wish to make a few subsidiary points which have not yet been made by any of your Lordships.

The noble Lord, Lord Kimball, said that we must start by looking forward, not back. But we must start by looking at the present and seeing what it is like—and it is very bad. Noble Lords have quoted figures of declining income and so forth. The fact of life is that it is extremely bad, but take away the subsidies and it is a great deal worse; it really is quite impossible. I remember that in sub-committee D, under the able chairmanship of the noble Lord, Lord Middleton, we chatted away about meeting world prices, the GATT round and being on all fours with the rest of the world and its prices. At the moment, that is miles away, as far as I can see. The trouble is that although the subsidies are meant to be decoupled, no subsidy farming is decoupled until it ceases to exist. Subsidies are really meant to be decoupled to make up for a shortfall. If we are going to compete in the world market we need efficiency. Somehow or other some of those subsidies ought to be pointed at making farmers more efficient.

Although I was not there, I read that the Minister of Agriculture—and probably the head of the NFU—hinted at some form of co-operation. I am fortunate enough. I farm on a large scale—and I have declared my interest—and we are still making money. But the smaller farmers are probably not. In a way, they are probably very wasteful. I cannot outline any particular system, but somebody should be able to devise a way whereby groups of farmers could get together—possibly using the contractual industry as well—so that they could assume some of the cloak which we larger farmers wear quite successfully. That would be a better step forward than the £97 for every acre of every crop they grow, and so much more for set aside and so on.

Furthermore, we pay a fairly high price for our subsidies in terms of bookwork, deskwork and bureaucratic—I would not dream of saying "nonsense"—procedures. But some aspects take so much time that the farmer hardly has time to farm; he is making out a passport for his steer—a blue card, a green card and, for those who like football, a red card, I am told! It goes on and on. If you make a little mistake with the forms, you really are in trouble. We received our first threatening letter this year when we lost a bullock. We used to have 90 bullocks but now we have only 89—the other one had gone—so of course we were not paid for the non-existent bullock. That was fair enough, but then we received quite a tough letter saying that the next time we lost a bullock it would be much more serious and we probably would not be paid for any of them. That is just an aside. A tremendous amount of simplification could be done about the way our subsidies are received, particularly for animals.

Animals already have a passport, but they are now going to have a book, just like we do, and a bar code. By the time a bullock eventually meets its demise the book will carry at least three signatures—auctioneers, farmers and others through whose hands it has passed. Perhaps we can improve on that.

Another matter which has not been raised follows on quite well from what I have just said. Nobody in your Lordships' Chamber seems to have noted that today food in this country passes through very few hands indeed. I am told that Sainsbury's and Tesco's deal with about 51 per cent. of the food we consume. In addition, there is Somerfield, Asda, Morrison's in the north, and so on. There lies a tremendous danger to the farming community of which notice should be taken. Those big entities are very powerful. They presumably avoid the Monopolies and Mergers Commission because they do not join together in a monopoly; they are just large. They are tough purchasers, very tough sellers and—dare I say?—with the exception of Waitrose, with which I deal and which is excellent, they are sometimes very slow payers. The big entities are strong.

It follows that if farmers could get together in bigger groups without losing their identity there would be some hope of competing with these big entities. But probably more important would be an approach made to the auctioneers. They will lose their markets because those big players do not like markets. We should make the auctioneers into "agents" such as they have in Australia, where distances to the markets are too far to travel. The agent is the farmer's man. He knows where the animals are going and he gets the beasts together so that he has some bargaining power. Something along that line would be very important indeed. It would not be impossible for somebody to work out such a system.

In commenting briefly on the idea of the noble Lord, Lord Middleton, about processing food, I have to tell a story about my own experience with fish. We produce a lot of fish, approximately 1,500 tonnes a year, and we now have to process it. I never wanted to, but we now fillet, marinade and so on. The rules are very, very strict indeed. They are very strict from the Government, quite rightly; and far stricter from Waitrose, quite rightly. I went there the other day, dressed up in my white coat, my hair protector and white gumboots. The manager made a filthy face at me and said "For God's sake, go away!". I asked "Why?". He said, "The inspectors are here.". I said, "But look at me, I am wonderful.". He said, "It is your wheelchair; they think it is very insanitary.". I fled, I have to say.

4.58 p.m.

Lord Rotherwick

My Lords, I must first state that, like other noble Lords, I am a farmer, among other things, and, thank goodness there are other things in my life apart from agriculture. Agriculture is not a rich occupation. We have heard many figures from many noble Lords, and there is one that I wish to quote. Allowing for the deduction of family labour, the NFU forecasts that UK farm incomes have fallen by at least 49 per cent. in 1998 compared to 1997.

I pride my farm on being one of the best performers in the Cotswolds. Our 1997–98 projected accounts will show a loss after paying a notional rent. I am thankful that I am not a tenant farmer and I have deep sympathy for small farmers who are in considerable difficulty. I agree totally with the noble Earl, Lord Radnor, that smaller farmers should come together into bigger groups of farmers. Even I, as a substantial farmer, group together with other larger farmers in order to command a better bargaining position when selling grain and other commodities.

Most people perceive a farmer as having great wealth because of the land he owns. But the average return on capital has been in the range of only 2 to 4 per cent. The average farmer would have done much better if he had gone off to be retrained as a solicitor, an accountant or even a politician.

Moreover, recently the Government have persisted in loading more and more industrial costs on his back, which increases his production costs and cannot be passed on to the consumer. Typical of these are the costs of both the harsher abattoir rules following BSE and the obligation to adopt welfare friendly production systems, which we all know are much stricter than those of his continental counterpart or other non-EU countries.

If high quality, safe foodstuffs produced under stringent controls result in higher food production costs, UK farmers must accommodate these higher costs. But then the UK consumer must be prepared to pay a higher cost for those foodstuffs. The UK farmer needs the Government to help the agricultural industry in informing the UK consumer of the different standards of food that he has a choice of by development of labelling, marketing and promotion of UK higher quality safe foodstuffs. At present some foreign foodstuffs, as we have heard from other noble Lords, are often not required to be produced under such stringent controls and are outcompeting our produce due to their lower production costs. The pear and pig industries are good examples of this.

Both the UK and Europe are in the process of examining the margins made in the food sector by supermarkets. But, from information already available, there seems little doubt that the prices they pay to the farming community have fallen considerably more than the prices they charge to the consumer. Deloitte & Touche, in its publication Farm Results 1997–98, compares actual net farm incomes for the three years 1995–96 to 1997–98 with its projection for 1998–99. Over that period the best sector is dairy and arable where the income per hectare has fallen from £227 to £95. In the root crop sector, it has fallen from £462 to just £64.

Let us consider for a moment what that means. It is the equivalent of a worker in the building trade earning £80 per day with regular overtime having to accept less than one day's earnings for a full week's work. For let us be aware that farm incomes do not disappear because the work is not there. It is simply that the recompense for the work has declined almost to vanishing point.

To make matters worse, the standard response by farmers to falling incomes is often to cut back on direct costs; for instance, by using less expensive older types of spray at lower rates. This can often result in more resistant weed species and lower output. They might cut back on indirect costs; for instance, by not buying that new high-tech sprayer, they will not be able to embrace newer spray techniques and improve savings on chemicals. They might cut back on such things as machinery, which has a knock-on effect on those associated fanning machinery industries. They might cut back on employing local trades people to do property maintenance and repairs. And so this vicious spiral continues.

I have already pointed out that agriculture is not like other industries in that its product is the food we require for life itself. If the producers are put out of business, our only recourse is to get our food from elsewhere. This is feasible but it reduces the ability of our citizens to control the quality of what they eat. The Sunday Times reported two weeks ago that chemical residues were found in 40 per cent. of foods tested by it—most of the offenders being from abroad. A report on Farming Today on Monday of this week indicated that antibiotic resistance will cause more deaths than CJD and that much of the problem will be down to agriculture across Europe.

We must be grateful for the recent government money given to specific areas of agriculture or to specific regions of the country. But this package is too little too late and it is unlikely to stem the tide of bankruptcy, despair and the flood of imports from overseas. Will the Minister tell us today what his Government intend to do to help? Perhaps I may suggest some helpful measures that he could carefully consider. It would not cost much to allow 100 per cent. depreciation of new capital equipment in the year of purchase. It would not cost much to abolish VAT on repairs to farm buildings. It would not cost anything at all to ensure that no further specialist taxes are placed on the farming community. We rely deeply on the Government to create an environment in which farmers can survive. At present, we are suffering from a non-competitive environment.

Finally, I should like to ask the Minister to acknowledge that the farmers of this land are the creators and guardians of our clean and attractive countryside that is rich in wildlife. They are responsible in large measure for the preservation of our historic landscape. They are the major players in the continuation of the rural lifestyle and, potentially, the providers of precious leisure facilities to large numbers of urban dwellers.

Earlier today, at the Countryside Commission's countryside access conference, the Minister of State for the Environment, Michael Meacher, stated that the leisure industry in the countryside was responsible for 400,000 jobs and that the 1994 figure of £4 billion that this industry generates makes it a bigger industry than the agricultural industry. Is it now the case that our UK agriculture industry has been relegated into second place behind leisure? One questions whether, without a strong and vibrant agriculture industry which is living, working and sustainable, our leisure industry will be the worse off.

I was interested to hear the remarks of the noble Lord, Lord Kimball, about the sporting industry because I suspect that, if Michael Meacher had added that on to the agricultural industry, he may well have found that the leisure industry came second to this great agricultural industry of ours.

5.9 p.m.

Lord Geraint

My Lords, I congratulate the noble Lord, Lord Kimball, on initiating this important debate. As many noble Lords will be aware, I have spoken many times during the past month about the plight of the agriculture industry. But today I shall be very brief indeed. I am just going to remind the Minister that we are still in a crisis.

I am concerned about the severity of the crisis in the countryside and its effect on the local economy. Farm incomes in the United Kingdom have fallen by nearly 100 per cent. in the past two years. The incomes of Scottish farmers living in less favoured areas have fallen from £13,800 in 1996–97 to just £2,400 in 1998–99. The situation in Wales is even worse. The statistics released by the Welsh Office show that before the rescue package of £120 million announced last month some farmers were on target to make just £200 this year. Even after taking into account the emergency aid package, those same farmers will earn an average of just £1,400 this year. In my view, those figures are simply appalling. They vividly demonstrate just how bad things have become in Welsh farming. According to the majority view of Welsh farmers, the upheaval under which farmers have been struggling, confirmed by the recession in January, was the worst experienced since the 1930s.

I urge the retailers to play their part in rebuilding the agricultural industry. I have yet to hear a reasonable justification for why supermarket prices have remained so high when revenue to the farmers has plunged so dramatically. I hope that producers and consumers will be able to persuade the supermarkets to build a better relationship between everyone concerned for the sake of the people living in the countryside.

The figures I am about to quote are interesting. During the past three years, there has been a steady rise in the gap between producer and retail prices. There is a gap of 57 per cent. in beef prices; 56 per cent. for lamb; 64 per cent. for pork and 74 per cent. for bacon. I wonder who is profiting on the back of the producers. Perhaps the Minister will be able to let us know when he replies.

I am delighted to see the noble Lord, Lord Carter, in his place. He knows more about the agricultural industry than any other government Minister at present.

Noble Lords

Hear, Hear!

Lord Geraint

Noble Lords tend to agree with me.

According to a survey carried out at the Royal Smithfield Show, 97 per cent. of farmers do not trust supermarkets to be fair to the British agricultural industry and are worried and concerned about the increasing dominance of supermarkets. In my view, livestock farmers should close ranks on marketing and should sell their livestock through their livestock auction system which has been proved to be the best in the world. Farmers should act before the high-powered supermarkets try to destroy our auction system. United Kingdom farmers are well advised to sell their produce at auction.

The Government can advise farmers and all those involved in, and who live in, the countryside to diversify. They can grant extra subsidies or any other state financial aid; but one thing is certain: unless farmers receive a realistic price for their end produce, the present crisis will not go away and many farmers will find it difficult, financially, to carry on.

Once again I urge the Government—I do so quite regularly—to set up a Royal Commission to look into the problems of all the people who care for the countryside. I remind noble Lords that while we talk, 800 million people throughout the world are starving and the Government are still paying farmers for not producing food.

I also suggest that the Government should call together the chairmen of the supermarket giants and the leaders of the farmers' unions in the United Kingdom to discuss strategy so that we can make progress to save the agricultural industry. If there is a will—I repeat, "If there is a will"—there is a way out of the present crisis.

5.12 p.m.

The Earl of Clanwilliam

My Lords, as a non-fanner, I enter this debate with some trepidation, but perhaps I may be granted observer status. As such, I shall certainly not take up the full nine minutes.

Noble Lords have pointed out the plight of the small farmer, and that is what I wish to emphasise. He is suffering much more deeply than his large-scale opposite number in the farming community. It is the small specialist farmer, for instance, who has seen his stock prices plummet and has nowhere to turn. It may be that he has lost the feel for mixed fanning and forgotten the old ways. In addition, his son may well have left the land, seeing it as no source of future income, and requiring a way of life that is not compatible with the lifestyle to which he aspires. Not only may the present farmer be forced to leave the land; there will be no one to take his place. What price then the environment, with large areas of smallholdings deserted? It is a dreadful prospect that we face, and one which my noble friend Lord Kimball addressed with eloquence in his interesting introduction to this important debate, for which I take the opportunity to thank him.

Like any civilised society, we need small farmers to produce healthy, home-grown food. Foreign standards of production do not match our own, with the consequent difficulties for small farmers trying to compete. Nothing is new in this world—certainly nothing in this debate. One solution I would suggest is to take a leaf from across the Channel where Normandy and Breton farmers have successful co-operatives. Co-operatives have been mentioned by the noble Earl, Lord Radnor, and my noble friend Lord Middleton. The French co-operative farmers seem to have buried their innate suspicions of each other and have made successful inroads into sending their produce across the Channel to the UK. We can be assured that Brussels, in reforming the CAP, will favour such Francophile plans, which may well therefore be well placed to continue.

That brings me to the possibility of creating organic co-operatives, a feature badly needed in the organic world, and one which would enable the small farmer to enjoy the subsidies that this Government have increased to foster that system of agricultural production. In that connection, a new document has been published by the Family Farmers Association, which emphasises the need for co-operatives. I recommend that document to the noble Lord, Lord Carter. He may well find in that some ways of helping to promote organic co-operatives.

Organic farming is a system of mixed farming which can bear the costs of changes in those world prices which affect the specialist farmer so deeply, and which allows a farmer to live off his own land. That provides the necessary security for continuity. I do not need to impress upon your Lordships the great advantages, in terms of both transport and price, for a specialist farmer in marketing his produce through a co-operative, thereby creating a continuous flow of goods to the ever-present supermarket. I shall draw a veil over my feelings about those controllers who abuse the market with impunity. The co-operative will enjoy the advantages of the economies of scale—that much-lauded phrase of the marketing man—and create the critical mass necessary for joint production. It will allow hill farmers to join with lowland farmers and create a whole system in any given area to produce cereals, meat and horticultural produce.

I cannot leave this subject without drawing to your Lordships' attention the recently produced report of the Soil Association, entitled The Use and Misuse of Antibiotics in UK Agriculture. That report draws on a wide range of authorities, not least a recent Select Committee report on antibiotics. I cannot refrain from thinking that an awful lot of problems which farmers are suffering today would have been avoided had they not been seduced into intensive farming. I recommend the report from the Soil Association to your Lordships and I shall arrange for all speakers in tonight's debate to receive a copy.

5.18 p.m.

Lord Nunburnholne

My Lords, I note the comments of my noble friend Lord Inglewood about small farmers, be they tenant or freehold. I have bad news for him. I live just up the road from him at the top of Alston Moor, not a hop, skip and a jump away, although I have not yet met him. On my moor—it is not my moor in that I do not own it—in the past 11 years five middle fell and low fell farmers have gone broke, two of whom have committed suicide. It was not this Chamber obviously—as one can see from the attendance here tonight—and it probably was not the other place (was it Brussels?), but who signed their death warrants?

5.20 p.m.

Lord Mackie of Benshie

My Lords, I, too, thank the noble Lord, Lord Kimball, for introducing this debate. Although I have spoken often on agriculture recently, he has taken the debate forward to the future. I do not share the general joy at seeing the noble Lord, Lord Carter, on the Front Bench. Poachers who turn gamekeepers are always worse and perhaps we might have done better to have an amiable chap to reply to the debate who does not know as much about agriculture as the noble Lord. Nevertheless we have a good case. If we had a bad case, we could do with an amiable fellow to reply to the debate. However, as we have a good case I trust and hope that the noble Lord, Lord Carter, will push it in the right direction where the trouble starts which, I understand, is in the Treasury.

I wish to discuss the general situation in agriculture throughout the world. We were the first country to industrialise and at the same time we experienced a revolution in agriculture. In the late 18th century and the 19th century we built up an efficient system of farming. That lasted until 1870 when the Vanderbilts built railways across the prairies of America and grain started to pour into this country. That store of grain was grown on soil fertilised by the buffaloes over many centuries. Since then farming has only really prospered when there has been some disaster. During the two wars farming was prosperous. In between the wars there was the misery of the appalling depression of the 1930s. At that time agriculture was competitive. Farmers on the plains of America have been ruined, as have farmers in the Argentine. The primary producer is at the mercy of a savage and ruthless market. Whether he produces cocoa, coffee, tin or any other commodity, the primary producer is always hit when things go wrong.

In this modern world we should be able to produce a system of agriculture that is productive, that cares for the countryside and at the same time feeds the people. That is what has happened, of course. The people of this country may say that they pay too much for food, and perhaps they do. However, the proportion of money spent on food per family has fallen steeply in recent years. We have to ensure that we make the system work. The CAP was an admirable idea but it was ruined completely by politicians. Every time the Commission put forward a case for a reduction in prices, the politicians said that voters in Bavaria or wherever did not want that, and therefore prices were increased, with the result that we are in the situation that now pertains.

We are now approaching the advent of this great Agenda 2000. Every single political party, including my own, says it is committed to producing competitive agriculture. It is easy to produce competitive agriculture, but we also want prosperous agriculture. I have sworn that I shall not mention the term "a level playing field", so I hope noble Lords will take it that I have not used that term. On the previous occasion we discussed agriculture I mentioned some figures as regards the cost of labour in Poland and Hungary. The price of a tonne of barley at present will pay the wages of a man in Poland for nearly four weeks, but the price of four tonnes of barley will pay the wages of a man in this country for only one week. That is the kind of competition that we are up against. We are also up against subsidised agriculture in eastern Europe.

A friend of mine who farms in Hungary discovered that a combine which costs him £120,000 in this country costs him £80,000 there. In addition he received £27,000 in subsidy from the government for buying the combine. Therefore the combine cost him £53,000 rather than £120,000 in this country. That makes a great difference to costs per acre. When the Government consider the entry of the countries of eastern Europe into the European Union and the reform of the CAP, they must ensure there is some form of equality as between producers in the countries of the European Union. Obviously the standard of living of farmers in Hungary and Poland is far too low. However, we must have equality of opportunity.

The other thing that the Government must do is to establish their food standards agency—call it what they will—as an independent body which will be respected. Farmers are criticised by people who think that something must be wrong if farmers use fertilisers and pesticides. The noble Lord, Lord Christopher, said that the public has been critical of farming methods. However, those methods are all under the control of government agencies. It is up to the Government to ensure that the public's fears are proved groundless. The Government must ensure that research is carried out on these matters. One needs money to undertake research on the use of antibiotics and other such matters. I shudder when I think of feeding chickens with antibiotics not to cure them of something but to make them put on more flesh. I and many other people want to know whether that will cause harm. The Government must spend the money to enable research to be undertaken on these farming methods. It is no good asking farmers to produce food for the masses in this country at a reasonable price but then slating farmers for doing so. The Commission's Agenda 2000 refers to the necessity to support agriculture.

Do Her Majesty's Government want agricultural incomes to be as high as industrial incomes? Is that one of their aims? It is certainly mentioned in the Commission's document. There have been many good speeches in the debate but the most savage one that I enjoyed the best came from the noble Lord, Lord Plumb. He gave figures that he obtained direct from a commissioner. I trust and hope that the Minister will accompany the noble Lord, Lord Plumb, to meet the commissioner in Brussels tomorrow to ensure that we gain access to the money that is available, even if it costs us 70 per cent. to do so rather than the 50 per cent. it costs other people. Those are questions that the Government must answer.

I have referred to the food standards agency and equal standards. If the Government can achieve those basic things, then the farmers have a chance. I agree with the noble Lord, Lord Middleton, that there must be a scheme to alleviate the lot of small farmers who are going broke and are in despair. We must see to it that they have a chance to leave the industry gracefully, or to stay in the industry and use all the facilities such as machinery rings and so on that exist nowadays. If that is done, I am sure that we shall return to a period, not of great prosperity, but of reasonable prosperity, which will keep people on the land and keep the land right.

5.30 p.m.

Baroness Byford

My Lords, I, too, wish to thank my noble friend Lord Kimball for providing the opportunity for this important farming debate. It has ranged widely and has reflected the immense pressures under which farmers currently work. Rightly, my noble friend focused our minds on the future of the agriculture industry. He touched on many matters. I shall name merely a few: further enlargement; reform of the CAP; Agenda 2000; constitutional changes; less favoured areas; and environmental and rural support. That brief list serves to indicate the huge diversity in farming and the problems faced by the industry today. I declare a slight interest in farming as a retired poultry farmer; also, my husband has an interest in farming matters.

Many speakers reflected the continuing demise of our agriculture. While there is a degree of optimism in certain sections of the industry, many real problems still face our farmers. The partial lifting of the beef ban by the European Commissioners last week was welcome. However, the ban will not be lifted until March or April. Continued restrictions on selling beef on the bone lessen our drive to regain export markets lost to us over the past three years. The Government have made an additional £120 million available, which is to be welcomed. However, that financial help has gone to only a narrow section of farmers. For some, that help has come too late.

Beef farmers wish to see a return to normal trading as soon as possible. The lifting of the ban on beef on the bone is essential, as much of our former exported beef was purchased abroad through buying the whole beef carcass, not merely beef off the bone. If our export markets are to pick up, that is an important move that must be made. I hope the noble Lord the Chief Whip will be able to tell us more in his reply.

At a time when farmers believe that EU moneys have been available to assist them in the current crisis, the Government have not seen fit to seek extra help under the hardship fund. The noble Lord, Lord Plumb, made that point. I understand that there is likely to be an under-spend of moneys allocated within our agriculture budget. That is a matter of concern. Will the noble Lord, Lord Carter, also comment on that in his reply?

At the Smithfield show last week the Agriculture Minister acknowledged that farm incomes had dropped. There was a drop of 33 per cent. between 1988 and 1997, with a further fall in 1998. That is a second fall in a row. Total income from farming has fallen by 63 per cent. in real terms. The Minister went on to say that the cutbacks mean that it is unlikely that additional cash will be available to promote the marketing initiative that is so urgently needed to relaunch our markets abroad.

The situation cannot, and must not, be allowed to continue. The dramatic fall in farm incomes forecast for 1998 is due to a further sharp fall in the value of output from the industry of some 10 per cent; that is, around £1.6 billion in monetary figures. That fall in the value of the industry over two years totals some £3.5 billion. Although welcome, the recent package of help of some £120 million offset against that figure only highlights the dilemma facing the farming industry today.

The pig industry has experienced a difficult year, with profits plummeting. Additional costs have been borne by producers. It is estimated by the ABN that some 11.3 per cent. has been added to base costs to cover costs resulting from the ban on meat and bonemeal, the stall tether ban, farm assurance schemes and deductions made at the abattoir. Those extra costs have come at the same time as falls in prices and as a direct consequence of the comparative price of imports, which are not subject to the same standards of welfare or food safety.

The poultry industry has also gone through a difficult time. However, it, like other areas of the industry, is launching a positive promotional fight-back campaign. What it seeks is fairness. Imports to the UK need to be more rigorously inspected and to be seen to be inspected by the Government. Each poultry processing plant in third countries wishing to export to the EU should be inspected by EU vets prior to their being allowed to do so. Currently, it is the authorities in the third country that decide whether the plants comply with EU hygiene rules and standards. The results of tests of UK poultry meat for residues are published every quarter. No test results are published for poultry meat imported from third countries. The lack of information is serious. Producers in third countries are permitted to use veterinary products and feed ingredients that are banned in the UK.

Labelling and food standards have been mentioned by other noble Lords. The agreement with the British Retail Consortium on labelling must also apply to fresh and frozen poultry meat and to imports of finished further processed products from third countries. Such products should not be permitted to be labelled as British. If such labels are misleading on pork, they are equally misleading on poultry meat. As for pigs, meat and bonemeal is banned from poultry feed in the UK. However, poultry producers outside the UK still use it. The ban is to protect the UK beef feed chain. But that protection adds some £30 million annually to the feed bill of the British poultry industry which our competitors in other countries do not have to pay and for which we receive no recompense.

The debate touched on hopes for the outcome of Agenda 2000 and the reform of the CAP. They are crucial to our farming industry. In the ministerial Statement to the House on 16th November the Government stated that the reform of the CAP must create the conditions to allow sustainable and competitive EU agriculture to operate effectively on world markets. Will the Minister define more clearly what is meant by "sustainable" and how the Government see that being achieved? The Statement goes on to say that they wish to see a freeing up of resources to offer scope for better targeted measures to support the rural economy and enhance the environment. Again, perhaps I may press the Minister for greater detail.

The debate has also touched on the early retirement scheme. Farmers are indeed facing difficult times. For those of more mature years the possibility of early retirement is an attraction. The scheme does not require amalgamations, but would enable those who will not survive in the industry to leave it with dignity. What is the current position with regard to the scheme? My noble friend Lord Stanley referred to it earlier.

I turn now to the wider issue of the countryside, for farming and the countryside go together. Two meetings have today taken place in London. The Countryside Commission held a conference to consider countryside matters. I was not there, but I understand that the right honourable Michael Meacher spoke to the conference about the consultations on the right of access and admitted that most demand was for access close to cities and towns. I understand that there was no mention of farming or horticulture. Our farming future is reliant on a total overview. I am somewhat concerned about that.

In this House there was a presentation by Partnership in the Countryside and English Partnerships, which I attended, which dealt with working with rural communities. Those bodies are looking at practical ways to enable communities to help themselves. They encourage community-based businesses and aim to provide information, contacts, funding and examples of good practice. This is important and underlines the immense pressure that farming is under at present.

We could have no one better than the noble Lord, Lord Carter, to reply to this wide-ranging debate. The tremendous pressures upon small tenant farmers, world influences, level playing fields, better use of diversification, the situation in Northern Ireland, food security and the cost of form-filling are but a few of the items that have been mentioned. This has been a worthwhile debate and I thank my noble friend Lord Kimball for making it possible.

5.41 p.m.

Lord Carter

My Lords, before I reply to the debate, perhaps I may, as Chief Whip, congratulate noble Lords on the brevity and succinct nature of their contributions. I now have about an hour in which to reply!

Like other noble Lords, I thank the noble Lord, Lord Kimball, for tabling this Motion and all those who have spoken in the debate for the excellent contributions which we always expect from this House on agricultural and rural issues. In the time properly allowed to me, I cannot hope to respond to all the questions and points that have been raised. However, I shall ensure that all those who do not receive a reply from me today will receive a response in writing.

Because of my former farming interests—which are well known—and my previous connection with an agricultural consultancy, I should make clear that I have made arrangements to relinquish those interests and that those arrangements have been approved by the Cabinet Office. On becoming a Member of the Government, I faithfully followed the guidance provided by the Cabinet Office and the Registrar of Interests in your Lordships' House.

This has been an excellent debate and I congratulate the noble Lord, Lord Kimball, on raising such an important question. This debate and a number of recent ones demonstrate the concern and commitment of this House to the well-being of agricultural and rural communities. The Government acknowledge that the agricultural industry is going through a very difficult time at present and that times are hardest for those in the livestock sector. That is why on 16th November my right honourable friend the Minister announced a package of aid worth £120 million for the livestock sector and why the Government have taken a number of other measures to ease pressures and encourage development.

I agree at once that the total income from farming figures carry grave news. I in no way wish to belittle the difficulties that farmers face, but we all know that farm incomes are cyclical. In recent years, they have benefited greatly from devaluations and improved productivity. The pendulum has now swung back, with the strengthening of sterling and the over-supply of commodity markets. It is not that many years since, for the first time since the war—and certainly for the first time in my professional experience—tenant farmers were applying to arbitration to have their rents frozen or reduced because of the reduction in farm profits at that time. It is not many years since figures from the NFU showed that farm incomes were at their lowest in real terms since 1945. Farm incomes are cyclical, and I do not for a moment underestimate the problems that farmers now face.

The strength of sterling has been the main contributory factor towards the fall in farm incomes, with the strong pound hitting exports and boosting imports. There has also been a world-wide reduction in prices for most major commodities. But these are not the only reasons. The continuing weakness of the beef sector following the BSE crisis has not only hit beef farmers but has had knock-on effects in other areas. In addition, there has been the collapse of important export markets in Russia and the Far East, which has exacerbated the problem, and the over-optimistic assumptions about the scale of future demand, which led to expansion in some sectors, particularly in pigs.

We acknowledge these difficulties. That is why we have been listening to farmers and their representatives across the UK and why we have already taken a series of steps to help our agriculture, for both the present and the future. When I spoke to Mr. Nick Brown, the Minister, this morning, he asked me to emphasise in this reply that we all need to work together to ensure a competitive, viable and profitable farming industry for the future which will safeguard our rural areas. The CAP reform provides an opportunity in this direction. For example, the rural development proposals set a framework for strengthening our rural areas. We hope to see a redirecting of funds to rural development measures and increased funding for agri-environmental measures. We have been listening to farmers and their representatives and shall continue to do so. My right honourable friend the Minister is planning a broad consultation with all those involved in farming on the way forward on Agenda 2000.

Turning to the individual sectors, we recognise that this has been another difficult year for beef and sheep producers. For beef producers, the market has been influenced adversely by the export ban, continuing structural surplus, falling market prices and falling demand. For sheep producers, there have been two consecutive years of delayed finishing and poor market prices.

EU beef and sheep regimes prohibit the Government from taking unilateral action to support market prices. We have introduced a number of measures to assist the plight of producers. In February, £85 million was distributed to beef and sheep producers in compensation payments. We have recently received agreement from the Commission to open private storage aid for sheepmeat in the UK, to extend beef intervention arrangements in Northern Ireland for the remainder of this year and to increase the advances payable under the beef special premium and suckler cow premium schemes from 60 per cent. to 80 per cent. As I have said already, on 16th November a further aid package worth some £120 million was announced which, subject to Commission approval, will provide agri-monetary compensation in the form of supplementary payments under the suckler cow premium scheme, increased payments under the hill-livestock compensatory allowances scheme and the continuation of the calf processing aid scheme until the end of the current financial year.

The recent decision to lift the beef export ban will in time ease at least some of the pressures currently faced by beef producers. The lifting of the ban was a major objective of the Government's policy on agriculture. Tremendous efforts, led personally by the Prime Minister, have been made over the past 18 months to achieve this outcome. This demonstrates our commitment to securing a long-term future for the beef industry. But no one should be in any doubt that, unless the fundamental imbalance of the EU beef market is addressed and corrected, there is unlikely to be a sustained return to profitability within the industry. Against this background, it is clear that reform of the regime is essential.

Turning to the question of beef on the bone, my right honourable friend the Minister welcomed the SEAC assessment of the risk when it met on 9th November. The report is now being considered within government, and in particular by the Chief Medical Officer who will advise Ministers soon. In addition, we need to take account of the potential effects of the Commission's recent proposal for Community-wide controls on specified risk materials. Once this process of consideration is complete, there will be a further announcement about UK controls on bone-in beef.

We all know that it will take time for the British beef industry to regain markets which have been closed to it for the past two and a half years. But the conditions are now in place for the industry to plan for the future. While it will not be easy to renew lost markets, the endorsement we have given of the safety of British beef can only act as a boost to consumer confidence and the industry generally.

I turn now to the pig sector. We know that the pig industry is going through a very hard time at present, with market prices well below the cost of production. Until last May, I had been involved in the pig industry for nearly 40 years. The situation now is the worst I have ever known. This is an EU-wide problem caused in the main by over production, the loss of valuable export markets and a reaction to the very high profits that we made until 1996. The EU pigmeat regime is very light and contains no provision for direct aids to producers of the kind introduced for beef and sheep farmers. To pay these as a state aid is not an option as it contravenes European law. We oppose all state aid schemes in the pigmeat sector because they can distort trade, interfere with the market and risk prolonging the crisis. I hope that they are listening in France.

The pig sector benefits from a number of market-related measures agreed within the European Union and supported by the Government. These are worth almost £100 million in market support across the EU this year. The measures include the re-introduction of refunds on exports of fresh and frozen carcasses and cuts of pigmeat; two further increases in those refunds, including a 75 per cent. increase in exports to Russia; and the introduction of an aid to private storage schemes. My noble friend, Lord Donoughue, the Parliamentary Secretary, has spearheaded a campaign aimed at the catering and food service sector with the objective of increasing the use of British pigmeat products in a sector which takes 30 per cent. of the pigmeat market. The Government have received undertakings from the major retailers that all their own label fresh pork, bacon, ham and sausages will come from stall and tether and MBM-free systems. In addition, they will not sell imported fresh meat processed or packaged in the UK under a British label.

The arable sector also faces difficulties due mainly to a run of very big harvests in cereal-producing regions across the world. Other factors have been the strength of sterling and the poor weather. But we have emerged from a number of years of excellent arable profits which as we all know have been capitalised in the price of land. Recognising these adverse weather conditions, the Government took action to help UK cereal farmers in September by relaxing the moisture content limit laid down by the EU for cereals sold into intervention from 14.5 to 15 per cent. This helped to reduce the costs incurred by the industry in drying grain and was welcomed by the farming industry. The Ministry also made good progress with this year's arable area payments. Some 98 per cent. of advance oilseed payments were made by the end of September. Main arable payments started in October and are due for completion by the end of December. I am pleased to be able to say that about 85 per cent. of these payments have now been made, totalling over £700 million.

The noble Lord, Lord Palmer, made reference to bio-fuels. MAFF, through the work of the Alternative Crops Unit, is promoting the uptake of crops as a source of renewable raw materials for energy and industry. The unit encourages developments in non-food crops by maintaining databases, disseminating information and organising a programme of seminars and workshops. The question of possible support for energy and industrial crops is now being considered in the Agenda 2000 proposals for CAP reform. Industry has voiced concerns over the future of voluntary set aside and the uncertainties of future support for non-food crops. The Agenda 2000 proposals did not contain any specific recommendations for energy and industrial crops, but recognised that renewable raw materials could represent a new opportunity for agriculture and forestry and contribute to job creation in rural areas. They can also make a significant contribution to achieving the climate change commitments that we have made.

The Commission has committed itself to producing a report within the context of Agenda 2000 on the present state of the non-food and energy crop markets and their future development and, if necessary, to make appropriate proposals. I understand that the Commission will make an initial report to the Agriculture Council next week. The UK will be pressing for a serious discussion about the future development of the energy and industrial crop sectors.

We know that the hill areas have always had a particular sensitivity. In addition to the aid given to hill farmers in the recent aid package, in the longer term we want to replace HLCAs with a new scheme which will deliver support to hill farmers much more effectively to ensure that hill farming has a more secure and sustainable future. The aim of the new scheme will be to help maintain the environmental and social fabric of upland areas. The issue is being considered in the context of Agenda 2000 proposals for reform of the common agricultural policy. These envisage a change in the basis of granting support to the less favoured areas. The key proposal is that compensatory allowances will become area payments and have a clearer environmental objective instead of the livestock headage payments which we have at present with HLCAs. We all know their environmental effects. We realise that change may not be easy and we are keen to hear the views of all interested parties before deciding on the way forward. We hope to start consultation on options for a new scheme later this year.

The wellbeing of agriculture cannot be secured completely by response to short-term crisis, helpful though that may be in particular sectors. The Government are also looking at ways in which long-term stability and prosperity can be brought into the rural economy. First, the proposed reform of the CAP provides an opportunity for change. The Government would like to see the policy reformed to phase out production-linked support, allowing European farming to develop into a competitive industry that can survive and prosper in increasingly open markets. In doing this, however, we must and do recognise the importance of farming to the environment and the economy of rural areas. As a former member of Sub-Committee D of the European Communities Committee of your Lordships' House, I well remember the number of reports that it produced which supported this policy framework.

We therefore welcome as part of the Agenda 2000 process the Commission's proposal on support for rural development. The proposal sets the framework for strengthening the environmental and rural development components of the CAP, allowing member states to prioritise their wishes for environmental action, support for less favoured areas, forestry, structural adjustment and diversification. Most of the measures would be able to be applied across the whole country. However, much more needs to be done in the way of redirecting funds towards the rural economy before these proposals can take effect. In line with the Government's commitment to the rural environment, the Comprehensive Spending Review provided for a continuing expansion of areas subject to agreement under the major agri-environment schemes in England. An extra £40 million is being made available over the next three years to fund improvements and enhancements to the schemes.

The Government are also committed to examining the future needs of agriculture and the countryside. In connection with Agenda 2000, my right honourable friend the Minister of Agriculture plans broad consultation with all parts of the industry. The Government's manifesto on which we fought the election set out a number of pledges that outlined our approach to the countryside and rural matters. We have been taking forward policies for rural areas in many different ways. In addition to aids for agriculture we have made available an extra £50 million a year for rural public transport and increased the target for development on brownfield land to give extra protection to the countryside. The Government now intend to put all these policies together and set out a framework to help achieve our vision for the future. The proposed interdepartmental rural White Paper will be a clear example of this approach to policy.

We hear all about supermarkets that exploit farmers. We look at the agricultural industry to take initiatives where it can. There have been recent allegations that supermarkets exploit farmers based on the differences between market and retail prices. We have heard them today. We understand that major retailers are demanding and powerful customers. But farmers appreciate that they also provide access to millions of consumers. It is inevitable that small businesses such as farmers will encounter difficulties when dealing with major companies such as supermarkets. But we have to be realistic. Today most sectors of business operate in an increasingly global market. If we cannot supply what the customer wants we can be sure that somebody somewhere can and will. Producers therefore need to be able to deal effectively with major buyers. This often means collaboration so that producers can offer the scale, quality and consistency of supply required by the major buyers.

For that reason, we have joined the NFU in a joint initiative on collaborative marketing described as "building business advantage". My right honourable friend the Minister and the President of the NFU launched the process at the Royal Smithfield Show. The idea is a simple one. By focusing on the successful practitioners we aim to highlight the benefits of collaborative marketing such as economies of scale and access to professional marketing assistance and technical support. Over the next few months, the NFU will hold a series of regional seminars at which the benefits of this approach can be discussed. There will be opportunities, too, to see successful co-operative activity in action.

As I read out this brief, I have a strong sense of déjà vu. The noble Lord, Lord Plumb, will remember very well the initiatives in the early 1970s in which we were both involved. Does he remember the proposal for the establishment for the British Agricultural Marketing and Development Organisation (BAMDO)? In agriculture and policy making, I fear that if one stands in the same place the policy caravan passes and repasses.

The noble Lord, Lord Inglewood, mentioned Article 39 of the Treaty of Rome. That is an admirable statement of the objectives of agricultural policy. It is a statement which is not far removed from the preamble clause to the Agriculture Act 1947, which was the foundation of our post-war agricultural prosperity. I cannot help but point out that the Agriculture Act 1993 repealed the objectives clause of the 1947 Act. It was a simple and understandable repeal. In my view, it marked a watershed in UK agricultural policy because it recognised that policy decisions have finally and irrevocably moved from Whitehall Place to Brussels.

The noble Lord, Lord Plumb, mentioned enlargement. We all know that the European Union now stretches from the Arctic Circle to the Mediterranean and from the Atlantic to Poland. After enlargement it will stretch from the Atlantic to Russia and almost to the Adriatic. This enormous geographical, social and agriculture structure cannot but present an enormous challenge to the whole future of the CAP.

I was asked a technical question by the noble Lord, Lord Plumb. He asked why all the agri-monetary compensation had not been taken up. As he knows, there are limits on the amount of compensation that can be spent on each of the four sectors eligible for aid, which are beef, milk, sugar and cereals. Because of EU rules most of the aid which is currently available is payable only to the cereals sector. We decided not to do that. The United Kingdom is paying the maximum available to the beef sector in the second year of the three-year package. A further small package of aid would be available to the beef sector as a result of the revaluation on 3rd May. Up to half of that package can be reclaimed from the EU budget without any further matching national contribution. The plans will need to be notified to the Commission by May of next year.

We should not overlook the effect of the freeze on the green rates. That freeze ran for several years. It had the effect that the conversion rate from ecus into pounds sterling was fixed at a higher rate than it would have been otherwise. So payments to UK farmers under the livestock and arable schemes were considerably higher than if the rate had not been frozen in recent years. I do not have the figure by me, but I believe that it was some hundreds of millions of pounds over the period to which it applied. I see that the noble Lord, Lord Plumb, is nodding.

There is an idea that compensation has no cost to the UK Exchequer. The operation of the United Kingdom's European Union budget abatement means that even paying the EU reimbursed element of agri-monetary compensation carries significant public expenditure implications for the UK Exchequer.

There are other questions to which I shall reply in writing. One noble Lord referred with some praise to the American Farm Act and the way in which farmers there have to manage without subsidies. As a result of the recent 1999 Agricultural Appropriations Bill, United States farmers will receive an additional 7 billion dollars in the form of disaster aid and tax relief.

The noble Baroness, Lady Byford, asked me about the underspend on the agricultural budget. There are no significant underspends on that budget this year. It is true that we allowed for greater expenditure in the EU livestock and arable schemes in the estimates that we submitted to the Commission. However, these schemes are demand-led and are totally funded by the European Commission. Therefore, there is no specific provision for them. For example, it is simply not the case that, because the total value of livestock and arable direct payments administered by agriculture departments this year is less than forecast, the difference is available to fund compensation. It is not true that there is money available for the Government without any additional cost to the UK Exchequer.

I hope that I have answered at least some of the points raised in the debate. I shall certainly ensure that all those which have not been dealt with will be answered in writing. It has been a good debate. It has given me the opportunity to show that the Government—

Lord Mackie of Benshie

My Lords, can the noble Lord answer the simple question that I asked him? Do the Government still stand by the 1947 Act and by the statement of the Commission that in agriculture we deserve a standard of living comparable to that of others?

Lord Carter

My Lords, we certainly support the objective of Agenda 2000. But as I have said, that objective was set out in the 1947 Act and repealed by the previous government. Perhaps I may end with the remarks with which I concluded my maiden speech in this House nearly 12 years ago. I quoted A.G. Street. He once observed that for farmers everywhere in the world the most important and urgent question for them every day was not what the politicians would or would not do for them, but whether it would rain tomorrow.

6.4 p.m.

Lord Kimball

My Lords, I begin by congratulating my noble friend Lady Byford on her first speech from the Dispatch Box on her new portfolio. Those of us who are familiar with her husband's farm will realise that she comes from a very knowledgeable farming background. Perhaps I may also say what a pleasure it is to have the wind-up speech made by the noble Lord, Lord Carter. His knowledge of the subject is well known. It is very much appreciated by all of us that he has chosen to reply to this debate. We have had what I can only describe as an informed and sympathetic debate. I thank all noble Lords who have contributed to it and who have taken so much trouble to raise so many constructive points. With those few words, I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.