HL Deb 22 October 1998 vol 593 cc1627-40

7.51 p.m.

Lord Rotherwick rose to ask Her Majesty's Government what are their intentions for taxing pesticides, and what will be the implications of such a tax for farming and the countryside.

The noble Lord said: My Lords, I must declare an interest as an Oxfordshire farmer who for some years was a farm manager with an agricultural diploma.

The agricultural industry is not a rich industry. In the past couple of years we have seen between a 2 and 4 per cent. net return on capital, and perhaps up to double that for tenants. In making a profit, the maintenance and improving of yield are of paramount importance in farming. Farmers have to make full use of crop husbandry methods, pesticides and technology to enhance yields. Since the early 1950s pesticides have played a significant role in preventing crop losses of about a quarter in wheat and about three-quarters in potatoes. More importantly, they have ensured that farmers can produce crops which are consistently of good quality, virtually blemish free, store well, keep for longer and are pest and disease free at the point of use. In real terms these benefits mean that the consumer is paying less than half for basic foods compared with the 1940s.

Pesticides enable us to be among the best and most efficient agricultural producers in the world and to compete successfully in the fierce world marketplace. The best way of lowering the use of pesticides is through the practice of integrated crop management (ICM). It is widely defined as a whole farm policy, aiming to provide the basis for efficient and profitable production which is economically viable and environmentally responsible. It integrates beneficial natural processes into modern farming practices using advanced technology and aims to minimise the environmental risks while conserving, enhancing and recreating that which is of environmental importance.

The idea of integrating beneficial natural processes into modern farming practices so that farming makes a more efficient use of its inputs (fertilisers, seeds, energy, and so on) makes good commercial sense. In addition, better targeting of inputs, careful field margin management and the better use of traditional practices such as crop rotation should bring environmental benefits. The key to a reduction in inputs is to reduce the need for them by adopting crop husbandry practices that conserve nutrients and reduce pest disease and weed attack.

ICM is not a new concept but is built around existing knowledge and sound husbandry practices. Although many of the practices are not new, they need to be regularly updated to include the findings of the latest research.

The industry is always looking at the cutting edge of technology. Some recent developments for reducing pesticide usage harness expensive high-tech spray equipment, sometimes coupled with GPS equipment. They deliver very accurate rates of pesticides as and where they are needed in the field. Capital tax write-off of 100 per cent. would enable many more farmers to use that expensive technology, thus producing worthwhile reductions in pesticides. We prefer to use as little pesticide as possible.

I hope that noble Lords are now gaining a picture of an industry which is forward thinking, responsive to the demands of its market and prepared to innovate. It is interesting to note that in the UK over the past 10 years, without the benefit of taxation, there was an overall decline in the use of pesticides by 23 per cent.; and this is continuing. It is predicted that there will be a fall in spending on pesticides by approximately £100 million over the next five years.

Moreover, the UK regulatory scheme operated by the Government is one of the best in the world. If it has flaws the correct way forward is to amend it, not to correct it by taxation. Will the Minister share with us any evidence that pesticide regulation is inadequate, and that, despite the excellent report from the Working Party on Pesticide Residues, our environment is at risk from them?

It is a most absurd situation where licences for certain chemicals are withdrawn in this country for certain foodstuffs, yet the same foodstuffs are grown abroad with the same chemicals and imported back into this country. Supermarkets use one set of standards for our British farmers and another for their own profits. Surely it is important to grow our food at home where we can carefully monitor pesticides used on it. If we were to use no pesticides and to go organic, research shows that a crop like wheat yields 40 per cent. less. Thus we would need an extra area the size of Wales in arable land to produce the same output as at present, or have to import 5 million tonnes of grain at an annual cost of about £0.5 billion—and that would wipe the smile off the Chancellor of the Exchequer's face, especially with the difficulties that he must be facing at present.

Now that the Ecotec study is complete, when will the Government publish it? And will they consider it alongside any other such studies? A pesticide tax will fall harder on the small farmer, the hill farmer and the northern farmer who are under severe financial pressure at present and who pay more for their pesticides than the southern medium to large concerns. Those farmers are less able to afford high cost research and development and high-tech spraying machinery which enables lower pesticide use.

Taxation is not a cost-effective method for the Government to reduce pesticide use. It will take about £5 million to set up and perhaps £0.5 million per year to collect and redistribute. And to whom will it be redistributed? Moreover, expenditure on pesticides is price inelastic: a given percentage rise in price does not result in the same percentage fall in usage. In a normal year it is calculated that a pesticide tax may reduce pesticide usage by 3 to 5 per cent., depending on the crop in question and the toxicity level of the pesticide. However, in an abnormal year, where farmers are faced with abnormal crop husbandry problems, pesticides will be used according to need, not tax. Even a high tax will not prevent a farmer from using pesticides to maintain his crop yield, for the loss of crop yield will almost certainly lead to the loss of profit on that crop.

The Government would be far more successful in reducing pesticide application were they to put money into research and training. Already existing research is being undertaken to improve in particular the methods and rates of application of pesticides, and to speed up the studies of new varieties of disease resistant crops, with training to increase the number of farmers and farm labourers confident in the use of a wide range of spray products and all the latest techniques. I sincerely believe that it is important to encourage regular training of all those in the industry, including those with grandfather rights.

The pesticide taxes imposed in Sweden failed to achieve their objective. Similar taxes in Denmark also failed and the Government there give back the tax in the form of a land tax rebate.

A pesticide tax will not be fiscally neutral. Some farmers will absorb its cost and simply try to make savings elsewhere. In order to do so, they may move back to the older, cheaper products which, being less specific, destroy or affect more bird and animal food and lead to pesticide resistance, which in turn leads to the later use of more potent pesticides. They may move from the use of, say, herbicides to mechanical weeding which disturbs the soil and leads to an increase in both nitrate leeching and slugs. They may have to reduce existing conservation activities, too. The farmers who cannot absorb the new tax costs, even if the Government intend it to be only a short-term tax, will likely go out of business.

A pesticide tax will lead to the increased importation of foodstuff from abroad from countries which do not have the same levels of control of pesticides. Will the Minister indicate how she proposes to control pesticide residues in imported produce? Is she prepared for the cost of food imports to rise above the current £14 billion per annum level? Finally, if the Government wish to raise moneys for research the fairest and easiest place to do so is in the highly profitable supermarkets. The tax would then be levied on UK and foreign foodstuffs. However, encouraging low-pesticide usage is best done by good practice, not taxation. Taxation on petrol has never curbed the use of the motor car.

8.2 p.m.

Earl Ferrers

My Lords, I should declare an interest as being involved in agriculture. I hope that the Minister will be able to tell the House what stage the planned tax on pesticides has reached. Has it been decided to introduce such a tax and, if so, how and when will it operate? Indeed, one asks why it is envisaged in the first place. As my noble friend Lord Rotherwick said, agriculture is going through one of the worst depressions for some 50 years. The complaint is that the Government do not understand its problems. It is unbelievable that at such a time there should be a desire deliberately to add another burden of tax on agriculture.

Chemicals are an integral part of agriculture. The animal and vegetable kingdom is made up of chemicals. There is nothing wrong in using chemicals to supplement or to control agriculture, provided they are properly tested. When a person is ill he goes to a doctor and receives chemicals in the form of a pill. That is perfectly acceptable. Chemicals should be used subject to strict controls, and ours are some of the strictest. Farmers do not use chemicals unnecessarily because they are expensive. Their use is determined by need rather than by cost. An input tax would grossly and unfairly disadvantage British farmers over the European farmers who are our direct competitors.

Why are the Government proposing such a tax? I hope that it is not a sop to the Greens because over the past 10 years the sale of the active ingredients of pesticides has decreased by about 5 per cent. year on year. Are Her Majesty's Government entitled under European law to levy a tax which will unilaterally disadvantage one country—curiously enough, their own—against others? If the Government had unilaterally created a benefit one could imagine the row.

If the tax is levied, will farmers not be entitled to, and will they not, go to the Continent to purchase and import into this country similar chemicals but ones which carry no tax? Of course, all the instructions will be in a foreign language, which will cause a safety problem. Is it not a fact that those chemicals will be outside the strict regime of United Kingdom control?

If the Government are frightened by the effects of pesticides they should tighten up on the controls so as to exclude from use the doubtful rather than place an indiscriminate blanket tax on all, allowing the doubtful chemicals—if, indeed, there are any—still to be used and penalising those chemicals which are perfectly safe. This action, if taken, will have a damaging effect on farm incomes at a time when many farmers are struggling to stay in business. It will seriously curtail the capacity of British agriculture to compete favourably in the world market, because this Government will have deliberately increased the cost of their imports. I hope that the Government will not do it.

8.6 p.m.

Lord Stanley of Alderley

My Lords, I thank my noble friend for raising this vital Question. I wish to ask the Government just three questions. First, how can they reconcile their oft-repeated order to British farmers to learn to compete in a free market, then introduce a tax which will make them less—indeed, non—competitive on the world stage, as mentioned by my noble friend Lord Ferrers? That would apply particularly to potato producers, and their processing industry, who did as they were told and compete in a free market.

Secondly, will the Government explain how the tax would fit in with the farm insurance and integrated farm management schemes which the Government have encouraged and ensure minimum and safe usage of pesticides, as mentioned by my noble friend Lord Rotherwick? Thirdly, will the Minister spell out the effect of such a tax on the already stressed farming and rural scene? Perhaps she does not realise that it is stressed. If they are unable to do that, will the Government please publish a cost-benefit analysis before introducing the tax?

I hope that the noble Baroness will be able to extract a satisfactory answer from her advisers before she replies.

8.7 p.m.

Lord Wise

My Lords, it is clear that the main impact of the introduction of a pesticide tax will be to put even more pressure on farm businesses. There are four principal areas in which agricultural practice will he affected by the imposition of a pesticide tax. I refer to pesticide use; cultural control methods; buying strategies; and changes to the business structure of the farming industry.

The majority of pesticides applied to crops give an essentially favourable cost ratio benefit; that is, that the financial return obtained from the crop following application clearly pays for the price of the material. The introduction of a tax could create a shift in that ratio. As it is difficult to know the yield and output price with great accuracy at the time of spraying, an increased pesticide cost may be small compared to the uncertainties of an output value.

For those reasons, most farmers will base their application decisions on the level of risk to their crops rather than the detailed cost benefit ratio calculations. As a result, depending on how the tax is structured, most farms' usage of pesticides will remain unchanged and decisions to spray will continue to be made on risk.

The United Kingdom is quite different from other member states in that farmers and growers in this country tend to demand a higher degree of technical support when purchasing pesticide products. In the majority of cases, farmers delegate product choice to a trained and qualified adviser. The willingness to take professional advice has led to the skilful use of pesticides and the use reductions have resulted from knowing whether or not to treat a crop or, in horticultural crops, for example, whether the threatening levels of disease and pests will materially challenge the marketability of the end fresh product. Unfortunately, many farm businesses may well feel obliged to do away with that advice in order to save costs.

Currently, a wide range of cultural control measures are already employed on farms. These are largely based on crop rotations, which have tended to minimise the endemic levels of pests, diseases and weeds on farms. It is often considered that variety choice is one area where farmers could materially affect pesticide usage by selecting those varieties with high levels of disease and pest resistance. However, I contend that although agronomic characteristics are important to the grower yield, quality and consumer acceptance are the key parameters when choosing varieties. In horticulture in particular, if there is no demand for the variety it will not be grown.

While I agree that all reasonable steps should be taken to reduce risks from pesticides both to the environment, user and consumer, I remain to be convinced that a tax would be the most effective or sustainable method of achieving this objective.

I believe that sustainable risk reduction can be achieved by the wider adoption of integrated crop management techniques and improved application technologies. Improved decision-making and information technologies will help growers focus on optimised use, using as little pesticides as possible but as much as is necessary to sustain their farm business and the long-term agronomic potential of their land. I believe that that is the way forward and I hope that the Government will think again about imposing a tax.

8.11 p.m.

Lord Mayhew of Twysden

My Lords, I congratulate my noble friend Lord Rotherwick on raising this important subject. It is certainly an important subject for the apple and pear growers in our country. I declare a modest interest as president-elect of the Murden Fruit Growers Society. That has taken up quite a proportion of my three minutes.

But in what I might call in this context the residue, I would like to make the point that the apple and pear growers of this country are already intolerably discriminated against vis-à-vis their competitors on the Continent of Europe and further afield overseas. Not only is that due to the familiar undue zeal in this country with which we seem to permit, or even encourage, Brussels legislation to be interpreted against the interests of our producers, but also—to take one example—we have the problem with the growth regulator, Chlormaquat, which is freely applied to Dutch and Belgian pears on the tree, which are then happily exported to this country. Naturally enough, no one complains about seeing them on the shelves, beautiful in shape and size, but UK producers are forbidden to use it and in fact commit a statutory offence if they do so.

Now, we have this proposal—I hope not yet endorsed or blessed by the Department of the Environment, or the Ministry of Agriculture—to impose a tax on the purchase of certain pesticides. That is a layer of control over and above that exercised by, and vested in, the PSD. We all agree and accept that the PSD should be able to withhold a licence from a pesticide unless it is proved to be safe. Indeed, it has a duty to withhold it. But there is no lesser duty on that body to grant a licence if it is proved to be safe. Everyone understands that. I submit to your Lordships that that is safe and sufficient protection for the consumer.

We do not need any more restraint in the shape of taxation on the freedom of the British grower to meet foreign competition, and for this reason, which needs to be understood. Specific, licensed pesticides are so vital to fruit growers that their use is not optional: it is a fixed cost in all but name. That is a point which has already been made by my noble friend Lord Rotherwick and other noble Lords who have spoken this evening. If profitability is to be maintained, people will go on using the same amount of pesticide unless and until the rate of taxation becomes absolutely penal. In those circumstances the rate of use of pesticides will decline only because the grower has gone out of business. That is not what we want. I very much hope that this idea of a tax will be scotched here and now.

8.15 p.m.

Lord Monk Bretton

My Lords, I too thank my noble friend Lord Rotherwick for tabling this Question, which is opportune. I have an interest to declare, but rather less of one now because I am more or less a retired farmer.

I would like to say a little more about what has happened in Denmark and Sweden as regards the tax. In Denmark farmers got back a great deal of the money through the remission of other taxes in place of the pesticide tax. It has not done any good so far, although I believe that they are trying to increase the tax. It will probably not be sufficient to have the effect of reducing the pesticide used.

In Sweden the one success was a modest levy of tax to achieve best practice, which did some good. We already do that because the agro-chemical industry pays for approvals. In addition, £8 million per annum is effectively paid by farmers when they buy agro-chemicals.

The general thinking is that it would need a tax of over 100 per cent. to stop or greatly reduce the use of pesticides. That level of tax must be recognised as unconscionable, particularly in the circumstances of British agriculture at the moment. A lower tax would have a significant effect on the costs to the industry and not reduce the use of pesticides. It would not help the environment, farming or anyone else.

This is a delicate subject. There are media and special interest groups who put about exaggerated points of view on the subject which are extremely dangerous. I do not believe we want to go too far along the road of listening to that when it is not justified or right. I hope that Ministers will be careful not to be led astray by that hype. I am sure that they will have full regard to the facts. I ask them in particular to promote those facts and to guide the public perception. We do not want to go too far down the organic road. It could be extremely expensive and not well justified. And I am not so sure that food would be any safer in doing so.

8.19 p.m.

The Earl of Clanwilliam

I thank my noble friend Lord Rotherwick for introducing this debate and for warning me that he was going to have a go at the organic idea. So perhaps I may be allowed to spend a moment on that subject. Indeed, my noble friend Lord Monk Bretton has also spoken on those lines.

I believe that it is 50 years since the requirement for intensive feeding started at the end of the war. The organic agenda has continued throughout that time. It has influenced general farming. The extensive growth in the methods of farming have been a reflection of that work to some extent.

My noble friend Lord Rotherwick mentioned ICM, which is a system developed by the agrochemical industry in direct response to the organic agenda. There is a need for lower use of pesticides and to move towards more sustainable farming. That is vitally important.

The CAP has encouraged indiscriminate use of chemicals and the CAP is quite unsustainable. I suggest that organic farming is sustainable. It is a specialised and demanding form of farming which needs animals to provide organic fertiliser. It is a whole farm system, and not, for example, just for a specialist cereal farmer. It may be called all muck and magic but it is a skilled and sensitive form of farming not to be taken lightly.

There has been a suggestion that we should go organic. There is no question of the whole of England or the whole of the agricultural world going organic in the UK, especially when you consider that at the moment 0.3 per cent. of agricultural land is converted to organic farming, which is about 70,000 hectares. The existing target is a modest 10 per cent., and that is in the long term.

The demand for organic food is there and is unfulfilled. Sixty per cent. of UK sales are imported from Germany and Denmark. Meanwhile, the EU support in Austria, for instance, covers 10 per cent. of its land which is converted to organic farming, compared to this country with 0.3 per cent. The public are calling for cleaner food and less pesticides, especially in the diet of our children and for the protection of wildlife. We must respond to that demand.

If I thought that a pesticide tax would reduce its use I would support it but, as its use will be indiscriminate, I doubt that it will be of any value at all. We need to reduce the use of pesticides—and perhaps ICM is one of the methods—but such a tax will be self-defeating. The large farmer will use modern techniques, selective spreading and economical use of pesticides. The tax would hardly affect him, but it would affect the small farmer with his unsophisticated machinery, cheap imports and increased pollution. It would be far better to limit the use of pesticides—as already exemplified by the regulations—or the use of organophosphates by specifying the number and rate of applications.

If the object is to raise money it is also self-defeating. It will send the small farmers to the wall for some petty return while the EU spends £30 billion a year in farm support. The CLA calls for targeted campaigns in specific areas and training for farmers. That seems to me to be the most profitable approach. I support my noble friend Lord Rotherwick.

8.22 p.m.

Lord Rowallan

My Lords, I too would thank my noble friend Lord Rotherwick for introducing this debate. I declare an interest as a tenant farmer.

Pesticides have been accused of many things, including killing off birdlife, affecting food safety and destroying waterways. But they are an essential tool for the farmer because they keep weeds under control, make for ease of cropping and do a more efficient job of keeping the soil clean than ploughing and cultivating, with the resultant soil erosion.

Farmers are keeping a close eye on the usage of pesticides because they are the custodians of the country and they want to see wildlife abound. We have seen a huge decline in their use and we have few statistics to tell us that there are traces to be found in the food that we eat. So why have a tax at all? Is it to raise money or to cut usage? If it is to cut usage, if it is to work it will have to be at a high rate, perhaps 100 per cent. If it is to raise money, as the current pesticides bill is £540 million, at 100 per cent. it will certainly raise an enormous amount of money. Can farming survive another cost of this magnitude?

Are we in the UK to feed ourselves or are we to rely on Europe and the rest of the world to do so? Surely our number one priority is to become self-sufficient. Is the tax to be greater on the toxic chemicals needed to grow potatoes etc. and less on the more benign chemicals such as those to kill buttercups? If contracts are lost to Europe for food as a result of increased costs, our imports will increase and thus our balance of payments will get worse. Potatoes, for instance, require the most toxic of all chemicals. A 100 per cent. tax would add 1.35p per pound to the price, or 7 per cent. of the selling price. As deals are lost for 0.5p per pound, it can be clearly seen that even at 35 per cent. tax contracts will be lost.

This is an ill thought out tax proposal. Do not kill off farmers already in trouble with overburdensome taxes. Encourage them and the agrochemical industry to find cleaner pesticides and to lower rates of usage so that the guardians of the countryside, the farmers, can prosper and this country can stay self-sufficient and become even more eco-friendly.

8.25 p.m.

Lord Mackie of Benshie

My Lords, the subject is one to which we need to pay close attention. Many other noble Lords have mentioned the press and the propaganda put out by various bodies with genuine worry but little practical knowledge of farming and the results of their protestations. It is true that things have changed greatly. No one here is as old as I am, but I remember clearly the stubble fields in Aberdeenshire before the war and the lovely smell of wild mint. It was wholly delightful, and I dare say good for birds and nice for young fellows who were smelling it. It was not much good for farming, but it was a factor.

There is no doubt that farming has changed the habitat of a great many birds. I say birds because one of the chief protagonists of the tax is the RSPB. With the sowing of winter crops you never have any stubble. You harvest the crop and then you go straight in with the plough for the next crop. That has much more to do with the reduction in the bird population than the use of pesticides.

I admit that in the past I have had friends who blanket-spray crops all over their farms to knock off something in the hope of a penny or two more profit.

I also have friends who leave a spray width right round their fields to encourage the wildlife next to the hedges. That does a great deal of good.

As several noble Lords have pointed out, the use of pesticides is already dropping. The more knowledge that is gained, the less chemicals and pesticides are used. Knowledge has greatly advanced. If I may tell an old story, I asked my grieve once—I am talking about 50 years ago—whether he was sure that he was following the safety instructions for the men operating the sprayer. He said, "Oh yes, when they are cleaning the nozzles I tell them to blow and not to suck". We have advanced considerably since then and we are now taking greater care. The people most in danger are the operators, and farmers and producers of chemicals are stepping up the training of people using the equipment. That is very important indeed.

I have the latest figures from the college of experiments—they will not be news to noble Lords who have spoken, but they may be news to the noble Baroness—which give the yield reduction through lack of use of fungicides and plant growth regulators. On winter wheat the reduction in yield was 2.30 tonnes per hectare, which is an enormous amount. That was only fungicide and did not take into account that you had not used any herbicides to keep the weeds down. On winter barley it was 1.5 tonnes per hectare. On spring barley it was more than 1.5 tonnes per hectare. Farming cannot survive if farmers have to take that kind of loss. If farming is taxed at that rate, it becomes impossible. The tax is far too high to have any effect. Therefore, either you tax with a small tax and infuriate people or you tax with a big tax and ruin them. Neither is particularly helpful either to farming or to the general population. Even the RSPB is a little worried about farmers.

Lord Hoyle

My Lords, perhaps I may point out to the noble Lord that speeches should be limited to three minutes. He is now in his fifth minute.

Lord Mackie of Benshie

My Lords, I shall sit down in a moment. There are 20 minutes to go and I shall sit down in one minute. The closing speakers normally have a little longer than the other speakers.

Even the RSPB has said that a tax should not be imposed just now, with farming in a bad way. If it is saying that, the reason for imposing a tax does not come into it at all.

I shall close by quoting the CLA, which says what some people have said already: Further support should be given to promoting good practice and to training operators in good practice. This is likely to be a far more effective way of ensuring responsible use of pesticides than any general tax on such inputs".

8.31 p.m.

Lord Luke

My Lords, I thank my noble friend Lord Rotherwick for giving us the opportunity to discuss, albeit briefly, this vital matter.

We should recognise that the imposition of any form of taxation not only raises revenue but has an impact upon the behaviour of those being taxed. It is the duty of government to make sure that when economic instruments are used directly to influence behaviour the full consequences of imposing that taxation are both intended and equitable.

My noble friends have pointed out this evening with considerable force and eloquence that a pesticides tax could fall into a trap of double jeopardy. It could have an impact which is both unintended and inequitable. What the Government must consider after this debate is whether they should continue with their consideration of an extra input tax at all in the face of the arguments raised by my noble friends and others. How many bankruptcies, I wonder, are the Government prepared to see as the price they are ready to pay for introducing such a tax at this time?

I note, for example, that my noble friends Lord Stanley and Lord Rowallan pointed out the disastrous impact which such a tax would have on the potato processing industry in this country. My noble friends have argued most persuasively that a pesticides tax would undermine existing regulatory procedures, reduce the competitiveness of UK agriculture and horticulture at a most unfortunate moment and ignore the fact that two-thirds of any pollution is not caused by these industries at all.

Yesterday my noble friend Lady Anelay visited the Marden Top Fruit Show, which was mentioned by my noble and learned friend Lord Mayhew. She was most impressed to see the high quality of our fruit products and by the measures which our growers already take to avoid the unnecessary use of pesticides. Farmers and growers use pesticides to protect their crops from insect attacks and diseases. Pesticides allow producers to ensure that we have a consistent supply of high quality food. It is in the interests of every farmer and grower to use pesticides responsibly and safely. They make the valid point that, as efficient business operators, they do not waste money on expensive pesticide products by overuse or misuse. It simply is not in their interests to do so.

Do the Government seriously believe that there is a significant overuse of pesticides in this country? If so, when will they lay in the Library of this House the proof of that so that all noble Lords may peruse it?

The farmers and growers whom I have met on my visits to agricultural shows throughout the length and breadth of the country this summer all ask one fundamental question of the Government. Why penalise our farmers and growers with a tax which will make the playing ground of European and international competition even more uneven and unfair for our producers? Why open the floodgates to foreign, cheaper imports even further at the risk of encouraging the purchase of goods which are not always grown as safely or to the same high quality as our own? I look forward to hearing the response of the noble Baroness the Minister.

8.34 p.m.

Baroness Farrington of Ribbleton

My Lords, in responding to the Question from the noble Lord, Lord Rotherwick, I am grateful for the opportunity to explain the Government's position on the possible taxing of pesticides.

We made clear in our manifesto that what governments choose to tax sends clear signals about the economic activities that they believe should be encouraged or discouraged. Our starting point is that environmental pollution is to be discouraged. No noble Lord who has spoken tonight would disagree with that. Subsequently, the Government have made clear their general intentions in respect of environmental taxation in the statement of intent and are exploring the scope for using the tax system to deliver environmental objectives, often in combination with other measures.

However, just because we may consider that taxing "bads" rather than "goods" is inherently preferable does not mean that any such taxes should be imposed without very careful consideration. Here I refer to the point made by the noble Lords, Lord Stanley and Lord Wise, of whether taxes are the best way of achieving the objectives and whether they satisfy the fundamental tests of good taxation; that is, that they should be well designed to meet objectives without undesirable side-effects; keep deadweight compliance costs to a minimum; have an acceptable distributional impact; and we must have regard to the implications for international competitiveness.

The noble Lord, Lord Rowallan, the noble Earl, Lord Ferrers, and the noble and learned Lord, Lord Mayhew, referred to the needs of fruit growers. My noble friend Lord Hoyle was listening to the interests of that industry yesterday. What I should like to stress beyond doubt is that, as regards taxing pesticides, no decision has been made. Decisions on such issues are a matter for the Chancellor. However, I should like to explain the background to our interest before responding to the specific points and considering some of the implications which an instrument could have for the countryside and farming.

We are determined that consideration of the case for any instrument is as well informed as possible. That point was stressed by the noble Lord, Lord Mackie. In the context of listening to the noble Lord's reference to factors that could affect the bird population, perhaps I may say that my noble friend Lady Young of Old Scone had intended to take part in the debate. Unfortunately, there has been a problem with the aeroplane on which she was due to return and she was not able to get back in time. I found the noble Lord's comments very interesting but have enough of a rural background myself to remember that along with the mint was often a lot of ragwort in other fields close by.

We issued a discussion document on the potential pesticides instrument in the context of water pollution and commissioned a significant amount of research to examine the potential role. In this context perhaps I may answer the question of the noble Lord, Lord Rotherwick. The Ecotec Report will be published when its methods and findings have been fully considered. It is the Government's policy generally to make available research work for public consideration.

All relevant government departments have been involved in steering that work and the consultants have been asked specifically to consult as closely as possible with the main interested parties, including the NFU and the British Agrochemicals Association.

There is a growing body of evidence which suggests that pesticides can have harmful effects on wildlife and terrestrial and aquatic eco-systems. Although the current statutory approval system ensures that no products pose "unacceptable risks", residual risks remain. Given that uncertainty, governments have adopted a precautionary approach and developed a pesticides minimisation policy to limit their use to the absolute minimum necessary for the effective control of pesticides compatible with the protection of human health and the environment. Several noble Lords referred to that. That long-standing policy has therefore been to minimise the use and impact of pesticides.

Pesticides are used because of the benefits they bring in terms of pest control—noble Lords, with a variety of detailed knowledge, have spoken of that—and in the case of agriculture to increase the quality and yield of crops. As other noble Lords have said, farmers believe they are economically better off using them. However, there is reason to believe that pesticides are being over-used and that alternative approaches are available. The Government wish to investigate the scope for such action. Economic instruments are potentially capable of securing the best balance between minimising costs to producers and maximising environmental benefits, while complementing existing policy mechanisms. Such instruments could secure reductions in pesticide use. I note the points made by several speakers this evening on the way in which the industry itself is seeking to reduce the use of pesticides and to use them more efficiently and effectively.

It is clear that while the introduction of an economic instrument might generally be welcomed by those looking solely from an environmental point of view, such a prospect is regarded as a threat by others, particularly by the farming community and those in the agrochemical industries. We are looking carefully at the possible impact on all those involved in the manufacture, sale and use of pesticides. However, it is accepted that farming is one of the sectors most likely to be affected. As the noble Lord, Lord Rotherwick, said, this is a key concern. I assure him that we are examining it in considerable detail and are taking into account the complex interactions between the response to an instrument of manufacturers, distributors, food retailers and consumers, as well as the characteristics of the farms such as crop type and current pesticide usage. Noble Lords have spoken with knowledge and in detail about aspects of farming in that context.

It seems clear that if a tax were to be introduced, then in the short-term, before farmers take steps to reduce use, income and profits could be adversely affected. Detailed examination of ways of limiting adverse effects and encouraging positive reactions to an instrument are particularly important in this context.

The noble Lord, Lord Monk Bretton, drew attention to what is happening in other countries. That is an important factor to be taken into account during this consideration.

The noble Lord, Lord Stanley, said, somewhat despairingly, as did another noble Lord who spoke, that he was not sure whether we recognised the problems facing sections of the farming industry. We take seriously the difficulties that have been experienced recently by parts of the farming industry. We have taken action. For example, we have provided £85 million of agrimonetary compensation and spent £950 million in 1997–98 on BSE-related measures.

However, the rural economy is now less dependent on agriculture and its traditional industries than it once was, with less than 2 per cent. of the workforce employed in agriculture. Therefore, we are working also to address the needs of rural communities as a whole and are working out how best to build the rural dimension into all aspects of wider policy-making. The current position in the farming industry makes that all the more important.

To sum up, we are looking at the possible use of an economic instrument consistent with our pesticide minimisation policy. As the noble Lord, Lord Monk Bretton, said and as the contribution of the noble Earl, Lord Clanwilliam, demonstrated, in considering those factors it is clear that there are a range of views within the industry which are not always totally in agreement with each other. Any instrument would be only one element additional to complementary measures or indeed an expansion of current measures; for example, training and advice to farmers and agricultural workers, referred to by the noble Lord, Lord Mackie, which could also be introduced.

I stress yet again that no decisions have been made. Before taking any decisions we shall weigh up all the relevant factors, including the results of the research which we have commissioned, the responses to the earlier discussion paper and the points raised this evening.

There may be other detailed questions to which I have been unable to reply. I shall seek to write to noble Lords, for example, with details on the points raised about the potential for an impact on the potato industry. My friends in the farming community in Lancashire would forgive me not at all were I to do any less.

[The Sitting was suspended from 8.46 to 8.51 p.m.]

Forward to