Organic Farming and the EU: ECC Report

HL Deb 22 October 1999 vol 605 cc1383-436

11.28 a.m.

Lord Reay rose to move, That this House take note of the report of the European Communities Committee on Organic Farming and the European Union (16th Report, HL Paper 93).

The noble Lord said: My Lords, I am grateful that time has been found for this debate in what is an unusually crowded and fateful spillover. The timeliness of the subject is reflected in the number of speakers taking part. I look forward to the debate, and in particular to the maiden speech of my old and noble friend Lord Lansdowne.

I thank all members of Sub-Committee D for the hard work they put in to produce this report and for the enthusiasm they showed throughout the inquiry. I thank also all those who gave evidence, both oral and written, and those who hosted us on the two visits we paid to the organic farms at Eastbrook and Highgrove, Mrs Helen Browning, His Royal Highness the Prince of Wales, and the Highgrove farm manager, Mr. David Wilson. Both visits gave us valuable insights into the nature and demands of organic farming.

Finally, I should like to thank our specialist adviser, Sir Colin Spedding, whose huge experience deriving from 12 years as chairman of UKROFS, the standard-setting body in the United Kingdom, and whose fine intellect and elegant writing style we were fortunate to have at our disposal, and last but far from least, our dedicated and highly competent Clerk, Mr. Jake Vaughan.

We undertook this inquiry party because of the enormous recent growth of the sector throughout this country and Europe, partly because of a proposed amendment, which has since been adopted, to the European regulation on organic farming to extend, for the first time, common minimum standards to livestock, and partly because the whole question of government regulation of, and support for, organic farming raises important questions of policy. In particular, we were aware of the concerns felt by many in the organic movement at the rising volume of imports into this country of organic products, and at claims that producers in other member states of the European Union had an unfair advantage because of the higher levels of government assistance they were receiving.

We encountered an organic sector that was booming, both in this country and in Europe. In this country, which has lagged behind the rest of Europe, the amount of land farmed organically, including land under conversion, between April 1998 and April 1999 increased no less than fivefold. The main impetus for this growth has undoubtedly been consumer demand, reflected in premium prices for organic products. Mr David Wilson, the Highgrove farm manager, mentioned to us that organically grown wheat could fetch three times the price of conventionally grown wheat.

Consumer demand has been fed by food scares, the latest of many being over GM foods, and previous to that, of course, over BSE. The desperate state of much of conventional agriculture today is an additional reason for the rush by farmers to achieve organic status. In this context, the recent approximate doubling of the rate of government grant available to farmers converting was probably an incentive too far.

We reached a conclusion that many, if not most, of the benefits claimed for organic farming are justified—better animal welfare, increased biodiversity, probably improved water quality and, arguably, although this has not been proved, better food quality. Most of those benefits could probably be, and in some cases are, achieved by non-organic farmers. It is largely a question, we found, of management attitude and skills. However, in organic farming these are built in as guaranteed features of the system. That is not so in conventional farming.

The main drawback to organic farming is reduced yields. For example, cereal yields are likely to be 60 per cent to 70 per cent of conventional yields, although techniques could improve and reduce the yield difference over time. Even today, we were told, milk yields need not be appreciably lower from organic herds. But any reduction in yield raises the cost per unit of food produced and means that a larger acreage is required to produce the same output.

Organic farming is regulated by strict standards, as it needs to be to maintain consumer confidence. There is no way to tell that a product is organic except by receiving a reliable assurance that it has been produced following organic methods. All converting farmers must register and agree conversion plans with one of seven certification or sector bodies, of which the Soil Association is the largest and best known. They, in turn, must follow the standards set my UKROFS, although they may add stricter standards of their own. We noted some anomalies in standards, in particular where certain potentially toxic substances were still allowed to be used in organic farming. We call for research to identify suitable alternatives as quickly as possible in the interests of preserving consumer confidence. We also call for stricter standards to be developed and applied when it comes to the processing of organic foods. We received no complaints that standards were not properly enforced in this country.

We were not equipped to examine thoroughly the adequacy with which standards were enforced outside this country, although we received evidence to suggest that, outside the European Union, at least, there was too much reliance on paper audits and too few on farm inspections. We asked for the Commission to work with IFOAM—the international umbrella organisation for organic movements—to develop the system of on-the-spot overseas checks by European Union inspectors. It is essential that our producers, who operate to exacting and strictly enforced standards, do not have to compete against inadequately supervised products from other countries. That, of course, is something that applies equally outside the organic sector. I hope that the Government will maintain pressure on the Commission in that direction.

We welcome the extension of the European Union regulation to cover livestock, although some of the standards agreed as allowable for the EU as a whole are lower than those applied in the United Kingdom. Nevertheless, all our witnesses agreed that a regulation, even with such imperfections, was, in their view, better than no regulation at all. I believe that the noble Lord, Lord Rathcavan, will probably say something more on the subject.

On the issue of genetically modified crops, we call for a modus vivendi to be worked out between the organic farmer and the grower—if today only a trial grower—of genetically modified crops. In our earlier report on the subject, we concluded that GM technology, with appropriate safeguards, should be allowed to proceed because of all its potential advantages. But the demands that we have heard from some in the organic movement for zero contamination of organic crops by GM material would render that impossible. Organic crops may today be contaminated from all sorts of sources without their status being called into question—by diesel deposits from vehicles to spray drift from neighbouring conventional farms. To require GM material to be treated differently would surely be to succumb to a demonology. We suggest the same sort of minimal distances between GM and organic crops as are judged adequate to protect the purity of crops grown to produce seed might be appropriate.

Part IV of our report deals with the question of government support. Here one of our main conclusions is that there should not be special subsidies for all organic farmers on an ongoing basis. There is no justification, in our view, to concentrate resources on organic farmers when more could be achieved by supporting the extension of some of the principles and practices of organic across agriculture as a whole. The argument that a sector is dominated by imports is not in itself a decisive argument that a sect or should be singled out to receive government subsidies while others remain unsubsidised yet perhaps equally characterised by imports; nor is the argument conclusive that other countries give greater subsidies.

There are other factors, such as tax, which need to be taken into account. We, as a committee, Lave long wished to see the elimination of production subsidies, not their expansion. Moreover, organic farmers have shown much entrepreneurial spirit and we would not want to see them next to join the agricultural dependency culture. As we see today, that is not an effective protection in the end.

We also come out against the setting of any government target for the amount of agriculture that should be organic by a certain date. We thought it made no sense to set an official target the achievement of which was bound to depend largely on factors outside the Government's control. We also saw that the setting of a target might encourage a distortion of government policies. A desire to meet the target, if expressed in acreage terms, would only encourage governments to favour the conversion of grassland at the expense of sectors using less land, and the reverse if the target was based on the value of production. In any event, in my view, the acceptance by government of targets in almost any field simply condemns governments in the future to harassment and torture by pressure groups. We consider that as a matter of principle the fate of the organic sector should be left to depend on consumer demand.

However, there is one feature of organic farming that in our view justifies it receiving a measure of government support. Conversion to organic farming imposes high initial costs and reductions in yield for a period—two years in the case of grassland and most crops—during which, under the regulations, the farmer cannot market his produce as organic and so enjoy the price premium. We consider the Government's organic farming scheme, which this year replaced the organic aid scheme and under which grants are available to converting farmers over a five-year period, to be entirely justified and we voice our support for it.

Unfortunately, the Government seem to have made an unholy mess of the scheme. After virtually doubling the rates of grant available to farmers converting from April this year, the conversion of farmers to organic farming has been so much greater than the Government expected that within six months not only has the entire £6 million allocated to the scheme for the financial year to April 2000 been committed, but so also has the £8.5 million allocated for the financial year to April 2001. So the Government have decided that they need to revise the scheme and that meanwhile they will not accept any further applications under it. Moreover, farmers who convert without drawing a subsidy for doing so are being informed that they must not expect to be able to apply for funds when a revised scheme is introduced.

As I understand it, the period of "stock-taking", as the Government call it, is likely to last for six to nine months. I understand that the organic industry now expects that only some 10 per cent of those who would have applied to convert under the scheme will now go ahead and do so. If that turns out to be correct, the Government will have managed to bring the whole organic conversion movement to a juddering halt apparently single-handed. Meanwhile they will have created three classes of organic farmer: those who up to April 1999 received the original level of grant, which had been available since 1994; those who between April and October of this year received twice that level of grant; and those who from this month on receive nothing at all. As an example of what, on the face of it, looks like incompetent subsidy management, that takes some beating. In fact I wonder whether the Government will be able to live with it. Perhaps that again shows what havoc food scares can play with government policy. Meanwhile, I hope that the Minister in her reply will be able to explain what the Government intend to do next.

Organic farmers are, of course, well placed to benefit from other agri-environmental schemes, provided those can be adequately funded, which they are unlikely to be for as long as production subsidies take up the lion's share of agricultural support, as they do today. But organic farmers should be enabled to do so without having to pay any unfair penalty for receiving grants under both schemes, although of course we accept the principle that there should not be double funding for the same objectives.

We ask for more practical assistance and training to be available to those converting as organic farming is clearly extremely demanding on the skills of the farmer. We suggest that the Government might consider making use of the new European Union part-funded training courses available under the rural development regulation. If government are to spend funds on encouraging people to take up an activity, they surely have a responsibility to ensure that those funds are not wasted through the recipients not being equipped to make proper use of them.

Finally I should like to draw attention to the plight of small abattoirs as a result of new veterinary inspection requirements. Organic farmers are particularly dependent on there being a network of small abattoirs throughout the country. I am pleased that the Government have shown recent signs of taking on board the need for them to take action. I hope that that will be effective action and not simply a temporary reprieve for them. I hope that this is a matter which my noble friend Lord Willoughby de Broke, with his long interest in this subject, may take further.

How big will the organic sector become in this country? That is the great unanswerable question. Some see it as developing into the predominant method of agriculture eventually. Others see it as likely always to remain a small niche market, its products, which retail at 50 or 60 per cent above the price of non-organic food, too expensive for it ever to command mass loyalty throughout an economic cycle. Either way it seems likely that many of organic farming's admirable practices will continue to be adopted as standards by the rest of agriculture, and either way it seems likely that the general perception of organic farming will in the future be more sympathetic and respectful than it has sometimes been in the past. I beg to move.

Moved, That this House take note of the report of the European Communities Committee on Organic Farming and the European Union [16th Report, HL Paper 93].—(Lord Reay.)

11.44 a.m.

Lord Redesdale

My Lords, I start by thanking the noble Lord, Lord Reay, for chairing the committee and the Clerk for putting together a report which is both readable and understandable. I also wish to thank the Government for such a positive response to the committee's report which makes it slightly difficult to call for measures which they say they are about to undertake.

Organic farming is a difficult subject and it caused some dissension among the committee members. It is not just a method of food production; it is also a kind of philosophy which encompasses a number of areas: the environment, food safety and the countryside. Over the years food scares which began with eggs and then arose with beef have caused a massive dent in public confidence. Public confidence has been further dented by the adverse publicity for genetically modified organisms (GMOs). I take issue perhaps with the noble Lord, Lord Reay, as regards how GMOs should be treated in the organic context. I believe that it may be necessary to look at zoning for different areas. One of the great risks that an organic farmer faces is that, after having undergone the expense and effort of converting to organic status, he may find that someone has planted a row of GMO crops nearby and therefore the organic farmer's crops may be considered to be non-organic. The Government will have to give a lead on that matter.

One of the reasons people buy organic products is because they are seen as "safer than safe". Of course all the food that we eat at the moment is by definition safe, but there are slightly higher expectations of organic products in that regard. I believe that the recent growth in the organic market is due to the fear of GMOs. People who buy organic products can be split into two groups: those "foodies" who buy them because they taste better in that they are not as processed as, for example, many of the non-organic vegetables that we buy at present; and those in the green lobby who buy organic products as they are seen as more acceptable because they are environmentally more sustainable than non-organic products.

Both groups are prepared to pay a higher premium. However, the premium at present seems slightly excessive. I believe that that is unacceptable. One of the reasons for the premium is that organic farming leads to a reduced yield in some areas, although I believe that that is not the case in dairy farming. I do not have a difficulty with that concept. I know that since the war the idea seems to have been engrained in the farming community that there is a food shortage throughout the world and therefore every farmer must intensify his methods to produce as much as possible. However, I believe that one of the arguments for organic products must be quality not quantity. I suggest that increases in yield in this country will not lead to food security throughout the world. When I have discussed famine wearing my international development hat I have explained that the real problem is transportation rather than production.

Organic products are seen as having environmental benefits in terms of methods of production and countryside management. One of the interesting aspects of the report—this should be stressed—is that environmental benefits are not the sole preserve of the organic sector. Many farming practices can result in environmental benefits; for example, crop rotation and the preservation of hedgerows. However, many current farming practices are intensive. If people are prepared to pay a premium to obtain environmental benefits, that has to be advantageous. However, I do not believe that the Government should focus all their environmental subsidies in this one area as that would be disadvantageous to the rest of the farming world.

There are a number of issues that I hope the Government will be able to move further forward. They have talked about an expansion of the budget for research and development. One of the problems that cropped up again and again in committee was that, although research and development has been carried out, it has not been carried out to a level which proves, one way or the other, the environmental or food benefits of organic farming. Base studies seem to have been neglected—mainly because so many farms are now moving so quickly towards conversion. In the intensive sector, and moving all the way through to the converted sector, in many cases base studies have not been carried out. This is an area upon which the Government could focus by conducting base studies of the intensive sector and of the benefits which may be brought about by the organic sector.

At the moment the organic sector puts "organic" on its labels. This is regulated by UKROFS and the standards it imposes. However, there is a lack of knowledge among consumers and the general public of how these standards are achieved. Because of its small size, it would be unsustainable for the organic sector to take a lead on this issue. The Government could move forward and provide more public information about how the standards are achieved.

That leads me to another area of great concern. One of the great benefits of organics for this country is that much of it can be produced in this country. It is particularly attractive to the those in the environmental sector that the costs of transportation—which harms the environment—can be avoided.

However, the committee was particularly concerned that the standards of imports are not regulated to the same degree as food produced in this country. We must work with our European partners to ensure that standards are set throughout the world, especially for products that we cannot produce viably and economically in this country.

The issue of conversion is particularly difficult at the moment. The Government have found themselves in an interesting position in regard to the number of farmers who have converted. I must declare an interest. I own two hill farms and both of my tenant farmers are looking at conversion at the moment. They have been informed that the backlog is so great that they will not even get an appointment to talk a bout the first stages of conversion for a number of months.

One of the problems that faces the Government is that there is such a massive crisis in the farming industry that farmers are looking at organics as a lifeline, as a safety net, which would enable them to sell their products. Anyone who has been to the sheep markets in the North East will know of the desperate situation farmers are facing. Indeed, at the moment wool costs more to clip off the sheep than it is worth. Organics could provide a marketplace for farmers in this country.

The committee agreed that perhaps it would not be realistic to look at a target at this point. It is not possible to envisage what a sustainable target would be; that is, what the market would bear. However, the Government can go further and look at reviewing the situation of the subsidy for conversion. I agree that ongoing subsidy is unsustainable and of no real benefit to the farming sector. However, it would be helpful if those farmers who are looking seriously at the possibility of conversion could have enough economic confidence that, if they do move down this reasonably risky route, they will be able to go from stage one all the way through to completion.

I hope that in the future the Government will look at the premium which a farmer receives for his produce. The high prices in the supermarkets are not a direct result of the premium received by farmers. I hope that the Government will look at the premium being charged by supermarkets for marketing organics. It would appear that a fair whack of the premium is being added in distribution.

I welcome the report—especially as I have a personal interest. My wife has been converted to organics because of her fear of GMOs. Most of the food I eat at the moment has an organic label on it. I hope that organic food will be an expanding market so that I can have more choice.

11.55 a.m.

The Marquess of Lansdowne

My Lords, I have been told that I must not be controversial in my maiden speech. However, by its very nature, organic farming is a controversial subject. I hope that I do not upset your Lordships with some of the things I am about to say.

As your Lordships know, the agricultural industry is in deep recession. It has been estimated that only a quarter of all farming enterprises are currently profitable. With the irreversible trend towards greater free trade and globalisation, why should the position necessarily improve? If the pound weakens against the euro, the number of loss-making enterprises might fall from three-quarters to half. This will leave 50 per cent unprofitable.

Looking further ahead towards 2006 when the current CAP subsidies are due for review, does one honestly think that the taxpayer will be persuaded to increase the £3 billion subvention currently supporting the United Kingdom's agricultural industry? I doubt it.

So there is little, if any, blue sky in sight to lift the spirits of conventional farmers, both in the short and medium term. I suggest that if the current price-support mechanism is reduced and global trade continues to accelerate—which I believe it will—the United Kingdom's agricultural industry may become unsustainable except for the macro agri-businesses and specialist niche markets.

So will the traditional mixed farmer be allowed to wither away—with arable fields reverting to thistles and docks, hedges uncut, ditches filling with silt, buildings falling into disrepair; rural detritus sweeping England's once green and pleasant land? That could very easily happen unless a lifeline is thrown to the traditional farmer. It so happens that that lifeline already exists in the shape of organic farming; it just needs securing.

How can this be achieved? As we have heard, the organic farming industry presently accounts for only 1.5 per cent of the whole. However, last year it grew by 40 per cent, achieving a turnover of £399 million, of which, incidentally, 70 per cent was imported. With every new food scare—salmonella, BSE, E.coli and listeria; and, as we all know, with intensive farming it will increase—more and more people will take an educated interest in the sourcing of what they eat. With improving communications and the IT revolution, this trend will continue.

As we have heard, organic farm gate prices are currently commanding, on average, a premium of 75 per cent or thereabouts above conventional prices. For example, farm gate milk is 29 pence per litre today, as opposed to 17 pence, and feed wheat £200, as opposed to £75. Those farmers, even with yields 20 per cent or even 40 per cent lower than conventional farms, are currently profitable. They are also environmentally friendly and, above all, produce commodities which we instinctively know must be better for us than those using pesticides, fertilisers or hormones.

So what is being done to encourage farmers to convert to organic production? Sadly, not enough. In the current financial year, as we have heard from the noble Lord, Lord Reay, £6.2 million was made available for organic farming conversions and by August that provision was fully subscribed. As we have heard, next year's allocation of £8.5 million has already been fully bespoken and committed, resulting in the Minister announcing a moratorium on future conversion funding, pending a review.

The weakness—if I might say so—of the committee's report before the House today is that farmers will not risk converting to organic farming unless they are convinced that the current premium prices will be sustained when, and if, market forces reach an equilibrium. That is where social funding surely must come into play.

We already know that organic farming improves land fertility and wildlife habitats and has greater respect for livestock husbandry. We also believe that organic foods are better for our health. What price is worth paying to protect and improve the nation's health? A support mechanism needs to be established so that the organic producer continues to enjoy the benefits of adequate financial returns, and therefore remains profitable, yet at the same time organic produce must be made available on supermarket shelves at the same price as commercial foodstuffs. In other words, the taxpayer must be persuaded that there is a social benefit in bridging the gulf between the premium price and the market price, so that all consumers have the choice of buying either organic or non-organic foodstuffs.

Of course, there are considerable cost implications to this proposal, but I suggest that the benefits would outweigh the fiscal disadvantages through improved public health, consequently saving the NHS a considerable amount of money, securing rural employment and a diversified agricultural industry, maintaining an environmentally friendly countryside which, as your Lordships are well aware, is currently under enormous threat, and, finally, balancing production with nature's finite sources.

12.3 p.m.

Baroness Young of Old Scone

My Lords, although it is not immediately apparent to the naked eye, I share a characteristic with the noble Marquess, Lord Lansdowne, whose valuable maiden speech we have just heard. I believe that both our families hail originally from rural Perthshire, where agriculture is a major part of the rural economy and where the impact of agriculture policy on rural communities and on the environment are plain for all to see—as the noble Marquess pointed out. I am sure that I speak for all your Lordships in saying that we very much look forward to the noble Marquess's contributions to this House over the next few weeks.

In turning to the subject of our debate, I declare an interest as chairman of English Nature, the Government's statutory nature conservation body, and also as a member of the sub-committee which prepared the report. I thank the noble Lord, Lord Reay, for his chairmanship of the sub-committee. He was cairn, often in the face of considerable provocation.

As our inquiry established, organic agriculture provides demonstrable benefits for food quality, animal welfare and the benefit on which I should like to focus today: that to the environment. Organic agriculture benefits water quality and reduces pollution in the environment. Currently it is also one of the few agricultural modes that can show demonstrable benefits to biodiversity. There is now quite substantial evidence that organic agriculture is beneficial for birds and insects, and I am pleased to say that there is more recent evidence that it is also good for the rare arable weeds rapidly disappearing from our arable areas.

Organic agriculture could do even more for biodiversity conservation. English Nature and the Soil Association are currently working on targeting the organic standards slightly more specifically to ensure that they deliver the maximum amount of biodiversity. I am stressing the benefits to biodiversity because we are at a point where as much as 75 per cent of biodiversity in the farm countryside has disappeared as a result of agricultural intensification over the past 30 years. Organic agriculture is one of the few bits of blue sky which the noble Marquess rightly said were in rather short supply.

Therefore, I believe that organic production has an immense attraction. It is good not only for the environment and for the other benefits mentioned, but it is also a fast-growing market. Consumers are willing to pay substantial premiums to eat organically-produced food, yet we have a situation where 70 per cent of that food is imported. A substantial proportion of it could be grown in this country. I am not advocating a target, as we indeed did not in the subcommittee's report, but I believe that a broad target of more organic production, and at least sufficient to meet market demand, would be an economically sensible proposition.

At the end of the day, organic production is something of a bargain, through which biodiversity and other benefits are subsidised by a buoyant and growing market and paid for by willing consumers. We are receiving those benefits, as it were, "on the cheap", simply for the cost of the conversion subsidy and with no ongoing subsidy payments. That to me is a compelling argument for organic agriculture as a strong element of the agricultural mix.

However, as the noble Lord, Lord Reay, indicated, the tale of the Organic Farming Scheme enabling farmers to convert to organic production, is a sad one. Six months after the new scheme opened, all the money up until the year 2001 was gone and the scheme was closed with no clarity as to whether any further money would be available before 2001, or indeed after. The closure of the scheme has been a massive disincentive to farmers considering conversion, since they cannot claim retrospective payment. Yet just over 1 per cent of our agricultural production is currently organic. Although, as I said before, I do not believe that we should set percentage targets, I believe that that very small base should be increased to meet current demand.

Who knows what the lack of local, UK-based organic supply is doing to the organic market that was so buoyant, and was a real commercial success story. The Ministry of Agriculture, Fisheries and Food is currently undertaking a review of the Organic Farming Scheme. I believe that we cannot wait until 2001 for the next version, and I ask the Minister today for an assurance that the review will be swift and that the scheme will reopen in time for those contemplating conversion to apply again before the next growing season.

I also ask the Minister to assure the House that she will not simply rob Peter to pay Paul. An easy option would be to take money from other agri-environment schemes, such as the Countryside Stewardship Scheme or the Arable Stewardship Pilot Scheme. Those latter schemes are specifically targeted to deliver specific wildlife and conservation outcomes. The organic scheme should not be seen as an alternative to those, but as a highly valuable and attractive addition.

It is easy to nag governments for more money without knowing from where the money is to come, and I shall not fall into that pitfall. So where could the money come from? MAFF is currently considering priorities for the rural development regulation. The United Kingdom received a rather poor deal in Berlin over the rural development regulation. The money available for it is the same for the next six years as it was for the past five. We have the 13th poorest record of investment in rural development in the European Union. So MAFF will struggle to allocate from that small pot existing agri-environment scheme funding, funding for the less favoured areas and funding for any organic budget.

I ask the Minister to make a serious commitment to the modulation of existing massive mainstream agricultural subsidies. At the moment the vast majority of agricultural subsidies—97 per cent-—are for mainstream subsidies, with only 3 per cent for agri-environment subsidies. A very small percentage top slice from that 97 per cent could create a substantial pot to enhance the 3 per cent and would allow organic farming scheme and conversion scheme budgets to be increased. That seems to be the only way in which we can ensure that early steps are taken towards sustainable agricultural methods rather than being stuck with an inadequate CAP Agenda 2000 reform programme.

Organic agriculture is only one of the models that we should be pursuing for the future in terms of sustainable agriculture but it does deliver safe, healthy food and environmental benefits. Furthermore, it is a bargain in that ongoing support is from markets and not from subsidy. I ask the Government to demonstrate support for that methodology and that means of delivering environmental benefits through effective funding of the organic farming con version scheme.

12.11 p.m.

Lord Jopling

My Lords, I must begin by declaring an interest as a farmer, but not as an organic one. I have spent what I regard as a fascinating five months as a member of the Select Committee looking into the study which was published in July. I want, like other noble Lords have done, to pay tribute to my noble friend Lord Reay for the way in which he chaired that committee. Having spent the past 35 years in this building in one role or another and having served on a good many Select Committees, stretching back to the old experimental Crossman Select Committees in another place, I can say that I have never ever seen a better chairman of a Select Committee than my noble friend. I am delighted to pay tribute to him.

Perhaps I may now turn to a more discordant note. I began the study as one who is not particularly convinced of the merits of organic food. I have never sought to eat or to be provided with organic food. Now, after five months, I have to say that my attitude has not significantly changed. To the extent that my wife is biddable at all, I certainly do not encourage her to go out and fill my plate with organic food. I do not really see the point of it.

Why do I say that? First, the evidence which we heard in our inquiry demonstrated that organic foods have only minute chemical differences—if they are detectable at all. It is quite impossible for anyone to take foodstuffs and say with certainty that one is organic and the other is not organic. That is just not possible and no one pretends that it is. Secondly, I am not convinced that there are discernable health advantages. Those advantages that there are seem to be anecdotal. I respect them—if people believe that organic food is more healthy, that is fine—but I am not convinced. I see little firm evidence of the validity of those claims.

Thirdly, I have considerable doubts about the labelling of foods as organic. That is especially the case with imported foods. I have bitter memories of my role as a member of the Council of European Agriculture Ministers. As the Minister of Agriculture in this country who introduced milk quotas and saw later how they were administered in certain other countries of the Community, I hope your Lordships will understand when I say that I do not have too much confidence in the labelling of organic foods which are imported into this country. That is with regard to the European Union, as my noble friend Lord Reay said. I am even less confident about foods coming from third countries.

The fourth reason why I am not convinced is that I take a somewhat cynical view about the logic of the rules of organic farming. I asked a number of questions of our expert witnesses as to how some of those rules were justified. For instance, how can the use in organic farming of basic slag, which is a byproduct of the steel industry, be justified when at the same time manufactured superphosphates cannot be used? I see no logic in that. Up to the present time copper-based pesticides are permissible in organic farming. Of course, they are about to be phased out, but as the committee said in its report: Other anomalous substances were also cited which are not due to have their approvals withdrawn". That is the case with copper-based pesticides. I am glad that the Government said in their response that, consumer confidence in the integrity of organic standards is of vital importance". I think that many consumers imagine that livestock products which have the organic label attached to them have not had antibiotics involved in their management. That is wrong, as antibiotics can be used in the veterinary care of farm animals.

That is my impression as a consumer. I very much admire the environmental effects of organic farming but at the same time I doubt whether it is more environmentally friendly than, for instance, the environmentally sensitive areas scheme, of which I claim a certain paternity. The noble Lord, Lord Redesdale, made a similar point in his remarks.

I turn next to my impressions of organic farming in my role as a farmer. If I were giving advice to any farmer who was contemplating conversion to organic farming, I would make two points. First, I would say to him that it is infinitely more difficult to farm organically than many people realise when they convert. I would warn potential organic farmers to make a real study of the problems of not being able to use modern chemical and biological aids to farming which conventional farmers use.

The second point I would make to potential converters would be to beware of and not be lulled into a false state of optimism by the present level of premia which are available to organic foods over conventionally produced foods. My instinct—I stress that this is purely my instinct—is that those premia cannot last. We should understand that the supermarkets have little generosity to anyone but themselves. The moment they can buy what they want at the lowest possible price, you can be sure that they will do so. So my instinct is that those current large premia will not last.

These are my impressions from the Select Committee. The reality of the matter in the marketplace is of rapidly increasing demand by the public for organic foods. Whether that extra demand is justified is neither here nor there. The demand exists, and organic foods are becoming more and more popular. Rightly, and understandably, the supermarkets are giving much greater shelf space to organic foods. Organic farmers are doing their best to meet the demand. In my view, and given the conclusions I have already explained to noble Lords, good luck to them. My noble friend Lord Lansdowne, in an extremely fine and thoughtful speech, spoke of niche markets. He is quite right, it is a niche market, and those farmers who are exploiting it deserve a good deal of credit. As the noble Baroness, Lady Young, said, the organic farming area is one of the rare examples of blue sky in the farming industry today.

Given the present plight of agriculture, I am sure the Government are right to help farmers to convert. However, I see no point or justification in continuing public support after conversion. That was a view endorsed by the Select Committee. The fact is, as my noble friend Lord Reay said, that the conversion scheme is in serious crisis. According to the Government's press handout, in the year ending April 1999, there were 222 applicants for conversion grants. Since the new scheme has been introduced with grants that have almost doubled, there have been 700 applicants in the first six months. As a consequence, the scheme has been virtually suspended until April 2001.

1 believe that that must have been predictable. My noble friend Lord Reay pointed out that the Government ought to have realised what the effect would be of the doubling of the scheme. I do not know what has been going on in MAFF to create this crisis, but it is a crisis of its own doing. The ministry did not have to double the grants. The scheme could have been organised better with a less generous increase in the grants so that it would not have run into this trouble. I say this with regret because I have great affection for the ministry. However, it has been guilty of gross incompetence. I understand that in order to meet the current demand, an extra sum of around £20 million a year needs to be found. I hope very much that that money can be found in the review of the scheme. Nevertheless, the Ministry of Agriculture should hold its head in shame over the mess it has created with this issue.

12.24 p.m.

The Lord Bishop of Hereford

My Lords, I add my congratulations to the noble Marquess, Lord Lansdowne, on a really excellent maiden speech, and in particular for the powerful way in which he painted a bleak picture for the future of conventional farming, especially when we come to the next major review of the common agricultural policy. I express my very warm welcome for the report of the Select Committee, and thank the noble Lord, Lord Reay, for his introduction today. The report is clear, helpful and informative in its analysis of the issues, and, I believe, wise in its conclusions and recommendations.

I wish to comment briefly on three main issues and mention one or two points of detail shared with me by organic farmers in my diocese. I am glad to say that Herefordshire and Shropshire are among the prime organic farming areas in this country, and that, as one of the first of her new duties and responsibilities, the Minister paid a visit to Herefordshire.

First, the issues of finance and funding. I reiterate what has already been said. There is very great disappointment at the wholly inadequate provision of money for conversion. The Government claim to support organic farming and to see its benefits in terms of biodiversity, environmental gain and food quality. I am disappointed and saddened that the noble Lord, Lord Jopling, does not know why people want to eat organic food. In my own kitchen yesterday, I ate the last fruits of this year's crop of carrots and french beans. They were absolutely wonderful—I am sure I should not speak in such worldly terms. I should like to invite the noble Lord to come to lunch at the palace, in season of course. He will see what it is all about. I am glad to say that two years ago we managed to convert the palace without the benefit of government subsidy.

Biodiversity, environmental gain and food quality are not the only reasons for organic production; animal welfare, rural employment, soil structure and water quality have also to be taken into account. Yet, just as considerable numbers of farmers are enthusiastically deciding that they want such benefits, the money has run out. There will be no more until April 2001. The sum necessary, estimated at around £30 million by the Soil Association—that is only an estimate because, if the growth of conversion to organic farming gains momentum, it will be inadequate—is very small compared to what is spent on the support of conventional farming. I hope very much that the Minister will be able to give an assurance that such underfunding will be addressed as a matter of urgency, and relief provided well before April 2001. I add my plea to that of the noble Baroness, Lady Young of Old Scone, that MAFF, using the principle of modulation, has it in its power to do that. It is an option. A modest sum transferred from conventional support to additional support for conversion to organic farming would be money well spent.

Then there is the matter of ongoing subsidy. The committee has recommended that this should not be given once conversion is complete. I agree with that and so do the most successful and enthusiastic organic farmers that I know. It is true that because of ongoing subsidy in other European Union countries, our producers are in danger of being undercut. What they want to see is progress towards a market less distorted by permanent subsidy of any kind, and pressure brought to bear on those countries which do provide ongoing support for organic farmers to encourage them to come into line with United Kingdom practice. That is the way we should progress.

Finally, under the funding heading, there is the issue of so-called double funding—the possibility of farmers already receiving help under environmentally sensitive areas or countryside stewardship schemes being penalised if they enter organic conversion by having some of the organic grant reduced. I appreciate the careful treatment of this issue at paragraphs 95 and 96 of the committee's report. Clearly, the committee had some interesting conversations on the topic with some anxious farmers, but I believe there are grounds for reducing the organic payments, especially to those engaged in ESA schemes. There is clearly some convergence between the objectives of organic farming and some of those achieved by ESA or countryside stewardship schemes, at least in terms of extensification—lower inputs and lower outputs, less profit per acre in order to achieve environmental benefits. I hope that the Minister may be able to clarify this topic and spell out clearly how the Government understand the grounds on which the double-funding penalty should apply, and to what extent.

I turn now to the matter of targets. Should targets be set for a percentage of land converted to organic farming or a percentage of organic food consumed? The latter seems a distinctly fanciful and unrealistic notion. I am inclined to agree with the conclusion in the committee's report that acreage targets are also inappropriate. How big is the potential market for organic food? It is impossible to predict. There are so many variables: public taste; willingness to pay premium prices; the state of the economy; the availability of good-quality organic food; the success of organic farms in publicising and marketing their products; and the ability of UK organic farmers to compete effectively with imported produce. I would prefer to see the Government providing generous and flexible funding for those farmers who want to convert to organic production rather than the setting of any arbitrary targets.

The Soil Association points out that there are considerable areas of potential cost saving as the market grows, as I very much hope and believe that it will, in terms of economies of scale, in both production and distribution. If those factors can reduce the price differential between organic and conventional produce, the market will grow even more quickly, and so the process of conversion can continue to accelerate without damaging the viability of organic farming. We should not see organic farming as a small niche market. I hope that it will become very much a mainstream market.

So there should be no fixed targets but a generous conversion "tracker" fund to follow the lead set by the market and by the entrepreneurial skills of organic farmers. I recently paid two farm visits in quick succession. The contrast in the feel of the two farms was extraordinary. The first was a conventional farm of 1,200 acres, with 600 acres of arable and a very large beef herd. There was a kind of doggedness in the way the land was being farmed, according to the way the farmer had always done it. He was just about getting by, thanks to arable area payments and to being canny at buying and selling cheap in the beef market. That farm of 1,200 acres was supporting just four people. I then visited an organic farm of 700 acres employing 12 people, which was making a profit and feeling really good.

My third area of concern is that of standards. How can we ensure proper compliance with production and processing standards? I share the committee's welcome for the establishment of the United Kingdom Register of Organic Food Standards. The organic farmers whom I know approve of it, respect it, and believe that it does a good job. But there is, predictably, a great deal of scepticism about the implementation of Regulation 2092/91 in other European Union countries. I warmly welcome the committee's recommendation that there should be on-the-spot checks by inspectors to back up any paper-based system and, in due course, globally recognised and enforced standards.

I believe that we should be tough on our European partners over the livestock amendment to Regulation 2092/91 and resist derogations concerning, for example, tethering. It is a source of much bitter criticism on the part of the organic farmers I know that our competitors can get away with lower standards of animal welfare and still claim to be on a level playing field with us. That criticism is widespread, not least in the sphere of organic meat production.

Finally, I turn to some points of detail. It has been put to me that the change from the organic aid scheme to the organic farming scheme which took place earlier this year has led to even more burdensome paperwork and to delayed payments. One small family farmer I know, who has just 51 hectares, has just completed conversion but is still owed £6,000. When cash flow is extremely tight and when a farm is just keeping afloat, that is a large amount of money. May we please be assured that payments will not be delayed?

Once again, there is the burning issue of small abattoirs. Without their survival, organic meat production cannot survive—and animal welfare standards will fall dramatically. Many of us are immensely relieved to know that the Government are reviewing the Meat Hygiene Service, and we look for good news about the burden of charges on small abattoirs—not just further postponement, but a final assurance that those charges will not be levied and that the abattoirs will be able to survive.

Organic farming is in good heart, unlike most of the sorely afflicted agricultural industry. It is confident that it can, and will, grow. It is building good relationships with consumers. It is saving the country considerable sums of money. I refer to those unquantifiable, but enormous, sums spent on the need for water purification and dealing with the health casualties which are among the consequences of intensive farming. It is creating jobs. It is helping in a small way to stem the depopulation of deeply rural areas. It is something to celebrate. I hope that it will continue to enjoy the Government's committed and effective support.

12.35 p.m.

Lord Monk Bretton

My Lords, I, too, should like to congratulate the committee on its report, which is extremely well balanced. It must have been a massive exercise and I believe it to have been very well conducted. I agree with most of the points made. I agree about not setting a production target for organic food. The market itself must do that.

I question a few matters. I question, for example, whether the organic production rules are too good for welfare in dairy herds. I question whether too much emphasis is put on research into organic farming alone. There is a borderline, and a sensible balance must be maintained. For example, the benefits to the environment which can be produced in other ways will enter the picture when considering what kind of research should be undertaken.

I should mention my own standpoint. I have long been involved in farming. I started by taking a degree in agriculture. I have great respect for agricultural research. I also have a wish to avoid disturbing the environment unnecessarily. I do not believe that what was good enough for dad is good enough for me. However, I do not believe that it is right to discard the agricultural research of the past 100 years. That is not a very good aim; it is very expensive. Fundamentally, I am no great believer in organic farming as such, although I believe in freedom of choice for the individual and for the public.

I should like to highlight the salient features of the organic situation now as I see them. As we have already heard, the public have the bit between their teeth. Demand for organic food exceeds supply, and it is amazing what has been going on. But the public can be fickle. There is no very sound reason to suppose that organic food is necessarily better for one. Will that demand die back—at the next recession perhaps? It might. The public might just as suddenly suspect that organic food is a rip-off. That would be an awkward calamity as well.

The whole process has been born of lack of faith in government regulation of the food chain. That is true not only of government in this country; it has happened throughout Europe. It has had much to do with the BSE outbreak, which has rightly been pinpointed as the cause. It is a vital function of government to regulate the food chain. They must not only continue to make every effort to do so, but must be seen to be doing so. They must "get back into the saddle" in regard to these issues. Should the public be better educated in these matters; and who should do that? I wonder whether the Government have any views about that aspect. I was glad to hear it referred to by the noble Lord, Lord Redesdale, but the report does not cover it.

With the organic market, it is important that we try to build on facts. If we do not, the organic market will be more unstable than is desirable. I go back to the period during the war when there was much publicity about how to survive on rationed food and to have a balanced diet, despite food shortages. We all knew then the difference between the direct and the protective foods. The direct foods were vegetables, fruit and cereals and the protective foods, meat, milk and so on.

If there is a case for organic foods, it is definitely for the direct foods first. With the protective foods, we have the protection of the animal which will not thrive if wrongly fed. The animal takes the knock if there is something wrong with the environment and the way it is treated.

I shall now be controversial, because I turn to milk. Milk is doubly protected because the animal has inbuilt characteristics to prevent handing on deficiencies in its food to its young. I do not want to decry production of organic milk, but we must bear in mind that there is probably least argument for the production of organic milk. I am sure that anyone claiming that it was a better product than ordinary milk could be accused of advertising fraudulently. We know that organic milk usually starts with a higher bacterial count as it leaves the farm. That may or may not be overcome, but I believe it to be the case now. I emphasise the need for the public to realise such things and to know more of the stringent regulations which apply to all milk production.

I do not want the public thinking that if one cannot afford organic food, one will suffer. Tiresome social difficulties could arise if that view became too prevalent. Therefore, the virtues of organic food need to be put into perspective. Those who still want organic food should be provided with it, but it may not be as big a market as all that.

The other salient features which I perceive and to which I wish to draw attention are the following. First, we are sucking in unnecessary imports because of the subsidies paid in Europe which are not. matched here. They gave Europe a head start. I shall not say too much in criticism of the scheme that has gone wrong at the moment; that has already been done. I suggest that the global sum caused the trouble, not the Ministry of Agriculture, and perhaps the difficulties came from somewhere above. We are beginning to match the subsidies in Europe, and so we should. Perhaps it would be better to say that we should have already.

Secondly, we seem to be more successful in stimulating the production of protective organic food rather than the direct foods. I wonder whether we should try to correct that. If organic cereals are needed, there may well be more openings there than with any other product.

Thirdly, I see virtue in producing organic food from environmentally sensitive areas and nitrate sensitive areas. I think that comes from the pages of the report, staring at us. It would make sense to produce organic food from those areas. It may be that the market will do that; those areas have been restricted to other activities and may move towards organic production if they get the chance. It is desirable that organic production be steered in some way towards those areas.

I have commented on the limited global sum. I believe it was inadequate and that we would have moved further and faster forward if the money had been available earlier and the amount had been more realistic. I agree that it would be most unwise for there to be a blind rush towards maximum expansion of the market, whatever that market may be. It would be foolhardy to attempt anything of that kind, bearing in mind the inevitably much greater production costs of organic foods.

12.47 p.m.

Lord Rathcavan

My Lords, I add my congratulations to my old friend the noble Marquess, Lord Lansdowne, on his maiden speech today. It confirmed the early promise and style that he displayed as a younger man. As a member of the European Sub-committee D, I also add my congratulations to our chairman, the noble Lord, Lord Reay, on the comprehensive way in which he introduced the debate today, with his usual clarity. As the noble Lord, Lord Jopling, said, he has been an outstanding and exceptional chairman.

I shall try to confine my remarks to the new organic livestock proposals. Although we welcomed the promise of EU standards for organic livestock in the report, the new proposals appear to be causing more problems than they are trying to solve.

We now have a situation in which many livestock farmers have set out on the expensive and complicated route of registration, as they have to do before applying for conversion aid, only to find that their applications are delayed or cannot be approved because of lack of funding, as many noble Lords mentioned. But they have been put in even worse financial circumstances and distress than before. Banks are unlikely to lend money on the basis that the Government are seeking more funding for the year 2001–2002. I believe the sector bodies warned the Government in advance that the new organic farming schemes would suffer in that way.

Parallel, and even worse for the livestock farmers, is the new background created by the European Union proposals for the certification of organic production of livestock, announced only in August. They are set out in a new directive, with a lead-in period of one year before it has to be implemented in August 2000. During that period each member state has a level of derogation to interpret its own standards and practices on livestock as long as they are above the minimum, which is pretty low. As no doubt the Minister will tell us, the Government seek guidance from the sector registration bodies and UKROFS, the industry body, on how the new proposals should be interpreted.

Perhaps I may explain how this moving of the goal posts may have a drastic impact on livestock farmers. I shall simplify it a little, but the message is the same. (I ask the Minister not to show me a yellow or red card on points of detail.) Under the UK's old self-imposed rules, on a livestock farm the land was converted to organic production over the first two years, following which the stock born on that land was deemed to be organic. In the case of a bullock, there was a five-year lead time between the decision to register as organic and the sale of premium priced organic beef. That was the situation under the former Organic Aid Scheme which was available up to April of this year.

The rules were changed earlier this year so that a livestock farmer could convert his stock simultaneously with the land as long as the calves, lambs or piglets were fed the right proportions of certified organic feed. Therefore, the lead time on organic beef was reduced from five years to three years. However, the farmer must buy in a lot of expensive organic feed and still fulfil all of the organic farming standards and rules, such as reduced stocking no doubt.

We now have the new proposed European Union livestock standards and the rules are changing yet again, all within a year, to a level where the credibility of organic produce must begin to be questioned. The new proposed European standards provide that a non-organic calf can be bought in the market, no matter where it has been born, fattened on a registered organic farm and sold in, say, 18 months or less as certified organic beef. Therefore, the lead time has reduced from five years to 18 months, all in the space of a year.

Perhaps pigs provide a more illustrative example. At present, under the self-imposed UK rules, organic pork or ham comes from a certified organic sow conceived, born and raised on organic pasture and feed. But under the new proposed EU standards a farmer can go to the market and buy 100 weaned piglets for a few pounds each—that is how much they cost nowadays—without knowing where they have come from. He can fatten them up in a few months on a registered organic farm and sell them as certified organic pork, bacon or ham. I believe that the same is proposed for day old chicks.

The sector bodies which are responsible for registering, certifying and policing organic farming have yet to give their views to UKROFS, the central body for organic standards, which will then recommend to government how these new European standards should be interpreted. No doubt they will recommend much higher standards than the new European minimum ones, because the UK has a reputation and quality in organic produce which it wants to protect to maintain credibility with the consumer and justify the premium price, which is what it is all about in the first place.

The problems that these new proposals raise are fairly obvious. If other member states decide to take the easy way out and regulate for the lowest standards allowed, as some inevitably will, European livestock producers will devalue the UK market for organic meats and it will be very difficult for UK organic livestock farmers to compete, or even survive. As the right reverend Prelate said, there are double organic standards within Europe for livestock production which should be avoided. One wonders how on earth these new EU livestock standards were drafted and how and why the Government are not able to influence the outcome in some way. They were slipped in during the sleepy holiday month of August and their real impact has not been widely taken on board.

I do not expect the Minister to provide answers today—she awaits advice and recommendations from the sector—but I highlight this problem which is putting many farmers into further financial distress, let alone confusion. I hope that she will apply her considerable intellectual talents and skills to ensure that our premium market for organic meats is not undermined by lower costs and standards adopted by other European producers and that there is fair competition and clarity in the rules.

I raise one further point relating to the rules on double funding which may disadvantage a farmer who applies for organic status if he has land that is managed under some other environmental scheme, such as the ESA or Countryside Stewardship schemes. On this point I do not agree entirely with the right reverend Prelate; nor does the report. In the report we concluded that the rules on double funding could result in unfair reductions in payments to some farmers, and we asked the Government to seek ways to avoid this happening in future.

In evidence to us the Minister for the Countryside in the other place, Mr Elliot Morley, admitted concern about the unfairness in the rules on double funding and the potential disincentive that they applied. They are EU rules again, as the Organic Farming Scheme is part of the agri-environmental regulations, along with ESA and the Countryside Stewardship schemes. EU funding for the environmental and countryside protection schemes, and for all related rural development—or perhaps one should say rural survival—schemes, has been set back by the watering down of proposals in Agenda 2000 for further CAP reform, brilliantly negotiated by Commissioner Franz Fischler between the hugely different agri-agendas of north and south European countries.

In the end, it appears that the French drove a bus through Agenda 2000 at the Berlin Summit at the expense of further development of environmental schemes, including the Organic Farming Scheme. The schemes in the UK, in particular those in the less favoured areas of upland farming, need more funding now. I hope that the Minister will do everything in her persuasive powers to get more funding from the Treasury or, as the noble Baroness, Lady Young of Old Scone, said, use some creative thinking on the redistribution of existing funding at least, such as modulation. The current situation under the Organic Farming Scheme is, quite frankly, a shambles. An opportunity is being lost, and it must be stabilised and recovered.

12.58 p.m.

Lord Gisborough

My Lords, I add my congratulations to my noble friend, Lord Lansdowne, on his first-rate maiden speech. I hope that he has more than just a few weeks in which to return and is lucky. I also echo the words of my noble friend Lord Jopling on the excellent chairmanship of the committee of my noble friend Lord Reay.

More and more people are buying organic food, and more and more farmers seem to be interested in going organic to take advantage of the increased price that is obtainable. We have heard how new applications will not be considered until 2001 due to the huge demand. Only three days ago a former Minister, Joan Ruddock, the Member for Lewisham, said that the aim was that 30 per cent of farmland and 20 per cent of our food should be organic by 2010. Yet the benefits of organic food are completely unproven other than by the opinions of the organic lobby—and it would say that, would it not?

Most of the organic food in our shops now comes from Austria and other countries. I f there is that demand, it is surely better for the food to be produced in this country. It is hard to understand the logic whereby the UKROFS board in July stated that GM crops have no place in organic foods.

The Government have a record of extreme caution in their foodstuff policy, as witnessed by the beef-on-the bone saga. Yet they have gone public in support of GM foods. Those GM crops have been tested and trialled and have many advantages. For example, they can repel the selected predator which otherwise has to be killed by a spray which kills every other bug. In the case of organic crops, the predator is not killed, reliance being placed on hit or miss field management. We grow organic vegetables at home. I have to eat the bits of the potato that the wireworm has left me. I would much rather eat one from the supermarket grown on an ordinary farm.

One day when GM is understood, the emotive reaction removed and the gutter press stop talking about Frankenstein foods, it may well revolutionise agriculture and become acceptable and a dramatic help to the organic farmer. It will improve the health of their livestock and reduce the need of organic farmers to use antibiotics, as they now do. Above all, GM will enable the third world to feed its populations with organic produce with less need, of expensive fertilisers and dangerous sprays.

Consumers who shun GM and only want to eat organic food will probably happily take medicines containing chemicals of which they have no knowledge. They rely on the fact that the medicines have been tested and accepted as safe; and yet they are not prepared to accept well-tested GM foods. No doubt those scribbling reporters who talk about Frankenstein foods consume foods and drinks with preservatives and colouring that have well proven ill effects.

I ask the organic lobby one question: how would it react to GM peanuts? Peanuts have a gene that can cause an allergic response that can kill a person. GM peanuts can remove that gene. Would the organic lobby prefer the dangerous variety to the safe one?

There has never been any evidence whatever of any danger from GM crops, yet there is a "what if" factor on which can be built every weird and way-out scenario that can be imagined, regardless of likelihood. Equally wild statements could be made about the use of the possibly uncomposted manure which could contaminate organic crops; for example, that organic foods should carry a health warning.

During our evidence on GM food, one scientist—I think that it was Professor Bainbridge— said t hat GM food could not be 100 per cent safe. But no food is 100 per cent safe. Certainly organic food is not 100 per cent safe; there is a much higher risk of naturally occurring fungi producing mycotoxins than in those crops grown with fertiliser and pesticides. A girl recently died of drinking too much water. White bread is dangerous; and potatoes would never pass ministry regulations if they were introduced today for the first time. Let us remember that tobacco kills 121,000 people every year. Medicines are certainly not 100 per cent safe. Think of Thalidomide. And I understand that some medicines happily consumed by a confident public who demand organic produce have been made by genetic modification.

A reasonable judgment has to be made of the benefits and risks, and I believe that the Luddite attitude of the organic lobby is way over the top, beyond all reason and evidence. Now there is a call for a moratorium on the planting of GM crops. I ask: why should science be held up for the sake of the organic lobby? Why should a system that is accepted as having a lower output, that has to be subsidised and that has no proven advantage whatever be given special privileges to hold up agricultural progress—progress that could lead to the solving of starvation in the third world.

The organic lobby complains if GM crops are grown nearby. The committee recommended that the Government should find a way for organic farmers to live with GM crops nearby; and of course I am glad to see that the Government recognise the need for a modus vivendi between the two interests. It would be quite unacceptable if all GM progress had to be held up just because of the organic lobby.

The organic lobby claims, among other things, that its animals are raised in better conditions than on normal farms. Certainly there are conventional farmers with battery hens and closely confined pigs and calves, which most of us deplore. But I suggest that conventional farmers have a financial interest in looking after their stock with consideration, although some undoubtedly fall short. No doubt some organic farmers fall short.

I suggest that on the great majority of conventional farms the animals are looked after just as well as on organic farms. Most conventional farmers would support any move to improve livestock management where it is defective; and I am sure that most of us abhor intensive livestock systems. But if it were true that organic farmers treat their stock with more consideration than conventional farmers, the way forward is to ensure that all farmers follow similar guidelines.

The committee concluded that it was possible to achieve similar environmental benefits with conventional farming; and likewise with wildlife. The Game Conservancy Trust evidence included the following paragraph: We have shown, on our own farm at Loddington in Leicestershire, that biodiversity can be restored on a 'conventional farm' by appropriate management. For example, song birds have increased by an average 42 per cent over six years, including a number of species that are nationally in serious decline. All this has been achieved for a cost of £3 per acre per year out of farm profits". Organic farming undoubtedly requires far more skill and demands a much higher standard of management of crops and animals than conventional farming. Those organic farmers with the time and ability to achieve that skill may survive and produce crops, but I very much doubt whether the average farmer could cope. I think we shall find that many will take the subsidy to convert and then find it too difficult and revert, and the subsidy will have been wasted.

One of the selling points of organic food is that no antibiotics have been used. But that is a fallacy, as they can be and are used to cure stock, just as copper and sulphur based fungicides are used. Antibiotics may not be used as a prophylactic but many conventional farmers object to that too.

The growers of organic crops are quite sincere in their belief that they are producing something better than the conventional farmer and that the extra price reflects improved quality. But, unwittingly I believe, they are conning a public who are only too willing to be conned. The extra price is undoubtedly necessary due to the reduced yield and the time of transition. Whether that extra price will remain is another thing. As soon as supply matches demand or the public "fluff' to the facts, the balloon will burst and the differential price will drop: here is a farm produce called "organic" which has an appeal for people who sense that it is somehow better for them, but half of them have little idea what organic is.

The evidence of the International Federation of Organic Agriculture included the following statement: Consumers know next to nothing about the detail of organic standards and are willing to trust that a product that is certified 'organic' conforms to a basic 'no chemicals or additives' perception … Most consumers would not expect to find that over 30 additives or aids are allowed in organic food processing … They would not expect 20 per cent of the diet of some organic animals to come from conventional sources". Mr Billington, founder member of UKROFS and long-time and largest manufacturer of organic food, said: Relatively few processors subscribe fully to the organic ethos, and as the market grows they will become an ever shrinking minority". But if it makes them feel good, then good luck to the producers.

As for the government financial support, the committee said that excessive support should not be at the expense of ordinary farmers, many of whom are just as environmentally friendly as regards their farms as the organic producers are. The committee agreed that organic farmers should not continue to receive subsidy just because they are organic but only during the changeover. They must rely on the better prices to make up for the lessened output. So long as the public were of the opinion they were getting something they wanted, good luck to the farmers.

The supermarkets increasingly sell organic food, most of which comes from abroad. If there is that demand, they might well be asked to help support the conversion to organic farming. Many of them appear so keen to buy at the lowest price abroad that they forget that the money paid for British products comes back into their shops, while payment for goods brought abroad is never seen by them again. That principle applies to the purchase of all goods from abroad.

One does not have to travel far in Europe to see what little notice is taken of regulations. Considering how little notice is taken in France and Italy of the common market rules which we must follow here, one can be highly suspicious of some of the food claimed to be organic from some countries with even less bureaucratic supervision. Paper-based authenticity cannot be relied on and spot checks will be valid only if there are adequate inspectors and a provable insistence on honesty.

If the organic farms can provide the food which the public wish to buy at the higher prices, good luck to them, but it is thoroughly unacceptable for the organic lobby to interfere with the development of genetic modification and for this important science to be put at risk by the Swampeys and Melchetts of this world.

1.10 p.m.

Lord Christopher

My Lords, first, I want to associate myself with the thanks that the noble Lord, Lord Reay, extended to those who worked so hard on our behalf on the committee. We were extraordinarily well served and I hope that they do not see it as merely a formality. Secondly, I share the remarks made about the noble Lord's chairmanship. I found it very agreeable. He has a tolerance threshold which I envy, and the range of contributions from members of the committee today indicate how far that was tested.

We have coming together several aspects in relation to agriculture. We have farmers farming in a serious economic state. I need not trouble the House with figures. Perhaps the tip of the iceberg is the growing number of suicides among farmers. That is sufficient to make one realise that something has to be done.

Secondly, for the first time in my memory there is a consciousness among consumers not only that they need to be aware of what they are buying and eating, hut of how it is produced and at what cost to the animals. Yet there is still serious ignorance especially in respect of ready-prepared and processed foods, for which there is a growing demand. Perhaps I may illustrate that with one product, which is chicken. Tonnes of chicken are imported into this country from Thailand and Brazil. The imports from those countries rose this year by 73 per cent and 54 per cent respectively. Most of that chicken is used in processed and chilled meals, yet neither Thailand nor Brazil follow the European Union hygiene and welfare laws, let alone the requirements of the organic sector. It is suspected that banned antibiotics are used, including growth promotion drugs.

Therefore, we need much clearer labelling of produce so that people know what they are buying. I am extremely pleased to see that my old friend the Minister of Agriculture, Fisheries and Food is taking a tough line on the labelling of pork and bacon. I am not convinced by "British made" bacon. That is a splendid euphemism for a product which has come here to be put in polythene and is therefore "British made".

What else should be done? We ought to be encouraging farmers to be a shade less independent than historically they are and to begin to work together more. I believe that they must have a real influence and be market players collectively instead of relying exclusively upon others to sell their goods for them. In the short term, we should be encouraging more vertical integration among the farming community, probably on a co-operative basis.

I want to go beyond our report because many speakers have dealt with its detail and that need not be repeated. After completing the report, the committee reflected a little on where it might go next. Last week, the Soil Association put forward a proposition very close to some of the discussions we had among ourselves after concluding the report. Some of us saw organic farming not just as a cult, as some have sought to describe it, but as a real base from which progressively we could change current farming practices generally. We saw it in the prevailing climate, not as a great problem, but as a considerable opportunity. We believed that we should not necessarily be arguing that all farming should become 100 per cent organic, but that, sufficiently, we would command support and confidence among consumers in all farming products.

The Soil Association has recently proposed a single contract offering two levels using sustainable methods. The higher level, which is what today we would describe as organic farming, would be the certified organic farming. But the lower level would require a minimum level of environmental protection above an appropriate concept of good agricultural practice.

Related to that, it will be interesting to watch the progress of the organic targets Bill, to which reference has been made. It was launched 10 days ago in another place and has been supported by 60 Members of Parliament in an Early Day Motion. It seeks 30 per cent of farmland farmed organically by 2010 and 20 per cent of UK food supplied from it.

That brings me to what I regard as a key matter. It is not just that British farming is in such dire straits; it is as well that no farmer has any idea what the future holds. If I asked the Minister, "What is our strategy?", I do not believe that she could answer satisfactorily to herself, let alone to your Lordships' House. I do not blame her for that, so I do not ask the question. I am sure that she is in no different position from any of her predecessors over the past 20 or 30 years. When I look back, I sense that farming has lurched from crisis to crisis, from issue to issue, from idea to idea, without any coherent longer-term strategy for where we wanted it to go.

In my judgment, MAFF should have a properly staffed unit whose prime concern is a strategy for agriculture in the long term, planning across the board of farming and on a joined-up-government basis. I do not believe that that exists at the present time What do we want from farmers and farming? Where should we be? Where could we be in 2005 or 2010? How should we, and how could we, get there? How do we sort out the CAP, which is another millstone around our necks?

I have no doubt that organic farming and the approach of those who do so farm, and those who support the concept, must be one important foundation stone in a convincing and encouraging strategy. What I hope we shall not see, if press reports are to be believed, is a White Paper in December arguing that the idea of protecting prime farmland for food production is outdated and unnecessary. I and others on this side of the House will take a great deal of convincing that that is a sensible and wise course for agriculture. I hope that we shall see policies which effectively raise the sights and visions of those who are farming in this country.

1.20 p.m.

Lord Middleton

My Lords, it is with sadness that I rise to speak for the last time in a debate in your Lordships' House. However, that feeling is tempered by the pleasure derived from debating a report by a sub-committee to whose work I have in the past had the great privilege of contributing over a period of, I think, 12 years.

I speak as one whose livelihood has depended upon the management for profit of mixed farms under conventional systems for 50 years. I have also been, and still am, a member of various bodies concerned with protecting the natural surroundings. Difficult though it may be at present, profitable farming is about maximising production in line with the market and not damaging the environment in the process. Good land management is a balancing act. It is that sense of balance which so long as I have known Sub-Committee D categorises its work. It is demonstrated by this report on organic farming. That, together with objectivity when considering agricultural policies, has ensured the high regard in which these reports are held here and in Europe. Someone has said that Sub-Committee D is the only agricultural committee that has recommended repeatedly less money for farmers.

I turn now to organic farming. As we have heard, for various reasons—some good, some not so good —more and more consumers have shown a preference for organic produce and have backed their choice by paying a premium for it. Farming is about satisfying the market. Some 700 English farmers have noted that rapidly expanding growth in demand and, with admirable courage, some have taken a gamble on converting to organic systems. I understand that there are many more applications in the pipeline. The gamble lies in trusting that the premiums obtainable will be sustained in the face of increasing organic production. That is a risk that I personally, in my particular farming circumstances, would not be prepared to take. But I take off my hat to those who are so willing.

In that gamble, the odds on success for the producer are strengthened by the current perception on the part of the consuming public of the benefits of organic production, and such benefits are set out in paragraph 108 of the report's conclusions. They include more biodiversity, better soil structure, better water quality and some aspects of food quality such as healthier eating, safer food and better taste. The report states that the claims for those benefits appear to be balanced. If that is so, and there is much in the evidence to support that conclusion, that must strengthen demand and sustain the market for organic produce, at any rate until the laws of supply and demand begin to take effect.

There are some farmers and many consumers who look on organic production with almost religious fervour, creating a mystical cult immune from the hard realities of economic life. However, most farmers, like me, are engaged in a struggle for survival. As my noble friend Lord Lansdowne reminded us in an excellent maiden speech, and as my noble friend Lord Jopling warned us, before taking the plunge into conversion, farmers need to be convinced that lower yields and lower output per acre can be set off by lower input costs and higher prices, leading to sustained profitability.

When contemplating conversion, a farmer might do well to take a hard look at some of the benefits perceived by the consuming public in case they may one day be seen to be illusory. Let us take biodiversity first. There is good evidence in the report of enhanced biodiversity on organic farms. There is, however, evidence from the IACR of Rothamsted, the Game Conservancy Trust and even the RSPB that similar results can and are being achieved on conventional farms. Soil structure is improved in organic systems. While farmyard manure adds humus to the soil, it can cause pollution of water courses and excess run-off of phosphates. That problem was encountered by those Members of Sub-Committee C who visited Denmark earlier this month.

With regard to water quality, the perceived disbenefit is the leaching of nitrogen fertilisers from farm land into the groundwater. I chaired a Sub-Committee D inquiry in 1989 into that subject when we received strong scientific evidence that under ordinary good farm practice, nitrogen from fertilisers is absorbed by the crop and does not normally find its way into groundwater. We were told then that the biggest nitrate losses occur when turf from grassland is ploughed in and from the run-off from untimely or excessive applications of farmyard manure or slurry. That is reiterated in the scientific evidence given to this sub-committee, notably by the Institute of Arable Crops Research. ADAS found no difference in leaching from comparable organic and conventional farms under a ley farming system. There is a useful diagram on page 166 which illustrates the result of that study.

With regard to pesticide pollution in water, Professor Pickett, in his evidence, told the subcommittee that there was little problem now arising from leaching of pesticides into water and that the fungicides and herbicides with potential to leach are now restricted. He said that no proven health problems arise from any contamination which has been detected. As regards taste—and I hope this does not disappoint the right reverend Prelate, who is not now in his place—Doctor Goulding told the subcommittee that his understanding was that all tests that were done blind have shown that people cannot distinguish between products that have been grown conventionally or organically.

Food safety is rightly a matter of great concern to consumers. Paragraph 48 of the report refers to the fact that the organic sector—and I quote from paragraph 48—believes that, the absence of pesticide residues, enhanced levels of vitamins and reduced levels of nitrate and sodium show a clear benefit in terms of human and animal health". Yet the report admits in the same paragraph that, there is no scientific evidence in terms of replicated trials", to demonstrate the health benefits. That was the view of the director of Elm Farm Research Centre, whose aim is to provide research and development for organic farming.

On food quality, it was the view of the British Nutrition Foundation that the nutritional value of organic crops is likely to be the same as that of conventionally-grown crops.

As I said earlier, there is a wealth of evidence in this report that supports the claims as to benefits. But as those examples show, there is much evidence which indicates, as is pointed out in paragraph 33, that, the perception of the benefits and disadvantages of organic food is not necessarily accurate". Nevertheless, I agree with the main conclusions of this well-balanced report. I agree that organic farming extends consumer choice, which is desirable. I agree that in the present harsh economic climate for farmers, anything which provides market opportunities should be encouraged. Strict standards, both for production and for processing, should be established after rigorous scientific research.

There is a good case for government assistance for those farmers who take the plunge into organic farming. I agree with the sub-committee that support should be limited to the conversion period. After that, the organic fanner must rely on consumer confidence in the benefits that are derived from organic production.

I have drawn attention to evidence in the report which indicates that the foundations on which this confidence is built may be a little more fragile than its conclusions might have us believe. Here I echo the reservations of my noble friend Lord Jopling.

Having said that, I congratulate my noble friend Lord Reay, his committee and their Clerk on a concise and well-ordered report.

1.30 p.m.

Lord Willoughby de Broke

My Lords, I join other noble Lords in thanking my noble friend Lord Reay for his exemplary chairmanship of our sub-committee. As with all committees, there were differing opinions. I congratulate him on shepherding us to a unanimous report with tact and humour.

I found this a particularly interesting exercise, following so soon after our report on genetically modified organisms. It covered much familiar ground: food safety, food quality, biodiversity and landscape, but from a very different angle. I am sorry that my noble friend Lord Jopling was not seduced by the charms of organic agriculture. Perhaps he is casehardened by spending too long in MAFF.

I was encouraged and attracted by some of the practical aspects of organic farming. As a farmer I put my hand up to what the right reverend Prelate the Bishop of Hereford and my noble friend Lansdowne have called "conventional" farms. We have heard that expression used today. I am a conventional farmer, although that is a laughable phrase. Outside my permanent grassland, I have an all arable, autumn rotating farm. To keep that viable, we spray regularly and frequently, often with noxious chemical herbicides. We pile on the chemical fertiliser and we zap the slugs with repeated doses of high toxicity pellets. I do not call that conventional farming. It is depressingly modern farming and increasingly, I am afraid, unprofitable.

The organic creed of working with. nature, rather than seeking to dominate it, is now not only more attractive but more effective. Trying to control weeds and maintain fertility by rotation is, after all, true conventional farming. That is what farming used to be like until about 35 or 40 years ago. But even my patch of the Warwickshire badlands has something to be said for it. There are a lot of thorn hedges and small woods; we have built ponds and lakes. In the good old days, when I received large subsidies and a high price for my corn, I put grass strips around the edge of my arable fields. As a result, we have a wide variety of wildlife.

Much as I admire the organic system and its skilled practitioners, the committee had some quite convincing evidence that some of the benefits to the environment—called biodiversity—claimed exclusively for organic farms can be perfectly well obtained on conventional farms. It rather depends on the management practices. In other words, it is the management and not the system that matters. We received good evidence of this from Dr Goulding of the Institute of Arable Crop Research at Rothamsted, who stated: There is a choice. You can get diversity by creating a less efficient fanning system within the crop and having ether plants there or you can have effective production of cereals at 10 tonnes per hectare and having semi-natural habitats a round the crop. It is almost a matter of choice which way we go". The proof of the pudding is that Rothamsted, which is an all-arable, non-organic farm, has seen no loss of what I understand to be a quite wide diversity of bird life over the past few years. As my noble friend Lord Gisborough pointed out, that evidence is supported by the Game Conservancy Trust. The Minister will no doubt know that the conservancy always has a wealth of scientific evidence to support its conclusions.

The Game Conservancy Trust's farm at Loddington, which I have visited, is an excellent example of how a conventional—there is that word again—modern farm can restore biodiversity through appropriate management: through grass margins, arable fields, beetle banks, game conservation headlands and by using the wild bird option on their set-aside. It works very well indeed.

My point—and I believe it is the same one made by the noble Baroness, Lady Young of Old Scone—is that from a purely ecological point of view, it would make more sense to increase government support for such schemes as countryside stewardship and arable stewardship, which are available to all farmers, rather than just the organic sector. To be hard-nosed about it, even at current conversion rates, organic farming will cover only up to 5 per cent of all British farmland in a few years. Even if one were to double that figure, generously, to 10 per cent, 90 per cent of British farmland and the British environment will still not be affected by whatever goes on on organic farms.

The schemes which I have mentioned—countryside stewardship and arable stewardship—would deliver huge environmental benefits to the other 90 per cent of farmland. However, I am afraid that at the moment stewardship is wretchedly underfunded. It is oversubscribed by 60 per cent and, I understand, has an annual renewable budget of about £7 million. The arable stewardship scheme is still in its early pilot stages. The noble Baroness, Lady Young, also rather neatly found a funding solution. I can go along with modulation as long as it starts above where my farm stops. Will the noble Baroness give us some reassurance that the muddle that MAFF has got itself into over the new organic farming scheme will not jeopardise the already meagre funds allocated to countryside stewardship?

My noble friend Lord Reay, as chairman of the committee, hoped that I would say something about the Meat Hygiene Service. As a subservient member of that committee, I shall do so. A point endorsed in the committee's report was that one of the most striking features of the organic farms we visited—and it is probably true of all organic farms—is the very high standard of animal welfare and husbandry. Our report states that high standards of animal welfare are a clear benefit of organic farming and highlight techniques which could be used across all forms of farming.

Organic meat from those farms is reaching a ready and rapidly expanding market. One would have thought that it is a massive success story. However, the organic meat sector is reaching crisis point. I draw your Lordships' attention to a report from the Soil Association. The report has been only recently compiled—probably in September. The first page of the report states: The organic meat sector is at crisis point. Much of it, particularly that part not supplying supermarkets, faces imminent collapse if the Government presses ahead with proposed drastic increases in the frequency and cost of meat inspection by the meat hygiene service. This comes at a time when demand for organic meat has never been higher and is increasing rapidly". The effect mentioned in the report will go far beyond the organic sector. It will affect all livestock farmers who are trying to dig themselves out of the financial hole which they are in at the moment. It will affect all those who produce quality meat. It will affect the high street. It will affect butchers, farmers' markets, specialist food producers and their suppliers.

At the moment the Government seem to have an unhappy knack of saying one thing and doing something quite different. They say they support organic farming but then cut it off at the knees by suddenly axing the organic farming scheme only six months after it was announced. They say they want small farm businesses and specialist food producers to thrive. But the Government have done little so far except pile on the regulations, many of which are completely over the top. They have dragged their feet unforgivably since the beginning of the year on the whole question of meat inspection charges. In the face of overwhelming evidence and in spite of the clear existence of derogations for low throughput abattoirs from the requirements of the relevant directive, the Government have sat on their hands.

In May the Minister announced an urgent review, so urgent that the consultation period was reduced to an absurd five days. Five months later we have still not been given the results of this "urgent" review.

The Government have also tried to suppress a report by the Meat and Livestock Commission of September 1999. I am not surprised because that report blows the Government's argument clean out of the water. The conclusions at the end of the Executive Summary are quite clear: The degree of implementation of EU legislation, the charges and who pays have been reviewed across a number of EU Member States"— reviewed by the MLC— It is clear that whilst significant differences are occurring across the EU, the British meat industry is seriously disadvantaged compared to other Member States through a whole range of costs to do with meat inspection and BSE". Can noble Lords imagine any of our competitors in the European Union perpetrating these acts of self-immolation on a successful industry? We seem to be unique in this mad bureaucratic gold-plating. It is so damaging to our rural economy and to our social interests.

If that is the price of being communautaire, I believe it is too high a price. Will the Minister please tell the House when the long-awaited review will finally be published? When it is published I fear that it will be too late for the 40 abattoirs and slaughterhouses that have had to close since the beginning of the year.

1.41 p.m.

Lord Grantchester

My Lords, I apologise for being absent at the start of the debate due to the late arrival of my train at Euston. As a member of Sub-committee D I pay tribute to the help and guidance provided by Sir Colin Spedding, the specialist adviser to the committee. As retiring chairman of UKROFS, Sir Colin has an intimate and extensive knowledge of organic farming. I also thank our chairman, the noble Lord, Lord Reay, and our Clerk, Jake Vaughan, for the professional manner in which they led the inquiry and brought us to a unanimous report. I have to declare an interest as a conventional dairy farmer in Cheshire.

The report is timely. Against the backdrop of a severe crisis in all sections of agriculture, organic farming is booming. The funds allocated for the new organic farming scheme for the first two years have been exhausted in the first six months of operation. An application total of 700 is more than the total number of applications over the last five years under the organic aid scheme. A further estimated 250 applications, already in the registration process, have been caught out by the announcement on 4th October of the suspension of the scheme.

No doubt the continuing and deepening falls in conventional farming prices are behind much of the organic farming surge. A doubling of the budget to £30 million would be required to meet the current rates of application. Following the suspension of the scheme earlier this month, can my noble friend the Minister indicate when she envisages that the review will be completed? Can she give any undertaking that at least the scheme will not suffer a reduction in the amount of payments per hectare?

Other schemes under the agri-environment regulation that are similarly over-subscribed are rationed under a scoring system. Will the organic farming scheme be affected similarly? Can the Minister give any early indication on the priorities between the schemes?

I first became interested in agriculture through the organic movement, through the work of Newman Turner and Friend Sykes. I have to declare an interest as a past member of the Soil Association and the Henry Doubleday Research Association.

My understanding is that organic farming is a system of farming that puts its philosophy behind a sustainable agriculture dependent on a fertile soil. The healthy soil feeds the plant and is not merely an anchor for the plant whose nutritious needs are met directly through soluble products purchased in bags under intensive modern agriculture, hence the name the "Soil Association".

At that time little thought was given to environmental requirements and organic farming did not claim any moral high ground on genetics or biotechnologies. Justification for the organic aid scheme to aid farmers to convert was to cushion farmers for the loss of income suffered when their output fell during a transitional period before which organic status could be granted and thus higher prices received. The placing of organic conversion schemes under the agri-environment Regulation 2078/92 is unfortunate as organic farming, although undoubtedly bringing environmental benefits, was not primarily an environmental system.

Environmental designation has resulted in confusion through the double-funding provisions whereby payments for organic conversion are reduced by 10 per cent for the schemes that overlap. That is often disproportionate and has not been made clear to farmers before they decide to convert.

It is to be noted that conversion grants will be a component of the rural development Regulation 1257/99. Can the Minister explain how that may affect payments under the agri-environment regulations? Will environmental conditions or a form of cross-compliance cease to be a feature of the organic farming scheme and thus the arbitrary result of double funding avoided?

Is it to be expected that the budget will no longer have to balance the benefits to be provided between organic farming and environmental schemes? Can the Minister confirm that removing the organic farm scheme from the agri-environment regulation will not reduce the budget for schemes under the regulation, for example, the countryside stewardship scheme? That would mean more money available for such schemes which are presently vastly over-subscribed. What would be the effect on the budget of the rural development regulation?

Perhaps with that restructuring we can begin to discuss more rationally ways in which all farming methods can be made more environmentally friendly, the whole question of biotechnology explored and organic farming begin to appreciate the potential benefits from genetic advances.

I want to echo the words of my noble friend Lord Christopher. There is an urgent need to determine the strategy for agriculture against which such questions can be set and a clear future mapped out. Organic standards need to be underpinned scientifically. The report points out several anomalies that need to be addressed. The consumer has turned to organic produce from a lack of confidence in modern production systems to deliver wholesome food It would be unfortunate if the close scrutiny of organic standards disclosed elements of inconsistencies to our already sceptical public. I suggest to the Minister that future research and development requirements be focused on developing standards to eliminate such anomalies. The future of each and every farming system depends on maintaining public confidence in its integrity.

Finally, as livestock standards in organic farming are agreed across the European Union, I stress that UKROFS move as close as possible to EU agreed standards and that sector bodies of UKROFS learn the lessons of conventional farming and do not seek to impose higher standards and high costs on British farmers to their detriment when competing against imported produce.

1.48 a.m.

The Earl of Clanwilliam

My Lords, I too congratulate my noble friend Lord Reay on the report produced by his committee. I cannot sufficiently express my satisfaction at the report. Indeed, I refer noble Lords to its opening words: Organic farming is booming". That is music to my ears. Ten years ago such a remark would have been greeted with incredulity. Now that is not so. Indeed, the queue to join the Soil Association list of approved organic farmers has outstripped the funds available from MAFF, as other noble Lords have already demonstrated.

The report is a masterpiece of logic and impartial examination, not only of the organic farming process and its economics, but also of the acceptability of the principle by the public. At the time of the report some 1.6 per cent of UK farmland had converted to full organic farming. The minimum requirement to meet demand is to raise that level to 5 per cent in the shortest possible time with a longer-term aim of 30 per cent by 2010. My noble friend Lord Gisborough has done a good rubbishing act of the organic farming principle, on which I congratulate him.

The point is that the effect of the Soil Association and its organic philosophy has been reflected in agriculture in general in the past 10 years. While there have always been excellent conventional farmers who look after their property with skill and expertise, it is true that a great number of them have now become more extensive farmers. So at least the organic principle has permeated throughout the agricultural scene.

In the meantime, there has been what can only be described as an explosion both of interest from the public and of applications to join the Soil Association among converts to organic farming. There must always be a basic standard of the very best, and that basic standard is the standard set by the Soil Association. Many other systems are viable; many other systems are useful; many other systems are good. But without a basic standard as produced by the Soil Association, we would be greatly at a loss.

By April this year 240,000 hectares, up from 30,000 in 1998, were registered and managed as "in-conversion" organic land. Of that land 60,000 hectares were registered as fully organic. That alone is an immediate doubling of organically farmed land. The requirement to have a two-year period of conversion means that there will be another 60,000 hectares at the start of 2000 and a jump of another 120,000 hectares to 240,000 at the start of 2001.

But here is the rub. The Government have been extremely clever in twisting the arm of the Treasury and obtaining increased funds—up from £1.6 million to £6.2 million for April to August 2000 and another £8.5 million to April 2001. However, the first tranche was allocated within six months and the second tranche, planned for the period starting April 2002, has already been allocated.

It is not that increased funding is not appreciated. I assure the noble Baroness that it is, by all concerned. But it is a fact that events—it was Harold Macmillan who, when asked what was the greatest problem in politics, said, "Events, my boy, events"—have overtaken the department. MAFF spends only 3 per cent of its £3 billion budget on the agri-environment and organic farming receives but 0.2 per cent of that—the £6.2 million to which I referred earlier.

It is also worth noting, as the noble Baroness, Lady Young of Old Scone, said, that we only spend 3 per cent of our agricultural annual spend on the environment, compared with the 11 per cent spent by our neighbours in Europe. Hence we can see that the figure of 70 per cent of imports of the whole organic turnover comes from Europe. Again, in respect of research, MAFF is spending £125 million. But organic farming which, in the light of this report, may be claimed to be the healthiest and most sustainable agricultural option, receives £2.1 million or 1.2 per cent of the total.

I must apologise for this deluge of figures, but it is vital to have the facts acknowledged. They clearly demonstrate that there is a grave shortfall in funding, not only for those presently wishing to convert, but also for all those who will decide to convert in the immediate future.

I have a Written Answer to a Question I asked about the amount of money spent since 1996 on various forms of extensive farming. The figures show that £137 million was spent on ESAs; £70 million on the countryside stewardship scheme; £32 million on SSSIs, and £18.5 million on organic aid—that includes the last two sets of figures.

Much has been said by other speakers about the need to maintain the prevalence of ESAs, the countryside stewardship scheme and so forth, and I fully support that. But there could be another balance in this matter when we consider that of those large sums there is only another £30 million required to subvent the increased requirement for organic farming. Can the Minister say what plans there are to fill that gap? I appreciate that we have a noble and effective friend at court in the person of the Minister. The noble Baroness will have her work cut out to wring more money out of the Treasury. But more money there must be, especially if the judgments of the Select Committee are to be implemented.

I think I may be allowed to construe from the report a feeling that organic farming should be taken up as a mainstream policy option for UK agriculture. Like everything else it needs more funding, but in this case the money is there. It is a matter of priorities.

As has been said by others, organic farming is particularly useful for animal welfare, biodiversity, water quality and a whole range of other activities which are all available to what are known as "conventional" farmers. Many are taking them up much more seriously. Indeed, a great deal more information is now available to them about the effect of pollutants compared with 10 or 15 years ago.

The figures may seem to be in proportion, but they only highlight the position of organic farming as the Cinderella of the industry. It is true that much of modern and intensive farming is an industrial activity. As the GM debate demonstrated, the loss of credibility is on the part of the agro chemists who have demonstrated clearly the economic origin of their motivation. The public have responded with deafening solidarity. The farmers are responding by flocking to the organic colours in droves.

I particularly ask your Lordships to note the seminal evidence given by the director of the Soil Association, Mr. Patrick Holden, and his chairman, Helen Browning. I take this moment to declare my interest as a patron of that organisation which has been such a driving force in the promotion of organic farming in the face of widespread scepticism for over 50 years. But their time has now come and it is up to the Government to meet the challenge with courage and cash, particularly cash—and cash from within their budget. I commend the report to the Government.

1.57 p.m.

Baroness Miller of Chilthorne Domer

My Lords, I, too, join with the other members of the committee—of which I was pleased to be a member—in congratulating the chairman on doing a great job in pulling together the diverse opinions, of which we have heard several this morning, and producing a report that is balanced but certainly not anodyne. One of the points that has come out clearly through the debate today is the question of funding for conversion. It is also pleasing that the report is so topical.

The case for dependable and clear funding has been coherently made. While we were pleased that the Government chose to put significantly more money into organic agriculture, it is a great regret that they under-estimated demand to the extent that they did. That might be understandable. But I find their response to paragraph 120 of the committee's report, where we say that more funding should be available, that, availability of funding will be a material consideration in determining future priorities", to be less than adequate. Does the Minister feel that that is satisfactory? As several noble Lords have already said very eloquently, we need an overall strategy. The Government should be determining future priorities and then determining how to fund them. That would be a far more satisfactory approach.

While I am on the subject of funding, I should like to draw noble Lords' attention to the Countryside Agency's response to the government document, Agriculture: The Way Forward. The noble Earl, Lord Clanwilliam, made a number of extremely good points about the agri-environment schemes and I believe that noble Lords will be interested to hear the response of the agency. I make no apology for quoting it at length because I think it is significant to our debate this morning. The agency said: If increased funds were available for the Organic Farming Scheme. significant numbers of additional farmers could be assisted in the process of converting land to organic production. Organic farming has benefits for the environment. Wider benefits to rural areas also result, for example from the increased need for labour on organic farms. We would therefore like to see increases in domestic demand for organic produce supplied as far as possible by local producers rather than by imports". I believe that the agency put that very succinctly and tied in the various benefits that we, as a committee, outlined sketchily in paragraph 108 of the report.

However, as some noble Lords observed, for those benefits to be entirely realised, much more attention needs to be paid to the marketing and processing infrastructure. The noble Lord, Lord Willoughby de Broke, mentioned small abattoirs and the noble Lord, Lord Christopher, talked about co-operatives and "vertical farming", as it is called.

As the Government currently have task forces engaged in writing the chapters of the regional development plans upon which all this marketing and processing infrastructure is likely to depend, they are aware that the writing of those regional chapters is not, at present, receiving much input from the rural practitioners who have considerable experience in developing co-operatives and good practice in this area of work. For example, in my own county of Somerset, the organic milk producers' co-operative has been tremendously successful, not only in selling organic milk but also in giving support to its members in the way of help and advice. At a time when farming is very difficult, the membership greatly values that element of belonging to a co-operative. It is important that those regional factors, upon which the funding for the next six years will be assessed, are based on good experience in the field and that we build on such experience.

Several noble Lords chose to question some of the benefits and wondered why we would want to single out organic farms in particular, as opposed to putting more money, for example, into the ESA or the Countryside Stewardship schemes. I believe that noble Lords need to bear in mind the fact that ESAs cover only a certain percentage of the country and that what we are trying to achieve is a rural Britain which enables smaller family farms to form a part of the farming community. That should not be entirely dependent upon whether people live in a beautiful or a special landscape. Those landscapes have been made special because they have been managed as small family farms for many hundreds of years. It is often the small family farms in areas with no special designation that need the kind of help that an organic scheme can provide. Indeed, those are the farms that have taken to organic farming with particular success.

The research and development budget for this area was mentioned by a few speakers. The Government have, very fairly, made the point that they have increased this from £1.5 million to £2.1 million. However, when we consider that the total budget for research and development for MAFF is about £130 million, this is a very small amount and does not even equate to the share of the market that organic produce holds.

The evidence that weighed very heavily with me when the committee was considering the research and development element came from the Veterinary Epidemiology and Economics Research Unit at the University of Reading. Miss Hovi, who gave that evidence, said: I perceive organic farming to be very much in the vanguard, to moving, implementing and innovating things…So I think that organic farming, even if it remains marginal as a farming system, is a very important area of innovation within agriculture". That is something that the Government need to bear in mind when allocating research and development money. Organic farming is far from being what one or two noble Lords may have suggested today; namely, a case of harking back to a golden age, or perhaps, a slightly precious cult. Indeed, I do not think that organic farmers would agree with that view of themselves. They have been in the vanguard of developing several systems from which conventional agriculture has benefited enormously. I have in mind, in particular, some of the methods of controlling pests through natural biological pest control, using predators. The cross-over in research and development from organic into conventional farming is exactly the kind of area where we would like to see greater spending. I hope that the Minister will be able to give me some assurance in that respect.

I turn now to the other questions raised about the organic method of agriculture. Several noble Lords questioned whether problems with water quality would be well addressed by organic production. I should point out that Wessex Water, for example, now chooses to pay a premium to farmers within its catchment areas if they switch to organic. I am sure that the company would not do so if it did not believe that there were significant benefits involved. Indeed, there are also the standards set for farmers. I have in mind the encouragement to grow hedgerows which is providing significant benefits in areas with high levels of soil erosion.

Finally, I should like to mention the GM versus organic question. I could not fully agree with our report in this area—nor, I believe, would these Benches—where we looked at just the modus vivendi. It is a very difficult area. However, if it came to the crunch and became apparent during the research and field trials that a choice would have to be made between genetically modified and organic crops because pollen pollution would contaminate organic produce to the extent that its cultivation would become impossible, we and, I believe, the public would decide that GM production should stop and organic production proceed.

We need to bear in mind that we face the next round of World Trade Organisation talks; that we are a small island with fairly small farms; and that we have finally recognised that wildlife in our country has to live side by side with farming. There is no doubt that organic agriculture is the healthiest way forward in that respect. Whether or not one believes that organic food has particular dietary benefits—I believe that, as does an increasing proportion of the public—I believe that we need to consider a strategy for farming based on the organic model. We need, therefore, to encourage the organic model to be healthy and to supply what is an extremely healthy market for British produce. This report has usefully defined the contribution that organic farming can make to the overall picture of agriculture today.

2.8 p.m.

Baroness Byford

My Lords, it gives me enormous pleasure to comment on the discussion that has taken place. First, I wish to congratulate my noble friend Lord Reay on his exceptional chairmanship of the committee and to thank the committee for its challenging report. The report balances the wishes and desires of people to have safe food and organically grown food with the realisation that conventional production is necessary in terms of feeding the wider world. The report looks to the future and to the role of GM crops. The report is a tribute to the work of the committee. I am only sorry that I was not able to take part but I thank everyone who contributed to the report.

The report touched on many issues. At this time on a Friday your Lordships would not be happy if I were to discuss every item which has been mentioned and which I think is important. However, as other noble Lords have mentioned, I wish to refer to the big rush to organic production and the sadness at the lack of funding available. Hopes have been raised. Governments must plan these matters well in advance. Those of us who are involved in agriculture know that it is a long-term commitment. It is not something that one can jump in and out of. At this stage I should declare my interest as a former poultry farmer. Our family has a farm in Suffolk. We grow our own vegetables at home. Therefore I suppose that we could be classed as organic producers, and we constantly have to compete with the squirrels which raid our vegetable patch.

The committee has highlighted important topics. It has mentioned conversion to organic farming and the fact that yields from organic farming are lower. It has mentioned livestock standards and GMOs—a subject to which I wish to refer later. I believe the committee agrees that subsidies should be available only for "pump priming" and not for the long term, and that it is unrealistic to set targets in this regard, although many would wish that. I am glad that the committee mentioned that. The whole organic scheme has been over subscribed—I think that my noble friend Lord Jopling said that it had come to a juddering halt. That reminds us how sensitive agriculture is and how quickly things change. I am sure that the House will not take it amiss if I repeat that farming is in dire circumstances today.

Training courses have been mentioned briefly. My noble friend Lord Willoughby de Broke particularly mentioned small abattoirs. Again I shall return to that matter. Before I mention some other areas in greater depth, I congratulate my noble friend Lord Lansdowne on his maiden speech. It was lovely to hear that extremely thoughtful and challenging speech on the balance that needs to be drawn. I am sorry that his maiden speech has been made so late in the Session but we were glad to hear from him. We hope that he will continue to speak in this House.

I was pleased to hear the speech of the noble Lord, Lord Middleton, as he has served on the committee for many years. I believe that in the past he has chaired the committee twice. I thank him for his good contribution. I shall not comment on all the contributions.

As I say, the difficulty the Government face is in drawing a balance between organic and conventional production. My noble friend Lord Jopling highlighted what we would describe as conventional farming. That has an enormous role to play. He raised individual issues concerning the organic industry and he referred to the doubts about labelling. The Minister will remember that she and I spent several days in Committee last week, where I perhaps spoke for too long about the need for labelling. The debate today has highlighted the discussions that will be very important to the new Food Standards Agency when it is set up. Our contribution today will have been worth while if it does nothing but highlight this important issue.

My noble friend Lord Jopling and the noble Lord, Lord Christopher, referred to labelling in the European Union, as well as in third world countries and in the wider world. Consumer confidence is immensely important, a point made by many noble Lords, and therefore labelling and knowledge are very important. Although I notice that the noble Lord, Lord Rea, is no longer in his seat, I shall make the point that the issue of nutrition is also very important.

My noble friend Lord Jopling also referred to the premium that is paid. He had doubts as to whether, as the organic sector grows, the consumer—we are, after all, producing food for the consumer to buy—will continue to be willing to pay a high level premium for it. Other noble Lords referred to the applications of those applying to join the scheme who find themselves unable to do so.

I congratulate all members of the Select Committee on their work and thank them for their thoughts and for sifting through and compiling all the evidence, which has resulted in a report which is readable, valuable and interesting.

Growth projections for the organic sector, both here and in Europe, are startling—particularly when one considers that it started from a very low point. In the light of the projected growth it is important that imports into the UK are reduced as quickly as possible. Many noble Lords referred to the fact that 70 per cent of our organic food is imported.

In this context, the rapid rise in both half-day and full-day visits to the Elm Farm Research Centre is encouraging. However, the value of the visits is somewhat lessened if those who go along to find out about organic farming are unable to start speedily the process of conversion. We on this side of the House recommend that a review of the follow-up work be done to ensure that there is no avoidable delay for those seeking further advice or financial assistance.

As conversions increase, the possibility of conflict between organic and GM production methods will arise. The ongoing discussions should be expedited and clear rules established to reconcile, first, the Soil Association's requirements for maintaining a non-contaminated crop; secondly, the latest results of research into the distances that various pollens can be carried on the wind—as global warming increases, both the frequency and the average speeds of the winds become more critical; and, thirdly, a concept of fair dealing which means that neither organic, GM nor conventional will be see seen as more favoured; nor will a farmer who chooses to remain with conventional methods be seen as disadvantaged.

Perhaps I may comment on one or two other points before I ask questions of the Minister. The UKROFS-founded standards launched by European Union Regulation 2092/91 in 1991 were minimum harmonised rules. Most noble Lords who have spoken pressed the Government to ensure that we should all work towards whatever rules are laid down. An organic label certifies that a product is produced in a particular way; it does not guarantee that it always has the desirable qualities that the general public believe it has. The Food Standards Agency should issue information to the public which makes clear what organic products stand for. I have spoken about regulations in regard to imports.

Two noble Lords referred to the farm at Loddington in Leicestershire. As a Leicestershire lass, I am embarrassed not to have been there. They stressed the important point that biodiversity can be restored to conventional farms by appropriate management, a point to which my noble friend Lord Gisborough referred. On our farm in Suffolk we are extremely conscientious about protecting hedgerows and encouraging wildlife and take great care when we have to spray.

Several noble Lords referred to the problem of food safety. The report says that there is no conclusive evidence that organically produced food is safer or less safe than that produced conventionally. The balance of the report is very important. As to nutrition, the British Nutrition Foundation stated that the nutritional value of organic crops is likely to be the same as that of conventionally grown crops.

At page 24 the report goes on to say that there should be, a clear and intelligible basis for organic standards for both production and processing, and so urges that the standards should be underpinned by detailed scientific research". On that note, I again urge the Minister that I am sure that all noble Lords around the House would wish the GM crop trials to continue and not to be disrupted. GM crops will not be able to be sown and grown in this country until the trials are completed. Great concern has been expressed about the disruption to those trials. We on these Benches very much support the Government's commitment to the trials going ahead because that research must be carried out before general commercial planting can take place.

As I said earlier, EU countries started originally on pump priming. However, I beg the Government to ensure that our organic farmers are treated even-handedly. We on these Benches are concerned that in some countries subsidies are being continued, which will obviously put our organic farmers at a disadvantage.

I have mentioned labelling and standards to the Minister, and I shall not proceed on that issue any more heavy-handedly. The Minister is aware where I stand on those issues. It is extremely important that, whatever farming methods we use in this country, be they organic, conventional or moving towards GM crops, we must be able to label them for the consumer. At the end of the day, the consumer makes the choice and we need to have it laid down.

The right reverend Prelate the Bishop of Hereford referred to a matter which worries me greatly. I ask the Minister, when she comes to respond, to make particular reference to it. That is the issue of late payments. We in the industry all know that we are very heavily regulated, whether in conventional or organic farming. However, the question of late payments to small farmers is extremely worrying and I have had it raised with me on my tour around the country visiting other farms.

The example of the difficulty with pigs was raised by the noble Lord, Lord Rathcavan. Indeed, the noble Lord, Lord Christopher, mentioned in particular the problems with poultry, of which obviously I have great knowledge. Those problems are of great concern to us.

I return to the question of the small abattoirs. I am sure that the Minister will not be surprised that I raise this point in particular. The noble Countess, Lady Mar, is not able to be with us today and so is not in her seat, but she really has fought the corner on behalf of the small abattoirs. One of the great advantages of organic farming in particular is that people wish to identify with their local area and get produce from their local community. At a time when so many of our small abattoirs are failing—we have just heard of another 40 such this year—due to over-regulation and overbearing costs which our counterparts overseas do not have to carry, this issue really is of immense concern.

If we want the organic sector to succeed, as I am sure we all do in this Chamber, those in the business of producing organic meat must have access to abattoirs near to them. Anyone who knows anything about the end product of meat knows very well that the quality of meat is higher when the animal has not had to travel far before being killed.

With those few comments, I thank all noble Lords who have worked so hard on this particular report. I am an outsider and someone who is now not herself a practising farmer but who works within the accepted conventional sense. I have also been at the poultry end of farming. This issue is an enormous challenge to us as a country. I do not see it as organic versus GM versus conventional farming. I believe that there is a role for all of us. Some have spoken of organic food as being a niche-market, but I believe that it is much more than that.

Whatever we do, and whichever system we follow, we must make sure that each and every farmer operating in our country has an equal chance to compete on an even and level playing-field with their colleagues overseas.

2.24 p.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Baroness Hayman)

My Lords, like the noble Baroness, Lady Byford, I am grateful to the committee for its report and to all noble Lords who have spoken in what has been an impressive, well informed and stimulating debate. As the noble Lord, Lord Reay, pointed out in his excellent introduction, the debate is extremely timely. These matters are of great concern at the moment. We should all be glad to have had the foundation of a report whose quality, I suspect, reflects the quality of the chairmanship of the committee, a point made by many noble Lords who spoke today.

The debate has also been the occasion of an extremely impressive maiden speech from the noble Marquess, Lord Lansdowne. We were all struck by the thoughtful, well informed and confident, based on knowledge, nature of his speech. We heard an equally impressive contribution in the manner of a valedictory from the noble Lord, Lord Middleton. His contribution in your Lordships' House on these matters has been enormous over the years and it is one that we should all recognise.

We heard a provocative speech, as is often the case, from the noble Lord, Lord Gisborough. We could have had a debate on his speech alone, but that would perhaps have taken us too late on a Friday. It aided the debate that we had some questioning voices—I think of the noble Lords, Lord Gisborough and Lord Jopling. An exceedingly questioning voice was that of my noble friend Lord Christopher. He posed unanswerable questions which I am glad to say he later withdrew. However, he rightly reminded us that we perhaps need to raise our heads above the current concerns—not because they do not need to be addressed or are not of extreme importance but because we need a strategic overview against which we can look at the individual decisions that have to be taken in response to those events of which the noble Earl, Lord Clanwilliam, warned us.

We even heard of the conversion of the right reverend Prelate the Bishop of Hereford. I suspect that it will make slightly smaller headlines, on the basis that it was of an agricultural rather than a theological nature, than it might have done, but the right reverend Prelate's contributions on rural issues are always carefully listened to in your Lordships' House. I became aware on that early visit to Hereford how important a player he is in that agricultural community and how well informed he is on issues relating to it.

The Government welcome this report, which is the outcome of a thorough examination of the issues arising from organic production. The Government's response has been alluded to by many noble Lords who have spoken in the debate. I do not think that it would be productive for me to go through the response in every detail. Instead I should prefer to concentrate on those issues to which particular attention has been drawn in the course of this wide-ranging debate. I am pleased to note that there is a great deal on which the views of the committee and those of the Government coincide.

As many noble Lords have said, the debate takes place against the background of very rapid growth both in the demand for, and the supply of, organic produce. A measure of the rapidity of this growth lies in the fact that in April this year three-quarters of the land which was being farmed organically was still in conversion. In the year to last April the number of registered organic producers in the UK increased by a half—to 1,500—and the value of primary organic production reached £50 million. Since April, more than 700 producers have applied for aid under the organic farming scheme. A number of noble Lords have pointed out that others would have done so but for the suspension of the scheme. I shall return to these issues, but I should point out that those 700 applications since April are in complete contrast to a figure of only 400 applications in the five-year period to June 1999.

A comparison of those figures gives some background to the underestimation made of the uptake that would come about when the Government's scheme was expanded and the rate of aid increased. That budget has been increased ninefold: £6 million in the first year, £8.5 million in the second year, and £9 million in the third year. I am grateful that at least one or two members of the committee and several noble Lords who spoke today have recognised, despite their criticism of some aspects of the scheme, that this is a very substantial increase in support for the organic sector. The policy has been to stimulate conversion, and that policy has succeeded. With success have come problems; no one would deny that.

These developments suggest that there is a real growth in interest in organic farming and food. The growth has indeed been so rapid that it has confounded our forecast of uptake under the Organic Farming Scheme, and we have been obliged to close the scheme to allow a review to take place. In that review we shall need to consider a wide range of factors which influence the decisions of farmers who may wish to undergo organic conversion.

As was pointed out by the right reverend Prelate, organic farming can no longer be dismissed as a niche option. The noble Baroness, Lady Miller, suggested that it had been viewed as a "slightly precious cult". Equally, however—and a number of noble Lords have pointed this out—organic farming should not be seen as the only sustainable method of farming. Other methods can be sustainable and bring some of the environmental benefits associated with organic farming.

The growing interest of the major retailers reflects a substantial and apparently continuing growth in consumer demand, founded partly on perceptions of product quality—I shall not enter into the debate about taste, with or without a blindfold—and partly on the understanding that organic farming generates benefits for the environment. A sustainable market for organic produce must rest upon secure market foundations and there are clear signs that those foundations are being established.

The Government have recognised, as have noble Lords, that there is an initial loss of income for many producers converting to organic which represents a barrier to entry into the organic sector. But the committee also concluded that organic production does not necessarily mean lower profitability for the producer once that conversion is complete. Indeed in a market which is growing faster than supply, the prospects for profitability should look encouraging. I was glad to note today support from many speakers as well as support in the report of the committee for the view that the levels at which organic production settles should be for the market to determine rather than for a government to set targets for production and consumption.

We are similarly in accord on the value of conversion aid as a means of easing entry into the organic sector. This is justified by the resulting environmental benefits which, as my noble friend Lady Young of Old Scone pointed out, provide benefits for as long as the producer remains in organic production in exchange for very time-limited conversion payments. However, my noble friend also made the point, as did the noble Lord, Lord Redesdale, and several others who have spoken in the debate, that a proper balance needs to be maintained between different elements in our portfolio of agri-environmental schemes. When funding proves to be a constraint, as it has in recent weeks, we must ensure that the available funds are used to best overall effect.

I was asked about the plans for the review of the Organic Farming Scheme. Some harsh comments were made about the scheme. I have to say that there is an element of 20–20 hindsight in some of the criticisms made about the lack of prediction regarding uptake. We saw a 30-fold increase in demand in response to the doubling of aid. That is an enormous increase. It was undoubtedly based on several factors and reflected a range of issues in agriculture at the present time.

Many speakers endorsed our view that maintenance payments are not the way forward. Our priority in reviewing the scheme will be to examine ways of improving the existing conversion scheme to encourage expansion. We shall need to take a new look at the nature of the barriers to organic conversion to see how they affect producers in different sectors and circumstances. We shall need to examine why it is that the new scheme has been so heavily over-subscribed, and whether the advice that is available to producers provides sufficient safeguards against ill-advised conversions which have little prospect of viability. We may need to consider whether some forms of conversion offer greater environmental benefits than others and whether we should introduce greater differentiation between payment levels for different types or uses of land. We shall certainly need to think about whether applications should be prioritised so that limited funds can be allocated to best overall effect. Finally, there may be benefit in examining a number of market factors which will influence producers' views as to the financial prospects for conversion, a matter to which the noble Marquess made reference.

A number of noble Lords, including the noble Baroness, Lady Byford, and the noble Lord, Lord Rathcavan, pointed out the number of producers who were planning organic conversion who may be unable to proceed because of the suspension of the scheme. In particular, those who had already secured certification by a sector body but had not applied for conversion aid by the time the scheme closed on 4th October may have entered into commitments from which it is not easy to withdraw. We must recognise that. While the possibility that such a situation could arise was clearly signalled in the scheme literature, we are giving urgent consideration to the position of those producers at the request of the sector bodies. We understand also that other producers may have been making preparations for conversion which had not reached the stage of seeking certification. To them I have to say that we will review the limitation in the existing aid scheme which requires certification to have been secured no more than three months before an application for aid. But I must emphasise that when the conversion scheme is reopened, such producers will be subject to whatever conditions are then applied.

A great deal of the debate has focused on the reasons why consumers choose to purchase organic products and the need for their perception to be a positive one if the organic sector is to grow and prosper. We certainly agree with the view of the committee that production standards for organic food and the way in which they are enforced must be such as to command the confidence of the consumer—and perhaps I should say the confidence of ex-Ministers of Agriculture such as the noble Lord, Lord Jopling. We shall have that very much in mind as the new community standards for organic livestock and organic livestock products are implemented next year. That point was made also by the right reverend Prelate. As to the vehicle for achieving greater confidence in third country systems, greater involvement of IFOAM may prove to be a way forward if consensus can be achieved by member states.

We subscribe to the suggestion of the equal playing field and consumers understanding and having clear information. The noble Lords, Lord Redesdale, Lord Monk Bretton and Lord Gisborough, asked whether consumers understand the meaning of an organic label. There is already a leaflet in the MAFF Food Sense series which explains what organic farming is and how the standards are set. Responsibility for that area of work will largely move to the FSA, which the noble Baroness, Lady Byford, and I have recently been discussing, although MAFF will retain an interest in and responsibility for standards. I very much take the point on labelling, whether it is proactive labelling about organic products, warning people who might be endangered by an allergic reaction—of which we had an example today—or whether it is informing people who, for ethical or religious reasons, need to know what is in their food. The quality of the information and communication with consumers will be vital.

There is a specific issue relating not only to consumers but also to producers on national labelling and the lack of clarity. At the moment that works to the detriment of some British producers. We are looking carefully at whether we can do something in that area.

The EU livestock regulation and the standards for livestock and livestock products adopted by the Council of Ministers in the summer were raised by the right reverend Prelate. I shall certainly not give a red or yellow card to the noble Lord, Lord Rathcavan. He described the problems and issues with a clarity that I shall not try to emulate. The regulation introducing the standards both allows member states to adopt stricter standards for the products and provides for derogations from them. Decisions on how the standards are to be implemented need to be taken to enable the regulation to be implemented by next August. As the noble Lord rightly predicted, those decisions have not been taken because they need to be informed by the conclusions of an industry working group which has been considering the issues concerned and those of UKROFS, the body responsible for implementing organic standards in the UK. We are some way from reaching conclusions yet.

Mention was made of GMOs, and we recognise the concern in the organic sector on the question of the planting of genetically modified crops. It is a subject on which the European Communities Committee has also produced a valuable report. But the point was also made today about the value of fostering the safe development of biotechnology so that its potential benefits can be realised. The noble Lord, Lord Gisborough, raised the issue and the debate that took place within the organic movement as to whether GM would have a place there.

Some speakers such as the noble Lords, Lord Reay and Lord Gisborough, mentioned the need for the creation of a modus vivendi between the trials and organic farmers. We seek to encourage dialogue between the two sectors to identify means of improving communication and minimising any adverse impacts of one sector on the other. I was grateful to the noble Baroness, Lady Byford, for her support for the proper conduct of the trials so that we all have the information on which to base decisions.

The issue of R&D spending was raised by several noble Lords—the noble Lord, Lord Redesdale, the noble Baroness, Lady Miller, and my noble friend Lord Grantchester. We have increased the budget from about £1 million in 1997–98 to just over £2 million. Organic farmers will benefit from a range of work undertaken elsewhere in the Ministry's R&D programme to which the noble Lord, Lord Monk Bretton, paid attention. Before we consider the allocation of yet more money to organic R&D we need to assess the impact of the increased resources that we have already provided and take into account some of the views expressed today, for example by my noble friend Lord Grantchester, as to where the priorities should lie.

The noble Lords, Lord Reay and Lord Willoughby de Broke, and the right reverend Prelate made reference to small abattoirs. We well understand the importance of access to local slaughtering facilities, particularly for organic producers. We also recognise the deep concerns about the prospect of increased charges for veterinary inspections in abattoirs. It is not our intention to put out of business small operations, particularly those that specialise in a high quality product, and we have taken a number of steps to prevent this. My right honourable friend the Minister announced recently that charges for specified risk material controls will now not be imposed before 2002–03 at the very earliest. Low throughput abattoirs will not be required to have full-time supervision by a vet during post-mortem inspection.

We have put in train two reviews to identify ways in which inspections can be carried out most effectively at least cost to the industry. One is a review by the Meat Hygiene Service of its levels of inspection in individual low throughput premises. The other is an efficiency review of the operations of MHS staff in licensed slaughterhouses, cutting plants and cold stores. In addition, following the Government's announcement last week of a review of the regulatory burdens on the farming industry, a group has been appointed to undertake an urgent review of the burdens on the meat industry, and in particular slaughterhouse regulation and meat hygiene rules.

In response to the noble Lord, Lord Willoughby de Broke, far from suppressing the MLC report on charging for meat hygiene inspections in other countries, we have welcomed its publication. My right honourable friend has written to the European Commission to draw its attention to the report in order to ensure that we operate on a level playing field and that other countries do not under-implement or subvent their own producers. I hope that the noble Lord finds some reassurance in that.

As to the issue of dual funding, I can tell my noble friend Lord Grantchester that organic conversion aid is paid as part of the agri-environment package, because the agri-environment regulation is the only legal basis for the payment of such aid. That will remain so under the rural development programme. Therefore, the dual funding problem remains a potential issue.

The right reverend Prelate was worried about the reduction in payment under the Organic Farming Scheme. Payment is made only where there is a direct overlap between its environmental conditions and those of the ESA or the Countryside Stewardship Scheme. The reductions per hectare are very small. As the noble Lord, Lord Rathcavan, rightly pointed out, it is important to ensure that under EU rules there is no double funding and we do not pay for the same things twice.

The noble Baroness, Lady Miller, and my noble friend Lord Christopher drew attention to the mechanisms for the marketing of organic produce. In particular, the committee's report drew attention to the potential benefits to organic farmers in terms of market position and distribution and packing costs of the establishment of co-operatives. The Government agree that greater collaboration can result in marketing advantages. The benefits of collaboration include increased scale, access to professional marketing, technical and administrative support, cohesive negotiating ability, improved supply chain communication and many other benefits that normally are available to bigger businesses. In November of last year we joined with the NFU to launch Building Business Advantage, an initiative to encourage primary producers, including organic producers, to consider membership of a collaborative marketing group.

As regards the concern of the noble Baroness, Lady Miller, about regional development programmes, they are being developed to try to provide a flexible basis for the implementation of the regulation. As I am sure the noble Baroness is aware, extensive consultation is taking place at present. Some the points she made are being made clearly there.

In conclusion, it has been an extremely useful debate based on an extremely useful report. I stress again that we are committed to organic production; and that is the reason that we brought in the new scheme and have put in the increased resources. But we believe that it is time now to take stock to see that the money is being used to best effect. We recognise the disappointment that that has caused, but the rapid evolution of the sector and the need for that strategic thought means that we can take some benefit from the pause and ensure that the new scheme is brought in line with the developments in the sector. We welcome any views from the committee, or individual members on it, while that review takes place.

I thank the chairman and the committee for the time and effort they have put in to both the review and today's debate.

2.50 p.m.

Lord Reay

My Lords, I thank all noble Lords who have taken part in an excellent debate with a fascinating range of speeches, none of which I thought need test anyone's patience—at least, not a chairman's. I am always pleased when noble Lords who are not members of the sub-committee take part in a debate. We had a fair sprinkling today. It helps to justify the choice of subject, a matter which is always of concern to a committee chairman.

I am grateful to those who said kind things about me—far too kind, I fear, in some cases. It has been a great pleasure and privilege for me to have had the opportunity to chair the sub-committee for three years, in particular while it conducted inquiries on such interesting subjects as this. I very much appreciate and echo what my noble friend Middleton said about the tradition of balance and objectivity that the sub-committee seeks to bring to its reports—a sub-committee which my noble friend chaired twice in such a distinguished way.

I add my congratulations to others given to my noble friend Lord Lansdowne on his maiden speech. It was extremely able, knowledgeable and interesting and has given us much to think about, I am sure that it will repay careful study. It is one of the tragedies afflicting this House at the present time that the House cannot be confident that it will be able to enjoy many more such contributions from my noble friend.

I take up one issue of the noble Lord, Lord Redesdale. He said that we have no food shortages today and so lower yields present no problem. That is true in the context of the European Union under the CAP. The CAP artificially stimulates production, which produces surpluses, which then cannot be disposed of because of international trade rules. However, it would not always be true if we did not have such a situation and a free market, or something closer to it, operated in its place.

There were calls for MAFF to come forward with a new agricultural strategy. But it seems to me that in this country we have decided on the direction we would like agricultural policy and support to go: that is, away from support for production towards a free market with a greater emphasis on the environment. Only if that happened could we expect agri-environmental schemes to be adequately funded. The trouble is that we cannot put this policy into effect because we cannot achieve a majority for it in the European Council. What we might do next is a subject for another debate and perhaps another inquiry.

I agree with the Minister that there is much in common between the Government and the committee on many aspects of this subject. However, as the noble Baroness said, during the debate she received some hard hitting criticism of the organic farming scheme. She did her best to deflect it with her usual charm and ability. I do not wish to comment further on that subject; we have made our criticism.

I am grateful to the Minister for throwing some light on the elements of the Government's thinking as they try to work out what to put in place of the scheme. We shall want to study carefully what she said on that subject, as on other aspects of her reply. I commend the Motion.

On Question, Motion agreed to.

House adjourned at five minutes before three o'clock.