HL Deb 08 March 2000 vol 610 cc1088-147

5.37 p.m.

Lord Palmer rose to call attention to the economics of agriculture within the United Kingdom; and to move for Papers.

The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper.

Firstly I would like to place on record how grateful I am to my fellow Cross-Bench Peers for allowing me this debate. We have not had a full debate on agriculture itself since December 1998 when the noble Lord, Lord Kimball, masterly galloped us through the problems facing the farming industry. Fifteen months on, the farming industry is in a real crisis.

The Prime Minister recently said that parts of the farming industry are in crisis. That, my Lords, is not true. All sectors of the farming industry are in the deepest crisis in living memory, as I shall shortly try to illustrate.

I must declare an interest as someone who tries to farm in the Scottish Borders, but I am an arable farmer who has fared marginally less badly than the other sectors.

It must not be forgotten that no business can go on continually losing money and the horror for farmers is that it is normally through no fault of their own as they have no control whatsoever over their own destiny. We must not forget that it was as recently as 1954 that food rationing ended—my teenage children find that difficult to comprehend, especially when even in the 1970s farmers were still being financially encouraged to produce more food and of course borrow the shortfall. Now we are told, stop, set it all aside, and with world starvation at record levels I find this difficult to understand.

However I am sure that the noble Lord, Lord Mackie of Benshie, who sadly is unable to take part tonight, would have used his well-known trademark and have said something along the following lines: if in 1974 you had bought a 100 horsepower tractor, you would have received a grant under the Farming and Horticultural Development Scheme and you would have needed to have sold 78 tonnes of wheat. Ten years ago there was no grant and that same tractor, admittedly more refined, would have required the sale of 159 tonnes of wheat. Last year, had you wished to buy that same tractor, 250 tonnes—250 tonnes—would have to have been sold in order to acquire that same tractor.

These figures alone surely must emphasise the crisis that agriculture is in. I make no apology for painting this gloomy picture. Twenty years ago malting barley was being sold at £120 a tonne. If the price of malting barley had kept pace with the minimum increase in the agricultural wage today, farmers would be receiving £170 a tonne. For those of us who do produce malting barley today, we are lucky to get £70 a tonne. I wonder how the noble Baroness would feel if today she was earning 60 per cent less than she was 20 years ago.

The saddest story of all is the pig sector. Farmers are now obliged to adhere to the strictest levels of animal welfare and in our part of the world are losing £18 for every animal that they sell—not unnaturally, pig farmers are leaving the industry at an alarming rate. And what we must not forget is the horrific effect within the whole farming industry that this is going to have. If there are no pig farmers, sales of feed barley will drop dramatically.

Sheep farmers are getting less for their fleeces than they were 50 years ago. Last year the retail cost of lamb was 608 pence per kilogram. In 1999 the farm gate price was 179 pence per kilogram. Turning to milk, the retail price of milk last year was 60.15 pence per litre, and what did the producer get—just 18.37 pence per litre.

While researching figures for this debate I have to say that I became more and more despondent. If we look at the egg sector, the farm gate price for a dozen eggs last year was 27.33 pence per dozen and the retail price was an incredible 137.5 pence per dozen. To summarise, dairy farmers' income is down 41 per cent. Cattle and sheep income is down 52 per cent, and cereal farmers are suffering a drop of 49 per cent.

Another serious problem relating to the economics of agriculture is the price transparency of inputs in relation to our other European partners. To give two small but important examples, agro-chemical prices are 70 per cent higher here in the UK than they are in Spain. A combine harvester is 45 per cent more expensive here than in any other European Union country and I would urge Her Majesty's Government to look most carefully at this disparity.

Another very worrying factor is the dramatic increase in the number of farmers leaving the industry. Ten years ago there were nearly a quarter of a million farmers. Today there are just under 200,000. Another worry is the serious decline in the agricultural workforce. I have been farming for 21 years and I inherited a workforce of 17. Today I am farming a larger acreage with just four.

In the last 10 years the UK's agricultural workforce has declined from 477,000 to 435,000—a drop of 42,000. Job satisfaction is non-existent and farmers are under increasing stress. Last year the rural stress information network received 70 calls. Already in the first two months of this year it had received 27 calls. Grim, my Lords. Even grimmer is the bank lending to agriculture in the UK. According to figures released by the Bank of England, all banks' lending to agriculture, forestry and fishing in nominal terms amounted to some £2.3 billion back in 1979 while in 1999 lending totalled some £7.8 billion. This shows an increase of 236 per cent compared to 20 years ago-236 per cent.

I hope by now I have painted a sufficiently gloomy albeit realistic state of our agricultural industry. Now what can be done? The vexed subject of agrimoney compensation, I am sure, will be mentioned by other noble Lords. The deadline for the Government to make a decision on whether to claim is now just seven weeks away.

The current economic climate for agriculture is different to that experienced by other sectors of the economy. While the general economy has grown on average at an annual rate of 2.5 per cent over the last four years, agriculture has just entered its fifth successive year of recession.

British agriculture is far more vulnerable to exchange rate movements than other sectors of the UK economy since agriculture support prices and direct payments are set in euro. Therefore in agriculture, unlike manufacturing, both the domestic and the export market are directly affected by exchange rate movements. It is important to note that every other member state, apart from the UK, has claimed all the EU funded share of agrimoney compensation, and that some member states have also paid the national top-up. Thus the argument for agrimoney compensation is strong and I would urge Her Majesty's Government to take action before the deadline runs out.

Non-food crops have the potential to make a huge contribution to environmental conservation, rural communities and the agricultural economy, but the inability of the Government and the European Commission to commit resources and to deliver a coherent policy means that this is simply not happening and I believe that it should be.

The development of a robust non-food crops industry is both possible and desirable and its development will make a strong contribution to the objective of sustainable development within the European Union. I greatly welcome the response by the Government to last Friday's debate and I just hope that things will really now start moving.

A mechanism should be introduced which enables non-food crops to compete across the whole of the country; for example, biomass crops should be grown on non-eligible land. If this cannot be achieved we must, at the very least, end the use of the list which restricts the crops which can be grown on set-aside for non-food use. A marketing initiative should be targeted at the retail and manufacturing industries to impress on them the commercial benefits of using crop derived raw materials such as biodegradable plastics, food wraps and even electricity.

North Sea oil is not going to last for ever. The nonfood crops sector is in its infancy. For this reason, it is vital that both public and private research and development of non-food crops is encouraged. Advances in processing and utilisation technology and genetic manipulation of the crops themselves will lead to the expansion of opportunities for which crop derived raw materials can be used. More must be spent on research and development. We still only spend £1.1 million a year, and that is a sixth of what Germany spends. We are lagging way behind all of our European partners when we surely should be leading the field.

I much regret that the Government could not accept, at least in principle. Stephen O'Brien's Private Members' Bill in the other place last Friday on food labelling and country of origin. Will the Minister say whether the Government will actively seek a change in the European law to deliver honest food labelling, and how long does she estimate this will take to put in place?

The Prime Minister has urged us all to diversify, but in really rural areas there is, sadly, no alternative to farming. When I had the privilege to represent Scotland on the ELO, I took its president on a tour of Scotland. We stopped at the bottom of Glenshee and he stared in amazement at the barren mountain face and he could not believe that it was home to 1,000 black-faced sheep.

The Prime Minister has pledged to reduce the amount of bureaucracy. It is ridiculous that the average farmer now spends two days a week form filling. Surely this is unnecessary. Can the noble Baroness tell us when the Government are going to fulfil the Prime Minister's pledge? What, sadly, all this boils down to is one fundamental question. Do Her Majesty's Government want an agricultural industry in the United Kingdom? If the answer is yes, then urgent, and I mean immediate, measures must be put in place. If the answer is no, then something will have to be done in order to preserve the countryside for those who live and work in it. Otherwise we will be in a scorched earth situation similar to the one during the Napoleonic wars. I cannot believe that Her Majesty's Government will get any thanks or pleasure from that route.

This afternoon the Prime Minister pledged to sit down with pig farmers in order to work out a short and long-term plan to tackle the immediate crisis. Perhaps at last this means that the Government have recognised how serious the problem is, but I fear it will be too little and, sadly, too late.

I implore the Government to take urgent action now in order to secure and to sustain the finest, the safest and most efficient agricultural industry in the world. We surely owe it to future generations, not only of farmers but to future inhabitants of this country so that Britain will always be a green and pleasant land. I beg to move for Papers.

5.51 p.m.

Lord Sewel

My Lords, I congratulate the noble Lord, Lord Palmer, on securing this debate and on the excellent job he has done in outlining the problems and difficulties facing agriculture in Britain today.

However, I think that we have already reached the stage where expensive, short-term palliatives are no longer sufficient. If my memory serves me correctly, when I was in the Scottish Office we supported agricultural jobs to the equivalent of something like £20,000 per full-time job. We spent more on agricultural support than on all other industrial support put together.

We face something which is not a British problem; it is primarily a European problem. I have a deep and abiding hatred of the common agricultural policy. It is an expensive failure. It is a con on both the consumer and the producer. It has failed for a number of reasons. First, it produces surpluses in all major commodities at prices which consumers are unwilling to pay. Secondly, it penalises efficiency through such measures and nonsenses as milk quotas, and prevents European agriculture from competing effectively at world market prices. It is expensive to both the taxpayer and the consumer. Because it is based primarily on production, it results in environmental degradation. It has been a failure because it has been unsuccessful in its primary objective—as the noble Lord, Lord Palmer, indicated—of retaining the agricultural population. Its whole basis and rationale has been undermined. But, above all, it distances the producer from the market and leads to an invidious form of dependency.

The time has come to examine the case for public support of agriculture. Traditionally that argument has been based on three major components. The first concerns the need for food security, which was clearly appropriate in the years immediately after the Second World War and during the 1950s and perhaps a little later, but it is not appropriate in the modern world. The idea of interdependency and globalisation makes national food security a total nonsense.

The second argument is that it is appropriate to support agriculture in order to even out the troughs associated with an industry subject to volatility. I agree with that to an extent, but why single out agriculture in this way? Other industries are subject to volatility and the response has been for the producers themselves to accept responsibility to tide themselves over troughs and to get through to peaks. In agriculture that opportunity exists through various forms of hedging and also through security of long-term contracts.

The third argument, historically, has been that of import substitution. Superficially this is attractive. However, I think that we all remember that following the import substitution argument was the great folly in economic policy of the 1950s and 1960s. It would be possible to have a Scottish pineapple industry if we did not wish to import pineapples from other countries. But just imagine the cost of having, and supporting, a Scottish pineapple industry! A much sounder policy is based on comparative advantage, and doing what we do best, doing it well, efficiently and economically. That means, I hope—despite the absurdities of the common agricultural policy—that there will be no Scottish pineapple industry.

The fourth argument, which I believe is a much stronger argument, is that there is a need to support agriculture on social and environmental grounds. Those cases are much stronger. However, I believe that the social change argument is limited to enabling those involved in agriculture to manage the adjustments necessary when major structural change in any industry is under way. I believe that government have a responsibility to enable that to take place as painlessly as possible, unlike what happened under the previous government in some areas of heavy industry, particularly coalmining.

The environmental protection argument is the strongest of all because I believe that our citizens are willing to pay for a living, active, well managed, environmentally sound countryside. That requires a degree of change of mentality among some producers. They speak easily about being guardians of the countryside and that is right and proper, but that guardianship also requires a commitment to environmental trusteeship. I hope that government will increasingly find a way to support environmental protection and enhancement.

If we look to the future, I am convinced that the way forward is a combination of niche quality markets, such as Scottish beef—although I would say that, wouldn't I? That requires proper labelling; there is much to be done on the labelling side—a concentration on following through further efficiency gains and freeing up regulations and controls to enable us to compete at world market prices; and the element of countryside management. However, the tragedy is that both at a European and British level we do not have the vehicles to deliver these policy objectives. Agenda 2000 was pretty much of a damp squib in terms of moving the agricultural reform debate forward.

In the short term I think that it is inevitable that governments will be faced with more and more demands for direct support. I do not think in all honesty that that is a long-term, sustainable policy. The only hope is that over the horizon—recognising the failure of Agenda 2000—we face the WTO round. That will result in more liberalisation. It will be a tougher and, I think, in many cases an unwelcome development, but an increasingly necessary way forward. We must find the means by which our own agriculture can adjust to those changes.

5.58 p.m.

Lord Kimball

My Lords, the noble Lord, Lord Palmer, has done an immense service to this House and to the countryside, in particular in the way in which he has drafted his Motion so that we can concentrate on the economic hardship in the countryside.

Time forbids me to follow the noble Lord, Lord Sewel, in what I can only describe as a vivid and accurate requiem for the common agricultural policy. I declare an interest as a small farmer and a deputy president of the Countryside Alliance.

Perhaps I may briefly look at what I feel are the main economic problems. The BSE crisis is exacerbated by the continuing refusal of the French and the Germans to accept our exports. The brief that we have received indicates that the pig industry is well served by its association. We recognise the problems it has with cheap imports and the very high standards of pig welfare imposed on our pig farmers. We must find a way of adjusting those into a more economic frame.

I should like to deal with two other points. First, the old threat of modulation is now a reality in the countryside. The Agenda 2000 reforms allowed voluntary modulation among the member states of the European Union on one condition: that the money saved in modulation was put back into green box rural development schemes. When she responds to the debate, I think that the Minister will agree that originally her department wanted to abolish the direct aid payments for both the arable aid and headage payments. Instead of achieving that, we are taking a small step in the right direction but on the wrong basis.

Under modulation we can start reducing these payments over the period 2001 to 2006 by a maximum of 20 per cent. The IACS payments come direct from Brussels, but the green box payments, these payments that we are now saving, have to be matched by the Treasury. So we can see another element which does not make it easy for the noble Baroness—even if she wished—to help in this way.

Perhaps I may look quickly at the figures for the next six years: £500 million for countryside stewardship schemes; £140 million for organic conversion; £100 million for farm woodlands; and only £40 million for marketing, where more money could make an enormous difference in the present economic circumstances.

When she comes to respond to the debate, I hope that the Minister will be able to give some comfort to the industry, particularly in regard to a matter on which I have pressed her before. On what business units are the modulation payments based? Today many farmers amalgamate in order better to use their capital and equipment. The modulation payments should be made on the basis of the acreage owned and not on the acreage of an economic business unit. The Minister could help if she took the remaining 80 per cent of these payments and paid them under the environmental cost compliance payments. I doubt whether the Treasury would allow her to do that, but it would help if she could say what progress she is making.

In conclusion, perhaps I may deal with one other economic matter. I was privileged to represent in another place one of the major plant breeding establishments in the country at Rothwell. The economics of agriculture demand an improvement in plant characteristics in order to lower production costs and increase yields on existing farmland. The very people who are against genetically modified crops are surely in favour of not increasing the acreage that is cropped throughout the rest of the world.

The Government have run away from the question of genetically modified crops. The farming industry as a whole needs this new tool to obtain the benefits of improved seeds. We must not be deprived of our place in the world market in the development of this science. Despite the reassurances of the scientific community, people may not be convinced about the safety of genetically modified products. The Government should put into effect, as recommended by the Agricultural Select Committee, a proper system of labelling of genetically modified food. People can then choose either organic products or genetically modified products.

In the time available, those are my four points which I believe could help the industry economically.

6.4 p.m.

Earl Ferrers

My Lords, as I am involved in agriculture, I, too, should declare an interest. I thank the noble Lord, Lord Palmer, not only for introducing the debate but for the very clear and constructive way in which he spoke.

He said, quite rightly, that farming is going through its worst depression for 60 years. That is so. Some 22,000 farmers and their staff have left the industry in the past 12 months; 10 per cent of farmers are on antidepressants; 25 per cent of tenant farmers have marital problems due to the crisis; 50 per cent of tenant farmers have difficulty in finding the rent; and 80 per cent have stopped or reduced investment. That is a fairly grisly story.

If one looks at the pig industry—as the noble Lord, Lord Palmer, did—one finds that the number of pig farmers, their workers and those who supply the pig industry has dropped by 30,000 since the start of the crisis, and another 30,000 are under threat.

Dairy farms are running at a loss. The UK price of milk is 16p per litre; the price in Denmark is about 26p per litre. I understand that some people in the United Kingdom are getting even 13p per litre, with the likelihood that that may be cut by 2p per litre. Milk is now becoming cheaper than bottled water.

What are the causes of all this? One of the causes is that conditions in the European Union are not equal. Imported pig products can be packed in the United Kingdom and sold as British food. Imported meat is often produced under conditions which are banned in the United Kingdom and, therefore, it is produced more cheaply. Sow stalls are banned, yet doing away with them puts up the cost of a pig by £2.

The noble Lord, Lord Palmer, referred to the fact that combined harvesters and chemicals are much cheaper on the mainland of Europe. That is so. But the worst problem is the strong pound: £2,000 million of agrimoney has been made available since 1997 for the United Kingdom to accept for exactly this position. When a country's currency rises, it is entitled to claim it. Other countries have done so; we could do so. Some £2,000 million is available; only £520 million has been claimed. Many bad things are said about the European Union, but if there is something that the United Kingdom can take advantage of, we should do so.

The Government can help. I know why they do not: the Treasury is frightened. The Treasury is always frightened. But we are seeing an industry going down the pipe, as it were. That does not worry the noble Lord, Lord Sewel—he thinks that that is okay—but it worries most of us. It is unnecessary because the Government can help.

I do hope that the Minister will not say "Restructuring the common agricultural policy is the answer". Of course it needs to be restructured, but that is long-term stuff. When one talks about the industry restructuring itself, sometimes that seems to be ministerial speak for "Let them go bust" or "Let them get into larger farms".

The environment and wildlife are the "in" thing. The noble Lord, Lord Sewel, referred to that too. He said that he would like the environment to be looked after. I do not think he mentioned wildlife, but that was part of it. I do not believe that this country should be viewed as a place for a kind of grandiose gardening scheme. Agriculture is important, and upon the success of agriculture depend all these other things. The Government can help but, if I may respectfully say so, they do not.

The climate change levy cost the industry 10,000 jobs and 11 million in the first year. Ask any farmer and he will tell you that bureaucracy is becoming intolerable. The hedgerow regulations—those lovely things—criminalise people for taking out hedges, and yet the European Union is to introduce regulations which will criminalise people who allow hedges to grow too big and to grow into fields. That is a complete contradiction. One really must allow some latitude to people in agriculture.

We have gone completely crazy over pesticides and chemicals. I agree with my noble friend Lord Kimball with regard to genetically modified foods. We do not know what they are, but they should be given a chance to be tested properly. I hope that the Government will condemn Greenpeace—the organisation of the noble Lord, Lord Melchett—for vandalising other people's crops and trespassing on their land. It is wrong; it is inflammatory. The dear old BBC puts a picture of this time after time on the news, inferring that that is what is being done.

Perhaps I may make one further request. Under the Bill of the noble Lord, Lord Watson, in Scotland it will be wrong to kill a mammal with more than one dog. Farmers who are plagued by rabbits normally shoot with a number of dogs. That will become a criminal offence. The Prime Minister said, Let me make this clear. As long as I am Prime Minister, I guarantee this Government will not allow any ban on shooting or fishing". Will the Minister please confirm that?

6.10 p.m.

The Lord Bishop of Hereford

My Lords, we are all much indebted to the noble Lord, Lord Palmer, for introducing this debate. It is a further opportunity to draw attention to the parlous state of farming and to the wider rural economy which depends entirely on the well-being of farming.

The debate is about economics. Let me pose the question: what economic factors need to be in place for it to be possible for an industry to flourish? In this case, what are the economic prerequisites for a thriving agricultural industry? They are fairly obvious: fertile land; a good climate, a well-trained and well-motivated workforce equipped with efficient machinery; measures in place to guarantee food safety, such as traceability of livestock; good standards of animal welfare to reassure the public; a large market nearby, a substantial population needing food; and—an economic as well as an environmental benefit—short distances over which the food needs to be transported.

By what mischance or combination of inaction, folly, obstinacy or human error have we reached the point at which our farming industry—which is richly blessed with both natural and man-made advantages, including all the economic prerequisites I mentioned, and ought to be immensely flourishing—is in a state of acute crisis? Why is the rural economy malfunctioning to such a disastrous degree, and what can the Government do about it? In a moment I shall mention some ideas, and I look forward to the Minister's response.

First, perhaps I may mention the important debate which took place a week ago in the General Synod of the Church of England. The Synod passed a unanimous Motion addressed both to Church people and to government, expressing its strong concern for the farming industry: for farmers, farm workers and their families, and especially for the particularly hard hit tenant farmers. There was appreciation of the direction in which government policy is moving with the rural development regulation proposals, and much appreciation of a helpful letter from the Minister, Nick Brown, received by the Synod just before the debate, setting out the basis for a long-term farming strategy. But there was an urgent plea for short-term help, so that businesses can survive to take advantage of the new opportunities that we hope to see. We called for a retirement scheme for those who want to leave the industry with dignity and are presently trapped in it; for much more rigorous and informative food labelling; for a reduction in the crippling burden of red tape and paperwork; for further help for those voluntary organisations which are struggling valiantly to provide pastoral support; and help to the victims of the present crisis. Church people were urged to support that work, and to buy locally produced food. It was an important and deeply serious debate. The mood was sombre, but not entirely without hope.

So what do we ask of the Government in order to keep that hope alive? Clearly, there are some things that the Government cannot do. They cannot undo the globalisation of trade and the enormous increase in the amount of imported food that is available. However, I suggest that the Government could do five things. First, they could have a more careful regard for the delicate and complex inter-relationship of economic factors in farming: for example, the removal of the crippling abattoir charges which threaten to destroy meat production and precisely the kind of diversification which the Government say they want to see.

Secondly, we ask the Government to draw down the agrimonetary compensation which was negotiated, as the noble Earl, Lord Ferrers, said, precisely to tide farmers over this kind of currency fluctuation. Yes, it would mean match funding. Yes, it might mean the end of the UK rebate. But it would trigger more EU money, since Brussels' contribution to the EDRP and Objective 2 depends on current spending levels.

Thirdly, we ask the Government to abandon the uniquely pedantic way in which the UK interprets EU directives, with enormous cost consequences, especially in meat inspection charges. Fourthly, we ask the Government to set manageable financial thresholds for the help that is on offer. At present, many small farmers who are most in need find that they cannot afford to benefit from the help that is on offer. That is particularly true in relationship to the mechanism of countryside stewardship.

Fifthly, we ask the Government not to impose the proposed pollution tax on pig and poultry farmers and to lift the threat of the climate change levy on horticulture. All of those are theoretically virtuous taxes, but they would have the effect of further damaging or destroying these fragile businesses and helping our overseas competitors. In the UK it would mean more unemployment, more distress and, in the end, greater cost.

The farming industry has changed, is changing and is trying to help itself. But in the short term it faces real disaster: a domino effect of one sector dragging down another. As pig and poultry farmers go out of business, they will stop buying feed from their arable neighbours, creating an agricultural melt-down on a scale that will make today's heartbreak, anger and distress look quite trivial.

Heartbreak, anger and distress are not economic factors but they have economic causes, and economic solutions are available. We hope and pray that the Government will do all in their power to provide those solutions. The noble Lord, Lord Sewel, said: let us do what we do best. I absolutely agree. We have a brilliant farming industry. Let it do what it is best at doing.

6.16 p.m.

Baroness Young of Old Scone

My Lords, I declare an interest as a taxpayer. Agricultural policy in this country is no longer stacking up. MAFF spends £3 billion of public money. and what is the result? We have food surpluses; a loss of public confidence in food; a decline in the agriculturally related element of rural communities—although I must stress that other elements of rural communities are showing remarkably robust performance figures. We certainly have a degraded countryside and a serious decline in wildlife. And 50 per cent of farmers are in financial trouble. I say 50 per cent. There are, of course, 50 per cent who are not. We should not overlook the point that the present level of agricultural incomes is no lower in real terms than it was in 1985 and 1990. We have seen successive emergency bale-outs to the agricultural industry, on top of the £3 billion, of £787 million since 1997. So the public have a right to question that scale of public support, and a right to ask what they are getting for their money.

There have rightly been calls for a new future for the agricultural industry. But the new future that seems to be envisaged is one that needs to be questioned. It implies restructuring, bigger holdings, more efficient, competitive farming, able to hold its own and to export at world market prices. I should like to challenge that single model. In terms of what is needed for the future, it is only one of a range of models, all of which need to co-exist and some of which will need public subsidy for the future.

As we have seen over the past 15 years in the forestry industry, we want to see a move towards multi-purpose farming which is about safe and healthy food production, environmental management, diversification to provide opportunities for access and recreation, and building new social and community fabrics within the countryside. The noble Lord, Lord Palmer, asked whether the Government wanted a thriving agricultural industry. I am sure that the answer must be yes—but not at the current social, environmental and economic cost.

My idea for a new model of multi-purpose farming is not a new one. However, it deserves some exploration of its components. There would indeed be some intensive, competitive, large-scale farming which would not be dependent on subsidy, although I hope that even within competitive and intensive farms we should see space for minimum environmental conditions and places for wildlife.

Alongside some areas of the countryside where that intensive agriculture would take place there would also be a whole range of other models: organic farming, depending primarily on premium prices rather than on subsidy, although possibly with some subsidy to pump-prime the process. There may well be other premium price accreditation systems which can be developed and which are different from the organic system but nevertheless desired by the public.

We should also see local farming systems developed: niche farming, regional produce and local production and marketing. Some subsidy will be necessary to help pump-prime those local and often environmentally sound farming systems. But we should also see some marginal farms, which by no stretch of the imagination would the market support. Their major products will be other public goods, countryside management, landscape, access, wildlife, the environment and the environmental services that many eco systems provide. We should not be ashamed to support them through subsidy because they are providing public goods that we all need and require.

We want diversification in many of those systems. Already 58 per cent of farmers receive money from outside their farms. We also want all those systems to deliver minimum environmental standards and perhaps receive subsidy also for environmental management over the minimum.

There will soon be more than £300 million in environmental payments, all aimed at counteracting the damage caused by the £3 billion of mainstream perverse subsidy. The Government deserve credit for recent moves to enhance the figure to that level, but why is that money being spent simply to remove the adverse effects of mainstream subsidy? Swift progress needs to be made with the new model of diverse agriculture that I described and reform of the perverse subsidy systems. There may be savings in public expenditure for a higher level of public benefit. That might even please the Chancellor.

6.21 p.m.

Lord Vinson

My Lords, I declare an interest, as I farm extensively in one of England's remote rural areas where there are more sheep than people, close to the noble Lord. Lord Palmer—to whom we are indebted for this timely debate.

Behind all our considerations lies the basic problem that no country wants to run out of food. Governments world wide subsidise their agriculture to ensure supply. The consequence is over-production. When a commodity is in surplus, prices naturally fall. Governments move in with additional subsidies, which in turn create even more surpluses and prices fall still further. Farming internationally is now in that phase.

We also have in power a new generation of politicians who have never personally faced the rigours of food rationing and are fed up with the whole subsidy exercise, and whose instinct is to say, "Why not let agriculture go hang?"

Agriculture is different because it works to a far slower timescale than most industries. It cannot be switched on and off. It takes 10 years to build a balanced dairy herd and six years to build an age-balanced sheep flock. Live animals cannot be kept in store but must be sold, whatever the market price. Agriculture is deeply dependent on the weather. Last but not least, it is directly exposed to basic world commodity prices at market clearing rates.

It is a chimera to imagine that the world can produce food at the prices on offer. Only 5 per cent of world foodstuffs are traded. The rest are disposed of under other arrangements, at higher prices.

Britain is exposed to the effects of an over-valued pound. It is all very well to say that farmers should hedge exchange rate volatility but that is not possible given that farming is done in small packets. An industry that is the least inflationary of all is currently crucified by the high pound against the euro. It is a pity that the Government do not take advantage of the agrimoney compensation arrangements, which were specifically designed to alleviate that problem.

There is a real problem—not least confirmed by the ghastly figure for suicides among farmers. Prices have dropped between 10 per cent and 30 per cent in most sectors. Milk is selling at half the price of bottled water in supermarkets. Four years ago, agricultural output in this country was roughly £20 billion annually and was one of our biggest industries. Output is now £16 billion. The impact on rural areas is enormous and no amount of diversification can fill the gap.

The underlying problem is that agricultural products are too cheap. Supply and demand have got out of balance. If food is being sold well below the cost of production, who is subsidising whom? America currently has massive farm bankruptcies and the home of free enterprise is not letting its farms go into free fall. America is subsidising its farmers, as is Canada, by billions of dollars a year because prices have fallen too low to sustain output.

One school of thought is that we should abandon agriculture and import our needs. The noble Lord, Lord Sewel—who is no longer in his place—may be among those who think that. That argument is attractive and simple but wrong. If we abandon agriculture we would have to import 20 million tonnes of grain, which would have an electrifying effect on the Chicago market. Prices would go roaring up and, apart from a balance of payments crisis, consumers would be no better off. There is also no way that America or Canada could supplant Europe's grain needs. America's grain production is some 300 million tonnes a year. Europe's is 200 million. Attempting substitution by American or other world production would be wholly unrealistic and largely unnecessary in terms of comparative advantage.

It is essential that governments make certain that grain is priced at a level that will ensure enough production without creating a level of farm bankruptcies that would undermine supply.

What, then, is the most appropriate mechanism for governments to support agriculture and thereby much of the rural economy that so depends on it? Food is currently too cheap. The customer buys food cheaply but subsidises the farmer indirectly through the tax system. We used to have a deficiency payment system that supported the markets at a price at which the average farmer could just make a living and no more. Good farmers did better, bad farmers did worse. The consumer benefited by direct low prices. We should try to persuade our European Union masters to return to that system.

As a nation, we need to make up our minds whether we want an agricultural industry that competes on level terms with the rest of Europe, is not handicapped by bearing the direct costs of excessive regulation and can pay a decent wage to its workers—to enable them to share in the national prosperity to which they have contributed so hugely over the past few years.

We are dealing with a huge, complex and varied industry. The subject needs to be considered factually and unemotionally. I hope that this debate will contribute in that way.

6.27 p.m.

Lord Williamson of Horton

My Lords, earlier today we had an excellent debate on defence. But there are good precedents for beating our swords into ploughshares. I am grateful to the noble Lord, Lord Palmer, for initiating this debate. It could not be better timed.

Before considering the action taken recently by the Government and the action they might take in the interests of British agriculture, how is it that farming in Britain—which flourished for many years under the common agricultural policy loved by agriculture Ministers and unloved by economists—finds itself in severe difficulties? It is surprising how often the new direction of agricultural policy launched by the MacSharry reforms of eight years ago and implemented by governments in recent years, and the decisions taken at Berlin last March, do not seem widely comprehended. There are sleeping beauties everywhere and a kiss or two is needed to bring them into the new millennium.

There are three principal reasons for British agriculture being in recession, with a fall of almost £4 billion in output value since the mid-1990s and a drop of 60 per cent in income in real terms. The first is the change in agricultural policy, which is reducing or removing support from market operations—fully or partially replacing it with direct grants to farmers. When I was in Brussels many years ago and we were spending £17.5 million a day on agricultural support in the European Community, I used to ask whether anyone had ever seen a cheque to a farmer. The answer was never, because support was primarily given by intervention in the market, export refunds to traders and so on.

Has anyone in recent years seen a support price increase for an agricultural product? The answer is that there have been practically none. Prices are being frozen or reduced to world price levels. It has been government policy for some years to reduce agricultural support prices, at least in real terms—thus benefiting the consumer—and move to direct compensation for farmers, that being likely to increase the cost to the taxpayer. Those changes can be illustrated by the latest package of March 1999 when the decision was taken to cut the cereals intervention price by a further 15 per cent in two steps from July this year, the beef intervention price by 20 per cent over three years and the support price for milk by 15 per cent from 2005, and increase some direct grants in consequence. Those price cuts will give an economic benefit of about £1 billion a year and, if passed through to consumers, will knock about 2 per cent off the retail food price index. The direct grant and other changes will increase the EU budget costs by about 2.5 billion euros when all the changes are fully implemented. The Government estimate that those measures will knock about 5 per cent off total farm income, although some may be regained by the separate rural development measures.

The second reason, which has already been mentioned, is the strong pound. Important sectors of agriculture are tied into a system of support prices and direct payments. Too much so, of course, but we must face facts. Under the agricultural policy these prices and payments are expressed in euros. It is thus a genuinely common policy for farmers in 11 other European Union states, and possibly soon in 14, but because the UK is outside the euro zone British farmers suffer exchange rate risks, not just through the markets but also through the support arrangements. The question is whether we have done enough to minimise the disadvantages which British farmers suffer from our non-participation m the euro zone. I think not.

The third reason is that British farming is still suffering from the consequences of the BSE epidemic, about 150,000 cattle having been lost directly from contracting the disease and with widespread disruption of farming and the food supply chain. I recognise that the Government are currently bearing some of these costs, in particular the cost of inspections, the removal of specified risk material and the cattle passport, but the beef industry suffers continuous losses of value. Other costs fall also on pigs, poultry and sheep. We are still paying a high price for not rigorously respecting the law on the ruminant feed ban.

Now for the good news and what might be done. For supermarkets and consumers it is good news almost everywhere. For farmers there are some signs of recovery in prices. US winter wheat plantings are at their lowest level in 28 years and lamb prices have recovered, finally hitting £1 per kilo. There is also good news from the government side given the way in which the rural development plan for England, which was launched by the Minister on 2nd February, is being actively pushed forward, with very good officials engaged in this work, including the countryside stewardship scheme, and emphasis on the environment and the wider rural economy, financed by EU funds and modulating payments under direct grants.

I propose to the noble Baroness two actions. First, the cost of inspection of specified risk material from cattle and sheep should be considered, correctly, as a protection of human health and should be borne by public funds, not just for a period but indefinitely. Secondly, the Government should adopt the principle that funds available from the European Union for agri-monetary compensation should normally be taken up fully, not partially, and matched by the national contribution. I understand that the amount at issue is about £225 million from the EU and £225 million from national funds in the year 2000. Even allowing for our budget contributions to the EU payment and the effect of the budget rebate, there would be a substantial payment—about £65 million, I believe—to British farmers by taxpayers in other European Union countries. Why do we not accept this kind gift from foreign taxpayers?

6.33 p.m.

Lord Willoughby de Broke

My Lords, I am grateful to the noble Lord, Lord Palmer, for his masterly introduction to this debate and exposure of the problems that face British farming today. Some years ago Noel Coward wrote a song entitled, "Bad Times are Just Around the Corner", which contained the lines, In rather vulgar lettering a very disgruntled group have posted bills in the Cotswold Hills to prove we're in the soup". I declare an interest as a member of a very disgruntled group of Cotswold Hill farmers.

For British farmers bad times are not just around the corner; I fear that they are already here. We are hurting badly, as we have already heard this afternoon. I am sure that we shall hear more from other contributors later. What rubs salt and pepper into the wounds of British farming is that the Government seem to be unable to offer much beyond platitudes and bromides. The Prime Minister on his visit to the west country encouraged farmers to diversify, for example into organic farming. I remind noble Lords that the door has been slammed in the face of many would-be applicants because the organic farming scheme has run out of money. In any case, can organic farming ever provide more than, say, 5 per cent, or a tiny amount, of British farm income? It is certainly not a solution to the difficulties that face the whole of British agriculture today.

How can the Government make encouraging noises about diversification and enterprise when they increase rather than decrease the burden of regulation on small businesses, as the noble Lord, Lord Palmer, pointed out in his introduction? A good example of that is the Meat Hygiene Service. The Government like to say that they are listening. I am aware that the noble Baroness does listen to our debates and Questions very carefully, but sometimes it appears that her department has turned off its hearing aid. If the Government are listening, why is the MoD still buying 75 per cent of its chickens from France when that country is rubbishing our beef and still banning it illegally from sale? I produce exhibit A, which is a bottle of French milk bearing the label, "Savourez-le! … Il n'a subi aucum traitement conformémeut à la réglementation".

Earl Ferrers

My Lords, I apologise for interrupting my noble friend, but I believe that he is out of order in producing an exhibit and displaying it in the Chamber.

Lord Willoughby de Broke

My Lords, I apologise. I simply illustrate that French farmers pay absolutely no attention to the rules of the EU which bind everybody else. Why do we not, just occasionally, take a leaf out of their book? If the Government are listening, why does the MoD buy 98 per cent of its lamb abroad at a time when British sheep prices and British sheep farmers are at rock bottom? If the Government are listening why do they not do something about the scandal of the thousands of pigs imported into this country which are fed on meat and bone meal? If that material was fed to pigs in this country the farmer responsible would face a criminal prosecution.

If the Government are listening, will the Prime Minister, the Chancellor of the Exchequer and the Minister of Agriculture explain why they all voted for the stall-and-tether ban on pig production in this country but did absolutely nothing to ensure that government catering establishments used pig meat from British farms which conformed to our very much higher welfare standards?

Like the noble Lord, Lord Palmer, with whom I agree, I ask why, if the Government are listening, last Friday they talked out the Private Member's Bill on food labelling of the right honourable Member for Eddisbury which would have ensured that consumers in this country, if they so wished, could buy British and not Thai or Brazilian produce with a British flag stamped on it?

Finally, the noble Lord, Lord Sewel, vigorously pursued a point on which I am in agreement with him. I can do no better than quote the words of the noble Baroness in a Written Answer to my noble friend Lord Inglewood— The common agricultural policy, as currently structured, does not serve farmers, consumers and taxpayers well".—[Official Report, 28/2/00; col. WA 51.] The noble Lord, Lord Sewel, underlined that point by pointing to the deficiencies of the common agricultural policy. What he did not do was to follow it through to its logical conclusion. We should get out of the common agricultural policy, which is a total disaster, as everyone agrees. If we did so we would save £4.5 billion a year in contributions to the European budget which we could then spend on our own agricultural sector. I agree with the noble Baroness, Lady Young of Old Scone, that some of that money could well be spent on environmental improvements and goods. We would have about El 1 million a day to spend on the agricultural and environmental sectors if we were bold enough to leave the common agricultural policy.

If the Government—whether the present one or any other does not matter—are unable or unwilling to dismantle the CAP, they will preside over the inevitable decline of British agriculture.

6.38 p.m.

The Countess of Mar

My Lords, I am grateful to my noble friend Lord Palmer for enabling us to air our concerns on this subject tonight. I express a desire that the Government will at last act as well as listen. We have heard repeated statements about the support provided to farmers by the Government, yet when the figures are analysed it is impossible not to compare the £1,000 per head of rescue funds which the Government claim to have spent on agricultural workers with their willingness to contemplate a subsidy package of £2 million to prevent the closure of the Longbridge car plant. That is equivalent to more than £14,000 per job in an industry where there is 300 per cent overproduction.

Subsidies, designed to encourage farmers to grow specific food crops and to breed livestock that were in short supply during and after the Second World War, have become like a fix to a drug addict. As with an addict, any excuse will be found to avoid confronting the truth. Subsidies in the form of the CAP are no longer the answer for the control of agricultural production, as the noble Lord, Lord Sewel, and others have so clearly indicated. What is required is a realistic system for pricing agricultural products—one that takes into account the fact that the whole community benefits from the way in which a farmer works his land and cares for his stock.

We are told that there is a surplus of many agricultural products. There may well be in the EU as a whole, but why do the latest government figures show that in the UK there is a food trade deficit of £8.5 billion? That compares with a food trade surplus of £5.7 billion in France. It is hard to comprehend the reason why it is our farmers who are told that they are overproducing when, at the same time, we seem to be forced to accept from abroad products that could well be produced here. Our average household spends only II per cent of its income on food; the French spend nearly 25 per cent.

I live not far from the Vale of Evesham. It was once renowned for the excellence of the fruit and vegetables grown in its fertile soil. Now most of the holdings lie derelict. Instead, we are told that we prefer fruit and vegetables, imported at great expense, from the four corners of the earth. I say "we are told" because there are now strong indications that not all of our population are prepared to believe that. There has been an enormous growth in farm gate sales and in farmers' markets for value added goods produced locally.

Here I declare an interest as my husband and I have a small farm in Worcestershire where we produce milk and cheese from our goats and, in season, lamb from our small flock of Black Welsh Mountain sheep. All our products are sold locally. It is our aim to supply a choice of wholesome food at prices that provide us with a reasonable return and are considered to be reasonable by our customers. In addition to our work on the farm, my husband and I both have to work in other fields. We are now working harder than we have ever done simply to stand still.

It is the numerous small farmers, like my husband and me, who help to maintain the countryside so beloved of the townsfolk and visitors from abroad. Most of those farmers are now desperately struggling to survive. They have an inherent love of the land and an appreciation of its wider value that does not seem to be understood by their urban counterparts. They are proud and independent men and women who do not want to be reliant upon state handouts. What they need is practical help in those areas where they lack expertise. Marketing and market research are not skills that come naturally to farmers. The promotion of choice, wholesome, locally grown products is beyond their means. The socio-economic value of a successful agricultural sector to the population needs to be understood. I spoke about that in a recent debate. We also need the application of a large pinch of good sense by the bureaucrats who govern so much of our daily lives. I appreciate that this will not provide answers for all food producers and consumers, but it will help substantial numbers of them.

6.42 p.m.

Lord Hardy of Wath

My Lords, I have no great expertise in agricultural economics. My first experience was as a small boy when a local farmer stopped his tractor and asked my friend and I whether we would like to earn half-a-crown by helping him to dig potatoes. So we helped him to pick potatoes: he then gave us sixpence. We pointed out that he had mentioned half-a-crown. He said, "I only asked whether you would like to earn half-a-crown, not that I would pay it".

I have represented farmers for a long time. While that does not mean that I am an expert, I am aware of the grave anxiety they feel. I share the deep unease, even sickness, which some experienced recently. Three factors underlie the problem; they have been identified. The ramifications of the strong pound have been spelt out by the noble Lord, Lord Williamson. I trust that the last points in his speech will receive much attention from Her Majesty's Government. The second factor is the BSE crisis. It is a great pity that the whole business was not managed better 10 years ago.

The third factor—it is hurting many small farmers in south Yorkshire—is (if I may use the term without being patronising) the death of the peasant or cottage economy. In recent months, one of my friends has had to get rid of 5,000 hens because the little grocer shops which he serviced for a long time cannot compete with the supermarkets. A pig farm two or three miles away went bankrupt last month despite having spent £75,000 on capital equipment and improvements to comply with regulations in the United Kingdom.

An anxiety expressed to me at the weekend is that the estimates for the yield and returns for wheat and barley this year are likely to bring the arable sector into a state of unease. Even if American production is reduced, it seems possible that, unless the land is good, the yield and returns even with subsidy may border close to the cost of production. That does not bode well for that sector.

I share the view that farmers must win friends. I was horrified recently when I learned that one farmer in south Yorkshire proposes to pull down about a mileand-a-half of hedgerow in order to improve production. We do not need that. Farmers do not need the hostility that such a destruction of the natural heritage would create. Farmers must continue to farm the land but also act, perhaps increasingly, as stewards of the British ecology. I believe that on this side of the House we have an obligation to press the case for such support as will maintain activity in rural Britain.

I was extremely anxious about the countryside and access proposals. I know how difficult are the experiences of farmers living close to conurbations. The nuisance of litter, damage and destruction can be utterly discouraging. I am pleased to note that Schedule 8 to the Bill has a prohibition on access by mechanically-powered vehicles. If farmers are to be assisted in the maintenance of their role as stewards, we shall have to ensure a more capable, comprehensive police service in rural Britain. Crime is not concentrated universally in the cities. Farmers often have unfortunate experience. Police resources must be extended further away from town centres.

I trust that my noble friend will take from the debate the serious anxiety about many sectors of agriculture. We need to see a more positive approach from the Ministry of Agriculture. At times I found it extremely bureaucratic as a constituency MP. The last case that I put before the ombudsman before I ceased to be an MP was resolved some months after I entered this House. I was pleased to see that we won our case—a case which should never have had to go to the ombudsman—and a local farmer received a substantial payment. That payment should have been made in the first place without the anxiety, anger and acrimony which developed.

In that regard I was distressed by the speed with which the Ministry of Agriculture sought to respond to the EU's proposals on field boundaries. It could have been more robust. I cannot envisage our French neighbours and others inside the European Union taking such swift action which their people would not have liked. I trust that the Ministry will support those farmers who care for the natural heritage. There are many of them. They need to be encouraged and assisted so that more will follow suit.

6.48 p.m.

Lord Rotherwick

My Lords, I have been reading the report on the rural economies from the Performance and Innovation Unit of the Cabinet Office. On page 5 it states, quite correctly, that in the late 1940s government, viewed agriculture's primary role as to ensure security of food supply". On the next page it states that, the values, belief's and behaviours on which post-war policy was based have not proved to be permanent". The report states later that, many people now value rural England more as a source of environmental goods than as a place for food production". I have no doubt that that is true, but I have severe doubts about whether it is relevant to the job of government, whose duty it is to see past the public perceptions to the truths and in particular the dangers of any given situation.

Nowhere does the report raise any question about the security of our food supply. It is interesting to note that during the past few years in various parts of our tumultuous world the food supply has been severely curtailed or stopped altogether. Our current high quality food security is not immutable. Surely, the casual assumption that our high quality food sources are sufficient and safe for ever should not be taken for granted.

The net incomes of livestock farmers are running at 50 to 70 per cent of those of 1991. Mixed farmers are doing slightly better and only the incomes of cereal farmers are holding at around 1991 levels. However, average prices do not show the whole picture. I was a mixed farmer, but, sadly, I am now only a cereal farmer. Like the noble Lord, Lord Palmer, I began farming with about 17 farming staff, but now have a permanent staff of only three and I now farm considerably more hectarage.

In the past three months since December, the strength of the euro against the pound has fallen by about 15 per cent. I could have just about paid a notional rent in December, but today I could pay only 60 per cent of that. I believe that I am one of the top 25 per cent best performing farms. I shudder to think what the future is for the tenant farmers who pay rent.

Reports from the NFU and the Tenant Farmers' Association indicate that this year most of them will make a loss. Loss-making tenant farmers will do the same as many of the 20,000 farmers did last year—they will quit the industry, many of them taking nothing with them but their skill and expertise.

"Crisis, what crisis?". It is one that is all too real for a number of families and individuals. It is one that may have serious repercussions two, 10 or perhaps 20 years from now. The Government seem to be in denial over the crisis and I suppose that they should no longer be relied on to help. Quite the contrary, the Government will impose more millstones on this once world heating industry in the form of modulation. The current crisis could bring about structural changes of an unprecedented scale within the agricultural industry. The likelihood is that farms will increase in size and that the number of animals in herds will also increase. Soon the small tenant farmers will all but disappear.

"The people" with whom the Government consult so assiduously want choice, high quality, and above all, cheap food. But are they getting it at the moment? Choice and cheap food, yes, but what about the quality of imported foods? As Joyce Quin told Stephen O'Brien last week in another place, we may not tell the consumers which of the products on sale are produced in other countries to welfare and hygiene standards well below those imposed by our own Government on our own farmers. We may not inspect incoming produce for dioxins, raw sewage or even BSE. We may not highlight organic produce from land that has undergone a conversion period of less than half that demanded here. That is particularly important as 80 per cent of such foods are imported.

Last week. I returned in the Eurostar from the Continent. The dinner menu was veal. It was certainly not grown in Britain because our animal husbandry standards make us virtually non-competitive. But what a lovely easy way to avoid having to offer British products; and, what is more, it is legal under European law.

6.53 p.m.

Lord Walpole

My Lords, I thank my noble friend Lord Palmer for providing me with the opportunity of speaking today. I am not declaring an interest because I am a statistic. I have retired from farming. I shall be brief.

I have down in my name the European Communities Select Committee Report on Biodiversity in the European Union, which I hope will come before the House very soon. It is not irrelevant. I do not know which Minister will be answering that debate as the report is an environmental one. However, it includes agricultural and fishery topics in addition to planning, transportation and marine problems. I felt that the DETR would be the relevant department and that MAAF might not become involved. Therefore, in case there is no joined-up government on that day—and I hope that there will be—I felt that I should speak out today.

I do not want to talk about the problems of under-funding or over-production because far more well informed speakers have done or will do so in the debate. That is not to say that I do not have a personal understanding of, and a great sympathy for, the situation that pertains.

I am of course well aware of the plethora of news releases coming out of MAAF and I have found them most confusing. However, No. 43 on countryside stewardship is a step in the right direction, but underfunded. No. 45 on waste is encouraging. I believe that rethinking the common agricultural policy is essential and the Government failed to achieve what they hoped for in Berlin. That was unfortunate but, I am afraid, in the circumstances understandable.

When we come out of the tunnel—and out of it we must come—farmers will have to realise that they are the custodians of our countryside. I know that many do, but not enough. That fact must also be recognised by the Government. Without government help, no farmer now or in the foreseeable future will be able to afford to do everything that is essential for the preservation of all the aspects of the countryside which many of us hold dear.

Looking well into the future, I believe that farms must be environmentally sustainable, rambler friendly, wildlife friendly, countryside friendly, and, above all, economically viable.

6.56 p.m.

Lord Beaumont of Whitley

My Lords, there is no need for me to recapitulate the ills of British agriculture. The number of speakers in the debate, opened so ably by the noble Lord, Lord Palmer, is evidence of that. Nor shall I spend time on the short-term ameliorations that are needed. They have been spelt out by a number of speakers and the sooner they are provided the better, in particular help for the organic sector.

I want to concentrate on two points. The first is the immensity of the underlying situation and the second is the toughness of the measures needed. This is not a passing crisis limited to this country; it is a deep-seated, long-term world disaster. It started in this country before the last war, was interrupted by the war and its psychological aftermath, resumed now, and is doomed to continue and become worse indefinitely.

It is the result of unbridled free trade, the purpose of which, as my Liberal forebears rightly knew, was to produce cheap food for the urban poor. That was an admirable objective, but not at the expense of the destruction of the English farming industry and not at the expense of the rural countryside.

If there are those who believe that there can be a recognisable rural England, or Wales, or Scotland without the preservation and, indeed, the restoration of the farming population, they are in error. They have only to see the destruction of rural New England by the competition of the monocultures of the Middle West.

What is to be done? The tide must be turned by a major turnaround and by the abandonment of free trade. We are told that that would mean misery for the third world. That is not so. The protection of food security in all countries and the abandonment of the obscene ferrying of luxury foods over vast distances, consuming immense quantities of fuel, can only do good to everyone.

On Thursday 26th June 1846 at 1.30 a.m., as described by Disraeli in his life of Lord George Bentinck, Sir Robert Peel sat on the Treasury Bench and watched the gentlemen of England troop into the Lobby against him to save British agriculture. Another such massive, if not so romantic, turnaround must be asked of this Government and of all political parties. Pray God that they will not fail the British countryside in which so many of us and so much of Britain have our roots.

6.59 p.m.

Earl Peel

My Lords, I am sorry to say that your Lordships do not have Sir Robert Peel; you have me instead! I take this opportunity to thank my noble friend Lord Palmer for introducing the debate. It is timely.

As noble Lords have quite rightly said, we face a very real crisis in the agriculture industry. One thing is abundantly clear: there is no easy solution. The issues are extremely complex and decision-making is difficult, not only on the farm but also at the Ministry of Agriculture. I believe that we must show sympathy for the noble Baroness and her ministry at this difficult time.

We have all witnessed personal tragedies. I, like other noble Lords, know one or two extremely sad cases, and we must not lose sight of or forget them. We have a duty to do whatever we possibly can. However, what can we do? The truth of the matter is that the industry is undergoing a major shake-up. Although it is tough to admit, I fear that it was inevitable. There are simply too many farmers producing too much food. Modern technology has taken its toll and farmers are, to an extent, the victims of their own success. Having said that, I deplore the attitude of some, and I do not like comments such as, "Oh, the Tories let the miners go to the wall; now we'll let the farmers go to the wall". That is disingenuous and I believe that it is also highly short-sighted.

On the other hand—and this has already been touched on—farmers must realise, as many do, that they have no divine right to subsidies, in whatever guise, any more than any other sector of society. Support through the public purse must be earned and respected. However, I turn to what I believe to be perhaps the real point of our debate today and the real challenge which faces the ministry. Whatever countryside we aspire to, it will all be worthless without cultivation, without livestock (think for one moment of the number of SSSIs that rely on livestock for their conservation and integrity), without management and without farming. Only farmers can deliver what we want and they can do so only if they receive a reasonable return on their capital and on their labour.

Therefore, like other noble Lords, I believe that it is incumbent on the Government to act under the agrimonetary compensation scheme to make allowances for what I might call the "weak euro". As my noble friend Lord Ferrers said, that scheme was designed specifically to cope with currency fluctuations. Our farmers really do believe—I think quite justifiably—that they deserve equal treatment with other European farmers and that they are being deprived of a substantial slice of cash which is owed to them. I ask the noble Baroness whether she and her ministry will deny farmers the money which they deserve.

As for the future, I believe that we shall see greater globalisation, a freer market and greater competition. Who would have thought, for example, that the flower-growingindustry in the Isles of Scilly would now be threatened by flowers being flown in from Kenya? That is the level of competition with which we are having to contend. And we must face up to it. I am afraid that it will mean cost-cutting and a loss of manpower. It will probably mean larger farms, which I would very much regret. However, we must look at common welfare standards. We must look at labelling and certainly at better marketing. Compared to the French, I believe that we are particularly bad at that in this country.

However, it was with great joy that the other day I opened my local Darlington and Stockton Times and saw a photograph of my noble friend Lord Lindsay opening a new launch of Yorkshire lamb. I believe that that is exactly the kind of activity in which farmers in this country should participate more widely. We have already had reference to niche markets, and I believe that there are real opportunities in that direction.

On the question of less red tape, I shall believe that when I see it. I sincerely hope that there will be a greater emphasis on the environment. The CAP has been positively destructive in that regard and we need to see a greater percentage of support in that direction. However, I welcome the steps that the Minister has already taken. Yes, we are already seeing diversification and it will grow, but it will not be the panacea that some people believe. Ultimately, in the remote agricultural areas I believe that farming will still need to be a stable industry that maintains the socio-economic background of the countryside.

We all want to see a diverse, competitive agriculture sector with a much greater environmental commitment to producing healthy food. I have full confidence that, given the opportunity, our farmers can deliver that. However, reform of the CAP must continue. But, as my noble friend Lord Vinson said—and he was absolutely right—we must not forget what happened in America. America withdrew subsidies and its agriculture industry very nearly collapsed. It was derisory of the way that we ran ours, but it came along with huge dollops of money in order to prop up its own industry. Finally, therefore, we must always have that safety net. However, I believe that the composition and structure of the safety net present the real challenge to the Government and to the EU.

7.5 p.m.

The Earl of Carnarvon

My Lords, I congratulate my noble friend Lord Palmer on introducing this very important debate. I must declare an interest as a farmer in north-west Hampshire and as a former chairman of the Agricultural and Food Research Council.

A recent survey of 30 small and medium-sized abattoirs found that 26 expected to close down, three of them in the week of the survey. That was a matter referred to by the right reverend Prelate the Bishop of Hereford. Large abattoirs claim that payment on a headage basis would mean higher costs for them and would make them less competitive on a European scale. That may be true, but the current situation is forcing small plants out of business.

That is of vital importance for a number of reasons. The British livestock sector is suffering from severe recession, especially in pig production, as we have already heard today. While our animal welfare standards and other regulations ensure that our costs are higher than any of our competitors, the strength of sterling enables imports to force down prices. Therefore, the only way that our industry can survive is to produce high quality, organic or added value products that can sell for a premium, especially through farm shops, as the noble Countess, Lady Mar, said, and local outlets and farmers' markets. That is totally impossible without small local abattoirs, as the high throughput centralised plants cannot keep individual carcasses separate.

I turn to the question of sick and injured animals. Without local abattoirs, or knackers' yards, what can a farmer do with fallen stock? At present the hunt kennel is the only means of disposal. If hunting ceased, what then? He cannot shoot the animal and bury the carcass; that is illegal. It is essential to keep open rural abattoirs to prevent unnecessary suffering of farm animals. The rate at which small abattoirs are closing down means that immediate government action is imperative.

Livestock numbers in Hampshire have been falling for years. By the end of this year there may be fewer than 200 dairy herds left in Hampshire. I know that the problem with statistics is that they are always out of date, but at least 18 dairy herds in Hampshire were sold last year and more since. Judging by the notices of dispersal sales in Farmers Weekly, there are many more to come in the near future. They are not small-scale, out-of-date enterprises. Many of them are large, well run herds of up to 200 cows or more.

Beef and sheep farming is hardly more profitable. While beef farmers are recovering slowly from the BSE crisis, sheep farmers have experienced two years of poor returns, with prices only now rising from very depressed levels. The result is that sheep numbers have fallen in that area and many flocks have been sold. I buy approximately 500 North Country Mule ewe lambs each year. In 1996 they cost £74 a head; last year I bought them for £29 a head. Therefore, the effect on the hill farmers from whom I buy must be terrible.

The loss of livestock will have a dramatic effect on the landscape, as will other changes. Poor land will cease to be farmed as it is entered into agri-environmental schemes or set-aside. Even the biggest and most efficient farms are not immune to financial pressures. One agri-business farming some 13,000 acres laid off three men recently by moving away from ploughing towards a minimal cultivation technique. Several owners are being consulted about future policy, including the option of 50 per cent set-aside, the maximum allowed.

I cannot predict the outcome, but if all agree to such a course of action, 6,500 acres of set-aside in a relatively small area of Hampshire, Wiltshire and Berkshire would certainly have a major impact upon the landscape. I am sure that the noble Baroness, Lady Young, would be extremely worried about that, as she would be about the employment position.

An accountant specialising in agriculture in Hampshire has said that the reserves of many farms are now exhausted and without profits undoubtedly some will be forced out. The current recession is the most severe to hit farming, and I have been farming for over 50 years. If it does not improve soon, it will have the most dramatic impact upon the countryside, something to which the noble Lord, Lord Sewel, referred. And I am extremely worried also about the economic, environmental and social consequences.

7.10 p.m.

Lord Selsdon

My Lords, your Lordships will be happy to know that it is half-time and I would like to make a half-time speech. To me, this is quite a remarkable day. I thought that there might be 10 or 12 speakers. Before this date, when I spoke to the noble Lord, Lord Palmer, I said that I would like to talk about animals and economics because for much of my life I have dealt with the economics of food and marketing and when I worked for the Midland Bank, we were called the "farmers' bank".

But, in a way, there is a message which goes out from this House today. It says that we are right behind the farming industry at this time. If we can let the farmers know, by communicating the contents of the speeches today, that we shall use all our endeavours and our best efforts to persuade the public sector, governments and international agencies that we must have a viable agriculture industry in the future, then that message does us much good.

Those of us who are meant to be banking and economic people do not trust government figures; we never have. So taking the government figures on all aspects of the industry, I have over the past two weeks done my own research. The figures always say that one year is not comparable with the last. With that in mind I revisited, by phone and in other ways, areas of land which my family used to farm, totally uneconomically, in Dorset, Sussex, Hampshire, Berkshire and Wiltshire. We were disastrous farmers.

My grandfather, who accustomed me to getting up in the morning to milk the cattle, said that he would never dismiss anyone whose family had worked on the land. The land had no value other than the animals and the people it supported. If I recall correctly, we have 18 million hectares of land. We have on that land something like 11 million cattle, 40 million sheep, 8 million pigs, 140 million fowl and 400,000 horses—the same as in Australia, I believe—added to which there is other livestock.

I am a grade 3 Peer so I have no intention of aspiring to talk about grade 1 or grade 2 land. But grade 3 land accounts for roughly 60 per cent of this country. It is totally uneconomic at this time.

Why is that? One always remembers the VAT man and the Customs and Excise man—the dreaded Excise man who destroyed the ability of Cornish farmers to make a little bit of extra money on the side by importing French brandy in order to subsidise their farms. But the most deadly man of all was the man from the Ministry of Agriculture and Fisheries. He had the power to enter your land under the protection of the bulls in service Act, the dangerous weeds Act or the Colorado beetle Act. It is bureaucracy which has destroyed grade 3 people.

A good friend of mine and of the noble Lord who has been so wonderful in opening this debate once said to me, "Agricultural land is uneconomic" and I said, "But why is it so highly priced? Why is it that today it has £60 billion of value? Why has the price of land remained so high when the economics of it are so wrong?" He said, "Well, you see, agricultural land is only 50 per cent mortgaged but if you look at the return it ought to have, it would be 100 per cent mortgaged".

It is heavily mortgaged but there is still an asset there. I know not why the price of land is so high but my friend gave me a lovely phrase which I have never forgotten—pride of ownership. In my 49 telephone calls to people, I asked, "Why are you still in agriculture?" They replied, "My father was. I am". There are 350,000 families—husbands, spouses and partners—who love the land and love their animals. In a way, perhaps, one could say that they are foolish but maybe they are wise because suddenly, into the breach, comes the decision that the whole of the south of England is to be covered with houses. I declare an interest because I work for a contractor. But we are after brownfield land. Our countryside is an asset that has no value; it is invaluable. If your Lordships' House supports all that today, we may get somewhere.

7.15 p.m.

Baroness Wharton

My Lords, I am grateful to my noble friend Lord Palmer for initiating this debate today. I intend to speak on only a couple of issues, the first of which is the pig industry.

In researching for this debate, I spoke to veterinarians and pig farmers. Yes, farming is in crisis. I read the Veterinary Record regularly and I do not believe that matters can get any worse.

In his introduction, my noble friend said that the Prime Minister had pledged to sit down with the farming industry to tackle the immediate crisis. I thought he had already done that on 1st February, in a speech to the NFU because he said: I do not rule out further measures to help". He then continued to have further meetings with representatives of the pig industry. In spite of what has been said today, the UK Government have not offered any help to the pig sector to deal with the problems which BSE has caused. Has the Minister in another place applied to the Commission for a grant of exceptional occurrence because I am sure that the industry qualifies for it?

So far there has been a great deal of talk from officials but there is nothing yet on offer. We have all heard that time is running out. I would hate to see the Government react with too little and too late, because, by then, the industry really will have been destroyed.

We demanded high welfare standards. The industry complied with that request at considerable cost to itself. I should not wish to see it now forced to abandon the improved welfare standards which we fought so hard to place upon it.

On labelling, I still find that confusing. The country of origin is often difficult to identify. We really must have clear labelling so that consumers are left in no doubt as to where their food comes from. British shoppers do care. But they cannot make informed choices when labelling is less than helpful as to the country of origin. Many people to whom I have spoken are willing to pay a little more in the knowledge that pig and poultry products are produced to a high welfare standard.

We all have a part to play in preserving our own agriculture, which has already done so much to improve its own farm animal welfare. Farm prices are at rock bottom and they show no sign at present of improving. But the plight of farmers is not reflected in the prices that we pay. I hope that the Government will start to turn their promises into action. But the time for that to be done is now. The future may well be too late.

Another matter of concern to veterinarians and farmers alike is the draft regulations which are the work of the Joint Food Safety and Standards Group. Those regulations will soon be submitted to Ministers for signature. I spoke to an independent nutrition and legislation consultant retained by the George Group about Regulation 13. That regulation seeks to ban all types of feed additive mixtures, unless they are incorporated into feeds.

That has been around since 1970 but has been circumvented or ignored by practically all the 15 countries within the EU, and for good reason too. Its implications for animal welfare are extremely worrying. One example is hypomagnesemia. In cattle that is grass staggers or tetany. It is a rare condition these days because farmers add magnesium salts to the drinking water every day. This method ensures that they get their daily intake of magnesium. Should farmers not be able to carry on adding this mineral daily in water, the result could well be death. Cattle and sheep on extensive grazing cannot obtain sufficient micronutrients only from grass to meet their requirements.

The implementation of Regulation 13 will also cause problems in pigs and poultry. With the demise of "in-feed" antibiotics for growth promotion, there has been much more use of vitamin boosts in times of increased stress. Other companion animals are also affected. As we know, Europe already circumvents that regulation, but if we adopt it we will be adopting all sorts of welfare problems for ourselves because I believe that we have a habit of employing the type of people who thoroughly relish the job of enforcing every regulation or directive that comes out of Brussels regardless of the consequences. Rules are rules and they have to be obeyed. I do not believe that this country will ever behave otherwise because we dot every "i" and cross every "t". Sometimes I wonder whether officialdom ever gives a thought to the fact that occasionally it might be wrong.

I end with a quote made earlier this year from the past president of the British Veterinary Association, Bob Stevenson. He said, Livestock farmers are battening down the hatches and vets are clearly seen as a cost rather than a benefit, with the result that farmers are calling on us less and less". One does not need a crystal ball to understand what that means. Unless things improve rapidly, animal welfare could be put on a back burner and that would be a very bad thing. It would be very tragic. I hope that that does not happen.

7.21 p.m.

The Earl of Selborne

My Lords, like so many others, I must declare an interest as a farmer and, perhaps unusually, I am chairman of the Agricultural Mortgage Corporation with a particular interest in that respect. Being in the second half of the speakers' list, there is no need for me to repeat the causes of the problems facing UK agriculture. Anyway, the noble Lord, Lord Palmer, who initiated the debate so effectively, listed the lot. So we do not need to worry any more about the issues. We have identified them as an overvalued pound, over-regulation, historically low commodity prices, high welfare standards in this country and an inappropriate common agricultural policy.

We need to move on in this debate—and many speakers have done so—towards solutions. In his speech the noble Lord, Lord Palmer, drew attention to an issue to which UK agriculture has to address itself with, one hopes, government help; namely, why is it that we face higher input costs? He mentioned Spanish agrichemicals and continental combines. I could mention many others. If I ordered A1 semen from a named bull that would cost me a lot more than it would cost in Australia. Do not ask me why, but that is true. We know about right-hand drive vehicles in this country, but we have never worked out how on earth it is that we allow ourselves to pay so much more for them. Put together, this amounts to extremely incompetent consumer buying by the agriculture industry. I know that the manufacturers blame the Government, the Government blame the manufacturers and the farmers blame everyone else. We need to get together and sort it out for ourselves. It is a matter which agriculture needs to address. If it finds a problem with regulations it will have a strong case to go to the Government.

But we are locked into a high-cost farming system whereas by now we should have tried to devise a strategy for the industry which recognised lower commodity prices. As so many speakers have said, we are locked into a common agricultural policy which positively hikes up costs. For example, in the case of milk quotas those who remain in the business have to give a pension to those who have retired if they want to use their quota. Voluntary set-aside is another expensive way of maintaining rents at an artificially high level. Why should one rent land if one can get set-aside payments of over £100 an acre?

Clearly, the Government can have a hand in this. But when we come ultimately to recognise, as speaker after speaker has done, that we have rightly imposed on ourselves higher welfare standards, we have recognised that it is an obligation on all farmers to produce more than just food, although that remains our main product. We must therefore think in terms of rewarding those who produce bio-diversity, nature conservation as well as animal welfare and high food quality.

As the noble Baroness, Lady Wharton, said, we need to ensure that the consumer is aware of these advantages and will pay for them. I do not believe that labelling by government regulation achieves that. It is another bureaucracy. It tends to lead to confusion and it is not a very good way of communicating risk or even communicating market attributes.

The problem is that if labelling is government regulated—or worse, EC regulated—people simply do not believe it. There is a good case for privatisation, which I recommend to new Labour. Why do we not have a kite mark scheme owned by consumers or promoted by an independent organisation, not to please the Government or farmers themselves because no one will believe it, but an organisation which tries to give a nominal score to these attributes which we value: bio-diversity, animal welfare, food safety and quality? It would be difficult to get all these together and rated out of a score of 10. Whoever chaired that organisation would have the most appalling difficulty.

I know that organic farmers would treat such a scheme with grave suspicion because it might suggest that other people could produce to the same level of conservation merit as they do, and of course they could. That is why the organic people will be worried. I would very much like to see such a scheme. I hope that it would be recognised that it was the agricultural industry which was supporting it, but not leading it, trying to meet the issues that everyone in the Chamber has recognised.

We have put ourselves into a bind with high cost systems. We are producing far better products than other countries. Our food quality is superb and yet the consumer, even the Government when they are the buyer for the Ministry of Defence, do not seem to recognise that. It is up to us to tell them how they should recognise it.

7.25 p.m.

Baroness Strange

My Lords, we are all particularly grateful to my noble friend Lord Palmer for initiating this debate on a subject which is not only crucial to our countryside as we know it, but also crucial to the hearts of all British people whether they live in towns or in the country. We are talking about the whole of Britain, as it is, as it was, and as we hope it will be.

Your Lordships will know the old story of the man who created a beautiful garden from a wilderness, all with his own hands. One evening he was standing admiring its beauty when the local minister came by and admired it, too. The gardener said, "Ay, I've made a grand job of it." The minister reminded him that he must also give thanks to the Almighty. "Ay", said the gardener, "but it was a fair mess when He had it all His own way." So it is with Britain, with our landscape. Much of its beauty is due to the people who have protected it, cared for it, and worked it. We have much to thank farmers for.

Your Lordships have already covered all the other issues—cows, sheep, hens, arable farming and crops, small abattoirs and the fact that while costs, rents, electricity, fuel, machines and wages have all gone up, prices have persistently gone down. So I shall talk just a little about pigs. Like my noble friend Lady Wharton and others, your Lordships may have noticed the charming ladies who inhabit, hock deep, a sty of straw in Parliament Square. They have outside two large notices, "Save our bacon" and "Does Blair care?" Whether the right honourable gentleman the Prime Minister does, or does not, care for the lifestyle of pigs, I do not know. But I do know that he was meeting pig farmers today and so I am cautiously optimistic. Perhaps he does care. I know that I care.

Beside the luxurious straw bedding there is what at first sight appears to be an instrument of torture, a sort of iron maiden. It is a very small iron cage into which some pigs on the Continent are tied up so they cannot move. Many foreign pigs are kept in inhumane conditions. To add insult to injury, their end product is subsidised by their governments.

British pigs lead happier lives, but their owners are not subsidised. This demonstration is to help British pig farmers to survive. Many of them have not. I know that I have no wish to eat bacon that has been produced by torturing animals. I am sure that many people will feel the same. If the pig has had a contented, happy life, it is rather different.

I am sure that your Lordships will be glad to know that no one is going to eat those two beautiful large white Tamworth cross pigs, Cherry and Winnie, who have been living in Parliament Square. They are going to a special children's farm where they can be played with and stroked every day. If only there could be a happy ending for all British farmers—including pig farmers—and for our countryside which we all love. I hope that someone in the Government is caring about our agriculture now.

7.29 p.m.

Lord Bruce of Donington

My Lords, this has been a most remarkable debate; one more unique than any I have experienced so far. It is clear from the speeches made this afternoon that the CAP has no friends whatever. No one has spoken favourably of it. Three or four noble Lords have wished that it would go away and have been willing to assist in its euthanasia, but the rest, some 17, have stuck daggers in its back. Can we not dispose of it now and agree that the common agricultural policy is a lot of nonsense? Why do we not say so? It simply is not working.

There are many good reasons for that. One important reason was given by the noble Lord, Lord Vinson, who is temporarily not in his place. He pointed out that agricultural commodities are different from other manufactures in that they comprise animals and plants; entities with life in them which have their own independent rhythm. They cannot be parked on the tarmac like Ford cars if they cannot be sold. They have a rhythm of their own; one allied to that of nature or which is peculiar to a particular species. In the UK, at least, they live on varying types of land.

We must therefore treat agriculture completely differently. It is high time that we said so. There is no need to perpetuate the myth that the common agricultural policy is the be-all and end-all of human existence. It may well be on the Continent, to the extent that it was devised by Germany and France in a deal ultimately consummated in the Elysee Treaty of 1963, in which France agreed to support Germany on certain conditions and Germany agreed to support France. In any case, they would consult together before each Council meeting. We all know that. We all know too the corruption that has occurred, not only at Commission level, but also in the way in which individual political parties in France and Germany have entered into corrupt arrangements in order to finance themselves.

The answer really is simple and can be put within the time limits that we are set. It is clear that we must pay special attention to agriculture. It cannot be treated like any ordinary run of the mill manufacturing or productive industry. All we need to do is to repatriate to our own country any aid and guidance which we need. We are the people who know the climatic conditions, types of animals and variables of nature as they apply to us. Our governments, if they are responsive, can deal with the matter themselves, subject to the correction of another place and indeed ourselves; subject to certain restrictions and the public at large. Why not repatriate the whole business and let us deal with the problem ourselves? I am completely at one with those of my colleagues who say that the agriculture industry must exercise more initiative than it is able to, or is inclined to, at the present time.

Agriculturists must help themselves. There can be no doubt about that. But in agriculture—and I am talking only of agriculture—one must be free of eternal regulation. Today I have been through parts of the European budget for the year 2000; a document of 1,801 pages, which is beyond the capacity of any government Minister, or indeed, his civil servants, to look at. We all know perfectly well of the regulatory regime imposed on us even without parliamentary scrutiny due, if noble Lords have read the comitology report, to the existence of completely independent committees in Brussels under the chairmanship of the Commission, whose regulations have gone directly onto the statute book without any intervention or scrutiny by the British Parliament. So let us grow up and deal with matters ourselves. I should be most happy to join your Lordships in so doing.

7.34 p.m.

Lord Laird

My Lords, I am most grateful for this opportunity to draw attention to the dreadful state of the agriculture industry in Northern Ireland. I join those who salute my noble friend Lord Palmer for initiating the debate. My noble friend Lord Molyneaux of Killead correctly and with great clarity drew attention on Monday night to the state of the farming industry in Northern Ireland. I have no wish to waste time going over the same ground except to place the Province in context.

The agricultural food industry is three times more important to the economy of Northern Ireland than it is to the United Kingdom as a whole. In 1999, farm incomes fell in real terms by 23 per cent—considerably more than in the rest of the United Kingdom. Farmers in a small Province now owe over £520 million to the bank and that figure continues to grow. So we know only too well the problem, but what can we do at this stage?

I understand why the Government believe that any measures can be taken only on a total UK basis and not just for Northern Ireland, even if the Province's burden is proportionately much worse. The Ulster Farmers' Union has operated a campaign of awareness of the difficulties and it has highlighted several areas for particular support. I have little doubt that the Government understand the serious position of the farming industry and that a programme of measures is currently being prepared. I look forward to hearing about assistance for the pig industry which, as we all know, is on its knees. An undertaking should be given that all the EU agrimonetary compensation available in the year 2000 will be energetically sought. A positive outcome could be achieved by the consideration of "low incidence" BSE status for Northern Ireland.

Those are important measures, but by their very nature they are short-term measures. The farming industry is the oldest of industries, rooted in all parts of the country and in everyone's life. But the time has come for a more radical reappraisal. A pact must be made between the industry and the Government, each with a major part to play. We must save agriculture but not at the cost of saving all the farmers. Too many have outdated methods of operation in which their farms are considered as a way of life and not as businesses, as they should be.

Farmers, particularly those in Northern Ireland, must be encouraged to look at what they do, how they do it and why. A hard look by any business person when considering the future is vital. If that suggests to him that massive changes must be made, even to the extent of leaving farming, then so be it. I fully understand that by the nature of agriculture as a capital intensive industry, change is slow, and that is where the Government have their part to play. Not so long ago, the Government rightly supported the miners and their community during the dramatic changes in that industry. So why not put in place an imaginative scheme, including a good deal of lateral thinking, to change totally the farming industry?

We must consider, for example, a compensation scheme for early retirement and for a change of direction. Consideration should be given to methods of relieving loan debt or helping with interest payments. There should be a total refocusing programme to allow the farming community time to reflect and collectively consider the future. If we want farmers to be the stewards of the countryside, fine. But it must be on a business basis. I accept that those will be highly expensive schemes and that they can work only alongside short-term measures such as those discussed in your Lordships' House today, but if we do not grasp the mettle now and simply continue to throw short-term money at the problem, the expense will be just as great and we shall be debating the topic again in 10 years' time. A pact should be made that if the Government put in place schemes and appropriate funding, the farming industry will take steps to change and to reposition itself.

7.39 p.m.

The Duke of Montrose

My Lords, those involved in agriculture pursue their trade with an obsession second to none, so it is not surprising to find that the industry has shown an increase in productivity which amounts to 3.5 per cent over the past 25 years. For most industries that would be sufficient to keep them economically viable and successful, but for farming that is not the case.

The Government tell us that they have devolved agriculture to the Scottish Parliament, so I am delighted that this debate has been led by the noble Lord, Lord Palmer, and that various other Scots are speaking. At the moment the core problem of agriculture is in our relationship with Europe. The United Kingdom is the forum in which such problems have to be settled, so the Scots will continue to bring their representations to your Lordships' House.

Many times we have heard of the dismal figures that the Government produced last November on farm incomes, but I want to mention the Scottish ones in particular. They show, for example, that in 1998 the average dairy farm had a net income of £4,400, which was a drop of 68 per cent on the previous year. In calculating income for 1999, it is estimated that there was a further 8 per cent drop. Most other sectors experienced similar problems.

The noble Lord, Lord Palmer, and other noble Lords have drawn your Lordships' attention to the root of the problem, which is the strength of sterling against the euro. I believe your Lordships understand the mechanism by which that affects so many aspects of agriculture. From July 1993, when the conversion was calculated using green pounds, to the present day, the value of the pound has increased by 52 per cent. In regard to the price of milk, mentioned by my noble friend Lord Ferrers, even if one uses the change in value from 1996 to the present day, a farmer who receives a price of 17p a litre now could argue that without the increase in value of the pound against the euro he should receive 23p. At the moment many are left with a price of merely 15p a litre.

I agree with the noble Lord, Lord Sewel, and other noble Lords that we must address the long term, but I am anxious that we should look at the short-term measures required. We have heard much about the financial difficulties of even some of the large producers who are preparing to sell up. The noble Earl, Lord Carnarvon, spoke of Hampshire. The south-west region of Scotland accounts for 85 per cent of the dairy farms in Scotland and it is served by markets at Carlisle, Ayr and Castle Douglas. The market at Carlisle recently had 23 pedigree herds booked for sale, whereas normally at this time of the year it would expect to have only six. The owners of those herds have been prepared to put in the time and the effort to carry out the cataloguing, the clipping, the cleaning and the preparation of their animals. The market estimates that there is an equal number of farmers who will simply send their herds for slaughter. In Ayrshire it is anticipated that another 30 herds will go and there are similar stories from other parts of Scotland. Adding to the frustration is the fact that word is going around that the Lockerbie creamery is buying in milk from France at 11p a litre.

From the west coast and the island creameries, which exist merely to serve their local communities, a different story emerges. Those at Bute and Campbeltown are giving cause for concern. The local agricultural adviser believes that the creamery on Islay has ceased to be viable and that will spell the end of the seven herds that currently supply it.

Those island farmers have cost structures that are hard for most other areas to imagine and they have not been helped by a government policy of having a blanket fuel price escalator applied across the country. The cost of running a reasonable agricultural transport lorry is now about 50p a mile for fuel alone. The transport charge for taking a lorry from Stirling to one of the islands with a load of hay is £800, which, with one of the best large-scale hauliers, works out at £50 a tonne on top of the cost of the hay.

Farmers in that area have experienced an additional frustration in that one of the life-belts that they were offered was the agricultural business improvement scheme. Most farmers who wish to stay in business are prepared to clutch at anything that is offered. Farmers completed the required resource audit, carried out all the work to meet the conditions of the scheme and put in 9,616 applications. By the time the rural affairs department had paid out 5,337 such applications the money had run out, so half of them were left without any recompense for their efforts. A similar pattern is emerging under the countryside premium scheme. I believe that out of those who have applied in Dumfries none has gained approval.

In winding up our debate on the Government's proposals for the milk industry on 9th November of last year, the Minister said that the Government's priority is a thriving dairy industry that can compete in world markets. As many noble Lords have mentioned, the strength of the pound has now become the main force driving the restructuring of our agricultural industry. That is surely a fairly impermanent feature of the economy. Can the Minister tell the House how much of our milk production the Government are prepared to hand over to imports when it is a commodity that has strategic as well as vital health implications? It is also a product to which this country is eminently suited.

7.46 p.m.

Lord Northbourne

My Lords, I am most grateful to the noble Lord, Lord Palmer, for introducing this debate. Many noble Lords have spoken of the plight of farmers so I shall not speak on that subject. Judging by an Answer that the Minister gave on 9th February, it seems to me that the Government's policy is to say to farmers that their problems can be solved by increasing efficiency. I am not entirely convinced that that is a realistic assessment. We already have one of the most efficient agricultural industries in the world.

I want to address the possibility that we face an unavoidable, real agricultural recession of the nature that we endured in the 1920s and 1930s. An agricultural recession does not lead to increased efficiency. As some noble Lords have indicated is beginning to happen it leads to retrenchment; it leads to battening down the hatches, as the noble Baroness. Lady Wharton, said; it leads to dereliction of land and rusting machinery; it leads to a flight of enterprise and skill from the land; and it leads to a flight of capital from the land.

That happened in the 1920s and 1930s and when the war started it was a struggle to get the land back into production. In those days I was 14. I remember the situation. My father was in the forefront of the battle to get the Kentish agriculture industry back to producing the food that the nation needed. There was a shortage of machinery and crop storage. More importantly, there was a shortage of people with the skills to carry out the job. At least at that time the land was still available. The land had been allowed to turn into grazing. I remember a cousin of mine who farmed his 2,000 or 3,000 acres by buying a pony and ranching the land. The noble Lord, Lord Selsdon, referred to the importance of the land.

If we have an agricultural recession today we face a new threat of the irreversible loss of agricultural land, which is one of the nation's most valuable assets. We have superb agricultural land, some of the best in the world. Today, unlike the situation in the 1930s, the general economy is booming. There are many competing demands for land. And land lost to housing, roads, industry and theme parks to mention but a few, is land lost to food production forever.

At this point I disagree with the noble Lord, Lord Sewel; I do not believe that this country will never need food produced at home again. That is what was thought in the 1920s and 1930s. The Americans and the Canadians were "mining" the Prairies for cheap wheat, but we did not know it at that time. We thought Hitler was a reasonably nice guy; we did not realise what was coming. We are burying our head in the sand if we think that the world will never again need the food produced in this country.

We may not have a world war; we can never foresee what will happen. But I can perhaps give one statistic which may suggest the reality of the possibility that the production of our agricultural land may one day again become crucial. In October last year the world's population reached 6 billion. It has doubled since 1960. It could easily double again in the next 40 years; that is, another 6 billion mouths to feed in the world. Over I billion today are between the ages of 15 and 24: that is, just reaching the peak child-bearing years.

The potential consequences of population growth are staggering. The noble Lord, Lord Oxburgh, the Rector of Imperial College—who unfortunately cannot be in his place today because he is abroad—said in 1998: As world population doubles yet again demands for national resources, energy, food and water will lead to environmental pressures on a scale that is hard to imagine". Some noble Lords may say there is potential for technological improvement. But is it reasonable to say that this country will never again need its agricultural land? I urge the Government to consider carefully before they put us and our children at risk in the future. What is the Government's—I ask the same question of the Opposition—long-term policy for the future for good agricultural land in this country? What steps do they plan to take in the event of a recession to secure this unique and irreplaceable asset for future generations?

7.53 p.m.

The Earl of Shrewsbury

My Lords, I too congratulate the noble Lord, Lord Palmer, for securing this most important debate. I declare an interest as a farmer and landowner, and as president of the Staffordshire and Birmingham Agricultural Society, which has a wonderful show at the end of May this year. It is our 200th anniversary and I hope that your Lordships will attend in large numbers.

As one who cares deeply about the countryside and its general well-being, it saddens me to witness the steady decline of agriculture. I believe that agriculture is in deep depression at the moment. It is an industry which is experiencing a depression which many believe to be as bad or perhaps even worse than the great depression of the 1930s when I remember my father telling me that he paid tenant farmers 30 shillings an acre just to keep the land going.

It is unprecedented to see every sector of agriculture and horticulture in such steep decline. It is unprecedented to witness month by month reports of rising numbers of farmers leaving the land; of young people deciding not to follow their parents into the industry; of divorces; of suicides; and we have not yet seen the peak of this tragedy.

The recent Cabinet Office report paints a far different picture of rural affairs. Its authors tell us that whilst agriculture is experiencing difficult times, those of us who live in the countryside benefit from longer, healthier lives, in general pretty good services and a better general well-being, both mental and physical. That is pretty good. So everything in the garden is nice and rosy according to the Prime Minister's advisers, most of whom I guess could not tell a field of spring barley from winter wheat, apart from the fact that sometimes it is green, except on my farm where it is usually yellow.

Tell that to the farmer's wife who has just found her husband hanging from a beam in the barn because he could not face the future. Tell that to a farm worker who has just lost his job. Explain that to the stockman who has built up a prime pedigree herd over the course of his lifetime, only to see it destroyed for compensation a fraction of its true value. Tell that to the agricultural engineer who has been forced to close his business. The list of tragedies is endless, and even worse in the hills and the less-favoured areas.

I believe that the report paints an inaccurate picture of rural well-being. It states that, in general, levels of unemployment are lower in rural areas than in urban areas. But what it fails to point out are the vast numbers of people who use country villages as dormitories. Their numbers distort the true picture. Many villages are ghost towns during the week except for the evenings, and yet the inhabitants do not use the village shop, if indeed one exists any longer; they are generally multi-vehicle families who travel to supermarkets. Those of us who live and work in rural areas know full well the true picture. It is all very well for the No. 10 spinmasters to gloss over the fact. What they would wish us to believe is a gross distortion of the true situation.

I should like to touch briefly on the pig industry, for it is suffering pain far worse than the other sectors of agriculture. The industry is in freefall. What is needed is a level playing field. The factors which have hit the industry are many and varied; the strength of sterling; the BSE crisis; welfare issues and requirements which our EU colleagues are not restricted by; unfair treatment by supermarkets and also a glut of pigmeat throughout Europe. All those are villains in the scheme of things.

The noble Baroness, Lady Hayman, kindly replied to a number of Written Questions which I tabled recently, and I am grateful for her responses. The recent letter from John Godfrey, chairman of the National Pig Association, tells me, We now have the Prime Minister's commitment to help". But I wonder whether that sentiment is a little premature. I ask the Minister in her wind-up to clarify just what plans for assistance for the pig industry the Prime Minister might have in mind.

I suggest to the noble Baroness that many of the current problems stem from cheap imported pigmeat from our EU partners, where their welfare standards are woefully below those practised in this country. It seems ridiculous to me that pig farmers in this country must pay for the disposal of pig offal, even though dedicated pig abattoirs sell processed pig offal to EU countries, only for it to be included in pig rations, and the finished product is then exported back to this country. Surely that flies in the face of all the standards and restrictions which have been placed on UK farmers. The result is a product which costs less to produce by our EU neighbours, making our pig industry completely uncompetitive.

Finally, honest labelling: I understand that imported pigs are processed in this country and many of the products are then labelled as British. That cannot be right when such products are often produced in systems which practise welfare regimes of a far lower standard than those practised in this country. It is pulling the wool over the consumers' eyes.

We should be giving every possible encouragement to our farmers, who are the best farmers in the world. The demise of the agricultural industry in this country will have lasting and long-term effects both on the countryside and on the balance of payments. To take no positive action now will reap a sad and expensive harvest in 10 years' time. That would be short-sighted in the extreme.

7.58 p.m.

The Earl of Arran

My Lords, I should like to talk briefly about the most beautiful of all the regions; that is, the West Country.

Agriculture matters more to the economy of the south-west where we live and farm than any other region. At over £1 billion, the value of agriculture output contributes 2.5 per cent of regional GDP—twice the average for other English regions—while the industry employs some 70,000 people, which is 2.3 per cent of regional employment; again, the highest for any English region. However, in the more rural parts of the region such as north Cornwall, west Devon and Exmoor, the significance of agriculture to the rural economy is even greater. For example, in rural Devon and Exmoor, 14.4 per cent of the workforce is employed in agriculture, which is three times the EU average.

On his recent visit to the south-west, the Prime Minister acknowledged what he called "pockets of deprivation" in the rural economy—and they certainly exist. On market days in towns like Holsworthy, Launceston and South Molton, where we live, so many businesses depend on the surrounding farms that you can almost smell the depression in the air.

But there is also an undercurrent of deprivation which runs through the rural economy throughout the region. This is concentrated among the indigenous country people—those who not only live in the countryside but earn their living there. This is where the effects of the crisis in agriculture have been felt most severely.

If all country people are to share in rural prosperity, which appears to be the Prime Minister's objective, it has to mean that resources must be concentrated, whether for jobs, housing, services or economic development. Those resources need to be concentrated on those people who make up that undercurrent of deprivation. Very many of them are in farming.

That is why assistance for agriculture, both short-term and long-term, is so important. It is not only a question of keeping farmers going so that they can continue to act as rather badly paid landscape gardeners. In the more rural areas especially, farming is still the mainspring of the rural economy, with at least one job off the farm for every job on the farm. On that basis, almost 30 per cent of the jobs in my part of north Devon depend on agriculture. And bear in mind that many of the other 70 per cent are people who may live in the countryside but who work in a town or city and who are really part of the urban economy. So in terms of the genuine rural economy, farming becomes even more dominant.

The Prime Minister acknowledged the seriousness of the crisis in farming and conceded that the countryside without agriculture would be a contradiction in terms. Yet that is precisely what we now face. Farming incomes have fallen by 70 per cent over the past two years. Last year the average hill farmer had a net income, according to the Government's own figures, of only £4,500 as a reward for his own and his wife's labours. Assuming, conservatively, that they both work a 60-hour week, that gives them an hourly rate of pay of 72p. Just imagine if one's own net income had fallen by 70 per cent over the past two years. That is not a pretty thought, but that is the reality of farming as it exists at the moment. Of course we need a long-term plan for the recovery and regeneration of our agriculture, but a long-term plan is a fat lot of good if you cannot get through the short term. That is where the Government must help, without further delay.

I make no apology whatsoever for swiftly repeating three important points. First, the Government must apply for the full amount of the agrimonetary compensation which is available from the EU and match it in full so as to offset some of the huge damage inflicted by the strength of the pound. Certainly, as the noble Lord, Lord Palmer, who introduced this most important debate and for which I thank him, said, in the early 1990s when German and French currencies were very strong, those countries took full advantage of the compensation available from Brussels. Secondly, the Government must lift that awful burden of the offal tax on the pig farmers. Thirdly, they must implement the key recommendations of the red-tape review.

This will not be enough to transform the agricultural economy, but it might make that vital difference between survival and extinction for many farm businesses, and it would send a signal to the countryside that this is a Government who deal in actions as well as words.

I have to say this, although so many other noble Lords have already said it. Without short-term aid to tide over farming and to inspire confidence in the future, the damage to the rural economy and to our rural culture from what would amount to agricultural meltdown could be irreversible.

8.3 p.m.

The Earl of Sandwich

My Lords, I should like to thank my noble friend, who has again done us all a great service by putting down this debate to remind Her Majesty's Government of the very existence of farmers who, as we have heard from many noble Lords, are different. I believe that the Minister accepts that because she is sensitive to the needs of rural areas. It was also cheering for farmers in the south west to see the Prime Minister briefly come out and appear to accept their point of view. But it has to be accepted that the culture from which most Ministers and policy-makers come is mainly urban. For many MPs of all parties, farmers are simply another demanding section of society, grazing pigs in Parliament Square. They do not recognise that farmers make up the basics of our society, especially in the south west.

Surely the government must give the taxpayers, both urban and rural, much more vision of what they are aiming for in five years' time. This Government have the luxury of at least thinking that they can look forward to that period of time. But they must not waste that time. They must show that on a number of fronts they are determined to ensure that our farmers are valued and given a framework for the future. Fortunately. there are rural MPs, like David Drew, for example, who are deeply concerned about wider questions such as the food chain and the neglect of the rural economy as a whole. The Government will have to satisfy them.

We have already heard of a number of ways in which the Government could provide the confidence that is needed. The first is, of course, the green pound, mentioned principally by the noble Lord, Lord Williamson of Horton. But here is a typical example of Euro-bounty: in November you will lose 13 per cent on your already agreed arable area payment, but you will get a cheque some time in February to make up the difference. Why should the farmer subsidise the European Union in the interim period? We all hope that the Government will meet the April Fool's Day deadline.

Secondly, unnecessary burdens should be removed from the livestock industry, be they legal, tax, or administrative. The fate of 17 per cent of small abattoirs should be enough to prove that. There are still things that must be done in the wake of BSE to reduce the absurd cost of the Meat Hygiene Service. I have heard of a case in Sussex where five hygiene inspectors were needed to oversee three slaughtermen.

Can the Minister say anything about the future of the OTMS scheme and the 560 kilo weight limit, which is literally pushing more and more livestock farmers in the south west towards insolvency because of the fall in the value of their assets? This is important in that region, which has a high proportion of cattle, and is a particular problem in Dorset, where there is a greater density of dairy cows than almost anywhere else. An increase in compensation from 50p to, say, 60p or 65p per kilo would substantially improve the value of cows and hence the livelihood of dairy farmers at this critical time, who do not even live in so-called "designated hill areas" although they do believe that they live in the hills.

Thirdly, the future direction of environmental support should be spelled out. The Government are already doing this and I welcome this year's doubling of the countryside stewardship schemes with their planned fourfold increase from £29 million to £126 million over the next seven years. This also gives some indication of where the Government want to go with Agenda 2000. That is to be welcomed.

Again, the Government have listened to concerns about organic support. When speaking to one or two farming friends, I had the impression that the organic movement will attract many more mainstream farmers if it can demonstrate more integrity and less emotion. From the political point of view, the organic movement is on to a winner. It neatly combines much of the urban vision of the countryside as a wholesome place where rosy-cheeked folk produce healthy apples and sell cheese in farmers' markets on the one side, and the rural necessities of finding an alternative income, adding value and improving the landscape through such schemes as countryside stewardship on the other. Who could quarrel with that?

However, there is still a suspicion that more standards inevitably lead to higher prices and fewer farmers in the market. Look at what has happened to milk, which both governments have left in the lurch. In the meantime, food imports—as others have said—do not seem to be subjected to the same criteria.

By their nature, traditional farmers cannot afford to take risks. That is why they have survived for so long. I believe that they will gradually respond to the organic movement. One-quarter of all organic farms are already in the south west and in west Dorset we have plenty of examples of good practice and success. That is only to be welcomed. However, most farmers do not have the confidence to switch to new ideas. There is not enough support for start-up and retirement schemes to help families through the transition. The French know a great deal more about this. The result is that many farmers who are young enough have gone part time or into other businesses altogether. Will the Government do anything for young or retiring farmers under the specific heading of modulation?

My noble friend Lord Palmer did not mention bananas today, but I know that both he and others are concerned about protection for efficient small producers, wherever they live. It is the vulnerable producers around the world who should always be the focus of support. I am sure that the Minister will say that she and her colleagues are not giving up the attempt to look forward, push the CAP reforms through ahead of enlargement and give our farmers a better idea of what they can expect in the next generation.

8.10 p.m.

Lord Soulsby of Swaffham Prior

My Lords, I know that this House is particularly grateful to the noble Lord, Lord Palmer, for initiating this debate on the economics of agriculture. Many noble Lords have commented on the serious state of the industry and on the economic impact of various aspects of agriculture. I shall not repeat those comments as I find myself at the end of the speakers' list. However, I hope that the seriousness of the situation will be carried to the general public. That applies especially to the splendid article that appeared in the Daily Telegraph recently by the noble Lord, Lord Runcie, on pigs and pig farming, which read very well indeed. I shall concentrate on some of the contiguous issues rather than on some of the economic aspects.

Agricultural land in the United Kingdom consists of 18.5 million hectares, of which 60 per cent is grass or rough grazing; in other words, about 11 million hectares. But those 11 million hectares make up what the noble Lord, Lord Palmer, called "this green and pleasant land" in which we live. It is the farmer, the grazier, the livestock producer who keeps it green and pleasant. Drive him out of business, and we will lose the guardians of our countryside.

While all sectors of farming are under extreme pressure, some, such as dairying and pig and sheep farming are especially hard hit. Of course, dairy farming is a high technology area, depending on heavy capital investment and very great skill. It is now uneconomic to produce milk several pence per litre below the cost of production. Many dairy farmers are going out of business, selling valuable pedigree dairy stock that they have bred for years and having invested capital in buildings, computers and health programmes. Once gone, I do not think they will ever return to the dairy industry. What will happen then to the buildings and, in particular, to the pastures on which they graze their cattle and which they use for making silage?

Pig farming is another intensive agricultural enterprise and one which is competing against cheaper imports from Denmark, Holland and Ireland—countries which are unencumbered by the high standards of welfare that we demand in this country. The ban on the use of meat and bone meal, for example, as a result of the BSE crisis has added to the problem. Moreover, there is the high value of the pound. Here, too, losses are of the order of £4 million per week and bankruptcy, unemployment, family crises and suicides have followed as a result while at the same time we import pig meat to our supermarkets and feed our forces on imported pig meat.

Sheep farming is another saga of the depressing situation of livestock production. This applies particularly to the marginal farmers. Sheep production is the only realistic form of production in the marginal areas. I was privileged to be in Powys on Monday this week and heard about the full economic impact of the present crisis. That has been detailed by other noble Lords, but there is another aspect; namely, that the sons and daughters of these farmers are unwilling to continue the custom of following their parents into farming. It is not economic. The life is too harsh, and too heavy demands are placed on such farmers by various regulations.

Farms are sold or tenants give up their farms. Houses become country retreats for the urban dwellers and marginal land is particularly difficult to keep in productive shape. Neglect marginal land and we will go back to bracken and gorse and, occasionally, discarded bedsteads. The major criticism of sheep farmers in Wales is not that they want hand-outs. What they want is a level playing field on which they can compete. Indeed, I believe that they can compete.

The noble Baroness, Lady Wharton, mentioned the European Union regulation which would prohibit the use of feed additives such as minerals and vitamins unless they were incorporated into feed. That would make it impossible to administer these essential dietary components to animals in need of them. The estimated cost of the regulation, which has been on the books since 1970, would be of the order of £200 million. In addition, ill health and poor welfare might result.

Finally, perhaps I may stress that the British livestock farmer has not lost the ability to be a good husbandman—one who is cognisant of animal welfare and can farm at a profit. Given a level playing field, he can easily compete with any farmer anywhere in the European Union or in the world.

8.15 p.m.

Lord Carlile of Berriew

My Lords, I, too, should like to congratulate the noble Lord, Lord Palmer, on initiating this debate. As I am sure we would all expect of the noble Lord, his speech was true and realistic. There was no word of exaggeration in it; indeed, noble Lords may feel that it is remarkable that an opening speech in a debate of this kind should have such a consistent echo through all the speeches that followed.

I also have an interest to declare, though not as a farmer. As far as farming and gardening go, I am an enthusiastic spectator. My interest is as a non-executive director of a plc that has feed mills and supplies feed, seed and general supplies to the agriculture industry throughout the whole of Wales and the Marches on a substantial scale. That interest gives me a very singular, bird's-eye view of what is going on in the industry. Every month we see the management accounts in which we note the increasing level of debt of farmers. We see the number of farms just going out of business; and, above all, we see how many small businesses in the agricultural supply industry are going out of business. Indeed, we are often picking up the pieces.

We can also look at the share prices in the feed sector which are dropping like stones at present. Moreover, as in our company, we can see that economies have to be made by the reduction of jobs—jobs that were part of the local picture for people living in rural areas who knew that they could not always rely merely upon the farm.

I have another non-pecuniary interest to declare that, frankly, it would have been risible to refer to in an agriculture debate a few years ago; namely, my role as patron of the National Depression Campaign. I took on that role as the father of a severely depressed daughter. However, in the years in which I have been doing it, depression among farmers has become a very major issue in that work. Those who say that farmers commit suicide because they are too ashamed to go to their doctor or consult a counsellor are wrong. These days, farmers are prepared to go and see counsellors and doctors. They are committing suicide because, even after they have been through that process, they simply cannot cope with the financial debt that faces them, the consequence that that is likely to have for their families and the ruination of centuries of family tradition.

One speaker referred earlier to the pride that owners have in the land. I believe that the noble Lord, Lord Selsdon, referred to the pride of ownership. That is very true. It is part of the rural tradition. Farmers have not had a return on their capital for years; they stopped expecting a realistic return on their capital decades ago. It has certainly not been a realistic aspiration during all the time that I have been involved in political life. But, as one noble Lord said earlier, what they have lost now is a return on their labour.

I give your Lordships one example. I have in mind a very close friend of mine. As he lives and farms in Montgomeryshire—Trefaldwyn—I shall eponymously call him Maldwyn. He is a cowman, one of the best cowmen in Wales. He has a county council smallholding which he acquired after years of working for other people. His wife has a job as a milk recordist. They have 40 in their milking herd. Their profit in 1998 was £12,000—that is from the activity of both of them—which they regarded as a reasonable living, although I dare say Maldwyn and his wife could have earned twice as much elsewhere.

In 1999 they had a profit of £4,900, but Maldwyn's wife earned more than £4,900 in the year 1999 as a milk recordist. Therefore, the farm made a loss. In 2000 they expect a loss even though she is still working as a milk recordist. I have milked at that farm in the early morning; you could eat off the farmyard. Maldwyn is a real yeoman farmer. Their small farm now runs at such a substantial loss that there is not the remotest hope of his son, who might well have followed him in the industry, remaining in the industry at all. His son, inevitably, works away.

As a tenant farmer, what does Maldwyn have? He does not have the farm; he has his livestock. Before BSE his dairy cows were worth in round figures about £1,000 each. Today they are worth about £450 each. Mr Micawber would tell us the result of such a situation for a middle-aged farmer who is dependent, in part at least, on borrowed money. What has happened to his calves? In 1996 he obtained about £110 per calf, under the calf slaughter scheme which was then in operation. By July 1999, when the scheme ended, the price had gone down from £110 a calf to £38 a calf. Today he gives the calves away because there happens to be a hunt nearby which can use the calves' carcasses to feed the hounds. Even that option may not be available to him much longer. That is an issue on which the noble Lord, Lord Palmer, and I share strong feelings.

The problem has been clearly stated in terms of what is happening on the farms, but what is happening in the community? From 1983 to 1997 I represented Montgomeryshire in another place. That is part of rural Powys which was mentioned earlier. When I first became a Member of Parliament farmers used to complain to me frequently at my constituency surgeries. However, their complaints were as likely to be about each other as about the government, regulations or government policy. My successor, Mr Opik, the current Member for the same constituency, tells me that things are different now. Indeed, they had started to become different at various times before 1997.

Montgomeryshire has the largest number of farmers of any parliamentary constituency in the country. It has the largest number of farming union members, albeit they are divided between two unions, of any parliamentary constituency in the country. It has the largest young farmers' club membership—that is a dynamic organisation trying to create a future for young farmers—of any parliamentary constituency in the country.

The issues that we are discussing today have been discussed and researched time and time again. It is a pleasure to see the right reverend Prelate the Bishop of Hereford taking part in this debate. In the mid-1980s his diocese produced an excellent report on rural life and the future of agricultural communities. Incidentally, part of his diocese covers south Montgomeryshire and therefore I was well aware of the matters mentioned in the report. Everything that report predicted has come to pass. Almost nothing that report prescribed has been put into effect. The result has been—we are not completely surprised at the decline of rural areas—that those living in rural communities face what has rightly been described as a real crisis and a real agricultural recession.

The noble Lord, Lord Vinson, referred to the effect on communities of this kind of recession. It was brought home to me by a four-word slogan I saw some time ago in rural mid-Wales: "No sheep, no people". That is true. We hear much about diversification. I know dozens of farmers who have tried to diversify. Virtually everyone who could do that has done it. However, even people in rural mid-Wales will not buy love spoons from each other. They will not eat breakfast and sleep in each others' beds even in rural Wales. I am afraid that for those who live on the periphery of this country it is inevitable that either we have a derelict countryside as a result of rural recession or we have a supported countryside, which will save it from rural recession.

I believe that Wales, Ireland and Scotland have, historically, faced the most serious depopulation of any area in western Europe. They face the risk once again that all their young people will be forced to leave to obtain what may well prove to be temporary ".com" careers before they can return to mid-Wales to retire. The elderly population of areas such as those which have been spoken of with great knowledge in this debate has risen year upon year. When I became a Member of Parliament in 1983 the average age of a farmer was 51. When I ceased to be an MP in 1997–14 years later—the average age of a farmer was 65. It had risen by one year for each one of those 14 years. That is clear evidence of what has happened to the industry.

Measures can be taken. Short-term measures are required. We hope that we shall hear the Minister tell us that the agrimoney compensation will be given for the reasons which have been clearly given by the noble Lords, Lord Williamson and Lord Hardy, by the noble Earl, Lord Ferrers, and others. We also need to hear the Government give a commitment that in areas such as Wales with regional development agencies we shall cease to have the ludicrous situation which has appertained ever since the Welsh Development Agency and the Development Board for Rural Wales were formed; namely, that those agencies were not allowed to dip their fingers into agriculture. They were not allowed to try to create the circumstances in which Wales's biggest industry, agriculture, could develop. Their brief was to bring in other industries, alternatives to agriculture. That completely unrealistic separation of roles should cease.

We hope to hear from the Government that the reformed TECs will have a role to ensure that there will be a real concentration on finding alternative training and employment for people who have been employed in agriculture. We on these Benches say to the Minister, in a sentence, that farming is in catastrophe. We ask the Government, please, to use their power and money to do something about it.

8.28 p.m.

Baroness Byford

My Lords, the noble Lord, Lord Palmer, has introduced this debate at an opportune moment. He referred to the potential of non-food crops, which we debated in this House last Friday. They have a role and a future, but although this is welcome, they still form only a comparatively small part of the overall farming scenario.

The contribution of the noble Lord, Lord Palmer, clearly emphasised the continuing crisis that faces farmers today. However the Government try to portray life in rural areas, they cannot but accept that many farmers and their families face problems of unacceptable proportions. I declare my family farming interest.

As other noble Lords have said, farm incomes have plummeted. The NFU mentions an average of £ 16,250 for 1997–98, of which £5,000 is pensions, benefits and off-farm earnings. The figures for 1998–99 have halved to an average income of £8,000. I believe that they are due to halve again. Today one of my noble friends mentioned a farmer's income of 72p an hour. Where is the minimum wage there? For many there is little farm income, and for some, none.

On Wednesday of last week I attended a meeting of the Church Synod, where the right reverend Prelate the Bishop of Hereford moved a debate which recognised the current crisis in agriculture and how that was reflected in the wider rural community. Speaker after speaker spoke from personal experience. The right reverend Prelate the Bishop of Carlisle, who is not in his seat, spoke of the bleakness of his diocese; of farming at an all-time low; of Sellafield under threat; of the shipbuilding industry under pressure. Where will alternative jobs come from if employment in agriculture continues to shrink? Many noble Lords have given similar examples today.

While the Church Synod was meeting at Church House, the pig farmers had their meeting in Westminster—not across in Parliament Square—to raise the issue of their demise with parliamentarians. I was somewhat anxious when I understood that no one from the Government was able to attend. Why? At a time such as this that was very unfortunate. However, like other noble Lords, I am pleased to have heard today that the Prime Minister will be meeting leaders of the industry. One hopes that the issue of its demise will at least be discussed and matters moved forward.

We were asked what we would do. What should the Government do? They can do several things. They can act immediately to implement all the recommendations of the three reports which have just been completed—Looking into Red Tape, IACS Payments and the Future of the Intervention Board. This would be a welcome move and would ease many burdens on farmers.

The Government can look at all proposed legislation and calculate the implementation costs for our farmers. The Prime Minister has announced that there will be no pesticide tax at present. We welcome that. But when the government moratorium ends, IPPC charges will impose extra costs on our pig and poultry producing farmers. This charge does not have to come into force across the EU until 2007.

Will the Government think again about applying the climate change levy, which will obviously have great implications for our fruit and vegetable growers? Are other countries imposing such charges on their horticulture businesses? There is also the question of battery hen cages and the feedstuff regulations, to which my noble friends have referred. Our farmers follow the highest standards in animal welfare. If these same high standards are not adopted simultaneously by all countries, our farmers will become uncompetitive and will surely be forced out of business.

Moreover, often our Government seek to impose new standards in advance of agreed EU implementation dates. I queried the IPPC charges with the noble Lord, Lord Whitty. In his reply he said: Existing installations will be phased into the IPPC on a sectoral basis until 2007"— I looked again and I did not believe what I was reading— in order to spread the workload of the regulators". Is that right? Is that fair?

I turn now to the effect that the farming crisis is having on families. Many noble Lords have mentioned this. The burden is carried by the whole family and very often especially by the farmer's wife. Many of these resourceful ladies have taken on extra jobs, created value-added businesses and, as other noble Lords have said, some have taken on outside work. The strain on the whole family is enormous. This is evidenced by the work of the Royal Agricultural Benevolent Institute which between 1994 and 1997 helped some 15 working farmers each year. Since April 1998, when the RABI launched an emergency appeal, it has helped some 231 farming families—an alarming increase.

As other noble Lords have pointed out, when a farming job goes it affects not only the family farm. Once a family farming job is lost, 15 allied jobs go with it. It affects suppliers, vets, agricultural businesses, services and processors. Some 18,000 farmers—indeed, my noble friend Lord Ferrers said the figure was 22,000—left the industry last year. What are the costs in benefits, in welfare payments, in retraining? What are the costs of trying to service bank loans when the value of the stock is plummeting?

We posed these questions to the Government but we were given the standard answer that such statistical details are not available. As the debate is about the economics of agriculture, perhaps the Minister will have some information for us today. If not, perhaps she can ensure that we receive further information later.

In human terms, the farming crisis cannot be overstated. I believe that there is a great future for our farming and horticulture industries, but to safeguard them the Government must have a clear, long-term strategy. I totally agree that if we do not have a short-term strategy soon, there will be no long-term farming needs anyway. But let us accept that the Government are putting their minds to addressing the short term and looking to the longer term. Many points have been made about this and I shall return to the matter later.

As has been echoed around the Chamber today, I believe that the industry faces five major problems: the whole question of tenant farmers; lack of succession; no retirement funds; still falling prices; and unfair overseas competition.

The 1995 Agricultural Tenancies Act has obviously freed up the market-place as the decline in the supply of tenanted land has been reversed in each of the past four years. Moreover, the figures from the Central Association of Valuers show that 50 per cent of new tenancies for 1999 were for more than five years. This is most encouraging.

But the typical tenant farmer picture is far from upbeat. He and his wife are working horrendous hours to earn a sum that has halved and halved again in the past three years. His children do not want to follow him into farming because they see no future in it. The value of his livestock, his milk, his barley, his sheep, his savings, his pension is almost gone; he owns nothing—and the Government have refused a retirement package to enable him and his wife to get out with dignity.

However, there are other farmers who have been able to move forward—as, indeed, have some tenant farmers. They have pooled resources with their neighbours; they are sharing machinery; they are learning more about marketing; and they are adapting to the computer age. Even then, their products must compete with imported foods which do not match the UK animal welfare standards, hygiene standards and environmental standards. No matter how much we wrap the Union Jack around our products, the consumer still buys foreign goods because they are not clearly labelled. Many noble Lords have mentioned that point today. The suggestion of my noble friend Lord Selborne that the industry should have an independently led promotional group is a very good one.

In the time available it would be impossible for me to reflect on the many excellent contributions that have been made to the debate. I should, however, like to comment on a few of them. Honesty in labelling is very important. I, too, am very disappointed that the Government did not accept Stephen O'Brien's Private Member's Bill last Friday. The strong pound is crucial to the problem. As other noble Lords have said, the Government must apply for the agrimoney, and they must do so urgently. Several noble Lords mentioned the issue of GM trials. They must go ahead because we need know their results. Small abattoirs must be protected. The regulations which make trading difficult for them must be eased, otherwise we will lose our organic markets and niche markets. Questions concerning regulations and bureaucracy have echoed around the Chamber, one after the other. When is a subsidy not a subsidy? In Europe we call it a subsidy; in America they call it something else. It is high time that we agreed certain standards and a language in which we can understand each other. I, too, would encourage the MoD to buy British. We have the best; for goodness sake, let us buy it. Other countries would certainly do the same for their farming industry.

At the other end of the scale, new people—young farmers—are coming into the industry. I am pleased that the noble Lord, Lord Carlile, mentioned this. They are there, they are enthusiastic, they want to get to grips and to take an active part in farming. But they need to have direction and a long-term view.

To me, security of our basic food needs is essential. I welcome the environmental schemes that the Government are bringing forward, but the security of our basic food needs is something for which I would fight and try to secure.

I believe that there is a future for our farming industry. But the Government must take a much more robust stand to enable it to thrive. I welcome the announcement that the Prime Minister will be holding a meeting with those from the industry. But he has to stop consulting—and, yes, he has to start implementing clear, fair, helpful steps in a strategy aimed at long-term economic stability within this important industry.

8.40 p.m.

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

My Lords, I join in the general congratulations to the noble Lord, Lord Palmer, for having pitched the terms and subject matter of the debate in a way that has provoked enormous interest, passion and a great deal of personal knowledge and experience. The remarkable self-discipline in regard to the length of speeches has made the pace of the debate for those listening to it very enjoyable and stimulating. I begin by congratulating everyone else who managed to keep so well within their time. The only point on which I would criticise the noble Lord, Lord Palmer, is that he has given me what I fear is an impossible task in trying to respond to all the issues raised.

I say that in the awareness that his Motion deals with the economics of agriculture within the United Kingdom. We heard contributions from the noble Lord, Lord Laird, about the state of agriculture in Northern Ireland, and from the noble Duke, the Duke of Montrose, and others about interests in Scotland; and the noble Lord, Lord Carlile, spoke about issues relating to rural Wales.

It is important to recognise, as some speakers did, that we are a United Kingdom in terms of our relationships with the European Union, and therefore it is absolutely appropriate that we debate these issues here. Equally, we may need to take into account particular attributes of the industry in certain areas of the United Kingdom and look carefully at the relative interests. One such example is the BSE status of cattle in Northern Ireland.

It may be useful at this point to say to the noble Earl, Lord Ferrers, that legislation on hunting in Scotland will absolutely be a matter for the Scottish Parliament, as I am sure he understands from our long debates on devolution. However, I can reiterate the reassurance given earlier by the Prime Minister in terms of there being no threat whatsoever to shooting or fishing in this country.

Earl Ferrers

My Lords, perhaps I may seek clarification on that point. As the Prime Minister is Prime Minister of the whole of the United Kingdom, is the Minister saying that that guarantee applies to Scotland as well as England?

Baroness Hayman

No, my Lords, I think I was saying the exact opposite. The Prime Minister is, of course, Prime Minister of the United Kingdom. As I understand the situation, the Scottish Parliament has legislative capacity over hunting issues in Scotland—the noble Lord, Lord Mackay of Ardbrecknish, is present and will correct me if I am wrong. Therefore, it is possible that the regime in Scotland could be different from that in England. I can, therefore, give the noble Earl reassurances in regard to England, but decisions regarding the nature of any legislation on the matter in Scotland are for the Scottish Parliament.

Earl Ferrers

My Lords, perhaps I may interrupt the Minister once more. When the Prime Minister made that important observation, which gave succour to many people, did he realise that he was actually excluding Scotland?

Baroness Hayman

My Lords, I am not sufficiently "on message" to be able to tell the noble Earl what the Prime Minister realised or did not realise. He normally realises quite well what he is saying. I almost wish that I had not dealt with what I thought was a simple issue raised by the noble Earl. If I spend too much time on specific issues I shall not get anywhere.

The debate has been well-informed. I was especially touched by the recognition on the part of the noble Earl, Lord Peel, that there are difficult choices to be made; and that choices may need to be made in the balance between long-term and short-term measures to support agriculture. Public money cannot be used twice. There must always be priorities in terms of public spending. Most noble Lords have recognised that a great deal has been done in the short term.

I must say to the noble Lord, Lord Rotherwick, that it is wrong to suggest that anyone has ever said that all is rosy, or has denied the state of the crisis in agriculture, or not recognised the very real, very personal consequences to which the noble Lord, Lord Carlile, the noble Baroness, Lady Byford, and others drew our attention. There are, among all the statistics, personal and family tragedies, and none of us should ever deny that. The farming industry is in deep recession. That has never been denied; nor has there been any turning of our backs on measures to help in the short term.

As well as the £3½ billion that goes into the CAP year on year, I remind the House of the packages of aid that have come in since May 1997: £150 million in early 1998; £120 million in November 1998; £150 million in September 1999, including some of the areas raised during the debate; the deferral of charges for inspections in relation to specified risk material from cattle and sheep carcasses; the deferral of charges for cattle passports; the money into HLCAs; the marketing support of £1 million, which was increased in October 1999 by a further £5 million; the £10 million of extra money that has gone into organic farming, which means that since we came to power there is now three times the area in organic farming or conversion.

Concerns have been expressed about abattoirs—I am well aware of those—and the charging regime for the Meat Hygiene Service. However, we have frozen the hourly rate of MHS charges for this year, and have guaranteed that they will not rise next year more than the rate of inflation.

The Countess of Mar

My Lords, will the noble Baroness kindly give way? There is a lot of misunderstanding in this industry. Will she make absolutely clear that it is just the hourly rates that have been frozen, not the number of hours? The number of hours is likely to increase in accordance with EU requirements.

Baroness Hayman

My Lords, I believe that I did use the term "hourly rate". I was trying to be careful. The noble Countess is right; there are problems in dealing with and implementing the regulations. We did freeze at 1999 levels the levels of veterinary supervision in low through-put abattoirs, but that does not apply to all abattoirs.

As was mentioned in the debate, we have also seen the £1.6 billion that will go into the rural development regulation over seven years; £300 million pounds of matched funding to match the effects of modulation, allowing us to double the countryside stewardship schemes; and the other help that will be given for skills training and marketing. The issue of young farmers was raised on several occasions. Those are areas that may well be of great benefit to young farmers. There have been the three red tape reviews that we have undertaken, together with the NFU, and the acceptance of the vast majority of the recommendations and work that is ongoing in relation to those. Mention was made of the announcement about the agreement reached with the industry on the pesticides tax.

I list those matters not just to remind the House of the Government's action but that even against that background, we are having this debate. I make no apology to the noble Earl, Lord Ferrers—with whom I hesitate to cross swords at this time in the evening—for emphasising what he called the long-term stuff. The long-term stuff is enormously important in terms of the CAP. We heard a wide variety of views on solutions to problems if not an analysis of the problems themselves.

Some trenchant speeches have followed a line that was not totally parallel with everything else that was said. However, opposition to the present state of the CAP probably united the whole House on this occasion. MAFF and myself feel that it is important to change the emphasis within the CAP, with a policy shift that reduces agriculture's reliance on subsidies based on production and focuses on support for the public benefits that agriculture brings.

There is recognition of the unique quality of agriculture. It is invidious to talk about the suffering of individuals from losing their employment in industries where families have worked for generations. That can apply to a coal mining community or one that has been dependent on shipbuilding, and can be as painful as for an agricultural community. We should not leave any such communities unsupported at times of enormous change.

My right honourable friend the Prime Minister made it clear in his speech to the National Farmers' Union that we recognise the interdependence of the environment, rural economy and countryside on the agricultural industry. We must make sure that the support given recognises that interdependence and supports the environmentally beneficial aspects of agriculture, with schemes that assist the role of stewardship of the countryside rather than perverse incentives.

The English rural development plan, in which we intend to invest £1.6 billion over seven years, sets out how we will deliver on that and other policy objectives, such as the encouragement of restructuring for the long term. As part of that, we are promoting non-food crops—an issue to which the noble Lord, Lord Palmer, referred and which has been debated at length in your Lordships' House. We share the noble Lord's desire to see effective use made of such crops. That fledgling industry, which is one we need to encourage, is an example of diversification. Although I accept that diversification is not available to everybody, some pockets of agriculture that are not suffering are those where people have successfully diversified and found a niche market.

My reading of the PIU report was not that rural economies and communities are rosey and blooming, and that everything is perfect there in a way that is not true of urban economies. The report pointed out the complexity of the issues. The noble Lord, Lord Carlile, expressed his concerns about depopulation in rural Wales. I do not have figures for the Principality, but the population of rural England has risen 24 per cent—four times the rate of growth for the whole country. The picture is more complex than simply everyone in the countryside suffering when agriculture has a difficult time. Different parts of the countryside have different problems. There are terrible pockets of deprivation, but there are also areas where things are not so bad. My noble friend Lord Hardy referred to issues that go wider than agriculture, such as rural transport and crime, which are important for the economic welfare of people living and working in the countryside.

As to what can be done in the short term, most of the debate centred on agrimonetary compensation. I was asked to give the Government's position, but I am unable to answer tonight. The Government are still considering whether to apply for the next tranche of agrimonetary compensation. That decision will have to be made soon.

Agrimonetary compensation is not free. It does not even require simply matched funding—to which the right reverend Prelate referred. Where compensation is compulsory because of the Fontainebleau agreement, the UK pays 71p for every £1 of agrimonetary compensation. If compensation is optional, 50 per cent is paid for by the UK and 50 per cent from EU funds, so it costs the Treasury—or the British taxpayer, as my noble friend Baroness Young pointed out—85p in every £1. That level of financing requires examination of the value for money that the industry overall would enjoy and relative priorities. Something that always concerns me and which we must consider carefully is the areas that would benefit from agrimonetary compensation. It would not benefit the whole industry.

Almost as much time has been spent talking about pigs as agrimonetary compensation. The pig regime, like the poultry regime in Europe, is extremely light and there would be no benefit. Choices may have to be made in terms of spending priorities.

Earl Peel

Does the Minister agree that the formula devised under the Fontainebleau agreement has nothing to do with the farming industry or with the farmer? The compensatory schemes were designed specifically to help farmers when the euro was weak. Most noble Lords have said that we have here a level playing field, and this is something which is due to farmers. Other European countries have claimed it when their currencies have been strong, and it is now incumbent on this Government to do so. I am sure that the noble Baroness can agree with that.

Baroness Hayman

My Lords, I understand the argument that the noble Earl makes. We have paid substantial sums of agrimonetary compensation—a great deal more than was paid during the time of the previous government. We shall not go into that. While I understand the point that the noble Earl raises, in the end we must look at the best potential use of public money for the agricultural industry. That is neither a yes nor a no; it merely explains the framework within which we must operate agrimonetary compensation.

Many noble Lords have expressed concern about the burden of regulation on farmers. I have no wish to be part of a department that gold-plates EU regulations or produces additional burdens on farmers. I am aware that there are noble Lords who do not wish to be part of the CAP—I look straight across to the noble Lord, Lord Willoughby de Broke—the implication being that the UK should not be part of the European Union at all. That is a debate for another time and place. That is not my view. However, as long as we are members of the EU we have a responsibility towards it and there are negotiations to be had. We must deal with the situation, not just pretend that the European Union and EU legislation do not exist. I am afraid that that is the problem with the O'Brien Bill which is concerned with country-of-origin labelling.

I reassure noble Lords that those elements of the red tape reviews that require work within Europe, particularly in Brussels, are being actively pursued. My right honourable friend had a meeting with Commissioner Byrne yesterday. We hope to make progress on the issue of meat hygiene regulations and the move to a risk-based approach. Equally, a pilot project to introduce the electronic communication of IACS forms is already in place, with the aim of making it available to everyone in 2001. We are also working on new IT systems to allow all subsidy claims to be submitted to MAFF electronically by 2002.

I referred to country-of-origin food labelling. Reference has also been made to labelling in relation to welfare standards. There has been support for the UK not to retreat from its high standards of animal welfare. The response to other countries with lower standards is not to try to impose illegal bans but twofold. First, we have undertaken consultation on rigorous new rules concerned with misleading advertising about country of origin so that we can take action to ensure that consumers are not deceived, particularly by pig meat products that are described as having been produced in Britain but have simply been sliced or cured here. There is very specific new guidance on that matter. I believe that the way forward—the noble Earl, Lord Selborne, touched on this matter—is to market positively rather than negatively on quality.

Baroness Byford

My Lords, I thank the Minister for giving way. There is no question of our not supporting high standards of animal welfare. The difficulty is that if other countries are able to produce to lower standards our farmers are put under extreme pressure. They cannot be competitive and so go out of business. I believe that that point has been echoed throughout the House today. I hope that the Minister grasps that nettle. We certainly believe that these standards should be maintained. However, the problem goes beyond the EU. Reference was made earlier to the global market. While we may be able to do something within the EU, global competition is another matter.

Baroness Hayman

My Lords, I understand the point that the noble Baroness makes. It is for that reason that we must work within the European Union and the World Trade Organisation in order to make animal welfare part of EU and WTO thinking. We can ensure that we do not allow imports that fall below EU standards of animal welfare, but we cannot voluntarily impose on importers additional standards of animal welfare. The answer lies with consumers. Consumers who as concerned citizens want high levels of animal welfare must follow through their thought processes when they purchase food. It is very important that we encourage the kind of marketing that allows people to do exactly that.

Earl Ferrers

My Lords, perhaps I may very boringly interrupt the noble Baroness again. Do I understand from what the noble Baroness says that we must label produce perfectly clearly so that everyone knows what has gone into it, but that it is also perfectly all right to import into this country food produced to lower standards provided it is labelled as such? If so, I should have thought that the home producer would be enormously prejudiced.

Baroness Hayman

My Lords, the noble Earl is never boring. Animal welfare and production standards apply at EU level. We must check that we do not import meat and poultry that is produced to lower standards. What we cannot do is impose our own voluntary additional standards as a barrier to trade, and for that reason the marketing issues are important. I was very interested in the suggestion of the noble Earl, Lord Selborne, about independent kite-marking. Together with the NFU, we are working on a kite-marking system to see how in this country we can market the additional benefits in terms of welfare and hygiene standards. But that would be done as a joint NFU/government initiative. I am interested in his view that the scheme will not be believed unless it is completely independent.

The important issue of regional marketing was raised. It is interesting that supermarket customer focus groups tell the supermarkets that regional promotions on food are more effective than national promotions. That is an important lesson.

I am concerned about time, so perhaps I may deal briefly with some of the other issues. Feed additives—an animal welfare issue—was a subject raised by the noble Baroness, Lady Wharton, and the noble Lord, Lord Soulsby. I was talking about it with representatives of the horse industry today. I know that they are concerned. We had just had a consultation on it. The strength of feeling and the concerns about the effect of the proposals have been expressed clearly. They have given us a great deal of negotiating ammunition to take the issue forward.

The noble Lord, Lord Northbourne, asked about high quality agricultural land. The PIU report dealt with those issues. It was not government policy but a report to government on which views were sought and some 120 responses have been received. It suggested that the protection of high-grade agricultural land is an outdated barrier to development and that more regard should be paid to protect land of higher environmental value by developing a new framework for identifying the full range of environmental assets. The report illustrates clearly that the issues and the planning framework are complex and require careful and detailed consideration to ensure that we develop balanced solutions. We intend to build on the responses to the report in the rural White Paper which will be published later this year.

I shall read carefully the remarks of the noble Lord, Lord Kimball, on modulation and the rural development plan. Payments under the England rural development plan will normally go to farm businesses.

My noble friend Lord Hardy referred to access to the countryside. I hope that he has been reassured by the published Bill which makes clear that with greater access there will be greater responsibilities; and that only if people abide by sensible restrictions will they be able to benefit from the new right. The Government's access proposals are not a threat to landowners' and managers' livelihoods and will bring in an important new protection for wildlife.

The noble Lord, Lord Walpole, spoke about biodiversity. I assure him that MAFF is considering the Select Committee report, along with the DETR.

The noble Earl, Lord Sandwich, asked about OTMS payment rates. Rates and rules are set by the commission not the Government. We have to consider whether there is any way within the confines of the present scheme—there are financial constraints in terms of the rates, the rules and the Bill—that some of the technical difficulties farmers are experiencing can be resolved.

Reference has been made to the possibility of an early retirement scheme for farmers and the difficulties of tenant farmers. It was one of the issues on which we consulted last year. The majority of the responses to those consultations demonstrated the belief that other rural development schemes had higher priority. It is difficult to frame a scheme for early retirement which meets the needs of those suffering most at present. It is equally difficult to frame a scheme which supports specifically young farmers. Some of the elements of skill training and marketing will be of help in particular to young farmers and young entrants.

The right reverend Prelate spoke about the countryside stewardship scheme. He felt that it was too complicated for some small farmers. Some small farmers manage to benefit from it. However, it is a competitive scheme. Many applications from farmers of all sizes are turned down. I hope that the additional money for the scheme in the English rural development plan will help. Perhaps the right reverend Prelate could let me know of any specific difficulties and I shall look into them.

I was asked about the long-term strategy for agriculture. I spoke about looking for a sustainable future for the industry which recognises its particular contribution to the countryside, to the rural economy and to the rural environment.

Many noble Lords referred to the fact that the Prime Minister, in his speech at the NFU conference on 1st February, signalled his willingness to address the problems with the industry both in the short and long term. Today he announced that that meeting will take place on 30th March, and I should make it clear that it will go wider than the pig farming industry. It will encompass the whole of the United Kingdom and include agriculture Ministers from Scotland, Wales and Northern Ireland and food and farming industry leaders. It will be oriented towards action and agreeing a plan for the future of agriculture. I must say to the noble Earl, Lord Shrewsbury, that that is as far as I can go tonight in spelling out those plans.

We have had an interesting debate that has recognised the short-term pressures and the need to look to the long term and to the future. Reference was made to the General Synod debate and its conclusions. I can do no better than share its conclusion of a deep commitment to the long-term cause of securing a sustainable rural economy in which agriculture continues to play a role of fundamental importance.

9.15 p.m.

Lord Palmer

My Lords, when I saw the list of speakers for tonight's debate I knew that we were in for a first-class debate. However, it greatly exceeded my expectations. It was this House at its very, very best. I am most grateful to all noble Lords who have taken part so eloquently tonight.

I have to say that I slightly hoped for more encouraging signs from the noble Baroness, who, in my view, did a splendid job in taking up such a wide range of issues. I am sure that we all wait with baited breath for the announcement of agri-money compensation. I just hope that the noble Baroness is able to twist her right honourable friend's arm. And with that thought, I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.

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