Westminster Hall Sitting of 16 March 2004

Preamble
[MR. EDWARD O'HARA in the Chair]

Farming
Motion made, and Question proposed, That the sitting be now adjourned.—[Vernon Coaker.]
9.30 am
Mr. Peter Atkinson: I am pleased to have the opportunity to debate the financial future of farming. I do not want to be unduly churlish, but the recent reforms of the common agricultural policy are among the most significant changes for farming since the last war. It is therefore a pity that we are debating the subject in Westminster Hall and not having a full-scale debate on the Floor of the House. Some hon. Members will recall that it was the practice to have regular debates on agriculture, but my memory suggests that we have not had a proper debate on the subject for a long time. Although I am grateful for today's debate, it is still the second-best option. Farming in Great Britain deserves more than 90 minutes in Westminster Hall.
The debate gives hon. Members the opportunity to raise some of the concerns arising out of the Government's decision to decouple subsidies in line with the mid-term reform of CAP. Farmers' income has increased during the past few years. In the past year, it has risen from an average of about £11,000 a year to approximately £15,000, but that is still a small amount of money. The farming industry may be only a small part of the British economy, but it is none the less important. Most people believe that the landscape that they so cherish is looked after by farmers; the role of farmers is thus far more important than the simple economic strength of their industry. That is why anything that damages the farming industry should be viewed with great concern by the British people and the Government.
One problem that farmers face is uncertainty. They have lived with it for years—it is part of a farmer's life when it comes to the weather, climate and so on. However, the financial uncertainty that has been with them for years seems to be getting worse. The mid-term reform of CAP means that we now know, in rough terms, what is going to happen to subsidies in Scotland, Wales, Northern Ireland and England. However, farmers cannot look at their books and say what their income is likely to be, or what sort of subsidy they are likely to receive. Indicative of that is the fact that, at a meeting of senior members of the Scottish agriculture department, a senior official who was asked for an estimate of farming incomes in a few years' time replied, "I don't know."
Farmers need certainty. They need to know where they are going. Farming is a hugely capital-intensive business, not only because of land prices but because of the costs of long-term investment. Farmers cannot predict the future, but if they do not have a reasonable idea of where they might be in four or five years, it becomes ever harder to make investment decisions.
2WH
Dairy farmers are under the greatest pressure. The other day, they were told in no uncertain terms that unless they could reduce their production costs to below 18p a litre, they might as well pack up and go home. It is no doubt true that at least 60 per cent. of milk produced in England is sold at a loss. The reason why so many dairy farmers seem to survive against all the odds is that many dairy farms are family-run; but they seem to live on air, not money. It is because the family pitches in that farms can continue, but they had a blunt warning that if they could not reduce their costs they would go out of business—or be forced to take up another form of agriculture. That is a crucial decision for farmers. Some families, particularly those in my constituency in Northumberland, have been dairy farming for years. They are now having to consider whether to continue or join the many who have already left the industry.
I shall concentrate on one sector that has been seriously affected by the Government's decision to introduce a two-tier system of single farm payments in England: farmers in upland areas. Many in Northumberland are likely to be seriously affected by the Government's decision that there should be two payment areas—those where the land is classified as severely disadvantaged, and the rest, so to speak. The majority of hill farmers in Northumberland, the north Pennines, the Lake district, the Peak district—where the constituency of my hon. Friend the Member for West Derbyshire (Mr. McLoughlin) is—Exmoor, Dartmoor and the Welsh borders will be hugely affected.
Just over 300 farmers attended a meeting that took place at Hexham auction mart a week ago. That suggests how much worry, and what strength of feeling, the decision not to pay a full rate of subsidy in those severely disadvantaged areas has caused among those farmers.
There seems to be a misunderstanding about what is happening up in the hills. About 30 years ago the Government gave farmers a substantial grant to reclaim moorland and rough grazing. Those farmers did so, on a large scale. In areas that were categorised as severely disadvantaged 30 years ago, there has been substantial improvement in the way that the land has been brought into pasture and grazing, and looked after.
It is paradoxical that for years farmers were given money to remove heather moorland and white grass rough grazing and convert it to productive grassland, but now they are being given grant money to return it to the state of unproductive grassland and heather. In my constituency there is an experimental farm, which led the way in reclaiming rough grazing for good pasture. When the Government policy changed, the principal resigned, because having spent 30 years teaching everyone how to recover such land, he could not face the idea of having to tell people how to return it to the way it used to be.
The long and the short of it is that many acres in the SDAs are typical grassland. One farmer in my constituency has 50 acres of arable land, which he ploughs regularly, in the SDA. The impact of the decision will be marked. Farmers in upland areas will experience a substantial reduction in their income as the single farm payment switches from the historical basis to the area payment basis over the next eight years.
By way of example, one farmer in my constituency, whom I shall not name, has calculated that his total payment in subsidies, which is now £30,927 a year, will

3WH
diminish to £14,625 during the eight-year transition period. His cumulative loss will amount to £78,440. In contrast, his neighbour, on the other side, has an upland farm that to all appearances is just the same as my constituent's, but that is outside the SDA line. That line on the map means that the farmer next door will gain £66,000 over the eight years. That will cause problems for the farmers affected.
Problems arise in many ways. The upland farmers—;certainly in Northumberland—have tended to be specialists in high-quality livestock. They breed top-quality lambs that sell for substantial prices in sales of breeding stock, as well as top-quality cattle. To maintain that high standard new stock must be brought in, but to improve a flock or herd, top-quality replacements must be bought in. Therefore there is competition between farmers at the auction marts for such stock. How will a farmer who has lost £78,440 compete with a farmer who has gained £66,483? The answer is that the farmer in the SDA, who relies on buying good-quality stock, will have to face being outbid by his neighbour who is in a better position to afford it.
There will be other knock-on effects. My constituency in Northumberland lies on the Scottish border. In Scotland the historical system has been adopted throughout—a fixed amount. Farmers on the Scottish side will have vastly more than their neighbours on the English side. That will apply to farmers in Wales, too. Those in the borders and the marches will be in the same predicament. One farmer will be disadvantaged in comparison to another, simply because of a geographical spread.
The decision will have an environmental impact. Many environmental organisations are deeply concerned about its impact on the look of the hills. When I met farmers the other day to talk about the matter, one of the things that they, and especially a big beef producer, said was, "If this happens, I will not be able to afford to maintain a suckler cow herd. I will simply have to sell it off and go into the business of ranching sheep. That is low cost, and would allow me to lose the man that I employ and simply run a large sheep ranch on my own and my son's labour."
Taking the cattle off the hills will change the environment because those who understand such things know that sheep graze one particular type of ground in a different way from cattle. In order to maintain the environment that we like so much in our upland areas, we need that variety of grazing. That will go and the environmental cost will be serious, not only for the appearance of the land but for wildlife. Ungrazed land in the upland areas soon becomes infested with things such as ticks. That will have a profound effect on some of the birds and animals that live there.
I pray in aid a letter that has been given to me by my hon. Friend the Member for Ryedale (Mr. Greenway), whose constituency is hugely affected by the proposal but who is sadly unable to be here today. He received a letter from the chief executive of the North York Moors national park authority, and it is worth quoting a paragraph from it as it encapsulates the environmental concerns that the change has prompted. The chief executive writes:
4WH
"The detail of the proposed payments does however bring with it some severe consequences for the National Park. The core of the National Park is Severely Disadvantaged Area and this land is due to receive a much lower rate of payment per hectare than the rest of the country. Not only does the Severely Disadvantaged Area encompass moorland, it also includes almost the entirety of the famous Dales of the Park such as Farndale. Fryup Dale, Bransdale, Rosedale etc plus large parts of Bilsdale and other Dales. As you know, these Dales are stunningly beautiful and they contain relatively large numbers of fairly small farms."
That at least identifies those farmers who will be hugely disadvantaged. The land is worked much more intensely than moorland. Consequently, current public subsidy is much higher than for moorland areas because the productivity is high enough.
I know Farndale quite well, because it happens to belong to a constituent of mine. It is one of the most beautiful valleys in that part of Yorkshire. The small farms do much to add to the appearance of a very attractive dale. If we knock the economic heart out of those communities, the future for the appearance of Farndale and the other dales, in my constituency and that of my hon. Friend the Member for West Derbyshire, will be bleak.
Mr. Patrick McLoughlin: Will my hon. Friend also take time to point out that farming on some of the smaller farms, in smaller fields, with the restrictions that they have, can be much more expensive and intensive for the farmer and farm labour than in some large arable areas, which will be included in the general payment scheme? Far from helping the countryside and the agri-rural environment, as the Government say that they want to, the proposals could greatly damage the smaller farms that we often find in that part of the country.
Mr. Atkinson:Precisely. That is exactly the problem. To make a gentle political point, it is slightly perverse that a Labour Government should seek to deprive the small, hard-working farmers whom my hon. Friend has just mentioned and to reward large grouse moor owners, such as those in my constituency and in the north Pennines. I am a great grouse-shooting enthusiast. I believe that it greatly benefits the countryside, preserves the heather moor and adds a lot to the local economy. However, I am not quite happy with the idea that an Arab prince who owns a very good moor in my constituency should receive the substantial additional payment, while the hard-working farmer that my hon. Friend has mentioned suffers. That seems perverse from a Labour Government.
There is an economic problem too, because such farms employ labour. Some of the bigger farms in my constituency employ labour directly, but the smaller farms employ people to do particular jobs. That makes an important contribution to the local economy. The money is spent in local agricultural merchants and shops. Such farmers tend to be isolated so they usually spend more money in the local community rather than drive to the nearest town for their shopping. Removing the money will seriously disadvantage that economy.
Excluding farms in the SDAs from the full subsidy will be especially damaging. I do not understand why the particular boundary line was chosen. It is a line on a map that is seriously outdated because, as I mentioned earlier, much of the land has been improved. Surely a

5WH
much better way of categorising the land would be to adopt what is known as the moorland line, which is used for many other purposes and defines what most ordinary people would call moorland—heather or white grass—differentiating it from cultivated land. That would seem a much more sensible arrangement.
There have been suggestions that the affected farmers could be compensated through much higher rates of environmental payments to counter their loss in the single farm payment. That is not a solution. Although environmental payments could give more money to those farmers, they would not remove uncertainty because they can vary and depend on adjusting farming activities to meet their criteria. Sir Donald Curry, who was responsible for the Curry commission, is a constituent of mine, and knows well the problems faced by the SDA farmer. He said that giving extra money for environmental schemes is not an answer.
I urge the Government to go back to the drawing board. Like me, most farmers believe that their choice of a high-rate scheme was right. There was much criticism of that, but in the long term it is better than going for the historical scheme. The historical scheme may suit Wales or Scotland—I do not wish to enter a debate on that—but, given two difficult options, it was right to choose an area payment scheme. Ultimately, it will free farmers to be much more responsive to the market. However, it would be wrong to act over the bodies of many hundreds of hard-working farmers in the upland areas who look after the landscape that the British people most appreciate. I urge Ministers to reconsider.
9.47 am
Mr. Alan Hurst: I congratulate the hon. Member for Hexham (Mr. Atkinson) on securing the debate. As he rightly said at the outset, there have not been as many debates on farming in recent times as there were when I first came to the House. That may be encouraging in some ways, in the sense that the more debates there are, the worse the state of the industry is. There is some indication that its state has improved a little during the past two or three years.
I often think that farming is somewhat similar to a slow-moving rollercoaster, except that the downs seem much steeper and more protracted than the ups. Farming is a unique industry in many ways, in that it is subject not only to economic trends but to disease, taste, fashion and, most of all, weather. These days, it is also subject to environmental concerns. In many ways, being a farmer is like operating an agricultural fruit machine—all the elements have to be up at the same time to have a successful business. There are not many times in our history when that has been so.
Governments have always been concerned about the uncertainty in farming. My knowledge of Roman history is not sufficient to say whether Romans tried to protect agriculture, but I suspect that they did. Certainly, within the past 150 to 200 years, there have been various schemes of Government intervention to protect and secure stability for farming. The Conservative party will be painfully aware of the corn laws and their abolition, which damaged the party so much and provided such success for its greatest leader, Mr. Disraeli. That showed that there is always a conflict. On the one hand, one wishes to protect, promote and
6WH
secure certainty for farmers, but on the other there are manufacturers and consumers who want cheap food. That conflict is sometimes difficult to resolve.
Modern times have made things worse for the farmer, although listening to farmers, it can seem as if nothing makes things better. The coming of the steamship made the situation worse, as it brought in food from competing overseas countries that had better climates than ours. Refrigeration must have been one of the biggest curses of all. It allowed meat to be imported from the other side of the world in competition with that which was slaughtered at the bottom of the lane.
Farming prosperity has not always, if ever, been associated with national prosperity. There have been periods, such as the 1920s, when the country as a whole was doing relatively well but farming was doing badly, while in the 1930s, the country and farming were both doing very badly. It was only with the second world war and the Labour Government after it that a serious attempt was made, with the introduction of national subsidies, to provide stability and prosperity for farming. Anyone who has been in politics for a little while will have heard the story of the Norfolk farmer who in 1948 applied to join his local Conservative club. The secretary told him that he had to be a Conservative, and the farmer replied that he had always been a Conservative. The secretary then asked, "Well, why haven't you applied to join before?" to which the farmer said, "It's only since the blessed socialists have been in that I can afford the membership fees."
After the war, farming entered a period in which the Government were concerned about its future and were keen to help, not only for the industry but for national security as they believed that the country needed to produce a large part of its own food. From the 1940s until recent times, with one or two exceptions, farming has been much more prosperous than before. As national subsidies were replaced by the Common Market and the common agricultural policy, the subsidy element remained, although it started to produce problems for farmers and consumers. As we know, all newspapers—not just the tabloids—like to mention wine lakes, butter mountains and all the other things that they, in a facile way, see as the consequences of intervention. However, one wonders how much of our farming industry would still exist without that intervention, subsidy and support.
During the past few years, we have seen a particularly unpleasant depression in agriculture. I cannot speak with any authority on grouse shooting, as it is not a sport that is greatly followed in Essex, as the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) can confirm, but diversification is one way that farmers have been urged to go forward. However, there is a limit to diversification, and I sympathise with the hon. Member for Hexham. His farmers may not be able to diversify as readily as those who are situated close to large urban areas.
Farmers have also been urged to follow niche markets, and a farmer in my constituency has successfully gone into ice cream manufacture from being a dairy farmer. She has done well and is an example of a farmer successfully finding a niche market and diversifying. However, there is a limit to that, because they would not be niche markets if everyone took part in them. However much we may promote

7WH
diversification and niche markets, we must be aware that agriculture is dependent on livestock and the growing of crops.
From the mid-1990s, and certainly from 1998 onwards, all sectors were in depression, which is more common than it used to be. When farms were more frequently mixed, if one sector was depressed, farmers could move to another sector that was not depressed. However, the mixed-farm principle has fallen by the wayside, so the opportunity to move does not exist, and when all sectors are depressed, it is impossible to move.
When I spoke to pig farmers in my constituency in 1998, they told me that the price that they received was about 55p per kilo, while the break-even price was 90p, so they were making a loss on every pig that they produced. Although those who stayed in production are now making more than 100p—more than the break-even price—the goalposts have moved, as they so often do. A rise in prosperity elsewhere has led to a rise in the price that pig farmers pay for feed—one sector's prosperity has cut the other's profit margins.
None the less, it is good to see improvements. Even three years ago, the price of grain was way below break-even price, but it is now profitable again. Several factors are behind that: some are climatic, some relate to the position of our competitors, but all are variable. As the hon. Member for Hexham said, the fact that the factors involved continually change makes it difficult for farmers to plan for a long-term future.
The new scheme has now been unveiled, and I agree with the hon. Gentleman that there is a general welcome in England for its broad-brush approach. However, there are questions about the details and about how the scheme is applied. I am in no position to comment on hill farmers' problems, although my parents lived in a hill farming area for several years. Whenever I visited, I dreaded going to the chapel with them on a Sunday afternoon, because the congregation consisted of hill farmers, who would invariably give me a terribly hard time. They thought that if it rained too much, it was bound to be the Government's fault, but that if it did not rain at all, it was also the Government's fault. None the less, I fully understand the problems that such farmers have faced, and the addition of foot and mouth, which was particularly prevalent in hill country and in the west country, brought devastation to them.
I think that I understand how the new scheme works, although anyone who attempts to examine economic and agricultural matters probably needs a PhD and at least five years at university. Indeed, the language involved would probably qualify as a second language in any school of linguistics. As I understand the scheme, however, we essentially end up with a lump-sum payment. Two elements are involved. One is historical, and I understand why it has been rejected. I remember from my schoolboy A-level history that one reason for Spain's decline was that its procedures were frozen so much that there could be no innovation. If the payment had been fixed to reflect what happened in the two years at the beginning of this century, those who were debating the formula halfway through the century could well have some questions about that. There can also be an element of artificiality as regards how one gets to the position when those years come in. The Government
8WH
were therefore right to have the balance scheme followed by the tapering, so that the historical element will disappear over time.
The question is what follows from that. Once we say that we are paying not for production but for the guardianship and use of land, certain matters arise. I therefore have one or two questions for my right hon. Friend the Minister. What, for example, will happen to historically unsubsidised sectors? Pig breeding is historically an unsubsidised sector, but is there not a case for those who breed pigs on open land to look for payments? There is a range of non-subsidised sectors, such as fruit growing. Given the principle behind the scheme, are such sectors also to receive payments?
How can the scheme be adapted to encourage new entrants into agriculture? Some elements of the scheme remind me slightly of milk quotas, and there is obviously a financial value to farmers in passing on land that incurs payments. We need to think about how to attract new people into agriculture. Indeed, that is one of the major difficulties that we face. The average age of farmers is higher than the average age of Members of Parliament—it is an ageing profession.
Then we must consider the price of land. Have we considered the effect that the scheme will have on the price of agricultural land? In many ways, agricultural land is an artificial commodity; it is almost a mirage—I should not say that lest there is a land crash. A farmer could earn as little as £15,000 a year from 300 acres, which is an absurdly low figure. Farmers must either have the most astute accountants in the land or must be working for below the minimum wage. For a farmer, an income of —15,000 a year from 300 acres is not a good return on the land. Logically, the price of the land should be much lower, and if we worked out the cost of renting land at an economic price, I do not know how many farming businesses could make a profit.
A further question for the Minister to consider is that of cross-compliance. What connection is there between the environmental schemes that operate and on which payments will ultimately be conditional? What schemes will there be and what level of compliance will be required? Will existing environmental schemes continue or will they be merged into one overall scheme? Will additional payments be made if farmers go beyond the standard level of compliance with environmental regulations? What will be the level of inspection for compliance with environmental demands? Will it be a burdensome or a relatively relaxed regime? Will the regime make farmers feel like they are in partnership with the Government, or will they feel at odds with inspectors?
That brings us on to a matter that is always raised: what will happen about our competitors? Farming does not operate in a vacuum or, to use a jargon phrase, in a national envelope; it competes internationally. Will we operate on the same terms as our competitors? Will our competitors give environmental subsidies for compliance with environmental requirements? I hope that the Minister will reply to those questions.
Let me return to the unsubsidised sector of pigs. The Government have introduced helpful initiatives, for example the home-sourcing initiative through which allowance is made when offering contracts for the benefit to the local community and production

9WH
standards. Will that be more widely and strongly encouraged? Will greater attempts be made to stimulate proper, effective labelling of products so that we know what we are buying?
I generally welcome the approach that the Government have taken, but we need more flesh on the bones so that it is clear in what direction we are going. The Government, and all parties, are mindful of the difficulties that farmers have endured over a long time, and we are pleased that times are better now than only a little while ago. I look forward to hearing the Minister's replies to my tentative questions.
Several hon. Membersrose—
Mr. Deputy Speaker: Order. Back-Bench Members who want to contribute might wish to know that Front-Bench contributions should start no later than 10.30 am.
10.4 am
Mr. Patrick McLoughlin: I congratulate my hon. Friend the Member for Hexham (Mr. Atkinson) on securing this timely debate. It is timely because of growing concerns, especially in severely disadvantaged areas, on which I want to concentrate this morning. It cannot be emphasised too often that our countryside exists because of our farmers. They have looked after it from generation to generation and from season to season.
One of the reasons why so many millions of people visit my constituency in the Peak district is to enjoy the beautiful countryside that generation after generation of farmers has bequeathed to us. That can be neither emphasised nor repeated often enough. Too often we take the countryside for granted and imagine that it is beautiful because nature has made it so. However, the countryside is as it is because it has been maintained and farmed. One need only look at barren land that has not been looked after for a few seasons to realise that if the countryside and our national parks were not cared for, they would not be the attractive places that millions upon millions of people from different parts of the country visit every weekend. That is why I should like to concentrate on the Government's proposals for the SDAs.
It is essential that the Government get the policy right. I would like to believe that they have made a genuine and honest mistake, perhaps through misunderstanding the difference between disadvantaged areas and severely disadvantaged areas and the moorland line. The Government have made a mistake in their definition. The hon. Member for Braintree (Mr. Hurst) said that the issue is complicated and I have no doubt about that. Indeed, one of my constituents wrote a letter to the Department for Environment, Food and Rural Affairs to ask how the SDAs first came up. He received quite a long reply from someone working at the uplands land management branch on Horseferry road, from which it is worth quoting. The letter said:
"I understand that the present SDA line dates back to early the 1960s. It was then called the Hill Cow Line. Farmers within this were eligible for hill farming subsidy payments and capital grants"—
10WH
as my hon. Friend the Member for Hexham said. The letter continues:
"The subsidy system started much earlier than this in the late 1940s but was paid, I believe on the breed of livestock rather than within a specific hill area."
I shall not read the entire letter, but it goes on:
"In 1984 the EC changed the criteria for LFA designation and the UK reviewed the line. The new criteria included 'agricultural disadvantage' and rural areas of less than a certain population density and danger of depopulation. It was at this time that the LFA was split into Severely Disadvantaged and Disadvantaged land. The land bordering the existing LFA, now called SDA was assessed. The criteria being that it was eligible for LFA if it was suitable predominantly for suckler cow and hardy sheep rearing. Arable areas could be included if the crop was for on-farm feed. This usually corresponded to Agricultural Land Classes 3c. 4 and 5. There was a presumption against including dairy land unless conditions were particularly difficult, e.g. significantly longer in-wintering period. The SDA land was not reassessed. It was presumed that it … fulfilled these physical criteria, even though some areas would have undergone significant land improvement over the years. Again, there was still an economic advantage being in the SDA.
The LFA was reviewed in 1990 and, as far as I am aware there were little or no changes of substance. The EC required the area be described by listing the parishes … that lay wholly or partly within the line drawn. These were notified to the EC in 1992.
Flagg Hall farm lies at an altitude of 900–1,000 ft (270–300 m) above sea level, deeply within the SDA. Land normally at this altitude especially well away from the coast would normally be expected to be considerably"—
Mr. Deputy Speaker:Order. The quotation is extremely long and I think that the point was well made some time ago.
Mr. McLoughlin:The quotation helps me to make my point, but I shall draw it to a conclusion if I am out of order. I merely point out that the farm in question is now included in the SDA, yet its stocking level is compatible with areas outside the SDA.
At the weekend, I met farmers whose farms were partly inside and partly outside the SDA. That happens particularly often in my constituency. One can see on a map where the line runs through villages that only part of a village may be included. That means that neighbouring farmers are in completely different financial environments: some obtain a full benefit and others within the SDA receive a reduced amount of Government subsidy. The Government might argue that there should be no subsidy at all—perhaps they can argue that—but there is a subsidy. They have accepted that a subsidy will exist. They must therefore be sure that, when they arrived at the decision, they fully understood the whole question of the SDA.
The Minister for Rural Affairs and Local Environmental Quality: I should be grateful if the hon. Gentleman clarified what he is suggesting. It is surely inevitable that wherever one draws a line, there will be a difference between one side and the other, whether it results from devolution or the definitions of "area". Is he arguing for a single-rate payment?
Mr. McLoughlin:I am arguing that the Government should consider whether they became confused—let me be as kind as that—between the moorland line and the

11WH
SDA line. Surely they did not mean to include in the SDA line areas where there are farms that provide the same quality of service and production levels as some of the areas outside it. That is totally incompatible with what the Government are saying. I do not believe that any farms within the moorland line could produce what some farms in the SDAs are currently producing, in both quality and quantity.
I fully accept that a great deal of work has gone into the policy and that there are difficult decisions to be taken. I could say much more on the subject and I apologise to you, Mr. Deputy Speaker, if I quoted at length from a letter, but it is relevant to the way in which the old SDAs have grown up over the years. They have a huge history. Part of the Government's problem is that, if they are relying on maps that were drawn, as we have heard today, in the late 1940s and early 1950s, it is a mistake. It would be wrong for agriculture to use such criteria.
My hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale), who speaks from the Front Bench, wrote to the Secretary of State to explain that more than 5,000 farms will be in danger from the proposal. That is absolutely right. They are, in general, smaller farms and farms that require much more labour, because they are hill livestock farms and arable farms.
The Government's proposal is a mistake: it will pit farmer against farmer and divide farming communities. I very much hope that the Government will reconsider the proposal as a matter of urgency and that the Minister will comment on that today, because there have been reports that the Secretary of State will be away from London for some time, and the issue is of considerable interest to farmers in my constituency, who are very worried about their livelihood. I therefore hope that the Minister will give us an idea of the timetable to which the Department is working if a review of the system is taking place. I hope that he will reassure the farmers whom I met in my constituency over the weekend that a review is happening. They hope that the Government are taking on board the many representations that they receive.
10.14 am
Matthew Green: I, too, congratulate the hon. Member for Hexham (Mr. Atkinson) on obtaining the debate, which is timely. Much of my constituency is a less-favoured area and much of it is a severely disadvantaged area. That has had a considerable impact. I have had no fewer than three meetings with the National Farmers Union in my constituency in the past couple of weeks, and received numerous letters. Farmers are not often moved to write to Members of Parliament, even when those Members have many farms in their constituencies, as I have, but I have been flooded with letters from farmers, because of the impact that the system has had on them.
I do not intend to oppose the Minister on the issue. In principle, decoupling is right. If it had been left to me, I would hope that we would not be in the position that we are today. However, I am taking it as read that we are in that position, and I hope that we can move on from it and smooth out some of the worst anomalies in the system.
12WH
We have heard good examples of the problems caused by the single farm payment in the SDA areas. In particular, it is clear that livestock farming—suckler cows and dairy—in the SDA areas will be most affected. However, moving to area payments will hit livestock farming everywhere; livestock farmers will lose out the most, except those who practise extensive sheep farming in moorland areas. I would welcome recognition from the Minister that the change will affect livestock farmers the most.
I shall quote briefly from three letters from farmers in my constituency to give some idea of the scale of the problem. However, I shall not name those farmers, because the letters contain financial information. In the first letter, the farmer says:
"We farm 1,000 acres of LFA. You cannot class us as a moorland. We employ 4 people—they will be out of a job. We have 300 cows—they will have to go. My farm neighbours are English lowland, receiving £220 a hectare."
That is the estimated figure; the farmer estimates that he will receive only £72 a hectare. He continues:
"My Welsh neighbours are getting even more at £300 a hectare. How can I compete with that?"
Another farmer says:
"In 1999 I myself farmed 115 ha, running 800+ breeding ewes, 35 suckler cows and growing 12.71 ha of cereal, total subsidy before HFA and ESA payments of £22,891. At current projected levels, in the year 2012 the total flat-rate payment would amount to £8,625, amounting to a reduction of 62.3 per cent."
Another farmer, who has 1,300 sheep and 80 single suckler cows that are run on 229 hectares, says:
"Similar to many farms in the Clun Forest I have calculated a 70 per cent. drop in support payments under the proposed SFP. By 2012, 229 hectares qualifying for an estimated SDA payment of £75 as opposed to the estimated non SDA payment of £225, would see a shortfall of £34,350 a year."
The impact on individual farms in my constituency is considerable.
The environmental impact has already been mentioned. Mixed farms are regarded as being good for the environment and for the appearance of the countryside. However, many farmers, when faced with such a situation, will be tempted to move away from mixed farming into sheep ranching, which would have a considerable impact on the appearance of the countryside and the environment. I do not pretend to be an expert on the matter, but I understand, for instance, that orchids tend to grow where cows graze, but that if sheep are put on the same land, the orchids will disappear. The policy has many, perhaps unintended, consequences.
I shall not follow some Conservative Members in being too critical of the Secretary of State, because I understand that the National Farmers Union has had meetings with her on the issue, and have found her quite accommodating. I believe that she is seeking industry consensus about changes to the system.
Unlike the Conservative Members who have spoken, I shall not urge moving the current line to the moorland area, but shall propose the creation of three areas by separating the current SDA moorland area into two. That would be a lot fairer. The problem for the SDA farmers is that the moorland areas have been included, so subsidy will rise for extensive sheep farming on the

13WH
moorland areas, paid for by a loss in subsidy on the mixed farms in the SDA areas. Separating the two would mean that the current subsidy received by the SDA areas would stay in those areas, because the principle is that the existing subsidy on that area is examined and then is divided between the area that can be claimed on. That is my understanding of the matter, and I hope that the Minister will confirm it. In the SDA areas that would mean that, if the moorland areas were taken out, the current subsidy received by the SDA areas would stay within those areas.
Mr. McLoughlin:Can I be absolutely sure what the hon. Gentleman is saying? Is he arguing that the SDAs outside the moorland line will still be treated differently to the disadvantaged areas?
Matthew Green:I could stand here and argue for four areas: lowland, disadvantaged areas, severely disadvantaged areas and moorland. The biggest problem is the inclusion of moorland in the SDA areas, so I am arguing for three regions: moorland, SDAs and the others, which would be DAs plus lowland. There is a problem with separating everything from moorland, because most SDAs will continue to receive hill farm allowance. There is concern that if moorland is excluded and everything else is similar, the argument for continuing to receive HFA payments in future would be rather tenuous. I do not want to throw the baby out with the bathwater, which is what a move to the moorland line would involve.
There was a meeting of more than 200 farmers at Ludlow football club last week with Kevin Pearce, the NFU livestock expert, in attendance. At the end of the meeting, there was a show of hands. About 90 per cent. of the farmers in the room—all SDA farmers—said that they would prefer the three-way split to the boundary move from the SDA to the moorland. They believed not only that that was more achievable, as the Government are more likely to agree to it—perhaps that is why they think that—but that it also seemed relatively fair to keep the SDAs' current subsidy within the SDAs. We do not know what the figures would be, but separating the SDAs out would probably bring them fairly close to what the lowland and DAs would be getting anyway. That could feasibly be even more so if the farmers' claims about high levels of subsidy are true. We must be careful about that.
I have a series of other questions, and if the Minister cannot answer them today, I hope that he will write to me, because they are matters of concern. Like the hon. Member for Hexham, I have a border constituency. Farmers in Wales have, for understandable reasons, opted for historical payments, and if I were in their position, I should have done so too. A more difficult question for them is how long that position can be sustained. Historical payments have led to a number of cross-border issues. First, the actual border and where the farms are registered are not always similar. For instance, when I was first elected, I was given a list by DEFRA of the number of farms with confirmed foot and mouth cases in my constituency. The list numbered four, although there were actually nine. The first Shropshire farm to get foot and mouth was near the village of Chirbury in my constituency, but it did not appear on the list because it had a Welsh holding
14WH
number, even though the farm, buildings and two thirds of the land are in England. Can the Minister confirm whether such farms will be in England or Wales, or will they have split land? That will make a difference to the levels of payment.
Alun Michael:I can tell the hon. Gentleman that if the borders proposed by Owain Glyn Dwr had been observed, Exeter and most of the east of England would be included in Wales, and we would have a completely different picture.
Matthew Green:I thank the Minister for that, but I am not sure that it will be a great reassurance to farmers now. I realise that he may not be able to give an absolute answer today, but I should appreciate him writing to me.
Secondly, there is the issue of grass keep. A lot of Welsh farmers take grass keep on the English side of the border, and vice versa. If the Welsh farmers are receiving historical payments, they will be able to afford the grass keep more on the English side. There is also the issue that many farmers will want to keep the initial 90 per cent. historical payment on as small a unit as possible. They will retreat from tenanted land in the first year, so that they can claim their historical payment on as small an area as possible, and then perhaps return to it in future. We shall see some shifting around. Will the Minister consider that point?
Thirdly, there is the issue of market distortion. I have three livestock marts in my constituency, of which Ludlow is the largest. It is a successful sheep and cattle market, and many people from Wales go there. People will be able to offer—particularly with breeding stock and suckler cows—different prices for that stock in the market. I would appreciate it if the Minister would say something about the effects of market distortion.
The effect of the inclusion of improved grassland in the set-aside rules also arises now. Many dairy farmers have relatively small farms, but if set-aside is included in the improved grassland, they will probably have to take on more land so that they can set some aside. Previously, livestock farmers were not affected by set-aside, but they will be under the improved grassland proposals. I realise that it is a European directive, and not necessarily within the Minister's control, but recognising the problem and attempting to deal with it would be welcome.
We need more details about cross-compliance. I know it is early days, but much of farmers' planning will depend on what will be expected of them in respect of cross-compliance. The Minister will probably not be able to give firm details about it now, but I hope that he will at least reassure us that they will be available as soon as possible.
In the changeover period, 90 per cent. of the potential appeals will be historical; it is very important to get the figure right for the three-year reference period. Mistakes could be made by the DEFRA, which is the body responsible for appeals. It worries me that there is no independence of appeal, and I would like the Minister to comment on that.
I shall give an example of how problems could arise. A man who farms on a relatively small scale came to see me at my surgery on Saturday. During the outbreak of foot and mouth disease, his records were stolen from his Land Rover. He had recently received some annual

15WH
sheep premium and the Rural Payments Agency had back-claimed from the three years that happen to be in the reference period. He had figures for 2002 and subsequent years, and he has his premium for those years. The Rural Payments Agency checked the figures for 2002 and because his previous records had been stolen, it subsequently claimed the money back because he could not prove that he had the sheep during the important month or so in the relevant period.
I am worried that that farmer, who has been in farming for some years, could be doubly hit. I will take up the issue with the RPA to try to resolve the matter, but if we fail, he will have no historical payments because he has had his subsidy removed for the reference period. That will be serious because it will penalise him over a future eight-year period. The sum involved may not seem particularly large, but it is large to him as it is an important part of his income.
I hope the Minister appreciates that I am not trying to be oppositional. This is an important change; it is difficult to get it right and the Government are adopting an open-minded approach. I understand that the NFU is encouraged by the way the Government have responded to some of the difficulties, but I should like more assurance from the Minister that they are moving to deal with the problems of severely disadvantaged areas. I hope that the Minister will look carefully at the three-region option, which was heavily endorsed by SDA farmers in my constituency.
10.29 am
Mr. Roger Williams: I, too, congratulate the hon. Member for Hexham (Mr. Atkinson) on securing the debate, which comes at an opportune time. I warm to his comment that we have not had a debate on the Floor of the House about agriculture and I go so far as to suggest that if there had been such a debate, some of the problems that have been encountered with the SDA might have been sorted out, or at least identified, so that DEFRA would not have to reconsider the proposals. I declare my interest in such matters as they appear in the Register of Members' Interests.
I enjoyed the short history of agricultural support from the hon. Member for Braintree (Mr. Hurst). I have been farming for a long time, but not during the abolition of the corn laws or in the 1920s and 1930s. I farmed while the system of deficiency payments was in operation, during intervention and export restitution and through the McSharry reforms and Agenda 2000. We are now looking forward to the new proposals. It would be perverse not to recognise that farming incomes have risen, albeit from very low levels. The current levels have been reached through better livestock prices, particularly for beef and sheep, and a short-term rise in corn prices, which have made farmers' incomes look more respectable, although they are nowhere near the levels of the early 1990s.
The one commodity that remains poorly recompensed is milk. For several years, milk farmers have sold their commodity at below the cost of production. Although individual farmers will have different costs regimes depending on whether they are
16WH
owner-occupiers or tenants and their borrowing history, an estimate by the HSBC bank suggests that, on average, they have been selling milk at 2p below the cost of production. If that is multiplied by the amount of milk produced in the country it comes to £280 million; that is the amount by which the farmer subsidises the wholesale, retail and processing trade.
What can we do about that? I have one suggestion for the Minister. After the abolition of the Milk Marketing Board and the break-up of Milk Marque, farmers' co-operatives were reduced in size and did not have the economies of scale of a number of their competitors. It was suggested that individual farmers' co-operatives that decided to merge to give them a better competitive position in the industry would be referred to the Office of Fair Trading. Answering the OFT's questions would immediately cause huge expense for those farmers' co-operatives. That is a barrier to a better structure in the milk industry. Farmers believe that to be unfair when they consider the red meat processing industry, in which Grampian Meats has 50 per cent. of the market, having just purchased St. Mirren Meats. There seems to be one rule for the private sector and another for the farmers' co-operatives.
Matthew Green:My hon. Friend is probably already aware that when the DTI looked at the competition implications of Dairy Crest's recent acquisition of ACCA, it considered only the impact on the retail price for the consumer, not the impact on producers.
Mr. Williams:My hon. Friend raises an important point. In the short time that I have available, I should like to put it to the Minister that the OFT should be more transparent about what triggers an intervention. At present many farmers' organisations are afraid to go forward because of the huge expense that an OFT investigation entails.
The mid-term review is a huge opportunity for the farming industry. It will allow farmers to become business people and run their businesses according to their resources and skills, rather than being collectors of Government subsidies. It has been welcomed by the industry. We have four systems in the devolved nations of the UK. I recognise the problems on the borders between Northumberland and Scotland and between my hon. Friend's constituency and mine. Several issues will be difficult to sort out there. The devil will be in the detail. We could raise several matters here but I am sure that the Minister is well aware of them.
The SDA has caused a huge amount of concern. When the Secretary of State made her statement on the mid-term review, I was the only Member to raise the SDA, because I could see how it would affect the more intensive livestock farms as opposed to the moorland and grouse moor areas. If a Labour Government could think of any scheme to fill large landowners' bank accounts with subsidies, it would be that one.
I asked the Secretary of State about livestock SDA farms—the smaller upland farms that are the most vulnerable in terms of business, but contribute the most to the environment. They are, as the hon. Member for West Derbyshire (Mr. McLoughlin) said, situated in some of the highest-quality landscape areas, but those landscapes exist only because of the farmers' activities.

17WH
British people value those landscapes. That is why they go to national parks in the north and west of England, and in Wales. Any exodus from those farms because the farmers' businesses became untenable would lead to a huge outcry from the British people, as they would see their landscapes and countryside changed beyond recognition.
There are several other issues of concern, such as cross-regional matters. Simon Gourlay, who is a past president of the National Farmers Union, and who farms on the Welsh border, suggested that wherever the main farmhouse is situated should be the designation for that farmholding. I know that he has written to DEFRA and the Welsh Assembly about that. Will the Minister comment on whether that would be a simpler way forward? I understand that most people, particularly if they are in SDA areas in England, would like to be on the Welsh side of the border at the moment.
Let me consider more technical issues concerning the mid-term review. I understand that Britain would contribute £485 million in digression and modulation funds, but would receive only £445 million back. That would not be enough to fund the agri-environment schemes as they are currently envisaged. Will the Minister comment on that?
I revert to an issue that has concerned me for many years, but about which I have always been regarded as old-fashioned: food security. It was at the forefront of consideration immediately after the war, in the 1950s, when agricultural policy was being decided. I do not think that we should ever forget that a hungry nation is a dissatisfied nation. We often talk of global warming and other issues; I hope that the modulated income will be used to ensure that support will continue for breeding flocks of sheep and herds of cattle, because there could be a time when farmers will become commodity brokers in livestock, and breeding will be so unprofitable that there will be a huge decrease in livestock.
The other day, I asked some young farmers what they would like to ask the Minister. The main questions that emerged were: why is not the Minister more proud of British agriculture? Why does not he celebrate the food that it produces and the way in which it looks after the countryside? If he did that, the relationship between the Government and the British agricultural industry would be a happy one.
10.39 am
Mr. John Whittingdale: I begin by joining other hon. Members in congratulating my hon. Friend the Member for Hexham (Mr. Atkinson) on securing the debate. By doing so, he has done us a service. I share the view that it is a shame that the debate was not held earlier, and that we have not had an opportunity in the main Chamber to talk about undoubtedly the biggest change in agriculture for many years. My hon. Friend is a member of the Conservative Whips Office, and was supported by the Conservative Deputy Chief Whip. Both their contributions were excellent and got to the heart of the matter.
We have had a well informed and useful debate. The hon. Member for Braintree (Mr. Hurst) is my constituency neighbour. We may have different views
18WH
about many issues, but he has always shown great understanding and knowledge of farming. It is always a pleasure to listen to him talking about the subject.
The mid-term review will affect every farmer. I repeat that, in the main, the Conservatives support the principles that underline it. We have always argued for decoupling, and the fact that it will take place at last is a considerable achievement. I do not underestimate the difficulty of implementing that decision. The Secretary of State had a very hard choice to make. However, the key decision to take was how to allocate the single farm payment. Whatever the method chosen was bound to result in some being winners and others being losers. No major group rejected the method that the Secretary of State eventually chose; most reluctantly accepted that there is some logic in the gradual phasing in of a flat-rate payment system.
A flat-rate payment system should be fairer, as it removes the divide between some supported crops and non-supported crops. It should be simpler, although I share the concern expressed by the hon. Member for Ludlow (Matthew Green) that we have not yet seen the detail, particularly of the cross-compliance conditions that will be attached to the payment. We will be keen to ensure that we are not substituting one complicated bureaucracy for another. We are also concerned about the time scale that must be introduced, and whether or not the Rural Payments Agency will be up and running and ready to implement a major change. I hope that the Minister will assure us that he is confident that the RPA will be able to put the necessary mechanisms in place.
Farmers in England accept the logic of the change and the system that the Secretary of State has chosen, but there is still unhappiness that farmers will be treated differently. Obviously, there will be differences throughout Europe. We have moved towards full decoupling, but other countries have not, which will create an unlevel playing field throughout Europe. There will also be major differences in the United Kingdom. We will no longer be able to say that there is a common agricultural policy in Europe. The fact that two identical farms on either side of the Scottish or the Welsh border will receive different amounts and that, over time, the gap between the amounts that they receive will grow will give rise to the feeling that this is unfair and that there is no equity.
I accept, however, that all farms will be faced with the same decisions because they will all be operating in a world market. Nevertheless, the fact that one farmer receives a much greater payment than another for the same environmental management is bound to lead to resentment. We have heard about farms that not only neighbour each other across a border but actually straddle borders. That will give rise to even greater resentment. Some farms have some land in Wales and some in England, some of which is inside an SDA and some outside. One example that has been drawn to my attention is that of a 600-acre Shropshire dairy farmer who has 250 acres in an English SDA, 150 in the west of England and 200 in Wales. He will receive three different entitlements for those three blocks of land, and his farming decisions will be determined not by the market but by how he can maximise his subsidy.
Part of the rationale behind the mid-term review is that it was supposed to result in a situation in which farmers decided how to farm on the basis of what they

19WH
could sell in the market, not on the basis of how they could maximise their subsidy payments. I am sure that the Minister will tell me that the distortions are the result of devolution and that devolution can mean different systems for different areas. However, there is the additional difference between the payments inside the SDAs and those outside, and that is wholly the Government's decision.
I understand the intention behind the Government's decision to pay a lower rate in the SDAs than outside. However, some of the biggest gainers will still be those who own large expanses of relatively uncultivated land, particularly grouse moors as mentioned by my hon. Friend the Member for Hexham. The Government have tried to meet the consequence by implementing a lower rate in the SDAs, but my concern is that they seem not to have realised that there are a large number of intensive farms within the SDAs. Those farms will see a catastrophic drop in their income.
I was concerned that, when Lord Whitty gave evidence to the Select Committee on Environment, Food and Rural Affairs, he appeared to say that no research had been done into the effect of the changes on individual sectors. He said:
"We know what the overall effects will be but we do not know, and have not the modelling to show, the effects on individual sectors".
It is strange that we have taken such a momentous decision for farming apparently without the Government having done that research.
Yesterday, I met representatives of the Royal Association of British Dairy Farmers, who told me that there are 1,500 dairy farmers in the SDAs and that they are all likely to go out of business unless changes are made. Some of those farmers have done everything that the Government have wanted them to do. I was given the example of Wensleydale, with which I am sure my hon. Friend the Member for Hexham will be familiar. Farmers there came together to form a co-operative and are now supplying the makers of Wensleydale cheese. Those farmers have done everything that the Government have asked of them: they identified a niche market and are working together to produce a value-added, high-quality product. Half of them happen to be in the SDAs, and as a result, they will almost certainly be unable to continue in business.
That problem affects many areas of the country, including the west country, Exmoor, the Welsh borders and Northumbria, as my hon. Friend mentioned. They are some of the most beautiful areas of England, although the hon. Member for Braintree and I also see a curious charm in the East Anglian arable fields. Some of those beautiful areas depend heavily on farming for the maintenance of their environment, so the change will have a severe environmental impact as well.
My hon. Friend the Member for Hexham mentioned that one of his constituents is Sir Donald Curry, who has done great work in advising the Government and made sensible recommendations about the future of farming. However, he has said that he was not consulted about the decision:
"I am concerned and have had numerous calls and letters about it. The level of redistribution within the SDA is unacceptable and unforeseen."
20WH
The Government should take that seriously, and I hope that they will show flexibility. When I raised the issue on the Floor of the House with the Secretary of State, there did not seem to be much flexibility, but I am encouraged by the reports that, privately, she accepts that some movement is needed.
There are various methods of addressing the situation. My hon. Friend the Member for Hexham mentioned the possibility of increasing environmental payments, the National Farmers Union advocates three tiers rather than two, and there is the suggestion that we use the moorland line. All those proposals will have costs attached to them, and one difficulty is that we do not have any analysis of how the payments in, for example, non-SDA areas would be affected if we made those changes. I hope that the Minister will be able to say a little more about that, because it is important that we have those facts. Everyone agrees that something needs to be done. The Government, I suspect, have simply not realised the effect of the decision on thousands of extremely productive farms in the SDAs, which make a vital contribution. I remind the Minister of the opening words of the Farmers Guardian editorial:
"Anybody can make a mistake but the true test of a person, or indeed a Government, is the way you respond to it."
10.50 am
The Minister for Rural Affairs and Local Environmental Quality: I congratulate the hon. Member for Hexham (Mr. Atkinson) on initiating the debate, and I agree with one of his early comments, which was echoed by the hon. Member for Brecon and Radnorshire (Mr. Williams) among others. He said that although the contribution of farming to the rural economy is quite small, the contribution of farming to the countryside and the environment is enormous. That is why decoupling and paying farmers for the public benefit, rather than giving them a production-related subsidy, must be the right long-term way forward.
I welcome the hon. Gentleman's support for the area payment approach, as opposed to the historic payment approach. The hon. Member for Brecon and Radnorshire suggested that there was concern among young people that we were not sufficiently proud of British farming. Perhaps that is because of the great coverage of all that is gloomy and negative about it, when there is much positive that could be said. We have every reason to be proud of the farmers—people I meet all the time—who are entrepreneurial and creative, as well as highly committed. All that the Government are doing is trying to help them to be competitive and successful, and have a sustainable future in farming.
It is worth pointing out that farm incomes should be viewed in the context of considerable public support for agriculture. United Kingdom farmers receive about £3 billion in payments under the common agricultural policy each year—£2.5 billion in direct payments and £500 million in budgetary expenditure on market support. The Government's policy is not to attempt to intervene in the market to create artificial income, but to facilitate the right economic framework to enable farmers to succeed. Reference has been made to Sir Donald Curry's excellent work on that, and the

21WH
Government's sustainable farming and food strategy sets out how we mean to work in partnership with the industry in that context.
Although there are many positive things that can be said, I want to focus in the short time available on the points that have been made by hon. Members. First, the general message seems to be positive, but each hon. Member who has spoken seems to be concerned about some of the detail of the impact of the proposals of my right hon. Friend the Secretary of State.
The hon. Member for Hexham concentrated in particular on upland farmers and the effect of a two-area approach on those in severely disadvantaged areas. He makes a reasonable point. He and others, including the hon. Members for Ludlow (Matthew Green) and for West Derbyshire (Mr. McLoughlin) have argued for a different alignment in England. I stress that we shall consider all the representations and the points that have been made to us. That is the point of a period of listening.
Hon. Members must nevertheless bear in mind that change would produce a different set of winners and losers. I do not think that it would be terribly helpful to add to rumours of the possible shifts and changes. Let us engage in conversations and examine the representations. Let us consider what consensus might be reached in the industry. Then, as always, my right hon. Friend the Secretary of State will want to focus on all the information that has come in, and to take a decision.
I assure hon. Members, in answer to a query that arose, that during the period when my right hon. Friend will be representing this country in several European, and other, settings, she will be well in touch with the Department and her ministerial team and will be focused on securing the right outcomes.
The hon. Member for Ludlow also focused on specific cases with a lot of detail, but seemed to argue for a retention of the link to stock levels, when decoupling is the way forward. Perhaps that point was being made by his correspondent rather than by the hon. Gentleman, but I shall certainly respond to him on the detailed issues that he raised. For instance, he referred to a case involving the Rural Payments Agency. It is my experience that, generally, comments about the agency based on the detail of individual cases can be misleading, although I should be happy to write to him about that point.
Mr. McLoughlin:The Secretary of State made her announcement in February and the Minister says that the Government are collating evidence and listening to all sections of the industry. Can he give us any idea of when the industry can expect a clearer way forward? What the Secretary of State announced obviously stands. However, if there is to be a review, it will be immensely helpful for those who are worried in the industry to know what time scale the Minister is considering.
Alun Michael:The hon. Gentleman and others have rightly referred to our discussions with farming organisations, including the National Farmers Union. However, it is wrong to talk about outcomes and
22WH
changes while those discussions continue. My right hon. Friend is looking to make the right decision and to understand fully the points that are put before coming to a conclusion.
The hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) acknowledged that any decision would cause problems. He also acknowledged the logic of a tapering approach that seeks to move to area payments, but in a way that gives people time to adjust to the changes in payments. He referred to the differences across the Welsh and Scottish borders, as well across the lines in England. However, the decisions made in Scotland and Wales are the result of devolution. It is understandable that such decisions have been taken, because, as the hon. Member for Brecon and Radnorshire suggested, the historic payments may look more attractive in the short term. In the longer term, however, the area payments are, in our view, much more sustainable. Those who perhaps aspire to see such arrangements across the border, such as the hon. Member for Ludlow, may therefore take a different view in the longer term.
A number of detailed questions were asked, for instance, about cross-compliance. It is necessary to consider the relationship among the higher tier scheme, which involves more complex agreements, the simple voluntary scheme that is being promoted and cross-compliance, in which the minimum regulation standards are observed. A consultation on cross-compliance is due to take place shortly. That process will bring forward the details for which the hon. Member for Hexham asked and will provide an opportunity for comment and discussion. One problem is that there is always a lot of consultation when dealing with issues that are so complex for the industry. During the consultation, people complain of uncertainty, but we cannot have it both ways. We must listen and get engaged with the sort of detail that several hon. Members have raised.
I am conscious that the time I have to respond to a broad range of issues is short. I therefore undertake to write to those who have spoken to cover the points that I do not manage to reach. For instance, the approach of the Rural Payments Agency was raised. The agency has established a programme and project management system in order to deliver single payment systems by 2005. The set-aside on grassland was also mentioned. We are still discussing the rules, but we argue that the Commission should look again at its proposals, so the issue is not closed.
On the key issue, I must tell the hon. Member for Hexham that no line will be perfect; there will be anomalies somewhere, whatever lines are chosen. We shall listen carefully and ask whether there is a better way. My right hon. Friend the Secretary of State has put forward a sensible and coherent set of proposals. Following the consultation, we shall seek to give the greatest clarity to the industry, which is what all hon. Members want. We need a process that is sustainable in the long term, in which, as we move to the simple area system, people know the graduation of payments, and that will help to provide the certainty that is necessary to underpin a sustainable future for farming and food.

Supermarket Code of Practice
11 am
Andrew George: I am pleased to have secured this debate, and delighted to see the Minister. I have seen him in this position before, when he was goalkeeping behind me for the House of Commons football team, so I know that he has a safe pair of hands to assist him in responding on this important matter.
Today is an important day for me not only because of this debate: in the Lower Waiting Hall, there is an exhibition of Cornish cuisine, and one point that I want to make relates to the importance of farmers co-operating and coming together to promote a brand, and of achieving vertical integration through the supply chain.
Let me give the background to this short debate on the supermarket code of practice. The Select Committee on Environment, Food and Rural Affairs, both in the cross-party report on gangmasters that it published last September and last December, has identified that supermarkets can dictate market conditions. On 10 October 2000, the Competition Commission produced a report identifying the fact that supermarkets represented a complex monopoly practice, and proposed that a code of practice be established. After what I believe were a number of drafts, a code was finally published on 31 October 2001. However, according to those involved in the process, particularly from the supplier side, it was a rather watered-down version of the code that was originally proposed by the commission.
The Office of Fair Trading announced in February 2003 that it would review the success of the code's progress, and it published its report only a few weeks ago, on 20 February. What it found was no surprise to people on all sides who had been watching what was happening with the code, including suppliers, who had caused the code to be established, largely through the complaints that they made about their treatment.
The main results of the OFT review were as follows. The code was not working effectively: 80 to 85 per cent. of suppliers who responded to the survey claimed that the code had failed to effect any change in supermarket behaviour, despite the recommendations of the Competition Commission's 2000 report. However, there was no hard evidence that that was the case. Some 73 per cent. of suppliers reported a fear of complaining, which was the main reason for the code's lack of effectiveness. No cases had been brought under the code's mediation process by suppliers claiming a breach of the code. One case was brought, but it related to a contract established before November 2001, which I understood was the start date before which past contracts could not be included, so the code was not used. A number of aspects of the code were criticised, including the rather vague term "reasonableness" and other subjective terminology that was open to wide interpretation.
Rather worryingly, the OFT analysis also included the following statement:
"We do not believe that there is anything in the changes in the fortunes of UK farmers, especially the amounts they are paid for their produce, which can be linked to the code or the general behaviour of the supermarkets."
24WH
The review pointed to BSE, foot and mouth disease and the strength of the pound against the euro, rather than farmers' treatment by supermarkets, as largely responsible for farmers' misfortunes. However, farmers' organisations rightly question the assumptions behind the suggested source of their misfortunes. Two of the problems—BSE and foot and mouth disease—affect only red meat consumption and have very little impact on other sectors. Furthermore, fluctuations in the exchange rate have not resulted in fluctuations in price. If the problems had anything to do with the strength of the pound, there would be the same fluctuations in price as there have been in the exchange rate, which has not happened. Supplier organisations strongly believe that consolidation of agriculture downstream has affected the proper operation of the market.
I have read the OFT report and spoken to many farmers and farmers' organisations, and to others working in the supply chain. Many people have provided me with case material, but I could not use it even today for fear that they could be identified and delisted, or lose contracts with buyers in the future. However, one does not have to be Sherlock Holmes to identify serious problems in the way in which the market operates. Farmers face particular challenges. They produce perishable goods, even in the case of livestock that are ready for slaughter. Growers produce goods that are ready for harvest at very particular times. They depend on their buyers playing ball and sticking to their contracts and the nature of those contracts.
Mr. Elfyn Llwyd: I congratulate the hon. Gentleman on raising this issue.
The hon. Gentleman describes the worst effects of an unbridled monopoly. Is he aware of the report published recently by the New Economics Foundation, which states:
"270 jobs are lost each time a supermarket opens"?
Worse still, it states that
"50 farmers and small traders are forced out of business every week"
by the operation of the big four.
Andrew George:I am grateful for that intervention. I was not aware of that finding, although I am not surprised to hear it. The main purpose of the debate is to examine the effect on the supplier side, however, and not simply the impact that supermarket chains undoubtedly have on other traders in the environs of sites where they establish new supermarkets. I do not doubt that some studies have identified a net job loss rather than a net job gain in the wider economy, and that supermarkets would want to debate that issue.
My point is that supermarket practices place farmers in a particularly difficult situation. For example, farmers and growers have to buy the packaging materials that supermarkets use, and often they cannot do so at cost price. Many farmers know full well that they are being charged for packaging that may simply be a plastic bag in which to put broccoli or a cauliflower, and that the supermarkets are charging them more than the cost price of those materials as a way of recouping money. Payments are also often delayed. On 17 January 2003, the Financial Times published a study into supermarket power. On page 17, the study said that in 2001, Tesco,

25WH
Asda and Sainsbury's alone extracted an additional £623 million from suppliers through longer credit terms. Supermarkets are obviously in a strong position to negotiate better credit terms.
Retrospective conditions are often added to contracts. Suppliers often do not even see their contracts. Suppliers who want to keep their contract may have to make unexpected contributions to promotions of the sort that I am sure we have all seen, such as "Buy one, get one free" or "Buy one, get one at half price." Farmers often make the major contribution enabling supermarkets to make such offers. Farmers might also have to deal with consumer complaints and with recompensing the consumer. It is sometimes unclear, particularly in the case of perishable goods, whether the cause of the problem lies with the handling and storage arrangements at supermarkets rather than with the farmer who supplied the goods.
There is often a problem with contracts being changed at short notice. Contracts are sometimes ended after the plants are already in the ground or ready for harvest. That happened recently to a supplier not many miles from my constituency. There has also been threatening behaviour.
Mr. Roger Williams: Does my hon. Friend agree that not all farmers deal directly with supermarkets? They may deal, for instance, with slaughterhouses that have direct contracts with the supermarkets. Such farmers could be in a weak position because of the monopoly of the supermarket even though they do not deal directly with it.
Andrew George:My hon. Friend makes a good point. Particularly in the red meat sector, it is noticeable that, with consolidation, some of the sector is growing to such a level that it can negotiate better deals and better contracts with the supermarkets and use its market muscle, but it is true that many farmers supplying to slaughterhouses have to be extremely careful.
In one case, a grower decided to switch his supply to another co-operative that was supplying another supermarket. He received a threatening letter from the original supermarket saying that it would make sure that he never supplied any source that was a source for the other supermarket. It ultimately apologised for the letter and withdrew it, but the fact is that we know that such practices go on. There is a severe fear of de-listing. That happens throughout the food chain; it does not apply only to the suppliers. Other food supply organisations and representatives, some of which are very substantial names and businesses, have raised similar concerns and fears in briefings to me prior to this debate.
The consumer has an important role to play. There is a general impression—indeed, the OFT gives us the same impression—that the consumer is a two-dimensional person who is interested only in price and nothing else. My own impression is that consumers are much more sophisticated. Price is clearly a key determinant, or at least the impression of low price is. Supermarkets often give the impression of low price
26WH
while in fact people end up spending more than they originally intended. However, price is not the only determinant. It is quite clear from consumer surveys and from the views of consumer-based organisations such as the National Federation of Women's Institutes, which is supporting the need for further intervention in the field, that consumers are interested in other values as well as price, including concerns such as local sourcing, food miles, environmental impact and support for British producers. We have just come out of fair trade fortnight, which identified a great deal of interest across the nation in producers and conditions not only in this country, but in other countries.
I want the Minister to look carefully at the OFT report. The OFT is suggesting that it will undertake further research. Although that is welcome, there is a great deal of frustration: following the original report from the Competition Commission in 2000, the suggestion that we will undertake further research is not good enough. He might consider establishing a post with what could be called a particular function, as a Minister and ministerial discretion can direct action that is more important than research, rather than requiring primary or secondary legislation. Whether we called the holder of such a post a food trade inspector, a watchdog, and ombudsman or whatever, it would be useful to have a clear sense of purpose within the OFT to achieve a number of critical improvements to the way in which the food supply chain operates.
First, the outcome of the OFT report shows the importance of the need for anonymity to overcome the problem of fear. The OFT needs to be proactive, not to react to complaints. It should proactively undertake investigations, possibly on the basis of confidential tip-offs, although often simply by looking at areas of the supply chain where it perceives difficulties. Subjective language such as "reasonableness" should be replaced with more objective language clearly outlining the length at which payments will be received. There needs to be greater transparency in the food chain. Emphasis needs to be placed on the fact that procedures are in conformity with the code, and perhaps the annual accounts of the larger retailers could contain a statement to that effect.
Where a complaint is made, the appointment of a mediator should not be the responsibility of the supermarket; it could perhaps be the responsibility of the OFT, the complainant and the supermarket acting jointly. The bad publicity that would result from the publication of a report's findings would make a big difference to the way in which supermarkets operate. I am suggesting not that the OFT should ensure that reparations and compensation are paid where a problem is found, but simply that it should monitor the payment of reparations and compensation where the report identifies a need.
Therefore, I am not convinced that there is a need for further legislation of any kind, but we must have clear ministerial direction and clear ministerial bottle if we are to take the issue on.
11.16 am
The Parliamentary Under-Secretary of State for Trade and Industry: I congratulate the hon. Member for St. Ives (Andrew George) on securing a debate on a subject that is important not only to suppliers, but to supermarkets and consumers. He outlined the case excellently, and I shall try to respond to many of the points that he made. I am also grateful to the hon. Members for Meirionnydd Nant Conwy (Mr. Llwyd) and for Brecon and Radnorshire (Mr. Williams) for their comments. The issues clearly affect all those hon. Members' constituencies, and I acknowledge their work in bringing them to the Government's attention. I say that not least of the hon. Member for St. Ives, with whom I have enjoyed time on the football pitch, as he rightly said. On occasion, we have worked well together and we can perhaps do so now to resolve this issue.
It is important that I explain the background to the current supermarket code of practice before attempting to consider the way forward. In 1999–2000, the supermarket sector was the subject of an extensive investigation by the Competition Commission. The investigation was undertaken in response to a reference made by the OFT under the Fair Trading Act 1973 to consider the existence, or possible existence, of a monopoly over the supply in Great Britain of certain groceries by certain supermarkets. That reference reflected complaints that supermarkets had been placing unreasonable demands on their suppliers. The investigation therefore focused on the supply of groceries, particularly to the UK's four largest supermarkets, which at the time were Tesco, Sainsbury, Safeway and Asda.
It is important to note that the report, which was published in October 2000, concluded that the industry was broadly competitive and that, overall, excessive prices were not being charged and those supermarkets were not earning excessive profits. However, it identified three situations in which competition was distorted and which operated against the public interest. The first concerned the relationships between the largest supermarkets and their suppliers. The commission identified several practices that, when engaged in by the larger supermarkets—those with significant buying power—adversely affected the competitiveness of some of their suppliers. As a result, those suppliers were likely to invest less in new product development, which, in turn, could lead to lower-quality products and less consumer choice.
The commission therefore recommended that a code of practice be drawn up to cover the practices that it had identified and that the code be binding on supermarkets with at least an 8 per cent. share of the market. The four supermarkets that were the subject of the commission's adverse findings were required to give legally binding undertakings under section 88(2) of the Fair Trading Act 1973. The supermarket code of practice, which forms a part of those undertakings, was designed specifically to address the unsatisfactory aspects identified by the commission in the dealings between supermarkets and their suppliers of groceries. In short, it provides for those dealings to take place on a clearer and more predictable basis, and the OFT is empowered to review how the code is working in practice.
28WH
The October 2000 Competition Commission report identified two other practices whereby competition was distorted and operated against the public interest—selling some frequently purchased products below cost and varying prices in different areas in the light of local competition. The commission concluded that such practices, when carried out by the large supermarkets, contributed to a situation in which the majority of products were not fully exposed to competitive pressure. It considered several remedies, including a ban on below-cost selling, but concluded that such remedies would be disproportionate to the adverse effects found. It therefore decided not to make recommendations in respect of those two practices.
It is important to note that, in looking at below-cost selling, the commission was not concerned about whether the selling price was below the cost of production. Rather, it was concerned about whether products sold by supermarkets were below the price at which the supermarket had purchased them. Even if the commission had decided to recommend a ban on below-cost selling, it would not have prevented supermarkets from paying suppliers less than the cost of production. I hope that I have given hon. Members a better understanding of the background to the code of practice.
I now turn to the legal details. As I explained, the supermarkets' code of practice was drawn up in accordance with a recommendation in the Competition Commission's October 2000 report on supermarkets. It came into force, as the hon. Member for St. Ives said, on 17 March 2002. It was designed to regulate a limited number of practices engaged in by the larger supermarkets that the commission felt distorted competition and operated against the public interest.
The code is legally binding on the supermarkets that were the subject of the commission's adverse finding—those with a market share of 8 per cent. or more at that time. Because Morrisons was not the subject of the Commission's adverse finding, it cannot be bound by the code even after it completes its acquisition of Safeway. However, we understand that Morrisons has indicated to the OFT that it would be prepared to abide by the code on a voluntary basis.
I think that the hon. Gentleman will agree that the code was never intended as a panacea to remedy all the ills that have been found and deal with all the issues that he raised. It is a formal remedy to an adverse finding by the Competition Commission. As such, its scope and application cannot be extended to cover issues or parties that were not the subject of the commission's adverse finding. It does not regulate the base price paid to suppliers for their products, which is a matter for commercial negotiation. Neither could it do so, as that was not an issue on which the commission made an adverse finding.
The OFT is required to review the operation of the code on an annual basis. It published its first review of the operation of the code on 20 February this year. The review found a widespread belief among suppliers that the code was not working properly, as the hon. Gentleman has outlined. However, it found no hard evidence to support allegations that the code had been breached. I recognise his point that it is difficult for suppliers to come forward if they feel that they are going to be in breach of the code. That is where it becomes

29WH
difficult to obtain the hard evidence that we need to act. Although he must have a heavy case load, if he would like to talk in confidence, I am prepared to meet him following today's debate and consider in detail how we can best pass that concern on to the OFT. I recognise that there is a difficulty.
Andrew George:I thank the Minister for his offer to meet and I am keen to take it up. Does he accept that, given the nature of the OFT report's findings, which identified a sense of fear among suppliers to the supermarkets, the code cannot carry on as it presently stands? A degree of anonymity is required by anyone attempting to interface with it.
Mr. Sutcliffe:I recognise the point. I will try to come on to what the OFT is doing and what we need to consider. Outside the official response to its work, I take the issue seriously and will be working on it and looking closely at what the OFT says. That is why I wanted to speak to the hon. Gentleman and other hon. Members who have hard evidence, because we need such evidence to obtain a result.
As part of its review, the OFT sought information from more than 60 trade associations representing the suppliers, as well as other interested suppliers and the supermarkets. I understand that 35 organisations replied, including a few individual grocery suppliers for the regions that we both know well. Although responses came from a small number of organisations, the OFT is confident that the views expressed are broadly representative of grocery suppliers overall. We think that trade associations with which the grocery suppliers have been involved have put the case across.
As the hon. Gentleman said, much of the information that was received was anecdotal and came without hard facts. We want to obtain those facts. The OFT has found it difficult to come to any firm conclusions about how individual supermarkets are operating under the code, and particularly about whether there has been any breach.
It is fair to say, however, that the OFT's consultation exercise has revealed several points. There is a widespread belief among suppliers that the code is not working effectively, and the main reason identified for the perceived lack of effectiveness appears to be a fear of complaining among suppliers, as we have recognised. The OFT has referred to a climate of apprehension among suppliers. That seems to relate to suppliers' fear that they would be de-listed by supermarkets, which the hon. Gentleman mentioned. I ask the suppliers, trade associations and others to work with the OFT to ensure that we have hard facts on which to operate. The OFT noted that no cases had gone to mediation under the code and that the only written complaint concerning an alleged breach related to events that took place before the code came into force.
When supermarkets originally made their undertakings, the OFT encouraged traders to build up dossiers of alleged breaches of the code. We must ensure that we devise a process that will enable complaints to be made. The OFT takes the matter seriously and is examining it in greater detail. It intends to carry out a
30WH
further audit of the situation, because it recognises that the code of practice is not working effectively. That will be its starting point.
I accept what was said about the speed at which we need to operate because, as the Minister for Employment Relations, Competition and Consumers, I am concerned about the treatment of consumers in relation to some of the issues that have been raised.
The hon. Gentleman raised the question of why there is not an ombudsman, a regulator or someone at the OFT with specific responsibility for this area. I know that a number of people have called for such a post. However, I am not clear what an ombudsman or individual regulator would do that the OFT is not already doing. The OFT has said that it recognises that there is a problem, and the basis for an annual review is in place, although we need to find a better procedure through which individuals can complain and retain their anonymity. The hon. Gentleman is right that there is no need for further legislation or more bureaucrats to look into the matter. As has already been said, the OFT has the power to investigate complaints against supermarkets.
Andrew George:When the Minister and I meet, perhaps we could explore the matter further. It is clear to me that there are a number of areas in which it would be helpful for the OFT to provide a clear focus for action. It should be proactive in producing and publishing reports, and it should address the issue of anonymity. Such an approach by the OFT would ultimately be in the interests of supermarkets, because it would be good for them to be able to demonstrate greater transparency and to reassure consumers that they are not damaging British producers.
Mr. Sutcliffe:There is no disagreement between us on the need for the OFT to act or on the need for its action to be based on factual rather than anecdotal evidence. The view that the code is not working effectively should be challenged on the basis of facts. That would make the whole situation transparent, and people would feel that their grievances had been properly examined. I want the OFT to continue to examine the position in the terms raised by the hon. Gentleman, and I also want consumer protection issues to be taken into account.
The hon. Gentleman said that supermarkets play an important role in the UK, and I do not think that the measures that he is asking us to adopt are anti-supermarket. The code was the result of an initial reference by the OFT to the Competition Commission. We need to ensure that the OFT gets things right. If it produces hard evidence, we will act upon it, because it will be in the public interest to do so.
The hon. Gentleman has raised an important issue. I undertake to meet him to discuss how to ensure that factual evidence from suppliers or their trade associations is put before us. I shall continue to work with the OFT to ensure that there is a speedy response to any concerns that are raised, and shall try to get everyone's agreement on how to establish an effective code of practice. I am pleased that Morrisons is prepared to operate the code voluntarily, but we need to re-examine that issue.

31WH
The hon. Gentleman raised these matters in a spirit of co-operation, and in that spirit, I am sure that we can reach a solution that will allow suppliers and consumers to be protected, while clarifying the supermarkets' position. I congratulate him on raising the issue.
11.29 am
Sitting suspended until Two o'clock.

Water Framework Directive
2 pm
Mr. David Kidney: I like to think ahead and plan what I am going to say in my speeches, and today I thought that I would start by saying that the title of today's debate is dull and uninformative. I look around at the empty seats and I see that that is all too true. How prescient I was. The words "water framework directive" conceal legislation, admittedly secondary legislation, that is both highly complex and hugely significant for the environment. It is therefore important that the subject reaches a wider audience, and this debate is my contribution to getting the message across to the wider world.
In a sense, I do not need to apologise for the subject being dull, because that is a problem for the Minister for the Environment, who will want to take people along with him. Eventually the legislation will have enormous effects. It will touch the livelihoods of many and the lives of everyone in this country. When people wake up to find the great influence that the legislation has on them they will want to know why they were not involved. It is a few years before it takes full effect, but I want the Minister to be able to tell those people that they had every opportunity to contribute to the debate and to make their voices heard in the decision making, and that it is their fault, not the Government's, that they did not.
I know that the Minister has worked hard with the devolved Administrations because some of the responsibility for implementing the directive lies with devolved authorities. River networks tend not to respect borders. One set of regulations deals with Northumberland jointly with the Scottish Parliament, precisely because the network crosses from one jurisdiction to another. It is particularly important to liaise with the devolved Administrations because there are joint responsibilities on the ground.
Water is in the title of the directive, but the framework will have much wider impacts than just on water. I want to start by dealing with the issue of water alone. Heaven knows, it is vital enough. I was struck by the newspaper reports of the Pentagon's assessment of the threats faced by the United States. While threats of terrorism remain and in the US they still talk of rogue states that they must regard as enemies, it was striking how one of the Pentagon's top worries is future conflicts over scarce water resources around the world. If wars are to be fought over water, clearly it is time to think ahead and carry out the work that will prevent such conflicts.
I hope that countries such as ours in the developed world can help developing countries to manage their future water supplies. This is why the framework is so important. When we start to help others, when we start to advise them and to lecture them about how to manage their water sustainably, it behoves us to get our own house in order first. This is where the directive is so significant. We want to be able to tell the rest of the world that here in Europe we have done everything possible to manage our water suppliers responsibly, sustainably and in line with good environmental practice, and to urge them to do the same. I want us to be able to lead by example and speak with authority when we do that work overseas.

33WH
The water framework directive requires all European member states to draw up plans to protect and enhance the quality of rivers, lakes, estuaries, coastal waters and groundwaters, and by 2015 to have in place river basin management plans that will be reviewed every six years thereafter. It is an enormously complex task. It is very challenging, even with a timetable that seems so lengthy. There is plenty to be done. The Government have already been criticised for not doing enough fast enough, and I shall come to that.
I want, however, to start in my usual reasonable, good-natured way by giving the Minister credit for the things that the United Kingdom has done well. Drinking water quality in England and Wales is something of which we can be genuinely proud. In 2002, there was 99.87 per cent. compliance with quality standards. It is pretty difficult to get better than that, although that statistic hides the fact that there has been a considerable improvement during the past seven years. Since 1997, leakages from the water pipe network have been reduced by 20 per cent.
Our beaches, rivers and drinking water are the cleanest that they have been for a century—a pretty creditable record. Last year, a record 332 UK beaches won seaside awards from clean-up campaigners. The same year, 105 UK beaches were awarded the prestigious blue flag, compared with just 17 in 1992. Some 94 per cent. of UK river networks are of good or fair biological and chemical quality—an all-time high. However, that statistic hides another from English Nature, which says that less than one third of rivers in sites of special scientific interest are of a satisfactory standard.
While I am in the mood for giving the Minister credit for the good things, let me also mention the Water Act 2003, which is to be warmly welcomed. We now have in place a system for the comprehensive management of future water abstractions. Abstractors have a duty to use water efficiently, public bodies must make water conservation an aim of their operations and the Consumer Council for Water has a sustainability duty. Those are all good achievements on the part of the Government.
I congratulate the Government on one more thing—their principal guidance to the water regular Ofwat. There was speculation in the newspapers a couple of weeks ago that No. 10 had spiked DEFRA's guns and was going to insist on lowering environmental standards in the next round of water charging to keep consumers' bills at reasonable levels. In the end, however, last week's guidance made it clear that the Government have taken a sensible approach that balances further environmental improvements against reasonable price controls between 2005 and 2010.
The current price review, or asset management plan 4, highlights an issue that often arises when I talk to people about the water framework directive—the relationship between the directive's requirements and everything else that we do as regards our water environment. How does the framework legislation relate to the periodic review of water price limits, the "polluter pays" principle, land use planning, flood management, economic and social regeneration, biodiversity issues, fisheries and marine conservation, health and amenities? Those are enormously important issues, but we do not always see
34WH
the links between the framework directive, our secondary legislation under it and the Government's wider legislation and aims.
Some say that the Government's approach is unambitious and that they are technically and narrowly implementing the directive at the last minute. The subject is so important and so exciting, and it has so great an influence on so many areas of life, that the Government would be missing a trick if they did not do something far more ambitious. It is as though they were a painter who had been presented with a great canvas, a superb subject and a vast array of colours, but who chose to do a little drawing in one colour at the corner of the canvas. It is important that we inject into people the feeling that this is an opportunity that no one should miss. I say to the Minister: let us be bold, let us have a vivid, unforgettable masterpiece as a result of his work at the canvas.
When it comes to the progress that we have made, the original directive gave us until the end of last year to transpose its provisions into domestic legislation. I am not sure whether the Minister will say that he just made it or that he just missed it, because the regulations were laid before the House in December 2003 and came into force at the beginning of 2004, but in fairness to him, several member states have not yet managed to achieve that, so we are ahead of some members of the European Union.
The Environment, Food and Rural Affairs Committee considered the framework, and wrote an excellent report. The Committee criticised the Government, saying that they did not seem seized of the urgency of the task; and it called on them to adopt a more positive and more active approach. Among those wanting to urge their views upon me for today's debate was Water UK, which still has a list of concerns on matters that it says are not clear enough.
Mr. David Drew: I apologise for missing the first couple minutes of my hon. Friend's speech. I am a member of the Environment, Food and Rural Affairs Committee, so I bear some responsibility for that report. We said that the Government had an awful lot to do, but that we would need to see how resources were to be locked in or it would be a bit of a wish list. We were apprised of how serious an issue it was, which is why we linked it in with the Water Act. We wanted cause and effect to be locked into one. Would my hon. Friend like to comment on that?
Mr. Kidney:Frankly, that clarification is all of a piece with people saying, "Let's be ambitious in how we implement this. Let's make sure that we have firm links to other issues that we think important, such as biodiversity, the management of wetlands and flood prevention. Let us build those things in and plan it from the beginning, so that we get there in the end rather than leave things to the last minute in a rush to be compliant with the directive timetable." That will lead to greater cost rather than less. Being able to plan ahead should enable us to gain the maximum benefits, but without the costs that might come with slow, tardy implementation.
I mentioned Water UK, which was represented in the Minister's third round of consultation. On a different tack, the non-governmental organisations are broadly

35WH
supportive of all that the Government are trying to achieve, but they still speak of gaps and delays. As I said a moment ago, we have already had three rounds of consultation, but the Government are planning a communications strategy this year, and the Environment Agency will be responsible for the preparation of a public participation strategy. The Minister may say that some of that consultation is already in hand as part of this year's programme.
I turn to the question of linkages and interrelationships. Diffuse pollution gives a good illustration of the scale and difficulty of trying to make decisions that please everyone. Many respondents to previous consultations said that such pollution was a matter of concern and demanded to know the Government's answer. In a debate pack prepared by the House of Commons Library—they are marvellous documents—I saw that a Plymouth newspaper had quoted a DEFRA spokesperson as saying last December that the Department intended to consult on diffuse pollution and its effect on agriculture by the end of March 2004. I have not seen that consultation yet, and it is already the middle of the month. Where is it?
Farmers are sensitive about the subject, although I hasten to stress that there are many sources of diffuse pollution. Indeed, some sources are urban. The National Farmers Union branch in Stafford urged that point on me this morning. It is ironic that 42 members of that branch had arranged many months ago to visit Parliament today; they urged me to pass the message on to the Minister that an awful lot of diffuse pollution does not come from farms.
At one end of the range of options for dealing with the subject is fresh regulation. However, the burden of complying would be borne by the so-called polluters, including farmers; it has been estimated that it could cost as much as £400 million. That might stamp out the problem, but the cost would be so high as to drive many farmers and others out of business. I hope that the Minister would find that outcome unacceptable. At the other end of the scale is the light-touch approach, seeking voluntary co-operation with those responsible for the pollution, but ending up with no or little improvement. I hope that the Minister would rule out that outcome.
What choice does the Minister have between those two extremes? What resources does he have at his disposal to help make his approach work? We have just been through a round of common agricultural policy reform and declared how we will apply single payments and insist on cross-compliance in this country. Are resources available through that policy that could be used to address diffuse pollution? That would be a good example of the inter-relationship between two different subjects. If that funding is all accounted for, where will we find the money for incentives for farmers to cooperate? We also need to consider the "polluter pays" penalties for those who do not co-operate. Would there be pressure for further CAP reform in the European Union's common implementation policy for the directive, which would come in time to provide public funding for the incentives that I mentioned for people such as farmers?
36WH
Tackling pollution brings not only environmental and social benefits, but economic ones. The water companies spend £120 million a year removing pesticides from water courses. By acting firmly, decisively and in good time, we can save money for the future.
We can achieve those objectives if we want to. The Government have the right words. To those who have not seen it, I commend the document "Directing the Flow", published in November 2002. Pages 28 and 29 discuss the directive, and it is a superb statement of the Government's approach. The Government's response to the Select Committee report was also thorough. Those are good signs, but some explicit links are missing that we might have expected to see. The Water Act has been passed and the Planning and Compulsory Purchase Bill is about to become law, but we did not do what was necessary about flood management and land use planning when we had the opportunity. Worries are still being expressed by people about the future tackling of diffuse pollution and the treatment of wetlands. I noticed that the second newsletter from the European Union directors of the water framework directive states that they have issued new guidance on wetlands. What does the Minister think of that guidance? However, there are challenging targets. There were challenging targets last year to get the law in place, and there are challenging targets this year—for example, for the Environment Agency to consult on its draft strategy for drawing up river basin management plans, and how to include public participation.
I am excited by this subject, and there are prospects that should excite us. There is potential to enhance all three legs of sustainable development. Environmentally, we can have cleaner, more adequate water supplies, improved biodiversity and better protection for sites of special scientific interest, wetlands and local wildlife sites. Economically, we can have lower clean-up costs in future, improved tourism and leisure opportunities and regeneration opportunities along the way. Socially, we can challenge the problem of flood management and stop it at source in river areas before it reaches urban developments downstream. We can have greater access to the countryside and healthier living standards as people use the opportunity to take exercise as well as eat healthily. Rural businesses such as farming can carry out their work in a more socially responsible way.
There are good prospects under this directive and the relevant legislation for us all to achieve some good objectives. They must be achieved with the active involvement of all the relevant stakeholders, not favouring businesses over environmental groups, nor vice versa. They will be led by the Environment Agency as the Government's champion on the subject, although people have questioned whether the Environment Agency has sufficient skills and resources to do its work properly, and those are points for the Minister to bear in mind.
I hope that the Minister agrees that education will be key. DEFRA is working on a communications strategy as one element that will ensure success in the future. Other elements involve Parliament. I admit that today is a bad example, as not many hon. Members have turned up for the debate, but there is interest in the issue, and we should ensure that people understand how important it is. I should like regular reports to be made

37WH
to Parliament and debates to be held. If we cannot get Members into the Chamber, will the Minister consider seminars to get them together to discuss vital matters before final decisions are taken and to listen to different points of view?
Will DEFRA have a champion of its own? I am sure that the Minister is a fine champion of his Department on many subjects, and does not have as much time to devote to this matter as the stakeholders—the public and Members of Parliament—might want. Will he consider whether someone could be the focus of contact with the public and the production of the news as it comes in, and involve people in future debates and discussions? We should keep working with stakeholders, and should not believe that three consultations were good enough simply because the legislation was passed. There must be many more consultations like those. I have not checked the full list of who has been consulted. Does it include local government planners and the regional development agencies, which are so important to the regeneration of the areas that are affected? I know that a pilot is being run in the Ribble basin. Perhaps regular news, updates on progress and any findings that are emerging would he helpful to Members of Parliament and to others with an interest in this subject. Surely that pilot would make a good case study?
Mr. Drew:Does my hon. Friend agree that one of the more interesting aspects of the water framework directive is not only its impact in this country and in Europe, but the ideas that it may produce for the wider world? I am very interested in recent discussions on the Nile basin. Several of our water companies have visited the region to advise countries that lie alongside the Nile. Surely the directive should stimulate such activities, because the whole world has to be careful about the use of water, not just the western world?
Mr. Kidney:My hon. Friend confessed that he had missed the beginning of my great speech today. He sat down behind me, so I do not know precisely when he came into the Room, and he may have missed the significant point that I made at the beginning of my speech about how important it is to be able to speak with authority and lead the world by example when we ask others to do in their countries what we have shown that we can do at home. My hon. Friend makes a very good point, because it agrees with the point that I made earlier.
At the beginning, I said that the title of the debate masked something of great significance. I am sure that many will find the regulations and the regulatory impact assessment dry and lifeless, but so much good can come from a positive approach that the Minister has the power to see to it that the words jump off the page and splash some colour into all our lives. I was trying to think of suitable alliterations to liven up this part of my speech. Let us see more babbling brooks, sweet springs and rippling rivers. These are things that the Minister has it in his power to achieve. Few issues are more important to our communities, our country and our world than water management. I hope that the debate, sluggish though it was at the beginning, will start a sustained and serious campaign of support for what our country and all the countries of the EU seek to achieve.
2.24 pm
Mr. Robert Key: Because I shall speak with passion, nothing that I say will be reported anywhere, so I can be candid.
I congratulate the hon. Member for Stafford (Mr. Kidney) on introducing this very important debate. I also congratulate the Minister, even before I say a word about what he has achieved, precisely because he has achieved so much. He has fought and won a notable battle with the forces of No. 10 and Ofwat in ameliorating the decisions that have been taken about the future care of this country's water resources. The water framework directive preamble says:
"Water is not a commercial product like any other but, rather, a heritage which must be protected, defended and treated as such".
I do not always go overboard in my support for European directives, but on the present occasion I want literally to go overboard and splash in the shallows of the Hampshire Avon. Every weekend, in Salisbury, I look over the parapet of the Ayleswade bridge, which was built in 1247, and consider the depth and quality of the water; I observe the bottom and whether the river appears healthy. I reflect on what we are doing to that river.
I have known the river since I was a child. I paddled in it when I was two years old. I fell into it when I was four years old, and was rescued by the Bishop of Bombay. I have rowed on it and watched birds and flowers there. I am a keen supporter of the water meadows trust. As the Member of Parliament for what is a wonderful constituency, that river means a lot to me.
It is a short step from the general words of my preamble to the principle that the price of water must reflect the full cost of protecting water heritage. That is the issue that I want to discuss. The cost must reflect the full cost of finding alternatives to damaging abstractions and pollution. The long campaigning—20 years, in my case—to protect the quality of the Hampshire Avon from abstraction and effluents is a vivid illustration of what the water framework directive is about.
The first paragraph of article 1 of the directive states that the purpose of the directive is to establish a framework that
"prevents further deterioration and protects and enhances the status of aquatic ecosystems".
Thus the directive is about protecting water qualitatively and quantitatively, and therefore its objectives overlap with the ecological objectives of the habitats directive. That is what is at stake in the argument that has been raging for years in my constituency about abstraction by Wessex Water—a fine company with lots of dedicated personnel who are in constant conflict with Ofwat about their investment plans. In the middle is the Minister.
The price review process gives far too much influence to Ofwat. Back in 1999, Ofwat succeeded in reducing prices substantially by eliminating many environmental programmes in the Wessex Water area, such as the Blashford lakes programme. That was an irony, since I recall an occasion when I had to stand in unexpectedly for the then Secretary of State for the Environment, who had just been sacked, the day before he was due to open the new Blashford lakes complex. I was sent there instead, as a Parliamentary Private Secretary. I still have

39WH
a very nice print of the Hampshire Avon hanging in my bathroom, with a hastily rewritten notice underneath, with the name "Key" instead of "Ridley".
This year Ofwat wanted to cut another £5 billion from the programme and it was only a courageous fight by the Minister that prevented that. The River Wylye in my constituency has been a particular victim of what I am describing. The structure of the price review programme should be reviewed in the light of the water framework directive and the habitats directive, to ensure that it gives sufficient weight to environmental protection.
Locally, Wessex Water's draft plan for 2005 to 2010 included virtually no investment in reducing abstraction or removing phosphates from sewage treatment works. There was an allocation of £8 million, compared with a £90 million minimum request from the Environment Agency and English Nature. I understand that after a lot of pressure, Wessex Water has verbally agreed to put £10 or £12 million in its final plan, to cover investigating an alternative to the 1 billion litres a month taken from the little chalk stream of the upper Wylye and exported to Somerset. It is madness. We have massive leakage in the area, yet we are abstracting the headwaters of one of our most precious river systems to fulfil the needs of quite another part of England. The earliest that even the present scheme could have any effect on the river flows would be about 2014 or 2015. That assumes agreement by Ofwat to let Wessex Water finance it in the 2005 price review period.
There is no funding for a solution such as an agreed building programme in a Wessex Water plan, because Ofwat forced the so-called statement of intent on the Environment Agency and English Nature. The statement of intent must be reviewed every year. January is usually the month, so I expect the review to be published shortly. The plan said that Chitterne abstraction would be used as a last resort. As so many of us predicted, however, there was a failure to protect the Wylye. The abstraction at Chitterne for five months was five times the target level. The flow in the River Wylye dropped to 40 per cent. of the average. The agreement nevertheless has to run until 2007, and allows Ofwat to delay the programme and the price increases to find a solution to the low flow problem for another five years.
In spite of all that, Wessex Water last year—last summer was quite warm and dry, as I am sure hon. Members recall—failed to apply for a drought order or introduce any restrictions on supply. Of course, the issue of prices lies behind all that. In retrospect, the policy of 2000 to reduce prices by 12 per cent. was idiotic. Wessex Water bills went down by 5 per cent. in real terms in the period 2000 to 2005. Even from that artificially low base, however, prices in Wessex Water's plan increased by only 12 per cent. for 2005 to 2010, compared with 31 per cent. nationally.
The key issues on which we are fighting locally are to ensure that the £12 million really is there to investigate alternatives to the Wylye abstraction and to ensure that the investigations result in a project agreed by all the parties to eliminate abstraction from the Wylye. Eliminating the abstraction must be the answer. We must also ensure that the full Environment Agency and
40WH
English Nature programme for phosphate removal is in the Wessex Water final plan, but we have not yet been promised that it will be.
The argument has been going on since 1990, when the Wiltshire fisheries association starting fighting its corner, although I started fighting back in 1983. We shall not get an answer until 2014 at the earliest. It is not acceptable that we have had to wait for a quarter of a century to remedy serious environmental damage to a special area of conservation site, which is supposedly the most important designation.
There is a huge problem of attitude. Water Voice Wessex wrote to me on 22 July 2002 about what it saw as a settlement for low flow rivers such as the Hampshire Avon. It said:
"Water Voice Wessex fought hard for customers against the original £105m proposal"—
that was Blashford lakes—
"which we did not believe was cost effective, and would have increased bills significantly by £11 per year ad infinitum. This new proposal will quickly improve the low flows on the Hampshire Avon and not significantly increase customers' bills. This is a win-win for all concerned."
It is a lose-lose for all concerned. The environment will lose and there will not even be any long-term benefit for consumers, because the other problems will become greater if, for instance, phosphorous and other chemicals are not tackled.
The public consultation draft, "River Avon candidate Special Area of Conservation Strategy", published by English Nature in October 2002, said:
"The River Avon is one of the most biodiverse chalk streams in the UK, with over 180 species of aquatic plant … one of the most diverse fish faunas, and a wide range of aquatic invertebrates"
having been recorded. There were populations of Atlantic salmon, bullhead, brook and sea lamprey, as well as flowing water vegetation, including water crowfoot. The river and adjoining areas also provided a habitat for populations of Desmoulins whorl snail, with which I am sure we all familiar.
The key issue was that the discharge of substances, including hormone-disrupting substances, mostly as a result of the pill, discharged from sewage treatment works was affecting much of the sensitive environment. Discharges of phosphorous chemicals—detergents, in other words—from point sources were being reduced, but there was a long way to go. This country must decide what it wants to do. Are we going to go down the route of cheap water for everybody, with no regard for leakage or the consequences for the environment? The leakage levels are still enormous. Paragraph 6.7 of Wessex Water's first annual report to the Minister on progress, published in January 2003, says:
"During 2002 Wessex Water continued to reduce leakage. By March 2003 leakage should be reduced to 75 million litres a day."
That has been assessed as the economic level for leakage.
"For 2003–04 leakage is predicted to reduce to just over 74 million litres a day and remain at the economic level."
Who says that that is an economic level? What sort of economics of the madhouse is it that assumes that it is all right to lose 75 million litres a day, at the same time as 1 billion litres are being taken out of the headwaters of a sensitive chalk stream on Salisbury plain? It does not add up.

41WH
The Minister will be familiar with me banging on about this, but I am convinced that the answer must be water metering. There is no way that people will realise how much water they are wasting unless they can see a little dial going round that tells them, before a bill flops on the doormat to remind them every now and then. There are plenty of ways in which we can reduce water consumption—but we are not. Planning authorities are nearly always reluctant to go for grey water schemes and to operate sustainable urban drainage systems in their areas. Planners are put under huge pressure to build more and more housing, as is Salisbury district council. Water companies are not statutory consultees. The whole thing is completely mad.
All power to the Minister if he can persuade No. 10 to take a more enlightened view. Will he please get Ofwat and Water Voice under control, and talk to them about the consequences of their fighting for the consumer? In the long run, apart from the fact that we shall all be dead, we shall not have any decent rivers in this country. I hope that in my few minutes, I have been able to instil some passion into the debate, which was so ably introduced by the hon. Member for Stafford. I am grateful to him, and wish that we could convince our constituents of the importance of the work going on in this area. It is not just about people flopping around looking for things with long Latin names, but about one of the most precious parts of the heritage of this country. If we do not take care of it, we shall lose it.
2.37 pm
Sue Doughty: I, too, congratulate the hon. Member for Stafford (Mr. Kidney) on securing the debate and introducing it in the way that he did. He painted a picture—a glowing canvas—and rightly identified lots of areas that are beginning to shine out here and there as little corners of hope. We must integrate the whole picture: when we talk about waste management, we usually grumble about having a jigsaw with no picture and only some of the pieces. Here, too, there is a vision for the future, and we must find out how to fill it in and move forward.
The subject of this debate should not be as dull as ditchwater. The directive should not be portrayed in that way, because it is one of the most exciting environmental measures that we in Parliament shall see. It sets the scene not only for this country but across Europe, and goes a long way to recognising the stress that our environment is under. It will start to put right some problems and set the scene for the future, where the climate is changing and rainfall is different, and—as the hon. Member for Salisbury (Mr. Key) said—our growing population is making huge demands on water usage within a very small island. It is a matter of urgency, although I accept that we cannot implement it instantly. There must be a lot of careful planning to ensure the outcomes that will deliver the directive's huge benefits.
It was most interesting yesterday to see Folkestone and Dover Water Services Ltd. proposing metered water supply, recognising that we cannot continue to take water without understanding the impact of that. We are looking at the benefits of the water framework directive, which will require rivers, streams, lakes, estuaries and coastal waters to achieve good ecological status by 2015. It is interesting that that is the date when
42WH
that water company expects 90 per cent. of users to be on metered water. I would expect other water companies to start to take that approach.
I share the views of the hon. Gentleman that we must do much more to manage leakage and water usage, and to recognise their huge threat to the environment. As we always say, our countryside needs to be there not only for our use, but for our children and their children. The work we do now will preserve the heritage for them, start to reverse some of the damage that we and our forebears have done, and start to bring in improvements. That will not be simple, because there is huge pressure on the countryside. We talk about the uses that we make of the countryside—whether we are concerned not to build on it, or whether we want it for leisure access, such as water sports. Those uses have an impact on the countryside, and we must ensure that people get the benefit of the countryside, while understanding that we need to preserve it and that we cannot take a chance on biodiversity.
I had the pleasure of going out with English Nature to look at a site in my constituency—it was almost literally in my backyard, because my home is in the River Wey basin. It was an eye-opener for me to see the diversity of the species on that site, which is being managed to preserve different areas and species such as kingfishers and other birdlife, and deer. It was interesting to see all the different aspects by which we measure the quality of the environment.
There is much work to do. We need to put programmes and measures in place by 2012, and the mechanism for delivery is the river basin management plans. As we have heard, the Government brought the regulations for the transposition of the directive before a Delegated Legislation Committee very late and, as a result, we had little time to debate that important measure. We have concerns about integration of the programme. There are good intentions, but there must also be the means for delivering the environmental improvements that the directive is intended to bring about. We have concerns about the Government's interpretation of the directive and their approach to its implementation. We want to know that the Environment Agency will have the support that it needs to implement the directive, because implementation will not happen without that support. We fear that the Government may take a timidly minimal approach to the directive, both in relation to the environmental improvements and to the public participation that is needed. There must be more flesh on the bones.
The bulk of the duties of regulation are to be carried out by the Environment Agency, and the Minister stated in a Standing Committee that the agency is satisfied with the outcome of its negotiation for the funding settlement. However, he continued:
"Of course it would like more funding. I understand that and I would like to give it more funding, but we have to work within a budget framework and to a ceiling."—[Official Report, First Standing Committee on Delegated Legislation, 27 January 2004; c. 15.]
I do not get the feeling that the Environment Agency is satisfied with the funding. I believe that it will be compromised by insufficient resources in addressing such a demanding agenda.
For once, I will not say to the Minister that I want more and more money to be spent; I recognise the achievements behind the announcements that were

43WH
made last week about how much money would be made available to the environment. However, we need to start working according to the "polluter pays" principle. We must implement mechanisms to ensure that people who damage the environment pay for its reinstatement.
Mr. Kidney:I have every confidence that the Environment Agency does its job well. The resources that it requires are not just financial; what matters is the skills set and the suite of powers and carrots and sticks that it has to do the job. We need to hear details of those from the Minister.
Sue Doughty:I thank the hon. Gentleman for that intervention. He put his point concisely, and I support it, as we want to know how the Environment Agency will carry out the work.
Having said that, I reinforce my praise for last week's announcement. Liberal Democrats will always support the Government when they take a strong line on the environment. We heard about several schemes, and the plan to reduce the input of the nutrient phosphorus, which can upset the ecological balance of rivers, into the River Axe in Devon by removing phosphate at local sewage treatment works is just one example of the good work that can be done to bring about a benefit.
However, the Environment Agency wanted the Government to go further, and I should like to know about future plans because we must recognise and protect our heritage. We must consider the problems of diffuse pollution—the nitrates and pesticides that wash into the rivers through farmlands. We sit on committees and it is our responsibility to keep in touch with farmers, so that we all know about the huge problems that they face and the demands that we are putting on them to change how they work through reform of the common agricultural policy and changes to the rural environment. However, we have to find a way for farmers to reduce nitrate use while passing the cost to others so that they can stay in business as conservers of the countryside as well as producers of excellent food and rural products.
We have some concerns about public participation. If we are saying to people that, because of the environment, they cannot do this, cannot build here or must look after that, and that they will have to pay the price in their water bill, we must negotiate with them and explain why we are saying that. Such a dialogue is missing, and consultation is not always the same as involvement. Regulation 12 of the Water Environment (Water Framework Directive) (England and Wales) Regulations 2003 deals with consultation, but we need to know how it will take place. How do the Government envisage the process developing when we want to spend money? How will we have that conversation? I do not want to use the phrase "big conversation" because I feel a little scarred following the recent public debate on genetically modified crops and the subsequent announcement.
We need to ensure that the public can do more. We should be able to tell them our environmental objectives and ask them how they would prioritise and fund them. Could we put out information with water bills to tell the
44WH
public what we are trying to do for their environment and how we are spending their money? Some places, particularly in the south-west, have had problems with sewage and coastal water, and we should provide much clearer explanations to the public about why their bills have been at such a level. They are ultimately picking up the cost, so we need to consult more.
The same is true with the NFU, as we are asking the farmers to make changes. I have mentioned the costs, but most farmers want to look after the countryside and do the right thing. Consultation should be a two-way process, so that farmers can explain the implications of what we are asking of them and make their own suggestions about how changes can be delivered. We have a problem with regulation 12, as it does not seem to provide a way for farmers to appeal, perhaps in challenging a river basin management plan. The current requirement is only that the Environment Agency should take representations into account. We need a fairer deal with farmers, so that their voice is properly heard. They need to know, point by point, what the problems are.
There were earlier discussions about accountability to Members of Parliament, and some good suggestions were made. I listened to the hon. Member for Salisbury, who has taken time to look at how the plans affect his constituency. We need to do that so that we understand not only the problem as a whole but how it affects our different regions and river basin management plans. We must listen and talk to our constituents, so that we can bring their views into the debate.
In considering how the directive will be implemented, we have one query about bodies of water. The Environment Agency will be responsible for identifying bodies of water with areas of 50 hectares and over, thus excluding all but 12 per cent. of lakes. We cannot include all the smaller bodies of water, but could we do a representative sample of some of them, as with the pilot in the Ribble valley, so that we get a better understanding of the interrelationship of ponds? I learned yesterday from one of the scientists at the marvellous exhibition in the Terrace marquee that there is a huge interrelationship between small lakes and ponds. There is a large regional diversity in the ecology of ponds, almost more than in large lakes and rivers. Pockets of rare species are found in small areas, which is why small water areas are so important. Networks—whether ponds, streams or marshes—must have proximity if they are related ecologies. It would be interesting to see whether we can investigate that further.
We also need to consider further integrating what we are already doing. We need to integrate the water framework directive with the Government's existing commitments to conserve biodiversity through the UK biodiversity action plan. Wetland biodiversity is under pressure. We need that integration, so that we are not picking off one opportunity at a time. We need to do much more. If the biodiversity action plans were to go into the river basin management plans, it would take us a long way forward and give us a much stronger information base.
I know that other Members will have quite a bit to say on this subject, and I am interested to hear what the Minister has to say. I am especially looking forward to hearing his response to several integration points, and to

45WH
hearing any further announcements that he makes about how the water framework directive will be implemented.
2.52 pm
Miss Anne McIntosh: I, too, congratulate the hon. Member for Stafford (Mr. Kidney) on securing the debate. I regret, on his behalf, that it has not been better attended, although the quality of the contributions more than compensates for that. It has been a stimulating debate, of which the image that I shall take away will be that of my hon. Friend the Member for Salisbury (Mr. Key) making a passionate speech in which he told us about paddling in the Avon waters as a youth. I shall remember that fondly.
I should like to impress upon the Minister that things have moved on a little since we last met, when the Opposition prayed against the implementation of certain regulations. I want to tell him how I started off as an early eco-warrior. Hon. Members may have heard a recent Saturday morning Radio 4 programme about green pioneers in a part of the country that I have kept fairly secret until now—although, as my hon. Friend the Member for Salisbury said, we know that whatever we say in the confines of Westminster Hall will go no further—where I was brought up in the north of England. On one side of the River Tees, there is County Durham and on the other side is North Yorkshire, which is not far from my present stomping ground.
There was a proposal to strip some water from the River Tees and carry it across to industry in Teesside, making what is now Cow Green reservoir. The reason why I was so interested in that, my first environmental issue, was because it would flood an area that had the only known blue gentians outside the alpine countries of Austria and Switzerland. In spite of huge local opposition, the project went ahead to no purpose whatever. By the time that it was finished and Cow Green reservoir was completed, the industry had secured its water supply from another source, and the project had flooded an area of outstanding natural beauty. Of course, it proved impossible to grow blue gentians outside that area in the north of England, so we no longer have fields of blue gentians. That was the start of my eco-warrior campaigning and the setting of our blue-green agenda several years ago. I was delighted that BBC Radio 4 paid tribute to those early green pioneers in that regard.
As the Minister is aware, we support his aim. In his Department's words:
"The Water Framework Directive … is the most substantial piece of EC water legislation to date."
When we prayed against regulations made under the directive, the Minister asked how the Government could be both early and late in the transposition process. As I was not allowed to answer back on that occasion, may I say that, as the hon. Member for Stafford has suggested, one can be both early and late? One might be one of the first European Union countries to transpose the directive, but the Minister almost missed the deadline. The Minister could be said to have been both early and late on that occasion.
The conclusions on pages 22 and 23 of the Government's response—presumably the Department's response—to the excellent report from the
46WH
Environment, Food and Rural Affairs Committee on the water framework directive, contain two points on which I want to press the Minister this afternoon. First, the Department said that it was
"conscious of the need to ensure proportionality"
in the way that the regulations are transposed and applied in this country. Precisely how does that proportionality apply, in the Minister's view, to the massive costs that will be inflicted on the farming community through the process, as a number of us have already claimed? Indeed, the Select Committee also argued that point.
The hon. Member for Stafford, in opening the debate, referred to my second point. There is scope for more joined-up government, particularly in land use and land-use planning. I want to place on record my gratitude—I think that the Minister knows of this—for the discussions that I have had with the Environment Agency office in York. Its headquarters are in Clifton moor, but it covers the whole of the region of Yorkshire and the Humber right up to the Scottish border.
I make an urgent plea to the Minister to use the moneys—the rural development moneys in particular—that will become available through reform of the CAP for imaginative flood defence schemes. If he has difficulty thinking of any, perhaps I could have a quiet word with him after the debate this afternoon, as we have identified one in our area. The Ings at Milby island in Boroughbridge are currently flooded because of the lack of compensation. If we can use those funds in an imaginative way to compensate the farmers for the good that they are doing for the rest of the community by shoring up and repairing flood defences, that would be most welcome.
We established the costs when we prayed against the regulations made under the directive. The costs to farm businesses alone are estimated at between £500 million and £3 billion. I have also seen a figure that suggests that the total costs will be much higher. It is estimated in one report in the press—the Minister can reject this figure this afternoon if it is not accurate—that the total cost of implementation has been priced at £9.2 billion.
I also urge the Minister to look favourably at the official Opposition's two early-day motions, and also all who have contributed this afternoon, including the hon. Member for Stroud (Mr. Drew) who clearly had a pressing engagement, which was perhaps related to the subject matter, and who is not here with us—I shall speak to him later. We have tabled early-day motion 511 on the water framework directive and early-day motion 631 on the groundwater directive, which go over these points. I hope that the Minister will look favourably on them.
How can DEFRA argue and how can the Minister say hand on heart that they are applying the principle of proportionality to the farming community when not only are farmers being asked to pay the costs from the directive, which could be as high as £3 billion, but the regulatory burden of most EU directives falls directly on those farmers? There is the integrated pollution prevention and control directive, the nitrates directive, the groundwater directive that will probably cost £1.2 million to apply, the water framework directive and the fallen stock directive. There is also the proposed pesticides directive—I could go on but time prevents me.

47WH
A number of hon. Members have already referred to the huge costs of the administrative burden falling on the Environment Agency. I did not get a convincing response from the Minister when we raised that point in the Delegated Legislation Committee that considered the transposing regulations, but enormous burdens are being imposed on the Environment Agency. He will confirm whether those burdens are on top of the other work that the agency is being asked to do. Does he expect the agency to juggle the resources? Will water companies be asked to reimburse the agency direct? How does he imagine that that will be paid for?
Water companies will, as we know, pass the charges on to consumers. I know that that will alarm my hon. Friend the Member for Salisbury, who is becoming known as a champion of his constituents in his discussions with Ofwat. It does not seem fair that one category—water companies—can pass on the costs to their customers, who are all of us. That seems particularly unfair on the most vulnerable people, who use water just as the rest of us do. I am thinking particularly of pensioner households and single parent households in which there is only one income earner, bringing up children on their own. How can we ask those people to meet the sizeable increases in their bills? How does the Minister expect farmers to cope when they cannot pass on their costs?
Obviously, the Minister will respond in his own inimitable way to my hon. Friend's question about slicing water off one water source to run it into another watercourse. What are the environmental disbenefits and the costs of that? I should also like to use this opportunity to bring another matter to the Minister's attention. I do not know whether he or the Secretary of State will be asked to rule on this, but the European Commission has apparently been requested, and may agree, to co-fund a highly controversial Spanish hydrological plan, the aim of which is an annual transfer of 1,050 cubic hectolitres of water from Ebro, in Catalunya in the north of the country, to the southern regions. There is deemed to be a mass tourism and intensive agriculture problem, and anyone holidaying in the south of Spain and particularly its islands will be aware of the problems of light rainfall and of getting water to those places. Now that there has been a change of Government in Spain, albeit in highly regrettable circumstances, can the Minister really expect British taxpayers' money to be used to co-fund a hugely expensive hydrological project that will bring no benefits whatever to this country?
I congratulate the hon. Member for Stafford on securing the debate and, in particular, on its timing. I am disappointed that he was unable to join us on and contribute to the Delegated Legislation Committee that considered the transposition and implementation regulations, but there is still time for him and other hon. Members to join us in supporting early-day motions 511 and 631.
Mr. Kidney:The hon. Lady invites us to join her on those early-day motions. Will she join the rest of us who have praised the Minister for the settlement on the guidance in respect of the price review for 2005–10?
Miss McIntosh:I am sure that the hon. Gentleman would not want to stretch my good relationship with the
48WH
Minister, but had his Department lost that argument with No. 10, it would have made a complete mockery of everything that the Department has been trying to do on the European water framework directive and the groundwater directive.
The Minister, and indeed the hon. Gentleman, would probably join me in paying tribute to the previous Conservative Government, who were the first to apply the EU drinking water and bathing water directives. I have a little anecdote about that, which I shall save for the next Adjournment debate on this subject. For now, I hope that the Minister will, wherever possible, build on the partnership approach—I prefer the term "partner" to "stakeholder", on which the Government insist—and look to a voluntary approach, particularly with the farming community, to ensure that the principle of proportionality espoused by his Department applies on this issue as it does everywhere else. I hope that the Government will take this opportunity to say that they will move away from what can appear to be a heavy-handed, regulatory and burdensome approach to the transposition, and that they will apply a lighter touch, rather than imposing highly expensive, costly and ineffective burdens on businesses such as farming and water companies, as the Department has done in the past.
3.5 pm
The Minister for the Environment: I join hon. Members in congratulating my hon. Friend the Member for Stafford (Mr. Kidney) on the way in which he presented his case. I support the main thrust of his argument that these are complex and significant issues and that it is necessary to raise awareness about them. I will respond to some of his thoughts on the subject, which were quite good.
I endorse his point that we should lead by example and speak with authority on water management issues. Hon. Members have shown great interest in the matter, especially the hon. Member for Salisbury (Mr. Key), who has a long-standing interest in water management matters and has spoken about them many times, with a great deal of sense. I do not doubt his enthusiasm and commitment, and I shall say something about the points that he raised in a moment.
The hon. Gentleman mentioned AMP4—the price guidance—and the Minister's recent guidance to the regulator, which was a fair outcome. There are anxieties about costs and we cannot escape that. We have to bear in mind the costs to consumers, but the hon. Gentleman is right: there will be costs if we want improvements. Although consumers want water prices to be kept down, they are very interested in the quality of the water that they receive and in the management of the aquatic environment. Biodiversity in that environment and the improvement of rivers and coasts are popular with the public. It is a matter of getting the balance right.
My hon. Friend asked how the water framework directive fitted into AMP4. In terms of major commitments under that directive, the bulk are likely to fall within the next round of price guidance, AMP5. Nevertheless, there are several aspects of AMP4 that will contribute to the objectives of the water framework directive. They include the freshwater fish directive, for which there is support, and continued improvement in

49WH
the quality of inland and still waters, especially those that apply to SSSIs. There are several upland pilots on water management involving water companies, which I am keen to see up and running. All of those contribute to achieving the objective of good biological quality water courses.
I accept that agriculture is not responsible for all diffuse pollution and I absolutely accept my hon. Friend's point about the farmers in his constituency. However, we cannot ignore the fact that farms are the biggest contributor in that respect, although there are others, such as the run-off from roads and other point-source pollution that we need to tackle. We need a range of measures involving incentives to deal with diffuse pollution, as my hon. Friend said. Our agri-environment programmes are substantial and the objectives of the review now contain some resource protection, which may involve regulation or financial instruments. They will form part of the consultation on our proposals for tackling diffuse pollution, which will be published towards the end of this month or the beginning of April. My hon. Friend will have the opportunity of seeing those proposals and he may wish to contribute to them.
My hon. Friend talked about involving MPs in consultation in its broader sense, and I agree with that. I like the idea of his proposal of a seminar for hon. Members on the water framework directive; I know that there is a lot of interest in the issue in the House, so I will give his proposal serious thought and consult within the Department to see what we can do about it. I am certainly sympathetic to his case.
The hon. Member for Salisbury made a very good speech. He said that he would speak with some passion, and indeed he did. As a matter of fact, the issue deserves some passion. The hon. Gentleman represents an area that has some wonderful chalk streams and some very delicate biodiversity. He has long championed water extraction issues and long campaigned for the kind of measures that we have now introduced in the Water Act. On the issue of management, he strongly argued that environmental aspects must be part of the price review process. That must be recognised, and we are trying to ensure that that happens.
As regards the abstraction problems in his part of the country, it is inevitable that a serious look will have to be taken at the abstraction licences of some of those involved, and some may have to be withdrawn under the new powers in the Water Act. There are facilities to do that, and the hon. Gentleman, who served on the Committee that considered the Bill, will know how they can be applied.
The hon. Gentleman also mentioned Wessex Water's low-flow agreement, and I am in the process of responding to Wessex Water on the issue. Its statement of intent allows for a five-year programme of work and research to assess the effectiveness of measures to restore low flows. As the hon. Gentleman rightly said, Wessex Water is only part way through the programme, and some measures are still to be fully implemented, so it is a bit early to reach conclusions about the programme's overall effectiveness. However, the second annual report to Ministers has shown that overall progress is being made in accordance with the statement of intent. The signatories to the statement—the Environment Agency, English Nature, Wessex Water and Ofwat—are
50WH
monitoring progress. In addition, a consultation group consisting of wider interest groups can follow progress closely and provide input. I know that the hon. Gentleman will support that approach.
Mr. Key:Will the Minister take care to notice whether Wessex Water has any plans to rebuild inadequate infrastructure? Such infrastructure is a major problem in terms of the flooding of sewerage systems in remote rural areas, which often leads to overflowing at sewage treatment works. Will he also consider the issue of phosphorus? As far as I am aware, there is no intention to upgrade sewage treatment works to filter it out.
Mr. Morley:I will certainly be happy to consider those points. I can tell the hon. Gentleman in general terms that the ministerial guidance to the regulator deals with issues such as sewer flooding and asset maintenance. I know from my regular meetings with him that he thinks that those issues are important, and I am sure that they will feature in the Wessex Water plan.
The hon. Gentleman will be pleased to know that the ministerial guidance covers consultation on research programmes on endocrine disruptors. The problem is important, and its effect on freshwater fish should be taken as a biological indicator of potential problems with pollution in our watercourses. We must understand the problem better and find ways to tackle it. I assure the hon. Gentleman that the Government absolutely agree with him on the point.
I also agree with the hon. Gentleman's comments on water metering, which, as he will know from my comments in Committee, is our ultimate aim. As far as we are concerned, the more people who move on to water metering, the better. That movement is taking place, and I suspect that it will continue, particularly in the light of the forthcoming price guidance.
I also very much support the hon. Gentleman's comments about the planning considerations involved in sustainable urban drainage and grey water systems. Again, we are giving great thought to the issue, particularly in relation to large new developments such as Thames gateway, which offers the prospect of building in sustainable water and energy management from the beginning. Some good examples of building regulations, development and design are in prospect. We are giving careful consideration to that.
I also listened to the hon. Gentleman's very blunt statements about Ofwat and Water Voice. They have a job to do. I have a great deal of confidence in the regulator. I also meet with Water Voice. Its job is to protect and promote the interests of consumers, so it will pay a great deal of attention to prices. But groups such as Water Voice would also agree that there must be an element of environmental improvement and sustainable management of water resources. That is also in the interests of consumers.
There is common ground. It is a question of striking the right balance, but it is difficult. There are these pressures. I heard the hon. Gentleman's comments about the price reductions last time, and I understand the point that he was making. Nevertheless, we must try to achieve a balance, minimising the cost to consumers while recognising that there are still improvements to be made. That is what we are doing. The final decision on prices is a matter for the regulator, as the hon. Gentleman knows.

51WH
The hon. Member for Guildford (Sue Doughty) talked about the implementation of the directive. It is a major directive and it is being implemented over a number of years. The Environment Agency's budget has increased and it decides how it allocates its resources. It has about 40 staff who are dedicated to working on the water framework directive, and that number is likely to increase in due course as we begin to develop the implementation programme. The Environment Agency has done a very good job with the Ribble valley pilot scheme, to which my hon. Friend the Member for Stafford referred.
I have been up to the Ribble valley myself to talk to the Environment Agency, English Nature and other stakeholders who are working in partnership on this programme. It is one of the aspects of the water framework that I like. I like the partnership approach, the public consultation and the involvement of people and the various interest groups in river basin planning. That is a strength of the directive. There is scope for integrating the points that she mentioned such as planning and biodiversity action plans. It is certainly being done in the Ribble basin. That is a useful lesson for us in how we extend this to other river basin catchment plans.
The hon. Member for Guildford also mentioned the important "polluter pays" principle, which the Government accept. We have to apply it in a proportionate way when considering who bears responsibility for some of the pollution problems that we face. She also mentioned public information and explanation, perhaps extending that to information on water bills. That is a sensible suggestion. It is a matter for the water companies, but I shall certainly bear it in mind.
It would be good to explain to the public how some of the budget has been spent on improvements, which was a point made by my hon. Friend the Member for Stafford. We have a good record in this country of improvements in water and coastal quality and in reducing pollution. We should point out the increase in the number of blue flags awarded, as my hon. Friend stated, the improvements in our rivers, which in some cases have been dramatic, and the further steps that have been taken in water management. It is important to stress the desirability of this. I am confident that the public support such issues. Indeed, some of what they pay goes towards that. I emphasise that it is not the largest part of the bill, although I note that some press coverage of the recent ministerial guidance suggested that sticking to green issues was the cause of higher bills.
The environmental programme is about 15 per cent. of the spending programme in relation to the overall price review. The bulk of the money goes to pay for the operation of the companies, and it is divided in various ways—capital assets, maintenance, caps on investment programmes and the other important aspects of delivering quality water. It would be wrong, however, to suggest that water bills will increase simply as a result of further environmental improvements. That is not the case. Although it is a part of the reason, it is entirely defensible.
52WH
The hon. Member for Guildford asked about extending the provisions of the water framework directive to smaller areas of water. We can do that, particularly under article 5, whereby we can in due course embrace smaller areas of water. I should like to see that done. The hon. Lady will understand that we want to concentrate on the important wetland areas—they are a priority. However, I do not disagree with her about smaller areas of still water. We can address that under the water framework directive.
The hon. Member for Vale of York (Miss McIntosh) mentioned—
Mr. Kidney:I seek clarification on article 5. In a briefing note, English Nature says that this year's Environment Agency review of what waters will be affected will be binding on the review of river basin management plans in 2009. The agency says that if 88 per cent. of our lakes are left out this year, they will be left out for good. That is not what the Minister is saying.
Mr. Morley:That is not quite my understanding. However, although my hon. Friend is not wrong, we cannot both be right. He is right about the process, but we are using European guidance on small wetlands and biodiversity. The question is how the catchments will protect wetlands both large and small. There is no reason why we cannot consider the matter generally under the article 5 guidance. I should like to go further in due course; the directive has a review period, which will give us the opportunity to consider doing so. I believe that we can deal with small water courses, but the most important thing is to address the river basin catchment plan, taking account of its effect on water in the entire area.
The hon. Member for Vale of York spoke of proportionality in the cost to farmers. I do not disagree; proportionality is the approach that we must take. We must try to be pragmatic and reasonable.
The hon. Lady knows that I am keen on imaginative flood schemes. We have come a long way in recent years in our approach to flood management. We now take a much more integrated and sustainable approach, although we are keen to have soft and hard options for flood defence, or sometimes a combination of the two, and that may involve flooding upland areas. However, I do not rule out compensation if a case can be made for it. Various models of compensation can be provided for landowners. However, landowners who farm on washlands that have traditionally flooded every year because that is the nature of the habitat, and landowners whose land is deliberately flooded as part of a flood management or alleviation scheme, are compensated differently. There is a difference in approach, but we have an open mind and are keen to discuss the matter.
The hon. Lady talked about costings and mentioned a figure of £9 billion. That was a very early figure. The impact assessment is being constantly refined, and we have come a long way from the figure that she gave. Current thinking is that the global figure will be about £450 million to £630 million per annum. Of that figure, the effect on agriculture is estimated as being between £30 million and £210 million. At the moment, these figures should be seen as indicative, not absolute, because I believe that we will refine them further.
Miss McIntosh:Has the Minister been able to discuss the revised figures with the NFU? Will he also report to

53WH
the House on how the pilot scheme in the Ribble valley is working? As he will know from the name, the vale of York does not have too much upland. Will it only be upland that will benefit from his schemes?
Mr. Morley:Not necessarily, although the hon. Lady may have been referring to some of the schemes mentioned in the price review, which relate to schemes that were proposed by United Utilities Water. They are upland management schemes, but they are fairly worthy, and I would like them to have the necessary financial backing, because they might add to our knowledge of water management and catchment management and make it more holistic. The benefits of the scheme have been costed at about £560 million a year, so the scheme should not be viewed simply as a cost that falls on consumers, companies or farmers. It is worth emphasising that the directive will provide a range of benefits.
The hon. Lady also mentioned the Ebro water scheme, with which I am familiar. I have followed the controversy surrounding it, and sympathise with her remarks. She will know that UK taxpayers are contributing to it, as regional funds are being used, but as a former MEP she will also know that the same applies when we receive regional funding through the contributions made by European taxpayers. Contributions should not be presented as a one-way process.
The hon. Lady may be interested to know that our latest information is that the incoming Spanish Government have announced that they do not propose to go ahead with the Ebro scheme, which is interesting. It is also encouraging, in a way, as Spain has several water resource management schemes in places, such as the Cota Doñana national park, which is an area that I know very well and have taken a close interest in for many years. I understand that the impetus behind the park came from a group of English people who were working with local Spanish people and were very involved in the area. There has therefore been a long involvement in this area of international importance.
Mr. Kidney:If the consultation with farmers on diffuse pollution is delayed beyond the end of March, the Minister's Department gave the Plymouth Western Morning News the wrong date. Will the Minister say whether farmers will be pleasantly surprised by the consultation, or will it be another shocking story of cost?
Mr. Morley:There will be a range of measures under the water framework directive. I cannot guarantee that there will not be costs, but costs are not the only way of dealing with diffuse pollution. It is very important that we consider all the options, some of which may be incentives. We should be imaginative, and take a holistic and integrated approach. That is certainly the view of the House, and I very much welcome the very thoughtful and detailed contributions that have been made today. They add to the Government's commitment to making the directive work effectively.

Wandsworth Council
3.30 pm
Tom Cox: With the Minister's agreement, I know that my hon. Friends the Member for Battersea (Martin Linton) and for Putney (Mr. Colman) hope to catch your eye in this debate, Mr. Deputy Speaker. We represent constituencies in Wandsworth, and local organisations in each of our areas will be seriously affected by the reduction of their funding proposed by Wandsworth council. We know Wandsworth council and its policies only too well. It has only one objective: to keep its council tax as low as possible. Although some may welcome that, it deeply harms long-established local organisations that provide a service that is much needed and respected by local people in the communities of Wandsworth. We are talking about one of the richest local authorities in the country. If it truly valued the roles of these organisations, it would be considering not reducing their funding, but increasing it.
Early-day motion 761, which has been signed by more than 50 hon. Members, clearly explains our concerns as MPs for the borough, as well as what the organisations and the people of Wandsworth are saying. In proposing the funding cuts, Wandsworth council is clearly threatening these organisations' very existence. They are organisations that many hon. Members will have in their constituencies and whose value they will know well—citizens advice bureaux, cancer support centres, the Wandsworth bereavement service, the Parkinson's disease service, day centres for the elderly and luncheon clubs. All such organisations are the daily lifeblood of a community. If such groups no longer provide services to local people, who will take over from them? Most certainly, it will not be Wandsworth council. I sought this debate to highlight in the House the deep concerns of local organisations and people in Wandsworth.
I pay the warmest tribute to the local Wandsworth newspapers: the Wandsworth Borough News and the Wandsworth Guardian. For many weeks, they have given these issues a great deal of coverage. Their reporters have not sat in their offices waiting for someone to phone them, but visited the local organisations to which I referred to meet and talk to the people who run them, and the people of Wandsworth who use their services and most certainly want them to continue. Local people's views and concerns have very clearly been reported in the local press. In the Wandsworth Guardian on 12 February, Petra Griffiths, the cancer resource centre director, said:
"This grant is essential as it enables us to function. It seems the council wants to keep their council tax low and have selected schemes like ours for grant cuts that they call low priority. We don't think we come within that category."
How right she is. Do any of us think that a cancer centre that supports and gives advice to patients and their families is a low priority?
Gladys Whigham, who runs the local branch of the Parkinson's Disease Society, said that the proposed cut would leave it with only nine months' funding for a welfare visitor who gives advice and helps its 50 members with benefit claims. She said:
"Unless we can find funding elsewhere—and everyone is looking for funding from elsewhere—we would be making our people pay for their care. That is not providing a service."

55WH
That lady's comments amount to a statement of a clear case. People who need care are often retired people who cannot work because of illness. It is not acceptable to my parliamentary colleagues or to me that such people should be told, "If you want care or services, pay for them." What angers me and many people in Wandsworth is that that is happening in one of the richest local authorities in the country.
Mo Smith runs a luncheon club that is also under threat. She says that it has
"members who have been isolated for up to a year at a time, who have had no real contact with people. We have given them a new lease of life since they have been here."
All Members of the House will fully understand and agree with what she says. Peter Cardy of Macmillan Cancer Relief sums up the matter clearly:
"Less than two years ago, the flagship Conservative council in Wandsworth was so flush with cash that it saw fit to cut its council tax by £50 for a typical band D household. By pure coincidence, this happened just before the London local elections. Apparently, it didn't need the money.
But people living with cancer do need it now. The pre-election savings Wandsworth found could have funded its grant to the excellent Wandsworth Cancer Resource centre alone more than 30-times over."
That is the key to the issue—saving money. It does not matter who will be affected if council tax can be kept low and large sums can be built up in the reserves for elections. My hon. Friend the Minister will be fully aware of the very substantial funding that the Government give to Wandsworth year by year. The debate will clearly show him how Wandsworth council uses some of that funding not as he, I, my colleagues or the people of Wandsworth would expect, but to build up its reserves.
As early-day motion 761 states, there is a very urgent need for discussions with Wandsworth council about why, as one of the richest boroughs in the country, it is cutting funding to key local organisations. I ask my hon. Friend the Minister urgently to demand such a meeting.
3.39 pm
Martin Linton: I thank my hon. Friend the Member for Tooting (Tom Cox) for securing the debate and providing me with the welcome chance to add a few words to his about the performance and practice of Wandsworth borough council. I appreciate that the Minister is not responsible for the council's policies. That is just as well, because if he were, I do not think that he would sleep easy in his bed. However, Wandsworth's recent actions must make him question its performance and practice. The authority was described only two years ago as excellent, but now, sadly, it is short-sighted and self-defeating.
The cutting of the grant to the cancer resource centre, which my hon. Friend mentioned, is particularly self-defeating, since it is recognised as a pioneering organisation in providing support and home visiting for cancer patients. I attended its 20th anniversary reception last year in the Commons, which was attended by the Minister, my hon. Friend the Member for Stevenage (Barbara Follett) and the chairman of the all-party cancer group, my hon. Friend the Member for Norwich, North (Dr. Gibson), who gave enthusiastic
56WH
tributes to the Wandsworth campaign as a prototype for local cancer groups. At a similar event attended by Wandsworth councillors, Conservatives lined up to say how much they admired the organisation, but they have now voted to withdraw its grant. The centre will have to close if the grant is withdrawn. It is used to pay for rent and key staff to run it, and there is no alternative way of paying the rent.
I am more concerned about the knock-on effect of withdrawing the grant, which will place a larger burden on the council's statutory responsibilities, costing it more than is saved by not making the grant. There will be more demands on social services and the national health service. The same applies to the cut in Wandsworth's bereavement service; it also does a fantastic job in the prevention field, which is reflected by many letters that I have received.
The council also tried to justify the closure of pensioners' luncheon clubs, saying that they are aimed at a younger and more able section of the older population. However, anyone who has visited the clubs will know that it is often such clubs that keep elderly people more active and mobile. I will read one paragraph from a letter that I received from a pensioner in my constituency:
"The luncheon club is a window into the outside world for many a pensioner who will, after leaving the club, spend the rest of the day and night without seeing or talking to another human being … Try to picture yourself alone in an empty room, hoping that somebody will call; then the phone rings and one of your mates from the luncheon club says, 'Don't forget, it's roast beef tomorrow. See you there'."
That is the kind of organisation that will have to close.
Even more destructive is the decision not to passport £529,000 to Wandsworth's schools, which follows a refusal last year not to passport £1.7 million to the schools budget. It is not as if Wandsworth is hard done by. The Government gave it £227 million this year and rely on the council to match the increase in education funding. However, the Government fund about 84 per cent. of Wandsworth's spending, which is one of the highest percentages in the country, while the council refuses to pay its share of the schools budget.
The refusal to passport might be understandable if Wandsworth had the highest education spending, but it has the lowest spending per secondary pupil in inner London in the current year, and it will do so again in future. Its refusal to match the Government's investment in education is appalling. It is taking away from the schoolchildren of Wandsworth £500,000 this year and £2.2 million in all, which it was given to invest in their education.
Wandsworth used the excuse that those cuts were necessary because the Government threatened to use their powers to cap the council tax if the council tried to increase the tax above a certain amount. That excuse is now seen as disingenuous and misleading, because there was never any likelihood that the Government would use their powers to cap Wandsworth and, in any case, it emerged three days later that Wandsworth had no intention of increasing council tax by anything like the amount that would have risked its being capped. Indeed, the council announced a zero increase in its spending. It is total bunk for Wandsworth to try to blame the Government. The cuts are entirely the responsibility of

57WH
the leadership of Wandsworth council, and they are not being carried out in any way at the behest of the Government.
More serious than that is the element of bad faith. On 1 January, Wandsworth promised in its indicative schools budget to passport the full amount to the schoolchildren of Wandsworth, with the proviso that it reserved the right to reconsider if material conditions changed. It then announced earlier this month that it would passport not the full amount, but only 93 per cent., and retain the remaining £500,000. However, it is not true that any material changes have occurred. The authority simply tried to mislead the Government into not using their powers under the Education Act 2002 and then changed its mind. That must have been in its mind the whole time, because it was the only party that knew what the council tax rise was likely to be.
I argue that the Government still have powers under the Education Act 2002 to force Wandsworth to passport the full amount. I know that it is after 14 January, but it is less than a fortnight since the announcement that the authority did not intend to passport the full amount. I urge my hon. Friend the Minister to speak to his colleagues in other Departments, and especially the Department for Education and Skills, to remind them that they still have the legal power to use their right.
The future of schoolchildren in the London borough of Wandsworth is at stake. I do not criticise the schools, but I do criticise the council, which is vested with responsibility for education, for withholding money that was paid by the Government to be spent on the children of Wandsworth. The council is retaining that money for political reasons. The Government are beholden to use their powers to ensure that the money finds the recipients for whom it is intended.
3.46 pm
Mr. Tony Colman: I, too, congratulate my hon. Friend the Member for Tooting (Tom Cox) on securing the debate, and I agree with every word that he and my hon. Friend the Member for Battersea (Martin Linton) said. I also welcome the Minister, who grew up in Battersea and went to school in Putney at Southfields school, Wandsworth, where he was head boy. The school was closed by the Conservatives and reopened under a Labour Government as St. Cecilia's, Wandsworth. I am pleased that my son is a pupil at that school.
Having started on that light note, I, too, wish to express my sadness at the loss of the regenerate.com luncheon club, headed by Mo Smith in Roehampton, and the Ashburton and Arndale luncheon clubs. Those clubs are a lifeline to many older people in the community and it is essential that Wandsworth continue to fund them.
My hon. Friends did not mention the cut of some £215,000 in the budget for the citizens advice bureaux, which led to the closure of the Putney CAB, a lifeline for my constituents who need legal advice. I support what has been said about those Wandsworth-wide groups, to which the constituents of all three hon. Members who have spoken in the debate have access. I am very proud of the cancer resource centre, which is a world centre, but that pride does not extend to Wandsworth council.
58WH
Funding for the bereavement service is going, and so is funding of the local Parkinson's disease service, which will be a real loss. The council has very large reserves that could fund the groups, and it could restore tomorrow what is being cut if the Minister spoke to the leader of the authority and told him what was going on.
I echo the concern expressed about the shortfall in the schools budget; it was £1 million last year and it is £1 million this year. I understood that Wandsworth was the one council in London that was not passporting its money, but this afternoon I received a letter from Sir Jeremy Beecham stating that Wandsworth is the one council in the UK that is refusing to passport the money. That is an extraordinary situation, and as Sir Jeremy said, it completely undermines the concept of local authorities having a role in education funding.
Like my hon. Friends, I have long queues at my surgery of people who are concerned about what is happening in Wandsworth council. They are worried about housing repairs and about the diminishing level of social housing. The council has made no attempt to deal with the housing shortfall in the area, and that is something that the Minister should become involved in.
Wandsworth is very proud of its rank as an excellent council and it is important to take that on board. It is interesting to read what it says on its website about the corporate assessment:
"Communication of the council's priorities is exemplary. Universally, and with whatever degree of support or concern, stakeholders and partners reported that one of the key strengths of the council is the sharp clarity of its priorities and what it will and will not do."
We are talking about what the council will not do. On "Focus", the assessment says:
"The council is not distracted by the need to address sudden unexpected crises."
The council has
"good intelligence, a clear picture of what matters, and a good early warning system for future issues."
Might I suggest that Wandsworth has not lived up to the billing that the Audit Commission gave? I would support "CPA—The Way Forward", in which the commission said:
"We are continuing to have discussions with central and local government stakeholders about the approach to be adopted in the case of 'excellent' councils whose services slip."
Services are slipping in Wandsworth.
The officers in Wandsworth are brilliant. They do all they can to keep services going. I asked one senior officer, who has since retired, why he remained at Wandsworth. He said, "If I left, the cuts would be deeper, the services would get worse." I look forward to seeing the Minister intervening where the services are slipping.
3.51 pm
(Phil Hope): I congratulate my hon. Friend the Member for Tooting (Tom Cox) on securing this debate. I also congratulate my hon. Friends the Members for Putney (Mr. Colman) and for Battersea (Martin Linton) on their forthright support for the passionate contribution that my hon. Friend the Member for Tooting made on behalf of his constituents,

59WH
the voluntary and community organisations in the borough and the schools whose the pupils and parents are so anxious about the problems that they face. I note that my hon. Friend's name is at the top of early-day motion 761, for which he has garnered wide support—
3.52 pm
Sitting suspended for a Division in the House.
4.5 pm
On resuming—
Phil Hope:Before I was interrupted, I was saying that my hon. Friend the Member for Tooting had his name at the head of an early-day motion that describes his very substantial concerns. I see the signatures of 53 other hon. Members who support him, and my hon. Friends the Members for Putney and for Battersea have supported him today in expressing concern about the decisions that Wandsworth council has taken about its council tax. Having grown up and gone to school in the area, as my hon. Friend the Member for Putney reminded us, I am sad that today's debate on Wandsworth should be about difficulties and negativity.
On 5 February, Parliament approved the local government settlement for 2004–05—the next financial year—which provides a generous grant increase of 5.5 per cent. and an overall increase of 7.3 per cent. Since taking office, the Government have increased funding by 30 per cent. in real terms. Indeed, my hon. Friend the Member for Tooting noted at the beginning of the debate the Government's support for local government. That contrasts rather starkly with the 7 per cent. real-terms cut made over the last four years under the Conservative Government. As a former county councillor who had to deal with huge budget cuts as a result, I know how much local government has benefited from the past seven years of Labour Government.
In the recent grant settlement, we reduced the ring-fenced grant from more than 13.3 per cent. to about 11 per cent. of the total grant. That is part of our overall commitment to reverse the trend on the ring-fencing of grants to local authorities.
We have always said that there is no need for excessive council tax rises. I shall come to the Wandsworth point in a second. We said that, given the generous settlement for next year, we expected to see council tax increases in low single figures, and we are encouraged by the evidence that many councils have listened to our exhortations to lower their council tax increases. A general point is that we have targeted capping powers and we will use them as necessary. We will decide on capping principles when we have received and examined the final detailed budgets from all councils. We will not cap for the sake of it, but we will cap to prevent taxpayers being subjected to excessive rises.
I shall now focus on the funding and council tax increases in Wandsworth. In the financial year 2002–03, Wandsworth received a 4 per cent. increase in funding. In 2003–04, there was a 3.5 per cent. increase, and in
60WH
2004–05, Wandsworth council will receive £227 million in grant—an increase of almost £9 million or 4.1 per cent.
Apart from the general grant funding, Wandsworth is receiving substantial further funding from the Government for 2004—05. That includes £12 million from the Department for Education and Skills, £5.7 million from the Department of Health and £400,000 of neighbourhood renewal funding. Wandsworth received £400,000 of e-government funding in 2002–03 and 2003–04, and it can expect further substantial support for e-government in 2004–05.
Now let us consider Wandsworth's council tax increases for the same period. In 2002–03—an election year—the borough had a council tax increase of minus 25 per cent. In 2003–04—after the election—it had an increase of 57 per cent., and for 2004–05, the increase is 0 per cent. I leave hon. Members to draw their own conclusions on Wandsworth's financial management, given that track record of council taxes, but I would like to draw my hon. Friends' attention to two contributions made to the debate from other quarters. They may have seen a letter sent by my hon. Friend the Minister for School Standards to the leader of Wandsworth borough council about school funding and passporting into the schools budget. My hon. Friend said:
"At our meeting earlier today you made a number of assertions about the possibility of budget-capping in 2004–05 and said that in the light of those concerns you are proposing no increase in the council tax rate and passporting at only 93.7 per cent."
"I have spoken to Nick Raynsford"—
my right hon. Friend the Minister for Local and Regional Government—
"and can give you that reassurance: as Nick Raynsford has made clear on a number of occasions, where Councils set a council tax increase in low single figures they will not be capped. I understand that Wandsworth could passport in full with a council tax increase of some 2 per cent. There is therefore no case for Wandsworth to break their promise to passport the full SFSS increase to schools, as the risk of capping does not exist. You said that you were committed to education and funding your schools. You have the opportunity to make that commitment a reality."
I read that out in full because it demonstrates that the Government are not happy with a council that decides not to passport 100 per cent. of a grant to schools.
My hon. Friend the Member for Battersea asked about the legal powers to enforce passporting. Regrettably, we can act only when the council considers the proposed schools budget inadequate, and we must act within 14 days of the 31 December deadline. We have passed that deadline and are therefore unable to use the powers to which he referred.
I hope that my response has made the Government's position clear. I also draw Members' attention to a letter sent by Sir Jeremy Beecham, who is chairman of the Local Government Association, to the council leader. He also sent a copy to the Government and the media. He said:
"I am bound to say that it is impossible to avoid the conclusion that political games are being played."
That is the case, and we are deeply concerned.
Budgetary decisions, including on the funding of voluntary bodies, are a matter for individual local authorities, because of the nature of the democratic structures in this country. Therefore, any cuts that

61WH
Wandsworth borough council makes in its grants to voluntary organisations in Wandsworth are a matter for that council. However, I point out that Wandsworth, like every other council, is accountable to its electorate for its spending decisions. I make that point—
Mr. Deputy Speaker: Order. We must now turn our attention to pigswill.

Pigswill
4.13 pm
Mr. Boris Johnson: On 24 May 2001, three months after the outbreak of foot and mouth, there entered into force the Animal By-Products (Amendment) (England) Order 2001. At the stroke of a bureaucrat's pen in the Department for Environment, Food and Rural Affairs, there perished in this country a practice that has taken place for thousands of years, ever since mankind domesticated animals—the feeding of food waste to pigs in the form of swill feed.
I know that Members on both sides of the House want to contribute in this short debate, so I do not propose to waste time by disputing the logic of that decision, although I believe that it was illogical to penalise innocent swill feeders for the irresponsible behaviour of one, who may or may not have been implicated in the outbreak of foot and mouth. I hold out no hope that the Minister will do the right thing and revoke the ban, but it is right to draw his attention to its adverse effects, which, like so many pieces of regulation, is adding to the costs of business and industry.
To take one example, Phyllis Court hotel in Henley must now pay an extra £1,000 a year to a licensed collector, whose responsibility is to remove wet waste that previously went to a pigswill feeder. Given that there is room for only three years' waste in our landfill sites, that is not the cleanest and greenest solution. It is estimated that the ban on swill feeding is generating an extra 1.7 million tonnes of waste per year, and that which does not fill up our landfill sites must be going down our drains, clogging up the sewers and attracting vermin.
Yet of all the people who are suffering the ill effects of the ban, the worst hit are the 62 previously licensed swill feeders. It is the injustice to them on which I shall concentrate. I will show that the Government have been triply culpable in their behaviour towards the swill feeders and therefore owe them compensation. There is the simple moral case: many swill feeders were urged by the Ministry of Agriculture, Fisheries and Food to buy very expensive equipment and a few months later that machinery, like their profession, was redundant.
The Minister for the Environment said last week in the House that he would not compensate the 62 swill feeders for this Government-imposed frustration of their Government-inspired expectations on the principle that the Government do not compensate for the introduction of health and safety measures. He cited in support of his actions the Tory Government's refusal to compensate those who de-boned the heads of animals when that practice was banned during the BSE crisis.
Hansard records how in 1996 the hon. Member for Scunthorpe (Mr. Morley), now the Minister for the Environment, clamoured for compensation for the head de-boners saying that the Government had a moral duty to compensate them. Someone has changed his tune. I expect the Under-Secretary of State for Environment, Food and Rural Affairs will invoke the prerogative of government to hypocrisy, to say one thing in opposition and to do another in government. He will brush aside the moral obligation that I believe is on him and his Government. I must warn him that they face a far more difficult legal challenge. Government negligence created

63WH
the conditions in which the foot and mouth outbreak became more likely and the innocent 62 swill feeders were made more likely to suffer for the Government's negligence.
It is now obvious that at the time of the outbreak the UK Government were in material breach of article 15, paragraph 3, of EU council directive 80/217/EEC, in that the UK's Animal By-Products Order 1999 allowed
"the consigning of swill from premises approved for the processing and feeding swill to other holdings".
Now the EU directive did not ban swill feeding—far from it. In fact the Minister may have inadvertently misled the House when he said that it had been banned across Europe, because it will continue in Germany, Italy and Austria until at least 2006. It might have continued here if Ministers had had more gumption and had stood up for the industry in this country.
The EU directive demanded a more stringent regime than that imposed in Britain, and it could be argued—I should warn the Minister that it will be argued when the matter comes to adjudication by the courts—that the UK Government's lax implementation of the directive created the conditions in which irresponsible and unhygienic swill feeding, of the kind we saw at Bobby Waugh's farm at Heddon-on-the-Wall, was more likely. That made the outbreak of foot and mouth more likely and the innocent swill feeders more likely to be punished for the crimes of the guilty few.
I need hardly remind the Minister, who I am sure is an expert in European law, that under the Francovich ruling the European Court of Justice laid down the principle of state liability for damage caused to individuals by breaches of community law, giving rise to an obligation on that state to make good such damage. Even if, as I hope will not be the case, the Minister does not accept that he and his Government have a moral duty or any legal obligation under Francovich principles, there is the simple moral point that the UK Government failed adequately to enforce their own regulations, never mind EU regulations.
A report by the EU Commission conducted from 1 to 5 October 2001 not only highlighted the legal discrepancies, but found that two former swill feeders were failing to comply with the Animal By-Products Order 1999. The report pointed out that
"insufficient hygiene standards have allowed for the contamination of clean areas by unclean waste".
In other words, it found that the UK Government were not sufficiently enforcing their own Animal By-Products Order, never mind implementing the EU directive correctly.
The clinching point in my case is that made by Mr. Jim Dring, the state veterinary officer responsible for reviewing Bobby Waugh's licence a mere 14 days before the index case of foot and mouth disease appeared on his farm. In a statement dated 5 Oct 2001, Mr. Dring accepted that had his inspection
"been more rigorous than it was, had the licence not been renewed, or renewed subject only to radical revision of Waugh's patently deficient feeding technique, then this awful 2001 foot and mouth epidemic would never have come about."
64WH
There could be no clearer admission by the emanations of the state of failure adequately to police their own regulations, nor could it be clearer that, had the state done its duty properly, there would have been no need to ban an innocent and ancient practice.
That is the moral and the legal case for treating those 62 swill feeders well, rather than just brushing them contemptuously aside—as the Minister has been tempted to do in the past—as people engaged in a sordid and mildly amusing activity, which is unlikely to command public support. They may be involved in a mucky business, but that is no reason to treat them like muck.
We must err on the side of caution in the agriculture sector, but my case is that the disaster took place precisely because the Government did not err on the side of caution in implementing the directive and enforcing the law; they must bear the responsibility for that.
I urge the Minister to consider how his Department's money will be best spent—in lodging lawyers in Luxembourg to fight a case in which the Government do not occupy the moral high ground, and which is, at best, legally uncertain, or in doing the right thing by the representatives of an ancient British industry who have been done out of a job through no fault of their own.
4.22 pm
Mr. George Howarth: I congratulate the hon. Member for Henley (Mr. Johnson) on securing a debate on an important subject. He may have over-egged his pudding in terms of the politics, but the basic point that he makes is correct.
Two potential issues are at stake that should be explored thoroughly and properly in the debate and by the Government, but that has not yet happened. The first issue is whether there has been a failure in policy or procedure by the Government. One incident triggered a ban that affected every swill feeder in the UK. The incident was serious, and it may be the case, although there is some dispute about it, that that incident triggered off the whole problem with foot and mouth disease. However, all swill feeders suffered the consequence of that one lapse. The decision was rushed through in a matter of days—there was no proper consultation, compensation or consideration of the effect that it would have on those swill feeders' livelihoods.
Mark Prescot and his brother were pig farmers in Melling in my constituency. They are not pig farmers any more. They had spent quite a lot of money on the correct equipment, but they were then prevented from engaging in that activity and were given no compensation for the money that they had invested in the equipment. I contend either that the Government were unfair or that they overreacted. If they overreacted, there is a case for maladministration. I have referred Mark Prescot's case to the Parliamentary Commissioner for Administration—several other hon. Members have referred similar cases to him—and he will determine whether there has been maladministration. I believe that there has, but will await his verdict.

65WH
However, even allowing for the fact that that investigation is under way, the policy was unfair. Comparisons can be made with deep-sea fishermen and mink farmers, all of whom were compensated for having to disengage from the industries in which they were involved. However, no serious consideration was given to the pig farmers. The most that Mark Prescot got was a helpful consultant who looked at his land and the activities in which he was engaged and concluded that he could not think of anything else that he could do except put in a fishing pond. That was helpful, although Mark Prescot realistically decided that charging people to use a fishing pond might not be the most economic use of his land. That is the only assistance that he received.
Among all the problems in my constituency—yours, Mr. Deputy Speaker, is situated next door to mine and suffers from similar difficulties—it may seem strange for me, as an urban MP, to be taking up this one. However, the fact is that my constituent has lost his livelihood and has not been compensated in any way. That is almost unprecedented. I cannot remember any other industry that has, in effect, been destroyed without any consideration of compensating those involved for the loss of their livelihood. It is quite possibly a case of maladministration—that remains to be seen—but it is most certainly a strong case of unfairness.
4.26 pm
Ann Winterton: I congratulate my hon. Friend the Member for Henley (Mr. Johnson) on introducing this important debate. I was involved with the issue in 2001, when I received representations from Mrs. Lynda Davies of the Association of Swill Users. As a result, I met Mrs. Davies and the Rev. Keith Ineson of the Salvation Army's agricultural chaplaincy in Cheshire to discuss the severe difficulties experienced by swill users. I pay tribute to Keith Ineson for his valuable work during the foot and mouth epidemic, and I am sorry to hear that he has been made redundant: he is the last agricultural chaplain in the United Kingdom.
In November 2001, Keith Ineson reported to me that 41 farmers in Cheshire, most of whom were tenants and had no alternative business or accommodation, were in dire straits, placing many families under great stress. Mr. Ineson reported to me that one elderly farming couple were then living on an income of just £100 a month. I remain concerned that the manner in which the ban on pigswill was implemented by DEFRA paid insufficient attention to the practicalities faced by the majority of farmers using pigswill, in addition to the detrimental way in which the ban impacted on pig farmers' livelihoods.
The decision to introduce a ban was based on the evidence derived from a single case of pigswill use, which was then considered to have been the source of the outbreak of foot and mouth disease, rather than on the usual methods of collection, storage, processing and distribution used generally by pig farmers in the United Kingdom. The feeding of catering waste to pigs was subject to a host of stringent rules and regulations, to which farmers working under licence firmly adhered, and Ministry of Agriculture, Fisheries and Food inspectors visited farms every three months. The failure was due to the lack of inspection, and not to the pigswill users.
66WH
There were particularly difficult circumstances pertaining to animal husbandry in the United Kingdom at that time, and DEFRA instituted an extremely brief period of consultation in which interested parties could participate. Even with meaningful consultation, the Department's stringent proposals were not amended as a result of the limited number of representations received during that short period. As a direct result of the ban, a considerable number of small businesses, each feeding an average of 1,500 pigs, were lost. These farmers were given a maximum of 10 days' notification in which to finish feeding pigs completely or to adapt their plants to take alternative feeding methods. Both options were totally unreasonable and unworkable, given the time factor involved.
I do not want to take any more time, except to make the point that in Europe. pigswill continues in Austria, Germany and Italy, those countries having obtained a derogation until 2006. They are more fortunate than the 62 swill users who, at the stroke of a bureaucrat's pen, were put out of business in this country. If justice is to be done, they should be compensated.
4.30 pm
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs: I congratulate the hon. Member for Henley (Mr. Johnson) on securing this debate.
It may be helpful if I put the debate on pigswill into its historical context. Legislation controlling the feeding of waste food to animals is not new. In the 1940s, there were a number of swill-related orders, including the Diseases of Animals (Boiling of Animal Foodstuffs) Order 1947 and the Foot and Mouth Disease (Disinfection of Road Vehicles) Order 1941, which was introduced during the war. Since then, the controls have been progressively strengthened in recognition of the risks of feeding food waste to animals and with the aim of trying to avoid outbreaks of serious diseases such as foot and mouth and classical swine fever. Significant among those were the orders of 1954, 1973, 1987 and 1999.
Until recently, swill feeding was considered a useful way to dispose of waste food, provided that the legislative requirements were strictly adhered to. What made us review that practice? In 2001 we had the worst outbreak of foot and mouth disease in living memory. Following the outbreak, the risks from swill feeding became much greater. Before the outbreak, the main risk was from the feeding of imported infected meat products. Afterwards, there was a much greater risk of infectivity from domestically produced meat because of the amount of virus in circulation. That is why we introduced the ban when we did, in order to reduce the risk of foot and mouth spreading. After the introduction of the UK ban, the European Commission proposed an EU-wide ban on swill feeding of waste food to livestock. We supported the continuation of that ban, which now applies across the Community, with Germany and Austria, and not Italy, granted a four-year transitional phase-out period.
Perhaps the hon. Member for Henley opposed the ban in the first place, but he suggested that after foot and mouth we should have reintroduced swill feeding, but

67WH
with stricter controls. We were not prepared to do so, and the Anderson inquiry into foot and mouth recommended that we should not do so.
Mrs. Angela Browning: Since the Minister has mentioned the Anderson inquiry, perhaps he can deal with the one point that I wished to make. My hon. Friend the Member for Henley (Mr. Johnson) has brought the issue forward and we have all had sight of Mr. Dring's full report. However, that report was not available to the Anderson inquiry. The Secretary of State has admitted that, although the report was available to Ministers, they chose not to make it available to Anderson. It is clear to anyone who has read the report that it is pertinent to foot and mouth. In the light of the new evidence now in the public domain, will the Minister reconvene the Anderson committee to see what lessons should be learned from that important document?
Mr. Bradshaw:No, I shall not do that, but I shall address the genuine concern that the hon. Lady raises.
The origin for the 2001 outbreak is considered to have been at Burnside farm, Heddon-on-the-Wall, Northumberland, which was licensed to feed processed waste food under the Animal By-Products Order 1999. Burnside farm was permitted to obtain processed waste food from approved premises. Following the outbreak, evidence was found of unprocessed waste food having been fed to pigs at Burnside farm. That is the most likely source of infection of the pigs.
As hon. Members have said, in recent days there has been highly misleading and mischievous press coverage based on selective quoting of a personal statement made by the local MAFF vet, Jim Dring, in autumn 2001 about his contacts with the Waughs' farm in the run-up to the outbreak. I have decided today to publish Mr. Dring's personal testimony in full, so that people can read it and make up their own minds. A copy has been placed in the Library and on the DEFRA website. Far from showing any incompetence on the part of Mr. Dring or the then MAFF part, I believe that the document shows a dedicated and conscientious vet dealing with some difficult customers who went out of their way to conceal dangerous and illegal activity on their farm. To suggest, as some have done, that Mr. Dring was responsible for the foot and mouth outbreak is like saying that a police officer who misses a piece of evidence at the scene of a crime is responsible for that crime rather than the criminal himself.
Ann Winterton:Will the Minister give way?
Mr. Bradshaw:No, I shall not do so any more.
There has also been some confusion about the EU directive that governed the feeding of pigswill at the time, which the hon. Member for Henley mentioned. The directive permitted the treatment of swill in specialised establishments under official control and provided for such swill to be consigned from those establishments to approved premises. It states:
"Member States may authorize the treatment of swill in specialized establishments equipped for the purpose, on which there are no animals and which are under official control. In this
68WH
case, by way of derogation from paragraph 2, the swill may, after heat-treatment, also be used for the feeding of pigs other than fattening pigs, provided that its distribution and use are controlled so as to avoid any risk of the swine fever virus spreading".
In my Department's view, our legislation fully implemented the provisions of the directive. Consigning properly processed swill from approved premises to approved swill feeders was, at that time, a legitimate activity, and it was permitted under the directive.
Mr. George Howarth:Does my hon. Friend accept that my constituent Mark Prescot, for example, complied fully with those regulations and yet was stopped from using swill feed and therefore lost his livelihood? Does that not deserve compensation?
Mr. Bradshaw:That was very unfortunate for my hon. Friend's constituent, but I will come to the issue of compensation in a short while.
As I said, the introduction of the Animal By-Products Order 1999 provided more stringent controls than ever before. However, experience demonstrated that no matter how stringent the legislation, there will be those who will do not follow the rules. In the case of foot and mouth disease, which cost the country approximately £8 billion, that had catastrophic consequences. There is only one conclusion to be drawn: the Government made the right decision in banning the feeding of swill to pigs.
I turn now to the issue of compensation, which was raised by my hon. Friend the Member for Knowsley, North and Sefton, East (Mr. Howarth). I fully appreciate that the introduction of the ban affected a group of producers that combined two roles—waste collector and pig farmer. In the past, Governments have not compensated farmers for changes in feed material available for their livestock. The ban did not prevent those affected from keeping pigs, although I accept that some farmers may have faced additional costs to adapt their feeding systems.
Pig producers, including former swill feeders, may continue to feed their livestock vegetable or bread waste or liquid feed that neither contains the banned products nor has originated from a kitchen or other premises where meat has been handled. Equally, the business of waste food collection could continue provided that no livestock are kept on the premises to which the waste was taken. In those circumstances, the waste would have to be disposed of by the collector at an approved disposal site.
My hon. Friend the Member for Knowsley, North and Sefton, East made comparisons with other sectors—the fishing and mink farming industries. The ban on mink farming prevented producers from farming mink, whereas the ban on swill feeding did not prevent the keeping of pigs. As I stated, it is not Government policy to compensate farmers for changes in the feed material available for their livestock and it would not be appropriate to start that now. The announcement made by my hon. Friend the Minister for the Environment in April 2001 about a £22.5 million package of aid to the fishing industry was not about compensation; it was an encouragement to adopt more sustainable fishing practices and to rationalise the industry through decommissioning.
The Government did, however, assist swill feeders in other ways. Free business advice from professional consultants was made available to all registered swill

69WH
users and processors. Our records show that there were 93 of these, and I am aware that the reaction of those that took part was mixed, but it was a major effort to provide practical assistance.
Other opportunities were available, such as the rural enterprise scheme to help diversification, details of which have been made available to those campaigning on behalf of the swill feeders. I consider that the Government have not only gone to considerable lengths to listen to the concerns of former swill feeders, but done what they can to make available practical assistance to help overcome the difficulties that the ban may have caused individual businesses.
Mr. Boris Johnson:Will the Minister specify exactly what practical help the Government have given to those swill feeders and why it cannot be extended to compensation for the machinery in which they have invested considerable sums?
Mr. Bradshaw:As I said, such compensation would set a precedent. The practical help is what I have just outlined: free business advice and help to encourage the swill feeders to diversify and to stay in business.
The hon. Member for Congleton (Ann Winterton) made a point about the consultation. The reason why the consultation period was brief was that we were in the middle of a foot and mouth outbreak. There were a good number of responses to the consultation. The overwhelming majority of organisations, including the National Farmers Union, the National Pig Association, the National Consumer Council and the Meat and Livestock Commission, supported the Government's decision to ban feeding pigswill to pigs.
Ann Winterton:They replied as they did because they were unaware that the Department for Environment,
70WH
Food and Rural Affairs, or MAFF as it was, had failed to inspect the premises in question. MAFF, not the pigswill user, was the true culprit.
Mr. Bradshaw:I do not accept that at all. When the hon. Lady reads Jim Dring's report in full, she will reach the same conclusion that I reached, which is that the culprit was a farmer—
Ann Wintertonrose—
Mr. Bradshaw:I shall not give way. The culprit was a farmer who was indulging in a dangerous and illegal activity, and Mr. Dring made every effort to do his job properly when he made his January visit. No one has suggested that he was negligent or that he missed important evidence. It is very easy for hon. Members to say in hindsight that the activity was obvious. It was not. I suggest that the hon. Lady reads the verbatim report made when Mr. Dring visited the farm in January.
The hon. Member for Henley also expressed concern that the ban has increased the amount of waste going to landfill. That needs to be put into context. When the ban was introduced, the number of pigs fed on swill amounted to approximately 1.5 per cent. of the national herd, which is very few pigs. The amount of waste food being used to feed pigs was not great compared with the amounts of waste food going to landfill from other sources. However, the Government take their recycling targets seriously and are aware that the amount of biodegradable waste sent to landfill must be reduced, not increased. DEFRA strongly supports the option of composting and the biogas treatment of catering wastes. Those plants must be approved under the animal by-products regulation. Given that that legislation was introduced only recently, we have been doing well in dealing with applications for approval. To date, 10 plants are being validated and are now treating catering waste.
Question put and agreed to.
Adjourned accordingly at eighteen minutes to Five o'clock.