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The Commission has proposed the introduction of stabilisers for two further products--apples and cauliflowers. That is sensible because both those commodities have been subject to substantial withdrawals in recent years. The extension of the stabiliser mechanism to them would mean that the vast proportion of expenditure in that sector would be covered by stabilisers. The Commission also proposes to extend the application of the stabiliser for some citrus fruits sent for processing and to extend processing aids to small citrus fruits. The first step is logical as it would subject both the main supportive disposal mechanisms-- withdrawal and processing--to a common mechanism. However, we have doubts as to whether the extension of processing aids to small citrus fruit is justified and I shall be pressing the Commission to justify that proposal.

The third aspect of the price package relates to the agrimonetary proposals. Those are set against the background of the overall objective, to which both Council and Commission are committed, of eliminating real monetary gaps and therefore monetary compensatory amounts by 1992. As the House is aware, that is an objective for which the United Kingdom Government have strongly pressed. I believe that it is an essential aspect in achieving a single market in agriculture in 1992.

Devaluations or revaluations are proposed in this package for all member states with monetary gaps as a further stage towards that objective. For the United Kingdom, the devaluations already secured--the most recent of which took effect from 1 January 1989--taken with the strengthening of sterling, mean that our MCAs are now 24 to 29 points smaller than they were two years ago and are zero for beef, eggs, poultry and pigmeat. The Commission now proposes that one third of our monetary gaps, as they were at 1 January this year, should be removed in the price fixing. However, in spite of the agreement that I secured last year, it looks as though the Commission is proposing a faster dismantlement for those member states whose currencies are in the narrow band of the exchange rate mechanism. I have made it absolutely clear that I oppose any discrimination between ERM and non-ERM members. We shall take a firm view on the agrimonetary proposals and on the precise details, as is usual, in the later stages of the negotiations and in the light of developments in the sterling exchange rate.

Mr. Robin Maxwell-Hyslop (Tiverton) : Will my right hon. Friend clear up one point? When he says 1992, does he mean in effect 1993, that is 31 December 1992 or 1 January 1993? I think that many people misunderstand that terminology.

Mr. MacGregor : We are looking at three stages. I would hope that that means the marketing years 1990, 1991 and 1992. We would be seeking to get the changes completed by January 1992.

With regard to the price package, the Commission has estimated that the proposals would reduce average common support prices by 0.2 per cent. in the European Community as a whole. However, after taking account of the proposed green rate changes, support prices in national currencies would rise on average by 0.6 per cent. For the Community as a whole, that would represent a cut in support--again, I stress that we are talking about support prices and not market prices--of 3 per cent. in real terms. In the United Kingdom, support prices would rise on

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average by 1.6 per cent. taking account of the proposed green rate devaluations. That could add about £50 million to aggregate farming incomes in a full year. The proposals would have no measurable impact on the retail food price index or the RPI.

With regard to other aspects of the documents before us today, I wish first to consider the sheepmeat regime. The reforms of the sheepmeat regime are important proposals which would affect the United Kingdom particularly because we are the biggest producer, exporter and consumer of lamb in Europe. The Commission's proposals aim to create a single market in sheepmeat, without charges or restrictions, by removing all national and regional variations and concentrating support through a common ewe premium payable in instalments and subject to headage limits. The premium would be calculated on the basis of a single EC-wide average market price, but with three regional coefficients reflecting production differences. That would be achieved by 1993 with a transitional period during which existing variations would be phased out. It would

Dame Elaine Kellett-Bowman (Lancaster) : Will my right hon. Friend give way?

Mr. MacGregor : I will give way when I have finished this sentence.

It would include the ending of the separate British stabiliser.

Dame Elaine Kellett-Bowman : That is exactly what I wanted to know. I thank my right hon. Friend.

Mr. MacGregor : I am glad to have been able, for once, to answer my hon. Friend briefly and completely satisfactorily.

The Commission's proposals have been extensively criticised by British sheep interests, most particularly because they involve the abolition of the sheep variable premium and also because of the headage limit which, as I have made clear, we oppose.

Mr. John Home Robertson (East Lothian) : That is what the Minister said about beef.

Mr. MacGregor : Yes, but we negotiated a substantial improvement in the headage limit on beef.

I have always stressed in Brussels the advantages of the variable premium schemes. The Commission's proposal on the variable premium is, however, just one of a number of proposals to abolish features of the present regime which give specific benefits to particular parts of the Community. For example, France would no longer enjoy special protection against imports from third countries, or the protection which clawback gives against imports from Great Britain. The Mediterranean member states would lose the concessions which give them a bonus on their ewe premium rates derived from the rate payable in France. In the comparatively brief discussions that we have had in the Council so far, therefore, the proposals have been criticised by most member states concerned from a wide variety of different points of view.

It is difficult to predict the outcome of these discussions on the future for the regime or when that outcome may be achieved, but I shall seek to ensure that there is a fair and affordable means of support to our sheep sector which ensures competitive terms to enable the United Kingdom to capitalise on its natural advantages as a sheep producer.

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Mr. Ron Davies (Caerphilly) : Will the Minister confirm that, in effect, he has just announced the end of the variable sheep premium in Britain? Can he tell us when the last premiums under the present scheme will be paid?

Mr. MacGregor : No, I would not confirm that. The discussions are still at a very early stage and it is not clear in which direction they will go. There are a wide variety of different points of view about the Commission's proposals and I would expect pretty intensive negotiations. It would not be right to say that the end of the sheepmeat regime would be the consequence of what I have said, nor is it clear at this stage what conclusion the negotiations will produce. I am determined to ensure an outcome to the negotiations which produces the best position for our highly competitive sheepmeat sector.

Mr. Andrew Hunter (Basingstoke) : Will my right hon. Friend confirm that he will be seeking an increase on the present 18.1 million ceiling for breeding ewes? Is he looking for a larger capacity in Great Britain?

Mr. MacGregor : That relates to the separate stabiliser. We must try to make distinctions. While we have not reached agreement about the future of the sheepmeat regime, there is a separate stabiliser for the United Kingdom. It is not clear whether that will continue, but it was not possible to negotiate the same stabiliser for the United Kingdom as for everyone else because we have a different regime through the variable premium. In the current circumstances, it would not be possible to argue for an increase in that ceiling because the sheepmeat sector has become very expensive. However, we do not know what outcome will be achieved in the wider sheepmeat regime negotiations--in a unified regime there would be no separate British stabiliser--so it would be premature at this stage to say in precisely which direction we are likely to go.

With regard to the price level for sheepmeat and the position of the stabiliser this year, I agree with the Commission's view that a support price increase could not be justified. One way or another, we must tackle the level of support quickly, given that the cost of the sheepmeat regime is expected to double between 1987 and 1989 despite the operation of the stabiliser. The cost of the regime must also be of major concern in the forthcoming review, which is the key both to controlling Community expenditure on sheepmeat and to achieving future support arrangements which allow free and fair competition among producers in different parts of the Community.

In parallel with the sheepmeat regime proposals, the Commission negotiated with third country suppliers changes to the existing voluntary restraint agreements. The revised import arrangements for New Zealand sheepmeat are the first to come to the Council. That is an area in which a number of interests must be balanced. Community sheepmeat producers who had to accept the restraints of the stabiliser arrangements, and who face a major reform of the regime, understandably expect third country suppliers to share the burden, and I accept that. On the other hand, Community consumers do not want tighter restrictions on the range of products available to them. Moreover--this point is important in the context of the sheepmeat situation --New Zealand is entirely free to decide her own view of any constraint on access to the Community market in respect of sheep. New Zealand has

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established rights under GATT which the Community must respect, particularly at a time when the impetus is to open up markets. In the Government's view, the Commission's proposal strikes the right balance and, as with the terms of today's motion, takes due account of the interests both of producers and of consumers. New Zealand has offered real concessions in terms of lower maximum quantities, specific limits on chilled sendings, and a price surveillance system. In return, the Community would make a further tariff concession and end the sensitive market area provisions. For me, that last point is very important.

In the cereal sector, the proposal for a cereals incorporation aid originated at the European Council last February, when the Commission was asked to consider ways of increasing the use of cereals in animal feedstuffs. The Commission made a proposal that was not accepted by the Council and which is strongly criticised--not least by ourselves. However, it was agreed that the Council, in considering the idea further, should be guided by a number of criteria--in particular, that any incorporation scheme must lead to increased use of cereals for animal feed, be controllable, and conform with the rules of GATT. In attempting to meet those guidelines, the Commission produced the present revised proposal.

I do not think that the Commission has succeeded in meeting the agreed criteria. Moreover, the scheme now proposed is very open to fraudulent abuse--an aspect to which I have already referred--and would create new distortions within our own animal feed industry and between member states. I know many people in this country who are concerned about that. For all those reasons, we are firmly opposed to the proposal. I am glad to report that when the Council met last December, the majority of other member states also had reservations.

The proposal concerning aid for small cereal producers follows an undertaking by the Council, reached as part of the 1988-89 farm price settlement, to arrive at a Community definition of a small cereal producer. In the event, the Council found it impossible to do so, but agreed instead that the existing rules, which permit member states to determine their own definition, can be maintained.

On other issues to which the documents before the House relate, there is considerable interest in encouraging farmers to switch to lower-intensity farming, which people feel can create real benefits for our landscape and environment as well as helping to reduce the output of unwanted crops. The extensification regulation--to use the ghastly jargon adopted by the Community--agreed by the Council last year, at the same time as the set- aside scheme, is an important step. It provides for member states to give financial incentives to farmers who undertake to reduce their output of certain surplus products by at least 20 per cent. That principle is easy enough to applaud--the difficulty is in finding acceptable and sensible ways of applying it in practice. As I have frequently said, such schemes must be properly run if public money is not to be wasted. Again, we do not want to open the door to fraud.

The administrative mechanisms necessary for extensifi-cation will need to be carefully worked out, especially in the livestock sector. That is why I was pleased when the Agriculture Council agreed this month that member states may apply extensification on a pilot basis until the end of 1990. That will provide an opportunity to try out schemes on a limited basis initially, to resolve some of the difficulties, and to see whether we can make such schemes

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workable and effective. We are now studying ideas for a pilot extensification scheme for beef, to be introduced later this year. In the arable sector, the obligation to apply schemes begins next year. Ideas include the possibility of encouraging a switch to organic farming or to spring-sown cereals and rapeseed. We are looking carefully into the practicalities.

In June 1987, the Council decided on an aid scheme to encourage farmers to convert to the production of non-surplus products. That scheme should act as a further complement to the stabiliser mechanisms in helping to restore balance to sectors in over-supply. Rules for the conversion scheme proposed by the Commission are now under discussion in Brussels. We must accept that scope for conversion is limited. It is important to ensure that conversion incentives do not create new surpluses or lead to distortion of the market for those producers who have already converted to alternative crops. To try to avoid those problems, the Commission's proposal lays down restrictive criteria for the selection of products, and member states have discretion as to exactly which products they wish to aid.

Mr. Ron Davies : Before the Minister leaves the subject of extensification schemes, I remind him of an undertaking that he gave the House some months ago, when he acknowledged that it would be appropriate to include conservation headlands in extensification schemes. In the scheme that he proposes to place before the House later this year, will there be any provision for conservation headlands?

Mr. MacGregor : That is obviously a possibility we must consider. The hon. Gentleman will know that we have a pilot project on conservation headlands in one of the environmentally sensitive areas, which will also help us in our considerations. I have also agreed to extend strips in the set-aside scheme, which to some extent is on the same lines. We are experimenting, but at this stage we cannot say exactly what we shall be able to include in the extensification scheme for the cereal sector. However, there will be plenty of opportunity to discuss it.

Mr. Roger Knapman (Stroud) : Will my right hon. Friend confirm that, if extensification is the name of the game, nitrogen control will be one of the options available to him?

Mr. MacGregor : As my hon. Friend knows, the nitrate issue and the possibility of protection zones will be addressed in due course, as the Water Bill progresses through this House. We shall be consulting widely on how to implement any proposals relating to them. However, although they share some of the same elements, that is not what I mean by extensification. My hon. Friend refers to extensification as the name of the game. Like many other things, it has a part to play in enabling farmers to adjust, and in achieving a better balance between intensive farming--now that we have surpluses and the capacity to produce so much more from the same amount of land--on the one hand, and environmental and countryside needs on the other. I do not suggest that any one approach is the name of the game--all have a part to play and we must not exaggerate the extent to which they can do so or suggest that any of them is a panacea for the problems that I have described.

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Miss Emma Nicholson (Torridge and Devon, West) : Does my right hon. Friend agree that as the extensification budget is only 3 per cent. of the common agricultural policy budget we cannot yet place any vast reliance on it as a source of alternative farming income, although it is something that we must monitor carefully as it develops in the years ahead?

Mr. MacGregor : That is one reason why I did not want to suggest that extensification represented a panacea or a major way through the problems. There are other reasons for coming to the same cautious conclusion at this stage. Certainly we are considering the various possibilities.

I wish to refer to two other issues. The Commission's report on the pigmeat market, commissioned by the Council, set out the probable causes of the crisis in the European Community pigmeat market in 1987 and 1988, the measures taken by the Commission, and the outlook for 1989. The report concluded, in my opinion rightly, that over-supply was the main cause of the depression in prices, but that existing market management measures were effective in alleviating--and I emphasise the word "alleviating"--the situation.

As the House knows, the pigmeat regime is a "light" one, with very limited market support possibilities. During 1987, two were used. Export refunds were significanly increased on several occasions, and exports from the Community rose from 360,000 tonnes in 1986 to 440, 000 tonnes in 1987. In both 1987 and 1988 aids to private storage played a small part in restoring confidence and stabilising prices at a time when the market was particularly weak. However, I have some doubt as to the real benefits of private storage aids--which are used very little in the United Kingdom--and I feel that such measures needs to be used very sparingly.

In the report the Commission also expresses a willingness to consider further policy alternatives to bring greater stability to this sector. I see no practical alternatives. As we know, it is very easy to expand pigmeat production quickly, so any scheme to provide more price stability would quickly lead to another production surplus and to escalating costs. Intervention arrangements have been tried in the past--before we joined the Community--but had to be quickly abandoned, and the reintroduction of such arrangements would lead only to greater instability in the long term. We should therefore continue to allow the market to be regulated by the free play of supply and demand and the judicious use of the support measures already available.

Finally, I must mention the two documents containing the Commission's most recent annual communications giving information to the Council on how milk coresponsibility level funds are spent. As the House knows, the Government have always disliked and opposed the levy as a means of tackling the costs of the dairy regime--I apply this equally to the cereal sector--and I continue to take that view. The problem for us, however, is that the milk regime is still the most extensive and expensive in the CAP--at 4,700 million ecus in 1989, despite all the quota reforms. We can only consider reducing or eliminating the levy as those costs come down, which means, that we must achieve offsetting savings in other directions. I believe that a contribution can be made by the achievement of better value for money in the management of this market. In

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particular, I am pressing for the further reduction of subsidies for internal disposal of skim milk powder for animal feed. The Commission's reports show that levy funds are used for two main purposes--to offset expenditure on dairy subsidies, and to expand the market for milk and milk products. The most recent Commission communication provides for an increase in the allocation of levy spending for promotional and market expansion measures from 31 to 51 million ecus, which is in tune with the views of both the United Kingdom industry and the Government. At the same time it is inevitable that a significant proportion of levy receipts will continue to be used to offset the heavy expenditure on subsidies in the dairy sector, and the document makes that clear.

Inevitably I have had to deal with many detailed matters in the large number of documents before us, but I hope that I have given an indication of the Government's position on all of them.

What is interesting about the Labour party's position is that, while Labour Members are quick to say that reforms are

necessary--indeed, on a number of occasions the hon. Member for South Shields has given full support in the House to the position adopted by the Government on the CAP reform proposals, for which I am grateful--they somehow give the impression that such reforms can be achieved painlessly and without structural adjustment. Having been quick to call for reform, they are equally quick to complain about the consequences.That is the attitude of a party which never expects to have to make difficult decisions in Government because it does not expect to be in Government. That no doubt explains why there has not been a single constructive, thought-through proposal on agricultural issues from the Labour party--indeed, any of the parties opposite--and why we shall no doubt hear none today.

I hope that I have dealt with all the key issues contained in the formidable number of documents before the House. To pull the threads together, one of the main themes is that CAP reform--this can never be stressed too much--is in the farmers' interests as much as everyone else's. Without it, chaos loomed. That reform is now in place. Its pace is being maintained and must continue to be maintained, especially in the light of the GATT Uruguay negotiations. That is in the interests not only of consumers and taxpayers but of producers if we are to provide a stable basis for British and European agriculture in the 1990s.

While we are taking steps to make the CAP more market-oriented, we also need to prevent the money being spent on it, which is still a very large sum, from being directed into the wrong hands through fraud. We also need to pursue various policies to ease the process of change for farmers, to encourage less intensive farming and to promote policies to encourage and help farmers to create a new balance between agricultural production and the continued development of an attractive countryside for the benefit of all of us. It is my next objective to see real improvements in that regard, and I hope that hon. Members on both sides of the House will endorse our endeavours.

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4.25 pm

Dr. David Clark (South Shields) : The aim of the debate is to give the Minister some guidance about the feeling on both sides of the House before he continues discussions with his European colleagues in the Council of Ministers meetings next week and, probably, a couple of weeks thereafter.

Perhaps I could begin by agreeing with the Minister. I join him in applauding the endeavours of the Spanish presidency to reach an agreement by April, and I am heartened that he is going to do all that he can to bring that about. It is important that farmers, who need to plan ahead, know with some certainty what price they can expect in the coming 12 months. I also support the Government in their effort to ensure that surpluses which have been removed at great expense are not allowed to build up again. Storage has been one of the disproportionate costs of the CAP, and we must not waste the hard-earned finance needed to get these balances down.

I also support the Minister's efforts to ensure that whatever package we end up with from the price fixing takes us some way towards an accord with the current GATT negotiations. In the long term we must try to evolve a system of agricultural support within Europe that can be compatible with the wishes of other parts of the world. Finally, I strongly support the Government in their assurance--I think that this is what the Minister was saying--that there would be no discrimination in the agrimonetary system which would worsen the position of United Kingdom farmers.

When we had this more or less annual debate about 10 months ago--price fixing last year was very late, adding to the uncertainty of farmers throughout the Community--the general mood, probably on both sides of the House, was also one of uncertainty. There was a feeling that agriculture did not know where it was going. I little dreamed, however, that in 10 months the system would have deteriorated so badly. It now seems that the Government have singled out agriculture for treatment that they have already given to the coal and steel industries, and indeed to the rest of the economy. The time will come when the nation will pay dearly for the Government's follies in respect of those other industries. If they succeed in their apparent policy of attrition against agriculture, the effect on the nation may be catastrophic indeed.

Sir Geoffrey Johnson Smith (Wealden) : We all recognise that agriculture faces considerable difficulties at present, nowhere more than in my constituency, but surely the hon. Gentleman would agree that it is not good enough to say that the Government are to mete out the same fate that befell the coal and steel industries. I suppose that the hon. Gentleman implies by that that the Government allowed those industries to go to rack and ruin : that is the impression that he has sought to create.

Dr. Clark indicated assent.

Sir Geoffrey Johnson Smith : I see that the hon. Gentleman is nodding. I, on the other hand, believe that there is a lesson to be learned from those two industries. I agree that the short-term, drastic measures taken in those instances affected people personally and harshly, but those industries are now much strengthened and can look

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forward to a prosperous and profitable future. That, surely, is the Government's aim, and that is why my right hon. Friend the Minister at the end of his speech asked for positive proposals from the Opposition.

Dr. Clark : The hon. Gentleman has partly understood the case, but he has got it wrong. I happen to agree that agriculture is an essential industry for this country, and I accept that coal is as well.

Another example which is close to my heart and in which I have a deep constituency interest is shipbuilding. As an island and a maritime nation we need shipping and a shipbuilding industry. However, under this Government both shipping and shipbuilding have been treated in such a way that they no longer exist, which means that if and when the revival in the economy takes place, we shall not have a viable shipbuilding industry.

If we allow agriculture to be run down to the same extent, there will come a time when we shall be short of food and unable to supply our own needs.

Miss Emma Nicholson : With his interest in shipbuilding, the hon. Gentleman will know that Appledore Langham shipbuilders in my constituency has, in effect, been relaunched and is on the crest of a wave with orders pouring in as a result of the Government's privatisation policy. I have the greatest sympathy for Ferguson-Ailsa, which has not yet achieved that splendid result. However, the hon. Gentleman's rhetoric and deep feeling on this matter must not blind him to the good things that are happening and which point to the way ahead.

Dr. Clark : Obviously, I am pleased if there is a resurgence in the shipbuilding industry in west Devon. However, I find it sad that the town of Sunderland, which is in the constituency next to mine, and which was the largest shipbuilding town in the world, no longer builds ships, despite having the most modern shipyard in Europe and despite it having received orders from overseas. As I have said, if we allow the same thing to happen to agriculture, we shall deeply rue the day.

We all want a pleasant countryside--nobody wants that more than I do--but it must be a living countryside. The people who work and live there, expecially the farmers, produce something that is absolutely essential to us--food. The British press, oriented as it is to London and the metropolitan areas, often forgets that food does not come from the supermarket shelves and that it must be produced ; and that water does not come from funny green bottles, but from our reservoirs and deep wells. We must accept that the supply of such commodities must be planned.

We should remind ourselves that, building on the success of the Labour Government's Agriculture Act 1947, we developed a system of agriculture that has meant that food shortages have ceased to figure on our political agenda, which is very welcome. Indeed, my hon. Friend the Member for East Lothian (Mr. Home Robertson), who is a farmer, constantly reminds me that the success of our agriculture has been brought about by a partnership between state and farmer, which, as he constantly reminds me, is one of the best examples, along with the National Health Service, of Socialism in practice, with everyone benefiting, in this case both consumer and farmer.

Mr. Home Robertson : I just wish the farmers would vote for us.

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Dr. Clark : Well, they may do. Anyway, at least one does--in East Lothian.

It is no secret that the Prime Minister regards farmers with disdain, as the last remnants of the welfare state. She fails to understand the delicate balance between shortage and surplus. Tragically, the Minister of Agriculture, Fisheries and Food, who should know better, seems to be going down the Prime Minister's route, as he made plain in his speech at the beginning of January at the Oxford farming conference.

Agriculture and food production is too important to be left to the whim of the free market. That is why it is essential that we have some partnership between the state and individual farmers. I have given that gloomy view because we have just received a report from the industry showing a drop of 25 per cent. in aggregate farm income last year, which was the worst year since the war. On top of that, farmers are now suffering badly from the Chancellor's policy of high interest rates.

Mr. Allan Stewart (Sherwood) indicated dissent.

Dr Clark : I see that the hon. Member for Sherwood (Mr. Stewart) disagrees, but the farmers to whom I speak are worried sick about the high levels of interest that they must pay--

Mr. Stewart : And about the weather.

Dr. Clark : I accept that the weather is important, but it is not responsible for the high interest rates that the farmers are having to pay on their capital investment and machinery. Whether the weather is up or down, the high interest rates are the result of the Chancellor's policies and they are making life hard for the farmers. As the Minister acknowledged in his annual report, to make matters worse some sectors of the industry have done better, while others have done worse. Overall, although some have done perhaps slightly better this year, they still have bleak, if not perilous, prospects. I am thinking especially of the upland farmers, who tend some of the most attractive, remote and environmentally sensitive parts of the country. The Minister's announcement this afternoon about the sheepmeat regime rang of defeatism in my ears. I hope that he will fight much harder than he gave the impression of doing this afternoon.

Hon. Members of all parties can agree that since the war agriculture's productivity has been second to none. If other sectors of industry had been as successful as agriculture, we should not have found ourselves in the economic mess that we have repeatedly been in. Morever, if the Minister pursues the policies that he outlined today, we believe that he will damage that productivity and that the success that has been built up over the years will not continue. That will mean that we shall be short of food and heavily dependent on other countries to supply our basic food, which is not a sensible policy. The irony is that the consumer has been paying an unduly high price for food. According to the report of the National Consumer Council, consumers have been paying roughly £14 per week too much. I know that the Minister accepts my point, but he does not seem to appreciate that most of that money does not go to farmers. Only about £1 in every £3 of the money spent on agriculture goes to farmers under the present common agricultural policy. I know that the Minister will probably agree with that figure. The other two thirds is spent on intervention

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storage, export restitution and--I know that the Minister acknowledges this--fraud. It is important that we do not allow stocks in intervention to build up, because the main expenditure is on intervention and the consequent export restitutions.

The Minister knows that the current CAP is madness. I know that he has tinkered with it and we applaud his efforts to try to improve the position, but the basic point, which I have made previously at the Dispatch Box, is that the Prime Minister is culpable for her failure to recognise that point in Brussels last year--

Mr. MacGregor rose--

Dr. Clark : I shall give way when I have finished this point. On that occasion, when the EEC was literally on the verge of bankruptcy, the Prime Minister had the unique opportunity to force a full-scale reform of the CAP, which, tragically, she fluffed. If she had taken the Minister with her, I do not believe that she would have made that mistake, but since then we have been trying to make the best of a bad job. However, I accept that the Minister has tried to improve things and I happily give way to him.

Mr. MacGregor : The hon. Gentleman has pointed out that much of the current cost of the CAP goes on export refunds, which enable Community products to be sold at world market prices, but he has given the impression that none of that money goes to the farmers. He knows that that policy exists to find a market somewhere for those products because we do not require all the products in the Community.

I am not clear what the hon. Gentleman is suggesting for CAP reform on that issue. Is he suggesting that we should dispense with export refunds altogether? Perhaps he will be more specific. The hon. Gentleman referred to the report of the National Consumer Council ; he knows that a large part of the calculation of the cost to families is based on the assumption that, if we imported food at current world prices, food would be cheaper. Is the hon. Gentleman saying that we should seek to bring Community prices down to the level of world prices and that those are the prices that farmers should obtain? Will he make his views clear on both points?

Dr. Clark : It is interesting that the Minister linked those two points because by doing so he showed the weakness of the CAP--and he knows it. The answer is simple : the right hon. Gentleman is right to say that if there were no CAP, world prices would be higher--nothing like as high as those of the CAP but, I freely acknowledge, higher than they are now. They are depressed because the market has been flooded with many commodities, as the EC has dumped exports of many surplus products. The Minister knows that, because we subsidise those export restitutions. We as taxpayers, are paying double. That is the key fallacy of the CAP and I am most grateful to the Minister for allowing me the opportunity to expose the basic weakness of the agricultural support system.

Mr. MacGregor : What alternative can the hon. Gentleman suggest to the lines that the Government are pursuing?

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Dr. Clark : The basic point of the Labour party has been that a fundamental reform of the CAP is essential. We have supported the Minister, and the point that I was making before he intervened was that we support him in not allowing too much food to build up in the intervention stores. That is why we support the limited storage period that is discussed in the price fixing : it makes sense. If there is no food in the intervention stores, equally there is no surplus food for export restitutions and money is therefore saved. On the subject of money, I shall take up another point which the Minister mentioned several times--fraud. I think he is getting the message that the British people are beginning to tumble to the extent of fraud in the EC and, in particular, in the CAP.

The Minister knows that this fraud involves not paper clips or pens but billions of pounds each year. We do not know the precise sum, but people are agreed that something inside the wide perameter of 10 per cent. and 20 per cent. of the total EC budget is lost on fraud. Both figures are disgraceful. That is a staggering amount and something must be done about it.

I concede that the British Government and the Minister have raised the issue, but they have tended to dismiss it by suggesting that most of the fraud takes place in other countries. The general view in Britain was that it was people across the water, without good systems, who were always on the fiddle, and the finger was usually pointed at the poor Italians. At least, the British media saw it that way. However, I was interested to read an article in the French newspaper, 10 days ago which nailed that lie. It pointed out that Libe ration, while it was correct that the Italians had the worst record of fraud, with 131 cases in 1987, Britain, to our shame, came second with 93 cases, and France third with 75. I thought that it was staggering that we should be in second position. Furthermore--

Miss Emma Nicholson : At the risk of upsetting diplomatic relations, does the hon. Gentleman agree that it is probable that every case of fraud in Britain was found out and the people involved were brought to justice? Is it possible that that may not be the case for the league leader that he has just mentioned, and that the gap between us may be vast?

Dr. Clark : I listened carefully to the hon. Lady and the charming way in which she phrased her intervention. Fraudsters, whether Italian, British or French, are all equally guilty of fraud. We have not done ourselves justice by trying to hide that. Some of the tales are absolutely incredible.

When one raises this point with the Italians they say, "Yes, we accept that we are worse than Britain, but the British are behind so much of the fraud in Italy." The Italians cite the example of Charles Kingsland. This is a remarkable case in which a former mayor of a small town, Bagheria and owner of an IDA company, was head of a syndicate. Ships were loaded with water- filled containers and barrels and left Sicily for London, from where they were supposed to sail for South America. Two other phoney companies were created in London by the English accomplice, Charles Kingsland, who is currently on the run from police. The matter came to light in 1981, when a barrel that was supposed to contain tomato concentrate burst open while it was being loaded near Palermo and the fraud squad finally became involved. This amazing

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situation would be farcical and funny if similar cases did not occur on such a wide scale. We have further evidence that fraud exists on a wide scale in this country.

On 25 January I raised the issue with the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food the hon. Member for Mid-Norfolk (Mr. Ryder). I did not receive a meaningful reply. In his wind-up speech will the Minister confirm that the Government's serious fraud squad office is close to completing inquiries into two significant cases of agricultural fraud in Britain involving EC money amounting to many millions of pounds? Have there been any developments in the six weeks since I first raised the matter? What is the Minister's response to the comment made by Mr. John Wood, the director of the Government's serious fraud squad, who said : "Our own domestic experience is that money obtained by fraud is being used to finance traffic in narcotics and is also being used to finance trade in arms and terrorism."

That is disturbing, and millions of people will be shocked to think that fraud occurs on such a scale in this country under the guise of support for agriculture.

Mr. D. N. Campbell-Savours (Workington) : Is my hon. Friend aware of the incidence of fraud among defence contractors? Public Accounts Committee reports have established that very often prosecutions are not brought. Is not the important question whether prosecutions are brought? If we tabled questions on all the cases identified by my hon. Friend which put us second in the European league, could the Minister tell us in which ones prosecutions were brought ; or did the Director of Public Prosecutions once again handle the matter in a sloppy way?

Dr. Clark : My hon. Friend is knowledgeable on such matters and an assiduous member of the Public Accounts Committee. He knows as well as I that the Government are loud on words about tackling crime but soft on action. That is obvious in relation to prosecutions for contamination of rivers or of companies selling contaminated feed for the poultry flocks in this country. The Government give no answers and there are no prosecutions. The same is true of fraud in the CAP. I find it damning to think that the average family in the United Kingdom pays between £1.50 and £2 a week because of fraud, some of which appears to go as direct donations to organisations such as the Mafia or the IRA. That is reprehensible and I deplore the fact that the Government do not appear to act on it. Time and time again, they try to play the matter down.

As the report of the National Audit Office of February 1988 made quite clear, concerted action is now needed. The Government have dragged their feet for far too long. Lord Cockfield, a former Commissioner, told the other place on 14 February, that he had put forward the proposal, as a Commissioner, to curb fraud in 1986 and the British Government had vetoed it.

Mr. Campbell-Savours : Tell us why the Government did that.

Dr. Clark : The Minister will not tell us, so I shall turn to more detailed aspects of his price-fixing arrangements. Before doing so, I must point out that in a recent parliamentary answer, the Minister was embarrassed to have to tell me that he had met the National Farmers Union 37 times in the past 12 months and the National Consumer Council only twice. When pressed, he said that

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he met the farmers because the matter concerned them more, but as food prices will be greatly affected by the negotiations in Brussels he should tell us how often he has discussed these issues with consumer associations in the past month, and what their general advice was. There are two sides to this equation--producers and consumers. What have the Government been doing to advance the viewpoint of the consumers?

I mentioned the success of British agriculture since the war. Much of that success has been due to the industry's ability to adapt research and development to improving production, and such research and development here has won a high reputation overseas. How do the Government expect us to continue to reap the rewards of such work when they intend to decimate what is left of the R and D efforts in the United Kingdom? The Minister has already done infinite harm to those efforts ; 2,000 jobs have already been lost from the Agricultural and Food Research Council in the the past four years. Scores of projects vital to food safety and agriculture have been lost.

The latest Government proposals to wield the axe even more fiercely are resisted in all quarters. The Farmers Weekly article on research and development makes depressing reading, with its revelation that another 2,000 scientists in ADAS and AFRC are likely to lose their jobs. It is also clear that alternative funds from the agricultural industry are unlikely to be forthcoming. This will result in an unacceptable decline in Britain's agricultural research and development, which will be detrimental to farmers and consumers and to the long-term interests of a successful industry.

When I raised the problem of bovine spongiform encephalopathy on a point of order, Mr. Speaker said that the Minister might deal with it in the course of his speech today, so it was sad to hear the Minister duck the issue. That has shown a lack of courtesy to the House--

Mr. Ron Davies : Uncharacteristic of him.

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