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that it is wisely and sensibly used. I do not think that I shall be alone in being confused about the extent of fraud in the European Community. Over the past few weeks in the press I have seen figures ranging from £2 billion through to £8 billion a year and I should like to know whether the Government have any real idea of how extensive the fraud has been, whether in this country or other European countries.

We are anxious to help farmers, but we should be aware that there is a danger, as a result of the EEC system, of giving help to people who may not be full-time farmers. Are the Government urging their European colleagues to come up with a more satisfactory definition of "farmer"? Who is a farmer and who is a full-time farmer, and how should we define this? Should it be on the basis of what proportion of a person's income comes from farming activities? I should be interested to hear the Government's comments on that.

Mr. Maxwell-Hyslop : I hope that the hon. Lady is not implying that if, as a result of falling farm incomes, some small farmers are forced to take part-time jobs as well, they should lose financial support from the Government.

Ms. Quin : Indeed not. The force of my argument is that we should be helping those who need it and I am sure that the category described by the hon. Gentleman includes people who are deserving of EEC support. Many of us are worried that the recipients of EEC agricultural funds may already be wealthy people in their own right, and it is not clear how much of their income is derived from farming and how much from other sources. If we want to get value for money in EEC agriculture, we need to consider that. I accept many of the points made about the dramatically deteriorating incomes of many poorer farmers in some of the least well-off areas in Britain and the rest of the Community.

What we have been discussing has an effect on countries outside the EEC. I strongly disagree with the points made by the hon. Member for Lancaster (Dame E. Kellett-Bowman), about New Zealand. New Zealand suffered many problems as a result of the fact that, in the 1970s, the EEC countries were thoughtlessly expanding production and causing enormous surpluses. New Zealand is a friendly, independent country. It arrives at its Government policies on the basis of democratic votes, so we should not take exception to those policies being pursued by a friendly country, and try to deny it access to the EEC market as a result.

We should think strongly about the effects of these policies on the Third world. In all our negotiations with the EEC, we should be looking not just at the effects on us but at the effects on countries outside, which are often a great deal poorer than we are. In short, we want a fairer system of agriculture within the EEC that helps those who need it, without harming the interests of friendly and poor countries who are outside the EEC organisation. It will be a huge task to achieve this, but it is one on which we should determinedly set our sights.

6.19 pm

Mr. Robin Maxwell-Hyslop (Tiverton) : I noticed an apparent divergence in concern about public health which would be bizarre if its effects were not so harmful. Children often have to inhale tobacco smoke because they are in a home where one or other parents smokes. The damage

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that they can sustain from that is now known. Hundreds of thousands of people die each year from smoking, and a huge number die each year as a result of passive smoking. No one is proposing to make the sale of tobacco illegal, yet we hear rumours that green top milk is to be made an illegal substance to sell. It seems that unpasteurised cream may also become illegal to sell, as may cheese made from unpasteurised milk.

Mr. Home-Robertson : I am provoked to intervene by the hon. Gentleman's argument about cigarettes. I introduced a private Member's Bill in 1986, which is now the Protection of Children (Tobacco) Act 1986. That measure is supposed to ban the sale of all forms of tobacco from youngsters under the age of 16 years, but it is a dead letter because the Government cannot be bothered to enforce it. Appropriate legislation exists, but it is not being enforced very well, if indeed it is enforced at all.

Mr. Maxwell-Hyslop : Perhaps the hon. Gentleman failed to listen to what I was saying. I was drawing attention to the bizarre disjunction between allowing tobacco to be sold when passive smokers--those who have not elected to smoke--will probably suffer irreversible damage to their health, but suggesting that those who exercise an informed judgment to buy green top milk or unpasteurised cream should be denied the right to do so. To promote the second course in an alleged attempt to protect the consuming public while offering no protection to those who have not exercised any choice to inhale tobacco is such a bizarre disjunction of priorities that no Government could sanely embrace it.

I could have wished that my right hon. Friend the Minister for Agriculture, Fisheries and Food, whose recovery from illness I greatly welcome, had so arranged his programme as to have been present throughout one of our rare debates on agriculture. I do not commend his decision not to do so. Ministers control their own programmes, and I do not commend the decision of my right hon. Friend to be absent from the House since the speech of the hon. Member for South Shields (Dr. Clark) from the Opposition Front Bench. I am extremely worried about a number of issues that I wish to share with the House. One is the fact that the health inspection of imported food depends on inspectors paid by the local authority at the port of entry when it should be a national inspection service and financed nationally. How can we expect ratepayers in an area where there is a port to provide adequate percentage of examinations for the benefit of the public throughout the rest of the country? That is another disjunction. I have complained about that arrangement in earlier debates.

We read in the reputable press yesterday of huge quantities of French flood -damaged food entering the United Kingdom, being relabelled and then being sold to an unsuspecting British public. It seems that the local inspectors were unaware of that. I do not blame them for that because it is not their fault that they are too thin on the ground, but it demonstrates more strongly than anything else the need for the food inspection service at the port of entry to be nationally financed and for central Government to be responsible for manning levels. It is consumers in the entire country, not just those who live within the local authority area around the port of entry, who are protected or not protected from heinously dangerous imports by too light a degree of inspection.

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What of the state veterinary service? It is of such a size now that it can be overwhelmed if it has to deal with more than one problem at a time. Those of us who represent constituencies with an agriculture interest know that the system of control of bovine tuberculosis is slipping back because the state veterinary service is having to focus its attention on bovine spongiform encephalopathy instead. That is not to underrate the importance of focusing veterinary effort on BSE. It is already known that scrapie can jump from sheep to human beings. Anyone who read the letters in the British Medical Journal last year from veterinary officers or doctors--I think it was doctors--who had been in practice in tropical Africa, where exactly that had happened, would be aware of that fact. If that can happen, we have every reason to believe that it will happen at some stage from infected cattle, unless there is a 100 per cent. grant to withdraw such cattle from actual or potential consumption at the first suspicion of symptoms.

I learned as recently as 48 hours ago from an experienced veterinary surgeon that there is as yet no clinical way of anticipating behavioural symptoms as the sole means of detecting the disease in living animals. The presence of the disease is confirmed only after the beasts' heads have been cut off and their brains examined by qualified personnel. If these animals are to be removed at the first opportunity so as to avoid any possibility of their entering the food chain, only a 100 per cent. grant will suffice. We all know that. Ministers must know that. After all, they are not fools. If we are serious about preventing avoidable disease of an extremely serious sort, that is the action that the Government must take. It is within their power to take it.

I wish to compare the fate of the sheep variable premium with that of the beef variable premium because I believe that there is an important lesson to be learned from the comparison. When milk quotas were introduced, the then Minister of Agriculture, Fisheries and Food justified southern Ireland having an increased quota when Britain's quota was cut on the ground that we were allowed to keep the beef variable premium. Having spent that coin, the beef variable premium was negotiated away while Southern Ireland kept its extra milk quota. We did not catch up with southern Ireland, having lost what the then Minister pleaded as the justification for Britain's quota being reduced while Southern Ireland's was increased.

What will happen if the sheep variable premium is negotiated away? We agreed only to a "standard quantity", which for some reason is now described as a "stabiliser". when I first knew it in this place, it was called a "standard quantity", and that term is much more descriptive of what it is. I hope that the House will forgive me if I continue to call it a standard quantity, although I do not do that because my memory has gone from scrapie. If we are to lose sheep variable premium, which I trust we shall not, there must be no question whatever of our still having a standard quantity or stabiliser, the only justification for which was the fact that we had a sheep variable premium when other EEC countries did not. If one goes, so must the other. There must be no compromise whatever about that.

I do not know what is in the report that is now the subject of the press conference for which my right hon. Friend the Minister left the House some considerable time

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ago. We shall know that later. I can only say that this debate is the poorer for none of us knowing what is in that report before the debate started. That was avoidable, and it should have been avoided. I do not like to see the Government manage affairs in this way when it is clearly avoidable.

Lastly, I refer to the alleged lack of change in agricultural support in certain spheres. It is obvious to those in the industry that if it is the same in pounds sterling as it was last year, it must be worth 7 per cent. less. That is not no change--it is 7 per cent. less. If, as my right hon. Friend the Minister indicated, the effect of the relationship with the green pound and the other things that he has negotiated is a plus of 1.6 per cent.--I have no reason to doubt that figure--according to my calculation that leaves a net drop in expendable income of 5.4 per cent. if the amount is the same in terms of sterling as it was a year ago. Let us face the reality of that and not pretend that incomes are unchanged. We do not claim to have increased old age pensions when they are changed only by the cost of living index--we say that they have been valorised by the change in the cost of living index--so let us not pretend that paying the same rate in sterling as last year means that the recipients will have the same purchasing power, because they will not.

The industry is going through a period of dramatic financial contraction, the effect of which is not and cannot be confined to it. It is to be seen in falling employment in the sectors which supply agricultural machinery, not just agricultural chemicals. It is to be seen in the fall in incomes of sub-post offices and shops in rural areas, which need the income from local agriculture to sustain their own livelihoods. No part of rural Britain is isolated from income levels in agriculture. We should remember that fact as we debate agricultural problems in a House which I note remains as wholly bereft of Scottish and Welsh nationalists now as it was when the opening Front Bench speeches were made.

6.33 pm

Mr. Martyn Jones (Clwyd, South-West) : It is pure coincidence that the Minister's report to this House of more cuts, which will undoubtedly reduce the income of hill farmers, has been delayed until today. I am sure that it has nothing to do with the large number of such farmers in Richmond.

Many hill farmers in my area, and many more in Wales, are already struggling, like the rest of industry, with the Government's huge increases in interest rates and inflation. Specifically, the reduction in payment for the production of beef and sheepmeat will have disastrous consequences for hill and marginal farmers who have no alternative to livestock farming. The exclusion of heifer beef from subsidy will mean a loss of £50 a head for my producers. That will be especially detrimental for small producers who finish store beef for market. The exclusion of heifer beef is almost certainly due to the fact that the rest of Europe does not produce the same quality of heifer beef.

As I have said, Wales is traditionally a livestock-producing area. It is extremely likely that, if we get rid of our lamb variable premium under pressure from the EEC and substitute a headage payment on ewes, restricted perhaps to 500 head on lowland and 1,000 on upland

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areas, that would be woefully inadequate and would lead to upland areas becoming yet another industrial wasteland--and we have seen many of those in Wales.

Most of the sheep production subsidy comes to the United Kingdom, but I must stress that evening out the subsidy by 1992 or 1993 on citrus production, wine, olive oil and tobacco will hardly have a beneficial effect on the incomes of United Kingdom farmers. My farmers noted with great displeasure the fact that the Government's figures show that agricultural incomes in the United Kingdom were down 25 per cent. and they were extremely disappointed with the Minister when he stated at the recent Oxford conference that only 50 per cent. of farmers rely on their agricultural income for their main income. The fact that many wealthy people buy country property with a few acres on which they graze the odd sheep more as a lawn mower or a hobby than as a living, makes a nonsense of the figures that the Government are using to decide policy.

Farmers acknowledge the need for the reduction of basic foods within the intervention system, but some stock must be retained and a great many farmers have expressed concern that the Government's current thinking seems to them to tend towards the suggestion that agricultural production can be changed overnight. Farmers are painfully aware, however, that there must be careful planning and consideration. A calf canot be produced at a moment's notice, nor can a lamb or a crop of wheat.

Farmers have always had a responsible attitude to food production and they have always responded to the demands of successive Governments. However, they are concerned that this Government's policy is undermining the industry. Their policy towards bovine spongiform encephalopathy is just one example. I agree with the hon. Member for Tiverton (Mr. Maxwell-Hyslop), and I am sure that all my farmers would also agree, that the only answer is for 100 per cent. grants to be paid on the value of the cow, whatever its state. We must stem the tide of 100 new cases of BSE a week. My farmers feel completely let down by the Government, and I am sure that consumers feel the same.

6.38 pm

Mr. Alan Amos (Hexham) : I am glad that we are having this debate this afternoon because I am becoming a little worried about the farmer- bashing which seems to be so fashionable in certain quarters. We owe our farmers a great debt. They are the most efficient farmers in Europe and they have never let us down in providing the nation with good and wholesome food. I for one do not pay too much attention to the nut-cutlet-eating, seaweed-juice-drinking, Guardian readers about these matters. Farmers actively embrace the latest technology and employ good working practices. They make a large contribution to our balance of payments and food prices have risen less quickly than the RPI in general. Apart from anything else, farmers are kind and generous people.

I notice that the hon. Member for South Shields (Dr. Clark) is in the Chamber. I am glad about that, because he is one of my constituents and he can confirm what I am saying. We have an obligation to help the farming community during this period of major transition.

The Government have generously given millions of pounds to manufacturing industry to help it adapt to the new technological era of the 1990s. Unlike those of all

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other sectors, incomes in agriculture are falling. Hill farmers in my constituency are in difficulties, and I am afraid that such farmers do not have alternative forms of employment. If they cannot be helped to stay in farming, livelihoods and whole communities will be destroyed.

Mr. Ron Davies : The same can be said of the steel industry.

Mr. Amos : The steel industry has done very well because of the Government's generous support. I hope that farming will end up as stable and as prosperous as the steel industry.

Agriculture is of strategic importance, and before any right hon. or hon. Member refers to the level of expenditure on the common agricultural policy, I must point out that a little less than two thirds of that expenditure goes not to farmers but towards the costs of storage, disposal, export subsidies, and so on. Farmers themselves do not receive that money direct. There is need for reform. It is a pity to see one of our great industries in a state of uncertainty. Farmers can handle the vagaries of the weather but find it difficult to deal with the inability of 12 sovereign European countries, with varying and frequent elections, to agree on overdue but essential reform. Some years ago, I was involved in agriculture, and it seems to me that milk quotas could have been avoided if our EEC partners had faced up to the problems of dairy surpluses earlier. Instead, they ignored the impending crisis and were forced into taking dramatic action--with all the attendant injustices of implementing and operating the quota system. Paradoxically, I suspect that most dairy farmers are happy to retain milk quotas for the certainty and stability that they now offer.

Matters cannot and will not remain as they are, for the reason that, quite properly, limits have been imposed on the Community budget and on the CAP's proportion of it, together with the existence of real and potential market imbalances in most products due to technological progress--which is something that we cannot and should not try to halt.

Unfortunately, an area that needs a clear sense of direction and stability- -agriculture--happens to be the only policy area that is controlled by the EEC, which is too often an institute known for inertia and pettifogging regulations. In the case of an industry that, in a very real sense, is a victim of its own success, politicians owe it a prosperous, albeit, generally, a non-expanding future. As manufacturing has almost undergone the fundamental transformation of restructuring, so too is agriculture about to embark on a similar exercise. That is not surprising. Farming is a cyclical business, as is the nature of economic development.

Northumberland, in which lies my constituency, has seen a dramatic change. Agricultural employment there between 1976 and 1986 fell by 14 per cent. Over the same period, the number of cattle fell by 22 per cent. Agriculture is extremely important in a county where three quarters of the land area is given over to its use. The county is vulnerable, because nearly 40 per cent. of that land is rough grazing. There is more land in that category in Northumberland than in any other in England or Wales. Northumberland has about 13 per cent. of the nation's total rough grazing.

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In looking for solutions, careful consideration must be given to the structure of the particular sector of farming involved. In Northumberland, 60 per cent. of its farm area is rented--nearly half the farmers in my constituency are tenant farmers. It is gratifying to see that about one third of applications for the set-aside scheme have been submitted by tenant farmers.

The underlying reason for agriculture's present situation appears to be lack of demand. In manufacturing, poor competitiveness forced British consumers to look to foreign imports. In agriculture, the demand for basic foods in a high income economy has reached a plateau. Even the United Kingdom's remarkable status as a major food exporter is fragile and is propped up by the very subsidies that have helped bankrupt the Community budget. If the Soviet Union succeeds with its programme of reforms, the situation will only worsen as that market dries up.

The solution does not lie in finding more money, and allowing matters to carry on as they are. What is the point of increasing the CAP budget to allow farmers to produce more food that can neither be eaten nor exported? Nor should such a thing be allowed in respect of cars, shipbuilding, steel or coal. The solution lies in allowing agricultural restructuring, rather than pretend that such restructuring is not needed.

If we can make the Common Market truly a common market, and allow market forces to operate more freely, countries will specialise in those products in which they have a comparative advantage. That would be in the United Kingdom's best interests, for our efficiency and structural advantages would allow us to dominate in the production of cereals, sheep, milk, beef, pigs and poultry. I have that confidence in British agriculture. A freer market should be seen as a golden opportunity for British agriculture to prosper, not as a danger to be avoided at all costs.

The second aspect of a long-term strategy must be diversification, both in agriculture itself and in the rural economy generally. Any industry that wants to survive into the 1990s must be flexible and able to meet rapidly changing demands. That involves retraining, the acquisition of new skills, and--more importantly--a willingness to do so. The Agricultural Training Board is already doing much good work, and I congratulate the Government on introducing grants for diversification into tourism, craft industries, and so on, and on the establishment of the farm woodlands scheme. Few people can be given any guarantee about the permanency of their occupations. Right hon. and hon. Members do not expect such a guarantee--though my right hon. and hon. Friends may, more so than others.

Such adjustments can be painful, or they can be relatively easy if there is Government assistance. The ALURE strategy is one of the most significant statements in post-war agricultural policy.

Mr. Campbell-Savours : On a point of order, Madam Deputy Speaker. Can you tell the House whether you have been informed by the Leader of the House whether there is to be a statement on the arrest of four former and existing Marconi employees and on the further inquiries into that company that are to take place? Will there be a statement on that matter tonight or tomorrow?

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Madam Deputy Speaker (Miss Betty Boothroyd) : Mr. Speaker has received no such request from any Minister.

Mr. Amos : The ALURE strategy is one of the most significant statements in post-war agricultural policy. While accepting that agriculture will remain the dominant user of land in rural areas, it makes a brave and radical attempt to face the future.

Another part of the strategy must be acceptance both by central and local Government of the need to preserve the livelihood of hill sheep farmers and cattle farmers--especially the smaller among them. We are talking about the future of whole rural communities. It must be realised that any decline of agriculture in areas such as Northumberland will mean the decline of whole economies. If the major employer contracts, so will the need for schools, shops and transport. That must elicit a national commitment, as any EEC policy to aid small farmers, while costing the British taxpayers a lot of money, will not, because of the European definition of a small farmer, help our own farmers. That is a case of agricultural and social policy becoming undistinguishable.

Real and vital assistance can be given through a fair and reasonable level of HLCAs for breeding cattle and ewes and through the grants policy on LFAs generally, together with paying the maximum allowable nationally funded element of the suckler cow premium under the new EEC arrangements for beef. Hill farmers in my constituency would certainly prefer the proposed special premium to be paid to the breeder.

A fourth aspect is encouraging farmers to extend their traditional individualism into taking even greater responsibility for their own industry. They have a duty to find better ways of marketing their produce, to identify market trends, an to become market leaders in supplying more quickly the demands of a rapidly changing market. They must grow for the market, meeting and anticipating change in the market place and in consumer preference.

If there is scepticism, as there is, about the more extreme claims of the health food lobby, where are the counter-arguments? The farmers must make them. "Food from Britain" should be viewed not with suspicion but as an invaluable ally in diversification into growth areas. Why do the French, for example, have such a hold on our market for high value-added dairy products? Equally, it is not unreasonable for a partnership to develop between the private and the public sectors in research and development. If, however, the agricultural community is to be asked to make larger contributions, it is only right that it should be given more say in how the resources are used.

When there is change--which, in principle, farmers accept must come about : they are realists--let us provide enough time for that change to be carried out properly : for instance, charges for ADAS services and research and development. I recently visited some of my horticulture farmers. They accepted the new policy on near-market research, but, quite reasonably, they wanted a fair period in which to adjust to the new circumstances. The amounts involved are not large for the Government, but they are large for farmers. Agriculture is not like manufacturing ; its output cannot be increased or decreased by the market. It is a long-term business, and we must give it time to adapt. That is only fair.

In the short and medium term, a number of measures should be taken, but I shall mention only two. Given that a certain amount of agricultural land will become surplus

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to requirements, particularly for cereals, the voluntary set-aside scheme now established should commend itself as one that all sides of the industry can at least agree to accept. Such an idea, however, is not easy for the Government to sell to the general urban population, so it would be in farmers' interests not to pitch their demands unreasonably high.

The price mechanism must also be given a bigger role to play in establishing a larger element of market realism in most sectors. Mention of the price mechanism need not produce shudders of fear. The ability and potential of the farming community to achieve ever higher rates of productivity should be part of any consideration of future agricultural policy. Talk of nitrogen quotas for cereals, for example, I consider misconceived. Apart from the impossibility of enforcement, we should be encouraging the use of technology to improve yields to maintain our competitive advantage, thereby raising demand for our produce. If we spurn modern techniques, hon. Members may rest assured that our competitors will not, and they will soon overtake us. Although the demand for organically produced food will continue to represent a tiny fraction of the market, there will be some expansion as incomes rise, providing an opportunity for diversification. I should like at this point to pay tribute to one of my farmers, John Whaley, who is doing a great deal in that regard.

Other short-term but essential measures must include further devaluations of the green pound if the pound falls back from its current high level. That raises the central and perhaps dominant question of free and fair competition. Too many of us feel that the British always play by the rules and lose out as a result. I believe firmly that as long as United Kingdom Ministers fight our corner doggedly in EEC negotiations the British farmer is better off inside the Common Market than outside it. Our Ministers are doing exactly that.

For example, the FEOGA-funded element of the suckler cow premium was increased by 60 per cent., the headage limit on beef was raised to 90 per cent. and a larger than expected devaluation of the green pound took place recently. Our message is getting over in the EEC, but the message to our EEC colleagues must always be : "If you do not follow the rules, don't expect us to do so."

Equally, we must be ever vigilant over European discrimination against British interests--in headage limits for beef or sheep to replace the variable premium schemes, and the exclusion of heifers from any new beef arrangements. I know that those have been more or less decided, but none the less we must constantly fight against them, as they affect Britian in particular. Such measures are not only anti-United Kingdom, but anti the most efficient producer, which makes no sense from anyone's point of view.

All things being equal--although they never are--my guesstimate is that, by the end of the century, about 90 per cent. of British agriculture will be carrying on as before. Provided that the inevitable changes are phased in gradually and with Government support and help, our agriculture will be highly efficient, more balanced and prosperous. It will continue to make a tremendous contribution to the United Kingdom balance of payments, and will be well able to face the challenges of the future.

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6.54 pm

Mr. Elliot Morley (Clanford and Scunthorpe) : There is no doubt that farmers face real problems related to their income and the pressures imposed on them. Those pressures are caused not merely by the CAP, but by external factors such as high interest rates and the cuts in research and development--a major concern to farmers in my constituency. During election campaigns, however, when I see the colour of the posters in farmers' fields, I sometimes wonder whether they really want the policies that the Government whom they presumably support are bringing in. Farmers seem to suffer from split personalities : what they want and the way in which they vote do not always coincide.

The farm price proposals do not deal with farmers' falling incomes, or with their other problems. I am concerned about farmers' incomes, because I know that many farmers are caught on the treadmill of borrowing money and then trying to repay it by increasing their income from crops, using more and more fertilisers to make up the shortfall, with undesirable environmental consequences.

It is also clear that the common agricultural policy is a Frankenstein's monster out of control--a monster with an insatiable appetite for milk and wine lakes and cereal mountains. According to figures from the Consumers Association, costs that are protected are kept artificially high in the Community compared with world prices. The figures show that the price of butter in the EEC is 132 per cent. higher than the world price, the price of skim milk powder 37.9 per cent. higher, the sugar price 100 per cent. higher and the beef price 96.6 per cent higher.

I am afraid that I have not noticed the Government's measures to deal with the excesses of the CAP having much effect. There is a good deal of sabre- rattling when various Ministers--even the Prime Minister--go across to Brussels, but there has not been much change. Although there has been a reduction in structural payments, there are still more increases in subsidies.

There is no doubt that some industries could survive and be competitive without such support. All that the pig farmers in my constituency ask is parity of treatment in the European Community. They do not ask for any subsidies or special help ; they just want to be treated in the same way as pig farmers in Belgium, Holland, Germany or Denmark--and I am sure that the same applies to many other farmers. For example, it is no use bringing in new controls on pesticide levels if, in 1992, produce is to be imported into this country which does not comply with the standards that we would rightly expect from our farmers.

The proposals contain a 5 per cent. reduction in price support for the sugar industry. I concede that, according to the Consumers Association, sugar is very over-priced in world market terms, but I nevertheless believe that there is scope for new markets for sugar beet, especially in this country. In particular, sugar products can provide the chemical industry with biodegradable plastics. Part of the problem with developing that industry is caused by the quotas currently imposed on sugar beet growers in this country. Those need to be looked at if we are to ensure that there is a viable market. It is worth pointing out that the planting of sugar beet is environmentally advantageous, contributing to nitrogen levels in the soil. I also believe that the green pound should be abolished in due course and MCAs as soon as possible, even before 1992.

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Although, on the face of it, the reduction in structural support, which has declined from £392 million in 1983-84 to £209 million in 1988-89, may seem desirable, some changes could be beneficial, in particular the move towards environmentally sensitive areas. Similar structural changes such as grants for drainage have been damaging, so I am pleased that there will now be controls on them.

There could be greater scope for controlling food output and caring for the environment by extending the use of the environmentally sensitive areas scheme. At the moment, such schemes account for only 0.5 per cent. of MAFF's budget, so there is considerable scope for increasing that. There is also scope for extending low-input farming instead of using set-aside. I have never been in favour of set-aside, because it is a negative use of public money. It is not constructive in terms of reducing surpluses. Evidence shows that the set-aside scheme has not made any great impact on surpluses, especially on cereals. I should prefer the emphasis to be placed on low-input farming and on giving financial support to farmers who farm in environmentally sensitive ways.

Cuts in research and development also pose problems. As the hon. Member for Hexham (Mr. Amos) pointed out, if we are to succeed and survive in Europe, we must use modern farming techniques. That being the case, there is no justification for the recent announcement of the £30 million cut in research and development over the next 3 years.

One environmentally sensitive project, aimed at controlling pests in soil by the use of nematode worms instead of chemical pesticides--which would not only be advantageous to farmers in reducing the cost of chemical inputs, but to the advantage of all of us as it would be a natural rather than a chemical method of pest control--has had its funding cut by one quarter. I see no justification for cuts on that scale.

There has been a dramatic reduction in support over recent years. We need careful planning. I am not saying--I do not believe that any of my hon. Friends would say--that farmers should be cut off from any kind of suport. In fact, that would be disastrous, because if it happened as part of a unstructured plan, farmers would try to make up that lack of support in higher outputs from their farms and would farm in far more environmentally damaging ways. Therefore, there must be a structure. Support should be given in a planned and structured way, but it should be linked to environmentally sensitive methods of farming, rather than to set-aside and other schemes.

We must consider our overall strategy of what we grow in this country and what we import. It may well be to the advantage of the consumer that we import more cereals from the Third world, rather than grow them in our inclement climate with the use of high chemical inputs. That would benefit the economy of the Third world and free our farmers to grow other crops, perhaps those attracting a higher premium because of rarity value or the way in which they have been grown.

We must also bear in mind New Zealand's traditional role in the supply of cheese and butter. I believe that we should support the New Zealanders and that their products should be to our market. However, it seems strange that New Zealand can export its products halfway

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round the world and still sell them at a lower price than some of our producers. Surely that raises questions about the efficiency of some of our producers.

I want to take issue with the hon. Member for Lancaster (Dame E. Kellett- Bowman), who is no longer in her place, and who made some remarkable comments about New Zealand and its policy of being a non-nuclear zone. There is no justification for victimising a country such as New Zealand simply because it has such a policy. We could extend the logic of that to the Americans, who have taken steps to penalise our computer manufacturers for exporting computer parts to Russia and the Soviet bloc, and take steps against US imports. Our farmers can meet the modern challenge of diversification. I believe that they can operate so that direct support can be reduced. Green consumerism will force changes on farmers and producers, because people will use the power of their pockets when buying consumer goods that have been raised or produced in a way that they regard as environmentally unacceptable. That will apply to intensive animal products. There has been a great deal of comment recently about intensive methods of animal rearing. There is scope for de-intensifying that, which may lead initially to a rise in the cost of those consumer products. However, I believe that many people will be prepared to pay a premium for not having the present methods of animal rearing.

In conclusion, the solution to the problems of price support and the CAP lies in a carefully structured package. The free market will simply lead to a return to the situation of the 1930s and force farmers off the land. Farmland and fields will return to the derelict state that they were then. It is important to keep farmers on the land. They are not only producers in an industry, but people who can protect our common heritage. Many farmers have been forced, often against their will, to operate in ways that they know are damaging, because of circumstances beyond their control-- especially interest rates and financing packages. There is now an opportunity to reduce surpluses and to support farmers to the advantage of all--consumers, the countryside and farmers.

7.5 pm

Mr. Andrew Hunter (Basingstoke) : I shall be brief. I intend to concentrate exclusively on the Commission's price proposals. In so doing, I welcome the fact that the debate is so early this year and that negotiations are advancing so rapidly, because no one benefits from delays such as we have experienced in the past.

I shall make just one general point and seek to illustrate it from the first volume of the Commission's proposals. The general observation that I wish to make has become common ground in the debate. All hon. Members who have spoken have acknowledged that the gravest problem facing British agriculture at the moment is the pressure on farm incomes. This issue must be kept in proportion. It is not a problem that is consistently or uniformly experienced. It varies from one sector of agriculture to another and, by definition, from one region to another. However, the essential point is that there is now pressure on farm incomes such as has not been experienced for many years.

It is absolutely right that production should be controlled, but we must be wary of the situation that we

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have created, whereby in controlling and limiting production we put pressure on farm incomes and replace one set of problems with another.

The proposals as a whole worsen the position rather than improve it. That can be seen clearly from three sections in the proposals. The first concerns sheepmeat--a subject which has featured prominently in the debate. There is clearly some good news on that front. The EC is now advancing steadily towards self-sufficiency--the figure is now about 81 per cent.--so there is scope for more improvements. There have been improvements in recent years, with an increase in total headage of about 5 per cent. two years ago and nearly 4 per cent. last year. It is good to note that the United Kingdom has had more than its fair share of that increase--with an increase last year of about 8 per cent. It is also good to note that consumption is increasing within the Common Market, albeit fractionally, by about 1 per cent. per year. It is likewise good to note the fractional drop in imports from about 259,000 tonnes in 1987 to 250,000 tonnes in 1988.

However, now comes the bad news, which has already featured in the debate. There are to be no institutional price changes in the sheepmeat regime. As my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) said, that is something of a non-event. The impact of inflation means that sheep farmers are suffering a 7 per cent. loss in support in addition to a 10 per cent. drop in market prices in the past year.

It is clear that sheep farmers are far less well off than they were even two years ago. The basic reason for that has been the operation of the Great Britain stabiliser mechanism, which has been far too harsh. Perhaps I misunderstood the observation made by my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman). The argument is not that we alone have a stabilising mechanism, because such mechanisms exist throughout the Common Market. The argument is that it is too harsh in this country and that a softer regime operates elsewhere.

Dame Elaine Kellett-Bowman : There is a separate stabiliser mechanism here. We would not mind having the same structure as other countries, but it is unfair that we should have a different one.

Mr. Hunter : I now understand more fully the point made by my hon. Friend, and she is correct. That brings me to my next observation, which concerns the variable premium.

The ceiling on breeding ewes has been acceptable so long as the variable premium has existed. I emphasise the point made by my hon. Friend the Member for Tiverton: that if there is a concession on one, we must be doubly on our guard--if we lose the variable premium, we can also lose the ceiling on breeding ewes ; conversely, if we keep the variable premium we must be prepared to accept a ceiling of some sort.

If I heard him correctly, the Member for Brecon and Radnor (Mr. Livsey) gave a statistic of which I was unaware. I believe he said that we account for 70 per cent. of sheep farming in the Common Market. Did I mishear him?

Mr. Livsey : I said that 70 per cent. of EC sheep were in the British Isles.

Mr. Hunter : I thought that that was what the hon. Gentleman said. The significant point at the moment is

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that, under the existing regimes we receive only 30 per cent. of total EC sheep support. Given the total support that we obtain, the hon. Gentleman's figure shows that even now the situation is far from acceptable.

Mr. Livsey : Does the hon. Gentleman agree that support for sheep in the European Community represents only 2.5 per cent. of the total budget, so it is a relatively small element in the CAP budget?

Mr. Hunter : I entirely accept that.

Attention has already been drawn to the fact that the existing regime is under review and we can expect substantial reforms in the near future. I am sure that the key words here must be "caution" and "vigilance".

For all the reasons given in this debate, sheep farming is vital to many parts of the country and I urge the Minister to pay great attention to ensuring that sheep farming, particularly in the uplands, remains economically viable, because there is no alternative. In the beef sector, again, there is a combination of good and bad news. Perhaps there is a moral to be learned from this with regard to reforming the sheep regime. The current beef regime is substantially harsher than the previous one. Intervention remains unchanged, but that is only a small part of the problem facing beef farmers. The annual limit of intervention to 220,000 tonnes, the arguably too low trigger for intervention buying, the inadequacy of the special premium compared with the variable beef premium, the limitation of the premium to 90 head instead of the variable premium, and the absence of a heifer premium all without doubt place a heavy burden on the British beef farmer.

All this is taking place against a favourable backcloth. The position as regards beef and intervention in the Common Market during 1988 was not so bad as in previous years. Under the old regime, there was a reduction in production. Almost 5 per cent. less beef was produced in 1988, which brought us back to about 96 per cent. self-sufficiency.

In 1988, too, public intervention and private storage were appreciably down on the 1987 figures. A drop in buying and an increase in sales resulted in the most significant decrease in the stocks in intervention. The warning to which one must pay heed is that, arguably, the change in the beef regime has proved to be an over reaction. Consequently, the British farmer is at a greater disadvantage than he need otherwise have been. I sincerely hope that that lesson will be learned when we reform the sheep regime. Finally, with regard to cereals, pages 31 to 35 of the Commission's proposals do not make happy reading. Clearly, stabilisers did not work last year. Salient quotations can be drawn from page 31 of the Commission's report, perhaps the most depressing of which is the acknowledgment that there is a

"risk of ongoing imbalance between supply and demand over the next few years."

So far, stabilisers have not achieved the required and hoped-for decrease in production, but they have increased the financial pressure on cereal growers.

Intervention prices remain the same but conceal a greatly increased burden on the cereal farmer. The latest green pound devaluation goes no way towards compensating for that. In effect, intervention has been reduced by an additional 3 per cent. because the supplementary levy was

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