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House of Commons

Friday 12 June 1992

The House met at half-past Nine o'clock

PRAYERS

[Madam Speaker-- in the Chair ]

PETITION

Glassworks (Queenborough)

9.35 am

Mr. Roger Moate (Faversham) : I wish to present a petition from the Queenborough action group and residents of Queenborough and Rushenden on the Isle of Sheppey, Kent. The petition is led by Mr. Robert Eatwell and is signed by more than 800 residents of Queenborough and Rushenden. The matter is of great local importance, but it should also be of great concern to all hon. Members and the Government, and it has my support.

The petition relates to a major proposal that a redundant glassworks should be used for processing toxic waste. The petition reasonably urges that such a change requires a proper environmental impact assessment and planning authority. I support that approach, as does Swale borough council, the planning authority. The petition sheweth :

That whereas authorisation given by Her Majesty's inspectorate of pollution to VERT Ltd. prejudices the processes of the Town and Country Planning Act 1971 by permitting VERT Ltd. to process toxic waste by vitrification in a redundant glassworks in the middle of the small town of Queenborough and whereas the planning authority Swale Borough Council consider that that change of use planning permission is required VERT Ltd. intend to proceed with their process in flagrant disregard of the health and safety of nearby residents and have failed to consider the environmental impact assessment required by the Town and Country Planning (Assessment of Environmental Effects) Regulations 1988.

Wherefore your Petitioners pray that your honourable House will examine the procedures linking the Town and Country Planning Act 1971 and the Environmental Protection Act 1990 and demand that the Government take urgent action to protect the residents of Queenborough, Rushenden and surrounding districts from a considerable loss of amenity and a serious threat to their health. And your petitioners, as in duty bound, will ever pray etc.

To lie upon the Table.

BILL PRESENTED

European Union (Public Information) Bill

Mr. Nigel Spearing, supported by Mr. John Biffen, Mr. Peter Shore, Mr. Richard Body, Mr. Austin Mitchell and Mr. Richard Shepherd, presented a Bill to require the preparation and distribution of a statement summarising the provisions and implications of any Treaty on European Union, or any Treaty having similar effect, together with any principal associated Treaties, and the consequent changes in the rights and powers of the citizens and Parliament of the United Kingdom ; and for connected purposes ; And the same was read the First time ; and ordered to be read a Second time on Friday 19 June and to be printed. [Bill 32.]

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Common Agricultural Policy

Relevant documents : European Community Documents Nos. 7570/91 and the Supplementary Explanatory Memorandum submitted by the Ministry of Agriculture, Fisheries and Food on 13th November 1991 relating to reform of the Common Agricultural Policy and 5534/92 ADD 1 to 3 relating to the prices for agricultural products and related measures for 1992-93.

Motion made, and Question proposed, That this House do now adjourn.-- [Mr. Nicholas Baker.]

Madam Speaker : There is much interest in the subject of the debate, and I have no alternative but to impose a 10-minute limit on speeches between 11.30 and 1 pm.

9.37 am

The Minister of Agriculture, Fisheries and Food (Mr. John Selwyn Gummer) : The United Kingdom has always been the leading proponent ocommon agricultural policy reform and has always been clear about the principles on which that reform must be based. During the negotiations, I was pressed by the Labour party and by other commentators to convert these principles into a detailed blueprint covering every last facet of a reform policy-- what many referred to as an alternative to the MacSharry plan. They suggested that if I did not produce such an alternative, MacSharry was bound to win. The hon. Member for South Shields (Dr. Clark) said that, whether the Minister liked it or not, it was probable that MacSharry's notions would be accepted.

I always resisted this approach, not because I was unclear about what I wanted but because I knew that I would not get what I wanted by setting out a shopping list from the start. Negotiators do not tell those with whom they are negotiating their bottom line before they start. With the exception of the hon. Member for South Shields, the agreement has been widely welcomed. It is based on principles that, it was claimed, we could not uphold and which were spelt out last year in "Our Farming Future".

Let me remind the House what we said there. We said that efficiency was vital to a competitive agriculture, and that support policies must be geared to the needs of the real market. This agreement, by cutting prices and reducing the role of intervention, will bring farming nearer to the market and encourage farmers to pay much greater attention to the demands of the consumers. Moreover, we have been able to change many of the anti- competitive elements in the Commission's original proposals. Where quotas have been introduced, we have ensured that the new arrangements will be operated flexibly and without fossilising existing farm structures.

We insisted that the burdens of reform must be borne equitably across the whole Community. In particular, we insisted that reform must not be biased against larger, more efficient farmers. Again, we were successful. None of the Commission's discriminatory proposals has been carried through to the final agreement.

We insisted that the objectives of the CAP should be adjusted to give greater recognition to the importance of environmental protection and we have secured a Council declaration--an integral part of the final agreement --that clearly embodies this need.

We insisted that support for farming in the less-favoured areas must be maintained. The changes we secured to the beef premium arrangements and the defeat

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of the Commission's proposal for discriminatory new headage limits for the suckler cow and ewe premiums have guaranteed continuing support for farming in our hills and upland areas.

Above all, we said that any agreement must reduce the resource costs of agricultural support in the Community. This, too, we have achieved. Overall, the cost to the consumer and taxpayer will be lower under the reformed CAP. We now expect the burden imposed on consumers by the CAP, once the reforms have been fully implemented after three years, to be lower by some £8,000 million--£1.90 per week for every family in the Community. Of course, this is not to say that prices will immediately fall by this amount. The reductions will take place over a period, and during this time other elements in the final retail price of food will be changing. Nevertheless, the savings in resource costs are real--£8 billion from consumers' pockets that would otherwise have been spent on the CAP.

The Opposition cannot have it both ways. Last time we met, the hon. Member for South Shields argued that high support prices imposed massive costs on consumers. He then claimed that reducing those prices would have no effect on consumers. He cannot have it both ways. The fact is that £8,000 million which consumers would otherwise have directed to the CAP will not now be so contributed.

Mr. Nigel Spearing (Newham, South) : This is the principal point of the proposal. Will the Minister assure us that the £8,000 million comes not just out of the pocket of food prices--that is what he, perhaps inadvertently, implied--but could also be a reduction in the actual amounts from budgets of national member states to the CAP? When does he think that the additional money that we will now have to pay to introduce the scheme will cease? At what date, or in roughly what range of time, will that £8,000 million less begin to take effect?

Mr. Gummer : It will begin to take effect from the start of the changes. The changes start differently, depending on the season. It takes rather longer for the arable changes to come into operation than it takes for livestock. The whole complete package will be finished in between three to four years, depending on the season. By the time that we come to the end of that process, we shall have implemented the reductions in price that work through in the £8,000 million. If the hon. Gentleman is patient, he will hear me go through the consequent effects. No doubt we can have a further discussion if he feels that I have not covered the points as he would like me to.

Mr. A. J. Beith (Berwick-upon-Tweed) : Given the drastic reduction in farming that has taken place in recent years, and the consequent loss of jobs for agricultural workers, how does the right hon. Gentleman see the significant reduction that he still believes these changes can achieve being reflected in farm incomes? How does he see the future of farming in that situation?

Mr. Gummer : If the hon. Gentleman is patient, he will see the other side of the coin. The £8,000 million reduction in the consumer spend is reflected nothing like as much, but the changes will be seen in the direct payments from the taxpayer to the farmer, which is precisely what the House is constantly demanding. It has constantly said that an awful lot of money in the CAP never gets to the farmer.

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The hon. Gentleman and I have said the same thing again and again. We have always tried to ensure that there is a simple, direct method whereby we can support farming, ensure that the land is looked after and protect our food supply. That is what we have sought to change. If he will bear with me, I will go through that part of it. However, I start by making the clear statement that this is £8,000 million out of that which otherwise the consumer would have been contributing to the common agricultural policy.

These savings to consumers are a result of a significant change in the way that the CAP supports farmers--a shift away from support paid for by consumers to support paid for by taxpayers. In lieu of price support, we have direct payments to farmers. This is a sensible change when one moves from shortage to surplus. When one is in shortage, it is sensible to support pricing, because that draws more production through, which is what we wanted to do.

The CAP is a sensible policy, because it produced the food that we needed. The problem has been that, for some years, we have not been in that position. We need a system of support for agriculture in the countryside that does not increase production. The only way to do that is to move the mechanism of support from the consumer--the way that is bound to increase production--to the taxpayer, who is then able to direct the support to ensure that farm incomes are sufficient to keep farmers in the countryside, the countryside cared for and the food that we need produced, but not in such excessive quantities that the cost escalates beyond any kind of payment.

There is, inevitably and rightly, a change, and the cost to the taxpayer will increase, but by significantly less than the saving to the consumer. Overall, the cost of the CAP to consumers and taxpayers when put together will fall, and fall substantially. It will fall even if we assume that what we spend now under our existing policies would not have increased year by year as a cost to the taxpayer. It is a major saving even if we say what no one here believes, that there would not have been an increase to the cost to the taxpayer under our present system. [Interruption.] The hon. Member for South Shields laughs to cover up the fact that he does not understand the system. He has done this for the past three years and will no doubt do it until he ceases to perform his role, as I imagine will no doubt happen this autumn.

Who actually believes that the experience of generations would have been reversed? Had we actually allowed high green prices to continue to generate surpluses, the cost to the taxpayers would have inevitably have risen sharply, with no offsetting savings to consumers. To return to the point made by the hon. Member for Berwick-upon-Tweed (Mr. Beith), those extra costs would not have gone to the farmer, because the mechanism then was that we would pay increasingly for storage and for selling surpluses off to countries that did not need them, and so would not accept them except at knockdown prices. All those things do not, except in part, give the farmer returns and support farmer income, which is what we are about.

Let me run through the key elements of what we agreed. More details are available in the briefing note that I have had placed in the Vote Office. Hon. Members should be aware, however, that it contains a clear note that it is the detail as far as we have it. Discussions are still continuing

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-- [Interruption.] It is amazing. Opposition Members know so little about the system that they think that what I have said is surprising.

We have agreed all the major principles. The United Kingdom wants to ensure that all the details of the enabling legislation shall be exactly right. It seems that Opposition Members do not remember that our consideration of legislation involves Second Reading, examination in Committee and on Report and Third Reading. In this instance, the main principles have been clearly enunciated. The detailed matters--for example, which year we shall use as the base year and exactly how measurements will be made--are being properly discussed at this moment. Opposition Members should know that and should not giggle to cover their ignorance.

Mr. Mark Robinson (Somerset and Frome) : Does my right hon. Friend agree that, if we were not having this debate, Opposition Members would be the first to complain?

Mr. Gummer : My hon. F‡riend is right. In fact, they have already complained. I have been asked on radio and television why we are having the debate today and not on some other day. Opposition Members try to have it in every possible way except the right one, which is to welcome what we have before us, what we have been asking for for a long time.

Mr. Dennis Skinner (Bolsover) : I wish to extract some information. We are discussing what is supposed to be a grand design, but I am sure that the Minister knows that I am concerned about three specific families who do not have a set-aside scheme and who will probably not get one. The families were producing dioxin-contaminated milk, and it is about a year since they were stopped from doing so.

Are there any proposals that, if implemented, will enable those three families to continue in production? At present, they are not allowed to produce because of atmospheric pollution and pollution as a result of the production of coalite and from other sources. How will these families be paid? I heard recently that an official from the Ministry told them that there is no more money.

I want to know whether there is anything in the proposals that we are discussing that will enable the three families to continue to farm. They should be paid in one form or another. What are the proposals?

Mr. Gummer : I think that the hon. Gentleman knows that the issue that he has raised has nothing to do with reform of the CAP. The farmers to whom he refers have been paid money over the past year while we have investigated the reasons for their problems. Their problems have not been caused by agriculture as a whole, by the Ministry of Agriculture, Fisheries and Food or by the Government. The farms have been polluted and I have stopped the farmers producing food that might be detrimental to public health.

I know of no hon. Member who would be quicker to demand my resignation if I had not protected the public good than the hon. Member for Bolsover (Mr. Skinner). The hon. Gentleman has misused the opportunities that have been given to him to raise this matter by failing to say how much the Ministry has done for the families for the

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past three years. I met two of the farmers and went through their problems personally. The hon. Gentleman knows perfectly well what the situation is.

Central to the reforms are the changes to the cereals regime. Perhaps the basic mistake--

Mr. Skinner : Will the Minister give way?

Mr. Gummer : I will not give way to the hon. Gentleman, because it seems that he does not wish to be involved in these matters.

Mr. Skinner : Will the Minister--

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse) : Order.

Mr. Gummer : Central to the reforms are the changes to the cereals regime. Perhaps the basic mistake of the designers of the original CAP was to set cereal prices too high. It is understandable that they did so because there was a real fear of famine. In the longer term, however, changes to the regime should have been introduced much more rapidly. For the past 30 years, high cereal prices have encouraged over-production. Through the effect on feed costs, they have pushed up livestock prices, with the result that production has been encouraged and consumption depressed.

Moreover, the surpluses in cereals that this policy has produced have been dumped on world markets with the aid of high export subsidies. This has damaged the Community's relations with other cereals exporters and has added to the growing cost of the CAP while undermining the poorest producers in the third world.

I hope that we shall realise the importance of the change that is to be made for the third world. The mechanism that produced over-production at a time of surplus also produced subsidised production in Britain and the rest of Europe, the outturn of which was put on world markets. Producers in the poorest areas were unable to compete. I have seen Belgian rapeseed oil on sale in bazaars in Cameroon at a price which was cheaper than locally produced palm oil. That was a serious distortion, and it has been overcome as a result of the changed policy.

In the agreement that we reached last month, the Community has at last grasped the nettle. Over the next three years, from the 1993 harvest, cereal prices will be cut by 29 per cent. Indeed, if prices fall below the new target price to the intervention price, which they will do if the Community market remains in surplus, the reduction will be closer to 35 per cent. In other words, the mechanism means that, if the surpluses continue, the price itself significantly reduces further. There can be no doubt that reducing prices by about a third in only three years will have a major impact on the economics of cereal production, reducing the incentive to expand production. I hope that we shall not underestimate the importance of the change or the difficulties that it presented to countries in the Community. Few hon. Members thought that we could make such a radical alteration. After all, Germany has departed from the principle of high grain prices, which was a constant of its agriculture policy since Bismarck. It has utterly changed what was its central agriculture policy throughout most of modern history. That shows how seriously these matters have been examined. The agreement marks a fundamental change in European agriculture policy, a change which was championed by the United Kingdom.

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Mr. Harry Barnes (Derbyshire, North-East) : Will the Minister give way?

Mr. Gummer : I shall continue. I want to answer a question that was asked by the hon. Member for Berwick-upon-Tweed.

Mr. Barnes : It is on this point.

Mr. Gummer : As I have said, I want to respond to the question of the hon. Member for Berwick-upon-Tweed.

As a result of the price cuts, every cereal producer will find his return from growing cereals reduced. To make up for this, producers will be offered a direct subsidy on an area basis, provided that they agree to set aside 15 per cent. of their arable land. I think that it is called combinable crop land, but for most of us arable land is the nearest phrase.

I must stress that the new arrangements differ fundamentally from our present and much more limited set-aside scheme. Under the new scheme, set- aside will become a normal feature of the production pattern on most cereal farms. It will have a much greater impact than our present piecemeal arrangements.

I know that many hon. Members dislike set-aside on principle. I acknowledge that it does have many disadvantages. Given time, there are much better ways of bringing supply and demand into better balance, but time is precisely what we do not have. With the current level of Community production, and the prospect of surpluses of, perhaps, 30 million tonnes after this year's harvest, only an effective Europewide set-aside can tackle overproduction rapidly enough.

There are moments when the best is the enemy of the good, and that is true here. A longer-term system that was better prepared over many years is the answer that we would have liked. That we failed to achieve years ago. Now we have an answer that will work. Indeed, it is the only answer that can work in the time that it has to work.

Mrs. Margaret Ewing (Moray) : The Minister has come to a critical aspect of the renegotiation. When will he be able to spell out the detailed conditions and administrative arrangements for set-aside that will be made for farmers? The right hon. Gentleman will be aware that they will be starting to harvest next month. If they are to change the entire pattern of their farming programme by the autumn, they will need to know the new conditions and arrangements very quickly.

Mr. Gummer : The hon. Lady is right. I shall do what she says as rapidly as possible. When I say that, I am not being restrictive in any way. The farmers will have those things that are immediately possible under the regulations as they are written. We shall produce them as soon as we can, which means in the next day or two. The rest of the changes will come as quickly again, as they are decided. Discussions are still continuing.

We are trying to make it as simple as possible--which has always been our aim--consonant with everybody in Europe doing it in the same way. That is what we are trying to achieve and I promise the hon. Lady that I shall achieve it as quickly as is humanly possible. Let there be no mistake : the measures that we are adopting will go a long way towards dealing with over- production. A 15 per cent. set-aside requirement does not mean a 15 per cent. fall in cereals production. Not all

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producers are subject to set-aside ; those with only small areas of arable crops are exempt. There is bound to be some slippage, but it will be limited.

The 15 per cent. requirement assumes that farmers will rotate their set- aside land, which will make it impossible for them to set-aside only their worst land. If they do not choose rotational set-aside--and, at our insistence, they do not have to do so--they will have to set aside a higher percentage of their land. The exact percentage will be decided later, but the aim will be to ensure that both forms of set-aside have the same overall effect in production reduction. Obviously, it would be unfair for a farmer to say that he will not rotate set-aside, resulting in a smaller cut in production, but with the same support from the Community. The new, non- rotational set-aside will be fully supported, but it will require of farmers a sufficient additional set-aside to ensure that the production effect is similar.

The House should not forget that the percentage set-aside for the Community is set by the Council. If set-aside proves less effective than expected in reducing production, the Council will be able to increase the percentage. The Commission has made it clear that, in its view, the set-aside percentage should be used in that way as a mechanism to regulate and stabilise production levels.

For all those reasons, I am confident that set-aside, together with the cuts in price, will make a significant contribution towards tackling over- production. Even so, I would not have agreed to the new system if it had not met our main objections to the Commission's original proposals.

First, in the original proposals--Labour Members said that we would have to give in to them--the Commission said that much of the land set aside by large producers should not be subject to compensation. Because farms in the United Kingdom are, on average, significantly larger than those elsewhere in the Community, that proposal would have discriminated massively against British farmers. Only 40 per cent. of set-aside would have been paid for, compared with 70 per cent. elsewhere in the Community.

When we debated the proposals in December, I made it clear that that was not acceptable and would be resisted. I am pleased to say that that resistance was successful and that all planned set-aside under the new system will be paid for at the full rate.

Secondly, the Commission's proposals required all set-aside to be rotational. That was not acceptable, because such a requirement would prevent us using set-aside in ways that would be of long-term benefit to the environment--a matter about which most in the House are concerned. In addition, rotational set-aside in itself would cause significant environmental problems, such as nitrate leaching. As I have said, the agreement we reached will enable set-aside to be on a non-rotational basis. It would be for individual member states to set a management condition to set-aside in the light of national circumstances. We are determined to ensure that, in the United Kingdom, those take full account of environmental factors and that we take advantage of the environmental opportunities offered by set-aside.

The hon. Lady may be assured that, as soon as I am able to present our proposals, I shall do so. However, we must get it right when we set the conditions for the United

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Kingdom--for Scotland, England, Northern Ireland and Wales. Generalised conditions would not be appropriate, because, for example, the environmental problems in Spain are so different from those in France or Scotland.

Thirdly, the Commission proposed that each individual farm in the arable sector should be given an individual base area, which would have determined its eligibility for the new area aid and its set-aside obligation. That would have been phenomenally difficult to deal with administratively, and I was not prepared to have a Domesday book scenario. Such a system would also have been inflexible, because changing patterns of agriculture could not have been accommodated. I am pleased that we have managed to remove that proposal.

Although the new payments will not be made until next year, to qualify for them farmers will have to set aside land from this autumn. That gives farmers less notice than we would have liked, especially as the detailed rules for the new scheme have yet to be agreed. We are working urgently on that matter and we will be carefully consulting on the implementation of the new scheme in the United Kingdom, consonant with our ability to produce those results and details as quickly as possible.

I have described the new system for arable crops at some length ; indeed, during our last debate it was suggested that I should do so. It is essential that the reforms are agreed, because they are basic to the whole of the remainder of agriculture. The reforms in the arable sector will have a major effect on the livestock sector. By cutting feed costs, the costs of production for pigs and poultry will be significantly reduced, which is bound to have a knock-on effect in other parts of the meat industry.

It was in recognition of that that we agreed to reduce the support price for beef by 15 per cent. over three years from 1993. However, because the benefits of lower feed prices will not be felt by those producing beef from grass, we also agreed a significant increase in the beef special premium and the suckler cow premium.

To ensure that the main benefit of the new premium levels goes mainly to grassland producers, they will be made subject to stocking limits. Payments will be made up to those limits, but any amounts beyond them will not receive premiums. In addition, producers who farm beef extensively will be able to claim an additional premium of £24 per head under both premium systems. Those provisions will benefit the environment, because they will help to ensure that the new higher rates of premium do not encourage over- grazing. I am glad to tell the House that the Commission's original proposal to make payment of a suckler cow premium subject to a headage limit of 90 animals was not adopted. That was another of the proposals that would have hit the United Kingdom especially hard--and among its countries would have hit Scotland even harder. Again, we succeeded in securing its removal.

To ensure that expenditure under the new arrangements is kept under control, both types of premium have been made subject to overall ceilings. For the beef special premium, it will take the form of a cap on the number of claims that can be paid in a particular region. I hope that the hon. Member for Moray will not mind my using England as an example, on the basis of its being designated as one region. However, the same would be true for Scotland, Wales, Northern Ireland or any region upon which we decide.

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The ceiling will be based on the number of claims paid out in that region in a previous year. We can choose the year-- 1990, 1991 or 1992. If the total number of claims does not exceed that figure, they will be paid in full. If they exceed it, the total amount is shared out in proportion and each claimant receives less. That is a much more flexible system than a quota system on the animals, as was originally proposed.

Individual producer quotas will be introduced for the suckler cow premium, which will be subject to the same flexible rules on quota transfers as we secured for the ewe premium, with which I will deal in a moment. Before I leave the subject of premiums, I should mention one further innovation. It will explain why I mentioned Scotland, not Northern Ireland, in connection with an earlier point.

An additional premium of almost £50 a head will be paid in member states where a high proportion of beef cattle are slaughtered in the autumn. I was able to gain a specific assurance that that new premium will be paid in Northern Ireland. That will be of considerable help to the Northern Ireland economy and will remove what would otherwise have been a discrimination between the north and the south.

Mr. Christopher Gill (Ludlow) : I am sorry to ask a technical question, but it appears that politics has reached every nook and cranny of agriculture. Is it the view of my right hon. Friend and his team that increasing the beef premium scheme also increases the prospect of providing good-quality beef to the British housewife? Is he convinced that it is sensible to continue increasing that premium, which essentially encourages the production of beef from the dairy herd rather than from the specialised beef herd?

Mr. Gummer : I am grateful to my hon. Friend for his technical point. We reached every nook and cranny of agriculture long before it was a European concern, when we had our own system in this country. We did it even more extensively and widely. My hon. Friend cannot suggest that it has anything to do with Europe. The extra premium for the suckler cow herd is specifically designed to bring forward the best beef in the best circumstances, and in the most extensive grazing situation. My hon. Friend will find that the mix is much better than he fears, and it will achieve precisely what he wants. The United Kingdom has always been deeply opposed to the intervention system for beef. The point that my hon. Friend made would have been true in that respect. It is a change for the worse in the Community sector. I have never been afraid to point to those aspects that could be improved. The intervention system is wasteful and inefficient, and ruins good beef to the benefit of neither the farmer nor the consumer. The Commission shied away from making proposals in that delicate area. It was left to the Council, led by the United Kingdom, to devise realistic measures to curb intervention.

The amount that can be bought into intervention each year will be limited. While the possibility of safety net intervention will still exist, it will become a genuine measure of last resort instead of the regular daily activity that in some countries becomes the basis of the whole production, producing for intervention. That will no longer be possible. The new beef arrangements move support away from the storage of beef to those who raise

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and finish beef cattle--particularly those most dependent on grass in areas such as the south-west. We have long argued for changes of that kind.

I am sure that the House recognises that, in all these proposals, the demands for CAP reform that we made year in, year out, have been secured. The more that the House examines the proposals, the more it will be seen that they are our solutions, increasingly implemented in our way within the Community.

For sheep, our principal priority was to defeat the Commission's discriminatory proposals on sheep headage limits. If they had been implemented, up to 15 per cent. of eligible animals in the United Kingdom would have been excluded from premium, against some 3 per cent. in the rest of the Community. The effect in remote areas could have been devastating-- not least in Wales and Scotland, which are particularly dependent on sheep production. That is true also of Northumberland and the backbone of England, and of highlands everywhere. It is not only the producers themselves but the nature of the countryside that depends on the retention of the sheep in the hills. Again, we were successful and the existing arrangements will remain unchanged.

The Council agreed, however, to make the premium subject to individual producer quotas. The cost of the sheep regime has increased sharply in recent years and it was clear that something had to be done. The annual ewe premium is the single most important and costly element in the regime. We cannot ask for reductions in spending elsewhere if we are not prepared to accept restrictions on spending in areas that are particularly beneficial to the United Kingdom. Quotas will set an individual limit on the number of animals eligible for ewe premium in future and that should go a long way towards bringing the costs of the sheep regime under control. From the outset of the negotiations, I was determined to accept quotas in that sector only if I was sure that they would provide sufficient flexibility for the industry to continue to develop and to adjust to the needs of the market. It is one thing to say that one does not want costs to escalate or over-production to result, but quite another to fossilise particular production in particular areas, in the particular circumstances of a particular year. The final agreement meets that condition.

Producers who transfer or sell their holdings will be able to transfer all their premium rights to their successors. A producer will also have the right to transfer a quota to another producer without also transferring the holding. However, where a quota is transferred without the holding, a proportion will be siphoned off to a national reserve to be allocated to new entrants and other priority producers. I was able to ensure also that the final agreement provides for quota leasing.

Although a flexible quota transfer system is essential, we must make sure that quotas are retained in marginal areas, where farmers have few alternatives to sheep. I was concerned that, if one asked as part of the environmental package that the sheep remained on the hills, one must not create a system so flexible that the areas in which one most wants sheep to live are denuded of them because the quotas are sold.

For that reason, I secured a provision enabling member states to stop the transfer of quotas away from sensitive

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areas particularly dependent on sheep production. It is clear also that the transfer of quotas by tenants has potential implications for others, including landlords. I therefore secured provision for problems in that regard to be addressed in the negotiations on detailed rules.

That is another example of the issues that we are working on now. They may provide a source of amusement for the Opposition, but they are essential to tenants and landlords in difficult areas. It is not surprising that Labour was not elected in those difficult areas. We face a major task in implementing the new system and allocating quota to individual producers. We will of course consult the industry and other interested parties.

Dr. David Clark (South Shields) : Is the Minister saying that there will be transfers of sheep quota and that there will be a monetary value attached to quotas in areas other than those that he designates as sensitive? Is there any provision for quotas to be transferred across national boundaries? That is a narrow technical point, but it would be helpful if the Minister could answer it.

Mr. Gummer : None of the provisions allows for quotas to be transferred across national boundaries. I happen to believe that those changes would be very good, and that is how it should be across our whole quota system. That is my personal view, but so far it is not one which has commended itself. We will work on and I hope that one day we will have that kind of transfer.

Of course there is a value in quotas. It is ridiculous to suggest that there is not. A quota must be valuable to be able to receive a premium on an animal. There is no mystic way--this is the point about money : it is an index of value. It is only those who do not face up to the reality of what money really is, and when it ceases to be that, that things go wrong. A quota can be transferred, and in transferring it one gains a benefit. That benefit must have a price.

Mr. John D. Taylor (Strangford) : If a person holds his land but sells the quota, what proportion will go back to the nation? Will the proportion be the same throughout the Community?

Mr. Gummer : That decision is for national Governments, and the proportion is between 1 and 15 per cent. We must have a percentage and it will be for us to decide. It will be an important decision. There are considerable arguments in both directions. Much as I want a new entrants scheme, young farmers, and all the rest of if, that is the most difficult thing in the world, because one ultimately has to choose between people and that is not an easy task. However much we might like something in principle, it may be difficult to achieve in practice.

Mr. MacSharry's milk proposals would have been particularly damaging to the United Kingdom. The dairy cow premium would have discriminated against larger and more efficient milk producers and quota cuts would have further reduced our ability to serve the domestic market. I hope that those who represent Welsh constituencies will remember that. Some in Wales argued that they could accept MacSharry's proposals, but the Welsh milk producer would not have enjoyed the benefit received by the average Irish milk producer. The Welsh producer's support would have been transferred from Wales to Ireland, which would have been discriminatory to a considerable extent. I believe that that is now accepted even by those who suggested otherwise before the election.

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I am glad to report that we got rid of the dairy cow premium. There will be no cut in quota this year. We secured a cut in the butter price of less than we wanted, but the balance of the agreement is right--a cut in price rather than in quota.

Both in Britain and elsewhere in the Community, there is a great deal of anger about the fact that, whereas some member states have fulfilled their quota obligations, cutting production and paying fines for over-production, others have not. The different treatment that the Council has afforded to Spain and Italy shows the strength of that feeling. Spain would undoubtedly have been granted a higher quota in its accession negotiations if the correct figures for Spanish milk production had been known. We have agreed that, at present, Spanish milk production is some 1.3 million tonnes more than the quota allowed.

Spain is a net importer of milk, which means that it is not only producing but consuming that milk. Spain has agreed to cut its production by 800,000 tonnes. The Community has agreed to increase Spain's quota to cover the other 500,000 tonnes when that has been achieved. That will mean a net cut in milk production not only for Spain but for the Community as a whole because, as Spain is not self-sufficient even now, it will have to look elsewhere if it is to meet its demand for milk.

We are inclined to blame others and talk of others' failure to do what we would like them to do. I hope, therefore, that the House will recognise that an 800,000 tonne reduction represents a major commitment, and the Spanish will not get the quota increase until they have achieved that end.

We insisted that the implementation of future cuts in the milk quota should depend on the state of the market. I cannot now see any reason why there should be a further cut in quota in the next two years.

Italy also sought an increased quota, but the Italian case is utterly different. Although perfectly able to introduce quotas, and committed to do so since 1984, Italy offered no remotely acceptable proposal for a reduction in production. The Council therefore refused to accept the Italian case and is now looking to Italy to implement the quota rules on the same basis as the rest of the Community. The package included a significant reform of the Community's arrangements for supporting tobacco. I know that many hon. Members feel that the Community has no business supporting tobacco production. I must say that I find that argument difficult to uphold. People say that we should not have tobacco production in Europe but should allow people to go on smoking and import the tobacco from elsewhere.

We would then have to spend money on keeping the families who used to produce tobacco where they are, as we cannot have them flooding into towns where there is no work for them. We must accept that, with 800,000 people on 200,000 holdings dependent on tobacco production to a greater or lesser extent, it is not feasible to end support for tobacco production.

There can be no doubt that the new system is a definite improvement on the current regime. Support for tobacco will be made subject to a global quota, which by 1994 will have fallen to 350,000 tonnes--100, 000 tonnes below the level of production last year. Moreover, there will be a further review of the tobacco regime in 1996.

From the start of the negotiations, I insisted that environmental considerations must form an integral part

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