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legislation so that more land will be let, more farms become available and more opportunities created for new entrants to farming.

Mr. Jonathan Evans (Brecon and Radnor) : My right hon. Friend rightly refers to the steps that she is taking in respect of the potato industry and of milk, but she will also be aware that there is a great deal of concern among farmers in the livestock sector, arising from the fact that the very measures introduced to reform the CAP have brought with them unnecessary bureaucracy. Although many farmers in my constituency welcome the changes announced at the end of the year, can my right hon. Friend tell us whether there are to be further changes to simplify what has become an unnecessarily complex system ?

Mrs. Shephard : My hon. Friend is likely to be referring to the cattle identification documents for beef. We have achieved considerable simplification of those arrangements, as I announced at the annual general meeting of the National Farmers Union. The industry welcomed the simplification, but there is still some way to go. Some regulation is necessary to combat fraud, of course, as I am sure my hon. Friend will understand.

The Government will also need to fight for a level playing field for our farmers. I hope that that will be the only time I use the phrase "level playing field" in this debate, but I fear that it will not be. This sometimes means bringing other European member states up to our level--for example, in animal welfare, an area in which I have been pressing hard for legislation to put others on a par with our own high standards. Elsewhere, I have maintained the pressure on the Commission to ensure that Community legislation is properly enforced in all member states, especially in respect of state aids.

Mr. Nick Ainger (Pembroke) : I, too, would like to avoid the phrase "level playing field", but the Minister has referred to regulations in and differing practices between national states in the Community. Should we not first put our own house in order, particularly in respect of regional differences in relation to arable farming ? The Minister will be well aware, as I have written to her about this, that Wales is discriminated against by comparison with England. A farmer in a Welsh less-favoured area will receive, at the latest estimate, only £110 per hectare for cereals, while a farmer in England growing cereal in similar conditions will receive £191. How does that square with what I shall describe for the second and last time as a level playing field ?

Mrs. Shephard : The hon. Gentleman knows the answer to that as I seem to recall that he asked me the same question at our last oral Question Time. He knows that these matters must be dealt with for the United Kingdom as a whole, with the agreement of territorial Ministers and of the Ministry of Agriculture, Fisheries and Food. I also told the hon. Gentleman at the time that the arrangements pertaining to Wales are the responsibility of my right hon. Friend the Secretary of State for Wales.

Dame Elaine Kellett-Bowman (Lancaster) : Will my right hon. Friend give close consideration to the matter of inspection and try to devise a system in which countries do not supervise their own countrymen ? It has been proved time and again that other European countries will not

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condemn their own nationals. If they were examined by nationals from other countries, it would be much easier to get on top of state aids and to reduce the fraud which still disfigures the Community.

Mrs. Shephard : My hon. Friend is correct to say that if there are to be higher standards--of animal welfare, or of compliance--the EC needs to pay attention to the policing and enforcement of those standards. At my insistence in a particular instance the Commission has opened proceedings against France in respect of support being given to its pig sector.

An important contribution to British farming's future comes from Government -funded research. My Department will spend about £117 million on agriculture and food research and development in 1994-95. That is a large sum. The benefits to farming of our research and development programmes are also substantial. They have led, for instance, to significant improvements in animal breeding, helping farmers to produce the better quality products that consumers demand.

We are also promoting work on non-food crops and animal welfare. Research into the precision application of farm chemicals has contributed to a better environment as well as improving efficiency. Looking further ahead, there are important benefits to be exploited from advances in plant sciences and molecular genetics. In all these ways and more, our research and development programme is designed to help our farmers and the industries and consumers whom they serve. The Government also recognise the importance of successful marketing for the future of British agriculture. Here we have given a lead through a range of valuable measures, including refocusing Food From Britain, which we are supporting with more than £15 million over the next three years, the Continental Challenge and the proposed new marketing development scheme. I have asked my hon. Friends the Minister of State and the Parliamentary Secretary to involve themselves personally in specific areas where they have particular expertise.

Sir Teddy Taylor (Southend, East) : Before leaving the subject of aid, will my right hon. Friend tell the House and the public exactly what was the purpose of the very substantial and costly area payments that were introduced ? According to information that has been provided, they have cost an absolute fortune, but quite a number of people are not terribly sure what they are for.

Mrs. Shephard : I shall be delighted to answer my hon. Friend's question. The new area payments system is part of the reformed common agricultural policy. It is designed to reduce support for the end product-- in this case cereals, the reduction being 35 per cent. over three years. Payments are made direct to the producers, as compensation, on condition that they set aside 15 per cent. of their arable land.

It is widely agreed that within the single European market, and with the greatly increased trade in cattle and other livestock, we need to be particularly on our guard against the import of animal disease. That is why I have introduced newly strengthened measures to reinforce our defences. I have also made clear my determination to take whatever additional measures are necessary to safeguard this country's high health status.

Finally, and perhaps most importantly for the health of our farming industry, the Government are pursuing a sound

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economic policy, which has resulted in inflation at consistently low levels not previously achieved for more than 30 years. Interest rates are among the lowest in the European Union, and it is generally agreed that the economy is well on the way to recovery. This provides a sound foundation on which farmers can base their decisions in what is necessarily a long-term business.

Through all these means the Government are supporting British farming. We do so because it is an essential British industry, producing some 73 per cent. of the country's requirements for the food we are able to grow. Our total food and drink exports were worth some £8 billion in 1993--6.6 per cent. of our total exports.

Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury) : My right hon. Friend has just given export figures, but our imports are about £13.5 billion, which means that in the food and drinks sector there is a deficit of about £6 billion. Does my right hon. Friend agree that, while Food From Britain is doing an excellent job in promoting our exports, additional measures could be taken to encourage import substitution so that we might have more of our own produce, thereby reducing the deficit ?

Mrs. Shephard : The efforts of Food From Britain and the group marketing grants are designed to achieve precisely this end. There is some limitation when it comes to achieving a complete wipe-out of the trade gap of £6 billion. This is due to our being unable to grow tangerines in Inverness, and so on. However, we could encourage domestic consumption and more energetic and vigorous export efforts.

Mr. Robert Hicks (Cornwall, South-East) : On import substitution, the alleged state aid in relation to pigs and pig meat is a classic example of the way in which United Kingdom producers can satisfy and enhance their section of the United Kingdom market. At present such an outcome is being prevented by alleged dumping, particularly by the French but possibly by others as well, as a consequence of subsidies being given to domestic producers.

Mrs. Shephard : We should certainly take action where we can prove that illegal state aid is being given by other member states. In the case of the illegal aid to the French pig industry, we were greatly aided by the helpful action of the French Government, who issued a press release telling us their intention. It is not always so easy to prove, but where there is proof I will act.

Mr. Christopher Gill (Ludlow) : Will my right hon. Friend give way ?

Mrs. Shephard : I will give way, but I have taken some dozen interventions and after this one I should like to make progress.

Mr. Gill : I am sure that the House accepts that we cannot grow tangerines in Britain, but there are more fundamental problems of which the Minister is aware. In many instances they result from the fact that quotas limit the amount of raw material produced in Britain for our manufacturers. I was thinking particularly of sugar beet and milk. Those who add value to products cannot source raw materials at world prices, but have to pay the enhanced European Union price. That is surely one of the big,

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fundamental problems that must be addressed if we are to reduce the deficit in our food and drink balance of payments.

Mrs. Shephard : As so often happens, my hon. Friend puts his finger on the problem. The United Kingdom has never supported the use of quotas as a means of supply control because they distort the market, they are a disincentive for new entrants and they work side by side with all the market forces in a most difficult way. However, our argument did not prevail. Quotas were established to limit over-supply of commodities such as milk. Given that they now exist, I certainly do not want our industry disadvantaged by a further quota cut in important commodities such as milk when we are ideally suited to produce milk and certainly want the jobs that can come from additional manufacturing of milk products.

We support British farming because of its vital role in sustaining the most vulnerable and remote areas of our country and conserving the countryside. In that context, because farmers and some hon. Members have expressed concern following the recent cuts in hill livestock compensatory allowances, I should stress that our commitment to support livestock farming in the hills remains. We have no plans to abolish HLCAs, which are a long-standing and integral part of the Government's agricultural policy, but it is worth emphasising that the 67,000 livestock farmers in the hills will receive this year more than £550 million in direct payments. That is a measure of the strength of our commitment. Nevertheless, I am aware of the concern and I shall be undertaking a series of visits to our hill areas in the spring, summer and autumn. At the same time, we are integrating environmental aims more closely in environment policy.

Mr. William Ross (Londonderry, East) : The right hon. Lady has told the House that she intends to visit hill areas. Will that be in all parts of the United Kingdom, including Northern Ireland ?

Mrs. Shephard : I have had an invitation to visit Northern Ireland and I hope that I shall be able to accept it.

Last week, I announced a further six environmentally sensitive areas, two in the south-west, three in the centre of England and one in Essex, taking the total to 22, covering some 10 per cent. of our agricultural land. That will be followed by a series of further new environmental measures that I plan to introduce in the coming months. They will lead to United Kingdom expenditure on agri-environmental schemes rising to £100 million.

Mr. Ieuan Wyn Jones : The Minister has touched on the important issue of agri-environmental payments. Is it now Government policy to shift support from production to environmental payments ? If that is a clear shift in Government policy, will she consider simplifying the environmental payments as there are so many schemes with different criteria in different parts of the United Kingdom ? A simplified system would be easier to administer and easier for the farmers to understand and would enhance the environment.

Mrs. Shephard : We are introducing an environment component into the support for livestock farming in the hills. That may be what the hon. Gentleman has in mind. I am aware of the problems of livestock farmers in some hill areas, who might have the misfortune to be the subject of several schemes which interlock but do not always quite

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work together and have proper demarcation. That is certainly one of the issues that I shall be examining when I visit our hill areas. We shall shortly also be issuing a consultation paper on how to improve the environmental contribution of the main livestock subsidy schemes.

A further important issue for the farming industry is the future of the Agricultural Wages Board, on which we have consulted widely. As I said earlier, the consultation exercise generated almost 4,000 responses, with the vast majority supporting retention.That consultation exercise has raised a number of important issues which I am considering carefully with my colleagues, and I hope to make a statement before Easter on the way forward. My right hon. Friend the Secretary of State for Scotland plans to make a statement on the future of the Scottish Agricultural Wages Board at the same time. The past two years have seen farm incomes rise substantially. The information is given in detail in "Agriculture in the UK 1993" and "Farm Incomes in the UK" which have just been published. Total income for farming in the United Kingdom rose in 1993 by 38.6 per cent. in real terms, following an increase of 24.2 per cent. the previous year. That is good news after several years of decline. It has provided an opportunity for farmers to pay off debt and invest in replacement machinery. As I meet groups of farmers, I detect a slightly more buoyant feeling among them, although, as I always say, I would not want anyone to think that farmers have had a good year. I recognise that not all sectors have fared so well. The pig sector is suffering from a difficult period of low prices, although there have been slight improvements in recent weeks. Parts of the horticultural industry, particularly apple and soft fruit producers, are experiencing difficult times.

Mr. Michael Lord (Suffolk, Central) : My right hon. Friend is well aware of the difficulties facing the pig industry and the apple growers, and I am sure that she is tackling them as robustly as she can. I must stress that speed is absolutely essential. Unless help comes quickly, or unless the countries which are helping their farmers are prevented from giving that aid, the crucial time will have passed, the damage will have been done and the opportunity will have been missed.

Mrs. Shephard : Clearly, the fruit and vegetable regime is due for reform, which should take place this year. It is sad that the industry is experiencing the current problems after the sterling efforts of English Apples and Pears in promoting a superb product. I have said before that if everybody in Britain ate just one more Cox's apple each week, which is not a hardship, it would go a long way to solving the problem. Nevertheless, reform of that regime is overdue. Those two sectors apart, the industry is in a happier position than for some time.

I have gone into the details of domestic agriculture because that determines my approach to the CAP in general and price fixing in particular.

Mr. Michael Jopling (Westmorland and Lonsdale) : Does my right hon. Friend recognise that dairy farmers, of whom I am not one, are extremely concerned that there should be an early decision about the plans put up by the milk marketing board ? Will she always remember that the milk marketing board was set up because the dairy industry

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had small dairy farmers in remote parts of the country screwed down into a state of helplessness ? Does she realise that, even now, those people in the dairy trade will never be satisfied until they have taken the milk industry back to the state of near helplessness that it used to be in and that the sooner she makes a decision to support dairy farmers, on the basis of what the milk marketing board is asking, the better ?

Mrs. Shephard : I can reassure my right hon. Friend that the board's proposals on Milk Marque have gone out to consultation and we have asked for replies by 8 April. The vesting day of 1 November--the date proposed by the board, not MAFF--looks achievable, although obviously I cannot prejudge the effects of the consultation. I can reassure my right hon. Friend, however, that I am very aware of the vulnerability of milk producers, particularly those in the most isolated areas of Britain. I know that they want certainty, but equally they do not want a half-baked scheme that will then be prey to criticism from the competition authorities. It is most important that we get it right. I hope that 1 November is achievable. Our objective is to get a CAP that will encourage a competitive and more market -driven European industry in which our farming industry is bound to succeed. This is the only realistic approach, bearing in mind the budgetary constraints that now exist and the movement towards a more liberal world trading system following the recent GATT agreement. As so often, thinking in the UK is well ahead of that of its partners. The NFU's recent discussion document "Real Choices" shows that it, too, is wisely taking a longer-term perspective. European agriculture will only prosper in the long run on the basis of being competitive in world markets. That is why we pressed so hard for reform of the CAP. The 1992 reforms were a big step forward. They reduced the overall cost of the policy, brought farmers closer to the market and improved the environmental aspects of the CAP. But they were only a first step. We need to take the reform process forward, initially by reforming the unreformed sectors--notably wine, fruit and vegetables, sugar and olive oil.

The beef regime needs further reform because of continuing market imbalance and high costs. The price proposals for beef rightly seek to limit excessive spending on the beef special premium scheme in other member states, but not in the UK. I am, however, disappointed that the prices package contains nothing on further reform for beef or the unreformed sectors, and I shall be pressing the Commission to come forward with early proposals.

We have consistently been concerned at the high cost of the CAP. The introduction of both the budgetary stabilisers and the agricultural guideline resulted from UK pressure, and placed a brake on other member states' spending ambitions. Earlier this week, my right hon. and learned Friend the Chancellor secured agreement on a new budget discipline decision that will reinforce the operation of the guideline in the context of the European Council decisions in Edinburgh. The cost of the CAP to consumers has been brought under control : indeed, the rise in the food price index has been consistently below that in the general retail price index in recent years.

Against that background, as I have already indicated, the price proposals are rather more limited in scope than they have traditionally been. For the most part, they make no adjustment to the price and aid levels set by CAP reform. Support for commodities still awaiting reform is,

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in the main, retained at last year's level. It is proposed to cut monthly increments for cereals to reflect lower costs of storage. The monthly storage refund for sugar is to be similarly reduced. The aid to linseed is to be cut. In the milk sector, the Commission has presented two reports to the Council : one on the market situation for dairy products and the other on the implementation of the quota system in Spain, Italy and Greece.

The market situation report concludes that the market for milk and milk products in the Community is currently in better shape than was feared at the time of CAP reform in 1992. But in view of its concerns about the fragility of the situation, the Commission proposes that milk quotas should be cut by 1 per cent. from 1 April. To address the specific problem of continuing structural imbalance in the butter market, it also proposes that the intervention price for butter should be reduced by a further 3 per cent. from 1 July, which would be in addition to the 2 per cent. reduction that has already been agreed.

The price proposals will generate budgetary savings of £26 million in 1994 and £1.3 billion in 1995. The very large saving in 1995 results mainly from the proposal to postpone the payment of olive oil aids so that they fall into the 1996 budget. For 1994, CAP expenditure appears likely to be below the guideline, but it is not clear that the proposed savings are sufficient to ensure that the guideline is respected in 1995. I shall be pressing the Commission for clarification on that, and it will be a key objective to ensure that the outcome of the price fixing respects budget discipline. In any event, I believe that CAP support levels are too high, and I shall be urging the Council--subject to questions of balance between commodities--to adopt reductions.

One of the most controversial sectors in the negotiation will be milk. The Government can support the proposed reduction in the butter intervention price ; indeed, we would argue that an even deeper cut is justified. But we are opposed to a reduction in milk quota, for precisely the reasons I explained to my hon. Friend the Member for Ludlow (Mr. Gill). We do not have enough quota to meet our needs, and a further reduction in quota would deal a severe blow to the British dairy industry.

We will therefore oppose the proposed quota cut in the strongest possible terms. It is not justified by the Commission's analysis of the market situation and is not necessary to meet the Community's GATT obligation. It would have an adverse impact on the 1995 budget, largely because of the impact on the beef sector and the expensive accompanying compensation package that there would have to be for producers. And it would be indefensible at a time when large allocations of quota have been made to the acceding EFTA countries and when the Commission is proposing to make unjustifiably generous awards of additional quota to Spain, Italy and Greece.

That brings me to the Commission's report on the implementation of the quota system in the southern member states. It is clear from the report that, while all three countries have made progress, none has fully met the conditions on which additional quota was granted provisionally last year. Yet the Commission is proposing that Spain's additional quota should be awarded definitively for 1994-95 and beyond, and that the allocations for Italy and Greece should continue in 1994-95, albeit on a provisional basis and at a reduced level for Italy in view of its failure to meet its target for reducing surplus milk production.

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These proposals cause me considerable difficulty. When we agreed last year to the provisional award of additional quota to those countries, we did so on the clear understanding that certain conditions would be met. The Commission's report identifies shortcomings in all three cases. They are perhaps not so serious in the case of Spain as to warrant the withholding of quota, but that quota should be awarded provisionally pending a further review of progress later in the year. The situation in Greece and Italy is more worrying still. There are significant deficiencies in the Greek system for administering quotas, and there are serious doubts as to whether Italy can achieve the target set by the Council for reducing surplus milk production. In the circumstances, the Commission's proposals are too generous and the allocations to both those countries should, at the very least, be reduced. I shall press for that.

I also believe that the Commission has failed to think through its proposals to reduce the aid to linseed. There is a risk, therefore, that it will increase rather than decrease expenditure, because the aid reduction, combined with the new requirement on linseed growers to set aside 15 per cent. of their land, will upset the balance with competing crops and lead to a shift out of linseed. The right approach, which I shall be urging on the Commission, is to cut the aid to flax. That crop is very expensively supported and it will expand significantly if we do not get the balance right.

A further important element of the Government's approach to the CAP is the fight against fraud. Fraud does not just damage the taxpayer's interests ; increasingly, as total aid levels are subject to regional ceilings, it damages farmers' interests too. The United Kingdom has led the campaign in Brussels against fraud, and we shall continue to do so.

Yesterday's proposal by my right hon. and learned Friend the Home Secretary to launch a joint action is just the most recent UK initiative. Our efforts have borne some fruit : the tobacco regime has been changed, largely to deal with its vulnerability to fraud. The Maastricht treaty strengthened the role of the European Court of Auditors, and imposed a requirement on member states to treat fraud against the Community budget no less seriously than fraud against national budgets.

To an extent, CAP reform will help to reduce the scope for fraud in, for instance, export refunds and intervention--aspects that have been subject to much criticism. Direct payments to farmers are easier to control, and the integrated administration and control system, which we strongly supported, will ensure that the rules are the same in all member states.

Mr. Ainger : I must again raise the issue of the way in which Welsh farmers appear to be treated differently from English farmers, especially in regard to delays in payments of sheep and beef premiums. Does the Minister accept that, while we can criticise other nation states in Europe, we really must get to grips with the problems in the United Kingdom before we start criticising other countries ?

Mrs. Shephard : I entirely agree. Certainly, where fraud is discovered in this country--we are talking about fraud, rather than implementation of the reformed CAP--it will be firmly and vigorously pursued, as I am sure the hon. Gentleman knows.

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As for the administration of the arable area payment scheme in Wales, I am sorry to say that that is a matter for the Welsh Office ; but I am sure that the hon. Gentleman will pursue the issue. Mr. Ainger rose

Mrs. Shephard : No, I will not give way any more ; that is it.

Mr. Ainger : On a point of order, Madam Deputy Speaker. We are debating the implementation of CAP prices in the United Kingdom. I understand it to be Government policy that Wales is part of the United Kingdom. I am asking relevant questions about this point, but I am told by the Minister that they are a matter for someone else. May I have your assistance, Madam Deputy Speaker ?

Hon. Members : Bogus.

Madam Deputy Speaker (Dame Janet Fookes) : Order. I can do without sedentary help from hon. Members.

Mr. Ainger : Thank you, Madam Deputy Speaker. May I have your view on this ? I have asked relevant questions, within the terms of the debate, to which I have been unable to obtain answers.

Madam Deputy Speaker : The Chair cannot adjudicate on the extent to which Ministers' answers satisfy hon. Members. In other words, that is not a point of order for the Chair.

Mrs. Shephard : Thank you, Madam Deputy Speaker.

I have outlined my objectives for the forthcoming negotiations, and for the longer-term development of the CAP. My policy is rooted in my belief in British farming, which is a major player in the British economy. People tend to criticise farmers, while forgetting the essential fact that they produce food--three quarters of the country's indigenous food requirements. That is a contribution that we literally cannot live without.

British farming is pursuing a more market-oriented approach, with Government help and considerable success. However, the fundamental importance of agriculture to our economy, and the fact that nearly every country in the world provides support for its farmers--some to a far greater extent than us--mean that it does need Government support. Support must fall to more realistic levels, but as long as agriculture needs basic support we shall continue to supply it. Farming is not only the keystone of the rural economy ; farmers are the traditional guardians of the environment, and they need support to help them to maintain that role.

Earlier today, the Labour party held a press conference. I think that it was about the CAP ; it certainly was not about British agriculture. I am glad to say that Labour was very clear about its support for Government policy--reducing the cost of the CAP, reducing waste in the CAP and reducing fraud in the CAP. Those are all admirable objectives. What the party was not clear about was its support for the British farmer : there was not a word of praise, support or encouragement for him or her. I suppose that that is hardly surprising in a party whose preoccupations are entirely urban.

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As for the hon. Member for North Cornwall (Mr. Tyler), no doubt we can look forward this afternoon to his explanation of how he and his party can square their intention to bring about a federal Europe with a separate agriculture policy for Britain. Perhaps that will not be too difficult for them ; they have had a good deal of practice in facing both ways at once. Whatever they come up with, however, will not be good for Britain.

We should dispel the gloom of the faint-hearted. We can and do win in Europe, although we often stand alone. From that originally isolated position, my predecessor overturned the MacSharry proposals, which would have done so much harm to British farmers. What is more, it is the United Kingdom that has placed concern for the environment at the centre of the CAP and changed the emphasis of the CAP, bringing it closer to the market. Those are significant achievements, suggesting that our influence in Europe is greater than some would have us believe.

I shall be fighting to ensure that we continue to influence the CAP, and to ensure equality of treatment for all member states of the European Union. I believe that our farmers are the most efficient in Europe. We support them, but I want them to help themselves as well. This year's general agricultural prosperity gives them a sound foundation on which to build up their own image--to present themselves as the responsible business men that they are.

My intention is clear : to continue to fight for the success of a prosperous and efficient British agriculture. Agriculture is vital to the prosperity of Britain, the economic health of our rural areas and the environmental health of our landscape. It is a cause worth fighting for.

5.6 pm

Dr. Gavin Strang (Edinburgh, East) : I beg to move, at the end of the Question to add :

commends the contribution which farmers and farm workers make to the economy and supports the maintenance of the agricultural wages boards in their present form in order to prevent an increase in poverty in the countryside ; deplores the budget cuts in hill livestock compensatory allowances, in capital grants and in research and development which, coming on top of previous cuts, will inflict long-term damage on the industry ; believes that the 1992 changes in the Common Agricultural Policy, including the introduction of set aside, which the then British Agricultural Minister, the Right honourable Member for Suffolk Coastal, described as very much in the United Kingdom's interest do not adequately address the failures of the common agricultural policy including its exorbitant cost to the taxpayer ; and is of the view that the Government's claims to be tackling waste, fraud and bureaucracy are hollow as long as the Common Agricultural Policy continues in its present form.' I welcome the Minister to her first general agriculture debate. As she will probably recall, at one time we used to have a major agriculture debate each year, following the annual price review. After we joined the European Community, the major agriculture debate was held before the crunch decisions were taken on the annual EC prices package. As the Minister herself pointed out, because of the MacSharry reforms the annual price-fixing has become less significant. Therefore, in my view, it is still appropriate to hold the debate before the final decisions are made in the Agriculture Council, because they are important decisions. Nevertheless, the debate is really a general agriculture debate.

The Minister has already criticised the statement that I made this morning on the remarkable ground that I said

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nothing in support of Britain's farmers and farm workers. I suggest that the Minister begins by reading the Opposition amendment, whose first words are

"commends the contribution which farmers and farm workers make to the economy".

I note that there is no reference to farmers and farm workers in the Government motion.

When the Minister took on her responsibilities about 10 months ago, we had high hopes. We thought that her appointment would lead to some change--at least some mitigation of the policies pursued by the Conservative party for so many years which have damaged the agriculture industry. As I shall explain, we have been disappointed : the Minister has failed to live up to that early promise. Indeed, I submit that there has been no substantial change in the general thrust of the Government's policy following her accession to her important position.

Let me remind the right hon. Lady that, in what I believe was her first intervention in the final stages of the passage of the Agriculture Bill in 1993, she spoke out about the Government's position on the potato issue. She will already have disappointed not only much of the potato industry but, dare I say it, even some of her own constituents with the outcome. I welcomed the Minister's statement on the potato marketing board during the passage of the legislation as it represented a clear change from the statements made by her predecessor. But the House needs no reminding that, within a few months, on 30 November, she made a definitive statement that "Having considered all the arguments with great care, we have concluded that the Scheme must come to an end".

Any hopes that there might have been some help for the potato marketing board were dashed within a few months.

I shall not blame the Minister for the disarray in the milk industry because she inherited the 1993 Act when it was too late to amend it. The state of the milk industry is a direct consequence of the irresponsible legislation introduced by her predecessor. If anyone cares to read the statements that we made during the passage of that Act, they will recognise that our line has been vindicated. I remind the House that we wanted to retain the milk marketing boards, although we wanted to build in greater flexibility. A Labour Government fought with great difficulty to secure amendments to European Community legislation--I remember being in the Council of Ministers at the time--and the continuation of the milk marketing boards. Conservative Governments should have maintained that policy. Rather than confronting industry directly and saying, "Look, as Conservatives, we are against the milk boards because we think they are a form of pragmatic socialism"--a phrase used by a previous Conservative Cabinet Minister--the Minister's predecessor sought to hide behind the Commission's view that the milk marketing board scheme did not encompass skimmed and semi-skimmed milk. Since the legislation was enacted, however, the European Court's adviser, the Advocate General, has come out against the EC Commission and has supported the British industry's view that the scheme encompassed skimmed and semi-skimmed milk.

Mr. James Paice (Cambridgeshire, South-East) rose

Dr. Strang : I shall not give way as frequently as the right hon. Lady--she is the Minister--but I shall give way on a few occasions and with pleasure to the hon. Gentleman.

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Mr. Paice : The hon. Gentleman fought hard to save or to continue the milk marketing board after our accession to the European Community in the early 1970s. Does he draw any conclusions from the fact that in the past 20 years dairy products from abroad have achieved a massive penetration of the British dairy market--it has suffered as a result-- because of the inability of the milk marketing scheme to adapt to the pressures caused by the new marketing systems and the development of new dairy products?

Dr. Strang : The hon. Gentleman makes an interesting point. Part of the answer to his question lies in what the Minister said. She reminded the House that the Government had opposed the introduction of milk quotas, which place a constraint on the expansion of our milk industry. It is a worrying situation. As he may be aware, some multinational companies--I will not name them--are threatening to move their investment elsewhere because they are not satisfied that they will be able to get enough milk to produce the high-value products that he and I want them to produce in this country. We should have built some additional flexibility into the milk marketing boards scheme as it could have helped us to deal with the problem. The milk marketing boards should have been retained. Once the Government decided that they were to be abolished, however, they should have accepted responsibility for the revised scheme. They should have said that they would consult the industry before deciding on the new arrangements for that hugely important industry. I put it no stronger than this--they might have concluded that the creation of regional, integrated co-operatives was the best way to secure a flexible market and competition with the big dairy companies. If the Government had considered that option- -no doubt they would have paid great attention to the submissions of the milk marketing board and the Dairy Trade Federation--they might have reached that conclusion, in which case we would not have the present disgraceful state affairs

The introduction of the new arrangements has been delayed. I am sure that the Minister will correct me if I am misrepresenting the position, but, as I understand it, 1 November is the earliest that the new arrangements can come into force. There is a general belief that it will probably happen then, but I understand that the new revised arrangements are still under consultation. We do not yet know, therefore, whether they will satisfy the Government and come into operation on 1 November.

As the Minister implied this afternoon, the arrangements may be challenged on competition grounds by the United Kingdom or in the longer term--in two years or so--by the Commission. I am happy to give way to the right hon. Gentleman.

Mrs. Shephard : I am not a gentleman yet, but I may become one. I do not feel like performing like one at the moment.

I did not say that the arrangements would be subject to challenge from the competition authorities. I said that we had to arrange matters so that they would not be subject to early challenge by the competition authorities. I said so in an answer to a question from my hon. Friend the Member for Worcester (Mr. Luff), who wanted to speed up matters. I replied that, while I understood the problem of delay, I

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did not want that delay to result in an arrangement that was subject to early challenge by the competition authorities. I think that the hon. Gentleman perhaps misheard.

Dr. Strang : . I am grateful for that clarification. The right hon. Lady will understand that her intervention confirms the substance of my point that the Government are trying to ensure that the new revised arrangements are not subject to a challenge, or an effective challenge, by the Commission in the future.

Mrs. Shephard : Among many other things.

Dr. Strang : We shall accept that clarification as well.

Mr. Campbell-Savours : If the Minister had accepted the structure that we proposed in Committee, she would have secured her objective six months ago.

Dr. Strang : . I pay tribute to the valuable work of my hon. Friend the Member for Workington (Mr. Campbell-Savours), who led for the Opposition in the Committee that discussed the matter. I in no way disagree with him, but, whatever the Government do, and whatever the extent to which the Minister squares the position with her authorities, in two years' time, if not earlier, there is a possibility of a challenge from the Commission. Let us not forget that. We faced such a problem when we were in government. Understandably, the Governments of some member states will encourage the Commission to challenge the arrangements in this country. We were disappointed by the Minister's statement on potatoes following the enactment of the Agriculture Act 1993. We were again disappointed by the outcome of the Minister's deliberations and those of the Government on public expenditure on agriculture. Hon. Members will understand that, in addition to the huge expenditure required under the auspices of the common agricultural policy, a substantial amount of expenditure is in the Government's control.

The Minister started by attacking the farm and conservation grants. The Government like to claim that they support the principle of a more environmentally friendly agriculture, but the Minister cut the grant for investment by farms in waste handling facilities. The Government also cut a range of other environmentally friendly grants, such as the grants for traditional walls--or for "dry stane dyking", as I believe hon. Members usually call it. The grants for the creation of hedgerows were cut too.

The Government have made it clear that when they need cuts in expenditure the environment is one of their first ports of call. So much for all their talk about the agri-environmental package and the need to encourage the building of environmental objectives into British agriculture.

The second target for cuts was, for the second year in a row, the hill livestock compensatory allowances. We listened carefully to what the right hon. Lady said about those. I welcome the fact that she is to visit the hill areas in England, and I am pleased that she will go to Northern Ireland. I hope that the Secretaries of State for Scotland and Wales will allow her to visit hill farmers in Scotland and Wales as well.

Perhaps the right hon. Lady could learn something if she spent time talking to the hill farmers of this country. She

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