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11.25 am
Mr. Richard Livsey (Brecon and Radnorshire): It is good to follow the hon. Member for Preseli Pembrokeshire (Ms Lawrence). She has been doing her homework in visiting farms in her constituency, which is the best way to find out precisely what is going on. I thank the hon. Member for Ceredigion (Mr. Dafis) for raising this topic, which is vital in my constituency, a mainly farming area, with up to 25 per cent. of the population dependent on farming in one way or another.
Hill farms, upland farms, small dairy farms and smallholdings have all been badly hit, particularly in the past two years or so. Upland farms, which come between hill farms and lowland farms, have a less robust support system than some of the hill farms, and they have been particularly badly hit, and--I say this as an agriculturist--the push factors out of farming are acute.
Between 1992 and 1997, hill livestock compensatory allowances were cut twice by the Conservative Government. Those HLCAs are in the less-favoured areas and are a social support mechanism. They are vital for maintaining people in the hills and uplands. Clearly, that is crucial in areas of Wales such as my constituency, where practically nowhere is less than 400 ft above sea level.
The previous Government muddled the bovine spongiform encephalopathy crisis with HLCA payments. They used the HLCA mechanism to add on a special one-off £60 million payment. Fair enough, the money was needed, but it was for only one year. The present Government are religiously cloning the previous Government's budget and now we have a crisis. I sincerely hope that that budget will be consolidated and changed into HLCA payments.
The rise of the pound against the European currency unit of 20 per cent. has created huge problems, particularly in terms of the reduction in ewe premiums of up to 40 per cent. We do not have to be magical mathematicians to realise that if a farmer has a 600-ewe flock and the ewe premiums have gone down from approximately £20 to £12, that is a big loss for that farmer.
For small upland dairy farms, there are lower cull cow prices as a result of the over-30-months-scheme weight limits and lower milk prices. Smallholdings are in crisis as well. Farmers have occasionally cried wolf when the situation has not been as serious, but it is really serious now, and all the farms to which I refer are family units.
In the current financial year, one county council smallholding in my constituency will be £19,500 down on the previous financial year. It is not difficult to see where that is coming from--the reduction in milk prices of £13,500; the reduction in barren cow prices of £3,000; and the reduction in calf sales of £3,000, all in the past 12 months. It is not this Government's fault; it is the result of all sorts of things that happened under the previous Government. We have a major crisis on our hands. The farm comprises only 50 acres, but three children have been reared there. Now, the farmer rightly says that this is the worst crisis in agriculture since the 1930s, and I do not think that that is an overstatement.
One particular plea to the Minister is to chivvy up his Department and get the ewe premium payments expedited. Many farmers in Wales have not received them; they would make a big difference to them on the threshold of winter. The previous Government cut staffing, so it has taken a long time to expedite the payments.
I recently visited three farms in the famous area of Beulah. The Beulah ewe is known worldwide as a first-rate breeding ewe. It is the dam of the Welsh mule. The farmers whom I visited enjoy a fantastic vista across to the Cambrian mountains. We could see nine family farms spread out in front of us, but only two of them had sons who could carry on the business. That is a major crisis.
One farmer I visited had two daughters, one of whom had worked on the farm--but even she, as a professional shepherd, had left because she could earn more money working as a shepherd in Wiltshire than she could earn on the family farm. As the hon. Member for Ceredigion said, net farm incomes are too low to support two people. Indeed, the Welsh farm management survey has forecast a reduction of 40 per cent. in farm incomes in the current financial year. That is a huge crisis for farmers. Young farmers are not prepared to stay at home and live on a poverty wage. Who can blame them? But that means that the countryside will rapidly depopulate. We have already heard this morning statistics on the average age of farmers in upland Wales.
The all-Wales agri-environmental scheme is about to be introduced, and the Liberal Democrats welcome that. However, it appears that it will not be as well financed as the pilot Tir Cymen scheme. It is vital that the overall income used for production purposes on our upland farms is compensated for in the agri-environmental scheme. There must be no less money coming in to support our family units.
The whole rural economy is in crisis. The powerhouse agency must have a sound and thrusting strategy for small businesses. It must ensure that rural families have sufficient income from off-farm activities as well as from on-farm activities. There is the whole question of changes from 5b funding to objective 2. I understand that a great deal of 5b money has not been claimed in Wales, and we must get access to that.
What are the solutions to the problems that I have outlined? We must have the £60 million BSE payment--which was one-off--incorporated into HLCAs. The HLCAs must be restored to their 1992 levels, before the Tories cut them, plus inflation. We have to secure green pound compensation, which will greatly assist the impact on the ewe premium and on milk prices. We must raise the weight limits on the over-30-months scheme. We must take up the European Union retirement scheme, which the previous Government would not do. I well remember the right hon. Member for Suffolk, Coastal (Mr. Gummer), in a previous decade, saying that he would not touch it. He was wrong to take that view.
We must adopt the European Union's scheme for young farmers, which gives them access to funding, so that they can obtain working capital to help them make a start on their farms. We must ensure that the Agenda 2000 proposals take into account an element of modulation on a UK basis and, indeed, on a Welsh basis, to support family units.
Mr. Ieuan Wyn Jones (Ynys Mon):
I congratulate my hon. Friend the Member for Ceredigion (Mr. Dafis) on securing time for this important debate. I welcome the contributions of the hon. Members for Preseli Pembrokeshire (Ms Lawrence) and for Brecon and Radnorshire (Mr. Livsey). Many of the points of real concern to the agriculture industry have already been aired. The hon. Member for Brecon and Radnorshire referred to the crisis surrounding entrants into the industry.
One major concern is that the average age of people in the agriculture industry is steadily rising. Young people no longer want to come into the industry. Therefore, packages to support young farmers are important. I think in particular of pensions and of the European Union schemes. When I visited France with the Select
Committee on Agriculture, I found young farmers from Wales taking up the offers available in that country. They could not stay in Wales because there was nothing on offer.
The immediate crisis facing the industry in Wales must be set against the background of continuing concern about the viability of the industry in general. Indeed, we need to look at the viability of the whole rural economy. It is important to put the debate into the context of the employment crisis, but that must be set against the background facing the rural economy year on year. We cannot look at agriculture in isolation--it must be part of an integrated rural strategy, bringing the strands together. If the economic powerhouse is to make a real impact in rural Wales, it must ensure that the integrated approach is uppermost in its policy.
Although agriculture faces major problems, it is still the major player in the economy of rural Wales. We have heard eloquent speeches, from both sides of the House, about the immediate crisis facing the industry. For example, we heard about the problems surrounding the strength of the pound; the green pound and its effect on commodity support; the BSE crisis and the previous Government's refusal--and, so far, the refusal of this Government--to ask the European Union for additional support; the reduction of support through the over-30-months scheme; and the continuing ban on exports.
I am pleased that certain moves have been made to resolve the crisis. If the Government secure a raising of the ban on beef exports, that will boost confidence and aid the marketing strategy of the beef sector. That should be an immediate aim.
We have also heard much about hill livestock compensatory allowance payments. There is no immediate prospect of an increase in those payments. Farmers are aware that although prices have been frozen this year, the prospect is that they will be frozen again next year. A freeze is likely, because the Government have adopted for at least two years the previous Administration's spending plans.
Unless Ministers are prepared to consider switching money from other budgets in the Welsh Office, farmers face the prospect that HLCA payments will again be frozen next year. The effect of such a freeze on farmers in difficult areas will be devastating. This year, therefore, farmers are making the case that the review should be a real one and should not be conducted against a background of frozen payments.
Current pressures on the industry are adding to the underlying problems that it faces. There are two major concerns on the horizon--common agricultural policy reforms and Agenda 2000, and the World Trade Organisation talks. We must consider how the industry will be supported, because it must be supported. People from every part of the political spectrum realise that agriculture cannot survive without support in some areas in Wales and other parts of the United Kingdom. The nature of support for the industry will change over time, but it must have support.
For all types of reasons, Plaid Cymru Members support the shift from headage payments to agri-environmental payments, although we place some caveats on that support. First, as my hon. Friend the Member for Ceredigion made clear, agri-environmental payments
must be regarded as part of a package rather than as the entire answer. Commodity support--added to the agri-environmental part of the equation--must be retained in one form or another.
Secondly, the Government must show clearly that they are committed to keeping their side of the bargain. Let us acknowledge the fact that, currently, the European Union finances 100 per cent. of commodity support. The problem with agri-environmental payments is that they must be co-financed. Based on the record of recent Governments, however, we cannot rely on European payments being co-financed. Whenever European Union support required matching income, the Conservative Government refused to do it properly. The result has been that farmers in other parts of the European Union receive co-financed support, annually giving them greater income buoyancy.
A question that Ministers will have to answer is whether they will ensure that a shift to an all-Wales agri-environmental scheme is properly financed. We should remember that the Tir Cymen pilot scheme has been largely successful, building on the previous environmentally sensitive area schemes--some of which were successful, although others were not. Although the results of ESA schemes have been patchy, the Tir Cymen scheme has built on their successes and examined the possibilities of co-farm management.
The Tir Cymen scheme has been generally successful because it was targeted; the available pot of money was not spread too thinly and it dealt with only one geographical area. The problem with an all-Wales scheme is that, unless the Government realise that more money must go into the system, only one of two options will be available. The first option is that the butter will have to be spread more thinly, which--because there will be no incentive--will deter many farmers from entering the system. The second option is to prevent some farmers from entering the scheme.
An all-Wales scheme can work in only one of those two ways. The real fear among Welsh farmers is that the second option will prevail, and that the rules will be rigged to prevent some farmers from joining the scheme. Many farmers believe that such an outcome is likely, although I hope that Ministers will convince hon. Members that it is not.
The point made earlier in the debate about CAP reform was well taken, because such reform must be made. I am sure that all hon. Members believe that allowing 80 per cent. of the aid to go to 20 per cent. of farmers is a grotesque situation. I should tell the hon. Member for Preseli Pembrokeshire that Plaid Cymru Members support modulation, because we believe that help must be targeted. We support modulation not to ensure that those with large farms continue to fill their pockets with European money, but to ensure that the Welsh traditional family farm receives targeted support and that cuts under CAP reform do not disproportionately hit small family farms. Most farmers in Wales share those objectives. In targeting aid, we shall not only reduce the CAP budget but ensure that farmers who really need help receive it in the most beneficial form.
HLCA payments have always been regarded as socio-economic payments, assisting farmers who farm in difficult areas. There is even a system within HLCAs that
distinguishes specially disadvantaged areas from disadvantaged areas. HLCA payments have always been made on the basis that more assistance should be given in the areas where it is more difficult to farm. Over the years, many people have examined different systems of providing such support, but no one has yet devised a better one. Everyone has been forced back to the conclusion that the current system is the fairest way in which to provide money. Although I realise that we might have to re-examine the current system to ensure that it is properly targeting payments, it is broadly accepted by the industry.
The Government's decision to freeze HLCA payments this year is no different from the decision made by the previous Government. I remember so well hearing an agriculture Minister say at a sitting of the Select Committee on Agriculture, "Of course, we shall have to consider reducing HLCA payments to farmers in years in which their incomes go up. That must be seen not as support in the traditional sense, but as support when incomes are low. Payments are increased when farmers' incomes are low and go down when incomes rise." Over the past 10 years, however, the problem has been that payments have been cut when incomes are high, but have never been increased when incomes are low. Over the past 15 years, in real terms, HLCA payments have been eroded considerably.
By observing the lines on graphs, we know that, ultimately, HLCA payments will simply disappear. That is the obvious outcome. For many years, there has been a type of shadow-boxing in progress, in which farmers argue and lobby for greater HLCA payments. Although Ministers listen, they do not listen properly, because the payments are never increased. The payments are withering on the vine. We can predict that, in about 10 years, the value of the payments will be virtually nothing.
What is the Government's policy on HLCA payments? Do Ministers want them eventually to disappear? If so, what do they think should replace them? Everyone involved in the debate realises that if support is withdrawn, agriculture will simply cease to exist as a living industry in some areas of Wales. My hon. Friend the Member for Ceredigion touched on an important point when he said that we are talking not only about the economy of rural Wales but about the fabric of rural society. Hon. Members who have visited farms in rural Wales realise the difficulties facing those farms.
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