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10.31 am

Mr. James Paice (South-East Cambridgeshire): I want to follow the example of the hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy) and concentrate entirely on agriculture, in particular livestock producers in the hills and uplands, where the crisis is most acute.

A survey by the National Farmers Union in 1995 showed that 42 per cent. of farmers in the less-favoured areas had a net farm income of less than £10,000. By any reckoning that is a low figure and it is the background against which we must view the worsening situation.

The hon. Member for Braintree (Mr. Hurst) was right: agricultural employment has been falling for a long while. That is happening predominantly in the arable areas, whereas the hills and uplands tend to have family farms and the fall there has been significantly smaller.

It has been implied this morning that the whole of the problem in the hills falls to the BSE crisis. We cannot get away from the fact that it is a significant factor, but we should consider some more up-to-date information. The peak of the crisis came at the end of March 1996, when the market collapse took place; market prices climbed back during 1996 and other livestock prices benefited from the collapse in beef prices.

Today, fat cattle are about 90p per kilo, compared with £1.09 12 months ago, after the recovery. Store cattle have fallen by more and fat sheep by dramatically more, to 94½p from £1.39 per kilo a year ago. That picture is mirrored across all other farm produce. Imports are coming from countries that use inputs such as mammalian meat and bonemeal, which are banned in this country.

We have had four currency revaluations in 1997, of which two were under the previous Government, because of the appreciation of sterling. As my hon. Friend the Member for Congleton (Mrs. Winterton) said, the two later revaluations must have been partially affected by the handing over of the control of interest rates to the Bank of England.

It has been estimated that the total cost of the revaluations to the agriculture industry is about £2 billion off farm gate prices. The consequences are there for all to see. The Meat and Livestock Commission estimates that in 1997 sheep exports will be between 400,000 and 500,000 head, compared with 1 million head in 1995 and 770,000 in 1996: a dramatic decline and one significant reason for the fall in sheep prices.

In January to September this year, beef imports from the Republic of Ireland were up 72 per cent. on the same period last year. Those from the rest of the European Union, including many countries that do not have all the controls that we have, but where BSE is known to be present, were up 42 per cent. In particular, it seems odd that we can import beef from over-30-months cattle, whereas we quite rightly cannot consume our own.

The price falls show that a significant part of the current crisis falls to events of the past few months. The Government's actions do them little credit. They abandoned the regional panels within days of taking office, thereby severing the contact with the industry

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that would have let them know what is going on. The over-30-months scheme cost the industry £29 million, but one should consider that farmers in the less-favoured areas, with an income of about £10,000, would have to dispose of only two cull cows to reduce their income by 10 per cent. because of the difference in price over the past 12 months.

Hill livestock compensatory allowances have been cut. The hon. Member for North Cornwall (Mr. Tyler) said that the Conservative Government cut HLCAs. I acknowledge that they did in some years, but that was against the background of a falling pound, rising exports and increasing prices.

The Government decided to charge farmers £5 to £10 for cattle passports. The Conservative Government said that we would fund the setting up of a computerised system; the current Government have abandoned that. The Minister of Agriculture, Fisheries and Food said the other day that the existing passport scheme costs about £7.2 million; but his proposed figures could raise anything up to £38 million. When I challenged his Minister of State, he refused to rule out the possibility that the Treasury might make a profit from the fees.

The Meat Hygiene Service will cost the farming industry about £44 million. I share the views of the hon. Member for Ross, Skye and Inverness, West on the subject of beef on the bone. I believe that the evidence demonstrates that the public believe the ban to be an overreaction.

The Minister of Agriculture, Fisheries and Food has criticised my party for urging extra public expenditure on monetary compensation, but he refuses to take on board the fact that some money is available to him. The sheep annual premium scheme will underspend in the current year, so there will be a significant increase in our Fontainebleau rebate in the next financial year; Treasury figures suggest that it could be in excess of £100 million. That money could be reallocated back into the Ministry and used to help with European compensation without an overall increase in public expenditure.

In the past few months, the Labour party has made a great deal of its alleged representation of rural areas. There is a great difference between representing and caring. The Minister of Agriculture, Fisheries and Food has already garnered a reputation for being distant, remote and unwilling to meet representatives of the farming and other industries for which he is responsible. By getting rid of the regional panels, he has cut himself off from the one link that he had. He has been worrying about new names and logos for his Ministry, but the current problems may lead to a dramatic diminution of the agriculture industry for which it is responsible. I hope that the Minister will take on board not only the views of hon. Members on both sides of the House who have spoken this morning but the views of the thousands of farmers across all sectors, but especially in the livestock sector, who face a desperate future. They have gone out on the streets and to the docks. I do not condone any violence, but I recognise the plight that has driven them to those actions.

I hope that the Minister will go back to his colleagues and say, "Act now. We cannot let farmers face the new year in this abysmal situation; the pound continues to harden and prices continue to fall." In this densely

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populated country of ours, we cannot afford to let the countryside fall into dereliction, but that is what will happen to our hills and uplands if we do not assist farmers now.

10.40 am

Dr. Liam Fox (Woodspring): I begin by congratulating the hon. Member for West Aberdeenshire and Kincardine (Sir R. Smith) on obtaining the debate and enabling us to discuss some topical and important problems that confront the countryside. As he began in Scotland, I too shall begin with comments about Scotland.

I sometimes wonder whether those who live in the central belt of Scotland understand that rural Scotland not only comprises 90 per cent. of Scotland's land mass but is home to one third of the Scottish population. That seems sometimes to be forgotten in Scottish domestic politics. It is certainly forgotten by Labour Members, because they have not bothered to turn up this morning.

Employment in rural Scotland increased by 6.5 per cent. between 1981 and 1991; the population rose by 3.5 per cent. In office, the Conservatives set up the rural partnership fund, which was worth £3.7 million in 1996-97 and £4.2 million in 1997-98. In response to a specific point made by the hon. Member for West Aberdeenshire and Kincardine, I remind him that under the Conservatives capital allocations to housing were substantially higher for rural Scotland than for urban Scotland. He made one or two valid points.

Sir Robert Smith: The Conservatives also introduced rules under which receipts from sales of council houses had to go towards repayment of debt rather than investment in the quality of the local housing stock.

Dr. Fox: I shall not go into that argument. Repayment of debt is important when some councils in the United Kingdom have debts higher than those of some third-world countries.

Today, we have had the rural Liberal Democrats trotted out. More townie than townie or more country than country are the Liberal Democrats, depending on the audience. In a different debate, we will have the townie Liberal Democrats trotted out. A party that cuddles up so closely to the Government--and with a leader who waits under the Cabinet table for any crumbs of prestige that might be dropped on him--is in danger of being found guilty by association with the Labour Government.

The Government do not regard the countryside as a real place with real people or real jobs. For many members of the Government, the countryside is somewhere where people from Islington go at weekends. We have to ask what the Government have against the countryside. They have increased interest rates. The rural development agencies will be based in urban areas. In the south-west--a matter that is important to my hon. Friends the Members for Tiverton and Honiton (Mrs. Browning) and for South-West Devon (Mr. Streeter), who were unable to speak in the debate, the RDAs will be dominated by Bristol and Plymouth, not rural areas. The local government settlement has a rural to urban bias.

The Government failed to fight for beef at Amsterdam. They have failed to compensate for the rise in the pound. They have introduced cattle passport charges, new Meat Hygiene Service charges and extra abattoir waste costs.

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They have cut over-30-months scheme cattle compensation and the hill livestock compensatory allowance. The Government seem to serve no one's interest but their own. They are there to serve the cult of the Prime Minister's ego, not the people in the countryside.

The question is--[Interruption.] The Liberal Democrats should stop for one minute and contain themselves. Why does the rural economy matter? Because it has a £17 billion turnover. It represents 1.5 per cent. of the United Kingdom's gross domestic product. It employs 608,000 people--more than transport, mining and quarrying, research and development, post and telecommunications, or the energy or water supply industries. It makes an important contribution to our trade. It is important for our investment. However, the key measure of farm investment--the agricultural gross fixed capital formation--will be hit by the current loss of confidence and the Government's raising of interest rates.

Farmers are the natural custodians of the countryside. Under the Conservative Government, more than 5,200 farmers signed up to the countryside stewardship scheme. By designating environmentally sensitive areas, which cover more than 15 per cent. of UK land, we encouraged integration of agricultural practices with sensitive conservation management. Under the farm woodland premium, more than 17,000 hectares of tress have been planted. Those are all important environmental gains.

The problem with farmers is that they are capital rich and cash poor. When a crisis hits, they stop spending, which presents a potentially catastrophic downturn for rural service industries. The low incomes associated with the current situation mean that the young will not enter farming. Where will the next generation of farmers come from? If people leave farming, prices will fall, there will be a loss of capital value and we shall have a spiral downwards. That is the root of the crisis. As several of my hon. Friends have said, we face a genuine crisis in the countryside.

Then again, the countryside and environmental management require farming to make a profit. Stone walls do not build themselves. Hedges do not look after themselves. What those in towns tend to call nature is in fact a constant battle against nature, waged on the nation's behalf by those who look after our countryside.

The point made over and over again by hon. Members from all parties is the plight of the beef industry. I represent a constituency which has a large number of beef and dairy farmers. There is a need to understand exactly where we are at present. We have fulfilled the conditions that were set out at Florence. We have kept our part of the bargain. We have the safest beef in Europe. That has been accepted by hon. Members on both sides of the House today. The public view what the Minister announced last week as an excessive knee-jerk reaction, but we must accept that the beef ban is now political and economic. It is nothing to do with safety. It is a protectionist measure levied against British farming by a protectionist mentality in the European Union that seeks to protect European farmers from higher-quality British products.

The Government should feel most ashamed of their failure to fight for beef at Amsterdam. We have made it clear that we would not have allowed the Amsterdam

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process to come to a conclusion without the lifting of the beef ban, but it was cast aside callously by the Government, who have no regard for what was happening.

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