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Mr. David Drew (Stroud) (Lab/Co-op): I admit that it is a spatchcock of a proposal, but the difficulties arose because even the NFU was greatly split over it, let alone the other farm organisations. It could be argued that the Government could have shown greater leadership, but the proposals were bound to upset someone. Does the hon. Gentleman agree that we have the best of what could have been proposed?

Mr. Paice: The term "a spatchcock of a proposal" deserves to be put in bold capitals in Hansard. It sums up the situation. It is not the fact that we have a hybrid scheme that is the problem—it is the fact that the Government announced it in March 2004 without any understanding of the complexities of sorting out who would be entitled to it and how it would work. Despite all that, they insisted on introducing the scheme on 1 January. They fundamentally misunderstood the task on which they had embarked and that is what has caused the shambles, the dismay and the distress felt by so many farmers.

Andrew George (St. Ives) (LD): I entirely agree with the hon. Gentleman's analysis that the competence of DEFRA is in question, given that it made an announcement without at the same time making clear its assessment of its impact. Nor did the Department properly lay out how it would overcome the obvious complexities involved in delivering the new scheme. What is the view of the Conservative party and which options, of those available to the Government, would it have chosen?

Mr. Paice: The hon. Gentleman is not keeping up with the real world in which we live—

Mr. Ian Liddell-Grainger (Bridgwater) (Con): The hon. Gentleman is a Liberal Democrat.

Mr. Paice: Well, I suppose it is hardly surprising, then.

The fact is that the Government made their decision back in March and, like it or not, we are lumbered with it. That is the system that we are going to get. If the hon. Gentleman wants to ask me questions about what we would do, he must also say what the Liberal Democrats would do if, by some unbelievable circumstance, they
 
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were to be able to do something. As always, of course, the Liberal Democrats can say what they like because they know that they will never have to do it.

Kali Mountford (Colne Valley) (Lab) rose—

Mr. Paice: I will give way to the hon. Lady and then I will move on.

Kali Mountford: I am grateful to the hon. Gentleman for his generosity in giving way. I have listened carefully to his speech so far and am fascinated by it. However, will he now move on to such schemes as the rural bus partnership scheme, the rural train partnership scheme, the village renaissance scheme and the market towns initiative? Will he discuss village schools and other aspects of our rural communities?

Mr. Paice: I intend to move on, and I am grateful to the hon. Lady for inviting me to do so.

As a result of the complexity of the scheme that we have just discussed, it was widely believed that the Rural Payments Agency could not make any payments until well into 2006, despite the target of December 2005. We know now, because it was announced literally two or three hours ago by the agency, that that will be delayed until February 2006 at the earliest. That is a direct result of the complexity of the system that the Government introduced. We need a specific undertaking by the Government that those delays will be recognised and, if necessary, an interim payment made. The cash-flow implications for farmers of the 14-month delay originally envisaged between their last integrated administration and control scheme payment and their first single farm payment were bad enough. If the gap is going to be 16, 17, 18 months or more, the cash-flow implications are entirely unacceptable.

Cross-compliance and what farmers have to do to receive payments are another feature of the new system. Farmers must obey a huge list of statutory requirements. That sounds fine—of course people should obey statutory requirements—but farmers will pay twice. They will pay the penalty for breaking the statutory requirement and they will also lose their single farm payment. The Minister must explain the justification for that double whammy. Perhaps the starkest example of the Government's gold plating of regulation is to be found in the rules on cross-compliance, including the rules on good agricultural and environmental condition. Annex IV of the European regulation defines good agricultural and environmental condition in just 13 short lines. The Government's statutory instrument consists of 700 lines. Last week, farmers received three books on cross-compliance, including 36 pages on soil management and 44 pages on habitat and landscape. That illustrates more than anything the Government's contempt for farmers and their complete failure to understand that farmers know far more about managing their land than Labour Ministers.

What is going to happen now? It is widely believed that the reforms will result in a further fall in domestic production. That matters, because increasing imports of food have a damaging effect on the environment, both through global warming and through the destruction of
 
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local environments where food is produced. Equally important, we face massive increases in world demand for food because of population growth and prosperity, which will result in an estimated 50 per cent. increase in grain demand by 2025. In the short term, there is a risk of disease, and we have already seen how avian flu in south-east Asia has suddenly removed supplies of poultry meat from our market.

The Government do not seem to care. They have not made any assessment of how much production will fall or what will happen to our land when it is taken out of production. How much of our food manufacturing industry will move abroad if raw material is not produced here? That sector employs another 500,000 people. Some people estimate that hundreds of thousands of acres of grass will not be cut or grazed. No doubt, the Government will point to the entry level scheme, which is fine as far as it goes. However, £30 per hectare will barely cover the costs. Ministers say that the scheme requirements are little more than things that most farmers have been doing anyway. They are right, but farmers have being doing those things as part of profitable farming. If there is no profit in farming and no margin in ELS payments, they will not be done.

Mr. Clifton-Brown : My hon. Friend is quite right—we should produce food in this country. However, we have one of the worst balance of payments records that we have ever had. In the dairy sector alone we have a £700 million deficit. Is that not a disgrace, as we could produce that food ourselves?

Mr. Paice: It is indeed. I shall take one more intervention and then I shall move on to that very point.

David Burnside (South Antrim) (UUP): I hope that the hon. Gentleman will cover in his speech the greatest capital cost to be borne by farmers over the next year—the implementation of the nitrates directive. In Northern Ireland alone, for 22,000 farmers managing 32,000 farms it will cost £237 million, with only £30 million available through the farm waste management scheme. That massive capital cost will be imposed on farmers throughout the United Kingdom during the next year. What will the Conservative party recommend that the Government do, or what will the Conservatives do if they are in power to alleviate that massive capital cost to our farming communities?

Mr. Paice: I was not intending to refer to the nitrates directive, simply because there are so many things that I want to mention, but the hon. Gentleman is right to raise that point. It is another huge imposition on farmers. The answer is clear: we must press for much longer derogations from the directive and ensure that its implementation does not cause the massive capital cost to which he refers. That relates to my overall point about the gold-plating of regulations.

We need a real vision of what we want from our farming industry and of what we expect in the countryside, but that vision is woefully absent from the Government. In contrast, the Conservatives believe that domestic food production is important and that our rural environment is best cared for by working with the farmers who occupy it. As a result of the changes, some farmers may decide to stop farming and others will
 
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refocus their business on leisure, but for those who continue the most important feature of change is the need to get nearer the market and to produce for the customer. For some, that will mean direct sales to the consumer, and for others it will mean adding value either individually or co-operatively—but for all of them it means being able to compete. British agriculture cannot continue to carry the superstructure of regulatory cost that it has borne in the past. Nor can it compete with producers who do not face those regulations.

What is the point of our egg industry becoming salmonella-free if we then import Spanish eggs stuffed full of the disease? What is the point of encouraging farmers markets if our abattoirs are being forced to close because of red tape? Last week, I visited a butcher who has his own small slaughterhouse—exactly the sort of enterprise that we all, on both sides of the House, want to support. He is licensed to kill, cut and retail meat, but if the animal belongs to someone else—perhaps another farmer—who wants to sell the meat at a farmers market, he is not allowed to kill and cut the beast, even though it would be going through exactly the same process as the meat he sells in his shop. A Minister with any real concern, and who wanted farmers markets to develop, would sort out such an absurdity.

What was the point of our healthy livestock being slaughtered during the foot and mouth epidemic when the Government do nothing to stop the illegal importation of perhaps 11,000 tonnes of meat, 200 kg of which even DEFRA accepts may be infected with the disease?

What about food labelling and the deceit that allows, for example, pigmeat grown abroad to be labelled British because it is sliced in this country, or that allows food to be labelled organic even if it is not produced to British organic standards? The Government have repeatedly refused to change the law, but we will— not just for farmers, but for consumers. We are not advocating trade barriers, but when we import food that is produced using methods that are banned in this country, the consumer has a right to know. Our farmers could then exploit our higher environmental and welfare standards, but without honest labelling they are operating with one hand tied behind their backs.

Market strength is also an issue. As we have heard already, many farmers complain about the power of the supermarkets. We must face up to the fact that supermarkets have provided a massive increase in the diversity of food available to the consumer—of course, that is in all our interests—but they dominate the buying chain. For example, 65 per cent. of liquid milk is sold by supermarkets. Clearly, the code of practice is not worth the paper that it is written on. It needs to be much tougher and transparent. The Office of Fair Trading is carrying out an audit—it would be wrong to presume its conclusions, which I await with interest—but, clearly, the present situation is entirely unacceptable.

Farmers need to work together. There is a need to change both the corporate and tax treatment of our farm co-operatives to enable them to become more effective and to make vertical integration possible, but even that is of little help if co-operatives are not allowed to become the serious players that they are not only elsewhere in Europe, but in the United States, Canada, Australia and New Zealand. All the other countries that
 
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advocate the free market allow their co-operatives to grow and become serious players in the industry. The Government's forcible break-up of Milk Marque has placed a large black cloud over the future of the co-operatives' ability to represent farmers' interests in the marketplace.

The countryside has many functions. It is home to 23 per cent. of our people. It produces 64 per cent. of all our food. It is the landscape that attracts millions of visitors each year—a landscape that has evolved over the centuries, much of it as a result of past farming practice. The people who live there have many interests and many careers, but they are being short-changed by the Government. They receive lower levels of service, fewer buses, fewer police officers and less standard spending assessment funding than their urban counterparts.

Agriculture is at the centre of our rural communities and it is far more important than its contribution to our gross domestic product suggests. It underpins many other rural businesses and much of our rural tourism, as well, of course, as the whole food industry. The Conservative party believes that agriculture can have a prosperous future producing food and energy crops, while caring for and constantly improving our rural environment.

Rural areas can again become thriving places to do business, rather than just dormitories, but they need a Government who have an instinctive understanding of rural life and of the interaction between its many parts, rather than a Government who impose their urban views. The Labour Government have shown that they cannot provide that—we can and we will.

4.52 pm

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