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The Earl of Onslow: My Lords, perhaps I may briefly interrupt. What the noble Lord says is absolutely

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fascinating. He produced the number of 170,000 people; he went on to speak about children and relations; and he then went on to talk about the Napoleonic Code, about which I understand. How many people are involved? Is 170,000 the gross figure or the net figure?

Lord Brain: My Lords, the noble Lord has me in a slight quandary. When we were taking our evidence we had to use a judgment. That was a figure given to me by a Spanish MEP. I believe that the noble Lord, Lord Reay, in introducing this debate said that we knew there were about 130,000 farmers and 30,000 to 35,000 in the processing industry. We discovered that a farmer rarely employs any labour and that it is the extended family--the wife, the daughters and the sons--who gain from this. Yes, it may be 350,000 or it may be 500,000 people who obtain some employment, but perhaps for only four weeks a year. I was not going to go into the technical detail, but we received quite a lot of evidence that one of the problems is that tobacco cannot be mechanically harvested, partly because of the way it is grown. Therefore they go along the rows, rather like picking grapes in the old days, picking off certain ripe leaves which they then transport, possibly in a pannier on their backs.

I am afraid that I have digressed from the point I was trying to make, which is that we have never studied the Napoleonic Code with reference to land when we talk about bonds, insurance schemes and getting people off the land.

I have spoken long enough. I believe that this is a very good report and, like others who have spoken, I shall be most interested to hear the Government's reply.

5.15 p.m.

Lord Grantchester: My Lords, I am grateful that time has been allocated by the House for a debate on this report. On the face of it, a debate might seem unnecessary given what appears to be virtual unanimity of opinion on all sides of the House on the tobacco regime. Notwithstanding that, it is important for us to underline the degree of dissatisfaction over this regime and the half-hearted reforms being proposed by the Commission.

This dissatisfaction is evidenced by the fact that the committee declared unanimously in paragraph 37 the following view. I am happy to underline it by repeating the quotation:

    "the subsidy of tobacco production in the European Community is a scandalous waste of taxpayers' money ... The tobacco sector is a hole in the ground into which money is being poured with no thought for the long-term prospects of those involved in it".

Indeed, the tobacco regime would make an interesting chapter in Gulliver's Travels. The European Union pays large sums of money (£760 million this year) to grow a poor quality product of no usefulness, for which there is very little demand and whose effects on health cause us to spend even more money to counteract them. Tobacco attracts the highest subsidy of any commodity in the EU. Even the previous Government described the arrangements as:

    "A crazy regime and a crazy way of spending taxpayers' money".

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It is encouraging that my noble friend Lord Donoughue responded to our report on behalf of the new Government, agreeing in principle that we should decouple support from production. We need to persuade our European partners to start the process of disengagement.

It is important to note that three-quarters of European tobacco production comes from just two member states, Greece and Italy. However, up till now the British Government have been able to gain the support only of Sweden and, to a lesser extent, Denmark. It is indicative of the previous Government's isolation in Europe that they could not attract more allies on this issue. Now, thankfully, with the Labour Government, who have immediately begun to improve relations with the EU, there is a prospect for reform. It is a not a practical proposition to end the tobacco regime completely and immediately, but we are now at least in a better position to encourage our partners to disengage gradually.

Negotiations on this issue will not be easy, as there are several other states, notably Ireland, which have an interest in maintaining common agricultural policy support for other crops on the social grounds which apply to tobacco. Not surprisingly, therefore, the status quo has its attractions for some.

We must resist calls for the status quo to be maintained. Tobacco is one of the few subsidised crops which is not eaten and which is uniquely recognised as injurious to health. Smoking is the greatest cause of avoidable death and in the UK alone kills 120,000 people each year. It is disappointing, therefore, to reflect on the possibilities of reform in other areas when so little seems possible so far as tobacco is concerned.

As regards practical proposals, I believe that the introduction of saleable bonds could be effective. They should be flexible in their payment scheduling to allow individual farmers to find their own solutions to restructuring their businesses. This need not require that farmers remain in agriculture. Of course, further resources would need to be put into regional development. Guidance would also need to be given on alternative enterprises within what are essentially objective 1 areas.

Solutions demand diverse responses and any scheme must, therefore, be able to accommodate alternative routes out of the problem. If premiums and quotas remain at existing levels, there will be little cash for bonds and local development plans. If reforms are to achieve long-term change, they must be coupled with gradual reductions in premiums. One cannot simply pull the plug.

The added advantage of bonds is that savings could be made by reducing the bureaucracy which comes with the administration of quotas. Perhaps the Minister could give the House an indication of the potential cost savings from quota administration and fraud control. If only more limited reforms are undertaken, quotas could be made saleable and a buy-up scheme implemented. Saleability would result in the less efficient producers moving out of tobacco, thus encouraging departure from the regime. New entrants to the sector would have to be

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barred from purchasing the bonds, which, make no bones about it, is difficult to achieve in an open society, where farmers like to pass on their "inheritance".

The committee's deliberations on this subject were unavoidably constrained by the fact that they took place toward the end of the previous Parliament. With more time, we could have conducted a more detailed investigation. That would not have undermined the case for reform; rather, it would have reinforced it.

The new Government have brought a new credibility to our relations with the European Union. Let us hope that one of its fruits will be the ending of this scheme, which wastes our money and our health. I commend the report to the House.

5.22 p.m.

The Earl of Balfour: My Lords, the 13th report of the European Economic Communities' Committee on the tobacco regime makes depressing reading. Although it has already been said by the noble Baroness, Lady David, I should like to quote one sentence from page 17 of the report:

    "The figures speak for themselves--we currently spend £1.2 million on smoking prevention and £800 million on subsidising a crop which has little market value".

In this country we have decided to ban tobacco advertising in sports activities--yet I should have thought that sport was one activity that would have discouraged smoking. But be that as it may.

Perhaps I may speak as a smoker, a farmer and a forester. As a farmer, there is no earthly point in my growing a crop that I cannot sell. If I cannot sell a crop, I shall not grow it. Agricultural crops are zero-rated for VAT. Forestry, on the other hand, is rated for VAT. That is unfair because trees should be regarded as a crop. Tobacco is bad for us--I accept that, as a smoker--and so why not add on VAT in respect of its production? If a tobacco plant can be grown, so can a tree. I should like to put forward some constructive suggestions.

But, first, let me ask this country to think again. I have always been fascinated when we have tree planting days. With great respect, any fool can dig a hole in the ground and stick in a tree. But unless that tree is looked after carefully for the first 16 years of its life, its chances of survival are extremely slim. At the end of about 16 years one may start to obtain some return from thinnings. Today, however, one will obtain only about £1.50 per tonne and it goes to make chipboard. It is not until perhaps the tree is about 30 years old that one can achieve any kind of return. I am also fascinated by local authority tree preservation orders. Nothing lives for ever and trees die just as we do. If we allow the old trees to carry on living, we risk spreading a disease which will destroy many other trees. If the legislation had been worded so as to have a tree management order, it would have been very much more productive.

Where crops other than tobacco cannot be grown, I suggest that forestry should be established. It is labour-intensive. But it should not be done as the

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Forestry Commission has done it so often, with large areas which contain only one or two species of trees. There, there is a risk of disease and also all the trees mature at the same time. We should have a wide variety of trees of all types, if necessary even to the extent that the land is terraced, as might be necessary in parts of Italy and Greece. We should make woodlands zero-rated for VAT and forestry should be treated as an agricultural crop. Europe imports a great deal of timber. We should grow our own. Even coppicing for baskets or charcoal might be a possibility.

The noble Lord, Lord Harris, rightly pointed out that the Government should subsidise or support people, not industries. The noble Lord, Lord Brain, said that the Napoleonic land tenure arrangements may make forestry difficult. But if forestry can be regarded as a crop, there may be more possibilities.

5.27 p.m.

Lord Beaumont of Whitley: My Lords, we have had a good debate on a good report. I offer my thanks, along with those of other noble Lords, to members of the sub-committee and its chairman, the noble Lord, Lord Reay, who so ably mixes the blood of the aristocracy from at least three European countries, thus making him a very suitable chairman for this particular operation. I very much look forward to the reply of the Minister whom I welcome to his post. Let me say, however, that I shall greatly miss the noble Lord, Lord Carter, who has been banished to the slightly less rewarding office of the Whips.

The Commission has dismissed gradual disengagement. That is wrong and indefensible, as the committee points out. It was very ably said by the noble Lord, Lord Grantchester, that there could be few bodies which would continue to provide heavy subsidies for harmful substances of admittedly poor quality. I understand why the committee did not take particularly into consideration the health issue. Apart from anything else, by doing so it managed to earn the well deserved acknowledgement and praise of the noble Lord, Lord Harris. But I do not believe that the health issue should be dismissed. The argument that if we do not grow tobacco other people will do so is morally contemptible and on an intellectual par with similar arguments about, say, landmines. Before anyone misquotes me or takes me up, let me say that I am not comparing tobacco with landmines. I am merely comparing the intellectual arguments used in both cases.

The evidence of rural communities must be supported and I would willingly spend a considerable part of your Lordships' time saying how that should happen. However, this has been a full debate; we have covered a lot of ground. The noble Lord, Lord Wade, covered that issue well and the House will no doubt appreciate it if I keep my remarks short, which I intend to do.

Of course rural communities must be supported and there are interesting suggestions as to how that should be done in paragraph 4.4 of written evidence. However, it seems to me that we are quite clear that this is not the way in which rural communities should be supported. An interesting point was raised by the last speaker and

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by my noble friend Lady Robson in the questioning in written evidence in relation to the World Trade Organisation.

I do not often defend the World Trade Organisation. However, it is useful that that body is visualised as bringing an end to this particularly ridiculous and corrupt regime at some time in the near future. If that is so--it appears to be so--it is short-sighted for the Community not to start thinking now about the way forward. As one noble Lord said, the British farming community is very good at thinking of alternative uses when it is told that certain crops are no longer needed. I have no reason to believe that European farmers will be any less efficient. The sooner all the regimes, including the Italian and Greek governments, turn their attention to that and stop merely blocking it, the better.

This is a thoroughly good report on a thoroughly bad European document. I hope that the noble Lord, Lord Donoughue, will be able to give us some hope that the Government will be able to see their way forward to doing something about it.

5.33 p.m.

Lord Lucas: My Lords, I too congratulate my noble friend Lord Reay on this excellent report, which I am sure would have gained just the plaudits from us had we continued in government as it will no doubt receive from the noble Lord, Lord Donoughue, and justly deserves. Also, I congratulate the noble Lord, Lord Donoughue, on finding himself in the position which I was happy to occupy so recently. I am sure he will fill it with great ability, to which I certainly cannot lay claim.

This is also perhaps an opportunity to congratulate the noble Lord, Lord Beaumont of Whitley, who I find on this occasion so converted to the cause that he is wearing the Swedish flag in his lapel, on representing the only other member of the Community who supports us in our endeavour.

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