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Lord Donoughue: My Lords, I welcome again what was said about the longer term. In my view it is more important than what we have announced today, although that is critical to individual farmers. I agree totally with the noble Lord in relation to a broader rural economy. We are committed to what we call a "living countryside" and a "prosperous rural economy". But that depends upon a whole number of rural industries. The noble Lord mentioned forestry, but there are many others and not just farming.

I believe that we cannot have a prosperous countryside without a prosperous farming industry. But the prosperous countryside goes much wider and we are looking into that. As a small point, the abolition of the agricultural panels when we first took over was in order to replace them with representatives of the much wider rural economy. Now when we meet there are up to 16 different trades and professions present. That is important. I agree also with the noble Lord's point that we must not undermine within the less favoured areas what we do with Agenda 2000.

Lord Hardy of Wath: My Lords, I congratulate my noble friend on his Statement. Can he confirm that a critical situation in agriculture existed before May last year? Since then he has not only given one tranche of relief but secured rather more success in negotiations in Europe than several of his more recent predecessors managed to achieve.

Will my noble friend accept that if an adequate active population is to continue in the rural areas of England, as well as in Wales and Scotland, some consideration

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will have to be given to longer-term changes in agriculture, especially in regard to the replacement of the basis of headage by acreage or hectorage? Will my noble friend accept that that is in the longer term, but in the shorter term smaller farmers--some of whom may have entered in recent years because livestock production is the way in which the smaller farms establish themselves in the industry--need to be retained? In that regard will he continue to give sympathetic consideration to their plight and perhaps look again at the regulations and policies in regard to intensification.

Lord Donoughue: My Lords, I thank my noble friend for his remarks and for his positive approach to our Statement. It is indeed the case that the brewing agricultural crisis existed before May 1997. The turn-down in incomes began in 1996 and, of course, two-thirds of the rise in sterling occurred under the previous administration. We have given over £200 million in extra money to the industry this year alone.

My noble friend referred to the European Union. My view is that the change in approach to the EU, which began on 1st May, is probably the most significant change. I am absolutely convinced that we would not have got the beef ban lifted in Northern Ireland, and for the rest of Great Britain shortly, had the previous approach to Brussels--namely, as containing a gang of enemies--been continued.

My noble friend made a critical point as regards small farmers and the future of a living countryside. It is certainly not my vision of the future of the countryside that, in the pursuit of efficiency, we end up with a prairie. One of the regions that I am responsible for is the south west. It is absolutely clear to me that we have to find ways to sustain the family farm, which is often a smaller farm, in such areas. So we have a delicate balance within Agenda 2000. I am not sure that it has been fully thought through, but we have time to consider our approach. We want a more liberal and more efficient agriculture. We want an agriculture that can thrive on world markets and exploit the great population growth in the world. Without being committed to preserving all our existing structure, which I would not wish to do, we also want to ensure in that future that there are family farmers and small farmers who are providing a living rural society and community as well as a rural economy.

Earl Peel: My Lords, just how serious this matter is was brought home to me today. I have just returned from Edinburgh where I was talking to someone associated with hill farms. He told me that some hill farmers are now having to take advice from vets on how to put down their stock humanely because they simply cannot sell them for a profit. So I welcome the package. However, as my noble friend Lord Luke said, it has come too late. Indeed, there is no questioning the fact that enormous damage has been done. Nevertheless, we welcome the package for what it is.

I should like to explore one aspect of what the Minister said about the development away from the headage payments in the future. I find this quite

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interesting. There is no doubt in my mind that the way that headage payments have been administered has caused enormous environmental damage. I would very much welcome a move towards area payments, to which the noble Lord, Lord Hardy, made reference, instead of the headage payments which are now in place. I should be interested to hear whether that policy is one which the Minister and the Government are pursuing.

However, what concerns me most of all is the fact that we have all heard rumours and, indeed, read reports in newspapers that the percentage of the CAP within Agenda 2000, which is likely to be continued towards the less favoured areas, is likely to fall. That would be a disaster. Therefore, can the Minister give a firm assurance to the House that the Government will fight for every penny for the LFAs as a percentage of the CAP in the future? I say that because, without that, all the Minister said about small farms and the local socio-economic package would fall by the wayside.

Lord Donoughue: My Lords, we are aware of the hill farming crisis to which the noble Earl refers. That is why this package, like the previous one, is very much targeted to hill farming. The agrimonetary compensations will greatly help hill farmers. Of course, the hill livestock compensatory allowance--that is, £30 million to beef and £30 million to sheep--will also specifically help them.

However, I must reject the idea that the package is too late. It had to be considered in a measured way. I should point out to the noble Earl, and to other Members of the House, that it involves £100 million of new money from the reserve to which other sections of our community and our economy might feel that they have equal or greater claims. Allocating this money to farming rather than to health or education was not an easy choice. Indeed, such matters have to be most carefully considered.

I note what the noble Earl said about area payments. I can assure him that we are pursuing the whole question in the context of the intensive/extensive farming issue. As regards assistance to the LFAs under Agenda 2000, I can tell the noble Earl that we are acutely aware of the position. When we had the presidency and the informal Council in the north east--a less favoured area--we arranged that the special paper was actually on what was called, "farming in fragile areas", which is very much the same. It is certainly our intention to fight to defend that sector of our agricultural community.

Lord Geraint: My Lords, I welcome the Statement repeated by the Minister. However, before we get carried away with the proposals I am sure the noble Lord is aware that the incomes of farmers have gone down since his Government took office by anything up to 100 per cent. I honestly believe that the farmers of Wales, England and Scotland will be bitterly disappointed with the proposals. Indeed, there is hardly anything in them: if they have lost 100 per cent. over the past 18 months, they will receive about 10 per cent. extra. So where will that leave us? Nevertheless, it is a step in the right direction.

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I ask the Minister once again to consider what I suggested earlier this year. I have in mind the view of the majority of the farmers and leaders in this country; namely, that a Royal Commission should be set up to look into the plight of people living in the countryside.

Lord Donoughue: My Lords, we are very aware of the rapid decline in farming incomes, although it varies. I should point out to the noble Lord that, on average it is not 100 per cent. Indeed, it is just over 70 per cent. and it took place following a quite remarkable rise of over 70 per cent. in the previous four years. It was a fall from an exceptional high, but that does not make it less painful.

As regards the areas with which the noble Lord is particularly concerned, I can tell him that many did not enjoy the bonanza of the 70 per cent. rise in real incomes in four years which occurred in agriculture as a whole. So, for them, it is especially painful. However, we are aware of the situation and will consider the noble Lord's idea of a Royal Commission.

Lord Jopling: My Lords, when the Minister reviews the various matters, especially as regards LFAs, will he give particular consideration to extending considerably the area covered by the environmentally sensitive areas scheme? While the scheme suffers perhaps from the fact that I claim some paternity for it, it has four outstanding merits. First, it is already approved by the European authorities. Secondly, it is extremely environmentally sensitive. Thirdly, it does not encourage further production of surpluses. Fourthly, and most importantly, it is aimed particularly at farmers in "difficult" areas, mostly small farmers. That means that one would give the help where it is needed most.

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