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Baroness Anelay of St. Johns: My Lords, I wonder whether the noble Lord will give way. As I made clear at the time, the figures that I quoted are from the NFU. Perhaps the Minister would like to take up any complaints with the NFU. I believe that those figures have been published nationally and not, as yet, contested.

Lord Donoughue: My Lords, many different figures have been published. I do not take up in a hostile manner any point made by the National Farmers Union. Whatever the figure one takes, it will have a serious impact.

The livestock sector has been hit worst of all. For beef producers, there has been a continuing structural surplus, falling market prices and falling demand. That is at the heart of the long-term problem. The ban on the export of British beef has led to the loss of important markets. For sheep producers, there have been two consecutive years of delayed finishing and poor market prices. We acknowledge that the strong pound has also made beef imports attractive and sheep exports unattractive.

Several noble Lords, including the noble Lord, Lord Palmer, the noble Baroness, Lady Trumpington, and my noble friend Lord Grantchester, referred to pigs. I was asked why pig farmers were not part of the package. That is fairly simple. It is because we cannot aid pig farmers within such a package under the CAP regime, under which state aids are not allowed. We object strongly when other fellow member states attempt to introduce state aids. We have tried hard to help the pigmeat sector. We have helped it with a new scheme of private storage aid and with export refunds.

Perhaps I may mention a point often raised on supermarkets. The supermarkets have said that all the pigmeat - fresh and processed - that they buy for their

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own labels will be produced to UK welfare standards. They do not insist on such standards for imported products that are to be sold under other labels for the practical reason that they cannot control standards in other countries of origin. However, I believe that that step is significant progress; it is a great step forward that assists the pigmeat industry; and it is a step that was not sought or achieved by the previous administration.

I am involved in a campaign to promote sales of UK pigmeat to the domestic catering sector. I attended and spoke at a conference on the subject this week and I have spoken at a previous conference. I met representatives of the pig industry in Blackpool. We are committed to encouraging and helping the industry as far as possible.

I now wish to touch on the Scottish dimension. I noted that my noble friend Lord Sewel sat beside me for a long time to ensure that the Scottish perspective was not neglected. Farmers in Scotland have of course suffered from the same problems as their counterparts throughout the rest of the United Kingdom, but those problems have been worse in a number of ways. The weather has been particularly threatening to winter planting. For a variety of reasons we acknowledge that Scottish agriculture can be more susceptible to the various pressures that currently operate. Some 83 per cent. of Scottish farmland is designated as a less favoured area, as compared with the UK average of 43 per cent.; and Scotland has a higher dependency on specialist beef and sheep farms. It was therefore relevant and pleasing that in the large package of aid that we announced on Monday Scotland was a major beneficiary, receiving a total of £37 million from the £120 million.

Ministers are aware of the problems and concerns in Scotland and the rest of the United Kingdom. We have been listening. That is why Monday's package was based specifically on the requests put to us by the National Farmers Union and by the farming community when we visited them.

I should stress that even before Monday's package we had recently implemented a large number of measures to assist upland producers across the United Kingdom. Those measures recognise the particular difficulties of the Scottish uplands that have underlain much of this debate.

In February this year £85 million was distributed to livestock producers. It was targeted particularly on hill farmers. Scottish beef and sheep farmers received £24 million of that package. That makes a total to them this year of over £60 million. Our lobbying in Brussels has achieved an agreement from Brussels to grant private storage aid in the UK for a maximum of 2,400 tonnes at a flat rate of 1,400 ecu per tonne. Present indications are that significant quantities of lamb will be removed from the market as a result. It has also just been agreed to increase the advances payable under the beef special premium and suckler cow premium schemes from 60 to 80 per cent. That will bring forward some £100 million of payments to the industry which would otherwise not have been available until the spring of next year and it should help to ease producers' cash-flow problems.

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These measures must be viewed alongside the significant amount of money that has already been directed towards livestock producers. Since March 1996, £2.5 billion will have been spent on BSE-related measures. In addition, beef producers are receiving around £500 million each year in normal beef subsidy payments and in 1996-97 over £450 million was paid out to sheep producers in ewe premium payments. That represents considerable support for the sector at this time. It makes it not possible for critics to state that we do not aid the farming sector. The scale is massive.

On the consumption of beef by the Armed Forces, we have already achieved success in persuading the Commission to allow us to make intervention beef stocks available to the Ministry of Defence for Her Majesty's Armed Forces. I understand that all its requirements for beef for forces serving in the United Kingdom will shortly be met from product of United Kingdom origin. We are also considering how we might increase the amount of lamb from United Kingdom sources, although that is more difficult because there are no intervention stocks and frozen lamb from overseas is very competitively priced and offers good value for money. I have personally been involved in negotiations with Defence Ministers on this subject. I have found them extremely understanding and helpful.

Therefore considerable measures have already been implemented, and I now turn to the significant additional measures that we have announced this week. One or two noble Lords spoke as though this had been our only response, and that it was tardy or too late. I have made clear that there have been many earlier aid measures and that this week's aid package is the second this year together totalling over £200 million.

I am pleased that some noble Lords welcomed this week's aid package. The noble Lord, Lord Gisborough, said that it was not enough. But I should point out that in addition to all the billions of pounds per annum in aid to farming, these are subsidies to 1 per cent. of the economy. Before the package they are already greater than aid to any other sector. They are two-and-a-half times as much as to the next subsidised sector, and three-and-a-half times as much as goes to manufacturing--namely, 20 per cent.--as compared to 1 per cent. of our economy. So the scale of subsidy is already massive, and we are now discussing adding to it. As it was for our predecessors, the choice for the Government has been to spend £120 million in farming. I can see the case; indeed I have advocated it. However, the subsidies represent £120 million that is not now available for disabled children, nurses etc. So the decisions are not easy.

In announcing the package, my right honourable friend the Minister stated that, subject to consultation with the European Commission, it is the Government's intention to draw down £48.3 million in compensation from the EU under the agri-monetary heading.

Similarly, we have listened to the concerns of farmers and farmers' organisations in relation to the planned closure of the calf processing scheme, given the absence of an export market for British beef. As my right honourable friend the Minister announced, the

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Government have decided to continue to operate the scheme for the remainder of the present financial year. That is in the light of the Commission agreeing to fix a special rate of aid for the United Kingdom of 80 ecu--around 70 per cent. of the current rate--to attract the poorer quality calves from the dairy herd, leaving the better quality calves to find their own price level on the market. We shall wish to keep the scheme under review with the industry.

The plight of the hill farmers has been a theme throughout this debate. It was mentioned, impressively, by the noble Baroness, Lady Trumpington, the noble Lord, Lord Rathcavan, who has great knowledge of Northern Ireland, and the noble Lord, Lord Glentoran. The Government are committed to supporting farming in the hills. That should be in no doubt given that over £600 million in livestock subsidies are being distributed to hill farmers this year alone. My right honourable friend's announcement on Monday of our intention to increase hill livestock compensatory allowances for the 1999 scheme year by £60 million responds to the particular difficulties that hill farmers currently face. That package was deliberately targeted to hill farmers because the Government are committed to maintaining our nurtured uplands. We do not want them abandoned, and they are one of our main priorities. In the longer term the Government want to replace the hill livestock compensatory aid schemes with a newer scheme.

A major way to assist the beef sector is to achieve the lifting of the beef ban in Europe. The Scots especially should be concerned with that, Scottish beef having an international reputation for quality. We need to persuade colleagues that all the measures that we have taken to prove that British beef is safe are working. We have made progress and I believe that we now have all the conditions in place for an early end to the ban.

Looking to the future, whatever can be done in the short term--and we have attempted to do a great deal--the outcome of the negotiations on the Agenda 2000 proposals for the beef sector will be vital to the future of the sector in the long term. If the current proposals are agreed, they will provide for a significant reduction in beef prices, together with an increase in direct payments to producers to compensate for the reduction in prices. This will provide the sector with the opportunity to become more market-oriented and may boost consumption.

More broadly, for the longer term I noted the interesting points made by the noble Lord, Lord Stanley, from his great experience, and by the noble Lord, Lord Glentoran and the noble Earl, Lord Sandwich. They are right to emphasise the long term rather than the short-term crisis and the serious difficulties of managing change, which is I believe the biggest challenge facing us and the farming community.

I note what the noble Lord, Lord Stanley, said about the puzzling rescue intervention in the United States. I assure him and other noble Lords that we are focusing on the long term. My right honourable friend stated on Monday that we would urgently consult on this and that we hoped to make a statement in due course.

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On the wider rural economy, I note the points made, from his great expertise, by the noble Lord, Lord Wade, about the broader economy. It is, of course, the Government's aim to make rural areas better places in which to live, work and visit and to have a prosperous and living countryside. Rural development proposals form a part of Agenda 2000. The Government are looking at these issues and will make an announcement shortly.

Perhaps I may refer briefly to some of the many other questions that were asked. The noble Lord, Lord Palmer, asked about cereal prices. We are aware of the difficulties in that regard, with the problems of over-supply and poor weather. The Government have obtained relaxation of moisture content limits for intervention to reduce the drying costs, and the payments of main arable subsidies are on target.

The noble Lord also raised the question of bio-fuels. MAFF spends some £400,000 a year on research and development on alternative crops, including bio-fuels. The Commission is working on a report on this matter, into which we shall have an input.

The noble Baroness, Lady Trumpington, raised the issue of farmers' wives. It is true that they have a crucial role in supporting and sustaining the men and the family generally through the crisis. We too salute them. I always try to include them and the women's farming union on my regional visits.

The noble Baroness, Lady Masham, raised the question of whether scrapie can be passed from sheep to man. As the noble Baroness knows, scrapie has been known to be present in commercial sheep flocks for over 200 years and there has never been anything to suggest that the disease can be transmitted to man.

The question of organics was raised by the noble Lord, Lord Rathcavan, and the noble Earl, Lord Sandwich. This Government have doubled the aid for conversion to organics and increased research, and this is one of our priorities.

The noble Lord, Lord Wade, mentioned the enlargement of the European Union. Discussions with the countries seeking enlargement include an examination of how their systems can adapt to European Union conditions. The United Kingdom aim in Agenda 2000 is to move away from production payments for existing and future members. Without such reform, it is likely that stocks of key agricultural commodities will build up. We are pressing the case for payments to be degressive and time-limited.

The noble Lords, Lord Wade and Lord Gisborough, and others mentioned the early retirement scheme. The Minister has said that he will consider an early retirement scheme once the Agenda 2000 proposals have been finalised. A detailed examination of the draft began in June under the UK presidency and is continuing under the Austrian presidency. The current

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draft proposals remove the requirement that land be amalgamated or taken out of production, which should provide greater flexibility for possible implementation in the United Kingdom. However, no conclusions have yet been reached.

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