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Lord McKenzie of Luton: My Lords, that item was not on the agenda of the May ECOFIN, which is what the Question relates to. High oil prices are significant for the general economic well-being of the EU as well as for the individual situation of consumers. The UK has done what it has done and has been challenged by some for doing so. I shall pass on to Ministers with responsibility the plea for some leadership more widely in Europe on that matter.

Lord Barnett: My Lords, is it still Treasury policy not even to discuss any question of European Union taxation affecting this country, even if it is beneficial to free trade throughout the European Union? For example, is the Minister aware that it has been said by serious people that criminal activity in missing trader-type inter-community fraud is costing the European Union, including ourselves, a lot of money? I know that the Treasury is trying to deal with that through the Finance Bill, but does the Minister accept that it would be better to use the European Union across the board to help to deal with that serious problem?

Lord McKenzie of Luton: My Lords, as I outlined in my original reply, VAT was discussed at ECOFIN, and a VAT package was put forward by the Austrian presidency. That package was focused on modernisation and simplification of some of the VAT rules, which is long overdue. It also contained changes to allow effective operation of the internal market while ensuring that member states had the greatest control over their own tax systems and revenue. In particular, it looked at services and where those supplies were deemed to have been made.

My noble friend makes a crucial point about missing trader fraud—carousel fraud, as it is known. The UK has looked at means of stopping it, in particular by dealing with reverse supply mechanisms for the sort of products that are subject to this fraud, which is very serious and costs the Exchequer a lot of money.

Lord Howell of Guildford: My Lords, is the Minister aware that we think the idea of a windfall tax on oil companies is a rotten idea and a silly one at a time when we are trying to get more investment into the oil industry to stabilise oil prices and energy security? Does he agree that, if the Chancellor wants to reduce
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the price of petrol, an opportunity is open to him? It might not be very wise, but he could do that simply by reducing the 70 per cent tax on every litre of petrol. Is not an even better course than any of those to urge moves towards a less oil-dependent and a greener pattern of economy? There are measures that we would very much like to see the Government getting on with to do that rather than merely worrying about the present price of oil.

Lord McKenzie of Luton: My Lords, there were a number of points raised in that question, none of which was the subject of discussion at the ECOFIN meeting, but I will try to respond in general terms. The impact of windfall profits on oil companies can be dealt with in a variety of ways, and often investment decisions by oil companies are as much affected by the price of oil as by the tax structure itself. I remind the noble Lord that the situation that we face with high oil prices is generated by significant demand around the world, particularly from China and India. That is a different situation from the one that we faced in the 1970s when it was supply-side impacts. We have to recognise those world influences on the price of oil.

Lord Pearson of Rannoch: My Lords, the noble Lord referred to the action plan on the internal control framework. Can he enlighten the House as to exactly what that is and what progress is being made? Does it perchance have anything to do with the almost immeasurable fraud and waste in the European Union which now, according to its former chief accounting officer, Marta Andreasen, is entirely out of control, to the extent that it cannot even be measured, let alone disclosed?

Lord McKenzie of Luton: My Lords, it will come as no surprise that I do not accept the general thrust of the noble Lord's point. We recognise that there have been issues about statements of assurance, which have not been forthcoming for too many years, although there have been recent improvements. Certainly, 2004 showed an improvement over 2003 in that regard, particularly following the introduction of the integrated administrative and control systems on agricultural expenditure. A full accruals accounting system was introduced in January 2005. The latest proposals relating to integrated internal controls will be another significant step that the UK strongly supports to help tackle the issues.

Lord Brooke of Sutton Mandeville: My Lords, in the context of amity, productivity and in particular relevance, how long did the meeting last?

Lord McKenzie of Luton: My Lords, I honestly cannot tell you. If it is a matter of such fascination for the noble Lord, I will find out and write to him.
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Food: Organic

2.50 pm

Lord MacLaurin of Knebworth asked Her Majesty's Government:

What steps they are taking to encourage United Kingdom self-sufficiency in organic food.

Baroness Farrington of Ribbleton: My Lords, the Government would like to see UK producers meeting more of the demand for organic food. The action plan to develop organic food and farming in England aims for the UK-produced share of the indigenous food market to have increased to 70 per cent by 2010, which would be similar to that for conventionally produced foods in a similar category. Good progress is being made towards that end.

Lord MacLaurin of Knebworth: My Lords, I thank the Minister for that reply. What in her view is preventing British farmers from fulfilling most of the growth in consumer demand for organic food in this country? Is it, for example, the high cost of conversion? Is it uncertainty about the future of the market? Or is it the lack of a level playing field, with non-UK producers being required to meet lower standards than their UK counterparts?

Baroness Farrington of Ribbleton: My Lords, there were quite a lot of questions there, but I will seek to answer them all. We work closely with the retailers. Obviously, we work particularly closely with the farmers because of the importance of helping them to cope with a situation in which inevitably there will be fluctuations in supply and demand. Organic food that comes from the rest of the European Union must meet the same standards as ours because the level is applied throughout the European Union. There are financial arrangements to help people to convert and additional help for organic farmers who are going on to the new scheme.

Lord Sewel: My Lords, does the Minister accept that the export of organic agricultural products is a significant part of the development strategies of many of the countries that the G8 are so concerned about?

Baroness Farrington of Ribbleton: My Lords, yes. That is why we want to work in close co-operation with our own producers to ensure that they are not treated unfairly. We also want to ensure that we do not in any way impose—it would be illegal and unethical—unreasonable tariff and import barriers. I answered the original Question in the context of indigenous food. At the moment it is not possible to grow, for example, pineapples or mangos in the UK, so we are talking sometimes about totally different food areas.

Lord Taverne: My Lords, if the Government are concerned to base their policy on scientific evidence, will they not recognise that organic farming is essentially based on a myth—the basic scientific howler that synthetic chemicals are bad and natural
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chemicals are good? Every time that the claims made for organic food have been examined by an independent body, such as the Advertising Standards Authority or the Food Standards Agency, they have been rejected. In those circumstances, would it not be wise for the Government and more ethical for supermarkets not to promote a product that commands premium prices and whose extra value is illusory?

Baroness Farrington of Ribbleton: My Lords, I am interested to know what position the noble Lord, Lord Taverne, takes on the subject.

I am aware that the work that has been done to make comparisons between nutritional standards has certainly not proved the organic case. I am also aware that a great many people prefer to have food that has not been subject to chemical treatment as part of its growth. To a certain extent, it is a matter for the individual consumer, and the demand for organic produce is increasing.

The Countess of Mar: My Lords, although I entirely agree with the Minister that it is a matter of customer choice whether to buy organic food, is it not also the case that a certain amount of research, particularly that done in America, has shown that there are pesticide residues in the blood of little children? In view of the fact that a child's immune and central nervous systems are not complete when they are born, is it not wise that some parents choose organic food?

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