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Another factor is that, as negotiations under the World Trade Organisation progress, farming will become more and more exposed to international competition. It is vital that every effort is made to maximise progress and efficiency in order to maintain competitiveness wherever possible. Here at home, as we are faced with our own financial crisis and the Government have already identified proposals to cut £162 million from the Defra budget, that will be an immense challenge. Can the Minister give any indication of the key areas in which this is likely to be achieved?
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Something which the whole industry would like to see, and on which my noble friend Lady Byford made some of her points, is a reduction in the cost of administering the single farm payment. It seems quite extraordinary that, by adopting a more sophisticated structure, the average cost of administering every payment in England was, as she said, £1,743, whereas I have been told that in Scotland the figure was £240. However, the Scots are certainly now having to address the structural shortfalls in their scheme and they will have to move to an area-based system, but unfortunately they are unable to make the necessary alterations until the review takes place in 2013. Their advantage is that they now have certified maps for all the major holdings and the costs are not likely to approach those experienced in England. What cost target do the Government expect to meet when they carry out the single farm payment this year?
An area of additional expense for both the Administration and for farmers is the newly introduced sheep electronic identification scheme, under which all sheep and goats born after 1 January will have to have two ear tags, one of which is electronic. This shows every sign of being as much of an administrative nightmare as the single farm payment has proved to be.
Your Lordships' House has already heard of many of the aspects which appear to be unrealistic. They are already posing problems in Scotland where the Administration are looking for a system that could be considered practical. There is the worry that individual farmers with their own reading machines, some of which might be less than top-of-the-range technology, will be liable to create errors. Under the system that they introduced, once all the sheep are tagged, almost all registration of movement will be carried out by drafting the sheep through what are designated "critical control points". These will almost all be livestock markets and slaughterhouses.
The markets, in particular, can have throughputs of anything from 1,000 to 10,000 sheep a day. Various systems have been under trial and even last week at my local market, with 2,000 sheep present, the operators were proudly trying to maintain that they had only a 10 per cent error rate with the young lambs. However, this means that there could be 200 lambs with buyers which are not showing up correctly on the records.
I ask the Minister to note the proposal currently going through the European Parliament, which contends that the only practical way forward is a three-year introductory period in which the regime is allowed to operate without any question of penalty. This would allow a realistic assessment of what requirements are practical and of the processes and technology capable of delivering what is required. Can we have some assurance that the Government will be prepared to pursue this argument when it comes to the Council of Ministers?
8.17 pm
Lord Selsdon: My Lords, over the years that I have been in this House, I have found myself more and more confused by government. Government seem to try, in the interests of everyone, to do too much too often, and confusion reigns. I was brought up to
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The lifeblood of our country was effectively trade, and I apologise for having been brought up in the world of trade and having to say that I sat below the salt. However, when I look at the Annunciator, which lists the items covered by this debate, it seems that the word "trade" has almost disappeared from the agenda. I ask the Minister, when he comes to reply, whether he can recall who is responsible for trade these days.
I believe that if we look at the strength or weakness of our economy, the answer lies in trading ourselves out of the difficulty. These problems have happened historically, and perhaps I may quote a problem that occurred not so long ago when the monarch at the time set up a committee-not a quango or an ango-
- "to take into their consideration, the true causes of the decay of trade and scarcity of coyne ... and to consult the means for the removing of these inconveniencies".
That was in 1621 after the Armada. Your Lordships will be aware that the Armada tapestries will soon be arriving for exhibition here and it will be very moving to see them. However, the theme will be the defence of the realm and the importance of trade.
If we are to trade, we must look at the situation today. Since the war, we have moved from an equal balance of payments-balancing in visibles or goods-to a deficit of £100 billion. We have moved from a currency that was relatively strong and stable to one which is almost the weakest in the world. To put it in simple terms, the kilometre now has the same value as the mile. When we have a balance of payments deficit on visibles, the depreciation of our currency means that we are a major importing nation, as we always have been. The cost of our imports has risen in direct proportion to the weakness of our currency and there seems no possibility of that currency strengthening. There were moments when there was a natural boom, such as when the retail trade purchased goods before Christmas when the currency was high and sold when the currency was lower. Vast expenditure took place when low-cost airlines brought foreigners here to do their Christmas shopping, instead of taking the British abroad on holiday.
Unless we have a stable currency and think of our future as a trading nation, we shall be lost. However, the United Kingdom is one of the few countries in the world which automatically has a worldwide role. That is not necessarily due to the Commonwealth but due to our history of being able to invest and to set up in whatever sector. We are good managers and we have the advantage of the English language. Take the shortage of food: it would be easy for the British agricultural sector, with the right support, to go into any country in Africa and to treble or to quadruple agricultural production. The Sudan was to be the bread basket of the Middle East and the Gezira scheme ran without problems for years. We need to consider those areas.
I have just written a Green Paper called Shipping it Green. I have raised this in your Lordships' House before but, if we get together with the Commonwealth, we can control the largest sector of the world in many
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8.22 pm
Lord Lea of Crondall: My Lords, I should like to address my remarks to social cohesion in the developing government scenario. I was pleased to hear the analysis of the noble Lord, Lord Skidelsky. I put on record how indebted we are to him for the wonderful book he has written about John Maynard Keynes. Keynes is alive and well, thank you very much. There are lessons to be learnt from the 1930s, as the noble Lord has pointed out in that book, even though the world has changed substantially since then. I echo some of the remarks of my noble friend Lord Myners. I look forward to him being a thorn in the flesh of anyone in the Chamber from his new roving position on the Back Benches.
First, I ask the noble Lord, Lord Henley, whether he agrees that the disaster in the financial services industry has caused the explosive growth in the deficit. Unless we get that right, we shall not get anything right. Eighteen months ago, we were at an annualised rate of 2.5 per cent and now we are at 11.1 per cent. What has happened? There has not been a sudden pay increase for public sector workers. I hope we will not have a dialogue of the deaf. Mr Cameron said that he wanted consensus that we would all tick the same boxes: a fairer society, economic growth, an entrepreneurial spirit and so on. How can we have a mature dialogue unless we have answers to some germane questions? In the middle of all this, we have three or four totally separate black holes in the various analyses being put forward. I do not see why that is so.
The noble Lord, Lord Skidelsky, stopped short of making a point that I should like to make-I believe he would have made the point if he had wished to use this metaphor-that the doctrine of cuts relates to economic growth through the magical resurgence of animal spirits. We are not in the African jungle playing the tom-toms, so what are the animal spirits? Are they the same spirits which led to the disaster? Obviously, if you believe that, you will believe anything. I think that the gloves-on approach in this House in relation to the financial services industry, with some very notable exceptions-I do not want to embarrass my noble friend Lord Myners-suggests that we believe that the financial services industry is still untouchable because it is that part of the world economy which lays the golden eggs. Perhaps the noble Lord, Lord Henley, would kindly answer this question: is the financial services industry now laying golden eggs or is it laying landmines and hand grenades?
It is always the poor that get the blame. I am afraid we are heading in that direction now. The other day,
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At the moment, I do not think that social cohesion is viewed as important. On the contrary: people are moving away from each other at a terrifying rate. I say this in all seriousness to the Liberal Democrat part of the Government because this is a role which they can play and I wish them well in it. We should be looking at an analysis of industrial and economic players and not just at some sort of doctrinal presentation from politicians, worshipping at the altar of the bond markets. As Angela Merkel, hardly a radical socialist, said the other day, we really ought to work together, including in Europe, to ensure that that comes about.
The public sector is not always paid more than the private sector. If you want a top accountant or an economics expert from KPMG to come into Whitehall, you will have to pay them about 50 or 80 per cent extra, in brown envelopes. If we are not careful, we shall destroy morale in public services-in education and in health-which form part of the living standards of the people of this country, as was pointed out by my noble friend Lord Myners, the other day.
8.30 pm
Lord Greaves: My Lords, I, too, wish the new Ministers the best of luck, which they will need, and success in their jobs. Indeed, I wish that for the whole coalition Government. Like everyone on all sides, during the past three weeks I have watched events-I have been on the periphery of them-and have been greatly astonished at what has happened. We now have a completely different political situation and we all must adapt to it.
As regards the environment, rural affairs and agriculture, I am disappointed that there is no Liberal Democrat ministerial involvement in Defra. That will make life a little more difficult for those of us interested in this area, but I am sure that we will find ways of getting round that and co-operating with Ministers who have been appointed in both Houses.
The Coalition: Our Programme for Government, which is an expanded version of the original agreement, contains a great deal of good sense. It contains some other stuff as well, but that is inevitable in a document of this nature. Many things that will be important in the next five years are not contained in the document. Inevitably, many areas could not be covered, because otherwise the document would have been like a telephone directory. Of course, there are also all those things that Harold Macmillan described as, "Events, dear boy, events", which will turn into extremely important
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I want to concentrate on one or two omissions as regards farming. The noble Baroness, Lady Byford, and the noble Duke, the Duke of Montrose, touched on two that I want to mention particularly-the CAP and the Rural Payments Agency. On the common agricultural policy, the programme states:
"We also believe that much more needs to be done to support the farming industry, protect biodiversity and encourage sustainable food production".
We could all write lengthy essays on the meaning of those words, but the important point is that much more needs to be done to support the farming industry. That is an important declaration of intent whose details will emerge.
I notice that the responsibilities of the Minister in Defra, the noble Lord, Lord Henley, will include sustainable development. I wish him the best of luck with that and I look forward to hearing him tell the House what it actually means. Whenever we have legislation that includes the expression "sustainable development", we find it extremely difficult to get the Minister to tell us what it means. I therefore look forward to having those debates with him.
Basically, reform of the CAP is about two things: the size of farm support and what the balance of that support is spent on. The noble Duke referred to the famous Pillars 1 and 2, direct support to farmers and the rural development programme, including environmental work. There is a general consensus that there needs to be a movement from Pillar 1 to Pillar 2. However, it is interesting to note that the agreement hints at change in the balance of support from larger, more economically efficient farms in the lowlands towards hill farming and farming in the uplands. It is clear that farming in the uplands, vital as it is to the landscape, the local economy and the whole system of livestock farming, could not survive if left to itself within a free market. That would have disastrous effects. The Government are therefore to look at ways of providing extra support to hill farmers, in addition to the uplands entry-level environmental scheme, which will replace the current hill farm allowance. I say in parenthesis that it is vital that that transfer is a success.
As regards the Rural Payments Agency, as mentioned by the noble Baroness, Lady Byford, there is no mention in the coalition's programme for government. The Rural Payments Agency administering the single payment scheme has a history of bureaucratic shambles. The latest is the delay in providing the new maps for many farms, which is causing great delay, distress and difficulty to many farmers. Several thousand were outstanding a few weeks ago and many more maps and missing data are disputed. It is true that the figures quoted for the cost per payment is much greater in England than in Scotland. I do not think that people would mind too much about that if the system were administered efficiently, but the combination of high bureaucratic
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8.36 pm
Lord Ryder of Wensum: My Lords, I congratulate my noble friends on the Front Bench and pay full tribute to the skills of the noble Lord, Lord Myners, as a Minister over the past 18 months.
I expressed my disagreement in your Lordships' House with the policy of the then Opposition of sharing the proceeds of growth when it was clear that, long before the collapse in the markets, Mr Brown's public spending, underpinned by the so-called golden rule, was out of control. I urged the then Opposition to alter their line, alas without success. Later, in a debate last November, I sought to persuade your Lordships that a ramification of quantitative easing, and our exit from it, could be a resurgence of inflation. Today, CPI stands at 3.7 per cent and RPI at 5.3 per cent, nearly double the EU rate and the highest for 20 years. The UK has tripled its monetary base in a single year.
Alan Greenspan, the former Federal Reserve chairman, writing in the Financial Times a year ago, highlighted inflation as the real threat to Britain's sustained recovery. He warned that the pending avalanche of government debt on to the global markets made inflation a special concern. Nearer home, at the same time, Spencer Dale, the Bank of England's chief economist, warned about the dangers of injecting further liquidity for fear of igniting inflation. Let us hope that his boss, the governor, is no longer influenced by a Cambridge mentor of the 1960s and 1970s-the neo-Keynesian Lord Kahn-who preached that,
Kahn's disciples still hover in the anterooms of influence and their drug of preference has always been excessive demand. An undimmed principle stands out to those of us active in the inflation battles of 30 and 40 years ago. Inflation cannot maintain high levels of employment in any but the shortest term. In the longer run, to keep up employment, larger doses of the drug are needed, accelerating inflation still further. The outcome is high unemployment, misery and potential social unrest.
No wonder that gold is strong as investors flee government-supplied currencies. Of sterling, the euro and the dollar, none, at the moment, inspires faith. The dollar may be the least weak, but a strong suspicion lurks in some quarters that even the US Administration will permit inflation to tackle part of their ballooning deficit.
Of course, an independent sterling provides us with more levers than the euro would, including the freedom to depreciate our currency, but it also enhances the risk of inflation being used to erode the value of public debt. Veterans from the 1970s battle against inflation and the then neo-Keynesian orthodoxy recognise the phrases "competitive sterling" and "stable inflation
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The OECD, in its economic outlook published last month, stated that the UK, almost alone, risked credibility on inflation. Of course, the OECD realised that inflation has exceeded the 2 per cent Bank of England target in no fewer than 24 of the past 30 months. The OECD predicted that interest rates could reach 3.5 per cent within 18 months due to the Bank's failure to staunch inflation. That could result in a triple blow of higher taxes, higher spending cuts and rising interest rates. That is why we cannot be relaxed, let alone cavalier, about inflation.
It is certain that the Chancellor will implement changes on 22 June with inflationary implications. Manufacturers have reported rises in the cost of not just oil-related products but other materials, such as rubber and timber. Factory-gate inflation has just risen for the sixth month running.
The British are prone to inflation as a genetic disease. In effect, it is taxation without parliamentary approval. We must recover with sound money or we shall not recover at all. Unless the upward trend is checked, the Bank must act without delay.
8.42 pm
Lord Jones: I thank the Minister for her exposition of coalition policy and wish her well in her department. It is good to follow the noble Lord, Lord Ryder. I recollect that he was the Government Chief Whip in another place-a veritable street fighter in the Maastricht debates. His considerations on whipping a coalition would be interesting were we to hear them.
Universities provided the backbone of the prosperity on which Britain was built. Today, they are laying the foundations of economic recovery not only in the United Kingdom but across Europe and the rest of the world. As a whole, the sector generates £59 billion per year for our country and its economy, making it bigger than either the pharmaceutical or the advertising sectors. More than 1,000 spin-out companies have been established across the United Kingdom from universities, employing more than 14,000 people. In addition, the universities bring in more than £5.8 billion in foreign currency from tuition fees and other activities. Surely British universities will be a major engine in the recovery machinery for Britain's hoped-for economic resurgence.
There is a major threat hanging over our universities today. The sector faces huge financial problems. It is true that the universities have had a major increase in income during the past decade but, as the competition from overseas universities increases, so the shortcomings of our institutions become more apparent. Not only do equipment and buildings begin to show their age, but the best talent is often poached by institutions able to offer the latest equipment and facilities.
Too often, the university sector is dominated by a small number of institutions. That is particularly the case with research funding. I know that the apparent
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Another area of concern is the sector's inability fully to address the need for widening participation. Despite a decade or more of a programme to widen participation in the social backgrounds of the student population, today the scope remains remarkably similar to what it was in the mid-1990s. Some universities have embraced the widening participation agenda; others have paid lip service. Glyndwr University, of which I am honoured to hold the title of chancellor, has been leading the way in developing the economic agenda for Wales. The A55 expressway knowledge industries corridor project includes a number of exciting developments across north Wales, bringing the university even closer to private sector employers. It is the champion of widening participation, with one of the highest proportions of students from socially disadvantaged backgrounds of any university in the country. It has an excellent employability record for its graduates, and our students are doing exceptionally well.
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