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6. Mr. Mark Simmonds (Boston and Skegness): What discussions he has had with those in agriculture in advance of his forthcoming Budget. [27556]

The Economic Secretary to the Treasury (Ruth Kelly): Treasury Ministers have regular contact with a wide range of interest groups and individuals, including those with an interest in agriculture.

Mr. Simmonds: I thank the Minister for that answer. Considering that the Government have overseen a crisis in agriculture and in rural Britain since May 1997, crops grown for biodiesel would provide an excellent additional agricultural income and substantial environmental benefits. In the Chancellor's 2001 Budget, he announced that biofuels would qualify for a 20 per cent. tax rebate in fuel duty. The Minister should tell the House why the environmentally superior biofuels have not been given the same duty rebate as the gas fuels, currently 40p per litre, and that that anomaly will be addressed to the benefit of agricultural incomes throughout the United Kingdom.

Ruth Kelly: I am absolutely delighted that the hon. Gentleman recognises the sense of the Chancellor's proposal in the previous Budget to introduce a specific rebate for biodiesel in the next Budget. We have been listening to representations on that subject. I believe that there will be significant environmental improvements as a result of that rebate and I am sure that the Chancellor will listen very carefully to the representations that have been made today.

Mr. Huw Edwards (Monmouth): When my hon. Friend meets representatives of the farming industry before the Budget, will she discuss the increased resources that the Government have put into organic conversion, and the support that they have given to agri-environmental schemes such as Tir Gofal in Wales, which has been remarkably successful and was commended by those organic producers from my constituency whom I saw yesterday? Does she agree that the future for agriculture must be to support those family farmers who farm in an

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environmentally sustainable way, instead of giving disproportionate subsidies to large-scale producers in the east of England?

Ruth Kelly: I thank my hon. Friend for his comments. I certainly agree that the organic sector of our farming industry has an important role to play in the development of that industry. At the moment, I believe, about 2.5 per cent. of agricultural land is devoted to organic farming. There have been calls from the organic sector to increase that to about 30 per cent., which, at first glance, strikes me as rather ambitious.

However, I completely agree with my hon. Friend that we need to take the development of the sector seriously. We need to continue our strategy of moving resources away from production support and into measures that will contribute to environmental development. In future, we want a market-oriented agricultural sector that provides for sustainable development and meets consumer demand.

Mr. Nicholas Winterton (Macclesfield): I shall meet members of Macclesfield and district National Farmers Union on Saturday morning, and I should like to take them a message of hope from the Government. Does the Minister accept that if we are to maintain the countryside and to produce from land within the United Kingdom that food which we can economically and properly produce, the Budget must include some assistance, incentive and encouragement for our farmers? Will the Minister give me that assurance, to take to my farmers on Saturday morning?

Ruth Kelly: I certainly ask the hon. Gentleman to pass on my warmest regards to members of his local NFU when he meets them. He can of course tell them that it is the present Government who have commissioned the Food and Farming Commission, led by Don Curry, to look at the development of the sector to ensure that it can be developed in a sustainable way. The commission includes stakeholder representatives from all parts of the industry, and we look forward very much to considering their representations.

I would also ask the hon. Gentleman to point out that it is the present Government who have led reform of the common agricultural policy within Europe. It is by forming alliances that the Government have been in the vanguard of reform and able to put forward the real changes that will matter in future to the agricultural sector.

Global Downturn

8. Fiona Mactaggart (Slough): What assessment he has made of the impact of the global downturn on the future performance of the UK economy. [27558]

The Economic Secretary to the Treasury (Ruth Kelly): No country can fully insulate itself from developments in the world economy, but the UK is now in a better position than on previous occasions to cope with turbulence in it. As a result, leading external forecasters expect UK economic growth to be the fastest in the G7 this year.

Fiona Mactaggart: I thank the Economic Secretary for that reply, and I believe that the very challenging global

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circumstances—this is the first time for 30 years that every region of the world is facing a downturn—are only matched by the fact that this is the first time in the same period that Britain is the best-placed country in the world to face them. Does she agree that this is a very difficult time to consider increasing taxation to improve our public services because of that challenging global situation?

Ruth Kelly: I thank my hon. Friend for her comments and for pointing out that Britain is indeed in a very positive economic situation and better placed than any of the other 29 member countries in the Organisation for Economic Co-operation and Development to weather the very serious global economic downturn that has taken place since 11 September and as a result of the unwinding of the high-technology boom, as she rightly appreciates. Of course, we in this country must have a debate about the funding of our public services; it is important that people realise that, to correct 30 years of underinvestment, we need to put public services on a sustainable footing. What the Opposition consistently refuse to tell us—it became apparent just this week in the debate on public services—is whether they would match our funding plans, or whether they would slash public services.

Chris Grayling (Epsom and Ewell): May I ask the Economic Secretary to turn her attention to one of our key international trading partners and markets—Germany? What assessment has the Treasury made of the degree to which the problems in Germany are either caused by the current international situation or, as increasingly frequent independent analysis argues, are long-term, structural and caused by the fact that it joined the euro at the wrong rate? Is that latter analysis the accurate answer?

Ruth Kelly: The hon. Gentleman refers to the problems that the Germans are currently experiencing. In fact, growth in the euro area has turned out to be weaker than most independent forecasters were predicting only a few months ago. However, the European Council confirmed at the December ECOFIN meeting that the economic fundamentals are sound in the EU and that it expected a gradual recovery during 2002. What is important is that we have sound fundamentals and that we take the measures on economic reform to improve labour market flexibility and product-market competition and to ensure that it is as easy as possible for the EU to recover from the slowdown in global demand.

Mr. Peter Pike (Burnley): Does my hon. Friend agree that, at this time of global downturn, it remains an absolute Government priority to allow industry to invest, especially in research and development and in high-value, high-skill products, so that we are best advantaged when the markets start to pick up?

Ruth Kelly: I completely agree with the points made by my hon. Friend, and it is incredibly important that we improve the manufacturing base and increase productivity in our manufacturing sector, so that we can take full advantage of the upturn in global demand when it comes. That is why the Government have introduced tax credits for small and medium sized enterprises and are consulting on how to extend those measures to larger firms. It is why we set up regional development agencies to drive forward economic growth in each of the regions. It is why we set

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up venture capital funds to ensure that small and medium sized enterprises have the access to capital that they so desperately need to grow, and it is also why we are working in partnership with the CBI and the TUC to look at ways of raising skills in the workplace, so that we have people who are fully trained and able to take advantage of those opportunities as they arise.


9. Mr. Chris Mullin (Sunderland, South): What plans he has to review the provision of roll–over relief on capital gains tax on the sale of agricultural land for development; and if he will make a statement. [27559]

The Paymaster General (Dawn Primarolo): We currently have no plans to review this relief, which supports trading including farming.

Mr. Mullin: May I put it to my hon. Friend that the windfall profits arising from planning permission for agricultural land are already sufficiently enormous without it being necessary to award the landowner tax relief as well, especially since one of the effects is artificially to inflate the price of agricultural land? Whose idea was this? How can it possibly be in the public interest? Is it really not about time that a stop was put to it?

Dawn Primarolo: I have discussed this matter with my hon. Friend before and I know that he follows the subject very closely. The proceeds of the sale have to be reinvested in trade assets for the roll-over relief to be available in the first place. Roll-over reliefs are designed to allow traders to modernise and expand without an immediate charge to tax being made on the money of the business.

I continue to have an open mind on the subject and I have considered closely the factors that interrelate with the sale of land, particularly farming land, for greenfield development. I am not convinced that roll-over relief is the problem, but I understand that the subject is dear to my hon. Friend's heart. I look forward to continuing to discuss the issue with him. If he has any further information, I shall be more than happy for him to send it to me and for me to reconsider it.

Alistair Burt (North-East Bedfordshire): When the hon. Lady is examining submissions about tax relief and other initiatives for the Budget, will she take into consideration a recent European Commission survey that showed that, contrary to the beliefs of some Labour Members, Britain provided the lowest state aid to agriculture of any country in the European Community, whether that was measured as a percentage of GDP or in terms of the number of people employed?

When the hon. Lady thinks about initiatives for the future, will she bear in mind the difficulties that agriculture has faced and will she therefore consider favourably tax changes that will help farmers? Will she particularly consider the initiatives suggested by people in that hard-pressed sector, because she is very unlikely to receive any suggestions from the Ministers with responsibility for agriculture?

Dawn Primarolo: I am sure that the hon. Gentleman is aware that a vast array of tax reliefs and supports are

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available for the farming community. He went on to make an important point about the diversification of rural communities and about considering ways in which we could assist that. I assure him that the issue is a high priority for the Government. I take his contribution to be a Budget representation and I will draw it to the attention of my right hon. Friend the Chancellor.

Mr. John Smith (Vale of Glamorgan): May I welcome my hon. Friend's comments? The last thing in the world that we should be doing is putting up more barriers to farmers diversifying from agricultural overproduction and into new rural industries. I shall meet members of the Glamorgan branch of the NFU in Cowbridge tomorrow, and I would be delighted to be able to tell them that the Government plan to do even more to help them with diversification.

Dawn Primarolo: My hon. Friend can take my best wishes and those of my hon. Friend the Economic Secretary to the group that he will meet. I am sure that he will be able to reassure its members that the Government continue to take the views of the rural community very seriously. Not least, I point to the substantial help that Customs and Excise and the Inland Revenue were able to give members of the rural community during the difficult period that they all experienced during the foot and mouth crisis.

I would like my hon. Friend to echo the comments that I have made to him and to the hon. Member for North-East Bedfordshire (Alistair Burt) about the fact that diversification of rural communities is of great importance to the Government. We will continue to take forward that programme as best we can and, as my right hon. Friend the Chancellor would expect me to say, as resources allow.

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