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Lord Beaumont of Whitley: My Lords, the noble Lord is mistaken. It is National Carers' Week and these are the colours of carers.

Lord Lucas: My Lords, nonetheless, it is always a pleasure to discover a member of the Liberal Democrat Party at one with us and at one with reality. It is not often that we encounter those two happy conditions.

Most noble Lords who have spoken today pointed out that this debate concerns a social subsidy. We could be subsidising anything. It has nothing to do with tobacco, and I shall not therefore stray into the areas of anti-smoking and tobacco quality which others covered. Nor--I hope not too much to their disappointment--shall I follow the noble Lord, Lord Brain, down the route of the "Code Napoleon" or my noble friend Lord Balfour into forestry.

I was fascinated by the little vignettes that today's debate provided; its ability to hold a magnifying glass over this particular vignette at work and its characteristics and foibles. It is fascinating to see what a bureaucracy is like when it has no proper political

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control. It is comforting for a politician to see that we do have a function in this world. The Commission possesses all that supreme intelligence and so little common sense. It has so little ability to indulge in radical self-criticism and radical change. It seems to believe that if one changes something radically, everything is lost and all is chaos. Politicians live by change. We live for what we can change in the world, and the combination of the two is the way the system should work. An organisation that is so biased towards a bureaucracy has some fundamental faults which are hard to eradicate and which appear throughout its work.

The Commission has an attachment to stability at all costs, even when it comes to keeping people in poverty because that is the way things are and that is the direction in which they are set, even to the extent of running a system to a point where, in the end, change has been ignored for so long that when it comes it is catastrophic and calamitous.

What really astonished me about the report was the sheer mendacity of the Commission. I find it difficult not to characterise what it says as anything other than outright and deliberate lies. When there are politicians around, the bureaucrats have other people to do that for them and I am sure that they are grateful for that.

The report also gives a little vignette of European politics and the way in which countries fight over what is "our" share of the cake. To the Greeks and the Italians the tobacco subsidy is their share of it, and they fight not out of any rationale but because other countries have other subsidies which is "their" share. The trade-off works because the rationality and the possibility of reform become crippled by the inability to deal with individual subjects on their own. One can only deal with the tobacco subsidy when one is dealing with all other sets of regimes at the same time. Therefore, if the Greeks and Italians are to suffer from these changes, then in some way they can make the Brits suffer.

One can see the clash of the old and the new socialist cultures; the belief that is still common in Europe in relation to subsidy--that is, subsidy at its most extreme. In some cases 99 per cent. is represented by subsidy. We are almost inventing jobs for people to do. Indeed, we see in France some more of that to come--350,000 jobs to be created in the public sector. To do what? To add what to the economy? That is the sort of feature of socialism which I am sure the noble Lord, Lord Bruce of Donington, recognises from his youth in the Labour movement. It is a characteristic of the cause which he once so ably espoused, and perhaps still does, in which case he may enjoy seeing it come to fruition in the European Community.

The noble Lord, Lord Harris of High Cross, made a valid point when he said that we should not look at the net expenditure on the European Commission; it is gross expenditure. The money that comes back to us is not spent as efficiently and wisely as we would spend it or indeed, if we were to leave it to the individual members of our nation to spend wisely. We cannot equate money with money; outgoings with incomings. It is a large amount of worth and value which we invest in the European Community.

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Several solutions were proposed to the problems that the tobacco regime represents--and a number of good ones. It was said that the subsidy should be directed at the real problem for which it is supposed to exist. If there are social problems, let them be dealt with directly. Trying to deal with them through a different method is fundamentally unsatisfactory and leads to all kinds of distortions.

The World Trade Organisation will clearly have some effect on the future of the subsidy. If the European Community wishes to keep it the way it is, perhaps it should redirect it into something which is economically neutral. Perhaps we should pay the Greeks to grow wild flowers in their fields and to sit outside their front doors playing the bouzouki. It would scarcely cost more and would produce many benefits for the rest of us, even perhaps for the Greeks themselves.

On the question of subsidiarity, as my noble friend Lord Reay said, why should the European Commission tell these individual countries how they should live? Why should it be the Commission's business to keep Greek peasants doing what they have always done--living in poverty, growing tobacco? Why should this not be a matter for the Greek Government to choose? Yes, we agree that we as a Community will give money to Greece and will give money to the poorer areas of the Community to help them prosper. But why should we be limited to the imagination of the Commission to deal with this matter? Why should we not, as my noble friend Lord Wade of Chorlton so ably said, draw on the kind of experience we have in this country of how to revive and revitalise rural communities? These things are much better done by individual countries than done in a regimented way by the Commission. We are much better placed to respond to the individual problems that we have and to deal with the particular problems which come from the Code Napoleon. If money is needed to solve that kind of problem, why should it not be applied to solving that kind of problem? That is fundamental to the difficulties these rural areas find themselves in. Why should it be restricted to subsidising the growth of tobacco? If we are to supply subsidy, subsidising new businesses, infrastructure, the ability to market and transport produce and communications of all kinds are what rural areas need and not money to spend on a totally useless activity.

I look forward with great interest to hearing what the noble Lord, Lord Donoughue, will say in reply to the report. I shall put one particular emphasis on it. I shall listen carefully to the answers that he proposes Europe should adopt and I shall imagine him trying to apply those same answers to our own little tobacco regime in miniature--the hill livestock compensatory allowance. There we are, facing the same problem of looking after rural communities which are no longer viable. There is no way in which those rural communities, as farming communities, can pay their way without subsidy. How are we to deal with that problem within our own shores? Will we adopt the recipes which we suggest for others?

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5.42 p.m.

The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Lord Donoughue): My Lords, I thank the noble Lord, Lord Reay, for initiating the debate. I agree with virtually all he said and I do not propose this evening to defend the indefensible. I thank him for the kind words he said about me personally and assure him that I am very committed to the reform of the CAP. However, I should warn him that I do not expect to achieve all of that before Ascot--not before the first day of Ascot anyway!

I thank my noble friend Lady David for her characteristically kind words. I thank the noble Lord, Lord Beaumont of Whitley. I can tell him that during the first few weeks of this job I totally shared his regret at the banishment of my noble friend Lord Carter away from agriculture. But it is beginning to feel better. I thank the noble Lord, Lord Lucas. He was modest. I say that with the hindsight of my present experience I look back on his performance in this job with growing retrospective admiration and sympathy. I shall look carefully at what he said about hill livestock.

As a government, we welcome the committee's excellent report. It is a well organised analysis of the position and is commendably frank in some of its justified criticisms. As stated in the Government's response to the report, we agree with most of the points made by the committee. I certainly agree with a good many of the comments made in today's debate, in particular with the comments of my noble friend Lady David on the Brussels contradictions and with the belief of the noble Lord, Lord Harris of High Cross, that such nonsense cannot survive enlargement and what is to happen in the World Trade Organisation.

The House will be aware that the European tobacco regime has attracted criticism wider than here. It has attracted this criticism for a number of years not least because of the great expenditure involved and the health implications. There has also been widely reported criticism--it has occurred this afternoon and even within the Commission--of the illogicality of supporting production at the same time as encouraging anti-smoking measures. The House of Lords report, commendable in almost every way, is, if anything, a little gentle on that aspect. My noble friend Lord Rea spoke with great medical expertise, especially with regard to his concern for health in the less developed world. I noted, too, the comment of the noble Lord, Lord Beaumont of Whitley, in that regard.

The ban on advertising is fairly oblique with regard to this debate but perhaps I may say that the Government believe that the ban will be most effective if introduced as part of a package. Next month the Minister of State for Public Health is holding a summit of experts on ways to reduce smoking. We are also looking carefully at how best to remove tobacco sports sponsorship without putting at risk particular events in the UK. It involves a number of sports, particularly horse racing. National heritage Ministers will be consulting the sports concerned and legislation will include a transitional period.

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Coming back to the central concern of the debate, we must ask what are the chances of reform. We have to concede to the Commission--even critics must concede--that the 1992 reform was a significant step in the right direction. It reduced the scope for fraud and it cut overall expenditure. Costs on the regime are now down 23 per cent. from the 1991 peak. Fraud has been reduced. There are now no intervention and export refunds, which were the areas most prone to fraud. The aided categories have been simplified--cut from 34 to eight--and monitoring strengthened. We note that the Greek and Italian tobacco agencies have not been set up and that the Commission at least is reasonably satisfied that other crop control agencies now being used for tobacco control have good effect. We believe that the Community now needs to take the opportunity to build on those reforms.

Looking at what is proposed, we are pleased that the Commission accepts that maintenance of the status quo is not an option. The fact is, as often mentioned in the debate, that the regime supports production of tobacco--nearly 5 per cent. of world production--of a very low quality and that the product would barely be grown in the European Union without subsidy. The Commission report says that the quality could improve. There is a long way to go. That is reflected in the fact that Europe imports most of the tobacco it consumes and exports 80 per cent. of its own production to those less privileged--mainly north Africa and eastern Europe--as my noble friend pointed out.

The Commission examined and rejected the option to disengage, which is attractive in many ways. We, like the noble Lord, Lord Harris of High Cross, whose anti-political correctness status I always find engaging, were very disappointed by that conclusion. We pressed hard for decoupling from production, but it was the Council of Ministers who insisted that that should not happen. It preferred the proposal to reform the existing system, the key elements of which are modifications to encourage quality and measures to enable growers to move out of tobacco with a voluntary buy-out scheme and flexibility to transfer into varieties in demand.

Broadly, we welcome the Commission's proposals in so far as they go because they are a modest improvement, but one of our main concerns is that the Commission's ideas fall far short of what is required. It is our view that further reform will soon be needed.

The Commission's preferred options for improving the regime raise questions of effectiveness and control as well as of health. One can argue that the more quality is improved then there are more tobacco and health questions. Those issues will need to be fully explored when the detailed proposals are made available. We shall be probing those issues.

The Commission's report focuses on making more effective use of funds to secure better quality production while maintaining broadly the current level of support. This approach seems certain to be reflected in any formal proposals eventually put forward. The Commission is waiting for the European Parliament's opinion on its report before issuing its detailed proposals. We regret this, but it is expected to take until the autumn.

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The cost of the regime is over one billion ecu paid on a maximum quota of 350,600 tonnes. That makes tobacco the eighth most costly CAP regime and accounts for about 2.5 per cent. of CAP expenditure. It is the most costly CAP regime in terms of support per hectare. We agree with many noble Lords, including my noble friend Lady David and my noble friend Lord Grantchester, in that we do not consider that financial support for tobacco production is an effective way of spending Community money. We have strongly argued that the cost of the regime should be reduced. At this point I say to my noble friend Lord Bruce that many of his views on EU expenditure are not entirely unfamiliar to me, but on his general point I agree that CAP imposes a big burden on both taxpayers and consumers. We point out that the percentage of the EU budget has been reduced from two-thirds in 1988 to under one-half now, but it is still too high. The Government are pressing the Commission to come forward with further proposals.

A point made by a number of noble Lords, which is central, is that the problem is really a social one; it is not a commodity issue. Tobacco tends to be grown in remote rural areas on very small plots with an average size, as mentioned, of about three acres. It also involves Napoleonic or Continental land ownership issues. There are great difficulties in changing land use, which the noble Lord, Lord Brain, mentioned. It is an intensive crop and the social problem is that in some areas it is a, or the, major employer and important local source of income. The question of the numbers of people involved was raised. It involves 170,000 full-time jobs including 135,000 growers and in addition 30,000 processing jobs. I say to the House that we do not dismiss that as a social problem. It is a significant number of people. We sympathise with the attempt to help to deal with that problem, but our position is that what is proposed is not the best way to do it. It is a difficult problem. The farms often have no irrigation and there are no real alternative crops which would make such small farms economically viable. Switching to other crops runs the risk of upsetting the balance in those sectors and the European Union has placed quantitative restrictions on support for some of them.

We are disappointed that the Commission did not look closer at non-agricultural alternatives. There is also the wider question of rural policy raised by the noble Lords, Lord Wade and Lord Lucas, and the argument that we need a positive rural policy in Europe as here. I wholly agree. My right honourable friend the Minister is looking at ways to alter the balance in our own ministry towards a wider rural policy, away from the concept of just supporting agricultural production. We propose to advocate that change in Europe, but one would be foolish to pretend that it can happen overnight.

Our central, particular approach is that any measures introduced in this area should be aimed at reorientating growers towards other activities. Our view of the ideal solution would be a Europe-wide commitment to an eventual phasing out of the regime. I note that the committee suggests 10 years and I wholly agree. I agree with the noble Lord, Lord Reay, that the large amounts of money involved would be much better spent phasing out the industry and not perpetuating it.

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As regards the tobacco regime, we are critical. We agree with all the criticism so pungently expressed by my noble friend Lady David. We encourage voluntary departure from the regime so long as it leads to permanent reductions in quota. We do not believe that the quota obtained through a voluntary buy-up scheme should be redistributed nor do we wish to see new entrants encouraged. The Government support the Commission's ideas for premia modulated according to quality, in so far as they go, but we much prefer to see lower premia to expose producers more to the market.

Looking at the political practicalities of achieving what we believe in, we have to state the unfortunate fact, as the noble Lord, Lord Reay so excellently said, that few other member states support our views on reform. No fewer than eight countries have producer interests which they are not prepared to set to one side. So far--and I stress this--most other non-producers have had little to say. Given that and the system of qualified majority voting in the Council, the chances of our being able to bring about a radical change are limited unless and until external forces such as the World Trade Organisation talks and enlargement pressures force it. In the context of enlargement, we note that current production in Poland and Hungary alone would increase the European Union quota by 17 per cent.

In conclusion, it would be foolish to promise the rapid reforms in which we strongly believe, but I assure the House and members of the Select Committee that when the Commission's proposals come forward this Government will press for the greatest possible degree of reform, and, bearing in mind what my noble friend Lord Grantchester said, we shall also try, unlike our predecessors, to build a coalition of support for our rational position among our European partners.

6 p.m.

Lord Reay: My Lords, I am extremely pleased that so many noble Lords have participated in the debate, and particularly that so many have done so who are not members of Sub-Committee D. All too often, members of sub-committees tend to end up talking to themselves on occasions such as this, but that has very much not been the case today.

I should like to refer briefly to the remarks of the noble Lord, Lord Harris of High Cross. I value highly the support that he gave to the report. The noble Lord had a criticism of the last sentence of paragraph 39 in which we say how public health arguments, even if ill founded, could nevertheless help to create the will to change the regime. I can see why a campaigning smoker like the noble Lord could be offended by the apparent lack of scruple in that observation. However, I take the sentence to which he objects more in the nature of an objective and passive observation than as an incitement to indulge in anti-smoking propaganda. I hope that others will do the same. However, that was the noble Lord's only small criticism among all his other highly complimentary remarks about the report, for which I am truly grateful.

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I have detected hardly any other criticisms of the report during this debate and I am grateful for the degree of support which it has received. Indeed, familiar antagonisms in your Lordships' House disappeared in the cloud of unanimous agreement which the report received. The noble Lord, Lord Beaumont of Whitley, found nothing with which to disagree in what the noble Lord, Lord Bruce of Donington, had to say. My all but namesake, the noble Lord, Lord Rea, found nothing with which to disagree in anything said by my noble friend Lord Boyd-Carpenter. What else is there to live for?

I am also grateful to all members of the sub-committee who have spoken, including my noble friend Lord Wade, the noble Lords, Lord Brain and Lord Grantchester, and the noble Baroness, Lady David. I thank them particularly for the kind things that they said about me. I also thank the noble Lord, Lord Beaumont of Whitley, for the same reason.

I listened at the time to the early morning interview of the noble Lord, Lord Brain, on Radio 4--and very good it was too. The noble Lord told us about the Portuguese MEP who asked, "What about set-aside?". As my noble friend Lord Lucas correctly pointed out, we must not forget that there are regimes under the common agricultural policy which benefit producers in this country. My noble friend mentioned one which is of particular interest to us. I refer to the hill farmers' scheme. We cannot say, hand on heart, that none of those would or should have happened if the CAP did not exist or if it were to be in some way repatriated. We must always bear that point in mind.

I am grateful to the Minister for the way in which he has received the report. I am sure that what he has said will bear close study. But it gives me confidence to believe that the Government will continue to strive for reform in the Council, which is what we all wish to see. I commend the report to the House.

On Question, Motion agreed to.

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