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Earl Peel: My Lords, I thank the noble Lord for giving way. The noble Lord, Lord Beaumont of Whitley, said that he was in favour of modulation. Can the noble Lord, Lord Mackie, tell the House whether he and his party are in favour of modulation?

Lord Mackie of Benshie: My Lords, I was coming to that point, which means that I now have to answer it! Of course I am not in favour of modulation. There is a case for saying that there should be special payment for small farms, for conversion or for some such feature. However, one cannot base support for a whole industry on the size of the unit. I am all in favour of doing something to help the small farmer, but it must be separate.

The same is true as regards help for the building of dry stone walls, party hedges and so forth. It is an aside; it is not central to the question. They are good and proper items for the public to spend their money on in order to enjoy the countryside, but they are not central to the support of the agriculture industry.

I have spoken for 12 minutes, which is what I am allowed, and I know that everyone is needing a drink. However, I wish to put one or two questions before I conclude. My main question relates to BSE. Does the Minister have proper information about the test for BSE that has been developed in America? I have read in the newspapers that it is now easy to administer and reliable in its results. If that is so, it would make a great difference to the handling of the problem. I enjoyed the debate. I doubt whether we shall obtain much of an answer from the Minister, but I look forward to his speech.

6.56 p.m.

Baroness Anelay of St. Johns: My Lords, I, too, am grateful to my noble friend Lord Ferrers for initiating the debate. We all look forward to and enjoy the vigorous debates which he introduces. Today, noble Lords around the House have unleashed a volley of expert arguments which have unerringly hit their target. I have behind me the benefit of the expert knowledge of my noble friends. That is just as well, because I recognise my own inexperience in this policy area except, of course, I have had half a century of experience as a consumer.

They say that confession is good for the soul, so I shall admit that during my formative years, when I grew up in what was a green belt--I hope that, despite the Government, the green belt will continue--I trespassed

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on the wheat fields. I dread to think what damage I did to them. I shall not say how, but in a most innocent way, of course. How could your Lordships think otherwise in those circumstances?

During the past three months, as a newcomer to discussions on agricultural policy, I have been struck by two main impressions. First, that the countryside is the shop floor of a major industry, so that the current crisis in agriculture is not only a problem for farmers. The knock-on effects for other sectors can be as dramatic and devastating as they are for farmers. Agriculture is not only the backbone of the rural community, but vital to the urban community, too.

As has been mentioned, agricultural production covers approximately 75 per cent. of the land area of the United Kingdom and Northern Ireland. The importance of the indirect employment effects of agriculture means that the contribution which the industry makes to the GDP extends well beyond the figure of 1.4 per cent. represented by farming's direct contribution to GDP.

A recent study by Reading University on the impact of changes to the CAP found that those effects would be even greater outside farming than within it. The worst case scenario estimated that the equivalent of 5,400 jobs could be lost in farming itself, rising close to 200,000 once the various multipliers upstream and downstream of farming are included. That illustrates clearly the scale of the impact which agriculture has on the economy.

Will the Minister join with me today in paying tribute to the United Kingdom and Northern Ireland farmers and growers who have worked so hard to provide this country with good quality food and sustainable agriculture of which we can be proud? Will he recognise that it is essential to ensure that that investment of effort, expertise and resources should continue to be available for the next generation. At the NFU rally yesterday at Central Hall, a representative of the young farmers reminded us that there are 30,000 young farmers ready and willing to continue the work. We need also to continue the effort for the millions of consumers who rely upon their production.

Secondly, I am struck by the fact that this Secretary of State and thereby this Government give the impression to the country that they are urban-minded and seem to know little and care even less about those who live and work in the countryside. The result is that farmers are not only facing problems in several sectors of production all at the same time, but those problems have been exacerbated by the series of decisions taken by this Government over the past nine months.

My noble friends have given a detailed analysis of government actions which have hit agriculture hard. Those actions will take £2 billion out of the farming industry at a time when farm incomes have fallen dramatically over the past nine months. This morning I visited the Isle of Wight to attend the AGM of the NFU branch there. The members pointed out to me what falling incomes meant to individuals. One farmer said that in the past 12 months he has faced a 60 per cent. drop in income. Projected forward to cover a 16-month period, that rises to a fall of income of over 80 per cent.--and he has a mixed farming background.

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When I attended the NFU rally yesterday as an observer, like other noble Lords, it was clear that its primary concern is that the Government should give farmers the opportunity to compete on equal terms with other EU producers. Several of my noble friends have argued today for green pound compensation. They have proved how the strength of the pound, together with revaluations of the green pound since the election, all urged on by the Government's monetary policy, has caused mayhem. Prices of UK agricultural products have fallen by £1.8 billion; farmers' borrowings have increased by approximately 10 per cent.; the rise in interest rates since September 1997 alone will cost farmers an extra £90 million; and the strength of sterling has encouraged a dramatic increase in cheap imports--from Ireland alone, they are up by 78 per cent. All that is at a time when every other eligible member state pays the EU share of agri-monetary aid to its farmers. The Irish and German Governments have added the permitted supplements on top of that aid.

Of course I appreciate that this Government, like any responsible government, should exercise financial caution. But I understand why farmers argue that the case for government action is now stronger than ever.

Will the Minister tell the House whether the Government have explored every possible course of action by which moneys could be made available to pay green pound compensation and why they have decided not to take action? Will he tell the House also whether there are any underspends on any Community-funded programmes and, if so, what is the size of that underspend?

Noble Lords have referred today to the reform of the CAP. It is certainly the case that reform is becoming ever more essential in view of the impending enlargement of the EU; the increased problems being faced already as the EU complies with its existing World Trade Organisation obligations; and the need to arrive at a satisfactory negotiating position for the next WTO round.

Why did the Prime Minister drop the subject of CAP reform from his opening statement to Jacques Santer on 8th January? He was keen enough to talk about it as being a priority before the election. Why not now? Do the Government really intend to make any progress on CAP reform during their presidency and, if so, what progress?

If the Government do not have a satisfactory answer to those questions today, I should be even more surprised than I was at the time by the Secretary of State's Statement on 22nd December in another place. It seemed careless then; it still seems careless now. For, in a few roughly worded phrases, the Secretary of State launched a policy of restructuring of the entire beef industry and a system of subsidies that could have enormous repercussions on the countryside, let alone on the livelihoods of thousands of British farmers and those in ancillary trades.

His words on that day raise several vital questions. How will the run-down of subsidies be synchronised with EU policies in such a way that it does not risk leaving Britain at a disadvantage against other European producers? What are the Government doing now to ensure that the form of modulation support currently being discussed in the EU is not used to damage UK agriculture?

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Indeed, what will happen to the land? Where will the farmers go? The Secretary of State simply talked about retirement schemes. It seemed to be an extraordinary Statement.

After reform of the CAP, I presume that some areas will be unprofitable to farm. No doubt the management of many, if not all, of those areas will continue to be socially desirable for environmental as well as for amenity reasons. What are the Government's plans? Will they develop the existing agri-environmental schemes? Do they believe that such schemes should be market based? Or are the Government planning to adapt the cross-compliance route which was mentioned earlier?

The Government owe it to the farming community as well as to anybody with an interest in the countryside and to all of us as consumers to approach their proposed run-down of beef farming and the reform of the CAP in a more considered way than they appear to have done so far. Socially and environmentally, farming of any kind is a complex, multi-faceted business, the future of which really cannot be disposed of in a ministerial Statement made with virtually no warning on the eve of the Christmas Recess.

Today I have concentrated on two major issues because of time constraints. I recognise that other noble Lords have been constrained to keep to seven minutes so I thought I should keep well within my 12 minutes. I am aware also that next week we shall have the opportunity to discuss further the arguments put forward by my noble friends in relation to the beef bones ban. Therefore, I conclude by pointing out that in nine months the Secretary of State has so far not yet expounded a coherent policy which will sustain the rural economy and healthy farming. It is vital for the whole country that he should turn his mind to doing that now.

7.8 p.m.

The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Lord Donoughue): My Lords, I wish to thank the noble Earl, Lord Ferrers, for his characteristically lively opening speech. It certainly reminded me of how we miss him at the Dispatch Box at Question Time. I also thank the many noble Lords who have contributed to this long debate. I sensed that not all were wholly on the Government's side but I felt that all contributions were interesting and authoritative. I should add that the late appearance of someone named Cromwell was extremely intimidating for someone of my racial and religious background.

Many noble Lords speak with great knowledge and long personal experience of agriculture. Therefore, I shall pay even more attention than usual to the many serious points which have been made. I shall try to respond to as many as possible this evening but the number of points and questions is dauntingly long. I have enough notes to take us through to Friday evening. It is inevitable that in some cases I shall have to ask for the tolerance of noble Lords and write to them individually.

However, before dealing with the detail, I should like to spend a few minutes getting it into general context--that is, into economic and social context--as I believe my right honourable friend did in his Oxford speech.

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I believe that that was acknowledged by the noble Lord, Lord Middleton, and others and was indeed, contrary to what was suggested, a coherent and measured view. I should like to begin by agreeing with all noble Lords who have argued for the importance of agriculture in our economy. Although it now accounts for under 2 per cent., I agree wholly with the noble Baroness, Lady Anelay, as regards its much greater significance for the general economy. I also agree with those who have asserted the even more crucial role of farmers in our rural society and environment.

Personally, I was born and grew up in the countryside, perhaps flattening fewer crops than the noble Baroness opposite, and I still support country sports. I also empathise with some of the vibrations emerging from the countryside. Therefore, I trust--and I say this quite seriously--that they will not be hijacked for partisan party political reasons, although there are many good political points to make, because that would actually blunt their impact on government.

The crisis in the agricultural sector, reflected in the serious decline in farming incomes quoted by many noble Lords, is complex in origins and certainly did not begin on 1st May 1997. Its severity derives from the conjunction of several factors all adding to the pressures on our agriculture and especially on beef and livestock.

First, there is the secular decline in demand for meat throughout Europe, with the consequent impact on prices. Indeed, that has been evident for a number of years. That requires structural adjustments in the industry and cannot be compensated for by subsidies forever. As has been mentioned, the dairy industry is also suffering from seriously low prices.

Secondly, there is the particular blow of the ban on exports of British beef related to BSE. We inherited that ban and that crisis and believe that it involved serious mishandling during the previous regime. We have set up an inquiry into the conduct of that handling. The lifting of the beef ban, on which I shall say more later, is a top departmental priority. One consequence of the ban is that the structural reduction in the beef industry necessary in Europe has in fact been achieved through the ban imposed in the short term on one producer--the United Kingdom. So the structural adjustment has been imposed in one go on one country. We have to change that situation.

Thirdly, there is the strength of sterling hitting most areas of farming, as was mentioned by many noble Lords. That phase originated before we took office and I do not propose to apologise for a continuing strong currency. It has many national benefits although, as noble Lords have pointed out, it hurts our farmers both by promoting imports and by reducing some, though not all, green pound compensation. However, it followed a prolonged period of sterling weakness during which farmers enjoyed commensurate benefits.

Fourthly, there is the strong consumer demand for greater food safety and animal welfare. That was especially referred to by the noble Duke, the Duke of Marlborough. We totally support that, as the establishment of our new Food Safety Agency

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demonstrates. But higher standards do involve higher costs throughout the farming and food chain, some imposed by government. Many, including those relating to BSE and cattle traceability, fall upon farmers, among others. But the industry benefits from greater confidence deriving from higher food and animal health standards. Therefore, it is appropriate that the industry contributes to the change. That is a financially prudent approach which was sensibly initiated throughout much of the time of the previous government; but it does add to the farmers' costs.

Therefore, the conjunction of those four major factors--there are others, but I chose those--has made this a particularly, and perhaps unprecedentedly in my lifetime, difficult time for British agriculture. As I say, none of those factors actually originated with the present Government, so it would be partisan for anyone to blame us for those difficulties. It would be argued by many on my side that much of the blame lies closer to home; namely, on the Benches opposite. But I do not propose to pursue that line as, from the beginning, it has not been my approach to agriculture. Except for the strength of sterling, where we cannot predict the future, all the factors I have mentioned are possibly permanent aspects of the agricultural landscape. They point to the need for restructuring in the sector and particularly underline the need for CAP reform.

The Government's approach will be to try to manage that change, doing as much as possible to ease the burden on the farming sector and the wider rural community during the process of change. However, given the situation, I must say that it is crude and impractical to talk as if all that is required in such a complex situation is an ever-increasing flow of subsidies to the agricultural production sector. The British taxpayer simply will not wear that. Agriculture already receives billions of pounds a year in subsidy, and beef alone received £1.5 billion this year, following an even larger amount last year.

The average British family already suffers a cost of between £12 to £15 per week to subsidise agriculture. We cannot add significantly to that burden. No other sectors in our economy, many of which are suffering equally from strong sterling and rising costs, even ask for compensation. Parts of agriculture, nobly represented by the noble Baroness, Lady Trumpington--for example, horticulture, pigs and poultry--work on and compete with very little aid. But the fact that we cannot produce endless subsidies to parts of agriculture does not mean, as has often been suggested, that we are in any way hostile to the countryside.

The argument that we are hostile has been widely presented. Indeed, many sides opposite--well, one side mainly--I thought, enjoyed particularly the vigorous, though fair, case advanced by the noble Lord, Lord Marlesford. We shall listen to the arguments very carefully. I do not accept the charge of hostility to the countryside either for myself or, indeed, for my right honourable friend, who, as acknowledged with generosity by the noble Lord, Lord Jopling, has for 27 years represented one of the largest rural hill constituencies. Nor do I accept it for the Government.

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In fact, the Labour Party currently has more MPs representing rural and semi-rural constituencies than the Conservative Party and the Liberals combined. We know, of course, that there are no Conservatives in rural Wales.

Therefore, in his opening remarks the noble Earl, Lord Ferrers, was wrong when he said that Labour were an urban Government. Similarly, the fact that we had, perhaps, only two Labour speakers in what is a Conservative debate does not mean that there is no Labour interest in such matters. I personally recall spokesmen in Opposition leading our side's debates on the economy and then on the arts when I believe that fewer than two Conservative Back-Benchers spoke. It did not occur to me at the time, but I now wonder whether it meant that the Conservatives were totally ignorant about the economy or the arts.

Our approach is to support the wider, sustainable, rural economy and society. Here I should tell my noble friend Lord Grantchester and the noble Earl, Lord Peel, that the role and new name of MAFF will emerge in due course. We shall certainly work to provide a strong rural voice in the Cabinet and in the country. Within that sphere, farmers do have a key role in our rural view, not only as food producers but also as stewards of the countryside, as my noble friend Lady Young of Old Scone stated. I should particularly like to thank her for being uniquely cheerful.

I wholly agree with the noble Earl, Lord Ferrers, that a healthy environment needs healthy farming. That is especially true in marginal and less-favoured areas. I can assure the noble Lord, Lord Rathcavan, that we shall fight that corner in Brussels. However, I have to point out that our policies do look beyond agricultural production. They seek to sustain the wide diversity of occupations and objectives in the broad, rural economy. I was most interested in the excellent speech of the noble Lord, Lord De Ramsey, when he spoke on the diversity of objectives in a countryside policy, some of which may of course conflict.

We shall further integrate environmental objectives into agricultural policy. We shall support the aspects of Agenda 2000 which seek to do that. We already have in place a wide-ranging package of voluntary incentive measures aimed at helping farmers to achieve environmental objectives. We are looking to add to those measures, as with the new pilot arable stewardship scheme. But pursuing our strategy for a healthy rural Britain will take time and patience. That involves departments such as housing, transport, schools, health and others, because those aspects are all part of a living countryside. It is not just a case of giving farmers money; there have to be schools, village shops, transport and access to health services. Therefore this is not a simple problem to resolve. To do so will, of course, cost money.

We are now operating the budgetary provisions for agriculture set out by our predecessors. I shall be surprised if they complain about that. They ask me questions and I wish to ask them some questions. If they

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were in government now, would they spend more, or did they not expect to win the election and deliberately underprovided?

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