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Lord Donoughue: My Lords, I welcome the fact that the noble Lord, Lord Luke, welcomed the package. That is only fair, and I am sure that the whole farming industry will welcome it. Some of the issues which he raised went rather wider than the subject of the package but they are of relevance to the industry. I suspect that

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we may have a better opportunity to deal with those matters in Wednesday evening's debate on the state of agriculture.

I thank the noble Lord for his consolation on my sore foot. I must admit that I am still not quite as quick on my feet as I should like to be.

The noble Lord said that the Statement did not mention the level of the pound. Two-thirds of the rise in the level of the pound took place under the previous administration so I might have expected the noble Lord not to mention it either, but it is now easing a little.

The noble Lord asked me about pig meat and labelling. We have taken measures to ensure that the content and the country of origin are clear on the labelling. We had recent meetings with the supermarkets which were extremely helpful. They agreed that next year they would import only fresh meat which met our standards or processed meat under their own labels which had not been produced in countries with welfare standards worse than ours or where the animals had been consumers of meat and bonemeal.

The Opposition seem to have a continuing misunderstanding of the position as regards the underspend, but after this time I cannot believe that it is an accidental misunderstanding. There is no underspend in the department. The sums referred to are European Union funded payments for which there was no budgetary provision. They are demand led and cannot, with total accuracy, be predicted in advance. Therefore, there was a shortfall in the estimates. That is not the same as an underspend and it does not release any surplus of money which can be spent elsewhere.

The noble Lord, Lord Hooson, asked for more targeting. We sympathise with that. Much of our effort this year in our two aid packages has been to try to target more. However, within the constraints of the CAP, it is not easy to do that. But if the noble Lord looks carefully at the package, he will see that it has been devised and targeted towards the sectors which we believe have suffered the most--the livestock sector and especially the hill sector.

The noble Lord asked how much is new money. The package is mainly new money. Roughly £100 million of it is from the Treasury and from the reserve. I calculate--although I ask your Lordships not to pin me down absolutely--that £20 million will be recovered from the European Union.

The noble Lord may be interested to know that we estimate that roughly £21 million of that will go to Wales. He asked also about the £48.3 million which is part of the agrimonetary package.

Lord Hooson: My Lords, do I understand that that is part of what is attributed to 1999 but is a draw-down on the 1998 funds?

Lord Donoughue: My Lords, it is the part which is the second phase of the three-year package in relation to the agrimonetary arrangement.

The noble Lord mentioned charges. I resist what was behind his remarks on that subject. Those charges are necessary to bring our industry up to the standards

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which are necessary to sustain consumer confidence. Consumer confidence is an asset to the industry; it is a benefit to the industry; and in most other industries such charges are paid for by the industries themselves. I do not see them as a burden on the industry but as a necessary cost in order to maintain confidence in the industry, which has been damaged deeply by the experience of recent years and especially BSE.

The noble Lord said that this problem has existed for a long time. I should point out to him that this is the second package in a matter of some 10 months. I believe that the Government have acted with reasonable speed. But it takes some time to construct packages which are both targeted in the way that he would like and acceptable to the European Commission. I shall write to the noble Lord on the question of headage.

6.48 p.m.

Lord Monro of Langholm: My Lords, I declare an interest. I know that farmers will welcome the £120 million but will be disappointed about the total because they are going through a real crisis in the countryside at present and this package has come almost too late for many.

Will the Minister tell me what sort of new money will be available for an average hill farmer with, for example, 400 ewes and 30 sucklers, and when it will be paid? It would seem that the money will not be available until the spring. That will mean that there is a long hard winter ahead for most hill farmers until anything at all is paid.

Secondly, in his peroration, the Minister spoke at length about the reform of the CAP. Most farmers accept that if there is a reform of the CAP in the near future, there will be less income for the farmers and a less substantial increase in prices in the shops. That seems an unlikely way for agriculture to make profitable progress. Therefore, will the Minister tell the House how and when he believes the reform of the CAP will take place, because there is a great deal of apprehension in the countryside as to whether it will be advantageous? The majority of farmers feel that, at the end of the day, they will see a lowering of the current subsidies, particularly for livestock, which mean so much to them at the present time.

Lord Donoughue: My Lords, I am sorry that the noble Lord feels that the industry will be disappointed. It may be that it is never possible to do enough. However, we have done a great deal. I should like to give the House an indication of how much will go to the average hill farmer, but the average hill farmer is not easy to define. It will certainly run into four figures. The noble Lord asked when. The agrimonetary money is paid in January. The hill livestock compensatory allowance will be paid in March. Those items therefore are paid quite soon.

No one can forecast when reform of the CAP will happen. We know from previous experience that the European agricultural community is reluctant and slow to face reform. But it was committed at the Cardiff Council to follow an agenda, and reform should be

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firmly agreed by the year 2000. Of course, it must be in place for the World Trade Organisation talks that will start that year. None of us can foresee what the final shape will be, although this Government argued our position at the Council. I was there at the Council to argue it in the presidency. We support the Agenda 2000 reforms put up by the Commission although we consider them to be too modest.

To the farmers I would say that all change is threatening. No doubt some will feel that. But we believe that ultimately it will be advantageous to British farming to be reformed in the more liberal way being proposed which will make our farming more viable and sustainable. I cannot believe, after the two crises we have been through this year alone, that anyone could argue that the present situation in farming, the present structure and nature of its financing, is the ideal.

Lord Northbourne: My Lords, I welcome the package and particularly the Minister's statement that he intends to develop a strategy. I should like to think it will be a strategy for food production in this country well into the 21st century. Are the Minister and his colleagues taking into account in developing that strategy the projections for growth in world population? I understand that the projection is that the world population will double in the next 30 years. How will we feed people in this country in the year 2030?

Does the Minister agree that, on the whole, British agriculture is both efficient and flexible? It is also not unwilling to restructure; but restructuring agriculture, particularly agricultural holdings, takes time. More than anything else farmers need a certainty in the direction in which we are going and time to adapt. They need help to level the violent fluctuations in prices which are so damaging to agriculture. A clear policy and help with violent fluctuations in prices are more important to farmers even than subsidies.

Lord Donoughue: My Lords, I am pleased the noble Lord welcomed our approach to the longer-term strategy. That is exactly what we propose to construct and it is a strategy for our whole food production chain, not just the production end. We will of course take into account what the noble Lord said in relation to growth in world population. That is a central point in regard to the necessary reforms as in Agenda 2000.

The key question is whether our farming will have proper access to the growth in world markets. If we are excessively protected within the existing European regime, under the world trade rules we will not have adequate access. That is why reform to a more liberal regime which will give our farmers more access to those growing world markets is particularly important. I take very much on board what the noble Lord said about restructuring taking time and the need to adapt. Our proposals today are short-term measures. We wish them to buy time to introduce longer-term reforms. But they

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are not a statement that we will always underwrite the present structure in cement. That is not the case. Restructuring must take place.

Lord Elis-Thomas: My Lords, I welcome in particular the £21 million for the livestock sector in Wales to which the Minister referred in the Statement. Can he confirm that when his colleagues are looking at the long-term strategy for the rural economy, food production, afforestation and added value from countryside products in terms of food-related manufacture will form a central part of that strategy? If there is to be a shift of resources from the end-price support for agricultural products, that must be relocated within added value in the rural economy if it is to be of benefit to those areas.

In looking at the Agenda 2000 renegotiations, will the Minister examine the difficult issues which may arise as between the European Union funding arrangements, the UK Treasury, the Scottish parliament, the Northern Ireland Assembly and the National Assembly for Wales? Clearly those bodies will have a direct involvement in the whole question of the rural economy, particularly if added resources are to be made available from the European Union in terms of objective one. They will need to be targeted with UK Treasury support to replace any reduction in agricultural support. That will ensure that there is not a further undermining and bringing about of a crisis in the rural economy as a result of the transition into the Agenda 2000 arrangements.


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