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The Earl of Courtown: My Lords, I thank the Minister for his explanation. I agree with many of the comments made by the noble Lord, Lord Thomson of Monifieth. They are based on his great experience in this industry, which I do not have.

On a point made by the noble Lord, Lord Thomson, and by my honourable friend Mr. Spring, are there any plans to remove the provision from the statute book now that there does not seem to be so much need for it?

Lord McIntosh of Haringey: My Lords, I am grateful to both noble Lords for the reception that they have given to the order, and particularly to the noble Lord, Lord Thomson, because of his distinguished service in the television industry. He is right in saying that Channel 4 has been a unique achievement. It is the Government's prime purpose to ensure that it continues to be successful not only financially but in fulfilling and enhancing its public service remit.

The noble Lord is also right in saying that the safety net was originally devised with good intentions. Some feared that Channel 4 by itself could not sell its advertising. Indeed, I remember a number of advertising companies, and the ITV companies themselves at the

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time, believing that they were uniquely qualified to sell Channel 4 advertising. In fact, they were uniquely unqualified. They tended to sell Channel 4 advertising as a sort of "come on", a loss leader as part of a much larger contract for Channel 3 advertising. The result was that before the change Channel 4 advertising was not particularly appropriate to the programmes around which it was being shown and did not take advantage of the availability via Channel 4 of nationwide minority audiences. That is what Channel 4 has proved by the way that it has been selling advertising since the change. The result has been that the safety net has worked only one way and has provided money entirely towards Channel 3 and away from Channel 4.

Both noble Lords asked why we could not get rid of the order altogether rather than reduce it to zero, presumably having to keep it at zero. The answer is simply that it would require primary legislation and we do not have a slot for primary legislation. As soon as we do, this will form a small and uncontroversial part.

I am grateful to the noble Lord, Lord Thomson, for his remarks about the increased requirement for original programming. The requirement will be that 40 per cent. of programming most of the day is the upper limit for repeats, and in peak periods 20 per cent. That will mean a considerable improvement in the quality and originality of Channel 4 programming.

I am also grateful for the noble Lord's remarks about privatisation. I confirm that we expect Channel 4 to continue to be part of the public broadcasting sector, playing a vital role in providing high-quality distinctive and innovative programming and experimental programming, which was added to the remit. The Government have no intention of privatising Channel 4. I commend the order to the House.

On Question, Motion agreed to.


5.9 p.m.

Lord Palmer rose to call attention to the present state of agriculture in the United Kingdom with particular reference to the upland regions and Scotland; and to move for Papers.

The noble Lord said: My Lords, first, I should like to put on record how very grateful I am to the Chief Whip and the charming and helpful staff in his office for allocating this crucial debate at such short notice. Monday's emergency aid package will be most welcome to many farmers across the United Kingdom. I thank the Government most sincerely for at last realising how serious the problems are facing the United Kingdom farming industry.

It is interesting to note that, although not many of them are in the Chamber at present, 66 per cent. of the speakers due to take part in the debate tonight are hereditary Peers. I am sure that those of us who are doing so are not doing so for our own interests but because we care passionately about the countryside and those who live and work in it.

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The United Kingdom's agricultural industry is in the most terrible financial mess, or, as we say north of the Border, in a terrible pickle. Farmers have, unfortunately, a reputation for crying wolf. But this cry for help is very real, as real as it has ever been in the history of farming.

I was doing the odd calculation over the weekend at home. Our wheat income alone is down £63,000 on two years ago, and thankfully we are luckier than most.

I shall not mention too specifically the upland areas as I know that other noble Lords will do so. Suffice it to say that many hill farmers are living well below the Government's recommended minimum wage and in conditions reminiscent of Victorian times.

With half the world's population starving, this is a shameful state of affairs. One of my neighbours sent away what was admittedly a fairly mediocre crop of wheat to his merchant. While he was not expecting a large cheque for it, he actually received a bill for £8.25 a tonne. If one thinks of the expense of growing that crop, particularly for a tenant farmer, it is a very sorry state of affairs and, I must emphasise, through no fault of that farmer.

The latest UK statistics show that in the past 10 years 510 farmers have committed suicide--510, my Lords. When times are good, farming can be a lonely existence, but in bad times the burden of worry is impossible to share, and, of course, one of the saddest things of all is that today there is absolutely no job satisfaction in any aspect of farming.

I tried to think of some similarities in other professions. Perhaps the most apt is to compare it to the idea of the noble Lord the Minister having to pay Her Majesty's Government to stand at the Dispatch Box and defend Her Majesty's Government's record and their actions--not a thrilling thought, as I am sure the noble Lord, Lord Donoughue, would agree.

In the countryside there are horrific stories of farmers shooting their pigs, their sheep and their calves in order to minimise the horrendous losses. At home we are desperately trying to sow next year's wheat crop--with great difficulty as the ground is so wet and a lot of the present year's harvest has still to be combined. There are still thousands of acres of straw to be baled or disposed of. We have no idea what the crop will cost to grow, what it will yield, what it will cost to harvest, what it will cost to dry and, most importantly, what it will be worth.

A third of the Scottish "tattie crop" is still in the ground, and we have already had severe frost and, not to be forgotten, a record rainfall. This will no doubt lead to increased prices for potatoes and potato products, which is not always good for the industry as housewives will buy cheaper products such as rice and pasta. Very often these have to be imported, which in turn cannot be good for our balance of payments.

Farmers have no control whatsoever over their destiny and those of us involved in the industry now find this a very worrying and frightening aspect of life. No other business has such an incredibly unfair lot, and it is only right, just and proper that Her Majesty's

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Government must come to the aid of the UK farmer, bring that aid to the forefront of their agenda and put something in place that will prevent farmers from having to come, cap in hand, at times of adversity. What is desperately needed is a sensible and proper long-term strategy, and it was encouraging that the noble Lord's right honourable friend mentioned this in his statement on Monday. But we now need action.

Until 20 years ago we were told that more food was required. We were financially encouraged to drain the wetlands. The banks were happy to lend us the shortfall. Now we are told: "Stop, set it all aside, and here is a grant to do so". It was and is sheer madness.

Often people say to me: "You farmers are just like the miners or the steel workers". We are not in that category. We have simply done what we were told to do. We cannot just change production overnight, and the poor hill farmers have no choice whatsoever in diversification. This is a very important and significant difference and one which I am sure the Minister will take on board.

I know that the Government are not responsible for the weather, but the appalling situation has had an exacerbating and knock-on effect. Here I should like to give one or two examples. A four-metre drill would usually drill 40 acres a day on average. This year those drills are down to about 28 acres a day due to the wet conditions, which result in a lower forward speed. This also increases the bill for wearing parts such as power harrow tines. This also leads to higher fuel usage. For example, 40 gallons of diesel would normally sow about 30 acres. This year those 40 gallons are doing only 18 acres.

Due to the extreme weather conditions, winter cereal sowing will not be completed, leading to an increase of spring-sown acreage, I suspect mostly of spring barley where there should have been wheat. This will undoubtedly lead to an over-supply of spring barley, which will certainly depress prices even further next year. Due to demand, spring barley seed will be in short supply, leading once again to increased prices for seed. The situation is dire and again farmers are in this vicious circle through absolutely no fault of their own.

What winter crops are presently being sown are going in in far from ideal conditions and therefore a yield reduction of, I suspect, a tonne an acre will undoubtedly be incurred next year. In financial terms this is a horrendous thought and a worry to those of us involved in agriculture, especially at today's ridiculously low prices.

Turning to the livestock sector, heifers with calves at foot were selling for £1,300 per head two years ago. Last year they were selling for £1,000 a head. This year they were selling for £660 a head. Over the two years that is a 49.2 per cent. drop.

Turning to the sheep sector, 18-kilogramme lambs were selling for £40 a head. This year they were selling at only £27 a head, a 32½ per cent. drop. Old cast ewes were selling last year for £15 a head. If you are lucky, you might get £6 per head this year, which is a 60 per cent. reduction--and that figure is before deductions.

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Turning to pigs, why was there no mention on Monday of aid to pig producers, especially when they are suffering the lowest prices for 50 years and making losses of £6 million a week? UK pig producers are disadvantaged by a number of unilateral decisions by Her Majesty's Government on welfare and food safety which do not apply in other EU countries. Could the Government ensure that all pigmeat-derived products imported into this country meet the same high standards as exist in the United Kingdom?

What can be done? And what must be done? If one looks at the interrelationship between UK farm income and the agricultural green rate, your Lordships will see that there is an almost perfect fit. In other words, farm incomes have in recent years been almost directly related to the level of the green pound. I say this because it shows how disastrous was the decision of the Government not to compensate as permitted under EU rules for the strength of the UK currency through 1997 and 1998.

The main reason given by the Government at the time for refusing to agree to such compensation was that under the rules agreed at Fontainbleau they would have been obliged to pay some 71 per cent. of the £950 million compensation that was due to the industry under the green money rules. That argument can be criticised on a number of grounds.

But, to me, the principal point is that, in taking this line, the Government have totally ignored the adverse effect of a slump in agricultural incomes on the whole of the rest of the rural economy, particularly those reliant on agriculture, both upstream and downstream. It is a matter of fact that those reliant on agriculture--such as merchants, machinery suppliers, et cetera--have all been experiencing an extremely difficult time and, as such, many redundancies have not only occurred in the farming industry but also, sadly, in all the allied trades.

I believe firmly that if the direct cost of this in terms of additional social security payments, and the indirect cost in terms of lower incomes and, hence, tax payments all round, were totted up, the loss to the Exchequer would be considerably greater than the payments it would have made under the compensation arrangements. In other words, and in simple terms, the Treasury has cut off its own nose to spite its face.

However, although any assistance at this stage would obviously help farmers, there would also be a hugely significant spin-off benefit to the wider rural economy, through the multiplier effect. In my part of the world it is conservatively estimated that for every direct job lost in agriculture, three in the allied trades will disappear. Given the pivotal role that farming still occupies, and always will, in rural areas, a relatively small amount of support for the industry will create a virtuous circle beneficially affecting a much wider economic area of activity.

Conversely, if agriculture continues to be in a free-fall situation, many of its members will not be in business at this time next year. This vicious circle will continue to the detriment of the rural economy as a whole.

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Often when we have been discussing agriculture in your Lordships' House, I have pleaded for a higher degree of investment into research and development, especially for alternative crops where, for example, they could be used for bio-fuels. North Sea oil will not last forever and I beg Her Majesty's Government to look again at this plea.

Farmers are the real-life custodians of our countryside, which has been loved and nurtured by them for centuries. In order to have a living and buoyant countryside, we must above all else have a thriving and, most importantly, a profitable agricultural industry. The very landscape of our countryside, its wildlife and its environment are seriously at stake. I urge Her Majesty's Government to put further measures in place to achieve this long-term goal. I beg them to do it as soon as it is possible. My Lords, I beg to move for Papers.

5.25 p.m.

Lord Grantchester: My Lords, I thank the noble Lord, Lord Palmer, for initiating this debate tonight. I should start by declaring my interest as the owner of a dairy enterprise in Cheshire.

I do not need to underline the dire state of agriculture today. I am sure that when the noble Lord, Lord Donoughue, replies, he will tell us of the initiatives and steps that the Government are undertaking to alleviate the situation.

Agriculture has reached this position through its own success. It has responded to the call for production, the payments for produce, with annual growth rates unequalled by any other industry, with the result that we are now virtually self-sufficient or better in every sector. Farmers are now faced with a future of having to maintain incomes from unsubsidised production at world market prices. They are in a dire situation with subsidies at the moment. Thanks to the strength of the pound and for other reasons, they see themselves already being paid at levels below world market prices. For example, I understand that the world market price for wheat is assessed to be about £80 to £85 per tonne. Prices today under the present CAP system are around £70 to £75 per tonne. Under this pressure farmers look for a change in the system that condemns them to poverty for their success.

Clearly a rethink is called for. It cannot be a solution to keep on paying for agricultural produce that nobody wants. If world market prices are to rise and agriculture continues to support the rural economy, decoupled payments such as bonds must be paid as an interim while communities readjust. Payments must be transferred from production support to environmental goals.

The impetus for change seems only to be realised when under pressure. Now is the opportunity to integrate farming with the environment. With the need for financial assistance, farmers will respond--and with the same likelihood of success as they responded to the call for production. In this regard the announcement on 29th October of a further £2 million to be spent on countryside stewardship schemes is opportune. These

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schemes are already over-subscribed. Farmers have already recognised that subsidies for production are unsustainable.

Add to that the pressures from enlargement of integrating Eastern Europe and the potentiality of production from vast areas of exceptional quality of land, and it means that change has to come. The opportunity must be grasped with confidence by the soon to be formed regional development agencies. The landscape is a by-product of the rural economy. These agencies must be imaginative in developing transitional schemes and development opportunities for farming communities. A re-think on planning controls and how they can be made to preserve the environment while encouraging change is desperately needed.

During this debate on common agricultural reform, we must ensure that we are logical in what we demand of agriculture. I refer to the situation where consumers ask of our farmers that they bear added costs as regards welfare codes and processes of production, yet that same consumer is happy to purchase from stores the same produce, at a lower cost, as it comes in from other countries that do not maintain the same standards. Can the Minister say what can change immediately under EU law to ensure that British agriculture can compete fairly with imported produce?

I would like to take this opportunity to ask the Minister to clarify the position regarding the British Retail Consortium's announcement last week that all pig meat will be purchased to the same standards as the UK agricultural standards. In this regard, I understand that the original announcement that all pig meat was to be purchased to UK standards has now been altered such that only own-label or fresh pig meat will be to UK standards. Can the Minister clarify this in his final remarks?

The Government's response to the debate on Monday shows that they are clearly aware of the situation and are willing to respond to the challenges ahead.

5.29 p.m.

Lord Stanley of Alderley: My Lords, I have to declare an interest in that I farm in both Wales and Oxfordshire. I am most grateful to the noble Lord, Lord Palmer, for spelling out so eloquently and so well the problems affecting agriculture today.

I would like to thank the Government for at last appreciating the short-term financial crisis that applies throughout the agricultural industry. Serious though this short-term crisis is, I believe most producers will weather the storm if the Government could give them a clue as to the long-term future and plans for agriculture. Although I have always supported the case that British farmers should prepare to compete in the world market, not least because the GATT rules will force us to do so--and I believe the majority of farmers accept that position--I am now very badly shaken to learn that the New Zealanders and Americans, who have gone down this particular path, have come unstuck and have had to bail their farmers out, the Americans, as I understand it, to the tune of nine billion dollars, so making the playing field not just unlevel but totally unplayable.

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So, following the remarks of the noble Lord, Lord Palmer, I ask the Government to reappraise their policy and encourage the EEC to do likewise. I do not quite know how for I certainly dislike quotas, set-asides and everything that goes with them. Conservation schemes are totally and utterly useless unless they encourage a profitable agriculture. However, an outright belief in a totally free market will not work and, as noble Lords have said already, is not working today. I hope the Minister will agree that the matter requires urgent consideration by the Government; by someone perhaps younger and wiser than I am.

5.31 p.m.

The Earl of Lytton: My Lords, I welcome the opportunity to speak in this debate and I congratulate the noble Lord, Lord Palmer, on introducing it. I am sorry that I was not in my place when he started. I was caught out by the earlier than anticipated start of the debate.

It is a most timely debate. In welcoming the debate I welcome also the Government's announcements on Monday. I declare an interest. I am co-owner of a hill farm on Exmoor so I speak of the uplands and not of Scotland. The uplands are areas where the value of the landscape is often in inverse proportion to the viability of the farming economy. We have to remember that because it is that landscape which is dependent on the economy. Agriculture in these areas is not just incidental to the landscape but is an intrinsic part of it. However, regrettably, in many areas it may be intrinsically uneconomic.

The economy of the uplands is certainly on the brink, as I know only too well. It risks wholesale contraction, disinvestment and fragmentation of holdings. Many hill farmers do not feel that their efforts are respected or appreciated by a public who too often are seen as wanting rights, imposing duties and sharing none of the attendant risks. It is not sustainable. It is a dependency economy kowtowing to successive governments for hand-outs. We need to reappraise that. It needs to stand on its own feet because if it does not the future is bleak. Even now, with upland farmers often having no willing successor to take on the holding, it is a very dangerous situation.

We need a complete rural policy and not palliative aid. I was particularly pleased to note the reference in the announcement on Monday under the heading "The Future". Item 16 refers to developing a blueprint for a successful and viable agricultural sector. I say "Hear, hear!" to that. But it is not just agriculture; it is the broader spectrum of what is happening in the rural economy that we need to look at.

A rural policy has to add value to land management and not take it away. Tourism, public amenity, environmental goods, access, organic produce, the biofuels, to which the noble Lord, Lord Palmer, referred, fibre and food production all need to be looked at in terms of being provided for gain and reward. Agriculture needs to be supplemented by broad spectrum, rural economic endeavour. Such a policy needs to be backed not only in government guidance but

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also in a clear remit for both the regional development agencies and the new countryside agency to foster and promote a rural economic strategy. At present this appears to be absent, almost studiously ignored.

The tax regime, to which the noble Lord, Lord Grantchester, referred, needs to be in line with planning policies that look beyond food and fibre and themselves foster diversification, but they must foster it in a way that assists the process of traditional land use and does not turn farms into mini industrial estates. Not everyone can diversify. So many types of diversification are not wholly consistent with land management. There needs to be a culture of buying the produce of our countryside--the temperate foodstuffs which we import in such vast quantities. When we import such foodstuffs we export the fundamental economic backcloth to our countryside. We cannot leave it to Europe to sort it out. There needs to be a domestic rural policy. This is long-standing, unfinished business. On the back of that the uplands countryside is not a free good; it is part and parcel of a business activity. We need to remember that.

5.35 p.m.

Baroness Trumpington: My Lords, I apologise for arriving late. I was told that the debate would not start until around 2 a.m. tomorrow morning.

This is a timely debate and I am only sorry it is so time limited. The financial package announced by the Government the day before yesterday is of course greatly welcome. It comes at the eleventh hour, perhaps too late for some hill farmers, whose desperate plight we are discussing, and of no help at all to pig farmers. And yet, although this financial help is important, farmers do not wish to be thought of as scroungers. They would far rather earn their money by selling the goods they produce at reasonable market prices.

As a former MAFF Minister, I am well aware how quickly out-of-date one becomes. However, even during the time I served in that capacity, on my many visits to hill farms during those years up to 1992, I was aware of the struggle that those farmers endured. How much worse is it now?

On 19th November I heard a Minister--not this Minister--in this House in answer to a Question say that farmers should adapt. When asked how, he replied that,

    "it is necessary for all engaged in industry in this country to adapt to changing conditions".--[Official Report, 9/11/98; col. 503.]
My Lords, picture a small farmer strip farming in the Yorkshire Dales. He has stone walls to maintain, he has ever-ageing machinery, he has his sheep or perhaps a small suckler herd, and he has his land to look after. His income has been ever decreasing and this year it has plummeted. And the Minister has the nerve to say he must adapt. I wish he would tell me how--perhaps by starving.

In the Lake District, with its wonderful scenery, tenant farmers struggle to make a living. I am told that the National Trust, whose tenants many of those farmers are, take an extra rent from those farmers who have gone into B&B in order to try to stay solvent. If that is true, I deplore it.

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Speaking of B&B makes me think of the farmer's wife, as surely she has the hardest job of all. She really is a Jill-of-all-trades. I have just carefully read a glossy production produced by the Government entitled Better for women, Better for all. There is not one mention of farmers' wives or families. I bet that a farmer's wife would laugh in your face if you asked her when her husband had had paternity leave. I salute those women of the countryside who sustain their men throughout this difficult time.

A recent leading article in the Farmers Weekly was not about prices. It was a serious and heartfelt plea urging farmers not to hide their feelings of despair; to recognise the signs of behaviour that lead to suicide and to seek help before it is too late. I am proud to be a patron of the Rural Stress Information Network, an organisation set up to provide a support and information network to those living in rural communities. It works closely with the Samaritans and others and I applaud its work. It is, however, a sombre thought that such an organisation is necessary.

The Welsh hills and those that I have already mentioned are lovely to look at. The passing tourist is spellbound with admiration for them, but to maintain that beauty lawnmowers are required; in other words, sheep. Without sheep those hills would rapidly turn into unsightly scrub--hardly the lure for British and foreign visitors which is so important to the tourist industry in those areas. The hill farmer not only maintains the landscape but contributes to the economy, provides indirect employment and supports local institutions such as schools, local government and other bodies that are so important to the life of a small community. The Government's financial package is a help, but I wonder how close we are to watching the hill farming industry become extinct.

5.41 p.m.

Lord Rathcavan: My Lords, like other noble Lords I apologise for not being in my place at the beginning of this debate. I was also caught short by the timetable. I am grateful to the noble Lord, Lord Palmer, for introducing a debate that has particular relevance to my own province, Northern Ireland. A very high proportion of small farmers and hill farmers face their farming future with despair. The Ulster Farmers Union paints a grim picture of the value of the output of the agricultural industry in Northern Ireland. It has fallen by nearly 30 per cent. over the past two years while income from farming has fallen by nearly 80 per cent. Debt to the banks has increased by 25 per cent.--that represents £500 million, but Northern Ireland is not a very big place--and debt to the feed merchants has increased by 80 per cent.

In his Statement earlier this week the noble Lord, Lord Donoughue, announced a special package of assistance to help hill and livestock farmers in particular face the financial pressures over the winter months by increases in the suckler cow premium and HLCA payments on cows and sheep. He has been particularly generous to Northern Ireland within that package. Our farmers will be grateful for the increase in the livestock

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headage payments but it will make up or substitute only one third of their loss of income during the past 12 months.

Welcome and essential as this aid may be, it does not address the central issues that face the small and the hill farmer. What does the future hold for his type of farm? That is a question to which other noble Lords have referred. What kind of business will he pass on to his sons and successors? On Monday the Minister was honest enough to state quite clearly that his proposals were short-term measures to buy time to introduce long-term measures. He gave some useful reflections on the future of the rural economy and the living countryside. As other noble Lords have said, I hope that this evening the Minster can throw further light on the future options that may be available and anticipate the timetable for agreement on measures on the lines proposed in Agenda 2000, and say whether the target date of the end of June is feasible, if not probable.

In particular, I believe that we need a run-down in dependence on livestock headage payments which mislead farmers in planning for the future. We also need further environmental measures: the extension of environmentally sensitive areas and countryside management schemes. I should like to see more help for organic farmers or measures to make it easier for farmers to consider achieving organic status. It is a long and difficult step to take but there is an undersupplied market with premium prices. I hope that the measures to be introduced will encourage farmers to think more in terms of what the market needs, not what they can produce.

As a member of Sub-Committee D of the European Communities Committee of your Lordships' House, earlier this year I was involved in a report on reform of the CAP and the effects on the rural economy. I remember that during one of our visits to Brussels to take evidence we were told by one of the officials that,

    "the future for farming was not farming".
He compared the farming industry with the coal mining industry of a decade ago. That was rather brutal. I hope that we can put that comment out of our heads. I hope that farmers, particularly small farmers and hill farmers whom I know so well, will have some future options to consider in the coming year.

5.45 p.m.

Lord Dixon-Smith: My Lords, I declare an interest as largely a grain farmer in Essex. Today I wish to talk about other matters. On many occasions in my boyhood in the early 1940s I was trailed around by my father who was very active on the War Agricultural Executive Committee. He then sought to influence--if he could not influence he bullied--farmers whose land was then wholly derelict as a result of the depression of the late 1920s and the 1930s. In those days the countryside was enclosed. Hedges were 30 to 40 feet in height and of the same width. Brambles spread out across fields and nettles were everywhere. In many places all that flourished were rabbits. Since that time agriculture has

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had its ups and downs. But however bad the downs of the past I never felt that I might see that situation again. I must say that this time I am not so sure.

Last week in the Farmer and Stockbreeder it was announced that Bury St. Edmunds Market would close down on 16th December. That is the fourth major cattle mart in East Anglia to go in three years. The reasons are simple. I refer first to the consequences of BSE. I need say no more about that because enough has already been said about it in this House. Next, there has been a slump in pig and sheep prices. There has also been the effect of much more direct selling to processors. As a consequence of those factors commission income to the market has decreased by more than 50 per cent. in 12 months and it cannot afford to continue.

One or two matters flow from that. I disregard the immediate impact on employment. Many of the carcass contracts which are the result of direct sales to processors are based on market prices. As the number of markets erodes--markets are diminishing rapidly--the validity of that price in determining the price of a contract with a processor is lost. In the long term this strengthens the hand of the processor. That is one problem. It would not matter so much if one had seen the price of the commodities in the shops reduce. That might give the farmer some hope of increased consumption and help his recovery; it might even help the market price. But that has not happened. While one looks to a recovery in the market one wonders whether a situation in this country has been created in which the market no longer works.

That is one aspect of the problem. There are other things happening at present. The veterinary services are finding that their large animal practices are suddenly disappearing. Large animal practices are mainly agricultural business; that is, cattle, sheep and pigs. If vets are not being called to treat sick animals, what happens? It is not a pleasant picture. We can all imagine it. We are not particularly blood-thirsty as farmers, but the short answer is that if you have a very sick animal and you cannot afford to call a vet, you have your own bullet and you use it. That is not a pleasant thought.

In other areas we have to face similar effects in related industries. Thankfully, there has been some recovery in cereal markets recently as a result of the slightly weaker pound against European currencies, but that sector is still under pressure. That is illustrated quite nicely, but not very pleasantly, by the fact that tractor sales were down by 37 per cent. in the first nine months of this year. That impact, directly on the manufacturing industry, will be repeated again and again across that sector. So, the impact of this agricultural wind-down, if that is what it is, will be much wider than just to the agricultural community.

I am grateful for the Government's acknowledgement on Monday that there is a problem and for the financial assistance they have offered. However, I am bound to say that it is placed into a ghastly perspective--for which I hope I may be forgiven--by saying that it was announced on the same day as an unfortunate individual received just short of £4 million compensation as a result of a medical accident. We are talking about an

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industry here and thousands of people. However, I have to accept that all too often--and I am grateful that this is the case--events are beyond Government control. There are many world events that have led us to that situation.

I am grateful to the noble Lord, Lord Palmer, for initiating this debate and for his excellent grand tour of the situation. However, I see no alternative but the remorseless trend towards fewer and fewer farmers left on the land.

5.52 p.m.

Lord Wade of Chorlton: My Lords, like other noble Lords, I am grateful to the noble Lord, Lord Palmer, for raising this issue and for the elegant way in which he described the present plight of the agricultural industry--an industry I fully support.

My noble friend Lord Dixon-Smith described very well some of the by-products throughout the rural community of the poor situation within farming. I support his last comment that one cannot see any long-term solution when the present policies apply throughout Europe and Britain. The £120 million will clearly be welcome to the few people who receive a small amount, but, as the Minister said when he announced it, it is no solution to the long-term problems of agriculture. Noble Lords referred to the fact that we need to use this situation to look at the longer term solutions that could be applied.

The overall position has been described as one which will continually worsen. It hits the marginal farmers. They are the ones who cause our hearts to bleed for their plight. One issue which has not been addressed and which has been suggested to the Government on a number of occasions is that we want an effective retirement policy. Clearly, the only solution to many of these marginal issues is for farmers to leave farming. Only yesterday I heard of a farmer in Cumbria, an oldish man, who wanted to leave farming. He hoped to leave last year but found it difficult. He tried to leave this year and found his resources were even worse. He did not have sufficient money on which to retire and to look after his family. His only solution was to kill himself.

There are lots of incidents where, if that has not happened, it has been seriously considered. I should like to see the Government come up with a sensible retirement policy which would allow those who wish to do so to leave farming with sufficient money to keep them for the rest of their lives. That could be structured in such a way that it would cost less overall to buy them out than to support them continually over a long period of time.

Another issue which must be addressed more positively is that of the rural community. It is only by introducing alternative wealth-creating opportunities in rural areas that more money will be put back into some of the pockets of deprivation now seen all over Britain. In that respect, I should like to see more positive steps taken to look at the kind of solutions that the Government have found in the past in urban areas. Specific projects have been built and funded--in some cases funded by Europe--to create new jobs and investments.

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Contrary to what the noble Earl, Lord Lytton, said, I believe there are many opportunities for new investment. There are successful examples of farming and of estates bringing in other industries. They have developed their properties without in any way destroying the appearance of the buildings. They have kept the traditional look but changed the inside to encourage new jobs and new bases of wealth creation within these rural areas. Therefore, I should like to see the Government establish a positive policy to create rural projects. I believe there have been trial developments of that sort in the Trough of Bowland in Lancashire. Perhaps the Minister can confirm that. I understand that they have been extremely successful and would be an example of what could be achieved in other areas of deprivation.

The Government must also review more strongly the CAP and how it operates. That was a Sub-Committee D proposal last year. The one thing that the CAP has not done is to bring wealth to the agriculture industry. It has cost a tremendous amount of money and where that has ended up I do not know. From the examples we heard today, the money has not ended up in the majority of the farmers' pockets. It certainly has not brought any benefit to them. It has brought more deprivation to the rural areas than there was before. Can I ask the Minister what will happen about enlargement? That is now an issue which must be addressed. It keeps being put off, but somehow we must decide on whether we put much more money into the CAP and have enlargement or refuse to put more money in and be faced with cheaper imports and products. That issue must also be addressed.

In summary, I see no proper future that will mean a return to the traditional ways of agriculture and a prosperous rural community. In order to achieve that we must have a new approach to the CAP, to other economic opportunities and planning issues and to the encouragement of new investment in rural areas. We must have a system which allows for those on the margin to get out of farming and find other ways of using their land which would be more in keeping with what the people of Britain really want.

5.58 p.m.

Baroness Masham of Ilton: My Lords, I thank my noble friend Lord Palmer for his enthusiasm and dedication in getting this debate extended. I congratulate him on his excellent speech. This is a sombre and serious debate.

I must declare an interest as I farm a small farm of 200 acres on my noble husband's estate in north Yorkshire. Also, I have a niece who, with her husband, farms in Caithness in the north of Scotland--my old home. They have four young children. Their situation is very difficult.

It is not the large commercial farms I want to mention today but the small farms. Many people will say that the small farmer cannot survive and shrug it off, but what will happen to the countryside? It is often those farmers who care. The countryside is their way of life. They have pride in their stock. Many are tenant farmers. This year has been a disaster, not for any party political

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reason but for world reasons and the weather. The endless rain in the north has not only been depressing, it has made it almost impossible to make hay in some areas; and bringing in the much needed crops, especially in the north of Scotland, has been an almost impossible task.

It was welcome to hear the Minister of Agriculture's announcement this week. Many people who are living in severely disadvantaged areas do not know whether they will qualify for help. I hope that the Minister will be able to tell them soon.

I have a flock of pedigree attested Texil sheep, some Welsh Badger sheep and some Shetlands, as well as a pony stud. My niece has cross-bred sheep, for which Caithness is famous. This year wool prices are down. Russia is no longer able to give as much for the skins, the prices of which have dropped by between £8 and £10 per skin. Those in rural areas, and especially hill farmers, have to spend 71.9p a litre for diesel. That is a big problem. It can cost small farmers £40 to £50 per week just travelling to auction markets. The haulage charge can be greater than the take-home price of the sheep. There is increased bureaucracy at abattoirs, but there should be the strictest surveillance of health and hygiene for the stock.

Farmers are concerned that the new regulations concerning dipping could cost farmers up to £1,000 next year due to new groundwater rules and licensing on every farm. One needs the safest procedures, but the expense is an added worry. The pound being so strong has made the export market almost stand still. Southern Europe urgently wants small lambs. The Government's help is needed to get exports started very soon.

Just before the September sheep sales there was a scrapie scare. Will the Minister say something about that? Can scrapie be passed from sheep to man? I found it sad that some excellent breeding stock was so badly priced that breeding rams were going for no more than meat prices. One has only to look at the UK stock at the Royal Show or the Highland Show to see that it is as good as any stock in the world.

As one of the few women to speak in this debate, perhaps I may say that the biggest query and injustice seems to be to the housewife. The supermarket giants are still selling lamb at high prices. Yet the farmers are getting the lowest prices for years for their lambs. Why is that? The supermarkets demand that the farmers produce the best meat R3L. With winter coming and farmers having to feed stock, the bills pile up, as does the stock; and there is a real dilemma. Is it true that some sheep are being culled? How awful that there are starving people in some parts of the world and unsold sheep in another.

Veterinary bills can be astronomical yet farmers have to contend with many difficult conditions. The mild damp weather has been perfect for encouraging such conditions as persistent sheep foot rot. There is also the problem of resistance to wormers. Farmers need help and advice.

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In rural hill areas there is a problem of isolation and depression. Farmers are working their guts out--for what? As has been mentioned, the suicide rates have increased. Perhaps the Minister will say something about that. My noble friend referred to the figure of 510. The Samaritans are very concerned. The difficulties involve a combination of many factors. People from the towns come to the Yorkshire Dales for holidays. They love walking in the countryside. I only wish they could learn about the hard work that goes into keeping the countryside in good order, and that they would shut gates. Two of my stallions got out last week and had a fight. They were battered and bruised. The gates are now padlocked.

6.5 p.m.

Lord Rowallan: My Lords, I, too, must declare an interest as a farmer in a less favoured area. I thank the noble Lord, Lord Palmer, for introducing the debate and apologise unreservedly to both him and the Minister who will reply for not being in my place at the beginning of the debate. I was at another meeting and the debate began a little sooner than I anticipated.

Farming undoubtedly is in a state of crisis. The combination of the strong pound, the green pound, BSE, no foreign beef exports, cheap imports of all agricultural products, few British buyers as the local butcher seems to have gone and the few who are left seem to be operating a cartel for the supermarkets, jittery bank managers, scientific professors with various so-called expertises creating scares, salmonella outbreaks, E.coli outbreaks and many more have created a despondency such as I have never seen in the farming world before.

The £120 million package announced on Monday--£36 million of which relates to Scotland--will of course help. Increased headage payments of 55 per cent. must help. But with the time they take to come through the system, and as they work out at an average of only £3,600 per farm, they may not be enough to stave off the threat, or all too often the realisation, of bankruptcy for many. One has only to pick up the Scottish Farmer, a well known farming magazine in Scotland, to see that it is now full of impending displenishing sales--and no wonder, with lambs in November last year fetching £26 and today only £13. Yeld ewes, at the end of their life, which last year fetched £20 now fetch £3. Hoggs on remote Scottish islands fetch 25p. What hope is there for a secure future in our farming industry? The aid announced on Monday, welcome though it was, is short term only. We must address the long-term programme to put confidence back in the farming industry.

Without government and EU aid farming cannot survive. But it is often asked by those outside the farming industry: why should farming receive aid? The mining, steel, shipbuilding and manufacturing industries all too often have had nothing. The EC is struggling under the weight of CAP, and as the EC expands so do the problems of CAP. And CAP is changing. It is a market manipulator. People now expect agriculture to provide more than just food. It is that which makes the essential difference. That is the reason why agriculture is a multi-functional industry. It is the provider of food but it is also the cornerstone of rural communities and

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the custodian of the environment. There is surely nothing wrong with expecting to be compensated when the Government and the EU change the marketing conditions for which they are responsible.

Price support from all sources looks certain to reduce, so the asset value of the farmer must reduce also. So the farmer struggles to survive with a smaller income and less collateral. While the relative economic weight of agriculture has diminished, it remains an important economic generator--often the only one in rural areas. In Europe 80 per cent. of land is rural and 25 per cent. of the population live in the country. In Scotland the situation is similar, with 90 per cent. of the land being rural and 33 per cent. of its population living in the country. But there the similarity stops, for 85 per cent. of Scotland is classified as being a less favoured area and 77 per cent. of that is classed as rough grazing making it suitable for livestock rearing only. It provides 34,000 jobs directly and many more indirectly. Ninety per cent. of the breeding ewe flock and 85 per cent. of specialist beef herds are found in those less favoured areas. All too often, governments no longer control the levers of supply and demand, so new ways must be devised for ensuring the future of the farming industry.

The distribution of rural development funds should be fair throughout the EU. They can be used to support infrastructure spending as an indirect aid and for on-farm and off-farm business developments. Farmers must be further encouraged to diversify. I run an equestrian centre on my farm, alongside my sheep and dairy herd. My neighbour has a thriving bed-and-breakfast business. It still galls me, as the Minister knows, that I have to pay business rates on my equestrian buildings but not on the cattle sheds next door. It would surely be more sensible to encourage such diversification even in the short term, to enable it to be set up, rather than be hindered.

The National Farmers Union and the farming community like headage-based payments, which are simple and easy to understand. However, we are rapidly moving towards area-based payments. On the face of it, they look generous at 40 to 200 ecu per hectare. Up until Monday, that computed to the equivalent of 12 ecu per hectare that we were receiving in Scotland. After Monday's announcement, the figure has risen to 20 ecu per hectare--but that is still only half the lowest proposed payments and one tenth of the highest. As so often is the case, we cannot say how good an idea is until we look at the detail. The obvious first concern is that larger holdings, often having lower stocking densities, will receive more and that the tenant farmer could again find himself involved fighting his landlord, in the same way as with quotas.

The last round of GATT talks had a so-called peace clause, which comes to an end in 2003. What then? The next round of talks and the guaranteed further enlargement of the EU will ensure more changes. Moves towards a more market-based system should be accompanied by a programme of compensating payments, to allow all European farmers the chance to adapt to the new regime.

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The Government are often accused of being anti-country. Now is the time for them to prove otherwise--not just in the short term, as they did on Monday to a large extent, but in the long term too. A very good starter for 10 would be to get the EU to lift the beef ban immediately.

6.11 p.m.

Lord Lyell: My Lords, I thank the noble Lord, Lord Palmer, for giving the House the opportunity to raise this subject. The noble Lord is one Scot and there are others. Perhaps 50 per cent. of your Lordships present might be Scottish, some living in less favoured areas, some not. I must declare an interest, as a farmer with both a suckler herd and a sheep flock, which I have attempted to develop over the past 40 years.

The Statement made earlier this week was especially welcome. It would be remiss of me, let alone other speakers, not to say thank-you for small mercies. I am reminded of one happy little motto, which might have been repeated yesterday by the noble Baroness, Lady O'Cathain--every little helps. I see that slogan when I shop at the supermarket in Kirriemuir and other areas, and it rings true for all farmers who are represented in this debate and for all my friends and neighbours in Scotland.

In the Statement made on Monday and repeated in your Lordships' House, it was gratifying to learn that £85 million more is to be given in agrimonetary compensation. That is most welcome, but I have not a grudging "Yes, but." Even this year my own farm office, which is particularly IT-competent and literate, found some difficulty in dealing with the tranches of HLCA aid and other agrimonetary funds coming to us--some from 1996-97 and some from 1997-98. It can be difficult to trace the amounts of money involved and more study might be useful for the purposes of the £85 million.

The Statement went on to reiterate that there is £48.3 million more for beef--for which I as a producer, having declared my interest, am immensely grateful. We are impressed also by the advance from 60 per cent. to 80 per cent. in the beef premium. I think that just means a slight shift in the arrival of funds. Nevertheless, every little helps and that aid can be of considerable assistance to small farmers, their advisers and the banks--who are increasingly supporting small rural farmers, especially in upland areas and the glens of Angus so well known to my noble neighbour Lord Mackie of Benshie.

According to the Statement, the HLCAs increased by £60 million--an increase of up to 55 per cent. in headage payments. I am always interested in departmental speak. The average will be a little below 55 per cent. but that increase is of help in the current climate. As my noble friend Lord Wade of Chorlton pointed out, the efficient marketing of produce from farmers is a continuing struggle and is growing more difficult. The noble Lord, with the excellent cheeses that he produces from time to time, will be aware that if the farmers are not winning, they are not losing in that particular market.

I wonder whether the noble Lord, Lord Sewel, is able to confirm whether I am correct in thinking that England, Scotland and Wales--not Northern Ireland, in

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case the blood pressure of the noble Lord, Lord Rathcavan, rises unduly, although he will have the opportunity to correct me later--account for only 77 per cent. of self-sufficiency in beef? That may be a one-off figure from the Meat and Livestock Commission for 1997-98, as a result of the BSE problem--but perhaps the Minister and farmers could give some guidance.

I am reminded of the many happy times that I spent in Northern Ireland. Whatever the noble Lord, Lord Rathcavan, might think of my personal performance across the water, I was immensely grateful for the professional help given by the Department of Agriculture in Northern Ireland, which typically gave good advice to small farmers. I hope that the equivalent department in Scotland will be able to work on the same basis. I recall that across the water in 1988-89, coloured pieces of paper were used, because even then we had in Northern Ireland a passport scheme for every bovine moving from its home to market and on to various other markets. At each stage of the journey, even if the animal was to return home, a different piece of coloured paper would be used to identify it. I am somewhat concerned that we might be following that example in Great Britain, thanks to the cattle tracing programme.

I conclude by thanking the Scottish Office, using an anecdote from my own area. We had a problem with one of the tranches of the HLCAs as to how the money was paid and its purpose. My farm office rang the Scottish Office in Edinburgh and the answer to our query came back within three minutes. That shows how efficient departments can be. It may not be in the gift of every farmer in Angus, Argyle or Inverness, at the end of a hard day, when the department may be closed, to be computer literate and obtain all the information and funds that have been announced as being available to small farmers. I am personally very grateful. I know how hard Ministers work, and I hope that they will be able to give encouraging news this evening to small farmers in Scotland, England, Northern Ireland and Wales.

6.18 p.m.

The Earl of Sandwich: My Lords, I thank the noble Lord, Lord Palmer, and the Chief Whip--both of whom understand the critical importance of this subject--on achieving today's debate.

We all know that livestock incomes have suffered worse than ever during the past year. We have heard most of the reasons--beef bans, foreign imports, the green pound, rising standards and disgracefully low prices. LFA cattle and sheep average income fell to £8,400--a 41 per cent. drop according to the Farm Business Survey. In the south-west, according to Exeter University, the average net hill farming income on which a family has to live after farming costs fell from £19,000 to £7,800--a 59 per cent. drop. This is a crisis barely disguised by the sales of personal assets and private sacrifices on which the long-term future of the family depends.

No one imagines that the LFA farmers, while deserving of aid, are the only ones affected. The FBS figure for lowland cattle and sheep is the worst of all; a

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63 per cent. fall last year compared to 1996-97. Even in the Dorset downland, which can go above 800 feet but does not qualify as disadvantaged, farmers around me are suffering severe falls in income year on year. Farmers in west Dorset are among the country's most resilient and uncomplaining, even in hard times, but they feel trapped in a paralysis which afflicts our whole national attitude to farming. It is not just paying the bills today; it is the view out of the window tomorrow.

There is a lot of talk about alternatives. But if you are a farmer--and that includes women--you automatically diversify in any direction you can. If that fails you improvise. You have to lay off your extra labour while your son or father-in-law comes in to help. Your wife runs the B&B or works at the petrol pump. Farmers already know far better than any of us how to balance their sources of income. What they find more unpredictable, even more than rainfall, are the Government's intentions.

Can farmers be sure that they will not be abandoned by us just as, under the previous government, we abandoned the miners? Is there a genuine government vision of the future living countryside, or are they just hoping that with Agenda 2000 and the eventual lifting of the beef ban farmers will cease to complain and income prospects will be rosier again? We have heard soothing words from the Minister this week, and of course farmers like refunds, even when they are wrapped up as Christmas presents. But is it not time that the Government came out with something other that dips into the Treasury and small amounts of emergency aid which only postpone the evil day?

It is true that the HCLAs have made an important contribution to incomes--already equivalent this year to about £1,800 per head--and obviously farmers are relieved that these have been increased and the calf processing scheme extended. Indeed, the NFU press release even states that farmers,

    "cannot afford to be seen as ungrateful professional grumblers".
What the industry needs soon is a statement of confidence in its future within the economy as a whole. I know that that is easier said than done in the first year of a new government, but they have been in office for more than 18 months and farmers have a right to expect a more comprehensive policy. From what the Minister said on Monday, I am sure that he wants that. If this Government cannot provide it, no government can.

The strange thing about agriculture is that there is consensus about change and yet so little is done. Everyone knows that the CAP has helped the richer farmers at the expense of smaller farmers, hill farmers and poor farmers in developing countries. The Government know that Agenda 2000 is not enough, that there has to be a major shift in European policy, and I believe that they are right to take a much more positive stance in Europe.

However, it will all take a long time and what is going to be done in the meantime? For example, what lessons have been learnt from agri-environmental schemes such as those recommended in the excellent Select Committee report on Agenda 2000? Does the success of the stewardship scheme signify a major shift away from

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subsidised production towards a new culture of countryside management, which is already familiar to those of us who live with SSSIs and heritage schemes? Can the Minister say anything more about the planned expansion of the ESAs and the greater take-up of existing ESAs, a point which the noble Earl, Lord Stair, would have made if he had been able to remain? Those things would be a major strategic shift in favour of the countryside.

Can organic farmers and high quality producers be given more encouragement with start-up and marketing if they cannot be shielded from price cutting in the supermarkets? Will more upland rural areas be redesignated as national parks and their farmers to be turned into environmental managers? Farmers need the answers fairly soon or their children will move out and one more farm will become another holiday home. As noble Lords have mentioned, one thing is certain--many more farmers are going out of business. Farm workers are suffering and the agricultural charities will have to support many cases of hardship. There has already been talk tonight of planned retirement. I look forward to the Government's response and hope that they will play their part here, too.

Perhaps I may take one more minute and briefly declare a hereditary interest in one aspect of agriculture; namely, fast food. The sandwich, which started as a private habit of the fourth Earl, is becoming one of this country's major agriculture product and even exports, employing tens of thousands of people. On behalf of the British Sandwich Association, I recently attended the Paris food fair, alongside the junior agriculture Minister, to proclaim this industry's success in part due to the skills of British baking. The sooner the beef ban is lifted the more we shall be able to return to our traditional filling. I therefore hope that the Minister will remember that during his next light lunch.

6.25 p.m.

Lord Gisborough: My Lords, I, too, thank the noble Lord, Lord Palmer, for introducing the debate. I apologise for arriving late; I was taken by surprise by the timing. Finally, I declare an interest as a farmer.

I shall not deal with the fall in prices because they have been dealt with already. Suffice it to say that over the past two or thee years the price of most of the store sheep, breeding lambs and so forth, has about halved. Furthermore, farmers have taken their sheep to market and have then had the cost of bringing them home. The average upland farm profits have been estimated to be reduced by two-thirds from 1996-98. The noble Lord, Lord Palmer, dealt with the wider problem of the loss of jobs in machinery firms, markets and related trades.

On 22nd December 1997, the Minister announced that the Government intended to open early consultations with the farming industry on restructuring in the livestock sector. He noted that major changes in the beef sector were likely over time, with fewer producers and a more viable industry emerging in the UK and in Europe generally. The Minister went on to indicate that the Government would explore with interested parties whether the European Union's early

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retirement scheme and other EU structural measures could play a part in assisting the process of change and achieving their longer-term objectives.

The reduction in farm incomes and increasing borrowing levels due to farm losses may encourage some older farmers to consider retirement. However, the current reduction in beef stock values due to the knock-on effect of young stock prices is a disincentive to sell up at the current time. Farmers are hanging on in the hope that values will improve. They cannot retire at present because of the low values and that is causing a log jam in the tenanted market.

That will reduce the opportunities for young farmers to start farming on their own account, taking advantage of reduced breeding stock values. An early retirement scheme to encourage the viability of holdings by expansion in the specific product sectors was adopted in 1992 by the EEU Regulation No. 2079. If such a scheme were introduced for a specific period, in time some farmers may consider it preferable to retire now--taking advantage of the EU payments--rather than hanging on for the higher stock values and losing the retirement incentive.

The Government asked for industry consultation on the proposals. I should like to request an early report on the progress of the consultation procedure. I hope that the UK adoption of the early retirement scheme is encouraged.

In addition to the problems of the upland farmers, we are now threatened with a pesticide tax. I do not know the reason--whether it is to produce revenues, crop protection or is vaguely green--but it will do little to stop the use of pesticides. No one wants to use them because of the expense. But a high quality of produce is demanded. If we are not allowed to use pesticides or are discouraged from using them--and we shall certainly be discouraged from using GMO pest-resisting gene seed--it will be more difficult to produce high quality food in this country. In that case, we shall have to import high quality food which has been produced using pesticides from outside, which would be mad. It would damage farming. In Sweden the tax has been a flop and it has failed in Denmark. It would be the last straw if it were to be introduced in this country along with the fuel tax, which is another tax threatened on the countryside.

I welcome the package of £120 million which has been promised to the industry. It is a help even if it is small. The other day a farmer went to his landlord and asked for a reduction in his rent. He asked for a reduction of £100 per year. He got a great deal more.

I am glad to say that, at present, the banks are also helping small farmers. Each bank is hoping not to be the first to have to pull the plug. That is extremely commendable. However, as has been mentioned, the supermarkets have not reduced their prices and are not contributing to the welfare of their suppliers. If they want people to continue to supply them, they must look after them, just as the landlords and the banks have done. They must look after people when they are in trouble. Their actions are counter-productive and they will regret it unless they join with everybody else in looking after people when they are in trouble.

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The farming structure is basically sound, leaving aside the problem of price. But, at the moment, farming is haemorrhaging and haemorrhaging fast. Recovery will come but it will be of little use if, by then, farmers have been driven out of business.

6.32 p.m.

Earl Peel: My Lords, first, I apologise to the House for not being here for my slot. Unfortunately, wires were crossed and I was given the wrong information. However, I accept that that is no excuse and it is entirely my fault. However, I gather that my noble friend Lord Addison is not here so perhaps I am grateful to him.

I thank the noble Lord, Lord Palmer, for instigating this debate. It is timely and, as all noble Lords have observed quite correctly, we have a serious crisis in the farming industry at present. I shall not comment on the Statement because I was here when it was repeated yesterday and I made my remarks then, so I do not wish to repeat them now.

I should like to concentrate on the future. My noble friend Lord Rowallan quite rightly asked whether farmers are worthy of support. That is an interesting question. We are discussing principally the hill farmers. I declare an interest in that I own land in the hills in England and hope that that does not preclude me from making comments about Scotland. I believe that the role of farmers in the hills is absolutely essential in producing livestock and breeding stock because 75 per cent. of breeding stock for the lowland farms comes from the hills. However, their skills are also essential in maintaining the infrastructure and the landscape of the uplands in Great Britain which are appreciated so much by so many people. It is interesting that the majority of those areas have now been designated as SSSIs, SPAs or whatever. That bears testimony to the fact that the role of those farmers is absolutely essential in relation not only to farming but also to the environment.

However, that does not mean that there are not opportunities for reform. There are. It has always seemed to me absolute madness that we have tried to support farmers through the headage system, through the HLCAs and the ewe premiums. That has encouraged over-grazing and a major deterioration in much of the heather uplands and the pasturelands of Great Britain.

It seems to me that that madness is compounded by the fact that it takes private money from investment by people with grouse-shooting interests to put that heather back on the hills when it has been destroyed in the first place by public money. On top of that, additional money comes from English Nature and the Ministry of Agriculture through all the various schemes, which I welcome. But surely we must be able to pull things together so that we are all going in the same direction. I hope that the Government will bear that in mind and perhaps the Minister will comment on that when he winds up the debate.

For all that, I firmly believe that the hill farmers deserve support. It worries me greatly when I hear that their percentage of money from the CAP may fall.

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I suggest that one way to make available more money to hill farmers to carry out all the tasks that we want them to carry out is by streamlining some of the many organisations involved in distributing all the money. When one is dealing with an environmental issue, it is not unusual to find oneself at a meeting dealing with five or six different agencies which are all basically doing the same sort of thing. I question whether that is a good use of public money.

Perhaps I may comment briefly on the future. CAP reform is vague. It seems that we do not know whether we shall move towards free markets or whether the European stance of trying to support production and then control it through quotas, which has always struck me as a fairly dotty idea, will continue or whether we shall move to a more comprehensive and radical reform of the CAP.

Whatever the outcome in cash terms, we must have rural policies which embrace the support of careful development. I should like to see a substantial increase in the percentage of the CAP devoted to the agri-environment. The CLA has put that very strongly and effectively in its response to the Government. I hope that its ideas will be implemented.

Despite the depression that we see at the moment, we must be optimistic. I believe that our farmers will come through this. They are quite capable of holding their head up high in any world markets. They will have to diversify. They have done much already. They must continue to adapt, and, I suspect, reluctantly they may have to enlarge. But if there is one message that I should like to put across, where I do not believe they have been as effective as they might, it is in the sphere of marketing and marketing local products in local areas. The French are extremely good at it. We must learn from them.

I believe that the British farmers expect to feel confident that they have the full support of Her Majesty's Government. It is sad to say, but I do not believe that that has been as forthcoming as it might be. We had the Statement yesterday. Let us hope that that heralds a new beginning and that British farmers will feel that we have a Government who will help them to deliver high quality food in an environment of which we can all be proud.

6.38 p.m.

Lord Glentoran: My Lords, I hope your Lordships will forgive me for speaking in the gap, but I was not sure that I would be able to be here for the debate. I am associated with and speaking in particular from the point of view of hill farms and wetlands in Northern Ireland where I have spent the largest part of my life. Therefore, in that regard, I declare an interest.

Most of the farms around us are bankrupt or near enough. Change is undoubtedly necessary. I welcome very much the Statement which the Minister made yesterday which detailed the provision of help for Northern Ireland and Northern Ireland farmers. When I congratulated the Minister some time ago on his appointment, he admitted that he knew very little about agriculture at that time. But I know and we all know

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that he has an exceptionally good brain and he has been putting it to work on behalf of the farming industry. I wish to concentrate on change and the future, a point which the Minister made almost as a key point yesterday.

Change needs energy, youth and, usually, it needs capital. I believe that the latter are vital ingredients for bringing about change in the agricultural industry as it is now, and especially in the areas in which I am involved. One of the questions which have to be tackled by the Government is how they should do this. How does today's elderly farmer, perhaps like myself, get out with dignity and without losing everything? How much of the uplands, the hill lands, does the nation want? Further, who will look after it?

I am told, although it seems strange, that set-aside is probably the most efficient economically of all the subsidies within the agricultural industry. It may be possible that something linking set-aside to hill land--that is, valuable land from an environmental and recreational point of view--is a possibility. There is increasing pressure to have access to the countryside. If the general public and those who love the countryside are to have the benefit of it, not only to look at it but also to enjoy it, that will cost money. Private owners and farmers who are using traditional methods today cannot fund that.

However, change must take place; indeed, I support it. I just hope that the brains and all the technology now available will be able to bring forward constructive ideas which will keep our hill lands and wetlands, available to people, available as habitats to those who use them and, to some extent, available to the livestock which has always been there. But we must find a satisfactory way to facilitate such change not only as regards new methods; we must also help the people who wish to change. Incidentally, I also understand that there was, and still is today, some quite beneficial taxation for retirement from farming which will end in April 1999.

6.41 p.m.

Lord Mackie of Benshie: My Lords, like other speakers I should like, first, to thank the noble Lord, Lord Palmer, for introducing today's debate and for doing it so well. Indeed, the noble Lord did much work on it and produced an admirable opening speech. We have heard many good speeches and most speakers have declared an interest. I am afraid that I must tell your Lordships that I now have no interest. After 44 years, I retired from farming when I was 70 years old. I must say that I am very glad that I am not farming today. The situation has been described by everyone. I do not believe that the Minister can be in any doubt that it is a real and serious crisis, unequalled since the 1930s.

I had prepared a list of things to say, but I shall only mention one of them. I was told by one of my noble friends that a small tenant farmer of his had a very good three year-old Galloway heifer. He took it to market and received £60 for it, where he might previously have got £500. Such situations are repeated all over the country; indeed, it is hitting the small farmer. Many of my nephews and cousins are still farming, but the House

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need not feel sorry for them. They have good farms and know how to farm. They have diversified, and so on, so I believe that they will survive. However, the small farmer on the hill land has no real chance whatever. He has found himself under pressure even in a good year when the average income was about £10,000, which is way below the income of any industrial worker. I suppose that he lived a happy life, but he did not have a great deal of money. There is certainly no way that he can build up reserves.

I believe that the Government have done well in producing the money that they announced on Monday. I believe that it will be a great help; indeed, £3,000 on average at this time is most helpful to a chap who is struggling with his bank, the weather and everything else. The Government must consider further schemes. The noble Lord, Lord Wade, mentioned a possible retirement scheme. Of course, we must have such schemes and many good ones are available. The bond scheme, whereby a farmer is simply given an income of so much for 10 years which he can market if he wishes, has been put forward. It is quite a good one and one which could do a great deal to help those people who are absolutely stuck and do not know which way to turn. If we are to help the industry and turn it round, those people must be helped.

Moreover, there is no doubt that the Government must ensure that the countryside is full of small and big industry, but preferably environmentally-sound industry. That will enable farmers, their wives and children to find work and hold on to a small farm, which they can farm well and from which they can obtain an income. That will keep them in the countryside and keep the countryside bright.

The noble Lord, Lord Dixon-Smith, mentioned the hedges in Norfolk before the war which measured 40 feet high and 40 feet wide, with weeds abounding everywhere. That is what some environmentalists want today. Indeed, they complain bitterly about the hedges being trimmed and about there being no weeds in the fields. We must be practical in this respect. Of course environmental measures are necessary and something upon which the Government could spend money. That could greatly help the situation in the hills.

The noble Earl, Lord Peel, talked about the sheep on the hills. He is certainly quite right; indeed, there are far too many sheep grazing on too little grass or heather. The ewe breeding flock in Scotland has gone up by 2.5 per cent. to 3.76 million and the number of lambs has gone up to 4.71 million. A large part of the reason for that is the subsidy per head of sheep. If a farmer receives a subsidy per head, it is obvious that he will carry as much stock as he can. But that has been overdone. Therefore, the Government should be looking at a complete reversal of that policy. The money should go direct to the farmer, according to the amount that he was getting, together with all the conditions for improving the environment. It is perfectly true that, when looking at a great many pieces of hill, if it is a sporting estate, it will be seen that on one side the heather is good, while on the other side there is grass because the farmer had to keep more sheep to survive. I notice that the Irish are trying to get a scheme into

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operation to cull sheep and pay a certain amount per head if the flock is reduced. That is an idea which, again, the Government should consider.

Many of the measures suggested today have been short-term and designed to alleviate the genuine distress involved, which everyone has emphasised. However, we should look at Agenda 2000 and realise that all three main political parties are committed to what we call, "competitive agriculture", or free trade; or, indeed, whatever the system was that destroyed the plains of America between the wars and grew the hedges in Norfolk to 40 feet high and 40 feet wide. I do not believe that we want to go to that extreme.

The main aims of Agenda 2000 are set out rather well in the publication of the Scottish Agricultural College. It states that the agricultural proposals aim to achieve,

    "increased competitiveness for farm produce on both internal and external markets so that EU producers can take full advantage of 'positive world market developments'".
I do not know what is meant by that but I presume it means that in the future China and Japan will again be able to buy grain from the West and put up the price of grain.

I hope that this competitiveness does not mean a return to the 1930s system. I hope that the Government accept the need for another aim; namely, that of a fair and stable standard of living for farmers. I do not see how that will be achieved unless the Government stick to the policy of paying money directly to farmers--that is, subsidies, or whatever you like to call them--and do not relate it to a crop. In that way one could give the farmers of Europe a fair standard of living and enable them to compete in world markets.

The integration of environmental considerations is another factor to be taken into account. The countryside is a place to be enjoyed by everyone. However, I also believe that reasonable sums of money should be paid to farmers to maintain the countryside. They should be paid direct to the farmers. If that were done, farmers would stand a chance of maintaining standards and enjoying prosperous agriculture.

The paper also mentions simpler European Union legislation. That would be a blessing. It would be much simpler if the money were paid direct to farmers. I hope that the Minister will say something about opinion on Agenda 2000. Happily, France and Germany are much closer to their country populations--their "country cousins"--than we are in this country. We have been an industrial country for so long that most people regard farmers as strange creatures, whereas in France and Germany people realise that farmers are their cousins and relations. I trust that France and Germany will be able to keep our Government--whom I do not trust for one moment to "dish out" any money they do not have to--on the right lines. That would be a blessing.

6.52 p.m.

Baroness Anelay of St. Johns: My Lords, I also thank the noble Lord, Lord Palmer, for giving us the opportunity to debate this vital matter.

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The aid package announced on Monday is welcome as far as it goes. On Monday my noble friend Lord Luke referred to the Statement as something akin to the curate's egg; namely, good in parts. It provides only short-term measures to assist for one year one part of the food production industry. That is a vital part but nonetheless it is only a part. The greatest concern of farmers and growers was expressed clearly recently at the poultry industry conference in Brighton. To that industry it appears that there is no overall government strategy for food and agriculture. What farmers need is a long-term solution, not special treatment but fair treatment. Later I shall attempt to suggest examples of that fair treatment.

What happens to the farmers and growers matters to all of us. The crisis in agriculture has not been "magicked" away by one Statement made on Monday. The Minister made that clear when he repeated the Statement in this House. After all, no one would look a gift horse in the mouth--not that I am suggesting that the noble Lord, Lord Donoughue, is a horse, although like other noble Lords I appreciate his great interest in the turf--and reject the aid package of £120 million. However, we should take note that farmers have lost almost £3 billion over the past year. I am sure that the Welsh livestock producers who rallied in London today under the banner "Farmers in Crisis" would not let us forget that fact.

The NatWest Bank believes that 25,000 farmers--up to 15 per cent. of full-time producers--may be forced to leave the industry. Farmers' incomes are at their lowest level in real terms for 60 years. They fell by almost 50 per cent. in 1997 and are expected to fall by a further two-thirds this year. Other noble Lords have referred to price reductions. I have taken my figures from the NFU. The price farmers get for their beef is down by 35 per cent. in two years; the price for milk and chicken is down by about 22 per cent. About the only farmers who have seen prices rise are those growing potatoes. As we have heard, those in Scotland have had a terrible time trying to get them out of the ground.

Unlike most recent troughs in the industry, this time the crisis is hitting farmers across the board. Arable and livestock sectors are suffering together. If farmers are in trouble, it matters to the rest of us, and it matters a lot. It means that other country people will face financial difficulty too. It means that shops will find it harder to keep going. Rural shopkeepers are already reporting a 25 per cent. drop in takings this year alone. It also means that rural transport services will have fewer passengers. More people, especially young people, will move to the towns and rural schools will be that much emptier.

As noble Lords have mentioned tonight, farmers also maintain the countryside. If they are not there to do it, the countryside we cherish will change drastically. Much of our countryside is not "natural", as some urbanites such as myself might at one time have imagined. It is the product of centuries of human activity. It is what we are used to and what many of us value. Farmers are the people we have to thank for that.

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We need the United Kingdom's farmers and they need us. They need us to give them a fair deal. There should be a fair deal for farmers and growers when they compete with imported produce which at the moment is cheap because of the strength of the pound. Our farmers need to be able to compete on a level playing field as regards produce which is grown, reared or manufactured under conditions abroad that are no longer acceptable in this country. I think in particular of pigs and poultry in this respect. At the very least this will involve honest and clear labelling. In some cases it might even mean that one needs to press for an outright ban.

Earlier the noble Lord, Lord Grantchester, spoke of the confusion that appears to surround the selling of pigmeat. I hope the Minister can tell the House what steps the Government are taking to make sure that the pledge on pigmeat labelling which they gave in a press release on 3rd November becomes a reality. The situation is confused. The press release was entitled,

    "Consumers win as Brown and retailers agree on labelling".
However, they do not seem to agree at all. A MAFF press release stated,

    "Britain's major supermarkets today gave a commitment to Agriculture Minister Nick Brown that they would not sell imported meat processed in the UK under a British label".
That pledge was confirmed in another place by Mr. Brown. However, later the BRC said that the pledge applied only to fresh imported meat. It was only that part of the pledge which the noble Lord, Lord Donoughue, repeated in this House on Monday. What is the Government's response to the BRC spokeswoman who said,

    "MAFF press officers were not at the meeting and were mistaken in assuming the BRC statement covered all meat and not just fresh meat when preparing their press release"?
Is that true, or is it true that a senior member of MAFF's press office team was at the meeting and he has said not only that he did understand, but that a BRC representative agreed that the MAFF press release was correct? He has said that the retailers' representative also agreed the position statement covered bacon, fresh and frozen meat. We need to know what progress has been made on unmuddling that muddle.

We need to give farmers a fair deal by cutting the burden of regulation and the input costs not faced by their competitors. My noble friend Lord Gisborough referred to the threat of a pesticides tax. Surely we must be careful about new and unnecessary burdens, especially such a tax. Pesticides are an expensive input which farmers do not want to use unnecessarily. A tax would surely not serve to control pesticide use, but would be yet another burden imposed on British farmers, and one not faced by all their competitors either within the EU or internationally.

Farmers need a fair deal by encouraging all areas of government to purchase British-produced food. Farmers need a fair deal by encouraging supermarkets to show greater responsibility in their dealings with farmers and particularly by reflecting falling farm-gate prices in the prices on their shelves.

Farmers also need a fair deal by planning for future changes, something to which many noble Lords have referred. My noble friend Lord Wade of Chorlton

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referred to the fact that some progress should be made on the question of farmers' early retirement. I recall that the Minister's right honourable friend in another place, Dr. Cunningham, said in a Statement in December 1997 that the Government would be looking urgently at the question of early retirement for farmers and that it would be part of the Agenda 2000 negotiations. Can the Minister tell the House what progress the Government have made on such negotiations since last year? What is their objective?

On CAP reform, surely what the farmers and the country need is reform which does not discriminate against UK agriculture and which would redirect savings into agri-environmental schemes and rural development.

Reference has been made to the problems that farmers face in trying to diversify. At Question Time on 9th November (col. 502.) referring to Welsh farming, the noble Lord, Lord Williams of Mostyn--I note that he is now in his place--stated that,

    "the current problems in farming bring into sharp focus the need for Welsh agriculture to adapt".
That is quite right. As my noble friend Lady Trumpington made clear, one cannot underestimate the fact that farmers have already grasped the nettle of diversification very hard--and have got stung very hard on occasions. For some farmers, diversification is simply not an option. For all of them, we must attempt to plan for the future.

Finally, I believe that farmers are not asking for special treatment from anybody. They are used to hard graft and to getting on with the job, but they deserve fair treatment. I hope that the Minister will be able to give the House an idea of what future the Government see for farmers and growers in the UK, for their future must be of concern to all of us.

7.2 p.m.

Lord Donoughue: My Lords, this has been an excellent debate. I congratulate the noble Lord, Lord Palmer, on raising such an important question. I sympathise with the several noble Lords who missed the opening of the debate due to our early start. I nearly missed it as well and, in fact, did not see my officials beforehand or my final speech, so I hope that I do not veer too much away from the MAFF party line--not too much! So many questions and points have been raised that it may take me a little while to answer them. I trust that your Lordships will be patient with me.

The Government acknowledge that the agriculture industry is going through a very difficult time at present and that times are hardest for those in the livestock sector. We know how hard that is. In opening, the noble Lord, Lord Palmer, asked, quite directly and personally, how I would feel if I were badly rewarded for standing at the Dispatch Box. I shall not disguise the fact that I do feel painfully badly rewarded for standing here and that I have to pay for it in many ways--not all monetary. Therefore, I have a strong fellow-feeling for farmers, especially those who work for even less.

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The recent drop in farm incomes is at the heart of the problems described by many noble Lords. Incomes in the agricultural sector have benefited greatly in recent years from devaluations and improved productivity, and incomes rose in real terms 74 per cent. between 1992 and 1996. That was quite a bonanza. Now, the pendulum has swung back dramatically, with the strengthening of sterling and falling commodity prices. Other sectors of UK industry face similar problems brought about by the strength of sterling. That has been the main contributory factor to the fall in farm incomes, with the strong pound hitting exports and boosting imports across the board.

However, that is not the only reason. The continuing weakness in the beef sector following the BSE crisis has not only hit beef farmers but has had knock-on effects in other areas. The collapse of the important export markets in Russia, as mentioned, and in the Far East has exacerbated the problem. Also, over-optimistic assumptions about the scale of future demand were made in some farm sectors. One thinks of the pig sector. All of that has hit many farming incomes. I do not accept all the figures presented by the noble Baroness opposite--

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