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According to a survey carried out at the Royal Smithfield Show, 97 per cent. of farmers do not trust supermarkets to be fair to the British agricultural industry and are worried and concerned about the increasing dominance of supermarkets. In my view, livestock farmers should close ranks on marketing and should sell their livestock through their livestock auction system which has been proved to be the best in the world. Farmers should act before the high-powered supermarkets try to destroy our auction system. United Kingdom farmers are well advised to sell their produce at auction.
The Government can advise farmers and all those involved in, and who live in, the countryside to diversify. They can grant extra subsidies or any other state financial aid; but one thing is certain: unless farmers receive a realistic price for their end produce, the present crisis will not go away and many farmers will find it difficult, financially, to carry on.
I also suggest that the Government should call together the chairmen of the supermarket giants and the leaders of the farmers' unions in the United Kingdom to discuss strategy so that we can make progress to save the agricultural industry. If there is a will--I repeat, "If there is a will"--there is a way out of the present crisis.
The Earl of Clanwilliam: My Lords, as a non-farmer, I enter this debate with some trepidation, but perhaps I may be granted observer status. As such, I shall certainly not take up the full nine minutes.
Noble Lords have pointed out the plight of the small farmer, and that is what I wish to emphasise. He is suffering much more deeply than his large-scale opposite number in the farming community. It is the small specialist farmer, for instance, who has seen his stock prices plummet and has nowhere to turn. It may be that he has lost the feel for mixed farming and forgotten the old ways. In addition, his son may well have left the land, seeing it as no source of future income, and requiring a way of life that is not compatible with the lifestyle to which he aspires. Not only may the present farmer be forced to leave the land; there will be no one to take his place. What price then the environment, with large areas of smallholdings deserted? It is a dreadful prospect that we face, and one which my noble friend Lord Kimball addressed with eloquence in his interesting introduction to this important debate, for which I take the opportunity to thank him.
Like any civilised society, we need small farmers to produce healthy, home-grown food. Foreign standards of production do not match our own, with the consequent difficulties for small farmers trying to compete. Nothing is new in this world--certainly nothing in this debate. One solution I would suggest is to take a leaf from across the Channel where Normandy and Breton farmers have successful co-operatives. Co-operatives have been mentioned by the noble Earl, Lord Radnor, and my noble friend Lord Middleton. The French co-operative farmers seem to have buried their innate suspicions of each other and have made successful inroads into sending their produce across the Channel to the UK. We can be assured that Brussels, in reforming the CAP, will favour such Francophile plans, which may well therefore be well placed to continue.
That brings me to the possibility of creating organic co-operatives, a feature badly needed in the organic world, and one which would enable the small farmer to enjoy the subsidies that this Government have increased to foster that system of agricultural production. In that connection, a new document has been published by the Family Farmers Association, which emphasises the need for co-operatives. I recommend that document to the noble Lord, Lord Carter. He may well find in that some ways of helping to promote organic co-operatives.
Organic farming is a system of mixed farming which can bear the costs of changes in those world prices which affect the specialist farmer so deeply, and which allows a farmer to live off his own land. That provides the necessary security for continuity. I do not need to impress upon your Lordships the great advantages, in terms of both transport and price, for a specialist farmer in marketing his produce through a co-operative, thereby creating a continuous flow of goods to the ever-present supermarket. I shall draw a veil over my feelings about those controllers who abuse the market with impunity. The co-operative will enjoy the advantages of the economies of scale--that much-lauded phrase of the marketing man--and create the critical mass necessary for joint production. It will allow hill farmers to join with lowland farmers and create a whole system in any given area to produce cereals, meat and horticultural produce.
I cannot leave this subject without drawing to your Lordships' attention the recently produced report of the Soil Association, entitled The Use and Misuse of Antibiotics in UK Agriculture. That report draws on a wide range of authorities, not least a recent Select Committee report on antibiotics. I cannot refrain from thinking that an awful lot of problems which farmers are suffering today would have been avoided had they not been seduced into intensive farming. I recommend the report from the Soil Association to your Lordships and I shall arrange for all speakers in tonight's debate to receive a copy.
Lord Nunburnholme: My Lords, I note the comments of my noble friend Lord Inglewood about small farmers, be they tenant or freehold. I have bad news for him. I live just up the road from him at the top of Alston Moor, not a hop, skip and a jump away, although I have not yet met him. On my moor--it is not my moor in that I do not own it--in the past 11 years five middle fell and low fell farmers have gone broke, two of whom have committed suicide. It was not this Chamber obviously--as one can see from the attendance here tonight--and it probably was not the other place (was it Brussels?), but who signed their death warrants?
Lord Mackie of Benshie: My Lords, I, too, thank the noble Lord, Lord Kimball, for introducing this debate. Although I have spoken often on agriculture recently, he has taken the debate forward to the future. I do not share the general joy at seeing the noble Lord, Lord Carter, on the Front Bench. Poachers who turn gamekeepers are always worse and perhaps we might have done better to have an amiable chap to reply to the debate who does not know as much about agriculture as the noble Lord. Nevertheless we have a good case. If we had a bad case, we could do with an amiable fellow to reply to the debate. However, as we have a good case I trust and hope that the noble Lord, Lord Carter, will push it in the right direction where the trouble starts which, I understand, is in the Treasury.
I wish to discuss the general situation in agriculture throughout the world. We were the first country to industrialise and at the same time we experienced a revolution in agriculture. In the late 18th century and the 19th century we built up an efficient system of farming. That lasted until 1870 when the Vanderbilts built railways across the prairies of America and grain started to pour into this country. That store of grain was grown on soil fertilised by the buffaloes over many centuries. Since then farming has only really prospered when there has been some disaster. During the two wars farming was prosperous. In between the wars there was the misery of the appalling depression of the 1930s. At that time agriculture was competitive. Farmers on the plains of America have been ruined, as have farmers in the Argentine. The primary producer is at the mercy of a savage and ruthless market. Whether he produces cocoa, coffee, tin or any other commodity, the primary producer is always hit when things go wrong.
In this modern world we should be able to produce a system of agriculture that is productive, that cares for the countryside and at the same time feeds the people. That is what has happened, of course. The people of this country may say that they pay too much for food, and perhaps they do. However, the proportion of money spent on food per family has fallen steeply in recent years. We have to ensure that we make the system work. The CAP was an admirable idea but it was ruined completely by politicians. Every time the Commission put forward a case for a reduction in prices, the politicians said that voters in Bavaria or wherever did not want that, and therefore prices were increased, with the result that we are in the situation that now pertains.
We are now approaching the advent of this great Agenda 2000. Every single political party, including my own, says it is committed to producing competitive agriculture. It is easy to produce competitive agriculture, but we also want prosperous agriculture. I have sworn that I shall not mention the term "a level playing field", so I hope noble Lords will take it that I have not used that term. On the previous occasion we discussed agriculture I mentioned some figures as regards the cost of labour in Poland and Hungary. The price of a tonne of barley at present will pay the wages of a man in Poland for nearly four weeks, but the price of four tonnes of barley will pay the wages of a man in this country for only one week. That is the kind of competition that we are up against. We are also up against subsidised agriculture in eastern Europe.
A friend of mine who farms in Hungary discovered that a combine which costs him £120,000 in this country costs him £80,000 there. In addition he received £27,000 in subsidy from the government for buying the combine. Therefore the combine cost him £53,000 rather than £120,000 in this country. That makes a great difference to costs per acre. When the Government consider the entry of the countries of eastern Europe into the European Union and the reform of the CAP, they must ensure there is some form of equality as between producers in the countries of the European Union. Obviously the standard of living of farmers in Hungary and Poland is far too low. However, we must have equality of opportunity.
The other thing that the Government must do is to establish their food standards agency--call it what they will--as an independent body which will be respected. Farmers are criticised by people who think that something must be wrong if farmers use fertilisers and pesticides. The noble Lord, Lord Christopher, said that the public has been critical of farming methods. However, those methods are all under the control of government agencies. It is up to the Government to ensure that the public's fears are proved groundless. The Government must ensure that research is carried out on these matters. One needs money to undertake research on the use of antibiotics and other such matters. I shudder when I think of feeding chickens with antibiotics not to cure them of something but to make them put on more flesh. I and many other people want to know whether that will cause harm. The Government must spend the money to enable research to be undertaken on these farming methods. It is no good asking farmers to produce food for the masses in this country at a reasonable price but then slating farmers for doing so. The Commission's Agenda 2000 refers to the necessity to support agriculture.
Do Her Majesty's Government want agricultural incomes to be as high as industrial incomes? Is that one of their aims? It is certainly mentioned in the Commission's document. There have been many good speeches in the debate but the most savage one that I enjoyed the best came from the noble Lord, Lord Plumb. He gave figures that he obtained direct from a commissioner. I trust and hope that the Minister will accompany the noble Lord, Lord Plumb, to meet the commissioner in Brussels tomorrow to ensure that we gain access to the money that is available, even if it costs us 70 per cent. to do so rather than the 50 per cent. it costs other people. Those are questions that the Government must answer.
I have referred to the food standards agency and equal standards. If the Government can achieve those basic things, then the farmers have a chance. I agree with the noble Lord, Lord Middleton, that there must be a scheme to alleviate the lot of small farmers who are going broke and are in despair. We must see to it that they have a chance to leave the industry gracefully, or to stay in the industry and use all the facilities such as machinery rings and so on that exist nowadays. If that is done, I am sure that we shall return to a period, not of great prosperity, but of reasonable prosperity, which will keep people on the land and keep the land right.
Baroness Byford: My Lords, I, too, wish to thank my noble friend Lord Kimball for providing the opportunity for this important farming debate. It has ranged widely and has reflected the immense pressures under which farmers currently work. Rightly, my noble friend focused our minds on the future of the agriculture industry. He touched on many matters. I shall name merely a few: further enlargement; reform of the CAP; Agenda 2000; constitutional changes; less favoured areas; and environmental and rural support. That brief list serves to indicate the huge diversity in farming and
Many speakers reflected the continuing demise of our agriculture. While there is a degree of optimism in certain sections of the industry, many real problems still face our farmers. The partial lifting of the beef ban by the European Commissioners last week was welcome. However, the ban will not be lifted until March or April. Continued restrictions on selling beef on the bone lessen our drive to regain export markets lost to us over the past three years. The Government have made an additional £120 million available, which is to be welcomed. However, that financial help has gone to only a narrow section of farmers. For some, that help has come too late.
Beef farmers wish to see a return to normal trading as soon as possible. The lifting of the ban on beef on the bone is essential, as much of our former exported beef was purchased abroad through buying the whole beef carcass, not merely beef off the bone. If our export markets are to pick up, that is an important move that must be made. I hope the noble Lord the Chief Whip will be able to tell us more in his reply.
At a time when farmers believe that EU moneys have been available to assist them in the current crisis, the Government have not seen fit to seek extra help under the hardship fund. The noble Lord, Lord Plumb, made that point. I understand that there is likely to be an under-spend of moneys allocated within our agriculture budget. That is a matter of concern. Will the noble Lord, Lord Carter, also comment on that in his reply?
At the Smithfield show last week the Agriculture Minister acknowledged that farm incomes had dropped. There was a drop of 33 per cent. between 1988 and 1997, with a further fall in 1998. That is a second fall in a row. Total income from farming has fallen by 63 per cent. in real terms. The Minister went on to say that the cutbacks mean that it is unlikely that additional cash will be available to promote the marketing initiative that is so urgently needed to relaunch our markets abroad.
The situation cannot, and must not, be allowed to continue. The dramatic fall in farm incomes forecast for 1998 is due to a further sharp fall in the value of output from the industry of some 10 per cent; that is, around £1.6 billion in monetary figures. That fall in the value of the industry over two years totals some £3.5 billion. Although welcome, the recent package of help of some £120 million offset against that figure only highlights the dilemma facing the farming industry today.
The pig industry has experienced a difficult year, with profits plummeting. Additional costs have been borne by producers. It is estimated by the ABN that some 11.3 per cent. has been added to base costs to cover costs resulting from the ban on meat and bonemeal, the stall tether ban, farm assurance schemes and deductions made at the abattoir. Those extra costs have come at the same time as falls in prices and as a direct consequence of the comparative price of imports, which are not subject to the same standards of welfare or food safety.
The poultry industry has also gone through a difficult time. However, it, like other areas of the industry, is launching a positive promotional fight-back campaign. What it seeks is fairness. Imports to the UK need to be more rigorously inspected and to be seen to be inspected by the Government. Each poultry processing plant in third countries wishing to export to the EU should be inspected by EU vets prior to their being allowed to do so. Currently, it is the authorities in the third country that decide whether the plants comply with EU hygiene rules and standards. The results of tests of UK poultry meat for residues are published every quarter. No test results are published for poultry meat imported from third countries. The lack of information is serious. Producers in third countries are permitted to use veterinary products and feed ingredients that are banned in the UK.
Labelling and food standards have been mentioned by other noble Lords. The agreement with the British Retail Consortium on labelling must also apply to fresh and frozen poultry meat and to imports of finished further processed products from third countries. Such products should not be permitted to be labelled as British. If such labels are misleading on pork, they are equally misleading on poultry meat. As for pigs, meat and bonemeal is banned from poultry feed in the UK. However, poultry producers outside the UK still use it. The ban is to protect the UK beef feed chain. But that protection adds some £30 million annually to the feed bill of the British poultry industry which our competitors in other countries do not have to pay and for which we receive no recompense.
The debate touched on hopes for the outcome of Agenda 2000 and the reform of the CAP. They are crucial to our farming industry. In the ministerial Statement to the House on 16th November the Government stated that the reform of the CAP must create the conditions to allow sustainable and competitive EU agriculture to operate effectively on world markets. Will the Minister define more clearly what is meant by "sustainable" and how the Government see that being achieved? The Statement goes on to say that they wish to see a freeing up of resources to offer scope for better targeted measures to support the rural economy and enhance the environment. Again, perhaps I may press the Minister for greater detail.
The debate has also touched on the early retirement scheme. Farmers are indeed facing difficult times. For those of more mature years the possibility of early retirement is an attraction. The scheme does not require amalgamations, but would enable those who will not survive in the industry to leave it with dignity. What is the current position with regard to the scheme? My noble friend Lord Stanley referred to it earlier.
I turn now to the wider issue of the countryside, for farming and the countryside go together. Two meetings have today taken place in London. The Countryside Commission held a conference to consider countryside matters. I was not there, but I understand that the right honourable Michael Meacher spoke to the conference about the consultations on the right of access and admitted that most demand was for access close to cities
In this House there was a presentation by Partnership in the Countryside and English Partnerships, which I attended, which dealt with working with rural communities. Those bodies are looking at practical ways to enable communities to help themselves. They encourage community-based businesses and aim to provide information, contacts, funding and examples of good practice. This is important and underlines the immense pressure that farming is under at present.
We could have no one better than the noble Lord, Lord Carter, to reply to this wide-ranging debate. The tremendous pressures upon small tenant farmers, world influences, level playing fields, better use of diversification, the situation in Northern Ireland, food security and the cost of form-filling are but a few of the items that have been mentioned. This has been a worthwhile debate and I thank my noble friend Lord Kimball for making it possible.
Lord Carter: My Lords, before I reply to the debate, perhaps I may, as Chief Whip, congratulate noble Lords on the brevity and succinct nature of their contributions. I now have about an hour in which to reply!
Like other noble Lords, I thank the noble Lord, Lord Kimball, for tabling this Motion and all those who have spoken in the debate for the excellent contributions which we always expect from this House on agricultural and rural issues. In the time properly allowed to me, I cannot hope to respond to all the questions and points that have been raised. However, I shall ensure that all those who do not receive a reply from me today will receive a response in writing.
Because of my former farming interests--which are well known--and my previous connection with an agricultural consultancy, I should make clear that I have made arrangements to relinquish those interests and that those arrangements have been approved by the Cabinet Office. On becoming a Member of the Government, I faithfully followed the guidance provided by the Cabinet Office and the Registrar of Interests in your Lordships' House.
This has been an excellent debate and I congratulate the noble Lord, Lord Kimball, on raising such an important question. This debate and a number of recent ones demonstrate the concern and commitment of this House to the well-being of agricultural and rural communities. The Government acknowledge that the agricultural industry is going through a very difficult time at present and that times are hardest for those in the livestock sector. That is why on 16th November my right honourable friend the Minister announced a package of aid worth £120 million for the livestock sector and why the Government have taken a number of other measures to ease pressures and encourage development.
The strength of sterling has been the main contributory factor towards the fall in farm incomes, with the strong pound hitting exports and boosting imports. There has also been a world-wide reduction in prices for most major commodities. But these are not the only reasons. The continuing weakness of the beef sector following the BSE crisis has not only hit beef farmers but has had knock-on effects in other areas. In addition, there has been the collapse of important export markets in Russia and the Far East, which has exacerbated the problem, and the over-optimistic assumptions about the scale of future demand, which led to expansion in some sectors, particularly in pigs.
We acknowledge these difficulties. That is why we have been listening to farmers and their representatives across the UK and why we have already taken a series of steps to help our agriculture, for both the present and the future. When I spoke to Mr. Nick Brown, the Minister, this morning, he asked me to emphasise in this reply that we all need to work together to ensure a competitive, viable and profitable farming industry for the future which will safeguard our rural areas. The CAP reform provides an opportunity in this direction. For example, the rural development proposals set a framework for strengthening our rural areas. We hope to see a redirecting of funds to rural development measures and increased funding for agri-environmental measures. We have been listening to farmers and their representatives and shall continue to do so. My right honourable friend the Minister is planning a broad consultation with all those involved in farming on the way forward on Agenda 2000.
Turning to the individual sectors, we recognise that this has been another difficult year for beef and sheep producers. For beef producers, the market has been influenced adversely by the export ban, continuing structural surplus, falling market prices and falling demand. For sheep producers, there have been two consecutive years of delayed finishing and poor market prices.
EU beef and sheep regimes prohibit the Government from taking unilateral action to support market prices. We have introduced a number of measures to assist the plight of producers. In February, £85 million was distributed to beef and sheep producers in compensation payments. We have recently received agreement from the Commission to open private storage aid for sheepmeat in the UK, to extend beef intervention
The recent decision to lift the beef export ban will in time ease at least some of the pressures currently faced by beef producers. The lifting of the ban was a major objective of the Government's policy on agriculture. Tremendous efforts, led personally by the Prime Minister, have been made over the past 18 months to achieve this outcome. This demonstrates our commitment to securing a long-term future for the beef industry. But no one should be in any doubt that, unless the fundamental imbalance of the EU beef market is addressed and corrected, there is unlikely to be a sustained return to profitability within the industry. Against this background, it is clear that reform of the regime is essential.
Turning to the question of beef on the bone, my right honourable friend the Minister welcomed the SEAC assessment of the risk when it met on 9th November. The report is now being considered within government, and in particular by the Chief Medical Officer who will advise Ministers soon. In addition, we need to take account of the potential effects of the Commission's recent proposal for Community-wide controls on specified risk materials. Once this process of consideration is complete, there will be a further announcement about UK controls on bone-in beef.
We all know that it will take time for the British beef industry to regain markets which have been closed to it for the past two and a half years. But the conditions are now in place for the industry to plan for the future. While it will not be easy to renew lost markets, the endorsement we have given of the safety of British beef can only act as a boost to consumer confidence and the industry generally.
I turn now to the pig sector. We know that the pig industry is going through a very hard time at present, with market prices well below the cost of production. Until last May, I had been involved in the pig industry for nearly 40 years. The situation now is the worst I have ever known. This is an EU-wide problem caused in the main by over production, the loss of valuable export markets and a reaction to the very high profits that we made until 1996. The EU pigmeat regime is very light and contains no provision for direct aids to producers of the kind introduced for beef and sheep farmers. To pay these as a state aid is not an option as it contravenes European law. We oppose all state aid schemes in the pigmeat sector because they can distort trade, interfere with the market and risk prolonging the crisis. I hope that they are listening in France.
The pig sector benefits from a number of market-related measures agreed within the European Union and supported by the Government. These are worth almost £100 million in market support across the EU this year. The measures include the re-introduction of refunds on exports of fresh and frozen carcasses and cuts of pigmeat; two further increases in those refunds, including a 75 per cent. increase in exports to Russia; and the introduction of an aid to private storage schemes. My noble friend, Lord Donoughue, the Parliamentary Secretary, has spearheaded a campaign aimed at the catering and food service sector with the objective of increasing the use of British pigmeat products in a sector which takes 30 per cent. of the pigmeat market. The Government have received undertakings from the major retailers that all their own label fresh pork, bacon, ham and sausages will come from stall and tether and MBM-free systems. In addition, they will not sell imported fresh meat processed or packaged in the UK under a British label.
The arable sector also faces difficulties due mainly to a run of very big harvests in cereal-producing regions across the world. Other factors have been the strength of sterling and the poor weather. But we have emerged from a number of years of excellent arable profits which as we all know have been capitalised in the price of land. Recognising these adverse weather conditions, the Government took action to help UK cereal farmers in September by relaxing the moisture content limit laid down by the EU for cereals sold into intervention from 14.5 to 15 per cent. This helped to reduce the costs incurred by the industry in drying grain and was welcomed by the farming industry. The Ministry also made good progress with this year's arable area payments. Some 98 per cent. of advance oilseed payments were made by the end of September. Main arable payments started in October and are due for completion by the end of December. I am pleased to be able to say that about 85 per cent. of these payments have now been made, totalling over £700 million.
The noble Lord, Lord Palmer, made reference to bio-fuels. MAFF, through the work of the Alternative Crops Unit, is promoting the uptake of crops as a source of renewable raw materials for energy and industry. The unit encourages developments in non-food crops by maintaining databases, disseminating information and organising a programme of seminars and workshops. The question of possible support for energy and industrial crops is now being considered in the Agenda 2000 proposals for CAP reform. Industry has voiced concerns over the future of voluntary set aside and the uncertainties of future support for non-food crops. The Agenda 2000 proposals did not contain any specific recommendations for energy and industrial crops, but recognised that renewable raw materials could represent a new opportunity for agriculture and forestry and contribute to job creation in rural areas. They can also make a significant contribution to achieving the climate change commitments that we have made.
The Commission has committed itself to producing a report within the context of Agenda 2000 on the present state of the non-food and energy crop markets and their future development and, if necessary, to make
We know that the hill areas have always had a particular sensitivity. In addition to the aid given to hill farmers in the recent aid package, in the longer term we want to replace HLCAs with a new scheme which will deliver support to hill farmers much more effectively to ensure that hill farming has a more secure and sustainable future. The aim of the new scheme will be to help maintain the environmental and social fabric of upland areas. The issue is being considered in the context of Agenda 2000 proposals for reform of the common agricultural policy. These envisage a change in the basis of granting support to the less favoured areas. The key proposal is that compensatory allowances will become area payments and have a clearer environmental objective instead of the livestock headage payments which we have at present with HLCAs. We all know their environmental effects. We realise that change may not be easy and we are keen to hear the views of all interested parties before deciding on the way forward. We hope to start consultation on options for a new scheme later this year.
The wellbeing of agriculture cannot be secured completely by response to short-term crisis, helpful though that may be in particular sectors. The Government are also looking at ways in which long-term stability and prosperity can be brought into the rural economy. First, the proposed reform of the CAP provides an opportunity for change. The Government would like to see the policy reformed to phase out production-linked support, allowing European farming to develop into a competitive industry that can survive and prosper in increasingly open markets. In doing this, however, we must and do recognise the importance of farming to the environment and the economy of rural areas. As a former member of Sub-Committee D of the European Communities Committee of your Lordships' House, I well remember the number of reports that it produced which supported this policy framework.
We therefore welcome as part of the Agenda 2000 process the Commission's proposal on support for rural development. The proposal sets the framework for strengthening the environmental and rural development components of the CAP, allowing member states to prioritise their wishes for environmental action, support for less favoured areas, forestry, structural adjustment and diversification. Most of the measures would be able to be applied across the whole country. However, much more needs to be done in the way of redirecting funds towards the rural economy before these proposals can take effect. In line with the Government's commitment to the rural environment, the Comprehensive Spending Review provided for a continuing expansion of areas subject to agreement under the major agri-environment schemes in England. An extra £40 million is being made available over the next three years to fund improvements and enhancements to the schemes.
The Government are also committed to examining the future needs of agriculture and the countryside. In connection with Agenda 2000, my right honourable friend the Minister of Agriculture plans broad consultation with all parts of the industry. The Government's manifesto on which we fought the election set out a number of pledges that outlined our approach to the countryside and rural matters. We have been taking forward policies for rural areas in many different ways. In addition to aids for agriculture we have made available an extra £50 million a year for rural public transport and increased the target for development on brownfield land to give extra protection to the countryside. The Government now intend to put all these policies together and set out a framework to help achieve our vision for the future. The proposed interdepartmental rural White Paper will be a clear example of this approach to policy.
We hear all about supermarkets that exploit farmers. We look at the agricultural industry to take initiatives where it can. There have been recent allegations that supermarkets exploit farmers based on the differences between market and retail prices. We have heard them today. We understand that major retailers are demanding and powerful customers. But farmers appreciate that they also provide access to millions of consumers. It is inevitable that small businesses such as farmers will encounter difficulties when dealing with major companies such as supermarkets. But we have to be realistic. Today most sectors of business operate in an increasingly global market. If we cannot supply what the customer wants we can be sure that somebody somewhere can and will. Producers therefore need to be able to deal effectively with major buyers. This often means collaboration so that producers can offer the scale, quality and consistency of supply required by the major buyers.
For that reason, we have joined the NFU in a joint initiative on collaborative marketing described as "building business advantage". My right honourable friend the Minister and the President of the NFU launched the process at the Royal Smithfield Show. The idea is a simple one. By focusing on the successful practitioners we aim to highlight the benefits of collaborative marketing such as economies of scale and access to professional marketing assistance and technical support. Over the next few months, the NFU will hold a series of regional seminars at which the benefits of this approach can be discussed. There will be opportunities, too, to see successful co-operative activity in action.
As I read out this brief, I have a strong sense of deja vu. The noble Lord, Lord Plumb, will remember very well the initiatives in the early 1970s in which we were both involved. Does he remember the proposal for the establishment for the British Agricultural Marketing and Development Organisation (BAMDO)? In agriculture and policy making, I fear that if one stands in the same place the policy caravan passes and repasses.
The noble Lord, Lord Plumb, mentioned enlargement. We all know that the European Union now stretches from the Arctic Circle to the Mediterranean and from the Atlantic to Poland. After enlargement it will stretch from the Atlantic to Russia and almost to the Adriatic. This enormous geographical, social and agriculture structure cannot but present an enormous challenge to the whole future of the CAP.
I was asked a technical question by the noble Lord, Lord Plumb. He asked why all the agri-monetary compensation had not been taken up. As he knows, there are limits on the amount of compensation that can be spent on each of the four sectors eligible for aid, which are beef, milk, sugar and cereals. Because of EU rules most of the aid which is currently available is payable only to the cereals sector. We decided not to do that. The United Kingdom is paying the maximum available to the beef sector in the second year of the three-year package. A further small package of aid would be available to the beef sector as a result of the revaluation on 3rd May. Up to half of that package can be reclaimed from the EU budget without any further matching national contribution. The plans will need to be notified to the Commission by May of next year.
We should not overlook the effect of the freeze on the green rates. That freeze ran for several years. It had the effect that the conversion rate from ecus into pounds sterling was fixed at a higher rate than it would have been otherwise. So payments to UK farmers under the livestock and arable schemes were considerably higher than if the rate had not been frozen in recent years. I do not have the figure by me, but I believe that it was some hundreds of millions of pounds over the period to which it applied. I see that the noble Lord, Lord Plumb, is nodding.
There is an idea that compensation has no cost to the UK Exchequer. The operation of the United Kingdom's European Union budget abatement means that even paying the EU reimbursed element of agri-monetary compensation carries significant public expenditure implications for the UK Exchequer.
There are other questions to which I shall reply in writing. One noble Lord referred with some praise to the American Farm Act and the way in which farmers there have to manage without subsidies. As a result of the recent 1999 Agricultural Appropriations Bill, United States farmers will receive an additional 7 billion dollars in the form of disaster aid and tax relief.
The noble Baroness, Lady Byford, asked me about the underspend on the agricultural budget. There are no significant underspends on that budget this year. It is true that we allowed for greater expenditure in the EU livestock and arable schemes in the estimates that we
I hope that I have answered at least some of the points raised in the debate. I shall certainly ensure that all those which have not been dealt with will be answered in writing. It has been a good debate. It has given me the opportunity to show that the Government--
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