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Lord Eatwell: If the Minister holds that view--who is to judge?--then who is to judge what gives a misleading impression in Clause 109(2)(b)? And who will judge whether or not information is generally available in the market under Clause 109(2)(a)?

Lord McIntosh of Haringey: The amendment about which we are talking does not refer to subsection (2)(a). I was talking about a misleading impression as to supply and demand for the price or value of investments of the kind in question.

I am advised that I have taken far too long already, as I appreciate. If I have not responded to noble Lords on any particular point--I have not done so on the take-over code--I shall write to noble Lords.

After serious consideration of all the amendments--it has taken far longer than the 30 minutes I have been speaking--I conclude in general that what we have done is neither too lax (as is suggested by my noble friend Lord Eatwell), nor too rigid (as suggested by noble Lords opposite), and I commend the government amendments to the Committee. I ask the Committee to reject the other amendments.

Lord Peyton of Yeovil: I realise that for some reason or other the noble Lord is in a great hurry. I have quite a number of things I should like to say. I can be very short. If the Minister has now finished speaking, I should like, first, to add my congratulations to the Members on my Front Bench on their admirable restraint in the handling of this Bill, slightly tinged with regret at the absence of protest and unease at the length of the Bill. I believe, rightly or wrongly, that that is at the root of the Government's troubles. The more you put into a Bill, the more you try to fill every gap and provide for every possible occurrence, the more difficulties you will be in.

Perhaps I may point out to the Minister that Clause 109(11) states:

I could have told him that. It also states that:

    "'investment' is to be read with section 20 and Schedule 2".

I suspect that most people know what "investment" means. It goes on:

    "'regular user', in relation to a particular market, means a reasonable person who regularly deals on that market in investments of the kind in question".

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I believe that the obesity of the Bill lies at the root of the Government's problems in handling it.

I agree that it is not a Bill which need arouse party passions, but, with reference to the amendment proposed by the noble Lord, Lord Eatwell, it will not be further improved merely by sprinkling adjectives over it. In my view, the addition of the word "ethical" will not help to stop the abuses which we all want to see stopped.

Furthermore, I am deeply indebted to the noble and learned Lord, Lord Donaldson, for his intervention. I am still far from clear as to where the boundary lies between the so-called civil market abuse regime and criminal activity, and nothing that the Minister said has explained it to me.

He must deal with it sooner or later, because I do not understand the matter. He went on to deal with the Sumitomo case, stating that the mere fact that a criminal prosecution did not follow did not mean that a criminal offence had not been committed. It seems to me that the mere use of the term "market abuse" suggests that there is some criminal conduct.

I believe that one is entitled to make some protest. It is difficult for people who are not as well prepared or briefed as Ministers to follow answers delivered at such speed. I am not sure why the noble Lord had to hurry so much, but I want to make the modest and restrained protest that what he said at that speed--he is normally very clear--was extremely hard to follow.

Lord Bagri: As I know something about the Sumitomo case, perhaps I may congratulate the Minister on trying to deal with it. I know how difficult it was to deal with. That is why we welcome the extension of the market abuse regime to cover both non-authorised persons and off-exchange activity which has a manipulative effect on the exchange market.

I listened with interest to the Minister's reference to a hypothetical situation about market abuse, dealing with metal futures and so forth. It was a relevant reference as we have to deal with it almost every day.

Lord Kingsland: I want to take a few minutes to respond to the Minister's reply. I am surprised that he was not attracted by the elegance of the solution I offer in my amendments. First, we have a clear statement of the standard of behaviour; then we have the conditions under which it is capable of being broken; and to each of those conditions is attached a requirement of intention. Finally, in subsection (3), we have an absolutely clear, safe harbour. We have the standard set out, the requirement of intention, the actus reus of the offences and a clear, safe harbour. In my submission, that gives the offence of market abuse the predictability it needs if it is to survive the European convention test which will be applied to it after 2nd October.

The Minister referred to remarks made by the then Minister of State, Ms Hewitt, in another place. He quoted her as saying that what matters are the adverse effects on the efficiency of markets, not moral

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culpability. If that is so, why have the Minister and his Government introduced fines into the offence? If it is merely a question of effects and the efficiency of markets, why is not restitution sufficient? That would solve all the noble Lord's problems because, if there were no fines, the element of criminality would be banished from market abuse. I put it to the noble Lord that he cannot have it both ways. If he wants fines, he has to have intent, or at least recklessness, as well. The two things go together.

I was surprised that he failed to make reference to my observations about the SEC. The United States has more experience of supervising successful securities markets than any other country. It introduced the regime based upon the criminal law on the one hand and the regulated market on the other. Throughout, it has insisted that its regime is conditioned by intention and a form of recklessness which its courts say goes beyond gross negligence. The Minister did not attempt at any stage of his speech to demonstrate why that experience in the United States has no relevance whatever to the United Kingdom.

Nevertheless, despite those strongly expressed views, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 208B not moved.]

Lord Eatwell had given notice of his intention to move Amendment No. 209:

    Page 51, line 4, after ("a") insert ("reasonable and ethical").

The noble Lord said: The Minister said that in his speech he did not have the opportunity to address the matters raised in my amendments. I look forward to receiving his letter on those issues. Having said that, I shall not move the amendment.

[Amendment No. 209 not moved.]

[Amendments Nos. 209A to 211A not moved.]

Lord McIntosh of Haringey moved Amendment No. 212:

    Page 51, line 18, leave out subsection (3).

On Question, amendment agreed to.

The Deputy Chairman of Committees (Lord Ampthill): As a result of that amendment, I cannot call Amendments Nos. 212A to 213A. They have been pre-empted.

[Amendments Nos. 212A to 213A not moved.]

Lord McIntosh of Haringey moved Amendment No. 214:

    Page 52, line 1, leave out from ("Behaviour") to end of line 2 and insert ("does not amount to market abuse if it conforms with a rule which includes a provision to the effect that behaviour conforming with the rule does not amount to market abuse.").

On Question, amendment agreed to.

Clause 109, as amended, agreed to.

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Lord Bach: I beg to move that the House do now resume. In moving the Motion, I suggest that the Committee stage begins again not before 9 p.m.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

Agriculture: IACS Payments

7.59 p.m.

The Earl of Caithness rose to ask Her Majesty's Government what effect the new rules on Integrated Administration and Control System (IACS) payments will have on farmers and wildlife.

The noble Earl said: My Lords, it is with some sadness that I raise this issue in your Lordships' House this evening. The matter should never have reached this stage and this debate should not be necessary. I declare my interest as a countryman, a surveyor, an ex-land agent and an ex-agricultural valuer.

The problem before us relates to a change in interpretation. Many years of customary practice have been discarded and a new ruling has been imposed upon farmers. Perhaps I may take your Lordships back to 1994. In accordance with EU policy, in January 1994 the government of the day issued advice to farmers in The Integrated Administration and Control System, Guidance note on mapping and field data requirements. Paragraph 22 of the guidance notes stated:

    "When giving your crop, set-aside or forage area, the area indicated by an Ordnance Survey or professionally produced map will generally be acceptable, provided that the field is fully planted or utilised according to normal agricultural practice (and there has been no change in boundary). It is not necessary to reduce the area to take account of small parts of the field which have been left unplanted to accommodate narrow field margins, tractor turning areas, hedges and ditches. In determining whether an area should be deducted you should consider whether the areas left unplanted are larger than the areas which are traditionally left unplanted".

That is the basis on which farmers worked before the guidance was produced. It was in line with EU policy; it has been the guidance on which farmers have worked since then; and that has all been overturned by the unelected, unaccountable Eurocrats in Brussels, who now say that normal farming practice in whatever country one lives is not acceptable for hedges because the definition of a hedge or a field margin is now two metres either side of the central line of the field boundary, and any area in excess of that nullifies the whole area.

It is for that reason that I have considerable sympathy with the Minister, as I am sure does the whole House. It cannot be much fun to be placed in that position. What is the result of the unenviable position in which the Minister and her department have been placed? First, farmers are now faced with a dilemma. They must lose a great deal of income, in some cases probably thousands of pounds in perpetuity; that is, on an annual basis. For example, I know of one 200-hectare farm which has eight miles of hedges, all approximately two metres wide. They must

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all be measured and some will have to be trimmed back. If the farmer is not prepared to lose the income, he will have to trim back the field margins to below two metres from the centre line in order to be safe. That has already led to radical hedge-cutting wherever possible.

The second category of losers is wildlife. Everyone knows that big, bushy hedges support three times the density of birds and twice the number of species. It is those very hedges that will suffer, are suffering and have suffered along with the wildlife in them. The third area to suffer is the scenic value of the countryside.

Having directed my attention thus far to the result, I believe that MAFF has been culpable in the decision-making. It has not made matters easier for farmers, and many farmers are saying that MAFF has changed and is no longer the organisation that they used to be able to trust. Perhaps I may give one example. Farmers were not notified of the new rule until well into the winter planting season for winter crops. Farmers who had already planted their winter crops had no time to make alterations or to plan.

The second reason why I believe that MAFF is culpable is that the advice which comes from the department is and remains unclear. That is bad for farmers. Perhaps I may draw your Lordships' attention to a Written Answer by the Minister on 9th February to my noble friend Lord Tebbit in which, among other things, she says,

    "we are currently analysing what effect it might have and evaluating the options for minimising any problems [that might] arise".

Therefore, if MAFF does not know where it stands, how can farmers know where they stand?

I have a number of questions for the noble Baroness. As she knows, with her approval I spoke to her department to advise them what I wish to ask. If the field margin is in excess of two metres, why will the farmer lose the whole of that area? Why does not the farmer lose only the excess? In other words, a 200-metre hedge line with a field margin of two metres is perfectly acceptable; but if a farmer has a 200-metre hedge line with a two-and-a-half metre field margin, then he loses the whole of the two-and-a-half metres, and not just the extra half metre.

Can the noble Baroness confirm that there will be no retrospection? There are two aspects to this question. Can she confirm that there will be no retrospection whatever before 2000? In a Written Answer to my noble friend Lord Courtown on 14th February she said that she would "not expect" there to be retrospection. That is unclear and, therefore, unacceptable.

Let us go forward to the year 2004. If a farmer is found to have a field margin in excess of two metres and that has been his farming practice, is he penalised for the year 2004 or is he held responsible retrospectively for the previous four years as well?

I turn to regional yield review. If farmers are producing the same yield on less acreage, surely they should be compensated for that by higher area payments. I hope that the noble Baroness will confirm that that is the case.

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The original customary practice took account of practice throughout the country. I know that in some areas the OS map and the parish boundary are one and the same. However, in some parts of the country the parish boundary is deemed to be four feet from the far side of the hedge of a cultivated field. Therefore, the farmer certainly will be penalised if that tradition exists in his area.

Where does a farmer now go for advice? Does he go back to MAFF? MAFF has the same people who for years told him to do something and are now saying, "No, you don't do it that way. You do it another way and you will be penalised if you don't". Therefore, I do not believe that MAFF commands the trust that it should.

English Nature said that the current ruling by Brussels threatens its ability to meet the Biodiversity Action Plan and other sustainable development objectives. I wonder how MAFF can take part in the biodiversity plan as a leading partner when it is the sponsoring department for the radical cutting-back of hedgerows. That is a total contradiction in duty.

It is sad that farmers have lost their trust in this Government. Their incomes have been slashed and are decreasing to even lower levels. Unless farmers cut back their hedges, they will lose yet further income straight off the bottom line. The cutting back of hedges and the detriment to wildlife is there for us all to see. Farmers are doing it throughout the country, and who can blame them? If I were still a land agent, I regret to tell your Lordships that, whether I liked it or not, that is the advice that I would have to give to my clients. Surely the totally wrong message is now going out to farmers: "never take up an environmental scheme if it makes economic production more difficult". What a tragedy that that message is now going out after years of hard work.

8.8 p.m.

Baroness Young of Old Scone: My Lords, I thank the noble Earl, Lord Caithness, for highlighting this problem. I declare an interest as the chairman of English Nature.

I believe that we need to give a sense of proportion to the issue this evening. It is important, but not quite the disaster that the noble Earl described. I shall not go into detail on the importance of hedgerows for wildlife. I say simply that they are one of the most important landscape features for biodiversity. They have a unique distinction in that they are not like people: the older and fatter a hedge, the better. I wish that it was like that for people! Old, fat hedges with ditches are even better. However, in IACS terms, they are even wider and therefore more likely to be penalised.

The Commission's recent guidance on IACs claims and field margins, including hedgerows, could result in environmental damage as a result of two circumstances. In addressing the first of those, perhaps I may gently defend MAFF--and that is not a position which I am always in--because it has made a very careful analysis of the issue. It is important that we

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understand the reality as well as the perception of the matter. About 4 per cent of farmers will actually be affected by the rule. As the noble Earl said, they may lose money or have to cut back and destroy hedges.

We should not underestimate that 4 per cent because it represents several thousand farmers; but, nevertheless, it is only 4 per cent. Perhaps as important, however, is the fact that other farmers may anticipate the impact of the rule, whether or not it would penalise them in practice, and take prophylactic action to reduce or destroy their hedges in any event.

There has been considerable publicity about this issue in the farming and general press. For example, on Saturday, 11th March, the Western Daily Press misleadingly stated:

    "Eurocrats are insisting that any hedge which is more than two metres wide will have to be ripped up or else farmers will lose vital subsidies".

It is that sort of overstatement of the issue which may cause many farmers who are not in fact threatened to panic prematurely.

In terms of this issue, the Government have several options available to them. There are two steps which they need to take. First, the Government must steady farmers' nerves by stating clearly the calculated percentage of farmers who in reality will be affected. They must reassure those farmers that the Government are pressing the European Union for a solution and are confident that one will be found. The Government really must urge farmers not to attack their hedges prematurely.

Secondly, in terms of the real impact, I urge the Minister to press Europe for a flexible interpretation of the two metre rule because 96 per cent of boundaries are compliant with the two metre margin in any event. A derogation should be sought for the remaining 4 per cent, accompanied by a simple self-certification process to make it clear that the boundary which exceeds the two metre margin is of environmental importance. It may be possible to have a system of validation, sample or other basis undertaken by a number of agencies which are already involved with individual farms--the countryside and wildlife agencies, the FRCA, the Farming and Wildlife Advisory Group and other such agencies. I believe that such a step would reflect within Europe the future multi-purpose nature of support to farmers, which is an approach which the Agriculture Commissioner has himself endorsed in the past.

However, perhaps I may urge the Minister to take a more imaginative approach to the issue. Under Article 3 of the horizontal regulation in Agenda 2000 which allows for environmental conditions to be applied to mainstream agricultural subsidies, it is possible to make a move to define landscape features such as hedges, ditches and field margins which extend beyond two metres from the boundary as features to be protected by all farmers as a condition of the receipt of arable area aid.

Alternatively, environmental conditionality could require an additional uncropped strip beyond the two metre margin which would be likely to encompass

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most wider boundaries. The introduction of such environmental conditions to the 96 per cent of mainstream agricultural subsidies, which are currently unreformed and environmentally, socially and economically damaging, would demonstrate admirably the Government's broader commitment to help to guide and support farmers to a more environmentally and economically sustainable model of agriculture for the future. Indeed, that would make a major contribution to the Government's headline quality of life indicator--the number of farmland birds. I hope that it would also be popular with farmers because this issue, which is clearly vexing them, would be resolved. It would be an excellent complement to the Government's recent splendid decision to increase funding for agri-environment schemes.

But this issue also raises the general question of the revision of the hedgerow regulations which the Government intend to introduce. The existing regulations deal only with the removal of hedgerows and not with their management. So under the existing regulations farmers can cut back their hedges. The revised regulation needs to take account of the importance of the condition, size and management of hedgerows.

This is indeed a pressing issue. The rule change applies from 15th May and the notification is already impacting on farm management. I am sure that the Minister will tell us what are her hopes for the resolution of this issue.

8.14 p.m.

Earl Peel: My Lords, I too thank my noble friend Lord Caithness for drawing our attention to this very important and--perhaps I may say--rather tragic incident.

I am amazed to hear the noble Baroness, Lady Young, say--although I am sure she is right--that only 4 per cent of farmers will be affected by this diktat. My information is that it will affect a great many more than that but, of course, I shall listen with interest to what the Minister says. But if it does affect only 4 per cent, then the situation is perhaps not as bad as some of us thought.

Having said that, on Monday, I was at a conference in Scotland where we were discussing land management issues. This was one of the major points of discussion. Everyone involved with land management was absolutely astonished that such a diktat could have arisen from Brussels, particularly at a time when we have been putting out messages for the past decade or so that farmers should try to have a higher regard for habitat and the environment.

I must declare an interest in this debate in that I am chairman of the Game Conservancy Trust, which has been very much at the forefront of research into habitats and the way that they are managed not only for game birds but also for a whole range of other species. At the trust, we have a model conservation farm at Loddington in Leicestershire where we have done a great deal of work on the restoration and

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management of habitats. The director of the farm, Nigel Boatman, wrote on 16th December to Janet Purnell, who is head of the CAP Schemes Management Division. Among other things, he wrote:

    "We believe that this ruling will cause considerable damage and destruction of wildlife habitat on farmland which could affect populations of wildlife species, many of which are already in decline".

So there is a man with great practical knowledge who is convinced that that new ruling from Brussels will have a very significant effect.

On our farm, which is approximately 800 acres, we have calculated that the cost will be in the region of £1,700 per year. Quite frankly, in this day and age, with farmers struggling to keep their heads above the financial waterline, £1,700 on an 800 acre farm is an awful lot of money. Whether it is 4 per cent, 10 per cent, 50 per cent or 100 per cent of farmers who will be affected, there is no doubt that habitat management will suffer very considerably indeed.

But there is one other point which I wish to make which is absolutely essential in this debate. Grass strips and the bottom of hedges are not just important from the point of view of producing a habitat and a food source for wildlife; they harbour the very important aphid predator insects which result in farmers using less spray.

We must not, please, lose sight of that because if we are to see those grass strip margins reduced, I fear that that will inevitably lead to a greater amount of agricultural spraying. Again, that is something which we have been discouraging and farmers are now taking much more seriously than they have in the past.

But where I become confused by this new diktat, if I may call it that, is that as my noble friend Lord Caithness said, the original Article 6 referred to the customary practices of member states. And yet this new arable aid payment scheme guide suddenly substitutes "customary" with that so-called two metre or less reference but it is called a guidance. Is it a guidance or is not a guidance? If it is a guidance then I presume that the noble Baroness and her ministry will be able to adhere to the status quo. However, if it is not a guidance, but a diktat, then clearly we appear to have some difficulties.

Furthermore, there appears to be an anomaly, in that in paragraph 117 on page 34 of Part II of the same guide, there is advice on managing hedgerows to benefit wildlife which suggests, among other things, leaving a grass strip. That surely is a totally conflicting message coming out of the same guidelines.

I realise that that is a difficult problem for the Minister and for the Government. There is talk about environmental assessments, but I can see no point whatever in them. We know what the environmental consequences will be if that diktat from Brussels is carried out. I hope most sincerely that the Minister will say that she will resist it at all costs to ensure that confusing messages do not go out to farmers at this difficult time.

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8.20 p.m.

Lord Hardy of Wath: My Lords, I am grateful to the noble Earl, Lord Caithness, for the initiative he has shown in securing the debate. It is perhaps unfortunate that it occurs today, after such a splendid Budget. The fact that not that much attention has been paid to the proposals so far will not continue if they take effect. In the regions there will be much outcry.

The Government seem to be caught in a conflict of interests. The Department of the Environment, Transport and the Regions is currently consulting--I believe that the consultations are due to end in June--on the protection of hedgerows, while MAFF appears to wish to see considerable destruction of hedgerows in May. That conflict should be considered as a matter of urgency.

I have a number of questions for my noble friend. The noble Earl, Lord Peel, referred to environmental impact assessments. While I should share his view of the matter, an environmental impact assessment carried out independently and reputably would be a good idea. There should have been one before the proposals emerged. If there has not been one, I urge that one is sought.

MAFF may rest its case on the position of Brussels. But was the national natural interest robustly presented in Brussels? Has Brussels been made aware that the proposals seem to conflict remarkably with Brussels' own commitments? I refer to the Birds Directive and Brussels' involvement in and sustenance of the Berne Convention on Wildlife and Habitat. Has Brussels carried out any environmental impact assessment of the consequences of that policy were it applied to Britain? Do we need to apply it with any great urgency? Some of our partner states are rather slower to implement decisions affecting their countries.

I have several further questions. Has the ministry considered the enclosure hedgerows? Seventeen years ago in the Commons I was told by the Minister that the old Enclosure Acts no longer had effect. Then MAFF accepted that they did. I then said to MAFF, "When you were giving out grants for grubbing out hedgerows, you did not ask the farmers whether the hedgerows they were grubbing out were already protected. What will you do about the grants that were illegally paid?" MAFF said that if it found out, it would demand that the money was repaid, which would have been absurd in many ways.

But what about the situation where, after I had raised that point, grants for grubbing out hedgerows were stopped and the government introduced grants to encourage people to plant new ones? What happens if someone has received a grant for grubbing out a hedgerow, then receives a grant for building a new one and then finds out that under this proposal that is also to be pulled out? Even if it was not an enclosure hedgerow, the confusion seems rather ripe.

I hope that the Minister will ensure that farmers are advised that, while they may be tempted to grub out hedgerows in response to this policy, they must not do so. The noble Earl, Lord Peel, will understand if I refer

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to the Flamborough judgment, where our wildlife trust demonstrated the validity of our case that the enclosure awards--probably all 4,000 of them--provided for the perpetual maintenance of hedgerows. I said as a condition of ownership, but we shall leave that aside for the time being.

The Government need to understand that at the last election many people were delighted by the green character of our manifesto; a manifesto which promised wise and sensible protection of hedgerows. That was quite right, for we had strongly criticised the flawed and absurd regulations published in 1996. If we are to protect hedgerows--and we have a manifesto commitment to do so--we must reconsider the matter extremely carefully.

I am sorry to appear rather critical of the Government, but I must make this point: from my youth I have been a strong supporter of our party, but at the same time from my youth I have been committed to the cause of a green and pleasant land. In my youth, I could see industrial degradation to the north. Immediately to the south, I could see woodlands, trees and fields; an extremely pleasing landscape. The noble Baroness, Lady Byford, has seen the area. I should hate to believe that the progress we have made in transforming the degradation to the north will be matched by the devastation of our natural heritage to the south. I greatly hope that the Minister will reconsider the matter. We have a moral obligation to do so.

8.25 p.m.

Lord Monro of Langholm: My Lords, I too thank my noble friend Lord Caithness for the opportunity to raise this important issue. I declare an interest as a farmer and as a former Minister of Agriculture in Scotland. I raised many of the arguments about IACS in Brussels when they were introduced.

I hope that by now the Minister appreciates that this is an industry in crisis. Yet this afternoon I listened to the whole of the Chancellor's speech and he did not once mention agriculture. That was a desperate let-down for the industry. The noble Lord, Lord Hardy, believes that it was a great Budget. I hope that he listened to it being demolished by the Leader of the Opposition.

We know now that incomes are down by 75 per cent. Milk, pigs and livestock are all in dreadful trouble. That is one of the many reasons why Labour did so poorly in the Ayr by-elections last week. In such circumstances it is quite illogical--actually, incredible--that the Government should have accepted the two-metre rule. It will inevitably raise costs. Let us consider the Minister's official going round every headland and field to see whether a farmer has a two, two-and-a-half or one-and-a-half metre margin. It will inevitably cost money to the farmers. My noble friend Lord Caithness indicated the great problem that would arise if a farmer exceeded the two-metre limit by even a few inches.

I am sure that the noble Lord, Lord Hardy, would agree with me that it is extremely illogical that the Countryside and Rights of Way Bill--which contains

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some good provisions, including improvements to the environment and to SSSIs--began yesterday in the Commons, but, as Members of all sides of the House have indicated, we are setting out to see the demolition of a large number of hedgerows in order to please those in Brussels. It is an incredible somersault; on the one hand, trying to improve matters and on the other, accepting that order from Brussels.

With respect to the noble Baroness, Lady Young, she and her agency are being complacent. I should have liked to think that she would have come in with guns blazing, saying that the provisions for the environment are totally opposed to what one would expect from the Government and that they must, without any hesitation, go back to Brussels to try to reverse the decision.

I hope that the Minister will consider the practical implications of what farmers are being ordered to do. I know that she cannot be expected to have driven a large horsepower tractor with four, five or six furrow ploughs, but it is extremely difficult to get within two metres of a hedge, particularly if there are obstructions along the hedge line or the fence line. My noble friend Lord Peel emphasised the practical consequences with regard to spraying, but, in terms of ploughing and cultivation with the large equipment essential today with a small workforce, the Minister will be asking farmers virtually to do the impossible from the point of view of ploughing, harrowing and seeding.

I should like to ask her, as part of the issue of the environment, why she has accepted a change in the extensification rule relative to IACS. That is the formula, as she knows, which relates to the relationship between the headage of cattle on a farm and the acreage. If it is below a certain figure, the extensification grant comes in and if it is above it does not. This year the Government have insisted that farmers include heifers among the headage in the field that is available for the extensification grant. Why should that be accepted? Inevitably, it will lead to a significant number of farmers losing a grant that helps the environment.

At the end of the day, we shall have the same number of beasts on the same acreage, but the farmers will lose a grant that helps the environment in many ways. That shows that in Brussels the Government are losing out all the time by not standing up for the farming industry, which, at present, is suffering a terrible crisis.

Why do we also have to consider having a monthly return of the extensification grant on the headage relative to the acreage? That will be so complicated. Who will check all the figures? Why does it have to be done? I do not believe that the noble Baroness realises the amount of red tape coming out of MAFF and the ministry in Scotland. Farmers hardly have time to get out to do the work in the fields. In the past week or two I have been at home when lambing has been taking place and it has been difficult to find the time to deal with the paperwork that the Government throw at farmers.

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It would not matter if the Government were being more sympathetic towards the future of farming, but bear in mind that the Government have done little towards helping various industries. I know that the Prime Minister will meet the NFU and others next week. If he does not then announce something substantial, we shall find farmers marching on London, Edinburgh, Cardiff and, no doubt, Belfast, highlighting the way the Government are letting down the industry by not helping it in this time of crisis.

8.31 p.m.

Baroness Miller of Chilthorne Domer: My Lords, noble Lords on these Benches warmly thank the noble Earl, Lord Caithness, for instigating this debate. I want to address three issues. Other noble Lords, including the noble Lord, Lord Monro of Langholm, have spoken of the effects on farmers. At a time when the Government hope to cut red tape, it is strange that this regulation is so bound up in it.

While preparing for the debate, I looked at the MAFF guidelines, with their carefully drawn little maps. I saw what farmers are supposed to measure. When I asked the NFU office in the South West the length of boundary a farmer in that region would have to walk in order to measure it according to the careful AAPS guidance, the estimate was an average of 20 kilometres.

Can the Minister say whether in September 1999 MAFF knew that these complications would arise? What representations did it make to the European Union at that time? I understand that this instruction has come from the European Court of Auditors. It appears to be an accountant's decision because it conflicts considerably with the report that the European Commission published in December 1999, entitled Agriculture, Environment, Rural Development--Facts and Figures, which was encouraging to the environmental approach. That document went into some detail about the point of hedges in terms of soil degradation and erosion. It talked further about the impact of agri-environment measures. It seems to me that the Court of Auditors has not caught up with what the Commission's agricultural and environmental sections have been doing and the polices that they are promoting. What representations has MAFF made about that conflict?

I am also surprised that only 4 per cent of farmers are likely to be affected by the regulations. Although I accept that perhaps that may be the case in the whole of the United Kingdom, I feel that the effect by region will be far more substantial, particularly in regions such as the South West, which I know best, that depend for their regional distinctiveness on the sort of wide hedges, the bank hedges of Devon, the beech hedges of Exmoor and the rhynes of the Somerset Levels, all of which will be under threat because of this directive.

I understand that the Minister, Mr Meacher, is considering bringing in some further protection for AONBs. I wonder how that will stack up, because one of the distinctive features of AONBs is often the small

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field pattern and the sorts of features that I have mentioned. Can the Minister say whether there could be a regional approach to the matter if the guidelines are to stay in place? It seems that the western regions of Britain and perhaps Brittany and Normandy will be badly affected by these new rules. Those areas will be affected completely differently from the plains of Poitiers and East Anglia.

This matter is particularly regrettable in the light of the fact that encouraging wide margins and hedgerows in arable areas is essential. The RSPB has highlighted the way in which the loss of those features in cereal growing areas will be detrimental. Also farmers who are mainly dairy producers may be discouraged from growing any arable crops at all. That would have a similar detrimental effect, because mixed farming encourages biodiversity.

I wonder what will be the guidance of MAFF where there is a stream, a hedge and a margin, which is an ideal set-up in terms of biodiversity. What will they advise should go? Will it be the hedge that should go so that compliance can be sought, or should the stream be piped, which will make it is far less useful for wildlife? Can the Minister tell the House how MAFF has explored with Brussels where the policy statement about the environment, the new direction under Agenda 2000 and the CAP will fit into a directive that seems to be so backward looking?

Farmers are absolutely desperate. I asked the NFU in the South West for an estimate of the costs. These varied widely from £52 for a particularly small farm up to around £3,000 for a larger farm. In this House no dissent has been expressed about the fact that farmers are having a difficult time. It seems incredible that the Government cannot seek, as the noble Baroness, Lady Young, suggested, some form of derogation or cannot press Brussels to say that the way in which a field is fully utilised--that is a key phrase--should include the hedgerows for reasons of biodiversity and soil containment. A fully utilised field should not just mean the area where the crops are grown. It should be a forward looking definition. I wonder whether MAFF has taken that into account.

8.38 p.m.

Baroness Byford: I thank the noble Earl, Lord Caithness, for introducing this debate. He covered what is clearly a ridiculous rule and asked many questions of the Minister, and I shall not repeat what he has said.

Like other Members of the House, I too declare an interest, in that my family has a farm in East Anglia, one of the hearts of the arable-growing countryside.

I acknowledge that there has been no change to the rules of IACS payments since 1992. What has changed, and what this debate is about, is the interpretation of those rules. The European Court of Auditors has insisted on strict enforcement of the guidance issued in 1992. Perhaps the Minister will make it clear whether it is guidance or a diktat. As other noble Lords have said, the two-metre rule will be applied from 15th May this year. That states that field boundaries measured

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from the mid-point of a hedge or a ditch to the edge of the growing crop must be no more than two metres in width. If they are wider than that, farmers will lose part of the subsidy that they receive for growing arable crops.

A farmer has choices. First, he can submit the claim for the IACS payment as usual, knowing that in future he may find himself breaking the law. Secondly, he can rip out his hedges, knowing that he will be destroying the wildlife that he has sought to protect. Thirdly, he can apply for a grant under the new stewardship scheme, knowing that approval may not be given, or at least not be forthcoming in the required time. Lastly, should he take the time--and face the consequent expense and fees--to reassess his acreage ploughed?

What will happen if he miscalculates the crop? We have all heard horrific stories of farmers who, in the past, have miscalculated their areas and have then found themselves heavily penalised. I repeat, they have been heavily penalised. What prospect is there for them? As I understand it, there is no appeal mechanism. Perhaps the noble Baroness will confirm that point for me.

The length of our farm hedgelands stretches for many miles. Although the noble Baroness, Lady Young of Old Scone, has said that this ruling will affect only 4 per cent of farmers, it will affect many miles of hedgerows. Furthermore, farmers will have to take on this work at a time when so many are struggling even to survive, as my noble friend Lord Monro spelt out so explicitly.

Hedgerows provide crucial and important havens for small mammals, birds, plants, insects and butterflies. Hedges also act as windbreaks. I have already mentioned East Anglia, where my family has a farm. The hedgerows help to slow the rate of soil erosion, which is a very important issue as regards arable land. Is it not incomprehensible, therefore, that this Government, who claim to put the environment high on their list of priorities, are not standing against what they know will cause damage to wildlife and to our countryside? The Government say that they are seeking a compromise with Brussels. However, to date--I hope that the Minister will tell me that I am wrong about this--that is only a recipe for delay.

On 28th April last year we had a full debate introduced by the noble Lord, Lord Hardy of Wath, to call attention to the current arrangements for the protection of hedgerows. In her response, the noble Baroness, Lady Farrington of Ribbleton, made it clear that the Government were committed to providing strong and effective protection for hedgerows. She went on to explain that sums were available for agri-environmental schemes and would be increased by £40 million over the next three years. Is that sum intended to compensate for this new ruling, or is that not the case?

I understand that only last week 16 environmental groups, including farm organisations, co-ordinated by the Wildlife and Countryside Link, wrote to the Minister of Agriculture, Nick Brown, asking him to postpone the decision on implementing this ruling.

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Robert Macklin, the agricultural adviser for the National Trust, which is one of the organisations supporting the letter, wrote:

    "Penalising farmers for retaining field boundaries over 2m width just does not make sense. Such features should not only be permitted but should be actively encouraged within the arable subsidy system across the entire European Union".

May 14th is less than two months away. Will the Minister make money available to farmers to prevent them from ripping up their hedges? Will the Minister also arrange a speedy response to those who are applying for assistance under the stewardship scheme? Obviously, those farmers need to know what is going to happen. Will the Minister continue to negotiate with Europe to lessen the impact of this ruling? Finally, will the Minister assure the House that money will be made available now to cope with the likely influx of applications for the Countryside Stewardship schemes, let alone those that will follow the implementation of this ruling?

My noble friend Lord Peel asked directly whether this is a rule, a guidance or a diktat. We hope to hear the answer to that question tonight. Is it not ridiculous that those land managers who spent time and money encouraging their hedgerows to grow and flourish are now to be the ones who will be punished, and are those farmers who, in the past, have grubbed out their hedges--as the noble Lord, Lord Hardy, observed, they received money for doing it--and thus gained larger acreages and benefited from higher yields and larger subsidies on their crops, to be doubly blessed?

Finally, when will this Government stand up for our farmers and use their common sense when dealing with some of the orders emanating from Brussels? They are piling extra regulatory burdens on to our very hard-pressed farmers at a time when they can ill afford it.

8.44 p.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Baroness Hayman): My Lords, I, too, am grateful to the noble Earl, Lord Caithness, for raising an issue which I know is causing great concern in your Lordships' House and, indeed, in another place. I thank him also for giving me the opportunity to respond to some of the strongly felt points that have been made tonight. I hope to set out clearly the history and provenance of the issues that have generated such concern and depth of feeling. No one listening to our debate could be in any doubt about that concern, which of course stems from a desire to safeguard the environment and to ensure that we foster the kind of farming practices that promote the preservation of wildlife and the environment and, in particular, protect and encourage our hedgerows.

I hope that noble Lords will forgive me if I deal with the situation before us by looking back a little and taking noble Lords through the circumstances that led us to the conclusion that it was necessary to introduce clearer guidance on field margins and why we believe that the potential environmental impact--although it is serious and we want to minimise it--has been exaggerated in some parts of the media. I shall also

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explain what we are trying to do to minimise the effect on wildlife habitats, biodiversity and the scenic value of the countryside. Those are all issues that have been raised in our debate.

As the House will be aware, CAP payments to farmers are linked to the Integrated Administration and Control System. IACS is a mechanism for controlling expenditure and preventing fraud. The areas of land and numbers of animals for which farmers can claim subsidies are subject to strict controls. Each year, for each field on which they make a claim, farmers must provide details of the area and the use to which it has been put. According to IACS rules, the total areas recorded on official maps can be used as a basis for the claims on fields that are fully utilised. Where the quality of official maps is not good enough, the actual cropped area must instead be used as the basis for the claim.

Almost everywhere in the EU apart from the UK claims are based on cropped areas only. By contrast, here we are lucky enough to have maps of a very high quality from the Ordnance Survey. Since the CAP schemes were introduced in 1993, we have allowed the great majority of applications to be made on the full area of fields as shown on Ordnance Survey maps. This feature of IACS was hard won at the time--I expect that the noble Lord, Lord Monro, will remember when it was agreed with the Commission--and it has benefited UK farmers. In most cases, it means that they can work out their field areas directly from the maps without having each year to go to the trouble of measuring each field under crops or available for grazing livestock.

However, in recent years there have been indications from the European Commission's audit teams and from the European Court of Auditors of increasing concern about the extent of uncropped areas at the edges of fields. As noble Lords have pointed out, our policy has been to allow full Ordnance Survey areas to be used. But that is not to say that in the past we did not exercise any controls. Our inspectors look at 5 per cent of arable area claims each year and have always been under instructions to deduct ineligible features like ponds as well as margins that were considered to be too wide. Last year, MAFF inspectors carried out on-the-spot checks on 3,400 IACS claims covering 88,000 fields. As a result of those inspections, the ministry was becoming concerned about the width of uncropped margins.

Several noble Lords have asked me whether this is a new ruling, guidance or diktat. I can tell the House that it is not in any way a new ruling, guidance or diktat, in the sense that the guidance from the Commission has specified a limit of 2 metres for field margins since 1994. I believe that the noble Baroness, Lady Byford, accepted that.

The reason why EU auditors have drawn our attention to this only recently is that during the early years of IACS they were primarily concerned that member states should put the main features of the integrated system into place. Only once the comprehensive databases and arrangements to avoid

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paying aid twice on the same field had been taken care of has the auditors' attention turned to the more detailed aspects of member states' implementation of IACS guidance.

It was in the light of increasing concern from the auditors that we took the decision that it was necessary to clarify the position last year and to operate a stricter policy on margins from this year onwards. The reason for doing that is not out of any desire to have an adverse effect on the environment. Had we not acted, two undesirable consequences might have followed. First, the Commission could have been expected before long to start to disallow the total sum under which MAFF pays farmers under the Arable Areas Payments Scheme. In other words, it would have declined to reimburse the Exchequer out of the EU for the percentage of expenditure involved. As an absolute minimum, this would amount to 2 per cent of the total, or about £20 million, and could be much greater.

The second possible consequence was that the European Commission might sooner or later decide to change the regulations so that the farmers' claims could be based only on actual cropped areas, and that would be extremely disadvantageous to our farmers. Those two reasons taken together--the threat of disallowance and the risk of a damaging change in the regulations--led us to conclude that we had no realistic option other than to apply the 2-metre rule where the full Ordnance Survey is claimed.

Of course we recognise the real concern; that is, that the rule will have a damaging effect on the environment and on wildlife, and we certainly wish to avoid that. But as my noble friend Lady Young pointed out, we need to separate out some of the facts from some of the fiction here. Some reports in the media claimed that the rule will result in wholesale destruction of hedgerows and other environmentally valuable field margins throughout the country. We do not believe that is so, because the results of our inspections indicate that only a small proportion of fields will be affected by the application of this guidance.

Last year we inspected 89,000 fields. We issued a warning that margins would not be acceptable this year on fewer than 4,000 of them. Hardly any of those--less than 500--were fields claimed as forage or pasture. That means that the rule will not have any impact on such fields unless the margins are ungrazeable for one reason or another. The remaining 3,500 involve claims for arable area payments accepted on the basis of full OS field areas in 1999 but had margins that were found to be wider than 2 metres. That was less than 4 per cent of the total number of fields inspected.

The noble Baroness, Lady Miller, queried that percentage and asked whether it would be different from region to region. I expect there will be some regional variation and impact. However, if we can get the flexibility we are hoping for in terms of application, we believe that that will be of particular benefit to areas such as the south-west. Perhaps I can come on to what we are trying to do to obtain that flexibility in a moment.

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In cases where we believe that arable payments claims may need to be reduced because of the guidance, we expect that reduction to be small. But we recognise, as my noble friend Lady Young said, that there is a risk that some farmers, in a desire to avoid any reduction in their claims, will cut back their hedges or reduce the width of other types of environmentally valuable field margins, and many more may feel that they have to go out and measure all their margins just in case. That is why we raised this issue--I can assure my noble friend Lord Hardy that we raised it robustly at ministerial level with the Commission on several occasions--and why we are still actively exploring with the Commission whether there is any scope for flexibility in the way in which the rule is applied.

As noble Lords who have spoken pointed out, the Commission shares our concerns about the potential for damage to the environment and wildlife. But it is also concerned that the value of IACS as an effective anti-fraud mechanism should be preserved and that any flexibility that our farmers are given should not be seen as driving some sort of coach and horses through the IACS rules. We must achieve a balance and in so doing--in response to the noble Earl, Lord Peel--we do not want farmers (I understand that what might have been in good years a small amount of money is a significant amount of money in the current state of the industry) to cut back instead on their hedges too severely or plough them right up at the base.

We have advised farmers who face a problem to seek help from regional service centres. In some cases the answer may be to adjust the claimed area. In others, they may be able to enter the land into set-aside or into an agri-environmental scheme. We have sent out detailed briefings on these issues. As the noble Earl is aware, we have significantly extended the amount of help that will be available under the funding for agri-environmental schemes so that we have an opportunity and a mechanism for funding support in order to obviate any effect of the rule which will run counter to environmental objectives.

The noble Earl, Lord Caithness, asked why it would not be possible for a farmer who has a field margin that is slightly above two metres wide simply to deduct the amount that it is above the two metres rather than the whole two metre plus X margin. The simple answer is that EU regulations do not allow for that. They permit only two choices for area measurement: the whole ordnance survey of the field where it is utilised--in other words, where the margins are two metres or less--and the cropped area only where margins are more than two metres. So the option is not available. That is the reason why a margin wider than two metres has to be treated as an ineligible feature like a pond, a copse or a footpath and deducted from the OS area.

My noble friend Lord Hardy asked about important hedges. As he knows, hedgerows are protected by the regulations of 1997. It is not legally permissible for farmers simply to plough them up. Some important hedges are protected. Before any action is taken against hedges overall there has to be an application to the local planning authority. We want to encourage farmers to seek advice about minimising

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the environmental impact of any action that they may need to take in this area. This is a situation which is potentially extremely difficult.

On the issue of retrospectivity about which I was asked, I make clear that unless we have any reason to believe that the field margin in the years before 2000 has been so wide that we would not during that time have expected a claim based on full ordnance survey areas, any deductions and penalties made this year would not be retrospective. In relation to future years, any sanctions applied as a result of the two metre rule will only be made retrospective as far back as 2000 and no further.

The noble Lord, Lord Monro, asked about the extensification premium. Agenda 2000 made significant changes to various CAP schemes. The changes to the extensification payments were part of that and the detailed rules as to how farmers should claim those payments are laid down in EU regulations.

In relation to cross-compliance, I have to say to my noble friend Lady Young that if, as she suggested, there was a condition that wider margins must be maintained, no UK farmer would be able to claim on whole field areas and their arable area claims would be reduced significantly in some cases. That is why we are choosing in the first instance to pursue the other options that she mentioned to seek a flexible interpretation which would not impose significant new costs on farmers.

We are trying very hard in our dealings with the Commission, both at ministerial and at official level, to gain the flexibility that we want. I cannot tell the House what the outcome is or will be. However, I can assure noble Lords who spoke with great feeling on the issue that the Government are working as hard as possible to ensure that our farmers continue to have the option of claiming on the full areas of their fields without being driven to cut back on their natural boundaries.

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