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Lord Livsey of Talgarth: My Lords, we have had a very wide-ranging debate, and I thank the noble Lord, Lord Vinson, for introducing it as he did. I apologise for the absence of my noble friend Lady Miller who, with EU Sub-committee D, is looking at biofuels in the West Country. That is where I thought that I was going to be before I heard about this debate late last week.

I associate myself with the remarks that have been made about the noble Lord, Lord Bach, who was the victim of what he was told about the RPA. There was a lot of economy with the truth in the information that he received, and he was very hard done by. I welcome the noble Lord, Lord Rooker, although I have already done so twice.

The debate is on the current state of farming in Britain. We have heard an awful lot about the Rural Payments Agency debacle. We have had a discussion of that recently in this House, and I do not want to go over the ground that I went over then. However, it is very important to make the point that the 5,000 who have not so far been paid should be paid the single farm payment by 30 June. Many of them are hill farmers who are in desperate need of those payments.

I repeat what I said in the RPA debate—that I have considerable reservations about the agency's situation. Apparently, the costs of the administration of the RPA this year will be some £250 million. It will cost one-quarter of a billion pounds to administer the RPA! The cost of administration has doubled in the past 18 months, which is an extraordinary state of affairs. We must ask ourselves whether that is value for money. A similar thing is happening in the NHS, where £1.1 billion is being spent on an IT project that does not appear to be working properly. From what the Minister said recently, I know that an investigation is going on; I hope that it is very focused and objective.

The situation confronting British farming is very mixed. Some sectors are beginning to show signs of promise, while others are absolutely flat on the floor. The RPA issue has compounded the situation. On a product marketing basis, milk prices remain depressed. We have to record the fact that between 1,500 and 2,000 dairy farmers still leave the industry every year, which cannot go on. Cereals have not moved upwards in price for decades; if anything, the price has reduced to values that I used to budget on decades ago. Beef is starting to benefit from the opening up of the European and other export markets as a result of lifting the export ban, which is a very good thing.

One structural problem is that young people have left the industry and the farming sector. As someone who has been president of a young farmers' county branch for the past couple of years, I know that there is great potential for young people in the farming industry to tackle the competitive culture that is now coming in. In our area we have done a lot of work on farm diversification; indeed, we have run competitions to produce a wider variety of income streams into the farms. So there is depression, but there are also some
 
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signs of hope, so we should not be too downbeat. There is a challenge which, as people have already said, the farming industry has met very well from time to time—and it is well capable of doing so.

One of the most important issues that has, rightly, been put forward in this debate, is the whole issue of food security. It is a very worrying situation. When we consider the rate of 63 per cent self-sufficiency and 73 per cent indigenous self-sufficiency, we can see that the drop in the UK's ability to produce its own food is really a very serious matter. Imports have risen. There is no doubt that were farmers to be given the challenge to produce more in better market circumstances, the balance of payments to the Exchequer could be improved by at least £20 billion. That is a significant sum of money which could have very beneficial effects.

I am particularly concerned about the world-wide potential scarcity, as there is already, in food. I believe that as a natural resource it is as important as oil, if not more important. Undoubtedly, there is a food production gap, as there is an energy gap, in the world. We would be very foolish not to address that as being extremely important. We can play our part. However, we have to have a proper market in which to operate. Frankly, the exploiting of the market-place by some of the richest supermarket chains in the United Kingdom is totally unacceptable. Local economies have been marginalised. The transporting of food halfway around the world has also had a very bad impact on third world countries. This has to be tackled bravely.

The profitability of supermarkets—including Tesco with profits of £2.3 billion, which is equal to almost the whole net profitability of all British agriculture—is an unacceptable state of affairs. The investigation by the Competition Commission must look at the exploitation of primary producers. Only 8p in the pound spent in supermarkets goes to the primary producer. The rest goes elsewhere. On looking at information that came out this week, in March, the retail price of milk was 51p a litre and producers got 18.35p. That gives a differential of 32.5p a litre, which went somewhere other than to the primary producer. Across the EU, it is reckoned that only 27p per litre farmgate price is required for dairy farmers to make a profit. That would still allow a 24p a litre supermarket margin under the present situation. This is totally unacceptable.

I have long thought that the activities of accountants in those big firms have already discounted the value of direct farm support coming from government, and that they have ended up with the money and the farming industry has not. I am sorry to be so outspoken, but I believe that that is, generally speaking, the situation.

On looking at farm incomes, a question was asked on Monday about pay rates in the United Kingdom. The UK average was £431 a week, which works out at £22,400 a year. In my country, Wales, the average was £390 a week—£20,280 a year. I have to tell noble Lords the average farm net incomes in Wales over the past 12 months: milk producers averaged £20,000; less favoured area grazing livestock, £16,400; and lowland
 
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grazing, £8,100. They are all below the income that everyone else earns. The average is £15,700 a year. There is something radically wrong in the way in which the market of primary produce is operating.

The Government must insist that the Competition Commission looks at the primary producers supplying the food chain, as well as small grocer's shops. When we produced a lot of information on this in 1999, I was involved in the other place in primary producer prices. It ended up with a report saying that it was fair to consumers and there was not a single mention of what happened to the primary producer situation.

A lot of important speeches have been made today. The noble Lord, Lord Corbett, was right to concentrate on affordable housing because it is a very central issue, and I remember reading his articles in Farmers Weekly many moons ago. The noble Earl, Lord Selborne, made a crucial speech about the importance of agricultural research and research council funding for it. We cannot afford to neglect this area. We have to tackle climate change, and research stations are working on the resource side by growing nitrogen-fixing crops which do not use vital resources. Frankly, if we neglect areas of agricultural research such as these, we shall get absolutely nowhere. The noble Lord, Lord Plumb, made an excellent speech which needs to be examined carefully, given the wisdom of his experience over many years. Further, the noble Lord, Lord Grantchester, made a courageous speech from the Government Benches. He told his own Government exactly what the situation is, and I congratulate him on that.

As an agriculturalist I could go on for another hour, but I do not have the time, as the whip is rightly indicating. This has been a good debate. I am sure the Minister will take on board what he has heard today and will act to improve the situation in what is a crucial industry: our agriculture.

4.31 pm

Baroness Byford: My Lords, I am most grateful to my noble friend Lord Vinson for introducing this debate and to all noble Lords who have participated in it. The awful truth is that much of British agriculture is kept afloat only because of its assets in the form of land, which outweigh its debts in the form of bank loans and unpaid bills. The situation in England is far worse than anywhere else due to the appalling delays in the new single farm payment scheme. I am glad to note that the payments are starting to come through, but that does not take away from the fact that we should never have been in this state in the first place. I am sure the noble Lord, Lord Rooker, will acknowledge that. It is a disgraceful situation and I hope that he will ensure, with his usual robustness, that the outstanding payments are made as soon as possible.

Many noble Lords have referred to the noble Lord, Lord Bach. The noble Lord was unfortunate to hold this ministerial position at the wrong time. He inherited a system with which he had had nothing to
 
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do. As we took Bills through the House he was always courteous and ensured that all noble Lords were given access to the Bill team, for which I am grateful.

The latest figures on single farm payments show that 58,700 full payments have been made, along with 31,000 partial payments. This means that 85.8 per cent of the total expected payments have been settled, but some 5,000 claimants with claims of over £1,000 each have still not received any money. I hope that the Minister will be able to update the House on the position. While addressing the single farm payment scheme, can he tell us whether the Government will consider extending the deadline beyond the end of May for the 2006 applications? Let us get everything correct within the Rural Payments Agency rather than insisting that farmers apply early. I understand that penalties will not be imposed, but actually they are not the answer. As other noble Lords have pointed out, the system is complex and needs sorting. At this point I should remind the House of my family farming interests.

Several noble Lords referred to the problems faced by hill farmers, an issue I shall return to straightaway. In its briefing the NFU states that it believes that,

"a transition period of two years (2007/8) must be implemented whereby the current HFA scheme is continued, as we are not confident that the current systems in place would be able to meet the proposed deadlines. A new scheme would have to be set up by 1 Jan 2007. In our view the evidence is clear that it is simply not achievable for RPA to draw up a scheme, have it approved by EU, and then ask farmers to apply within that timeframe".

Again, I would be glad if the Minister would comment on that.

Perhaps I may turn now to the many excellent contributions that have been made today and pick up on the question of food security and self-sufficiency. I am often rubbished and told that we do not need to be self-sufficient—that it does not matter—but in an uncertain world where, unfortunately, climate change often means that the harvests of some countries totally fail, it is something to which we should cast our minds. With the change to the single farm payment, there is a likelihood that farmers may well move from producing wheat and feed to producing energy crops and diversifying into forestry. This could be reflected in the amount of food we produce, which may well continue to fall.

I turn now to British food production in more general terms. Many aspects of the current position give me cause for concern. Chief among these is a realisation of the number of miles that our food travels from farm to fork. Even our daily bread has to be transported many miles to the shelf from which we take it. In the old days, the main street of any British town used to have at least two bakers, two butchers, a greengrocer and, perhaps, a grocer. Now, in some places, they are lucky if they have a convenience store or a corner shop.

The noble Lord, Lord Tomlinson, referred to the globalised market. We know that that is where we have to compete, but I believe that we should compete in an even-handed way and it is up to the Government to ensure that that is possible.
 
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Within this tale of closures to which my noble friend the Duke of Montrose referred, abattoirs have been legislated almost out of existence, so most of the butchers' shops they supplied have gone too. The latest EU ruling on beef means that any meat over two years old has to be sold off the bone. There is no great trouble with that, but the bones the butcher removes have to be stained, kept in a separate store and removed from premises in dedicated transport. The butchers could easily return it to the abattoirs, which have all the facilities necessary for marking and destroying, but the rules forbid it. I have been told that the cost to the butcher of the new method will be about 40p per kilo of meat sold. Surely this is ridiculous.

Let me move to one or two issues which other noble Lords have referred to and perhaps bring in some new ones. The noble Lord, Lord Plumb, touched on disease and its spread. He gave a figure of some £573 million, which the Government pay towards control of various diseases including TB, scrapie and BSE. I know that the Government have instigated a partnership to consider the sharing of responsibility for the costs of animal diseases and I would be grateful if the Minister could comment on that. Although it is fairly new and getting established, it needs to be clear where the responsibilities lie and how the industry is expected to pay towards some of the costs.

The noble Lord, Lord Grantchester, and others have referred to the continuing cost of bovine TB, which is at this stage out of control, with more than 3,500 herds being reported on tests for the first time last year. If the Minister could tell the House when the Government will have a response to the ongoing comprehensive review, that would be enormously helpful. Perhaps he could also comment on the zero-based review which Defra is undertaking at this moment.

We all want to see the production of healthy, good food. I should like it to be as locally grown and marketed as possible. I am not saying that there should not be international trade—please do not think that I am—but when the noble Lord, Lord Tomlinson, referred to it, I do not think he built into the equation the pollution caused by the food miles travelled and the pollution from air miles. That does not come into the equation but I believe it should.

I was grateful for the contribution of the noble Lord, Lord Young of Norwood Green, and for his reference to the gangmasters. I prayed against the statutory instrument two days ago but only to raise awareness of it and the need to get the legislation enacted as quickly as possible. I think the delay has been unfortunate.

The noble Lord, Lord Corbett of Castle Vale, should look to my previous Question on the Order Paper in relation to affordable housing. I am trying to get a response to it as quickly as possible. It is an issue on which I speak on a regular basis in this House. The ability to live and work—and to continue to work—in their own locality is a big problem for many.
 
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My noble friend Lord Selborne referred, as others did, to science and research. Everything that we do should be based on good science and research knowledge, with the Government making their judgments on that. If we keep cutting back on research establishments, we run a real risk of losing knowledge and skills.

In thinking about where we can go in the future, I have tried to say, "We are where we are". It is not a happy situation; incomes are, on average, £12,500. For long-term investment, that is not good. I have tried to say where we think we can go. My noble friend Lord Caithness and others spoke about the need to minimise regulation. We all know that we need regulation, but please can it be as proportionate and minimal as possible? We should not have any more regulation than other countries against which we have to compete and which are allowed to get away with less.

I believe that the farming industry has a great role to play in the future of our country, not just in the production of food and energy, but for the life it offers people. Our tourist industry is based on the success of farming. Healthy living and activities are based on people getting out and enjoying the countryside.

I have two more things to say to the Minister. First, I would like to highlight the concerns expressed by farmers about the cross-compliance rules being introduced with regard to the single farm scheme. Some are quite worried that this will have a regressive impact on the way in which they farm, and some may well come out of the scheme. Secondly, my noble friend Lord Caithness said that he wanted the Government behind farmers. I would rather have the Government alongside farmers, giving them the lead and showing them where they think the farming community can play a worthwhile role in the future.

4.42 pm

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