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Lord Rodgers of Quarry Bank: My Lords, I hope that the Lord Privy Seal and the House will not make too much of last night's events. My own experience of them was that they were very good tempered. The fact that it was only the third time this century that that particular procedure had been invoked might be a very good argument for not bothering to take matters further.
I fully understand how my noble friend Lord Russell felt offended by the attribution of hypocrisy to Members of your Lordships' House. I take the view that the noble Lord, Lord Whitty, who is very skilful in these matters,
Clauses 1 to 4, Schedules 1 to 4, Clauses 5 and 6, Schedule 5, Clauses 7 to 36, Schedule 7, Clauses 37 to 46, Schedule 6, Clauses 47 and 48, Schedule 8, Clauses 49 and 50, Schedule 9, Clauses 51 to 63, Schedules 10 and 11, Clause 64.--(Lord Williams of Mostyn.)
Lord Renton: My Lords, having criticised the Government on a previous occasion on a similar Motion on the Crime and Disorder Bill, perhaps I might invite your Lordships to rejoice in the fact that on this occasion the clauses will be taken in numerical order, as will the schedules attached to them. Perhaps we might take this as a good precedent for the years to come.
Lord Hooson rose to call attention to the report of the Institute of Welsh Affairs, The Farming Crisis in Rural Wales, and to the consequences of that crisis including public order problems; and to move for Papers.
The noble Lord said: My Lords, I put down this Motion for possible debate when my noble friend Lord Thomas of Gresford drew my attention to the publication in January of the report of the Institute of Welsh Affairs, compiled by four distinguished academics in Wales with expertise on rural affairs. To my astonishment, I was successful in the ballot--and that is how this debate comes before your Lordships today.
On 21st January, on a Motion moved by the noble Earl, Lord Ferrers, we debated the state of agriculture in the United Kingdom generally. Today we are concentrating on the state of agriculture in rural Wales because what amount to really serious problems in more favoured parts of the country have become in rural Wales, and I am sure in similar areas in England and in Scotland, a true economic and social crisis. At the moment it bears all the signs of an agricultural slump. By the use of the word "crisis", I mean that this is a time of real danger for the rural community. I am talking about an area which is the backbone of Welsh cultural and social life. Therefore, there is a great social implication to the present state of affairs in rural Wales.
What I hope to achieve from the Government in this debate is a more understanding and sympathetic response than has been manifested hitherto and that they show some signs that they really appreciate the depth of the crisis and indicate that it is their intention to take really serious, urgent measures to alleviate the position. I hope to show the Government that there is every justification for that.
Eighty per cent. of the land in Wales is characterised as being a "less favoured area" under Objective 5B of the European Union, which means that it is earmarked for special treatment. Figures published by the Government reveal that in 1994-95, 69 per cent. of farms in Wales in less favoured areas had incomes of less than £10,000 per annum--and that was a very good year in agriculture. The figure increased by 17 per cent. in the following year, but reduced by 21.7 per cent. in 1996-97 and the forecast reduction for 1997-98 is another 27.2 per cent. We must bear in mind that farm incomes in 1995 (a good year) were less than the average industrial wage in this country and that they have now reduced by a further 50 per cent.
All of this happens at a time when farm income is rising in Germany, the Netherlands, France and Belgium. There is an even, steady spread of earnings throughout the European Community, except in Portugal, where I believe incomes have reduced by 13.2 per cent., and in this country. The fall in prices for sheep and cattle has been catastrophic. Farmers are faced with very serious cash shortages.
I take as an illustration my own area of Montgomery. I have declared an interest in this regard many times. I have farmed there for over 30 years and represented Montgomery in another place for 17 years. One of the oldest animal feed firms in Wales, D.C. Evans of Newtown, recently called in receivers. It employed between 30 and 40 people. It had been run as a family firm for years. I do not have the slightest doubt that the real cause of its difficulty was that it had extended credit
I should like to give an example of today's prices in the market. Old ewes which a year ago--that was also a time of depression--sold for about £20 to £25 a head now sell for between £3 and £7. That is because of government action that requires certain things to be done to old sheep. I refer to the removal of intestines from any animal over 12 months. The maximum price one can obtain for a cast cow, valued at £750 two years ago, is £310, due partly to government regulation.
It is fairly obvious that the demonstration at the ports was misdirected. My Motion refers to the consequence of the crisis, including public order problems, with which my noble friend Lord Thomas will deal later. Having been brought up on a farm in North Wales and spent almost the whole of my adult life in mid-Wales, I have never seen Welsh farmers demonstrate like this before. It is alien to their lifestyle and upbringing. I believe that it amounts to a cri de coeur--a desperate attempt to call the attention of the public, the media and the Government to their plight.
The Irish, who are fellow members of the European Community, are doing only what British farmers were accused of doing by French farmers a few years ago in relation to lamb. The real problems lie firmly here at home with the attitude and actions of the previous government, perpetuated and to a degree aggravated by the present Government. I believe that it has also been egged on by the constant attempt of much of the media and the Euro-sceptics to try to blame all of our problems on Europe.
It was not Europe but the Government here which so mismanaged the BSE crisis, as the noble Earl, Lord Ferrers, so vividly demonstrated in our last debate--all the more powerful because he was a distinguished member of that Government for much of that time.
It is the policy of this Government, like their predecessors, to keep the pound as strong as possible. It is that fact which is the major contributor to the present crisis. It is the policy of this Government, like the previous one, not to seek entry into the euro at its launch, but nothing could help farmers and manufacturers in this country more than that we should be in at the first possible opportunity. It was the previous government in a policy continued by the present government which reduced the HLCA compensation payments to farmers and initially put every possible additional cost of inspection, traceability and so on on to the abattoirs and consequently the farm. Mercifully, this policy has been modified to a degree, but in the ultimate it will be found that, while the Government have conceded some matters of late, they do not make up for what they have already taken away.
I should like to pose six particular questions to the Government. I hope that the noble Lord, Lord McIntosh, who I understand is to reply to the debate, will be able to answer them. First, what do the Government say has caused this crisis? Overall there has been a drop of 23.1 per cent. in farm income in the UK. The average drop in the EU is 3.1. per cent. (including the UK). We
Thirdly, have the Government any plans to reduce the burdens on abattoirs so that the cost of slaughtering in the UK is comparable with that of our European partners? I gave this example in a previous debate. It costs £2 to slaughter a lamb from this country if taken to Spain; it costs £6 to slaughter it here. Fourthly, what is the total value to date of the rebates secured by the UK Government under the Fontainebleau agreement? Based on Parliamentary Questions in the other place, it appears that the benefit has been well over £20 billion.
Fifthly, is it not correct that the Fontainebleau agreement was based on the fact that the UK, in comparison with other net contributors, had a smaller agricultural sector so that a 21 per cent. addition intended for agrocompensation agreements was imposed; possibly it was not anticipated at Fontainebleau. Every other government contributed 50 per cent. on agrocompensation agreements. We had to contribute an additional 21 per cent., making 71 per cent., but we have had to do nothing else in the meantime. The Government, whatever their complexion, have benefited enormously from that agreement.
Sixthly, has any UK government previously applied to the European Union for help under the agrocompensation agreements? The noble Lord will be aware that £980 million is waiting to be asked for. Other countries have applied in turn at different times. Why on earth cannot the Government make their 71 per cent. contribution considering that they have never had to pay anything else over the years on these matters?
I have been in politics long enough to know that every Chancellor of the Exchequer and Secretary of State has a back pocket. They have funds available for compensation when there is dire need. The Treasury back pocket on this issue is very well padded. The Government have benefited from a strong pound--just as the farming community has been penalised for that fact--and they should provide compensation. They will find in those items that I have indicated proper grounds for saying that not only is the farming community in rural Wales in a catastrophic state--it cannot see ahead and so on--but there is every justification for the Treasury to help out.
I have been brought up in a farming community. No community in this country is so used to the vagaries of life, weather and the market. I was born during an agricultural slump and I remember my parents talking about it. I have seen it for myself. Farmers do not want to be feather-bedded by the Community, but why on earth should the Government impose additional penalties upon them when they are unable to compete fairly with their partners in Europe under the umbrella of the common agricultural policy? When the Government imposed further and further penalties on
Most sensible farmers agree that the CAP should be seriously modified, but it must be done on a European basis. This country cannot do it unilaterally. I look forward to hearing the noble Lord's answers. I hope that he will take to the Prime Minister, the Chancellor of the Exchequer and the Minister for Agriculture the cri de coeur which is coming from mid-Wales and which is totally genuine. I beg to move for Papers.
Lord Williams of Elvel: My Lords, the House will be grateful to the noble Lord, Lord Hooson, for introducing his Motion, and for referring to the report of the Institute of Welsh Affairs which is the subject of the Motion. I, first, have to declare some interests. I am the owner of land in what used to be known as Radnorshire: 13.1 hectares to be exact, which I do not farm myself, unlike the noble Lord, Lord Hooson. I let it out on an annual grass keep to my neighbouring farmer. I am also vice-president of the Campaign for the Protection of Rural Wales, and, more important perhaps, I am a recipient of funds under the environmentally sensitive areas scheme, having signed a Tier 1 agreement with the Welsh Office. I shall say more about that later.
Having declared all those manifold interests, I shall go on to say that I cannot speak for rural Wales in general. Rural Wales is a diverse community, stretching from the north to the south, with different aspects of agriculture. I can speak only, and I want to speak only, of things about which I know. The things about which I know are livestock farming in the Radnor Uplands. So I hope that your Lordships will forgive me if I concentrate on that rather narrow brief, although it is a brief, I believe, that has relevance for the whole of rural Wales.
I read the report of the Institute of Welsh Affairs. I thought, to be honest, that it was long on analysis. I was rather doubtful about its recommendations. The analysis was undoubtedly done with extreme care, but I am not sure that it is right merely to say--the same is true of the CLA's submission--that just by throwing money at a problem one can solve it. Because, to get back to my home in Radnor, there seem, in the hill farming area, to be two distinct problems.
There is the short-term problem and there is the long-term problem. The short-term problem, as the noble Lord, Lord Hooson, rightly said, is that cash flow is negative for hill farmers. All my neighbours whom I have consulted report that they will make no profits this year; they will be losing money. Cattle, as far as they are concerned, are not even worth taking to market.
The strength of the pound, again as the noble Lord, Lord Hooson, rightly said, has threatened lamb exports. There is a consequent reduction in domestic lamb prices because there is an overhang. If lambs cannot be exported because of the strength of the pound, and they are overpriced in the international market, they will be dumped on the domestic market. All my neighbours are suffering from that.
What are the consequences? The noble Lord, Lord Hooson, described some of them. I leave aside the question of public order. As the noble Lord said, farmers in Radnorshire and Montgomeryshire are not people who demonstrate easily. We are a peace-loving lot and, unless it is absolutely vital, we do not want to be blockading ports or disrupting public order. Nevertheless it is worth bearing in mind that the suicide rate in Powys is second only in England and Wales to the suicide rate in Birmingham.
Hill farming is a hazardous, lonely, desperate business. People can become very, very depressed. Only the other day in my part of Wales there were two suicides: one of a girl of 18, and the other of a young man of 20, both connected with the farming business, who were so depressed that they decided to put their heads in a gas oven rather than go on with life. That is the most dramatic consequence of what is happening.
The second problem--slightly longer term but nevertheless requiring to be addressed--is that local authorities are inclined, quite rightly, to sympathise with the farming plight. In their sympathy they give permission for planning applications which in times of prosperity they would not give; in other words, bungalows can be built on farming land; wind farms can be put up. All sorts of planning applications which, in the long run, are detrimental to the environment of mid-Wales, or Radnorshire, are, because of the sympathetic attitude of the local authorities--a rightly sympathetic attitude--being passed, which previously, or in times of prosperity, would not have been passed.
Those are two of the major consequences of the short-term problem, apart from the difficulties that the noble Lord, Lord Hooson, quite rightly described. There is a longer term problem. The population of hill farmers is ageing. Young people no longer wish to stay on farms and inherit, as their fathers did. The result is that they will migrate to the towns, and possibly the cities, and at the end of the day, when those small hill farms of perhaps 170 acres or 200 acres become free, an undermanaged environmental situation will develop.
Farms will no doubt be converted into second homes. There is nothing wrong with that, but your Lordships should be under no illusion. The farmers in Radnor are extremely sensitive to the environment. They are the managers of the land as well as being farmers. If they are off the land, who knows who will manage that land in a sensible manner?
I do not want to be wholly negative. I want to suggest a possible solution to my noble friend. I quite understand that we should not be throwing money at the problem. I quite understand that the exchange rate may go up, and may well come down as the interest rate cycle starts to peak. I well understand that if you throw money at a problem you get a situation that existed in Radnor only a few years ago of "grant" roads, as they were known. Grants were given for any road which was made in any hill. The farmer got out the hardcore from the hill and, having put in the application to the Welsh Office, shared the profits with the contractor. There was a burst of prosperity. I well understand that throwing money at the problem is not the right solution.
I am of course in favour of what the Welsh Office has announced as an agri-environmental scheme. I am not sure what an agri-environmental scheme is, as applied to the whole of Wales, but no doubt my noble friend will enlighten me. It is a grand idea, but it will take some time to put into practice.
However, a scheme which the previous government put in place could be the basis of a solution. I refer to the environmentally sensitive area scheme of which I am a beneficiary. I do not know whether Montgomery is in the scheme--no doubt the noble Lord, Lord Hooson, will tell me that it is--but I know that Radnor has been declared an ESA. As a result, farmers in Radnor can sign contracts with the Welsh Office and do what they would normally do--that is, look after the land properly--and receive benefits in cash for doing so. On my smallholding, I cash in on that. I am doing nothing more than I would normally do; nor would any farmer. However, the scheme ensures that, first, the environment is protected and, secondly, that the farmer receives extra cash for being a guardian of the environment.
The difficulties with the present scheme are simple. First, it is bureaucratic. Masses of contracts must be signed in language which is legally obscure. I can understand the language, but many of my neighbours have great difficulty in doing so and they are suspicious that certain aspects may catch them out in the long run.
Secondly, authority is required to do anything on one's land which is contrary to the laid out map. For instance, the map will show that there is a potential archaeological site on a particular field and one must not do anything to disturb that site. As soon as my neighbours see "archaeological site" on their maps, they will have nothing to do with it and say, "I don't understand what an archaeological site is and I would not like to participate in this scheme".
My neighbours are farmers. They were brought up and inherited, or bought, their land in order to produce food. They do not particularly want to be relegated to the position of managers of the environment. If the ESA scheme were properly organised, made less bureaucratic, extended and sold properly, it would be the third way between being purely a farmer and an environmental manager. If the scheme were extended and the bureaucracy reduced I would recommend my noble friend to press the Welsh Office to enlarge it further because I am sure that it is the right way forward.
Lord Kenyon: My Lords, I, too, am most grateful to the noble Lord, Lord Hooson, for introducing the debate today. As he well knows, I take a deep interest in Welsh affairs, even though I can hardly claim to be a Welshman as my family have lived in Wales for only a brief 300 years.
I should, of course, declare an interest as a landowner and farmer in Wales. It is my income, as well as those of my tenants, which are suffering in the present crisis. Unless something is done not just to alleviate the immediate problems, but to underpin a stable climate for the future of farming in Wales, the changes that will take place will drive so many people from the land that parts of Wales will become an unkempt and abandoned wilderness.
Those of your Lordships who know the Welsh countryside, and those who have a concept of it, doubtless remember it for the outstanding natural beauty of its landscapes, its mountains, its forests, its rivers and the timeless charm of its hamlets, villages and towns. Those of your Lordships who saw it doubtless did so on a sunny summer's drive through some of the most picturesque parts of the Principality; perhaps Snowdonia. Perhaps you even got out of your car and took a stroll along a well beaten track in the foothills and thought what a pleasure it would be if you could breathe that air every day of your life. No doubt, too, you saw the shepherd and marvelled at the way he controlled his dog with effortless ease to collect his sheep, apparently without a care in the world.
Dream on, my Lords, dream on, because it is not always like that. When those winter winds are howling and the snow is piling up outside your door, that shepherd is still out there; though now the visibility is down to zero, the dog and the sheep are remarkably less co-operative, while the shepherd himself is very, very short on temper and is dreaming, too--dreaming of your cosy, centrally-heated life.
Why does he do it? Does he do it to make a living? I hardly think that that is what one would call it, working from dawn to dusk, seven days a week, 365 days a year for a net income of perhaps £5,000 a year. What is a minimum wage to him? And then, to add insult to injury, the problems of national government and international finance are heaped upon his shoulders. The strength of the pound conspires to reduce the direct support paid to him each year under the common agricultural policy, and reduce still further the meagre income from his business, while the Government continue to refrain from claiming the agri-monetary compensation that is due to the UK.
Is it a business, my Lords? It certainly is a business and the farmer has all the forms to fill in to prove it. But it is a very different business from the norm. I am sure that the economists among your Lordships would agree that the first principle when starting a business is
Sadly, farming is not like that. The noble Lord, Lord Hooson, explained that the price of old ewes is now between £3 and £7. I can add to that. I saw a credit note from an auctioneer to a farmer who had taken four old ewes to market. The price of three was £5 and the price of one was £7; that is £22 in total. But he did not take £22 home. By the time he had paid the auctioneer's commission and the levies and by the time the Government had taken their 17½ per cent. on top of that, his cheque was £1.13. That is less than the price of a sandwich in your Lordships' House. By the time he had taken the cheque to the bank and the bank had imposed its charges, the cheque was worth nothing.
When it comes to farming, you know what your initial costs are and what your running costs are, but until you get to market you do not know what your selling price is going to be. That depends week by week no longer just on the market supply and demand but on the daily stream of pronouncements from Brussels or Whitehall, or on some eminent academic who is telling us that this or that is bad for the health of the nation.
The CAP is in the process of reform and the longer-term result will undoubtedly see an overall reduction in the levels of direct support to farmers. However, at the same time, there is a golden opportunity for the Government to ensure that there will be greater flexibility in the way in which member states can target the spending of these funds. In particular, there is the spectre of modulation to which the CLA and, I believe, the NFU remain opposed. "Modulation" is the Brussels-speak for the process whereby the payments of grants are made on a sliding scale so that the payments to the larger producers are reduced and the smaller farmers receive correspondingly more. The argument against it is that as Continental farms are, on average, so much smaller than those in the UK, the level at which the cut-off begins to operate will be to the detriment of British farmers. But if the modulation were applied with subsidiarity it would then be for the Government to decide where the limits lie.
I am fortunate to live in a rural village which still boasts a church, albeit with a falling congregation, a sub-post office and general store, a garage, a butcher's shop and a pub. But all around me I see the shutters going up on the businesses as they are forced to close from lack of customers. Once they close, they are converted to houses and are lost for ever, severing part of the body of the community. I acknowledge that those problems are not unique to Wales but they are magnified by virtue of the greater isolation which is comparable only with parts of Scotland and Northern England.
Next week the Chancellor will announce in his Budget a further hike in the price of fuel, well in excess of the rate of inflation but nevertheless affordable to most people. Sadly, it will be a disproportionately large tax on the mobility of the ageing population in the rural villages where public transport is little more than a couple of words perhaps augmented by a bus once or twice a week. For them, it is just another post in their fence of isolation.
Lord Mackie of Benshie: My Lords, I cannot claim any real connection with Wales except that I recently contributed £10 to the noble Lord, Lord Geraint, as a result of the Wales/Scotland match. I do not think that that will go a long way towards solving the problems.
In speeches from various members of the Government, I have detected a tendency to play down the depth of the crisis in farming. Figures have been quoted to me which have taken 1990 as against 1995: 1990 was a very bad year and 1995 was a good year. I have been told that in real terms, farming income has increased by over 200 per cent. I am afraid that that sort of attitude put a great many Scottish farmers very much against the Government. They are right because they cannot see what the Government are doing. The Government have done one or two small things which should have been done before. But, essentially, the Government must take up the money which is being taken up by other governments--I admit that it will cost us a little more, but as the noble Lord, Lord Hooson, has explained already, that is being compensated for--and use it wisely to do something about the appalling condition of farming all over Britain.
That does not apply only to hill farms. I know extremely competent farmers who tell me that they will lose a hatful of money this year. Those people are right up to the mark. They are able and reasonably capitalised. But in Scotland, the Royal Bank published figures which showed that overdrafts at Christmas and the New Year were up by 10 per cent. That is in a period when a great deal of money must go out and yet very little comes in before the harvest. Therefore, I do not believe that the farmers are squealing.
We are in a situation which can be compared only with the 1930s. It is all very well to talk about the free market and the ability to compete. There was a free market and the ability to compete in the 1930s. It resulted in appalling misery and degradation throughout America and the prairies as well as in this country. Something must be done. There are plenty of suggestions as to what could be done. It is now too late for the Government to take up the £940 million but they can still take up the remaining tranches, which amount to about £620 million. Moreover, they should try to pay it out wisely.
The noble Lord, Lord Kenyon, referred to modulation. I do not believe that the modulation plans of the Commission--and they are only speculation at present--are too bad. They want to reduce the figure to 75 per cent. for the top farmers, which might or might not work. But the fact is, of course, that if a modulation plan is produced it will mean that the total amount of money available to support farming in this country will be much less.
There are a number of steps which the Government should take and take now. One of them is to set up a committee to advise them. They should include on the committee competent people to look again at the support available for farming in the hills and the less favoured areas, as they are called. Without support, those areas will become a desert--a not very satisfactory playground. As the noble Lord, Lord Kenyon, said, all the facilities will disappear and we shall be left with something which nobody wants to see. Therefore, I believe that it would be useful to set up a committee.
Also, the Government should give an indication that they mean to hold to the CAP as it is now. It is not good enough that in the rest of Europe governments are taking full advantage of the facilities available to support farming. Here we must suffer not only from the strong pound, from which all industries suffer, but we must suffer in addition from the fact that those countries are able to export to us at a very low figure.
Wales is not alone, but it is a good example because there is more hill ground there than elsewhere. It needs help and it needs a proper plan. It may need a retiral plan. However, whatever else may happen, the Government should think the matter out. If the population falls and there are fewer people in farming, that change must be managed competently. We should allow other businesses to arise in the countryside to keep people there, not as holidaymakers or occasional residents but usefully employed in the countryside. There is a very good example, set up long ago by a Labour government, in the shape of the Highlands and Islands Development Board which has done a great deal in that regard. There is a task ahead which I do not believe the Government have tackled properly as yet. I hope they will do so now.
Lord Elis-Thomas: My Lords, I thank my noble friend Lord Hooson for initiating this debate. I thank also the noble Lord, Lord Mackie of Benshie, for making a Scottish contribution. As ever, he has informed our debates on Wales and the rest of the UK.
The noble Lord, Lord Mackie, referred to the issue of a free market mechanism. In the context of agriculture, we are dealing with a managed market, managed or mismanaged by decisions of public policy. In the present crisis of agriculture in rural Wales, we are not dealing with a natural disaster or an occurrence relating to production standards, habitat problems or a social crisis. We are dealing with the results of a failure of a series of public policies to understand the context in which they were operating. I shall enumerate briefly those policies because they relate directly to this Government and the previous government.
First, there is the public policy in relation to public health. Clearly in this House we all have an understanding of the importance of the quality of food and the food chain and the need for clear standards of public health. However, there is the essentially important issue of how issues of public health are presented to the public and the context in which they are presented. Although we have debated that issue many times in this House, I am still completely dissatisfied with the responses that I have received from government on the way in which the BSE crisis and the resulting effect on the beef industry was handled by this Government in the context of the European Union policy on public health.
I know that the Government have established an inquiry into that issue, but the effects of the way in which it was handled in the short term and the consequences of their subsequent announcements on public health aspects of beef, including the whole issue of on and off the bone, was an indication of the insensitivity of the operation. In my view, the effects of those announcements on the beef market were not sufficiently understood. That is one aspect: a public health policy and the need for sensitivity as regards public health policy; and, indeed, the need for public health in relation to food and agriculture to be treated in the same way as it is in relation to other substances and commodities across the board. That is an issue which the Government need to address.
The second aspect of public policy relates to exchange rate issues and the effect that that has had on the return and the income of the agriculture industry as regards the green pound mechanisms. Successive governments have pursued policies which have resulted in a strong pound in relation to other European currencies. I suspect that never in this whole debate was the implication of that policy for agricultural support prices even considered. Clearly that impact has been catastrophic in terms of income levels.
When you have a mechanism of economic and public policy which impacts directly on the income levels of a sector of the economy, I believe that that should be understood and that ameliorating measures should be planned for that context. The whole question of relative exchange rates and green pound levels has perhaps had the most immediate impact on income levels across the board in terms of price support mechanisms.
The third aspect of public policy is that relating to environmental, and agri-environmental policy in particular. It seems to me that there is a lack of clear commitment by the UK Government in the context of CAP changes to the agri-environmental initiatives which are now appearing in the rest of mainland Europe. The whole decoupling argument is one which I suspect that this Government do not really understand. The importance of transferring support from end price support in the context of WTO negotiations, and the present and emerging renegotiation of CAP, requires a whole fresh approach to what countryside management and income support in the countryside should be about. Again, it seems to me that the Government have no understanding of that.
The further aspect of public policy, which is not understood clearly, is the whole question of the role of countryside and rurality within the post-modern 21st century context. Many in your Lordships' House and so many urban people seem to feel able to make continual demands on the countryside for recreational purposes, but seem not to understand that there is a price to pay for that joy and recreation. I speak as someone who has lived in rural Wales throughout his life out of choice. I am quite happy to see visitors enjoying the scenery and the environment and deriving benefit therefrom. However, there is a price to pay; namely, the price of supporting a viable countryside which is there to be enjoyed.
The transfer mechanisms that we have for that activity have not, in my view, been understood properly. The national park policies that we pursue do not provide enough resources to ensure that recreation is managed in a way which brings benefit to the inhabitants of the countryside. Neither is the whole issue, as it has recently been polarised between countryside and city, helpful to the debate. I shall not enter today into the whole argument about country sports and fox hunting; indeed, my views in that respect have been well documented.
However, there is a perception of countryside which is still sanitised through Country Living and other such magazines. That perception has been very well attacked by Fiona Reynolds of CPRE. I congratulate her on her recent appointment by the Government to assist them in the pursuit of gender equality within the Civil Service. I wish her well. If she takes to gender equality within government what she has delivered to countryside policies she will, I am sure, sort out all those in your Lordships' House, and elsewhere. She very clearly put forward the argument recently that the sanitised perception of countryside and rural living which is marketed to urban dwellers helps to create this false concept of what rural and urban life is really all about. That also should be addressed as an aspect of public policy.
Finally, it seems to me that the results are an indication of a failure to understand the gravity of the income crisis as it affects individual producers. A number of noble Lords have referred to recent income figures. I shall repeat just one; namely, the average income of £10,000 for an agricultural production unit within upland Wales. I emphasise the dependence on the livestock sector and the fact that there has been a reduction across the board in beef, in sheep and in all categories of production, including the milk sector, which all compound each other.
There is a way in which government can respond, but it has to be with greater sensitivity than we have seen so far. The countryside people whom I know and love, and among whom I have lived all my life, have responded with great patience to the current crisis in terms of income. I have lived through a number of crises in the extractive and basic industries in the Welsh economy--in steel, coal and agriculture--but I would say that this is potentially the worst. We have not yet seen what this will produce. I have seen the devastation of our coalfields in Wales: the devastation of our countryside will be even more dramatic. We have a recent estimate from Professor
Of course, the Government need to address that issue, but so did the previous government. That brings me to the Fontainebleau Agreement to which reference has already been made. The noble Baroness, Lady Thatcher, never understood the countryside. She was personally responsible for the destruction of the Welsh steel industry. I know that this kind of rhetoric is not normal in your Lordships' House, but I feel emotional on such issues. I want to put this on the record. The noble Baroness, Lady Thatcher, tried to destroy the Welsh steel industry; she tried to destroy the Welsh coal industry; and, with her Fontainebleau Agreement, she is also destroying the Welsh agricultural industry. She shall not pass.
Lord Geraint: My Lords, I am most grateful to my noble friend Lord Hooson for initiating this debate on rural Wales and the agricultural crisis, linked to the report by the Institute of Welsh Affairs. I can say one thing; namely, the agricultural industry in Wales is in a "mess".
I should like, first, to mention the walk of the Countryside Alliance last week. Those who took part in that march can take pride in the way that it was conducted and in the level of support achieved. But one thing the Countryside Alliance demonstrated was the fact that people were prepared to put their differences behind them and stand up for the countryside as a whole. It was a day to remember. Indeed, I do not think that I shall ever forget it. I hope that the Prime Minister in his wisdom will take heed of the efforts to save the countryside. I was also delighted to see the Welsh dragon at the corner of nearly every street as we walked all the way to Hyde Park.
I disagree with the Agriculture Select Committee, because it recommends that the entire EU beef industry must be restructured if the United Kingdom is not to lose its competitiveness In my view, if restructuring were to take place in Britain alone under the present abnormal circumstances a high proportion of British beef consumption would be met by imports. My advice to the Government--for what it is worth--is, do not pursue such a policy. British beef production is forecast to have fallen from 12 per cent. of the EU total in 1995 to 9 per cent. in 1998.
The Liberal Democrats are keen to set up a Royal Commission on the countryside to look at the issues that disadvantage rural areas vis-a-vis the rest of the country. Many noble Lords are aware that sometimes Royal Commissions take a long time to conduct their inquiries. However, we need one to consider the short-term issues and the longer-term issues facing the industry. I hold the view that we should have a Royal Commission in Wales to consider the future of the agricultural industry and the countryside. In addition to the Liberal Democrats others have taken up the challenge. The editor of Farming News said last week,
John Thorley, the chief executive of the National Sheep Association, said in Hereford last week that few farmers would doubt that what we are talking about is the survival of our industry, and its base in family farms which has been around probably since man changed from hunter-gatherer to farmer. There are those who now wish to see all that challenged. Does the noble Lord the Minister agree with me that there is a challenge to our right in Wales to get a reasonable return for expertise in investment and a challenge to the traditional methods of marketing our product? There is also fear in the hillsides of Wales that we shall not be allowed to farm the land over which we have jurisdiction. There are so many people with the backing of massive organisations and money who seek to enforce their collective wills on our industry whether or not they understand the issues. In my view they must be stopped before it is too late and the countryside is destroyed.
The National Farmers' Union is not pleased with the way the Welsh Office Agriculture Department is run at the present time. According to the National Farmers' Union in Wales, the dramatic fall in income has been compounded in recent years by continued delays in the administration and processing of support scheme applications by the Welsh Office Agriculture Department. These continued delays are totally unacceptable and have created severe cash flow difficulties for Welsh producers, thus placing them at a serious competitive disadvantage compared with their English counterparts. The majority of farmers in Wales and in the rest of Britain are keen to know what the future holds for them regarding milk and sheep quotas. I read the other day that they will all come to an end in the year 2006. I ask the Minister how many farmers there will be in Wales in the year 2006 the way things are going today.
Last week I read with interest that the Government are suggesting that they will not close small rural schools. If I understand the law at the present time, the Government have the right to decide whether or not a school is to be closed. The Minister shakes his head and therefore I am bound to be wrong. However, I am delighted that the Government will look after rural schools if they can.
The crucial question is, what is the latest development on the beef export ban? It is now quite clear that we have met all of Europe's preconditions in relation to the lifting of the export ban. The Government must be rigorous in seeking an end to this unjustified ban on our beef exports. An early end to this ban would give consumers a firm reassurance about the quality of British beef and would help restore confidence among producers. I also welcome the beef inquiry. I hope that the conclusions will give us an insight into what went wrong in the 1980s.
I turn to market realisations. It is right to repeat what has happened during the past two years. Agri-monetary changes and their impact on imports/exports, in tandem with BSE, have resulted in reduced market realisations. Cattle prices in Wales in November 1997, at 90.87p per kilogram, were 26.9 per cent. below market realisations in November 1995. By November 1997 lamb prices in Wales had fallen to 13 per cent. below levels prevailing
Have the Government any plans to restore confidence to those who live in the countryside, and especially to those involved in the agricultural industry? The Farmers' Union of Wales is concerned that the difficulties facing the Welsh livestock and milk sectors are irrefutable. These difficulties lie outwith the industry's ability to redress them and, as such, the Farmers' Union of Wales believes that if the Government wish to retain a viable agricultural industry in Wales, upon which the wider rural economy and the maintenance of the countryside is dependent, they must recognise these difficulties and take suitable action to prevent the irrevocable damage that will otherwise ensue. This assistance should take the form of agri-monetary compensation; reasonable compensation for the consequences of BSE measures imposed by the Government on the industry; and support for Welsh hill and upland areas. Unless assistance is forthcoming in the short term, the future of the industry in the longer term will be severely jeopardised.
What the farmers of Wales really need is the right to compete on equal terms with their counterparts in Europe. Unless that day dawns pretty soon I am afraid that our industry will be submerged. My message to the Government is clear: please act now and let us loose from the shackles of bureaucracy.
Lord Harlech: My Lords, I support everyone who has spoken. I thank the noble Lord, Lord Hooson, for initiating the debate on this important issue. As the noble Lord, Lord Elis-Thomas, rightly explained, there is a serious crisis. The Order Paper refers to a crisis. It has far-reaching consequences; it does not end at the farm gate.
As I have said before in this House, the rural economy is based on a complex socio-economic structure in villages and towns. Only this week I am aware that in a 15-mile radius nearly 20 machinery dealers have been laid off because of lack of orders since the farmer has no sense of security in his future at present and cannot make any investment.
The drop in income is crippling. The noble Lord, Lord Williams of Elvel, spoke about suicide rates. The rates in Wales are very high. Sadly, in Gwynedd, within 18 months two brothers have taken their lives. That lack of confidence means that while unemployment rises, costs and services continue to rise. The Government, and the future assembly of Wales, will have to address the increasingly high burden of costs on an industry that is less and less able to make economic returns and therefore be a contributor. Of course, no feather bedding is wanted, but confidence must be restored. It is in the hands of this Administration now to restore that confidence.
We have heard about the increase in slaughter prices. That is absolutely correct. It is nearly four times as expensive to slaughter in this country, with the inspection that is involved, as it is overseas. That is not, I suspect, a good message for the people who wish to ban live exports. Those exports will increase now that one can have animals killed more cheaply across the Channel.
A catastrophic situation has its roots in policies that were mistakes of previous administrations. I make no bones about that--and bones are part of our thinking these days. There is no doubt that failure to respond to the crisis is serious. We have heard about increasing demands. My noble kinsman Lord Kenyon referred to picture postcard indulgence in countryside activities. It is not like that; that is not the reality of country life. Perhaps I may say this for the third time. It is necessary to make a structure that is secure in order that the countryside becomes a place where people want to invest so that it does not suffer the slow death seen in other industries.
Lord Thomas of Gresford: My Lords, the bare figures and the analysis of those figures are contained in the Report of the Institute of Welsh Affairs, which I commend to your Lordships. I am particularly grateful for the way in which in this debate noble Lords from all sides of the House have brought those statistics to life. The noble Lord, Lord Williams of Elvel, spoke movingly of the suicide rate in what he described as a hazardous, lonely and desperate business. He talked about the migration of young people which depopulates the rural countryside, leaving what the noble Lord, Lord Kenyon, described as the "unkempt and abandoned wilderness" that Wales may become unless there are changes to government policy.
The Secretary of State should realise that the health of the farming industry means the health of the whole rural economy. It is not just the jobs of farmers which are at stake: it is the services which depend upon farming and upon the presence of farming families in the countryside for their very existence. It is the creation of that stability and confidence in farming to which my noble friend Lord Geraint and the noble Lord, Lord Harlech, referred.
The most recent statistics available are from the Welsh Office in its annual Farm Business Survey published last month which confirmed Welsh farmers' worst fears. The figures are worse than have been presented to your Lordships by other speakers today. Incomes are down by well over 50 per cent. on many farms with no prospect of an upward trend. Dairy farms have suffered a slump of 24.7 per cent. in their incomes. Reduced incomes are being met by increased costs, and today those are likely to be overlapping.
In the past year the Welsh Office confirmed that in the less favoured areas where cattle and sheep are farmed, farmers have seen their incomes fall by 40.6 per cent. compared with the European average, to which reference has been made, of 3.1 per cent. In the lowland areas there is a fall in income of 41.2 per cent.
This is farming in Cloud-cuckoo-land. The fact of the matter is that Welsh farmers will soon be out of business altogether unless the Government wake up. As my noble friend Lord Geraint said, the worry is whether farmers will be allowed to farm at all. How many farmers will there be in Wales by the year 2002? Farmers depend upon subsidies not because as a group they wish to batten upon the taxpayer but because successive governments have set up and agreed a system of payment for farmers which the Government lack the will, the drive and the energy to change. The noble Lord, Lord Kenyon, referred to the daily stream of pronouncements from Brussels. The noble Lord, Lord Elis-Thomas, talked about the mismanagement of public policy in this field.
I am sure that farmers would be the first to agree that being a good businessman, or a good farmer, should not consist of juggling one subsidy against another, or filling in forms seeking to qualify for this or that payment. They did not invent the system in relation to which they are criticised by Dr. Jack Cunningham. I adopt the description of Mr. Lloyd Jones, the NFU Welsh chairman, that this is a system which is "state of the ark" rather than "state of the art".
At that same conference, Mr. Ron Davies, the Secretary of State for Wales, speaking to 250 Welsh farmers, said that aggrieved farmers were right to engage in legitimate protests but that any illegal or violent acts, "will be met with a stern rebuttal". He said that Welsh farmers were deluding themselves if they thought such acts would influence the Government.
As the noble Lord, Lord Hooson, said--I am grateful to him for introducing the debate--farmers are not militants by nature. It is alien to their lifestyle to be involved in protests. But when they are faced with the loss not just of a job but of their home and way of life, perhaps even of their language and culture, when they have to suffer the frustrations of listening to the Minister of Agriculture, who produces no resolution of the crisis, while he exhorts them to be good businessmen and to get themselves off subsidies, farmers despair.
The spark that lit the fuse so far as the protests were concerned was the price for dairy cattle at the Gaerwen Smithfield market in Anglesey on 28th November. The price offered then was 50p per kilo, as opposed to the national average of 90.7p referred to by the noble Lord, Lord Geraint--in terms which showed how low that price was. That was the national price, but in Gaerwen on that day it was 50p per kilo lower than in
What he did not explain, as my noble friend Lord Hooson did explain, was that as a result of the Fontainebleau agreement this country has benefited to the tune of some £20 billion and has never had to contribute in this way before so far as we are aware. In a leader on 5th December, following that announcement, The Times said of the compensation figure of £980 million which was then available to British farmers--now, we are told, £620 million:
Those protests, in Holyhead, were initially handled with great skill and understanding, as one would expect, by the North Wales police. There was no serious clash between the police and farmers: true, 40 tons of Irish hamburgers ended up in Holyhead harbour, and that is to be regretted. It was an action which, I suggest, was less criminal than symbolic, carrying as it did overtones of protests in the past when governments failed to listen to the proper grievances of the people.
Thereafter, there was no more violence at Holyhead for a long time. Permanent pickets of up to 50 farmers were in place; farmers were allowed by police and port authorities to monitor cargoes and persuade lorries to turn back. One Irish lorry driver returned when picketing farmers discovered that his load of mushrooms concealed a cargo of Irish beef. There was an agreement that farmers could leave their vehicles parked and unmolested along the road out of the port. A North Wales police spokesman described the policing approach as a relative success, largely owing to the co-operation and responsible attitude of the majority of the demonstrators. They were well led and acted responsibly; and although they may have been aiming at the wrong target--Irish lorry drivers and Irish farmers are not responsible for the crisis in this country--they were doing their best through that means of protest to bring the farming crisis to the attention of this
But then, somebody decided to change the police tactics. In the early hours of 28th January, police officers were brought in from Cheshire, from over the border, no doubt to stiffen the resolve of the local police, who up to that time had handled the matter admirably and without clashing with the farmers. The numbers on that day were about 100. Some farmers later described the attitude of those police officers as, "wanting to show who was boss". Video cameras were used to take details of the farmers' parked vehicles. One farmer described how protesters were poked with truncheons. He told the Western Mail:
Unhappily, violence erupted--and then the police used CS gas on Welsh farmers. Regrettably, there was a struggle. We do not know how many farmers were injured. Unhappily, injuries occurred to at least 19 officers, one of whom was hospitalised with chest injuries. To put the other side of the coin, so that noble Lords have the full picture, a police spokesman said that farmers were intent on seeking a confrontation and that the police responded to the violence offered to them. He said:
This was a deplorable incident. It is impossible without fuller inquiry to choose between the competing claims as to who started it. My family motto is: "Ar bwy mae'r bae?"--"Who can we blame?"; and I do not propose to try to apportion blame in this particular case. It is undoubtedly the case that Irish farmers and Irish lorry drivers are not to blame, and that the farmers' protests should be directed at government and at the organisations which, at a time of national crisis, still buy imported meat. But this Government will not get away with portraying Welsh farmers as violent yobs who have to be put in their place. Farmers for their part should realise that, if they step out of line themselves, all they are doing is giving this Government an escape route which they will willingly embrace to escape from their responsibility. The buck for doing something about this crisis stops with the Prime Minister. We await his response.
Lord Roberts of Conwy: My Lords, we are all grateful to the noble Lord, Lord Hooson, for initiating this debate. It has shown the concern that there is about the impoverished state of farming in Wales. It has reached a dangerously critical point. We have heard a variety of figures bandied about, but I am grateful to the noble Lord, Lord Thomas of Gresford, for concentrating on those contained in the farm business survey released at the end of last month by the Welsh Office. Those are
If one takes the preceding year into account as well, incomes in Wales are down by more than half on the majority of farms. That is the stark reality with which we are faced. Clearly, a major drop in income of that order is going to have a devastating effect, not only on the farming industry itself but on other industries and services dependent on agriculture. That was the finding of a survey carried out in west Wales by the National Farmers Union and graphically summed up in the opening paragraph of a report in the Farmers Guardian of 20th February:
Of course there have been bad times in farming before--and good years too. But what characterises this depression is that there is no clear vision, it seems to me, of the way out of it. It is the current mood of hopelessness and no sign of better prospects ahead that causes real despair in the farming and rural communities. That picture was very much implied by the noble Lord, Lord Elis-Thomas. One has to couple with that, I fear, the apparent failure of the Government to get to grips with some of the urgent and obvious problems and provide remedies.
Let us take, for example, the central issue of agri-monetary compensation for UK producers as a result of the revaluation of sterling. It is referred to in the report of the Institute of Welsh Affairs mentioned in the Motion.
For my analysis I turn to the First Report of the Agriculture Committee in the other place, and paragraph 18 in particular, where the whole issue and the evidence of the Minister of Agriculture are authoritatively discussed. The paragraph states:
That was the position at the end of last year. I was surprised to find that the situation had not substantially changed when the issue was debated in the other place last week, although some underspends had by then been revealed in the European Agricultural Guidance and Guarantee Fund which would have made tapping the
People know, we know, farmers know, that there is considerably more money available and that other countries have sought compensation for their agricultural producers following revaluations of their currencies in the past. People cannot understand the Government's reluctance to seek assistance on a more substantial scale. It has never been properly explained why the Government have not made this application. Even the Agriculture Select Committee is puzzled--and that is the word it uses on more than one occasion--by aspects of it, as is stated in its Third Report.
The Minister also told the Agriculture Select Committee towards the end of last year that, contrary to reports in the farming press that hill livestock compensatory allowance rates were to be frozen, agriculture ministers had not yet decided on the appropriate levels for HLCAs this year. That may well have been the case then, but subsequently the Minister did decide to freeze them at 1996 levels and farmers appear to have lost the increase in planned HLCA spending for 1997-98.
I am sure that that will be warmly greeted by bodies like the Institute of Welsh Affairs who are keen supporters of agri-environmental schemes. But they realise only too well that such schemes, if they are to be genuinely helpful, must be properly funded. That depends on the nature of the Commission's proposals for the reform of agricultural support generally and support for the less favoured areas in particular. Those proposals are, I understand, expected shortly. But much depends too on the attitude of the Government and whether they will be positive or niggardly in their approach.
On 5th March there was a report in the Financial Times under the heading "Minister unveils countryside plan", which referred to two pilot projects at Bodmin Moor, Cornwall and in Bowland, Lancashire, which will test how best to combine protection of the countryside with measures to boost the rural economy. Dr. Cunningham is quoted as saying:
I understand from the same story that the grants will come from existing budgets under the countryside stewardship scheme for improving landscape and environment and the European Union-funded Objective 5b programme for rural development.
I had the good fortune, when I was a Minister in the Welsh Office, to be involved with the introduction of the Tir Cymen Scheme which is a rather superior countryside stewardship scheme in Wales. I must say that I was struck by the comment of one of the farmers who operate the scheme in the Dinefwr area of
Of course, hard work is not the only input. Financial resources are also required. The current fear is that if the profitability of farming is not greatly improved, there will not be many farmers left capable of taking advantage of the agri-environmental schemes when they become more extensively available. That point was made by the noble Lord, Lord Geraint.
Of course, we acknowledge that the Government have agreed to bear certain costs and defer charges, as announced on 25th February. But the farming industry is still crippled by the beef export ban, with cheap imports coming in and the collapse of incomes largely due to the strong pound. Again, perhaps I may refer to the remarkable statement in the Third Report of the Select Committee which said:
The report of the Institute for Welsh Affairs is full of ideas that call for a cohesive strategy backed by ample resources. But the situation with which we are now faced is far more basic. As Mr. Jim Thomas put it:
The rural economy lies at the heart of Welsh life and its prosperity is essential to the survival of the language and culture, as the Minister well knows. When we were in government we published our vision for rural Wales in a White Paper entitled, A Working Countryside for Wales. It was full of good ideas about how to sustain rural communities, promote enterprise and employment in the Welsh countryside and protect the local environment. The political commitment to the countryside was there but one has to say that it appears to be absent from the present Government's dicta, despite all their pre-election promises.
We are aware that agriculture is in a parlous state and that the rural economy is under threat. The Government will no doubt argue that that is not the result of their 10 months in office and that it has been building up over the past two years at least. But it is an inescapable fact that matters have now reached a critical stage and that unless substantial action is taken the rural economy faces serious and possibly irreversible decline. That is
Lord McIntosh of Haringey: My Lords, I should like to start by saying, "My Lords, and fellow Celts". I can only claim half Celtic ancestry but am pleased to have the noble Lord, Lord Mackie of Benshie, from north of the Border rather than from west of the Border joining me in this debate. My mother in fact came from Bethnal Green. She claimed that part of her ancestry was Welsh, in the horse-dealing business, but was not terribly specific about the nature of the horse-dealing business that came to Essex from South Wales.
I join with other noble Lords in thanking the noble Lord, Lord Hooson, for giving the House the opportunity to debate this matter and to expand on the considerable emphasis given to Welsh farming in the interesting debate that took place in December of last year. Some noble Lords were surprised by the emphasis on farming in that debate but, having heard today's debate, there can be no justification for that surprise. It was clearly appropriate that we should seek--and the noble Lord sought--an opportunity to debate the issue in full. I am grateful to all noble Lords for the expertise and personal knowledge which they brought to the debate and which the Government will take extremely seriously in their consideration as policies develop. I shall try to answer as many as possible of the points made in the debate. Should I miss any--I probably will--I shall write to noble Lords following the debate.
During the debate on 10th December my noble friend Lord Williams of Mostyn underlined the importance of agriculture to the Welsh way of life. I know that he and my colleagues in another place fully understand the frustrations which led to the recent demonstrations. The farming community in Wales, as elsewhere, is a decent, hard-working and resourceful community. No one in Government for one moment underestimates its current plight. We recognise the depth of feeling which prompted many to join the countryside rally on 1st March, together with the noble Lord, Lord Geraint, and no doubt others here today.
In relation to the Holyhead hamburger party, I was going to make mildly sympathetic comments. However, I confess to being taken aback by the speech of the noble Lord, Lord Thomas of Gresford. If a comparable speech, which bordered on justifying lawlessness, had been made in relation to the miners at Allgreave or Saltley, or about the French lorry drivers and the way that they treated British transport drivers and Spanish farmers in recent years, there would have been a considerable degree of outrage in your Lordships' House. If we are to stand up against lawless behaviour, against intimidation and against the maltreatment of those who the noble Lord, Lord Thomas of Gresford, recognised--the Irish farmers--are entirely innocent, then we must stand against it wherever it occurs, whether in Holyhead, France or in the Midlands at coal depots.
The Secretary of State for Wales and the Prime Minister have taken a close personal interest in this issue. Ministers have met farmers' leaders on several occasions to hear at first hand the anxieties of the farming community. The Motion today concerns the recent report of the Institute of Welsh Affairs on the present situation in the farming industry. The institute makes a valuable contribution across a wide range of issues affecting the people and the economy of Wales. However, on this occasion I do not believe that the report, in its conclusions, tells us anything that we are not already addressing in the development needs of rural Wales.
Perhaps I may start with the first question of the noble Lord, Lord Hooson; that is, the reason for the crisis in the agricultural sector reflected in the decline in farming. It is the result of a combination of several factors. First, there has been a general decline in demand for meat throughout Europe, coupled with over-production and the consequent impact on prices. That has been evident for a number of years and requires structural adjustments to agriculture. I shall of course return to that point.
Secondly, there is a ban on exports of British beef following the BSE scare. The Government inherited that problem and the House will know that we have now started a full inquiry under Lord Justice Phillips into the way the BSE issue was handled at the outset. I was grateful for the welcome given by the noble Lord, Lord Geraint, to that inquiry. The lifting of the ban is our top priority and the House can rest assured that we are working and will continue to work very hard to achieve that during the UK presidency of the European Union. Remarks have been made in relation to beef on the bone. There was perhaps a small step, but a move towards lifting the ban last week. That was the main purpose of the ban on beef on the bone; that is, to progress the lifting of the European ban. We will stick to our guns on that, as on other issues.
Thirdly, the strength of sterling has of course been a major contributory factor in the fall in prices for all major commodities, which in turn led to a fall in farm incomes. This is a matter, as has been recognised in debate, of swings and roundabouts. Over time UK farmers in all sectors, including the dairy sector, have benefited from the operation of the EU agri-monetary arrangements which slow down the rate at which currency strength feeds through to the sterling value of common agricultural policy payments. Even taking into account revaluations from last year, the current conversion from CAP payments remains 3 per cent. higher than in January 1992.
I know that the noble Lord, Lord Mackie, does not like selective comparisons over time. As a statistician, I sympathise with him. I know that the noble Lord, Lord Elis-Thomas, was suspicious of the way in which these figures are sometimes presented. But it is a fundamental fact that farm incomes have risen and fallen dramatically in different years, even in the past 10 years. Some of the reasons for this have become apparent in the debate and my noble friend Lord Williams of Elvel referred to the effects in Radnor in the early 1990s.
Fourthly, in response to the questions of the noble Lord, Lord Hooson, there is the strong consumer demand for greater food safety and animal welfare. This Government have made no secret of the fact that public health is a high priority to us, as it is to the noble Lord, Lord Elis-Thomas, and we have wasted no time in taking forward the work on the independent food standards agency. These four major factors point to the urgent need for restructuring, especially in the beef sector, and particularly underline the need for common agricultural policy reform.
The institute's report calls on the Government to respond to the plight of farmers. Indeed, the Government have responded positively to the current difficulties with a substantial aid package worth £85 million to the livestock industry. This exceptional and one-off aid package is both substantial and realistic, given the pressures on public spending. The maximum compensation that the UK could have paid under the compensation available in the period up to 31st January was, as a number of noble Lords have said, around £980 million spread over three years. Up to half of that in total can be reclaimed from the EU budget. The other half--or more than half--as has been recognised, comes from our own resources.
Within the totals there are limits on the amounts which can be spent on each of the four sectors for aid--beef, milk, sugar and cereals. The maximum payable to the beef sector under the arrangement up to 31st January was £154 million spread over three years. The maximum we could have paid to the beef sector in year one would have been £77 million. So the £72.5 million of agri-money compensation for suckler cow producers that the Government have announced is close to the maximum we could pay under the rules. I want to make it clear that, when people talk about global sums of £980 million, in the case we are most concerned with in this debate, we have spent virtually up to the limit of what would have been permissible under the rules.
A number of noble Lords referred to the hill livestock compensation allowance. The noble Lord, Lord Roberts of Conwy, in particular referred to the fact that it had been held at 1996 prices. He will recognise that it was increased in 1997 by £9.6 million to £36.4 million. I recognise, in turn, that that is because of the BSE crisis, but I would wish him to know that the European Union turned down any other prospect for one-off relief. That is why those are the only increases available. A major review of the HLCA has been carried out. It is very close to being published. The reason it has not yet been published is that it is still being translated into Welsh as I speak.
In Wales the package is worth more than £12 million: £8.4 million will go to farmers with suckler cows and £3.8 million will go to sheep farmers. This will mean--I say this to the noble Lords, Lord Thomas of Gresford and Lord Roberts of Conwy--nearly £2,000 extra on average for most cattle and sheep farmers in the Welsh uplands. The Welsh Office has sought to target help on the farmers with suckler herds so that we can help the farmers who are the bedrock of specialist beef production in Wales now and for the future. The aid is in addition to the substantial aid, worth £1.4 billion,
The institute's report makes great play about the provisions of the Fontainebleau agreement. Under its terms the UK's VAT contributions are abated by an amount equal to 66 per cent. of, broadly, the difference between what the UK contributes to the Community budget and what it receives. Over the years the abatement mechanism has generated some £22 billion for the United Kingdom. That is my answer to the fourth question of the noble Lord, Lord Hooson. It has had a significant effect on the amount of public expenditure which has been available to benefit all parts of the United Kingdom. My answer to the fifth question of the noble Lord, Lord Hooson, is that, after all, Fontainebleau was 10 years ago. Of course, agriculture was one factor in the agreement, but it was far from being the only factor. So my answer is qualified on that particular point.
The Institute of Welsh Affairs argues that the abatement acts as a disincentive to government to seek additional European Community spending in the United Kingdom. But without the abatement we would all be poorer. The nub of the matter for making additional aid available to any group in whatever form is that it involves an increase in government spending. Additional government spending in one area requires that a choice be made between reordering priorities and reducing spending in another area in order to live within what the country can afford; or going beyond that and either increasing borrowing or raising the level of taxation. These choices mean that there is a need to strike the right balance in the interests of all groups. The £85 million beef support package the Government were able to agree demonstrates that we have done that.
The Government have also recognised the industry's concerns about BSE-related compliance costs. The House will know that a fortnight ago the Government announced that they will pay some £70 million of those costs. What that means in practice is that charges for implementing specified risk material controls on cattle, sheep and goats will not now be recovered from the industry from 1st April as previously planned. This will represent a total saving to the industry of £35 million. I have to say to the noble Lord, Lord Hooson, in respect of his third question, that that is some support for abattoirs, but there is no other support for abattoirs planned at the present time. In addition, the entire start-up costs and the first year of the running costs of the new computerised cattle tracing system will be funded by the Government. This will represent a total saving to the industry of £35 million: £15 million in start-up costs and £20 million in running costs, including enforcement.
Noble Lords can see that the Government are paying attention to what is happening in agriculture. As I said earlier, we have responded positively to the needs of the industry. This reaffirms the Government's strong commitment to agriculture in Wales. It is a key industry.
The key issue for the immediate future in terms of stimulating economic growth is to focus on getting the new Welsh Development Agency running. The establishment later this year of a single economic development powerhouse will, I am sure, lead to significant improvements in services tailored to the specific needs of Wales. The powers of the Welsh Development Agency will be combined with those of the Development Board for Rural Wales and the Land Authority for Wales to provide services for urban and rural areas alike. While, for some, mid-Wales seems to be regarded as the rural part of Wales, that is not exclusively the case. There are many other rural areas in Wales and the combined skills of the new agency in rural affairs will be available across the whole country. The Secretary of State for Wales has confirmed his commitment to a strong rural affairs structure within the new agency and it is likely that this will be located in one of the regional offices.
However, there is little doubt that agriculture needs itself to adapt to meet the demands of the 21st century. As a number of speakers have recognised, Welsh agriculture, in common with farming in the rest of the United Kingdom, faces immense challenges in the years to come. The challenges arise both within the European Union and worldwide, but we cannot ignore them. We have to be realistic; agriculture needs to adapt. Reform is inevitable and we must respond to the challenges which it will bring.
Current market trends in the three key agricultural sectors in Wales of beef, lamb and dairy production all reflect price changes at the global level. We have to recognise that our prices in some key sectors are well above the prices of some of our world competitors. In the five years between 1992 and 1997, the average steer price in Great Britain exceeded the Argentina beef export price, one of our main competitors, by between around 40 per cent. and almost 100 per cent. In the second quarter of 1997, it was still some 50 per cent. higher. Lamb prices exceeded world prices by some 35 per cent. United Kingdom milk prices exceeded world prices by some 45 per cent. As a result our market position is weak and vulnerable.