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Structural Reform In The Cap: Eec Report

Volume 374: debated on Tuesday 5 October 1976

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12.4 a.m.

rose to move, That this House takes note of the Forty-sixth Report of the European Communities Committee of this Session on Structural Reform in the C.A.P. (R/717/76 and R/1234/76). The noble Lord said: My Lords, there is a sentence in the Book of Ecclesiastes which runs:

"To everything there is a season and a time to every purpose under heaven."
Whatever the noble Lord, Lord Strabolgi, and I may differ on—and I hope that it will not be very much—I hope that we can agree that five minutes past twelve is neither the time nor the season to begin a debate on the Common Agricultural Policy and its structural Directives. If I were kind, I should withdraw my Motion, but I must persist after all the efforts of my colleagues on the Agricultural Sub-Committee, not to mention the clerk and the specialist adviser. I therefore beg to move that this House takes note of our Report on Structural Reform in the CAP; the Common Agricultural Policy.

My Lords, why is the Common Agricultural Policy important? Why should we be interested in it? It is unpopular, ungainly and apparently wholly unreformable. Nevertheless, it is the Community's most developed and most coherent common policy. Without it, the EEC might easily disintegrate altogether, and it still absorbs an overwhelming though gradually decreasing proportion of the Community Budget. It is a central pillar of the structure of the Community.

We may have different views about the price support system which is the device of using the price to the producer as the main tool of an agricultural policy. That is the keystone of the Common Market's Common Agricultural Policy. But whatever our views of the price mechanism itself, we must all surely share the longer-term objectives which are furthered by the structural Directives which are the subject of the report that I am presenting to your Lordships tonight; because the objective of these directives is a more rational, up-to-date and efficient farm structure which should, in the end, benefit both the producer and the consumer.

My Lords, you cannot consider farm structure in isolation from farming and people. Farm structure is not an antiseptic or metaphysical concept or just an economic jargon term. Decisions about the structure of farming in the EEC affect the lives of millions of people who work in agriculture. They also affect the pattern of life and the day-to-day existence of thousands of small communities—and we have heard about that in the previous debate. In the sphere of agricultural reform every apparently or superficially straightforward objective has enormous social consequences. The Common Agricultural Policy is an agricultural policy but, as we heard in the previous debate, unless it is to founder it must be part of an overall regional social and perhaps eventually monetary Community in which the CAP takes its proper place.

It is common knowledge that the CAP has spurred on those changes which have resulted in cutting the Community's agricultural workforce in half. That sounds fine. But what is the human cost? And when looking at these Directives, which look clean-cut and clear, we must always think of the human consequences. The future of the small and uneconomic farmer presented your Sub-Committee with serious problems. We could not agree. It is the logic of the directives which I am asking the House to consider that we wind up the tiny, unproductive farm—and the noble Lord, Lord Raglan, mentioned this in the earlier debate. I wish that the debates had been taken together; for it would have been a better evening for your Lordships.

Therefore, the question that I wish to put is this: what message does the EEC have for, let us say, people in North Wales, where unemployment is already at 10 per cent., and where the traditional industries like slate mining and coal mining are being wound down and where the small farmers preserve traditions and communities and keep mountains from being submerged in bracken and thereby attract tourists?

My Lords, it is the interlocking of the human and the economic that these structural Directives really make us face when we are looking at the future of the Common Agricultural Policy. I have tried to paint the background. I should like to look at the Directives one by one.

I should like to begin by forgetting that I spent some time in Strasbourg; I should like to begin by being purely British. Do the grants these Directives allow serve British interests? Do they suit British needs? Do they fit in with the

policies outlined in Food from our Own Resources? Do they form part of the best possible farming future for Britain inside the Community?

The first Directive that we considered was No. 72/159. This is a system which is gradually absorbing if not overtaking and replacing our traditional farm and capital grants scheme which is well-tried, simple, easy to understand and something to which farmers are accustomed. The first serious question that I must put to the noble Lord, Lord Strabolgi, is this: is the new Community grant, the farm horticulture development scheme fully adapted to British requirements? We heard tales in evidence given to us—and there were figures in the Community's document—that the take up in the United Kingdom had been pitifully low. The Community scheme demands a five-year plan of investment, a forecast of increases in production, something British farmers have never had to do before when filling in applications for our own scheme.

Are the Government satisfied that even their latest version of the Community scheme has made it worth while for the British farmer to apply? Can the Government give any rates with regard to the figures for applications which have been made? If there is anything the noble Lord can say about altering the base rate at which pig producers can apply, I am sure they would be very grateful to hear it.

That Directive is the one which affects farmers most significantly; but there were others that we had to consider. They mostly fell into the category of things which did not suit the United Kingdom well at all. They were in train before we joined the Community, so it is not completely surprising. The second Directive that your Lordships' Agriculture Sub-Committee examined is 72/160, which provides for an annuity or premium to farmers who stop farming because they are too small, and hence make land available for other larger units. It was interesting to hear the noble Lord, Lord Peart, reflect on the importance of amalgamations and increased farm sizes in the previous debate.

This Community grant is available only if the land given up by those who qualify under it is handed over to somebody else who has already qualified for the first grant that I mentioned. Therefore the take up has been fairly low, even remembering that British farm sizes are 2½ times as large as the average size in the Community. I should like to ask the noble Lord, Lord Strabolgi, about this Directive, 72/160. Is it really suitable for the United Kingdom? Does he feel that there are any improvements which the Government should strive to make to make it more attractive to people in this country who might be feeling the need to pass on to something else?

The other Directive that we took evidence on was 72/161. This has two sub-divisions. The first title is concerned with socio-economic advisers, a term to which the noble Lord, Lord Mackie of Benshie, took exception in our deliberations. I must say that anybody who dared to call himself a socio-economic adviser when going into a farmyard would be a very brave man. But it enables us to apply for grants from Community funds for our own ADAS services and their equivalents in Scotland and Northern Ireland.

Has the sum of money which we noted in our report for 1974 and 1975 as being promised, yet been received, or is it still something that is just a glint in the eyes of the recipients and for which the cheque has not yet been signed in Brussels?

The second part of Directive 161 concerns vocational training for farmers. There were some grounds for thinking that this again, while useful, had not been fully adapted to British requirements. I wonder whether the noble Lord, Lord Strabolgi, has anything to say about the comments of the Agricultural Training Board on this particular Directive.

I want to finish soon. I should have spent longer on the details had it not been so late, but I hope I have said enough to give the noble Lord, Lord Strabolgi, a platform for commenting on the usefulness of these Directives to the British agricultural industry. These Directives form a part, though only a small part, of the EEC agricultural budget. We must look at the other part when considering the Directives on which your Committee reported.

This Common Agricultural Policy has two aspects: one concerns the positive measures and grants under the Directives we have been examining under the "Guidance" section, and these make a small but worthwhile contribution towards the solution of the Community's underlying agricultural difficulties. The other part is the increasingly costly price support activities. To me, it seems almost incredible that while the Common Agricultural Policy has been creaking and groaning under the weight of currency fluctuations and under the stresses and strains in the agricultural scene, the Council have not raised the absolute limit on the "Guidance" section of the CAP which seeks to improve agricultural structures. Even worse, because the grants are not pitched sufficiently high for Member States to find them sufficiently attractive, there were surplus allocations for one year set aside for the "Guidance" fund, and these were merely transferred forward to future years instead of being used to make the grants more attractive.

I want to conclude by asking the Government whether they can give us any idea about their intentions for the reform of the Common Agricultural Policy. I shall not comment on the Green Pound: that has been dealt with today in Luxembourg and we shall read about it in the papers. But whatever is said in Luxembourg, the Green Pound at its present level cannot persist. By the beginning of 1978—which is not very far away—we as a country are committed to phasing out some of the agricultural subsidies. At the moment we are 30 per cent. below price levels in the Community.

We need to begin to form a view on what the new direction of the CAP should be, because our partners in the Community will not tolerate the level of subsidies they have been prepared to tolerate up to now. At the beginning of next year, the Government have a chance to begin to prepare the country for the changeover when the transitional period of our entry into the full CAP starts at the beginning of 1978. We take the Chair in the Council of Ministers; Roy Jenkins is going to Brussels. There is a moment in the Community's history when profound re-thinking is not only necessary but perhaps something that can be put into practice.

The noble Lord, Lord Peart, mentioned the drought, and some of us feared that this might be used as an excuse for not reforming the CAP. I hope that the noble Lord, Lord Strabolgi, can give us some idea of the kind of changes the Government would like to see in the nature and application of these structural Directives, and if he can give us a hint of the Government's views on these grants as part of a strategy for agriculture, part of a strategy for a successful and prosperous British agricultural industry playing a leading role in the development of a new Common Agricultural Policy, then this debate, however late at night and however sparsely attended, will have been worth while. I should like to apologise to the House for having gone on so long, but I feel that, however late the hour, this is a subject of such importance that, having taken so much trouble in our Committee to collect evidence, it was necessary to bring it before the House. My Lords, I beg to move.

Moved, That this House takes note of the Forty-sixth Report of the European Communities Committee of this session on Structural Reform in the CAP—( Lord O'Hagan.)

12.21 a.m.

My Lords, I will not, as everyone says, keep the House for long at this late hour, but it is a subject of immense importance and I think that a general structural reform of agriculture in all forms is probably the most important agricultural subject that we have discussed today. Structural reform really means the creation of efficient farms, and by "efficient" I do not mean farms that can be run with one man by turning on taps, pouring fertilisers in all directions and sweeping up the result in the cheapest possible manner. I think that structural reform and efficient farms must mean a system whereby we can go on improving the land and making it more fertile, improving the buildings and seeing that there is a succession of good farmers to people the farms. The Mansholt plan in Europe was intended to get rid of a very large number of very small farmers, and to approach the kind of structure which gives us a tremendous advantage in Great Britain. Real wealth in the world started only when people could be spared from hunting or producing food, and this process has gone on in every civilised evolved country to the extent where in America they produce all the food they require and export a great deal, with only 4 per cent. of the working population engaged in it. This must be the objective of any structural reform in Europe.

We require to look at our own structure. We have a great advantage at the moment, for we do not appear to know where we are going. We do not know whether we want the landlord and tenant system, taxation has made it nearly impossible to continue with an owner-occupier system, no word has been heard, thank Heave! about land nationalisation for a long time, and now in the Highlands we are engaged in trying to get the crofters to buy their farms. The Government must, sooner or later, get their taxation policy right. I am all for a lot of taxes, such as wealth tax, estate duty and capital transfer tax, if they are allied to the ability of a hard working chap to keep enough money with a reasonable rate of income tax to pay them off, which can be a great incentive. But at the present moment nobody knows what he is doing. I do not think this has much to do with the CAP policy, but it has a great deal to do with our own policy and our own farms.

There are a number of points which have not been touched on and I should like to mention one or two. We have not taken evidence on the last Directive, although a few people mentioned it, which is the one on mountain and hill farming and farming in the less favoured areas. This is a matter which the Government would do well to look at, because while the headage payment under the hull farming schemes is quite satisfactory, an enormous amount of food in this country is produced on the land immediately below the hills and that is not taken care of in exactly the same way as the pure hill areas. We need to stress this point because in this country a very large amount of stock and very large acres are represented by this area of marginal land. At present they are catered for largely by the beef and the calf and ewe subsidies.

The capital grant scheme has been of great advantage to farming, and there is little doubt that the new farm and horticultural development scheme is rather better once you get over the initial complication of making your application. I understand that the result of the introduction of the new rates is that grants are being taken up rather more frequently.

I think we ought also to consider, especially in the case of the areas badly hit by drought for two years running, mainly in the South of England, whether people will have the money to put up their part of the scheme. I have always said that the Government should consider cheap loans in areas where the farmers have not the money. There are certain areas in Scotland and in favoured parts of England at the moment where they would not need the money. On the other hand, in large areas of the South of England the farmers must be short of money.

I am glad that the noble Lord, Lord O'Hagan, mentioned the socio-economic advisers. I should like to say something not only about their name but about their function. I am very glad that we have a certain amount of money with which to train these socio-economic advisers, but I hope and trust that they will be purely part-time and that they will desist from their curious duties when farmers, who are not stupid people, understand the advantages to be gained by the various grants. I view these socio-economic advisers with grave suspicion. I think that they are an addition that we could well do without because farmers are not nearly so stupid as many bureaucrats seem to think.

We ought to pay a good deal of attention to our own experience in the Highlands of the crofting Acts which we have had from time to time and the development of crofting in the Highlands. I agreed with the noble Lord, Lord Peart, when he said that amalgamation grants might do as much as anything towards improving structure. What has often happened in the Highlands and the crofting areas is that the old people have hung on to their crofts—not only the house but the land also—while young men have been unable to get enough land to make a go of it. Very often the co-operative schemes—the communal hill farms—are not worked, simply because the system of bookkeeping is that you pay all the accounts when you get the cheque for the lambs and the wool and you divide what is left; therefore no reserves are ever kept with which to enclose land. But where the crofters take advantage of a rationalisation scheme and enclose land themselves one begins to get a good deal of advance and to see green areas in the hills where people are really working and applying themselves.

All of these matters are very relevant. We took evidence also from the Friends of the Earth. The Friends of the Earth might be thought by a number of people to be cranks and I dare say that they are a bit cranky, like all of us. However, they spoke a great deal of common sense. It is no good having a countryside containing enormous farms, but very few people to work them and nobody to do the odd jobs, and putting enormous inputs of bought-in energy, in the form of fuel, sprays and fertilisers, into the land when it can be done a great deal better, in some cases, by using more labour. As the Friends of the Earth pointed out, we are using far too much in the way of the indigenous fuels and riches of the earth without looking at the question of a biological approach to the inputs in farming. They pointed out one or two quite interesting facts. That Denmark, which is supposed to have a surplus of 300 per cent. if you take away inputs, in other words the barley, the wheat and other things that they buy in from abroad, would in fact reduce production to about a quarter and might not then be self-sufficient, and I think we want to look at these long-term biological factors when we are studying structural reform. I think the Government could well mount more serious investigation into the claims of various biological Friends of the Earth and others who believe in biological rather than in chemical farming. As a farmer using all the modern devices myself I sometimes worry about it, and I would like to see more serious investigation of the claims of the biologist as against the claims of the chemist.

12.31 a.m.

My Lords, I really must start by saying how very unfortunate it is that not only such an important subject is being debated in your Lordships' House at this late hour, but also that so few Members of your Lordships' House are here to take part in the debate. I know it is extremely difficult to get Members of the European Parliament to be within your Lordships' House during these debates because both my noble friend Lord O'Hagan and I have gone through this process, but I think it would have been both interesting and helpful if we could have had at least one Member of the European Parliament available to take part and to give us some of the views of colleagues in the European Parliament of Strasbourg and Luxembourg.

I should like to take this opportunity of congratulating my noble friend Lord O'Hagan not only on having obviously been the driving force behind the report which we are considering tonight, but also on the very clear and excellent speech with which he introduced the report. Again, I think it is a great pity that more people were not here to be able to hear his speech and to debate it. He has stressed the enormous implications of the CAP and the policies relating to the restructuring of the CAP; the implications of this policy on individuals in their thousands—those individuals, the farmers and their families, who will be affected by changes in farm structures, to say nothing of the 250 million people who will be indirectly affected, by prices, by product availability, and so on, as a result of the measures which are to be taken.

We have earlier considered in some detail aspects of the agricutural industry and I share with my noble friend the regret that this was not all considered at the same time, because obviously both these subjects must impinge very much one upon the other, and particularly in the United Kingdom, where the dairy industry is, of course, one of the largest elements within the agricultural industry and it is almost impossible to discuss properly and seriously the one without the other. In fact, many of the proposals of the restructuring will presumably to some extent affect the dairy industry. One of the difficulties in discussing the Common Agricultural Policy is the wide divergence in the farming structure in the different Member States, and, like my noble friend Lord O'Hagan, I will try to concentrate, at any rate to begin with, on the CAP in relation to the United Kingdom.

I know that the noble Lord, Lord Strabolgi, will not take it in bad part if at this stage of the evening I start to be slightly Party political. I think we must begin by realising that the whole of the consumer interest, that is, the price of food in this country, is very largely dependent on the beneficence of other Member States of the Community through the monetary compensation amounts which, due to the state of the pound, are now flowing at the incredible rate of over £1 million per day. Something nearer £1,250,000 per day is being paid by the Member States of the Community to enable people in this country to keep down to some extent the price of food. It is being kept down by something like 20 per cent.

I really must say, although it is late at night, and I know that the noble Lord, Lord Strabolgi, will not take it amiss if I embark on Party politics, that it would be inappropriate to advise our friends on the Continent who support us so much financially at this time that they should take any regard whatsoever of the card vote at the Labour Party conference last week on the subject of direct elections, when we are depending so much on our friends for this bonus of over £360 million a year. I should like from this side of the House to assure my friends on the Continent that it in no way reflects the feelings of the British people.

My Lords, another slightly Party political point is in relation to Directive 72/159 relating to Community policy to increase the size of the average farm. I accept that the Community farm in most of the other Member States, on the whole, is smaller than that in the United Kingdom, but the policy of Her Majesty's Government seems not to be restructuring farms to increase their size in order to increase efficiency, but to take every means, fiscal and political, to reduce the size of farms. What is in fact happening is that by fiscal measures you are forcing a reduction in the size of farms and limiting the possibility of one generation succeeding the other. That is in relation to the owner-occupier of farms.

On the other hand, this afternoon we have been discussing an equally interesting hereditary principle—indeed, a feudal hereditary principle—which will be applicable to the holder of land as a tenant. Of course, this will be very greatly to the detriment of the agricultural industry as a whole. What in effect will happen is that the young man who wishes to become a farmer will never have a chance of becoming a tenant farmer because tenant farms are being held practically in perpetuity. So it will be only the young man with some capital who has any chance at all of becoming a farmer. What young man nowadays, at the age of 23 years or 24 years, has sufficient capital to buy a farm, with the price of land as it is? If the Government are seriously going to consider applying policies of the CAP in this country, they will have to reconsider their fiscal and political activities in this field.

One has only to take obvious evidence in a magazine such as the Farmers' Weekly, in which about five years ago there were at least two or three pages advertising farms available to rent or to lease, and now probably about one or two farms only are being advertised. This indicates that there has been a very rapid decline in the number of farms available for young men wishing to enter the industry. One must take this in relation to Directive 72/160, which refers to farmers going out of agriculture. If elderly farmers are leaving agriculture, and you are dissuading them from running small farms, and you want large farms with younger people in them, they have to have the possibility to buy these farms. So one must ask who will be going into farming in this country in the conditions as they are being set out by Her Majesty's Government?

With regard to other Directives within this report, the Forty-Sixth Report of the European Community Committee, I very much welcome the consideration that the Commission are giving to the reform of upland and mountain farming, particularly in relation not only to Scotland but to other parts of the Community, because I think this is an area where there have been for some time conflicting interests as between tourism, farming and regional development. They are all three policy aspects of activities which are going on in those regions and which seem to have been pulling in different directions. I think they must be considered together, not in isolation. So much of the farming problem is not an isolated problem and one will never find any sort of solution unless one looks at the picture as a whole.

There is a danger in taking people off the land for economic reasons and this cannot be done without having some very serious side-effects not only on the land itself but also on society. There are already many derelict areas of land which were formerly farmed and have now been abandoned by the farmers in favour of the city. In those areas which have been abandoned I believe that there should be very energetic policies devoted, possibly, to reafforestation. Very much more should be done in the field of forestry; and I consider that it is a part of the agricultural industry which has been very much neglected both in this country and in other parts of the Community, particularly with the need that exists in the Community for wood, which for the time being has to be imported. I think this is an area to which much more consideration should be given.

For the individual, the farmer who leaves his farm, the change from farming to urban life may turn out to be disastrous. I do not think it is an easy thing to say, "We will close down the farms, enlarge them, and take people off the farms". That is, in fact, making families change their whole way of life. Not only that; it is divorcing them from a background and habitat to which they have been brought up from childhood, and very much more consideration must be given to this problem, because the farmer more than any other worker is the one man who is attached to his job, to his house, to his physical surroundings. It is very much harder for a farmer to move into the city than, say, for a steel welder to move from one factory to another in another part of the country. Here again there should be a much more human approach and more understanding of these particular problems. I am not sure whether it is a socio-economic director who is wanted—I do not care what he is called—but I really think that consideration must be given to the kind of social problems that must arise from this aspect.

If there is a criticism to be made of the attempt by the Commission to analyse and make proposals relating to the structure of CAP it concerns the apparent lack of correlation between the financial, economic and social considerations, and also, of course, the repercussions in areas of policy-making and policy decisions, which overflow from one sector to another. Previous speakers both in the earlier debate and to some extent in this debate, although only a few have so far spoken, have tended to think in United Kingdom terms of large farms, but we have to understand that the CAP is based primarily on the objective of the farmer who is working his own land for a fair return on his work. That is really the principle on which the CAP is based—that he must not suffer from price fluctuations and be discouraged from producing what society needs.

I think we all agree that agriculture and the products of agriculture must be the most essential of all industries and products. I apologise to the House for not having had lime to look up in the latest Department of Employment Gazette the average wage for an unskilled manual worker, but the last time I looked it up it was somewhere near £68 a week. You can imagine what a farmer must earn in order to get an equivalent income.

This really is at the back of the thinking of the Commission: that whatever measures are taken the farmer who stays on the land should not have an income value less than at least the average wage of the skilled, or even unskilled, manual worker; because, of course, the differential is now narrowing. I very much welcome the Commission's proposals. I think they are thoughtful. They are taking into account many of the problems. I do not say necessarily that they are the total solution. Enormous sums of money have been going in MUA's which obviously will have to be phased out, because it is an intolerable situation that so much money that could be spent on doing so much good throughout the Community should be spent to prop up a falling pound in order to prevent consumers in this country from having to pay too much for their food.

I welcome the report from the European Communities Committee. I particularly welcome from these Benches the presence of my noble friend Lady Tweedsmuir. I think these reports are some of the most efficient documentation we are privileged to have in your Lordships' House, and I should like to extend my gratitude to her for all the work she and her Committee do. In conclusion, I would thank again my noble friend Lord O'Hagan for presenting this report and for all the excellent work that has gone into it.

My Lords, if I may, I want to advert to a point made by the noble Lord, Lord O'Hagan, and the noble Baroness, about the reasons for discussing the milk proposals and the structure proposals separately. We had a long debate in the Committee, and I think they were right in believing that they should be taken separately. This debate should have been a very wide debate indeed, and I am very sad that, because of this ridiculous timetable we are having to pursue, the debate is being held at this time and so thinly attended. I agree with the noble Baroness that we should have a debate when there is time for the Members of the European Parliament to attend. I hope at the start of the next Session, when very often your Lordships' House is looking for something to do, we can have a full-scale debate on the CAP which will include reference to this excellent report which the noble Lord, Lord O'Hagan, has taken such tremendous trouble to produce.

My Lords, may I thank the noble Lord for his very kind remarks. We will take note of what he has said.

12.48 p.m.

My Lords, I agree with my noble friend Lord Raglan; we are indebted to the noble Lord, Lord O'Hagan, for this excellent report, and I am very grateful to him for moving his Motion. We are indebted also to the European Office—I am very glad, also, to see the noble Baroness, Lady Tweedsmuir, here—for the lucid way in which it has been presented. I agree also with Lord O'Hagan that the CAP is the central pillar of the Common Market's farm structure. The noble Lord and other noble Lords have made various points which I shall deal with later. It is a rather memorable debate for me in many ways; it is the first one in which I have taken part with the noble Baroness, Lady Elles. I have often admired her polemics across the Dispatch Box, but this is the first debate in which we have taken part together. I did not really expect her to keep off Party politics; she hardly ever does. I can hardly think of a subject on which she would. This is, of course, a particular week in which her mind is concentrated on these things. So, apart from a few Party political points, I do very much welcome her most constructive approach. I will try to answer some of the questions she raised, as well as those of Lord Mackie of Benshie, who is an old debating partner on these subjects.

My Lords, the debate has provided an opportunity for a wide-ranging discussion of points of great interest to British agriculture. If I may address my remarks at the outset to the Motion before the House, I must express my gratitude to the Scrutiny Committee under the chairmanship of the noble Lord, Lord O'Hagan, for the excellent work they have done in the large area of farm structure policy, and my agreement with their finding that the structure Directives raise important matters for the future of British farming within the Community.

The Commission's report on the operation to date of the agricultural structure Directives, numbers 159, 160 and 161, states that it is too early to make a detailed assessment of their effect. The report for the most part describes the history of the structure policy and summarises the implementation of the three Directives in the various Member States. The most important point to stand out from the report is that the United Kingdom's agricultural structure is substantially different from that of other Member States in having an average size of holding several times higher than the Community's average, as has been said in this debate. But average figures can conceal great variations in size and efficiency. There is, in fact, in this country still scope for improving farm incomes through greater efficiency, for example by replacing old buildings and equipment and educating and training farmers and workers to a higher level of technical competence. It is important too that farms should be of an economic size.

The Government consider that there is an important place in the Community for a policy on agricultural structure, since an efficient agriculture offers the best hope of containing the EEC common prices for commodities. I will have a little more to say later on about the Government's future thoughts in this direction. We have come to the conclusion that Directive 72/159 provides a useful framework for aids to farm modernisation. The planning concept in the Directive, the treatment of farm income as a structural matter, the range of aids available and the scope for national schemes are good, and in our view should be beneficial. It is true, of course, that our early experience of development plans under the Farm and Horticulture Development Scheme, which implements the Directive in this country, was disappointing in that there were not many applicants. One reason for this was that the development plan procedure, apart from being new, was complicated and time-consuming and may well have restricted the scheme's appeal to farmers. However, the simplification introduced into the Scheme on 1st June this year and the major promotional effort which the Agricultural Development and Advisory Service are now putting into the Scheme have resulted in a dramatic increase in applications. Now that initial teething troubles have been overcome the Directive seems to be well suited to United Kingdom conditions.

The Directive and the FHDS concentrate on the middle band of farmers, since both the farmer who is already efficient and whose income is above the comparable income outside agriculture, and also the relatively inefficient, non-viable farmer who could never hope to reach the comparable income are excluded from the most favourable forms of aid. In short, the Directive is aimed at those farmers with the greatest potential for development. At the same time there is a continuing need for investment aid on other farms, both those above the comparable income and those below it. There will therefore be an important place for national aid under the Farm Capital Grant Scheme for investment on these farms.

Directive 72/160 aims to encourage farmers to give up non-viable farms in order to release the land for amalgamation with other land to form or expand commercial units. The Commission's report states that the effectiveness of the Directive has been limited by the way in which it has been implemented in Member States. Experience in the United Kingdom, based on schemes operating since 1967, suggests however that the Directive's approach is not really suited to United Kingdom needs, and other Member States have expressed doubts. The success of schemes of this kind as a means of encouraging farmers to give up farming must depend greatly on the extent to which other employment is available—and I shall have more to say later about this point, which was raised by the noble Baroness. Moreover, United Kingdom evidence is that most amalgamations take place outside the schemes and this suggests that many farmers who receive grants under the Scheme might well have released or amalgamated their land anyway. It must be recognised that, by virtue of its concepts and the measures prescribed, the Directive has implications well beyond the economics and efficiency of agriculture. It raises major social and regional issues.

Barring a comprehensive approach, perhaps on a regional basis, which went well beyond strictly agricultural questions and is outside the scope of this debate, we believe that the most effective direct way to improve farm structure is by means of capital aids to enable farmers to maximise their incomes. Thereafter, natural economic and social forces should be left to operate—I am sure that would appeal to the noble Baroness—as they have been doing in the past, to increase farm size to match agricultural conditions in this country. We feel that the Community should now seriously consider whether Directive 72/160 continues to fulfil a useful role, not only in relation to the United Kingdom but as regards the rest of the Community.

One firm conclusion that the Commission Report comes to is that all unit of account limits set out in the structure Directives should be increased in order to take account of inflation in the Community since the Directives were first introduced. This proposal would be given effect by the adoption of Draft Instrument R/1234. This Instrument would increase rates of aid broadly in proportion to the length of time which has elapsed since the Directives came into operation. In broad terms, it seems acceptable that amounts should be increased in order to maintain the levels of incentive in the face of inflation and that the increases should be in proportion to the age of the Directive.

Nevertheless, it must be borne in mind that only 25 per cent. of expenditure is reimbursed by the Community and, for this reason, it may be desirable for the Community to select those limits on which the need for action is urgent and proceed with those in advance of the others. We would hope to see in this category the limit per hectare for compensatory allowances under the Less Favoured Areas Directive. The Government also intend to seek some flexibility over guidance premiums so that individual Member States might make payments at the level most appropriate to their own circumstances.

In total, structure policy should be aimed at improving the economic viability of farms throughout the Community and thus reducing their dependence on high levels of price support. This would best be done by concentrating on farm modernisation and leaving social and economic forces, including the relating of prices to efficient production, to eliminate inefficient farms, without prejudice to circumstances where social considerations point to the need for special measures of assistance. The Government aim to direct Community policy towards this end and to ensure that all measures are fully cost-effective and bearing in mind also the need to allow sufficient flexibility to take account of national circumstances.

That is the general picture, but I was asked some specific questions which I will do my best to answer. The noble Lord, Lord O'Hagan, asked about pig investment. Directive 159 provides that grant aid to encourage investment in pig production must be limited to enterprises which are capable of producing 35 per cent. of their own pig feed requirements. The object is to avoid encouraging the development of intensive pig production units divorced from agricultural land. It makes sense in a community which is virtually self-sufficient in pig meat that the funds available to improve farm structure should be aimed at developing smaller, less intensive farms rather than large, intensive production units. This restriction is well understood and accepted in the Community.

The noble Lord also asked about FHDS and whether this was not too complicated and too rigid. There is no escaping the fact that Directive 159 and hence the FHDS are more complicated than previous investment schemes have been in this country. Partly because of its complexity and partly because of its unfamiliarity, the scheme attracted disappointingly few applicants in its first two years of existence. Because of this, the Government decided to simplify the scheme. On 1st June this year various changes were introduced. Application under the scheme is now simpler than before and some of the conditions are less strict.

There is more flexibility over how plans may be carried out and in the conditions in which changes can be permitted. Also, since June the ADAS has devoted a major effort to promoting the scheme and to advising farmers on it. These developments, coupled with the favourable rates of grant under the scheme, have attracted a greatly increased rate of application which suggests that the earlier problems of complexity and rigidity have been overcome.

The noble Lord also asked for some figures. Of course, this has not been going for very long and I can only give him figures for the last two years. But, for example, in 1974 there were 685 applications received as against 979 in 1975. In 1974 there were 132 development plans approved and in 1975 there were 465. So I think that that 6hows quite an improvement.

The noble Lord also asked about agricultural training. The EEC grant paid under Title II is intended partially to reimburse costs of training measures that relate to the EEC's policy on agricultural restructuring. This grant is not intended to reimburse any part of the Member State's normal provision of vocational training at secondary and tertiary levels. Consequently, the grant is partly intended to assist in the vocational training of those persons who have "missed out" on normal State provision of basic agricultural vocational training and education.

With regard to advanced courses of vocational training and education the Commission take the sensible view that this type of training will benefit only those persons who are sufficiently receptive and capable of applying new learning. To ensure, therefore, that EEC grant-aided advanced training is given to those who can benefit, the Commission has decided that eligible persons must have either previously undergone a course of basic agricultural training or be over age 25 and have at least five years' relevant practical farming experience.

I very much welcomed the constructive speech of the noble Lord, Lord Mackie of Benshie. He asked, as I thought he probably would, about hill farming and made some points which we shall of course note very carefully. The EEC Directive No. 75/268, on mountain and hill farming and farming in less-favoured areas, is designed to ensure the continuation of farming, to maintain a minimum level of population and to raise farm incomes in hill areas. Under this Directive headage payments are made to hill farmers to compensate them for the handicaps of farming in hill areas and favourable rates of aid for expenditure on capital investment are available.

I would remind the House that the Government commitment to this policy amounts to about £60 million annually. The noble Baroness, Lady Elles, asked about efficient farms—which I thought was an important point to have raised and I am very glad she did so. If I understood her aright, she asked why large and efficient units were excluded under the FHDS and whether improvement should be concentrated on better land where returns would be greatest.

There is no limit on the size of farm benefiting under FHDS. The central feature of Directive 159 is the concept of development plans. The Directive, and the FHDS which implements it in the United Kingdom, are therefore aimed at those farms which could most benefit from undertaking a development plan. These are, broadly, the middle range of farms where labour incomes are low at present but could be brought up to the comparable income outside agriculture. Farms which already earn an income equal to or above comparable incomes are probably highly efficient already and have less need of formal development plans. Aid for investment is available to them under the United Kingdom national scheme, the FCGS. A number of very large units indeed have, in fact, qualified for aid under the FHDS.

I also took very careful note of what the noble Baroness said about farmers who cannot be persuaded to leave their land, and I thought there was a lot of very basic truth in what she said. This, of course, is not a matter of such concern in the United Kingdom as elsewhere in the EEC on the Continent where, of course, there is a large peasant farming community. Money it self is not always the main attraction when it comes to farming, as the noble Baroness recognised. It is, of course, a way of life; and farmers, especially the owner-occupier, are fundamentally reluctant to give up their land until they have to retire. They look upon their land, quite rightly, as a durable asset especially in times of inflation. Other Member States have experienced this, too, which is why the EEC has set up a Working Party to examine the position in advance of reviewing all the structure Directives.

Lastly, my Lords, the noble Lord, Lord O'Hagan, laid emphasis, I think, in his opening remarks on the need to reform the CAP. He asked particularly about the Government's priorities and how they are going to be achieved. Before I deal with the future, however, I hope that the noble Lord will not take it amiss if I remind him that the present Government have, during renegotiation and during the discussions on the stock taking, and indeed subsequently, pressed for and achieved a substantial measure of improvement in the operation of the CAP. I think that we owe a great debt, if I may say so, to my noble friend Lord Peart as a spokesman on agriculture. I am very glad that we have the former Minister now in this House as Leader. I should like to associate myself with all that has been said. But do not let us suppose that we are just starting out on this path, as I thought in a way the noble Lord perhaps implied. We have already made good progress, for example, in the beef sector with the introduction of the beef premium scheme and in the restructuring of the support arrangements for cereals.

The Government's central aim has been to see the CAP operating effectively and without unnecessary waste of resources. This remains of basic importance. The CAP, in our view, should provide effective support for efficient producers, but it must not be allowed to impose excessive cost burdens on taxpayers or on consumers. The problem is to avoid the creation of wasteful and unnecessary surpluses which are generated by pitching support prices too high. An important way of achieving this is to link support prices to the needs of the modern and the efficient farm and to the situation in the market of the commodity in question. I know that my right honourable friend the Minister of Agriculture, Fisheries and Food will have these points very much in mind during the approach to the next Community price fixing.

My Lords, let us be realistic: improving the operation of the CAP is a continuing process; different Member States have different interests and objectives. We cannot unilaterally change the nature of the CAP overnight. But we can work for change on the basis of a general recognition, shown, for example, in the Commission's report on the stocktaking of the CAP, that improvements must and indeed shall take place.

1.10 a.m.

My Lords, I must thank all Members of the House for staying so long and especially the Chairman of our Committee for keeping a watchful eye on our proceedings, as ever. I want to thank particularly the noble Lord, Lord Strabolgi, for having replied so comprehensively and exhaustively—not exhaustingly—to all the questions that we put to him. I will study tomorrow what he said and perhaps write to him if there are any further points.

I must also thank my noble friend Lady Elles for her contribution. If she ever has the time to offer herself for co-option to the Agricultural Committee, her speech tonight will have qualified her without any of the other qualifications that she has already chalked up in the European field. I will say one more thing. When somebody who is a full-time chairman of one of the Scrutiny Sub-Committees, or, as in my case, somebody who is acting as chairman, introduces a debate in your Lordships' House it is the custom to stay as non-Party political as possible and to reflect the views of the Committee in so far as there was a coherent view in the Committee, when presenting the debate.

I say to the noble Lord, Lord Strabolgi, that I will think of his comments on the train to Brighton tomorrow; I will reflect about the effect of the Government's policy on British farm structure and hereditary tenancies. I will not mention it now, but I may write a letter to him. I beg leave to withdraw my Motion.

Motion, by leave, withdrawn.