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Common Agricultural Policy (Agricultural Produce) (Protection Of Community Arrangements) (Amendment) Order 1980

Volume 414: debated on Wednesday 12 November 1980

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3.1 p.m.

rose to move, That the order laid before the House on 17th October be approved.

The noble Earl said: My Lords, I beg to move that the Common Agricultural Policy (Agricultural Produce) (Protection of Community Arrangements) (Amendment) Order 1980, copies of which were laid before this House on 17th October 1980, be approved. This order is one of the six statutory instruments required to implement the sheepmeat régime which came into operation on 20th October. The Community regulations establishing the régime, which have been published in the Official Journal, are directly applicable in the United Kingdom. Further domestic legislation is, however, required to provide for enforcement of the Community provisions and for the protection of Community expenditure.

It may be helpful if I were, briefly, to summarise the main provisions of the régime. The support arrangements, which are fully financed by the Community, consist of annual premia which are payable in all member states and are designed to guarantee the incomes of farmers who maintain breeding flocks. Member states also have the option of operating either intervention or a variable premium. Only France has chosen intervention. The United Kingdom is operating the variable premium. All other member states have chosen to operate only the annual premium. The variable premium, which we are operating, is a deficiency payments scheme on similar lines to our previous Fat Sheep Guarantee Scheme, which it replaced on 20th October. Member states which operate the variable premium must recover—or to use that dreadful word "clawback"—an amount equivalent to the premium which will be paid to the producer on sheep or sheepmeat which they export. Trade with New Zealand and other third country suppliers is covered by voluntary restraint agreements under which third countries will restrict their exports to the Community to a level which is slightly higher than that which has prevailed recently. In return, the Community's import duty on sheepmeat has been reduced from 20 per cent, to 10 per cent.

There has, of course, for over 12 months been a lamb war and the French, quite illegally as we all know, imposed very severe restrictions on the imports of British lamb to France, but this "confrontation" has now mercifully ceased as a direct result of these negotiations. These negotiations sought to resolve the conflicting interests of the different member states. The new régime conveys major benefits to this country. The price to the United Kingdom consumer is kept low. The return to the farmers goes up by about 17 per cent, in one year. France's illegally imposed import levies of 80–90p per kilogramme have now ended. If as a result of this, English exports of lamb increase to France and the French price drops, the French farmer gets reimbursed. The French get an intervention system, which they like. We keep the variable premium or deficiency payments scheme, which we like. It is all funded by the EEC, in which the United Kingdom will be the major beneficiary, with receipts approaching £100 million in due course. We shall save on the fatstock guarantee which we used to pay out of our own Treasury funds at a cost of about £3½ million this year. On top of that the interests of Australia and New Zealand are protected with the tariff on their exports to the community being halved. I really do think that it is a remarkable piece of negotiation, which satisfied all countries and which went to the credit of Europe.

There are, I know, significant difficulties at the moment over the clawback arrangements for lamb which is being exported, and we are keeping a careful watch on these. Any new system inevitably throws up difficulties at the outset and we very much hope that these difficulties, which I do not underestimate, will prove to be teething troubles and will settle down. We have a firm undertaking from Vice-President Gundelach that he will keep the clawback arrangements under review and that it is not the intention to hinder the development of our export trade. My honourable friend the Minister of State has this week talked to Mr. Gundelach about these difficulties and Mr. Gundelach has agreed to look into possible measures to moderate the effects of the clawback on our exports. We shall continue to watch the market and to press for action.

But the principle behind the new arrangement is, I would suggest, an example of how, given time and good will, the problems of the Common Agricultural Policy can be resolved—even if not as quickly as some of us would like. I really think that this is a good "deal" for Britain and I have no hesitation in commending it to your Lordships as a significant advance in the sensible and corporate development of the Common Agricultural Policy. The order itself adds various items, which are now subject to Community arrangements under the sheepmeat régime, to the list of specified commodities in the Common Agricultural Policy (Agricultural Produce) (Protection of Community Arrangements) (No. 2) Order 1973. The 1973 order provides general powers for the protection of the support system for Common Agricultural Policy products. It provides that persons dealing with the specified commodities may be required to keep appropriate records and to produce them on demand to authorised officers, who may enter land on which these commodities are kept for the purposes of inspection and taking samples. It may on occasion be necessary to use these powers to ensure proper administration of the support arrangements for sheepmeat. I commend this order to your Lordships and I beg to move.

Moved, That the order laid before the House on 17th October be approved— ( Earl Ferrers.)

My Lords, we thank the noble Earl for his explanation of the new régime, but I think that he made rather light of some of the difficulties that have arisen. It is probably also worth examining the present difficulties and to ask him what he sees as the future for a very important sector of industry, not least Scottish industry. He will, of course, appreciate that this has been a long time coming; in fact, I can remember being involved in some of the negotiations about four years ago. Noble Lords should remember that I am not a fervent Marketeer, but we are members of it and we must make the best of it.

I think that it was in May that agreement was reached and the intention was that, given that certain negotiations had to take place with New Zealand, Australia and others to obtain the voluntary restraint agreements, that could be done and would be introduced on 15th July. Well, there has been a long delay, and, of course, the more that delay overlaps a current season, the more difficulties there are in certain areas. I should tell the noble Earl right away that certainly in Scotland, where the pattern of marketing is very different from that which takes place in England, we lost out considerably due to the late implementation of the régime.

Anyone who knows what a bad time they had in Scotland in the less favoured areas over these past two years will appreciate that we are awaiting at the moment a review that I know is taking place with Ministers about some payment—and I trust there is no question that it will be made—of compensatory allowance to the hill areas in respect of that. I am prepared to leave that at the moment, but the position is quite critical for these areas. There has been a decline in breeding stock. I think it is about 15,000, a figure I heard quoted in the Scottish hill areas, and the drop in real income has been absolutely catastrophic for people in the industry.

When we come to this new régime there is immediately considerable help, and I think we should pay tribute to the Minister of State. I am sorry his father is not here. He could convey a message from me to Mr. Alick Buchanan-Smith, a good Scotsman, that he has done pretty well, but he must not weary in welldoing in relation to the hangover problems and the consequential problems which arise from this régime.

So far as the Community is concerned we have the dominant interest in respect of sheepmeat and products from sheep. The Community itself is about 65 per cent, self-sufficient. That means imports. Seventy-five per cent, of the imports are taken up by us. As indeed we are the largest producers, we are the largest consumers, and during this past few years we have been building up a valuable—very expensive—export industry, meeting all the demands of the EEC in respect of slaughter and transport and everything else, registration, qualities, and gradings. We have to look at this because surely we should be paying some attention to our own particular interests.

As the largest consumers and producers, we look at how this affects the producers There is an immediate, beneficial effect; there is no doubt about that. We have lost the fatstock payments. I think it was about 30p per kilo, and we have gained. Certainly in the first week the payment was about 63p per kilo. That is a considerable subsidy. This is open-ended—and that was demonstrated in the second week when prices fell for a reason I shall come to, and a dangerous reason in many ways—and I think the actual payment was 69p per kilo. That is a considerable subsidy; about 30p greater than what was paid from the Exchequer through the departments.

One of the pluses is that it is no longer an immediate charge on the taxpayer and on the Treasury, but paid fully by the EEC. The first week cost them £4.6 million. I reckon the second week cost them about £5 million, or more. Bearing in mind that in the EEC budget about £32 million was earmarked for the rest of this year and over £166 million for the whole of next year, how long is this going to last?

No doubt there are people who might be prepared to pay to get agreement, but once the net value of this to Britain comes home to them—and remember we too pay our share of that, and until such time as we get the financial matters fully agreed and fully into line we are paying more than our share of it—questions will be raised about this and suggestions will be made about a ceiling to be placed on these premia—or premiums. I am not going to follow the Minister into Latin plurals in this one. I think everyone talks about premiums in this particular case.

There is the first question. When we look at the producer, we see he has benefited. That is a plus. The consumer benefited because there had been considerable reductions in the price of lamb. Whether or not these reductions have been fully passed on to the consumer is a question that we shall probably look into in the months ahead.

On the question of our traditional exporters—and of course they are Australia and New Zealand, mainly New Zealand— I think it has been a pretty satisfactory deal to those of us who were concerned about the fate of New Zealand's industry, in respect of the way that they had supported this country through thick and thin, and the way they still support it. If you go to the Far East and throughout that part of the world the one place where you see loyalty to British industry is in New Zealand. You will probably see more British cars on the streets of New Zealand than you will on the streets of London, such is their loyalty to Britain. But we have done reasonably well this time, and I gather that the New Zealand Government are quite pleased about it. They are getting an increased quantity, and the levy has gone down from 20 per cent, to 10 per cent.

Then we look at the question of our own exporters. The Minister's words were that confrontation has ceased. The lamb war is over. What was the lamb war about? It was about the fact that France would not allow our exports to get in there. What is the position today? The position today is that there is little or no lamb going into France. The confrontation is over, but we have not won the war. Not only is there no lamb going into France, there is very little going into Germany, Holland, Switzerland and to the other markets that we have painfully and expensively built up. I gather that its value to Britain is about £60 million. I saw one particular firm quoted as having a potential loss of over £30 million. This arises from the fact that we have three options. We have not got one common policy. To get agreement we have got options. Each country concerned selected the option which suited it from the point of view of what was its dominant interest. Our dominant interest is the consumer and the producer. So what we have done is to opt for something we know about, the variable premiums.

But France has not. Therefore, high price is an intervention. Irish eyes are certainly smiling here; Ireland opted for the annual premium, the headed payment. The variable premium, as soon as a carcase is exported, is clawed back; it is paid back. So we are at a considerable price disadvantage when that is added; it is virtually a levy. It is a premium levy, and so we cannot sell. We are selling very little in France, and equally in the other countries within the EEC.

But it goes further than that because the premium is clawed back if you export outside the EEC to Switzerland, to Algeria, to the Middle East. I think it is a little more than a hiccup when we hear what the people who are doing the exporting themselves say:
"Mr. Eddie Sumner, president of the Abattoir Owners' Association, members of which kill 80 per cent, of the lambs produced in the UK, said the 100 per cent, clawback had effectively destroyed an export market which had taken years and huge sums of money to develop.
"The only lambs being shipped were being sent at a loss to maintain valuable trading links but this could not continue for long".
The Government have got promises from Mr. Gundelach that he will watch this situation, that he will do something about it. This is not something that we can do ourselves. In respect of this we shall need to get agreement from all the people concerned. Quite frankly, I am not all that hopeful that we shall get agreement all that quickly. Time is of the essence, because industry cannot stand something of this sort going on for weeks and weeks. I hope the Minister can give an indication as to whether this is being considered now and how quickly he thinks a change can be made in respect of clawback. We can understand the clawback so far as the EEC countries are concerned. It is more difficult to understand how, with regard to the premiums paid on an annual basis, they can export without any clawback at all.

I believe that in the first memorandum of agreement it was suggested there would be a harmonisation of prices within four years. That means that the consumer has a right to rejoice at the moment—in that we are getting the benefit there—but how long will that last? Are the EEC prepared to wait perhaps four years to get harmonisation of prices, with the variable premium then costing a lot less to them? We are left in the position of having high prices and, while the producers may be all right, the consumers will not be. Can we, then, switch? Will it be worth our while switching—because claw-back will be that much less if the premium is so much less—to another option at our will, or would that take another negotiation?

We appreciate what has been done and the difficulties there have been in this negotiation. We are concerned, too, about what we think are not just teething troubles: there is the question of difficulties about certification and the fact that it seems that every type, whether or not premiums were paid on them, was subjected to clawback. I think that is all being sorted out by our own actions, but, on the main business, the fact that there is clawback on 100 per cent, and that the clawback applies not only to EEC countries but to non-EEC countries is a matter of concern. We do not apply that in respect of other subsidised foods from the EEC. Consider butter, which is sold at subsidised prices outside the EEC. There is no clawback there.

We are considerably disadvantaged in this one section of our industry, and do not think it is a small section. At present, I believe that over 20 per cent, of our sheepmeat is exported abroad, and in Scotland the stake is even higher. Indeed, I believe that about 70 per cent, of all sheepmeat produced in Scotland is exported, not necessarily abroad but to the South.

Yes, my Lords; I agree with my noble friend. We consume only about 30 per cent, ourselves. The less favoured areas have a very big stake in this and these are the areas we must protect. First, there must be a payment to make up for what we lost in the last year concerning the delay, and, secondly, there is the whole question of the future in respect of the developing export market.

I acknowledge that this has been a remarkable piece of negotiating, but it would be wrong to smooth over the difficulties and to talk about the lamb war being over and the confrontation having ceased. There are major problems, and I know that the Scottish NFU is working on some of them at the present time. So far as I can see, the biggest problem will be the clawback. The next problem is the question whether this is only a transitional stage that we are in. Shall we lose the benefit of the advantages given directly to producers to the satisfaction of consumers? I hope the Government will face up to the difficulties that exist and will say something reassuring about the problems in respect of exports at the present time.

3.25 p.m.

My Lords, the noble Lord, Lord Ross of Marnock, has covered the ground in his usual able manner. I have a few questions to ask along the same lines, but first I wish to reinforce them more from the strict practical viewpoint of the sheepkeepers and farmers, who are not exactly wild with joy now, having looked forward to this régime's implementation with a great deal of hope. They are now rather doubtful about the whole thing and, as Lord Ross said, they are worried lest the open-ended premium will come under attack.

I congratulate the negotiators on what they have achieved in an extraordinarily difficult situation; they have pulled out of the hat something which could work, but perhaps the Government could explain a little more the difficulties and their attitude to them. Can the Minister say whether it is purely a question, first of all, of delayed hope keeping back the numbers and therefore dropping the price of the large lamb crop we have had this year, and which is producing the extremely bad market prices that farmers are getting? Does he think this will be overcome and will smooth itself out? Or does he think there are other factors—all part of the general economic situation and so on—which are making lamb difficult to sell?

In regard to clawback, it is obviously logical that if lamb goes into France, where there is an intervention system, the exporter should not get two premiums; I think one says "premiums" or "premia" according to the side of the House on which one sits. Is it not a fact that lambs are going into France, where intervention is working, but the price there is low? Is that preventing our people from exporting? The Minister must have a great deal of information on this and I suggest that a rather fuller explanation of the difficulties would be beneficial and would reassure the sheep farmers of the country who, after hope, are quite worried as to how the whole thing will work. I echo what the noble Lord, Lord Ross, said about New Zealand. It is most welcome that we have been able to negotiate and they have been able to accept the deal. While it limits the number of carcases coming in, it at least gives them a rather better deal than they were getting previously.

3.28 p.m.

My Lords, I thank the Minister for the way in which he introduced the order. Likewise, I thank the noble Lord, Lord Ross of Marnock, who, as always, has done a great deal of homework; it is nice to see that somebody is learning about the sheep industry after so many years. As noble Lords will be aware, my family have had an interest in sheep for a long time. I entirely agree with the success of the negotiation. As the Minister said, it is wonderful what time and goodwill will do, but, by golly! it has taken a long time.

There are those of us who are struggling in a somewhat worried way, especially in the hills, as the noble Lord, Lord Mackie of Benshie, said. I am told by the agricultural colleges that we have seen a drop in income for this type of farming of something over 30 per cent, in the last two years. When that is set against the rise in the cost of everything we buy, which must have gone up two or three times that figure, and when one looks at the present rate of interest on overdrafts, time is something which is rapidly running out for a great many of the farmers concerned in the hills. I would mention to my noble friend, without carping, that while he talked about English lamb exports, I suppose Scotland on the whole does more exporting of lamb than England. However, I am sure it was a ministerial slip in that the Minister of State had probably not checked his brief.

In regard to the premiums that we got in the first week, I happened to be selling lamb in one market on that occasion and really the situation was very interesting. I do not know if I or my children are going to get for the lambs as much as the 69p which the noble Lord, Lord Ross of Marnock, mentioned. But the thing that interested me was that in this market at Paisley absolutely top-grade lamb was selling to the butcher for about seven shillings a pound. Though the premium was fairly high it still meant that I was getting £3 or £4 less per lamb than I got for the same type of lambs this time last year. So the premiums are indeed extremely valuable but I have not yet seen represented in any shop that I have been to the fall in the butcher's price of lamb. I hope very much that my noble friends, who are doing their best to complete these negotiations with the EEC, will bear in mind that there is very little time left if a lot of farms in my part of the world are to survive.

3.32 p.m.

My Lords, I will not bore your Lordships any more than I feel I must. As another sheep farmer who is engaged in exactly the same kind of activity as my noble friend who has just spoken, I should like to add my congratulations to the noble Earl, Lord Ferrers, and to the Department of Agriculture for having brought off this result. This is a remarkable success, considering the length of time it has taken. I agree entirely with both the noble Lord, Lord Ross of Marnock, and the noble Lord, Lord Mackie, that the time factor is something which the agricultural people in Brussels apparently never really understand. They go on talking about things, thinking they are dealing with some dead object that is not going to change, when in fact they are dealing with live objects that alter all the time. If one's lambs are born in, say, April, they are not at all the same if the scheme comes into effect in November; they are a quite different kind of animal. They would still be called lambs but they would be twice as big. Those in Brussels do not realise that these delays are terribly frustrating.

Not only is this the case in this instance which of course has gone on for a long time; it happens over and over again. On the committee on which I sit in your Lordships' House—Committee D, dealing with agriculture—we have spoken over and over again in reports that we have made about the fact that the people in Brussels do not realise that they are dealing with livestock—not dead stock; that livestock changes and that one simply must get these matters through in time to make them effective at the moment at which they are really needed. The Minister of Agriculture in the last Labour Government had just the same difficulty. It is one of the things that we have got to keep hammering at all the time in Brussels; otherwise they will not take it in.

I agree with all that has been said about this order. I hope it will be a great success; I hope that it will continue and that it will not, as the noble Lord, Lord Ross of Marnock, quite wisely said, be so costly to the CAP that they will feel unable to carry on with it. That would be a disaster. I also agree that at the moment the sheep industry in this country is in such a bad way, overdraft rates are so enormous and the problems are so great, that we shall be grateful for any help that we can get.

The question of the clawback is some-that must be looked at very carefully, because in point of fact the export industry is almost at a standstill. As a great many of the lambs and the sheep in Scotland are exported it would be nothing short of a disaster if, although we do get this subsidy—and I am not saying that it is not very valuable and that we are not most grateful for it—at the same time there was no export trade. I can remember that two years ago, when one was selling lambs in the markets, if the French market closed, down went the price of lambs. If all our export is going to be hit very badly by this, whatever else is done will hardly make up for the fact that there is no export trade.

I wish the Government luck in this because it is going to be very hard work. They will have to operate against the French again and try to get the clawback changed. If they can do that, then certainly it will be a great triumph and will greatly enhance the value and importance of this order. In the meantime, I should like to add my congratulations on the fact that the Government have succeeded in doing what they have done, and I hope that it will be a tremendous success.

3.35 p.m.

My Lords may I intervene briefly to highlight one particular aspect of this order? I should like to join in the congratulations to the Government on bringing off an arrangement which puts an end to a serious situation, nevertheless leaving a difficult situation remaining. I should like, if I may, to compliment my noble friend on the way he introduced this order; it was a model of brevity and clarity. I should also like, again if I may, to compliment the noble Lord, Lord Ross of Marnock. It is quite a long time since I listened to a speech of his where I agreed with practically everything he said.

My Lords, I have been here recently; the noble Lord has come just recently.

The point I want to stress above all is the position in the crofter companies in Scotland. We understand the reasons for the delay in getting the arrangement, but the fact is that it came too late for the sales of the store ewes in the Highlands and the Islands. I know that there is a scheme to help the Western Isles, although it is very small in comparison with what is being done in Southern Ireland through the Community. But the effect upon the Highlands has been really disastrous. With costs in a year going up 20 per cent., prices have gone down 40 per cent.; so that the net income from the sale of hill ewes is sbout 40 per cent. of what it was.

There is a short-term problem here. I know that my noble friend Lord Mansfield has been working very hard on this and that the right honourable gentleman Mr. Buchanan-Smith did give some hope that something might be done, but it would be very helpful if my noble friend could hold out some more tangible hope to the Highlands in the short term—some kind of hill lamb compensatory payment on the hill ewes that have had to be sold off this year at a very low price indeed. Noble Lords will know that this is something that takes place annually. I do not suppose they have ever had such a bad year as they have had this year; costs are going up so much.

The population of the Highlands is dwindling. The sheep population and the hill cow population are both diminishing and something has to be done in the short term to compensate for the fact that it was not possible sooner to reach agreement at Brussels; but also in the long term to ensure that this kind of thing does not happen again and to build up the basis of the Highland economy which depends so largely upon livestock. I do not know how that is going to be done, but I hope that work is going on and that there will be help from the Community, first of all to renew and then to sustain growth in the Highlands. If not, we shall have fewer and fewer people there, the cost of services per head of population will grow more and more and therefore services will be withdrawn. Really it is a very serious situation indeed; so I hope my noble friend will be able to give some comfort and some hope that special measures will be taken for agriculture in the Highlands.

We know there is a Highlands and Islands Development Board, and that co-operates where it can; but that is not its primary responsibility. The noble Lord, Lord Ross of Marnock, set up that board and it has done very good work within the narrow limits of its possibilities. But something such as a rural developments scheme for the whole of the Highlands and Islands is now called for, and I hope that this is the right occasion on which to highlight the point to your Lordships, since alas! we do not have many opportunities for so doing.

3.40 p.m.

My Lords, I am very grateful to your Lordships for the way in which you have received this order. I entirely accept the point which my noble friend Lord Drumalbyn has made, and which was indeed made by my noble friends Lady Elliot of Harwood and Lord Glenkinglas, and the noble Lord, Lord Ross of Marnock, about the difficulties that have been facing hill farmers. I know that they have accepted very high increases in costs and the result has been that this year they have received a lower return for their animals.

One of the most important factors in that respect is that there should be an underlying security, which I hope the sheepmeat régime will provide. If this works in the way that we hope it will work—and there is no reason to think that it will not—then there will be a security for the fat lamb market and that will work itself through to the store market and to the markets that are supplied by the hill sheep farmers. That does not mean to say that I do not recognise the problem that has affected them so far. My noble friend Lord Drumalbyn asked what was going to happen. I can tell him that the hill livestock compensatory allowances are currently under review, in consultation with the farmers' unions, and the Government will make a statement on the outcome as soon as the matter has been concluded.

I am bound to say that I thought that my noble friend Lord Glenkinglas was in spiking form. First, he told the noble Lord, Lord Ross, that he was glad that the noble Lord was at last learning about sheep, and then he told me that I had not read my brief. I must tell my noble friend that that observation went through me like a spike. If I used the word "English", it was not supposed to be in an exclusive sense; it was supposed to be all-embracing. I think that perhaps we are not quite so touchy on this side of the Border as are those on the other side of the Border. If I offended my noble friend in that respect, of course I apologise. What I said was meant to include the Scottish aspect. I must tell my noble friend that it was not that I had not read my brief, because that part of my brief I wrote myself.

My Lords, I am very grateful to the noble Earl for giving way. I am not in the least touchy about this matter, but I can assure the noble Earl that there are four or five million Scots who are very touchy. I did not say that the noble Earl had not read his brief; I said that he had not asked his friend the Minister of State to check it.

My Lords, I accept the point, and of course if I incurred the displeasure of the noble Lord, or worse still, that of those 4 million of his countrymen, I apologise.

The noble Lord, Lord Ross, who, if I may say so with the greatest respect, possibly had a touch of a dismal Jonah attitude, pointed to the difficulties currently facing the sheep industry, and I accept that those difficulties are there. He said that I had made light of them. I hope that I did not. I tried to suggest to the noble Lord that the régime came into operation only on 20th October. It is now 12th November. While the difficulties over clawback arrangements, about which he is rightly concerned, might prove to be longer-term, I hope they will not be. It is too early to say that this is a long-term problem. However, I would draw the noble Lord's attention to the fact that my honourable friend the Minister of State spoke to Mr. Gundelach only this week, and Mr. Gundelach acknowledged these problems and confirmed that it was not the intention of the new arrangements to hinder trade from the United Kingdom.

Mr. Gundelach agreed to examine urgently three specific difficulties. First, there were the exports from the United Kingdom to third countries outside the Community. Secondly, there was the extent of the clawback of the variable premium, which does not take account of the costs of transport between the United Kingdom and the Continent: this is an important point. Thirdly, there was the uncertainty facing exporters who did not know the rate of clawback at the time that they arranged their exports for the coming week. Those are important points, and I can assure the noble Lord that we are not satisfied with the position as it is at present. I very much hope that this will not prove to be a long-term feature, but if it does, we shall take action on it.

The noble Lord, Lord Ross, and, I think, my noble friend Lady Elliot said that the delay in bringing the arrangements into operation really had messed up—of course my noble friend did not use so colloquial an expression—the prices for the hill sheep farmers. The noble Lord, Lord Ross, asked why on earth that was so. The Government never subscribed to the implementation date of July, although that date was actually mentioned during the negotiations. We secured agreement that the date would depend on the conclusion of the voluntary restraint agreements being introduced. That gave the New Zealanders a vital negotiating card in seeking acceptable arrangements, and it allowed them to turn down the arrangements if they thought fit. The Commission conducted the negotiations as quickly as it reasonably could, but the French held up the agreement at the July Council. However, despite that, it was possible for agreement to be reached at the next Council on 30th September, and the arrangements were introduced as quickly as possible thereafter.

I agree with my noble friend Lady Elliot that these delays are bad and that they can affect trade and industry adversely. I think it is one of the facts of life that sometimes when one tries to secure an agreement among all members of the Community, it takes rather longer than one might wish; but it has been achieved.

The noble Lord, Lord Ross, referred to the exports which have suffered, and he said that though I had stated that the lamb war was over, nevertheless we are not exporting any meat to France. The lamb war related to the illegality with which the French precluded entry of our sheep into France. That is over, but of course while it was taking place we saw a very marked drop in our exports to France. In 1977 they were about 20,000 tonnes, while in 1979 the figure dropped to 5,000 tonnes. While that process was going on we built up an export market to Belgium and Germany which in 1977 amounted to only 3,000 tonnes, but which by 1979 had risen to 31,000 tonnes. It is that market which at the moment has been suffering, while at the same time we have not yet been able to build up our market in France. We have in fact lost that market, and even with the best will in the world it cannot be expected that it can be renewed immediately. But we hope that it will be possible for the French market to be built up.

The noble Lord, Lord Ross, also referred to the problem of the reference price being increased over four years, and he asked what would then happen to the subsidy to the farming community. Will it stop? This is a complicated subject, and I shall try to explain to the noble Lord exactly how the arrangement operates. Each country has a guide level. In the United Kingdom, if the market price is below the guide level, we receive a variable premium which brings up the figure to the guide level, and above the guide level there is a reference price. At the end of the year a calculation is made which brings the return up to the level of the reference price, and that is paid by annual premium. At the moment, the reference prices are different in all the various countries of the Community, because we have only recently started the régime. In France the reference price is 213p, in Italy it is 232p, in Germany it is 195p and in the United Kingdom it is 181p. Over the four years, those prices will come into parity and therefore as each of the four years goes by the annual premium, in the case of the United Kingdom, will increase until it reaches the level of the reference price, which will by then be common throughout the Community. So the two things will operate: the annual premium, which will be made up to the reference price, and the variable premium, which will continue, as I think the noble Lord understands.

I am grateful to your Lordships for the approval which you have given to this order. I hope I have answered the questions which the noble Lord, Lord Mackie, asked me, mainly on there why have not been exports to France. I hope I have given him the reasons for that.

On Question, Motion agreed to.