asked Her Majesty's Government:

My Lords, within my own departmental responsibility, I am increasing the money spent on marriage and relationship support in England and Wales to £4 million in 2000–01, rising to £5 million per year in 2002.

Let me add, however, that the Government are unequivocal in their strong support for marriage. Our consultation document, Supporting Families, affirms that,

"marriage is still the surest foundation for raising children and remains the choice of the majority of people in Britain".

We firmly believe that,

"marriage provides a strong foundation for stable relationships".

My Lords, I thank the noble and learned Lord for that reply, but it does not quite answer the Question. The work being carried out by the noble and learned Lord's department is necessary, but it is not really producing the goods. We have the second highest divorce rate in the western world. The Government say many warm and comforting words about marriage. Indeed, the noble and learned Lord himself said that we have a duty to support marriage. Is he aware that after the abolition of the married couples allowance on 5th April, we shall be the only country in the western world that does not recognise marriage through the tax system? Does he believe that that decision supports marriage, or is he saying one thing and doing another?

My Lords, certainly not. I do not believe that people choose to marry or to remain in marriage because of fiscal inducements from the state. I have a much higher view of people than that. I believe that people, often women, can be trapped in a dependent relationship because of their means, but that is a quite separate issue.

My Lords, will my noble and learned friend the Lord Chancellor explain how the Government's fiscal policies work to prioritise the interests of children?

My Lords, it is a particular pleasure to answer that question from my noble friend, who is the chair of the Women's National Commission, and to do so today on International Women's Day—the very day on which my noble friend the Leader of the House has promulgated a campaign to promote the participation of women in public life.

Yes, our fiscal priority is to put children first. Children are 20 per cent of our population, but 100 per cent of our future. We concentrate resources on where they are most needed: on families bringing up children, particularly those on lower incomes. It would be wrong to discriminate against children on account of their parents' status. By 2001, we shall be spending £6 billion per year on extra support for children.

My Lords, can we set aside the previous planted question and return to my noble friend's Question? Does the noble and learned Lord the Lord Chancellor believe it sensible that we, of all the countries in the western world, will not have any recognition of marriage in our tax system after 5th April? Does not that seem wrong? Is it not sending out the wrong signal? Does not the noble and learned Lord the Lord Chancellor realise that some people do indeed refrain from marriage for financial reasons? After 5th April, there will be an additional financial reason to refrain from marriage. As the noble and learned Lord rightly said, marriage is the best way to bring up children.

My Lords, I have to say that a vast amount of humbug is talked about abolishing the married couples allowance. It falls outside my responsibility, but it is really a misnomer. The married couples allowance is not restricted to married couples. It is a tax break paid at the same flat rate to married couples, to single parents, and to unmarried parents living together. The previous government called it an anomaly and reduced it from 40 per cent to 15 per cent. When I hear the merits of that allowance invoked by the Government Front Bench—I mean the Opposition Front Bench; I must not mix them up again!—I must remind your Lordships that the now shadow Chancellor, Michael Portillo, is himself no supporter of the married couples allowance. When cutting it in 1994, he said that it was the most anomalous of allowances and that there was no ongoing justification for it. I have no reason to believe that he has changed his mind.

My Lords, Sir Graham Hart's review published last March suggested that a clear distinction should be drawn between funds for research and development and the strategic funding of marriage support agencies. The noble and learned Lord has assured that House that there has been a real increase in expenditure. Will he indicate how much or what percentage of that expenditure is going to the marriage support agencies?

My Lords, I shall write to the right reverend Prelate about that matter, but I believe that the overwhelming bulk—if not all—is going to the agencies, not to research, and that there is a separate research budget.

My Lords, in view of what has been said from the other side of the House, is it not a fact that the Chancellor of the Exchequer who abolished inheritance tax between spouses was a Labour Chancellor, my noble friend Lord Healey?

My Lords, I believe that to be correct.

My Lords, as a divorced parent of one marriage that has failed and in the light of what has been said about children coming first, may I ask the noble and learned Lord whether he agrees that it is important that we encourage and reward parents for staying in a marriage because we know that children brought up in a proper stable marriage perform better in school and later in life?

My Lords, I can only repeat what I have said. I believe that marriage is the surest foundation for bringing up children. One has no grip on reality if one believes that fiscal incentives induce people to marry or to stay in a marriage that has failed.

My Lords, do the Government have any plans to amend the working families' tax credit when no account is taken of the married wife who stays at home to look after children and does not go out to work, thus disadvantaging the whole of that family?

My Lords, I do not accept that description of the working families' tax credit. It is much more generous than the family credit that it replaced. Working families with children will receive an average £24 more a week than under family credit. That, combined with other government policies, will lift 1.25 million people out of poverty, of whom 800,000 are children.

asked Her Majesty's Government:

My Lords, at the end of September 1999 the total number of police officers in England and Wales was 125,464. That is 1,694 fewer officers than in March 1997. At the same date, civilian support staff numbers were 53,254, an increase of 243 since March 1997. Civilians now account for 30 per cent of police service personnel. Following the passage of the Police and Magistrates' Courts Act 1994, the actual number of police officers at any one time is a matter for chief constables to determine within available resources.

My Lords, I thank the Minister for that reply. Will he agree that since March 1997 police numbers have fallen from 125,052 to 123,050 and that 30 police force areas out of 43 have fewer police officers, or are my figures fictional?

My Lords, the figures that the noble Baroness has read out differ from mine, but that may be because the accounting period is slightly different. I had expected some sympathy from the noble Baroness as on 22nd July 1996 she said (at col. 1164 of the Official Report):

"we can play with statistics as much as we like, but I can say that the money for 1,000 police officers has been made available to the police … The chief police officers themselves are predicting that there will be over 1,600 more in this present financial year, 1996–97".

Sadly, the noble Baroness got it wrong and there was an increase of 257 police officers.

My Lords, does my noble friend recall that it was the previous administration—this is not a planted question—who enacted the Police and Magistrates' Courts Act 1994 which, as he rightly said, took away the power to determine the number of police officers from the Home Secretary and gave it to the chief constables, some of whom unfortunately decided that the money was better spent on things like bigger headquarters, bigger and better cars, and so on, but not on manpower? Does he also recall that it was the previous administration who took away housing allowance for new recruits, thereby, at a stroke, creating a two-tier police service and that that is one of the major factors in low morale and the great difficulty that many of our police forces have in attracting recruits?

My Lords, the noble Lord speaks with wisdom and greater knowledge of these matters than most Members of your Lordships' House. I agree with him. Actions taken by the previous government have made recruitment increasingly difficult within the police service. Sadly, it is the case that police numbers have been falling since 1993. They fell in every year in the life of the previous government with the exception of 1996–97. That underlines the difficulty. That is why my right honourable friend the Home Secretary has set aside ring-fenced money within the crime fighting fund to increase the number of officers by some 5,000 over and above those who would ordinarily be recruited. That is a statement of our longstanding commitment to retaining the strength of our police service.

My Lords, I chair a police authority. Can the Minister confirm that one of the main reasons why we do not have sufficient money with which to finance more police officers is the great cost of police pensions? Can he tell us when the Government will make the long-awaited announcement on what we shall do about police pay and pensions?

My Lords, I accept that police pensions place a particularly heavy burden upon local police authorities. There is no doubt that that continues to be a problem. Pension costs have been an increasing burden on police authorities. The Government are looking at the situation. We have been looking at it since March 1998 when we published the consultation document, and we are looking at all the options. When we come to a final view on the matter we shall endeavour to consult further with the Association of Police Authorities so that we can get it right for the future and so that police authorities do not have to carry an undue burden in relation to pension costs.

My Lords, the Minister referred to the famous 5,000, which he called additional numbers. Will he confirm that even including those, the target for the next three years is to acquire 17,500 extra policemen? Given that over 16,000 are due to retire, that means there will still be fewer policemen at the end of the next three years than there were when the Labour Government came to office, at which time, as he just confirmed, the numbers of policemen were rising?

My Lords, the numbers of policemen rose only over the last year of the last government against a background of a decline since 1993. We stuck to their spending plans for the first two years of our government and police numbers continued to decline. That is why my right honourable friend set up the crime fighting fund. It is a ring-fenced fund to get police officers in place. As no doubt many will be aware, there will continue to be recruitment difficulties. Our aim is to ensure that we have 5,000 additional police officers over and above those that the chief constables expect to recruit.

My Lords—

My Lords—

My Lords, I am sorry to interrupt my noble friend but the noble Baroness, Lady Gardner of Parkes, wished to ask a question also. However, we have reached 15 minutes on the clock and must move on.

asked Her Majesty's Government:

My Lords, the Government take infection control seriously and have developed a strong programme of measures to ensure that the NHS strengthens hospital infection control arrangements. The most recent steps include the issue of National Priority Guidelines that cite improvement as an essential task for NHS organisations.

My Lords, I thank the Minister for that reply. However, is he aware not only of the National Audit Office's statement that 5,000 patients die annually from infections, but also that the cost to the health service is £1 billion a year? Is he satisfied that nurses' training includes what most of us regard as elementary precautions on cleanliness and hygiene in hospitals? Is he aware also that nowadays many people say that if we go into hospital we should be sure to take cleaning materials and disinfectant because we will find that the bathrooms in particular are extremely dirty?

My Lords, first, I am aware of the figure of £1 billion and the suggestion that 5,000 deaths are caused by hospital-acquired infection. But those figures must be treated with caution. The 5,000 deaths figure was extrapolated from statistics in the United States. It is hard to put a firm figure on the numbers because those who have an infection and die in hospital are often sick with other conditions as well. However, regrettably I accept that some patients die because of an acquired infection. I accept also that the cost to the NHS is considerable in financial terms.

There are two aspects to cleanliness. First, I agree that we need a strong culture in the NHS which ensures that everyone recognises their responsibility to act in the most hygienic way possible. This is a major responsibility for nurses and doctors who set the conditions and tone for everyone else. But over the past few years the NHS suffered also because of the move to compulsory competitive tendering in relation to cleaning services, and undoubtedly that reduced cleaning standards.

My Lords, is the Minister aware that the report stated that some chief executives did not take adequate interest in hospital-acquired infection? Is it not time that infections such as MRSA become notifiable?

My Lords, the Chief Medical Officer is at the moment developing a strategy for tackling communicable diseases and will be looking at a number of areas where we can improve the way in which we approach the difficult problem of MRSA, which was identified by your Lordships' committee a couple of years ago.

The noble Baroness is quite right that the NAO stated that some chief executives were not taking their responsibilities seriously enough. That is why we ensured that the National Priority Guidelines made clear that that must be an essential priority and we remind NHS boards and chief executives of their clinical governance responsibilities through the new standards on infection control issued last November and the health circular issued in February this year. With a programme of action in place to ensure that we obtain effective measures to control and prevent infection so far as it is possible to do so, I believe that we can turn this situation round.

My Lords, in relation to the question raised by the noble Baroness, Lady Masham of Ilton, is the Minister aware, on a reading of the National Audit Office report, that there had been many previous reports on this matter and that the single issue on which the Department of Health could be most effective is by making things like MRSA a notifiable infection? Or does he prefer—washing his hands of the issue—the theory of the NAO report, that it is the Treasury that failed to provide the necessary resources for infection control? I offer both those theories.

My Lords, the single most important way of reducing hospital infection is the determination of those who lead individual organisations at local level to recognise that this is a serious problem. The whole basis on which this Government approach the matter is to make it clear to NHS trusts and their chief executives that this is a matter that warrants their personal attention, that they need proper infection control measures in place at local level and that all staff should be aware of the importance of good cleanliness, handwashing and everything else that will contribute to an effective policy.

My Lords, is the Minister aware—I do not suppose he will be—that my mother trained at Great Ormond Street and Guy's Hospital in the 1920s and 1930s? Most of her junior nursing time was spent cleaning, even down to polishing castors on beds. They understood in those days that infection was from cross-contamination. With the introduction of antibiotics those cleaning regimes rather fell off. Now that we have antibiotic resistance, is it not time that scrupulous attention is paid not just to washing hands, but to keeping wards clean and checking that there is no peeling paint, as there is at St. Thomas' Hospital, for example, the flagship hospital of London?

My Lords, it is important that cleaning as a service in hospitals is as effective as possible. I have no doubt whatever that in the past decade those standards have not been as good as they ought to be. We are in the process of reviewing our policy on market testing of support services such as cleaning. We are making it clear in guidelines that those who have to make judgments about support services need to ensure that within the specifications and the judgments as to where contracts are placed, quality and patient satisfaction is as important as cost.

My Lords, is the Minister aware that when my wife was in St. Thomas' Hospital two years ago, she had to clean out a bath that was covered in blood?

My Lords, I was not aware of that. The noble Lord illustrates a problem that the NHS has faced for a considerable number of years. In tackling the issues of cleanliness in hospital wards, we must ensure that the cleaning services are appropriate. Equally, it is important that ward sisters, who play such a crucial leadership role, have sufficient control to ensure that the cleaning services are acceptable and that they lead by example in terms of personal cleanliness and in ensuring that doctors, nurses and other staff wash their hands and do all the things that are necessary.

asked Her Majesty's Government:

My Lords, yes.

My Lords, I thank the Minister for her very brief reply. Can she tell the House when, after the formation of the DfID, the MoD and the DfID agreed their relevant contingency plans and the basis for charging?

My Lords, ongoing discussions are taking place between the DfID, the MoD and, indeed, other government departments on the best ways to respond to disaster and emergency situations. The financing of such plans forms a part of those continuing discussions.

My Lords, I should like to congratulate the Minister on the efforts made by her department to commission South African helicopters to bring in immediate aid during the earliest stages of the crisis that has struck Mozambique. However, will the Minister, using her undoubted charm and intelligence, approach her right honourable friend the Secretary of State for Defence to see whether equipment for replacing bridges that have been breached by the floods and mending the main roads could now be considered to be a top priority'? Does the Minister agree that air transport is an extremely expensive way of delivering food and other aid to the people of Mozambique?

My Lords, first, I thank the noble Baroness for her recognition of the efforts that have been made by the Department for International Development. Clearly, the tasks of rehabilitation and reconstruction in Mozambique will be critical. Plans have already been made to hold a donor co-ordination conference to discuss the reconstruction effort. The British Government are doing all they can to bring forward plans on how best Mozambique can be assisted in that reconstruction. Those plans will include discussions with other government departments.

My Lords, does my noble friend agree that, in the view of the vast majority of fair-minded people, far from carping at the lack of cooperation between the two government departments, we should be congratulating both of my right honourable friends, Clare Short and Geoff Hoon, on the work that they have done? Does she further agree that it particularly ill becomes the Opposition Benches who, when in government, presided over the greatest cut in overseas aid resources that had ever taken place, which took us further and further away from meeting the as yet unattained obligation to the United Nations of donating 0.7 per cent of our GNP for development assistance?

My Lords, I agree with my noble friend. Not only should we congratulate my right honourable friends Clare Short and Geoff Hoon, but also our servicemen and women, all the volunteers who have given their time, effort and energy to work in Mozambique, the aid agencies and, indeed, the people of Mozambique themselves. They have had to deal with a situation which would be a challenge for any government. I further agree with my noble friend that this Government have demonstrated a strong commitment to international development. We have reversed the decline in the international development budget and we are committed to trying to ensure that the budget is increased to meet the 0.7 per cent target mentioned by my noble friend. Perhaps I may also add that I believe it is important for us to feel a sense of pride in the UK's response to the Mozambique flood disaster. Our response was immediate. In relation to this crisis, we remain the largest bilateral donor in Mozambique and we are committed to assisting in the country's reconstruction effort.

My Lords, is the Minister aware that, for a large part of the public, the response did not appear to be immediate but rather the culmination of a protracted difference between two government departments over which the Prime Minister should have taken early control? Furthermore, if, as her response to the question of the noble Lord, Lord Tomlinson, suggests, that was not the case, would not the best way to make the truth clear be to respond to the request to hold a public inquiry into exactly what happened?

My Lords, we must differentiate between the facts and how we respond to those facts. Anyone who saw the pictures that were shown on our television screens over the past week would be concerned. Members of the public do not have all the information that we in this House and in another place have to hand when planning the way in which we should respond to an international disaster of the kind we have seen in Mozambique. No operational delay occurred as a result of the discussions between the Department for International Development and the Ministry of Defence. We were one of the first donors to go into Mozambique. We remain the largest bilateral donor. We assisted the World Food Programme with helicopters even before the UN had gone into Mozambique. Those are the facts and the points that should be remembered. I think it would help us all if the press—who themselves used up scarce resources by using helicopters—were to report more of what has been beneficial in terms of our assistance rather than to go on carping.

My Lords, even before this crisis, Mozambique was, quite rightly, a priority country for assistance, both in terms of development aid and debt relief. Will the Minister confirm that both development aid and debt relief are now being accelerated because of the recent crisis and that the Mozambiquans will in fact be better off once the crisis is over?

My Lords, I shall make three points in response to the noble Earl's question on debt relief. First, in terms of our own relationship with Mozambique, we have cancelled all debts with that country; namely, the aid debt and the export credit guarantee debt. Secondly, we are working to persuade other bilateral donors to whom Mozambique is indebted to cancel those debts as well. Thirdly, we are working to encourage the World Bank and the International Monetary Fund to do the same. As regards our own budget, we are committed to spending around £70 million in Mozambique over the next two years. In addition, we have given emergency funding and, of course, we shall be open to support Mozambique in the reconstruction and rehabilitation phase once discussions have taken place about priorities.

My Lords, I beg to move the Motion standing in my name on the Order Paper.

Moved, That the debate on the Motion in the name of the Lord Bramall set down for today shall be limited to two-and-a-half hours and that in the name of the Lord Palmer to four hours.—(Baroness Jay of Paddington.)

rose to call attention to the state of the nation's defences in the light of the Defence White Paper (Cm 4446); and to move for Papers.

My Lords, the House will be grateful to the noble and gallant Lord, Lord Bramall, for introducing this Motion and talking about the White Paper. He made a typically forceful speech. He will no doubt expect that I may disagree with him on some aspects of what he said, but if I do so it is as a subaltern to his former company commander—which, indeed, the noble and gallant Lord was—with the greatest respect but in the knowledge that the subaltern usually won the argument.

I welcome the White Paper. I have a certain sympathy with what the noble and gallant Lord said about the language in the paper. However, generally speaking, it seems to me to mark a good step in the implementation of the Strategic Defence Review. In passing, I would say that when I sat in the place where the noble Lord, Lord Burnham, now sits for the Opposition, I was rather sceptical about the idea of a defence review. We had had Options for Change—the noble Earl, Lord Howe, will remember that—and the defence costs study. I took the general view that we had had enough and that the Armed Forces should not be subjected to yet another major defence review. However, as a result of what has happened, I have become converted and I agree with the generous assessment of the noble and gallant Lord, Lord Bramall, that the SDR was a success. The question now is: how do we put the SDR and the conclusions of the SDR into proper practice?

I cannot disagree with the noble and gallant Lord about overstretch. I talked about overstretch from the Opposition Front Benches in all the time that I was there. We have all talked about overstretch for as long as I can remember and for as long as I have been in this House. As long as there are former Chiefs of the Defence Staff in the House I have no doubt that we shall continue to talk about overstretch in the Armed Forces.

The conclusion of the SDR—which the noble and gallant Lord brought out, but, I thought, perhaps insufficiently forcefully—was that you cannot reduce the strength of the Armed Forces without reducing the commitment. If you do one without the other, you are lost. It seems to me that you will have to look either at increasing the strength of the Armed Forces in the present situation, or reducing the commitment.

In that respect I draw attention to something in the White Paper which I am sure my noble friend will be able to answer. I was rather surprised to see that we had overseas interests due to the international nature of trade that affected our defence capability. I find it a rather odd concept in the modern world that trade should be accompanied, as it were, by gunboats, or by helicopters or whatever. After all, e-commerce is not, as far as I know, subject to normal defence procedures. I should be grateful if my noble friend could help me on that point.

I also noted that our history gave rise to commitments to overseas territories. I understand all the arguments and, in her previous incarnation in the Foreign and Commonwealth Office, my noble friend dealt with some of those overseas territories. However, I am not entirely certain that we should not be thinking in the long term about exactly what our commitments there should be.

I welcome the arrangements for defence procurement. We have had enormous problems with this over the years. I have made many speeches criticising the previous government on the mess that they made of procurement. We are now seeing the results; for example, rifles that jam, ships that cannot leave port, upgraded Tornados that cannot launch the right missiles and so on. I believe that the Government have grasped this and with the new structure of defence procurement will be able to cure these problems. Obviously there is a long lead time with these matters and we cannot expect everything to happen overnight.

I also welcome the emphatic response to the NATO problem, that our defence must be modelled around NATO and that anything we do in Europe must be conditional on subordination to NATO. That is not just because the Russian threat is not ended, although that is a possibility, but because NATO is the only viable, multi-force operation with command and control procedures that we all understand, and which work. Anything that consists of a European army adopting new command and control procedures would seem to me to be fantasy land.

However, I support a European involvement. I support the idea that the European Union should be able at some point in the future, and on occasions which we cannot predict, to intervene when the United States decides that it does not want to intervene. Such occasions may arise. Provided that it is all subordinated to the NATO prerogative, I would be in favour of that. Nevertheless there are those who say that we must be more independent in a European Union army. That would mean creating a new satellite intelligence system and creating a new heavy airlift capacity. The amounts of money involved in that are absolutely gigantic.

Before I end I take your Lordships through the percentage of gross domestic product that our major European partners spend on defence. The 1997 figures are the latest ones I could get. The United Kingdom spends 2.7 per cent of its gross domestic product on defence; France spends 3 per cent; Germany 1.6 per cent and Italy 2 per cent. What stands out there to me is the figure for Germany of 1.6 per cent. If there is to be a European force of 50,000 or 60,000 troops in the field with support services, it seems to me that the Germans have to contribute much more to that budget than they are doing, or are likely to do at the moment.

I believe that this White Paper is a transitional one. It has moved the SDR forward a little. Other White Papers will move the SDR forward further. I congratulate the Government on what has so far been a rather successful run.

My Lords, the noble Lord, Lord Williams of Elvel, is right to draw attention to our international obligations. In considering our own defence forces we should bear in mind that the two countries which have done more than any other since the end of the First World War to try to maintain the peace of the world are the United States and the United Kingdom.

The noble and gallant Lord, Lord Bramall, has done a valuable service. He has raised the question of our reserve forces. We could not have played our part in winning either the First or the Second World War without strong reserve forces, especially the Territorial Army in which I served from June 1938 until July 1945.

Until last year it was easy to discover details of the units and the specialist efforts of the Territorial Army. This year, it has not been so easy. The noble and gallant Lord referred to a number of issues arising from the Defence White Paper. I hope that the Government will bear in mind the comments that he made.

We know from the Strategic Defence Review 1998 that the Government decided that the Territorial Army should be reduced to about 40,000, and it has been. But that is too small, especially as its members are now required to supplement the efforts of the Regular Army when serving abroad. A number have served in the Balkans, including my noble friend Lord Attlee.

The Strategic Defence Review this year implied that the Territorial Army would be made more useable and that it would be better resourced and better trained. But is that so? A competent Territorial Army commander would have issued his programme for the training year beginning on 1st April this year many weeks ago because it takes time to compile. That being the case, can the Minister explain why the man-training day budget for some TA logistic units has been cut by 20 per cent, as hinted at by the noble and gallant Lord? What signal does that send to Territorial Army soldiers in units that have been cut and, to some extent, reorganised? I should mention in passing that my noble friend Lord Attlee is unfortunately unable to give the House information on this point because he holds a command position in the Territorial Army. I hope that the Government will decide that the Territorial Army must be expanded. In the event of another major war we would be at a disadvantage, given its present modest size.

Last year the functions and duties of the TA were briefly but reasonably well described. However, it is impossible now to discover the strength of the various branches of the TA. I hope that from now on we shall be given more information.

The only other matter I have time to mention concerns the conflict between human rights and service discipline. It is a matter which, in the Government's interests, must be resolved. There will be the occasional crisis if the Government continue to fail to ask Parliament to legislate. It is no good leaving it merely to the advice of a Minister, as the noble Baroness suggested on one occasion when this matter was raised.

The issue is simple. The exercise of human rights by any member of the Armed Forces under, for example, Article 10 of the convention—which is set out in the Schedule to the 1998 Act—could easily conflict with good order and military discipline. Article 10 grants the right to freedom of expression "without interference by public authority". I emphasise those words; they are in the article. Therefore a private soldier could criticise a general publicly and could not be stopped.

The noble Baroness challenged my interpretation of Article 11 when I asked a Question on 22nd February. She rightly drew attention to the last sentence of Article 11, which states:

"This Article shall not prevent the imposition of lawful restrictions on the exercise of these rights by members of the armed forces".

That is not the whole answer. If no steps are taken to prevent the exercise of these rights, chaos will result. It means that a matter will have to go to court, which, bearing in mind the uncertainty of the wording, may or may not grant an immediate injunction. In any event, even if the court grants an immediate injunction, the matter will have to be decided by the High Court, and it could take weeks before a final decision is made. The Government really must do something about this while the Armed Forces Discipline Bill is in another place.

My Lords, I am grateful, as I am sure are all your Lordships, to the noble and gallant Lord, Lord Bramall, for enabling the House to discuss this theme at this time. I was also most interested to hear the points made by the noble Lords, Lord Williams of Elvel and Lord Renton. I am sure that the Minister will respond to them.

To take an analogy, in some ways it is almost as difficult to judge the defence needs and the state of defences of the nation against this White Paper as it is to discuss and analyse the real state of the health of a company based on its annual report. Indeed, there are some similarities between the White Paper and an annual report—some of which are physical and obvious. The White Paper is quite a glossy publication: it is strong on photographs and some of its language has been described as somewhat bland. Nevertheless, it is an extraordinarily important document and, in some ways, a rather disturbing one.

It is disturbing because, among other things, it is very explicit on the objectives and the needs for defence, some of which have been referred to. They are writ very long indeed. Let me take one example—the obligation on this country in defence terms,

"to act as a force for good in the world".

When the Prime Minister spoke in Chicago earlier this year about the moral imperative to act where there has been systematic abuse of human rights, he clearly envisaged in that context the potential defence dimension to such action. If we take only that one objective and set it against what we know about the resources, there is clearly a potential mismatch or overstretch between them. I should be grateful if, when the Minister responds, she will comment on how the Government see the balance of priorities between the objectives for which the defence resources of the nation are to be committed. They are in themselves a universe of obligation.

The concerns about overstretch, to which the noble and gallant Lord and others referred, have been well documented, discussed and debated, both in the other place and in the media. I shall comment on one concern—the challenge of retaining people serving in the Armed Forces. The recruitment advertising campaign that the Government and the MoD have been running has had considerable success. However, if one pours people in at the top while losing them out of the bottom all the time, the overstretch problem will remain. I should be grateful if the Minister could tell the House more specifically what measures are planned to improve the retention rate within the Armed Forces.

I drew an analogy with an annual report, which is, of course, a report at one moment in time. Time and events move on. Likewise, the White Paper presents a perspective at one moment in time. Even since its publication events have moved. I should like to headline two matters and seek a response from the Minister.

There is reference in two or three paragraphs of the White Paper to the situation regarding the ESDI. Earlier this week, I noted an interesting article by the Secretary-General of NATO, the noble Lord, Lord Robertson. The noble Lord wrote with considerable urgency that Kosovo had revealed an imbalance in capabilities between the European Union and the United States which was,

"neither fair nor politically sustainable".

I have just returned from a visit to the United States. It is clear that, although this matter is not top of the agenda in terms of the domestic elections now under way, there is real irritation and impatience, certainly in the media, with the inability of the Europeans to get their act together in terms of "the bang for the buck". The truth is that our spending collectively on defence amounts to 60 per cent of America's and for that we receive 15 per cent of the capability. That is not a sustainable position and something must be done about it. I should be pleased to hear from the Minister the Government's further thoughts on the ESDI.

One paragraph of the White Paper refers specifically to relations between NATO and Russia. Since its publication, we have heard the present Russian leader talking to Sir David Frost on television and explaining that, on the whole, Russia might quite like to belong to NATO. That statement is set against the background of the appalling saga of events in Chechnya. If ever there was abuse of human rights, surely we saw an illustration of it in that dreadful conflict. As the Prime Minister prepares for a visit and more detailed discussions with Mr Putin, it is important to hear from the Government what their thinking is and what we intend to say to Russia.

The White Paper is important. In some ways it is reassuring; in some ways it is disturbing. It must always be remembered that an annual report invites investors to put their money on the line. In a sense the White Paper invites the men and women who serve in our Armed Forces to put their lives on the line. It is therefore critical that resources and obligations are matched.

There is one powerful point of reassurance in the White Paper. We are told that while we may be somewhat short of resources on land, on sea and in the air, no less than one-fifth of all the civil servants of the United Kingdom now work for the Ministry of Defence. We are not short behind the desk!

My Lords, I join in thanking the noble and gallant Lord, Lord Bramall, for instigating this debate. The Strategic Defence Review was praised and welcomed. It spelt out intentions and, in places, aspirations. It is reasonable now to examine one or two of the key planks in the review and assess progress.

Sadly, the 1999 White Paper revealed some serious shortfalls in implementing the SDR. It is also very complacent. I have counted between the two covers over 30 instances of the "We are jolly well going to take the bull by the horns" sort of remark. In the Secretary of State's introduction we learn that,

"The Armed Forces are already exploiting opportunities for using new technology in operations".

and,

"We will be continuing to look for opportunities for further joined-up working".

Elsewhere, we are told,

"We are already working to reduce our vulnerability",

and,

"Our approach is to establish within the EU what is required to properly support decision making".

I had hoped for more positive results.

More irritating are dubious references to further funds having been allocated. I offer a prime example of spin:

"Additional funding has also been made available to restore deficiencies in weapons systems and spares of critical equipment, and the enhancements to the RAF's deployed sustainability will be introduced progressively in the period to 2006".

The defence budget has not been increased—rather, the reverse is the case. So what has suffered in order to find those extra resources for the Royal Air Force's needs? Six years to restore deficiencies and spares of critical equipment, anyway, seems inexcusable. Young men and women are required to go and fight for us. The Government take six years to catch up with critical operational needs. It is just not good enough.

Another reference to additional funds talks of £140 million for the Defence Medical Services, But if press reports are to be believed, the provision for the medical services has been cut back. What has suffered because £140 million has been transferred from elsewhere; the RAF enhancements maybe?

I had hoped that we could learn more, not only about what has been thought about and planned, but what new improvements have been completed and are working satisfactorily. The paucity of examples—except, I am pleased to note, in the personnel field—is depressing.

As the Prime Minister has written in a different context:

"the job of government is to meet the needs and aspirations of the people. That depends on deciding on the right policies, and then delivering them effectively".

I heard President Thabo Mbeki sum up the latter part of that aspiration rather more succinctly in these words:

"It is not done until it is done".

So what have the Government done about the strategic airlift requirement? It was identified, and rightly, in the SDR as an absolutely key capability, so urgently needed that the Royal Air Force had to give up more than three squadrons-worth of operational fast jet fighters to help to pay for it. But where are the four C-17 aircraft or their equivalent for our short-term strategic airlift needs? Can the Minister tell us the position?

The much heralded Joint Rapid Reaction Force is misnamed. It is unable to live up to its "Rapid" title, and the White Paper admits as much. A key plank of the Strategic Defence Review has yet to materialise. Will the two replacement carriers (another key plank) suffer a similar fate? Meanwhile, we have seen the Government's defence policies in Kosovo, in the Middle East and elsewhere relying more and more on the deployment and application of offensive air power. We should not have given up, with no viable offset, all those fast jet fighter aircraft which could do far more to sustain Her Majesty's Government's foreign and defence policies in the expeditionary overseas actions on which we have had to embark in the past few years.

Meanwhile, without strategic lift, we are not well positioned to be a worldwide "force for good". What an object lesson we have had over Mozambique. Those Puma helicopters were not even on standby for a stripped down move, let alone ordered to move until Tuesday of last week. By Thursday, they were on their way. That was a remarkable example of 33 Squadron's fine leadership and motivation. The whole House should congratulate those fine airmen and airwomen.

Despite my criticisms of the White Paper, I pay tribute to the Minister for the way in which she has invariably and so helpfully responded to points made in defence debates. I am sure that today will be no exception. Her busy schedule has been badly skewed by the timing of today's debate. As Convenor, I can but express my apologies to her that this Cross-Bench day has interfered with her visit on important national business to the Gulf. We are truly grateful to have the lead exponent for the Ministry of Defence in this House to respond.

Before I sit down, I wish to draw attention to the recent retirement of the noble Lord, Lord Monro of Langholm, from the post of honorary inspector general of the Royal Auxiliary Air Force. For 10 years, from January 1990 to January this year, the noble Lord has devoted himself wholeheartedly to the interests of the RAAF. Throughout a series of defence reviews he has sustained the morale and efficiency of the many dedicated men and women who voluntarily serve their country in a great variety of important fields. The noble Lord has encouraged them. He has been a line advocate for their interests. He has had the reward of seeing those particular reserve forces being allowed to grow in capability and strength. His is a fine achievement. The noble Lord will long be remembered with affection and gratitude for all that he did. I am sure that he will not lose touch with the auxiliaries. He will always be their most welcome guest at any time of the day or night, in the field or in the mess. He deserves your Lordships' congratulations and good wishes.

Hear, hear.

My Lords, I said in 1992 that Russian strategy was clearly to end up with a lean, mean army; a defence industrial capacity drawing in Western technology and maintaining its nuclear capacity; and a political climate calculated to disperse NATO's defence capacity. Significant conversion would not take place. The defence complex would prove impossible to dismantle. We would end with a Russia possessing the most sophisticated weapons and a major arms exporter, with inevitable consequences for arms proliferation. I asked then whether we should be facing Russia with a seriously depleted defence capacity, industrial and military. I ask that question again today.

Meanwhile, the Russians succeeded in destroying COCOM and gaining wide access through partnerships to Western technology. They are only now signing the START II treaty. They signed the chemical warfare convention only in 1997 and have as yet destroyed nothing.

What is the Russian defence position today? Russia is increasing its budget for defence procurement by 50 per cent this year. Total expenditure on defence and security now accounts for one-quarter of the federal budget and spending on national defence is to go up by 27 billion dollars. The budget for the navy has doubled. Meanwhile, Russia has exported more than 3 billion dollars-worth of arms in the past year, usually as part of a package of military aircraft, helicopters, ships and so on. Russia now has 1,600 defence plants employing 2 million people.

India, to which Russia sold the cryogenic rocket motors that enabled India to become a military nuclear power—and whose navy, army and air force are largely equipped by Russia—is taking delivery of yet more armaments. Time does not allow me to go into detail. Russia continues to target and supply Malaysia, and even today Indonesia, and not least China, with military aircraft, helicopters, submarines and destroyers. Now that sanctions have been lifted, Russia is to sell MiG 31s and multiple launch rocket systems to Libya. Russia has renewed its military agreement with Cyprus and of course continues its close military links with Syria. Russia is about to build nuclear power stations in Iran, with two reactors, and India, and will help Libya to reactivate its nuclear power station.

At home, Russia has successfully tested yet again its Topol M intercontinental ballistic missile, and Russia's strategic missiles troops have 20 new Topol M missile launchers on combat duty.

What has that to do with the UK's defence strategy, since it does not yet include any indication of a specific military threat to NATO—though the new military doctrine allowing the use of tactical nuclear weapons in local and regional conflicts is disquieting? The drive to spend more on defence procurement not only brings in money but creates a whole network of valuable relationships and points of influence in the Middle and Far East and in Latin America—and is helping to create all the conditions for the asymmetric threat. That drive is also enabling Russia to build fully equipped modern strategic forces and a powerful nuclear capacity. They will not need to be used. They will simply be there—able to create pressure when required. Moreover, Russia will be able to act through its many surrogates and allies, from Libya to China.

What will our situation be? Countering a strategic attack on NATO is one of the defence missions and the most important—but it is being treated on the old 10-year rule principle that led to our woeful situation in 1939. Then, as now, the Treasury was in the driving seat. It is comfortably argued that we shall foresee any threat in time to prepare, but by 2005 at the latest Russia will enjoy a formidable power to threaten while we shall be unable credibly to deter.

Because of the Government's inability to recognise the need to match resources to ever-growing commitments and the failure to stick to their own SDR, the Armed Forces are seriously overstretched and disgracefully under-funded. We are even dependent on Russian Antonovs to meet our strategic airlift requirements if we wish to deploy anywhere—including Mozambique—and our procurement programme is seriously underspent and overdue. Why?

Mr Putin is not a Yeltsin. He is a man who will know how to threaten, infiltrate and manipulate. I find it less than reassuring that he has welcomed the news of the formation of that grand organization, the European Defence and Security Identity. Nothing could suit Russia better than to see NATO assets committed to some open-ended EU venture just when they are needed to deter. That is when the Russians will probe NATO on, perhaps, the Baltic states. We are told that is not a European army but that,

"the bulk of military capacities for planning and conducting any EU-led operation will be drawn from the resources available for NATO, but the EU would be making the decisions on military matters and would take political control of crisis management operations".

The main representation on that issue at the moment is political, not military.

Our 15,000 men are to come from our NATO troops. We are already pinned down in Kosovo for what could be 10 years and we have been in Bosnia for six years. We are still in the Gulf and in Northern Ireland. The theory is that the EDSI will force other European countries to spend seriously on defence and to commit troops. How? Of the 2 million troops theoretically under arms, 700,000 are conscripts. Europe, other than France, could only produce a miserable 2 per cent of the troops in Kosovo. We and the French will bear the burden, for I do not believe the others will ever produce much more than a handful of admirals and stretcher-bearers. They cannot even produce policemen, for God's sake! I do not think that exercise will go far to reassure the Americans.

There was and is nothing wrong with some defence diplomacy—it is an honourable thing—provided there are the resources to pay for it. But to make extensive political commitments, then prove unable to meet them for lack of money and men—as could well happen if the UN takes up our promises in the Memorandum of Understanding, already an impossible commitment—seems likely to prove counter-productive. Far more important, mounting political commitments are making it impossible to train the forces in the ability to wage high-intensity warfare, which is their prime military task and one that cannot be achieved at the last minute.

Our defence forces are not primarily a political weapon, and should not be. Neither the Treasury nor the Foreign and Commonwealth Office are the right people to make the strategy. Action must be taken now, before it is too late, to address the military tasks and needs of our defence forces.

My Lords, I am especially grateful to my noble and gallant friend Lord Bramall for introducing this debate with such force and eloquence. Even as we speak, the Public Accounts Committee in another place is examining a recent report on defence procurement by the National Audit Office. This debate gives me the opportunity to return to a subject on which I have spoken many times in your Lordships' House, for which I do not apologise. It does not have to do with some of the weightier matters of strategy and resources that have been dealt with by other speakers. I would like to have followed them in talking about the continuing mismatch between resources and commitments, but instead I will return to a subject that will be familiar to some of your Lordships.

The report of the National Audit Office, which was published last month, is entitled Accepting Equipment Off-Contract and Into Service; in other words, procurement. That is a comprehensive and valuable report which covers a very wide area of this aspect of policy. There is only one page of that report to which I should like to draw the attention of your Lordships. For those who may want to read the report, the reference is page 36. That gives a fascinating and alarming insight into the story of the Chinook Mk2 helicopter, especially the computer software called FADEC which regulates the flow of fuel to the aircraft's engines.

The report sketches the history of the helicopter. It points out that when the Chinook Mk1 was updated FADEC was installed, and in order for it to be given an airworthiness certificate it had to go to the Defence Evaluation and Research Establishment at Boscombe Down. That establishment carried out tests on the aircraft. In 1993 it advised the Ministry of Defence that it could not give it an airworthiness certificate because of,

"the unquantifiable risk associated with the unverifiable nature of the FADEC software".

It concluded that it was necessary to rewrite the software. The software was rewritten and in 1998, five years later, the aircraft was given an airworthiness certificate.

All of that may sound like a fairly routine piece of military procurement, except for one matter. In the period between the refusal of Boscombe Down to give the aircraft an airworthiness certificate and 1998 when the certificate was issued something happened, and we all know what it was. A Chinook Mk2 crashed on the Mull of Kintyre in Scotland killing the aircrew and 25 members of the Northern Ireland intelligence community. No one knows why that aircraft crashed because there was no black box flight recorder and no survivor. Nobody can know what happened.

It has been said many times since by the Ministry of Defence and its officials that there was no evidence of technical or mechanical malfunction. That may be so, but it does not mean that there was no malfunction; only that there is no evidence of it. I do not claim that the FADEC computer system was responsible for the crash. As a former consultant to Boeing, I know a little about these matters. I am second to none in my admiration for the professionalism and integrity of that great corporation. I merely say that there is a possibility, however remote, that some kind of malfunction contributed to the crash.

A Royal Air Force board of inquiry was set up to look into the crash. Initially, the board said that there was no reason to attribute human failings to the crash. That was endorsed by the station commander concerned. It was further supported by the fatal accident inquiry in Scotland which said that there was no evidence of human failure. It was only when the verdict was reviewed by two senior officers in the Ministry of Defence that a verdict of gross negligence was entered against the two pilots, Flight Lieutenants Cook and Tapper.

I must remind noble Lords, as I have done many times in the past, that Queen's Regulations for the Royal Air Force, which are carefully drafted to protect people who are suspected of negligence, even when they are alive, provide strong protection for the rights of dead aircrew. The regulations provide that deceased aircrew should not be found guilty of negligence unless there is "no doubt whatsoever" about the causes of the accident. Yet these dead pilots were found guilty of gross negligence. It really will not do for the Ministry of Defence to keep on saying that it will not revisit the verdict unless further evidence comes to its notice. There is no further evidence, and there cannot be; it is all there, including the report of the National Audit Office.

I know that this is a familiar story to the noble Baroness who has acted in an honourable and sensitive way, as she does in all her dealings with these matters. I gave her notice that I intended to raise this matter today. I must now ask the noble Baroness a question that I have asked before without receiving a satisfactory answer. In the light of all the evidence, and the recent report by the National Audit Office, can the Minister now say that in the minds of Ministers in the Ministry of Defence there is no doubt whatsoever about the causes of this accident? If the Minister replies that there is no doubt whatsoever I should like to know on what evidence that is based, given the fact that the original Royal Air Force inquiry and fatal accident inquiry gave no indication of human failure. Is there any evidence which was not available to those two inquiries? If so, we have the right to know what it is. On the other hand, if the Minister cannot give us an unequivocal and unqualified "yes" in response to my question, we are entitled to conclude that there is some doubt, in which case the verdict of gross negligence should be set aside.

As matters now stand, the verdict has cast doubt upon the reputation of two bright, brave young officers with all the anguish and hurt that that has brought to their families and friends. More importantly, I believe that it has left a stain upon the honour of the great service to which they belonged. That stain will remain until the Government do something to remove it. I look forward to the Minister's reply at the end of this debate.

My Lords, I cannot follow the noble Lord, Lord Chalfont, because of the time limitations. The House is indebted to the noble and gallant Lord, Lord Bramall, for his forceful speech, which touched on overstretch and deficiency. The overstretch is real; the deficiency is Europe's. I have been deeply disturbed by a good deal of the press coverage of defence matters in recent weeks. It reminds me of the time 15 or more years ago when, accompanied by a distinguished Conservative Member of the other place—not the noble Lord, Lord Monro of Langholm, to whom tribute has rightly been paid by the noble and gallant Lord, Lord Craig of Radley—I visited a major Royal Air Force station which accommodated squadrons then committed to act on behalf of NATO while the Cold War was at its height.

To my astonishment, I discovered that the then government had imposed enormously tight flying restrictions upon those squadrons, so much so that it seemed doubtful whether they could reach NATO's current requirements despite their frontline role. I recall saying to the station commander that the restrictions imposed by the then government meant that less flying time was available than had previously been available years before to the Royal Air Force Volunteer Reserve at weekends. I said to my parliamentary colleague that when I returned to Westminster I would table a Question, which I did. A journalist from one of the popular newspapers said that he believed it to be a red hot story. I agreed but said I doubted whether the particular newspaper would publish it. The Question was asked and the Answer was given but there was not a word about it in the press.

In recent weeks we have read some preposterous stories about the present Government. For example, reference has been made to Bowman. I believe that that story is worthy of consideration by the House. The Government inherited the communication equipment programme for the Armed Forces, but it was about six years late and the structure of the contract was in chaos. My noble friend may wish to comment on that. We have been told that the rifle issued to British forces is unsatisfactory, but that has been standard equipment for goodness knows how long, certainly as long ago as the Falklands War.

We also learn that the Royal Air Force has no capacity to bomb accurately. Perhaps my noble friend will also comment on that. This is related to the transformation of the GR1 Tornado strike aircraft into the GR4. With the rapid development of electronic warfare and communications equipment, when the GR4 is fully operational it should have the capacity to deliver a bomb smartly and accurately. The Air Force has not suddenly decided that it does not have that capacity. Jaguar aircraft and the Tornado GR1s which have not yet been converted are capable of performing with skill, accuracy and dedication, as they did in the Kosovo conflict.

Some astonishing stories in the press demean our forces. The noble and gallant Lord, Lord Bramall, rightly said that our forces have been bearing the honour of Europe upon their shoulders in former Yugoslavia and other parts of the world. That leads me to the European reference which I think is appropriate in this debate. Before coming to this House, I have spent more time in debates in the Western European Union on European security and defence than anyone since the Council of Europe and WEU were formed. I found them frustrating, irritating and annoying. From time to time one became enraged at the way in which many of our European partners were demanding commitments and interventions which they themselves were incapable of providing. They would provide stretcher-bearers, ambulances and traffic policemen but not combat capacity: that was for the United Kingdom. Since trade follows the flag—my noble friend Lord Williams of Elvel may not always agree in saying that honour must be properly served—and since our Armed Forces are of a high quality, we cannot stand back and watch horror and barbarity proliferate.

However, that situation has been going on for a long time. As Europe has developed its political appetite for the second pillar—to operate as a defence institution—it is time for Europe to recognise that it must start making an adequate contribution. That point has been valid, and some of us have been arguing it, for the past decade. The pity was that before 1997 the previous administration was quite prepared to see Europe pour scorn on, and put a lid on, any criticism offered about the European contribution. I have personal experience of that from studies of the capabilities of Western European air forces when the Council of Ministers prevented proper consideration of that important matter.

It is time we recognised that with the development of the second pillar we need to see retention of that part of the Western European Union's role which provides for an international parliamentary forum where attention could be drawn to inadequacies and inefficiencies—and poppycock. I became sick of listening to the Foreign Ministers and Defence Ministers of a number of Western European countries who were always eager to see British forces sent in. I remember saying to one Italian Minister that the only contribution I would prefer to see would be a translation into Italian of Alfred, Lord Tennyson's poem The Charge of the Light Brigade in order that it should accompany whatever contribution the Italians were making.

We have to recognise that there will be change in Europe: that it is right for Europe to act maturely in international affairs. But Europe must accept that it cannot rely on Britain to continue to bear for a long period an unfair share of the burdens which that provides. The point was illustrated by a question I asked in the House last Monday. In relation to Mozambique I referred to the need for heavy-lift aircraft, heavy-lift helicopters, and heavy-lift capacity. But we have to accept that the British taxpayer is entitled to demand that we seek to insist that in Europe there are fair shares within the second pillar, if that is to have any meaning.

My Lords, I add my thanks to the noble and gallant Lord, Lord Bramall, for instituting this debate. I am somewhat disappointed that we have only two and a half hours to discuss what seems to me an enormously important subject. I wonder what message that sends to our Armed Forces. I hope that the Minister will find time for a longer debate at some stage in the future on important issues such as the European security and defence initiative and other issues.

I have time to concentrate on only one issue. I should like to add my strong support to those who referred to the critical importance of delivering the Strategic Defence Review. I, too, share some of the criticisms about the complacency which I felt came through in the White Paper. I know that that view was shared by some members of the Armed Forces.

It is worth reminding ourselves—some noble Lords have touched on it—what the Armed Forces have been through since the end of the Cold War. We had Options for Change which promised "smaller but better" and, frankly, was never delivered. We then had Front Line First, or the defence cost study which had some good things in it but also did great damage to our medical services. Throughout that time the Armed Forces were continually engaged. We had the Gulf War, Northern Ireland, Bosnia, Rwanda, Iraq, and now Kosovo.

As many have said, the Strategic Defence Review was well received. It was credible. It provided a blueprint for the future. There is no doubt that it raised high hopes among the Armed Forces. Although each service—the noble and gallant Lord, Lord Craig, touched on this—undoubtedly had to give up some significant elements of their fighting capability, the overall cohesion of the package was well received. If the basic Strategic Defence Review is not delivered—I do not say in its entirety; one always knows one has to trim things at the edges—and the capability of the Armed Forces outlined in it, I believe that the Armed Forces will become increasingly sceptical that yet again promises have not been met.

It is clear that we are having to delay the arrival of some new equipment into service. We are having to delay or defer other necessary improvements. We are having to cancel exercises; and we cannot fund the SDR at the present level of funding. I endorse strongly the comments of the noble and gallant Lord, Lord Bramall, about the 3 per cent efficiency savings which have to be found year on year for four years. Unless that 3 per cent savings initiative is removed, the problems of funding the SDR will become even more acute. That must have implications for morale, lead to increased scepticism, major problems for retention and reduce the fighting effectiveness of our Armed Forces. It is easy to talk about fighting effectiveness. We are saying that we are prepared to send men and women on operations not as well equipped and trained as they should be.

Finally, I wish to talk about training. One of the key assumptions of the Strategic Defence Review—it was an important assumption—was that we would retain the capability to take part in high intensity conflict; in other words, we would be prepared to go to war and to fight. Once one loses that capability, it takes years to get it back. Even on some of the peace enforcement/peace support operations, we need that capability. The Strategic Defence Review made it quite clear that our Armed Forces were to be equipped, manned and trained so that they could take part in a wide range of operational commitments: from defence diplomacy at the bottom end through traditional peacekeeping to the more complex, difficult and dangerous operations of peace enforcement and peace support; and, at the top end of the spectrum of conflict, taking part in high intensity conflict.

That places heavy training and leadership demands on the Armed Forces. There is no doubt that a number of our senior commanders are deeply concerned about the erosion in training standards, in particular at the top end of the spectrum of conflict. Some have said to me, "We are not as well trained as we were before the Gulf War". Again that must have implications on the Strategic Defence Review and morale, retention and fighting effectiveness. In short, if the Government are to deliver the Strategic Defence Review, the defence budget is too small and we shall not be able to meet the aspirations of the Armed Forces.

My Lords, I, too, am grateful to the noble and gallant Lord, Lord Bramall, for introducing the debate today. Your Lordships have already heard that there is serious concern over the defence budget. Unless the matter can be addressed with some urgency the SDR promises may not be met and our Armed Forces will become less capable, less efficient, less well trained. They will be fewer in number and operating with less up-to-date equipment.

During your Lordships' Defence Group visit, a consistent theme was presented to us about the worries and effects that the 3 per cent efficiency savings are having on the Armed Forces. Without a more reasonable budget and more resources, our present Armed Forces will not remain capable, well trained and efficient.

Currently, the Army has just under 30 per cent of its staff either on operations, recovering from them or training for them. However, in the middle of last year that figure was 47 per cent. That is overcommitment nearly beyond the bounds of belief. It is essential that deployment levels are kept to within the laid down provisions of SDR.

The critically high deployment figure has created unprecedented turbulence. In the Army it has slowed down the formation of 12 Mechanised Brigade and has prevented the "formation readiness cycle" from starting. That, in turn, has led to near impossible overstretch, the well recognised enemy of retention.

Overcommitment causes undermanning and that, in turn, leads to overstretch, which is the main factor contributing to lack of retention in all three services. There are only two ways of dealing with overcommitment; either commitments are reduced or more money and resources are found to create more units.

The Army has made a significant effort at recruiting but is still some 5,600 below strength. The cost of training and keeping a soldier over a period of three years amounts to some £60,000. It is therefore essential that every effort is made to retain junior ranks for longer than three years. That would save money overall and ensure that the country had a better trained and more experienced Army. It is incumbent on the Ministry of Defence to approach retention with a far more robust attitude.

I believe that the MoD has been mean with the proposed lump sum bonuses for accumulated separated service. The bonus should be £5,000 and not £1,000 as suggested. If such a payment were implemented, the rate of retention might well increase dramatically. Although the introduction of 20 minutes of free telephone time a week and the e-mail system are much appreciated, would it not be possible for servicemen and women to be issued with free mobile telephones when deployed on operations or peacekeeping missions which they would return when leaving those theatres?

Retention would also be helped by ensuring that there is no slippage in the dates set for accommodation improvements. The sum of £1.8 billion has been committed to modernisation of single accommodation and more is required. But the date for completion of the project has slipped to 2005. Why is it necessary to spend millions and millions of pounds on new barracks in the United Kingdom to house regiments from Germany when those troops could remain there at no extra cost to the current budget?

There is concern too about married quarters. Following a 100 per cent stocktake of the estate it became clear that an additional £112 million was required for modernisation and the completion date slipped from 2003 to 2005. In addition, a further £12 million has been cut from the Defence Housing Estate budget. That upsets families and is no help in encouraging people to remain in the services.

In the Army, more than 70 per cent of jobs are open to women, with 7,648 enlisted and the majority working well and efficiently. Many years ago, two women staff captains worked for me. They could not have been more efficient. However, I want to sound a word of warning. It would be utterly wrong if women were allowed to enlist into the combat units of the Royal Armoured Corps and the infantry. It would make units less efficient: it would also become much more difficult to retain the all-important will to win the battle at all costs. In any event, the close confines of a closed down armoured vehicle for days on end could not be more unsuitable for women. The evidence to support my opinion has been drawn from a study carried out in the US. It found that American women in combat units reduced combat readiness, effectiveness and unit cohesion.

I cannot emphasise too strongly that if our troops are not trained properly for war fighting, we cannot expect to win battles in the future. Some 39 exercises, including the Royal Marines' Arctic exercise, were cancelled last year. Most cancellations were due to Kosovo, but some were due to budgetary constraints. If overcommitment of operations affects training to such an alarming extent, it is surely an indication that we may not have our SDR force level deployment correct. The cancellation of overseas exercises, such as in Belize and Kenya, is a disappointment to servicemen and women and is another factor that does not help retention.

I want to reiterate that serious lack of resources will prevent the SDR promises being implemented and, if that happens, many servicemen and women will leave. That will result in poorly trained Armed Forces, under strength and badly equipped.

Furthermore, political correctness could undermine the military ethos which stems largely from traditions within the regimental system. The Armed Services must not be regarded as civilians in uniform and be subject to civilian management procedures. They need a separate and different way of life and clear military discipline. Any damage to that military ethos will prevent the right kind of person enlisting into the Armed Forces of the Crown to provide protection for our freedom. It is our duty to guard against, and be alert to, any indications that might damage that special ethos. We must ensure that it continues to thrive.

Finally, I pay tribute to members of our courageous and loyal Armed Forces who have shown that they are the very best. They are an example to, and the envy of, the rest of the world. We should be justly proud of our servicemen and women. The whole nation owes them a large debt of gratitude.

My Lords, we are, of course, all grateful to my noble and gallant friend Lord Bramall for raising this interesting and vital issue of the Defence White Paper. I remember the noble and gallant Lord showing me his maiden speech before he made it. It was absolutely first-rate, as all noble Lords told him. As this is not his maiden speech, he may receive fewer letters of congratulation, but his speech today is every bit as relevant and forceful. I also want to thank my noble friend the Minister for rearranging her busy schedule to be with us today. She always bothers to listen to and answer our many complaints.

Those of us who belong to the Defence Study Group and take an interest in the defence of our realm are like a chorus of sad Cassandras. During the past 14 years, since I have been a member, governments have come and gone, walls have collapsed in Berlin, wars have been fought and the Soviet communist empire has disappeared. But we are all, alas, singing the same song.

Our Armed Forces are being reduced and reduced and reduced. To see the thin red line, you probably need a magnifying glass, if not a microscope. The noble Lord, Lord Williams of Elvel, must have very good eyesight. There is no longer enough time between front-line unaccompanied tours. The magical figure of 24 months is becoming more mythical than real. Added to that are the very real worries which are being imposed upon our forces by the European Union. If an officer is unable to give an order in case he may be sued because of the possible dangers involved, we shall not be able to have any Armed Forces at all. Ships, guns and planes are all dangerous things—so is peacekeeping and war—but we are not talking about computer games.

The second point that I would make briefly is about weapons. In order to be an effective armed force you must have weapons which actually work. We have heard endlessly of the rifles which for some reason or another stick. It is perhaps almost better to have no weapon at all than to be issued with a weapon which does not work.

Thirdly, there is the question of families. Here there are three distinct issues. The first is the separation caused by unaccompanied front-line tours, about which I have already spoken. Anyone whose husband is in the services is prepared to make reasonable sacrifices, but less than 24 months between front-line unaccompanied tours is not reasonable.

The second issue is housing. It was the Conservative government sold off MoD property to an agency because it would all be so much better managed. All property, we were told, would now be brought up to standard because there would be money available to do so. Many of us objected strongly and, indeed, voted against the proposals, as did my noble friend Lady Park of Monmouth and myself. It gives me no pleasure to say that we have been proved right. Much of the Army's housing is in a shocking state. It has not been brought up to the standards that we were led to expect.

My third point is about pensions. Yes, your Lordships will have guessed that I refer once more to the attributable forces family pension, to which all servicemen now contribute. If you know that if anything happens to you, your widow will have a pension for life from the contributions that you have made, you will have some confidence. However, that is not now the case. If your widow wishes to remarry in order to provide a father and a firm family background for your children, she will lose the pension to which you have contributed. Your Lordships will have heard this argument before. I include it simply as one of my three points.

Recently, we have heard much about the importance of a European force, as well as NATO. Certainly, we hope that our European allies will send more troops, money and supplies to support NATO, for which the Americans and the British are still bearing the brunt. However, we do not envisage a future in which NATO, as a tried, practised and working organisation, could be in any way sidelined by an amorphous European force governed by committees.

During the time that I have been lucky enough to be associated with the Defence Study Group, there have been from time to time government reviews, starting with the ill-omened Options for Change. They are all bright, glossy, and full of interesting figures, and they all cut down our forces and their finances. However, the last one—the Strategic Defence Review—seemed to have some chance of succeeding. It looked at our defences from the other way round. Of course, it was not perfect; nothing in this world is. Our forces had to budget for an annual 3 per cent reduction. If all things had been equal, that might have proved possible. But all things are not equal. The MoD has now had to fork out for Bosnia, Kosovo and Iraq, with no help from the Treasury. What was already a very tight budget is rapidly becoming an impossible one. We know that we have the best Armed Forces in the world; we know that they are all totally splendid and we admire them from our hearts. We certainly pay enough taxes. Could not a higher proportion of them be squeezed from the Treasury for defence and for our Armed Forces?

My Lords, the noble and gallant Lord, Lord Bramall, has certainly done your Lordships a service by introducing this debate. However, I suspect that he will have been as disappointed as we are on this side to see the paucity of supporters on the government side of the House. Perhaps that has become a feature of debates on this subject.

First, I wish to address the matter of recruiting, in particular, to the reserve forces. I am cautiously encouraged that regular recruiting is buoyant or, at least, is becoming more buoyant. That is certainly good news for us all in the light of the stretched circumstances in which the Armed Forces have to operate. However, as other noble Lords mentioned this afternoon, it is very bad news that retention is still so poor in the regular forces. I very much hope that, when she comes to reply to the debate, the noble Baroness will be able to touch on that and explain more about what is being done to try to deal with that matter.

As to the reserve forces, it is perhaps a little difficult to judge how the TA's restructuring has affected recruiting at this comparatively early stage. However, I understand that figures are holding up quite well and, again, I hope that the noble Baroness can explain how they stand.

I declare a non-financial interest as a member of the National Employers' Liaison Committee for the reserve forces. In that committee we very much welcome the recognition which Ministers have given to the valuable role of the reserve forces, and particularly to their employers. We recognise and admire the commitment of volunteers who deploy on full-time service. Equally, however, many of them might not be prepared to volunteer without the support of their employers and their families. One of the roles of the local employer liaison committees and the National Employers' Liaison Committee is to communicate more effectively with employers. I believe that that is now being achieved.

A number of initiatives have been launched in the past year by the National Employers' Liaison Committee in conjunction with other departments and with the Reserves Training Mobilisation Centre, which is proving most successful. There are other activities, such as the "Employers Abroad" scheme, whereby employers have been able to see for themselves the crucial role played by our Armed Forces, including the integrated reserves, in sustaining peace in the Balkans.

Employers who have released reservists to take part in those activities have got back individuals who are much more able to communicate effectively, think on their feet, take decisions if required to do so and, yet, maintain their full focus on the corporate goal. The authority and presence needed in a hostile military environment are not tied to rank and position alone. Civilian employers have not necessarily known as much about that as they should or they have not appreciated it in the way that we would wish. Therefore, the recent initiatives are important steps in the right direction.

As the noble and gallant Lord, Lord Bramall, said, there is still considerable weakness in the medical reserves. I have been involved in this subject for some time, both as chairman of an NHS trust until two years ago and, now, as a member of the National Employers' Liaison Committee. In a couple of months I shall visit the Balkans with senior members of the NHS, as other medical employers have already done, to see the valuable work carried out by medical reservists there. To that extent, and being acutely aware of the pressures which exist within the National Health Service, I, too, very much hope that the Minister will do all that she can to ensure that her department and the Department of Health work together as closely and pragmatically as possible in order to achieve the desired results. That surely would be a good example of joined-up government.

Qualifications matter, and the world-class training that the reserves receive goes a long way to achieving qualifications. Within the National Employers' Liaison Committee we point out that reservist activities provide a return to the employer—what we call the "profitable partnership". Over 6,000 employers, including most of our best known firms, have recognised that. I fear that it is not so widely recognised or understood among the small and medium-sized businesses. Of course, very many reservists are employed by them. It is important that the partnership to which I have referred is a true partnership. With the new importance being attached to the reserves as a capability, there must be real benefits from reservist activities to the employer, as well as to the Ministry of Defence. It is essential that the employer is not left feeling that he or she is a minority shareholder rather than a full partner.

I address briefly a different theme—one in which I cease to be quite so complimentary about the Government. There seems to be virtually no mention in the White Paper about finance. When there are presently so many operational commitments and wider demands on the Treasury, it is particularly important that the Ministry of Defence is run in the most cost-effective way possible. The noble Baroness, Lady Symons, has the major responsibility for looking after defence procurement.

I have heard some pretty horrific examples which remind me of a speech that I made in your Lordships' House 20 years ago addressing the same kind of theme. I have heard that in the United Kingdom within the last couple of years the invoiced cost of installing a 90-foot computer cable between a hub and a socket one floor above amounted to an astonishing £999. I have also heard that in the Falklands the cost of moving a 13-amp socket three feet was over £800. The cost of fixing grilles to portacabins amounted to a four-figure sum. Those are pretty simple domestic tasks. If the noble Baroness had to fit an "Xpelair" into her kitchen, would she expect to spend nearly £900? I doubt it. But I am told that that has been the actual approved cost of fitting one into an office somewhere at Arborfield within the past couple of years. Unbelievably, those examples are in line with the contracts which were set.

Things have gone seriously wrong if procedures, outsourcing and contractorisation have led to such extravagant waste which should be as intolerable in the public sector as it most certainly is in the private sector. It seems that it is something of a scandal and I very much hope that the noble Baroness will be able to do something about it.

I return to my main theme. I certainly support the Government in their intention to have useable reserve forces. They have an essential role to play. Certainly, in the National Employers' Liaison Committee, we do all that we can to explain the benefits of that policy and develop the sound start made. But it is up to the Government to do rather more to persuade all concerned that they have not embarked on "defence on the cheap".

My Lords, as the question of overstretch and the balance between resources and commitments has been fairly well discussed already, although I feel strongly on that subject, I shall pass over it. I shall also not mention the Defence Medical Services about which I feel strongly because we debated that on an Unstarred Question raised by the noble Baroness, Lady Cox, not long ago.

The SDR initiated a number of fairly radical reorganisations which included the establishment of some joint service ones, but the MoD underestimated the cost both of executing the reorganisations themselves and the cost of providing the equipment, where new items were needed, and the actual running costs, especially that of training to an adequate level. In addition, the Government imposed the iniquitous 3 per cent annual efficiency saving to which reference has been made by more than one speaker, which in reality, as has been said, has served as an annual 3 per cent cut.

As has so often been the case in the past, savings assumed to arise from a reorganisation have not been realised to the extent forecast. The result is that in many different fields of defence, the new organisations cannot be adequately equipped, trained and manned. That must be remedied by increasing the MoD's financial allocation.

The next subject on which I wish to touch, which has been mentioned already by one or two noble Lords, is the relationship between ESDI and NATO, including the expansion of the latter. The Government have got themselves into a thorough muddle on that issue. The noble Lord, Lord Hurd, gave a very perceptive lecture on that subject at the annual War Studies Lecture at King's College about a month ago. Unfortunately, there were very few present who were not members of the war studies department, partly because it clashed with the Division in this House on Clause 28.

I hope that I am not misrepresenting the noble Lord's views when I summarise them. He said that to make sense of that problem, one must ask: what is a realistic scenario affecting European security in which first, the Americans would not want to be involved; and secondly, we should not want them to be. The answer is simple: something of no great urgency or which seriously affected international relations. If that were not the case, the Americans would want to have a hand in it and we, and almost certainly the Germans, would want them to, certainly if it in any way affected relations with Russia. I believe that that was the burden of his argument, with which I strongly agree.

My own view—and it is not the view of the noble Lord, Lord Hurd, but is my own view—is that if that is the case, it is absurd to suggest, as paragraph 19 of the Defence White Paper does, that an ESDI should be able,

"to tackle the most demanding crisis management tasks, in operations up to corps level (up to 50,000 to 60,000 personnel, together with appropriate air and naval elements)".

I suggest that the most that would be needed would be that one of the members of the European Union should be able to provide a 2-star land/air headquarters and associated communications to command a land force of up to 20,000 men; and that one member, another member, should be able to provide a similar naval headquarters, if one were needed, in the Baltic, and another in the Mediterranean. With that sort of scenario, I cannot envisage the need for naval operations in those circumstances in the North Sea, the Channel or the Atlantic.

A far better answer, which I have long advocated in this House and elsewhere, would be a more integrated European element within NATO, of which we, Germany and France must be members but which other members of the alliance need not be if they do not wish to be. If necessary, it could exercise command of the forces of members of the EU who are not members of NATO, just as there are today forces of non-members serving under NATO command in the Balkans.

Another point I make is the application of science and technology to defence. There is disappointingly little in the Defence White Paper about that, although paragraphs 7 to 9 of Chapter 1 pay some attention to it. Only four-and-a-half lines are devoted to the DERA on page 47, and that concentrates on the hope that it,

"can attract investment and develop new business".

I am concerned with the danger that, if it is turned into a public/private partnership, the close contact between its scientific and engineering staff and the combat user, which is so important, could be weakened.

That constant interchange is essential not only so that the researcher and developer may appreciate the combat user's needs and the conditions under which he will operate, but also for the flow in the opposite direction: so that current and future scientific and technological developments may be made known to the user and that he may be persuaded not just to improve his equipment and methods but may also consider radically new ways of nullifying the effect of hostile armed forces. I am far from satisfied that enough effort is being put into that field.

My Lords, I, too, add my thanks to the noble and gallant Lord, Lord Bramall, for introducing this debate. It is always a great pleasure in this House to listen to the voices of those in the defence field who are expert, who have very long experience of what they speak about and who bring to our debates an authority which makes us all stop and think again about the policy we are discussing.

In Mitrovica in the last couple of weeks we have had yet another example of the patience, common sense and humour that the British forces bring to what are often extremely difficult situations. We have much reason to admire them.

As somebody who is not an expert on defence, it would be inappropriate for me to add a great deal to what has been said by noble Lords far wiser and more experienced in this field than I am on the issue of overstretch. I only want to say that I believe that the case made by the noble and gallant Lords, Lord Bramall, Lord Craig of Radley and Lord Carver, is extremely powerful. The noble Baroness, Lady Strange, pointed out that the retention figures are extremely disturbing and that in the modern world families ask to be considered alongside the head of the family. Therefore, it is increasingly difficult to expect those families to put up with conditions of life which are so inferior to those enjoyed by others in other professions.

We must address that. The noble Baroness, Lady Strange, was eloquent on the subject of the quality of Armed Forces' accommodation, some of which I have seen for myself. I strongly agree with her about the very poor conditions in which some of our servicemen are expected to live.

The noble Lord, Lord Glenarthur, pointed to the encouraging recruitment figures. I hope that the Minister will be able to say something about those recruitment figures and about the Ministry of Defence's admirable campaign to try to attract more people from the ethnic minorities. But it is of course the case, as my noble friend Lord Watson of Richmond pointed out, that recruitment figures must always be set against retention figures and it is no good taking one without the other. It is the combination which gives one the net gain to the Armed Forces and it is that figure which is disturbing.

I should like to echo what the noble and gallant Lord, Lord Craig of Radley, had to say about procurement. It seems to me—the noble Lord, Lord Williams of Elvel, also pointed to it—that there is something deeply troubling about the efficiency of our procurement process. The noble Lord, Lord Glenarthur, referred to the cost of laying a cable. I am reminded of what he said about the recent United States Congress study and what was called the famous 2,000 dollar toilet seat. It seems to be broadly the case that procurement in the defence field is simply not subject to as acute competition as it is in the civilian area. I wonder whether in that context broader European competition might give all European countries a better deal than they appear to be getting at the present time.

I turn briefly to an area of the White Paper which has been less discussed; namely, peace support operations. The noble Baroness, Lady Park of Monmouth, said very powerfully that it was important that the military were directed towards their overall duty, which is to defend the country and its interests. Having said that, however, it is also worth saying that peace support operations are of crucial importance. This is where joined up government comes to the centre of things. The relationship between the Ministry of Defence, the Foreign and Commonwealth Office and the Department for International Development is crucial to whether the achievements of our Armed Forces are carried forward into the development of civilian peace operations.

In that context, reading the most recent reports from Kosovo, one is left with a great sense of concern. In a recent leader the Guardian said that we had won the war and we may be losing the peace. Certainly, those of us who have read the OSCE reports have to be concerned about the speed of the run down of, among others, British troops in Kosovo—a figure of no less than 6,500 over a very short period of time—presumably largely because of the overstretch of our Armed Forces at a time when, bluntly, the civilian operation was in no position to take over full responsibility.

We have to address that issue in order to be able to sustain the achievement of our Armed Forces and not to rely on them too much for what ought to be the responsibility of civilian operations to take over where they leave off. That is simply not happening at the present time, partly because we do not have an adequately mobilised civilian force to take that responsibility at the appropriate time.

That is not true only of peacekeeping operations; it is also eminently true of humanitarian and environmental disaster operations, the most recent example being Mozambique. In a supplementary question earlier today I asked the Minister for the Department of International Development whether we were giving adequate attention to the requirements of bridge building and road repair in Mozambique at a time when the continuation of air travel is the most expensive way to meet the needs of the population of Mozambique and when the floods are beginning to recede. That appears to me to be an eminently suitable task for our brilliant engineering corps within the Armed Forces, but one which would have to be part of an essentially civilian operation.

I shall turn to three areas of the White Paper within the field of defence and foreign policy co-operation and mention each briefly. The first is the European Security and Defence Initiative to which the noble Lord, Lord Hardy of Wath, and my noble friend Lord Watson referred. The noble and gallant Lord, Lord Carver, said that he could not imagine any situation in which there would be a serious crisis and the United States would not be ready to take a leading role. I wish that I agreed with him, but I cannot do so absolutely.

There is one pending crisis in which the United States might not be willing to become involved. I refer to the increasingly fragile situation in Montenegro. Many of us have been saying for some months now that that country might well be the next place in line for what has been the consistent strategy of Mr Milosevic—picking on each part of the former republic of Yugoslavia to drive it into submission to himself or else out of the republic altogether.

Noble Lords will know that in the past few days Montenegro has broken away from the dinar currency area of the former republic of Yugoslavia, and has declared the deutschmark as its currency. As such it is running very considerable risks of some form of military action against it. If Montenegro falls, the West will be regarded as having betrayed that one part of the former Yugoslav republic which consistently supported what we did in Kosovo. I believe that the repercussions could be extremely serious. I wish that I could be quite certain that the United States would be willing to intervene in that situation, but I am not. I believe that the throes of an election which last for almost a whole year in the United States and the rising voices of isolationism in Congress at least allow one to raise a question as to whether this is the kind of area where European initiatives come to the fore and where we might be expected to take some responsibility ourselves without always looking across the Atlantic.

I make two final points. The first concerns an area of overstretch which has not yet been discussed in this debate. I refer to the continuous flying operations over Iraq. Frankly, I suspect that the sanctions policy there is running rapidly into the ground, if it has not already done so. I wonder whether the Minister can tell us the cost of those operations and what consideration is being given to a form of sanctions more directly focused at the ruling group in Iraq, which manages to escape virtually all the effects of sanctions against the civilian population and not to suffer in any way from them.

Finally, I refer to the section "New threats and challenges" in paragraph 8 of the White Paper which refers to the concept of a national missile defence. Last week I was in Taiwan, which is busily attempting to get within what it sees to be the probability of an American national missile defence, if the next set of tests is successful. The implications of that for NATO, for western European solidarity, for Taiwan, China and Russia, are very great indeed. The White Paper passes over it by saying that the time is not yet right. Yet in the United States it has become a fundamental subject for discussion in the area of strategic defence. Perhaps there is not time to go into that tonight, but I hope that there will be an opportunity for this House to consider in much greater detail the implications of national missile defence for the United States, and for that matter its allies, before we find ourselves caught up in a new strategy which we have not even had the opportunity to consider or discuss.

My Lords, the entire House—possibly with the sole exception of the noble Lord, Lord Palmer, who wanted more time for his debate which is to follow—must be deeply grateful to the noble and gallant Lord for introducing this debate. However, it is not good enough. We have had nothing like enough time in which to discuss the problems arising out of the White Paper and service affairs in general. Almost every noble Lord has spoken powerfully to this subject. I particularly pay tribute to the noble and gallant Lords and to my noble friend Lady Park of Monmouth who is, as usual, fulfilling our function as the Fat Boy in Pickwick Papers and making our flesh creep. But we really must have more time to debate this subject.

In another place there was a two-day debate broken by the Government's half-term folly and your Lordships must have something comparable to that. I do not mean a debate on a Friday, even if the Government have avoided the Grand Military at Sandown. In the other place the Government tabled a Motion to approve the White Paper. Do we wonder whether they did not do that here because they might lose it? But in the debate in another place the Government spent a great deal of their time complaining about newspaper and television reports which seem to show that the MoD was in financial trouble and in terms of procurement. I do not intend to talk about procurement today, possibly because there is not time and also possibly because the noble Baroness knows too much about it.

Your Lordships have spoken on those subjects, but there has been little opportunity to explain the case for and against the sea of troubles. When she winds up, I hope that the Minister will come to explain the disagreement between the Ministry of Defence and Clare Short regarding payment for the men and materials sent to Mozambique. That matter was touched on earlier in the Question from my noble friend Lord Attlee, but we have not received an answer. It was clear that it was vitally important or more important than anything else that whatever action was taken was taken quickly, but the Ministry of Defence is so short of money—it is not even able to pay its outstanding bills—that it can scarcely be blamed for refusing to take responsibility for those additional costs.

Many aspects of the problems set out in the SDR, the White Paper and the report of the Select Committee have been covered during the course of the debate. The central question must he for the Government to confirm or deny the statement of the Chief of Defence Staff, General Guthrie, that the "European Army is a fantasy".

Is that an expression of the policy of Her Majesty's Government? In recent debates in your Lordships' House, it has appeared that the CDS has followed the party line closely. Therefore, I hope that that is the case. If it is not a fantasy—the cross head in the RUSI Journal called it a "myth"—we should be planning a very different navy, army and air force from those we have at present. If the Minister will make a categorical ex cathedra statement on that matter, her remarks will be greeted with much relief.

There can be no doubt that the Armed Forces are at this time in a difficult position. Apart from procurement, they have the right to expect that those who lead the services may do so with efficiency and expedition. From these Benches we have argued against the Armed Forces Discipline Bill. There is no doubt that the Human Rights Act is making life difficult. Therefore, it is essential that the services have the right man, or men, at the top. The CDS, General Guthrie, is shortly to retire and there are rumours that he is to be succeeded by General Sir Mike Jackson, even though he himself has only recently taken on a new post. I should not dream of asking the Minister to comment on that matter, but I must point out the real danger to acceptable and harmonious jointery if the top job is to go to a soldier for the third time in succession. Furthermore, General Jackson has shown himself to be a critic of NATO planning by setting out his views in the RUSI Journal. Many of us believe he is right, but is he in step with the Government?

The confidence we need the forces to have in their senior officers, such as the CDS, is not helped by officers such as the CDS and the C-in-C Home Fleet writing to the press. That is the job of Ministers, not of the military. We know that not all the Chiefs of Staff are as much in agreement with the progress being made as the CDS seems to be. What happens if a senior officer at some time in the future is required to write a letter with which he does not agree? All senior officers are totally loyal to their political masters, but it is not their business to write such letters and they should not be required to do so.

I trust that the decision about the new CDS will be made by the Prime Minister and not by the Secretary of State. Wales and London show the clear dangers of "inserting" candidates into the top position and we must hope that it does not happen again. I must at this point make a plea to the Prime Minister, when he announces his additions to those who will come to join us in your Lordships' House, to put in a naval officer. Since the sad deaths of Lord Lewin and Lord Fieldhouse the views of the Royal Navy—pace the noble and gallant Lord, Lord Craig, who had some views on the matter—have scarcely been heard in the House.

Much has been said about material, so I suggest that the House should concentrate on the most important material of all: the men—homines not vires—of the Armed Forces. In another place, the Minister proudly announced that last year was the best recruiting year for a decade. To be fair, he showed also that he was interested in retention, even if his chief method of doing so seemed to be through improved telephone allowances and e-mail. Is that the "policy for people" about which the Government have been talking?

In another place, my honourable friend, Nicholas Soames, really caught the point when he said that British soldiers had proved, from Waterloo to Kosovo, that they could face tremendous odds with confidence and triumph. He said,

"if one asks a soldier what is the key to that confidence, he will immediately answer 'training and discipline"'.

We are seeing today too many decisions, DCIs and Acts of Parliament which are undermining that confidence and discipline. The Government must realise that service life and civilian life are different and must be judged differently. A serviceman must have total confidence in those set over him and in his mates. If he does not have that confidence and they do not have the authority which will enable them to instil that confidence, the Armed Forces will be lost.

Last week I saw in a newspaper a picture of a Scots Guards Drill Sergeant shouting at a recruit with the suggestion that in future he would have to whisper. I am sure that General Kiszely, now ADCS, would have been happy with that, with all that it would do to discipline on the slopes of Tumbledown. Human Rights Acts are all very fine, but they must not be applied to the Armed Forces in a manner which will produce pale imitations of what is required. I again quote Mr Soames,

"Ministers must realise that however disagreeable it may be to contemplate, the essence of military training is to prepare soldiers to fight in a bloody, frightening and exhausting war".

The SDR was generally, although not universally, welcomed. The White Paper, as your Lordships have shown today, less so. Too much remains undone; there has been too much saying and not enough doing. For instance, Birmingham University has been selected as the preferred host for the centre for defence medicine about which the Government are talking. According to the Government, they are making "rapid progress". Actually, all they have done is to select the site.

Not unreasonably, the Government are asking for time. Within reason they have it. But time, like an everflowing stream, bears all its sons away. I am sure that the Government will allocate time for a full debate soon, in which we may be able to discuss at reasonable length all the problems facing the Armed Forces. When we have another debate next year, let us hope that there are better things to report than there are now.

My Lords, I too thank the noble and gallant Lord, Lord Bramall, for introducing the debate and, indeed, all of your Lordships who have participated in our discussions.

The central theme of the White Paper is modernisation. It sets out the progress that we have made in many areas, not least in delivering the Strategic Defence Review and in taking forward European defence. The process we have begun is about delivering improvements to the capability of our Armed Forces. I join all noble Lords who have expressed their appreciation of our skilled and professional men and women committed to defend and promote the interests of this country.

None of us should underestimate the significance or ambition of the undertaking to modernise our Armed Forces and the means to support them in which we are now involved. It is a hugely complex and challenging process, but it is a necessary one. A modern Britain needs modern defence forces and the Strategic Defence Review lays out the path to achieve them. When the outcome of the review was announced in July 1998, it was widely acclaimed and admired for its logic, good sense and forward looking vision, as the noble and gallant Lord, Lord Bramall, has been kind enough to acknowledge. But we always knew—the noble and gallant Lord also made this point—that we would really be judged on our delivery of the improvements which the SDR proposed.

We made it clear then that the changes we are making would take time to achieve. The heavy operational commitments which our forces undertook around the world last year—in Bosnia, the Gulf, East Timor and Kosovo—have made this more challenging still. As a result, in some areas we have had to adjust timescales for implementing some new initiatives. I assure the noble and gallant Lord, Lord Bramall, that fundamentally the SDR is on track and will be delivered. Far from undermining the review, our operational experiences over the past year, not least in Kosovo, have reinforced its conclusions.

My right honourable friends the Chancellor of the Exchequer and the Secretary of State for Defence are to be congratulated for allocating an additional £500 million to the defence budget to take account of the additional cost of operations in the Balkans and elsewhere. That will help take the SDR to the next stage. I hope that the noble Baroness, Lady Strange, is reassured on that point. The announcement was made on 22nd February.

This afternoon much has been said about the 3 per cent efficiency target. It was mentioned by the noble and gallant Lords, Lord Bramall and Lord Carver. I take this opportunity to clarify the position on the efficiency saving. The MoD set itself a target of achieving a 3 per cent efficiency saving in operating costs for this and the next two years. Of course, it is a challenging target but one that can be met by genuine efficiencies, not by the sort of arbitrary cuts that the Strategic Defence Review was at pains to redress. The important point is that savings are not passed to the Treasury; they are available to the MoD to fund real improvements in defence capability.

Much has also been said about the current level of funding. I say as gently as I can to the noble Baroness, Lady Park, who made such trenchant criticisms of government funding, that although the defence budget will indeed fall over 3 per cent over the next three years, she must compare that to the 17 per cent fall in the previous seven years which was the legacy of the party that she supports in your Lordships' House.

My Lords, I am grateful to the Minister for giving way. I hope that I have always made it clear in this House that I do not approach the subject from a party point of view. I have always acknowledged, for instance, as regards the defence costs study, that we were to blame. The point at issue is what the forces need. I do not make a party point.

My Lords, the noble Baroness is extremely kind to point that out. I recognise, as does the House, the great support that she gives our Armed Forces. In a debate of this kind I believe that I am justified in defending the fact that this Government have been far more generous to the Armed Forces than were our predecessors.

The White Paper describes some of the significant milestones that we have already achieved in delivering the SDR. I assure the noble and gallant Lords, Lord Bramall and Lord Inge, that we are making significant progress. The noble and gallant Lord, Lord Craig of Radley, asked for specific examples. We have already achieved an initial capability for the new Joint Rapid Reaction Forces. When complete, in 2002, the JRRF will enable us to deploy forces with a real capability anywhere in the world. It will draw forces from a pool of up to 50 warships and support vessels, four brigades and 260 aircraft of various types.

Last October, we set up the Joint Helicopter Command, which brings together almost all our battlefield helicopters and will command 16 Air Assault Brigade. It provides a real improvement in our operational effectiveness. The Joint Nuclear Biological and Chemical Defence Regiment has been created. The joint Rapier air defence training unit is now a reality. A new joint doctrine and concept centre is already up and running, and the Defence Procurement Agency opened for business last spring.

We said that we would do all those things and we have done them. The noble and gallant Lord raised the question about strategic lift. That is under consideration now and shortly I hope to be able to give a complete answer on that important point.

On 1st April Joint Force 2000—the joint Royal Navy/RAF Harrier Force—will be formed. It will combine both aircraft fleets in a single force under a single command able to operate either from land bases or from our aircraft carriers at sea. That is not about organisational neatness, but about real operational capability.

Aircraft carriers have been mentioned. Work was commissioned for them on 23rd November last year. What was not mentioned by any of your Lordships was the beginning of the procurement process on 12 destroyers. I assure the noble and gallant Lord, Lord Inge, that as the Minister primarily responsible for such issues I am not complacent. I am acutely aware of the importance of delivery of those important issues.

I turn now to the way in which the Government are tackling the acquisition of equipment and its logistic support programme—what we have called Smart Procurement. In addition to the DPA that was set up in April 1999, in April this year, the new Defence Logistics Organisation will go live. That brings together the individual service equipment support areas into a single tri-service organisation employing over 40,000 people. It will allow us to deliver the full benefits of our Smart Procurement initiative which is about providing fully effective through-life equipment, not just at the initial procurement stage.

Smart Procurement has already delivered significant improvements in defence procurement. Adoption of innovative support arrangements for Eurofighter and the attack helicopter are expected to save 1.8 billion and £700 million respectively over the life of those aircraft. The team working on the Challenger 2 project has already identified £200 million worth of savings. An estimated 30 per cent saving in time in arriving at a contract has been achieved in the Future Offensive Air System for the RAF, and the PFI Hawk Synthetic Trainer has been delivered to the RAF on time and to a budget 20 per cent cheaper than on a conventional procurement approach.

Such issues around Smart Procurement are not just tweaking the old MoD machine. They are a fundamentally new way of working. It is a way that calls for real commitment from Ministers, from officials, from the military and close co-operation with industry. I am happy to say that industry has been hugely helpful in the support given to us.

That is a very impressive programme of change, but as my noble friend Lord Hardy of Wath said, the House may be forgiven for thinking that that was hardly the case, given some of the sensationalised reporting that we have seen in recent weeks. I agree with the noble Baroness, Lady Strange, that there are some problems with equipment, but some of the reporting that we have seen on such points has frankly been enormously exaggerated. It is ridiculous to suggest that every piece of equipment that we have is the most modern money can buy. No army, now or ever, has been able to boast that. We know that the SA80 is a capable and accurate weapon, but we also know that it has some reliability problems in extreme weather conditions. Those problems did not start on 1st May 1997. That weapon was in use for 11 years before that date. The important point is that this Government have recognised the priority of ensuring that something is done about it.

Similarly, as the noble and gallant Lord, Lord Bramall, said, the Clansman radio has had problems. It was excellent when it came into service, but it is now showing its age. Its replacement, Bowman, was a procurement programme in deep trouble. When we came into office it was already 75 months late and still slipping. This Government have now put Bowman on a sound footing to ensure that the Armed Forces can have the new radio system that they deserve as soon as possible. We have even managed to bring forward the in-service date of the personal radio element of Bowman, reversing some of the delay that we inherited.

My noble friend also addressed some of the points around the Tornado mid-life update, something that attracted a good deal of press comment recently. Let me make it clear that the important point about that update is that it will be delivered on time and within budget and it will deliver the RAF an increased operational effectiveness. That update programme has not, particularly in Kosovo, diminished our operational capability, but it will ensure that our capability is enhanced.

There has also been much said about levels of activity, particularly for the Navy. We discussed this matter before Christmas in response to a Question raised by the noble Lord, Lord Burnham. Of course, the Navy has had to adjust its programme to keep within budget. It was ever thus. But this has been done without reducing the overall capability.

The Navy is not only going about its business as usual, but is entering a period of major deployment overseas. At the end of last month "HMS Illustrious" left for the Gulf at the head of a task group including a nuclear submarine, nine warships and 2,000 personnel. I had the privilege of visiting the ship last Sunday in Abu Dhabi. And in the spring HMS "Cornwall" will lead a global deployment—Navy Task Group 2000—which will be one of the most extensive in 15 years involving 10 warships, five auxiliaries and two submarines. That does not sound like a Navy confined to port.

There have also been suggestions that the RAF is being grounded in part. That too is grossly exaggerated. The RAF has had to be on deployment in the Balkans, Italy, the Gulf and the Falklands. That huge programme of activity is being maintained with no constraints due to finance, aircraft unavailability or pilot shortage. Again, it is business as usual.

I turn to the points raised by the noble Lord, Lord Bramall, the noble Baroness, Lady Park of Monmouth, and the noble Lord, Lord Glenarthur, in relation to the Defence Medical Services. There is indeed reason to have concern on those points. The cuts introduced in 1994 by the party opposite in the defence cost study shattered the morale of medical staff. That is why we—this Government—are spending £140 million making good the under-investment that we inherited. We are making good on the personnel side and on the equipment side over the four years from 1998 to 2002 with further funding continuing thereafter.

Despite serious manpower shortages, the Defence Medical Services is meeting all its operational commitments. I take this opportunity to pay tribute to the dedication and professionalism of all those working in the medical services. Their support is vital to our operational capability and we owe it to them to get this right. Ministers are acutely aware of the problems that have accumulated and we are doing our best to address them.

The noble Lord, Lord Burnham, was quite right when he said that our most important assets are the men and women who serve in our Armed Forces. We made our Policy for People a central component of the Strategic Defence Review because we know how vital it is to recruit and retain the best people. We said that we would introduce measures to improve recruitment and retention, and I assure the noble Lord, Lord Watson of Richmond, that we have.

It is a tough challenge. Let us not forget what has happened to the numbers of men and women in our Armed Forces. In May 1997 the Army was undermanned by 5,000 people. On top of that, during the Strategic Defence Review, we identified a requirement for over 3,000 new posts. Nevertheless, we are making progress. Recruitment is buoyant. Last year recruitment figures for all three services were the best in a decade. This Government have worked hard to get the numbers up. But as the noble Lord, Lord Watson of Richmond, said, this is only half the equation. The key to tackling overstretch is to stem the flow of skilled people leaving the forces.

We owe the men and women in our Armed Forces a more stable and predictable pattern of life than they have been able to achieve in the recent past. It is because the level of duties has been so high that so many people have been leaving. We are determined to do something about that. I assure my noble friend Lord Williams of Elvel on that point.

We are making strides in reducing our commitments. The latest reductions in the Balkans, when fully implemented in the spring, will bring down the percentage of the Army preparing for, deployed to or recovering from operations to 28 per cent compared to the 47 per cent that we experienced at the height of the Kosovo campaign. That means that we will have reduced commitments below the level that we inherited. During that period our force levels in Bosnia will have fallen by over 2,500 personnel and those in Kosovo by 6,500. I hope that answers the point raised by the noble Baroness, Lady Park of Monmouth.

But reducing commitments is not always possible. We have responsibilities around the world and must discharge them. It is important therefore that the men and women who work so hard to make the world a safer place are well looked after. We have been trying to do that by improving deployment allowances; by increasing operational leave allowances; and by improving telephone allowances and access to medical services. Importantly also, the Government have implemented in full the pay rise to our service personnel every year.

We have also made real improvements to opportunities for personal development in the services through our Learning Forces Initiative, improving access to modern learning facilities like interactive learning centres and of course the Internet. Those measures provide skills for life, not just during an individual's career in the Armed Forces.

The noble and gallant Lords, Lord Bramall and Lord Inge, and the noble Lord, Lord Vivian, raised the important issue of training. Of course we recognise the importance of training at all levels—individual, unit and at formation level. We are committed to ensuring that our forces are properly trained. We have just embarked on a major review of training which will ensure that we maintain the highest quality in our training and that it is better integrated and more responsive to our needs. So we need no persuading on that point. We are absolutely persuaded that it is crucial to the delivery of our front-line capability.

The Strategic Defence Review is also modernising our reserve forces. Restructuring of the reserves will be complete by the beginning of April. The Government are committed to a strong reserve force for all three services. We are grateful to the noble Lord, Lord Glenarthur, for his recognition of the benefit of those forces to their employers and potential employers in the future—an important point made by the noble Lord. The reserve forces make a real difference to our ability to be a force for good in the world. They have proved their worth time and again; for example, in the Balkans where over 10 per cent of our resources were drawn from the reserves.

Following the SDR we have taken two key steps to make our reserves more useable. First, we set up the Reserves Training and Mobilisation Centre at Chilwell, which is a dedicated facility to handle the needs of the Army and individual reservists during mobilisation and demobilisation. Secondly, we completed the Reserve Mobilisation Study. That has shown clearly that compulsory mobilisation of reserves for peace support operations such as the Balkans can be done. It is legal; it is feasible. The reserves are there to be used and, if necessary, we shall be using them.

I should like to say something about European defence support, a point which mainly exercised my noble friends Lord Williams of Elvel, Lord Hardy of Wath, and the noble and gallant Lord, Lord Carver. Our starting point is that it is clearly wrong that Europe collectively should only be able to contribute a small proportion of the total forces required to solve a problem on its own doorstep. During operations over Kosovo last year we Europeans flew only one third of the total number of aircraft sorties during the campaign. We must not obscure the fact that it was American military power that gave credibility to the diplomatic campaign.

Of course, the majority of forces now operating under NATO command are from European nations. But deploying a force of a few tens of thousands—a fraction of the total military personnel available to us—on precisely the type of peace support operation which will be increasingly common in the future, has undoubtedly stretched Europe's collective resources. It raised some difficult questions. We believe that those questions must be confronted. That is why we have been doing the work we have with our European allies and partners. At the Helsinki European Summit in December, EU heads of state and government committed themselves to be able, by 2003, to deploy rapidly and sustain for at least one year forces of up to 60,000 strong for crisis management tasks as a contribution to a NATO-led operation. I assure the noble Baroness, Lady Park, that that is not something we envisage happening outside NATO.

Unfortunately, this relatively clear goal, this straightforward determination to improve European nations' individual and collective military capacity, has been muddled by arguments from commentators around it. But let me say categorically, as my noble friend Lord Williams reminded us, that we believe that our security in Europe rests fundamentally with NATO. NATO is our cornerstone. The alliance has been the guarantor of our safety for over 50 years and we have no intention of changing that. So I assure the noble Baroness, Lady Strange, that we have no intention of giving Eurocrats a role in our military command; we have no intention of moving to some sort of mini-NATO for Europe. We believe that it would be damaging to NATO and consequently extremely dangerous, not least to our own national interest. We have no intention of ruining an organisation that has reliably provided Europe with its security for the past half century. I can say categorically to the noble Lord, Lord Burnham, as I have done on many occasions in the past, that we have no intention of setting up a European army.

However, the US Administration on both sides of its political divide supports us on this. We have seen what has been said, not only by Strobe Talbot but also by Robert Zoellick, a key adviser to George W. Bush. So I hope that the position on what the Government are doing on this issue is clear to noble Lords. It does not simply mean spending more money. In any case, as was shown in Kosovo, Europe's problem is not so much the quantity of its defence spending, but its quality. We must generate more real and usable military capability. That is what we are seeking to achieve.

The noble Lord, Lord Renton, reminded us of his worries about service discipline and human rights. I recognise his concern. However, I can assure the noble Lord that the changes we are making are supported by the Chief of the Defence Staff and by all the Chiefs of Staff. I know that the noble Lord remains worried. For that reason, I should like to make an offer to him. Would he like to discuss this matter with me more fully outside your Lordships' Chamber where, perhaps, I shall be in a better position to demonstrate my points to him?

My noble friend Lord Williams of Elvel asked questions about the use of our Armed Forces in relation to trade. Yes, on occasion we do use our Armed Forces in this way. For example, they have provided a number of mine counter-measure vessels in the Gulf to ensure that trade lanes are kept free of mines. I believe that that is an entirely proper utilisation of our armed services. Of course they are also used in defence of our overseas territories, not only in the Falklands but, as I am sure my noble friend will recall, they assisted in aiding the difficult situation that was experienced not so long ago in Montserrat.

The noble Lord, Lord Chalfont, raised again issues over the Chinook incident. I do not believe that there has been any new evidence, despite reports to the contrary. FADEC was not a factor in the accident. Nothing in the NAO report would lead us to reopen the board of inquiry. However, I do know that this is causing much distress. I hope that the noble Lord will accept that I, too, have a great interest in this matter. We are shortly to have a meeting and I hope that those discussions will allow us to cover this matter more frankly.

The noble Baroness, Lady Strange, made a number of points about defence housing. It is true that we have concentrated on the worst housing. Perhaps it will be a comfort to the noble Baroness if I tell her that we plan to spend twice as much this year as we did last year on improving defence housing. We believe that 500 to 600 new houses will be added to the estate in the course of the coming year.

The noble and gallant Lord, Lord Carver, raised his worries about DERA. I am aware of the anxieties expressed by the noble and gallant Lord. The future of DERA has indeed been a very difficult issue. We are concentrating a great deal of time—perhaps I may say ministerial time—on this important issue. I hope to be in a position to speak publicly about it in the near future.

The questions raised by the noble Baroness, Lady Park, about Russia are ones that are in the forefront of our minds. The SDR recognised that an attack by a resurgent Russia had to be the greatest threat that might happen. No matter how remote that threat might be, we concluded that we needed to retain the capacity to respond to such a threat. I can assure the noble Baroness on that point. But of course it is not confrontation that we seek with Russia, but friendship and co-operation. I am sure that the noble Baroness would be the first to acknowledge that.

The noble Baroness, Lady Williams of Crosby, raised a number of different issues. Perhaps I may write to her about the specialist military we have deployed at the moment in Mozambique. I should also like to write to her on the interesting point she raised about Montenegro. That is also a matter of concern.

The British Armed Forces are, man for man and woman for woman, up with the very best. Their excellence is quite rightly recognised throughout this country, as it is also recognised around the world. I am told this constantly when I travel abroad on the part of the Government. They are a force for good around the world. We do not hesitate to use them when it is right to do so and when we believe that they can really make a difference. That is an important point. The reforms that we are introducing following the Strategic Defence Review are delivering results, as I hope I have been able to demonstrate today. They are putting in place the defence capability which Britain needs and which our Armed Forces both need and deserve.

My Lords, before the noble Baroness sits down, will she answer one simple question? Can she give the House any comfort as regards a further debate of a proper length on the White Paper?

My Lords, as the length of my reply to noble Lords will have already indicated, there is much to be discussed on the issues surrounding defence and much that I would like to say. I hope that the noble Lord will agree with me that the proper way to resolve the matter is through the usual channels.

My Lords, we have had a spirited, interesting and, I hope the Government will agree, informative debate on this matter. I am most grateful to all noble Lords and to my noble and gallant friends who have contributed so excellently and aptly this afternoon. I should like also to thank the Minister who, in her invariably courteous manner—and, as we have heard, at some personal inconvenience to herself—has listened patiently and tried so helpfully to answer many of the points that have been raised.

I very much hope that the Government will reflect most carefully on the various matters put forward by noble Lords who have such considerable experience in this field. Of course, for the time being, the Ministry of Defence is not yet, to coin a phrase, "making it happen" in terms of what the SDR and the White Paper led us to believe will be necessary to meet our foreign affairs and strategic commitments. As regards modernisation, we were smart enough and modern enough to be successful in Borneo, in the Falklands and in the Gulf, so that is a continuing process.

However, whatever the noble Baroness may say, the key lies in resources. I shall echo what the right honourable gentleman the Prime Minister said in another context. More skilled and trained people, better performance and honouring promises requires more funding. This applies every bit as much to defence as it does to the National Health Service. It is essential that resources and commitments are brought in line. If the Government's foreign policy strategy and the pressures from a variety of sources to which they are subjected from time to time do not allow them to make cuts, then resources must be increased and certainly not reduced, as has been happening year by year.

In the hope that the Government will appreciate that this equation can no longer be fudged, I beg leave to withdraw the Motion.

rose to call attention to the economics of agriculture within the United Kingdom; and to move for Papers.

My Lords, I congratulate the noble Lord, Lord Palmer, on securing this debate and on the excellent job he has done in outlining the problems and difficulties facing agriculture in Britain today.

However, I think that we have already reached the stage where expensive, short-term palliatives are no longer sufficient. If my memory serves me correctly, when I was in the Scottish Office we supported agricultural jobs to the equivalent of something like £20,000 per full-time job. We spent more on agricultural support than on all other industrial support put together.

We face something which is not a British problem; it is primarily a European problem. I have a deep and abiding hatred of the common agricultural policy. It is an expensive failure. It is a con on both the consumer and the producer. It has failed for a number of reasons. First, it produces surpluses in all major commodities at prices which consumers are unwilling to pay. Secondly, it penalises efficiency through such measures and nonsenses as milk quotas, and prevents European agriculture from competing effectively at world market prices. It is expensive to both the taxpayer and the consumer. Because it is based primarily on production, it results in environmental degradation. It has been a failure because it has been unsuccessful in its primary objective—as the noble Lord, Lord Palmer, indicated—of retaining the agricultural population. Its whole basis and rationale has been undermined. But, above all, it distances the producer from the market and leads to an invidious form of dependency.

The time has come to examine the case for public support of agriculture. Traditionally that argument has been based on three major components. The first concerns the need for food security, which was clearly appropriate in the years immediately after the Second World War and during the 1950s and perhaps a little later, but it is not appropriate in the modern world. The idea of interdependency and globalisation makes national food security a total nonsense.

The second argument is that it is appropriate to support agriculture in order to even out the troughs associated with an industry subject to volatility. I agree with that to an extent, but why single out agriculture in this way? Other industries are subject to volatility and the response has been for the producers themselves to accept responsibility to tide themselves over troughs and to get through to peaks. In agriculture that opportunity exists through various forms of hedging and also through security of long-term contracts.

The third argument, historically, has been that of import substitution. Superficially this is attractive. However, I think that we all remember that following the import substitution argument was the great folly in economic policy of the 1950s and 1960s. It would be possible to have a Scottish pineapple industry if we did not wish to import pineapples from other countries. But just imagine the cost of having, and supporting, a Scottish pineapple industry! A much sounder policy is based on comparative advantage, and doing what we do best, doing it well, efficiently and economically. That means, I hope—despite the absurdities of the common agricultural policy—that there will be no Scottish pineapple industry.

The fourth argument, which I believe is a much stronger argument, is that there is a need to support agriculture on social and environmental grounds. Those cases are much stronger. However, I believe that the social change argument is limited to enabling those involved in agriculture to manage the adjustments necessary when major structural change in any industry is under way. I believe that government have a responsibility to enable that to take place as painlessly as possible, unlike what happened under the previous government in some areas of heavy industry, particularly coalmining.

The environmental protection argument is the strongest of all because I believe that our citizens are willing to pay for a living, active, well managed, environmentally sound countryside. That requires a degree of change of mentality among some producers. They speak easily about being guardians of the countryside and that is right and proper, but that guardianship also requires a commitment to environmental trusteeship. I hope that government will increasingly find a way to support environmental protection and enhancement.

If we look to the future, I am convinced that the way forward is a combination of niche quality markets, such as Scottish beef—although I would say that, wouldn't I? That requires proper labelling; there is much to be done on the labelling side—a concentration on following through further efficiency gains and freeing up regulations and controls to enable us to compete at world market prices; and the element of countryside management. However, the tragedy is that both at a European and British level we do not have the vehicles to deliver these policy objectives. Agenda 2000 was pretty much of a damp squib in terms of moving the agricultural reform debate forward.

In the short term I think that it is inevitable that governments will be faced with more and more demands for direct support. I do not think in all honesty that that is a long-term, sustainable policy. The only hope is that over the horizon—recognising the failure of Agenda 2000—we face the WTO round. That will result in more liberalisation. It will be a tougher and, I think, in many cases an unwelcome development, but an increasingly necessary way forward. We must find the means by which our own agriculture can adjust to those changes.

My Lords, the noble Lord, Lord Palmer, has done an immense service to this House and to the countryside, in particular in the way in which he has drafted his Motion so that we can concentrate on the economic hardship in the countryside.

Time forbids me to follow the noble Lord, Lord Sewel, in what I can only describe as a vivid and accurate requiem for the common agricultural policy. I declare an interest as a small farmer and a deputy president of the Countryside Alliance.

Perhaps I may briefly look at what I feel are the main economic problems. The BSE crisis is exacerbated by the continuing refusal of the French and the Germans to accept our exports. The brief that we have received indicates that the pig industry is well served by its association. We recognise the problems it has with cheap imports and the very high standards of pig welfare imposed on our pig farmers. We must find a way of adjusting those into a more economic frame.

I should like to deal with two other points. First, the old threat of modulation is now a reality in the countryside. The Agenda 2000 reforms allowed voluntary modulation among the member states of the European Union on one condition: that the money saved in modulation was put back into green box rural development schemes. When she responds to the debate, I think that the Minister will agree that originally her department wanted to abolish the direct aid payments for both the arable aid and headage payments. Instead of achieving that, we are taking a small step in the right direction but on the wrong basis.

Under modulation we can start reducing these payments over the period 2001 to 2006 by a maximum of 20 per cent. The IACS payments come direct from Brussels, but the green box payments, these payments that we are now saving, have to be matched by the Treasury. So we can see another element which does not make it easy for the noble Baroness—even if she wished—to help in this way.

Perhaps I may look quickly at the figures for the next six years: £500 million for countryside stewardship schemes; £140 million for organic conversion; £100 million for farm woodlands; and only £40 million for marketing, where more money could make an enormous difference in the present economic circumstances.

When she comes to respond to the debate, I hope that the Minister will be able to give some comfort to the industry, particularly in regard to a matter on which I have pressed her before. On what business units are the modulation payments based? Today many farmers amalgamate in order better to use their capital and equipment. The modulation payments should be made on the basis of the acreage owned and not on the acreage of an economic business unit. The Minister could help if she took the remaining 80 per cent of these payments and paid them under the environmental cost compliance payments. I doubt whether the Treasury would allow her to do that, but it would help if she could say what progress she is making.

In conclusion, perhaps I may deal with one other economic matter. I was privileged to represent in another place one of the major plant breeding establishments in the country at Rothwell. The economics of agriculture demand an improvement in plant characteristics in order to lower production costs and increase yields on existing farmland. The very people who are against genetically modified crops are surely in favour of not increasing the acreage that is cropped throughout the rest of the world.

The Government have run away from the question of genetically modified crops. The farming industry as a whole needs this new tool to obtain the benefits of improved seeds. We must not be deprived of our place in the world market in the development of this science. Despite the reassurances of the scientific community, people may not be convinced about the safety of genetically modified products. The Government should put into effect, as recommended by the Agricultural Select Committee, a proper system of labelling of genetically modified food. People can then choose either organic products or genetically modified products.

In the time available, those are my four points which I believe could help the industry economically.

My Lords, as I am involved in agriculture, I, too, should declare an interest. I thank the noble Lord, Lord Palmer, not only for introducing the debate but for the very clear and constructive way in which he spoke.

He said, quite rightly, that farming is going through its worst depression for 60 years. That is so. Some 22,000 farmers and their staff have left the industry in the past 12 months; 10 per cent of farmers are on antidepressants; 25 per cent of tenant farmers have marital problems due to the crisis; 50 per cent of tenant farmers have difficulty in finding the rent; and 80 per cent have stopped or reduced investment. That is a fairly grisly story.

If one looks at the pig industry—as the noble Lord, Lord Palmer, did—one finds that the number of pig farmers, their workers and those who supply the pig industry has dropped by 30,000 since the start of the crisis, and another 30,000 are under threat.

Dairy farms are running at a loss. The UK price of milk is 16p per litre; the price in Denmark is about 26p per litre. I understand that some people in the United Kingdom are getting even 13p per litre, with the likelihood that that may be cut by 2p per litre. Milk is now becoming cheaper than bottled water.

What are the causes of all this? One of the causes is that conditions in the European Union are not equal. Imported pig products can be packed in the United Kingdom and sold as British food. Imported meat is often produced under conditions which are banned in the United Kingdom and, therefore, it is produced more cheaply. Sow stalls are banned, yet doing away with them puts up the cost of a pig by £2.

The noble Lord, Lord Palmer, referred to the fact that combined harvesters and chemicals are much cheaper on the mainland of Europe. That is so. But the worst problem is the strong pound: £2,000 million of agrimoney has been made available since 1997 for the United Kingdom to accept for exactly this position. When a country's currency rises, it is entitled to claim it. Other countries have done so; we could do so. Some £2,000 million is available; only £520 million has been claimed. Many bad things are said about the European Union, but if there is something that the United Kingdom can take advantage of, we should do so.

The Government can help. I know why they do not: the Treasury is frightened. The Treasury is always frightened. But we are seeing an industry going down the pipe, as it were. That does not worry the noble Lord, Lord Sewel—he thinks that that is okay—but it worries most of us. It is unnecessary because the Government can help.

I do hope that the Minister will not say "Restructuring the common agricultural policy is the answer". Of course it needs to be restructured, but that is long-term stuff. When one talks about the industry restructuring itself, sometimes that seems to be ministerial speak for "Let them go bust" or "Let them get into larger farms".

The environment and wildlife are the "in" thing. The noble Lord, Lord Sewel, referred to that too. He said that he would like the environment to be looked after. I do not think he mentioned wildlife, but that was part of it. I do not believe that this country should be viewed as a place for a kind of grandiose gardening scheme. Agriculture is important, and upon the success of agriculture depend all these other things. The Government can help but, if I may respectfully say so, they do not.

The climate change levy cost the industry 10,000 jobs and 11 million in the first year. Ask any farmer and he will tell you that bureaucracy is becoming intolerable. The hedgerow regulations—those lovely things—criminalise people for taking out hedges, and yet the European Union is to introduce regulations which will criminalise people who allow hedges to grow too big and to grow into fields. That is a complete contradiction. One really must allow some latitude to people in agriculture.

We have gone completely crazy over pesticides and chemicals. I agree with my noble friend Lord Kimball with regard to genetically modified foods. We do not know what they are, but they should be given a chance to be tested properly. I hope that the Government will condemn Greenpeace—the organisation of the noble Lord, Lord Melchett—for vandalising other people's crops and trespassing on their land. It is wrong; it is inflammatory. The dear old BBC puts a picture of this time after time on the news, inferring that that is what is being done.

Perhaps I may make one further request. Under the Bill of the noble Lord, Lord Watson, in Scotland it will be wrong to kill a mammal with more than one dog. Farmers who are plagued by rabbits normally shoot with a number of dogs. That will become a criminal offence. The Prime Minister said,

"Let me make this clear. As long as I am Prime Minister, I guarantee this Government will not allow any ban on shooting or fishing".

Will the Minister please confirm that?

My Lords, we are all much indebted to the noble Lord, Lord Palmer, for introducing this debate. It is a further opportunity to draw attention to the parlous state of farming and to the wider rural economy which depends entirely on the well-being of farming.

The debate is about economics. Let me pose the question: what economic factors need to be in place for it to be possible for an industry to flourish? In this case, what are the economic prerequisites for a thriving agricultural industry? They are fairly obvious: fertile land; a good climate, a well-trained and well-motivated workforce equipped with efficient machinery; measures in place to guarantee food safety, such as traceability of livestock; good standards of animal welfare to reassure the public; a large market nearby, a substantial population needing food; and—an economic as well as an environmental benefit—short distances over which the food needs to be transported.

By what mischance or combination of inaction, folly, obstinacy or human error have we reached the point at which our farming industry—which is richly blessed with both natural and man-made advantages, including all the economic prerequisites I mentioned, and ought to be immensely flourishing—is in a state of acute crisis? Why is the rural economy malfunctioning to such a disastrous degree, and what can the Government do about it? In a moment I shall mention some ideas, and I look forward to the Minister's response.

First, perhaps I may mention the important debate which took place a week ago in the General Synod of the Church of England. The Synod passed a unanimous Motion addressed both to Church people and to government, expressing its strong concern for the farming industry: for farmers, farm workers and their families, and especially for the particularly hard hit tenant farmers. There was appreciation of the direction in which government policy is moving with the rural development regulation proposals, and much appreciation of a helpful letter from the Minister, Nick Brown, received by the Synod just before the debate, setting out the basis for a long-term farming strategy. But there was an urgent plea for short-term help, so that businesses can survive to take advantage of the new opportunities that we hope to see. We called for a retirement scheme for those who want to leave the industry with dignity and are presently trapped in it; for much more rigorous and informative food labelling; for a reduction in the crippling burden of red tape and paperwork; for further help for those voluntary organisations which are struggling valiantly to provide pastoral support; and help to the victims of the present crisis. Church people were urged to support that work, and to buy locally produced food. It was an important and deeply serious debate. The mood was sombre, but not entirely without hope.

So what do we ask of the Government in order to keep that hope alive? Clearly, there are some things that the Government cannot do. They cannot undo the globalisation of trade and the enormous increase in the amount of imported food that is available. However, I suggest that the Government could do five things. First, they could have a more careful regard for the delicate and complex inter-relationship of economic factors in farming: for example, the removal of the crippling abattoir charges which threaten to destroy meat production and precisely the kind of diversification which the Government say they want to see.

Secondly, we ask the Government to draw down the agrimonetary compensation which was negotiated, as the noble Earl, Lord Ferrers, said, precisely to tide farmers over this kind of currency fluctuation. Yes, it would mean match funding. Yes, it might mean the end of the UK rebate. But it would trigger more EU money, since Brussels' contribution to the EDRP and Objective 2 depends on current spending levels.

Thirdly, we ask the Government to abandon the uniquely pedantic way in which the UK interprets EU directives, with enormous cost consequences, especially in meat inspection charges. Fourthly, we ask the Government to set manageable financial thresholds for the help that is on offer. At present, many small farmers who are most in need find that they cannot afford to benefit from the help that is on offer. That is particularly true in relationship to the mechanism of countryside stewardship.

Fifthly, we ask the Government not to impose the proposed pollution tax on pig and poultry farmers and to lift the threat of the climate change levy on horticulture. All of those are theoretically virtuous taxes, but they would have the effect of further damaging or destroying these fragile businesses and helping our overseas competitors. In the UK it would mean more unemployment, more distress and, in the end, greater cost.

The farming industry has changed, is changing and is trying to help itself. But in the short term it faces real disaster: a domino effect of one sector dragging down another. As pig and poultry farmers go out of business, they will stop buying feed from their arable neighbours, creating an agricultural melt-down on a scale that will make today's heartbreak, anger and distress look quite trivial.

Heartbreak, anger and distress are not economic factors but they have economic causes, and economic solutions are available. We hope and pray that the Government will do all in their power to provide those solutions. The noble Lord, Lord Sewel, said: let us do what we do best. I absolutely agree. We have a brilliant farming industry. Let it do what it is best at doing.

My Lords, I declare an interest as a taxpayer. Agricultural policy in this country is no longer stacking up. MAFF spends £3 billion of public money. and what is the result? We have food surpluses; a loss of public confidence in food; a decline in the agriculturally related element of rural communities—although I must stress that other elements of rural communities are showing remarkably robust performance figures. We certainly have a degraded countryside and a serious decline in wildlife. And 50 per cent of farmers are in financial trouble. I say 50 per cent. There are, of course, 50 per cent who are not. We should not overlook the point that the present level of agricultural incomes is no lower in real terms than it was in 1985 and 1990. We have seen successive emergency bale-outs to the agricultural industry, on top of the £3 billion, of £787 million since 1997. So the public have a right to question that scale of public support, and a right to ask what they are getting for their money.

There have rightly been calls for a new future for the agricultural industry. But the new future that seems to be envisaged is one that needs to be questioned. It implies restructuring, bigger holdings, more efficient, competitive farming, able to hold its own and to export at world market prices. I should like to challenge that single model. In terms of what is needed for the future, it is only one of a range of models, all of which need to co-exist and some of which will need public subsidy for the future.

As we have seen over the past 15 years in the forestry industry, we want to see a move towards multi-purpose farming which is about safe and healthy food production, environmental management, diversification to provide opportunities for access and recreation, and building new social and community fabrics within the countryside. The noble Lord, Lord Palmer, asked whether the Government wanted a thriving agricultural industry. I am sure that the answer must be yes—but not at the current social, environmental and economic cost.

My idea for a new model of multi-purpose farming is not a new one. However, it deserves some exploration of its components. There would indeed be some intensive, competitive, large-scale farming which would not be dependent on subsidy, although I hope that even within competitive and intensive farms we should see space for minimum environmental conditions and places for wildlife.

Alongside some areas of the countryside where that intensive agriculture would take place there would also be a whole range of other models: organic farming, depending primarily on premium prices rather than on subsidy, although possibly with some subsidy to pump-prime the process. There may well be other premium price accreditation systems which can be developed and which are different from the organic system but nevertheless desired by the public.

We should also see local farming systems developed: niche farming, regional produce and local production and marketing. Some subsidy will be necessary to help pump-prime those local and often environmentally sound farming systems. But we should also see some marginal farms, which by no stretch of the imagination would the market support. Their major products will be other public goods, countryside management, landscape, access, wildlife, the environment and the environmental services that many eco systems provide. We should not be ashamed to support them through subsidy because they are providing public goods that we all need and require.

We want diversification in many of those systems. Already 58 per cent of farmers receive money from outside their farms. We also want all those systems to deliver minimum environmental standards and perhaps receive subsidy also for environmental management over the minimum.

There will soon be more than £300 million in environmental payments, all aimed at counteracting the damage caused by the £3 billion of mainstream perverse subsidy. The Government deserve credit for recent moves to enhance the figure to that level, but why is that money being spent simply to remove the adverse effects of mainstream subsidy? Swift progress needs to be made with the new model of diverse agriculture that I described and reform of the perverse subsidy systems. There may be savings in public expenditure for a higher level of public benefit. That might even please the Chancellor.

My Lords, I declare an interest, as I farm extensively in one of England's remote rural areas where there are more sheep than people, close to the noble Lord. Lord Palmer—to whom we are indebted for this timely debate.

Behind all our considerations lies the basic problem that no country wants to run out of food. Governments world wide subsidise their agriculture to ensure supply. The consequence is over-production. When a commodity is in surplus, prices naturally fall. Governments move in with additional subsidies, which in turn create even more surpluses and prices fall still further. Farming internationally is now in that phase.

We also have in power a new generation of politicians who have never personally faced the rigours of food rationing and are fed up with the whole subsidy exercise, and whose instinct is to say, "Why not let agriculture go hang?"

Agriculture is different because it works to a far slower timescale than most industries. It cannot be switched on and off. It takes 10 years to build a balanced dairy herd and six years to build an age-balanced sheep flock. Live animals cannot be kept in store but must be sold, whatever the market price. Agriculture is deeply dependent on the weather. Last but not least, it is directly exposed to basic world commodity prices at market clearing rates.

It is a chimera to imagine that the world can produce food at the prices on offer. Only 5 per cent of world foodstuffs are traded. The rest are disposed of under other arrangements, at higher prices.

Britain is exposed to the effects of an over-valued pound. It is all very well to say that farmers should hedge exchange rate volatility but that is not possible given that farming is done in small packets. An industry that is the least inflationary of all is currently crucified by the high pound against the euro. It is a pity that the Government do not take advantage of the agrimoney compensation arrangements, which were specifically designed to alleviate that problem.

There is a real problem—not least confirmed by the ghastly figure for suicides among farmers. Prices have dropped between 10 per cent and 30 per cent in most sectors. Milk is selling at half the price of bottled water in supermarkets. Four years ago, agricultural output in this country was roughly £20 billion annually and was one of our biggest industries. Output is now £16 billion. The impact on rural areas is enormous and no amount of diversification can fill the gap.

The underlying problem is that agricultural products are too cheap. Supply and demand have got out of balance. If food is being sold well below the cost of production, who is subsidising whom? America currently has massive farm bankruptcies and the home of free enterprise is not letting its farms go into free fall. America is subsidising its farmers, as is Canada, by billions of dollars a year because prices have fallen too low to sustain output.

One school of thought is that we should abandon agriculture and import our needs. The noble Lord, Lord Sewel—who is no longer in his place—may be among those who think that. That argument is attractive and simple but wrong. If we abandon agriculture we would have to import 20 million tonnes of grain, which would have an electrifying effect on the Chicago market. Prices would go roaring up and, apart from a balance of payments crisis, consumers would be no better off. There is also no way that America or Canada could supplant Europe's grain needs. America's grain production is some 300 million tonnes a year. Europe's is 200 million. Attempting substitution by American or other world production would be wholly unrealistic and largely unnecessary in terms of comparative advantage.

It is essential that governments make certain that grain is priced at a level that will ensure enough production without creating a level of farm bankruptcies that would undermine supply.

What, then, is the most appropriate mechanism for governments to support agriculture and thereby much of the rural economy that so depends on it? Food is currently too cheap. The customer buys food cheaply but subsidises the farmer indirectly through the tax system. We used to have a deficiency payment system that supported the markets at a price at which the average farmer could just make a living and no more. Good farmers did better, bad farmers did worse. The consumer benefited by direct low prices. We should try to persuade our European Union masters to return to that system.

As a nation, we need to make up our minds whether we want an agricultural industry that competes on level terms with the rest of Europe, is not handicapped by bearing the direct costs of excessive regulation and can pay a decent wage to its workers—to enable them to share in the national prosperity to which they have contributed so hugely over the past few years.

We are dealing with a huge, complex and varied industry. The subject needs to be considered factually and unemotionally. I hope that this debate will contribute in that way.

My Lords, earlier today we had an excellent debate on defence. But there are good precedents for beating our swords into ploughshares. I am grateful to the noble Lord, Lord Palmer, for initiating this debate. It could not be better timed.

Before considering the action taken recently by the Government and the action they might take in the interests of British agriculture, how is it that farming in Britain—which flourished for many years under the common agricultural policy loved by agriculture Ministers and unloved by economists—finds itself in severe difficulties? It is surprising how often the new direction of agricultural policy launched by the MacSharry reforms of eight years ago and implemented by governments in recent years, and the decisions taken at Berlin last March, do not seem widely comprehended. There are sleeping beauties everywhere and a kiss or two is needed to bring them into the new millennium.

There are three principal reasons for British agriculture being in recession, with a fall of almost £4 billion in output value since the mid-1990s and a drop of 60 per cent in income in real terms. The first is the change in agricultural policy, which is reducing or removing support from market operations—fully or partially replacing it with direct grants to farmers. When I was in Brussels many years ago and we were spending £17.5 million a day on agricultural support in the European Community, I used to ask whether anyone had ever seen a cheque to a farmer. The answer was never, because support was primarily given by intervention in the market, export refunds to traders and so on.

Has anyone in recent years seen a support price increase for an agricultural product? The answer is that there have been practically none. Prices are being frozen or reduced to world price levels. It has been government policy for some years to reduce agricultural support prices, at least in real terms—thus benefiting the consumer—and move to direct compensation for farmers, that being likely to increase the cost to the taxpayer. Those changes can be illustrated by the latest package of March 1999 when the decision was taken to cut the cereals intervention price by a further 15 per cent in two steps from July this year, the beef intervention price by 20 per cent over three years and the support price for milk by 15 per cent from 2005, and increase some direct grants in consequence. Those price cuts will give an economic benefit of about £1 billion a year and, if passed through to consumers, will knock about 2 per cent off the retail food price index. The direct grant and other changes will increase the EU budget costs by about 2.5 billion euros when all the changes are fully implemented. The Government estimate that those measures will knock about 5 per cent off total farm income, although some may be regained by the separate rural development measures.

The second reason, which has already been mentioned, is the strong pound. Important sectors of agriculture are tied into a system of support prices and direct payments. Too much so, of course, but we must face facts. Under the agricultural policy these prices and payments are expressed in euros. It is thus a genuinely common policy for farmers in 11 other European Union states, and possibly soon in 14, but because the UK is outside the euro zone British farmers suffer exchange rate risks, not just through the markets but also through the support arrangements. The question is whether we have done enough to minimise the disadvantages which British farmers suffer from our non-participation m the euro zone. I think not.

The third reason is that British farming is still suffering from the consequences of the BSE epidemic, about 150,000 cattle having been lost directly from contracting the disease and with widespread disruption of farming and the food supply chain. I recognise that the Government are currently bearing some of these costs, in particular the cost of inspections, the removal of specified risk material and the cattle passport, but the beef industry suffers continuous losses of value. Other costs fall also on pigs, poultry and sheep. We are still paying a high price for not rigorously respecting the law on the ruminant feed ban.

Now for the good news and what might be done. For supermarkets and consumers it is good news almost everywhere. For farmers there are some signs of recovery in prices. US winter wheat plantings are at their lowest level in 28 years and lamb prices have recovered, finally hitting £1 per kilo. There is also good news from the government side given the way in which the rural development plan for England, which was launched by the Minister on 2nd February, is being actively pushed forward, with very good officials engaged in this work, including the countryside stewardship scheme, and emphasis on the environment and the wider rural economy, financed by EU funds and modulating payments under direct grants.

I propose to the noble Baroness two actions. First, the cost of inspection of specified risk material from cattle and sheep should be considered, correctly, as a protection of human health and should be borne by public funds, not just for a period but indefinitely. Secondly, the Government should adopt the principle that funds available from the European Union for agri-monetary compensation should normally be taken up fully, not partially, and matched by the national contribution. I understand that the amount at issue is about £225 million from the EU and £225 million from national funds in the year 2000. Even allowing for our budget contributions to the EU payment and the effect of the budget rebate, there would be a substantial payment—about £65 million, I believe—to British farmers by taxpayers in other European Union countries. Why do we not accept this kind gift from foreign taxpayers?

My Lords, I am grateful to the noble Lord, Lord Palmer, for his masterly introduction to this debate and exposure of the problems that face British farming today. Some years ago Noel Coward wrote a song entitled, "Bad Times are Just Around the Corner", which contained the lines,

"In rather vulgar lettering a very disgruntled group

have posted bills in the Cotswold Hills to prove we're in the

soup".

I declare an interest as a member of a very disgruntled group of Cotswold Hill farmers.

For British farmers bad times are not just around the corner; I fear that they are already here. We are hurting badly, as we have already heard this afternoon. I am sure that we shall hear more from other contributors later. What rubs salt and pepper into the wounds of British farming is that the Government seem to be unable to offer much beyond platitudes and bromides. The Prime Minister on his visit to the west country encouraged farmers to diversify, for example into organic farming. I remind noble Lords that the door has been slammed in the face of many would-be applicants because the organic farming scheme has run out of money. In any case, can organic farming ever provide more than, say, 5 per cent, or a tiny amount, of British farm income? It is certainly not a solution to the difficulties that face the whole of British agriculture today.

How can the Government make encouraging noises about diversification and enterprise when they increase rather than decrease the burden of regulation on small businesses, as the noble Lord, Lord Palmer, pointed out in his introduction? A good example of that is the Meat Hygiene Service. The Government like to say that they are listening. I am aware that the noble Baroness does listen to our debates and Questions very carefully, but sometimes it appears that her department has turned off its hearing aid. If the Government are listening, why is the MoD still buying 75 per cent of its chickens from France when that country is rubbishing our beef and still banning it illegally from sale? I produce exhibit A, which is a bottle of French milk bearing the label,

"Savourez-le! … Il n'a subi aucum traitement conformémeut à la réglementation".

My Lords, I apologise for interrupting my noble friend, but I believe that he is out of order in producing an exhibit and displaying it in the Chamber.

My Lords, I apologise. I simply illustrate that French farmers pay absolutely no attention to the rules of the EU which bind everybody else. Why do we not, just occasionally, take a leaf out of their book? If the Government are listening, why does the MoD buy 98 per cent of its lamb abroad at a time when British sheep prices and British sheep farmers are at rock bottom? If the Government are listening why do they not do something about the scandal of the thousands of pigs imported into this country which are fed on meat and bone meal? If that material was fed to pigs in this country the farmer responsible would face a criminal prosecution.

If the Government are listening, will the Prime Minister, the Chancellor of the Exchequer and the Minister of Agriculture explain why they all voted for the stall-and-tether ban on pig production in this country but did absolutely nothing to ensure that government catering establishments used pig meat from British farms which conformed to our very much higher welfare standards?

Like the noble Lord, Lord Palmer, with whom I agree, I ask why, if the Government are listening, last Friday they talked out the Private Member's Bill on food labelling of the right honourable Member for Eddisbury which would have ensured that consumers in this country, if they so wished, could buy British and not Thai or Brazilian produce with a British flag stamped on it?

Finally, the noble Lord, Lord Sewel, vigorously pursued a point on which I am in agreement with him. I can do no better than quote the words of the noble Baroness in a Written Answer to my noble friend Lord Inglewood—

"The common agricultural policy, as currently structured, does not serve farmers, consumers and taxpayers well".—[Official Report, 28/2/00; col. WA 51.]

The noble Lord, Lord Sewel, underlined that point by pointing to the deficiencies of the common agricultural policy. What he did not do was to follow it through to its logical conclusion. We should get out of the common agricultural policy, which is a total disaster, as everyone agrees. If we did so we would save £4.5 billion a year in contributions to the European budget which we could then spend on our own agricultural sector. I agree with the noble Baroness, Lady Young of Old Scone, that some of that money could well be spent on environmental improvements and goods. We would have about El 1 million a day to spend on the agricultural and environmental sectors if we were bold enough to leave the common agricultural policy.

If the Government—whether the present one or any other does not matter—are unable or unwilling to dismantle the CAP, they will preside over the inevitable decline of British agriculture.

My Lords, I am grateful to my noble friend Lord Palmer for enabling us to air our concerns on this subject tonight. I express a desire that the Government will at last act as well as listen. We have heard repeated statements about the support provided to farmers by the Government, yet when the figures are analysed it is impossible not to compare the £1,000 per head of rescue funds which the Government claim to have spent on agricultural workers with their willingness to contemplate a subsidy package of £2 million to prevent the closure of the Longbridge car plant. That is equivalent to more than £14,000 per job in an industry where there is 300 per cent overproduction.

Subsidies, designed to encourage farmers to grow specific food crops and to breed livestock that were in short supply during and after the Second World War, have become like a fix to a drug addict. As with an addict, any excuse will be found to avoid confronting the truth. Subsidies in the form of the CAP are no longer the answer for the control of agricultural production, as the noble Lord, Lord Sewel, and others have so clearly indicated. What is required is a realistic system for pricing agricultural products—one that takes into account the fact that the whole community benefits from the way in which a farmer works his land and cares for his stock.

We are told that there is a surplus of many agricultural products. There may well be in the EU as a whole, but why do the latest government figures show that in the UK there is a food trade deficit of £8.5 billion? That compares with a food trade surplus of £5.7 billion in France. It is hard to comprehend the reason why it is our farmers who are told that they are overproducing when, at the same time, we seem to be forced to accept from abroad products that could well be produced here. Our average household spends only II per cent of its income on food; the French spend nearly 25 per cent.

I live not far from the Vale of Evesham. It was once renowned for the excellence of the fruit and vegetables grown in its fertile soil. Now most of the holdings lie derelict. Instead, we are told that we prefer fruit and vegetables, imported at great expense, from the four corners of the earth. I say "we are told" because there are now strong indications that not all of our population are prepared to believe that. There has been an enormous growth in farm gate sales and in farmers' markets for value added goods produced locally.

Here I declare an interest as my husband and I have a small farm in Worcestershire where we produce milk and cheese from our goats and, in season, lamb from our small flock of Black Welsh Mountain sheep. All our products are sold locally. It is our aim to supply a choice of wholesome food at prices that provide us with a reasonable return and are considered to be reasonable by our customers. In addition to our work on the farm, my husband and I both have to work in other fields. We are now working harder than we have ever done simply to stand still.

It is the numerous small farmers, like my husband and me, who help to maintain the countryside so beloved of the townsfolk and visitors from abroad. Most of those farmers are now desperately struggling to survive. They have an inherent love of the land and an appreciation of its wider value that does not seem to be understood by their urban counterparts. They are proud and independent men and women who do not want to be reliant upon state handouts. What they need is practical help in those areas where they lack expertise. Marketing and market research are not skills that come naturally to farmers. The promotion of choice, wholesome, locally grown products is beyond their means. The socio-economic value of a successful agricultural sector to the population needs to be understood. I spoke about that in a recent debate. We also need the application of a large pinch of good sense by the bureaucrats who govern so much of our daily lives. I appreciate that this will not provide answers for all food producers and consumers, but it will help substantial numbers of them.

My Lords, I have no great expertise in agricultural economics. My first experience was as a small boy when a local farmer stopped his tractor and asked my friend and I whether we would like to earn half-a-crown by helping him to dig potatoes. So we helped him to pick potatoes: he then gave us sixpence. We pointed out that he had mentioned half-a-crown. He said, "I only asked whether you would like to earn half-a-crown, not that I would pay it".

I have represented farmers for a long time. While that does not mean that I am an expert, I am aware of the grave anxiety they feel. I share the deep unease, even sickness, which some experienced recently. Three factors underlie the problem; they have been identified. The ramifications of the strong pound have been spelt out by the noble Lord, Lord Williamson. I trust that the last points in his speech will receive much attention from Her Majesty's Government. The second factor is the BSE crisis. It is a great pity that the whole business was not managed better 10 years ago.

The third factor—it is hurting many small farmers in south Yorkshire—is (if I may use the term without being patronising) the death of the peasant or cottage economy. In recent months, one of my friends has had to get rid of 5,000 hens because the little grocer shops which he serviced for a long time cannot compete with the supermarkets. A pig farm two or three miles away went bankrupt last month despite having spent £75,000 on capital equipment and improvements to comply with regulations in the United Kingdom.

An anxiety expressed to me at the weekend is that the estimates for the yield and returns for wheat and barley this year are likely to bring the arable sector into a state of unease. Even if American production is reduced, it seems possible that, unless the land is good, the yield and returns even with subsidy may border close to the cost of production. That does not bode well for that sector.

I share the view that farmers must win friends. I was horrified recently when I learned that one farmer in south Yorkshire proposes to pull down about a mileand-a-half of hedgerow in order to improve production. We do not need that. Farmers do not need the hostility that such a destruction of the natural heritage would create. Farmers must continue to farm the land but also act, perhaps increasingly, as stewards of the British ecology. I believe that on this side of the House we have an obligation to press the case for such support as will maintain activity in rural Britain.

I was extremely anxious about the countryside and access proposals. I know how difficult are the experiences of farmers living close to conurbations. The nuisance of litter, damage and destruction can be utterly discouraging. I am pleased to note that Schedule 8 to the Bill has a prohibition on access by mechanically-powered vehicles. If farmers are to be assisted in the maintenance of their role as stewards, we shall have to ensure a more capable, comprehensive police service in rural Britain. Crime is not concentrated universally in the cities. Farmers often have unfortunate experience. Police resources must be extended further away from town centres.

I trust that my noble friend will take from the debate the serious anxiety about many sectors of agriculture. We need to see a more positive approach from the Ministry of Agriculture. At times I found it extremely bureaucratic as a constituency MP. The last case that I put before the ombudsman before I ceased to be an MP was resolved some months after I entered this House. I was pleased to see that we won our case—a case which should never have had to go to the ombudsman—and a local farmer received a substantial payment. That payment should have been made in the first place without the anxiety, anger and acrimony which developed.

In that regard I was distressed by the speed with which the Ministry of Agriculture sought to respond to the EU's proposals on field boundaries. It could have been more robust. I cannot envisage our French neighbours and others inside the European Union taking such swift action which their people would not have liked. I trust that the Ministry will support those farmers who care for the natural heritage. There are many of them. They need to be encouraged and assisted so that more will follow suit.

My Lords, I have been reading the report on the rural economies from the Performance and Innovation Unit of the Cabinet Office. On page 5 it states, quite correctly, that in the late 1940s government,

"viewed agriculture's primary role as to ensure security of food supply".

On the next page it states that,

"the values, belief's and behaviours on which post-war policy was based have not proved to be permanent".

The report states later that,

"many people now value rural England more as a source of environmental goods than as a place for food production".

I have no doubt that that is true, but I have severe doubts about whether it is relevant to the job of government, whose duty it is to see past the public perceptions to the truths and in particular the dangers of any given situation.

Nowhere does the report raise any question about the security of our food supply. It is interesting to note that during the past few years in various parts of our tumultuous world the food supply has been severely curtailed or stopped altogether. Our current high quality food security is not immutable. Surely, the casual assumption that our high quality food sources are sufficient and safe for ever should not be taken for granted.

The net incomes of livestock farmers are running at 50 to 70 per cent of those of 1991. Mixed farmers are doing slightly better and only the incomes of cereal farmers are holding at around 1991 levels. However, average prices do not show the whole picture. I was a mixed farmer, but, sadly, I am now only a cereal farmer. Like the noble Lord, Lord Palmer, I began farming with about 17 farming staff, but now have a permanent staff of only three and I now farm considerably more hectarage.

In the past three months since December, the strength of the euro against the pound has fallen by about 15 per cent. I could have just about paid a notional rent in December, but today I could pay only 60 per cent of that. I believe that I am one of the top 25 per cent best performing farms. I shudder to think what the future is for the tenant farmers who pay rent.

Reports from the NFU and the Tenant Farmers' Association indicate that this year most of them will make a loss. Loss-making tenant farmers will do the same as many of the 20,000 farmers did last year—they will quit the industry, many of them taking nothing with them but their skill and expertise.

"Crisis, what crisis?". It is one that is all too real for a number of families and individuals. It is one that may have serious repercussions two, 10 or perhaps 20 years from now. The Government seem to be in denial over the crisis and I suppose that they should no longer be relied on to help. Quite the contrary, the Government will impose more millstones on this once world heating industry in the form of modulation. The current crisis could bring about structural changes of an unprecedented scale within the agricultural industry. The likelihood is that farms will increase in size and that the number of animals in herds will also increase. Soon the small tenant farmers will all but disappear.

"The people" with whom the Government consult so assiduously want choice, high quality, and above all, cheap food. But are they getting it at the moment? Choice and cheap food, yes, but what about the quality of imported foods? As Joyce Quin told Stephen O'Brien last week in another place, we may not tell the consumers which of the products on sale are produced in other countries to welfare and hygiene standards well below those imposed by our own Government on our own farmers. We may not inspect incoming produce for dioxins, raw sewage or even BSE. We may not highlight organic produce from land that has undergone a conversion period of less than half that demanded here. That is particularly important as 80 per cent of such foods are imported.

Last week. I returned in the Eurostar from the Continent. The dinner menu was veal. It was certainly not grown in Britain because our animal husbandry standards make us virtually non-competitive. But what a lovely easy way to avoid having to offer British products; and, what is more, it is legal under European law.

My Lords, I thank my noble friend Lord Palmer for providing me with the opportunity of speaking today. I am not declaring an interest because I am a statistic. I have retired from farming. I shall be brief.

I have down in my name the European Communities Select Committee Report on Biodiversity in the European Union, which I hope will come before the House very soon. It is not irrelevant. I do not know which Minister will be answering that debate as the report is an environmental one. However, it includes agricultural and fishery topics in addition to planning, transportation and marine problems. I felt that the DETR would be the relevant department and that MAAF might not become involved. Therefore, in case there is no joined-up government on that day—and I hope that there will be—I felt that I should speak out today.

I do not want to talk about the problems of under-funding or over-production because far more well informed speakers have done or will do so in the debate. That is not to say that I do not have a personal understanding of, and a great sympathy for, the situation that pertains.

I am of course well aware of the plethora of news releases coming out of MAAF and I have found them most confusing. However, No. 43 on countryside stewardship is a step in the right direction, but underfunded. No. 45 on waste is encouraging. I believe that rethinking the common agricultural policy is essential and the Government failed to achieve what they hoped for in Berlin. That was unfortunate but, I am afraid, in the circumstances understandable.

When we come out of the tunnel—and out of it we must come—farmers will have to realise that they are the custodians of our countryside. I know that many do, but not enough. That fact must also be recognised by the Government. Without government help, no farmer now or in the foreseeable future will be able to afford to do everything that is essential for the preservation of all the aspects of the countryside which many of us hold dear.

Looking well into the future, I believe that farms must be environmentally sustainable, rambler friendly, wildlife friendly, countryside friendly, and, above all, economically viable.

My Lords, there is no need for me to recapitulate the ills of British agriculture. The number of speakers in the debate, opened so ably by the noble Lord, Lord Palmer, is evidence of that. Nor shall I spend time on the short-term ameliorations that are needed. They have been spelt out by a number of speakers and the sooner they are provided the better, in particular help for the organic sector.

I want to concentrate on two points. The first is the immensity of the underlying situation and the second is the toughness of the measures needed. This is not a passing crisis limited to this country; it is a deep-seated, long-term world disaster. It started in this country before the last war, was interrupted by the war and its psychological aftermath, resumed now, and is doomed to continue and become worse indefinitely.

It is the result of unbridled free trade, the purpose of which, as my Liberal forebears rightly knew, was to produce cheap food for the urban poor. That was an admirable objective, but not at the expense of the destruction of the English farming industry and not at the expense of the rural countryside.

If there are those who believe that there can be a recognisable rural England, or Wales, or Scotland without the preservation and, indeed, the restoration of the farming population, they are in error. They have only to see the destruction of rural New England by the competition of the monocultures of the Middle West.

What is to be done? The tide must be turned by a major turnaround and by the abandonment of free trade. We are told that that would mean misery for the third world. That is not so. The protection of food security in all countries and the abandonment of the obscene ferrying of luxury foods over vast distances, consuming immense quantities of fuel, can only do good to everyone.

On Thursday 26th June 1846 at 1.30 a.m., as described by Disraeli in his life of Lord George Bentinck, Sir Robert Peel sat on the Treasury Bench and watched the gentlemen of England troop into the Lobby against him to save British agriculture. Another such massive, if not so romantic, turnaround must be asked of this Government and of all political parties. Pray God that they will not fail the British countryside in which so many of us and so much of Britain have our roots.

My Lords, I am sorry to say that your Lordships do not have Sir Robert Peel; you have me instead! I take this opportunity to thank my noble friend Lord Palmer for introducing the debate. It is timely.

As noble Lords have quite rightly said, we face a very real crisis in the agriculture industry. One thing is abundantly clear: there is no easy solution. The issues are extremely complex and decision-making is difficult, not only on the farm but also at the Ministry of Agriculture. I believe that we must show sympathy for the noble Baroness and her ministry at this difficult time.

We have all witnessed personal tragedies. I, like other noble Lords, know one or two extremely sad cases, and we must not lose sight of or forget them. We have a duty to do whatever we possibly can. However, what can we do? The truth of the matter is that the industry is undergoing a major shake-up. Although it is tough to admit, I fear that it was inevitable. There are simply too many farmers producing too much food. Modern technology has taken its toll and farmers are, to an extent, the victims of their own success. Having said that, I deplore the attitude of some, and I do not like comments such as, "Oh, the Tories let the miners go to the wall; now we'll let the farmers go to the wall". That is disingenuous and I believe that it is also highly short-sighted.

On the other hand—and this has already been touched on—farmers must realise, as many do, that they have no divine right to subsidies, in whatever guise, any more than any other sector of society. Support through the public purse must be earned and respected. However, I turn to what I believe to be perhaps the real point of our debate today and the real challenge which faces the ministry. Whatever countryside we aspire to, it will all be worthless without cultivation, without livestock (think for one moment of the number of SSSIs that rely on livestock for their conservation and integrity), without management and without farming. Only farmers can deliver what we want and they can do so only if they receive a reasonable return on their capital and on their labour.

Therefore, like other noble Lords, I believe that it is incumbent on the Government to act under the agrimonetary compensation scheme to make allowances for what I might call the "weak euro". As my noble friend Lord Ferrers said, that scheme was designed specifically to cope with currency fluctuations. Our farmers really do believe—I think quite justifiably—that they deserve equal treatment with other European farmers and that they are being deprived of a substantial slice of cash which is owed to them. I ask the noble Baroness whether she and her ministry will deny farmers the money which they deserve.

As for the future, I believe that we shall see greater globalisation, a freer market and greater competition. Who would have thought, for example, that the flower-growingindustry in the Isles of Scilly would now be threatened by flowers being flown in from Kenya? That is the level of competition with which we are having to contend. And we must face up to it. I am afraid that it will mean cost-cutting and a loss of manpower. It will probably mean larger farms, which I would very much regret. However, we must look at common welfare standards. We must look at labelling and certainly at better marketing. Compared to the French, I believe that we are particularly bad at that in this country.

However, it was with great joy that the other day I opened my local Darlington and Stockton Times and saw a photograph of my noble friend Lord Lindsay opening a new launch of Yorkshire lamb. I believe that that is exactly the kind of activity in which farmers in this country should participate more widely. We have already had reference to niche markets, and I believe that there are real opportunities in that direction.

On the question of less red tape, I shall believe that when I see it. I sincerely hope that there will be a greater emphasis on the environment. The CAP has been positively destructive in that regard and we need to see a greater percentage of support in that direction. However, I welcome the steps that the Minister has already taken. Yes, we are already seeing diversification and it will grow, but it will not be the panacea that some people believe. Ultimately, in the remote agricultural areas I believe that farming will still need to be a stable industry that maintains the socio-economic background of the countryside.

We all want to see a diverse, competitive agriculture sector with a much greater environmental commitment to producing healthy food. I have full confidence that, given the opportunity, our farmers can deliver that. However, reform of the CAP must continue. But, as my noble friend Lord Vinson said—and he was absolutely right—we must not forget what happened in America. America withdrew subsidies and its agriculture industry very nearly collapsed. It was derisory of the way that we ran ours, but it came along with huge dollops of money in order to prop up its own industry. Finally, therefore, we must always have that safety net. However, I believe that the composition and structure of the safety net present the real challenge to the Government and to the EU.

My Lords, I congratulate my noble friend Lord Palmer on introducing this very important debate. I must declare an interest as a farmer in north-west Hampshire and as a former chairman of the Agricultural and Food Research Council.

A recent survey of 30 small and medium-sized abattoirs found that 26 expected to close down, three of them in the week of the survey. That was a matter referred to by the right reverend Prelate the Bishop of Hereford. Large abattoirs claim that payment on a headage basis would mean higher costs for them and would make them less competitive on a European scale. That may be true, but the current situation is forcing small plants out of business.

That is of vital importance for a number of reasons. The British livestock sector is suffering from severe recession, especially in pig production, as we have already heard today. While our animal welfare standards and other regulations ensure that our costs are higher than any of our competitors, the strength of sterling enables imports to force down prices. Therefore, the only way that our industry can survive is to produce high quality, organic or added value products that can sell for a premium, especially through farm shops, as the noble Countess, Lady Mar, said, and local outlets and farmers' markets. That is totally impossible without small local abattoirs, as the high throughput centralised plants cannot keep individual carcasses separate.

I turn to the question of sick and injured animals. Without local abattoirs, or knackers' yards, what can a farmer do with fallen stock? At present the hunt kennel is the only means of disposal. If hunting ceased, what then? He cannot shoot the animal and bury the carcass; that is illegal. It is essential to keep open rural abattoirs to prevent unnecessary suffering of farm animals. The rate at which small abattoirs are closing down means that immediate government action is imperative.

Livestock numbers in Hampshire have been falling for years. By the end of this year there may be fewer than 200 dairy herds left in Hampshire. I know that the problem with statistics is that they are always out of date, but at least 18 dairy herds in Hampshire were sold last year and more since. Judging by the notices of dispersal sales in Farmers Weekly, there are many more to come in the near future. They are not small-scale, out-of-date enterprises. Many of them are large, well run herds of up to 200 cows or more.

Beef and sheep farming is hardly more profitable. While beef farmers are recovering slowly from the BSE crisis, sheep farmers have experienced two years of poor returns, with prices only now rising from very depressed levels. The result is that sheep numbers have fallen in that area and many flocks have been sold. I buy approximately 500 North Country Mule ewe lambs each year. In 1996 they cost £74 a head; last year I bought them for £29 a head. Therefore, the effect on the hill farmers from whom I buy must be terrible.

The loss of livestock will have a dramatic effect on the landscape, as will other changes. Poor land will cease to be farmed as it is entered into agri-environmental schemes or set-aside. Even the biggest and most efficient farms are not immune to financial pressures. One agri-business farming some 13,000 acres laid off three men recently by moving away from ploughing towards a minimal cultivation technique. Several owners are being consulted about future policy, including the option of 50 per cent set-aside, the maximum allowed.

I cannot predict the outcome, but if all agree to such a course of action, 6,500 acres of set-aside in a relatively small area of Hampshire, Wiltshire and Berkshire would certainly have a major impact upon the landscape. I am sure that the noble Baroness, Lady Young, would be extremely worried about that, as she would be about the employment position.

An accountant specialising in agriculture in Hampshire has said that the reserves of many farms are now exhausted and without profits undoubtedly some will be forced out. The current recession is the most severe to hit farming, and I have been farming for over 50 years. If it does not improve soon, it will have the most dramatic impact upon the countryside, something to which the noble Lord, Lord Sewel, referred. And I am extremely worried also about the economic, environmental and social consequences.

My Lords, your Lordships will be happy to know that it is half-time and I would like to make a half-time speech. To me, this is quite a remarkable day. I thought that there might be 10 or 12 speakers. Before this date, when I spoke to the noble Lord, Lord Palmer, I said that I would like to talk about animals and economics because for much of my life I have dealt with the economics of food and marketing and when I worked for the Midland Bank, we were called the "farmers' bank".

But, in a way, there is a message which goes out from this House today. It says that we are right behind the farming industry at this time. If we can let the farmers know, by communicating the contents of the speeches today, that we shall use all our endeavours and our best efforts to persuade the public sector, governments and international agencies that we must have a viable agriculture industry in the future, then that message does us much good.

Those of us who are meant to be banking and economic people do not trust government figures; we never have. So taking the government figures on all aspects of the industry, I have over the past two weeks done my own research. The figures always say that one year is not comparable with the last. With that in mind I revisited, by phone and in other ways, areas of land which my family used to farm, totally uneconomically, in Dorset, Sussex, Hampshire, Berkshire and Wiltshire. We were disastrous farmers.

My grandfather, who accustomed me to getting up in the morning to milk the cattle, said that he would never dismiss anyone whose family had worked on the land. The land had no value other than the animals and the people it supported. If I recall correctly, we have 18 million hectares of land. We have on that land something like 11 million cattle, 40 million sheep, 8 million pigs, 140 million fowl and 400,000 horses—the same as in Australia, I believe—added to which there is other livestock.

I am a grade 3 Peer so I have no intention of aspiring to talk about grade 1 or grade 2 land. But grade 3 land accounts for roughly 60 per cent of this country. It is totally uneconomic at this time.

Why is that? One always remembers the VAT man and the Customs and Excise man—the dreaded Excise man who destroyed the ability of Cornish farmers to make a little bit of extra money on the side by importing French brandy in order to subsidise their farms. But the most deadly man of all was the man from the Ministry of Agriculture and Fisheries. He had the power to enter your land under the protection of the bulls in service Act, the dangerous weeds Act or the Colorado beetle Act. It is bureaucracy which has destroyed grade 3 people.

A good friend of mine and of the noble Lord who has been so wonderful in opening this debate once said to me, "Agricultural land is uneconomic" and I said, "But why is it so highly priced? Why is it that today it has £60 billion of value? Why has the price of land remained so high when the economics of it are so wrong?" He said, "Well, you see, agricultural land is only 50 per cent mortgaged but if you look at the return it ought to have, it would be 100 per cent mortgaged".

It is heavily mortgaged but there is still an asset there. I know not why the price of land is so high but my friend gave me a lovely phrase which I have never forgotten—pride of ownership. In my 49 telephone calls to people, I asked, "Why are you still in agriculture?" They replied, "My father was. I am". There are 350,000 families—husbands, spouses and partners—who love the land and love their animals. In a way, perhaps, one could say that they are foolish but maybe they are wise because suddenly, into the breach, comes the decision that the whole of the south of England is to be covered with houses. I declare an interest because I work for a contractor. But we are after brownfield land. Our countryside is an asset that has no value; it is invaluable. If your Lordships' House supports all that today, we may get somewhere.

My Lords, I am grateful to my noble friend Lord Palmer for initiating this debate today. I intend to speak on only a couple of issues, the first of which is the pig industry.

In researching for this debate, I spoke to veterinarians and pig farmers. Yes, farming is in crisis. I read the Veterinary Record regularly and I do not believe that matters can get any worse.

In his introduction, my noble friend said that the Prime Minister had pledged to sit down with the farming industry to tackle the immediate crisis. I thought he had already done that on 1st February, in a speech to the NFU because he said:

"I do not rule out further measures to help".

He then continued to have further meetings with representatives of the pig industry. In spite of what has been said today, the UK Government have not offered any help to the pig sector to deal with the problems which BSE has caused. Has the Minister in another place applied to the Commission for a grant of exceptional occurrence because I am sure that the industry qualifies for it?

So far there has been a great deal of talk from officials but there is nothing yet on offer. We have all heard that time is running out. I would hate to see the Government react with too little and too late, because, by then, the industry really will have been destroyed.

We demanded high welfare standards. The industry complied with that request at considerable cost to itself. I should not wish to see it now forced to abandon the improved welfare standards which we fought so hard to place upon it.

On labelling, I still find that confusing. The country of origin is often difficult to identify. We really must have clear labelling so that consumers are left in no doubt as to where their food comes from. British shoppers do care. But they cannot make informed choices when labelling is less than helpful as to the country of origin. Many people to whom I have spoken are willing to pay a little more in the knowledge that pig and poultry products are produced to a high welfare standard.

We all have a part to play in preserving our own agriculture, which has already done so much to improve its own farm animal welfare. Farm prices are at rock bottom and they show no sign at present of improving. But the plight of farmers is not reflected in the prices that we pay. I hope that the Government will start to turn their promises into action. But the time for that to be done is now. The future may well be too late.

Another matter of concern to veterinarians and farmers alike is the draft regulations which are the work of the Joint Food Safety and Standards Group. Those regulations will soon be submitted to Ministers for signature. I spoke to an independent nutrition and legislation consultant retained by the George Group about Regulation 13. That regulation seeks to ban all types of feed additive mixtures, unless they are incorporated into feeds.

That has been around since 1970 but has been circumvented or ignored by practically all the 15 countries within the EU, and for good reason too. Its implications for animal welfare are extremely worrying. One example is hypomagnesemia. In cattle that is grass staggers or tetany. It is a rare condition these days because farmers add magnesium salts to the drinking water every day. This method ensures that they get their daily intake of magnesium. Should farmers not be able to carry on adding this mineral daily in water, the result could well be death. Cattle and sheep on extensive grazing cannot obtain sufficient micronutrients only from grass to meet their requirements.

The implementation of Regulation 13 will also cause problems in pigs and poultry. With the demise of "in-feed" antibiotics for growth promotion, there has been much more use of vitamin boosts in times of increased stress. Other companion animals are also affected. As we know, Europe already circumvents that regulation, but if we adopt it we will be adopting all sorts of welfare problems for ourselves because I believe that we have a habit of employing the type of people who thoroughly relish the job of enforcing every regulation or directive that comes out of Brussels regardless of the consequences. Rules are rules and they have to be obeyed. I do not believe that this country will ever behave otherwise because we dot every "i" and cross every "t". Sometimes I wonder whether officialdom ever gives a thought to the fact that occasionally it might be wrong.

I end with a quote made earlier this year from the past president of the British Veterinary Association, Bob Stevenson. He said,

"Livestock farmers are battening down the hatches and vets are clearly seen as a cost rather than a benefit, with the result that farmers are calling on us less and less".

One does not need a crystal ball to understand what that means. Unless things improve rapidly, animal welfare could be put on a back burner and that would be a very bad thing. It would be very tragic. I hope that that does not happen.

My Lords, like so many others, I must declare an interest as a farmer and, perhaps unusually, I am chairman of the Agricultural Mortgage Corporation with a particular interest in that respect. Being in the second half of the speakers' list, there is no need for me to repeat the causes of the problems facing UK agriculture. Anyway, the noble Lord, Lord Palmer, who initiated the debate so effectively, listed the lot. So we do not need to worry any more about the issues. We have identified them as an overvalued pound, over-regulation, historically low commodity prices, high welfare standards in this country and an inappropriate common agricultural policy.

We need to move on in this debate—and many speakers have done so—towards solutions. In his speech the noble Lord, Lord Palmer, drew attention to an issue to which UK agriculture has to address itself with, one hopes, government help; namely, why is it that we face higher input costs? He mentioned Spanish agrichemicals and continental combines. I could mention many others. If I ordered A1 semen from a named bull that would cost me a lot more than it would cost in Australia. Do not ask me why, but that is true. We know about right-hand drive vehicles in this country, but we have never worked out how on earth it is that we allow ourselves to pay so much more for them. Put together, this amounts to extremely incompetent consumer buying by the agriculture industry. I know that the manufacturers blame the Government, the Government blame the manufacturers and the farmers blame everyone else. We need to get together and sort it out for ourselves. It is a matter which agriculture needs to address. If it finds a problem with regulations it will have a strong case to go to the Government.

But we are locked into a high-cost farming system whereas by now we should have tried to devise a strategy for the industry which recognised lower commodity prices. As so many speakers have said, we are locked into a common agricultural policy which positively hikes up costs. For example, in the case of milk quotas those who remain in the business have to give a pension to those who have retired if they want to use their quota. Voluntary set-aside is another expensive way of maintaining rents at an artificially high level. Why should one rent land if one can get set-aside payments of over £100 an acre?

Clearly, the Government can have a hand in this. But when we come ultimately to recognise, as speaker after speaker has done, that we have rightly imposed on ourselves higher welfare standards, we have recognised that it is an obligation on all farmers to produce more than just food, although that remains our main product. We must therefore think in terms of rewarding those who produce bio-diversity, nature conservation as well as animal welfare and high food quality.

As the noble Baroness, Lady Wharton, said, we need to ensure that the consumer is aware of these advantages and will pay for them. I do not believe that labelling by government regulation achieves that. It is another bureaucracy. It tends to lead to confusion and it is not a very good way of communicating risk or even communicating market attributes.

The problem is that if labelling is government regulated—or worse, EC regulated—people simply do not believe it. There is a good case for privatisation, which I recommend to new Labour. Why do we not have a kite mark scheme owned by consumers or promoted by an independent organisation, not to please the Government or farmers themselves because no one will believe it, but an organisation which tries to give a nominal score to these attributes which we value: bio-diversity, animal welfare, food safety and quality? It would be difficult to get all these together and rated out of a score of 10. Whoever chaired that organisation would have the most appalling difficulty.

I know that organic farmers would treat such a scheme with grave suspicion because it might suggest that other people could produce to the same level of conservation merit as they do, and of course they could. That is why the organic people will be worried. I would very much like to see such a scheme. I hope that it would be recognised that it was the agricultural industry which was supporting it, but not leading it, trying to meet the issues that everyone in the Chamber has recognised.

We have put ourselves into a bind with high cost systems. We are producing far better products than other countries. Our food quality is superb and yet the consumer, even the Government when they are the buyer for the Ministry of Defence, do not seem to recognise that. It is up to us to tell them how they should recognise it.

My Lords, we are all particularly grateful to my noble friend Lord Palmer for initiating this debate on a subject which is not only crucial to our countryside as we know it, but also crucial to the hearts of all British people whether they live in towns or in the country. We are talking about the whole of Britain, as it is, as it was, and as we hope it will be.

Your Lordships will know the old story of the man who created a beautiful garden from a wilderness, all with his own hands. One evening he was standing admiring its beauty when the local minister came by and admired it, too. The gardener said, "Ay, I've made a grand job of it." The minister reminded him that he must also give thanks to the Almighty. "Ay", said the gardener, "but it was a fair mess when He had it all His own way." So it is with Britain, with our landscape. Much of its beauty is due to the people who have protected it, cared for it, and worked it. We have much to thank farmers for.

Your Lordships have already covered all the other issues—cows, sheep, hens, arable farming and crops, small abattoirs and the fact that while costs, rents, electricity, fuel, machines and wages have all gone up, prices have persistently gone down. So I shall talk just a little about pigs. Like my noble friend Lady Wharton and others, your Lordships may have noticed the charming ladies who inhabit, hock deep, a sty of straw in Parliament Square. They have outside two large notices, "Save our bacon" and "Does Blair care?" Whether the right honourable gentleman the Prime Minister does, or does not, care for the lifestyle of pigs, I do not know. But I do know that he was meeting pig farmers today and so I am cautiously optimistic. Perhaps he does care. I know that I care.

Beside the luxurious straw bedding there is what at first sight appears to be an instrument of torture, a sort of iron maiden. It is a very small iron cage into which some pigs on the Continent are tied up so they cannot move. Many foreign pigs are kept in inhumane conditions. To add insult to injury, their end product is subsidised by their governments.

British pigs lead happier lives, but their owners are not subsidised. This demonstration is to help British pig farmers to survive. Many of them have not. I know that I have no wish to eat bacon that has been produced by torturing animals. I am sure that many people will feel the same. If the pig has had a contented, happy life, it is rather different.

I am sure that your Lordships will be glad to know that no one is going to eat those two beautiful large white Tamworth cross pigs, Cherry and Winnie, who have been living in Parliament Square. They are going to a special children's farm where they can be played with and stroked every day. If only there could be a happy ending for all British farmers—including pig farmers—and for our countryside which we all love. I hope that someone in the Government is caring about our agriculture now.

My Lords, this has been a most remarkable debate; one more unique than any I have experienced so far. It is clear from the speeches made this afternoon that the CAP has no friends whatever. No one has spoken favourably of it. Three or four noble Lords have wished that it would go away and have been willing to assist in its euthanasia, but the rest, some 17, have stuck daggers in its back. Can we not dispose of it now and agree that the common agricultural policy is a lot of nonsense? Why do we not say so? It simply is not working.

There are many good reasons for that. One important reason was given by the noble Lord, Lord Vinson, who is temporarily not in his place. He pointed out that agricultural commodities are different from other manufactures in that they comprise animals and plants; entities with life in them which have their own independent rhythm. They cannot be parked on the tarmac like Ford cars if they cannot be sold. They have a rhythm of their own; one allied to that of nature or which is peculiar to a particular species. In the UK, at least, they live on varying types of land.

We must therefore treat agriculture completely differently. It is high time that we said so. There is no need to perpetuate the myth that the common agricultural policy is the be-all and end-all of human existence. It may well be on the Continent, to the extent that it was devised by Germany and France in a deal ultimately consummated in the Elysee Treaty of 1963, in which France agreed to support Germany on certain conditions and Germany agreed to support France. In any case, they would consult together before each Council meeting. We all know that. We all know too the corruption that has occurred, not only at Commission level, but also in the way in which individual political parties in France and Germany have entered into corrupt arrangements in order to finance themselves.

The answer really is simple and can be put within the time limits that we are set. It is clear that we must pay special attention to agriculture. It cannot be treated like any ordinary run of the mill manufacturing or productive industry. All we need to do is to repatriate to our own country any aid and guidance which we need. We are the people who know the climatic conditions, types of animals and variables of nature as they apply to us. Our governments, if they are responsive, can deal with the matter themselves, subject to the correction of another place and indeed ourselves; subject to certain restrictions and the public at large. Why not repatriate the whole business and let us deal with the problem ourselves? I am completely at one with those of my colleagues who say that the agriculture industry must exercise more initiative than it is able to, or is inclined to, at the present time.

Agriculturists must help themselves. There can be no doubt about that. But in agriculture—and I am talking only of agriculture—one must be free of eternal regulation. Today I have been through parts of the European budget for the year 2000; a document of 1,801 pages, which is beyond the capacity of any government Minister, or indeed, his civil servants, to look at. We all know perfectly well of the regulatory regime imposed on us even without parliamentary scrutiny due, if noble Lords have read the comitology report, to the existence of completely independent committees in Brussels under the chairmanship of the Commission, whose regulations have gone directly onto the statute book without any intervention or scrutiny by the British Parliament. So let us grow up and deal with matters ourselves. I should be most happy to join your Lordships in so doing.

My Lords, I am most grateful for this opportunity to draw attention to the dreadful state of the agriculture industry in Northern Ireland. I join those who salute my noble friend Lord Palmer for initiating the debate. My noble friend Lord Molyneaux of Killead correctly and with great clarity drew attention on Monday night to the state of the farming industry in Northern Ireland. I have no wish to waste time going over the same ground except to place the Province in context.

The agricultural food industry is three times more important to the economy of Northern Ireland than it is to the United Kingdom as a whole. In 1999, farm incomes fell in real terms by 23 per cent—considerably more than in the rest of the United Kingdom. Farmers in a small Province now owe over £520 million to the bank and that figure continues to grow. So we know only too well the problem, but what can we do at this stage?

I understand why the Government believe that any measures can be taken only on a total UK basis and not just for Northern Ireland, even if the Province's burden is proportionately much worse. The Ulster Farmers' Union has operated a campaign of awareness of the difficulties and it has highlighted several areas for particular support. I have little doubt that the Government understand the serious position of the farming industry and that a programme of measures is currently being prepared. I look forward to hearing about assistance for the pig industry which, as we all know, is on its knees. An undertaking should be given that all the EU agrimonetary compensation available in the year 2000 will be energetically sought. A positive outcome could be achieved by the consideration of "low incidence" BSE status for Northern Ireland.

Those are important measures, but by their very nature they are short-term measures. The farming industry is the oldest of industries, rooted in all parts of the country and in everyone's life. But the time has come for a more radical reappraisal. A pact must be made between the industry and the Government, each with a major part to play. We must save agriculture but not at the cost of saving all the farmers. Too many have outdated methods of operation in which their farms are considered as a way of life and not as businesses, as they should be.

Farmers, particularly those in Northern Ireland, must be encouraged to look at what they do, how they do it and why. A hard look by any business person when considering the future is vital. If that suggests to him that massive changes must be made, even to the extent of leaving farming, then so be it. I fully understand that by the nature of agriculture as a capital intensive industry, change is slow, and that is where the Government have their part to play. Not so long ago, the Government rightly supported the miners and their community during the dramatic changes in that industry. So why not put in place an imaginative scheme, including a good deal of lateral thinking, to change totally the farming industry?

We must consider, for example, a compensation scheme for early retirement and for a change of direction. Consideration should be given to methods of relieving loan debt or helping with interest payments. There should be a total refocusing programme to allow the farming community time to reflect and collectively consider the future. If we want farmers to be the stewards of the countryside, fine. But it must be on a business basis. I accept that those will be highly expensive schemes and that they can work only alongside short-term measures such as those discussed in your Lordships' House today, but if we do not grasp the mettle now and simply continue to throw short-term money at the problem, the expense will be just as great and we shall be debating the topic again in 10 years' time. A pact should be made that if the Government put in place schemes and appropriate funding, the farming industry will take steps to change and to reposition itself.

My Lords, those involved in agriculture pursue their trade with an obsession second to none, so it is not surprising to find that the industry has shown an increase in productivity which amounts to 3.5 per cent over the past 25 years. For most industries that would be sufficient to keep them economically viable and successful, but for farming that is not the case.

The Government tell us that they have devolved agriculture to the Scottish Parliament, so I am delighted that this debate has been led by the noble Lord, Lord Palmer, and that various other Scots are speaking. At the moment the core problem of agriculture is in our relationship with Europe. The United Kingdom is the forum in which such problems have to be settled, so the Scots will continue to bring their representations to your Lordships' House.

Many times we have heard of the dismal figures that the Government produced last November on farm incomes, but I want to mention the Scottish ones in particular. They show, for example, that in 1998 the average dairy farm had a net income of £4,400, which was a drop of 68 per cent on the previous year. In calculating income for 1999, it is estimated that there was a further 8 per cent drop. Most other sectors experienced similar problems.

The noble Lord, Lord Palmer, and other noble Lords have drawn your Lordships' attention to the root of the problem, which is the strength of sterling against the euro. I believe your Lordships understand the mechanism by which that affects so many aspects of agriculture. From July 1993, when the conversion was calculated using green pounds, to the present day, the value of the pound has increased by 52 per cent. In regard to the price of milk, mentioned by my noble friend Lord Ferrers, even if one uses the change in value from 1996 to the present day, a farmer who receives a price of 17p a litre now could argue that without the increase in value of the pound against the euro he should receive 23p. At the moment many are left with a price of merely 15p a litre.

I agree with the noble Lord, Lord Sewel, and other noble Lords that we must address the long term, but I am anxious that we should look at the short-term measures required. We have heard much about the financial difficulties of even some of the large producers who are preparing to sell up. The noble Earl, Lord Carnarvon, spoke of Hampshire. The south-west region of Scotland accounts for 85 per cent of the dairy farms in Scotland and it is served by markets at Carlisle, Ayr and Castle Douglas. The market at Carlisle recently had 23 pedigree herds booked for sale, whereas normally at this time of the year it would expect to have only six. The owners of those herds have been prepared to put in the time and the effort to carry out the cataloguing, the clipping, the cleaning and the preparation of their animals. The market estimates that there is an equal number of farmers who will simply send their herds for slaughter. In Ayrshire it is anticipated that another 30 herds will go and there are similar stories from other parts of Scotland. Adding to the frustration is the fact that word is going around that the Lockerbie creamery is buying in milk from France at 11p a litre.

From the west coast and the island creameries, which exist merely to serve their local communities, a different story emerges. Those at Bute and Campbeltown are giving cause for concern. The local agricultural adviser believes that the creamery on Islay has ceased to be viable and that will spell the end of the seven herds that currently supply it.

Those island farmers have cost structures that are hard for most other areas to imagine and they have not been helped by a government policy of having a blanket fuel price escalator applied across the country. The cost of running a reasonable agricultural transport lorry is now about 50p a mile for fuel alone. The transport charge for taking a lorry from Stirling to one of the islands with a load of hay is £800, which, with one of the best large-scale hauliers, works out at £50 a tonne on top of the cost of the hay.

Farmers in that area have experienced an additional frustration in that one of the life-belts that they were offered was the agricultural business improvement scheme. Most farmers who wish to stay in business are prepared to clutch at anything that is offered. Farmers completed the required resource audit, carried out all the work to meet the conditions of the scheme and put in 9,616 applications. By the time the rural affairs department had paid out 5,337 such applications the money had run out, so half of them were left without any recompense for their efforts. A similar pattern is emerging under the countryside premium scheme. I believe that out of those who have applied in Dumfries none has gained approval.

In winding up our debate on the Government's proposals for the milk industry on 9th November of last year, the Minister said that the Government's priority is a thriving dairy industry that can compete in world markets. As many noble Lords have mentioned, the strength of the pound has now become the main force driving the restructuring of our agricultural industry. That is surely a fairly impermanent feature of the economy. Can the Minister tell the House how much of our milk production the Government are prepared to hand over to imports when it is a commodity that has strategic as well as vital health implications? It is also a product to which this country is eminently suited.

My Lords, I am most grateful to the noble Lord, Lord Palmer, for introducing this debate. Many noble Lords have spoken of the plight of farmers so I shall not speak on that subject. Judging by an Answer that the Minister gave on 9th February, it seems to me that the Government's policy is to say to farmers that their problems can be solved by increasing efficiency. I am not entirely convinced that that is a realistic assessment. We already have one of the most efficient agricultural industries in the world.

I want to address the possibility that we face an unavoidable, real agricultural recession of the nature that we endured in the 1920s and 1930s. An agricultural recession does not lead to increased efficiency. As some noble Lords have indicated is beginning to happen it leads to retrenchment; it leads to battening down the hatches, as the noble Baroness. Lady Wharton, said; it leads to dereliction of land and rusting machinery; it leads to a flight of enterprise and skill from the land; and it leads to a flight of capital from the land.

That happened in the 1920s and 1930s and when the war started it was a struggle to get the land back into production. In those days I was 14. I remember the situation. My father was in the forefront of the battle to get the Kentish agriculture industry back to producing the food that the nation needed. There was a shortage of machinery and crop storage. More importantly, there was a shortage of people with the skills to carry out the job. At least at that time the land was still available. The land had been allowed to turn into grazing. I remember a cousin of mine who farmed his 2,000 or 3,000 acres by buying a pony and ranching the land. The noble Lord, Lord Selsdon, referred to the importance of the land.

If we have an agricultural recession today we face a new threat of the irreversible loss of agricultural land, which is one of the nation's most valuable assets. We have superb agricultural land, some of the best in the world. Today, unlike the situation in the 1930s, the general economy is booming. There are many competing demands for land. And land lost to housing, roads, industry and theme parks to mention but a few, is land lost to food production forever.

At this point I disagree with the noble Lord, Lord Sewel; I do not believe that this country will never need food produced at home again. That is what was thought in the 1920s and 1930s. The Americans and the Canadians were "mining" the Prairies for cheap wheat, but we did not know it at that time. We thought Hitler was a reasonably nice guy; we did not realise what was coming. We are burying our head in the sand if we think that the world will never again need the food produced in this country.

We may not have a world war; we can never foresee what will happen. But I can perhaps give one statistic which may suggest the reality of the possibility that the production of our agricultural land may one day again become crucial. In October last year the world's population reached 6 billion. It has doubled since 1960. It could easily double again in the next 40 years; that is, another 6 billion mouths to feed in the world. Over I billion today are between the ages of 15 and 24: that is, just reaching the peak child-bearing years.

The potential consequences of population growth are staggering. The noble Lord, Lord Oxburgh, the Rector of Imperial College—who unfortunately cannot be in his place today because he is abroad—said in 1998:

"As world population doubles yet again demands for national resources, energy, food and water will lead to environmental pressures on a scale that is hard to imagine".

Some noble Lords may say there is potential for technological improvement. But is it reasonable to say that this country will never again need its agricultural land? I urge the Government to consider carefully before they put us and our children at risk in the future. What is the Government's—I ask the same question of the Opposition—long-term policy for the future for good agricultural land in this country? What steps do they plan to take in the event of a recession to secure this unique and irreplaceable asset for future generations?

My Lords, I too congratulate the noble Lord, Lord Palmer, for securing this most important debate. I declare an interest as a farmer and landowner, and as president of the Staffordshire and Birmingham Agricultural Society, which has a wonderful show at the end of May this year. It is our 200th anniversary and I hope that your Lordships will attend in large numbers.

As one who cares deeply about the countryside and its general well-being, it saddens me to witness the steady decline of agriculture. I believe that agriculture is in deep depression at the moment. It is an industry which is experiencing a depression which many believe to be as bad or perhaps even worse than the great depression of the 1930s when I remember my father telling me that he paid tenant farmers 30 shillings an acre just to keep the land going.

It is unprecedented to see every sector of agriculture and horticulture in such steep decline. It is unprecedented to witness month by month reports of rising numbers of farmers leaving the land; of young people deciding not to follow their parents into the industry; of divorces; of suicides; and we have not yet seen the peak of this tragedy.

The recent Cabinet Office report paints a far different picture of rural affairs. Its authors tell us that whilst agriculture is experiencing difficult times, those of us who live in the countryside benefit from longer, healthier lives, in general pretty good services and a better general well-being, both mental and physical. That is pretty good. So everything in the garden is nice and rosy according to the Prime Minister's advisers, most of whom I guess could not tell a field of spring barley from winter wheat, apart from the fact that sometimes it is green, except on my farm where it is usually yellow.

Tell that to the farmer's wife who has just found her husband hanging from a beam in the barn because he could not face the future. Tell that to a farm worker who has just lost his job. Explain that to the stockman who has built up a prime pedigree herd over the course of his lifetime, only to see it destroyed for compensation a fraction of its true value. Tell that to the agricultural engineer who has been forced to close his business. The list of tragedies is endless, and even worse in the hills and the less-favoured areas.

I believe that the report paints an inaccurate picture of rural well-being. It states that, in general, levels of unemployment are lower in rural areas than in urban areas. But what it fails to point out are the vast numbers of people who use country villages as dormitories. Their numbers distort the true picture. Many villages are ghost towns during the week except for the evenings, and yet the inhabitants do not use the village shop, if indeed one exists any longer; they are generally multi-vehicle families who travel to supermarkets. Those of us who live and work in rural areas know full well the true picture. It is all very well for the No. 10 spinmasters to gloss over the fact. What they would wish us to believe is a gross distortion of the true situation.

I should like to touch briefly on the pig industry, for it is suffering pain far worse than the other sectors of agriculture. The industry is in freefall. What is needed is a level playing field. The factors which have hit the industry are many and varied; the strength of sterling; the BSE crisis; welfare issues and requirements which our EU colleagues are not restricted by; unfair treatment by supermarkets and also a glut of pigmeat throughout Europe. All those are villains in the scheme of things.

The noble Baroness, Lady Hayman, kindly replied to a number of Written Questions which I tabled recently, and I am grateful for her responses. The recent letter from John Godfrey, chairman of the National Pig Association, tells me,

"We now have the Prime Minister's commitment to help".

But I wonder whether that sentiment is a little premature. I ask the Minister in her wind-up to clarify just what plans for assistance for the pig industry the Prime Minister might have in mind.

I suggest to the noble Baroness that many of the current problems stem from cheap imported pigmeat from our EU partners, where their welfare standards are woefully below those practised in this country. It seems ridiculous to me that pig farmers in this country must pay for the disposal of pig offal, even though dedicated pig abattoirs sell processed pig offal to EU countries, only for it to be included in pig rations, and the finished product is then exported back to this country. Surely that flies in the face of all the standards and restrictions which have been placed on UK farmers. The result is a product which costs less to produce by our EU neighbours, making our pig industry completely uncompetitive.

Finally, honest labelling: I understand that imported pigs are processed in this country and many of the products are then labelled as British. That cannot be right when such products are often produced in systems which practise welfare regimes of a far lower standard than those practised in this country. It is pulling the wool over the consumers' eyes.

We should be giving every possible encouragement to our farmers, who are the best farmers in the world. The demise of the agricultural industry in this country will have lasting and long-term effects both on the countryside and on the balance of payments. To take no positive action now will reap a sad and expensive harvest in 10 years' time. That would be short-sighted in the extreme.

My Lords, I should like to talk briefly about the most beautiful of all the regions; that is, the West Country.

Agriculture matters more to the economy of the south-west where we live and farm than any other region. At over £1 billion, the value of agriculture output contributes 2.5 per cent of regional GDP—twice the average for other English regions—while the industry employs some 70,000 people, which is 2.3 per cent of regional employment; again, the highest for any English region. However, in the more rural parts of the region such as north Cornwall, west Devon and Exmoor, the significance of agriculture to the rural economy is even greater. For example, in rural Devon and Exmoor, 14.4 per cent of the workforce is employed in agriculture, which is three times the EU average.

On his recent visit to the south-west, the Prime Minister acknowledged what he called "pockets of deprivation" in the rural economy—and they certainly exist. On market days in towns like Holsworthy, Launceston and South Molton, where we live, so many businesses depend on the surrounding farms that you can almost smell the depression in the air.

But there is also an undercurrent of deprivation which runs through the rural economy throughout the region. This is concentrated among the indigenous country people—those who not only live in the countryside but earn their living there. This is where the effects of the crisis in agriculture have been felt most severely.

If all country people are to share in rural prosperity, which appears to be the Prime Minister's objective, it has to mean that resources must be concentrated, whether for jobs, housing, services or economic development. Those resources need to be concentrated on those people who make up that undercurrent of deprivation. Very many of them are in farming.

That is why assistance for agriculture, both short-term and long-term, is so important. It is not only a question of keeping farmers going so that they can continue to act as rather badly paid landscape gardeners. In the more rural areas especially, farming is still the mainspring of the rural economy, with at least one job off the farm for every job on the farm. On that basis, almost 30 per cent of the jobs in my part of north Devon depend on agriculture. And bear in mind that many of the other 70 per cent are people who may live in the countryside but who work in a town or city and who are really part of the urban economy. So in terms of the genuine rural economy, farming becomes even more dominant.

The Prime Minister acknowledged the seriousness of the crisis in farming and conceded that the countryside without agriculture would be a contradiction in terms. Yet that is precisely what we now face. Farming incomes have fallen by 70 per cent over the past two years. Last year the average hill farmer had a net income, according to the Government's own figures, of only £4,500 as a reward for his own and his wife's labours. Assuming, conservatively, that they both work a 60-hour week, that gives them an hourly rate of pay of 72p. Just imagine if one's own net income had fallen by 70 per cent over the past two years. That is not a pretty thought, but that is the reality of farming as it exists at the moment. Of course we need a long-term plan for the recovery and regeneration of our agriculture, but a long-term plan is a fat lot of good if you cannot get through the short term. That is where the Government must help, without further delay.

I make no apology whatsoever for swiftly repeating three important points. First, the Government must apply for the full amount of the agrimonetary compensation which is available from the EU and match it in full so as to offset some of the huge damage inflicted by the strength of the pound. Certainly, as the noble Lord, Lord Palmer, who introduced this most important debate and for which I thank him, said, in the early 1990s when German and French currencies were very strong, those countries took full advantage of the compensation available from Brussels. Secondly, the Government must lift that awful burden of the offal tax on the pig farmers. Thirdly, they must implement the key recommendations of the red-tape review.

This will not be enough to transform the agricultural economy, but it might make that vital difference between survival and extinction for many farm businesses, and it would send a signal to the countryside that this is a Government who deal in actions as well as words.

I have to say this, although so many other noble Lords have already said it. Without short-term aid to tide over farming and to inspire confidence in the future, the damage to the rural economy and to our rural culture from what would amount to agricultural meltdown could be irreversible.

My Lords, I should like to thank my noble friend, who has again done us all a great service by putting down this debate to remind Her Majesty's Government of the very existence of farmers who, as we have heard from many noble Lords, are different. I believe that the Minister accepts that because she is sensitive to the needs of rural areas. It was also cheering for farmers in the south west to see the Prime Minister briefly come out and appear to accept their point of view. But it has to be accepted that the culture from which most Ministers and policy-makers come is mainly urban. For many MPs of all parties, farmers are simply another demanding section of society, grazing pigs in Parliament Square. They do not recognise that farmers make up the basics of our society, especially in the south west.

Surely the government must give the taxpayers, both urban and rural, much more vision of what they are aiming for in five years' time. This Government have the luxury of at least thinking that they can look forward to that period of time. But they must not waste that time. They must show that on a number of fronts they are determined to ensure that our farmers are valued and given a framework for the future. Fortunately. there are rural MPs, like David Drew, for example, who are deeply concerned about wider questions such as the food chain and the neglect of the rural economy as a whole. The Government will have to satisfy them.

We have already heard of a number of ways in which the Government could provide the confidence that is needed. The first is, of course, the green pound, mentioned principally by the noble Lord, Lord Williamson of Horton. But here is a typical example of Euro-bounty: in November you will lose 13 per cent on your already agreed arable area payment, but you will get a cheque some time in February to make up the difference. Why should the farmer subsidise the European Union in the interim period? We all hope that the Government will meet the April Fool's Day deadline.

Secondly, unnecessary burdens should be removed from the livestock industry, be they legal, tax, or administrative. The fate of 17 per cent of small abattoirs should be enough to prove that. There are still things that must be done in the wake of BSE to reduce the absurd cost of the Meat Hygiene Service. I have heard of a case in Sussex where five hygiene inspectors were needed to oversee three slaughtermen.

Can the Minister say anything about the future of the OTMS scheme and the 560 kilo weight limit, which is literally pushing more and more livestock farmers in the south west towards insolvency because of the fall in the value of their assets? This is important in that region, which has a high proportion of cattle, and is a particular problem in Dorset, where there is a greater density of dairy cows than almost anywhere else. An increase in compensation from 50p to, say, 60p or 65p per kilo would substantially improve the value of cows and hence the livelihood of dairy farmers at this critical time, who do not even live in so-called "designated hill areas" although they do believe that they live in the hills.

Thirdly, the future direction of environmental support should be spelled out. The Government are already doing this and I welcome this year's doubling of the countryside stewardship schemes with their planned fourfold increase from £29 million to £126 million over the next seven years. This also gives some indication of where the Government want to go with Agenda 2000. That is to be welcomed.

Again, the Government have listened to concerns about organic support. When speaking to one or two farming friends, I had the impression that the organic movement will attract many more mainstream farmers if it can demonstrate more integrity and less emotion. From the political point of view, the organic movement is on to a winner. It neatly combines much of the urban vision of the countryside as a wholesome place where rosy-cheeked folk produce healthy apples and sell cheese in farmers' markets on the one side, and the rural necessities of finding an alternative income, adding value and improving the landscape through such schemes as countryside stewardship on the other. Who could quarrel with that?

However, there is still a suspicion that more standards inevitably lead to higher prices and fewer farmers in the market. Look at what has happened to milk, which both governments have left in the lurch. In the meantime, food imports—as others have said—do not seem to be subjected to the same criteria.

By their nature, traditional farmers cannot afford to take risks. That is why they have survived for so long. I believe that they will gradually respond to the organic movement. One-quarter of all organic farms are already in the south west and in west Dorset we have plenty of examples of good practice and success. That is only to be welcomed. However, most farmers do not have the confidence to switch to new ideas. There is not enough support for start-up and retirement schemes to help families through the transition. The French know a great deal more about this. The result is that many farmers who are young enough have gone part time or into other businesses altogether. Will the Government do anything for young or retiring farmers under the specific heading of modulation?

My noble friend Lord Palmer did not mention bananas today, but I know that both he and others are concerned about protection for efficient small producers, wherever they live. It is the vulnerable producers around the world who should always be the focus of support. I am sure that the Minister will say that she and her colleagues are not giving up the attempt to look forward, push the CAP reforms through ahead of enlargement and give our farmers a better idea of what they can expect in the next generation.

My Lords, I know that this House is particularly grateful to the noble Lord, Lord Palmer, for initiating this debate on the economics of agriculture. Many noble Lords have commented on the serious state of the industry and on the economic impact of various aspects of agriculture. I shall not repeat those comments as I find myself at the end of the speakers' list. However, I hope that the seriousness of the situation will be carried to the general public. That applies especially to the splendid article that appeared in the Daily Telegraph recently by the noble Lord, Lord Runcie, on pigs and pig farming, which read very well indeed. I shall concentrate on some of the contiguous issues rather than on some of the economic aspects.

Agricultural land in the United Kingdom consists of 18.5 million hectares, of which 60 per cent is grass or rough grazing; in other words, about 11 million hectares. But those 11 million hectares make up what the noble Lord, Lord Palmer, called "this green and pleasant land" in which we live. It is the farmer, the grazier, the livestock producer who keeps it green and pleasant. Drive him out of business, and we will lose the guardians of our countryside.

While all sectors of farming are under extreme pressure, some, such as dairying and pig and sheep farming are especially hard hit. Of course, dairy farming is a high technology area, depending on heavy capital investment and very great skill. It is now uneconomic to produce milk several pence per litre below the cost of production. Many dairy farmers are going out of business, selling valuable pedigree dairy stock that they have bred for years and having invested capital in buildings, computers and health programmes. Once gone, I do not think they will ever return to the dairy industry. What will happen then to the buildings and, in particular, to the pastures on which they graze their cattle and which they use for making silage?

Pig farming is another intensive agricultural enterprise and one which is competing against cheaper imports from Denmark, Holland and Ireland—countries which are unencumbered by the high standards of welfare that we demand in this country. The ban on the use of meat and bone meal, for example, as a result of the BSE crisis has added to the problem. Moreover, there is the high value of the pound. Here, too, losses are of the order of £4 million per week and bankruptcy, unemployment, family crises and suicides have followed as a result while at the same time we import pig meat to our supermarkets and feed our forces on imported pig meat.

Sheep farming is another saga of the depressing situation of livestock production. This applies particularly to the marginal farmers. Sheep production is the only realistic form of production in the marginal areas. I was privileged to be in Powys on Monday this week and heard about the full economic impact of the present crisis. That has been detailed by other noble Lords, but there is another aspect; namely, that the sons and daughters of these farmers are unwilling to continue the custom of following their parents into farming. It is not economic. The life is too harsh, and too heavy demands are placed on such farmers by various regulations.

Farms are sold or tenants give up their farms. Houses become country retreats for the urban dwellers and marginal land is particularly difficult to keep in productive shape. Neglect marginal land and we will go back to bracken and gorse and, occasionally, discarded bedsteads. The major criticism of sheep farmers in Wales is not that they want hand-outs. What they want is a level playing field on which they can compete. Indeed, I believe that they can compete.

The noble Baroness, Lady Wharton, mentioned the European Union regulation which would prohibit the use of feed additives such as minerals and vitamins unless they were incorporated into feed. That would make it impossible to administer these essential dietary components to animals in need of them. The estimated cost of the regulation, which has been on the books since 1970, would be of the order of £200 million. In addition, ill health and poor welfare might result.

Finally, perhaps I may stress that the British livestock farmer has not lost the ability to be a good husbandman—one who is cognisant of animal welfare and can farm at a profit. Given a level playing field, he can easily compete with any farmer anywhere in the European Union or in the world.

My Lords, I, too, should like to congratulate the noble Lord, Lord Palmer, on initiating this debate. As I am sure we would all expect of the noble Lord, his speech was true and realistic. There was no word of exaggeration in it; indeed, noble Lords may feel that it is remarkable that an opening speech in a debate of this kind should have such a consistent echo through all the speeches that followed.

I also have an interest to declare, though not as a farmer. As far as farming and gardening go, I am an enthusiastic spectator. My interest is as a non-executive director of a plc that has feed mills and supplies feed, seed and general supplies to the agriculture industry throughout the whole of Wales and the Marches on a substantial scale. That interest gives me a very singular, bird's-eye view of what is going on in the industry. Every month we see the management accounts in which we note the increasing level of debt of farmers. We see the number of farms just going out of business; and, above all, we see how many small businesses in the agricultural supply industry are going out of business. Indeed, we are often picking up the pieces.

We can also look at the share prices in the feed sector which are dropping like stones at present. Moreover, as in our company, we can see that economies have to be made by the reduction of jobs—jobs that were part of the local picture for people living in rural areas who knew that they could not always rely merely upon the farm.

I have another non-pecuniary interest to declare that, frankly, it would have been risible to refer to in an agriculture debate a few years ago; namely, my role as patron of the National Depression Campaign. I took on that role as the father of a severely depressed daughter. However, in the years in which I have been doing it, depression among farmers has become a very major issue in that work. Those who say that farmers commit suicide because they are too ashamed to go to their doctor or consult a counsellor are wrong. These days, farmers are prepared to go and see counsellors and doctors. They are committing suicide because, even after they have been through that process, they simply cannot cope with the financial debt that faces them, the consequence that that is likely to have for their families and the ruination of centuries of family tradition.

One speaker referred earlier to the pride that owners have in the land. I believe that the noble Lord, Lord Selsdon, referred to the pride of ownership. That is very true. It is part of the rural tradition. Farmers have not had a return on their capital for years; they stopped expecting a realistic return on their capital decades ago. It has certainly not been a realistic aspiration during all the time that I have been involved in political life. But, as one noble Lord said earlier, what they have lost now is a return on their labour.

I give your Lordships one example. I have in mind a very close friend of mine. As he lives and farms in Montgomeryshire—Trefaldwyn—I shall eponymously call him Maldwyn. He is a cowman, one of the best cowmen in Wales. He has a county council smallholding which he acquired after years of working for other people. His wife has a job as a milk recordist. They have 40 in their milking herd. Their profit in 1998 was £12,000—that is from the activity of both of them—which they regarded as a reasonable living, although I dare say Maldwyn and his wife could have earned twice as much elsewhere.

In 1999 they had a profit of £4,900, but Maldwyn's wife earned more than £4,900 in the year 1999 as a milk recordist. Therefore, the farm made a loss. In 2000 they expect a loss even though she is still working as a milk recordist. I have milked at that farm in the early morning; you could eat off the farmyard. Maldwyn is a real yeoman farmer. Their small farm now runs at such a substantial loss that there is not the remotest hope of his son, who might well have followed him in the industry, remaining in the industry at all. His son, inevitably, works away.

As a tenant farmer, what does Maldwyn have? He does not have the farm; he has his livestock. Before BSE his dairy cows were worth in round figures about £1,000 each. Today they are worth about £450 each. Mr Micawber would tell us the result of such a situation for a middle-aged farmer who is dependent, in part at least, on borrowed money. What has happened to his calves? In 1996 he obtained about £110 per calf, under the calf slaughter scheme which was then in operation. By July 1999, when the scheme ended, the price had gone down from £110 a calf to £38 a calf. Today he gives the calves away because there happens to be a hunt nearby which can use the calves' carcasses to feed the hounds. Even that option may not be available to him much longer. That is an issue on which the noble Lord, Lord Palmer, and I share strong feelings.

The problem has been clearly stated in terms of what is happening on the farms, but what is happening in the community? From 1983 to 1997 I represented Montgomeryshire in another place. That is part of rural Powys which was mentioned earlier. When I first became a Member of Parliament farmers used to complain to me frequently at my constituency surgeries. However, their complaints were as likely to be about each other as about the government, regulations or government policy. My successor, Mr Opik, the current Member for the same constituency, tells me that things are different now. Indeed, they had started to become different at various times before 1997.

Montgomeryshire has the largest number of farmers of any parliamentary constituency in the country. It has the largest number of farming union members, albeit they are divided between two unions, of any parliamentary constituency in the country. It has the largest young farmers' club membership—that is a dynamic organisation trying to create a future for young farmers—of any parliamentary constituency in the country.

The issues that we are discussing today have been discussed and researched time and time again. It is a pleasure to see the right reverend Prelate the Bishop of Hereford taking part in this debate. In the mid-1980s his diocese produced an excellent report on rural life and the future of agricultural communities. Incidentally, part of his diocese covers south Montgomeryshire and therefore I was well aware of the matters mentioned in the report. Everything that report predicted has come to pass. Almost nothing that report prescribed has been put into effect. The result has been—we are not completely surprised at the decline of rural areas—that those living in rural communities face what has rightly been described as a real crisis and a real agricultural recession.

The noble Lord, Lord Vinson, referred to the effect on communities of this kind of recession. It was brought home to me by a four-word slogan I saw some time ago in rural mid-Wales: "No sheep, no people". That is true. We hear much about diversification. I know dozens of farmers who have tried to diversify. Virtually everyone who could do that has done it. However, even people in rural mid-Wales will not buy love spoons from each other. They will not eat breakfast and sleep in each others' beds even in rural Wales. I am afraid that for those who live on the periphery of this country it is inevitable that either we have a derelict countryside as a result of rural recession or we have a supported countryside, which will save it from rural recession.

I believe that Wales, Ireland and Scotland have, historically, faced the most serious depopulation of any area in western Europe. They face the risk once again that all their young people will be forced to leave to obtain what may well prove to be temporary ".com" careers before they can return to mid-Wales to retire. The elderly population of areas such as those which have been spoken of with great knowledge in this debate has risen year upon year. When I became a Member of Parliament in 1983 the average age of a farmer was 51. When I ceased to be an MP in 1997–14 years later—the average age of a farmer was 65. It had risen by one year for each one of those 14 years. That is clear evidence of what has happened to the industry.

Measures can be taken. Short-term measures are required. We hope that we shall hear the Minister tell us that the agrimoney compensation will be given for the reasons which have been clearly given by the noble Lords, Lord Williamson and Lord Hardy, by the noble Earl, Lord Ferrers, and others. We also need to hear the Government give a commitment that in areas such as Wales with regional development agencies we shall cease to have the ludicrous situation which has appertained ever since the Welsh Development Agency and the Development Board for Rural Wales were formed; namely, that those agencies were not allowed to dip their fingers into agriculture. They were not allowed to try to create the circumstances in which Wales's biggest industry, agriculture, could develop. Their brief was to bring in other industries, alternatives to agriculture. That completely unrealistic separation of roles should cease.

We hope to hear from the Government that the reformed TECs will have a role to ensure that there will be a real concentration on finding alternative training and employment for people who have been employed in agriculture. We on these Benches say to the Minister, in a sentence, that farming is in catastrophe. We ask the Government, please, to use their power and money to do something about it.

My Lords, the noble Lord, Lord Palmer, has introduced this debate at an opportune moment. He referred to the potential of non-food crops, which we debated in this House last Friday. They have a role and a future, but although this is welcome, they still form only a comparatively small part of the overall farming scenario.

The contribution of the noble Lord, Lord Palmer, clearly emphasised the continuing crisis that faces farmers today. However the Government try to portray life in rural areas, they cannot but accept that many farmers and their families face problems of unacceptable proportions. I declare my family farming interest.

As other noble Lords have said, farm incomes have plummeted. The NFU mentions an average of £ 16,250 for 1997–98, of which £5,000 is pensions, benefits and off-farm earnings. The figures for 1998–99 have halved to an average income of £8,000. I believe that they are due to halve again. Today one of my noble friends mentioned a farmer's income of 72p an hour. Where is the minimum wage there? For many there is little farm income, and for some, none.

On Wednesday of last week I attended a meeting of the Church Synod, where the right reverend Prelate the Bishop of Hereford moved a debate which recognised the current crisis in agriculture and how that was reflected in the wider rural community. Speaker after speaker spoke from personal experience. The right reverend Prelate the Bishop of Carlisle, who is not in his seat, spoke of the bleakness of his diocese; of farming at an all-time low; of Sellafield under threat; of the shipbuilding industry under pressure. Where will alternative jobs come from if employment in agriculture continues to shrink? Many noble Lords have given similar examples today.

While the Church Synod was meeting at Church House, the pig farmers had their meeting in Westminster—not across in Parliament Square—to raise the issue of their demise with parliamentarians. I was somewhat anxious when I understood that no one from the Government was able to attend. Why? At a time such as this that was very unfortunate. However, like other noble Lords, I am pleased to have heard today that the Prime Minister will be meeting leaders of the industry. One hopes that the issue of its demise will at least be discussed and matters moved forward.

We were asked what we would do. What should the Government do? They can do several things. They can act immediately to implement all the recommendations of the three reports which have just been completed—Looking into Red Tape, IACS Payments and the Future of the Intervention Board. This would be a welcome move and would ease many burdens on farmers.

The Government can look at all proposed legislation and calculate the implementation costs for our farmers. The Prime Minister has announced that there will be no pesticide tax at present. We welcome that. But when the government moratorium ends, IPPC charges will impose extra costs on our pig and poultry producing farmers. This charge does not have to come into force across the EU until 2007.

Will the Government think again about applying the climate change levy, which will obviously have great implications for our fruit and vegetable growers? Are other countries imposing such charges on their horticulture businesses? There is also the question of battery hen cages and the feedstuff regulations, to which my noble friends have referred. Our farmers follow the highest standards in animal welfare. If these same high standards are not adopted simultaneously by all countries, our farmers will become uncompetitive and will surely be forced out of business.

Moreover, often our Government seek to impose new standards in advance of agreed EU implementation dates. I queried the IPPC charges with the noble Lord, Lord Whitty. In his reply he said:

"Existing installations will be phased into the IPPC on a sectoral basis until 2007"—

I looked again and I did not believe what I was reading—

"in order to spread the workload of the regulators".

Is that right? Is that fair?

I turn now to the effect that the farming crisis is having on families. Many noble Lords have mentioned this. The burden is carried by the whole family and very often especially by the farmer's wife. Many of these resourceful ladies have taken on extra jobs, created value-added businesses and, as other noble Lords have said, some have taken on outside work. The strain on the whole family is enormous. This is evidenced by the work of the Royal Agricultural Benevolent Institute which between 1994 and 1997 helped some 15 working farmers each year. Since April 1998, when the RABI launched an emergency appeal, it has helped some 231 farming families—an alarming increase.

As other noble Lords have pointed out, when a farming job goes it affects not only the family farm. Once a family farming job is lost, 15 allied jobs go with it. It affects suppliers, vets, agricultural businesses, services and processors. Some 18,000 farmers—indeed, my noble friend Lord Ferrers said the figure was 22,000—left the industry last year. What are the costs in benefits, in welfare payments, in retraining? What are the costs of trying to service bank loans when the value of the stock is plummeting?

We posed these questions to the Government but we were given the standard answer that such statistical details are not available. As the debate is about the economics of agriculture, perhaps the Minister will have some information for us today. If not, perhaps she can ensure that we receive further information later.

In human terms, the farming crisis cannot be overstated. I believe that there is a great future for our farming and horticulture industries, but to safeguard them the Government must have a clear, long-term strategy. I totally agree that if we do not have a short-term strategy soon, there will be no long-term farming needs anyway. But let us accept that the Government are putting their minds to addressing the short term and looking to the longer term. Many points have been made about this and I shall return to the matter later.

As has been echoed around the Chamber today, I believe that the industry faces five major problems: the whole question of tenant farmers; lack of succession; no retirement funds; still falling prices; and unfair overseas competition.

The 1995 Agricultural Tenancies Act has obviously freed up the market-place as the decline in the supply of tenanted land has been reversed in each of the past four years. Moreover, the figures from the Central Association of Valuers show that 50 per cent of new tenancies for 1999 were for more than five years. This is most encouraging.

But the typical tenant farmer picture is far from upbeat. He and his wife are working horrendous hours to earn a sum that has halved and halved again in the past three years. His children do not want to follow him into farming because they see no future in it. The value of his livestock, his milk, his barley, his sheep, his savings, his pension is almost gone; he owns nothing—and the Government have refused a retirement package to enable him and his wife to get out with dignity.

However, there are other farmers who have been able to move forward—as, indeed, have some tenant farmers. They have pooled resources with their neighbours; they are sharing machinery; they are learning more about marketing; and they are adapting to the computer age. Even then, their products must compete with imported foods which do not match the UK animal welfare standards, hygiene standards and environmental standards. No matter how much we wrap the Union Jack around our products, the consumer still buys foreign goods because they are not clearly labelled. Many noble Lords have mentioned that point today. The suggestion of my noble friend Lord Selborne that the industry should have an independently led promotional group is a very good one.

In the time available it would be impossible for me to reflect on the many excellent contributions that have been made to the debate. I should, however, like to comment on a few of them. Honesty in labelling is very important. I, too, am very disappointed that the Government did not accept Stephen O'Brien's Private Member's Bill last Friday. The strong pound is crucial to the problem. As other noble Lords have said, the Government must apply for the agrimoney, and they must do so urgently. Several noble Lords mentioned the issue of GM trials. They must go ahead because we need know their results. Small abattoirs must be protected. The regulations which make trading difficult for them must be eased, otherwise we will lose our organic markets and niche markets. Questions concerning regulations and bureaucracy have echoed around the Chamber, one after the other. When is a subsidy not a subsidy? In Europe we call it a subsidy; in America they call it something else. It is high time that we agreed certain standards and a language in which we can understand each other. I, too, would encourage the MoD to buy British. We have the best; for goodness sake, let us buy it. Other countries would certainly do the same for their farming industry.

At the other end of the scale, new people—young farmers—are coming into the industry. I am pleased that the noble Lord, Lord Carlile, mentioned this. They are there, they are enthusiastic, they want to get to grips and to take an active part in farming. But they need to have direction and a long-term view.

To me, security of our basic food needs is essential. I welcome the environmental schemes that the Government are bringing forward, but the security of our basic food needs is something for which I would fight and try to secure.

I believe that there is a future for our farming industry. But the Government must take a much more robust stand to enable it to thrive. I welcome the announcement that the Prime Minister will be holding a meeting with those from the industry. But he has to stop consulting—and, yes, he has to start implementing clear, fair, helpful steps in a strategy aimed at long-term economic stability within this important industry.

My Lords, I join in the general congratulations to the noble Lord, Lord Palmer, for having pitched the terms and subject matter of the debate in a way that has provoked enormous interest, passion and a great deal of personal knowledge and experience. The remarkable self-discipline in regard to the length of speeches has made the pace of the debate for those listening to it very enjoyable and stimulating. I begin by congratulating everyone else who managed to keep so well within their time. The only point on which I would criticise the noble Lord, Lord Palmer, is that he has given me what I fear is an impossible task in trying to respond to all the issues raised.

I say that in the awareness that his Motion deals with the economics of agriculture within the United Kingdom. We heard contributions from the noble Lord, Lord Laird, about the state of agriculture in Northern Ireland, and from the noble Duke, the Duke of Montrose, and others about interests in Scotland; and the noble Lord, Lord Carlile, spoke about issues relating to rural Wales.

It is important to recognise, as some speakers did, that we are a United Kingdom in terms of our relationships with the European Union, and therefore it is absolutely appropriate that we debate these issues here. Equally, we may need to take into account particular attributes of the industry in certain areas of the United Kingdom and look carefully at the relative interests. One such example is the BSE status of cattle in Northern Ireland.

It may be useful at this point to say to the noble Earl, Lord Ferrers, that legislation on hunting in Scotland will absolutely be a matter for the Scottish Parliament, as I am sure he understands from our long debates on devolution. However, I can reiterate the reassurance given earlier by the Prime Minister in terms of there being no threat whatsoever to shooting or fishing in this country.

My Lords, perhaps I may seek clarification on that point. As the Prime Minister is Prime Minister of the whole of the United Kingdom, is the Minister saying that that guarantee applies to Scotland as well as England?

No, my Lords, I think I was saying the exact opposite. The Prime Minister is, of course, Prime Minister of the United Kingdom. As I understand the situation, the Scottish Parliament has legislative capacity over hunting issues in Scotland—the noble Lord, Lord Mackay of Ardbrecknish, is present and will correct me if I am wrong. Therefore, it is possible that the regime in Scotland could be different from that in England. I can, therefore, give the noble Earl reassurances in regard to England, but decisions regarding the nature of any legislation on the matter in Scotland are for the Scottish Parliament.

My Lords, perhaps I may interrupt the Minister once more. When the Prime Minister made that important observation, which gave succour to many people, did he realise that he was actually excluding Scotland?

My Lords, I am not sufficiently "on message" to be able to tell the noble Earl what the Prime Minister realised or did not realise. He normally realises quite well what he is saying. I almost wish that I had not dealt with what I thought was a simple issue raised by the noble Earl. If I spend too much time on specific issues I shall not get anywhere.

The debate has been well-informed. I was especially touched by the recognition on the part of the noble Earl, Lord Peel, that there are difficult choices to be made; and that choices may need to be made in the balance between long-term and short-term measures to support agriculture. Public money cannot be used twice. There must always be priorities in terms of public spending. Most noble Lords have recognised that a great deal has been done in the short term.

I must say to the noble Lord, Lord Rotherwick, that it is wrong to suggest that anyone has ever said that all is rosy, or has denied the state of the crisis in agriculture, or not recognised the very real, very personal consequences to which the noble Lord, Lord Carlile, the noble Baroness, Lady Byford, and others drew our attention. There are, among all the statistics, personal and family tragedies, and none of us should ever deny that. The farming industry is in deep recession. That has never been denied; nor has there been any turning of our backs on measures to help in the short term.

As well as the £3½ billion that goes into the CAP year on year, I remind the House of the packages of aid that have come in since May 1997: £150 million in early 1998; £120 million in November 1998; £150 million in September 1999, including some of the areas raised during the debate; the deferral of charges for inspections in relation to specified risk material from cattle and sheep carcasses; the deferral of charges for cattle passports; the money into HLCAs; the marketing support of £1 million, which was increased in October 1999 by a further £5 million; the £10 million of extra money that has gone into organic farming, which means that since we came to power there is now three times the area in organic farming or conversion.

Concerns have been expressed about abattoirs—I am well aware of those—and the charging regime for the Meat Hygiene Service. However, we have frozen the hourly rate of MHS charges for this year, and have guaranteed that they will not rise next year more than the rate of inflation.

My Lords, will the noble Baroness kindly give way? There is a lot of misunderstanding in this industry. Will she make absolutely clear that it is just the hourly rates that have been frozen, not the number of hours? The number of hours is likely to increase in accordance with EU requirements.

My Lords, I believe that I did use the term "hourly rate". I was trying to be careful. The noble Countess is right; there are problems in dealing with and implementing the regulations. We did freeze at 1999 levels the levels of veterinary supervision in low through-put abattoirs, but that does not apply to all abattoirs.

As was mentioned in the debate, we have also seen the £1.6 billion that will go into the rural development regulation over seven years; £300 million pounds of matched funding to match the effects of modulation, allowing us to double the countryside stewardship schemes; and the other help that will be given for skills training and marketing. The issue of young farmers was raised on several occasions. Those are areas that may well be of great benefit to young farmers. There have been the three red tape reviews that we have undertaken, together with the NFU, and the acceptance of the vast majority of the recommendations and work that is ongoing in relation to those. Mention was made of the announcement about the agreement reached with the industry on the pesticides tax.

I list those matters not just to remind the House of the Government's action but that even against that background, we are having this debate. I make no apology to the noble Earl, Lord Ferrers—with whom I hesitate to cross swords at this time in the evening—for emphasising what he called the long-term stuff. The long-term stuff is enormously important in terms of the CAP. We heard a wide variety of views on solutions to problems if not an analysis of the problems themselves.

Some trenchant speeches have followed a line that was not totally parallel with everything else that was said. However, opposition to the present state of the CAP probably united the whole House on this occasion. MAFF and myself feel that it is important to change the emphasis within the CAP, with a policy shift that reduces agriculture's reliance on subsidies based on production and focuses on support for the public benefits that agriculture brings.

There is recognition of the unique quality of agriculture. It is invidious to talk about the suffering of individuals from losing their employment in industries where families have worked for generations. That can apply to a coal mining community or one that has been dependent on shipbuilding, and can be as painful as for an agricultural community. We should not leave any such communities unsupported at times of enormous change.

My right honourable friend the Prime Minister made it clear in his speech to the National Farmers' Union that we recognise the interdependence of the environment, rural economy and countryside on the agricultural industry. We must make sure that the support given recognises that interdependence and supports the environmentally beneficial aspects of agriculture, with schemes that assist the role of stewardship of the countryside rather than perverse incentives.

The English rural development plan, in which we intend to invest £1.6 billion over seven years, sets out how we will deliver on that and other policy objectives, such as the encouragement of restructuring for the long term. As part of that, we are promoting non-food crops—an issue to which the noble Lord, Lord Palmer, referred and which has been debated at length in your Lordships' House. We share the noble Lord's desire to see effective use made of such crops. That fledgling industry, which is one we need to encourage, is an example of diversification. Although I accept that diversification is not available to everybody, some pockets of agriculture that are not suffering are those where people have successfully diversified and found a niche market.

My reading of the PIU report was not that rural economies and communities are rosey and blooming, and that everything is perfect there in a way that is not true of urban economies. The report pointed out the complexity of the issues. The noble Lord, Lord Carlile, expressed his concerns about depopulation in rural Wales. I do not have figures for the Principality, but the population of rural England has risen 24 per cent—four times the rate of growth for the whole country. The picture is more complex than simply everyone in the countryside suffering when agriculture has a difficult time. Different parts of the countryside have different problems. There are terrible pockets of deprivation, but there are also areas where things are not so bad. My noble friend Lord Hardy referred to issues that go wider than agriculture, such as rural transport and crime, which are important for the economic welfare of people living and working in the countryside.

As to what can be done in the short term, most of the debate centred on agrimonetary compensation. I was asked to give the Government's position, but I am unable to answer tonight. The Government are still considering whether to apply for the next tranche of agrimonetary compensation. That decision will have to be made soon.

Agrimonetary compensation is not free. It does not even require simply matched funding—to which the right reverend Prelate referred. Where compensation is compulsory because of the Fontainebleau agreement, the UK pays 71p for every £1 of agrimonetary compensation. If compensation is optional, 50 per cent is paid for by the UK and 50 per cent from EU funds, so it costs the Treasury—or the British taxpayer, as my noble friend Baroness Young pointed out—85p in every £1. That level of financing requires examination of the value for money that the industry overall would enjoy and relative priorities. Something that always concerns me and which we must consider carefully is the areas that would benefit from agrimonetary compensation. It would not benefit the whole industry.

Almost as much time has been spent talking about pigs as agrimonetary compensation. The pig regime, like the poultry regime in Europe, is extremely light and there would be no benefit. Choices may have to be made in terms of spending priorities.

Does the Minister agree that the formula devised under the Fontainebleau agreement has nothing to do with the farming industry or with the farmer? The compensatory schemes were designed specifically to help farmers when the euro was weak. Most noble Lords have said that we have here a level playing field, and this is something which is due to farmers. Other European countries have claimed it when their currencies have been strong, and it is now incumbent on this Government to do so. I am sure that the noble Baroness can agree with that.

My Lords, I understand the argument that the noble Earl makes. We have paid substantial sums of agrimonetary compensation—a great deal more than was paid during the time of the previous government. We shall not go into that. While I understand the point that the noble Earl raises, in the end we must look at the best potential use of public money for the agricultural industry. That is neither a yes nor a no; it merely explains the framework within which we must operate agrimonetary compensation.

Many noble Lords have expressed concern about the burden of regulation on farmers. I have no wish to be part of a department that gold-plates EU regulations or produces additional burdens on farmers. I am aware that there are noble Lords who do not wish to be part of the CAP—I look straight across to the noble Lord, Lord Willoughby de Broke—the implication being that the UK should not be part of the European Union at all. That is a debate for another time and place. That is not my view. However, as long as we are members of the EU we have a responsibility towards it and there are negotiations to be had. We must deal with the situation, not just pretend that the European Union and EU legislation do not exist. I am afraid that that is the problem with the O'Brien Bill which is concerned with country-of-origin labelling.

I reassure noble Lords that those elements of the red tape reviews that require work within Europe, particularly in Brussels, are being actively pursued. My right honourable friend had a meeting with Commissioner Byrne yesterday. We hope to make progress on the issue of meat hygiene regulations and the move to a risk-based approach. Equally, a pilot project to introduce the electronic communication of IACS forms is already in place, with the aim of making it available to everyone in 2001. We are also working on new IT systems to allow all subsidy claims to be submitted to MAFF electronically by 2002.

I referred to country-of-origin food labelling. Reference has also been made to labelling in relation to welfare standards. There has been support for the UK not to retreat from its high standards of animal welfare. The response to other countries with lower standards is not to try to impose illegal bans but twofold. First, we have undertaken consultation on rigorous new rules concerned with misleading advertising about country of origin so that we can take action to ensure that consumers are not deceived, particularly by pig meat products that are described as having been produced in Britain but have simply been sliced or cured here. There is very specific new guidance on that matter. I believe that the way forward—the noble Earl, Lord Selborne, touched on this matter—is to market positively rather than negatively on quality.

My Lords, I thank the Minister for giving way. There is no question of our not supporting high standards of animal welfare. The difficulty is that if other countries are able to produce to lower standards our farmers are put under extreme pressure. They cannot be competitive and so go out of business. I believe that that point has been echoed throughout the House today. I hope that the Minister grasps that nettle. We certainly believe that these standards should be maintained. However, the problem goes beyond the EU. Reference was made earlier to the global market. While we may be able to do something within the EU, global competition is another matter.

My Lords, I understand the point that the noble Baroness makes. It is for that reason that we must work within the European Union and the World Trade Organisation in order to make animal welfare part of EU and WTO thinking. We can ensure that we do not allow imports that fall below EU standards of animal welfare, but we cannot voluntarily impose on importers additional standards of animal welfare. The answer lies with consumers. Consumers who as concerned citizens want high levels of animal welfare must follow through their thought processes when they purchase food. It is very important that we encourage the kind of marketing that allows people to do exactly that.

My Lords, perhaps I may very boringly interrupt the noble Baroness again. Do I understand from what the noble Baroness says that we must label produce perfectly clearly so that everyone knows what has gone into it, but that it is also perfectly all right to import into this country food produced to lower standards provided it is labelled as such? If so, I should have thought that the home producer would be enormously prejudiced.

My Lords, the noble Earl is never boring. Animal welfare and production standards apply at EU level. We must check that we do not import meat and poultry that is produced to lower standards. What we cannot do is impose our own voluntary additional standards as a barrier to trade, and for that reason the marketing issues are important. I was very interested in the suggestion of the noble Earl, Lord Selborne, about independent kite-marking. Together with the NFU, we are working on a kite-marking system to see how in this country we can market the additional benefits in terms of welfare and hygiene standards. But that would be done as a joint NFU/government initiative. I am interested in his view that the scheme will not be believed unless it is completely independent.

The important issue of regional marketing was raised. It is interesting that supermarket customer focus groups tell the supermarkets that regional promotions on food are more effective than national promotions. That is an important lesson.

I am concerned about time, so perhaps I may deal briefly with some of the other issues. Feed additives—an animal welfare issue—was a subject raised by the noble Baroness, Lady Wharton, and the noble Lord, Lord Soulsby. I was talking about it with representatives of the horse industry today. I know that they are concerned. We had just had a consultation on it. The strength of feeling and the concerns about the effect of the proposals have been expressed clearly. They have given us a great deal of negotiating ammunition to take the issue forward.

The noble Lord, Lord Northbourne, asked about high quality agricultural land. The PIU report dealt with those issues. It was not government policy but a report to government on which views were sought and some 120 responses have been received. It suggested that the protection of high-grade agricultural land is an outdated barrier to development and that more regard should be paid to protect land of higher environmental value by developing a new framework for identifying the full range of environmental assets. The report illustrates clearly that the issues and the planning framework are complex and require careful and detailed consideration to ensure that we develop balanced solutions. We intend to build on the responses to the report in the rural White Paper which will be published later this year.

I shall read carefully the remarks of the noble Lord, Lord Kimball, on modulation and the rural development plan. Payments under the England rural development plan will normally go to farm businesses.

My noble friend Lord Hardy referred to access to the countryside. I hope that he has been reassured by the published Bill which makes clear that with greater access there will be greater responsibilities; and that only if people abide by sensible restrictions will they be able to benefit from the new right. The Government's access proposals are not a threat to landowners' and managers' livelihoods and will bring in an important new protection for wildlife.

The noble Lord, Lord Walpole, spoke about biodiversity. I assure him that MAFF is considering the Select Committee report, along with the DETR.

The noble Earl, Lord Sandwich, asked about OTMS payment rates. Rates and rules are set by the commission not the Government. We have to consider whether there is any way within the confines of the present scheme—there are financial constraints in terms of the rates, the rules and the Bill—that some of the technical difficulties farmers are experiencing can be resolved.

Reference has been made to the possibility of an early retirement scheme for farmers and the difficulties of tenant farmers. It was one of the issues on which we consulted last year. The majority of the responses to those consultations demonstrated the belief that other rural development schemes had higher priority. It is difficult to frame a scheme for early retirement which meets the needs of those suffering most at present. It is equally difficult to frame a scheme which supports specifically young farmers. Some of the elements of skill training and marketing will be of help in particular to young farmers and young entrants.

The right reverend Prelate spoke about the countryside stewardship scheme. He felt that it was too complicated for some small farmers. Some small farmers manage to benefit from it. However, it is a competitive scheme. Many applications from farmers of all sizes are turned down. I hope that the additional money for the scheme in the English rural development plan will help. Perhaps the right reverend Prelate could let me know of any specific difficulties and I shall look into them.

I was asked about the long-term strategy for agriculture. I spoke about looking for a sustainable future for the industry which recognises its particular contribution to the countryside, to the rural economy and to the rural environment.

Many noble Lords referred to the fact that the Prime Minister, in his speech at the NFU conference on 1st February, signalled his willingness to address the problems with the industry both in the short and long term. Today he announced that that meeting will take place on 30th March, and I should make it clear that it will go wider than the pig farming industry. It will encompass the whole of the United Kingdom and include agriculture Ministers from Scotland, Wales and Northern Ireland and food and farming industry leaders. It will be oriented towards action and agreeing a plan for the future of agriculture. I must say to the noble Earl, Lord Shrewsbury, that that is as far as I can go tonight in spelling out those plans.

We have had an interesting debate that has recognised the short-term pressures and the need to look to the long term and to the future. Reference was made to the General Synod debate and its conclusions. I can do no better than share its conclusion of a deep commitment to the long-term cause of securing a sustainable rural economy in which agriculture continues to play a role of fundamental importance.

My Lords, when I saw the list of speakers for tonight's debate I knew that we were in for a first-class debate. However, it greatly exceeded my expectations. It was this House at its very, very best. I am most grateful to all noble Lords who have taken part so eloquently tonight.

I have to say that I slightly hoped for more encouraging signs from the noble Baroness, who, in my view, did a splendid job in taking up such a wide range of issues. I am sure that we all wait with baited breath for the announcement of agri-money compensation. I just hope that the noble Baroness is able to twist her right honourable friend's arm. And with that thought, I beg leave to withdraw the Motion for Papers.

My Lords, I beg to move that this Bill be now read a second time. I begin by reminding your Lordships that as chairman of a bank I have an interest to declare. But I could add that the Bill has the support of all the Scottish banks and, as far as I know, of all the non-Scottish banks which have to operate in Scotland. The Bill is designed to correct a longstanding and rather strange anomaly between the law in Scotland and in England and Wales. It is an inconvenience to customers, and also to bankers. I shall describe what happens at present.

When a cheque is presented in Scotland to a bank, if there are plenty of funds in the account of its owner there is no problem and it goes through in the normal way. However, as soon as the cheque is presented it operates as an assignment of the sum which is drawn in favour of the holder. That codifies a pre-existing principle of Scots common law.

As noble Lords will understand, that is all very fine when there are sufficient funds to meet the cheque. The problem arises when there are insufficient funds. In that case, the cheque, by its very existence, assigns the funds which are not available to be put aside. The bank is obliged by law to put aside that sum immediately, completely and irrevocably and not to make those funds available to the owner of the cheque in future. Therefore, from that moment the assets of the person writing the cheque are frozen, irrespective of any other circumstances.

The only way in which the position can be corrected at that point is if five conditions are met. The first is if the cheque is re-presented and met, because the drawer has sufficient funds. The second is if the holder returns the cheque to the drawer who can then demonstrate to the bank that the holder has relinquished his claim to the attached funds. The third is if the drawer can produce a written declaration from the holder that the claim has been relinquished. The fourth is that five years have expired and the fifth is that a judicial settlement is reached.

As noble Lords will be able to see, the situation places the provider of the cheque and the bank in an awkward position because the funds concerned are frozen. If, for example, a small company is involved, its business can be absolutely wrecked until all the conditions are met and the matter resolved.

The position in England and Wales is much more simple. If the drawer of a cheque has insufficient funds and the bank is not prepared to allow an overdraft, the cheque is simply returned to the payee. The payee must then deal with the debtor directly without involving the bank. Even if several cheques are presented simultaneously which, in aggregate, exceed the funds available, the bank is free to satisfy those cheques for which there are adequate funds and to return the rest. That situation occurs frequently. In other words, the present law outside Scotland is very flexible. The banker and the customer can arrange matters themselves and, it is hoped, no harm is done to the original writer of the cheque.

This matter has been under discussion for a long time. It was of major interest to the Jack Committee, which some years ago was asked to opine on these issues. That committee strongly advocated a change in the law. Therefore, in Clause 1 the Bill abolishes the funds attached rule for cheques. Subsection (1) abolishes the funds attached rule so far as it relates to cheques. Subsection (2) explains the funds attached rule by describing the rule in Scots common law: the presentation of a bill of exchange to the drawee operates as an assignation in favour of the holder of the bill of the funds for which it is drawn or, where the drawee holds insufficient funds, of the amount of those funds. Subsection (3) completes the picture by disapplying Section 53(2) of the Bills of Exchange Act 1882 in relation to cheques. Clause 2 contains supplementary provisions. I do not believe that I need go into those for your Lordships at this moment. Clause 3, of course, contains the Short Title.

I believe that this is a sensible and long overdue "putting right" of something that has caused quite a lot of inconvenience. I am informed that there are as many as 100,000 cases a year in which customers experience some form of inconvenience from the present anomaly. The Committee of Scottish Clearing Bankers estimates that attachment of funds procedures cost their members as much as £225,000 a year. Therefore, if the Bill were passed, it would remove an inconvenience and save a great deal of money, not only for banks but for their customers. I very much hope that your Lordships will feel that it is a worthwhile measure. I beg to move.

My Lords, I listened with enormous interest to what my noble friend said. The Bill is obviously an attempt to help all concerned in the circumstances that he described. However, I am concerned about one matter from the point of view of the bank's customer. The excellent Explanatory Notes which the noble Viscount has provided with his Bill explain that, where several cheques are presented simultaneously and there are insufficient funds to satisfy them all, the bank in practice will choose which cheques it satisfies from the funds available. It could not satisfy them all if the customer did not have sufficient funds. Therefore, the bank would choose which cheques to honour.

The Explanatory Notes go on to say:

"This could be done in a way which would do the least damage to the interests of the customer of the bank".

When my noble friend replies to the debate, can he tell me how the bank will decide which cheques are satisfied and which are not, and whether the bank would consult the customer in making that decision. I should be very grateful if in due course my noble friend could answer that question.

My Lords, this short three-clause Bill must seem a long way from the considerable documentation that must have been necessary when my noble friend's bank took over the Nat West, but I suppose that my noble friend must come down to these lesser but still important matters. As my noble friend explained, this issue entirely affects Scotland. It is unusual for the Scottish Members of your Lordships' House to come to your Lordships' House and suggest that perhaps the law in England is better than the law as it applies in Scotland, but that is what we are doing this evening. I even have a letter from the Law Society of Scotland which confirms that the attachment rule as far as it relates to cheques should be abolished and Scots law brought into line with that of the rest of the UK. As such a statement does not come often from the Law Society of Scotland, I thought it only right that I should acquaint your Lordships with it.

As my noble friend Lord Younger explained, this Bill seems a sensible, small measure which will get away from a very cumbersome procedure which I suspect not only causes problems for the banks but also causes problems for the customer and for the person who thought he was about to receive money by presenting the cheque.

I wish to raise only one issue. I understand the point concerning the case where there is one customer with a limited amount of money and suddenly four or five people turn up with cheques which come to more than the individual has in his bank account. Instead of the whole lot going away empty-handed, decisions are made about who will go away empty-handed and who will go away with the full amount. My noble friend Lady Carnegy asked a rather pertinent question in relation to that.

My question is similar but it is easier to explain by using an example of only one cheque. Let us suppose for a moment that somebody has a cheque for £100 and when he turns up at the bank, he discovers that there is only £90 in the account. I often wonder why we do not pay the £90 and argue about the other £10. It seems rather unfair on the chap who should receive £100 that he goes away empty-handed, when he could perhaps go away with £90 of the £100. Perhaps my noble friend will tell me whether this measure will indirectly affect that particular circumstance.

Having said that, on this side of the House, we are perfectly content with this measure. It seems a perfectly sensible reform and will—on this very unique occasion by bringing the law in Scotland into line with the law in England—improve the position in Scotland.

My Lords, perhaps a London born and bred Scot—half Scot at any rate—may be allowed to intervene in this matter. We are extremely grateful to the noble Viscount for introducing this Bill, which will allow banks in Scotland to drop antiquated procedures, make administrative costs savings, and offer a more streamlined service to customers.

As the noble Viscount made clear, it is a technical measure to correct an anomaly whose origins are lost in the mists of time, by which I really mean Scots common law. Of course, that is why it cannot be dealt with under deregulation powers. Deregulation powers to amend primary legislation are restricted to statute law and cannot affect common law, as this Bill must do.

It is 11 years now since the Jack report and the Scottish Office public consultations whose results were announced in 1993. That consultation showed that abolition of the funds-attached rule is the right way forward. Attachment of funds has no friends. This is a good opportunity to demonstrate that Westminster is mindful of Scottish interests. The Government will not resist this measure.

My Lords, I am very grateful to the noble Lord for his acceptance of the measure in that way. I am also grateful for the general welcome that it has received in your Lordships' House this evening.

I was asked two questions which I shall now try to deal with. First, my noble friend Lady Carnegy raised the question of how the bank would operate where cheques were presented and collectively they were more than the funds available to meet them. What happens is quite straightforward now south of the Border. The cheques in question would all be returned. In doing so, the bank would get in touch with the writer and say, "These cheques have been presented and they cannot be met because there is not enough money in your account". The bank would then ask how it was to be dealt with, whether cheques one and two but not three should be re-presented, or the other way around. In other words, there would be consultation, as my noble friend asked, in the best interests of the customer as to which of the cheques could be met. The remaining cheque or cheques which could not be met because there was still insufficient funds would remain a problem to be dealt with in the normal way by saying to the customer, "You have no funds to meet this cheque or cheques, therefore, you must consider what should be done".

That leads me to the second question which the noble Lord, Lord Mackay, raised. He asked what would happen if a cheque for £100 is presented and it can be met except for £10. The answer is that the cheque would be returned to the bank of the writer of the cheque. It would say to the customer, "Your cheque has been presented but you do not have £100 to meet it, only £90". There would then be the option of discussing with the customer whether he or she wished not to present it at all or whether a new cheque should be presented for £90, which would be met, leaving a debt to the business colleague of £10. That would he a matter for discussion between the customer and his or her bank. That raises the need for the measure. It is that sensible dialogue which is prevented by the strange anomaly in the law which we are trying to remove. With that assurance, I very much hope that your Lordships will agree that this measure is worth taking. I therefore ask noble Lords to give the Bill a Second Reading.

On Question, Bill read a second time, and committed to a Committee of the Whole House.