To ask the Minister of Agriculture, Fisheries and Food what measures he intends to introduce to assist medium-sized family farms that are dependent on livestock production.

The Government are well aware of the difficulties facing livestock farmers. Government and Community support to the livestock industry is currently costing £900 million a year. This year, hill livestock compensatory allowances have been increased by an average of 14 per cent. and, as I announced on 14 May, for the second year running two advances will be paid under the annual ewe premium scheme. Furthermore, for the first time, sheep producers in the less-favoured areas will benefit from the £3·10 supplement to the ewe premium agreed last year, which next year will be increased by a further £1·20 as a result of the recent price fixing.

I thank the Minister for that reply. Does he agree that any reform of the common agricultural policy must take account of the fact that farmers' incomes have dropped significantly in recent years and that if we are to maintain a stable agriculture industry, we must support medium-sized family farms, particularly those involved in livestock production, because their capacity for diversification is extremely limited?

The size of the farm is not the key issue. Some larger farms, for example, support a large number of families. We are concerned that farming as a whole should be sufficiently supported to make it prosperous so that it can look after the land and produce the food that we need. We want that sort of reform—not the building up of surpluses, payments to intervention storekeepers or support leading to dumped prices in developing countries. The modulation should be towards need rather than according to the size of the farm.

Does my right hon. Friend accept that one of the best ways to help medium-sized, or even smaller, farms and industry in Britain as a whole would be to reduce interest rates? Is he aware that to do that, it will be necessary to bring about a realignment of the pound within the ERM?

My hon. Friend must accept that we have been able to reduce interest rates by 3·5 per cent. because of our membership of the ERM at the present level. I do not agree with him in the change that he seeks, but I hope that he agrees with me that the one way to ensure that interest rates would rise again would be to increase taxation by the 15p which Labour's present policies would do.