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Mr. Brown: I do not agree with the conclusions that the hon. Gentleman draws, although he is correct to say that the CAP--and the Council of Ministers, which sets that policy--is an over-arching policy instrument. Much of what I can and cannot do is shaped by the CAP. That is why the debate about reform is so important to those who, like me, believe that our future lies in Europe. The hon. Gentleman's perspective is very different; he looks to leaving the EU as a way forward. That is a fundamental difference between us, but if we start from my premise, it logically follows that we need a CAP that can work for European agriculture. That is why I am so keen on reform.

Dr. Norman A. Godman (Greenock and Inverclyde) rose--

Mr. Nicholls rose--

Mr. Brown: I give way to my hon. Friend the Member for Greenock and Inverclyde (Dr. Godman).

Dr. Godman: Will applicant nations be able to sign up to the EU-wide rural development policy if their applications are successful? As my right hon. Friend knows, I have long argued that an unreformed CAP will harm the interests of countries such as Poland and other applicant nations.

Mr. Brown: The agricultural aspect is crucial to our ambitions for enlargement. Like my hon. Friend, I believe that a reshaped CAP has an enormous role to play in facilitating the enlargement of the EU. As he knows, discussions between the Commission and the applicant countries continue on that and other issues even as we speak.

Mr. Nicholls: I know that the right hon. Gentleman would not want to misrepresent my views. Will he accept that in no sense is it my position that we should simply withdraw from the EU? I want us to acknowledge the fact

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that if we cannot achieve a fundamental renegotiation of the terms of our engagement, we could still leave. We must recognise that we will be able to establish terms for our participation in Europe only if we make the point that Parliament must retain that ultimate ability. That is a very different point.

Mr. Brown: I am grateful to the hon. Gentleman for setting out his position so clearly. My objective is to remain in the EU to ensure that we are right at the heart of every negotiation of significance to this country--and, moreover, to add to the value of the EU rather than to stand slightly to one side and criticise it. That is a fundamental difference of approach.

Having welcomed the creation of the second pillar of the CAP, it is also fair to observe that the pressures of EU enlargement and the next World Trade Organisation round will strengthen our case for further reform. As I have often told the House, I attach enormous importance to the second pillar--the rural development regulation--as an appropriate instrument to reform the CAP.

Mr. Nigel Evans (Ribble Valley): With all the changes that are taking place, will there be any light at the end of the tunnel for the dairy sector in this country? As the Minister will know, I have many dairy farmers in my constituency. They are simply no longer making any money. Farmgate prices for milk have been tremendously depressed. What hope can he give dairy farmers that, in the short term, they will be able to turn a profit again?

Mr. Brown: Only yesterday, I met a group of dairy farmers and their Member of Parliament, my hon. Friend the Member for West Carmarthen and South Pembrokeshire (Mr. Ainger), to discuss precisely those issues. The hon. Gentleman is right to say that the price that farmers are receiving for their milk--it is often below the cost of production--is the key precipitator of the crisis in the sector.

The hon. Gentleman will know that, following the Prime Minister's summit on 30 March, every instrument that Government could use to help dairy farmers was proposed, including the lifting of the dairy hygiene charges, the drawdown of all agri-monetary compensation and the lifting of the weight limit on the over-30 months scheme. In addition--this gets to the heart of the hon. Gentleman's perfectly proper question--there is the issue of relations within the supply chain. I use my office as far as it is proper for me to do so to persuade others further down the supply chain that they have a vested interest in the security of the chain and in the profitability of the producer suppliers of the product--the more so as we are dealing with a fresh product, and substantial investment is necessary at each stage in the chain.

Several hon. Members rose--

Mr. Brown: I will take some questions on that issue and then move on.

Mr. Alan W. Williams (East Carmarthen and Dinefwr): On the dairy sector, my right hon. Friend mentioned the lifting of the cap on the over-30 months scheme. What is the latest position on that in negotiations with Brussels, and when will it be implemented?

Mr. Brown: As my hon. Friend knows, it is a European Union instrument, although it is the UK taxpayer who will

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pay the extra costs of the proposed change. We are in discussions with the Commission, and I hope to be able to make an announcement soon.

Mr. David Drew (Stroud): Does my right hon. Friend agree that at least part of the problem is the intervention milk price equivalent. That is a floor price; it is not the price that the industry should be setting for the exchange of milk. If the whole industry realised that, including the supermarkets, it would make a significant difference to the price paid to individual farmers.

Mr. Brown: I understand what my hon. Friend is saying. As he knows, I have considerable sympathy with that view--but these are, after all, private sector arrangements, so there is a limit to what it is proper for me to do. I am doing everything that I can to help the dairy sector, and dairy farmers in particular.

Mr. Richard Livsey (Brecon and Radnorshire): The Minister referred to the food chain. Has he noted remarks in the agricultural press by representatives of some stages within the food chain that the supermarkets are intent on buying at the lowest possible price from primary producers, regardless of any farm assurance schemes, whether they be for milk or other products? That is a major problem that he has to overcome.

Mr. Brown: In an industry such as the dairy industry, which is sophisticated and investment-intensive right the way through the supply chain, from producers to retailers, such a policy would be short term and foolish. Conditions for dairying in this country are ideal; I do not mean just climatic and agricultural conditions. The pattern of consumption in this country is different from that in the rest of the European Union. To allow the industry to be diminished for short-term considerations that will not endure would be very short-sighted.

That is a point that I make to all my Department's partners. With the Food Standards Agency being set up as a separate agency, the industry focus in my Department is thrown into sharp relief, so I make the point to every partner that we have, all through the chain. I get a good reception for what I am saying, but I think that it would be dangerous for me to do more than that.

I turn to the price-fixing proposals. The Agenda 2000 agreement set prices for a number of commodities on a multi-annual basis. For that reason, the Commission has made proposals this year for only modest changes in prices relating to cereals, silkworms, pigmeat and sheepmeat, rice and sugar.

To remove the need for annual fixing, the Commission proposes to transfer the legislative basis on which the changes are made to the basic Council regulation. The UK Government acknowledge the common sense of all that and give the Commission our support. However, I am disappointed that there is no provision for a cut in sugar prices. Support for sugar is increasingly out of line with what is available for other arable crops. The case for a price cut is strong.

On rural development, as well as the important move away from price support, Agenda 2000 introduced the rural development regulation which provides for the first time an integrated EU rural development policy. That is the way forward for the EU.

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The regulation gives us a significant opportunity to move away from traditional commodity support in favour of schemes that boost the broader rural economy, encourage farming practices that benefit the environment and help to modernise and restructure the farming industry.

We have ambitious plans for implementing the regulation. Over the next seven years, the Government are proposing expenditure of more than £1.6 billion on the England rural development plan--an increase of 60 per cent. over the period. This will enable us to provide increasing support for agri-environment and farm woodland schemes, continued support for hill farming and support for energy crops, and to introduce a number of new schemes to help rural communities. Several of the new schemes will help the process of diversification and help increase competitiveness.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy): The Minister was careful to refer to England. What is he proposing for Wales?

Mr. Brown: There is a separate plan for Wales, which is discussed by the Welsh Assembly and the Welsh Agriculture Minister. Responsibility for this matter is devolved, and the competent Minister is in the Welsh Assembly. I assure the hon. Gentleman that there is close co-operation between my Department and the agriculture departments in the devolved territories.

The hon. Gentleman has asked about the division of the moneys. It is complicated, but it was done proportionately. He is concerned mostly with hill farming, and the division of the money has been done in terms of the proportion of hill farms, rather than any other measurement. One might take the view that the settlement disproportionately favours Wales. I do not take that view; the settlement was fair, as the money was for hill farming.

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