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Paddy Tipping (Sherwood): As you well know, Mr. Taylor, there is no doubt that farming is facing serious difficulties at the moment: farm incomes have been very low for the past five years, the commodity price cycle is depressed, and the pound is very strong against the euro. To compound all that, there have been great difficulties, first, with BSE and, last year, with foot and mouth disease. The memory of the pyres and the pain of foot and mouth disease may well have brought people to the point where they are beginning to look for change in the farming industry.
I believe that a new consensus for change in the funding of farming is emerging. That mood of change is strengthened by a desire to reform the common agricultural policy. I am not entirely sure whether the entry of candidate countries such as Hungary and Poland will bring about major change. One school of thought suggests that that will cement the status quo, but there is an argument that the accession of those new member countries will at least provoke debate. The mid-term review, which will take place shortly, gives us another opportunity for discussion.
I simply wish to tell the Minister and other colleagues that CAP reform is long overdue. It is no good just to wish for reform; the Government must be a key playeran active partnerin those debates. The Government, who want to be at the centre of Europe, have an opportunity to produce and influence change, but at the end of the day the £3 billion spent on the CAP could be spent more effectively.
The Curry report is another driver for change. It is important to recognise the fact that that report, "Farming and Food: a sustainable future", did not just magically appear; there was a manifesto commitment at the last general election to create such a policy commission. What is important is not the change itself, but the scope, scale and timetable for change.
The CAP will not be reformed overnight. Some voices have argued that we should follow the New Zealand example and get rid of subsidies overnight. That is a false viewit is unachievable for a member of the European Unionbut there is a feeling among the public at large, the consumers of food, that we ought to scale down the food subsidy support that we give. However, we can embark on a process that has already begunthe process of switching funding from food production subsidies to payments for environmental gain and benefit. That process is not new; stewardship encapsulates it in a sense.
Of course the English rural development regulations allow us to transfer moneyas they say in the tradefrom pillar 1 to pillar 2. At the moment, that is funded by modulation at a rate of 4.5 per cent. The Curry report acknowledges that and argues that we must do much more. The Government have taken the Curry report seriously. They have broadly welcomed it, and the Prime Minister hosted a summit at Downing street not long ago. There will be further reaction to the report after regional discussions in September.
However, there has not been much progress on the important recommendation in the Curry report to the effect that we need to continue to move away from subsidising crop production to payments for environmental gain and benefits. There are real problems with doing that, but I want the Minister today and the Government in the next few weeks and months to provide some clear signposts and milestones against which to measure change. We now have an opportunityit may not come very oftento take forward that consensus for change.
In my own county, Nottinghamshire, farmers know that change is inevitable, and they are beginning to plan and influence change. My friend John Clarke, who is the chairman of the Nottinghamshire branch of the National Farmers Union and who farms at the White Post in Farnsfield, has convened a series of meetings involving farmers from north Nottinghamshire and, significantly, the East Midlands development agency to try to take some of the Curry theory and put it into practice in Nottinghamshire.
I notice that large business farmers in Nottinghamshirepeople such as Tony Strawson, for example, who farms at Featherstone farmhave entered into stewardship in a big way. I noticed, too, when I was talking to him the other day, that he recycles the water and debris produced by washing his carrots and beet back on to his fields. He is also involved in short-term rotation coppicing. Just down the road, Richard Thomas, a large potato producer, has moved into stewardship and is moving quickly into organic production.
The central issue remains to be resolved: how can we achieve the Curry recommendation to have a broad and shallow environmental scheme? Curry suggests the only approach now availablethe only show in townwhich is to modulate not at 4.5 per cent., but at 20 per cent. by 200607. The difficult issue for the Minister and the Government is how to fund that change. Modulation has to be match funded and the price tag on that proposal is £500 million over three years. The key issue is how that £500 million lever for change can be matched against the Government's other spending commitments and priorities. I mention that as we move quickly into the current spending review.
I believe that the Curry report is welcomed not just by most elements of the farming and landowning community, but by the lobby groups and interests groups. It is significant that this week the Royal Society for the Protection of Birds, the Woodland Trust and 15 other organisations have launched a postcard campaign called "Invest in Our Countryside Now", in which they argue strongly that this opportunity to transfer funding into environmental gain and benefits is the way forward.
Sir Don himself is anxious that his report is not cherry picked, but seen as a whole. The Country Landowners Association is strongly in favour of moves towards payments for environmental gain and benefits.
In that context, the position of the NFU is interesting. When the report was launched, the NFU was a staunch opponent of modulation. However, if we read the small print and look at what NFU members are saying in the south-west, for example, we see that there is a growing awareness that this kind of approach may have real possibilities. My challenge to the Minister is that, given this opportunity, it is important that we set out signposts and mileposts. The mileposts that I would like us to set for the next financial year, 200304, would be to move to modulation at 10 per cent. That would be a big step change. I estimateperhaps the Minister will correct methat that would cost about an extra £150 million. If we are serious about wanting change, and I believe we are, spending of that kind would provide a significant indicator that that is the route the Government want to take.
What is important for farmers and landowners at the moment is to have real understanding and real knowledge about the way forward. People cannot live with uncertainty. They want to know the direction of travel. If the modulation proposals and the move towards a broad and shallow scheme are not taken forward, there will be real despair and disillusionment in the countryside. We must not let this consensus overwhelm us, however, as there are clear difficulties with this kind of approach that need to be overcome. Our commitment to the philosophy underlying Curry should not underestimate some of the practical difficulties of implementing such an approach.
First, if we are to move towards payment for environmental gain, we need to be able to measure success. A very real issue is how we define public goods, which this kind of approach entails. Different organisations will have different opinions of the public goods that they want delivered. The RSPB has a firm view of the way forward, as does the Woodland Trust. Their priorities may be complementary, but there might be concerns within the access lobbyin the Ramblers Association, for example, of which I am a memberthat a desire for payments for greater access could put conservation in difficulty. We overcame those difficulties in the Countryside and Rights of Way Act 2000, and we can overcome those difficulties again. The issue is how we measure the output from this kind of approach and how we put a value on the environmental good, whether it is a plant, wildlife, hedgerows, access or new walls. Of course, for a payment of £150 million, one would need to be able to demonstrate clear outcomes.
Secondly, experience of agri-environment schemes shows that they can be complicated and have a heavy administrative cost. Any broad and shallow scheme of the kind that Curry has recommended should, in relative terms, be fairly simple. It needs to have easily defined goals, and the farmers and landowners involved in it need to have some degree of self-assessment. There may be a case for a whole farm approach towards environmental gain.
Paddy Tipping: I visit the hon. Gentleman's constituency frequently, tramp the footpaths and look at the farming practices there. When I take my children up into the countryside to look down over the surrounding areas, they say to me, "Isn't it marvellous, Dad, it's never changed", but the countryside is always changing. It is man-madewe create it. It is how we handle and manage that change that is important. The lesson of the last year, during which I have not been able to go to the Peak district, was clear: the tourists and visitors to the countryside provide the real wealth. The other side of the coin is that farmers and landowners have a real role to play in creating a countryside that people want to visit.
I take the hon. Gentleman's point: it is a persistent complaint, as I have just acknowledged, that some of the agri-environment schemes can be very bureaucratic and over-prescriptive. I do not want us to fall into a trapwe have an elaborate system of CAP payments, through integrated administration and control system payments and the rest, and we must be careful not to move into a green system of payments that is similarly difficult and similarly over-complex. The reason that I argue for 10 per cent. modulation in 200304 is that that would give us a chance to experiment. We should not set these initiatives in stone; we should be relaxed about change. As I said, the countryside is always changing, and it will continue to change.
Mr. Paul Tyler (North Cornwall): Does the hon. Gentleman accept that with greater bureaucracy there must be a responsibility on Government to set up the right mechanisms to ensure independent arbitration or the intervention of an ombudsman when there is a problem? It seems that, all too often, when the Department makes a decision, it is right, whatever the circumstances, and the farmer is wrong. We have all had that experience with IACS, but it is becoming increasingly clear that that also applies to the sort of schemes to which he refers.
Paddy Tipping: I, too, have heard those concerns, and on several occasions I have taken up concerns about payments, late payments and wrong payments. My experience is rather differentI have found the Department willing to look at issues. It is a year since the creation of the Department for Environment, Food and Rural Affairs, and although much remains to be done in that new organisation, significant changes are taking place, which we need to encourage further.
The final practical difficulty is the urgent need to demonstrate the consequences of the approach set out by Curry, which switches from payments for subsidies to payments for the environment. The Curry report was produced in the early part of the year. Farmers and landowners are looking for a message, one of which could well be: what is the consequence of taking that approach? Will farmers in the west country, for example, stand to gain more than large arable farmers in the eastern part of the country? We urgently need a model for the approach. The difficulty for the Minister is that our thinking is at an early stage, but it will be important for academics and the Government's resources to propose a series of ideasexamplesof what might happen if we proceed with Curry.
I began by saying that farming faces severe difficulties. The severity of the problem has opened up a real debate about the way forward for agriculture. There is an opportunity to change things and, after five very bad years, a determination to find a better way forward. The emerging consensus is that it is right to switch from subsidies on production to a system that makes direct payments for environmental benefits. Such opportunities do not arise often. There is a danger that unless the Department and the Government show leadership now and make the switch, farmers and landowners will face genuine despair. The programme is challenging, but I strongly believe that we should take that challenge and make the changes that I advocate.
Mrs. Gillian Shephard (South-West Norfolk): I congratulate the hon. Member for Sherwood (Paddy Tipping) on securing the debate. In particular, I appreciate the thoughtful way in which he introduced it. He, at least two other Members in the Chamber and, indeed, you, Mr. Taylor, are members of the Select Committee on the Environment, Food and Rural Affairs, which is exploring the issues raised. That attention needs to be paid to the future funding of farming is beyond doubt. If there had been any doubt about that, the impact of the foot and mouth crisis and the outbreak of classical swine fever in East Anglia illustrated in a truly appallingly vivid way to urban and suburban areas just what happens when the rural economy collapses. It certainly surprised some people in high places who thought that rural Britain was a minority pastime.
It is obviously nonsense to suppose that if Britain stopped farming, food would handily come into the country in raw material form, leaving our processing intact. From Thailand would come not chicken, but chicken McNuggets, chicken Kiev and all the rest of it; from Eastern Europe would come not milk powder, but various desserts and milk shakes. Leaving aside the human and animal implications for health of such an import policyalthough in passing I point out that most experts believe that the foot and mouth epidemic and classical swine fever outbreaks originated in imported infected foodit is clear that if the British farmer goes down, with him go millions of jobs in food processing, packaging, labelling and haulage. That sector of the national economy amounts to 14 per cent. of the total. Only the foolish would suggest that that can be jettisoned without national harm.
Mr. Mark Oaten (Winchester): Is the right hon. Lady aware that in the past three years there has not been a single prosecution in respect of meat imports? Does not that suggest that there must be something wrong with the Customs system that monitors meat coming into England?
Mrs. Shephard: The hon. Gentlemanindeed, anyone interested in such matterswill know that that subject has been raised a number of times in the House. Back Benchers have exerted great pressure on the Government to clarify what they are doing in the face of our anxieties. Perhaps the Minister will address that in his response.
I support what the hon. Member for Sherwood said about the importance of the countryside for rural tourism and the part it plays in the national economic effort. Some 80 per cent. of our land is farmed. Rural tourism accounts for 6 per cent. of the national economic effort. We have to ask who would come to view a rural wasteland, yet that is what we may come to see as land is abandoned or farmed in ever larger parcels, and as farmers, who are more and more financially squeezed, cut out the care of hedges, headlands and drainagein short, when they no longer care for the rural environment because they cannot afford to do so.
It is beyond debate that farming is essential economically and environmentally. However, one of the fascinating features about the debate in this country is that the public want to have it both ways. They want cheap food; one has only to map the price wars between rival supermarket chains to see that. As we heard in the Select Committee, although the supermarkets and other lobby groups claim that people are deeply interested in how food is producedwhether it is imported, organic or whateverI see scant evidence of that in my weekly shopping. In any case, what explanation is there for the shocking fact that five years ago 4 to 5 per cent. of all chicken consumed in Britain was imported, and today that percentage is 40 per cent. and rising? How does our determination to have cheap food square with the other demands that we are told we make for high standards of landscape and environmental management?
There is certainly no shortage of literature devoted to the matter. When the Select Committee interviewed representatives from the Countryside Agency, we were interested to learn that no fewer than 62 organisations are devoting their attention to the problems of the rural economy. To those we must add a plethora of other bodies that will emanate from the proposed regional assemblies. Let us hope that their advice will be more welcome to the agriculture industry than the example given by the chairman of the East of England development agency who, at the Norfolk NFU annual meeting in March this year, pointed out that the agency's principal help to the sector over the past year had been a project to market pickled herring. I am sure, Mr. Taylor, that you can imagine how well that went down.
I also hope that the enormous amounts paid out by the agency will be better used in future than the resources it devotes to publicising the excellent publication that is before me. It gives 10 case studies of farmers coping with their difficulties and was produced in my constituency. When I rang up the offshoot of the agency to tell it how excellent I thought the publication was, I also asked how the agency was distributing it, but it did not have the least idea and did not have a database of farmers.
As we are debating the future funding of farming, it is worth looking at the current situation. I hope that when the Select Committee produces its report it will focus on the productthat is to say, on food, other crops and the public good. That would be a welcome change because our experience in the Committee has been that too much debate is devoted to structures and systems.
There needs to be a drastic simplification of the bodies, grant aiding and otherwise, concerned with farming. Both the Country Landowners Association and the NFU advocate a simplification, not to say a great reduction, in regulation for farmers. Greater clarity in planning law is needed if farmers are to be encouraged to diversify, and in the absence of other agencies and organisations that are able to do so, DEFRA should examine the economic and environmental impact of the current restructuring, no matter how difficult that is. There is a lot of talk about the food chain. Farmers producing our food should be closer to the food chain. It is difficult for mixed farmers, who have to see to everything, to engage in discussions on the price of wheat when that is not under their control.
These observations are minor and circumstantial. It is of more strategic interest to the industry that farmers know what view the Government take of their interests. What do Ministers think will be the future of the CAP? What influence can they have on its development and future shape? What can they practically achieve in the face of strongly nationalistic attitudes to agriculture in some EU member states, not to mention the current attitudes in the United States?
Do Ministers think that farming has a global future? If so, how will they ensure that the regional assemblies, where they existand if they existwill give proper weight to rural issues, because their forerunners, the regional development agencies, certainly have not done so? What is to be done about food imports and labelling? Should farming move to a market-oriented system, and if so how soon?
Farming, in its creation of our rural landscape and its production of high-quality, healthy food, has served this country well. It is for this generation of Ministers and this Government to demonstrate that they value the contribution that farming has made to the well-being of Britain. The ball is in their court.
David Taylor (in the Chair): Order. There are seven Members standing, and I intend to call the first of the Front-Bench speakers at 12 o'clock, so if hon. Members could confine their remarks to five minutes or so, the great majority of them will be called.
Mr. Alan Hurst (Braintree): I am grateful to be called in this important debate. Sometimes it is helpful to think about how we came to be where we are, and although I do not propose to go back to biblical times, some reflection on past centuries will not be unhelpful.
All of us who represent rural constituencies will have spoken to old boys whose grandfathers came to East Anglia in the 1930s, when land was effectively being given away. One could lease land rent-free for three or five years, just so that the landowner could have it farmed. In the '20s and '30s agriculture was in an absolutely appalling state. It was essentially rescued by the second world waroccasionally, good comes out of bad. We appreciate how important it was at that time to
The Labour Government after the war enacted the regime of subsidy and support which has been carried on in essence to the common agricultural policy. Probably most of us have heard the story of the East Anglian farmer who in 1949 applied to join his local Conservative club. The secretary said, "You have to be a Conservative." The farmer replied that he had always been a Conservative, and when the secretary asked, "So why haven't you joined?", he said, "Well, it's only since the blessed socialists have been in that I can afford the membership fee." The moral of that story is alleged to be that the condition of farming substantially improved, as indeed it did, from the second world war onwards.
There are now other trends in the world that will affect support and subsidy in any event. The World Trade Organisation has certain views about what it perceives to be uncompetitive practices, and by moving a certain amount of support into environmental schemes, one may at least elude or evade too much of its investigation. My hon. Friend the Member for Sherwood (Paddy Tipping), with whose comments I substantially agree, apprised us of the difficulties of too rapid a move in that direction.
We must be aware that environmental subsidy and support is a fine thing, but we need to ensure that the overwhelming majority of it goes to support the continuation of farming and is not frittered away on the fringes andin saying this I do not in any way denigrate cake shopson things that are not integral to the rural economy. We appreciate the value that farming puts back into the community. It is common to quote the figure of £3 billionI believe that it was higher than that at one stagethat is spent in support of farming in this country.
I do not like to use phrases such as "added value" because they are inherently meaningless, but there cannot be much doubt that the boost that tourismjust to name one industryreceives from farming is immense. If there were no farms in lakeland and elsewhere in this country, the land would be different and tourism would be that much poorer. It is almost impossible to calculate the immense value that farming adds to other industries. We need to ensure, therefore, that in any movement towards environmental support, the money goes into farming.
I can contemplate nothing worse at this time, when farming has been laid low by a series of worldwide economic problems and inherent internal disasters such as foot and mouth, BSE and classical swine fever, than saying that there may be some merit in the New Zealand model. In my judgment, for this country there is no merit at all in the New Zealand model; we are not comparing like with like. That model could not be continued in this country.
There is a limit to what we can do with environmental support. The Curry report attempts to overcome some of the difficulties by using the phrase "broad and shallow". If I have a criticism of the Curry report it is that it has slipped into using the jargonese that so
The problem with the stewardship scheme is that it is almost as hard to get into as it is to get into Parliament. I believe that only 14 per cent. of farmers are members of the scheme. Its administration is by its nature very costly, so I am not certain that it always delivers rapidly the exact results that we want. We have all been to farms in our own divisions and seen the remarkable conservation that takes place. It happens not because there is a conscious attempt to conserve, but because farming has always been done that way.
I recently went to a very small farm on the edge of my division where there are splendid mixed oak and small-leaf lime woods. I asked the farmer whether he got any financial support to keep the woods in that condition, and he said, "No, they've always been there. We don't cut them down or plough them up. We keep them." I told him that he could go into preservation and he said that he was thinking of doing so. We should reward farmers who have, for generations, preserved the most attractive aspects of the countryside, rather than paying those who have been less conservation-minded in the past to introduce new schemes.
I shall not delay the Chamber for too long, but I saw a particular danger in the remark of the right hon. Member for South-West Norfolk about breaking up large farms and using contractors. "Contractor" reveals nothing about the qualities of the man himself; he has no interest whatsoever in conservation in the area that he is contracted to farm. He is paid to carry out a particular function; he may be sorry if he ploughs up a rare plant or destroys the nest of a ground-nesting bird, but his position is entirely different from that of the resident or tenant farmer. We need to devise a scheme, perhaps based on the Curry reporta good light for the futurewhich ensures that money going into agriculture goes to the farm. That would enable farming to remain a vital industry in this country and, at the same time, ensure that we gain benefits from genuine conservation and environmental improvement.
Set-aside initially meant leaving fields fallow in mediaeval times, but many such fields are an abomination today and serve no useful conservation purpose. The set-aside scheme should be based on Curry's recommendations, which would need quite a lot of money. However, subsidies would not be taken away but redirected to where they are needed. All farmers should be eligible, not just those who farm in picturesque locations.
Hywel Williams (Caernarfon): Farming incomes in Wales are derived mainly from milk, beef and sheep, which comprise 87 per cent. of the gross output of Welsh agriculture, and are clearly under pressure. Farmers in Wales seek to diversify, but as we saw in the foot and mouth crisis, diversifying into tourism can be of limited
Wales experiences out-migration, made worse in many rural areas by its crushing effect on the vitality of the Welsh language. We must foster and develop new and traditional agricultural skills, but young people, the carriers of those skills for future generations, are leaving the country in their thousands, pulled away by the lure of the city and pushed away by the low returns from persevering with farming that they see everywhere. They are also pushed away by the growth in the size of holdings and the resulting difficulty in getting started.
I want to raise an issue that is not always prominent in discussions of the future funding of farmingthe lessons to be learned from farming in developing countries. Yesterday, I had the inspiring experience of attending the launch of the Christian Aid campaign, "Listen to Africa"; please forgive the obvious plug, Mr. Taylor, but this is Christian Aid week. Christian Aid has produced a document called "Listen to Africa" which I commend to all hon. Members. I shall quote a few points from a section engagingly headed "The Blair plan for tackling poverty", which states that the Prime Minister
Christian Aid says that the benefits of globalisation are dubious, which must strike a chord with farmers and consumers in Wales and the United Kingdom, and perhaps also with the Minister, in his heart of hearts. The picture is not simple. Developing countries can benefit from certain types of trade. Ghana, for example, benefits from trade in pineapples and organic bananas, but I suspect that there are few banana or pineapple plantations on the wind and rain-swept uplands of my constituency in Eryri. Christian Aid estimates that the more open markets in the rich world would benefit the 49 poorest countries to the tune of only £1.5 billion. I therefore plead for less piety from people pushing the panacea of open trade.
Rice farmers alone could benefit from more than $8 billion, a sum greater than Ghana's gross domestic product. Farmers struggling to survive in Wales and the UK, including hill farmers and dairy men whose incomes have tumbled disastrously, have much in common with people in other countries threatened by globalisation. The villain of the piece is not to be found in the developing world, where people are prevented from subsidising their agricultural production, but elsewhere where people can afford to ignore the International Monetary Fund and the World Bank.
In conclusion, there is no need to be too pessimistic. Farmers are enterprising and adaptable, but Welsh agriculture is subsidy-dependent as a result of our geography, climate and topography. The National Assembly for Wales estimates that for every 1 per cent. reduction in direct farm subsidy, farm incomes are reduced by 1.5 per cent. I am grateful to the Farmers Union of Wales for drawing that fact to my attention. Insufficient consideration has been given to the effects of cuts in general farm subsidy on farm incomes in the build-up to the CAP mid-term review. The Minister should realise that the modulation framework adopted by the UK is clearly detrimental to the future of the family farm structure in Wales.
Mr. David Drew (Stroud): I have taken careful note of your remarks, Mr. Taylor, and shall try to speak for about five minutes to give other Members an opportunity to contribute. I shall therefore make only two points.
I shall start by looking, like other hon. Members, at the background to the current crisis, the extent of which is suggested by the fact that the income of British agriculture is some £2 billion below break-even point. The crisis has three obvious causes: the value of the pound; overproduction across the developed world, resulting in low prices for the past three or four years; and, in our own case, although we are not unique, the number of animal disease breakdowns and their implied costs.
I shall address the reform of the common agricultural policy and an issue that the Select Committee on the Environment, Food and Rural Affairs tried to tease out last week. If we are going to subsidise the industry, we need to consider what we mean by public policy, which is the key to understanding what may make this industry different from others. If it is different, we need to identify what we need to support and what we do not.
I shall make some provocative remarks about the CAP. While the Curry report is interesting, it is minimalist. It only identifies where we are and outlines the need to inch along to make changes, subject to our membership of the CAP, our obligations to the WTO and so on. The CAP doubtless served a purpose and had three aims: to increase production to ensure food
Subsidies to support production have five undesirable consequences. First, they give the wrong market signals. There is much evidence to suggest that because of the way in which the food chain has operated, subsidies give farmers the wrong message and make it easy for the all-powerful supermarkets to get what they want.
Secondly, the subsidy regime is anti-co-operative. There is little evidence in farming of the co-operation that exists in other parts of the economy. I know that co-operatives are stronger in other parts of Europeas a Co-operative Member, I will always stress that. We need to understand that the co-operative system has not worked in this country, and I attribute that largely to the operation of the subsidy regime.
Thirdly, subsidies are often paid to the wrong people. They go to some of the richest farmers in this country, who could endure market strictures, and to people who farm as a hobby. I do not intend to be pejorative. It is a myth that we have fewer farmers, if we define farmers according to the definition currently used by the Department for Environment, Food and Rural Affairs, but there are people who come on to the land and receive subsidy without adding to the food chain. They may have a bit of land and a few animals, but it is wrong that they should receive subsidies, while people who desperately need help to remain in farming do not receive sufficient support.
The fourth undesirable outcome of the subsidy regime is fraud. I shall be careful what I say, in view of my recent remarks. However, no one can pretend that the CAP has not led to excessive fraud. Fifthly, as the hon. Members for Caernarfon (Hywel Williams) and for Bridgwater (Mr. Liddell-Grainger) pointed out, the subsidy regime gives the Americans all the justification that they need for offering billions of dollars to support their farmers. They say, "It's all very well being lectured by the Europeans, but they are worse than we are." That is unacceptable.
We should identify those whom we need to support in the countryside, why we need to support them and how we will do it. I am not against environmental payments, but we should not see that as the only answer. Other speakers have made that point clearly. We should support certain types of farmers, whether Welsh hill farmers or tenant farmers. I have a long history of speaking in this place on behalf of tenant farmers. If those are the people whom we need to support, let us support them and let us be open about it. Let us give them a decent standard of living so that they can farm properly.
There are other farmers who can access the market satisfactorily, and they should be encouraged to do so and to build co-operative relationships with the processors and with other producers so that they can take on the supermarkets. That is much more radical than Curry's conclusions. We need to reform the CAP. We should give our partners in Europe an ultimatum: either we reform the CAP or we repatriate much of the money going into that basket. Finally, our public policy in regard to agriculture needs to be much more sensible and much more creative than it is.
Mr. Hugo Swire (East Devon): If the Government truly intend to move on in their relations with the farming community, they need to regain some of the confidence that they have lost among that community. On reflection, I believeand this view is almost universally shared in the west countrythat it was a mistake on the part of the Secretary of State to dismiss rather haughtily the findings of Professor Mercer's investigation of the foot and mouth outbreak in Devon. There are lessons to be learned by all those involved in farming and tourism. That was a missed opportunity.
The mistrust is further exacerbated by the recent extraordinary idea contained in the statutory instrument on animal health, which many of us see as giving the Government increased powers to enter property and slaughter animals without their owner's consent. No doubt the Minister will deal with that in his concluding remarks.
No discussion of farming and the funding of farming can take place without reference to enlargement and the common agricultural policy. We seem to be moving towards a consensus that we need to deal with that sooner rather than later. There is much of interest in the Curry report, particularly its talk of modulation. However, there are two aspects of farming in this country that need to be considered: how existing farms are to survive, and how they are to prosper in the future.
Talk of second pillars and agri-environment schemes is appropriate in some areas, and I concede that such schemes have a large role to play, but environmentally sensitive areas and the countryside stewardship schemes apply to only a limited number of farmers. Currently, only 14 per cent. of farmers in England are involved in such schemes.
For the dairy farmers of Devon the immediate problem is nothing to do with agri-enhancing schemes of one sort or another; it is simply farmgate prices. Many milk farms are going out of business each week. The price of milk is at an almost historic lowfarmers are getting about 15p per litre, but that is a premium price. By the time they have given a further halfpenny per litre towards a milk scan and another halfpenny towards a cell count, many farmers are receiving 13p per litre. Under planned reforms of the European export market, the price of milk in shops will be slashed and even smaller farms will be forced out of business. That is supported by the Government's own findings.
I turn to the livestock industry in my part of the world and its future. In reply to a question from me in March this year about the impact of the regulations governing animal movements on the viability of livestock markets, the Minister conceded:
There is a further problem, which I ask the Minister to address. While the livestock markets were closed because of foot and mouth, many farmers made alternative arrangements with slaughterhouses throughout the country. We can criticise the supermarkets for the price that they are paying the farmers for milk, but will the Minister also look into the relationship between the slaughterhouses and the supermarkets? Tesco now controls many of the slaughterhouses. It is unwise for farming to be so dependent on the supermarkets. Indeed, the relationship between farming and supermarkets warrants careful investigation. I hope that the Minister will address that in his concluding remarks.
The west country looks the way it does because it has been intensively farmed over the years. That is why people come and spend their holidays with us, and why we have twice as many tourists in the south-west as in Scotland and Wales. Any debate on the future of farming should take those factors into account. We should have spent a little more time this morning discussing how the industry can recover its confidence, not least its confidence in the Government, and how a level playing field can be created, especially in respect of imports.
The Exmoor Trust was launched on the back of foot and mouth disease, and has raised £84,000 from the people of Exmoor to be spent on farming. As a keen ornithologist, the Minister is well aware of the problem in Exmoor: the lack of resources put into such areas from the centre. National parks have been mentioned; Exmoor is a national park and it needs resources. When local people are left having to raise money on their own, it is clear that there is something fundamentally wrong with the state of farming in this country. The money should come from the centre outwards.
We are discussing the funding of farming, but we often seem to miss the idea that farming, like any other industry, is supposed to make the profits that are fundamental to the continued success of any business. Profits are vital not only in terms of paying wages and so on, but in two other very important ways: continuing a business and ensuring that it expands. If investment is to continue, a return must be gained on what has already been made, and if a business is to become more efficient and expand, further investment will be necessary.
My speech will concentrate on profitability. Although we talk an awful lot about grants, subsidies, diversification and so on, it is fundamentally the profitability of farming that will sustain it in the longer term. Members of the Environment, Food and Rural Affairs Committee will remember that Sir Don Curry came to the Committee to speak about his report. Under questioning, he agreed with me that there was sufficient profitability in the total food chain to provide everybody in the farming link with a decent and fair return on their investment and a reward for their labour. When he was pressed a little further, he acceptedI think that he was somewhat embarrassed to do sothat the links in that chain are very differently organised, so not every link is receiving its due profitability.
It is no great coincidence that we see tables demonstrating that farmgate prices have declined over 10 years while consumer prices for products on the shelves have risen in real terms, and that farm incomes have been decimated and supermarket profits have risen. We could consider every individual aspect of the situation, but those broad facts are correct, and they are not coincidental.
There has been talk of creating a food chain centre, and I hope that links and relative profitability in the food chain might be one of the things that such a centre would consider. To my mind, there is a distinct possibility that we shall put in public subsidy at the bottom end of the chain to support our farmers, merely to find that that funding transfers upwards through dividends to the shareholders of large supermarket operations. That cannot be a reason for us to try to support farmers; they need genuine profitability, and to be paid properly for the investment that they have made and rewarded for what they do.
I agree with all the previous speakers about the common agricultural policy, but the fact is that it is not within our gift to change it, and major changes are unlikely to be made in next year's mid-term review. Perhaps the Minister will comment on that, but we have seen in the past that such changes are unlikely to be made in that way. We must look for engines of change that are within the Government's gift, and think about what they can do now.
There may be two or three things that the Government can do. First, Sir Don Curry talked about modulation, which was the principal part of his engine for change. We would like the Government to give some indication that DEFRA will fight to ensure that in any comprehensive spending review, moneys will made available to support Sir Don Curry's proposals. If not, the whole modulation exercise will have no effect and make no change whatever.
Secondly, we have revisited the idea of an early retirement scheme on many occasions. The scheme can currently be introduced within the CAP. The Government have resolutely set their face against that proposal, but it is clear that for real change to occur, we need to allow some farmers to retire with dignity, to allow new blood and fresh ideas to come in.
Thirdly, we need to restore profitability to farming, which will encourage those who work in the sector. It is no good introducing an early retirement scheme and hoping that young people will come in and new money will be invested in an industry that has no real chance of achieving profitability in its own right, but is simply a means of attracting grants and subsidies, and perhaps a marginal increase in the value of land assets. Those proposals are within the Government's gift. They do not require radical overhaul of the CAP, and they can be implementedbut political will is required for that to happen.
One sector has not yet been considered in any great depth. We often talk about milk, beef, sheep and so on, but I want to talk about the egg industry. I must declare a constituency interest, as a very large egg producer is based in my area. Those in the industry have to take some very clear investment decisions, as it still faces considerable uncertainty about the future of conventional egg laying, especially in relation to the cages that will be permitted under current EU legislation until January 2012. Thereafter, the so-called enriched cages, containing a nest box, perch and so on, will be required.
It is vital that UK egg producers be given clear assurances about the availability of each production system, to allow timely investment decisions to be made. Such decisions cannot be made one year before the regulations take effect. Farming is a long-term business that needs clear guidance. The farm animal welfare regulations that will implement the EU directive will be introduced at some stage.
The costs for the egg industry will be heavy, at a time when it will find them extremely difficult to afford and even to plan for, especially as market access for third country eggs is set to increase as a result of Doha. The egg industry is important, but is not subsidised and has made enormous investments, not least in improving health following salmonella, including the introduction of the little lion displayed on its products and so on. The industry is still competing, but it needs a steer from Government on their proposals.
I recognise that the Minister will be short of time, but I should like to ask a few questions. If he cannot respond, may I implore him to write to me? I hope that he will be able to do so. First, will the Government clearly support the Curry report by seeking the cash that is needed from the Treasury in the comprehensive spending review? Will they reconsider the potential for introducing an early retirement scheme to provide an engine of change?
As for the egg industry, will the Minister give some categorical assurances that if the EU directive is to be implemented, it will be introduced without any amendment so that it is evenly applied throughout the whole EU? We must get away from thinking that we can do things better, and that we should try to lead Europe on such matters while at the same time sacrificing the industry that we are trying to support.
Will the Minister also ensure that there is proper consultation with the industry on the future of enriched cages? The industry needs to understand the Government's thinking on that issue, as big investment plans are being held in abeyance. If the industry cannot implement those plans in a timely fashion and get the money together, it too will be threatened by further imports, and we will see another part of UK agriculture begin to wither.
Mr. David Lidington (Aylesbury): I start by congratulating the hon. Member for Sherwood (Paddy Tipping) on securing the debate and on the extremely thoughtful and constructive way in which he introduced it.
The hon. Gentleman was right to say that British agriculture is at something of a turning point. Successive crises concerning animal disease and the severe and prolonged recession in all sectors have led many people in farming to wonder whether there is a future in farming enterprisesnot only for them, but for their children and grandchildren. That is happening at a time when there are major international pressures on the United Kingdom to change the system of support that we have applied until now.
It is important to bear in mind the dire state of farming. According to evidence recently given to the Select Committee on Agriculture, Food and Rural Affairs by the Institute of Agricultural Management, total income from farming in this country is now less than the combined value of arable and livestock direct payments. So whenever we debate in Parliament transferring money away from direct payments into environmental payment schemes or other alternatives, we are talking about transferring money away from businesses that in most cases do not have any financial cushion left to secure themselves against the risk of such changes resulting from Government policy.
It is vital to keep at the forefront of our minds the fact that farming is essentially a business, and that we should try to secure the conditions whereby it can again become profitable. I hope that the Minister will be able to assure us that the Government will accord the Curry report recommendations that propose ways of making farming not only sustainable but profitable the same degree of importance and urgency as the parts of the report that deal with changes to support schemes and a shift towards environmental payments.
International pressures have reinforced the domestic crisis in farming, causing people to reflect on the future. I should be interested to hear the Government's view on whether recent developments in the United States are likely to make a difference to the World Trade Organisation pressures on us. As my hon. Friend the Member for Bridgwater (Mr. Liddell-Grainger) said, the proposed massive increase in subsidy for United States farmers would give them considerably more subsidy per head than farmers in the European Union. That must have an impact on the future of international negotiations.
I have a similar question about the scale of the impact of the forthcoming enlargement of the EU. As soon as applicant countries become full members they will become entitled to direct payments. Will the delay in effecting enlargement mean, as some have suggested, that there is more scope under the current budgetary ceilings than had been previously assumed for those payments to be made without bankrupting the whole common agricultural policyat least not in the immediate term?
I shall now move on to the question at the centre both of the debate and of the Curry reportthe proposal to switch from direct payments to farmers to a system based on environmental support. Do the Government think that modulation is the best method? The debate centres on that idea at the moment, but even in the period of less than a week for which I have held my current Front-Bench responsibilities, I have become aware of farmers who question it. They suggest that cross-compliance, which means making direct payments conditional upon environmental outcomes, might be a better way of approaching the subject.
Modulation is just a worda piece of jargonthat could be applied in several different ways. Do the Government expect the Commission to propose a compulsory scheme of modulation throughout the European Union? If so, do they expect such a scheme to be based on the United Kingdom model of a flat-rate system or the French model, in which there is a different scale depending on the type of farm involved? That decision will have a considerable impact on certain agricultural sectors, especially the arable sector.
Although the Curry report is a good read and its proposals are stimulating, it has one serious flaw: it provides no detailed analysis of the costs of its recommendations either for farmers or for taxpayers. As regards farmers, Sir Don Curry told the Select Committee that there would be very few losers by his proposals, but he did not produce any sectoral analysis of how those proposals would affect different parts of agriculture.
There are similar questions about the impact of the modulation proposals on taxpayers. Curry suggested a total figure of about £0.5 billion, but he admitted in evidence to the Select Committee that that was a starting pointa ballpark figureand that factors such as extra checks for imported meat would probably necessitate more Government expenditure on top of that. It is difficult to assess the impact of proposals for environmental payments without knowing whether the Government are prepared to provide the match funding that Sir Don Curry proposed. He argued that without that match funding, the shift to 10 per cent., or even 20 per cent., modulation would not be a practical option.
I referred in my opening remarks to the need for us all to remember the fundamental importance of seeing farms as businesses, and that we should see it as our duty to do whatever we can to restore British agriculture to profitability. That may necessitate positive action and initiatives by the Department. It also means that the Department must reflect, pause, hesitate and cease to impose additional costs on agriculture, especially at a time when farmers have no spare cash with which to meet those extra regulatory burdens. The implementation of the nitrates directive will impose enormous costs on British farmers. The Government are floating ideas about disease insurance, which the Curry report said was likely to be prohibitively expensive for agriculture unless controls on illegal importsa clear responsibility of the Governmentare stepped up considerably.
I hope that the Government will take seriously the Curry proposal that the Department should undertake an annual assessment of the regulatory burden that it is imposing on British agriculture. That exercise would be a salutary discipline, and I hope that it would be followed by swift action to reduce that regulatory burden and the costs for our farmers.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Mr. Elliot Morley): I congratulate my hon. Friend the Member for Sherwood (Paddy Tipping) on securing the debate and on his thoughtful and comprehensive speech, which was appreciated by hon. Members from all parties. It dealt with serious and complex issues surrounding the future funding of farming in this country. I welcome the hon. Member for Aylesbury (Mr. Lidington) to his new responsibilities. If he is shadowing my portfolio, I expect to see him regularly at Adjournment debates and in Standing Committees on statutory instruments. I am sure that we shall exchange views regularly.
In the time available, I shall try to deal with some of the points made by my hon. Friends the Members for Sherwood, for Braintree (Mr. Hurst) and for Stroud (Mr. Drew), the right hon. Member for SouthWest Norfolk (Mrs. Shephard), and the hon. Members for Caernarfon (Hywel Williams), for East Devon (Mr. Swire), for South-East Cornwall (Mr. Breed), for Bridgwater (Mr. Liddell-Grainger) and for Aylesbury.
I concede that in this country, there is a consensus for change in the operation of the common agricultural policy. That encompasses farming, countryside, environmental and, indeed, political organisations. How do we achieve that change? The Food and Farming Commission report has been published, fulfilling a manifesto commitment. It was a good thoughtful report that identified many of the problems in the sector. The Government acknowledge that agriculture is suffering from undoubted difficulties, but many of them are not new. Structural problems have existed in the industry for many years, and we need to tackle them.
I was especially struck by a comment in the Curry report about the commission's identification of what it terms a "disengagement" of agriculture from the market and from consumers. There is a need to re-engage.
Part of re-engagement is the move away from production subsidies, which have distorted the market so greatly. My hon. Friend the Member for Sherwood wanted a clear time scale. The milestones in our approach include several regional meetings; last week I attended the Epsom meeting for the south-east of England. Their purpose is to get some feedback from stakeholders about the Curry report. We are also working hard on preparing the shape of a broad and shallow scheme, and considering its operation.
The recommendations entail significant financial implications. The match costs of modulation alone are £275 million and we have to make the case for the resultant benefits for the industry and the wider community. The spending review 2002 does that. Through consultation and the spending review, we expect to be in a position to make announcements about the way forward by the autumn. That is the road map for dealing with the proposals.
We take the proposals seriously. They are important and we can get on with several of them straight away. For example, we have set up the organic action plan, and, as I said, work on the broad and shallow scheme is under way. The nature of modulation and the whole farm approach are being considered now.
I greatly appreciate the interest of the Environment, Food and Rural Affairs Committee. Its involvement has been constructive and thoughtful. I have always had a high regard for it, both in opposition and in government. Its findings help shape and guide Government policy and thinking and I look forward to its reports on the matters that we are discussing.
I appreciate the points about total income from farming, but we need to be careful about the presentation of some of the statistics, and that includes current figures. According to our figures, total income from farming increased by 11 per cent. last year. We must be careful about interpretation. For example, the average subsidy for a livestock farm is approximately £30,000 a year, but after payment to the farmer and the family, it produces a net farm income of about £8,000. Such poor returns on that sort of subsidy clearly show that there is a problem with the system.
Large subsidies do not necessarily help the sector. In many ways, they distort the market and do not help farmers to get a return on their income. That applies to the milk sector among others. There are several reasons for low milk prices, but intervention sets a floor in the market that is not always helpful. There were predictions of a big drop in milk output after foot and mouth disease, but that did not happen. Production increased, and one of the problems with price is caused by supply and demand. That should even out, but I acknowledge the current pressures on the milk sector.
Let me deal with some of the questions about the shape of farming and change. There has been a long-term trend of consolidation into bigger agricultural units. Despite an overall decline in the number of farms, bigger farms have increased. It is difficult to measure some recent trends, but I shall give the right hon. Member for South-West Norfolk my views. I believe that small farms are holding on and may even be increasing. That is partly because people with other forms of income are prepared to buy smallholdings. They do not therefore rely on a small farm for their total income.
Newcomers in the sector often have the freedom to innovate and show great enterprise. I have seen some good examples of that. For example, a person with a horticultural holding, which was not especially small, was voted horticulturist of the year. His background was not in farming but in the music industry. He decided that he wanted to go into farming and he has been innovative and successful.
There is a trend whereby medium-sized farms come together to co-operate and reduce their margins. That is all to the good because there is a need for greater co-operation, which we want to encourage. The Curry report acknowledged that. There is also growth in contract management, although it is difficult to specify its scale.
Hon. Members mentioned globalisation. There are pressures on our producers and their standards. Quality assurance schemes, marketing and consumer education have a strong role to play. Educating consumers about what they are paying for when they support British producerssuch as animal welfare, countryside management and a range of attendant benefitsis valuable. We can do more about that, as the Curry report acknowledged.
The global market is a fact of life. It is constantly distorted, and I believe that the American announcement on subsidies is most unhelpful. It is an example of the Americans saying one thing and doing another about the free market and world trade. Those matters must be resolved in talks in the World Trade Organisation. Doha had a positive outcome because it paved the way for the sort of framework that we support.
As the hon. Member for Caernarfon said, there are international implications because subsidies in rich countries cause distortions in developing countries. The problem with the EU and other countries is that surpluses in the market depress not only our prices but those of the international market. That brings down world prices even further. It must stop, and most people recognise that.
The hon. Member for Bridgwater made a succinct intervention. I support the work of community groups, such as the Exmoor Trust, that come together. There is a range of possible support, not only from DEFRA but from the Countryside Agency and national parks. I hope that they will explore all the options.
I stress to the hon. Member for South-East Cornwall the fact that there are food chain initiatives, and I agree that the industry must engage more downstream. The laying hens directive will be tabled in full and unaltered. There is a need for discussion and engagement with the industry about, for example, enriched cages. However, the directive will be tabled unchanged. Any discussion about change will entail a full public consultation and the industry will have a chance to participate in it.
I hope that I have dealt with many of the main points. We have considered an important subject and we respect the work of the Curry commission, which points the way forward. There is much work to be done in the mid-term review of the CAP, and we are working on that and on the review of the agri-environment schemes. This is an exciting and challenging time for agriculture, and we intend to move forward through engaging with the industry and with other partners.