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7 Jan 2003 : Column 45WH—continued

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Common Agricultural Policy

12.30 pm

Mr. Graham Allen (Nottingham, North): Thank you, Mr. O'Brien—or, to judge from your name card, Mr. O'Hara. Has your name changed over Christmas?

I want to debate the cost of the common agricultural policy, because those of us who believe in Europe, and I count myself very much in that camp, are mocked by it every day. Its financial cost is high and in the view of those who want to further the European project, its political cost is even greater.

I hope to hear more from the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Scunthorpe (Mr. Morley), about the Government's proposals for CAP reform. More importantly, I want to know what the Government are doing to promote the reform proposals both to the British electorate and to the Governments and electors of other European countries. I hope that by the end of the debate we will be in no doubt that fundamental reform of the CAP is a vital British foreign policy interest, essential to Britain's future in the European Union and to the future and credibility of the European Union.

About half the EU budget is spent on agriculture. Many people—certainly in my constituency—could be forgiven for feeling that we belong to a common agricultural union rather than the European Union. Some of us would like more emphasis on the advantages of EU membership than on agricultural subsidy.

The common agricultural policy is almost wholly without merit. Its beneficiaries are rich farmers and giant agribusinesses, special interest groups, bureaucrats and, sadly, fraudsters and organised criminals. Its casualties are the citizens of Europe who must pay the bills for the CAP, both as consumers and as taxpayers, as well as the third world, the environment, wildlife and farm animals throughout the EU, law and order throughout the EU and, not least, public confidence in the integrity of the EU.

According to the Consumers Association, the common agricultural policy adds more than £16 each week to the average shopping bill of a typical British family. Our food is twice as expensive as, for example, that in New Zealand. New Zealand is well favoured agriculturally, and New Zealanders, unlike Europeans, do not labour under excessive subsidies and tariffs. The CAP costs the taxpayer £50 billion a year. If my right hon. Friend the Chancellor of the Exchequer put 2p on income tax, there would be an outcry, yet that is what the CAP costs every UK taxpayer.

Whatever its failings for Britain, one might feel better if the CAP helped the poorest farmers or rural communities in Europe. It does not do that adequately; 70 per cent. of payments end up in the pockets of the richest 20 per cent. of farmers in the UK and the EU. According to the Catholic Agency for Overseas Development, the CAP awards £500,000 to that horny-handed son of toil, the Duke of Westminster.

Even worse is the effect of the common agricultural policy on the third world. Many warm words come out of this place about the third world, but the CAP denies export markets to third world countries and destroys

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their home markets by dumping surplus foodstuffs on them. In doing so, it benefits bad Governments and middlemen in the third world and destroys the price structure for local farmers, perpetuating debt and poverty. Of course, the EU is not alone in dumping produce on the third world, but the CAP makes nonsense of our hopes that the EU might offer it a new and better pathway out of poverty and support the superb work that is being done by my right hon. Friends the Secretary of State for International Development and the Chancellor.

Not content with dumping food on the third world, the CAP dumps tobacco there as well. That tobacco is low in quality and high in tar and is rejected by Europeans. The same EU that rightly tries to protect its citizens from such tobacco is happy for it to be used to kill African and Asian people at the European taxpayer's expense.

Because of the CAP, each cow in the European Union receives a subsidy of $2.20 a day, according to CAFOD, an income greater than that of half the world's population.

In Europe, the CAP has done more to harm the environment than two world wars. It has promoted intensive farming—a better name for which is perhaps chemical farming; it has destroyed hedgerows and habitats; it has poisoned land, rivers and streams; and it has killed wildlife across Europe. Since 1970, the European Union has suffered a 40 per cent. loss in farm birds—an issue that is, I know, dear to the Minister's heart. That is the fastest known loss of species. If Shelley were alive today, he would write not an ode to the skylark, but an elegy. I shall seek another Adjournment debate specifically on the loss of bird life in the United Kingdom.

The CAP is a magnet for fraud, racketeering and organised crime, and if the scale and consequences of that fraud were not so terrible, it could form the basis of a new generation of Ealing comedies. One of the most memorable examples is the great olive saga. Realising belatedly that most of the CAP's £1.5 billion olive tree subsidy was being spent on non-existent olive groves, the EU used a £130 million satellite to spy on claimants. However, the technology was foiled when the claimants filled their bare fields with plastic olive trees. That may be yet another blow to the environment from the CAP.

Above all, the CAP has created a climate of cheating and corruption across Europe. For millions of European people it has become normal, even praiseworthy, to steal the resources that belong to all the people of Europe. Through the CAP my constituents not only pay higher prices and taxes, but finance crime.

The problems that I have outlined are well known and deep-seated. I do not say that there should be no regime to support agriculture. However, the regime should be open, honest and clear. Of course we need to protect our farmers and ensure that a proper food supply is maintained. That is a central tenet of any Government or union of Governments. Nevertheless, our current way of proceeding does not fulfil those objectives; rather than giving credibility to the wider concept of Europe, it undermines it. The problems will probably deepen when

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Europe broadens and expands, with the accession of new member states from eastern Europe, bringing millions of new agricultural claimants.

In Poland alone more people are dependent on agriculture than is the case in the United Kingdom, Italy and France put together. There is some optimism—although I hope that the Minister will not reply over-optimistically—about the possibility that enlargement will force the EU to reform the CAP. I am afraid that at the moment there is little evidence of that. Indeed, the French and Germans effectively kicked reform into touch until 2006. The accession states are being promised a rising percentage of payments from the CAP year on year up to 2013. I am afraid that it is far more likely that the accession states will create new allies and opportunities for opponents of CAP reform. While the Minister is battling away in Brussels for sensible CAP reform, the forces against his and the Government's efforts are not diminishing, but increasing.

We need a broader campaign. We must support our Minister, our Department and our national objectives on a wider scale. We can achieve that if the Government as a whole exert stronger pressure for CAP reform. I have no doubt that the Government are committed to reform, but that commitment must be more visible and voluble.

I have the greatest of respect for my hon. Friend as I have known him for many years and know the hard work that he puts in. Even so, the Prime Minister must take a strong personal lead in support of reform and make it part of his commitment to reform the European Union so that it has greater credibility among the people.

I would like our proposals on CAP reform to be accompanied by an unprecedented diplomatic and political offensive. I want every Government and every citizen of the EU, present and future, to be aware of a prime ministerial plan for European agriculture—a Blair plan, if I may call it that. I want the Blair plan to influence the political agenda of every country in the EU because I am convinced that citizens throughout Europe have as much to gain as we do in the United Kingdom.

Of course, 5 per cent. of European Union voters make their living from the land and agriculture, but 100 per cent. of EU voters are consumers and are waiting for a lead. Let us tell those voters why and how the Blair plan would mean lower food prices and lower taxes. Let us tell them why and how the Blair plan would help their small farms and rural poor, rather than the giant agribusinesses and racketeers. Let us tell them why and how the Blair plan would save their environment and their irreplaceable wildlife and give them healthier, happier animals and food of better quality. Let us tell them why and how the Blair plan would improve living standards and create new opportunities for some of the poorest people in the world and make a difference to them. All such things can move European voters as well as our own, and I am sorry that a Blair plan was not sold in such a way to the voters of France and Germany during the run up to their elections last year.

Let us waste no more time winning over every possible supporter for European reform of the CAP. The Government have everything to gain from a high-profile crusade for CAP reform, and it is a worthy cause for my right hon. Friend the Prime Minister, who is

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invariably at his best when he sees and expresses an issue in clear moral terms. This issue lends itself to that form of expression.

It is not only a practical necessity, but a moral duty, for the Governments of the EU to reform the CAP. It is a wasteful policy with wicked consequences, and nothing would do more to restore faith in the European Union throughout the UK and the EU than CAP reform. If I may veer into crude politics, it would also do my right hon. Friend a great deal of good in terms of the domestic political agenda. Indeed, I go further and suggest that CAP reform is essential if the Prime Minister is to win a referendum on the euro. If the EU remains incapable of running a successful common policy on agriculture after 40 years, why should anyone believe that it is capable of running a common currency and a common economic policy? As I said at the outset, the costs are not merely financial and to do with the waste of the common agricultural policy; there will also be heavy political costs if we fail to address the issue and fail to ensure that half of current spending in the European Union has the credibility that it deserves.

I hope that the Minister will address some of those issues. I am sure that the topic is on his agenda and that he works hard on it; however, it will not go away, and assumes greater significance as we approach a closer union, not merely in terms of the euro but in terms of the European project as a whole. Much rests on fundamental reform of the common agricultural policy.

12.45 pm

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Mr. Elliot Morley) : I congratulate my hon. Friend the Member for Nottingham, North (Mr. Allen). He makes a powerful case on all that is wrong with the common agricultural policy and on the kind of problems that our Government—every European Government—face in terms of the pressing need for the reform of the common agricultural policy. He is right in identifying the costs of the scheme; it currently costs about Euro45 billion in direct support. It is calculated that there is an additional Euro50 billion effect in relation to higher prices, which are due to protectionism through the interventions of various regimes. That has put prices up for the consumer. On top of that, member states' exchequers pay another Euro15 billion for a range of support for the agricultural sector. In the United Kingdom, that works out at some Euro15,000 per farmer per year, but as my hon. Friend rightly stated, there are distortions to that sum because of the structure of agriculture in our country.

The common agricultural policy has not been very successful for the consumer, the environment or, importantly, farmers. In many cases, the CAP, which is some 1.4 per cent. of the EU's gross domestic product, distorts markets. As my hon. Friend rightly states, the CAP has an impact on developing countries with agrarian economies, particularly when we very expensively support agricultural production with intervention prices and, to add insult to injury, dump surplus products on to international markets at subsidised prices. That simply depresses world prices, which in turn distorts proper world trade and has an impact on developing countries. It also has an impact on our producers, particularly those who are not subsidised under the CAP but have to compete with sectors that get those subsidies.

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My hon. Friend is also right to say that the CAP has led to intensification in a range of agricultural production. That intensification has, in many cases, caused environmental damage. It is often pointed out that farming shapes and maintains our landscape, and that is true. In many cases, it maintains a landscape that people think is particularly important and valuable. However, it is also fair to say that the intensification of agriculture has shaped our landscape in negative ways, too. One impact has been the decline in farmland birds, plants and insects. There has also been a loss of a range of fragile habitats, such as traditional hay meadows, flower meadows, and wetlands, which subsidies have made it worth while to convert for different forms of agricultural production. In some cases that change is driven more by the subsidy than by market demand and consumer requirements.

My hon. Friend is right to say that there is clear potential for fraud in all countries. There is also a costly infrastructure to administer. Farmers often complain about regulations and bureaucracy; the Government understand and have some sympathy, but if large-scale payments are to be made through public funds, there must be accountability and traceability, and that requires enormously expensive infrastructure. He is also right to say that the enlargement of the World Trade Organisation is driving reform. I agree that the Prime Minister and the Government have a role in terms of arguing the case for reform. Indeed, it is important, from an EU position, to argue the case for reform and to explain the potential benefits for the agricultural sector and its importance for consumers and society in general.

Mr. David Curry (Skipton and Ripon): Does the Minister agree that the one thing that is least likely to bring reform of the common agricultural policy is a Blair plan that is couched in the kind of moralising terms that we have just heard and which describes the whole CAP as a caricature of corruption? If the United Kingdom wants reform, would it not be better to cease talking that kind of language and begin talking in more practical language about how to help farmers, consumers, the environment and people generally, instead of saying how wicked the whole thing is? The CAP was put together by intelligent politicians for a reason.

Mr. Morley : The right hon. Gentleman is being a bit hard on my hon. Friend the Member for Nottingham, North, whom I did not think used that tone. I understand exactly the right hon. Gentleman's point. The CAP and its structures are rooted in a 1945 policy made during austerity and food shortages, when the priority was to maximise food production in a post-war world. In that context it was successful.

The right hon. Gentleman understands these issues and I agree with him that the CAP and its structures have outlived their usefulness. We are moving into another dimension in relation to food production, distribution, supply and agricultural support. There is more interest these days in environmental support, in how food is produced, in the quality of food and what is imported, in the treatment of animals and animal welfare. There has been a shift in attitudes and opinion. Of course, as my hon. Friend pointed out, and as the

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right hon. Gentleman knows, the WTO dimension regarding enlargement cannot be ignored. If the EU is to be enlarged, a move that the Government and I support, the CAP must also be reformed. I know that the right hon. Gentleman was making a point about how that should be discussed, but there is no disagreement on the need for that reform and for the case to be made.

Certain changes have been made. At the European Council in October an agreement was made to fix market support—pillar 1—expenditure for 2007 to 2013 to the levels set in 2006 plus 1 per cent. per year. That is an important restraint on EU expenditure, especially in respect of enlargement, and it must accommodate the phasing in of direct payments in new member states and the financing of further reform. That will not be open ended in relation to the kind of enlargement and changes that we are discussing.

We are also embarking on the mid-term review, to which Franz Fischler is committed. I have attended the Agriculture Council and I know that Franz Fischler has made it clear that decoupling is essential if we are to make progress in the WTO negotiations. We must move away from our present rigid agriculture support. We expect formal legislative proposals on the mid-term review on about 22 January. We support Commissioner Fischler's aims to secure agreement by the end of the Greek presidency in June 2003, although we recognise that that is a somewhat challenging timetable.

We think that the mid-term review is going the right way on the main points. There will be much negotiation on and examination of the detail, but we welcome the essential commitment to decouple payments from production, because that removes immediately some of the perverse incentives to over-produce that exist in the present system.

We are also interested in the cross-compliance and farm audits, which the Commission has proposed. As with everything else, the devil is in the detail—I shall press that point strongly.

Mr. Allen : Ordinary people must be persuaded of a couple of things and they need to be won over if we are to enhance the current European project. First, the careful detail that my hon. Friend has put forward must not be overturned by two or three important leaders getting together late at night and stitching up a deal. We must show people that we are working towards something that Her Majesty's Government have laid out and they must be able to see progress. Secondly, they also need—as I do—such things to be explained in clear, ordinary language. I understand why the Minister's explanation is technical, but to convince people about the reform pathway for the common agricultural policy, the argument must be put across to people. Some of us may understand the language—the distinguished Chairman of the Select Committee on Environment, Food and Rural Affairs, the right hon. Member for Skipton and Ripon (Mr. Curry), in particular may

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understand the terminology, although I do not pretend to—but we need to find a way to bring people along with us.

Mr. Morley : My hon. Friend is quite right again. Those of us who work in these areas tend to get absorbed in the jargon and take it for granted that people understand the points being made.

Mr. Curry : Before the Minister starts on decoupling, let me say that the hon. Member for Nottingham, North complained that the CAP directed the largest amount of money towards the richest farmers. Will the Minister confirm that the Government's policy in the mid-term review is to defend the direction of money pro rata to farmers irrespective of the size of their farms and to oppose the Commission's proposal to place a financial ceiling on the amount that individual farmers can receive?

Mr. Morley : Yes, I can confirm that the right hon. Gentleman is correct, but I should explain why. There is a proposal to put a ceiling on payments, and our problem with that is that our farms are bigger than the European average and the effect would fall disproportionately on the United Kingdom. There is also a practical problem: once one introduces ceilings on farm sizes, it is not difficult for people to split up holdings and register them in other family names, which would cause all sorts of management difficulties.

We want to move away from subsidies. We want to decouple completely, and we do not want to get involved in any proposal about ceilings because that, as far as we are concerned, would merely tinker with the system. We are committed to a more fundamental review. Although the right hon. Gentleman's comments are accurate, they should not be taken as a Government commitment of support for the big farmer against the small one, because that is not what we do.

We have enlarged and increased the English rural development programme by applying modulation in the UK, which no other member state currently does, although it is likely that others will follow. It could be argued that the biggest and wealthiest farmers contribute the most by putting money back into the scheme. Modulation takes a proportion of the subsidies—currently about 4.5 per cent.—and puts it into the rural development programme. That increases the finance available for schemes such as countryside stewardship, which is popular with farmers—it has a great deal of support in relation to applications—and with consumers because, given a choice between supporting environmental management or production payments, the vast majority will choose the former.

Countryside stewardship is a way of supporting farmers who provide benefits for the funds that they receive and is a far more targeted, transparent and productive way of using the money than at present when commodities are sometimes produced for which there is no real market.

Mr. Allen : My hon. Friend is generous in giving way again. He has little time left. Does he agree that the credibility of some of the wider European issues is being undermined by failure to reform the CAP?

Mr. Morley : I accept that point absolutely. It is also well recognised by the Prime Minister. If one wants to

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argue for big changes such as adopting the euro, one must address what my hon. Friend rightly describes as an embarrassment. The problem provides a rich seam to mine for those hostile to the concept of Europe and of member states working together. As my hon. Friend said, all sorts of nonsensical policies and potential frauds are involved, which tends to undermine European institutions. Therefore, reform is essential not only for farmers, consumers and the environment but for the credibility of the European Union.


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