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12 Feb 2003 : Column 976—continued
Andrew George: I thank the Minister for giving way. It is important that interventions are taken as they help to make the Government accountable.
I agree with the Minister entirely in his criticisms about how the proposals for modulation have been drawn up, so what alliances will the UK Government
seek to form with other member states to drive through the kind of reforms that he and I would like to take place?
Mr. Morley: The hon. Gentleman makes a fair point. To get change, we need to seek the agreement of other member states. Other than ourselves, I think that Germany is the only other country that is currently using the voluntary procedures. France tried that, but its scheme ran into all sorts of problems. They applied 20 per cent. maximum modulation to some farms and it appears that the French did not have the schemes to spend the money on. It was not the most brilliant of programmes.
Germany certainly supports our views. Other countries also support our views on how the proposals should be changed. Many Scandinavian countries strongly believe that there should be a shift from production support to rural development support. Hon. Members will probably be aware that part of the Commission proposal is that not all the proceeds of modulation will go to rural development. Some of the proceeds will go into paying for restructuring of other aspects of the CAP. One can see some logic in that, but it is a pity that the way in which the modulation is constructed and pitched will reduce the amount of funds available for rural developments, which we think is where the money should be switched. Clearly, there will be considerable discussion on how that is applied and about the details.
Finally, in terms of our concerns, we find some of the proposals related to the reform of the dairy regime very disappointing. While I strongly support the Commission's approach in relation to extending and rebalancing the price cuts in this sector, I have serious concerns about the suggestion that the dairy quota regime should be extended for a further seven years. The Commission has proposed changes that go some way down the road we shall need to travel if we are to remove quotas entirely and to improve our competitive position in world markets. The United Kingdom's views are well known. We would welcome an orderly phasing out of milk quotas, and it seems that member states and the Commission are moving to a position in which they accept that milk quotas will end. If so, the sooner we do that, the better it will be, rather than extending it in this way.
David Burnside (South Antrim): As the Minister comes to the end of his concerns, will he comment on a major concern in Northern Ireland, where our farms are smaller than those in England, Scotland and Wales, with the 32,000 farms averaging out at about 60 acres? The biggest impact of the reduction of £340 million between 2006 and 2012 will fall on the small farm sector, and that is a major concern of the Ulster Farmers Union.
Mr. Morley: I understand that. The hon. Gentleman is probably aware that the Commission's proposal includes a threshold limit in which there will be no modulation, so there will be some protection in its proposals for the smaller farms. There are arguments for and against. We have applied modulation in this country across the board. We had some debate about
that when we were originally discussing how modulation should be applied. There were proposals in our own country that there should be a similar approach of a threshold in relation to smaller units. However, when one looks at the detail one sees that there are all sorts of problems. There is the risk of encouraging people to divide farms into small units to get on to the threshold.We felt that the standard, across-the-board modulation, which is simple, easy to understand and easy to apply, was the best approach. We believe that the Commission should take this approach as well. As it happens, this system, given the structure of Northern Ireland farms, which I know very well, offers them some protection.
Mr. Michael Weir (Angus): There are similar concerns in Scotland. Is the Minister convinced that the level, which I think is Euro5,000, is too low to affect smaller farms? There is also serious concern in Scotland that the medium-sized farms in constituencies such as mine, rather than the larger and very small farms, will be hard hit by modulation, because they will lose a considerable part of their income. Does the hon. Gentleman have anything to say on that?
Mr. Morley: I think that the Euro5,000 issue is a matter for debate. At this stage in the proposals, obviously all the details are debatable in the negotiations. We shall listen to views that we receive about the threshold levels.
With regard to medium-sized farms, if there is a percentage modulation the larger units and those receiving the most in subsidies are the ones contributing most in modulation. So there is an element of fairness in the way in which it is applied, in that it recognises the level of subsidy that individual units receive.
Mrs. Angela Browning (Tiverton and Honiton): The Minister said that he is opposed to the extension of the milk quota to 2014. I hope that he will understand that for those farmers who have quota, which include those who are still actively engaged in dairy farming and some who own quota for which they paid but who lease it out as part of their income, there is a need, as with any other business, to be able to plan for the medium and long term. I hope that the hon. Gentleman will qualify his remarks by saying, if he is opposed to 2014, what he thinks is the optimum time. Farmers, particularly in the dairy sector, are very concerned, and deserve clarification. If I catch your eye, Mr. Deputy Speaker, I may say more about that.
Mr. Morley: The Government have made it clear many times that quota should be phased out. That can come as no surprise to the dairy sector. The hon. Lady will know that there are mixed opinions in that sector, but many people think that quotas have stultified its development by acting as a brake on innovation and expansion, and they would welcome their demise. I accept that people have invested in milk quota and we would not expect to see them end overnight. I agree that a reasonable date should be set which we can work towards to phase out quota. Although we think that the proposed dates are too far away, there are also proposals gradually to increase the amount of quota for
each member state. That will liberalise the regime to an extent. We think that 2006 would be a more realistic date for the phase out of milk quotas.
Mr. Roger Williams (Brecon and Radnorshire): With a reduction in the intervention price for dairy products, the value of quota could reduce to almost zero. The National Farmers Union anticipates a fall of more than 30 per cent. in milk prices. With farmers finding it difficult to produce milk that covers their costs, will any dairy farmers be left in Britain?
Mr. Morley: I believe that there will be because the dairy sector can adjust to the changes. Of course there are structural problems in the sector. My noble Friend Lord Whitty recently chaired the meetings of the food chain initiative. It has addressed some of the sector's problems, such as its seasonality and the slump in prices because of that. It has also considered ways to even out production and the low value products that milk goes into.
The issues can be addressed. I accept what the hon. Gentleman says about the value of milk quota. It is likely to fall. There is the added complication of the recent European Court ruling on non-producing holders of milk quota. They will have to divest themselves of it, which means that a lot of quota will come on to the market, and that is bound to influence prices. Having said that, there are complicated proposals in the mid-term review on calculating entitlement in terms of what quota someone may hold in future. That is unsatisfactory because it encourages people to accumulate quota on the basis that that might influence the support payments on the quota that they hold. In turn, that might remove quota from the market, especially in terms of lease availability. So there are all sorts of complications in relation to quota. That illustrates why we would be better off by moving away from them. We find it impossible to understand the logic that has driven the Commission to propose a further two years of price cuts on milk and an extra seven years of quotas. That is not appealing.
Those are the main criticisms, but we must not lose sight of the positive elements of the Commission's proposals, in particular the benefits of decoupling. That is an important gain and certainly one worth having. I also accept that much technical work has to be done on the proposals before the Council is in a position to assess the details of what they mean to our farmers. However, the reforms are crucial to our ability to deliver viable and sustainable farming in Europe and to withstand increasing competition from the rest of the world. That is why we need to get on with the negotiations, to reach an agreement and to address the details of the proposals. We will robustly make the case for UK farmers when the proposals are clearly against our national interest and we will argue for changes to be made. We will also look closely at how some of them are meant to work, including the problems inherent in the details and the possible bureaucracy that they might create. We will, of course, listen to the agricultural sector and other stakeholders, and will listen closely to hon. Members who wish to comment on such issues, especially in relation to their constituents. The CAP reforms are long overdue, but they are going in the right direction, as they put farming on a much more sustainable footing.
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