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7.15 pm

Mr. John Hayes (South Holland and The Deepings): I beg to move, To leave out from "Policy" in line 5 to the end of the Question, and to add instead thereof:

"recognises the need for a substantial recovery in farm incomes from the present low base to a level at which UK farmers are earning sustainable and competitive returns; supports the objective of achieving prosperous rural areas, an enhanced natural environment and provision of high-quality, safe food and high animal welfare standards; welcomes the European Commission's appreciation of the need to reform the Common Agricultural Policy, which absorbs half the EU budget, and recalls Government failures in this regard; further welcomes the proposals to decouple payments from production, and for further market reform; but has deep reservations about the effects of the current proposals on UK agriculture and recognises that the British people are increasingly hostile to a system that penalises both UK taxpayers and farmers; believes that dairy regime reform should provide greater opportunity for the UK dairy sector to add value to their product through producer-based processing; notes that the Commission proposals involve a potentially unfair mechanism for transferring funds towards agri-environmental and rural development measures; and urges the Government to use all the means at its disposal to ensure that these proposals are redrafted in the interests of UK farmers and consumers."

Calls for common agricultural policy reform have been the habit of politicians in the United Kingdom and across Europe as long as the common agricultural policy has existed. Crises, watersheds and turning points have come and gone, so the House will understand my scepticism about the likelihood or even possibility of reforming the CAP in our nation's farming interests. Similar scepticism among farmers is not just the product of realism about Machiavellian Euro politics, but is spurred by the demoralisation of British agriculture in recent years. Although it is understandable for reasons of political expediency, it is wholly unacceptable that the Government failed to mention in their motion the desperate state of UK farming. Our amendment properly sets that out, thus putting the debate in its proper context.

As the whole House knows, British agriculture is in crisis by any measure. Farm incomes are about a third below their 1995 level, a fall greater than that in any other European country. In 2001–02, input costs rose by 1.8 per cent. in Britain, whereas they have fallen in Europe as a whole. The number of people leaving the industry continues to grow, bank borrowing is still increasing, and in most sectors farm-gate prices are insufficient to give farmers a real chance of earning a decent living. British agriculture is in a desperate state, but things are different for our so-called partners in continental Europe—the kind of partners who are ever ready to take commercial advantage of catastrophes such as BSE or foot and mouth, and conspire to frustrate the Government's half-hearted efforts to protect our national interests. Conservatives recognise that there can be no viable British countryside without viable British agriculture.

It is unclear whether the Government share our view, but it is certain that most Europeans are not faintly interested in the survival of British farming. It is clear, however, that the CAP has encouraged highly intensive production-driven agriculture, as the Minister acknowledged in his opening remarks. Over-

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production, for example in the beef and dairy sectors, and price distortions have led to a perverse agricultural marketplace.

Mr. Roy Beggs (East Antrim): Does the hon. Gentleman acknowledge that to operate a viable farm business such as an intensive farm business in Northern Ireland and other parts of the United Kingdom, many small farmers have land on conacre year on year? It is not clear where the benefit of the new change will be felt. Will farmers benefit from the land that they own or rent on conacre, or will the benefit go to their landlord?

Mr. Hayes: There are genuine issues about whether the payments will go to the owner of the land or the farmer, and the hon. Gentleman is right to raise them. The hon. Member for St. Ives (Andrew George) made a good, fair point about tenant farmers, which the Government need to address. We expect purposeful and robust answers from the Minister to clarify the sensible point made by the hon. Member for East Antrim (Mr. Beggs).

Mr. Morley: It may help the House if I answer straight away. Under the proposals, the payments go to the farmer, whether he is a tenant or landowner. If he is a tenant, he has the right to payment if he moves to new land, which gives him some protection.

Mr. Hayes: That is, of course, right, but there are often difficulties in the relationship between owner and farmer, and they need to be ironed out. If payments go to the farmer, they can be moved around as the Minister suggests, but we need clarity about the different responsibilities and opportunities that exist for owners and farmers of land. I think that that is the point that the hon. Member for East Antrim was making, and it is a good and solid point.

Several hon. Members rose—

Mr. Hayes: I must now make some progress, but I shall give way again later if I have time to do so.

Farmers, often against their instincts, have pursued a regime that has resulted in a distorted market with an increased propensity for disasters, all at enormous cost to the British taxpayer. No one can blame farmers for dancing to a tune composed by others, nor honestly claim that the process has been led by consumer demand. Through its payment structure, the CAP has stimulated larger farms in the UK. I am mindful of the large, efficient arable farms in the east of England, many of which are situated in my constituency. They are good businesses run by good people, so it is a bitter irony that the Commission's modulation proposals will penalise large, efficient farms—in other words, British agriculture, in which farm size is larger than the European average.

Mr. Roger Williams: Last night, the National Farmers Union told us that the proposals abolished the Euro300,000 ceiling, yet the Minister said that there was some disincentive in respect of the efficient holdings that the hon. Gentleman is talking about.

Mr. Hayes: I can clarify that issue for the hon. Gentleman. That ceiling or cap existed in the proposals

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issued in July 2002. It was dropped in the proposals published at the beginning of this year, as I am sure the Minister will confirm by nodding, but he is right that there is concern that some member states want to reintroduce the ceiling. There is enthusiasm among some continental Europeans for reintroducing the cap, which would do even more damage to large farms, as he suggests.

It is clear that British farmers who happen to be large farmers will lose almost 20 per cent. of their income as a result of the direct payments. Worse still, it is true that some people want to reintroduce the cap to which the hon. Member for Brecon and Radnorshire (Mr. Williams) referred. In general, there is a strong case for allocating single payments to the farmer. As the hon. Member for East Antrim suggested, the complex issue of transfer of entitlements will need to be resolved where landlords and tenants are involved. As I said, it is important for the Government to develop a scheme that fairly reflects the legitimate interests of the relevant parties.

Mr. Beggs: Will the hon. Gentleman allow me to intervene again?

Mr. Hayes: Yes, but I want to make progress as this is a short debate. If I may, I shall ask the hon. Gentleman to keep his remarks fairly short. I shall then try to deal with them.

Mr. Beggs: I thank the hon. Gentleman for giving way again. We have an entirely different system in Northern Ireland. Tenant farmers have been mentioned and the situation is relatively clear in that respect. However, most farmers in Northern Ireland own freeholds and rent land from other farmers who are not active. That is where clear guidance has to be given.

Mr. Hayes: I would never attempt to second-guess the hon. Gentleman's legendary expertise in all matters Northern Irish, but I heard what he said, as I am sure the Minister did. Clearly, those issues will need to be taken into account when such matters are dealt with in further European negotiations.

The current reform of the CAP is motivated not by a desire to address the sort of problems that have already been mentioned in this debate, but by the realisation that maintenance of the CAP in its current form is incompatible with enlargement. For that reason, in addition to modulation, we face decoupling—a cocktail that, in its proposed form, is likely to be highly disadvantageous to British farming.

There is a good argument for recognising the special role that farmers play as custodians of the countryside through agri-environmental payments, but such payments must be equitable, enforceable and cost-neutral. To ensure that they are equitable, a baseline must be established that recognises past good practice and ensures that British farming is not measured merely by the unrepresentative post-BSE and foot-and-mouth years.

Mr. Richard Bacon (South Norfolk): My hon. Friend mentioned baselines. Foot and mouth and BSE are two diseases, but my constituents suffered very heavily as a

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result of classical swine fever. Is it not wrong that farmers who suffer as a result of such diseases and therefore have very atypical years should be penalised because those years are treated as a baseline?

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