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12 Feb 2003 : Column 986—continued

7.36 pm

Mr. Anthony D. Wright (Great Yarmouth): As many Members will know, Great Yarmouth is one of the UK's major tourist resorts, but a large proportion is rural and there are many arable farmers. Over the past few years, one of my constituents, Richard Hirst, has raised several issues with me, one being the mid-term review of the common agricultural policy.

Mr. Hirst tells me that, while he does not disagree with the principle of decoupling payments from production, the current proposals will have a severe effect on farmers like him who have not used their entire farms to grow eligible crops but have engaged in a sensible rotation including cereals, sugar beet, potatoes, vining peas and other vegetable crops. Over the past three years about 35 per cent. of the cropping area of his farm has been eligible for area aid payments, and about 6 per cent. for set-aside payments.

The new proposals suggest a single payment—to which Mr. Hirst does not object—based on the average claim for area aid between 2000 and 2002.That means that he will receive a much smaller payment than neighbours who have made much higher claims in the past. He will also have to set aside 10 per cent. of the cropped area to qualify for the payment, with no restrictions on the cropping that he can undertake. That means that a neighbour could receive a much higher payment, and then start introducing other crops and offer his produce for sale for a lower price than Mr. Hirst can offer, in the knowledge that he is receiving a greater subsidy per hectare than Mr. Hirst can receive. Mr. Hirst will also have to set aside more land than he sets aside now, which will also reduce his income significantly.

At present, Mr. Hirst is trying to do all the things that DEFRA suggests. He is growing crops for specific markets, mostly with contracts with processors or as near to the end user as he can get. He has land in countryside stewardship, and is about to undertake a study with Birds Eye to look at the possibility of producing crops in a sustainable manner. Because he is doing all that, he will be severely penalised—to such an extent that he suggests it might be better for him to give up farming altogether.

Mr. Hirst has put to me two options that he believes may mitigate some of the proposals. If the Minister cannot deal with them now, perhaps he will write to me. The first suggestion is that payments should be based on all eligible land, not just that claimed for arable area payments in the previous two years. The set-aside levels would again be based on those of the previous two years. The second is that, if the proposals are not changed, there should be a restriction on cropping preventing farms from undercutting those who grow alternative crops.

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I would appreciate a reply from the Minister. I am sure that farmers in my constituency appreciate the work that he is trying to do for farmers, not just in my constituency but in the UK as a whole.

7.39 pm

Andrew George (St. Ives): I appreciate the Government responding to the European Scrutiny Committee by enabling this important debate on the future of agriculture in Britain, so that the House can give the Government a mandate to bat hard in Europe on behalf of our agriculture. It is clear that the proposals for the mid-term review, although welcome to some extent, do not go far enough. In many people's eyes they constitute a timid fudge, compared with what we should be seeking to secure. It is also clear that the Government need to form alliances in the manner that certain other countries have publicly sought to do, in order to secure the better outcome for British farmers that the hon. Member for Great Yarmouth (Mr. Wright) spoke of a moment ago when discussing one of his constituents.

Although the documents before us are somewhat technical and complicated, and use language that will seem opaque to those who are not linked to the farming industry, they relate to the heart of the British people's relationship with the land, and to their psyche. To some extent, there still exists in the rural community a whimsical romanticism and a sense of utopia: a sense of man in close relationship with, and being challenged by, nature; a sense of the connection between man and his environment. [Interruption.] I mean "man" in the general sense—mankind. Indeed, this issue is fundamental to the way in which we look at agriculture in this country; it is at the heart of our identity.

It is important to reflect on the fact that, as any agricultural economist knows, it is inevitable that farms get larger over time. Over the past two centuries, concerns have been raised and protests made about the drift towards ever-larger farms. Of course, as people spend less of their disposable income on food, it is inevitable that farmers need to make more money from their holdings if they are to retain the same living standards as the rest of the population. The inescapable result is that farms become ever larger, which is why it is important that the Government intervene. If we are to retain a connection between rural society, the countryside and the primary industry that occupies most of that landscape, and if we are to prevent the countryside from being turned into prairie and ranch, in my view and the view of many who represent rural constituencies it is important that appropriate interventions be made to ensure that small family farms have a future.

Despite what the Minister may say about the need to reflect and protect the interests of larger farms, and about the impact of these proposals on such farms, the fact is that in a year when 15,000 farmers went out of business—the largest number who have done so since the second world war—there is serious concern that that process is likely to accelerate over time under the current agricultural structure. Indeed, certain aspects of these proposals are liable further to accelerate that process, which is why many people are concerned about them.

There is cross-party consensus that the proposals on decoupling are welcome: to break away from production payments and to move towards single

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payments is essential. Will the Minister tell us how long taxpayers can be expected to tolerate payments to farmers for, in effect, doing nothing? I realise that there are cross-compliance issues, but farmers will be paid merely for being farmers. The European Scrutiny Committee felt that the point should be covered in the debate.

The Government must have made an assessment of how long the current arrangement is likely to last, so it would be useful to know their view. UK society is largely urban, so the majority of taxpayers are town dwellers. They will find it less and less credible to pay farmers merely to be farmers. The Government should link management contracts to those payments so that they can be used to deliver the public, animal welfare, environmental and other outcomes that, for example, the Government seek to achieve through the creation of environmentally sensitive areas and other types of scheme. The public would then see genuine benefits from payments to farmers.

The Minister drew attention to the significant unfairness in the system of modulated payments. It is fundamentally wrong that such payments should go to Brussels and be distributed through Brussels rather than a UK authority. I know that my colleague in the Scottish Executive, the Minister for Environment and Rural Development, has joined the Secretary of State for Environment, Food and Rural Affairs in making strong representations to other European leaders and to the Commission. The arrangement is wrong. British farmers make significant payments to the central European fund but receive back only a fraction of them in the form of rural development and agri-environment scheme funds. British agriculture quite rightly protests that it does not operate on a level playing field in relation to the rest of the EU.

Mr. Hayes: The hon. Gentleman makes an important point. There will be inequities not only within countries but between them. Europe could absorb money from our farmers and our industry and then reallocate it to other countries. The money will be lost not only to farming but to the nation. The hon. Gentleman's point is worth amplifying.

Andrew George: I am grateful to the hon. Gentleman for his support. I urge the Minister to tell his European counterparts that we require national modulation schemes whereby funds are disbursed in the country in which they are raised. Instead of taking a uniform approach on the exemptions—the floors and ceilings—that apply, it would be far better to have variations that reflect the structure of farm-holding in each EU state. We need genuinely to devolve some of those decisions, especially on the management of the system. I urge the Minister to pursue that point in his negotiations.

Mrs. Browning: I do not disagree with the hon. Gentleman about looking at the differences, but as a Liberal Democrat spokesman will he please understand that a single market—for which his party is constantly pressing—means uniformity? That makes it so much harder to achieve any distinction between different markets, methods of farming and sizes of farms in EU countries.

Andrew George: I am grateful for the hon. Lady's intervention but her party took us into the single market

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and encouraged us to take the line of bland uniformity that Liberal Democrats do not accept. As with fishing and many other policy areas, of course we need to agree fundamental reforms at the centre, but Liberal Democrats would like to see devolution of the responsibility for the delivery of those policies. This may come as news to the hon. Lady, but our policy has remained consistent. We cannot take a uniform approach to agriculture, fishing and other industries across the whole of Europe and say that it must apply however difficult the circumstances. We must have a policy that reflects agreement on fundamental principles, then applies them appropriately in a devolved way in each nation state.

As to the dairy regime, if the Government favour—of the four options available in the mid-term review—a rapid phasing out of quotas by 2006, in the Commission's own estimate that would result in the price of raw milk at the farm gate falling by 38.5 per cent. on the basis of the 2001 benchmark. Dairy farms in this country are considerably larger and much more efficient than in many other countries, but they are barely able to make a living from current milk prices. It is important that the Minister addresses the likely impact of a further 38.5 per cent. price reduction. It could bring a ranching of the UK dairy sector, with much larger units divorced from farming and the local community in a way that has not been seen before. Having broken up Milk Marque, which we argued was inappropriate, perhaps the Government need to grab the bull by the horns and address farm gate prices. It is clear that dairy farmers do not receive a fair income that meets their production costs.

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