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Farm Incomes

6. Mr. Hugo Swire (East Devon) (Con): If he will make a statement on farm incomes. [215594]

The Minister for Rural Affairs and Local Environmental Quality (Alun Michael): Total income from farming in the UK is estimated to have fallen in 2004 by 5.4 per cent. in current prices, or by 8.1 per cent. in real terms, to £3.01 billion. Despite the recent fall, total income from farming in real terms was almost 70 per cent. higher in 2004 than at the low point in 2000.

Mr. Swire: Given that the Prime Minister is in an apologising mood, will the Minister take this opportunity to apologise to the hundreds of dairy farmers, and particularly those in the south-west, whose incomes have fallen year on year since Labour came to power? Given that the Secretary of State has consistently stated that she does not think it right or proper for the Government to get involved in negotiations on milk prices, what practical advice does the Minister have for the sector, which is suffering from a lack of Government understanding and woeful neglect?

Alun Michael: The apology should come from the Conservative party, which neglected agriculture for decades, so I am surprised that the hon. Gentleman had the cheek to ask the question. If one examines the issues, one sees that a wide gap exists between the performance of the most and least efficient dairy farmers—we concentrated on that issue at the last Environment, Food and Rural Affairs questions. We have made a grant of nearly £500,000 to the Food Chain Centre to examine how to improve dairy supply chain efficiency, because we must address the issue of productivity. In the next few weeks, we will receive a report from the Office of Fair Trading on the operation of the supermarket code of practice. The hon. Gentleman should recognise that the Government are contributing to the many things that are going on.

Mr. David Drew (Stroud) (Lab/Co-op): My right hon. Friend understands that farmers want an early sign that they will receive single farm payments. As we live in the era of the Freedom of Information Act 2000, does he agree that the figures on payments by the state to individual farm holdings should be disaggregated, so we can see that the payments are going where they are most needed and that we are getting the best return?

Alun Michael: I agree with the principle enunciated by my hon. Friend that it should be clear that money from the public purse is achieving the intended outcomes. Because we are discussing farm incomes generally, it is worth pointing out that the upper trend in incomes since the low point in 2000 reflects increased productivity in the farming sector—labour productivity is up 18 per cent. and total productivity is up 5 per cent. The farming industry is tackling its own problems, and the
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Government are working with it. As my hon. Friend has suggested, examining what is really happening rather than point scoring will help the industry in the long term.

Sir Peter Tapsell (Louth and Horncastle) (Con): Bearing in mind that many Lincolnshire farmers face an acute financial crisis, will the Minister say when the new single farm payment will be made? Will it be paid at the same time as or earlier than under the old system, and will it be staggered?

Alun Michael: If the hon. Gentleman had followed the exchanges at the last Environment, Food and Rural Affairs questions, he would know that the single farm payment will consist of a single payment, which will be made at the front end of the window. For a variety of technical reasons, we cannot promise to do that this year, when we hope to make the payment as early as possible. We are working with the industry on the best way of making sure that farmers benefit from the move to the single farm payment and on minimising any disadvantages in moving from the old system of partial payment and supplementary payments, which was not best for farmers. The situation is getting better.

David Taylor (North-West Leicestershire) (Lab/Co-op): A few days ago, I went to Cattows farm in Heather in my constituency with pupils from the local primary school to plant trees on that land. Those were some of the 6 million trees that have been planted over the past 10 years in the national forest largely located in my constituency. Will the Minister say a word or two about the potential of reafforestation in contributing towards a boost in farming incomes? Across north-west Leicestershire and south Derbyshire, we are seeing the fruits of what is being achieved in national forests.

Alun Michael: My hon. Friend raises a number of interesting points in what seems a simple question. The growth of some 7 per cent. in reafforestation makes a contribution to the income of farmers. Exercises such as that in which my hon. Friend was involved help young people to understand the importance of that, which is crucial. Of course, they also make a contribution to tackling climate change and general environmental improvement.

Andrew George (St. Ives) (LD): The Minister has already made it clear that he is aware that many thousands of farmers on the very margins of survival are anxious to hear more news and guarantees about the timing of the single farm payment, particularly its impact on tax records and cash flow. Will he therefore give serious consideration, in his discussions with farmers, to the possibility of an up-front payment of the bulk of the estimated payment before the end of this calendar year, with payment of the residue before the end of the payment window?

Alun Michael: If we followed that road, we would increase the bureaucracy involved. As we have said, we want to make the single payment as early as possible, bearing in mind that very complex processes have to be gone through to achieve that. As the hon. Gentleman's question implied, no one has any doubt that in the
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longer term, once we have bedded in these systems, making the payment up front, at the beginning of the window, will be to the benefit of farmers, and that it is worth going through the change this year. We will consider with farmers' representative organisations what we can do to ease the transition.

The hon. Gentleman rightly says that many people, particularly farmers on the margins, are looking to the future with some trepidation. However, it is worth pointing out that, this year, the latest farm land values show an increase of 25 per cent., with farmers buying most of it for the first time in many years. Confidence in the industry is increasing. Productivity is the big challenge. We are addressing the variations in productivity across the industry through the strategy for sustainable farming and food and the investment that we are putting into helping the industry to be more efficient and effective and to have a successful future.

Paul Flynn (Newport, West) (Lab): Is it fair that farm income should be further boosted by raiding the taxpayers' pocket again for the £600 million by which animals were overvalued during the foot and mouth epidemic? Is it not time to break the link between valuers and farmers whereby farmers can choose their own valuers, who have a perverse incentive to overvalue animals because their commission is paid as a percentage of the animals' total value?

Alun Michael: I understand my hon. Friend's point, but compensation that has been paid has been paid; that is in the past. Furthermore, money has been withheld where there were doubts about whether the money was justified. We are sometimes criticised for not having paid out money quickly enough. We are genuinely considering the public interest and ensuring that it is protected, and there have been changes in the system as a result of the experience gained during the crisis. I understand the points that my hon. Friend makes, which have been very much taken on board in the systems that are now in place.

Mr. James Paice (South-East Cambridgeshire) (Con): I am sure that the Minister agrees that farmers' incomes in future will increasingly depend on whether they can command a premium in the marketplace to exploit the high standards of production, animal welfare and environmental care. Does he therefore understand the utter frustration that the National Farmers Union, the Tenant Farmers Association and the National Beef Association express about their inability properly to exploit those advantages while the Government continue to allow food to be labelled as British when it is not?

Alun Michael: I am not sure whether the labelling of food is the problem. The problems and the fall in income this year are to do with lower market prices for cereals, a rise in input costs—primarily, the higher world oil prices—and movements in the exchange rate. There have also been lower prices for some classes of cattle and sheep. That leads to a fall in income. However, the hon. Gentleman should acknowledge that farm incomes are volatile—they go up and down, year after year and are influenced by many factors. We want to ensure stability
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and sustainability in farming by increasing productivity. That will enable farmers to compete in the future and to cope with the inevitable volatility in the market.

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