House of Commons
|Session 2007 - 08
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General Committee Debates
European Standing Committee Debates
Common Agricultural Policy Health Check
The Committee consisted of the following Members:
Hannah Weston, Committee Clerk
attended the Committee
The following also attended, pursuant to Standing Order No. 119 (5):
Monday 25 February 2008
[Mr. Joe Benton in the Chair]
Common Agricultural Policy Health Check
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Jonathan Shaw): We welcome the debate, under your chairmanship, Mr. Benton, on this consultation document, which is a recent communication from the European Commission on preparing for the common agricultural policy health check.
It is worth stressing at this point that the paper is consultative and that the Government await the full detail of the Commissions legislative proposals in May. We will consult stakeholders at that time before reaching our final position. However, today we have a good chance to debate the overall direction of travel and our ambitions.
My right hon. Friend the Secretary of State for Environment, Food and Rural Affairs has set out a clear vision for farming, outlining what we would like to see both for and from farming. We want an industry that earns its rewards from the market for quality and safety and for the environmental and animal welfare standards of the food and the products it makes. In other words, we want the industry to be profitable and competitive, domestically and internationally, and for it to collaborate to meet the challenges it faces and to manage risks. We want the industry to embrace its environmental responsibilities such as tackling climate change, managing water and the soil, and for it to see those as essential to long-term economic success rather than as a threat. We want the industry to be valued and rewarded by society for the environmental services it provides, which include managing the landscape and enhancing biodiversity.
CAP reform is a key element to achieving that vision for UK and EU farming. As it stands, the CAP is expensive, wasteful and inefficient at providing ongoing support to farmers. It distorts global markets, weighs farmers down with regulation and acts as a disincentive to farmers to maximise their competitiveness. Our long term vision is the elimination of pillar one of the CAP, which would leave public subsidy targeted at specific benefits such as environmental enhancement through pillar two. The health check is an important step in that process. It will not touch the overall size of the CAP budget, but it will offer scope to revise some of the key distortions of the CAP.
We welcome the Commissions health check paper in so far as it is in line with our longer-term vision. The health check will potentially bring benefits to the industry and improve the delivery of environmental benefits through farming. We must ensure that the proposals in May are ambitious. In order to bring such benefits, the health check legislative proposals need to be underpinned by these principles and aims: to reduce
We hope that the Committee appreciates the need for caution in revealing our red lines and end-game tactics at this stage, but our feelings on some elements of the CAP that are dealt with in the health check are no secret. For example, we wish to see an end to coupled payments in all member states, to simplify things and to create a more level playing field for our farmers, and to give them full autonomy over their production decisions so that they can compete in global markets. We would like export subsidies and intervention to be phased out and the abolition of milk quotas and set-aside, although we need to ensure that we mitigate the environmental effects of the latter. Those measures have distorted trade and increased costs to consumers, and they have inhibited farm competitiveness.
We would like to see the transfer of funds from pillar one to pillar two to deliver targeted environmental benefits. We need to guard against new distortions and complexities from capping. We believe that upper limits will be distorting and complex and that they will lead to avoidance by farmers who pay lawyers and accountants to break up their businesses and risk management. We need to avoid EU-funded risk-management measures that are likely to inhibit farmers from taking responsibility for their own business risk, stifle the development of private sector mechanisms by reducing demand and lead to trade and market distortion.
The health check is not the end of the road towards reform. The EU budget review provides an important opportunity for the EU as a whole to examine the cost of the CAP closely and to consider how the policy should be reshaped beyond 2013 to ensure that it is fit for purpose and that it delivers maximum value for the EU taxpayers money, in line with our vision.
The Chairman: We now have until 5.30 pm for questions to the Minister, and I remind the Committee that questions should be brief. Subject to my discretion, it is open to hon. Members to ask a series of related questions, one after the other. However, I trust that hon. Members who do so will bear in mind the interests of other hon. Members, who may also wish to pursue a sustained line of questioning.
Mr. James Paice (South-East Cambridgeshire) (Con): May I also say that it is a pleasure to serve under you, Mr. Benton, as we address this potentially hugely important issue? As you suggested, I shall ask a number of questions, all of which will be fairly closely interlinked, but I obviously appreciate your point about other colleagues. My questions will deal to a great extent with the overall direction taken by the consultative document and the Governments attitude to it. I was interested in the Ministers comment about red lines; if they prove as fallacious as the ones that were allegedly achieved in the treaty that we are debating on the Floor of the House, they will not achieve much.
First, however, I want to ask about something that the Minister has just said. He outlined the Governments attitude on the future of the CAP, and I have a lot of
Jonathan Shaw: We do want money to be shifted from pillar one to pillar two, and there will be changes in that respect, as the Commission sets out in the health check. Obviously, that will be subject to negotiation. Do we want all the money to be shifted from pillar one to pillar two? If we did, we would have to devise a whole series of mechanisms to implement that. We do not have a percentage at this stage, but we want to end subsidy for production in the long termthat is the long-term vision. We do not want subsidy for production, but we want more money to be spent on environmental goodspublic goods. Will that be exactly the same amount of money? Overall, the 40 per cent. of the total EU budget that we are talking about will, again, be subject to negotiation, and member states may want to use money for purposes other than subsidising production. However, we have not made a firm decision on such issues; the budget will be worked up and negotiated, and the Treasury will lead on that. We have not said that we want to move a particular percentage from pillar one to pillar two or that we want the same total amount. Ultimately, however, our aim is to end the subsidy for production.
Mr. Paice: I am grateful to the Minister, but, with respect, he has ducked the point. In his introductory remarks, he said that the CAP is expensive. One can only assume from that that the Government would like less money to be spent on it. We will no doubt discuss percentages of modulation later, but I am trying to address the Governments longer-term vision in terms of shifting resources from pillar one to pillar two. If the intention is that the CAP is to be less expensive, as we must assume from the Ministers comments, he is presumably talking about less expenditure overall, whether or not it is on environmental production, which is a separate issue. Am I right to make that assumption?
Jonathan Shaw: No, it is expensive for what it does in terms of the subsidy of production. In terms of the value, would we want to spend all that moneythat 40 per cent. of the total EU budgeton environmental public goods? I am not in a position to say. That is for the longer term. It is expensive for what it does, and our ambition is to see an end to the subsidy of production. Those are the two principles, and I hope that that answer the hon. Gentlemans question.
Kelvin Hopkins (Luton, North) (Lab): My hon. Friend the Minister read out a list of damning criticisms of the CAP, which has been a running sore for the past few decades. To apply the term health check to such a policy is perhaps too mild. Will my hon. Friend assure us that the kind of robust criticisms that he made in his opening speech are made regularly within the forums of the European Union and are not just for our own consumption?
Jonathan Shaw: I can assure my hon. Friend that I and other members of the ministerial team do not play a different game at home and in Brussels; we are consistent in our messages. One example of that is the point to which I have just referred. We want to see an end to subsidies. For example, we have been very robust in calling for an end to milk quotas, which we may come on to talk about. We will see a rise in the quota level, which we welcome. I am saying that here, and we said it in the Council chamber. I can assure my hon. Friend that we deliver a consistent message to the Commission, to other member states, to colleagues here and to a wider audience in the industry.
Kelvin Hopkins: I thank my hon. Friend for his answer and for that reassurance. CAP promotes perverse distributional effects in fiscal transfers between countries in the European Union. For example, some of the relatively rich countries can be on the receiving end, while others, which may be relatively poorer, are net contributors. Those perverse effects cannot be undone unless the CAP is fundamentally reformed. Britain suffers a net loss on the budget simply because of the CAP. Will my hon. Friend say that he will constantly make that point to our European colleagues until it is corrected?
Jonathan Shaw: Obviously, we want corrections; that is why we have our rebate. That will remain until we get the required level playing field on funding. The existing subsidies cause difficulties not just for countries within the EU. I know that that is an issue that my hon. Friend holds dear. There is also the question of subsidised exports, as wellproduction that is dumped on developing countries, which prevents them from developing their own industries and getting into EU markets. Such exports prevent those countries from becoming self-reliant, leaving them dependent on grants from more wealthy members of the developed world, and the EU in particular. We want to see funding that is more broadly based, an end to subsidies that affect production and competition within the EU and further afield.
Mr. Roger Williams (Brecon and Radnorshire) (LD): It is a pleasure to serve under your chairmanship, Mr. Benton. EU Agricultural Commissioner Mariann Fischer Boel has been at pains to point out that this is a health check and not a heart transplant for agriculture and that changes should be minor. Listening to the Ministers statement, there is not much there that surprises us. Will he rule out any major changes to CAP, such as co-financingin other words, nations funding their own agriculture support?
Jonathan Shaw: What is in the health check is what I have set out. We want to see the process reformed. As the hon. Gentleman rightly pointed out, it is not a major or significant change, but we agreed in 2005 that we would have this interim evaluation of how progress was being made. It is important that we see, for example, decoupling. The figure is about 90 per cent. at the moment; we want to see 100 per cent. and we hope that we will get at least 95 per cent. We will be pushing the barriers to ensure that reform is at the upper end of what our vision sets out.
Mr. Williams: The budget for the common agricultural policy is fixed to 2013, but accession countries such as Bulgaria and Romania now have to share in that fixed budget. Has the Minister made any assessment of how that will affect support for British farmers and what reduction in absolute terms that situation might inflict on them?
Jonathan Shaw: Not immediately, but I am sure that as the debate goes on, I will, and I will make the hon. Gentleman aware of it.
Mr. Mark Todd (South Derbyshire) (Lab): I repeat the words of my colleagues about serving under your chairmanship, Mr. Benton: I am sure that it will be a pleasure. Can my hon. Friend the Minister expand on one area that is touched on in the consultation? I am referring to an approach to deal with some of the most offensive elements of the CAPnamely, export support.
Jonathan Shaw: I am happy to expand on that issue and my hon. Friend is right to point it out: it is offensive. We should be mindful of the fact when we speak to our constituents. People who are concerned about the developing world want to see nations that are self-reliant, with people able to farm and produce goods for themselves. We need to be conscious of the common agricultural policy because it holds those people back from developing their own businesses and farming industries. That is why the Doha round will be so important. If we are to lead that debate, we need to do so by example, so that we can apply pressure to other countries that are perhaps less willing than us to see that transformation.
In line with our 2005 Commission for Africa reportmy hon. Friend will be aware of the recommendationswe want the EU to end export refunds by 2010. It would be good if that was done as part of a deal that saw them end elsewhere, but it should happen regardless; as I said, we need to lead by example. Export refunds are a particularly distorting mechanism, as they lead to the dumping of subsidised produce on the world market, which reduces the prices that other countries can get for their produce. In the context of the World Trade Organisation negotiations, the EU has offered to end all export refunds if others do likewise. However, the Agriculture Commissioner has suggested that the EU should end export refunds regardless, and we support her in that regardless of what happens in relation to the WTOdeal or no deal.
Mr. Todd: Those are welcome words. May I draw the Minister on to the global market situation in relation to many foodstuffs produced within the European Union? Many of us would regard the interventions and market constraints that are imposed as ridiculous at a time when global demand for cereals, dairy products and many other products is growing at a quite staggering pace. Does the Minister think that that message has got across to the EU Commissioner and her team? Is she proposing measures that are adequate to meet this very different circumstance?
Jonathan Shaw: My hon. Friend is right: the world has changed and prices have changed considerably. Cereal prices, for example, are good for our cereal farmers, but they have proved hugely difficult for and
Another issuewe may deal with this in more detailis biofuels. We have been subsidising them, but we clearly want to subsidise only those that come from high-quality sustainable sources. That is important, but we certainly would not agree to further subsidies; that question is very much open. I hope that I have answered the points raised by my hon. Friend.
Mr. Bruce George (Walsall, South) (Lab): My question may appear to be hostile to the European Union; I am more Euro-acquiescent than Euro-hostile or Euro-enthusiastic. One cannot consider the EU or the common agricultural policy without abuse and corruption coming to mind. Given that corruption is alive and well and prospering within the EU, is the Minister satisfied that adequate attention is being paid in this health check to rooting out, if humanly possible, corruption within the systemeither in the UK or in the mechanisms that may exist in the rest of Europe?
Jonathan Shaw: I am grateful to my right hon. Friend for that question. There are three important principles for the EU budget review: subsidiarity, with our being able to make our own decisions; proportionality; and sound financial management. European taxpayers money must be spent effectively and correctly. That will certainly be a key issue for us when considering the EU budget reforms post-2013.
Mr. Paice: I turn to another aspect of the single farm paymentcompulsory modulation, which the Minister touched upon in his opening remarks. The Commission proposes raising the rate from 5 per cent. to 13 per cent. In 2002, the original proposals for what became loosely known as the mid-term reviewin fact, it was the most fundamental reform ever of the CAPsuggested a figure of 20 per cent. That suggestion was dropped, and we now have the much lower maximum of 13 per cent. The Minister has already made it clear that the Government support the transfer from pillar 1 to pillar 2, as do the Opposition, but what is the Governments attitude to 13 per cent. and what sort of alternative figures might they consider?
Jonathan Shaw: Concern has been expressed by the industry about voluntary modulation. The hon. Gentleman knows better than I do that rural development programmes were not considered until relatively recently. As a consequence, only we and Portugal have used voluntary modulation. We are now going to have compulsory modulation, which we welcome. On the question of percentages, as I said in my opening remarks we cannot reveal everything at the moment, but concern has been expressed that the overall amount that we receive will reduce with the introduction of compulsory modulation.
Mr. Paice: I am grateful for that, but I think that the Minister misunderstands. We already have compulsory modulation; it is nothing newit is at 5 per cent. I am simply asking the Government if they think that 13 per cent. is roughly right, or that the figure should be 50 per cent., for example.
I would like to take the Minister on a stage and refer to his earlier answer to me about the phasing out of pillar 1. Does he not agree that the most sensible way to phase out pillar 1 is by a phased transfer from it to pillar 2 through compulsory modulation, heading up to zeroor 100 per cent. modulationso that there is no payment left in the single farm payment? Is that not the best approach for the Government to take over a time scale that will inevitably go beyond 2012?
Jonathan Shaw: The hon. Gentleman is right that we want to see that transfer and our vision is clear about the abolition of pillar 1. Whether all of that money is transferred in the way that he describes goes back to our initial discussion and the questions he asked me about the Governments vision in terms of the totality of the CAP within the EU budget. I am not in a position to describe the detail of our vision. All I can say to the hon. Gentleman at this stage is what our guiding principles are. He has pointed out the percentage, and yes, the percentage of voluntary modulation will rise from 12 per cent. in 2007 to 14 per cent. for England in 2012. We welcome the changes that have been introduced. We want to see the end of pillar 1; quite how it will end remains to be seen.
Mr. Paice: May I therefore take the Minister on to the issue of cross-compliance with pillar 1, the single farm payment? I am sure that we have all received many representations from outside organisations about cross-compliance, including proposals to enhance it, to toughen it, and to simplify it, as set out in the document. If the single farm payment disappeared, so too would cross-compliance. The Minister will understand that, because cross-compliance is the means of obtaining one single farm payment. Equally, if the single farm payment becomes very minimal, then it may be questionable whether people will bother with the cross-compliance aspects of it. What is the Governments attitude to cross-compliance and how are they responding to the various organisations that are seeking changes to the cross-compliance regulations regime?
Jonathan Shaw: I am pleased that the hon. Gentleman has raised this issue, because there is a lot of concern in the farming community in particular about the existing system. I would like to talk about that concern just for a few moments. People complain about there being too many inspections; they complain that too much time is spent on small failures, which can have a considerable impact in terms of loss of income; and people also believe that there needs to be more simplification. We think that there should be fewer inspections, they should be more broad-based and they should be targeted at farms where there are concerns. If a farm has had an inspection and it is clearly
We also think that some of the requirements should be removed. One can give the example of hormone use. There are other mechanisms in place throughout the food chain for detecting hormone use; if that use is picked up, the whole of a herd is destroyed, so no farmer will use hormones. Another issue is sewage sludge, which is a matter for the water companies, not for farmers, but they are still inspected on it. We want simplification and reductions where possible. However, cross-compliance is also attached to pillar 2, through the rural development programme.
Mr. Roger Williams: The hon. Member for South-East Cambridgeshire raises the issue of voluntary modulation. That is one aspect where farmers think implementation of the single farm payment is not exactly common, because there is distortion between different countries. Also, countries such as France obtained a derogation at the start of the single payment scheme, so that some of their support was still linked to production; that is another distortion within the Community. During the health check, will the Minister press for those derogations or distortions to be eliminated from the scheme?
Jonathan Shaw: We are concerned about the use of the national envelope under article 69 of the CAP reform agreement, which may be seen as a sort of back-door recoupling. We have £3.9 billion for the rural development programme, which is double the figure for previous years. We know that farmers are concerned about voluntary modulation and the reason for that is historical, as I said to the hon. Member for South-East Cambridgeshire. We did not apply for those schemes some years ago and as a consequence, given that they are historically based in terms of what has been applied for, we are not able to yield the type of income that perhaps other countries do. Hence the voluntary scheme.
From a farmers perspective, that can be hard when he finds that his income from his single payment is reduced. However, for the rural economy overall, we believe that it works well. There is a range of schemes, as the hon. Member for Brecon and Radnorshire will know. As I have mentioned, the agri-environment schemes are worth about £3.3 billion to areas of public good, which are where we want our money to be spent.
Mr. Williams: Perhaps I may point the Minister more directly to the issue that I am concerned about, which is that in France and some other countries there is still a direct production subsidy related to beef and cereals production. Although it has been reducing, it still exists, and we see that as a problem. Will the Minister press, through the health check process, for the elimination of those production subsidies that British farmers feel distort trade against them?
Jonathan Shaw: We will, as I said in my opening remarks. We want decoupling. It is at 90 per cent. now, which was an achievement of the 2003 reforms, and we
Mr. Todd: May I first ask about set-aside, the original principle of which was to create a means of reducing volume production? It has brought significant environmental benefits as well, but logically it has no place in a world where production no longer needs to be limited because there are markets for virtually anything we may produce. How does one balance the two objectives of liberation from a market constraint and preservation of the environmental gain that may have been achieved?
Jonathan Shaw: My hon. Friend is right. I do not expect that when set-aside was first devised, the architects of the policy could have had the foresight to see that it would bring important environmental gains.
My hon. Friend has raised the question of reform. We want set-aside abolished, for the reasons that he mentioned, but we want to mitigate the impact of such a move in terms of the environmental benefits. My right hon. Friend the Secretary of State has written to Commissioner Mariann Fischer Boel to make that point to her, and I and other colleagues have raised it at Council meetings. We want to ensure that we capture some of those benefits, while not inhibiting farmers use of their land. We need to strike a balance.
There has been criticism from Natural England and the Environment Agency, which advise the Government. Both wanted 5 per cent. of all farm land to be set aside, but we did not think that that was realistic. However, we will be monitoring cropping patterns and looking at the evidence, and Sir Don Curry, who is the chairman of the group responsible for the sustainable food and farming strategy, will bring together environmental and industry partners to look at the issue, so that we capture the environmental gains, while allowing our farmers to produce.
Mr. Todd: The topic of dairy quotas is substantially covered in the documents. As I suggested in an earlier question, demand for dairy products is growing rapidly around the world, and a key issue is how we equip the British dairy industry to meet that growth. That will require the development of appropriate plant to process milk into a form in which it can be consumed in the growing markets of the far east and India. How is the British sector coping with that prospect, bearing in mind that we have quite a long run-in before the abolition of quotas? How might the Commission assist a fundamentally efficient industry such as ours to meet those challenges?
Jonathan Shaw: One important way in which not only the Commission but all member states can assist is by not back-tracking, which is very important if they are to ensure that we have certainty. However, that will be difficult. If the quota rates are lifted, as they will be, and are eventually abolished, that will have an effect on prices and on some businesses. If people are to be
Mr. Paice: Risk management is also mentioned in the proposals. The Minister said that the Government do not support the Commissions proposals. I will have to paraphrase what he said, because I did not write down his words, but I think that he said that the Government did not support anything based on European market support or production support. If that is correct, I must point out to him that the proposals are not for Europe-based support; indeed, page 9 of the European document clearly states:
Commission analysis and expert opinion indicate...an EU-wide solution...would not be appropriate...It is preferable to allow
regions, or producer groupings, via second pillar measures, to assess better their own risks and their preferred solution.
Will the Minister explain more about the Governments opposition to risk management, especially if it is partially self-funded, as an ultimate safety net against major market shocks in a reformed or almost-abolished CAP?
Jonathan Shaw: The Commission may not be bringing such a policy forward, but member states determine the ultimate policy and some member statesone can guess whichsee a role for crisis and risk management at EU level. That is why I made my remarks in that way. I hope that the hon. Gentleman supports the Government position on that.
Of course, in the business world, things happen, and businesses must take account of the risks that they face. Are farmers like normal businesses? They are in one way, but there are differences. No one could have predicted that crops would be flooded in July. Farmers could not get insurance against that, although my right hon. and noble Friend Lord Rooker is talking to the industry about insurance schemes. When markets collapse because of, say, an exotic disease or foot and mouth, member states must pay out if they see fit; they should not seek funding or subsidy from the EU. That is why I made the comments to which the hon. Gentleman referred. Regardless of what the communication says, we were concerned that other member states might propose such a policy, and we wanted to make it clear that we would resist.
Mr. Paice: May I ask for clarification of the Ministers remarks, for which I am grateful? Do we take it from that that the Government are not opposed in principle to the idea of sector, regional or some other form of risk management being partially funded by the CAP? In this case, the Commission proposes funding from
Jonathan Shaw: I am not sure that we would want to use pillar 2 for insurance purposes. I have spelt out what we think pillar 2 should be about: it is a wide-ranging funding stream that provides a host of different opportunities, but we have not said that we want it to be used for insurance purposes.
We may be able to develop our own scheme. As I said, my right hon. and noble Friend Lord Rooker is talking to the farming and insurance industries to see whether we can develop mechanisms. Putting aside foot and mouth for the moment, we had bluetongue last year, which we knew was coming, and heavy rainfall, which we can expect to see more of, but we are going to have to manage such things. We will have to co-operate and work with our European partners, but we should develop risk base and insurance schemes at member state level.
Mrs. Betty Williams (Conwy) (Lab): On that very point on insurance and flooding, there is a problem in the Conwy valley in north Wales. I do not expect the Minister to comment on that particular case, but it needs to be addressed.
The document states:
Officials of the Devolved Administrations have been consulted in the preparation of this Explanatory Memorandum.
Has the Minister received representations from Ministers of the devolved Administrations as well as officials?
Jonathan Shaw: I can certainly assure my hon. Friend. Forming a UK position requires us to consult and work closely with our colleagues in the devolved Administrations. Developing and shaping our position will of course involve consultation.
Development programmes are devolved, so I can refer only to the development programme for England. However, our negotiating position within Europe will obviously be at member state level. Colleagues will be aware that we have an interesting array of other political parties in the devolved Administrations, and that presents us with challenges, but I am sure that we shall all work hard to ensure that we reach a good UK position.
Mr. Roger Williams: When the single payment scheme was introduced, nation states could adopt various approaches to meeting the requirements. England, for reasons that are still not 100 per cent. clear, decided to adopt the dynamic hybrid, which turned out to be the most difficult to implement. I was going to say that the Government suffered the consequences, but the agricultural industry suffered them as well, although a fine may be imposed on DEFRA for late payments in the future. Can the Minister say whether DEFRA is encouraging other nation states to change their systems of payments in the future, or is it content that other nation states can still adopt whichever policy they think is most appropriate?
Jonathan Shaw: The difficulties of the Rural Payments Agency and the single payment scheme are well documented. I see around me several members of the Select Committee on Environment, Food and Rural Affairs. Indeed, my first appearance before the House in my present role was to respond to the Select Committees inquiry on the Rural Payments Agency and the Governments vision for common agricultural policy reforman evening I remember well.
On the question of the differences between an historically based system and an area-based system, I think England is right. The system allows the farmer to determine what types of crops and animals he wants, responding to the market rather than being saddled with a scheme that goes back a number of years. Yes, of course mistakes were made, and we have rehearsed them on several occasions. We believe that the Rural Payments Agency is performing much better now and is going forward under Mr. Coopers leadership.
As for what will happen in the future, the point that we want to reach in common agricultural policy reform is a dynamic market in which farmers can make decisions based on market considerations and not on subsidised production considerations. It therefore seems to me and to the Government that the area-based system is the most appropriate.
Motion made, and Question proposed,
That the Committee takes note of European Union Document No. 15351/07, Commission Communication, Preparing for the Health Check of the CAP reform; and supports the Government's aim that the health check should cut further the trade-distorting nature of the CAP, reduce regulatory burdens, give farmers greater control over their business decisions and direct more public spending towards delivery of targeted public benefits. [Jonathan Shaw.]
Mr. Paice: This is a good opportunity not just to challenge the Minister about some of the proposals, and, more particularly, the Governments attitude to them, but also to discuss one or two issues surrounding the CAP. Reference has been made to some serious accusations about the CAP, and there is no doubt at all that over the years it has caused immense political angst, as well as huge expenditure, waste and fraud, and that it has been of dubious benefit to consumers and even sometimes farmers.
However, people often forget how far the CAP has changed. I mentioned earlier that the so-called mid-term review, the first of whose health checks we are debating, was the biggest change in agricultural policy since 1947, when market support of any form was introduced. Many peoples attitudes perhaps still have not caught up with what is really happening, and certainly with the fact that, as the Minister has said, in England we have no market support by way of direct payments. We have export restitution, and I agree with the Minister that the sooner it goes the better. The same applies to import controls if we really believe in a free market.
In relation to the health checkI am grateful to the Minister for his introductionwe need to be looking further forward than 2008, to what we will see in 2012
Kelvin Hopkins: I am interested in what the hon. Gentleman is saying. Does he agree that life for the farmer was more stable under the previous system of income support for farmers, before the CAP was introduced on our joining the European Union? Was that not a better system and did it not suit farmers better?
Mr. Paice: I am grateful for the intervention, but it was not an income-support system; it was a straightforward guaranteed-price system whereby the farmer sold his animals or his product on the market, and every March the National Farmers Union and the then Minister would get together to carry out the price-fixing review. They would set the prices over a timetable, varying with seasonality, for the next 12 months. Each day or week, the Ministry of Agriculture would work out the difference between the average market price for a commodity and the guaranteed price, and send the farmer a cheque for the difference. That is what the system boiled down to, and yes, in many ways it was just as stableperhaps more stableand it certainly meant that it was all funded by the taxpayer without any increase in cost to the consumer. Therefore, there were not the issues of export restitution and so on, but of course we were in a very different world. There was no global trade in food, or very little. There was New Zealand lamb but little else from the Australasian sub-continent, and there was virtually nothing, apart from Fray Bentos corned beef, from south America.
Mr. Paice: Not in those days. We were in a very different world and I do not think that we can really wish to go back to it. No, I want to see the British, the European and the world agricultural industry operating on a free-market basis.
Kelvin Hopkins: I appreciate the hon. Gentlemans commitment to a globalised free market, but if we ask the average farmer whether they prefer the stability that they had under the old system to the uncertainties that they face now, what will they choose?
Mr. Paice: If the hon. Gentleman asked, dare I say it, my generation of farmersthe generation of most of us in this roomhis supposition would be right.
Mr. Todd: I intervene merely to reinforce what the hon. Gentleman has said. Young farmers in my constituency have emigrated to New Zealand on exactly that argument.
Mr. Paice: I am grateful for the hon. Gentlemans endorsement of my point. If we move towards what I have described, that will be a stable position, and the industry needs to be in a stable position in which it can plan for the long term without having to face yet another mid-term review, yet another health check and yet another reform of the CAP, and without having to open farming magazines and see politicians calling for the abolition of the CAP or another reform of the CAP. The sooner we can move away from that, the better. The industry will be far better off.
The health check is a lost opportunity to begin planning. When I was a Minister I attended Council of Ministers meetings, albeit not in this policy area, and I know that what one country wants does not necessarily get through and that what the Commission wants is not necessarily accepted. I had hoped that the Commission would have been a little more adventurous about its long-term vision for what should happen post-2012, using the health check to start marking out the future. Nowhere would it have been better done than in the area that I mentioned in my questions to the Ministerthat of the single farm payment.
We, too, want to see a shift of resources from pillar 1 to pillar 2. That is why I pressed the Minister on whether he wanted all resources to go across or only some, with some being cut altogether. In principle, I believe that all support should be channelled through pillar 2, and that pillar 1 resources should be phased across. Instead of increasing compulsory modulation to 13 per cent. by 2012, I would like to have seen a much more robust phasing system introduced, with a 5 per cent. or even a 10 per cent. per annum increase in compulsory modulation, so that everyone could plan more carefully.
Of course, if we go down that road, we hit another issue that I raised in my questionsthat of cross-compliance. We debated set-aside when the hon. Member for South Derbyshire raised the subject. Different and widespread views are held about set-asidewhether some land should be forcibly required to be set aside and about cross-compliance. I agree with the Governments position on set-aside. It should not be an issue of cross-compliance. However, if we phase out the single farm payment we effectively single out cross-compliance.
The Minister said in response to questions that cross-compliance is part of pillar 2. Unless he intervenes on me or answers the question when winding up, I hope that he will write to me to explain where. With the
I much prefer the principle of the carrot rather than the stick, with a targeted incentive. For me, pillar 2 provides the opportunity to produce the benefits that the public, as taxpayers, are prepared to pay for, whether it is to do with flooding, with the environment as suggested by the Royal Society for the Protection of Birds, or with the development of environmental priority areas. We need to refine some of those systems and schemesthe payments are still rather broad-brushbut it is essential that the details should be left to member states.
I am sure that I am not the only Member to have been surprised at the way in which the Commission rejected our entry level stewardship scheme when it excluded management plans from the points scoring system. Those plans should never have been included, but I find it astonishing that the Commission should have had to make the decision rather than the UK.
We have to deal also with the issue of climate change. The document makes many references to that. I believe that the growing of crops for fuel or energy is something that will be resolved by the markets, and I do not want to see too much Government intervention. Other aspects, however, such as the development of the necessary plant technology and supply chains, may require other aidsfor example, a feed-in tariff for electricity generation. I am not convinced of the need for specific CAP measures, so I am a little concerned at some of the suggestions in the document.
I have several other concerns. The first is about our hill farms. Under the heading of dairying, the document refers to measures for mountainous regions. In this country, dairy farming is not a traditional occupation in most of our hilly or mountainous regions, although it takes place on the edges of some. It is much more likely to be beef or sheep farming. However, there is a social need to keep a farming population in our remote upland areas. To be honest, given the free market situation, it is doubtful that the economics of producing livestock in the hills will ever be sufficient to retain them. We need to expend some effort to find the best way forward. I know that the Government have had a consultation about what should replace the hill farm allowance and are proposing a form of stewardship scheme. I am not entirely convinced that that is the best way forward. Nevertheless, I am glad that the Government recognise the need for special measures to protect our livestock farming in the hills.
Jonathan Shaw: I agree with the hon. Gentleman on the hill farm allowance. He said, though, that he was not convinced that what we are proposing is the right scheme. Will he expand on his doubts?
Mr. Paice: I am happy to have a longer conversation with the Minister if he is genuinely interested. My doubts are over whether the proposal is sufficient and whether it is not too complex. The fundamental problem that we have in our hills has changed
Kelvin Hopkins: It seems to me that the hon. Gentleman is making a strong case for managing agriculture at a national level. Marginal and incremental changes that ensure that the land and the people who live on the land are well looked after, and that we have the right balance between the environment and the livelihoods of people, is much better dealt with at a national level rather than at the vast and sprawling European Union level.
Mr. Paice: I accept the hon. Gentlemans comments. He and I probably approach the issue of Europe from a slightly different perspective. However, at this level of detail, of course it should be decided at a national level. [Interruption.] The Minister says that to a large extent it is, but it all has to be approved by the Commission, as we have just discovered with the changes to the management plans of the rural development programme for England.
Let me move to my other concerns. The first is to do with the new 10 countries that are still in the transitional phase of accessing the CAP. There is a fairly stark graph in the European papers that illustrates how funding is shifting between the old 15 and the new 10, which comes back to my earlier point about the need for a stable system. I do not know whether it is possible to speed up their accession, but the sooner that they can get on to the same system as the rest of us and the whole of Europe moves forward with a much simplified, much reduced and much less interventionist CAP the better. All the extra support that those countries are getting now is certainly a bone of contention among English farmers. However, I remember the early to mid-1970s, when the English farmers received such support.
As far as I can see, there is no attempt in these papers to make any assessment of future supply and demand. We have seen a seismic shift in attitude over food supplies in the last two or three years. Earlier, the Minister referred to his having to walk the Governments vision for agriculture. I must tell him that, if one takes at face value what the Prime Minister and the Secretary of State both said at last weeks NFU annual general meeting, that document is out of date, because that vision for agriculture specifically stated that food security was not a policy issue and yet both the right hon. Gentlemen to whom I have referred made great play of food security in their speeches last week. So there is some confusion here.
From our point of view, we are very concerned about long-term supply and demand, because of issues such as increasing demand, climate change and so on, and we think that it is important to retain a viable agricultural industry in this country, not by some sort of interventionist Government support but by enabling it to compete as effectively as possible.
The hon. Member for Luton, North referred earlier to the developing world and I would like to make a point in that regard. If we find, as many experts suggest, that in 20 or 30 years time there is a food shortagea shortage may be a slight exaggeration, but there may be much less food available in the world market than there is todaywe, as a rich country, can be sure that we will be able to buy it if we need to, but it is those developing countries that will miss out, because they will not have the resources to buy expensive food on the world market, particularly when many of them will face the massive population increases that are also forecast. Africas population is forecast to more than double by 2050. Therefore, it is in the interests of the developing world, as much as in our own interest, that our industry is allowed, enabled and encouraged to succeed.
Kelvin Hopkins: The point about the security of food supplies for the future is something that concerns me too. However, one of the difficulties that Britain has is that we may have a problem of being able to feed ourselves in a world where there is over-demand for food. Many of these developing countries can produce at least subsistent levels of food, which we may not be able to do in the future. I think that that is an issue that ought to be exercising the Government. Would the hon. Gentleman agree?
Mr. Paice: I certainly agree that this issue should be exercising the Government, which is why I highlighted the shift in emphasis in the last couple of years by the Government on it. I will not detain the Committee any longer; I have already spoken for longer than I intended to. I just wanted to conclude by making a couple of points about the longer term.
There are some civil aspects of the Governments approach with which the Opposition agree, about decoupling the ending of market support, although risk management may have a role to play. I also support the Government in opposing the idea of an upper threshold for payments; the Government are quite right in opposing that idea.
However, where I believe that the Government have missed a trickit was Tony Blair, the former Prime Minister, who missed it just after the Government published its vision for agriculture to which we have just referredwas in trying to get the co-financing to which the hon. Member for Brecon and Radnorshire referred in a question. I say that because this issue of the rebate, which the Minister quite proudly paraded, is central, and if we could have a compulsory co-financed CAP, we would begin to see the attrition of the rebate at no cost to this country at all. Then, the types of issue that the Minister referred to, which is why we have not in the past accessed so much rural development moneyit is because of the rebate, Treasury rules
Finally, I hope that the Minister will undertake to return to the Committee in May or June, when we have the firm legislative proposals from the Commission that will arise from this consultation. Only then can we can have a substantive debate on what is being proposed rather than a more general debate, which is what we have had today.
Kelvin Hopkins: It is a pleasure, Mr. Benton, to speak under your chairmanship, even though I am not technically a member of this Committee and not a nominated member. Nevertheless, I am most grateful for the opportunity to speak today, because this is an issue that, like many other Members, I am concerned about, and I have spoken on a number of occasions in the Chamber about the CAP, arguing time and again for its abolition. It is time to avoid repeated reforms that do not make that much difference in the end, certainly in terms of costs. The costs of the CAP are still vast, and with 10 more countries to adjust to, they will become greater, because most of those countries are relatively poor and relatively more agricultural than ours. If we are to raise their living standards, they will clearly need a big share of CAP funding. The CAP is misguided, and tinkering at the edges by calling for health checks and marginal reforms is no longer sufficient.
Like you, Mr. Benton, I represent an urban seat, where there are no fields at all and I am therefore concerned about the costs of agriculture to the consumer. Leaving aside the CAPs budget costs, which are considerable, its cost in terms of increased food prices in Britain has been estimatedthis has been confirmed by the OECDat about £15 billion a year, which is a staggering sum. Given that food prices are starting to rise in world markets, that figure will diminish, but it is an enormous sum, which represents an extra £20 a week just on food prices for a family of four. If it were not for the CAP, we would have access to cheaper food and food prices would come down, to the benefit of many ordinary people, particularly those in my constituency who are not so well off. Some of us can afford to dine out and live well, but many live from week to week on relatively small incomes, and such issues are important for them.
There are other issues relating to the CAP, and I mentioned some of them in interventions. One is the security of food supplies for the future. In the second world war, we had a problem providing food for ourselves. Looking around the room, I think that one or two others might have been alive in the war, but I certainly was. We had rationing, although our diet was apparently rather healthy because we were given only the essentials. We certainly were not obese, because we took more exercise and walked everywhere, given that we did not have cars. However, I digress. We had a national problem with providing food for ourselves, and it is right that the Government should look to the long-term future to guarantee the security of food supplies, with a significant proportion provided at the national level.
Every country of the European Union has a slightly different pattern of agriculture, but this country is rather different in that a smaller proportion of our overall economy is committed to agriculture. It is no surprise, therefore, that we have become net contributors to the budget. We have gone along with the CAP because people are committed to a broader European vision and because we cannot seem to overcome the resistance of France, in particular, to getting rid of it. If all members of the European Union were responsible for their own agriculture, they could adjust policy to their own needs. If they choose to subsidise some sectors but not others, so be itwe should let them do that. We would perhaps choose to subsidise hill farmers, and I would agree with that. There are no hill farmers in my constituency, but they are part of our heritage and environment, wildlife is dependent on them and they provide a useful addition to our national food supply. Hill farmers might therefore be subsidised, and other sectors might be, too. In that way, we would at least have a targeted, carefully refined policy that was adjusted to our needs.
There is also the question of supply and demand. Agriculture and agricultural products are notoriously volatile in terms of prices. Those hon. Members with a smattering of economics may remember the cobweb theorem. Agricultural supply responds to demand with a time lag. If supply collapses one year because of a bad harvest, prices can shoot up. The next year, farmers will over-produce because prices are high, and the price will drop. We therefore need a stabilising factor, because simply leaving things to the free market is not a sensible way forward. We must have a degree of intervention in the agricultural sector, and that intervention is best done at the national level, with agreements across the world about not subsidising exports, for example, and about not behaving in an unfair way towards countries that are less well off.
Within the EU, we clearly want to work fairly and to assist poorer countries to develop, but not through the CAP. The CAP does not do so anyway, but adjusting it so that every country benefited equally and in the same ways is not the way forwardit would be horrendously expensive and distorting. The best way forward, as I have suggested many times, would be to distribute the budget according to the relative prosperity of nations, so that rich nations contribute according to their ability, and poor nations derive sums according to their needs. We could then decide on an annual basis, collectively, how much we were going to transfer, and what the fiscal transfers between the nations of Europe would be. We should not use the CAP as a misguided and inefficient way in which to redistribute income. In fact, that does not work, because some rich countriesIreland in particulardo relatively well out of the CAP because they are heavily agricultural, but other, relatively poor countries do not do quite so well.
There are all sorts of arguments why national Governments should decide their own agricultural policy and adjust their policies according to their nations needs. In the longer term, that would be beneficial around the world. The big blocsthe EU and the United Stateshave caused all the mayhem in world trade in agricultural products by heavily subsidising their own big, rich producers. To get away from that, individual European nations should have
The net contribution of the CAP even to France is less than it was. The French rightly wanted to subsidise a particular way of life. I take my holiday almost every year in France, and I enjoy that way of lifeit is wonderful. However, it is for France to decide what French country life should be like. It should not use the CAP to sustain it; rather, it should be sustained by national Government policies.
Mr. George: On his journeys to France, has my hon. Friend come across any French peasant farmers? If there are any, they drive very large cars. Assisting French peasants was one of the original purposes of the CAP.
Kelvin Hopkins: My right hon. Friend makes a good pointsome French farmers no doubt do well out of the CAPbut the CAP also makes a massive contribution to people for whom farming is a part-time activity. In Germany, many people who work in cities have little farms out on the edge of the city, and they benefit greatly from subsidies per tractor, for example. They do not need the money and they may not need to produce much food, but they get a great subsidy from the CAP. That is not sensible. If the subsidies were decided by a German Government, they would perhaps not be so generous; they might look at incomes and wonder whether they want to subsidise a local bank manager, say, because he has 10 acres of sheep farming.
The CAP is misguided. It needs not simply fundamental reform but abolishing, and agriculture policy should be restored to national Governments. Everyone would be happier with thatboth individual EU nations and nations throughout the world would feel that they were being treated more fairly. Agricultural policy would be better managed, less distorting and much fairer.
Mr. Todd: I am listening with amazement to some of my hon. Friends ideas. He appears to be advocating a patchwork of policies across Europe that, logically, would lead to competition between nations on regulation and interventions that would distort every market in Europe.
Kelvin Hopkins: I shall finish on this note. I really think that agricultural policy worked much better in Britain before we joined the CAP and that it would work much better if there were no CAP now. It would be much better for the countries of Europe and for the world. There is an overwhelming case for the abolition of the CAP, and if it were not for the resistance of some very powerful members of the European Union, it would be abolished very soon.
Mr. Roger Williams: It is a great pleasure to follow that attempt at demolition of the common agricultural policy. The hon. Member for South Derbyshire
I have lived through many reforms of the common agricultural policy, from those of McSharry and Fischler to the present one under Mariann Fischer Boel, although hers is only a health check. I congratulate the Minister on his measured approach to the matter. The proposals that he has put forward will, I think, gain much support both within agriculture and from bodies such as Natural England, which obviously have a great interest in the issue.
To go back a little, I remember a time when CAP spending was 70 per cent. of the total EU budget. As I understand matters now, it is about 40 per cent. and by the end of 2013 it will be about 33 per cent. One of the key issues of the reform is set out in the document that we have been provided with. It states:
The underlying financial principle for this Communication is that no additional EU funding will be available for the first and second pillar of the CAP in the period 2007-2013.
The policy is thus not going financially out of controlthe opposite, in fact. It is bearing down on the net expenditure in the European Union and no account is being taken of inflation, so the amount of money remains constant and its value is reducing on a regular basis.
I want to raise several points and emphasise one or two that exercised the Minister during questions. I think that farmers in this country would be much happier if the decoupling of support were to be made final in those European countries that have attempted to retain it. We talk a lot about a level playing field, and that is one of the issues about which farmers are very concerned.
No mention was made during questions of maximum and minimum payments, although I think the hon. Member for South-East Cambridgeshire raised it during his speech. Perhaps the Minister will respond on the issue of the de minimis payment. A lot of effort was put into producing payments of very small amounts in the English system, by the Rural Payments Agency. I think it would be of great benefit for the whole process if those were eliminated, and it would be no great cost to the farming community.
I think that all political parties would like to move towards the abolition of export restitutions and import tariffs, but I stress that some account must be taken of the conditions under which products are produced in third countries for import into the European Union. It is grossly unfair and very damaging when products are produced through the cutting down of rain forest, or through human rights violations, and similar circumstances that have been highlighted over the years. I commend the European Union for having intervened and for banning the import of beef from Brazil under certain circumstances. This is an issue that ought to be addressed more generally through the World Trade Organisation negotiations. With the phasing out of import tariffs, some account should be taken of the conditions under which those goods have been produced.
A number of hon. Members have spoken about hill farming and it is a very important issue. I cannot really see hill farming surviving in this country in an entirely free market situation. We must emphasise to our European colleagues, who I think will be quite happy to go along with us on this matter, that special circumstances must be considered and special support must be made available for our hill farmers.
There is terrific support in this country for the wonderful landscapes that we have, but I cannot in any way see them remaining in the condition that they are now unless some very substantial support is put into those areas.
The hon. Member for South-East Cambridgeshire drew the Ministers attention to the opportunities to look beyond the Health Check to consider what will happen after 2013. The Minister would be well advised to do that. The document produced a vision for the future of the CAP that was not widely welcomed, either in this country or elsewhere in the European Union. If the Government persist in going down the line that they have taken, I do not think that they will receive much support from the other nation states in the European Union. The Government need to look again at the line that they have taken.
We have had a good preliminary run-through of the issues involved in the Health Check, but I go along with the comments of other hon. Members that the Minister should come back in May and discuss these matters again because they are fundamental, not only to the health of British agriculture but to ensuring that people in this country have access to decent food and to ensuring that Britain plays its part in producing food for the world, particularly for those people who, because of climate change, may not have access to as much food in the future as they have had in the past. I believe that northern Europe, despite climate change, will probably maintain its capacity for agricultural production while other parts of the world will lose their capacity. Therefore, these are important issues and the Minister should come back and make further time available, so that hon. Members can debate them.
Jonathan Shaw: We have had a good debate today and I am grateful for the way that hon. Members have posed their questions and made their statements. I will briefly respond to some of the points that have been made.
The hon. Member for South-East Cambridgeshire said that he wanted to see free markets for farmers, but we also want to see fair markets. That is a point that has just been made by the hon. Member for Brecon and Radnorshire. Our farmers want to see a level playing field.
I said that we will see an increase from decoupling, from 90 per cent. to 95 per cent. We will continue to push for more; that is in our vision. Opposition Members have criticised the Governments vision, but that aim is part of our vision. That vision has been in place for a few years, so we are now seeing it bear fruit.
We think that British agriculture has a positive future and one where we do not have subsidies. It is a future where there are not subsidies for production and where there are not distortions within the markets
On some specifics, the hon. Gentleman asked whether cross-compliance is part of pillar 2, and it is. It has only recently become part of it, and even a person who has been as up to date with food and farming matters at the hon. Gentleman has been for a number of decades may have missed that. I will write to him and all members of the Committee with the detail of that.
The hon. Gentleman referred to the old RDP scheme, which will become the new RDP scheme. He is right that the Commission deemed the four different management plans not to comply. There are 20,000 farmers in the scheme, and we will therefore build on its benefits to create the new scheme that farmers will be able to join. We are working with the industry on that. There have been 18,000 new entrants with amended agreements, and Natural England says that those are working well, but we will see.
The hon. Gentleman and others are right to raises the issue of hill farmers. We have not been satisfied with the current hill farm allowance, which will end in 2009, because it subsidises income. We do not think that that is right, but the point has been made that farmers survival in such environments is essential. Will they be able to survive without some assistance? I think that hon. Members are right to say that they will not.
The hon. Gentleman referred to overgrazing, and we are now seeing undergrazing, which I saw in areas of Dartmoor when I visited the national park. We must come up with the right scheme to deal with such wonderful landscapes, which we all enjoy. My hon. Friend the Member for Luton, North (Kelvin Hopkins) said that he did not have any farms or fields in his constituency, but I bet that his constituents enjoy our wonderful national parks.
Jonathan Shaw: I will not give way, if that is all right. I bet my hon. Friends constituents enjoy the national park in the constituency of my hon. Friend the Member for Workington, and they would not be happy if the landscape just turned to bracken.
Jonathan Shaw: I will not given way to my hon. Friend, if he will forgive me. I have referred to him and listened to him with great attention, as have all members of the Committee. He has his own view of how we should organise our agriculture, with a group of individual nations co-operating together. If we did
Jonathan Shaw: His mother saved us, although she did not save us from everything. The land girls went from the cities into the countryside and fed the nation. It is quite right of my hon. Friend to talk about a badge of honour. I am sure that all hon. Members welcome that.
I very much hope that I have answered the point raised by the hon. Member for Brecon and Radnorshire about decoupling. As I said, we have set out our vision on food security, and it still very much stands. How do we get that food security? It is not just about the EU; it is about creating liberalised markets so that developing nations can grow their own crops and produce. At the moment, market distortions mean that they cannot do that. Dealing with such issues is very much part of our vision. The hon. Gentleman also mentioned minimum payments. We want to see them increase, and there should be some flexibility on that.
We welcome the health check and this debate. I hope that I have set out the Governments vision and objectives for when we see the legislative proposals in May. Many hon. Members have asked me to come back.
Mr. Williams: From the Ministers negotiations on these matters and looking at how money has moved from pillar 1 to pillar 2, does he think that that sort of money could be used for rural services such as post offices, which are causing a lot of concern in upland areas?
Jonathan Shaw: Most of the money from the rural development programme for England, about £3.3 billion, goes into agro-environment schemes. However, an element of it goes to rural development agencies. Those bodies, working with local authorities, are looking at innovative schemes whereby they can have mobile libraries, for example. Should a regional development agency and its partners want to look at something like post offices, I am sure that there is enough flexibility.
To conclude, many hon. Members have asked me to come back. Of course it is for the House to decide and Ministers will comply.
Question put and agreed to.
That the Committee takes note of European Union Document No. 15351/07, Commission Communication, Preparing for the Health Check of the CAP reform; and supports the Government's aim that the health check should cut further the trade-distorting nature of the CAP, reduce regulatory burdens, give farmers greater control over their business decisions and direct more public spending towards delivery of targeted public benefits.
Committee rose at six minutes past Six oclock.
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