The
Chairman: Order. Before we start the next round of
questions, can I make a plea that they are related to those magic words
“health
check”?
Kelvin
Hopkins: I should point out that we are discussing food
prices as well as the CAP—we have a two-pronged
subject—and my question is about the former. The CAP, allegedly,
makes food prices for an average family of four £20 a week
higher than they would be if there were no CAP and a genuine free
market in food. Poor families spend a much higher proportion of their
income on food than rich families. Does my right hon. Friend accept
that the CAP has a malign effect on food prices for working families in
Britain, and that that ought to be at the forefront of any debate on
the health of the
CAP?
Jane
Kennedy: Current high food prices are a reason to reform
the CAP, but not to return it to a production-based policy. DEFRA
published a discussion paper in July that clearly made the same point
as my hon. Friend. Paragraph 3.29 on page 13 of the document states
that
“the EU
continues to apply high import tariffs to many agricultural
commodities. While the average tariff for non-agricultural goods is 4
per cent., for agricultural goods it is around 20 per
cent.” The
next paragraph states that
the “tariff
and subsidy regime under CAP keeps prices for consumers artificially
high in the EU”.
Mr.
Paice: The right hon. Lady referred to the
Government’s welcome for the proposals to abolish milk quotas
and set-aside. If I heard her correctly—I am sure she has her
text in front of her—she said that one reason for that was to
allow farmers to make their own business decisions. Will she confirm
that, in the abolition of set-aside, the Government are not proposing
to reintroduce compulsory set-aside through
cross-compliance?
Jane
Kennedy: I can confirm
that.
Mr.
Jack: Will the Minister give us more specific information
on the discussion within the Council of Ministers, and reflect on the
discussion in the European
Parliament on the modification of milk quotas? Mrs. Fischer
Boel wanted to increase those quotas by, effectively, 1 per cent. a
year up to the end of the health check period, but the Italian
Government have indicated that they want a 10 per cent. change in
quotas, and the French Agriculture Minister has said that opinions
differed widely on the subject. Will the Minister update the Committee
on the differing proposals on the table for the change to milk
quotas?
Jane
Kennedy: As the right hon. Gentleman says, there is not
unanimity of view on the direction of reform that the UK is promoting
in the EU. Some countries seek to turn the clock back to a system
whereby funding is used directly to support producers and food
production. He asks for the precise position on milk quotas. If he will
allow me, I hope to have an answer for him when I respond to the
debate.
Tim
Farron: Will the Minister reflect on the fact that removal
of CAP pillar one payments to farmers does not create a free, and
certainly not a fair, market? State intervention is not the only cause
of market distortion. When there are thousands of producers and a
handful of processors and supermarkets, distortions in the market still
exist. What can she do to ensure that farmers receive a fair price for
their produce, while also ensuring that prices do not rise in the
supermarkets?
Jane
Kennedy: I am becoming increasingly aware of the tensions
that exist in the UK food supply chain. For example, I have received
representations from supermarkets against the Competition
Commission’s recent report, but equally I have received strong
representations from farmers saying that they want the report
implemented, particularly with regard to the introduction of an
ombudsman office to facilitate a better understanding of the
relationship between the big retailers and the food producers. Another
area on which I hope to turn the spotlight in terms of public policy is
the food services industry. Producers of food are caught between some
very big chains—global chains in some circumstances. Therefore,
their power to negotiate is affected in the way that the hon. Gentleman
describes. That will bear closer scrutiny, and I hope to be engaged in
public debate on
it.
Mr.
Paice: One area in which there is significant difference
between this document and the original health check document that we
discussed in Committee in the summer is modulation. Previously, the
Commission was proposing an increase in compulsory modulation, but at
the same time it was suggesting overall caps, or a degressive level of
payment, in relation to the payments for larger farms. That has been
replaced in these proposals by what is described as a
“progressive modulation”, which means that larger
holdings will pay a larger level of modulation. The other big
difference is that this time it is proposed that at least 80 per cent.
of any modulated money will be retained by the member state, rather
than going back to EU
funds. The
Government’s paper, which was produced by Lord Rooker, is
extremely evasive about the Government’s attitude to that
proposal. Will the Minister tell us the Government’s attitude to
the proposals on progressive modulation and whether the Government have
calculated,
if the Commission’s proposals were to go through, how much money
that would mean in the English or possibly the UK
context? Jane
Kennedy: I am grateful for the question. The Commission
sees progressive modulation as a way of improving the public perception
of the CAP, so there is talk about higher rates of modulation on larger
farms—that goes back to a earlier question. However, the CAP is
not a means-tested benefit and the size of a farm is not an accurate
indication of the income of the owners or employees. If our aim was to
encourage farms to become more competitive globally, it would be
perverse to put incentives in place that discouraged them from
expanding and achieving more competitive structures through economies
of scale.
The hon.
Gentleman is right that the term is “progressive
modulation”. I am amazed and impressed by the jargon—I
thought that the Army was bad enough with jargon when I was at the
Northern Ireland Office. Progressive modulation would add greatly to
the complexity of the payments system. There would be no benefit to
farmers or taxpayers from introducing a system that left farmers paying
accountants and lawyers to split up their businesses.
A better way
to improve the image of the CAP, if that is the objective, would be to
phase out pillar one payments altogether and focus on delivering public
benefits through pillar two. I hope that I have given the hon.
Gentleman a clear indication, but I am sure that we will discuss the
matter at length.
Mr.
Paice: I come to the second part of my question. I am
grateful for what the Minister said, and I entirely agree with her, but
if the proposal was to go through—it might still do so, because
we know how these things work—how much money would it mean in
the English or the UK context? Perhaps she would add to that by
commenting on the proposed increase in the basic 5 per cent. compulsory
modulation of 2 per cent. a year for the next few years, which I
suspect she would endorse. Is it the Government’s intention that
the increase in compulsory modulation should be deducted from the
current level of voluntary modulation as applied to English
farmers?
Jane
Kennedy: That is a good but detailed question. I would not
wish to give the Committee figures that might be inaccurate due to my
inability to draw them out of the excellent brief that was provided for
today’s debate. I shall seek to give that sort of detail in my
reply to the debate. As for the final point on which the hon. Gentleman
seeks clarification, the answer is yes.
Kelvin
Hopkins: In answer to my earlier question, my right hon.
Friend referred to tariffs against producers outside the EU. Those
tariffs might be beneficial to the health of rich farmers in some of
the richer countries of the European Union, but in a very real sense
they are not beneficial to the health of poor farmers in developing
countries. Will my right hon. Friend undertake to argue the case for a
reduction, or even the abolition, of tariffs against producers in
poorer countries, which would have a beneficial effect on their living
standards as well as those of working people in Britain and the rest of
Europe?
Jane
Kennedy: I have a great deal of sympathy for the point
that my hon. Friend makes, and I shall try not give too long an answer
to his specific question, Mr. Chope.
Increasingly,
we are seeing consumers—our constituents—looking to buy
food that they can be assured was grown locally. Retailers tell us that
consumers often exercise their power through their supermarket
purchases. Consumers are motivated to buy local produce for a range of
reasons. The present environment—things have changed
dramatically—gives UK agriculture an opportunity. My hon. Friend
was right to say that we and the EU have a responsibility to ensure
that our farming polices do not militate against emerging agricultural
economies in the way that the CAP does. That is why I strongly believe
that the UK, as part of Europe, must move away from the pillar one
style of support for production to a system that enables our farmers to
compete. I believe that the UK farming industry is well placed to
compete strongly in the world, as agricultural products will become
increasingly important in the years to
come.
Mr.
Jack: When the Environment, Food and Rural Affairs
Committee last went to the Commission for a briefing on the state of
play in the negotiations, it was made clear that the Commissioner was
resolute that decoupling would be a universal concept, with the
exception of those countries that wanted to keep a degree of coupling
for suckler cows, sheep and goats. Will the Minister update us as to
whether now, in late October, the Commissioner’s resolution
remains the
same?
Jane
Kennedy: The Commission’s view remains the same and
this country remains strongly of the view that that is the right
position. I hope to have the answer to the right hon.
Gentleman’s question about suckler cows when I respond to the
debate.
Tim
Farron: Going back to the issue of tariffs, I commend the
Minister’s comments about fair trade and allowing developing
countries and their farmers fair access to our markets. The
complication is that British farmers lead the world in animal welfare,
and the Minister rightly touched on that matter earlier. High animal
welfare standards are not cheap and competitors often have poor
standards that allow them to compete unfairly. Given that animal
welfare is such an important part of the Minister’s brief, what
reflections can she offer on the possibility of using tariffs or other
measures to ensure that British farmers compete with other producers on
a fair playing field and that animal welfare is
sacrosanct?
Jane
Kennedy: That is a good question and I largely agree with
the hon. Gentleman’s remarks. What is interesting—I have
learned about this even in the past week, although I suppose I should
be cautious about speaking from a fortnight’s
experience—is how difficult it is for consumers in supermarkets
to be sure that the produce that they buy is British beef, lamb or
pork. The farmers whom I have met so far have a case when they say that
they do not necessarily reap the benefit of a better price from the
retailer to reflect their investment in better welfare for their
livestock. I am not yet convinced that when people go into a
supermarket to exercise their power as consumers, they can make a
judgment based on the information before
them.
The right hon.
Lady has given me two or three very straight answers this afternoon and
has just said something that I think all Conservative Members will
thoroughly endorse. I look forward to her staying in her job, at least
until the next general election—[Interruption.] I have
got her worried now.
I wanted to
pick up the point that my right hon. Friend the Member for Fylde was
moving towards about the proposals in the health check to change
existing article 69 of the CAP—articles 68 to 70 under the
proposals. The issue is the proposed ability of member states to put up
to 10 per cent. of their single farm payment pot into the
“national envelope” and use it for such things as crop
insurance, mutual animal health funds and, indeed, the sheep and
suckler cow headage payments to which my right hon. Friend
referred.
Will
the Minister expand not just on the issue of using that money for sheep
headage or suckler cow payments—that happens not only elsewhere
in Europe but even in Scotland, where there is still a retained headage
payment on some beef cattle—but on the matter of crop insurance
and mutual animal health funds? When I read the document, I could
imagine someone on the financial side of DEFRA with his eyes flashing,
because that might be the solution to the cost-sharing problems with
animal health. Will the Minister tell us the Government’s
attitude to the proposals and assure us that anything done on the
animal health front will be in addition to, and not a replacement for,
what the Government are currently
spending?
Jane
Kennedy: In the health check, the Commission proposes
decoupling most of the remaining coupled payments, which I applaud.
That includes full decoupling in 2010 for arable crops, durum wheat,
hops, seeds, tobacco, hemp and a number of other products. It also
proposes transition to full decoupling by 2012 for male beef premium,
adult slaughter premium, calf slaughter premium, rice, fruit and
vegetables, and soft fruit.
A further two
proposals include transition to full decoupling by 2013 for long fibre
flax and potato starch, and a transition to full decoupling by 2014 for
sugar. However, the Commission proposes the option of retaining coupled
payments for suckler cow premium—the right hon. Member for Fylde
asked me about that earlier—ewe and goat premium at 50 per
cent., and cotton, and national direct aids in the new member
states. There
is concern about the impact of such proposals. Compensation would be
added to claimants’ entitlement through the single payment
scheme. We are disappointed that the Commission did not propose suckler
cow decoupling and we are pressing hard to achieve that, but we are
facing strong resistance.
In relation
to article 68 and the national envelope measure, we are concerned that
there is risk that the measure might be a retrograde step. It has the
potential to reverse some of the important CAP reforms that have been
implemented since 2003 and could introduce new coupled payments. The
Commission may allow more than €1 billion a year of European
Union taxpayers’ money to be spent on measures that are deemed
by the World Trade Organisation to distort trade and compensation. It
may also reduce by some 25 per cent. the net benefit that would accrue
from the reduction in EU trade, distorting support that is expected to
result from the changes envisaged under the health check.
Of particular
concern is the fact that since the CAP budgets vary substantially
between member states, the amount available to the Commission to
provide additional subsidy to specific sectors also varies widely. It
could lead to some substantial new market distortions in the EU. The
proposed rules would allow Spain to make an article 68 payment of
€136 per head of dairy cattle a year, while competing farmers
across the border in Portugal would get a maximum of only €49.
We are working very hard to get the constraints in place, and I
acknowledge the hon. Gentleman’s
concern.
| 
