CAP Health Check and Rising Food Prices
The Chairman: Order. Given that so many hon. Members want to ask questions, I propose, under the provisions of Standing Order No. 119(7), to extend the time for questions to 6 pm. The debate will still end at 7 pm at the latest.
Another aspect of the CAP, which has not been touched on, is the fact that as well as having a tariff on basic foodstuffs, there are restrictions on processing food in developing countries because they are higher value added and the European Union wants to retain relatively high value added processing, rather than allow it to be developed in the poorer countries. Will my right hon. Friend pursue that in her new post and look to find ways of permitting poorer countries to do more food processing and thus develop their economies and raise their living standards?
Jane Kennedy: I will undertake to do that, and I look forward to discussing such issues with my hon. Friend in the coming weeks and months. It is right that we press the EU to make the necessary reforms to the CAP to remove the distortions to the global food trade that he described.
Tim Farron: I am sure that the Minister is as delighted as I am that you have extended the time available for questions, Mr. Chope. The upside is that the more I say now, the less I will say in the main debateI promise.
On the health check and food prices, in the past few years, we have seen a reduction in the number of people in farming and the capacity to produce food in this country, particularly in the dairy sector, but in others, too. We can compare that situation with the WTO figures that predict a 50 per cent. increase in the worlds population by 2050 and a 100 per cent. increase in demand for food over the same period. Will the Minister reflect on those two things? Does she agree that, when it comes to the health check, we should ensure that we are aware of the need to have sufficient food production capacity in this country?
Jane Kennedy: I am happy to reflect on thatI could do so for half an hour. I have not yet looked in sufficient detail at the self-sufficiency argument, but it is interesting. I genuinely believe that the UK agricultural industry is well placed to take advantage of the reforms that we are proposing for the CAP. If we can secure those reformswe all believe that they should be achievedthe UK
In the 1980s, we grew more of our own food in the UK than at any other time in our history, including during the second world war. However, that was because the CAP was subsidising food production, and it did not necessarily reflect a healthy agricultural industry. Therefore, going forward, we need to engage in serious debate on the subject. Protectionism is not the answer. We need to persuade our partners in the EU that that position is the way forward, and I hope to bring my energies to doing so.
Mr. Jack: A number of the new member states have their farm payments covered by the so-called single area payment scheme, the operation of which the Commission proposes to extend until 2013. However, a number of those new member states have also felt a sense of resentment that they are not getting the same kind of financial deal that established member states get. Will the Minister give us some indication of how the politics of that debate are going? Does she feel that some of the newer member states might seek to find some way to increase payments under their system, the price of which could be agreement to the overall reform package?
Jane Kennedy: That is not a question to which I can give a simple answer. I believe that we have yet to achieve a level playing field in the CAP. The health check and the Commissions objectivemoving away from direct payments in the way that we have discussedare important if we are to move towards a level playing field. The health check reduces the reliance on direct payments, which bring about the distortions to which I alluded in my last answer.
A level playing field is important, and it is clear that the distribution of funding under the CAP is inequitable. We believe it important that UK farmers are not disadvantaged by farmers in other parts of the EU, either because they are allowed to meet lower regulatory standardsa point to which members of the Committee have already alludedparticularly in relation to animal welfare, or because they are allowed to benefit from measures that improve relative competitiveness in their member state, but which are not available in the UK. I am sure that we will return to that subject many times, possibly even later in this afternoons debate.
Mr. Drew: The Governments intention has always been to encourage transparency in the operation of the payment mechanism. What progress is being made on the single farm payment that would allow us to see who receives what? Notwithstanding data protectionwe do not need to see the nameswe need clarity on how the process really works and some idea of where the money goes and what benefit it has. Do the Government continue to push that argument within the EU, and if not, why not? Perhaps we could do more in this place to ensure that we got the greater transparency that would allow all of us in Britain to know exactly what money is paid and to whom.
Jane Kennedy: I will need to reflect further on my hon. Friends question on transparency. What I can tell him is that there is some concern about direct payments
I know that my hon. Friend was asking a broader question, but we have some concerns about proposals that might be made to narrow the definition. The Rural Payments Agency has published details of the CAP payments and the EU now requires further details to be published, so there is greater transparency, which he is asking for. Some information covering rural development was published last month and the rest will follow next year, so we are making progress on that.
Mr. Jack: Pursuant to the Ministers last comments, can she tell us whether the Commission has decided what the various levels of disallowance will be for this country in connection with the recent operation of the RPA?
Jane Kennedy: The RPA is a much-loved organisationI have worked with some during my time in government. The issue to which the right hon. Gentleman refers has yet to be resolved and is being actively considered. I look forward to working with the RPA and have already met its leadership. The health check might well bring forward challenges to the RPA, but it is in a better place than it was. The fact that it is in that better place is very much down to the drive and clear sense of direction that its management team and staff have brought to bear, and the offer to those in receipt of payments now to have a single caseworker will achieve a much better relationship with farmers.
Mr. Jack: Under the health check proposals, the Commission seeks to abolish intervention for durum wheat, rice and pig meat. For feed grain, intervention is to be set at zero. Recently, when questions were asked about the security of our food supply, members of the public were concerned that overall world stocks of wheat, for example, had dropped to 35 days. Can the Minister give the Committee any information about the state of stocks of any of those commodities, held either publicly or privately within Europe, and will she provide an assessment from the Department of the implications for stock holdings of those important commodities with regard to the health check proposals?
Jane Kennedy: I am unable to find those figures at my fingertips. If I find them in the briefing for the debate, I will share them with the right hon. Gentleman, but I do not have them at this moment.
Mr. Drew: Pursuant to my earlier question, I am pleased to hear that at long last we are going to try to define what a farmer isthe Minister was moving in that direction. One of the daft things about moving to area-based payments, although there are many reasons why we had to do that, is the fact that we have made
With that in mind, will we look again at whether there should be a de minimis level below which we will not make payments at all? One problem with the RPA is that it pays very small sums to great numbers of people, many of whom, by my definition, are not farmers.
Jane Kennedy: Yes, as part of the health check we propose a 5 hectare de minimis level. That is sensible. Otherwise, we would end up making very small paymentsa horse paddock could qualify, for example. The answer to my hon. Friends question is yes.
Motion made, and Question proposed,
That the Committee takes note of European Union Documents No. 9656/08 and Addenda 1 and 2 Draft Council Regulation establishing common rules for direct support schemes for farmers under the Common Agricultural Policy and establishing certain support schemes for farmers, and Draft Council Regulation on modifications to the Common Agricultural Policy by amending 320/2006, 1234/2007, 3/2008 and an unnumbered document relating to the Common Market Organisation for wine, and Draft Council Regulation 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD), and Draft Council Decision amending Decision 2006/144/EC in the Community strategic guidelines for rural development (programming period 2007 to 2013) and European Union Document No. 9923/08, Commission Communication Tackling the challenge of rising food prices Directions for EU action; supports the Government's negotiating aims that the 'Health Check' should cut further the trade and market 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, and considers that the separately proposed measures to tackle rising food prices are adequate and proportionate to the scale of the problem.[Jane Kennedy.]
Mr. Paice: I thank the Minister for the courteous way in which she has answeredor tried to answersome of our questions and promised to come back to us on others. We all understand that this is not the easiest of subjects to absorb in two short weeks.
I start by reminding the Committee of my interests in the register, although going by the Ministers last remarks, those interests may be short lived with regard to de minimis payments. As the hon. Member for Westmorland and Lonsdale said, the debate takes place against a background of increased concern about food security. Earlier, the Minister referred to self-sufficiency. Those of us who believe that food security is important do not advocate self-sufficiencyI want to stress that.
Nobody pretends that we can produce every egg, lamb, grain of wheat or whatever in this country. We never have done that and it is clearly impossible. Added to that, todays consumer demands make it impossible to produce all our requirements all year round. Trade, both import and export, is an important part of agriculture and, as the Minister and others have said, in assisting the developing world. I do not know whether it was a slip of the tongue, but I hope that in serious debates in the future, we do not get confused between food security and self-sufficiency. We do not make that claim.
However, Conservative Members feel strongly that domestic production is an important part of food security. Just as the Government appear to be concerned about
I congratulate the Minister on reading the House of Lords debate. If it does not get her to sleep at night, nothing will. However, it is a worthwhile report, and I look forward to the report from the Commission for Rural Communities, which, as has been said, will be some time coming. The Royal Society of Edinburgh published a report about a month agoa good study of the uplands of Scotland. I accept that it is about Scotland, but having read it, there is a tremendous amount of read-across to the English uplands and it is worth studying.
The reductions in UK production are worrying from the point of view of food security, and whenever we consider the health check proposals we must have that at the back of our mind. Can they in any way help to reverse the reductions or might they accelerate the trend?
The objective we seek from the health checkand, more importantly, from the post-2012 CAP, because the health check will run for only a relatively short period of four years once it comes into playis a truly common policy. That is why I wholly endorse the Ministers demand for decoupling across the board. I am glad that the Commission is proposing that a number of other products come into the decoupled regime, but I am sorry that that will take up until 2014, as she has said.
There are still some oddities: we will continue to have national aid for nuts. I will not open that point up to the sort of joke that might be made, but it is true that there is a page in this document listing the amount of money and the area to be given over in every member state to aid for nuts. They are nutritious of course, but it defies belief that, as a sector, nut producers should continue to receive aid.
Kelvin Hopkins: I am sympathetic to the hon. Gentlemans theme, which is to maximise domestic production of our own food. Does he have any statistics to show how much of the imported food is food we cannot produce ourselvestropical fruit, for exampleand how much of the decline in our home production has come about because we are becoming net importers of things that we can produce ourselves?
Mr. Paice: I am sorry, but I thought I had made it clear that the figures I quoted were for indigenous foodfood that can be grown in this country. If the hon. Gentleman wishes to look across the board at all food consumed in this country, I think that about 61 per cent. of all food is grown in this country, but the decline from 82 to 74 per cent. is in food that can be produced here. It does not include tropical fruit or things of that nature.
The second objective of the health checkand therefore, I hope, of the longer-term reviewis stability in policy. In the ever increasing number of years that I have been connected with the agriculture industry, there have always been calls for reform, review and abolition of agricultural policy. I remember it before we joined the EU, but since we joined there has never been a period when countless outside organisations and hon. Members have not been calling for further change. That is no way for any long-term business to proceed.
If anybody doubts that agriculture is long-term, they need only get out there and see how long it takes to produce crops and livestock. A long-term business cannot plan if it must constantly look round the corner for the next reform that may or may not affect income. It does not have to be a question whether there will be a payment for x or y; it may be to do with import controls or a range of other things. Businesses need stability.
As the Minister also asserted, we need the policy not to be trade-distorting, either internally or externally. That is why Conservatives Members endorse the Governments position on moving support to pillar two, because it achieves the common policy overall but allows more national discretion. Pillar two by its nature is not trade-distorting and there is not, therefore, an issue of anti-competitiveness across different countries in the EU. There are probably huge differences between us about how pillar two money is used, but the principle of shifting resources from pillar one to pillar two is right.
The first thing that the health check does is make some corrections, and in my view those things are entirely right. The first issue is the minimum threshold, which the Minister referred to. I must admit that I was slightly surprised when she cited the figure of 5 hectares. It is not necessarily that I think that is wrong, but the Commissions proposals are of course for €250 minimum, or 1 hectare. If the Government are pressing for that 1 hectare to be increased to 5 hectares, it is pretty dramatic.
I can tell the Minister that the effect of that would be pretty dramatic because by coincidence I happen to have with me details of the number of agricultural holdings across every country in the EU. In Romania, for example, there are nearly 3 million holdings of less than 2 hectares and 4 million holdings of less than 5 hectares. All those would be debarred from any receipt under her proposals. There are figures of an equivalent kind for Poland, and even in this country she would remove 107,000 holdings from the system. In the whole EU, with the 5 hectare de minimis figure she would remove just over 10 million out of 14 million holdings.
I suspect that the Minister will have to think again about that, or she will have a policy that applies only to approximately a third of current farmers in the EU. However much abuse there may beI certainly agree that there should have been a de minimis figure from day one, and we should not have extended the provision to pony paddocks and all the other nonsense that there was at its introductionI do not think that a 5 hectare de minimis figure represents a realistic, achievable policy.
I want to mention the second thing that is being put right in the health check: more decoupling. I have made the point that that should be applied across the board. I am concerned, however, that the health check does not
Nowhere is that more obvious than in the point about modulation. We have always endorsed the concept of compulsory modulation. The Commissions proposals on increasing it by just 2 per cent. a year for the next four years are unbelievably unambitious. I would much rather that we had a 5 per cent. increase, year in, year out, until a significant part of pillar one, if not all of it, had shifted across. I know, being realistic about EU negotiations, that that would not be achievable at this stage.
I am grateful for the Ministers quite robust comments about the concept of progressive modulation. I share those views. It is wrong for this country because it is trade-distorting and socially distorting, and for all the other reasons she gave, and it is wide open to accountants and lawyers to abuse it, and simply to break up existing holdings to claim more funding without the progressive modulation.
That brings me to the changes to section 69, which is now sections 68 to 70the national envelope concept. There are attractions to it. For example, there are people even in this country who will say, It would allow us to continue to make a headage payment for sheep in the uplands. However, it is wide open to the anti-competitiveness to which the Minister referred, because other countries could take the whole 10 per cent. of their national envelope and use it in ways that clearly distorted trade across the EU. I do not believe that any recoupling in any guise should be acceptablenot in the health check and certainly not beyond 2012. I hope that the Government set their face against the whole of that national envelope, because it is not consistent with the objectives that they have laid out.
I am grateful that the Commission has at least used the words simplifying and keeping land in
good agricultural and environmental condition.
I say that it has at least used the words, because we have already discovered that there is a great deal of difference between objective and reality.
I have often cited good agricultural and environmental condition as a clear example of where the Government have taken gold-plating to A-level standard, if I can use the Ministers earlier comment. The good agricultural and environmental condition requirements under current EU legislation occupy just 12 lines of text. The Government managed to turn that into three books, which they sent to every farmer to tell them what they had to do to keep their land in good agricultural and environmental condition.
This time, there is a slight change. The Commission proposes simplification. Annexe 3 of the proposals is just half a page of fairly succinct statements. I hope that the Minister will go back to her officials and say that when they publish whatever comes out of the health check, they must follow the Commissions brevity, rather than the verbosity that we have had previously.
There is a clear economic theory that says that Government or public supportparticularly such things as import controls and production subsidiesforces up food prices unnecessarily, but as politicians we have to be careful not to raise public expectations that by getting
I am particularly concerned that on page 9 of the papers before the Committee it is suggested that removing market support in certain areas could lead to a 7 to 9 per cent. price cut for consumers. I have only to remind the Committee of what has happened to two staple commodities in the past 18 months. The price of milling wheat, which feeds through to the price of bread, rose from £70 or £80 a tonne two years ago to £200 a tonne in the early part of this year. It has now fallen back to £145 a tonne. That has had nothing whatever to do with the CAP. It is purely a question of supply and demand on world markets, brought about by climatic conditions and exacerbated by the diversion to biofuels.
We have seen a huge increase in the price of bread. To be fair, not a lot of it was due to increases in the price of wheat, although that was the excuse used by the producers. However, the increase was not brought about by anything to do with the Government or production support. Exactly the same applies to the price of milk. Farm-gate prices have gone up from about 16p or 17p a litre two years ago to about 28p a litre, yet at the same time we have seen a cut in support for the dairy sector. Again, it is all down to world supply and demand.
I hope that the Minister will take this as a friendly suggestion: please do not allow credibility to be given to the argument that getting rid of support will bring down food prices, as many consumers will be disappointed. I do not advocate support for production and we should not use fallacious arguments for it. Nevertheless, food prices are important.
In the long term, there is only one way to keep food prices affordable, which is where I began: we need to ensure food security. We must continue to produce a significant proportion of our own requirements and, I hope, halt and reverse the decline to which I referred. If the world is going to be short of food, it is not logical for this country to set out on a policy that can mean only greater reliance on world supply, not less.
Overall, the health check proposals are a move in the right direction. I believe that they are unambitious, given where I would like them to go and in respect of laying out a post-2012 policy, but in principle they are right. It would therefore be wrong not to welcome them.
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