CAP Health Check and Rising Food Prices

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Tim Farron: I, too, thank the Minister for her full responses to our questions. She was entirely candid about the fact that she has been in the job for only a short time. I do not wish to be patronising, but she is doing very well.
I said earlier that it is not only state intervention that distorts the market; all-powerful players at the retail and purchasing end also play an important part. This may be something of a clichÃ(c) in farming circles, but it is undoubtedly true that if farmers received a fair price for their produce, there would be no need for any form of support.
Although prices have fluctuated in recent times, I am sure that the Minister is aware that over the past decade the supermarket mark up on a litre of milk has increased by about 200 per cent. The average price received by farmers—year in, year out, and taking one year with another—has not gone up by anything like that. We now have the lowest dairy production capacity on record, and that will have an impact. The situation is connected to uncertainty and a lack of stability.
Likewise, the fluctuation in prices has had an enormous impact on meat producers, with a number of farmers leaving the business. The average age of farmers is about 58 or 59. For example, Longsleddale, which is one of the valleys in my constituency, now has seven working farms, yet 15 years ago there were 28. Of those seven farms, only one has a line of succession. I do not know what will happen to the other six, but I can guess and it is not good news.
The reality is that, although we want to avoid protectionism, we must be aware of the food production capacity in our country. Allowing the reduction in capacity to continue will have an upward pressure on food prices, which we cannot afford. I concur with the Minister’s comment earlier about the food mountains in the 1980s. We want to ensure that we produce food that is consumed rather than wasted. The latter is not only immoral, but environmentally damaging and against all common sense.
In recent weeks and months we have recognised that the complete absence of regulation in the financial sector was not the wisest approach. Perhaps allowing the unfettered free market its way in food production is also unwise. Many assume that the more payments that farmers receive, the more pressure there is to increase prices, but that is only partly true, because if farm payments keep farms in business, a level of supply is maintained and a downward pressure on prices is exerted.
It is important to raise the issue of food security again. As has been mentioned, we are not talking about autarchy, complete insularity from the outside world, or throwing up barriers to producers from the developing world. It is none the less important to recognise that there is over-reliance—and increasing reliance—on imports that we could produce at home. That has a vastly damaging impact on the environment. We talk about moving to pillar two and encouraging farmers and other land managers to look after our ecology and environment, so is it not madness for us to promote a system that encourages an explosion in the number of food miles travelled by our produce from its place of production to our plates? We must consider that very seriously.
I raised the issue of projected demand over the next 40 or so years. We have been talking about A-levels a lot this afternoon: when I studied social history, we considered that poor fellow Rev. Thomas Malthus, who will be familiar to some Members. He predicted, to his eternal ignominy, in, I believe, about 1780, that we would all starve by 1850 because population growth would outstrip food production to such an extent that the latter would be unable to catch up. He did not take account of the ingenuity of farmers and the industrial revolution, which enabled us to keep pace comfortably with the increase in population. It would be a tragic irony, to say the least, if Malthus was proved correct some 250 years later. Demand for food is going to increase by 100 per cent. in the next 42 years, and we need to ensure that we have environmentally sustainable ways of meeting it.
When we look at pillar two and our desire to reward farmers for environmentally positive things—they already do those—we need to remember that there will be no environmental benefits or biodiversity schemes delivered if there are no people in our countryside working to deliver them, and that the countryside will not be maintained to the same standard without farmers. We talked about entry-level schemes earlier, but if we set the bar so high with some of the development schemes that we lose farmers, we will have taken a retrograde, counter-productive step, because some areas of our countryside, particularly uplands, will simply not be farmed. Not only will they look ugly, they will lack biodiversity and will not be accessible by the majority of people in this country who live in urban areas, which will be hugely damaging. We have talked about livestock destocking in the countryside and the uplands, but I am just as concerned about human destocking and ensuring that we protect our upland and rural communities.
Let me touch on a couple of points that were made earlier, I, too, am alarmed at the ambition when it comes to de minimis payments. That could be problematic, as has already been mentioned, but I am supportive of such a payment. A bottom limit of something in the region of £200 would be sensible. Administratively, that would be cheaper. We spend up to £10 million a year on the administration of payments to people who—I say this in the nicest possible way—are not really farmers. That is detrimental to the whole process and robs farmers of funds that could otherwise go to them.
I also share concerns about the progressive modulation, but I noted something that the hon. Member for Stroud said earlier with regard to the high amount paid to a small number of people. The last time I checked, £100 million goes to 360 recipients of single farm payments. We have to question whether that is the best use of money. Nevertheless, we struggle to find a way of ensuring that we deal with such an issue fairly and not counter-productively. When hill farmers are struggling to live on less than five grand a year, one has to wonder whether that situation is entirely fair.
I want to finish by saying that the Government must take account of our own capacity to produce food in an environmentally sustainable way. I am sure that the Minister, as a Labour MP for a Merseyside constituency, took a similar position to me in the 1980s when we lost a massive amount of our manufacturing base because of a temporary market situation and the indifference—at the very least—of the then Government to the situation affecting urban and industrial manufacturing communities. Will she reflect on the fact that many of us in rural communities see what is happening today as something not a million miles away from what happened to manufacturing communities in the 1980s? When a country loses its manufacturing base, even if the economic winds dictate that that should be the case—the reality is that we get boom and bust and things change—it cannot easily bring it back. Our concern is that we are losing massive amounts of our farming capacity and skills in our countryside. Should the increasing demand for food across the world continue as we expect, things could well be rosy for British farming, but not if our farming base has been decimated during difficult times.
6.12 pm
Mr. Jack: This has been a very interesting debate. It takes me back to June when I spent some time in Rome at the world food summit. Listening to presentations from Heads of State around the globe, one recognised the tremendous challenges that the world faced in feeding itself. The picture is summarised by the need to have a 50 per cent. increase in production by 2030. The question I ask myself is how much does the health check contribute towards European agriculture making its contribution to that very challenging world situation?
With regard to what shapes the prices of our food commodities, one reflects on the fact that drought in Australia, the growth of the ethanol market in the United States, and the rise in the demand for food in south-east Asia are some very big forces over which the European common agricultural policy has absolutely no influence whatsoever. For the past two years at least, those factors have shaped the prices and the availability of our foodstuffs. We have effectively subcontracted the security of our food supplies to those who run our food service industry and our supermarkets. The central role played by the Department for Environment, Food and Rural Affairs with respect to its principal title is very interesting. As my hon. Friend the Member for South-East Cambridgeshire said, if one looks at the “Vision” document of 2005, one will see that words such as “food security” are airbrushed out. It was all going to be down to the international world market; everything would be all right. In a relatively short time, things have changed. If the Minister is looking for more antidotes to insomnia, I recommend that she read the report of the Environment, Food and Rural Affairs Committee on the “Vision” document of 2005. In March, at the time of the National Farmers Union’s centenary dinner, the Prime Minister received a rare accolade for excellence of speaking when on two occasions he used the words “food security” in his remarks to the farmers. I recognised that as a sea change in the words that had no doubt originally been written for him by DEFRA, as it acknowledged that the issue of food security had to be addressed.
The health check is relevant, as it makes a small step along the road towards freeing up Europe’s farmers to make market-based decisions about what they should produce while, at the same time, recognising that the nature of the rural economy has fundamentally changed since the United Kingdom perspective was driven by employment in agriculture and horticulture, as now the activities of those so employed are in the minority and a wide range of other activities are in the majority. In the England rural development programme, although the sums sound large—about £3 billion during seven years—when what goes to environmental programmes is netted off, which is about £2.7 billion, a relatively small amount is left over to develop the rural economy and all that goes with it.
It is important to try to put the health check into context. I was struck by the some words in the Commission’s document. “Preparing the Health Check of the CAP reform” asserts that
“for the CAP to continue to be a policy of the present and of the future, it needs to be able to evaluate its instruments to test whether they function as they should, to identify any adjustments needed to meet its stated objectives, and to be able to adapt to new challenges”.
I certainly support that as a guiding principle of what matters are all about, which is why I asked the Minister whether she had looked at article 33 of the treaty.
It is against article 33 that the measure gives the legal base on which the changes are to be made. It is interesting to note in article 33 the complete absence of a reference to either the environment or the sustainability issues that form part of the United Kingdom’s observations about the health check. In a press release dated 20 May 2008, the Secretary of State said:
“The Health Check should shift the emphasis of the CAP even more towards protecting the environment. The UK is encouraging farmers to manage their land in a more environmentally beneficial way.”
That is why I drew to the Minister’s attention to the deficient wording of the Government’s motion. It invites us to improve those Delphic words “targeted public benefits”, but it does not tease out the very essence of what the Secretary of State identified as a crucial part of the health check. I am still not convinced that the actual proposals play into the sustainability agenda.
I was particularly worried by the implications of what my hon. Friend the Member for South-East Cambridgeshire brought out. For example, let us consider the debate in France about what the future of the common agricultural policy should be. Having had the pleasure of meeting Monsieur Barnier, I am left in no doubt that the French will go down fighting to hang on to any degree of flexibility that gives them the opportunity of sustaining the status quo for as long as possible, while looking for ways in which to slide money into their agricultural sector to give the impression that, while the labels may have changed, the subsidy has not gone away. That is why I asked about the future purpose of the common agricultural policy.
The Minister’s remarks were all technically correct—the brief could not be faulted, apart from my hon. Friend’s observations on the de minimis provisions—and she enunciated very correctly all the technical things that the health check seeks to do, but with what purpose in mind? I ask that because the reason agriculture has all of a sudden moved up the political agenda is that, about 12 months ago, there was a sudden and dramatic change in the cost of basic commodities of wheat, rice and food in general. After a very long period of falling real prices in food, the consumer got a nasty jolt. Things started to move up very rapidly.
This particular debate is somewhat sterile on the issue of marrying together the purpose of the health check and addressing the question of food security—not self-sufficiency, but the security of our food supply. It does not enmesh the two. If we are looking to see what the impact will be on European agriculture, the ending of set-aside is to be welcomed. However, in this debate we have not really considered one of the implications of that change, which will be the loss of biodiversity. In fact, the Minister’s own Department’s assessment lists a number of serious impacts on biodiversity, and it would perhaps be helpful if she might say a little now, or later in correspondence, about how DEFRA sees the biodiversity situation.
The hon. Member for Westmorland and Lonsdale and my hon. Friend quite rightly drew our attention to the decline in our dairy industry. Does that decline not crystallise for us the essence of what this health check is all about? At the very time that we are talking about a gradual increase in milk quotas, irrespective of what individual member states might want for themselves, we have the perverse situation that our own milk production is declining.
Had the Minister been able to levitate a little earlier in the morning, she would have heard the quite interesting arguments made on “Farming Today” as it debated the fact that about 1 million litres a week of liquid milk are being imported on to the mainland of this country, at the very time that milk quota, certainly for our farmers, is increasing, albeit modestly. The consumer says, “Is that securing the supply of dairy product for the United Kingdom?” Although consumers have been lucky enough not to face a shortage, I think that they are increasingly interested in the provenance of their food and they will be somewhat disappointed to find that our farmers in England and Wales, and I am sure also in Scotland where the Minister’s writ does not run, are not producing in self-sufficient terms something that we always had, which was our own liquid milk supply.
Something even more bizarre is happening in Europe. When I met representatives of Fontera, the New Zealand dairy co-operative, I found that they controlled something like 97 per cent. of New Zealand’s milk supplies. I asked one of them why it was that they were doing so well. I said, “Was it south-east Asian demand that was driving the New Zealand dairy industry?” “No,” came the reply, “it was increased demand from Europe.” That really surprised me, because I had thought, perhaps naively, that we still had, in a quota-driven world where there was an element of certainty for farmers, an ability to produce the dairy products that Europe needed, but Fontera said a different thing. Again, I think that that poses fundamental questions about what the purpose of the common agricultural policy is, because the current instruments are clearly not delivering to the people of Europe, in terms of a basic commodity—milk—what those people might have imagined would be the case.
As this debate unwinds, therefore, and as the stage is set for the fundamental debate about what the CAP will look like post-2013, I hope that Ministers, even in the dying days of the discussion on the health check, will use it as an opportunity to define with greater clarity what we want the policy to do. Reading the Commission’s words, I do not see that it has evaluated and tested the worth of the policy instruments to see whether they will deliver what European people want.
I could, but shall not, go on at length about the food-fuel paradox. However, at the very time when the UK Government have been encouraging the use of biomass in the production of heat, underscoring the importance of environmentally friendly fuels, a question mark remains over the security of our food supply. The Select Committee is conducting an inquiry into that. We want to make certain that it focuses on the things for which DEFRA has a policy responsibility. We will have to consider how to mobilise our farmers to maximise that which they are good at—the production of high-quality, sustainable food from within our own resources. We must also ensure that Europe exploits its own agricultural expertise in a way that will be to the benefit of those who live in this quarter of the globe.
There is a worry in the public’s mind about our dependence on world markets—there is an idea that the southern hemisphere will provide if the northern hemisphere runs short. That is very questionable. Brazil has 93 million hectares that it could bring into production, but what price sustainability? The answer is that none of us really knows. What we do know is the agriculture and horticulture in our own backyard and our own biodiversity challenges. We know our own farmers and food industry. That is where our focus and that of this health check should be at the moment. The measures that we have discussed are a modest contribution towards that, but let us not think that we have reformed the CAP when the health check goes through, because we will not have. The debate has only just begun.
6.27 pm
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