The Chairman: Does a member of the European Scrutiny Committee wish to make a brief explanatory statement about the decision to refer the document to this Committee?

Mr. Anthony Steen (Totnes) (Con): The hon. Member for Chorley is the authority on these matters, but as he is not here it is only appropriate that I make a short statement on behalf of the European Scrutiny Committee. It might help the Committee if I take a couple of minutes to explain the background to the document and the reasons why the European Scrutiny Committee recommended it for debate.

To avoid a build-up of public intervention stocks, the common agricultural policy has over the years contained provisions for the subsidised sale of produce to specified outlets. The Commission believes that that measure contributed to stabilising the markets and to ensuring that supplies reached consumers at a reasonable price. However, it has been pointed out that various common agricultural policy reforms have led to either the removal of intervention in some sectors or the restoration of the provisional function as a safety net. As a result, the programme’s reliance on market purchases for the provision of food has increased significantly. The Commission therefore proposed in Document No. 13195/08 that food for this purpose should be sourced from intervention stocks or from the market, that a wider range of products should be distributed and that the distribution should take place under a three-year plan with co-financing by the Community.

The United Kingdom has not participated in the scheme since the mid-1980s and remains unconvinced as to its merits. It considers that the Community should act only when there are clear additional benefits. I understand that entirely. The UK considers that social measures of the kind proposed will be more properly and efficiently delivered through domestic programmes.

The proposal raises some important issues—the Minister is nodding her head in support. It raises particular issues on the future scope of the common agricultural policy and the appropriateness of Community action as opposed to member state action in this area. In addition, the budgetary implications of the proposal are far from clear. Questions have been raised over the proposed legal base. Consequently, the European Scrutiny Committee felt that the document raised issues that the House might wish to consider further. That is why we are here today.

The Minister of State, Department for Environment, Food and Rural Affairs (Jane Kennedy): I hope that my comments will make absolutely clear the reservations of the UK Government over the proposal. I will give a short opening statement outlining the Government’s position, which is supported by the written submission to the European Scrutiny Committee.

I welcome the opportunity to debate this matter, although I am not sure about the timing of this sitting. It is beyond me why people’s focus might be elsewhere in the world. This is an incredibly important debate. It is important that parliamentary opinion on this measure is on the record. The proposal from the European Commission is to amend the existing food for the most deprived persons scheme, as has been described. I must explain why we are firmly opposed to it.

As the hon. Member for Totnes said, the food distribution programme was introduced in 1987. Its main aim was to help run down the stockpiles of basic commodities that had been purchased into intervention stores under the common agricultural policy. Stores of butter, milk powder, beef, sugar, rice and cereals were released to charitable organisations in participating member states on an annual basis to distribute to the poorer sections of the Community. He is right that we last participated in the scheme in 1998. We withdrew because of the sharp decline in intervention stocks in the UK and because of the high administrative overheads for the Government and participating charities.

As hon. Members know, the main purpose of the intervention system is to support market prices, but the side effect—indeed, experience has shown it to be the dominant effect—is to encourage over-production and to distract farmers from making proper market-based production decisions. The hon. Member for South-East Cambridgeshire this morning said that such measures would stifle innovation and diversification in some sectors, and I entirely agree. Successive CAP reforms, which the UK has pressed for, have sought to reduce the role of intervention. That, combined with the improvement in world commodity markets in the past few years, has enabled the UK taxpayer to benefit from the sale of most intervention stocks. There are none left in the UK, and faced with that situation, the Commission has proposed what I believe is an extraordinary adaptation of the food for the needy scheme, based on an increased focus on purchasing products from the open market.

The main purpose of the Commission’s proposal—I shall take a moment to explain it, not to defend it—is to modernise the scheme. It recognises that the CAP is now more market-oriented and that price support will play less of a role in the future, with less chance of the accumulation of large intervention stocks. The proposal, therefore, provides for CAP funds to be used to purchase goods on the open market, in recognition of the fact that it will be the main purchase route in the future. With the refocusing of the scheme, the proposal also provides for a wider range of goods to be purchased by participating member states, based on nutritional criteria, rather than limiting them to the products to which intervention applies.

The other major change is the proposed introduction of co-financing by participating member states, at the rate of 50 per cent. from 2013 should the scheme go ahead, but with a 25 per cent. rate for the first three years from 2010 to ensure a smooth transition and the continued high take-up of available funds. Lower rates of co-financing will apply in the more disadvantaged areas of the European Community. As before, participation in the new scheme will remain voluntary, so, even if it goes ahead, we will not be obliged to participate. I offer no comment now on the merits or on the underlying intention to help disadvantaged people, but I must tell the Committee what I explained in the explanatory memorandum, which, with beautiful understatement, says that

In particular, we believe that the expansion of the scheme to procure goods on the open market in recognition of the fact that significant intervention stocks are unlikely to exist in the future will mean that the new scheme is essentially a social measure. The memorandum also states that we believe that the EU should act collectively only

In particular,

and that measures to assist the neediest members of society are

We could expand at length on what those might be, but at this moment it would not be particularly helpful.

To help the Committee to understand the history of the proposal, it was discussed at the meeting of the Agriculture and Fisheries Council on 28 November, following earlier technical consideration by officials. Those discussions identified a number of policy and technical problems with the proposal, and, at the moment, there is no qualified majority in favour of it. There are two main concerns. First, there is the legal base. The proposal is made under article 37 of the treaty, the same legal base as the existing scheme. Article 37 would be appropriate if the predominant purpose of the scheme were the supply of food through intervention; however, the focus of the revised scheme is much more likely to be on the purchase of products on the open market, so, given the predominant purpose of the scheme, it is difficult to argue that the use of article 37 as its legal base is appropriate. Several member states have concerns about that—concerns that we share.

Secondly—incredibly, when we consider the circumstances—the concept of co-financing is strongly opposed by a number of currently participating member states who believe that the scheme should continue to be wholly Community-financed. Were the revised scheme to go ahead, co-financing would be important if not essential to ensuring that each participating member state reached an informed judgment on how best to support its deprived communities—the value for money question—because it would be likely to improve the governance of the scheme.

Given that a qualified majority does not currently exist for the proposal in the Council, we do not know how or when it will be taken forward. The European Parliament is not expected to give its opinion until March, and the baton has meanwhile passed to the incoming Czech presidency, which shares many of the UK’s concerns about the proposal. As I said at the outset, the timing of this debate is useful in terms of European scrutiny of the measure—although it clashes with events elsewhere—and I look forward to hearing the view of parliamentary colleagues on the matter.

The Chairman: We now have until half-past five for questions to the Minister, and I remind hon. Members that questions should be brief. Those who are used to this will know that a new procedure allows me to take a question and a supplementary from the same Member before calling a Member from the opposite Benches.

Mr. James Paice (South-East Cambridgeshire) (Con): I am grateful to have the opportunity to serve under your chairmanship, Miss Begg. I thank the Minister for her introductory remarks, which have in fact answered some of the questions that I was going to pose, particularly with regard to process.

Will the Minister address the issue of the EU budget? My understanding is that the programme will run from 2010, as she said. However, will she confirm that in fact the EU budget does not run for the three years starting in January 2010, and that current budgetary arrangements will end before that? Therefore, where is there a budget from which this whole three-year programme can be run? What is the Government’s estimate of the impact cost on our contribution, our rebate and the UK generally?

Jane Kennedy: The hon. Gentleman is right about what he defines as the problem of setting future budgets. We contribute to the existing programme through our contributions to the EC budget. Although we have no plans to participate in the scheme, if we did our contribution would increase because we would be required to contribute to the funds received under the co-financing arrangements. Any UK receipts under the scheme would also serve to reduce the size of our abatement. The budget for the scheme has dramatically increased in recent years to facilitate participation by new member states and, more recently, to cover increased food costs. As I said, although the budget is not defined, the Commission argues that the budget will be determined on the basis of member state requests when the first three-year food distribution programme is drawn up. Therefore, if the scheme goes ahead in any form, it is essential that it should have a defined budget.

David Lepper (Brighton, Pavilion) (Lab/Co-op): From what the Minister and the hon. Member for Totnes have said and from my own reading of the document, which I have to admit was not done in detail, I think that the answer to my question will be no, and I hope it is. I take the Minister’s point that we are not likely to participate in the scheme, but will she confirm that the proposals in the document will have no implications whatever for the network of fair share schemes across the country—for example, the one in my constituency—where volunteers receive surplus food from supermarkets and other stores, and distribute it to shelters for the homeless and other worthy charities?

Jane Kennedy: I can reassure my hon. Friend: the proposal will not have an impact on such schemes. Indeed, the UK’s network of support for the poorest members of society is based on an entirely different premise from that in the European Commission proposal.

Mr. Roger Williams (Brecon and Radnorshire) (LD): Obviously, the intention is that a nation participating in the scheme would use its own intervention stocks or purchase from its own country. Are intervention stocks the possession of the European Union rather than the nation state, and will it therefore be possible for other nations to make use of other intervention stocks?

Jane Kennedy: The scheme has been based on member states using their own intervention stocks. Figures show that Italy and Poland take more than 43 per cent. of the proposed budget. The Committee needs to be aware that the proposal is to move from the concept of intervention stocks because, as I have explained—the hon. Member for Totnes and the European Scrutiny Committee have rightly expressed concern about this, too—those have dwindled to zero, certainly here in the UK, and properly so. The proposal would enable the European Commission to make purchases on the open market to supply the scheme.