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Westminster Hall

Thursday 8 March 2012

[Mr Mike Weir in the Chair]

Common Agricultural Policy

[Relevant documents: Fifth Report of the Environment, Food and Rural Affairs Committee, The Common Agricultural Policy after 2013, HC671, and the Government response, HC 1356.]

Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Newmark.)

2.30 pm

Miss Anne McIntosh (Thirsk and Malton) (Con): It is a great privilege to serve under your chairmanship this afternoon, Mr Weir. The Select Committee on Environment, Food and Rural Affairs is delighted to have secured this debate, which is welcome and timely.

The common agricultural policy has been on a long journey since it was first established, moving from a time of rationing through a time of plenty to a time of increasing fluctuation. Previously, the CAP took the lion’s share of the European Union budget. Now it accounts for approximately 40% of total EU spending. We are mindful of the fact that negotiations on the CAP reforms are continuing in parallel with the negotiations on the financial framework 2014-2020 for the European Union.

The CAP is at a crossroads. Decisions made now will determine our future food prices and availability and shape Europe’s countryside and rural communities. I want to thank all those who participated in the preparation of this report. I am also grateful to those who have contributed to our subsequent inquiry into the greening proposals contained in the communication. We have not yet had the opportunity to agree that and publish a report. I pay tribute to those who farm not only in Thirsk, Malton, Filey and the rest of north Yorkshire, but across the United Kingdom. They have the perils of the landscape and also the elements to contend with. They are not just feeding the nation, but are increasingly being called on to feed a hungry world.

The current round of CAP reform is being played out against a very different background to farm reforms. Food security is rising up the political agenda, placing a renewed emphasis on agricultural policy. I submit that there is a potential inconsistency at the heart of Government policy between food production and sustainability. We await the Minister’s response to hear where exactly the Department for Environment, Food and Rural Affairs is taking us in its negotiations.

We should not underestimate the challenge facing agriculture globally. We need to increase production significantly, but we cannot do that simply by using more land, more chemicals and more water. We already have problems in the UK food system. Prices are rising. We have food inflation running at about 4%, but farm incomes are falling for many farms. Grazing and livestock income is predicted to fall nearly 50% over the coming year.

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Paul Flynn (Newport West) (Lab): In view of the change in farmers’ prosperity—there have been better times recently, particularly in the value of agricultural land—does the hon. Lady think it might be a good time to call on the farming community to take their share of the cutbacks suffered by the rest of the country? Would she suggest that a cap of £26,000 be placed on subsidies?

Miss McIntosh: I am sure the Minister will have heard that. That proposition was not put before the Committee and we have not reached a conclusion on that. The farmers are making a huge effort—unpaid—in areas such as retaining and storing water, for which it may be possible to use funds from the CAP in future.

The CAP needs to provide a clear plan for growth and sustainability. As a Committee, we were not convinced that either the European Commission or indeed the Department have faced up to the challenges ahead. In our approach in the report before us this afternoon, we are perhaps less reformist than DEFRA. We express some reservations about the prospect of capping. The hon. Member for Newport West made an interesting intervention, but we will resist any attempt—it would not be the first attempt—to seek to discriminate against some of the larger units that we have. Farming units tend to be larger in the UK. That is partly historic and partly because they are more productive. We would resist any attempt to discriminate on the grounds of size, and we would also resist the greening of pillar one through compulsory measures.

We recognise that our farmers are already subscribing in larger part to agri-environmental measures than many other farmers in the EU. We believe that successive Governments have done absolutely the right thing in pursuing that policy. We do not want to see our farmers, who are in agri-environmental agreements, discriminated against by having to go possibly at short notice down a different path, or be discriminated against by facing a penalty when they leave agri-environmental agreements to look at new agreements. We want reassurance on that from the Minister today.

Glyn Davies (Montgomeryshire) (Con): Even though I am making an intervention, I should declare an interest as a farmer. Does the hon. Lady agree that we must resist the principle of greening the CAP, which, I must admit, most people in this country support? It must not happen in a way that increases bureaucracy and the difficulty of operating within it to the extent that it discriminates against the British farmer.

Miss McIntosh: For the sake of clarity, I am addressing the House as Chair of the Environment, Food and Rural Affairs Committee. I will leave it to my right hon. Friend the Minister to respond to the debate, and I commend the work that he does. Having been a shadow Minister, I am delighted to participate in this debate.

I will deal some of the points that my hon. Friend has made. On food security, the EU must have a significant degree of self-sufficiency. Speaking personally, I am concerned that we are less self-sufficient in this country than we have been historically. That is a comparatively recent development over the past five years. I hope that we can stop such a development in its tracks and that we can become not only increasingly self-sufficient but

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a major exporter, following the Foresight report in particular and some of the invitations to farmers in that report.

Julian Sturdy (York Outer) (Con): I refer to my entry in the Register of Members’ Financial Interests. My hon. Friend is making a key point about food security and the importance that it will have not only in the UK but across the world, and also to the impact on food prices. Does she therefore agree that it would be dangerous to take all arable land out of production in the name of greening?

Miss McIntosh: We will return to greening measures in our further report. The greening measures are the most controversial part of the reform. We believe that the CAP should enhance food production capacity—not necessarily increasing production now—by keeping land in agricultural use and in good environmental condition so that the land is usable when we need it. We need a competitive and viable agricultural sector. We need to redress the imbalances, because farmers cannot get a fair return from the market.

Kelvin Hopkins (Luton North) (Lab): The hon. Lady makes a point about the importance of food security for the long-term future and for maximising our self-sufficiency, with which I totally agree. Does she agree that the logic of such an argument is that agricultural policy and agricultural subsidy should be managed nationally, not internationally?

Miss McIntosh: The evidence we received was very clear in that regard: as long as there is a level of farm support across the European Union—and in other parts of the international community—farmers subscribe to decisions being taken within the European Union, so that there is a proverbial level playing field. That is something I have sought most of my professional life. I do not know if we have reached it yet.

I want to say a few words about direct payments. In the Committee’s view, direct payments should be retained—the evidence was very powerful in this regard—up to 2020. They should not be abolished until business conditions in agriculture improve, because UK farms are highly dependent on direct payments—currently the single farm payment as introduced in 2005. Without them, more than 50% of farmers would be unprofitable. I dare say that many of those would probably be in my uplands in Thirsk, Malton and Filey. The evidence we received indicated that UK livestock production would fall significantly as a result of such an approach although, interestingly, it would have only a negligible effect on crop production. The Committee is concerned about the implications for food security and for landscapes, and the rural livelihoods that depend on farming.

Ian Paisley (North Antrim) (DUP): I thank the hon. Lady for giving way in this very important debate. Does she accept—and has the Committee reflected on—the issue regarding the fair distribution of the amounts between pillar one and pillar two? Does the Committee recognise that there must be a fair distribution, which should not be at the expense of one pillar over the other?

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Miss McIntosh: That is an excellent intervention. If the hon. Gentleman bears with me, I shall come on to those very concerns.

Under successive Governments, UK farmers have been expected to meet higher standards on animal welfare than farmers elsewhere. We have unilaterally applied the sow stalls and tether ban, which only comes into play in 2013 across the rest of the European Union. Those standards impose extra costs on our producers and make them less competitive globally. Direct payments provide a means to pay for those higher standards. Without them, society—the community—runs the risk of EU farmers going out of business while exporting the social and environmental impacts elsewhere. In the longer term, the European Union must argue more strongly for a recognition of production standards in trade agreements. We conclude that DEFRA must set out more clearly how it will reduce reliance on direct payments, including the policy tools needed.

Andrew George (St Ives) (LD): On direct payments, the hon. Lady will know—I know that the Select Committee has considered this issue—the definition of what an active farmer is. The Government entirely support the principle of that. Does she not also agree with the Government’s approach, which is that the definition of what is and is not an active farmer surely must be decided at a member state level?

Miss McIntosh: I will come on to say a bit about that if time permits. I have personal reasons that relate to constituency interests—apologies for not mentioning it earlier but, as declared in the register, I farm two fields in partnership with my brother—for believing that tenant farmers in this country risk being in a very difficult position. I am very grateful to the Minister for having heard me out on my personal concerns in that regard.

During the course of compiling the report, the Minister told us that DEFRA would like direct payments to be phased out over the next financial period—in other words by 2020—and to end shortly thereafter. If DEFRA wishes to achieve that, we would like to see a plan to make farming in the European Union more competitive and less dependent on subsidy, otherwise the Department’s position does not seem credible and risks alienating farmers and weakening DEFRA’s influence in Brussels. From the evidence the Minister gave us, there seemed to be no new ideas on how to make UK farming more competitive. The Committee is not convinced by the Department’s arguments that rising prices for some commodities will necessarily deliver long-term improvements in farm incomes, for example, because of pressure from supermarkets on farmers.

Barry Gardiner (Brent North) (Lab): I am grateful to the hon. Lady for setting out the Committee’s report so clearly and for initiating the debate. She will have heard the Minister say from a sedentary position, “That’s nonsense. It’s piffle.” It is important that she sets out how the Committee arrived at that conclusion and the basis of the witness statements that we took from the Minister and others.

Miss McIntosh: I am grateful to the hon. Gentleman and distinguished member of the Select Committee for those remarks. I could go through the witness statements at some length, but the record speaks for itself. For the record, the Government response states:

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“The UK Government accepts that there is more for us to do in this area and are continuing to develop our ideas for reform. A UK Government priority will be to continue the good work undertaken in previous reforms, such as phasing out the remaining coupled subsidies and continuing the market orientation of the CAP.”

I am sure that the Minister would like to stand by the evidence that he gave to the Committee in an oral session.

The Minister of State, Department for Environment, Food and Rural Affairs (Mr James Paice): I need to point out to my hon. Friend and, indeed, to the hon. Member for Brent North (Barry Gardiner) that if she read her speech as I believe she did, she said that I had stated in witness evidence that the policy was to phase out the single farm payment over the next seven years and end it shortly thereafter. That in itself is a contradiction. That is not our policy. Our policy is, yes, to seek a phasing out of the single farm payment. However, she implied that I had said that it was to be extinguished by the end of that seven year period. That is not the policy.

Miss McIntosh: I am grateful for that clarification because the Committee was led to believe that that was the desire of the Department and the Minister. Certainly, that was the understanding of the witnesses—both the witness statements—from the farming community as well. I am sure that hon. Members will want to return to that matter.

We have already moved away from the historic basis of payments, and it would be anachronistic to continue to pay farmers on the basis of what they produced a decade ago. However, a flat rate per area would result in considerable redistribution within the UK, suggesting that national flexibility will be needed.

Turning to greening the CAP, the Committee agrees with the principle that the future CAP should reward and encourage sustainable farming. The Foresight report, “The Future of Food and Farming: Challenges and choices for global sustainability”, says that we will need to produce more food but use fewer inputs. We conclude that greening measures should not come at the expense of productive successful agriculture, but we need to find win-wins for sustainability and competitiveness. I repeat: we applaud the fact that, in this country, our farmers are already greening through agri-environmental schemes to a much greater extent than elsewhere in the European Union.

Paul Flynn: Moving away from the principle of subsidising food production to subsidising the ownership of land, a recent claim was made that nearly 1,000 landowners in this country, some of whom are not farming their land at all, receive very large grants of more than £250,000. Does the hon. Lady think that the pubic will accept not only that such farmers should receive those large amounts, but that those large amounts should increase at a time when cuts are being made everywhere else in the economy?

Miss McIntosh: With the greatest respect, I have addressed capping, having a CAP and the historic reasons why we are more productive and have larger units. I personally oppose any move to discriminate against our productive farmers on those bases.

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The European Commission seems to be proposing a return to compulsory set-aside. We on the Committee think that that runs counter to the prevailing message that we should produce more food. The Commission needs to focus on ways to help farmers to produce more using fewer inputs for the reasons that I have given.

The Commission’s proposals to add more conditions into pillar one would tie farmers up in environmental red tape without delivering tangible environmental benefits. The Committee was persuaded that we need more simplification and less complication, which is why we are hesitant about the proposals. Also, farmers need to be involved in the process, so voluntary measures and incentives are preferable to more regulation.

The evidence that we have received shows that UK agri-environmental schemes are a European success story. CAP reform should build on that success by encouraging a broader uptake of agri-environmental schemes across Europe, not by creating a whole new system that requires more auditing and more expensive computer systems.

We reject DEFRA’s alternative proposal, which, as we understand it, would shift most of the CAP budget into pillar two and make it more flexible with fewer controls over how much member states spend on different objectives, because pillar two is co-financed—both the EU and the member state contribute funds. The Committee is concerned that cash-strapped member states, not least our own, will not want to take up more co-financed measures, and UK farmers will end up being disadvantaged. A common approach and common funding are needed across the EU.

The briefing prepared by the National Farmers Union for today’s debate contains a useful graph that shows that we are at the absolute bottom: the UK receives the lowest per hectare allocation of pillar two funds of all member states. That is reflected in the fact that pillar two payments for England are low, owing to the reluctance of successive Governments to draw down discretionary European funds. It would therefore be nonsensical to pile more funds into pillar two away from pillar one.

On the idea of ceilings and capping, the Committee disagrees with a payment ceiling, whereby the maximum direct payment cannot go above a certain level—probably €300,000—irrespective of the size of the farm. Direct payments should mostly reward farmers for their provision of a public good, so larger farmers deserve larger payments. The evidence that we have received suggests that capping direct payments would discourage farm rationalisation and generate more business costs.

Regarding tenants and landowners, we invite DEFRA to ensure that a new definition of an active farmer will not disadvantage UK tenant farmers and commoners, some of whom are found in my constituency. The UK has a unique system of tenanted and common land, of which I am extremely proud. The Commission proposes a new definition for eligible CAP recipients, and it is essential to ensure that tenants and commoners are not left out.

Tenant farmers can currently claim direct payments, provided that they meet the usual scheme rules. We agree that it is important that they continue not only to do so following CAP reform, but to be eligible, where they meet the rules, for agri-environmental schemes. We are working with representative commoners and other

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interests in the management and protection of common land to identify options for the delivery of direct payments on common land. I warmly welcome the fact that that is the Government’s response, and I pay tribute to the Minister for his personal involvement. We concluded that there is a need to look at European rules to protect tenant farmers, and we urge the Minister to lead, as he is doing, in that regard.

In our view, the CAP should in the future include optional coupled payments within strict limits. The Committee agrees that most payments should be decoupled from production, as with the single farm payment, because that allows farmers to respond to the market, is less distorting to world trade and does not lead to over-production. However, in the uplands, keeping livestock is central to the delivery of other public benefits, such as landscapes, but it is unprofitable. Payments per head within strict limits would be a fair and transparent way to reward farmers for the public benefits that they provide. We recognise that DEFRA opposes such payments, but we hope that the Minister is open to persuasion.

We have not taken a strong position on the budget. We agree that some savings need to be made, but they should be balanced against their effect on farmers’ incomes and the ability to fund agri-environmental schemes. EU money is the main funding for the agricultural environment and the environment in the UK, and the Department should be mindful of the consequences that will follow in stripping it away.

The evidence that we received did not support a return to greater price support, but said that measures such as intervention buying would be needed in the future to prevent a collapse in production if prices fall.

Our bottom line is that simplification of administering the CAP is desirable and that elements of the Commission’s proposals risk making the CAP more complicated—for example, by using a new definition of an active farmer that might have heavy audit requirements, a more complex new system of allocating direct payments or more green conditions.

Today’s debate is timely; the negotiations are at an early stage. We believe that the Commission’s proposals lack both vision and detail on how to increase the competitiveness of UK agriculture. Elements of the Commission’s proposals, such as payment ceilings and additional support for small farmers, risk making UK businesses less supported. The proposals should give greater consideration to rectifying imbalances in the food supply chain and strengthening farm extension services. Any new definition of an eligible recipient of CAP payments must not, as I said earlier, disadvantage the UK’s tenant farmers and commoners. Currently, the CAP is in a fairly good place in this country, but there is some way to go before we can best deliver a food policy that meets all requirements and delivers for the environment in this country and beyond, in the wider European Union.

2.56 pm

Dr Eilidh Whiteford (Banff and Buchan) (SNP): I congratulate the Environment, Food and Rural Affairs Committee and its Chair on the report and their important work in scrutinising the CAP reform process.

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I want to pick up on a few key issues in the Commission’s proposals that will be of great significance to farmers in Scotland, not least in the parts of Banffshire and Buchan that I represent, where farming has been a way of life for many generations and where food production is still absolutely the mainstay of the local economy.

I suspect that there is a good deal of consensus across the House on a couple of critical issues in today’s debate, the first of which is the need to cut red tape and reduce the administrative burden on farmers. In many respects, that is about fixing a major problem with the current CAP regime and is linked to the need for effective regionalisation and flexibility for member states. I hope that the Minister will consider in his comments at the end how we can start making decisions much closer to home and in the interests of our farming communities.

Roger Williams (Brecon and Radnorshire) (LD): The hon. Lady touches on an important point. A common agricultural policy is needed, but considering the difference between farming in Finland and farming in Greece, we need to ensure that local decisions are taken on local matters within the umbrella of the CAP.

Dr Whiteford: I agree entirely with the hon. Gentleman. Clearly, we have different climates and landscapes, diverse methods of farming and different ways of doing business in farming. Without prejudice to the common market, it is important that decisions are made in a practical way by the people best able to make them.

Member states will need flexibility in the process to tailor implementation to their own needs. Within the UK, all three devolved Administrations must be able to work around the challenges that they face in delivering sustainable agricultural development in some least favoured areas. About 85% of Scotland is classified as least favoured areas. That compares with much lower proportions in some other parts of the UK. I hope the Minister will offer assurances that he will press for greater regionalisation as the negotiations intensify and that the issue will not fall off the agenda.

The hon. Member for Thirsk and Malton (Miss McIntosh), the Chair of the Environment, Food and Rural Affairs Committee, quite rightly concentrated on direct payments in her remarks. I welcome the fact that the Government have moved away from the more rigid position of the previous Government, but I am still concerned about their direction of travel. I welcome the Minister’s remarks earlier on clarifying the Government’s position. I hope that he will listen carefully to the Governments of Scotland, Wales and Northern Ireland on direct payments and pursue a negotiating stance in Europe that reflects the needs and wishes of the whole UK.

It is worth remembering, as the hon. Lady pointed out, that direct payments are there primarily to compensate producers for the increased costs of operating in a highly regulated market and to enable them to meet the high animal welfare and food safety standards that we all expect. We need to acknowledge that that does not come for free. We need to accept the reality that, in the past few decades, farming has not been particularly viable as a commercial enterprise. If we did not support agriculture with direct payments, food production and land management simply would not be happening in large areas of the UK. Farming, especially in the least favoured areas, would have ceased a long time ago.

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We cannot consider this in purely economic terms. The hon. Lady hit the nail on the head when she put food security at the heart of the debate. Brian Pack’s 2010 report, which was produced for the Scottish Government, highlighted not just the food security challenge, but the challenges of climate change, water supply, energy use and biodiversity as the starting points for CAP reform. In a global context of rapidly increasing demand for food and the need to manage our natural environment much more sustainably, the case for direct support for farmers is actually much stronger now than it ever has been in the past.

We also need to consider the future of direct payments against the historical backdrop of Scottish farmers receiving a disproportionately low share of pillar one support—a pressing issue for those Scottish farmers who want to export their produce. At present, pillar one rates in Scotland are only €130 per hectare, which is less than half the EU average, and well below the UK average of €229 per hectare. The UK needs to argue for its proper share of pillar one, not least so that it can provide a fairer allocation to Scottish farmers.

Glyn Davies: I want to return to the point that I made when I intervened earlier. I think that there is general agreement that pillar one is crucial. In Wales, where we have more than 80% of least favoured areas, it is absolutely crucial. Farmers who approach me are concerned that a significant part of pillar one will be subject to greening policies that are so bureaucratic that they will not be able to comply with them. The biggest threat is that the greening proposals on pillar one will probably make that part almost inaccessible.

Dr Whiteford: The hon. Gentleman raises a valid point. In their current form, the greening proposals are probably unworkable. They are inherently bureaucratic, which is exactly what we should be trying to move away from. I am afraid that they will have unintended consequences and that the one size will simply not fit everyone in exactly the same way as we have seen in previous incarnations.

One priority for farmers in my constituency, as well as other parts of Scotland, is the need to retain the option for coupled support for the beef sector. The hon. Member for Thirsk and Malton mentioned that in relation to upland farmers. The Minister will know that Aberdeenshire is famed for its beef, but we face challenges in least favoured areas. A lot of the land used for livestock grazing in Scotland is not suitable for arable farming. Grazing livestock is the most sustainable and environmentally friendly way to manage that land. I hope that the Minister listened to the concerns of Scottish farmers when he met representatives of the National Farmers Union earlier this week. I am sure they made their views known; I hope that he will take their concerns on board and respond to that issue.

Another issue that relates to the point about greening is the three crop rule, which will not work in those least favoured areas where only grass can grow—a lot of those areas are permanent pasture. I hope that the Minister can find a workable solution to that, too.

CAP reform gives us an opportunity to clear up some of the problems with the current approach, including the opportunity to target support at those who are actively farming the land. There has been recent controversy

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about so-called slipper farmers. It is worth making the point that, certainly in Scotland, more than 98% of those in receipt of farm subsidies are actively farming. It is important to keep that in proportion, notwithstanding the need to tighten up and close that gap.

This is a time of austerity throughout Europe, and everyone is feeling the spending squeeze. We need to justify the support that we give to farmers through direct payments if we want to keep public confidence in the benefits that they accrue. A very strong case can be made for our food producers and land managers, but it is hard to justify large handouts to those who are not actually involved in farming.

It is important that any active farming test is based on how the land is managed, not on an arbitrary accounting measure, because many small crofters in Scotland are part-time farmers—they either run other businesses or have other employment—and they could be adversely affected. Increasingly, perhaps more in my own area than in some others, farmers are trying to diversify their farm businesses. Renewable energy is probably the most obvious example, but they are moving into areas that are sometimes considerably more lucrative that their farming businesses. Farmers who are actively managing land sustainably should not be penalised because of their other business interests.

Simon Hart (Carmarthen West and South Pembrokeshire) (Con): I imagine that the hon. Lady has similar examples to ours in Wales. Farm businesses that have traditionally formed the bulk of a family operation have been overtaken by, for example, a tourism diversification scheme. In our case, that is every bit as important. She makes a good point, but I hope that she recognises that that applies, particularly to coastal areas.

Dr Whiteford: The hon. Gentleman makes a good point about his constituency. The picture in Scotland is more mixed. There are some areas with a tourist dimension, but there are other areas where farming and food production is much more the core business. Again, even in the UK, we cannot say that one size fits all. Even within regions in parts of the UK, there is diversity.

Mr Alan Reid (Argyll and Bute) (LD): The hon. Lady rightly said that that direct payment should be linked to active farming. Does she agree that the system needs to be improved, so that new entrants will be attracted into farming? The present system with a fixed point in the past discourages new entrants.

Dr Whiteford: Absolutely. That has been an historic problem, and this is an opportunity to address it. The Commission’s proposals to support young farmers are probably a step in the right direction. It has been very difficult in recent decades, as the hon. Gentleman is aware, for new entrants to get a start in farming unless they inherit a family business. I am concerned that the proposed scheme will apply only to those who are already entitled to basic payments. That will not help new entrants aged over 40, or those who enter farming after 2014.

I should like the scheme to be open to all genuine new entrants to farming. I should also like member states to have the option to implement that policy, so that it can be tailored as necessary to address the real issues that

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we face. Likewise, a simplified scheme for small farmers could be a useful step in Scotland, where 13% of pillar one support is for less than €1,000. Crofters would be prime beneficiaries of such a move, and I hope that we will find a suitable way forward on that proposal.

Barry Gardiner: I agree with the hon. Lady on the importance of local understanding in the distribution of funds; they should be managed locally. However, has she considered that perhaps in other parts of the EU—not within the UK—there might be countries that could abuse or rig such a system to ensure more finances for their own farmers? That would not be good for farming in general or for the CAP’s objectives as a whole. Indeed, it would not be good for the environment.

Dr Whiteford: The hon. Gentleman makes a valid point, which touches on one of the key struggles that I mentioned at the outset: the problem of regulation and bureaucracy. We need to strike a balance between bureaucracy and regulation, with all the problems of compliance in recent times, and have an effective and workable system. There is no easy solution. Nevertheless, those who comply with the system should not be the ones who are punished by it. I have lost count of the number of farmers in my constituency who have complained about the amount of paperwork that they have to deal with to access CAP funding. Even though that burden of regulation has eased a little in the past few years, the single, biggest complaint that I hear from local farmers is about the very stringent and absolutely bureaucratic compliance rules.

The financial penalties for even a minor infringement or an administrative error can run into thousands of pounds, which is out of all proportion to the seriousness of the infringement. I have raised that with the Minister on more than one occasion, and he is well aware of farmers’ concerns. What prospects are there in this CAP reform round of addressing that serious issue, which has caused more problems than any other?

I hope that the Minister will respond to those concerns and to those that, I am sure, other Members will raise. There is a future for farming. It supports nearly 500,000 jobs in Scotland, either directly through agriculture or indirectly through the food and drink supply chain. Farming is a critical part of our economy and our culture, and the money that we invest in it is repaid many times over through the management of our rural communities.

3.10 pm

George Eustice (Camborne and Redruth) (Con): It is a pleasure to follow the previous speakers.

I am a member of the EFRA Committee, and I agree very much with many of the points made by its Chair, my hon. Friend the Member for Thirsk and Malton (Miss McIntosh). In particular, I agree with her criticism of the current direction of the reforms. The Committee is a broad Church, however, and it would probably be fair to say that I am less critical of the stance the Government have adopted, for the simple reason that all British Governments face the same problem on the CAP: ultimately, the policy is not their decision.

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There are complicated negotiations between 27 member states, so our negotiating stance constantly comes up against opposition from other countries. That makes it quite difficult to set out a clear view of what we want to do; indeed, the previous Select Committee criticised the Labour Government for wanting to see everything in the long term done in pillar two, and for wanting pillar one to be phased out. The Committee said that it was unrealistic to suggest that in negotiations and that it was wrong for the Government even to have a vision of where they wanted to end up.

I disagree, and farm policy is a good example of what happens when we stop making decisions at a national level and subject ourselves to the spirit-crushing process of endless negotiations with 26 other countries. We end up with a poverty of vision right across Europe about what a good agricultural policy should look like, and I will say more about that in a moment.

Roger Williams: I thank the hon. Gentleman for making that point, but does he not agree that if we are to have a common market and a trade in food between our nations, we need commonality and a common agricultural policy?

George Eustice: As I will say later, we need common objectives, but not necessarily a common policy. We also need clear state aid rules, as we have in other sectors. In that way, we can have a proper functioning single market and protect it, even though we do not have a common uniform policy across Europe.

The most important point about the proposals on the table is that they are a backward step for the CAP. The aim was to simplify it, and simplification has been the buzz word for many years, but the proposals will make it more complicated. As the Chair of the Committee said, we are effectively seeing a return to set-aside, with suggestions that 7% of people’s land should be set aside. At a time when food security, which should be a key objective of a common agricultural policy, is a growing issue, that is a step backwards.

I also object to the cap proposed on payments to farmers. If we want to encourage farmers to become less dependent on subsidies in the long term, we need to support consolidation and more efficient farms. A cap on payments would force farmers to break up holdings into collections of smaller holdings so that they still qualify for the subsidy, but that makes no sense. If we want a more efficient agricultural industry, why penalise the larger, more efficient farms?

There are some ludicrous things in the proposals. For instance, in an attempt to achieve crop rotation, there is some suggestion that farmers grow at least three crops to qualify for a subsidy. We can tell that the proposal was written by people who do not understand farming, because insisting on growing three separate crops will not necessarily bring the benefits we seek from crop rotation. For instance, somebody might grow cabbages, cauliflowers and oilseed rape to ensure they have their three crops, but those crops all come from the same brassica family, and are all subject to similar diseases, so a farmer who grew them would soon run into serious problems on their land.

What should a new CAP look like? We should start moving towards something that is about common objectives, rather than a unified common policy. The CAP should

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have key objectives, such as enhancing biodiversity, improving animal welfare and delivering food security. However, we should then give national Governments much more freedom to innovate, try new policies and adopt approaches that work in their countryside, rather than trying to have a uniform approach that works from Scotland all the way down to Greece, which is clearly difficult to achieve.

Allied to that, we would have a clear set of state aid rules that were specific to the agricultural sector, just as we have clear state aid rules for the single market in every other sector. Such rules would prevent, say, France from subsidising its farmers more than the UK Government and thereby putting our farmers at a disadvantage. Provided that we got those rules right, we could protect a single market in agricultural produce.

The key benefit of such an approach is that it would be more fluid. We would be able to hold the UK Government to account and say, “Why aren’t you trying this great new idea that is working so well in France? Surely, it would work here.” Instead, the best we can do now is to say, “How many meetings have you had with Poland to try to outmanoeuvre France?” That is not a good way forward.

When we make such proposals, people immediately think, “That’s a good idea, but it’s not realistic in the current time horizon.” I have heard that, too. Indeed, when I put these ideas to the Secretary of State last week, the answer was that they were ahead of their time, which is a flattering way of saying, “No, we’re not going to do that.”

Huw Irranca-Davies (Ogmore) (Lab): The hon. Gentleman has great experience in the European Parliament, and I want to put one point to him. What he describes is already the direction of travel in the common fisheries policy, where there is a strong push from the UK Government, as there was under the previous Government, to move towards a more dynamic, regional-management approach, with much greater subsidiarity and local decision making, albeit in an overall framework. The hon. Gentleman may be ahead of his time on this issue, but practice in other areas is catching up with him.

George Eustice: The hon. Gentleman is right, except that I was not actually in the European Parliament. I was a candidate in the 1999 European elections, although unsuccessfully—and for a different party, I should add. However, I have followed these issues closely, and the hon. Gentleman is right. The EFRA Committee has, separately, been looking at the common fisheries policy, and there are proposals on the table not only to have a common framework and common objectives, but to give much more devolved power to groups of national Governments so that they can manage their own waters. It remains to be seen whether we get those reforms through, but the Government have been quite successful in getting the Commission to adopt them. That also shows the difference a different Commissioner can make. In Commissioner Damanaki, we have someone who is much more open to such proposals in relation to the common fisheries policy.

I want to question the idea that it is impossible to do what I am talking about. Alongside taking evidence on the CAP, the Committee has been looking at the natural

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environment White Paper. The striking thing about the CAP is that we hear people say, “We want to green pillar one in a flexible way. All this money is going into it; we need to get some public good out of it and green it.” However, they do not really know where to start, and the current proposals have run into a bit of a muddle.

On the other hand, we have the natural environment White Paper, which everybody says is very coherent and really well thought through, as well as having lots of interesting proposals about valuing natural capital and creating markets in which we can mitigate and offset environmental damage in some areas through improvements in others. The problem is that there is not enough money to bring life to those ideas.

Is it really beyond the wit of man to connect the two? Let us take some of the principles from the natural environment White Paper, link them to the funding in pillar one and see if we can make that work. What would that look like? It would mean replacing the single farm payment with some kind of market in transferable environmental obligations. A farmer on the fens who grows lettuces, and who does not really require the single farm payment for his business model to work, might say, “I don’t want to set aside 7% of my land. I don’t want to get into that. I just grow lettuces, and that’s my business model.”

In contrast, a farmer on marginal land in Wales, for instance—I have nothing against Wales, and there are patches of good soil there—may decide to opt into environmental obligations on a larger scale. That can bring benefit, with the establishment of wildlife corridors, and with critical mass in some areas for improved wildlife habitats. That might actually work, rather than a piecemeal approach with 7% of every farm’s land set aside.

Such a transferable obligations system could also be extended to issues such as animal welfare. For instance, in the case of livestock farmers who pursue less intensive systems that are better for animal welfare, rather than having to fight in the market for recognition for their extra work to improve animal welfare, they could be given that recognition by the Government; we could make them eligible for payments for which those who pursue intensive systems would not be eligible. There are lots of interesting things that could be done with such a system of transferable obligations.

As for pillar two, the Select Committee Chair mentioned the problem of its needing to be co-financed; sometimes the Government have been reluctant to buy into those things. To my mind, the answer is perhaps to bring back even greater control of pillar two, so that it does not become co-financed, but we do not send the money to the EU in the first place, and then have it come back with strings attached: in fact, we try to finance that as an agricultural fund that focuses on several key areas. Developing farm competitiveness is an important one that we should try for.

I also agree with the point that was made earlier about encouraging new entrants into farming. There was an interesting project, piloted in Cornwall, called the Fresh Start project, which aimed to encourage new entrants to the industry. The average age of farmers is incredibly high. I think that two thirds of farmers in Europe are over 60, which is a shocking figure. We need new entrants. The Welsh Government have also started

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interesting schemes to encourage new entrants to the industry. Pillar two could focus on improving competitiveness and encouraging new entrants, as well as keeping going with schemes such as the entry level and higher level stewardship schemes.

Those two policies, to return to what I said at the outset, prove the point that if a national Government are given the scope, freedom and head room to think through what a good policy looks like, they can get it right. The ELS and HLS are good examples of that. Britain is a trailblazer in that respect, because we have been able just to do the right thing. We have not had to go behind closed doors and haggle about it with 27 other countries. If we could do that in more areas of agricultural policy, our farming would be stronger.

3.22 pm

Ian Paisley (North Antrim) (DUP): At the outset, I thank the hon. Member for Thirsk and Malton (Miss McIntosh) for the way in which she introduced what is one of the most important subjects Parliament deals with—the production of food. It is one of the nation’s most important industries. It has been taken for granted too often, and for too long, and cast as a secondary issue, but it is crucial, and it is right and proper for the House to have the opportunity to debate it.

I think that we are all on a common page, if not a common agricultural policy, and that page is headed “The system doesn’t work.” As the Irishman said: “But you wouldn’t start from here”; but the trouble is, we are here. We are at this point after years of implementation of a policy that was initially flawed anyway, and which created huge butter mountains and a waste of food. There is virtually nothing we can do about where we are now. Those who suggest that we can suddenly end this, and everything will be all right for the industry, are just barmy. That is just silly. If anyone were to say that about any other sector of the economy, they would realise how daft it sounds. From time to time, people cry out, “What about New Zealand? It did it.” It took New Zealand nearly 20 years to get things right, and there was a lot of pain in the process. Those who advocate moving away from subsidised agricultural production need to get a grip, and to make comments relevant to the needs of the sector.

George Eustice: Does the hon. Gentleman recognise that when New Zealand abandoned its subsidies it substantially devalued its currency at the same time, so that farmers lost subsidies but gained a dramatic increase in price for their produce?

Ian Paisley: That is an interesting debate in its own right; there could be a good examination of what has happened in countries that have tried to reform their agri-food sector. The New Zealand question is not a debate for today, but we should always have it at the back of our mind.

No matter what we try to do, it will be pain for someone. Most importantly and obviously, it will be pain for the farming community. We must ask ourselves whether we want to put that community through pain. Let us put the matter in perspective: agri-food production in this nation is a £20 billion industry. Milk production

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alone represents more than £8 billion in the industry. Good, clean, traceable food, that the consumer wants to put into their body, is a positive and beneficial product. If we start to mess about with it and ruin the stability of the industry, we must be careful to understand the consequences. The production of food that the public do not feel comfortable with, or about whose production they do not feel confident, will destroy a positive and powerful economic factor for our nation. We always need to bear that in mind when we deal with agriculture; because it goes by the way, which sickens me. We need to get a grip on the fact that agri-food production is, as I said, one of the most important industries, if not the most important, in which this nation is involved.

In Northern Ireland, agriculture is a key driver in our economy. Indeed, the agri-food sector represents approximately 20% of the total private sector employment in Northern Ireland. The food and drink sector contributes £3.2 billion to our little country’s national turnover. At a time of economic difficulty, agri-food production is in a state of growth, whereas other sectors of the industry are either stagnant or in minus figures. The sector is positively growing. Agri-food production will be a crucial factor in rebalancing our local economy away from total reliance on the public sector. The key to achieving those goals is driving an export-led growth in the agri-food sector in Northern Ireland.

Given the importance of the common agricultural policy to the Northern Ireland economy, and its cross-cutting nature across the majority of Government Departments, including not only Agriculture and Rural and Development, but Enterprise, Trade and Investment, and Environment, a formal agreement should be reached at Northern Ireland Executive level on how the reformed common agricultural policy will be implemented in Northern Ireland. The implementation of the reformed policy must deliver the objectives of the draft Northern Ireland Executive programme for Government. In bringing that about, it is vital that our Minister, locally in Northern Ireland, should up the game and engage directly with the ministerial team here, nationally.

Let us face it, the Minister present today, and his team, will negotiate the CAP package, no matter what form it takes. I want him to be on my side, and to argue the case for Northern Ireland. He will know that case, and how it affects the part of the United Kingdom I come from, if our Minister in Northern Ireland ups the game and engages more directly with him. I hope that that happens. The challenge is a serious one, because time is against us. The clock is ticking. The Minister needs to know all the permutations and ramifications of each decision that he will take at the CAP reform meetings, and how they will affect my part of the United Kingdom. There is a duty on politicians now to lobby hard, and that is why I welcome the debate. It sets some pretty important touchstones, which need to be recognised, and I think are being recognised, to a greater or lesser degree.

We also need to ensure that Northern Ireland gets its fair share of the UK CAP budget. It is a point that we need to negotiate directly. I do not want to do that against Scotland’s interest. Scotland has every right to make its case too—as does, of course, the great Welsh Principality, which has to be saluted at every opportunity in this place. We must ensure that there is regional

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flexibility within the United Kingdom. I understand that there could be a degree of flexibility across the regions of Europe. I want flexibility in the UK, so that the Department can ensure that it shares—parcels out—the money fairly and appropriately, understanding the unique circumstances in all parts of the UK. As a politician, I believe that the draft reform proposals outlined by the European Commission are deeply flawed, because they fail to address those peculiar, necessary needs and could have a major negative impact on our major industry in Northern Ireland, which would be proportionately much more significant than in any other part of the UK.

People should stop for a moment, pinch themselves and imagine a United Kingdom economy that does not have an agri-sector. If they do that, they will realise that without that sector we would be bereft of a culture and a way of life for many people and bereft of a powerful, important industry which, as I have mentioned, contributes a £20 billion value. We need to do that to recognise what is at stake and to ensure that we go out there and campaign, lobby for and achieve a settlement under the CAP that is beneficial for the whole kingdom.

The Commission’s CAP proposals will cause a huge redistribution of moneys within Northern Ireland, from lowland to hill farmers—similar to the constituency of the hon. Member for Thirsk and Malton. That will impact greatly on those who are able to make food production sustain a community and sustain a way of life. Under those proposals, they will lose out and will be disincentivised from becoming competitive. We have to put the finger on that and recognise that the policy drivers that Europe is pursuing are upside down. The speed of transition is too fast and will not allow adequate time for the industry to adjust from a 30% flat-rate payment to a 40% transition in direct payments in one year. That is too much. A slow, proportionate transition period is ultimately required.

There should be regional flexibility within the 27 regions that comprise Europe, and internal flexibility. At regional level, it is important that Northern Ireland receives its fair percentage. I mentioned earlier fair distribution between pillar one and pillar two. It will be difficult for us to argue for fair distribution when the Government’s policy appears to be a reduction in CAP money anyway, but the money that we get must be fairly distributed, when we get it, between the two pillars. I will not go into detail in respect of my views on the active farmer, but I agree with the points made by the hon. Member for Banff and Buchan (Dr Whiteford), who made that case exceptionally well.

The 7% set-aside rule is nonsense in light of the increasing global population and the increase that we have witnessed in westernised eating habits. In that regard, I should like to reflect particularly on the dairy sector, which is worth more than £8 billion to the UK economy and employs more than 80,000. We are the third largest milk producer in the European Community and the ninth largest in the world. Our products can be found in 98% of UK households.

Jim Begg, the director general of Dairy UK, wrote a pamphlet that has been distributed called “Action for growth”, in which he deals with how the CAP should address the needs of the milk producers:

“A requirement for ecological set aside of 7% of arable land will reduce the area available to dairy farmers for feed crops. Maintenance of permanent grassland will also restrict the ability

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to increase the production of home grown feed. The termination of historic payment calculation method will disadvantage dairy farmers in particular.

It is imperative that the UK ensures the distribution of payments in the EU and the UK does not discriminate against UK farmers or undermine their productive potential.”

A hearty “Hear, hear!” to that. The milk industry needs that security of tenure. We should not be doing something that upsets an already difficult market, in which prices can be difficult.

I make my comments as a representative of my constituency, in which the single largest employer is the poultry sector. One factory alone employs 1,100 people. Unfortunately, today it announced 19 redundancies, but in the scale of things—in the current economic climate—that could, of course, have been an awful lot worse. Poultry production is incredibly successful in Northern Ireland, but the fact that it, too, is feeling the squeeze at present and is having to announce re-jigs and evaluate job-shares makes it clear that even the most successful parts of our industries face a crisis at present. Heaping CAP reforms on such businesses does not address their real, genuine needs and is a flawed way for us to proceed.

3.35 pm

Neil Parish (Tiverton and Honiton) (Con): I thank the Chairman of the Select Committee for securing this debate, because it is important that we debate in this Chamber the future of agriculture, farming and the countryside.

I thank the Minister for being here. He has a difficult job ahead of him. I do not blame him for all our ills; the European Commission has got it entirely wrong. I have had some slight experience of the European Commission over 10 years. The Agriculture and Rural Development Commissioner has got it absolutely wrong; we have to move to more competitive agriculture, and we must look after and manage the countryside well, but the policy that he is producing does not go in the right direction on either of those issues. I agree with my hon. Friend the Member for Camborne and Redruth (George Eustice) that one size does not fit all.

Let me provide a brief history of the common agricultural policy. It arrived at the beginning of Europe, when the Common Market was made up of six countries, France and Germany being the dominant ones. This was after the second world war, when food was hugely important. For those five or six countries in the middle of Europe, it was much easier, given the type of crops they grew and their type of farming, to devise some sort of common agricultural policy. However, now there are 27 countries, covering from the north of Finland to the south of Greece, and including Poland, Romania and Bulgaria. There are hugely different types of farms—very small farms and very large state farms left over from previous communist systems, and private farms of various sizes throughout the rest of the European Union. If we also consider the different types of crops grown, and all the complicated subsidies introduced over the years—for cotton, olive oil, sugar and everything else—we begin to see the complexity of the matter. I agree that we need to ensure that we have an agricultural policy that suits this country. I know that the Minister is trying to work on that.

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The shadow Minister, the hon. Member for Ogmore (Huw Irranca-Davies), mentioned fisheries, and he has a point. The Commission is offering more regional powers; whether it is giving those powers in reality is a matter for another debate, but it certainly needs to move in that direction.

Let me turn to the need for agriculture. There are now more than 7 billion people in the world. There is a moral duty to produce food, and for this country to do so. As global warming and climate change alter the growth that can take place in many other parts of the world, it becomes up to us to produce good food when we can. Also, we would otherwise have to import food. There is also the issue of the water used to grow food; many countries can ill afford to lose water. Whatever economic difficulties our nation has, we can afford to feed ourselves and buy food, but in many parts of the world, that cannot be done. We need to be conscious of that.

We must face up to the reality of where agriculture and farming are going in future; I hope that the Minister agrees with me. I think he does not want to do away with the single farm payment and support for agriculture overnight, but he does want agriculture to be weaned off public support, because we cannot accept, year after year, ever more public support for agriculture. We need competitive agriculture, and we can have it.

The hon. Member for North Antrim (Ian Paisley) talked about the poultry industry; the thing to remember about it is that it is competitive even though it is unsupported. It is not supported by the common agricultural policy, so it competes well. We have a successful poultry industry in this country.

Dr Whiteford: In recent months, the poultry industry has had to compete on an unfair basis, thanks to EU rules that have pulled the rug out from under it after it has invested heavily. While we are in the common market, the rules must be the same for everyone.

Neil Parish: The hon. Lady is absolutely right. It is a travesty of justice that the rest of Europe has not complied with the requirements for enriched cages for producing eggs, but that is the fault not of this Government but of a weak European Commission that has not taken proper action against those member states that have not complied. No matter what the policy, it must be properly applied across member states, and not just by our country.

Barry Gardiner: I absolutely agree with the points that the hon. Gentleman makes. He may be sympathetic to this suggestion: if we were to see the withdrawal of the direct payment subsidy, UK farms would do rather well, because they are better managed and more competitive than many in Europe. That would help our industry, as long as there were common standards with which everyone had to comply—a point made by the hon. Member for Banff and Buchan (Dr Whiteford).

Neil Parish: The hon. Gentleman is right. We have very competitive agriculture, and our country can compete well. As we move on with agriculture, we will have to decide where to put what public support we have. There

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is an argument for some support in upland and difficult-to-farm areas, not only for agricultural production but in relation to the landscape; that is essential. We have to look at where we can create competitive agriculture.

That brings me on to regulation. I praise the Minister for bringing in Richard Macdonald to look at the regulation and to try to remove it from agriculture, so that the industry can be more competitive. However, although the Minister is busy removing regulation, the European Commission is busy applying more, even though the commissioners talk about wanting to get rid of regulation. All the reform will do is add more complication. We have talked about the 7% set-aside, the three or four crops and all the rubbish coming out of the Commission; we need to oppose that, and I know that the Minister intends to.

Huw Irranca-Davies: I make one point in defence of regulation, which is that there is good and bad regulation. There is over-regulation and over-complexity, but an area where the farming community has worked well—although we still need to do more—is on the water framework directive. When it comes to our rivers, the quality of the natural environment—something to which the Select Committee and its Chair must have turned their attention—has improved more than we could have imagined 10 years ago. There is good regulation as well as bad. We need to fear the bad, praise the good, and get on with delivering for this country.

Neil Parish: The shadow Minister is right that there is good regulation, but he must also admit that there is far too much regulation. It is not that regulation is good or bad, but that there is too much of it. The coalition Government are looking through regulation to weed out the unnecessary and keep the necessary. Over the years, we have built regulation on regulation; that has been the problem. Take farm inspections and other requirements, many of which we must comply with because of European regulation. We often have many different people on farms to inspect, so we are trying to bring in one inspectorate and not have as much duplication.

We ought to move towards a strong market in agriculture and agricultural products, which is why, as we can all agree, the groceries code adjudicator is so important. That may not be a European or CAP issue, but it is very much about ensuring that agriculture can compete in the market and get a fair deal from the marketplace. The crux of my argument is that if we are to wean farmers off subsidies over the years, we have to enable them to compete in that strong market.

Agriculture is important in itself—it is a huge part of the economy—but there are also 500,000 jobs in the food processing industry, and much of the food being processed comes from this country, as it should. Again, I am not exactly on the subject of the CAP, but I urge the Minister to look at how we procure food, and to ensure that all the food that we eat in this place—and everywhere else, including in Departments and in Westminster generally—is from this country. I assure the Chamber that in France people would not be eating British beef, so the last thing that we want to do here is eat French beef. That, however, is a particular pet subject of mine, so the Minister might not necessarily want to comment.

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In my constituency, there is a lot of grassland and livestock, both sheep and cattle, including dairy cattle. Much of the livestock is fed on grass, a lot of which is on permanent grassland, but some is on semi-permanent grassland. What I fear most about Commission proposals is that we will see agricultural grassland ploughed up unnecessarily, because of worry about the reforms. The Minister is reassuring farmers and trying to obtain the best reassurances possible from the European Commission, because such a development would be almost criminal. We need to deal with it quickly, to ensure that the Commission does not drive agriculture in the wrong direction.

In the future, I want agriculture to stand much more on its own two feet. That has to be. Public support for agriculture should not distort trade between member states or with those in other parts of the world. We must not forget that one of the reasons for reforming the CAP has always been that previous policies promoted high production levels in Europe, and those products were then dumped on the open market, destroying much of the agriculture in developing countries. We have at least moved away from that, and we do not want to move back in that direction.

I wish the Minister well in his negotiations with the rest of the European Union. As a Government and as a country, we must seek greater independence when it comes to how we develop our agricultural policy. The European Union must recognise that as it has grown, and will probably grow further, it must have much more flexibility when it comes to agriculture, because one size will not fit all, especially as the EU grows bigger and bigger.

3.49 pm

Barry Gardiner (Brent North) (Lab): It is a pleasure to speak in the debate, Mr Weir, particularly under your knowledgeable chairmanship on this subject. I pay tribute to the Chair of the Select Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), for obtaining the debate.

I do not wish to go over ground already outlined by hon. Members this afternoon. They have made many serious and important points, most of which I agree with. I want to restate a few basic facts, however, and €57 billion is one of them—40% of the entire European Union budget. This is a fix such as no heroin junkie has ever been on, and it is difficult, in the words of the hon. Member for Tiverton and Honiton (Neil Parish), to wean farmers off it, sometimes for the good reasons that he outlined.

The CAP provides support in three distinct elements to agricultural producers and rural areas. We should not forget that we are talking about not just farmers, but other land managers and the whole rural community. The three elements are direct income support, market measures and the rural development programme. As we have found, the key point is that the RDP must be co-financed, and we will return to that bugbear.

Given the enormous subsidy, is it not appropriate to consider what the CAP’s objectives are? Our Committee heard five objectives, the first of which should be

“to maintain or enhance the EU capacity to produce safe and high-quality food.”

The second objective should be to enhance

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“the competitiveness and viability of the EU agricultural sector”

because a

“competitive and viable EU agricultural sector is the key to producing more while having less impact”—

detrimental impact—

“on the environment and to reducing farmers’ reliance on income support from taxpayers in the long-term.”

The third objective should be

“to ensure the sustainable management of the EU’s natural resources, biodiversity and landscapes, recognising that farmers are the managers of over half of the…land area”

of Europe. The fourth objective

“should be to help to maintain agricultural activity in areas where it delivers significant public benefits, such as the maintenance of biodiversity and cultural landscapes”

such as those that were mentioned earlier. However,

“the CAP should not aim to deliver an acceptable standard of living to every farmer in the EU through income support alone”—

that was a key finding by the Committee and is in the report—and

“farmers should be encouraged to look to the market for their”

fundamental returns.

The aim of this CAP reform should be to enable farmers to achieve the sustainable intensification that is required to meet the global challenge of feeding a world population that will rise from the 7 billion that it reached just a month ago to the 9 billion that it will reach in 2050, but to do so without destroying the very things that it is predicated upon: our biodiversity and our natural landscapes. The Government’s position on CAP reform must be coherent in its strategy for ensuring food security, and DEFRA must decide—I am keen to hear from the Minister on this point—whether and, if so, how it intends to implement the previous Government’s “Food 2030” strategy, taking into account the recommendations from the Foresight report on “The Future of Food and Farming” by John Beddington and co. and the UK’s position on the future of the common agricultural policy.

In the interests of fair trade and the long term, the EU should argue more strongly for a recognition of standards of production in trade agreements, including animal welfare, the use of water and greenhouse gas emissions. That is essential to achieve the global shift towards sustainable intensification that “The Future of Food and Farming” report recommended.

The Commission’s proposals to green pillar one have been at the heart of the discussion throughout Europe and our debate today. There is a suspicion that that was a sop and a way to try to justify the subsidy and support. The proposals did not receive strong support from any of our witnesses. There was concern that they would make the CAP more complicated to administer, as other hon. Members have said, and that they would confuse the logic of the two-pillar structure.

[Jim Sheridan in the Chair]

Several witnesses expressed concern about expanding pillar two, and that is DEFRA’s alternative to the expansion of pillar one. The central issue seems to be the difficulty of achieving political support in Europe, and I want to tell a story about what happened when I was in Europe just last week. I had gone over there, as had the hon. Member for Thirsk and Malton, to join in the parliamentary debate that the Commissioner with

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responsibility for reform of the common fisheries policy had called. I spoke to several members from throughout Europe and tried to persuade them of the UK’s good ideas on CFP and CAP reform. I was told universally that although some of those ideas were good, for God’s sake, I should not let the British Government suggest them because they are the most toxic brand in Europe at the moment and suggestions will not garner political support if they come from the UK.

We must consider seriously how the Government have engaged in Europe, and how they have got themselves into a position when even good ideas will not be accepted because we suggest them. Perhaps we should get other people to suggest our good ideas, and then take a back seat.

George Eustice: If the UK is putting forward good ideas and they are ignored because they come from us, the failure is on the part of those countries that adopt that stance. Clearly, if an idea is good, they should adopt it.

Barry Gardiner: Of course, in principle, we should all work from a basis of fact, science and what is rational and reasonable. The hon. Gentleman and I are totally at one on that, but we are both politicians as well, and we know that alliances are important in politics. We know that sometimes the issue is not having the right idea or the best idea; it is stacking up the votes to get that idea not only on the table, but accepted. That is what the Government have singularly failed to do. They have singularly isolated themselves in Europe, and that is a real problem for our farmers, because many of the ideas are good.

Another aspect is how, as the hon. Member for Tiverton and Honiton said, we go about weaning farmers off the subsidies of pillar one. If we are to do that by 2020, or shortly thereafter—perhaps the Minister will clarify when—it sounds a bit like saying, “Make me virtuous Lord, but not yet.” In this round of CAP reform, we should try to get the Commission to set a date for when it will happen. Without a deadline, hon. Members know as well as I do what will happen. Come 2020, we will all be in the same position, saying, “Yes, make me virtuous Lord. Let us wean ourselves off the subsidy, but in 2027, or 2032.” We must bite the bullet. We cannot continue with this junkie habit, because it is damaging the prosperity of Europe as a whole.

It was interesting that one witness told us that the problem with shifting the policy to pillar two was that, when the opportunity was offered to member states with voluntary modulation, all but the UK ignored it, because they did not want to put additional money into match funding and co-financing. In principle, we may be in favour of co-finance in pillar two and putting more into it, but the political reality is that many do not have the money to do so. Another witness told us that expanding pillar two risked creating a very uncommon market. New member states cannot afford their share of the finance, so they cannot draw down European money.

I think we have the right nostrums. We should move away from pillar one and into pillar two, for all the reasons that hon. Members have outlined. However, regional flexibility is a problem. With pillar two, as

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Members have said, there is a problem of how to ensure, from Finland to Greece and Romania to Ireland, that the measures adopted are appropriate. Inevitably, as we all know, countries try to fix things in their own favour. If it is simply a smorgasbord created by an individual country, that smorgasbord will be arranged to give maximum benefit, advantage and subsidy to the country’s own farmers. Therefore, what is needed within Europe is recognition that although a regionalised, smorgasbord approach is the right one, parity must be ensured through something that we seem to have left out of this debate: sound science.

We believe in evidence-based and science-based policy. We must ensure that the benefits to the environment and the benefits that each country would bring to that regional smorgasbord are established on some sort of points system to show that they are equivalent to what other countries are offering, and therefore that the financial reward that follows from them is likewise rewarded. That is not new to DEFRA. It is already doing that in the UK national biodiversity strategy. It is considering different points for different elements of biodiversity. Why can we not propose that in Europe for adoption there? It is right to move towards a more regional approach and from pillar one to pillar two, but we must do so on the basis of sound science and public good, which must be assessed independently to ensure genuine parity.

4.2 pm

Kelvin Hopkins (Luton North) (Lab): I apologise, Mr Sheridan, for not being here for some of the debate. I have been trying to speak in the debate in the main Chamber. Being in two places at once is rather difficult. I wanted to have a say on the common agricultural policy, on which I have commented many times in the Chamber, and to take a rather more radical position than the Select Committee on Environment, Food and Rural Affairs or the Government.

I was somewhat disappointed by the Select Committee report. It was written by well-intentioned and good people, but I am disappointed that it does not take a radical position. In some respects, I support the Government’s position more strongly than the Committee’s. The report says that the CAP no longer takes the lion’s share of the budget, but it is still 40%. What is a lion’s share? I think that 40% is pretty much a lion’s share.

The CAP is still a net cost to the UK, although not as high as it was, and food prices have been consistently higher for UK consumers ever since we joined the European Union, or the Common Market, as it was. Higher food prices are regressive, in that they bear more heavily on those who spend a higher proportion of their income on food, namely ordinary working people and the poor. In that respect, it has always been negative, certainly in terms of the people in Luton North whom I represent.

Access to cheaper food from elsewhere in the world has been restricted. Before the CAP, UK prices and national subsidies were related to lower world food prices, not to the higher prices demanded inside the CAP area. UK membership of the European Union has resulted in an excessive cumulative cost in both budget and taxpayer terms and in food prices, but it has also had a knock-on effect on economic growth. If one

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spends more of one’s wealth on subsidising agriculture, clearly less of one’s wealth can be used in other parts of the economy, and we have had lower growth overall as a result.

On numerous occasions, I have called for the abolition of the CAP. I keep pressing that point, because I believe that within the European Union, or whatever it might be called, national subsidies would be more appropriate. They would be better judged, because nation states know better what it is appropriate to subsidise within their own economies; their agricultural sectors are different and they would be much more likely to husband their resources carefully if it bore directly on their own taxpayers rather than coming from some great gift in the sky, namely a CAP budget contributed to disproportionately by countries such as Britain.

That would be more targeted and efficient. It would also cause countries to decide to what extent they want to keep their agriculture at the same level or increase its size for security reasons. The report makes the point well about food security for the future. If we as nation states were concerned about it, our food production would be better than it is under the CAP arrangement, which makes us casual about it all.

Britain in particular would do well to maximise its food production—not absolutely, but in order to ensure secure supplies for the future. I am possibly the only person here born during the second world war. I survived only because we managed to import food, mainly across the Atlantic. Many people died bringing that food. We learned that producing a higher proportion of our food domestically is important for reasons of long-term security. With the world’s population growing and food shortages likely, we cannot guarantee that that will not be necessary in future. Food security is important.

Britain is an efficient agricultural producer. Other countries are very inefficient. Increasing their efficiency would make their agriculture more profitable, and they would be able to sell it. In some cases, their wage costs are much lower. They could sell more to countries such as Britain as and when we decide to purchase. A national approach to agricultural subsidies is the way forward. The CAP is outdated and was never a good idea in the first place.

From time to time we have called for reform of the CAP, and some reforms have been made. I called for its abolition, but our leaders during the previous Parliament decided that they would seek serious reform. I remember that at the end of Britain’s last presidency of the European Union, Tony Blair went to the very last meeting in December, in theory to call for CAP reform. He was then beaten all around the room by President Chirac, coming back with no reform and a cut in our rebate. At the time, The Economist, hardly a magazine of the left, said that the deal was so bad that no deal would have been better. So much for reform. We must put pressure on the European Union. That is the only thing it reacts to.

Neil Parish: I think the mistake made by Prime Minister Tony Blair at the time was that he gave away the rebate without getting the reform. What he should have done, if he was going to give away the rebate, is get the CAP reform first. That was his mistake.

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Kelvin Hopkins: Indeed. Had I been at his side, I would perhaps have advised him rather differently, but I was never at Tony Blair’s side, and he never consulted me on my views.

Daniel Kawczynski (Shrewsbury and Atcham) (Con): That was his undoing.

Kelvin Hopkins: Indeed. I do not flatter myself, but a bit of advice here and there might have been helpful.

The Government’s response makes important points, including a call for greater emphasis on subsidiarity. If subsidiarity means that more decisions will be made at national level within the European Union, it is a good thing. We had a debate about it in the Chamber the other day. I think that the rest of the European Union regards it as a decoration, but we take it seriously, and we want more things decided at national level. The Government urge more regional flexibility. The ultimate regional flexibility is for agricultural subsidy and policy to be decided at national level. That is a sensible way forward too.

The report mentions room for savings. The Government say that CAP expenditure should be cut substantially, and I tend to take the Government’s side. I hope that we will not take a “softly, softly” approach to the CAP, that the Government will continue to take a strong line and that ultimately, the CAP will be abolished and replaced by more sensible arrangements based at national level.

Earlier in the debate, a point was raised about genuine farmers. Quite a high proportion of farmers in continental Europe, particularly in wealthy countries such as Germany, use farming as a secondary source of income. They are solicitors, doctors, factory workers or whatever, but they have a small market garden and receive subsidies to buy tractors and so on, and that has been going on for decades. Such people are not genuine farmers, but they get a bit of extra cash from growing a few vegetables and receiving a subsidy from the European Union. That is not farming and we ought to take such matters seriously.

There is, of course, still a degree of corruption although it is perhaps not as bad as it was. I remember hearing about a beef producer who lived in a tower block in Turin, although I do not know how many cows would have fitted on the grass outside. That was some years ago, but there is scope for corruption and if national Governments have to subsidise the system, they will take such matters more seriously. They will ensure that people are genuine farmers and they will try to eliminate corruption so that every penny, cent, or euro is spent more sensibly and is better targeted. In that way, the agricultural industry across Europe will be better for everyone at both nation state level, and collectively.

4.11 pm

Huw Irranca-Davies (Ogmore) (Lab): It is a delight to attend this debate on the reform of the common agricultural policy; only three or four weeks ago, the Minister and I were debating the same subject in a European Committee. This is a welcome opportunity for further debate, and I congratulate the hon. Member for Thirsk and Malton (Miss McIntosh) because we need frequent opportunities such as this in order to keep track on progress and on the European negotiations of the Minister and his

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team. We must also watch the changes as they take place. This is a live and dynamic issue, and we hope that the leadership on reform that has been shown by the UK, both now and previously, will continue, and that we will push as hard as we can.

I would not go quite as far as my hon. Friend the Member for Luton North (Kelvin Hopkins), although I will return to his points in a moment. I hope, however, that the UK vision for CAP reform will deliver food security and viable farming livelihoods, as well as biodiversity, environmental gains and other public goods. My hon. Friend the Member for Brent North (Barry Gardiner) wisely widened out the debate, and we must also ensure that such benefits are delivered across the EU.

A common theme of this debate has been more regional autonomy and management, and how not to lose gains that the UK has made such as the uplands entry level stewardship scheme and so on. We must also, however, be ardently fixated on the need for environmental and animal welfare standards to be driven up across the EU. As a pro-European, I believe that one benefit of the EU is that it allows us to level the playing field up, rather than down. During negotiations it is important not only to look at ourselves—vital though that is—but also to look externally at the benefits for UK farmers if we level up the playing field. Not only will we have great standards of environmental and animal welfare, but the costs of agricultural food production and farming will be more uniform across the EU.

I genuinely congratulate the hon. Member for Thirsk and Malton and her Committee on initiating this debate and on the report. Early in her contribution, the hon. Lady made a commitment that the Committee will return to consider the topic, and I welcome that. She focused on what can appear to be a dichotomy between food production and food security, and environmental sustainability. That is the greatest challenge that we face, because it concerns not only environmental sustainability and biodiversity in individual fields and regions, but the challenge of climate change, and what that means for food production and the land use that was referred to so well in the Foresight report. How does the Minister square that circle, both in the UK and elsewhere?

To inject a note of optimism, I believe that we can face that challenge with strong leadership and vision, although we must recognise that there will be many a slip. My hon. Friend the Member for Brent North mentioned the previous Government’s “Food 2030” strategy, and I urge the Minister to return to that and perhaps address it in his closing remarks. Perhaps he could take the report off some dusty shelf in his Department and look at it again. One observation that is made frequently, not only by environmental or international development NGOs but by farmers and others in the farming community, is that although the “Food 2030” strategy is integral to CAP reform, it goes beyond that. It sets out a compelling, large-scale narrative, and a coherent vision of what we should be doing across the food chain, in terms of the environment and land management. I know that the Minister has such matters firmly at the front of his mind, but—I hope he will take this as constructive criticism—it does not matter how

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many narrow, discrete pathways of good work there are in his Department, those outside the political sphere tell me that the overarching, compelling vision is deficient. If we do not have the “Food 2030” programme, we need something that looks very much like it. An enormous amount of work went into that report, and I urge the Minister to look at it again as a basis for the overall framework.

The hon. Member for Thirsk and Malton mentioned the importance of self-sufficiency in food production, not only in the UK but in Europe. That provides a similar paradigm to our experiences of energy markets. We want the UK to be as self-sufficient as possible, but we also want to export as much as we possibly can. On St David’s day, my colleagues from the Welsh Assembly Government were in Brussels lauding the fact that the first 11 months of the past year saw a 22% increase in exports of Welsh lamb and beef. For the UK, the figures were 14% overall—the Minister will correct me if I am wrong. We are doing well across the UK, but Wales is doing exceptionally well. It still trades significantly with the EU as a trading block, but also well beyond Europe with countries such as China, India, Brazil and elsewhere. We must ensure that as well as UK self-sufficiency, we work with European colleagues to ensure a large degree of collaboration on EU sustainability. Britain is an island, although not in every respect, and we need to work together on many issues of food production and food security.

The hon. Member for Thirsk and Malton went into forensic detail on many other issues, and I will return to those during my remarks. She rightly pointed out the challenges faced by tenant farmers, and others, due to the current active farmer definition. That point was well made, and I am sure that the Minister will return to it. I agree with many of the hon. Lady’s points, and although I may not agree on some other issues, one benefit of the Committee’s report, and today’s discussion, is that it stimulates intelligent and well-informed debate. I hope that the Minister will accept that the comments that I and other hon. Members make are genuinely intended to help and to engage with him constructively so that he can take those thoughts into his discussions with the Commission, Members of the European Parliament and others.

All today’s contributions have been good in their own ways. The hon. Member for Banff and Buchan (Dr Whiteford) —as a Welshman, I can pronounce Buchan because I suspect that it has similar Gaelic roots—mentioned a theme found in several contributions about the need for an appropriate level of subsidiarity in decision making. There has been much talk about regionalisation and making decisions closer to home. I agree with that in principle although I do not know how far we will get; there is a similar debate on reform of the common fisheries policy. Regionalisation must be balanced against my earlier point about having more informed, intelligent decision making closer to home. We can say that with some confidence in a UK context, because although there is always the criticism that we could do more, our achievements probably set some of the highest standards in the EU. However, that regionalisation must be balanced against ensuring that we can monitor and evaluate what is happening in the rest of the EU. That is where the balance lies. We must ensure that other member states are equally good not only on food security, but on the environmental benefits and public goods.

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The hon. Lady raised, as other hon. Members did, the spectre of over-complication in the CAP reform proposals. We, too, have that worry. We do not want to make some construct whereby farmers and their advisers spend inordinate amounts of time working around and through the proposals in order to avoid some of the complexities. That would be a self-defeating proposal. I hope that the Commission is aware of that. Certainly in my discussions with it, it has not wanted that to happen, but I think that it needs to look carefully while it is in these stages of finessing the proposals—this will require the Minister’s engagement as well—to try to strip out some of the complication and not get to the point at which very well paid advisers are advising some of the larger farmers at great expense on how to avoid and work around some of the complexities. The worst situation would be smaller farmers having immense difficulty in doing that.

The hon. Member for Banff and Buchan spoke out on something that has received a fair bit of publicity recently—the concept of slipper farmers. This is an interesting one. Even if they are a marginal element, it is important to deal with the issue. I do recognise the points made by others. Clearly, in terms of units of production, some of the larger farms will be not only highly productive, but highly efficient in terms of the cost of food production; and that rattles through to the supermarket shelves. Let us say, however, that someone does not look anything like an active farmer. We might be talking about an investor community or someone who has no interest whatever in an active role on the farm or in an active role in biodiversity and landscape management.

I would be interested in the Minister’s comments. Some people have argued that we do not need additional rules to deal with it—that each member state already has competences that could tighten up the situation. However, keeping public trust is vital. Even if what I am describing is a marginal issue, there is a danger that it will tear down public trust in where subsidy is going. Even if we make the argument that subsidy is not going simply into traditional food production, but into all those wider public goods, we must ensure that there are not exceptions that tear down public trust. As I said, I would be interested in the Minister’s comments on that, in quite a rational way. Are there examples? What is his assessment of whether agricultural subsidy is being used in a way that was not intended, and what we can do to tighten up the situation before the issue becomes one of wider public concern?

The hon. Member for Camborne and Redruth (George Eustice) recognised the need for a clear and powerful vision as part of negotiating strategy—this is where we are; we are dealing with CAP reform. Regardless of other ways forward, we need that powerful vision underpinning the strategy. The hon. Gentleman pointed out some ideas for greater regional decision making, which he described as ahead of their time. We have no difficulty with that. Those ideas need to be put forward, because eventually their time does come. I apologise for giving him membership of the European Parliament and for raising by accident past membership of other parties. He will not be the only one here today in that position. I am not making a confession of that nature, I hasten to add, in case my constituency Labour party is listening, but I will make my own confession. I have

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attended a Conservative club in my constituency on a regular basis.


Indeed. It is at the club’s invitation; we hold our branch meetings at a Conservative club.

The hon. Member for North Antrim (Ian Paisley) regularly speaks in debates on this issue. He is no longer in the Chamber, but he talked about the importance of export growth and engagement with the devolved Administrations. The Minister and I have talked about that matter before, and I certainly know that from the Scottish perspective and from the Welsh perspective, there is very strong engagement. The flipside, of course, is that there needs to be one coherent voice speaking on the issue once all the different elements have been pulled together. We need to avoid the dilution of an effective UK voice when three or four different voices are speaking. We must bring in those voices—that engagement is critical—but ensuring that there is one coherent voice at the end is also critical. The hon. Gentleman made powerful points of detail on behalf of his farmers. I know that the Minister will have heard those points and will respond to them.

The hon. Member for Tiverton and Honiton (Neil Parish) talked about the moral duty to produce food. I agree, not least because of the challenges that we face currently. I am thinking not only of food poverty, but of growing populations. It is a moral duty in this country and globally. However, I would argue that we also have a moral duty—to pick up the comments made by my hon. Friend the Member for Brent North—to protect and enhance the environment, to tackle climate change and to improve animal welfare. I know that the hon. Member for Tiverton and Honiton would agree with those as moral duties as well. I made a point to him about good regulation. Mention was made of one of the best examples, although it brought costs with it—the regulation on enriched cages. It is a tremendous tribute to our farming community that it stepped up to the mark and invested heavily in them. It now needs to be rewarded. I have made this point to the Minister before: he, in concert with the Commission, must strongly pursue enforcement action against states that are not complying, because otherwise we are disadvantaged. We have made all the investment and done our moral duty on animal welfare, but others are not doing that. From that moral high ground, we should not hold back in pursuing enforcement action against other countries.

My hon. Friend the Member for Luton North, who has just left his place, introduced a welcome diversity into the ecology of the debate by calling for abolition of the CAP. All contributions are welcome; there are different views on the matter. He also reminded us, not too diplomatically, of the failure of past EU negotiations under former Labour Prime Ministers and called for the Minister to heed his advice. I will move on swiftly at this point.

My hon. Friend the Member for Brent North regularly takes part in these debates, and with a fair degree of expertise. I think that he made the first mention of sustainable intensification today. My apologies to other hon. Members if they used that phrase. My hon. Friend is gesticulating towards the Chairman of the Select Committee, the hon. Member for Thirsk and Malton, so I apologise if she used it too. It is a critical issue. I am referring to challenges of how we raise food productivity—by that, I do not mean production; I

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mean productivity—while at the same time not damaging the environment, but improving it. That may relate to soil quality, river quality or biodiversity. It is a huge challenge and it means that part of the EU reform needs to involve the driving forward of research and innovation in those areas, so that we have much more productive and much more efficient farming, both in the UK and throughout the EU. In that context, I have mentioned “Food 2030,” which could be a very helpful contributor to that debate.

My hon. Friend the Member for Brent North also raised the spectre of the UK’s isolation. The Minister and I talked about that only a few weeks ago, and he gave me assurances that it had no impacts, or certainly no long-term impacts. I am not making an easy political point on this issue; the matter has been raised by the farming community. It has been raised directly by the National Farmers Union in documents, directly by the Farmers Union of Wales, and by the leader of the Liberal Democrats in Wales. I will not cite what they said, but their clear concern was that the matter could have damaged what was, I think, a good negotiating position on CAP reform and other issues. Today, I again seek the Minister’s assurance that he has bypassed those problems—that the matter is not causing him problems—because we need that reassurance for the farming community. I am sure that he is doing a tremendous job out there of engaging with like-minded countries on various issues, but we need to know that we have not taken a step back because of wider political issues.

My hon. Friend the Member for Brent North reminded us of the importance of sound science and the evidence that underpins it. Curiously, as we understandably focus on the farming community and food production in these debates, we sometimes forget that our overall approach to what we are doing—squaring this circle—needs sound evidence at every step of the way. That is probably one of the lessons that we should have learned from past CAP reform and past common fisheries policy negotiations. I am sure that the Minister will have heard my hon. Friend’s powerful contribution.

Let me refer Members to the recent debate that we had in the European Committee if for no other reason than that I am losing my voice and I do not want to repeat everything that I said then. I want to raise a couple of broad points. First, let me make one remark in praise of the CAP. We must remember why it was originally set up as we—the collective we—celebrate its 50th birthday. Over the years, it has been a constant source of controversy, but it has none the less stabilised farm prices so that farmers can innovate, invest and modernise agricultural production. In recent iterations of CAP reform, there has been a move towards recognising public goods, which is a welcome development. We should not forget—I want to put this on record today as I did in the European Committee—that despite the still huge sums of public money going into the CAP and then being returned not just to the farming community but to rural development and so on, European support for farm incomes has fallen markedly over the past 20 years, thanks to a series of reforms. In 1986 to 1988, nearly 40% of farm income was derived from European support, but by 2008 to 2010, that figure was down to 22%. I accept that we need to get to a position where

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our farming is competitive across the EU and where that support diminishes again, or at least is focused on where the public benefits are clearly seen and evident. At least the trend is going in the right direction. Many people would want it to go faster, but we are going in the right direction.

We must recognise that additional work needs to be done. In the previous European debate, I referred to the OECD report, which considered CAP reform and identified the need to remove the remaining impediments to the functioning of markets, to increase the investment in agricultural innovation and to target more effectively environmental performance of agriculture, including direct payments to farmers for environmental goods and public services.

It is fair to say—the OECD notes this, but so, too, have many others—that the more detailed proposals, which were made late last year, did not receive a universal and magnanimous welcome. Many people in the farming and environmental communities, the Minister and I criticised those proposals as potentially a missed opportunity. I say “potentially” because there is still time to work on them, save them and make them good after negotiations with the European Commission. They are potentially bad because they risk failing not only our farmers but the natural environment as well. I know that the Minister will be working hard to turn the situation around.

Devolved engagement was mentioned by many Members, and it is critical. Rather than repeat the whole of the European debate, let me just touch on the greening proposals which, significantly, are designed to avoid a situation in which we undermine the environmental benefits that we have already created here within the UK. The proposals operate differently within different devolved regions. It is certainly the case that while many called on us to go further and to go faster, we have none the less managed to put in place some very good examples in partnership with farmers, especially compared with other member nations. Schemes such as the entry level stewardship and the uplands ELS were worked on into the midnight hours and beyond on successive nights with large cups of coffee, if not bottles of whisky.

In addition, there is potential for voluntary schemes such as the Campaign for the Farmed Environment. Those are highly innovative ideas and we need to ensure that whatever is introduced, we do not undermine them in any way. The Minister will be acutely aware of the concerns that exist in the run-up to the CAP reform. I am sure that the farming community frequently says to him, “Do we continue with the way we are? Do we continue with reapplying into the existing schemes, or do we drop out and keep our fingers crossed and hope?” I hope that the Minister will give clear guidance to the farming community about what it should be doing. Farmers should not lose out if they continue under the current systems until everything is decided.

The CAP’s well-intentioned greening proposals have received a fair bit of criticism because of some of the apparently negative consequences. We have talked about crop rotation and the rule that stipulates that 7% of land should be set aside for environmental gains. In previous debates, the one thing that we have learned is that when land is set apart, some of it can be of negligible biodiversity value. What we need to look at, based on what we have done in the UK and in other

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countries, is the best way to identify and manage those corridors or areas of ecology. I say to the Minister that what we do not want is for these well-intentioned greening proposals, which have faced some criticism from the environmental lobby as well, to undermine what is already there. On the flipside, some farmers have said to me, “That’s okay, we’ll find a way to work round it. We’ll identify the land that we can put within that 7%, and it will be no good for biodiversity, but we can do that. Or we can take what we are currently doing.” We do not want people to find ways around the proposal; we want this to be a positive measure in which the Minister can come back and say, “The way I will interpret this in the UK is for us to take this approach.” That will be much more positive, and will lead to the enhancement of our environment.

How has the Minister presented these proposals not only to the farming community but to environmental organisations? He needs to work with both groups together rather than separately. Our experience in government was always that the best way forward was to sit everyone down together and get an agreement. Some will want to pull in one direction and others in another direction. I talked about having a common UK position among the devolved Administrations. Equally, it is great to have a common position among green organisations, farmers and the agricultural community.

The proposals around the active farmer concept have received a lot of debate and discussion. I reiterate to the Minister our concerns about the businesses that have diversified—we encouraged diversification over successive decades—so that they do not look like they are spending 100% of their time on food production or farming. They may well be tested by this definition of active farmers, not least when we see the annual amount of direct payment being 5% or more of the total receipts obtained from non-agricultural activities in the most recent financial year.

As I have mentioned to the Minister before, agricultural firms can have very high turnovers but low or negative profit margins, and they can then be excluded from pillar one payments despite the fact that their business provides no real alternative income. I have also mentioned to the Minister large commercial organisations, such as the largest farming organisation that employs tenant farmers in the UK—the Co-operative Group. Co-operative Farms is a separate business, but it is a wholly owned subsidiary of the Co-operative Group, which operates in retail and banking. However, one cannot deny that the Co-operative Group is also farming actively in the UK, so we need to be very careful about how the EU proposals affect those companies and others.

The Chair of the Select Committee, the hon. Member for Thirsk and Malton and other hon. Members have asked how the concept of the active farmer affects organisations such as the Royal Society for the Protection of Birds, the National Trust and others that farm but do so in order to deliver environmental benefits. Very often, they provide good lessons in how to take the environmental agenda forward, but they are membership-based organisations and they have a wider core business than just farming. We need to ensure that the proposals do not impact on them.

There has been much debate about capping. Many financial analysts, including analysts outside farming, argue that because the proposed 30% environmental

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element of the single payment will be excluded anyway and because farm labour costs can be extracted under these proposals, the impact of the capping element could actually be negligible, with virtually no risk of subsidy capping or reduction in practice. However, to get to that point there will be Houdini-style contortions by many farmers and that is what we need to avoid. If it is simply an exercise in avoiding the impact of the capping element, perhaps we should argue to the Commission that it ought to just streamline or simplify it, and allow member nations subsidiarity to deal with how it works on the ground.

I just want to make a few more points to the Minister. The Commission’s CAP reform proposals allow a transfer of up to 10% of a member state’s pillar one national envelope to pillar two from 2014. However, I understand that there is no provision available for 2013, which will leave the UK with a significant gap in funding from 2013 to 2014. Perhaps the Minister could confirm that and, if it is the case, say what the Government intend to do about it. Will the Minister comment on the views of the RSPB and other NGOs that feel quite strongly that the agri-environment schemes should receive a larger share of the rural development budget in pillar two. How does he respond to that view? What are his thoughts?

The sugar industry in the UK has been in the press a lot recently because of its difficulties. What consideration has the Minister given to ending, within CAP reform, the sugar import barriers, so that British farmers such as Tate & Lyle, which rely on cane sugar supplies, can compete on an equal footing? What efforts is the Minister making to help young farmers to overcome the problems with the profitability of farming, and the problems of gaining access to capital? Gaining access to capital is not directly addressed in the CAP reform proposals, although there are some good proposals on young farmers. On a UK basis, however, I am repeatedly told about the difficulty that farmers experience in accessing capital, especially new entrants into farming.

I shall make two final points. First, will the Minister explain why these proposed reforms will continue to provide export refunds? That is a concern, not least because the EU itself made a commitment at the World Trade Organisation ministerial meeting in 2005 to phase out all those export subsidies by 2013. Secondly, as the Minister is aware, to improve farmers’ negotiating position in the food chain, producer organisations—the POs—and inter-branch organisations will now be expanded to cover all sectors. That is the trend, but the proposals do not appear in my reading of them to offer significant incentives for people to form those POs. Perhaps the Minister will explain how the proposals will work and how they can be improved, so that we get those incentives in place.

This has been a very good debate and a very good chance for many Members to air their thoughts to the Minister in a very constructive way. There have been lots of different ideas. We have time to improve these CAP proposals, but not a lot. I assure the Minister, as I have done before, that he will have Labour’s support to drive forward the right changes within the CAP proposals, so that they are good for the UK in so many ways—good for UK farmers, good for the sustainability of their livelihoods, good for food production and good for the environment—as well as being good for the EU as a whole and good in relation to our international obligations,

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not only in terms of food security but in terms of biodiversity, the environment and climate change. The Minister will have our support in that process, and once again I wish him the very best in his continuing negotiations.

Jim Sheridan (in the Chair): I think the hon. Gentleman’s voice held out well there. In fact, it got stronger as he went on.

4.46 pm

The Minister of State, Department for Environment, Food and Rural Affairs (Mr James Paice): Good afternoon, Mr Sheridan. I thank the hon. Member for Ogmore (Huw Irranca-Davies) for that expression of support. I will start by reminding hon. Members of my own interests, as already declared, and thanking them for the way that they have contributed to this debate on what everyone agrees is an extremely important issue that probably does not get enough debating time in the House when compared with many other issues. That probably reflects people’s concerns and the fact that the country has become more urbanised in the past few decades.

As my agenda for my remarks, I want to use the proposals about CAP reform. As Members will know, although the subject of the debate is the Select Committee’s report and the Government’s response, both documents are basically obsolete, given that the report was produced last summer, since when we have had the Commission’s detailed proposals. Indeed, we have been able to explore those proposals. Negotiations have started and the Government have obviously been able to develop our own ideas. So I think that it will be more helpful to use the Commission’s main proposals, most of which have already been referred to during the debate, as a framework, and in doing so I will try to pick up on all the comments that colleagues have made about the proposals and some issues that arise from them.

First, we need to reflect, as one or two of my hon. Friends and other hon. Members have done, on the background against which—uniquely, or certainly for the first time in many decades—this round of CAP reform is taking place. In my view, which I think is shared by the hon. Member for Ogmore, that background is one of optimism.

As was mentioned right at the start of the debate, also in the background is the Foresight report, which demonstrated that global demand for food will be somewhere between 70% and 100% greater—different figures are used—in the next 40 years than it is today. That rise in demand will be brought about not only by the population increase that Members have referred to, but by the fact that a large part of that population increase will happen in the two most populous countries—India and China—both of which have a rising middle class and a rising demand for higher quality and better diets. That is part and parcel of this change; it is not just about the rising number of people.

It is also worth making the point that 1 billion of those extra people in the years ahead will live in Africa—a continent that has immense potential for agricultural production, but a potential that is woefully underused for a whole raft of reasons, many of which were mentioned by hon. Members.

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Furthermore, all of those changes are set against the background of climate change, which will render parts of the world almost impossible to farm but which perversely appears to make northern Europe one of the best places to farm.

The background is crucial in assessing not only the Commission’s proposals, but where we go with agriculture in the coming years. It creates great opportunities, and the Government are disappointed that the Commission’s proposals do not really meet the opportunities that that background provides. At their worst, they could take us backwards—I do not believe that they will, but they could—so I should like to spend some time analysing them. I accept—the hon. Member for Ogmore is right—that some of what I will say is a repetition of what we discussed in a European Committee, but it was so good that I will say it all again.

The most important issue to start with is the future of the single farm payment. I am disappointed with the views of my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) on the single farm payment. I know a lot of farmers—farming has been my life—but I do not know a farmer who would not like to do away with subsidies. Of course, there are issues around that, but they would far rather not have a subsidy and not be dependent on public money. They would prefer not to have to be apologetic sometimes or to justify themselves. That in itself is an important point, and we should therefore set our sights on achieving that.

I want to put the record straight on the issue that we touched on earlier and say exactly what the Government’s position is. When I gave evidence to the Environment, Food and Rural Affairs Committee, I said:

“I have always believed…that direct payment support…will end eventually… We are not going to see it happen in this financial perspective, but I think it will happen and I think the challenge is to help the farming industry face up to that day whenever it comes.”

That was my view, and it remains my view. It has been my view for the 25 years that I have been a Member. To confirm the official position, as opposed to merely what I have said, I refer hon. Members to the official Government response to the report. It states:

“we have made it clear that phasing out such payments”—

single farm payments—

“by 2020 is unrealistic, in both practical and negotiating terms.”

That is, as the hon. Member for Banff and Buchan (Dr Whiteford) said, a significant change from the previous Government’s position. I therefore hope that there can be no debate about what we are suggesting.

The hon. Member for Brent North (Barry Gardiner) said that a date needs to be fixed. In an ideal world, one would be, but the first argument to win is that we should set a trajectory. It is clear that the Select Committee does not agree. It is perfectly true that many member states and the commissioner do not believe that we should be ending, or even considering ending, single payments. We should recognise what I think will be an inevitable event at some time in the not-too-distant future but beyond this financial perspective.

We can look at what is going to happen, even though the crystal ball is extremely murky about the outcome of the negotiations. Even if the Commission’s own budget proposals for the CAP go through, that will mean a reduction in the single farm payment. That is

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clear. There is a cash freeze over the whole financial perspective for the CAP. Excluding one or two movements such as convergence between the highest and lowest paid member states, the single farm payment will reduce, certainly in the UK, so let us not pretend that we can somehow protect it and live on it for ever. That is not going to happen, so it is important that we spend a lot of our time and effort focusing on the CAP and trying to ensure that the industry can accommodate that and, as has been said, become more competitive.

Dr Whiteford: Will the Minister press for a fairer deal for Scottish farmers in the pillar one support, because we are currently well below the average in the UK and less than half the average in the EU?

Mr Paice: I was going to come to that point. The hon. Lady referred in her speech to the fact that I was in Scotland yesterday. I met the Scottish NFU, and I gave evidence to the Rural Affairs, Climate Change and Environment Committee in the Scottish Parliament. I was asked the same question. I cannot give clear commitments, because we do not know what the outcome will be. We do not know what the total CAP budget will be. We know what the Commission is proposing. We certainly do not know how much there will be in pillar one or pillar two. We do not know what the convergence debate will lead to and whether that will be reflected in how we divide up the UK’s share of the cake, whatever it may be.

I will make the point that I made yesterday. It is a blunt instrument simply to take the total payment—to Scotland in this case—and divide it by the number of acres, because the acres are not all equal. As the hon. Lady rightly said, 85% of Scotland is in less favoured areas. Some of the land in the highlands is of little, if any, agricultural use. That bald statistic is a blunt way to compare resources. In any case, as she will be aware, the resources are simply based on the historical payments before the advent of the single farm payment. That is fact. As for the future, I made it clear yesterday that we will sit down with all the devolved legislatures to consider how to split the cake once we know how it has been arrived at and how big it is. We cannot prejudge the outcome.

I will say, because the hon. Lady intervened, that the point about the less favoured areas is crucial. The British Government fully support the need for Scotland, Wales, Northern Ireland and England to target support at such areas, which will be renamed under the CAP. I have forgotten the phrase, but it will come back to me. Those areas will get a new title, but little else will change. I am told that they will be called areas of natural constraint. In an ideal world—I will come back to the wider aspects—the targeted payment is best made from pillar two. The hon. Member for Ogmore referred to the uplands entry level scheme, which is what we have in England. Pillar two targeted payments for those areas with natural constraints could be just as effective as a blanket per acre, or per hectare, payment.

Miss McIntosh rose—

Huw Irranca-Davies rose—

Mr Paice: Ladies first.

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Miss McIntosh: We are benefiting from the fact that the Government’s thinking has moved on. If the Government are eventually moving away from direct payments, what tools does the Minister hope to use to make UK farming more competitive? I do not think that agri-environment schemes make British farming more competitive. They deliver sustainable farming, but we are looking to develop more competitiveness across the EU.

Mr Paice: I have never suggested that agri-environment schemes will make the industry more competitive. I will come to that point later.

Huw Irranca-Davies: When the Minister enters the final stages of the negotiations, he will draw up a list of priorities with colleagues in the devolved Administrations —a top three, a top five, a top 10. If there is a feeling, as seems to be emerging from the devolved Administrations, that the transition from historic payments to more flat payments is a top priority, will he be mindful of that and ensure, if necessary, that it is one of the red line negotiating positions with the EU?

Mr Paice: I am very happy to address that. Indeed, I addressed it yesterday in the Scottish Parliament. I am not sure about red line issues. As the hon. Gentleman knows, there is no requirement for unanimity, so we can have a red line issue that stays a red line issue and not get our way. On key negotiations, I can assure him and the hon. Member for Banff and Buchan that we have made it absolutely clear that we think the Commission’s proposals for the shift to an area basis is too draconian. The 40% first-year drop is far too dramatic, and we will support the proposition that there should be a more gradual transition.

I shall move on to the greening issue. As other hon. Members have said, that is perhaps the most important subject—it has certainly grabbed the most headlines in the farming press and in debates. As the hon. Member for Ogmore said, to put it mildly, the greening situation requires a lot of improvement. There are three components. First, farmers with permanent pasture must keep it as such and must not be allowed to plough it. There has been grave concern—and, indeed, anecdotal stories—that some farmers have started ploughing such land because they do not want to be stuck with that obligation. I urge them not to do that because we can negotiate around it. Indeed, at the NFU annual general meeting three weeks ago, the commissioner said that he did not see a problem with farmers who wanted to reseed such land every 10 years. As long as we can get that commitment in writing, we have largely resolved the issue. So there is no justification for farmers to consider ploughing up permanent pasture.

The second issue that has been debated is the requirement for a three crop rotation. My hon. Friend the Member for Camborne and Redruth (George Eustice) properly identified one of the nonsensical issues with that. A further issue with a three crop rotation is that very large numbers of dairy farmers, particularly those with outdoor stock farms in the hills, will grow a field of turnips, maize or barley to feed their own stock. It is clearly nonsensical for them to have a three crop rotation. We have made that point to the Commission repeatedly.

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I hope that we can get somewhere, but we will have to wait and see. I assure hon. Members that we have pressed very hard on that subject.

The third part of the greening proposal is, of course, the 7% ecological focus area. The commissioner has said repeatedly in Council meetings that he is not trying to reintroduce set-aside. However, one has only to listen to the language of this debate to realise that that is how the matter is perceived. The commissioner has said that someone will be able to count their hedges, ditches and I think that I even heard him say tracks—in other words, what someone has not got in production—and take out some land to get to the 7% if they have not got enough out already, as will be the case with most farmers. If farmers are fortunate enough to have perhaps a piece of woodland, they may well already be up to their 7%.

The Government consider that taking land out of agriculture, when, as hon. Members have all said, we need to increase production, is clearly wrong. However, there is a more fundamental problem with ecological focus areas. I have used the phrase that this is about trying to reach down to the lowest common denominator—the thing that most farmers will be able to meet without having to do anything—and that if they really have to, they might have to take a little bit more land out of farming.

The British Government take the view that we need to be far more active. Several hon. Members have rightly referred to our stewardship schemes. Such active management is far more important. There is plenty of science to demonstrate that, in terms of environmental care, biodiversity, water retention or whatever, active management of a small area of ground can deliver far better results overall than simply watching—for want of a better word—the 7%.

I will come back to the comments made by the hon. Member for Brent North in a moment before he leaves because I want to talk about his remarks on engagement. We are working very closely with a number of other member states to develop a proposal of what we might call equivalence measures: a menu of different options that member states can choose from, all of which have an environmental equivalence in quality terms. The commissioner has already made some good noises about appreciating the concept of equivalence, but he still seems to equate it with quantity rather than quality. That still concerns us.

Barry Gardiner rose—

Mr Paice: Give me a minute. I see that the hon. Gentleman is anxious to leave. I am sorry if I have bored him already. Frankly, what he was saying about engagement is, I am afraid, nonsense. He obviously has a very selective group of people to whom he speaks in the European Parliament, because the Secretary of State for Environment, Food and Rural Affairs and I have spent a great deal of effort over nearly the past two years developing relationships through the European Council, the Commission and the Parliament.

As I said to the hon. Member for Ogmore in our earlier debate, nowhere is there a better example of that than fishing, which has been mentioned. The Under-Secretary of State for Environment, Food and Rural

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Affairs, my hon. Friend the Member for Newbury (Richard Benyon), who has responsibility for fishing, visited Brussels four days after the Prime Minister executed—I mean exercised—his veto. He executed the issue, but exercised his veto. Yet my hon. Friend the Under-Secretary came away from that Fisheries Council having made a superb step forward in terms of the overall EU fisheries policy, which demonstrates that the British voice is still being listened to. Frankly, as the hon. Member for Luton North (Kelvin Hopkins), who has left his place, said, the previous Government’s attempt to renegotiate the CAP did not exactly put them in a good position from which to criticise others.

Barry Gardiner rose—

Mr Paice: I will let the hon. Gentleman intervene. I suppose that I have provoked him.

Barry Gardiner: Not at all. I apologise that I have to leave, Mr Sheridan. I am delighted to hear what the Minister has said, but, of course, the proof of the pudding will be in the eating.

Mr Paice: I am grateful to the hon. Gentleman.

I have two further short points to make about greening. First, it is a good example of something where one size does not fit all. Others have used the same phrase; we have used it regularly in Brussels. We have tried to persuade Commissioner Ciolos that he needs to accept that, as my hon. Friend the Member for Tiverton and Honiton (Neil Parish) said, there are a vast range of farm sizes, types, soils, topographies and so on across the EU. The rigid three-legged stool that the commissioner has invented for greening the CAP is too inflexible to meet all those needs. I fear that, as I suggested earlier, he is simply trying to deliver something that most farmers could achieve.

Huw Irranca-Davies: Equivalence is a welcome development. Although, understandably, the focus of the UK negotiating team will be very much on how it will apply here, what work are they doing about ensuring that equivalence is not used as an excuse in other member nations for avoiding delivering those environmental goods? We must refer to that moral duty to try to raise the level throughout the EU, which is where the greening measures are probably intended to impact most heavily. What work is the Minister doing to ensure that equivalence raises the floor and is not used as an excuse for abdicating any responsibility for the measures?

Mr Paice: The best answer I can give the hon. Gentleman is to point to what the Commissioner said at the NFU conference a few weeks ago, which I have already mentioned. He said that people in Britain are the “champions”—that was his word—of environmental conservation, stewardship and so on, and he did not want to penalise us. Therefore, we are using our own experience as the benchmark. We will be pressing the fact that standards need to be raised, rather than reaching down to the lowest common denominator, as I have suggested. My phrase “equivalence” is not about whatever is down at that level; it is about what is at a higher level and trying to raise concern for the environment and so

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on across the whole of the EU, including in those member states where lip service is barely paid to the matter.

I shall make a final point on greening. I should have mentioned this earlier as it was raised by several hon. Members. I have said publicly in writing in many places that any British—sorry, I meant English farmer in this context, although there will be similarities in the rest of the UK. Any English farmer who is either in a stewardship scheme or who is considering renewing or entering one need not be concerned about any changes that may come. I have said clearly that if—we hope that this will not happen—the outcome of the negotiations are to someone’s detriment, we will allow them to opt out at that stage with no penalty. I cannot be clearer than that; that is absolutely the case.

A number of Members referred to capping. Capping is, first of all, anti-competitive and does not stimulate businesses to grow. It will give the wrong message to the industry, which we want to be competitive. Secondly, in its proposed form, we think that the capping is quite bureaucratic. Bringing labour costs into it will complicate the process, which is completely opposite to the direction in which we wish to go. Thirdly, as the hon. Member for Ogmore said, there will be a great deal of business for lawyers in trying to find ways around it. When the hon. Gentleman referred to the Co-op, he also inadvertently put his finger on the fourth point to consider—corporate structures. Many of our largest farms operate under a corporate structure, which means that the issue of whether we break them down then comes into play.

That leads me to the closely linked issue of active farmers. The Commission’s proposals for active farmers are twofold. First, farmers should be actively farming—doing the job—and I will come back to that. The second aspect, which has caused the most concern, is the idea that the classification should be based on a proportion of farmers’ total income that subsidy comprises. That again falls foul of the corporate structure argument, because farmers may have businesses in a number of different corporate structures. Secondly, it prompts the scenario—the nightmare, almost—of having the Rural Payments Agency’s computer talk to Inland Revenue’s computer to establish whether someone’s non-farm income is at a specific level. Again, that is a non-runner in terms of implementation.

However, we have great sympathy with those who believe that the money should go to the people who farm the land. That touches on the question asked by the hon. Member for Ogmore. If they are tenants, the money should go to them. Under whatever form of tenancy, management or contract farming arrangement, the money should go to the business that controls the land. That is the way in which the system should operate.

That brings me back to the point made by the hon. Member for Banff and Buchan about the issue of slipper farmers in Scotland. Again, we understand that problem entirely, and we will do our best to find a way through it. It will not be easy, but it is important to ensure that people are doing something on their land before they receive any money. Whether the solution to the problem is that proposed by the Scottish National Farmers Union, namely, a minimum stocking rate—the problem tends to be associated with that sort of land—or another mechanism, I assure hon. Members that we will try to find a way forward.