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Lord Whitty: My Lords, I gratefully accept the congratulations on behalf of Margaret Beckett, who will pass them on to Franz Fischler. Both have made a significant contribution to the agreement. It shows that when the Commission shows leadership on behalf of Europe as a whole and when leadership is shown in this country, we can achieve a positive outcome. During the whole period of our membership of the Common Market, as it was, and the European Union, as it now is, successive governments have attempted to change the CAP and the distortions that it causes within Europe to the environment, the markets and international trade. The fact that we have been able to change it in a significant way this week is a historic turning point which will benefit farmers, consumers and the environment alike.

Lord Hylton: My Lords, the Statement mentions distortions in trade. Can the Minister comment on export subsidies paid by the EU and say whether the full text covers that point? Does he agree that dumping—for example, milk powder—has had the effect of destroying local markets for farmers in developing countries? Is any timetable built into the agreement for ending export subsidies?

Lord Whitty: My Lords, this agreement does not specifically cover export subsidies. The position of the EU going into the Doha round of WTO talks envisaged a phasing out of export subsidies. The exact detail will be negotiated with our trading partners. The timescale for that will be negotiated with our trading partners in Cancun.

I agree with the noble Lord that some of the effects of the existing and past export subsidies have been hugely damaging to some developing countries. It is part of this Government's intention to ensure that they are phased out as a result of agreements to be reached in the WTO.

Lord Mackie of Benshie: My Lords, I congratulate the Government and the team for the work they have done and am glad of the agreement reached. However, the Minister mentioned that there were certain compromises. Before I read all the papers he has accumulated for me in the Library, perhaps the noble Lord can tell me what constitutes a small farm. In this country, our family farms are rather larger than on the continent. That will be important. On decoupling, can the noble Lord also say whether the subsidy—the joined-up payment, whatever one calls it—will go with

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the land and not the person? Finally, can the Minister say something about milk quotas? Is that one of the compromises?

Lord Whitty: My Lords, perhaps I may take those questions in reverse order. The milk regime is one of the more disappointing parts of the deal. The milk proposals came slightly later than the rest of the package; we were working on a different timetable. But we are not happy with the outcome relating to milk either on the extension of quotas in time—although not as much as was proposed in terms of numbers, which would have been helpful—or on price reduction. So milk is one sector which we would have liked to have been more decoupled than the proposals allow. However, I believe that we shall move in that direction. Certainly the commissioner has that in mind.

The decoupled single payment will go in the first instance to the producer who was producing as of 31st May this year. The quantum will be based on an earlier reference period. It will be the person who was the producer on the land, whether landlord or tenant, at 31st May this year. The full details of that are partly in the document but much of it will be spelt out later in, no doubt, a hugely complex legal form.

The payment is attached not to the land, but to the producer. If it is transferred it has to be transferred to other land which will be subject to the same cross-compliance rules. Therefore there can be no loss of land to which the subsidy and cross-compliance rules apply.

The noble Lord is right about small farms. The relatively small part of the package which is geared to small farms—the franchise from the modulation payment—will, by and large, benefit very small farms and not the average-sized British farm. However, the average-sized effective British family farm should benefit from the other freedoms that the package produces.

Lord Carter: My Lords, it is correct to say that the shift of production support away from price support began in 1990 with MacSharry. It has taken 13 years to get to the point we are at now, which is a very substantial shift in policy.

It is hard to judge the value of the outcome. Perhaps the easiest way to do so would be for my noble friend to compare the final outcome with the British opening position and, say, the French opening position to see what has shifted in negotiations.

The issue of land is extremely complicated. I believe that my noble friend gave the date of 1st May. Does he agree that it would be wise for any deals in land between 1st May and perhaps the autumn—we may then know how the regulations will look—to include some legal arrangement so that if things change from what those who are doing the deal think, they can be protected?

Lord Whitty: My Lords, on the latter point, I would very much hesitate to be a Minister advising anyone on

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how to deal in land now or at any other point. The date is 31st May. The person who is producing on the land and had the old, historic subsidies would be entitled to it at that point. The full legal text will be available in a few months' time. No doubt people will make their decisions in that light.

While I always hesitate in any way to criticise our French colleagues, they have their position to take and have taken it fairly robustly through this process, and we are all agreed on this outcome. It is right to say that the French have moved dramatically. They moved from a position of total opposition to any decoupling of any payment whatever to a position where the principle is decoupling of everything and there are some options on some of the regimes for them partially to recouple back—for example, 25 per cent of arable payments. But the balance is clearly much closer to the UK Government's opening position, on which we were largely supported by the Germans, the Danes, the Swedes and the Dutch, than to the position of that group of countries led by the French.

I do not wish to become triumphalist about this, but a significant shift to what has been the historic British position over the past years has been achieved over the weeks and months of negotiations.

Baroness Warnock: My Lords, before the Minister sits down, perhaps I may say that he should be a little triumphalist. It is a matter of tremendous congratulations.

Lord Whitty: My Lords, all right. Just a bit.

Baroness O'Neill of Bengarve: My Lords, before the noble Lord sits down, perhaps I may say that my father, Conor O'Neill, negotiated our original entry into the common market. It was his greatest regret that these concessions had to be made and his judgment that at that time there was no way in, apart from making this concession. I wish that he were alive to hear this announcement.

Lord Whitty: My Lords, those of us who followed those negotiations at the time recognise what a difficult task the noble Baroness's father had at that point; and how we gained an awful lot from the rest of his negotiations. This may well have been a price worth paying for that. But it is also true that he and political parties on all sides at that time recognised the need for reform of the CAP. Regrettably, it has taken us this long to get there; but we are a very significant way there now.

Lord Sewel: My Lords, is the Minister aware that those of us who have been severe critics of the common agricultural policy—as it has developed it has been bad for producers, bad for consumers, bad for the taxpayer and bad for the environment—unreservedly welcome the Statement? It marks a major change in the future of agricultural support in Europe. It also justifies totally the Government's policy of engaging positively with our European partners. I do not think that we would have been able to have what is a triumph if we

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had not had that positive engagement with our European partners which has marked our relationship over recent years.

The Statement clearly has major benefits in that the movement away from production subsidies, bringing agriculture closer to its markets, is wholly to be welcomed. Does the Minister agree that as we move forward there are two tests: first, how Europe is able to contribute positively to the WTO round and further developments there, in particular in relation to the still restrictive protectionist policies of the United States; and, secondly, perhaps internally, that a movement away from agriculture support per se to rural developments in the broader sense is the greatest challenge we face in relation to our rural areas?

Lord Whitty: Yes, my Lords, I agree entirely that that reflects a great deal of co-operation bilaterally and multilaterally with our European counterparts. The Government's engagement in that has led to us being able to deliver this significant change. The noble Lord is also right that we now face an even bigger challenge in terms of making a success of the WTO talks and ensuring that the Europeans have a constructive effect on those talks. We are starting from a platform that is very positive, whereas a few months ago it looked as though Europe may be going into that discussion with a negative stance.

The noble Lord is also right that we are moving away from a rural policy that is related to subsidising certain parts of food production to one that is of benefit to the rural economy and to rural communities as a whole, including farming. That is a strong and beneficial development.

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