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5.10 pm

Lord Cameron of Dillington: My Lords, I serve on Sub-Committee D on Environment and Agriculture. I declare an interest as a farmer and landowner. I must

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also declare that for more than 20 years I have been lobbying to get the CAP reformed so that it addresses the problems of rural areas and represents all their population and not just the farmers. Even in the predominantly rural regions of the EU, agriculture’s share of gross value added is only 5.8 per cent. On average it is even less, and if you include the more urban regions it is much smaller still.

I believe that government should not interfere with the management and control of the nation’s businesses. That is not efficient. An administration trying to control aspects of agriculture in 27 countries should limit itself to regulation and ensuring fair competition. However, the sad thing is that far too many people on the Continent treat agriculture as part of their cultural heritage rather than a business, and believe that every farmer should be protected because what he is doing is part of some sort of sacred duty. In reality of course he is no more part of the cultural heritage than the village cobbler, the butcher or the baker, who get no support.

The landscape might be part of our culture, but not the farmer, so let us buy the product and not subsidise the man. That particularly applies to our less-favoured areas, where farming is mainly about landscapes, and landscapes are mainly about farming. In these remote and often mountainous parts, it is important for social and environmental reasons that land managers of some sort are encouraged to stay in place.

Anyway, as a result of this near spiritual approach to farming in some continental countries, when the Commission approaches the reform of the CAP it is as much a political exercise as it is a rational examination of the future needs and requirements of a massive, and massively diverse, food industry. The question that should be asked, and is really not, is: “What do we want from our agriculture in 10 to15 years’ time, and how do we ensure that we get it?” The answer should be that we want to have an environmentally sustainable industry, which produces high-quality, good-value and sufficient food in a way that does not endanger the environment or the needs of future generations. The way to get there is to improve the infrastructure and help create a competitive industry that responds to market signals and not to political ones; an industry that is not dependent on taxpayers’ financial support, or on protection from the rest of the world; and an industry that does not utilise 40 per cent-plus of the EU’s budget in order to keep it as it is now. In other words, agriculture desperately needs the commercial pressures in order to keep it constantly changing in tune with market signals. That is how it will thrive and produce the food that Europe needs.

However, the Commission, and now the Parliament, has to consider the vested interests. I might say that these vested interests do not only include farmers. It was interesting that when New Zealand did away with its agricultural subsidies in the 1980s fewer than 4 per cent of farmers went under, while I believe that over 50 per cent of its Ministry of Agriculture staff were made redundant. I will not go further down that road. Suffice it to say that these vested interests seem to have

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political clout, and even when you get some reform a new set of vested interests seems to appear. Real reform is thus very slow.

One of the more interesting interviews that we had during our inquiries was with the European commissioner for financial programming. As noble Lords might imagine, she can think of a lot of better things to do with 40 per cent of the budget than to give it all to farmers. One of the things she said in passing which caught my attention was that in giving eastern EU farmers their very small equivalent of the SFP, we were only really helping the Chinese and Japanese economies. She paused like I am pausing now. She went on to explain that this is because many of the small farmers were just using this money, which was new to them, to go out and buy TVs and microwaves which they had never before been able to afford, while just carrying on farming in the way they had always done. So one has to ask: “Is this money helping them modernise their industry or making them more efficient in producing more and cheaper food for the EU taxpayer, or is it just the start of getting them hooked on a way of life dependent on government handouts?” Furthermore, if that is a justifiable question applying to them, might it not also be true in connection with western EU farmers? What does the single farm payment actually achieve for EU taxpayers outside the less favoured areas?

There is no doubt that in eastern Europe farmers need help in restructuring their agricultural industry, but at present Pillar 1 is remarkably badly equipped to do this. Certain rural areas in western Europe also need help, but why pick only on farming as the conduit for support? The CAP could be described as being monotheistic in that it blindly worships farmers at the expense of others in the countryside. However, if we want to create wealth and employment in the countryside let us foster new cutting-edge businesses which will not need ongoing support once the right infrastructure is in place such as more commercial workspace or good broadband and transport links. If you want landscapes or habitats, then by all means pay farmers to produce them, but leave the food market alone. Encourage co-operatives, and above all encourage or even pump-prime insurance schemes so that both farmers and consumers can cope better with the bad years, but do not go down the route of the disastrous recent French proposals to make the EU food industry even more protectionist. That is reverting to the failed policies of the 1980s and will ultimately lead to an inefficient industry where the supply of food is gradually reduced and becomes more expensive than ever.

As I have said in other speeches to your Lordships, we are going to need a really competitive and productive European food industry in years to come. There could be world food shortages and it is inevitable that at times food prices will go up. However, as has been said, food as a percentage of the household budget in much of western Europe has fallen during the past 50 years from more than 30 per cent of household spend to some 10 or 11 per cent now, so here at least there is some slack in the system.

I believe that farmers and food would be so much more appreciated if the market was not distorted by

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the political interference of the CAP. I also believe that farmers in Europe can in future supply the food that Europe needs, and can even keep others further afield well fed, but only if they are exposed to the realities and pressures of the marketplace and not cocooned by the comfort of the present CAP. Meanwhile, a well funded Pillar 2 could do so much more for our countryside and those who live there.

5.17 pm

Lord Pearson of Rannoch: My Lords, I came along to listen to this debate because we were enjoined to do so yesterday during our proceedings on the Lisbon treaty when we discussed reform of the CAP. Having listened to the debate I join all other noble Lords in congratulating the noble Lord, Lord Sewel, and his committee, and the staff who supported them, on the very high quality of their report. That is not in doubt and never is with your Lordships’ European Select Committee reports.

Indeed, all your Lordships’ Select Committee reports are of the very highest quality and many of them go on to be very influential in the areas which they cover. However, I intervene to ask what I and others asked yesterday: how much difference can any reports from your Lordships’ Select Committee on the European Union make to policies which are now dictated by Brussels, however much the Government may agree with them? Virtually none, I submit. I am fortified in this fear by a series of recent Written Answers to the noble Lords Lord Vinson and Lord Tebbit, who asked what effect any of your Lordships’ European Select Committee reports have had on EU policy over the years.

Having tried and abandoned the disproportionate cost defence, so far the only answer the Government have been able to give came on 19 February this year, which stated:

When pressed on this paucity of hard achievement, the Government have fallen back on extolling the general quality of your Lordships’ European Select Committee reports, with which, of course, we all agree. The questions my noble friends and I were asking yesterday, and which I repeat today, are fortified by the Minister revealing during Committee stage on the Lisbon Bill that only some eight of the 27 other countries support the UK’s call for radical reform of the CAP and, indeed, of the even more infamous common fisheries policy.

As I understand it, the French and their allies have blocked any meaningful reform until 2013 and are threatening to do so well beyond that. So what chance is there of such reform? What difference does it make if the British Government agree with the report? None, I fear. Is not the only answer for us to repatriate our agriculture and fishing policies? Why do we not do that? We could then control our agriculture and fish, without being part of these truly wicked policies. I apologise to the Minister for trying his well known courtesy and patience so far, but I look forward to his reply.

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5.20 pm

Lord Dykes: My Lords, it is deeply moving to see the noble Lord, Lord Pearson, here today as a surprise appearance in the gap. He has added lustre to the quality of the debate, but his remarks were very predictable. I am sure that the Minister will deal with some of them. They always reach a fundamental existential conclusion, and we know what it is. It is not really part of this debate. I imagine that most other participants today are anxious for us to remain enthusiastic and active members of the European Union, which is an increasingly successful entity in a difficult and complex world, with more and more opportunity to help other parts of the world, not least in food production.

We have had the benefit of some very expert views. I think of the sagacious comments of my noble friend Lord Livsey, and I note what he rightly said about the expense of the United States farm support system. Other experts such as the noble Earl, Lord Erroll, and the noble Lord, Lord Cameron, have spoken, and we are due to hear from a great expert on agriculture and horticulture; the Conservative spokesman. Above all, I echo the thanks of previous speakers to the noble Lord, Lord Sewel, and his colleagues for a very arresting and radical report, which needs much careful attention.

This debate has arisen at the same time as the Commission has produced its preliminary draft health check proposals, of some complexity, and there is a lot more to come in the negotiations. Paragraph 211 of the report sums up the great difficulties of getting the balance right between the legitimate and growing single market in food and farm products and the pressure to repatriate partially some of the differences and variations in complicated national policies. That is an intricate exercise for the future, and we wish all member Governments and the Commission well in trying to get the best system for post-2013.

Britain takes less in total in CAP support payments on recent statistics than, say, France, but its average take is much higher because of the relatively high incidence of giant farms and large estates. Yet when the Commission tried, rightly, to apply a cap on CAP payments, the UK Government and wealthy UK estate-owning farmers protested vigorously, somewhat ironically. However, everyone knows that large farm estates have to be helped somehow to preserve and enhance the local environment for the general good. That is the reality. So the European Commission needs sympathy and help in its often abstruse and hard-to-grasp searches for solutions for post-2013.

The planned scrapping of set-aside will inevitably reduce the subsidies to the largest entities anyway, and those funds can then be deployed in smaller farms, especially where pro-environment objectives are encased in the overall activity. Meanwhile, the old world of excessive CAP support for excessive production is over—which is welcomed by most people—and few will lament that major change. The next few years will, however, reflect the global change to booming demand and food shortages in many developing countries.

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It is fascinating also to observe the changes in French thinking in recent times. The presidency period that it will inherit on 1 July will reveal a much greater willingness in France to accept radical new objectives, which is a major adjustment. So if France can change in the future, Britain needs to as well, armed as we are with our famous obsession for free markets and the survival of some of the most skilful asset-strippers. I say that slightly tongue in cheek, but people will know what I mean. Of course, the big German farms could also suffer if the 7 per cent reduction at over €100,000 is implemented by the member states by the November deadline for the package to be agreed.

I trust that this target can be reached, because there is a wide range of views among the 27 about future modernisation priorities, from the acceptance of some interventionist support at one end, to the total scrapping of present-day subsidies, which seems to be the view in Sweden. Meanwhile, the French agricultural population is now down to 4 per cent and many small farms in France have ceased to function. This makes the task of modernisation easier, not harder. I declare an interest, as I live in France and I am surrounded by some of the remaining small farms. I am glad that the Danish commissioner, who has been praised in this debate several times, has advocated the use of unspent funds within the CAP support nexus to help third-world farmers, showing once again the powerful example that the EU can set as a provider of investment aid to underdeveloped countries, rather than short-term handouts to prop up.

The relatively high free-market view is endorsed in the sub-committee report, with its advocacy of the farming sector,

I hope that the committee clerks, when they read the Hansard of this debate later, will send a copy to the United States and Japanese farm support agencies where subsidies remain the highest in the developed world, much worse than the CAP.

I hope that the European Commission will heed the committee’s later suggestion that the other available funds, such as cohesion, structural and regional funds, as well as CAP Pillars 2 and 1 can better be used to deal with the weaknesses of the rural economies in many sub-areas of the member states. The Commission in Brussels, like sub-committee D, is anxious to get the balance right between the logical availability of common support mechanisms post-2013 with the localised national and regional decision-making within each member country to secure the focused policy effect of cash help, plus incentive cash for innovative measures if farmers enhance the environmental benefits as well. This acceptance of permissive flatter payments being used by the members is surely a highly desirable objective if it can be practical, fair and transparent. That is of course a big “if”, but it must be achieved.

The Commission is very keen to move away from the historic payments model, as the report of the

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noble Lord, Lord Sewel, emphasised. It also expresses support for full decoupling and full abolition of set-aside, which must surely be pragmatically inevitable in the global village context if the advanced countries are to set an example. WTO rules also favour non-subsidy models for locally weak and impoverished farming zones, as well as normal units. I see that the National Farmers’ Union strongly argues for all arable support to go, not for keeping it for suckler cows and ewes, for example.

I believe that the Commission is more and more committed to the full abolition of export subsidies and the eventual elimination of milk quotas and cereal intervention payments. We have five years to go before this brave new world has to start, which is an adequate transitional period for normal healthy farm units to accept. Even after 2013, some support mechanisms could be retained pro tem on a tapering basis. In fact, the sub-committee report advocates this approach in paragraph 245.

On these Benches, we also welcome the report’s strong adherence to the co-financing of Pillar 2 outlays, as it enhances the subsidiarity of national efforts to secure local aims with efficient spending norms. We also welcome the proposal that member states could pay the SPS in two doses, which would mean that hapless farmers here would not have to wait an excessive time for full verification of claims. We would save some of the embarrassing comparison of other member states with the efficiency, or not, of what has happened here. I pay tribute to the noble Lord, Lord Rooker, who is not here for understandable personal reasons, for his honest admission of the difficulties with the department’s system in that regard.

I was glad to note that the National Farmers’ Union campaigned to get rid of the permanent pasture restriction, or the irritating “use it or lose it” rule. I very much agree with that. The NFU also worries about the distorting effects of Article 68 or 69—or is it the other way round?—payments under the 10 per cent procedure, and this certainly needs to be thoroughly sorted out and clarified into a tangible model system for 2013.

I understand also that the NFU—and I do not act as its agent, it just happens to have made a number of good suggestions on the health check—is concerned that the Article 68 schemes could produce the opportunity for member states’ agricultural ministries to slip into the habit of introducing quasi-modulation discounts. In paragraph 239 of its report, the sub-committee strongly supports the plans to get like-for-like reductions in voluntary modulation in return for increasing compulsory modulation. I would be grateful, therefore, if the Minister responded to this specific point in his wind-up speech, including the proposed modulation tabulation from the 3 per cent, the 6 per cent and the 9 per cent matrix of reductions onwards to the final outcome likely for 2012. I observe that the national modulation systems in, say, Portugal or Britain will reduce the payment against the increases in EU modulation, presumably to produce the same net effect, but how will all that work in practice? That is an important question. There are bound to be some uncertainties in those areas pending the working-up of

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the final reform package, but it would help to have the Government's preliminary thinking, while we fully accept that there is still a maximum of negotiating water to flow under the CAP bridge.

Finally, I would be most grateful if the Minister were able to say something on the latest unrest among dairy farmers, which has been mainly manifested in Germany, Holland, Austria and a little less in France. However, I feel that the debate has been useful and timely, and that the report of the noble Lord, Lord Sewel, is a tremendous generator of important and radical thought.

5.30 pm

Lord Taylor of Holbeach: My Lords, I declare an interest as I am active in my family farming and horticultural business, and am a member of and active in a number of organisations connected with it. I join other noble Lords in congratulating the noble Lord, Lord Sewel, and his committee on a first-class report. The competence of those involved shines through, and it is well written, clear and straightforward. It is more than a layman’s guide in the sense that it provides definitions of those strange words that the CAP uses, such as “decoupling” and “modulation”, which are not normally used in the language. It can also be used as a textbook by experts, as my noble friend the Duke of Montrose suggested.

I read the report thoroughly, as I had it with me while I was overseas sheltering from the rain last week. I tried to read between the lines to see whether I could detect any subtleties. I do not see any; I see a pretty unanimous committee working on a strong consensus. Accordingly, it has been able to produce a report that has not had to blunt its thrust, and has had good interaction with many witnesses. I found myself compiling what I want to say today with far too many notes, because the report is detailed and the various recommendations are worthy of comment. I have to edit out some of what I say, as I am sure the noble Lord, Lord Dykes, had to as he tried to encapsulate all his points.

Events have moved on since the report, as the noble Lord, Lord Sewel, said and as we discussed last night. The health check has arrived. It is only in draft, but it contains the structure for substantial reform. Although Commissioner Mariann Fischer Boel said that it was not reform but that reform awaited the budget review, we can see that the concept of having one vision and two steps incorporates a serious attempt at change. The report is right to have anticipated that. There is a coincidence of argument between the report and the health check, and the Government’s response. There are areas of difference but, generally speaking, there is consensus. As the noble Lord, Lord Sewel, pointed out, the events of the past few months have, if anything. highlighted the urgency of change and the need to maintain momentum for it. This week, the United Nations summit in Rome has drawn attention to the need for food security to be high up the political agenda. We have an opportunity to keep the topic to the fore.

One interesting thing about the report is that it reveals the tension that exists between commonality

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and subsidiarity, and I do not think that these matters are easily resolved. There is also a tension between the more productive areas of agricultural regions—the areas where I am fortunate enough to farm—and the less favoured areas of which my noble friend the Duke of Montrose and the noble Lord, Lord Livsey, spoke. The report leans towards a resolution through greater control by member states, particularly in the environmental and social fields in Pillar 2. I think that that must be right, but it still shows that there is a tension between protectionism and the free market. That may be inevitable but, pace the noble Lord, Lord Pearson, we did not solve that problem in the pre-CAP days. The noble Lord, Lord Sewel, is right to say that there must be a move towards removing subsidy and facilitating the freeing of the market. There remains a strong necessity to liberalise markets where we can, and the report recognises that.

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