Mid-Term Review of the Common Agricultural Policy

– in the House of Commons at 6:38 pm on 12th February 2003.

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[Relevant Documents: European Union Documents No. 7964/00, Special Report No. 8/2000 of the Court of Auditors on the Community measures for the disposal of butterfat, No. 12457/01, Special Report No. 6/2001 of the Court of Auditors on milk quotas and No. 12782/02, Special Report No. 5/2002 of the Court of Auditors on extensification premium and payment schemes in the common organisation of the market for beef and veal. The Third Report of the Environment, Food and Rural Affairs Committee, Session 2002–03, on The Mid-term Review of the Common Agricultural Policy (HC 151).]

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

I must tell the House that Mr. Speaker has selected the amendment in the name of the official Opposition.

Photo of Elliot Morley Elliot Morley Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs 6:52 pm, 12th February 2003

I beg to move,

That this House
takes note of European Union documents No. 10879/02, Commission Communication on the Mid-Term Review of the Common Agricultural Policy, No. 10896/02, Commission working document containing a report on milk quotas and No. COM (03) 23, draft Council Regulations on the reform of the Common Agricultural Policy;
supports the Government's objective, to work for a sustainable Common Agricultural Policy which contributes to prosperous rural areas, enhances the natural environment, and provides high-quality, safe food and high animal welfare standards, a fair and competitive environment for farmers and better value for money for taxpayers and consumers;
welcomes the European Commission's proposals on reform of the Common Agricultural Policy, in particular the proposals to decouple payments from production, to move from production-linked subsidies to wider agri-environment and rural development measures, and for further market reform, while lessening the adverse impact on trading opportunities to less-developed countries;
but regrets that the proposals in several areas did not go further, that they include a complex and potentially unfair mechanism for transferring funds towards agri-environment and rural development measures and, on dairy reform, that they do not meet the requirement of the Berlin agreement that there would be a mid-term review 'with the aim of allowing the present quota arrangements to run out after 2006'.

The European Commission's proposals on common agricultural policy reform, published on 22 January, give us a real opportunity to set down a sustainable basis for European agriculture policy. As we said in response to the Commission's initial discussion document last July, the Government strongly support the direction of those proposals. They will enable us to lay the foundations for a sustainable and internationally acceptable CAP, which will command the support of all stakeholders in the enlarged European Union. However, we have some significant criticisms of the package—I will come to them later—but we believe that, in general, the reforms are going in the right direction. Of course there is much work to be done before we can be sure that we have fully evaluated those proposals. Finding a fair, practical and acceptable outcome will not be easy.

Against that background, there are three key points on which I want to focus: the importance of securing changes to the CAP that bring real benefits to all our farmers; the importance of the EU taking a strong and forward-looking stance in the World Trade Organisation negotiations; and the need to take account of the wider international context.

We must take this opportunity to reform if we are to avoid further environmental damage, regenerate our rural areas and support our farmers in ways that allow them to plan ahead with confidence. There are real benefits to United Kingdom farmers in those proposals. In particular, decoupling support from production will be a massive advance for us, not least because it will improve the financial position of farmers. They will continue to receive much the same level of support as they do now, but they will no longer have to stick to certain production patterns to do so. As a result, they will be free to optimise, rather than being driven to maximise, their output. Of course they will have a great deal of flexibility in their businesses.

Decoupling will have wider benefits, too. Our farming will come closer to its markets, and it will be more efficient and more environmentally sustainable, as well as being more profitable. Research commissioned by my Department and by the Commission concludes that incomes will rise as a result of decoupling. The CAP will be simpler to administer because of the major reduction in bureaucracy that will follow these proposals. Reducing the overregulation of farmers is a key outcome that we should aim for.

Decoupling will lead to changes in farming practices. In some cases, those changes may be significant, or have significant effects on upstream or downstream activities. The implications for extensive beef production in some parts of the European Community—including the less favoured areas—are one area of concern. We will have to explore flexibility in the regulations as a way of dealing with specific sectoral or regional problems.

Agriculture is both the prize and the stumbling block in the WTO Doha development round. The EU should seize the initiative and put pressure on the United States and others to change their protectionist policies. A good outcome on agriculture will unlock a wide range of opportunities for developing countries. By contrast, stalemate in agriculture could put the round in jeopardy and therefore deny us the gains that we could make in agriculture and in other sectors. Delay, evasion and prevarication are not in our interests. We must acknowledge that September's WTO ministerial meeting in Cancun is a real deadline. We must prepare for it accordingly.

Photo of David Taylor David Taylor Labour/Co-operative, North West Leicestershire

The Minister refers to the widely welcomed change in direction that will lead to decoupling of payments. However, there are risks associated with that, as I am sure the Minister would agree. One particular risk is land abandonment. How might that risk be tackled?

Photo of Elliot Morley Elliot Morley Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs

My hon. Friend asks a reasonable question. If there are direct payments, issues to do with stocking arise. I think that my hon. Friend is alluding to that. We can deal with such problems through our agri-environmental approach. On some issues, such as upland management, the agri-environmental approach can be a more appropriate management tool than production support, which can distort markets and cause all sorts of problems. I assure my hon. Friend that we will take his concerns into account.

Photo of Elliot Morley Elliot Morley Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs

Briefly. I want to keep my contribution brief because this is a brief debate.

Photo of Andrew George Andrew George Shadow Minister (Environment, Food and Rural Affairs), Shadow Minister (Environment, Food and Rural Affairs)

I appreciate the Minister's willingness to give way. Following the previous intervention, I wonder whether the Government have made any assessment of the impact, on tenant farmers, rents and land values, of decoupling and direct payments to the farm simply for being a farm. Is the Minister concerned that there could be a hike in rents and land values that would put many tenant farmers in difficulty?

Photo of Elliot Morley Elliot Morley Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs

Some of the effects of decoupling are unknown. It does not necessarily follow that there will be a sharp hike in rents. There are changes in the proposals that would benefit tenant farmers. I am sure that we will touch on them in the debate. We will have to think carefully about certain issues and I accept that the proposals contain some unanswered questions. We will continue to debate such points among ourselves and in consultation with farming representatives.

We must not overlook the wider international dimension of CAP reform. Seen from the point of view of developing countries, our policies—and those of the US and other developed countries—deny them the opportunity to exploit their natural competitive advantages and trade their way out of poverty. CAP reform has to be part of the EU's efforts to help the poorer countries of the world to improve their lot. For all those reasons, the Government broadly welcome the proposals. However, we have a number of significant concerns that need to be addressed. I will run through them.

Photo of Mrs Gillian Shephard Mrs Gillian Shephard Conservative, South West Norfolk

The Minister knows the concerns of sugar beet farmers. He is talking about careful negotiations at the WTO. What words of comfort has he for sugar beet farmers—on alternative uses of sugar beet, for example? Sugar beet production may be phased out in this country.

Photo of Elliot Morley Elliot Morley Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs

As the hon. Lady knows, changes will inevitably occur in the sugar regime. The agreement on the sugar regime means that it will run until 2006. However, we cannot ignore the implications of decoupling for the sugar regime. I agree that there is an important role for sugar in industrial crops, such as ethanol fuels and in other forms of industrial production. I know that research programmes at the Central Science Laboratory have been examining the whole issue of industrial crops, and I agree that we need to consider how we can broaden the opportunities for farmers and, in particular, for those who are involved in the sugar sector. I take that point seriously.

Although we support the general proposition that there needs to be a switch from the first to the second pillar of the CAP—from production-based support to agri-environment and rural development measures—we feel that the proposals should go further in that direction than the EU is proposing. I also support the view that the existing system needs to be considerably simplified. The proposals being made are very complex.

We also have problems with the specific approach proposed by the Commission. It appears to put the burden of reductions very heavily on a minority of member states, including the United Kingdom and Germany. That cannot be right in relation to how the reforms should be put in place. Their impact should be much more fairly distributed. Moreover, some of the proposals would put the burden of change on some of the more efficient farmers that have a viable long-term future. We run the risk of turning the clock back and driving farms to split up into less competitive units.

At the January meeting of the Agriculture and Fisheries Council, my right hon. Friend the Secretary of State argued that we needed a simple system that applied the same rate or reduction to everyone. It must be fair and easily understood by farmers, and easy for our administrative systems to cope with. He also explained our serious problems with the Commission's proposed distribution key for the reallocation of rural development money between the member states as a result of the proposed modulation. This takes no account of the fact that the existing budget is not distributed on anything like a reasonable or equitable basis. The Commission proposals do nothing to correct this. We shall certainly want to press that point very hard.

It is ridiculous that a member state with an agricultural and rural sector as large as that in the United Kingdom receives only 3.5 per cent. of the current rural development budget. The Commission proposals would make the situation even worse. That is clearly not acceptable to us. The distribution of money raised through modulation must, at least, start to redress historic funding inequalities in the allocation of pillar 2 resources

We are also disappointed that the Commission proposals do not start modulation until 2006. If there really are barriers to an earlier start to the new system, I believe that more needs to be done to encourage member states to take better advantage of the existing voluntary system and to provide more flexibility within the system. One way or another, the rates of modulation need to be pitched so that they allow continued implementation of the rural development programme that we are developing in the application of modulation and into which we are putting more money.

Photo of Andrew George Andrew George Shadow Minister (Environment, Food and Rural Affairs), Shadow Minister (Environment, Food and Rural Affairs)

I thank the Minister for giving way. It is important that interventions are taken as they help to make the Government accountable.

I agree with the Minister entirely in his criticisms about how the proposals for modulation have been drawn up, so what alliances will the UK Government seek to form with other member states to drive through the kind of reforms that he and I would like to take place?

Photo of Elliot Morley Elliot Morley Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs

The hon. Gentleman makes a fair point. To get change, we need to seek the agreement of other member states. Other than ourselves, I think that Germany is the only other country that is currently using the voluntary procedures. France tried that, but its scheme ran into all sorts of problems. They applied 20 per cent. maximum modulation to some farms and it appears that the French did not have the schemes to spend the money on. It was not the most brilliant of programmes.

Germany certainly supports our views. Other countries also support our views on how the proposals should be changed. Many Scandinavian countries strongly believe that there should be a shift from production support to rural development support. Hon. Members will probably be aware that part of the Commission proposal is that not all the proceeds of modulation will go to rural development. Some of the proceeds will go into paying for restructuring of other aspects of the CAP. One can see some logic in that, but it is a pity that the way in which the modulation is constructed and pitched will reduce the amount of funds available for rural developments, which we think is where the money should be switched. Clearly, there will be considerable discussion on how that is applied and about the details.

Finally, in terms of our concerns, we find some of the proposals related to the reform of the dairy regime very disappointing. While I strongly support the Commission's approach in relation to extending and rebalancing the price cuts in this sector, I have serious concerns about the suggestion that the dairy quota regime should be extended for a further seven years. The Commission has proposed changes that go some way down the road we shall need to travel if we are to remove quotas entirely and to improve our competitive position in world markets. The United Kingdom's views are well known. We would welcome an orderly phasing out of milk quotas, and it seems that member states and the Commission are moving to a position in which they accept that milk quotas will end. If so, the sooner we do that, the better it will be, rather than extending it in this way.

Photo of David Burnside David Burnside UUP, South Antrim

As the Minister comes to the end of his concerns, will he comment on a major concern in Northern Ireland, where our farms are smaller than those in England, Scotland and Wales, with the 32,000 farms averaging out at about 60 acres? The biggest impact of the reduction of £340 million between 2006 and 2012 will fall on the small farm sector, and that is a major concern of the Ulster Farmers Union.

Photo of Elliot Morley Elliot Morley Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs

I understand that. The hon. Gentleman is probably aware that the Commission's proposal includes a threshold limit in which there will be no modulation, so there will be some protection in its proposals for the smaller farms. There are arguments for and against. We have applied modulation in this country across the board. We had some debate about that when we were originally discussing how modulation should be applied. There were proposals in our own country that there should be a similar approach of a threshold in relation to smaller units. However, when one looks at the detail one sees that there are all sorts of problems. There is the risk of encouraging people to divide farms into small units to get on to the threshold.

We felt that the standard, across-the-board modulation, which is simple, easy to understand and easy to apply, was the best approach. We believe that the Commission should take this approach as well. As it happens, this system, given the structure of Northern Ireland farms, which I know very well, offers them some protection.

Photo of Michael Weir Michael Weir Scottish National Party, Angus

There are similar concerns in Scotland. Is the Minister convinced that the level, which I think is Euro5,000, is too low to affect smaller farms? There is also serious concern in Scotland that the medium-sized farms in constituencies such as mine, rather than the larger and very small farms, will be hard hit by modulation, because they will lose a considerable part of their income. Does the hon. Gentleman have anything to say on that?

Photo of Elliot Morley Elliot Morley Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs

I think that the Euro5,000 issue is a matter for debate. At this stage in the proposals, obviously all the details are debatable in the negotiations. We shall listen to views that we receive about the threshold levels.

With regard to medium-sized farms, if there is a percentage modulation the larger units and those receiving the most in subsidies are the ones contributing most in modulation. So there is an element of fairness in the way in which it is applied, in that it recognises the level of subsidy that individual units receive.

Photo of Angela Browning Angela Browning Vice-Chair, Conservative Party

The Minister said that he is opposed to the extension of the milk quota to 2014. I hope that he will understand that for those farmers who have quota, which include those who are still actively engaged in dairy farming and some who own quota for which they paid but who lease it out as part of their income, there is a need, as with any other business, to be able to plan for the medium and long term. I hope that the hon. Gentleman will qualify his remarks by saying, if he is opposed to 2014, what he thinks is the optimum time. Farmers, particularly in the dairy sector, are very concerned, and deserve clarification. If I catch your eye, Mr. Deputy Speaker, I may say more about that.

Photo of Elliot Morley Elliot Morley Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs

The Government have made it clear many times that quota should be phased out. That can come as no surprise to the dairy sector. The hon. Lady will know that there are mixed opinions in that sector, but many people think that quotas have stultified its development by acting as a brake on innovation and expansion, and they would welcome their demise. I accept that people have invested in milk quota and we would not expect to see them end overnight. I agree that a reasonable date should be set which we can work towards to phase out quota. Although we think that the proposed dates are too far away, there are also proposals gradually to increase the amount of quota for each member state. That will liberalise the regime to an extent. We think that 2006 would be a more realistic date for the phase out of milk quotas.

Photo of Roger Williams Roger Williams Liberal Democrat, Brecon and Radnorshire

With a reduction in the intervention price for dairy products, the value of quota could reduce to almost zero. The National Farmers Union anticipates a fall of more than 30 per cent. in milk prices. With farmers finding it difficult to produce milk that covers their costs, will any dairy farmers be left in Britain?

Photo of Elliot Morley Elliot Morley Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs

I believe that there will be because the dairy sector can adjust to the changes. Of course there are structural problems in the sector. My noble Friend Lord Whitty recently chaired the meetings of the food chain initiative. It has addressed some of the sector's problems, such as its seasonality and the slump in prices because of that. It has also considered ways to even out production and the low value products that milk goes into.

The issues can be addressed. I accept what the hon. Gentleman says about the value of milk quota. It is likely to fall. There is the added complication of the recent European Court ruling on non-producing holders of milk quota. They will have to divest themselves of it, which means that a lot of quota will come on to the market, and that is bound to influence prices. Having said that, there are complicated proposals in the mid-term review on calculating entitlement in terms of what quota someone may hold in future. That is unsatisfactory because it encourages people to accumulate quota on the basis that that might influence the support payments on the quota that they hold. In turn, that might remove quota from the market, especially in terms of lease availability. So there are all sorts of complications in relation to quota. That illustrates why we would be better off by moving away from them. We find it impossible to understand the logic that has driven the Commission to propose a further two years of price cuts on milk and an extra seven years of quotas. That is not appealing.

Those are the main criticisms, but we must not lose sight of the positive elements of the Commission's proposals, in particular the benefits of decoupling. That is an important gain and certainly one worth having. I also accept that much technical work has to be done on the proposals before the Council is in a position to assess the details of what they mean to our farmers. However, the reforms are crucial to our ability to deliver viable and sustainable farming in Europe and to withstand increasing competition from the rest of the world. That is why we need to get on with the negotiations, to reach an agreement and to address the details of the proposals. We will robustly make the case for UK farmers when the proposals are clearly against our national interest and we will argue for changes to be made. We will also look closely at how some of them are meant to work, including the problems inherent in the details and the possible bureaucracy that they might create. We will, of course, listen to the agricultural sector and other stakeholders, and will listen closely to hon. Members who wish to comment on such issues, especially in relation to their constituents. The CAP reforms are long overdue, but they are going in the right direction, as they put farming on a much more sustainable footing.

Photo of John Hayes John Hayes Shadow Minister (Environment, Food and Rural Affairs) 7:15 pm, 12th February 2003

I beg to move, To leave out from "Policy" in line 5 to the end of the Question, and to add instead thereof:

"recognises the need for a substantial recovery in farm incomes from the present low base to a level at which UK farmers are earning sustainable and competitive returns;
supports the objective of achieving prosperous rural areas, an enhanced natural environment and provision of high-quality, safe food and high animal welfare standards;
welcomes the European Commission's appreciation of the need to reform the Common Agricultural Policy, which absorbs half the EU budget, and recalls Government failures in this regard;
further welcomes the proposals to decouple payments from production, and for further market reform;
but has deep reservations about the effects of the current proposals on UK agriculture and recognises that the British people are increasingly hostile to a system that penalises both UK taxpayers and farmers;
believes that dairy regime reform should provide greater opportunity for the UK dairy sector to add value to their product through producer-based processing;
notes that the Commission proposals involve a potentially unfair mechanism for transferring funds towards agri-environmental and rural development measures;
and urges the Government to use all the means at its disposal to ensure that these proposals are redrafted in the interests of UK farmers and consumers."

Calls for common agricultural policy reform have been the habit of politicians in the United Kingdom and across Europe as long as the common agricultural policy has existed. Crises, watersheds and turning points have come and gone, so the House will understand my scepticism about the likelihood or even possibility of reforming the CAP in our nation's farming interests. Similar scepticism among farmers is not just the product of realism about Machiavellian Euro politics, but is spurred by the demoralisation of British agriculture in recent years. Although it is understandable for reasons of political expediency, it is wholly unacceptable that the Government failed to mention in their motion the desperate state of UK farming. Our amendment properly sets that out, thus putting the debate in its proper context.

As the whole House knows, British agriculture is in crisis by any measure. Farm incomes are about a third below their 1995 level, a fall greater than that in any other European country. In 2001–02, input costs rose by 1.8 per cent. in Britain, whereas they have fallen in Europe as a whole. The number of people leaving the industry continues to grow, bank borrowing is still increasing, and in most sectors farm-gate prices are insufficient to give farmers a real chance of earning a decent living. British agriculture is in a desperate state, but things are different for our so-called partners in continental Europe—the kind of partners who are ever ready to take commercial advantage of catastrophes such as BSE or foot and mouth, and conspire to frustrate the Government's half-hearted efforts to protect our national interests. Conservatives recognise that there can be no viable British countryside without viable British agriculture.

It is unclear whether the Government share our view, but it is certain that most Europeans are not faintly interested in the survival of British farming. It is clear, however, that the CAP has encouraged highly intensive production-driven agriculture, as the Minister acknowledged in his opening remarks. Over-production, for example in the beef and dairy sectors, and price distortions have led to a perverse agricultural marketplace.

Photo of Mr Roy Beggs Mr Roy Beggs UUP, East Antrim

Does the hon. Gentleman acknowledge that to operate a viable farm business such as an intensive farm business in Northern Ireland and other parts of the United Kingdom, many small farmers have land on conacre year on year? It is not clear where the benefit of the new change will be felt. Will farmers benefit from the land that they own or rent on conacre, or will the benefit go to their landlord?

Photo of John Hayes John Hayes Shadow Minister (Environment, Food and Rural Affairs)

There are genuine issues about whether the payments will go to the owner of the land or the farmer, and the hon. Gentleman is right to raise them. Andrew George made a good, fair point about tenant farmers, which the Government need to address. We expect purposeful and robust answers from the Minister to clarify the sensible point made by Mr. Beggs.

Photo of Elliot Morley Elliot Morley Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs

It may help the House if I answer straight away. Under the proposals, the payments go to the farmer, whether he is a tenant or landowner. If he is a tenant, he has the right to payment if he moves to new land, which gives him some protection.

Photo of John Hayes John Hayes Shadow Minister (Environment, Food and Rural Affairs)

That is, of course, right, but there are often difficulties in the relationship between owner and farmer, and they need to be ironed out. If payments go to the farmer, they can be moved around as the Minister suggests, but we need clarity about the different responsibilities and opportunities that exist for owners and farmers of land. I think that that is the point that the hon. Member for East Antrim was making, and it is a good and solid point.

Several hon. Members:


Photo of John Hayes John Hayes Shadow Minister (Environment, Food and Rural Affairs)

I must now make some progress, but I shall give way again later if I have time to do so.

Farmers, often against their instincts, have pursued a regime that has resulted in a distorted market with an increased propensity for disasters, all at enormous cost to the British taxpayer. No one can blame farmers for dancing to a tune composed by others, nor honestly claim that the process has been led by consumer demand. Through its payment structure, the CAP has stimulated larger farms in the UK. I am mindful of the large, efficient arable farms in the east of England, many of which are situated in my constituency. They are good businesses run by good people, so it is a bitter irony that the Commission's modulation proposals will penalise large, efficient farms—in other words, British agriculture, in which farm size is larger than the European average.

Photo of Roger Williams Roger Williams Liberal Democrat, Brecon and Radnorshire

Last night, the National Farmers Union told us that the proposals abolished the Euro300,000 ceiling, yet the Minister said that there was some disincentive in respect of the efficient holdings that the hon. Gentleman is talking about.

Photo of John Hayes John Hayes Shadow Minister (Environment, Food and Rural Affairs)

I can clarify that issue for the hon. Gentleman. That ceiling or cap existed in the proposals issued in July 2002. It was dropped in the proposals published at the beginning of this year, as I am sure the Minister will confirm by nodding, but he is right that there is concern that some member states want to reintroduce the ceiling. There is enthusiasm among some continental Europeans for reintroducing the cap, which would do even more damage to large farms, as he suggests.

It is clear that British farmers who happen to be large farmers will lose almost 20 per cent. of their income as a result of the direct payments. Worse still, it is true that some people want to reintroduce the cap to which Mr. Williams referred. In general, there is a strong case for allocating single payments to the farmer. As the hon. Member for East Antrim suggested, the complex issue of transfer of entitlements will need to be resolved where landlords and tenants are involved. As I said, it is important for the Government to develop a scheme that fairly reflects the legitimate interests of the relevant parties.

Photo of Mr Roy Beggs Mr Roy Beggs UUP, East Antrim

Will the hon. Gentleman allow me to intervene again?

Photo of John Hayes John Hayes Shadow Minister (Environment, Food and Rural Affairs)

Yes, but I want to make progress as this is a short debate. If I may, I shall ask the hon. Gentleman to keep his remarks fairly short. I shall then try to deal with them.

Photo of Mr Roy Beggs Mr Roy Beggs UUP, East Antrim

I thank the hon. Gentleman for giving way again. We have an entirely different system in Northern Ireland. Tenant farmers have been mentioned and the situation is relatively clear in that respect. However, most farmers in Northern Ireland own freeholds and rent land from other farmers who are not active. That is where clear guidance has to be given.

Photo of John Hayes John Hayes Shadow Minister (Environment, Food and Rural Affairs)

I would never attempt to second-guess the hon. Gentleman's legendary expertise in all matters Northern Irish, but I heard what he said, as I am sure the Minister did. Clearly, those issues will need to be taken into account when such matters are dealt with in further European negotiations.

The current reform of the CAP is motivated not by a desire to address the sort of problems that have already been mentioned in this debate, but by the realisation that maintenance of the CAP in its current form is incompatible with enlargement. For that reason, in addition to modulation, we face decoupling—a cocktail that, in its proposed form, is likely to be highly disadvantageous to British farming.

There is a good argument for recognising the special role that farmers play as custodians of the countryside through agri-environmental payments, but such payments must be equitable, enforceable and cost-neutral. To ensure that they are equitable, a baseline must be established that recognises past good practice and ensures that British farming is not measured merely by the unrepresentative post-BSE and foot-and-mouth years.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk

My hon. Friend mentioned baselines. Foot and mouth and BSE are two diseases, but my constituents suffered very heavily as a result of classical swine fever. Is it not wrong that farmers who suffer as a result of such diseases and therefore have very atypical years should be penalised because those years are treated as a baseline?

Photo of John Hayes John Hayes Shadow Minister (Environment, Food and Rural Affairs)

My hon. Friend is absolutely right. I am familiar with the problems of that kind that have been suffered by pig farmers in Norfolk. The payment will be calculated on the basis of the physical facts of successful claims made over three years: 2000, 2001 and 2002. One or more of those years can be dropped if it is felt to be unrepresentative or exceptional, but the point is that all those years were exceptionally bad for British farming. The baseline that will be constructed will therefore be implicitly unfair to British agriculture, and my hon. Friend is right to highlight that point.

Measuring the environmental impact and the social and cultural importance of farming requires a balance sheet for agriculture. I recommend to the House and to the nation Lincolnshire's Charter for Agriculture and Horticulture, which provides an excellent model.

Photo of John Hayes John Hayes Shadow Minister (Environment, Food and Rural Affairs)

My hon. Friend has obviously read it. It suggests such a calculation of the true value of food farming and horticulture, leading to an annual statement. To be respected, and therefore enforceable, any system must be founded on such a degree of empiricism. The criteria against which payments are made should be fairly scrutinised and cost-neutral to the industry. Farmers have faced a bureaucratic burden that has increased overheads at a time when incomes are falling. But if the integrated admission and control scheme—IACS—is complicated, imagine what a multi-faceted, multi-tiered environmentally friendly payment system might mean in terms of paperwork. Simplicity is crucial. A straightforward system of single payments based on a clearly defined, understandable set of criteria is the best means of re-establishing a demoralised industry's faith in the new regime.

Farming's problems are typified by the plight of the dairy sector. It is almost impossible to make money producing raw milk when farm-gate prices barely exceed the cost of production. The only way in which a viable future for the British dairy industry can be established is by creating a climate in which farmers can add value to their base product. This means collaborative, producer-based processing. The Minister—the whole House—will know that Britain is unusual in terms of the concentration of processing capacity outside the industry. That means that the dairy sector is particularly vulnerable to price pressures, and this must be addressed in the reform of the regime.

Dairy farmers also need action on bovine tuberculosis. The National Farmers Union said:

"The disease is completely out of control and the government have no policy."

In 2002, 16,066 new cases were confirmed, and if we wait until the end of the trials, the whole of the west country will be a hot spot. It is well established that badgers are one—I say only one—of the various causes of the spread of TB, yet the badgers culled so far have been killed to no effect. What vaccination measures are the Government considering? How quickly can reliable tests using the latest science be put in place? How bad will the crisis be allowed to get—with farmers suffering the horror of TB outbreaks and ever more taxpayers' money being spent—before the Government consider a limited cull of badgers outside the trial areas, when there is clear evidence of the infection being passed between species?

Photo of Bill Wiggin Bill Wiggin Conservative, Leominster

The Minister will be aware of how concerned I have been about the crisis facing cattle owners in the United Kingdom. There are several problems with the current situation. The Krebs trials, as they are known, will probably not produce a conclusive result. The huge amount spent on research into tuberculosis is spent mainly on human tuberculosis. Does my hon. Friend agree that the real problem is that a commercially viable vaccine might not be found? If one is found, the Government must insist that it is produced, or in some way make it economically viable to produce. I hope that my hon. Friend will continue to pay a great deal of attention to this crisis, which is having a big impact on dairy and beef producers across the United Kingdom.

Photo of John Hayes John Hayes Shadow Minister (Environment, Food and Rural Affairs)

I am tempted to say that that is why I included the issue in my speech. My hon. Friend is absolutely right to say that there is a profound problem. He is also right about vaccinations, which is why I challenged the Minister on that matter. I know that the Select Committee will look at the question in some detail. My hon. Friend is a notable—some would say inspirational—member of that Committee, and he will bring the diligence that he has already shown in defending his farmers over this issue to the tasks that lie ahead. [Interruption.] I was pausing for breath as I thought about those dreadful problems.

Other important questions deserve equally clear answers. It is proposed to reduce the single payment between 2006 and 2012. As the Under-Secretary knows, the UK is one of the few member states that operate a voluntary modulation scheme to fund rural development. Does he agree that, to be fair to UK farmers, the current rates must not increase unless and until there is a parity of rates in a compulsory modulation scheme throughout the EU?

It is proposed to use a proportion of the amount arising from payment cuts to make budget savings that are destined for future market needs. Will the Under-Secretary guarantee that any such digression must be at the flat rate, with no de minimis exemption for small farms in the EU? Farmers rightly highlight their anxiety that the UK will suffer most from modulation and digression proposals because it has relatively large farms.

It is proposed to establish compulsory, permanent set-aside. Does the Under-Secretary realise that that is incoherent and unnecessary, and should be fought? Again, farmers have stated their opposition to the proposal and to the proposed ban on growing energy crops on set-aside land. The Chirac-Schröder agreement on CAP finance in October means that little money will be left for rural development. How will the farm advisory service and related measures be funded?

The British people have had enough of the wasteful, bureaucratic, inequitable common agricultural policy. Despite their rhetoric, the Government have not even taken up CAP reform where the Conservatives left off. The Under-Secretary looks sceptical, but I remind him that when in government, our Ministers produced "The Case for Radical Reform" of the CAP. It received little support from the then Opposition, of whose agriculture team the Under-Secretary, for whom I have a great deal of respect, was a prominent member. The Conservatives were determined to grasp the nettle, but the current Administration do not share that determination.

The motion simply expresses the Under-Secretary's regrets. He talked about taking robust action to defend the British position and highlighting some of the issues that hon. Members raised. However, the motion contains no call to action or fighting talk. Regrets come cheap and hon. Members will share my doubts about how hard he will fight and where he will draw the line on behalf of our farmers.

The tortuous negotiations that surround the reform are emblematic of Euro-politics. They are never straightforward, always esoteric and seldom in Britain's interests. Britons see their farmers facing ruin while they subsidise tobacco growers, non-existent olive farmers and bloated Brussels bureaucrats. The British people pay more than £1.5 billion a year for the privilege of being part of that club.

Photo of John Hayes John Hayes Shadow Minister (Environment, Food and Rural Affairs)

I would not put it in such lurid terms because I always speak with moderation. However, the British people's total contribution in 2000 was £1.8 billion and half the EU's budget goes on the CAP. In Blair's Britain, we all face the awful prospect of being robbed, but choosing to be robbed is extraordinary. Those whose nights are plagued by the European dream justify it on the basis that there is no alternative, and that some mythical, predetermined course of history makes closer and more expensive involvement in a failed collective policy for European agriculture inevitable. We are also told that our national freedom is irretrievable and that we have travelled too far down the road to national oblivion to turn back.

I do not share that defeatist mentality, and neither do most Britons. I was about to say that I did not share that Vichy mentality, but I did not want to make faint hearts flutter. The CAP must be radically reformed or die. This is the last chance for reform. Surely the Minister will not return to the House with a half-hearted package that will disappoint both Members and our farming industry, and tell us that further reform is on the cards. We have heard that so often before.

I am proud of British food and British farming. Agriculture anchors rural communities to the land. The availability of agricultural employment gives opportunities to young people and manual workers who would otherwise be excluded from the rural economy and from the countryside itself. But, even more than that, agriculture is at the heart of our consciousness and culture. It assures the continuity of our agrarian history and binds man to nature.

British farmers deserve better than these proposals, and Britain's countryside deserves a fair deal. The Government must fight for a decent future for British farming—or step aside and allow those of us who will fight to take on the people and policies that threaten rural Britain.

Viable British agriculture, policies that are accountable to the British people, and a living, working countryside—those are our goals; that is our mission. Conservatives will never be deterred from battling for British farming.

Photo of Anthony D Wright Anthony D Wright Labour, Great Yarmouth 7:36 pm, 12th February 2003

As many Members will know, Great Yarmouth is one of the UK's major tourist resorts, but a large proportion is rural and there are many arable farmers. Over the past few years, one of my constituents, Richard Hirst, has raised several issues with me, one being the mid-term review of the common agricultural policy.

Mr. Hirst tells me that, while he does not disagree with the principle of decoupling payments from production, the current proposals will have a severe effect on farmers like him who have not used their entire farms to grow eligible crops but have engaged in a sensible rotation including cereals, sugar beet, potatoes, vining peas and other vegetable crops. Over the past three years about 35 per cent. of the cropping area of his farm has been eligible for area aid payments, and about 6 per cent. for set-aside payments.

The new proposals suggest a single payment—to which Mr. Hirst does not object—based on the average claim for area aid between 2000 and 2002.That means that he will receive a much smaller payment than neighbours who have made much higher claims in the past. He will also have to set aside 10 per cent. of the cropped area to qualify for the payment, with no restrictions on the cropping that he can undertake. That means that a neighbour could receive a much higher payment, and then start introducing other crops and offer his produce for sale for a lower price than Mr. Hirst can offer, in the knowledge that he is receiving a greater subsidy per hectare than Mr. Hirst can receive. Mr. Hirst will also have to set aside more land than he sets aside now, which will also reduce his income significantly.

At present, Mr. Hirst is trying to do all the things that DEFRA suggests. He is growing crops for specific markets, mostly with contracts with processors or as near to the end user as he can get. He has land in countryside stewardship, and is about to undertake a study with Birds Eye to look at the possibility of producing crops in a sustainable manner. Because he is doing all that, he will be severely penalised—to such an extent that he suggests it might be better for him to give up farming altogether.

Mr. Hirst has put to me two options that he believes may mitigate some of the proposals. If the Minister cannot deal with them now, perhaps he will write to me. The first suggestion is that payments should be based on all eligible land, not just that claimed for arable area payments in the previous two years. The set-aside levels would again be based on those of the previous two years. The second is that, if the proposals are not changed, there should be a restriction on cropping preventing farms from undercutting those who grow alternative crops.

I would appreciate a reply from the Minister. I am sure that farmers in my constituency appreciate the work that he is trying to do for farmers, not just in my constituency but in the UK as a whole.

Photo of Andrew George Andrew George Shadow Minister (Environment, Food and Rural Affairs), Shadow Minister (Environment, Food and Rural Affairs) 7:39 pm, 12th February 2003

I appreciate the Government responding to the European Scrutiny Committee by enabling this important debate on the future of agriculture in Britain, so that the House can give the Government a mandate to bat hard in Europe on behalf of our agriculture. It is clear that the proposals for the mid-term review, although welcome to some extent, do not go far enough. In many people's eyes they constitute a timid fudge, compared with what we should be seeking to secure. It is also clear that the Government need to form alliances in the manner that certain other countries have publicly sought to do, in order to secure the better outcome for British farmers that Mr. Wright spoke of a moment ago when discussing one of his constituents.

Although the documents before us are somewhat technical and complicated, and use language that will seem opaque to those who are not linked to the farming industry, they relate to the heart of the British people's relationship with the land, and to their psyche. To some extent, there still exists in the rural community a whimsical romanticism and a sense of utopia: a sense of man in close relationship with, and being challenged by, nature; a sense of the connection between man and his environment. [Interruption.] I mean "man" in the general sense—mankind. Indeed, this issue is fundamental to the way in which we look at agriculture in this country; it is at the heart of our identity.

It is important to reflect on the fact that, as any agricultural economist knows, it is inevitable that farms get larger over time. Over the past two centuries, concerns have been raised and protests made about the drift towards ever-larger farms. Of course, as people spend less of their disposable income on food, it is inevitable that farmers need to make more money from their holdings if they are to retain the same living standards as the rest of the population. The inescapable result is that farms become ever larger, which is why it is important that the Government intervene. If we are to retain a connection between rural society, the countryside and the primary industry that occupies most of that landscape, and if we are to prevent the countryside from being turned into prairie and ranch, in my view and the view of many who represent rural constituencies it is important that appropriate interventions be made to ensure that small family farms have a future.

Despite what the Minister may say about the need to reflect and protect the interests of larger farms, and about the impact of these proposals on such farms, the fact is that in a year when 15,000 farmers went out of business—the largest number who have done so since the second world war—there is serious concern that that process is likely to accelerate over time under the current agricultural structure. Indeed, certain aspects of these proposals are liable further to accelerate that process, which is why many people are concerned about them.

There is cross-party consensus that the proposals on decoupling are welcome: to break away from production payments and to move towards single payments is essential. Will the Minister tell us how long taxpayers can be expected to tolerate payments to farmers for, in effect, doing nothing? I realise that there are cross-compliance issues, but farmers will be paid merely for being farmers. The European Scrutiny Committee felt that the point should be covered in the debate.

The Government must have made an assessment of how long the current arrangement is likely to last, so it would be useful to know their view. UK society is largely urban, so the majority of taxpayers are town dwellers. They will find it less and less credible to pay farmers merely to be farmers. The Government should link management contracts to those payments so that they can be used to deliver the public, animal welfare, environmental and other outcomes that, for example, the Government seek to achieve through the creation of environmentally sensitive areas and other types of scheme. The public would then see genuine benefits from payments to farmers.

The Minister drew attention to the significant unfairness in the system of modulated payments. It is fundamentally wrong that such payments should go to Brussels and be distributed through Brussels rather than a UK authority. I know that my colleague in the Scottish Executive, the Minister for Environment and Rural Development, has joined the Secretary of State for Environment, Food and Rural Affairs in making strong representations to other European leaders and to the Commission. The arrangement is wrong. British farmers make significant payments to the central European fund but receive back only a fraction of them in the form of rural development and agri-environment scheme funds. British agriculture quite rightly protests that it does not operate on a level playing field in relation to the rest of the EU.

Photo of John Hayes John Hayes Shadow Minister (Environment, Food and Rural Affairs)

The hon. Gentleman makes an important point. There will be inequities not only within countries but between them. Europe could absorb money from our farmers and our industry and then reallocate it to other countries. The money will be lost not only to farming but to the nation. The hon. Gentleman's point is worth amplifying.

Photo of Andrew George Andrew George Shadow Minister (Environment, Food and Rural Affairs), Shadow Minister (Environment, Food and Rural Affairs)

I am grateful to the hon. Gentleman for his support. I urge the Minister to tell his European counterparts that we require national modulation schemes whereby funds are disbursed in the country in which they are raised. Instead of taking a uniform approach on the exemptions—the floors and ceilings—that apply, it would be far better to have variations that reflect the structure of farm-holding in each EU state. We need genuinely to devolve some of those decisions, especially on the management of the system. I urge the Minister to pursue that point in his negotiations.

Photo of Angela Browning Angela Browning Vice-Chair, Conservative Party

I do not disagree with the hon. Gentleman about looking at the differences, but as a Liberal Democrat spokesman will he please understand that a single market—for which his party is constantly pressing—means uniformity? That makes it so much harder to achieve any distinction between different markets, methods of farming and sizes of farms in EU countries.

Photo of Andrew George Andrew George Shadow Minister (Environment, Food and Rural Affairs), Shadow Minister (Environment, Food and Rural Affairs)

I am grateful for the hon. Lady's intervention but her party took us into the single market and encouraged us to take the line of bland uniformity that Liberal Democrats do not accept. As with fishing and many other policy areas, of course we need to agree fundamental reforms at the centre, but Liberal Democrats would like to see devolution of the responsibility for the delivery of those policies. This may come as news to the hon. Lady, but our policy has remained consistent. We cannot take a uniform approach to agriculture, fishing and other industries across the whole of Europe and say that it must apply however difficult the circumstances. We must have a policy that reflects agreement on fundamental principles, then applies them appropriately in a devolved way in each nation state.

As to the dairy regime, if the Government favour—of the four options available in the mid-term review—a rapid phasing out of quotas by 2006, in the Commission's own estimate that would result in the price of raw milk at the farm gate falling by 38.5 per cent. on the basis of the 2001 benchmark. Dairy farms in this country are considerably larger and much more efficient than in many other countries, but they are barely able to make a living from current milk prices. It is important that the Minister addresses the likely impact of a further 38.5 per cent. price reduction. It could bring a ranching of the UK dairy sector, with much larger units divorced from farming and the local community in a way that has not been seen before. Having broken up Milk Marque, which we argued was inappropriate, perhaps the Government need to grab the bull by the horns and address farm gate prices. It is clear that dairy farmers do not receive a fair income that meets their production costs.

Photo of David Heath David Heath Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Home Affairs)

That is a desperately important point for dairy farmers, in terms of the asset value of quota and the revenue stream from milk prices, which are still far too low. Does my hon. Friend agree that one problem is the oligopoly in the supermarket sector, which will get worse if Safeway is taken over by one of the other big players? Does he agree that Safeway's acquisition needs to be put to the Competition Commission straight away?

Photo of Andrew George Andrew George Shadow Minister (Environment, Food and Rural Affairs), Shadow Minister (Environment, Food and Rural Affairs)

I entirely agree. There is no point pussyfooting around. It is essential that the Government seek to intervene, make their view clear and ensure that the matter is referred to the Competition Competition. Whichever of the interested parties goes forward with the purchase of Safeway, that acquisition is likely to have a detrimental effect on farmers and farm-gate prices.

My concern is that the Government are lurching forward piecemeal, with no real vision or passion for farming. They are timid and uncertain in negotiation and insufficiently bold and brave to make clear beforehand how they will deliver a clear vision for the future of agriculture in this country. It is not that I believe that the Secretary of State or the Minister lack commitment or do not have a passion for farming, but the real Secretary of State for agriculture is the person appointed to the post of rural tsar by the Prime MinisterLord Haskins. The Minister and the Secretary of State are merely the managers of the Department and the real vision comes from Lord Haskins, who was recently dubbed the villain of the countryside by Country Life magazine, perhaps appropriately.

We have serious concerns about the proposals in the mid-term review. It is an inadequate and timid fudge. UK farmers have lost out and will do so further unless we have an even playing field, especially in relation to modulation. We are concerned about the fundamental divorce of agriculture from the rural community if we let reforms go ahead that would result in the prairie and the ranch. Many of us fear the ranching of the British countryside.

We have not been given enough time to debate these important changes, which are fundamental to the future of our rural communities. Matters need to be resolved by June, and I urge the Government to give us more time to debate the issues before the Council of Ministers meets to resolve them.

Photo of Angela Browning Angela Browning Vice-Chair, Conservative Party 7:57 pm, 12th February 2003

I wish to add my voice to the others tonight that have urged the Minister to set out a clear path for the future of UK agriculture. It is not clear what the Department's view is when it enters negotiations on the CAP reforms. The Minister touched briefly on some aspects of agriculture, especially the dairy sector, to which I shall return, but farms are businesses and they have been through a horrendous time, what with BSE, foot and mouth and other animal diseases.

I am concerned about planning for the future and how we can sustain the family farm. We need to address the shape of agriculture in the future. Ranching is a concern, but east and mid-Devon do not have much arable farming, because the good grass that we grow is well suited to livestock farming. I would hate to think that the countryside of Devon would be overtaken by conifers or some such commodity. As much as possible, we should provide the food that we eat ourselves, and that must include meat as well as grain.

The Department's latest figures show that farm incomes have risen by 14 per cent. in real terms in 2001, although that is still 62 per cent. below the 1995 figures. Worryingly, that increase depends on £140 million of net production subsidy, with only an extra £20 million coming from the marketplace. Whatever package of reform the Government produce, I hope that they will bear in mind the fact that although the dairy sector provides 95 per cent. of our own liquid milk production, it loses out time and again in the production of value-added dairy products because we suck in masses of imports.

Photo of Elliot Morley Elliot Morley Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs

The hon. Lady has correctly identified one of the problems with milk, and I do not disagree with her. On prices and incomes, she is right that incomes rose by nearly 15 per cent. last year. That was the second successive year in which farm incomes rose. I do not want to be complacent about the problems facing the farming sector, but the hon. Lady and Mr. Hayes both used 1995 as the baseline year. That year was very unusual, in that price cuts in arable aid meant that compensation was paid for price falls that did not take place. That element of double subsidy in 1995 means that it is a very artificial base year to use as a comparison for price falls.

Photo of Angela Browning Angela Browning Vice-Chair, Conservative Party

I am quoting figures provided to south-west MPs by the south-west branch of the National Farmers Union. The information provided is excellent, and is said to be "according to DEFRA". I am therefore putting into the public domain information from the Minister's own Department.

The farm business survey shows that only two sectors are in decline. Dairy is one, and it is down 21 per cent. The situation for the dairy farm is dire. In my part of Devon, dairy farms are mainly family farms. I intervened on the Minister earlier to refer to a couple with bought-in quota. They still own that quota, because they hoped that their son would keep the farm on. He has now gone to live abroad. That is typical of many families in Devon, as the next generation of people look at what their parents went through. They consider the future of farming, and decide that it is not for them. That will have a huge impact on the shape of the countryside, its environment, and our ability to produce our food.

I have flagged up to the Secretary of State, in response to recent Government papers on agriculture, that there has to be competition and that we need good quality food. We also need to know about food's production standards and origins. However, countries in the single market covered by the CAP should not sign up to policies that would lead to their ability to produce the basic commodity and the finished product being leached away. That would mean that the UK would suck in more of those imports, with all the value added.

The Government's plan for CAP reform must set out where we can diversify, add value, and make sure that there is sustainability. Farming businesses need to be able to plan. The Minister will be amazed to learn that I am a vice-president of the Devon young farmers club, some of whom are not so young. When I talk to farmers, I am encouraged by the enthusiasm of many young people. They know that they will have to do things differently, but they want to know where the industry is going. They will give up if the direction and planning are not there.

My plea to the Minister is as follows: will he ensure that the country and the House know what the national plan is? When the Government negotiate at the heart of Europe, we will then have an idea of what the future will be for farmers and for the production of own food.

Photo of David Burnside David Burnside UUP, South Antrim 8:03 pm, 12th February 2003

I start by referring to the Register of Members' Interests, in which I make it clear that I receive an annual rent from my home farm.

Photo of Mr Roy Beggs Mr Roy Beggs UUP, East Antrim

I thank my hon. Friend, but I want to take this opportunity to declare my own interest. Although I will not have time to make a speech, I have made a number of interventions, so I want to draw the attention of hon. Members to my entry in the register.

Photo of David Burnside David Burnside UUP, South Antrim

If we do not look at CAP reform in a much more radical way, we will encounter many problems. We joined the common market in 1970, and the two biggest losers have been the farming industry and the fishing industry.

I am the son of a farmer, and I remember that the yield on barley was about 40 cwt an acre 20 years ago. Farmers received £120 a tonne in those days, without any subsidy. They now get up to 50 or 55 cwt an acre, and receive about £60 to £70 a tonne, plus a £40 top-up. They cannot cover their costs. At present, milk hovers at around 17p, 18p or 19p, but it costs 17p to produce.

We have had the wettest winter in history, which has destroyed hay and silage production and increased the cost of feeding during the wet period. I have asked the Secretary of State for Environment, Food and Rural Affairs whether she will press for wet weather aid, but I have had no response. Farmers deserve special wet weather aid.

International comparisons are always a bit superficial, and I am sure that the Minister will have read the report produced by the Select Committee on Environment, Food and Rural Affairs after our visit to New Zealand, which is often held up as the glowing example of freeing the market. Of course that market was freed after a currency problem in the early 1980s; people did not say, "We must free farming". The currency market created a reduction in subsidises across the board in a country with a very different climate and scale of farming.

The Ulster Farmers Union makes representations to me as the Ulster Unionist farming spokesman, and it is not happy with the deal. We will lose out because of the £340 million reduction between 2006 and 2012. The system will still be semi-subsidised. Farming is in a dreadful state. The pig industry in the United Kingdom is in an absolutely dreadful state. Dairy farmers cannot cover their costs, and no one can make money from barley.

Fudging around with this type of French-German deal on CAP reform is not in the interests of British farmers. Somewhere along the line, we will have to take hold of Europe by the neck, rather than being at its heart. We will have to take hold of the Commission and get a radical reform in the EU, because British farmers can be efficient.

We have to alter the scale of farming. I am afraid that we in Northern Ireland have to learn that the 60-acre has to become the 200-acre farm; the 80-cow dairy herd has to become the 250-cow herd—the minimum herd size in New Zealand—with a man and his wife, normally, farming.

Labour has declined on farms. On my father's family farm, we employed six to seven farm labourers—farm workers, as they are now called—20 years ago. In Northern Ireland, 32,000 farms are owned by 22,000 farmers, but there are now only 2,200 farm workers. In New Zealand, farmers can make money for 10 years, sell up and go on holiday, but it is difficult to persuade a son or daughter that it is a good idea to go into farming.

Farming is a very serious state, and I am afraid that there are not enough votes in fishing and farming for this Government. That is the problem, but it is time we had a radical review of the whole system of support because it is damaging farming. We are just surviving at present. I hope that the disease problems—obviously, foot and mouth and the other diseases that have had a short-term effect on us—will not come back. We are just about hitting our production levels at present, but those in some sectors are going out of business. We need a radical reform of the CAP, not the tweaking at the fringes that is currently being done.

Photo of Bill Wiggin Bill Wiggin Conservative, Leominster 8:09 pm, 12th February 2003

I want to touch on modulation and digressivity. Modulation progressively reduces the rate at which subsidies are paid, and digressivity involves progressively increasing the rate at which modulation is applied to farmers. Comparing the figures for other countries in the EU with the equivalent figures in the United Kingdom shows how disadvantaged this country is, especially given the combined affects of modulation and digressivity—it is not an easy word for me to say.

If we consider the bands in the proposals, we see that only 4 per cent. of UK farms fall into the band of farms that currently receive less than Euro5,000 a year in payments—which is approximately £3,300. Farms in that group would not lose out to modulation. A total of 41 per cent. of UK farms come into the Euro5,000 to Euro50,000 band, and a total of 55 per cent. of UK farms are in the overall group receiving more than Euro5,000. By comparison, France receives Euro5.82 billion in direct payments, compared with the UK's Euro3.2 billion. France will do far better than the UK. The figures in the various bands show that France has 7 per cent. in the lowest band, 72 per cent. in the Euro5,000 to Euro50,000 band, but only 21 per cent.—as compared with the UK's 55 per cent.—in the overall group receiving more than Euro5,000. That is where the cuts will be most swingeing. The average figures for current European Union member countries show 18 per cent. in the bottom band, 57 per cent. in the next band and only 25 per cent. in the overall top group, compared with our 55 per cent. That will make a huge difference.

The milk quota regime is obstructive and blocks development and expansion in the dairy industry. A Ministry of Agriculture, Fisheries and Food report in 1999 concluded that the quota system hampered efficiency and increased productivity. However, abolishing the regime overnight would not solve the problems. Abolishing the quota system would squeeze all small farms out of business, and small and medium-sized firms would find it increasingly difficult to sell into the bulk market. Individual farmers have little marketing strength. They need to form alliances to influence policy. In particular, investing in the production of their own milk, either individually or as part of a co-operative, would mean that they would have to have more control over the milk price and over the profits between farm gate and store.

When the proposals of the mid-term review were announced, the shadow Secretary of State, my hon. Friend Mr. Lidington, said rightly:

"The CAP is in need of reform. It is right to move to a world where farmers are free to respond to the demands of their customers rather than of governments."

He also said that, without profitable farming,

"both the wider rural economy and the landscape that we all cherish will suffer."

The importance of the figures that I read out at the beginning may have escaped the hon. Members who are sitting behind the Minister. Because of the nature and efficiency of UK farms, and because our farmers are the best in the world, we will now be penalised by the change in the regime. That is extremely serious.

I urge the Government to consider the wording of their own motion, which ends:

"'with the aim of allowing the present quota arrangements to run out after 2006'."

However, the Minister will know that those arrangements will go on to 2014.

That cannot be good for Britain. It is especially damaging for our dairy industry, which is the largest part of agricultural production in this country. It is beset by problems such as bovine tuberculosis. That is especially evil because some farmers are dependent on the compensation cheques that they received for having beasts destroyed, and there seems to be no light at the end of the tunnel. The Government have to address the issue of vaccination. I sincerely hope that the Minister will consider that before he comes before the Select Committee.

I urge the Government to reconsider the wording of their own motion and to ensure that it will be possible for quotas to end in 2006.

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. Before I call Mr. Williams, I ask him to respect the fact that the Minister requires five minutes to wind up the debate.

Photo of Roger Williams Roger Williams Liberal Democrat, Brecon and Radnorshire 8:14 pm, 12th February 2003

I declare my interests in agriculture that appear in the Register of Members' Interests.

I am pleased to take part in this debate. Agricultural reform and CAP reform have been a continuing process, albeit one that has not been radical enough or fast enough to benefit British consumers or farmers. We have seen the McSharry proposals and Agenda 2000, and now we are going on to decoupling. They have led progressively to less market distortion and have therefore been advantageous to agriculture.

Many farmers, especially those in the livestock sector, are desperate to escape from the morass of form filling and record keeping. One of them told me that, when the last census was conducted, the Government found that there were several hundred thousand people fewer in Britain than they thought. However, farmers have to keep a record of every single animal that is on their farm, the day it was born, the details of its sire and dam and so on.

Photo of Mr Matthew Green Mr Matthew Green Liberal Democrat, Ludlow

We know more about animals than people.

Photo of Roger Williams Roger Williams Liberal Democrat, Brecon and Radnorshire


Even the smallest livestock farmer will be involved in a number of support schemes that have different retention periods and retention dates. We need to move away from that, so that farmers can exploit the inherent entrepreneurship and business acumen that systems have so stifled over the past few years.

I want to say a few quick words about modulation. [Interruption.] I will not go into digressivity as that is a bit too complicated for this time of night. We must have a system of modulation that does Britain more justice. Under the present system, only 3.5 per cent. of the total of modulation money will be returned to Britain, and that has resulted from the reluctance of successive Governments to apply for money for rural development under the second pillar.

Although I commend the Minister for his bravura performances in the House, I must say that farmers are concerned about the weak role that the Secretary of State has played in looking after our interests in Brussels. For that reason, we will not be able to vote for the Government's motion.

Photo of Elliot Morley Elliot Morley Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs 8:16 pm, 12th February 2003

With the leave of the House, I note that we have heard contributions from Mr. Hayes, my hon. Friend Mr. Wright and the hon. Members for St. Ives (Andrew George), for South Antrim (David Burnside), for Tiverton and Honiton (Mrs. Browning), for Leominster (Mr. Wiggin) and for Brecon and Radnorshire (Mr. Williams).

I welcome the overall support that we have received for the main thrust of the Commission's proposals. Indeed, there has been almost unanimous agreement on where the weaknesses lie and where there is a need to press harder on the issue of modulation. It disadvantages UK farming and the UK system and, as the hon. Member for South Antrim rightly said, we need to drive forward the move for radical reforms. I am glad to say that my right hon. Friend the Secretary of State has been very much in the vanguard of arguing that case and linking it to the need for change in the Doha agreement.

I want to correct a couple of points that were made in the debate. The hon. Member for South Holland and The Deepings said that the reference years of 2000 to 2002 were poor years for UK farmers' incomes. That is true but, in future, the reference period that will count for future entitlement relates not to income but to the area farmed or the number of livestock held multiplied by the EU-wide rate. Therefore, UK farmers will not be disadvantaged in relation to net income, because the figure will be linked to what they receive under the EU schemes.

The hon. Member for St. Ives referred to the projected fall in milk prices of 38.5 per cent. Our economists do not accept that figure; we think that it will be much lower. The predominant effect will be on milk powder prices, which influence world prices.

Photo of John Hayes John Hayes Shadow Minister (Environment, Food and Rural Affairs)

Will the Minister answer one point about incomes? In response to a comment from my hon. Friend Mrs. Browning, he suggested that 1995 was an unrepresentative year for British farmers. However, he will know that in Finland, Greece, Italy, France, Germany, Austria and Belgium incomes are higher now than they were in 1995. That is the truth of the matter. It may be unrepresentative, but it is undeniable.

Photo of Elliot Morley Elliot Morley Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs

I would not deny that for a moment. One of the reasons for the increase in farm incomes in those countries is the fact that they are part of the euro. Perhaps this is a bid from a euro supporter in the Opposition for early entry into the euro. However, at the right increase, that would immediately add about 25 per cent. to the bottom line for British farmers. Perhaps he is making an early pitch for a new direction from the Conservative party; that is very interesting.

Important points were made about bovine tuberculosis. Although that subject falls slightly outside the terms of this debate, it is important. We are financing vaccine research, and I shall be only too pleased to give more details when I appear before the DEFRA Select Committee, which is quite rightly looking into the issue.

I turn to the questions about compulsory set-aside. The Government are not enthusiastic about compulsory set-aside. It has some nature conservation advantages, but with decoupling and cross compliance the arguments for it are quite weak. We shall take that into account in future discussions on the matter.

I was also pressed by Mrs. Browning to say what was the Government's vision. We set out a strategy for agriculture, following on from the farming and food commission. We have also implemented proposals to the England rural development programme, put forward a White Paper on rural development and set up rural forums, all matters which have been widely welcomed as showing the Government's commitment to the countryside.

In relation to what we have heard from the Opposition, I would repeat that the reason why we receive a pathetic 3.5 per cent of the rural development fund is that in the years of Conservative Governments it reflects a historic—

It being one and a half hours after the commencement of proceedings on the motion, Mr. Deputy Speaker put the Question, pursuant to Standing Order No. 16.

Question put, That the amendment be made:—

The House divided: Ayes 141, Noes 258.

Division number 90 Mid-Term Review of the Common Agricultural Policy

Aye: 141 MPs

No: 258 MPs

Ayes: A-Z by last name


Nos: A-Z by last name


Question accordingly negatived.

Main Question put:—

The House divided: Ayes 253, Noes 137.

Division number 91 Mid-Term Review of the Common Agricultural Policy

Aye: 253 MPs

No: 137 MPs

Ayes: A-Z by last name


Nos: A-Z by last name


Question accordingly agreed to.


That this House takes note of European Union documents No. 10879/02, Commission Communication on the Mid-Term Review of the Common Agricultural Policy, No. 10896/02, Commission working document containing a report on milk quotas and No. COM (03) 23, draft Council Regulations on the reform of the Common Agricultural Policy; supports the Government's objective, to work for a sustainable Common Agricultural Policy which contributes to prosperous rural areas, enhances the natural environment, and provides high-quality, safe food and high animal welfare standards, a fair and competitive environment for farmers and better value for money for taxpayers and consumers; welcomes the European Commission's proposals on reform of the Common Agricultural Policy, in particular the proposals to decouple payments from production, to move from production-linked subsidies to wider agri-environment and rural development measures, and for further market reform, while lessening the adverse impact on trading opportunities to less-developed countries; but regrets that the proposals in several areas did not go further, that they include a complex and potentially unfair mechanism for transferring funds towards agri-environment and rural development measures and, on dairy reform, that they do not meet the requirement of the Berlin agreement that there would be a mid-term review 'with the aim of allowing the present quota arrangements to run out after 2006'.