The recent European Council agreement included the setting of an EU level budget for Pillar 2 for seven years that was in line with existing expenditure. However, the allocation to each individual member state has yet to be agreed. Importantly, the agreement also included an option for member states voluntarily to modulate up to 20 per cent of funds from Pillar 1 to Pillar 2 with optional national co-financing. That provides UK administrations with continued flexibility to fund agri-environmental and other schemes.
My Lords, I thank the Minister for that Answer, but I remind him that the new CAP budget has to cover 25 countries as well as Bulgaria and Romania, as opposed to 15 countries previously. The possible move from subsidies for crop production to more environmentally beneficial farming is welcome. Is it not the case, however, that the amount of money for Pillar 2 is very insecure and that it is likely to be cut in order to keep up single farm payments? How much switch from crop subsidy to agri-environmentally friendly farming does the Minister envisage, and by how much will the Treasury be willing to match it?
My Lords, I pay tribute to the noble Lord and his Sub-Committee D, which produced an important report last year in which it encouraged the concept of voluntary modulation. To that extent, at least, I hope that it is relatively pleased with what we achieved in the budget.
The deal means that EU rural development expenditure is maintained at roughly the current level, but if you add in the compulsory EU modulation, which arises from the 2003 reforms, the focus of the CAP on rural development in the next financial perspective will be greater than under the current one, and that is before you add whatever degree of voluntary modulation is chosen. I make no secret of it: we would have preferred there to have been greater movement from Pillar 1 to Pillar 2 in the guaranteed money in the Commission's budget. We regret that, but we think, having got the greater freedom to transfer voluntarily, that we have achieved a lot.
My Lords, have the Government not previously stressed that they favoured expenditure in Pillar 2 rather than in Pillar 1? In the budget deal agreed in December, did they not agree cuts in Pillar 2? Has there been a reversal of policy or a change of view in the Government on CAP reform?
No, my Lords. We remain committed to CAP reform and an increased emphasis on Pillar 2. If we had a free hand to write the budget, the relative levels of spending that were agreed for Pillars 1 and 2 are not what we would have chosen. A number of member states expressed a clear view in the negotiations that at this stage they would not accept reductions in the funding for Pillar 1. In our view, the EU budget review in 2008-09 provides an opportunity for real change. The Vision for the Common Agricultural Policy, published by my department and the Treasury last December, sets out the case for that reform, and we need to continue the debate in Europe on how it can be achieved.
My Lords, will the Minister confirm that the possible reduction in Pillar 2 of CAP funding will prevent the development of new rural businesses, while at the same time making a significant reduction in the single farm payments through modulation? How is it that the Prime Minister managed to give away billions of pounds of rebate in the negotiations, while, at a stroke, we in the UK are now looking at a reduction in Pillar 2 and the single farm payments?
My Lords, the noble Lord spoiled his question with his comment on the rebate. With regard to the serious part of what he had to say, we realise that some farmers are concerned about a transfer from Pillar 1 to Pillar 2. Modulation will certainly have an effect on the amount of subsidy that a farmer receives, but it will not affect their ability to compete. The whole point of the 2003 reform—as I understand it, it has cross-party support, including the noble Lord's party—was to remove that link between subsidy and production, making CAP subsidies less distorting. Before we decide how much we should voluntarily modulate, we will pay particular attention to the impact on the farming sector.
My Lords, will the Minister explain why we stay in the common agricultural policy when it not only creates the difficulties raised by this Question but also kills millions—mostly children—in the developing world? Why do we not just organise our agriculture in our own interests and those of the least fortunate people on the planet, without passing our hard-earned billions through the corrupt filter of Brussels?
My Lords, we stay in the common agricultural policy because we are members of the European Union, and I for one am delighted that we are members of it. However, our criticism of the CAP, while perhaps not using exactly the same words as those of the noble Lord, has been pretty adamant during the past few years. We have done something about our criticism of the CAP, and it led to the reforms of 2003. If we had had our way, there would have been greater reforms by now.
My Lords, does the level of suicides among farm workers and farm owners in the countryside provide ample evidence of a crisis in British agriculture, leading to the need for a longer-term strategy of support for the countryside and agriculture alike, beyond the mechanics of the common agricultural policy?
My Lords, the level of suicides is indeed worrying. I am grateful to the right reverend Prelate for having referred to it. Whether or not the correct word is "crisis", there is certainly a lot of anxiety in the countryside. One of the reasons for that is the enormous change that is happening in the countryside and, particularly, in the farming industry. It needs to be handled with great sensitivity and care, but there can be a successful farming industry in the United Kingdom if it is modernised and does not rely on subsidy. Subsidy is what makes people dependent, and it has been in existence for too long in the farming industry.