Wine

– in the House of Lords at 7:45 pm on 15th January 2008.

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Photo of Lord Sewel Lord Sewel Labour 7:45 pm, 15th January 2008

asked Her Majesty's Government what is their response to the report of the European Union Committee on European Wine: A Better Deal for All.

My Lords, we have had a rather tortuous journey in the timing of this debate on the reform of the European wine regime. It is perhaps appropriate that we address the issue of wine reform during the dinner hour. I am not quite sure of the relationship between wine and the Human Fertilisation and Embryology Bill, but I am sure we could find one if we look hard enough.

To get down to business, the present wine regime is one of the few remaining unreformed elements of the common agricultural policy. It portrays all the worst elements of the CAP in its first incarnation. It is based on a combination of production subsidies and production controls: a failed answer to the problem of European agriculture. Our conclusion is that, as it stands, the wine regime is bad for consumers, bad for entrepreneurial producers and bad for the European taxpayer. We adopt a position that there is a need for urgent and fundamental reform, a position supported by the Commission and Her Majesty's Government. It is bad for consumers because it encourages the production of types and a quality of wine that, quite frankly, the consumer does not wish to drink.

Throughout the EU as a whole, wine consumption is declining. Ironically, it is only in the more northern countries, traditionally non-wine-producing member states, that consumption is increasing. In those countries, however, the consumer is choosing to drink more and more non-EU wine from new world countries.

The effect of this switch to new world wine is that the European Union is on the cusp of becoming a net importer of wine, something which is difficult to comprehend. How has this state of affairs come about? Brutally, it has come about because new world producers produce what the consumer wants and is prepared to pay for. They have developed a method of marketing their wine which is consumer driven. It is reasonably priced, and particularly strong in the important market segment of the medium price range: £5 to £10 per bottle. It is of reasonable good quality and presented in way easy for the consumer to understand, concentrating on grape variety, country of production and year of vintage, rather than the intricacies of chateau and terroir which characterise so much EU wine and are frankly often impenetrable to the consumer buying the bottle from the supermarket on the way home. Above all, new world wine has the consistency and predictability of taste that the consumer demands. However, that very predictability has been almost sneered at and regarded with contempt by too many voices in the European wine industry. The European industry is dangerously remote from the consumer and is in danger of paying a very heavy price for that remoteness.

The wine regime is bad for consumers, but it is also bad for the taxpayer—a figure we found strangely absent from the concerns of those, especially in the Agriculture Committee of the European Parliament, who were intent on preserving the main features of a fundamentally failed system: the status quo. The wine regime costs the European taxpayer €1.3 billion a year, about two-thirds of which is paid out in support of distillation which is, in essence, a production subsidy. It is not only expensive but, more importantly, it insulates the producer from the reality of the market and leads in some areas to the ludicrous practice of producing wine not for the market but for taxpayer-funded industrial distillation. Distillation subsidies and their abolition are at the heart of the problem facing the EU wine industry.

The existing wine regime is not only bad for the consumer and the taxpayer, it is bad for the innovative, market-oriented producer. Rather than supporting the promotion of the product, the labelling constraints faced by European producers too often act as a block between the producer and the consumer. Above all, potential new entrepreneurial, market-oriented producers are frozen out by the application of planting rights, which means that potential new entrants are denied entry to the market and existing, often inefficient, growers are protected. The argument in favour of planting rights is that while surplus production exists and people are being paid to leave the industry, it does not make sense to allow newcomers to enter the market. We take a fundamentally different view. We argue that, as long as distillation subsidies are removed, new entrants, whose success or failure will be completely dependent upon their success in the marketplace, should be welcomed and, indeed, are necessary if the EU wine industry is to turn itself around and flourish. We take the view that the present wine regime is totally misguided, unsustainable and in need of fundamental reform. Happily, this view is very largely shared by the European Commission, and I now want to turn to its original proposals. I am sure the Minister will update us with the outcome of the latest Agricultural Council meeting.

The most important of the Commission's proposals is the ending of all distillation subsidies. That is not only central: it is vital if the European wine industry is to stand a chance of getting closer to its market and its consumers. Another proposal concerns planting rights, which were originally due to expire in 2010. The Commission's original proposal was to extend them to 2013, and I understand that as a result of the understandable compromise reached at the Agricultural Council meeting, they are being extended to 2015. We have reservations about that. We think that encouraging new entrants is an essential way forward for the European wine industry, and we regret that it has been necessary to make that compromise, although we understand the political reality and necessity.

There are a number of other matters, such as labelling, where progress is being made, but perhaps not quite fast enough. I cannot for the life of me understand why a producer cannot put on a label anything he or she wants, as long as it is true. However, I want to refer to an element of the Commission's original proposals that was totally perverse: the proposal for a ban on the use of sugar for enrichment, together with the requirement to replace it with grape must. The effect of that would simply be to increase costs for producers in more northerly countries. When the European industry is facing significant external competition, what is the justification for increasing production costs? There is none. On other matters, we are prepared to support the implementation of schemes to allow producers to leave the industry—the so-called grubbing up proposals. We accept national envelopes because we recognise the need for some degree of flexibility, but we think that there ought to be absolute scrutiny to ensure that national envelopes do not become a backdoor means of giving production support.

Overall, the outcome has been enormously beneficial. The key objectives of the Commission's proposals have been secured. The Government have secured their objectives as well. I shall briefly indicate that our reservations are concerned with the failure to abolish planting rights until 2015, and we are concerned about national envelopes, particularly green harvesting, which we see as a means of maintaining production support and which ought to be looked at very carefully.

Finally, I turn to marketing. Marketing is the key to getting close to the consumer. In many of our discussions in Europe, marketing was reduced to advertising. Marketing is about much more than advertising; it is making sure that you are listening to the consumer, reacting to him and producing what he wants. It is no good telling him that European wine is the best in the world if he actually prefers to drink something else. It boils down to something as simple as that.

That is, in essence, what our report said. In closing, I shall briefly—too briefly—thank members of the committee who applied themselves with great energy to this inquiry. Above all, I shall single out two people: Robert Preston, our Clerk, who in his ineffable way crafted a report that all members of the committee could sign up to and who, as a result, has moved on to bigger and better things. We regret his—I was going to say "his passing", but that is the wrong word—elevation. I also single out our specialist adviser, Professor Sir John Marsh. Those of us who know him know that he brings a great deal of intellectual, analytical vigour to these matters. We thank them.

Photo of Lord Teverson Lord Teverson Whip, Spokesperson in the Lords, Environment, Food & Rural Affairs 7:58 pm, 15th January 2008

My Lords, I congratulate the Committee and the noble Lord, Lord Sewel, on this report. It fascinates me that we are having the debate about wine after the debate on human fertilisation; in real life it is usually the other way round.

I remember that when I was an MEP, whenever the acronym CMO came up, we used to blank out because it was a euphemism. It was not about common market organisation, but about common market fixing. That is why this regime and this regime change are so welcome at this time. The symptoms of those market distortions are surpluses—half of them are used for distillation—the green harvests, the grubbing-up regime and—a usual aspect of Europe—effective production quotas by restricting the land area for growing quality and other wines.

What is the result of that market fixing? The result is a bill of €1.25 billion per annum, half of the production of which is distilled, which effectively means removing it from the market. Commissioner Fischer Boel herself, in the preface to the report on change in the regime, says:

"The European Union has a budget to help our wine producers. But we spend far too much of it on simply disposing of surplus wine for which there is no market".

We also have a loss of market share across the Continent. I was amazed to hear that there are 2.5 million wine holdings throughout Europe, the majority of which—not all, in France, they are better off, but in the other nations—are still effectively in rural poverty, despite that €1.25 billion.

The wine regime missed or bypassed the 2003 CAP reform, and I am delighted that we in Europe are now taking this forward and not waiting for the health check, let alone for 2013. What I am not personally comfortable with about the committee's recommendations is national envelopes. As the noble Lord, Lord Sewel, himself said, there is so much room for abuse and backdoor subsidisation in that area.

It is expected that about 200,000 hectares will be grubbed up. That is a huge land mass. When we think that agricultural growing prices are at their highest worldwide for some time, I should have thought that natural market forces would make the subsidising of grubbing-up less necessary. I also note that the committee report, although it supports it in the short-term, is concerned about a neutral budget. Yes, there needs to be transition in the fiscal regime, but to come up with a neutral budget after such a large and radical reform is not adequate. I very much support the ending of the market support regime by ending distillation and the fact that we should be able to expand and have new vineyards, but we cannot support grubbing-up and have new vineyards at the same time.

I certainly support the reform of the quality regime. Exactly as the noble Lord said, as long as it is true, we should be able to put whatever we want on labels. Although not mentioned in the report, I am also pleased to see the end of export refunds.

My party does not have a great deal of policy in this area. My noble friend will no doubt put me right on that when summing up. We normally make policy at conferences, but I must admit that at conferences, we are normally more concerned with wine consumption than the production regime.

Photo of Lord Plumb Lord Plumb Conservative 8:03 pm, 15th January 2008

My Lords, I support the report of our very able committee chairman, the noble Lord, Lord Sewel, so I can be brief. As he said, since the report was published, we know that the Council has considered its position and made a decision. We can be reasonably satisfied that many of our recommendations were incorporated in the final political agreement and compromise proposal, which I gather was agreed on 19 December.

One notes from that that planting restrictions will not be introduced in member states, which of course is good for the United Kingdom. The wine producers here are still expanding. We should always remember that some of our wines are becoming very competitive. It also means that wine production can continue without the threat of a planting ban and that producers have the flexibility to make a marketable product and have the option, as I understand it, under the agreement, of using some sugar at a level that will make it marketable.

Our report is based on the European Union as a whole. The main focus throughout has been on the question of the national envelopes, but it is their size and content that will be the issue. I am personally concerned about the national envelopes—although the principle is good—because of how they may be used. That can be done only by reducing the amount of funding from rural development schemes. I hope that the Minister can assure us that that will not be at the expense of rural development generally.

As we understand it, member states will also be free to disperse funds through those national envelopes by means of a decoupled single farm payment of the supporting programmes to remove surplus production nationally. It will be interesting to see how each nation in the large production areas will respond.

As I see it, our mission to France to witness the industry in Languedoc and Bordeaux revealed three features that perhaps impede competitiveness. It is fragmented; it is producer-dominated; and 71 per cent of the vineyards consist of about 5 hectares. They are competing with wines that are produced on holdings of 50 hectares plus. It is seen very much as a cultural craft, not so much as a commercial operation. Growers see the need for change themselves. It was the first time ever in my history that I heard a Frenchman say that he did not want subsidies.

We have accepted the general situation in our report: there should be a voluntary and subsidised grubbing-up programme. As the chairman knew that I was a bit of a dirt farmer, it was always my question to ask those giving evidence about grubbing-up. That is a matter of concern to us all. As the chairman said, the cost of that regime is €1.3 million a year, which is part of the overall expenditure of the common agricultural policy.

To achieve a reduction in spending in the short term will be more complex than I had perhaps appreciated when we started the study, but if it is not grasped, and if the regime improves itself, I fear that production will suffer very much at the expense of greater imports from around the world. At the end, consumers will be the judge through quality and price.

Photo of Lord Cameron of Dillington Lord Cameron of Dillington Crossbench 8:07 pm, 15th January 2008

My Lords, the current EU wine regime typifies all that is bad about a subsidised and politically controlled industry. It costs approximately £1 billion a year and yet fails to address the problems that beset the industry and actually hampers, by its petty rules and restrictions, the ability of those involved successfully to trade their way into a sustainable future.

The sad thing is that out there is a potentially great EU wine industry. The even sadder thing is that many of the wine growers whom we met recognise that if they were allowed the freedom that they craved, they could succeed in the world marketplace. But the politicians say, "Why change?". Why make it easier for the young, new viticulturalists to come in and undercut those who are doing so well from the current system?

Only vines, they say, can provide such a high number of jobs. There seems to be no concept of the economic opportunities of the non-land based rural economy. Yet, at the same time, we learned that of the 26,000 wine growers in Languedoc-Rousillon, less than half of them are full-time estates. The majority are run as a hobby by local families, shopkeepers and businessmen who keep their small family holding going as part of their family heritage—frankly, without much interest in the quality of their produce. So there clearly is an alternative rural economy.

The saddest example of the dependency culture espoused by the politicians is in their attitude to new plantings. The argument goes thus: how can you allow new plantings to happen when at the same time you are paying others to leave the industry and grubbing-up their vineyards? The point here is that that argument holds good only if growers had equal business and marketing skills, produced the same quality of grapes at the same cost, and grew vines on equally ideal terrain.

What the politicians cannot understand is that in a proper marketplace not controlled by politicians, new business men and women are always coming in with new ideas and better skills to undercut and outsell the old guard. Change is a constant factor in any industry and even more so in the wine industry where fashions in taste are so fickle. We should help the old guard to retire gracefully by grubbing-up our vineyards but we should also allow others to expand their production if they want to, provided there is no safety net for them, no crisis distillation if they fail to sell that wine. Sadly, it seems to me that the Commission has not quite achieved all that it wanted in this respect, owing to some of the freedoms to be allowed by the national envelopes.

Finally, I believe that Europe can still produce some fantastically attractive wines at a range of different prices. The EU wine industry deserves to succeed and I pray and hope that this reform might just give it the jolt it needs to propel it successfully into the 21st century.

Photo of Viscount Ullswater Viscount Ullswater Conservative 8:11 pm, 15th January 2008

My Lords, I first wish to congratulate the chairman of Sub-Committee D, the noble Lord, Lord Sewel, for introducing the report from the committee in such a comprehensive and articulate way. It has been a pleasure to serve under his chairmanship, which he has conducted with charm and wit.

At a recent meeting with the Agricultural Commissioner, Mariann Fischer Boel, I was impressed by her clarity of thought and her pragmatism. She is an astute politician who understands the art of the possible rather than aspiring for the unattainable. It is in this light that the reform of the wine regime must be judged—a profound reform and yet budget neutral.

Two measures are designed to assist this approach and are in my view necessary if not essential. The first is the distillation subsidy and the second is a grubbing-up policy that will help,

"uncompetitive producers leave the industry with dignity"— as the Minister put it in his reply to our report—and perhaps help the older generation to retire from the business altogether. The two policies can work together to reduce the land under vines where the only market has been for low-quality wine or even producing wine for distillation itself.

These two measures are structural and essential if the EU wine industry is to make any progress in dealing with the biggest problem that it faces: market share. It is evident from the amount of penetration into the marketplace by wines from the New World that, in the EU, marketing and listening to the consumer have been neglected. But there is a wasted opportunity with other parts of the Commission's proposals which, frankly, have not faced up to the challenge posed by competition. I shall mention two: the planting ban which is being discussed, to be extended from 2010 to 2013 or, now, even 2015; and the labelling rules.

If I were to approach a car manufacturer in Europe and say to him, "You cannot increase your manufacturing capacity in Europe in order to take account of market conditions so as to protect other manufacturers until 2013—and by the way, we will also limit the number of vehicles you can produce from each factory", he would say, "What! Are you living in the real world?". And yet that is the proposal facing EU wine growers. By the way, as my noble friend Lord Plumb said, it is excellent news for English wine growers that there has been agreement not to introduce a planting ban where none existed as at 31 December 2007. The planting ban, to my mind, is industrial suicide and should be scrapped tomorrow.

The system of wine labelling in Europe is designed to protect the producer rather than to be of interest to the consumer. I was taken aback by the statistic that some 70 per cent or thereabouts of wine is bought from supermarkets and probably 85 per cent of the purchasers know little and care less about protected geographical indications or protected designations of origin. Wine makers should be free to describe their wines as they wish. More and more wines, especially those from the New World, have back labels which give much greater information about the variety of grape or the blend of grapes and whether the wine is suitable as an aperitif, for drinking with fish or meat, or just as a light wine for picnics and so forth. That should be the way forward.

I have concentrated my remarks on four measures which I think are essential for moving the wine regime into the 21st century. Two are proposed by the Commission—the end to subsidised distillation and an accelerated grubbing-up policy—and two are so fiercely guarded by the producers that even the pragmatic Mrs Fischer Boel will not be able to shift them. It is a missed opportunity and I hope that those reading this report will reach the final conclusion of the committee at paragraph 84. If EU wine producers are to have a brighter future, they must look to the marketplace and make the industry competitive.

Photo of Baroness Jones of Whitchurch Baroness Jones of Whitchurch Labour 8:15 pm, 15th January 2008

My Lords, as a member of EU Sub-Committee D, I would particularly like to pay tribute to our chairman, the noble Lord, Lord Sewel, not only for his skill in steering the committee towards such a radical and far-reaching set of recommendations but also for his courage in taking our arguments directly to the Agriculture Committee. At the time it was described as Daniel going into the lions' den. I believe that it helped to create the momentum for change which culminated in the 19 December agreement.

Wearing another hat, I am a board member of an organisation called WRAP, the Waste and Resources Action Programme. They have a very good public campaign running at the moment called Love Food, Hate Waste, which aims to reduce the amount of food waste ending up in landfill. It occurs to me that there is scope for a European version entitled: Love Wine, Hate Waste. The scandal of the current wine regime in Europe is not just the level of subsidy involved; it is also the waste of land, energy and human endeavour, producing wine which nobody wants.

When we started this enquiry it was a revelation to me that EU taxpayers subsidised the wine sector to the tune of nearly £1 billion a year. At least 10 per cent of this is surplus production for which there is no market. As Defra said at the time:

"The current regime perversely protects inefficient and poor quality producers and prevents those with a strong market demand for their wine from expanding".

While it might be considered glib to talk of a wine lake, the truth is that excess production has been distilled or stored on site for many years. As a pro-European I have to say that it is as well that this was not more widely known, as it does not enhance the reputation of the EU.

Notwithstanding the current welcome agreement, there are two areas of reform where I hope further progress can be made. First, as we have heard, the agreement transfers much of the current subsidy into national envelopes, with the intention that the funds can be used over a transitional period to help growers move away from surplus production and adapt to new market conditions. However, this will be achieved only if member states have an appetite for major reform. Crucially, they need to insist that producers become more responsive to consumer preferences and trends. It may be quaint to have production methods handed down through generations, but if consumers no longer want to buy the end product, it deserves to be in a museum, not a market.

During our inquiry, we heard time and time again that the new world producers, particularly Australia and New Zealand, concentrated on producing grape varieties that were popular, produced to a high quality year on year, and marketed as internationally recognised brands. They have tapped effortlessly into the middle-price sector where all the major expansion is occurring. This evidence from the new world contrasts painfully with some of the EU producer attitudes in which the consumer seems to be blamed for not recognising the superiority of their product. Breaking this cycle and delivering the structural change necessary to become competitive will require member states to take on some deep-seated vested interests, as well as to facilitate social and economic reform.

Secondly, the proposals for wine labelling fall short of the reforms recommended in our report. We heard considerable evidence that consumers were confused by the 10,000 or so geographical indicators currently used to define quality wine. Although the proposals allow more flexibility in labelling, maintaining that link between quality and geography is still lost on most consumers. I agree with many of my colleagues here today who have a preference for a new labelling regime under which producers are required to list the additives, grape variety and country of origin, and then have the freedom to market their products.

Finally, the irony of the whole issue is that the EU still produces the best wine in the world. We have the knowledge and the skills to take on the global wine sector and reverse our declining market share. I hope that, based on the report that we have in front of us, member states and individual producers seize the opportunity to expand their markets and become world leaders again.

Photo of Lord Moynihan Lord Moynihan Conservative 8:19 pm, 15th January 2008

My Lords, in 1980, when the last British governor of Southern Rhodesia, Lord Soames, tasted the wine before dinner, his Rhodesian butler pointed out that it was the product of a vineyard a mere 20 miles away, to which after a pause Lord Soames replied, "It clearly doesn't travel well". Tonight, we are considering a report on the wine industry, which has travelled smoothly across European borders, earning plaudits from those in the industry who have sipped its prose and ingested its recommendations. It has already had a positive effect on officials in Brussels, not only because it has been superbly served by the clerks to Sub-Committee D but because my colleagues on the committee demonstrated their commitment and commendable breadth of knowledge on the subject, as evidenced this evening.

Such has my work with this committee piqued my interest in the subject that I am considering planting the inaugural vines of a very modest private vineyard at Shack Moynihan just outside the village of Frant in east Sussex. With this in mind, for just three minutes, I shall concentrate my remarks on the wine industry in this country, specifically English and Welsh wine. I would like to draw the important distinction between English and Welsh wine and British wine. English and Welsh wine is made from grapes grown in England and Wales; British wine, on the other hand, comes from concentrate juice or grape must, which is imported into the UK and fermented and processed here. English and Welsh wines are far superior products.

I was delighted to note that just before Christmas, as has been commented on this evening, the EU Parliament agreed to what amounts to a permanent exclusion of the UK from the planting rights regime. This means that the existing extension to the EU-wide planting ban on new vines will not apply to the United Kingdom, as we have heard. The planting ban was introduced in 1999 in response to the over-production of wine in large EU member states, much of it of distinctly dubious quality. This, of course, is what caused the infamous wine lake. This planting ban has long been seen as the greatest challenge to the continued development of the wine industry in the UK. The industry has been growing steadily over a sustained period. If the ban was still applicable, we would very shortly exceed the 25,000 hectolitre de minimis limit permitted under it. When that limit was met, no new commercial vines could have been planted in the UK. In conclusion, the regime would have led to a six-year planting ban and a considerable increase in bureaucracy and red tape. It would have been a tragedy to put such a lid on the industry just as it was gaining a significant foothold in the market, especially when the diversification of produce is key to modern agricultural development.

When the United Kingdom Vineyards Association came before your Lordships' committee to give evidence last February, removing the planting restrictions was at the very top of its agenda. Its position was fully supported by our committee, and I believe it also received significant cross-party support in another place. I send the United Kingdom Vineyards Association my fulsome congratulations, and wish it and its members every success. Particular progress has been made in the sparkling wine sector in this country. Some parts of southern England, as we learnt, where the subsoil is chalk and limestone, have almost identical geological properties to the Champagne region of France. The possibilities are considerable. However, although we might quite justly relish the success story of English and Welsh wine, we must not allow this small triumph to obscure the wider issues that the committee has been looking at. We are in agreement that there must be increasing opportunity for genuine market forces to operate within the EU wine sector.

It is hard to see how a sustainable balance can be achieved across the Union unless we allow the focus of the industry to be squarely on the consumer, which means marketing in response to demand. The success of the new world bears testament to this. New world producers offer consumers what they want: wine that is reasonably priced, well labelled, approachable and consistent in terms of both flavour and supply. As such, their growing dominance in the market seems inexorable. Perhaps what gives me the greatest cause for hope in this context is the wine industry in this country, which is growing steadily, totally unsubsidised, and is now free from the bureaucracy that threatened to stifle it. I believe that it will stand the test of time, for this is indeed a worthy model, supported by a fine committee report.

Photo of Lord Watson of Richmond Lord Watson of Richmond Spokesperson in the Lords (Universities), Innovation, Universities and Skills 8:24 pm, 15th January 2008

My Lords, I declare an interest as non-executive chairman of a wine importing company, Raisin Social, which imports wines from both the New World and continental Europe. It struck me that there was a kind of collective interest that we should all declare. Out in Old Palace Yard is the equestrian statue of Richard the Lionheart, favoured son of Eleanor and Henry Plantagenet. Of course, under his direction the French wine industry was reformed and the wine trade between England and France fully established. We stand in his shadow and salute his raised sword. We did that for 300 years.

This is an excellent report, and we are all grateful to the noble Lord, Lord Sewel. Many tributes have been paid to him. As the noble Lord, Lord Moynihan, said, the report has travelled well, perhaps better than anybody could have reasonably expected. It is also a report, essentially, about the Commission initiative. Many people in the debate have recognised the significance of the Commission proposal. My noble friend Lord Teverson referred to it as a large and radical reform; the noble Viscount, Lord Ullswater, referred to it as a profound reform. At the centre of its effectiveness is the ending of distillation compensation. That is, indeed, radical. We are also reminded, however, that we have to continue with all this. The noble Baroness, Lady Jones of Whitchurch, made the point that there was more to be done, and member states must retain their appetite for this reform. We will hear from the Minister in a moment about what finally occurred on 19 December.

There is a lot to applaud in this. I want to make just two points. It is a rapidly changing scene. Looked at from the perspective of the English and Welsh wine industry, there is a lot going on. Great successes have been achieved. We need to be rightly ambitious about our own wine industry. Despite all the detriments of climate change, in this particular regard it may be working for us somewhat. The French are now eyeing large estates in Kent because the soil is the same and the climate is now arguably becoming better than it is in Champagne for the production of champagne. Who knows? We may be the most enthusiastic supporters of appellation contrôlée 15 years from now. Richard the Lionheart might approve of that.

I have one reservation about the report. I have to say this: we must be careful about the labelling regime. Of course, the label at the rear of the bottle on New World wines, describing what you should drink it with and so on, is attractive. That is very useful, but our experience of labelling in so many areas of retail is that it is easy to dumb down but hard to recover. There is, as far as wines are concerned, a real and important relationship between geography and quality. We should not just set that aside. It is foolish to underestimate the intelligence of consumers. I say that with some passion. We are, after all, asking consumers, including supermarket consumers, to be more and more intelligent and literate when reading labels on many sorts of things. I think the reforms that are being proposed by the Commission and the suggestions on labelling are very good, but there is at the heart of the labelling regime an insistence on the relationship between quality and geography—and even terroir—and we should set that aside with great care. It would be easy, in a burst of enthusiasm, to make a mistake in that area.

Overall, we are looking at a surprisingly brave commitment to reform by the European Commission, which, if it succeeds, will place the European wine industry, which still makes the best wines in the world, in a much more competitive position in the decades ahead.

Photo of Baroness Byford Baroness Byford Conservative 8:29 pm, 15th January 2008

My Lords, it is a particular pleasure to speak in the debate, although I must admit that I shall be looking forward to a glass of wine when it is completed. I begin by thanking the noble Lord, Lord Sewel, for his chairmanship of the committee and for the erudite way in which he has presented the report this evening. I also thank other noble Lords who served on the committee.

I wish to pick up on one or two of the recommendations made in the report. The important reforms are indeed welcome, as has been reflected tonight. I strongly support the ending of all subsidies for wine distillation. It seems wrong that subsidies are paid to producers of inferior wine who are unable to sell their product in an open market. The committee recognised that, without the removal of the subsidies, other proposed measures would not be able to deliver the efficiency gains that are necessary to set the industry on its feet again.

I am glad that the Government have accepted the concept of national envelopes, as mentioned by other noble Lords. However, is the Minister able to give us more detail about the proposed envelopes, how they will be developed and whether there will be a cap on the amount that national Governments can spend? Does he accept the possibility that countries could continue funding the distillation of surplus wine into industrial alcohol, and, if so, what representations has he made at European level?

The Government have indicated their support for the voluntary grubbing-up programme for uncompetitive vineyards. We also support the proposal but would like to see a tightly proposed definition of exemptions. We certainly do not wish to see a circumstance in which such money could be used for a particularly uncompetitive vineyard and then be used for the purchase, for example, of a new vineyard.

I am reminded of the debacle surrounding the EU proposals for the decommissioning of fishing vessels. In this country we simply decommissioned some of our vessels. Other member states used their subsidies to upgrade their vessels, enabling them to land even larger catches. We do not wish to see that situation repeated with the voluntary grubbing-up scheme.

All speakers tonight have reflected our welcome for the fact that the proposed ban on new plantings will not apply to UK producers. The Government have recognised in the report that much needed restructuring cannot take place unless uncompetitive producers are helped to leave the industry with dignity. Should the UK climate continue to warm, it is clearly in the interests of UK wine producers to be allowed freedom to grow their businesses. I look forward to the contribution of my noble friend Lord Moynihan on that. Have the Government made further representations to the EU on the issues of labelling and, particularly, the freedom of new producers to come in to the industry?

I am sure that the Minister will agree with me that subsidising wine production in the European Union represents very poor value for money for EU citizens, and, as my colleague, Richard Ashworth MEP, recently said:

"Europe needs to make less and better wine rather than European taxpayers having to pay up to buy the surplus low quality wine produced".

Finally, I add my comments to my noble friend Lord Moynihan on the wonderful way the UK wine producers have reacted. Some of the best wine that I have drunk recently has been English. I suspect that had I not seen the label I would not have known that in advance. Others are frowning. I look forward to having a glass of wine later, and I welcome this report as very timely. As others have said, it is surely in the interests of consumers to decide for themselves what wine they buy, but they need to be helped by making sure that the labelling reflects the content of the bottle.

Photo of Lord Rooker Lord Rooker Minister of State (Sustainable Farming, Food and Animal Welfare), Department for Environment, Food and Rural Affairs, Minister of State (Department for Environment, Food and Rural Affairs) (Sustainable Farming, Food and Animal Welfare) 8:34 pm, 15th January 2008

My Lords, this has been a very useful debate. I am grateful that it was called, and I pay tribute to the committee under the chairmanship of my noble friend Lord Sewel. I had the privilege of appearing before the committee, which gave me the advantage that I was able to create, as I had to do, the time to visit at least one premier vineyard in this country that has won gold medals in Paris for its bubbly wine down in Kent. I will not go further than that, but it was a very pleasant occasion.

The debate is about the Government's response to the report of the European Union Committee on European wine, A Better Deal for All. Yet, given the time constraints and with the consent of the House, I think it would be much better if I informed the House about what happened in Europe just before Christmas.

First, it is clear that Europe had lost its way. It is still the case, judging by the documents produced by the Commission, that Europe is a world leader in wine. It is the biggest producer of wine, the biggest consumer, the biggest exporter and the top import market. That sounds like a paradox, but that is the case as far as Europe is concerned. In the past 20 years, the overall trend has been towards a reduction in the area under vines, with a 10 per cent drop. This is a massively contradictory development. The EU has seen a limited but steady reduction in area while its main competitors have witnessed stunning growth in their production capacity, with increases of 21 per cent in the United States, 33 per cent in South Africa, 52 per cent in Chile, 178 per cent in Australia and 360 per cent in New Zealand. There is something happening out there in the industry.

Australia is now a leading supplier of wine to the UK market in volume terms. That is reflected in the choice of consumers purchasing wine. One of my ministerial colleagues said to me today that we had all started off on Blue Nun and Black Tower—I added Hirondelle—and had moved on to Pomerol and Pouilly Fumé. He said that the same would occur with another generation; they will come off the New World wines with the ordinary labels for the European wines. That may not be the case, but there is a pattern there, borne out by one of my colleagues in Defra.

The agriculture council finally reached agreement on a new wine regime on 19 December. I say "finally" because the agreement was the culmination of almost two years' work. It started in February 2006 with the Commission's wine seminar, which prepared the way for the proposals in July of last year. I know that your Lordships' report was widely read and absorbed across Europe and was recognised as providing a valuable contribution to the debate by acting as an informed counterweight to some of the sensationalist reporting of the Commission's proposals elsewhere. The Government are very satisfied with the outcome of the negotiation, and so is the trade. I am grateful for the work of my officials, particularly Robert Manning, who has been praised by the trade for the effort he put into this. We were able to secure a number of changes in the Commission's original proposal. There was a trade-off, and I will give an example in answer to the noble Lord, Lord Plumb, in a moment.

On planting rights, for example, the Commission listened to our concerns about the potentially damaging impact that its proposals to extend the planting rights would have had on the continued growth on the very small—about a 1,000th of Europe—but dynamic wine-production centre in the United Kingdom. The final agreement provides that planting restrictions will not be introduced in future in small wine-producing areas. If you were not covered at the end of December, you are not going to be covered. It is a free-for-all for planting in the UK, and that is fine. It is a significant change. I also pay tribute to two United Kingdom Members of the European Parliament, Brian Simpson and Neil Parish, for their assistance in securing this change. They made a magnificent effort, and there was excellent co-operation between Whitehall and Members of the European Parliament.

Similarly, on enrichment, two important changes to the Commission's proposals were secured in the final compromise. First, producers will be able to continue to use sugar to enrich their wine, instead of being forced to use grape must exclusively, as originally proposed. That means a large financial saving. They do not have to use sugar, but they can continue to use it. I might add that that is a normal process. It has gone on for hundreds of years with northern European producers. Southern European producers actually use acid because there is too much sugar in their wines. It needs to be palatable and drinkable, and this is part of the accepted process. Secondly, an acceptable compromise was reached on the maximum level of enrichment that is possible in northern member states. Both changes are important to the UK production sector, as our wine makers continue to have flexibility to enrich their wines to make a marketable and award-winning product.

The Government strongly supported the conclusion of the report that market measures such as distillation and storage had had their day and should be abolished. Those measures have no discernible effect in improving market outlook for the European wine industry, despite costing taxpayers €800 million a year. I am pleased to say that the final compromise provides for the phasing-out of those schemes. That will lead to an improvement in the market focus of the sector, which has been lacking up to now. Furthermore, in the immediate period, the schemes have to be funded from within the national programmes, meaning that the producer member states will need to decide to what extent they wish to allocate resources to measures such as these, as opposed to the other more worthwhile measures in the programmes.

I should perhaps say at this point that the content and size of the national envelopes proved to be the most difficult element of the reform. In response to the noble Lord, Lord Plumb, I say that, in order to fund the increased national envelopes, the original transfer of funding has been reduced to maintain budget neutrality. However, the list of eligible measures in the national envelope has been expanded to include, for example, investments in wine-processing facilities. That was a necessary trade-off to achieve the final agreement. We do not say that everything is perfect, but the final agreement is excellent news for the United Kingdom. We will take a little more time, but there had to be a compromise agreement.

It is worth pointing out that two important changes were secured. First, it will no longer be mandatory for export marketing schemes to be funded as part of a member state's national programme. Secondly, member states will be able to decide to disburse national envelope allocations via the single payment scheme. We would have preferred a reduced level of funding of the national envelopes and the immediate abolition of market support instruments. However, we accepted the compromise in the context of an otherwise acceptable package of reforms. In any case, we could not have changed the vote. It met our criterion that the reform should not result in an increase in the recent level of expenditure on wine; it will see the phasing-out of market support measures and secures a satisfactory outcome for the United Kingdom.

In the short time available I would also like to mention the other main elements of the agreement aimed at improving the competitiveness of the sector and improving consumer focus. The fact that the new grubbing-up scheme will last three years rather than five years will enable a quicker transition to the new market reality. There is also the extension of the single payment scheme to vineyards, including the creation of new entitlements for areas that are grubbed up under the scheme, and increased flexibility on the range of optional information that wine producers can put on labels, such as the grape variety and the vintage without a geographical indication. I have not talked to the French, but somehow I cannot see them wanting to change their labels. However, there is an incentive for them to do so. There is to be a simplified process for the adoption of wine-making practices laid down at international level by the International Organisation of Vine and Wine and an improved wine quality scheme that links directly with that for other products.

The outcome is good news for the expanding and successful UK wine sector. I am not sure, but I understand that there is a vineyard as far north as Leeds successfully producing wine. It is really good news to see vineyards around the UK, and I, too, have read the reports about the French coming in and buying large tracts of land simply because they are waking up to the fact that, with climate change, we are going to be big wine producers. We are already producing tea in Cornwall, and major new products will come as a result of climate change. The fact is that our wine production sector can now continue to expand without the threat of planting restrictions, which were without question a major threat. Our producers will also be able to enrich their wines to produce a marketable product.

The wine reform has been widely welcomed in the UK wine production and trade sectors. It has demonstrated the strong partnership working between the sectors and Defra to deliver a good outcome for the UK. The UK Vineyards Association estimates that the benefits to the UK of remaining completely outside the planting rights regime runs to millions of pounds in terms of the continued expansion of the sector and avoiding the imposition of new regulatory burdens.

I congratulate the committee on the report. A lot of in-depth research went into it which probably required a degree of travel; it was not all done in a Committee Room upstairs. The result is a high-quality report to match the quality of UK wine.