Common Agricultural Policy

– in the Scottish Parliament at 9:15 am on 29 May 2008.

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Photo of Alasdair Morgan Alasdair Morgan Scottish National Party 9:15, 29 May 2008

The next item of business is a debate on motion S3M-2002, in the name of Richard Lochhead, on the common agricultural policy health check.

Photo of Richard Lochhead Richard Lochhead Scottish National Party 10:00, 29 May 2008

I am delighted to have the opportunity to open this debate on the European Commission's health check of the common agricultural policy.

Farming and crofting play a central role in our economy and we all enjoy the products of Scottish agriculture in our homes and in restaurants. We can all be justifiably proud of Scotland's strong reputation for quality food and a spectacular environment, and we must equip our agricultural sector for the challenges ahead.

As I am in a generous mood today, I begin by welcoming the Labour Party amendment, which refers to the sector's role in sustaining our rural communities. I may even have something positive to say about other parties' amendments as well.

The Commission's health check provides an important opportunity to take stock of how far we have come since the previous reforms. The health check is a pit stop that will allow us to check on wear and tear and to anticipate what is needed over the next few years if agriculture is to remain a dynamic industry that is competitive in markets and plays its full part in achieving sustainable economic growth for Scotland through food production and the environmental management of our land.

The decoupling of payments has had a major impact on the industry. On the positive side, it has given farmers greater freedom to choose what to produce. In the past 12 months, I have had the opportunity of seeing plenty examples of farmers using that flexibility to the full, switching resources into new and innovative types of production and searching out higher earnings in the market, in return for higher-quality products capable of capturing new and expanding markets. Examples range from ice cream manufacture through to niche marketing of locally produced beef and lamb. However, I am acutely aware of the challenges that decoupling has brought, particularly in the more fragile areas of Scotland where there is a high dependency on livestock farming.

Looking ahead, we need to try to anticipate the new pressures that Scotland will face. We can expect increasing pressure to be put on the CAP budget from other policy areas in the years beyond 2014. The European Union budget review is starting to consider such issues. The eventual outcome of the World Trade Organization Doha development round may lead in general to reduced commodity prices, although that might be offset by an increase in global demand for food.

In addition, there is the challenge of climate change. Scottish agriculture must play its part in helping to achieve our ambitious target of reducing greenhouse gas emissions by 80 per cent by 2050.

The health check is not a radical review of whether we need the CAP. A thorough review of the policy may be needed when the budget proposals for the EU after 2013 become much clearer. Nevertheless, the health check provides an opportunity for making sensible changes. We in the chamber will want to ensure that the changes are in Scotland's best interests.

Photo of Tavish Scott Tavish Scott Liberal Democrat

A sensible change to the CAP would involve support for the fragile areas that the minister has mentioned. Some in the industry have presented arguments on the suckler cow premium, on the need to retain cattle in upland areas and on the link that goes right through the chain to the lowland areas of Scotland. Is he impressed by those arguments, and will he take them up?

Photo of Richard Lochhead Richard Lochhead Scottish National Party

I am certainly impressed by the argument that we must continue to offer appropriate support to our livestock sector. I hope that the health check will give us the opportunity to do that. The issue will be part of the consultation that we will issue in two or three weeks' time.

There is much in the European Commission proposals that we can welcome—for example, its desire for simplification. However, we are determined, as we move towards negotiations in the autumn, to listen to what people have to say about the proposals. As a Government, we need to be sure that the CAP that will operate in Scotland from 2010 to 2013 is fit for our purpose. The consultation that we plan to launch in June will help us to do that. We look forward to hearing from as many people as possible so that we are fully aware of the issues and can ensure that Scotland's voice is heard in Brussels.

Our objective is to ensure that the outcome of the negotiations later this year meets Scotland's needs. We must do all that we can to ensure that Brussels is fully aware of the special types of farming that exist in Scotland—Tavish Scott referred to one of those sectors—how much we value them and the support that we require in Scotland for the times ahead. At my invitation, Commissioner Fischer Boel will visit Scotland for two days in July, and I will ensure that her programme highlights many of the issues that we are discussing today.

Scotland is different. Scotland has almost 20 per cent of the UK's cattle herd and more than 20 per cent of the UK's sheep flock. We produce almost half the UK's spring barley, for which our distillers and feed merchants are grateful. We also have more than our fair share of challenges, with 85 per cent of the Scottish agricultural area officially being classed as less favoured areas. That means that our land is less able, for reasons of geography, climate, soils or terrain, to produce a wide range of crops. That contrasts with the LFA figure of only about 15 per cent for the English agricultural area.

We are therefore committed to the continuation of the less favoured area support scheme, which helps some 13,000 livestock farmers and crofters to undertake types of farming that are considered to be good for the environment. We are currently operating an interim scheme for 2007, 2008 and 2009, but we will consult later this year about how the scheme should operate in 2010 and beyond so that the important environmental benefits are not lost.

We need to consider the European Commission's health check proposals carefully against the background of the special nature of Scottish agriculture. I will do all that I can to ensure that the United Kingdom Government recognises Scotland's case. Chancellor Alistair Darling's recent intervention, when he wrote to the EU presidency calling for an end to direct support for farmers, was not particularly welcomed in Scotland. The UK's vision for farming does not always chime with our vision, and I will do my best to make that clear. We do not have the rolling fields of East Anglia.

When the CAP was reformed a few years ago and payments were decoupled from production, the perfectly valid argument was that farmers should not produce for subsidy. Today, however, it is increasingly clear that in many parts of Scotland farmers require support to produce, especially if we want Scotland to remain a food-producing nation. The Government certainly believes that that is in our national interest, and I welcome the reference to that issue in the Liberal Democrat amendment.

The Liberal Democrat amendment also refers to a review of the Scottish rural development programme. We are keen to keep the SRDP under review. We will not launch a formal review, which could lead to chaos, but we will certainly keep the programme under review to ensure that it reflects Scotland's priorities.

Photo of Alex Johnstone Alex Johnstone Conservative

While the minister is talking of reviews, will he say whether it is his intention to review the historical basis for payments to Scottish farmers? His predecessor made that commitment, but south of the border a very different decision was reached. Is that part of the review?

Photo of Richard Lochhead Richard Lochhead Scottish National Party

I will address that point later.

My experience at agriculture and fisheries council meetings in Europe tells me that many other member states are closer to Scotland's position. That should give our industry some comfort in the months ahead.

The Commission's proposals were published last week. It said that the proposals aim to ensure that single farm payments work effectively and that we have market support tools that offer a true safety net for genuine crises and catastrophes rather than quotas that can be an obstacle that prevents farmers from expanding production. The Commission also said that there will be a new emphasis under pillar 2 rural development schemes on four new challenges: fighting climate change; managing water; making good use of bioenergy; and protecting biodiversity.

When I recently met Commissioner Fischer Boel, she said that she was impressed by the SRDP and that it already addresses many of the issues. We appear to be ahead of the game in Scotland.

To meet some of the challenges, the Commission wants to increase funding for pillar 2 rural development payments across the European Union by increasing compulsory modulation. As we already have voluntary modulation, the Commission wants us to replace that with compulsory modulation. In addition, it proposes a progressive element to compulsory modulation so that the rate increases as the size of single farm payment rises. The intention is to reduce the large payments made to a comparatively small number of individual farmers. I agree with Conservative amendment because we have to think through very carefully those changes and their impact on Scotland. I believe that our approach should be outcome based.

Photo of John Scott John Scott Conservative

Does the minister accept that progressive modulation, as proposed, would damage some of Scotland's most enterprising and entrepreneurial farmers?

Photo of Richard Lochhead Richard Lochhead Scottish National Party

It could certainly lead to unintended consequences, such as large farms splitting into smaller farms to escape the regulation. That is why we must think through carefully the consequences for Scotland.

The Commission is also proposing increased flexibility in the use of the national envelope. That would make it possible to move a certain amount of funding between sectors by top-slicing single farm payments, moving money from one sector to another and using it, for example, to target support at particular sectors or geographic areas or to help with the consequences of disease. We would welcome that flexibility in Scotland. We already have the Scottish beef calf scheme, which is funded by the beef sector, so we have used such flexibility in the past. The new flexibility would go a stage further.

There are several other important proposals under the health check, including changes to cross-compliance requirements, abolishing set-aside, clarifying the definition of farmer and so on.

The final element that I want to address was mentioned by Alex Johnstone. We draw members' attention to the proposal that would allow countries that have adopted the historical model for the single farm payment to move towards flat-rate payment entitlements from 2010. Even if we do not move forward on that accelerated timescale, we need to think hard about the future of historical payments.

When the next European budget has been agreed, we will be some 12 to 14 years beyond the reference period used as the basis for current single farm payments. Increasingly, we can expect questions to be asked about why the production levels of 2000 to 2002 should determine support payments both at present and in the future. However, if historical production levels are not to be used, what should be the basis for future payments? What should we be trying to achieve through single farm payments? Those questions will be addressed in the Scottish Government's consultation paper.

Farmers and crofters manage nearly three quarters of Scotland's land. They produce the food that we take for granted and have also helped to create a variety of environmentally important habitats. The quality of our landscape not only stirs emotions but represents a real asset for Scotland.

Our forthcoming consultation will provide an important means of helping us to ensure that Scotland's views are heard and that the outcome of the health check is appropriate for Scotland, our farmers and crofters, our environment and our national interest. I commend the motion to the Parliament.

I move,

That the Parliament, noting the European Commission's legislative proposals for the health check of the Common Agricultural Policy (CAP) reform, welcomes the Scottish Government's commitment to consult on these proposals, and on the longer-term implementation of CAP in Scotland, in order that agriculture remains a dynamic and competitive industry with farmers playing their full part in achieving the Scottish Government's purpose of sustainable economic growth through food production and environmental management of our agricultural land.

Photo of Karen Gillon Karen Gillon Labour 10:12, 29 May 2008

The common agricultural policy is without doubt an important issue in Scotland, but let us not be under any illusion that it does not come at a cost. In 2005, the CAP cost UK consumers £3.5 billion, and in 2008 it takes up 42 per cent of the total EU budget. According to figures from the Organisation for Economic Co-operation and Development, the CAP will cost EU consumers €43 billion in higher food prices in 2008. Those figures cover the combined impact of import tariffs, export subsidies, production quotas and other restrictions. That is why we must continue to reform and update the CAP, ensuring that it is fit for purpose so that it can boost farm competitiveness, protect the environment, improve value for money and address concerns about food prices.

Photo of Jim Hume Jim Hume Liberal Democrat

Does the member acknowledge that the common agricultural policy is such a large policy because it is the only really common European policy?

Photo of Karen Gillon Karen Gillon Labour

That does not necessarily make it right. The points that I have made are still valid, and there is also the common fisheries policy, which Jim Hume may have forgotten about.

We must recognise that, in an ever-expanding EU and with food prices rising while many in the world are starving, the CAP as we know it is neither sustainable nor defensible.

Photo of John Scott John Scott Conservative

In the light of what you have just said, do you agree with Alistair Darling's statement that there should be an end to direct payments to EU farmers?

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

I remind members to make their remarks through the chair.

Photo of Karen Gillon Karen Gillon Labour

For the reasons that I have just outlined, I do not think that the CAP is sustainable in the long term, and we have to accept that. We must move to a situation in which we support farmers to be more profitable in their own right and in which producers are paid a fair price for the goods that they produce. There is not a farmer in the country who would not prefer that situation, and it is our duty to support them so that, in the medium to long term, they can achieve that objective.

In 2003, there was a radical reform of the CAP, which the Labour Government achieved—although it had eluded many of its predecessors. Who can forget the obscene situation in the 1980s when you were in charge of beef and butter mountains across the EU?

Photo of Karen Gillon Karen Gillon Labour

Indeed, Presiding Officer, but you are now of course.

We cannot and will not return to those days of Conservative rule.

The health check provides us with an opportunity to evaluate the reforms of 2003 and make any necessary changes to keep us moving in the right direction.

A number of recommendations have been outlined as a result of the health check. We welcome the minister's commitment to consult stakeholders on how those proposals can be taken forward.

The Labour amendment, which I am glad that the Government will support, adds two important components to the Government's motion. First, it refers to the role that agriculture plays in ensuring the long-term viability of our rural communities by providing direct or indirect employment, purchasing local goods and services and sustaining local populations and, in turn, local schools. The impact is clear. Whatever shape the CAP takes as a result of the health check, it must have communities' sustainability at its heart.

Secondly, the Labour amendment refers to the importance of high standards of animal welfare. We have been on a long journey to get us to where we are in Scotland and we must not allow standards to slip. We must also ensure that the same standards are applied across our European Union partners and further afield.

Photo of Margo MacDonald Margo MacDonald Independent

Does the member think that we have to be in Europe, or signed up to the common agricultural policy, to maintain standards?

Photo of Karen Gillon Karen Gillon Labour

No. I do not think that we need to be in Europe to maintain standards. However, if the member is asking whether I think that we should remain a member of the European Union, I can tell her that I do. The two points are not mutually exclusive.

Photo of Alex Johnstone Alex Johnstone Conservative

Does the member agree that it is essential that we are part of the European Union, so that we can ensure that our farmers are not subjected to standards that are not shared across our common market?

Photo of Karen Gillon Karen Gillon Labour

Indeed. I am a strong advocate of a level playing field for our farmers, not just across the European Union but across the world. Many of the problems that our farmers encounter come from competitors outside the European Union. We should apply the same standards to products that are imported into this country as we apply to goods that are produced by our own farmers.

We are happy to support appropriate environmental management of the land. In government, Labour set the agenda through agri-environment schemes, and the Rural Affairs and Environment Committee has acknowledged the important role that natural flood management can play in flood prevention, particularly on a catchment basis.

The health check recommends the ending of set-aside. The environmental benefits of set-aside, particularly to many farmland bird species, are widely acknowledged. Initial research by the Government has shown that 75 per cent of all set-aside has already been lost as a result of the 0 per cent set-aside rate for 2007-08.

We acknowledge that rising grain prices and global food shortages have changed the debate in many ways, but the Government must ensure that alternative environmentally beneficial options can be found. Some benefits could be delivered through voluntary rural development mechanisms, but Scotland's rural development pot is comparatively small. In the past year, £11 million of public funding has been paid out through pillar 1 in set-aside entitlements. What proportion of that will be redirected to rural development in order to preserve those benefits? What meaningful measures will be found to ensure that we do not further compromise our chance of halting the loss of biodiversity by 2010? I am also keen to hear more from the minister on how he believes that cross-compliance can be simplified and improved in order to bring about greater environmental, animal welfare and food-quality standards across the EU.

We have considerable sympathy for the proposal in the health check to make the national envelope provisions more flexible and useful. In the light of the Shucksmith report on the future of crofting, that is one mechanism that ministers could use to help farmers in our crofting communities and other marginal areas continue to keep livestock. It is important that the consultation considers that option fully and recognises its potential benefits for Scotland.

In the medium to long term, we must be able to move farming away from a reliance on subsidy and into a sustainable and profitable natural state. A key part of that will be how we increase the use of local produce within the public and private sectors in Scotland. That is crucial, so we must find ways to enable it to happen. We would welcome an update from the minister on the progress that has been made on that to date and on what further measures he intends to take.

Similarly, producers must get a fair price for the goods that they are producing. We need more than warm words from supermarket chains, which continue to make massive profits day and daily.

Ministers must continue to press them for greater transparency in their dealings with producers and a commitment to pay a fair price for the goods that they buy. We welcome the fact that the Competition Commission outlined a proposal for an independent ombudsman to settle disputes between retailers and producers. That would be a step in the right direction, but such an ombudsman must have teeth.

We acknowledge the on-going debate about levels of modulation. Labour has argued consistently for moving to greater modulation, because we believe that the benefits that it brings in relation to developing a more sustainable rural Scotland are clear. We do not see voluntary modulation as an alternative to direct funding from the Scottish Government. Therefore, I am disappointed that the Government's "Efficiency Delivery Plans 2008-2011" identify voluntary modulation as an efficiency saving—something that means not spending money, rather than something that makes a positive investment in rural Scotland. We hope that the minister will clarify whether the Government sees voluntary modulation as an efficiency saving as outlined in that document. How can it be an efficiency saving, given that there is only the option of moving money between pillar 1 and pillar 2?

In taking forward the debate about future levels of modulation, we must focus on the context of the debate. For us, it is about incentivising the farming community, based on an agenda of achieving a secure future that encourages diversification, supports environmentally sustainable farming and ensures the long-term viability of our rural communities.

We agree with the minister that we must think through the consequences for Scotland and ensure that we maximise any potential benefits from changes to modulation. I am not yet convinced that the amendments from the Tories and Liberal Democrats are not too prescriptive in that regard. We will listen to the debate before we take a final decision.

I move amendment S3M-2002.3, to leave out from "with farmers" to end and insert:

"playing its full part in ensuring the long-term viability of our rural communities and enabling farmers to play their part in achieving the Scottish Government's purpose of sustainable economic growth through food production, high standards of animal welfare and the environmental management of our agricultural land."

Photo of John Scott John Scott Conservative 10:21, 29 May 2008

I declare an interest as a farmer and refer members to my entry in the register of members' interests for further information. I apologise for not addressing my colleague, Karen Gillon, properly before, Presiding Officer.

I welcome this early debate on the CAP health check and the Government's motion and intention to consult on the health check on CAP reform. Many proposals in that mid-term review are to be welcomed; I will come to that shortly. First, I turn to modulation and the unique and anomalous position in which we and Portugal find ourselves, as the only EU countries to have adopted voluntary modulation. That makes us the odd men out in Europe. We need to see the abolition of voluntary modulation by 2014.

Madame Fischer Boel rightly believes that there should be a level playing field throughout Europe and intends to increase compulsory modulation from its current level of 5 per cent to 13 per cent by 2012.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

If the member is so against voluntary modulation, why did he not support my motion at the Rural Affairs and Environment Committee, which would have meant that voluntary modulation could not be doubled? John Scott voted to double voluntary modulation.

Photo of John Scott John Scott Conservative

I will treat that remark with the contempt that it deserves.

As compulsory modulation increases, voluntary modulation must decrease. I welcome the minister's assurance on that. It is vital that we remember that, historically, every 5 per cent increase in modulation has reduced farm profitability by 20 per cent. Given that farm incomes are subject to enormous volatility because of rising costs and variable end prices, the importance of a steadying and constant single farm payment cannot be overstated.

That brings me to progressive modulation. That, too, is an area in which the minister will have to stand up for Scottish farmers, many of whom have larger farm sizes than the European norm. Many of our largest units have been built up by the most efficient and visionary farmers and food producers, who must not now be penalised for their entrepreneurial flair, given that they support many high-quality jobs in our rural areas. Progressive modulation would be a tax on efficiency. It would discriminate against our most efficient producers and encourage property splitting. At the very least, it would affect Scottish food producers disproportionately. We believe that it is a complete non-starter.

On a more positive note, we welcome the proposal to abolish set-aside, which will allow farmers to get back to doing what they do best: growing food for a daily more hungry world. Given that world grain reserves are now at 52 days supply—the lowest since the second world war— we are only one bad harvest in one country away from a world shortage of grain. Further, if last year's oil price of around $100 a barrel encouraged a massive shift towards growing biofuel crops instead of grain, we can be certain that the current price of $125 to $135 a barrel will reduce grain production across the world even further this year.

Before I leave the issue of set-aside, it is important to note that efforts must be made to hold on to the gains that were made in biodiversity during the set-aside years. That will require ingenuity from farmers, policy makers and Government alike. I support the view that the minister expressed in that regard this morning.

The abolition of milk quotas by 2015 will be widely welcomed by our remaining producers in Scotland, who have had an extraordinarily difficult time since the quota was first introduced in 1983. Indeed, that 25-year spell has seen many dairy farmers go out of milk production; that is a matter of the greatest regret in Ayrshire and south-west Scotland, which are uniquely suited to milk production.

Article 69—now renamed article 58—proposals are to be cautiously welcomed, in as much as they recognise that a problem exists for beef and sheep production in our most fragile areas. Tavish Scott mentioned that. However, we should perhaps look more closely at schemes such as the Irish suckler cow welfare scheme, which is supported from pillar 2 funding, to see whether that model could be applied to beef and sheep production in our less favoured areas, rather than the top slicing of pillar 1 funding.

I believe that we should not yet move towards an area-based payment for single farm payments, and that the historic basis for payments should not be phased out until around 2013 at the earliest, if even then.

We must consider all those proposals in the face of the gathering storm that food security and food price inflation represent. If primary food production is to continue and develop in Scotland, farmers and producers must get a fairer return from the marketplace than they have had in the past, as Karen Gillon said.

The health check must not do anything to jeopardise the fragile shoots of recovery that have recently been seen in Scottish agriculture—the high cost of fuel and fertiliser that is currently being borne by the industry notwithstanding.

I move amendment S3M-2002.1, to insert at end:

"but, in so doing, notes the importance of consulting on the potential impact of progressive modulation on Scottish farms and affirms that any increases in European Union- wide modulation should be matched by a corresponding deduction in levels of voluntary modulation."

Photo of Jim Hume Jim Hume Liberal Democrat 10:27, 29 May 2008

I am pleased to participate in this important debate and, like John Scott, I declare a farming interest.

The aim of the common agricultural policy was to provide farmers with a reasonable standard of living and consumers with quality food at fair prices, and to preserve rural heritage. The policy has since evolved to meet society's changing needs so that food safety, preservation of the environment, value for money and agriculture as a source of fuel crops have become key factors.

Reform of the CAP, under the guidance provided by the Liberal Democrat minister, Ross Finnie, gave farmers greater freedom to decide what crops and livestock to produce. Under the reformed CAP, instead of having to produce specific products to obtain support, farmers can choose what to produce and therefore have an obvious ability to match market demands. At last, it was acknowledged that farmers who are in receipt of CAP support have important responsibilities towards the protection of the environment, animal health and welfare and public health; we in Scotland have a proud track record on all those things.

The health check is broadly welcomed and we know that it is intended to deliver only an adjustment to the CAP if needed, rather than a sweeping reform.

There must be a level playing field for farmers in Scotland, so that we can ensure sustainable food production and a successful agriculture industry. Of course, those two elements must run alongside the environmental stewardship of our land, so that Scotland's renowned biodiversity is retained and nurtured, as my amendment states. We cannot have environmental benefits without economic activity on the ground to deliver them.

The health check includes proposals that aim to simplify the single farm payment scheme, phase out milk quotas fully by 2015 and find ways of protecting livestock production in disadvantaged areas. Those are all welcome moves. There are, however, concerns over the proposals for modulation, which brings me to the key aspect of the Liberal Democrat amendment. Any increases in compulsory modulation by the EU must be tempered with reductions in national voluntary modulation rates. Many farms are already disadvantaged by voluntary modulation, which is not widely practised in other member states; as John Scott said, Portugal is the only country apart from the UK that has voluntary modulation.

There is deep concern in the industry over proposals for progressive modulation. Quite frankly, if progressive modulation is implemented, it will result in land being split into smaller, less efficient units, job losses and the discouragement of expansion in the industry. We must remember that Scotland has larger farms than anywhere in Europe, and that much European farming is lifestyle based, rather than a serious food-producing business. Why, therefore, should we put our country at a disadvantage?

There will be no even-handedness in any system that employs progressive modulation or capping. Large farms with higher numbers of staff will find it impossible to absorb the costs of progressive modulation, and that will undoubtedly cause economic damage. There will be no incentive to expand and develop the business, which will be devastating for our rural economy. The wrong message will also be sent out to future entrants to the industry, at a time when we need to encourage as much young blood as possible. We want to make farming and agriculture an exciting and viable prospect for the next generation.

As I said, we need economic activity on the ground to maintain and secure our environmental benefits. If progressive modulation and capping are imposed, how will that good environmental work be continued if there are no economically viable farms to manage the land?

I am sure that members have all read the Scottish Rural Property and Business Association briefing. A direct quotation from one of the association's members states quite categorically that, if progressive modulation became a reality, he would have to either downsize, which would mean getting rid of livestock and labour, or split the holding. Both options would result in smaller, inefficient farming—just think of the run-rig system of farming back in the 18th century and how inefficient that was. Perhaps Jamie McGrigor will discuss that.

The Liberal Democrats believe that the Scottish rural development programme should be reviewed in the light of concerns over food production and, therefore, food security. We live in an era of just-in-time delivery—unfortunately, gone are the grain mountains and wine lakes, and here are the times of world food shortages. However, as part of Europe, we can help with that. Food production has to be one of our key priorities.

In its 2007 manifesto, the Scottish Government said that it would give Scotland a stronger voice in Europe. It also said that it would work proactively to safeguard agricultural support for Scotland's farmers. I cannot emphasise enough that the Scottish Government must stand by its manifesto commitments to Scottish agriculture. I look to the cabinet secretary for clear assurances that he will fight the cause for Scotland in Europe as strongly as the Liberal Democrats did for eight years; that he will say no to progressive modulation and capping, for the benefit of our environment, economy and agriculture; and that voluntary modulation will reduce if compulsory modulation increases.

I move amendment S3M-2002.2, to insert at end:

"considers that any increase in compulsory modulation must be offset by a corresponding reduction in voluntary modulation to ensure that Scottish producers are not put at a competitive disadvantage within the European Union; further considers that Scotland, with its high proportion of large farm units, must not be disadvantaged by proposals for progressive modulation or capping; believes that, in light of rapidly escalating food and fuel costs, the Scottish Rural Development Programme should be reviewed, with the production of food and food security considered as a key priority, and recognises the correlation between economic activity on the ground and delivery of environmental benefits for all."

Photo of Rob Gibson Rob Gibson Scottish National Party 10:32, 29 May 2008

Interesting comparisons can be made between the condition of agriculture in our least favoured areas and that in our large farms, between that in Scotland and that in England, and between that in Europe and that in the rest of the world. Thankfully, we have, in the EU, the ability to state the case for a European model of agriculture. Of course, there will be many diverse sorts of agriculture within that, but fundamental to it are ideas about the standards of food production. That is the kernel of the debate about whether the CAP health check will work.

As Jim Hume said, it is important that the minister has a strong voice in Europe. Of course, that voice can be strengthened by the route that the SNP wishes to take. However, at the moment, we have a lot in common with other countries that produce a lot of food, such as France. I am delighted that the French have the next presidency of the EU, because that will allow us to have a dialogue with people who have major producers and the sort of diversity of farms that we have. Indeed, Mr Barnier is already setting the pace in that regard. I am delighted that he is talking about making the CAP a

"lasting and more balanced policy in the breakdown of aid, as well as more responsible and safer".

He wants that approach to be continued in the next presidency. That is in stark contrast to the discussion that has been had by the UK.

The UK Government's attitude, which was expressed in a letter by Alistair Darling, is to support free global trade. That attacks the standards that we could have. The aim is not to have barriers for the sake of having barriers, but to ensure the quality of the food that is produced in the European Union and in Scotland. Our beef and sheep producers all over Scotland have a high-quality product that is sold in an export market for the highest values. We are not trying to fill the supermarket shelves to the gunwales with quantity, but trying to produce quality. That product cannot be compared with the lower-quality dodgy material that is produced to lower standards that comes in from some other countries. Alistair Darling seems to want to keep open the door to that lower-quality product. We must avoid that.

Photo of Alex Johnstone Alex Johnstone Conservative

Does the member agree that Alistair Darling has also forgotten environmental standards for climate change gas emissions? We in this country strive to reduce the carbon footprint of our agriculture, but those in other countries have energy-intensive agriculture. We could simply export our carbon emissions and our food production with that.

Photo of Rob Gibson Rob Gibson Scottish National Party

I very much agree. Brazilian beef production involves cutting down rainforest and destroying the world's ecology, which shows why we must resist such mass imports.

Important facets of how we adjust have been mentioned. We should identify the elements in the Scottish rural development programme that need to be boosted. Some aspects that would help some of the least favoured areas need to be considered more carefully. Concerns have been expressed about how the forms are filled in, but we are moving into an age in which support from the Government and various bodies locally helps people to fill in forms. Rather, we must find a more specific means to examine the content.

Most people welcome decoupling, which has led to the potential for much more market-oriented farming. However, just as slipper skippers sell their quota for fishing, armchair farmers buy and sell single farm payments. I look to the minister to find ways to cut that abuse of the system, because that has come only with decoupling. To have a market in farm quotas is wrong.

We must provide start-up funds for new entrants in the crofting areas and many other areas. The policies of the Scottish Rural Property and Business Association

Photo of Rob Gibson Rob Gibson Scottish National Party

I am sorry; I do not have time for the member's intervention, although I would love to take it.

Because large landowners will not let out farms, fewer farms are available for people. In the crofting areas, we are trying to solve the problem by having resident crofters, but we need money under the schemes to support new entrants. That is another reason why the suggestion of examining the Irish model for suckler cow payments is important.

Above all, the health check, our friends in other countries and the commissioner's visit to Scotland this summer to see what we do will help us to face up to the food challenges.

Given that the costs of cereals have shot up and that much land has been taken out of being set aside, we must try not to disadvantage sheep and cattle producers, which support life in many communities that would be least able to support themselves otherwise. That is one issue that the health check can help us to consider.

Photo of Peter Peacock Peter Peacock Labour 10:38, 29 May 2008

At times, the pace of change in the common agricultural policy is positively glacial, but we also have flurries of activity, as we have with the health check. The health check does not appear to be hugely controversial but, at the European level, the common agricultural policy is still controversial. As Karen Gillon said, the policy consumes about 40 per cent of the EU's budget and its successive interventions over the years have created a hugely distorted marketplace, as we all understand. The countries with the largest agricultural sectors gain the most from the policy. Export subsidies can affect and damage developing countries, about which we are all concerned.

As Karen Gillon said, the big long-term policy question is whether the CAP is sustainable when it has such costs, affects the third world and creates market distortions. The EU believes that the policy is unsustainable in the long term, which is why the common agricultural policy reform programme is in place. The reforms are designed to reduce direct payments to producers.

Whatever the big long-term policy questions are, there is no doubt that the common agricultural policy is here to stay in the short to medium term and in the foreseeable future. In that context, the health check is important to adjusting the programme to make it more fitting for immediate future years. As members have said, the CAP is hugely important to Scotland. It helps to keep people in the countryside, to develop the rural economy and to manage the countryside, with an emphasis on environmental questions. It is also the basis of our food production.

As I said, the health check appears to be largely uncontroversial, although clear differences are emerging between agricultural sectors. NFU Scotland takes particular positions, not all of which the SRPBA shares. Crofters have different positions on some issues from the NFUS and the SRPBA. RSPB Scotland and other environmental organisations also have distinct policies in the framework of the health check. That is why it is important for the minister to listen carefully to all the views before formulating his response to the UK Government and the EU to inform the outcomes of the discussion.

As members have said, the milk quota proposals have attracted little contention, so I will not dwell on them. There is also little contention about the changes to the set-aside arrangements, although, as John Scott noted, RSPB Scotland and other environmental organisations have highlighted concerns about the loss of habitat and the need for mitigating habitat measures in the Scottish rural development programme. In a briefing from the NFUS earlier this week, I was told that, notwithstanding the changes to the set-aside arrangements, perhaps only 50 per cent of previously set-aside land is coming back into production this year, so the situation is not all bad from an environmental point of view.

Consensus is broad about the national envelope and I welcome what the minister said about keeping that flexible and open to more options.

As Karen Gillon said, we set out our position on modulation when the SRDP was debated. As members have said, the Commission proposes progressive modulation. The case for that is unproven. The NFUS has pointed out well that a technical device simply to split farming units could be used to go under the levels. What would be the point of that? None at all—it would diminish efficiency and cost jobs. Much more debate is needed about progressive modulation, as the minister acknowledged.

The case for historic payments is less and less clear as time goes on. We must move away from that system and towards a system of flat-rate and area-based payments, which are supported by several sectors, including the environmental sector and crofters, if not by the potential losers. However, even the SRPBA has accepted the need for change in historic payments.

As members said two weeks ago, the Shucksmith report on crofting made many recommendations about agricultural payments. It said that moving from historic to area-based payments was important and argued for more modulation in rural development funding. It supported extensive use of the national envelope to address disadvantages for crofters and possibly to support the bull hire scheme. I hope that the rural development programme might also help with the costs of sheep tagging, which is causing great controversy and worry in the crofting communities.

Shucksmith supported new measures for new entrants. The report called for changes in the less favoured area support scheme and an increase in the minimum payment rate under that scheme. It sought changes to the rural development programme, recommended linking payments more directly to public goods and measuring public goods and argued for a mountain area classification. The report also called for more use of the article 69 provisions, which John Scott mentioned and which have been important. Tavish Scott has talked about that.

The Shucksmith report highlighted the importance of retaining and extending the crofting counties agricultural grants scheme, to improve provision for new entrants and to support other enterprises that are land based but not agricultural. The report also pointed to the success of the LEADER programme and the importance of its principles, which could be pursued under the rural development programme, and to the success of initiative at the edge, which my Labour colleague Brian Wilson started. I know that SNP front benchers will be happy to support the continuation of any initiative that he successfully established—I see some heads moving but not nodding.

The Shucksmith report also highlighted housing grants for crofting, which remain important. In examining responses to the consultation, I hope that the minister will consider what the Shucksmith report recommends and what he can act on now to help crofters and to represent their interests in the health check changes.

Photo of Jamie McGrigor Jamie McGrigor Conservative 10:45, 29 May 2008

I refer to my agricultural interests in the register of members' interests.

I welcome the opportunity to speak in today's debate, which I hope will inform and guide ministers in the run-up to the crucial agriculture council in November and the full EU Council in December. It is vital that Scotland gets the best possible deal from the health check proposals, as the conclusions will impact on farming and crofting for many years to come.

It was kind of Karen Gillon to remind us of the surpluses under the Conservatives. Do not worry, Karen, blue skies are round the corner.

My colleague John Scott referred to modulation or, as I prefer to call it, agricultural clawback tax. We all know that the EU agriculture commissioner, Fischer Boel, detests voluntary modulation because she sees it as a nationalisation of the CAP. Farmers and crofters, especially those who failed to access the agri-environmental schemes that voluntary modulation purports to underpin, might call it something much worse.

I do not know why only we and the Portuguese insist on this masochistic exercise for our farming industry. Will the minister give us a categorical guarantee that any increase in compulsory modulation across Europe will be met by an accompanying equivalent reduction in voluntary modulation by the Scottish Government? That is the only fair and equitable way forward. Anything less will perpetuate or even increase the unlevel playing field with which our farmers and crofters have to deal. Ministers have said that they have the powers to reduce voluntary modulation as the compulsory element rises, but they must confirm that they will do that or, better still, get rid of it. The Scottish Conservatives' support for an increase in compulsory modulation is conditional on a reduction in voluntary modulation. We hope that the Government and other parties will therefore support our amendment.

On progressive modulation—the cap on single farm payments above a certain level—we share the concerns of farming and landowning representatives that Scotland will again be penalised compared with other EU countries because we tend to have larger farming units. Where is the fairness in hitting the most efficient farmers and food producers? What is to prevent large farming businesses from splitting themselves into smaller units to avoid progressive modulation?

Photo of Jamie McGrigor Jamie McGrigor Conservative

Not on that point.

We look forward to a commitment from the cabinet secretary that the Scottish Government will do all that it can to oppose progressive modulation. I believe that the money that is being top sliced from modulation—or, as some farmers would say, stolen from them—should be used to reflect modern farming priorities. For example, most hill farmers would be lost without quad bikes, but there is no priority to support the purchase or maintenance of quad bikes. Quad bikes rely, for the most part, on petrol, so they cannot use the red diesel that is put in tractors.

I am convinced of the importance of hill roads that open up far-flung land for good agri-environmental schemes and I believe that they should also be on the list of priorities. I would like to see a return to grants for lime and slag, to encourage tired pasture and improve grazing in marginal areas. That would help hill farmers' productivity and bring extra added value.

Will the minister ensure that so-called flood management tries to prevent floods rather than allowing the water to go where it wants? It seems ridiculous to do that.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

Will the member take any interventions at all?

Photo of Jamie McGrigor Jamie McGrigor Conservative

Not at the minute.

Set-aside played its part and it has been beneficial to wildlife. If it is to go, we need to see a smooth transfer of set-aside entitlements to standard entitlements. I trust that ministers will arrange that. In the long term, it would benefit agricultural land to have a system of rotation of different crops rather than persistent monocultures, which we have seen previously.

I am aware that proposals within the CAP health check under article 58 to allow specific recoupling for direct headage payments will be controversial. The Scottish beef calf scheme under the beef national envelope has certainly fulfilled a useful role in supporting the beef sector. Most farmers and crofters want to see the retention of the beef national envelope. Ireland's suckler cow welfare scheme has had a massive uptake and I am prepared to say that the Scottish Government should think imaginatively about a new measure or measures to support the retention of cattle and sheep in our more marginal areas, including most of my region of the Highlands and Islands. At the same time, any new support measures should not risk market distortion, not least as the beef market, especially, has begun to recover in recent times.

Ministers must ensure that any new support measures under article 58 do not become a Scottish Highlands versus lowlands issue. The retention of quality sheep and cattle in the marginal and remote areas of the country is crucial, because those farmers supply the stock that is fattened and processed in the rest of the country. The maintenance of critical mass in sheep and cattle numbers is of massive importance. Perhaps ministers could use some of the ideas in the Aylward report into the EU sheep sector; it certainly has some positive ideas, which have been welcomed by industry representatives, including the Scottish Crofting Foundation.

On the subject of the Aylward report, which the European Parliament's agriculture committee adopted this week, like the Scottish Crofting Foundation I was pleased to see that it called for the abandonment of electronic sheep tagging, which some MEPs have correctly branded an

"ill thought out, illogical and unworkable scheme."

I could not have put it better myself.

Photo of John Farquhar Munro John Farquhar Munro Liberal Democrat 10:51, 29 May 2008

I am sure that if Jamie McGrigor's proposals were accepted there would be many happy farmers and crofters in Scotland. He mentioned the disparity between the north-west coast of Scotland and the rest of the country. I welcome his suggestion that more support should be provided for roads into the Highland hills, as that would make my life much easier when I was out to get a beast for the pot.

One challenge that we face with large, centralised systems such as the CAP is making them flexible enough. Many suggestions have been made about how that should happen to ensure that the CAP can react to changing situations and fit the many different farming enterprises that can be found across the extended European Union. A problem has emerged because the CAP was framed some years ago to meet the demands of the day and things have changed dramatically over the years. That is why we need a health check.

World markets have changed dramatically in the past couple of years. The days of huge EU food surpluses are over and there is a need for the CAP to move back to its origins as a system devised to feed the people of Europe.

Our farmers and crofters must once again be encouraged to produce the food that we all need to eat. They need to farm sustainably, as members have said, but farmers and crofters must be encouraged to grow crops and to breed sheep and cattle. There has been a dramatic decline in rural Scotland in the sheep stock and in cattle numbers, which is having an adverse effect on the ecology of those areas.

That is why I particularly agree with the Lib Dem amendment that the rural—

Photo of John Farquhar Munro John Farquhar Munro Liberal Democrat

I do not always agree with Lib Dem amendments, but Jim Hume is such a nice man that I am convinced that I must support it today.

The rural development programme needs to be looked at once again so that farmers are encouraged to produce food rather than to farm subsidised weeds. Members may wonder why I make that comment. It refers to the set-aside proposals that were introduced some years ago, which mean that crofters and farmers can sit back, let the vegetation grow on the ground and not do anything about it, but they still get their regular single farm payment. They do not need to bother to have any stock, whether cattle or sheep. That seems all wrong. In my part of the world, stock numbers have plummeted since the single farm payment and decoupling were introduced and much croft land now lies empty as a result of the set-aside proposals. I will give one statistic for members who are wondering how much stock numbers have fallen. Last year on the Isle of Skye—that famous island that I have often mentioned in the Parliament—the wool crop fell by a third.

The document that was recently produced by the Ireland East MEP Liam Aylward—which is a promising report for the European Parliament's Committee on Agriculture and Rural Development—has been mentioned. It suggests that member states should have the right to introduce an environmental sheep maintenance scheme that recognises the positive role that sheep play in environmental protection. Like many others, I welcome Mr Aylward's report, but suggest that the idea could be expanded in order to encompass cattle production. I encourage the minister to have a good look at the report and at the possibility of introducing schemes to increase sheep and cattle numbers.

It is also vital that we maintain the beef national envelope. In that context, I welcome the NFU's recent change of position. Furthermore, I would like an envelope to be introduced to encourage the conservation and production of rare and indigenous breeds, such as Highland cattle, the Shetland breeds and the Aberdeen Angus and Belted Galloway breeds. Why not? From an historic and production point of view, it is important to maintain those breeds.

Less favoured area support scheme funding must be better targeted at genuinely less favoured areas. I invite the cabinet secretary to drive through the lush lands of, say, Aberdeenshire or Berwickshire with a crofter who works the shallow acid soils of the rocky west Highlands. I am sure that he would learn from the crofter's analysis of the relative challenges of farming very different lands. The relatively lush east coast pastures may be less favoured than the best arable land in the south, but the rocky land of much of the Highlands and Islands is far less favoured than much of the land that the less favoured area support scheme currently covers.

We are travelling in the right direction, but there is much to do. A health check has been proposed. By the time that the discussions and debates have been completed, we will have gone a long way towards supporting farmers and crofters throughout the country.

Photo of Dave Thompson Dave Thompson Scottish National Party 10:58, 29 May 2008

It is true that employment in agriculture has fallen in recent years, but such employment is still extremely important to Scotland. It is particularly important to the Highlands and Islands, which provide an astounding 53 per cent of Scotland's total agricultural area. According to Highlands and Islands Enterprise, the agriculture industry provides the Highlands and Islands with just under 24,000 jobs and is worth around £280 million annually. Therefore, it is, as the motion states, essential that

"agriculture remains a dynamic and competitive industry with farmers" and crofters

"playing their full part in achieving the Scottish Government's purpose of sustainable economic growth through food production and environmental management of our agricultural land."

The livestock sector and our more remote communities are in particular need of on-going support. Therefore, we must ensure that maximum flexibility exists in the final CAP health check proposals to secure the long-term sustainability of such an important industry. I know that the cabinet secretary will speak up for Scotland so that our special needs are understood throughout Europe, and that everybody who is involved in agriculture in Scotland will fully engage in the Scottish Government's consultation on the CAP health check to ensure that their and our interests are fully looked after.

The NFUS has already broadly welcomed the CAP health check proposals and supported the simplification of the single payment scheme, the phasing out of milk quotas by 2015, the abolition of set-aside, the protection of livestock production in disadvantaged areas and increased levels of compulsory modulation. Of course, it would also like any increase in compulsory modulation—

Photo of Jamie McGrigor Jamie McGrigor Conservative

Does the member agree that all modulation is compulsory for those who have to pay for it? It is not voluntary at all.

Photo of Dave Thompson Dave Thompson Scottish National Party

I suppose that that is true.

Compulsory modulation, which would help to create a level playing field throughout Europe, must be balanced by a reduction in voluntary modulation. I support the NFUS on that, because the playing field will not otherwise be level. I do not want our farmers and crofters to be disadvantaged in any way.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

Will the member explain why he supports the Scottish National Party Government's move to almost double voluntary modulation? It was the cabinet secretary's decision to do that.

Photo of Dave Thompson Dave Thompson Scottish National Party

I am surprised that Mr Rumbles asks that question, as the previous Government wanted to make the level of voluntary modulation even higher.

In considering the CAP health check proposals, we should take into account the recommendations of the Shucksmith crofting inquiry. I am sure that the Scottish Crofting Foundation will play a full part in the on-going consultation. Shucksmith specifically recommended that flexibilities in the CAP health check proposals should be used, and he specifically supported the revision of single farm payment rates to make the structure flatter, with a move towards an area basis for payments.

His report also favoured considering extended national envelope provisions to address disadvantages for small farmers and crofters in crofting areas, including the funding of a bull hire scheme and the introduction of mechanisms that would permit allocations of single farm payment entitlement to newcomers.

That there will be no shortage of input into the consultation is certain. Our job and that of the cabinet secretary is to ensure that all views are given a fair hearing and that a revised CAP that enhances Scottish agriculture and our precious environment comes out of the process.

Of course, the CAP is not just for the benefit of the environment and people in agriculture; it is also for the benefit of the wider public. We must link it into our national food policy. The first steps towards that policy were taken in January. They were designed to boost jobs and business, help make food healthier and minimise the environmental impact of food production. The policy aims to join up Government policies on every part of the food chain, from the farm gate to the plate. The operation of the CAP will have a major effect on it.

Scotland produces some of the finest food in the world. Food is about much more than what we eat: it is about jobs, the environment, tourism and the health of our nation. It is therefore vital that we get all our food policies right to secure a healthier, wealthier and greener Scotland.

Adjusting the CAP is by no means the only problem that rural businesses and communities face. One of the primary causes of pressure on agriculture and current price inflation is the ever-rising cost of fuel, especially in the Highlands and Islands. We heard much about that in last night's parliamentary debate. In the past ten years, standard road fuel duty has increased by around 33 per cent; in the same period, the level of duty on red diesel has increased by 275 per cent, which is shocking. The NFU has clearly illustrated the effect of that on farmers and crofters. On 20 May, it said that the cost of filling one farmer's combine had gone up from £267 last year to £560 this year and that the cost of filling a tractor has gone up from £89 to £186. That was around 10 days ago; the cost will be even higher today. In the light of that real increase in costs, the chancellor must reduce fuel taxation if he is to have any credibility at all. As we wrestle with the intricacies of the CAP health check, we must be keenly aware of all the other factors that affect the ability of our crofters and farmers to produce wholesome, environmentally friendly food at a price that allows them a living.

Photo of Richard Baker Richard Baker Labour 11:04, 29 May 2008

No one could reasonably accuse the Parliament of not sufficiently debating rural issues—at least, not if we consider the number of debates that we have had on the subject. The minister from whom we are waiting to hear has been on his feet in the chamber so often that the Minister for Schools and Skills will soon deem that he has had two hours of physical education a week.

I welcome this debate on the common agricultural policy health check, as the common agricultural policy is an issue of crucial importance to Scotland's farming industry and our environmental sustainability.

Photo of Robin Harper Robin Harper Green

Yesterday we had a debate on climate change without any mention of agriculture; today we are having a debate on agriculture and, so far, there has been no mention of climate change.

Photo of Robin Harper Robin Harper Green

Apart from a tiny mention. Does Richard Baker agree that, in ensuing conversations about the CAP, we need to start negotiating how it could be modulated and changed to support a reduction in the enormous amounts of greenhouse gases that are produced by agriculture to the levels that are produced by transport and housing?

Photo of Richard Baker Richard Baker Labour

I certainly agree that there needs to be a rebalancing of the debate in that context. I am aware that the CAP health check is crucial to our environmental sustainability and, as a member for North East Scotland, I am keenly aware of how important farming is to our local economy and the many communities and rural businesses that rely on our having a successful farming sector.

No one would argue that the CAP has been a perfect instrument to support the sector or that reform is not necessary. We will, of course, debate the pace and detail of the reforms—the consultation process will be vital in that regard—and I look forward to the minister's reporting back to Parliament at the conclusion of that process.

Useful and informative views have already been expressed on the direction of the CAP health check, with particular debate about changes in EU-wide modulation, what the level of modulation in Scotland should be and how it should be achieved. Labour has argued for moving to greater modulation and I hope that the debate about future levels will take place in the context of farmers and rural businesses being incentivised to benefit from taking part in rural development and in projects to encourage environmental sustainability, because modulation can be an agenda for diversification as well as for encouraging environmentally sustainable farming.

It is important to have a system that can respond to changing circumstances, which we in Scotland know about only too well. There is certainly merit in the proposals for flexibility around article 68, so that there is the potential, for example, to focus on particular areas or to assist in risk management. There will be at least some consensus on several of those issues. The general theme of the health check in developing the CAP in a way that takes into account public confidence is sensible.

It is important that the EU, the UK and the Scottish Government look beyond simply changes to the CAP and take wider and longer-term approaches to the future of the farming industry. I have spoken to farmers who wish that the sector was not so dependent on subsidy while acknowledging that that subsidy has been crucial in the past few years. However, we should be more ambitious in seeking to create a sustainable and profitable farming industry in Scotland. That means securing more business for local farmers through public procurement from the Scottish Government, local authorities and public sector agencies. It would be interesting to hear from ministers an update on their efforts in those areas.

There is the wider issue of food prices. Although there is understandable concern about rising food prices, there can be no doubt that, for too long, farmers in particular have not received fair prices for their produce—farmers have certainly not been getting a fair price from retailers. Whatever debate we have about reform of the CAP, it will not make a difference to sectors such as the Scottish pig industry, which is going through severe difficulties at the moment. I am aware from my visit to Grampian Country Pork in my region not only of how deep that problem is, but of the devastating effect a failing Scottish pig industry would have on rural communities and on animal welfare standards that far outstrip those in other parts of the world. I hope that the Scottish Government will do what it can to assist that key industry.

A number of us pressed in this chamber for the Competition Commission to take further steps to investigate the relationship between producers and supermarkets. It is significant that the commission proposed an ombudsman to settle disputes between retailers and producers. I am pleased that evidence will be taken in confidence, which is crucial. The new arrangements were long fought for and hard won. I imagine that they will take time to bed down, but I hope that the measures will create a more level playing field and that the key relationship between producers and supermarkets will benefit the sector.

Along with other issues that I and others have mentioned, those arrangements will be important in securing a long-term, sustainable and profitable future for Scottish farming. Our discussion about the CAP health check cannot take place in isolation from those issues, but it is in itself of crucial importance. It is right that the Scottish Government and this Parliament work with all those who have a keen interest in such changes to ensure that they work for Scotland, Scottish farming and for successful, sustainable rural communities.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat 11:09, 29 May 2008

The SNP's farming manifesto said that modulation would not be used to disadvantage Scotland's farmers. When the SNP Government came to power 12 months ago, almost the first thing that Richard Lochhead did was announce that he was almost doubling the so-called voluntary modulation for our farmers from 5 to 9 per cent by 2012.

During questions on the announcement last May, John Scott said on behalf of the Conservatives:

"Today's announcement, however, will bring about an increase of, effectively, 5 per cent in voluntary modulation, which will reduce net farm incomes by 20 per cent, bringing them down to just over £8,000. That is still too great an increase in voluntary modulation."—[Official Report, 31 May 2007; c 260.]

How right he was. On 19 September last year, the Government brought its amendments to the common agricultural policy single farm payment and support schemes regulations to the Rural Affairs and Environment Committee to introduce increases in so-called voluntary modulation. To introduce those cuts to farmers' incomes, the Government had to have a majority of votes on the committee to see it through. I immediately lodged a motion to oppose those financial attacks on our farmers.

I never expected SNP or, indeed, Labour MSPs to vote to oppose the Government—after all it was the SNP Government hitting the farmers and hoping that they would not complain and Labour that wants greater hits on our farmers through so-called voluntary modulation. At least they are open and consistent on that point.

Photo of John Scott John Scott Conservative

Mike Rumbles will recall from that debate in committee that when I asked the minister what the effect would be of not voting for the changes, he said:

"Annulment of the regulations would lead to a substantial delay in implementing the £1.6 billion rural development programme and everything that is associated with it. It would also lead to problems with single farm payments. Because the purpose of the regulations is to seek the Parliament's permission to take the voluntary modulation elements into account ... "—[Official Report, Rural

Development and Environment Committee, 19 September 2007; c 99.]

Photo of Trish Godman Trish Godman Labour

Mr Scott, this is just an intervention, not a speech.

Photo of John Scott John Scott Conservative

It would have been utterly damaging—

Photo of Trish Godman Trish Godman Labour

Mr Scott, please sit down.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

John Scott betrays his naivety—he actually believes that. In fact, the payments were delayed anyway. As the minister made absolutely clear during that debate, the matter could be reviewed at any time.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

I have just taken one. I did not expect that strong defender of the Scottish farmer, John Scott, to actually vote with the SNP Administration to increase modulation, a policy that he so readily condemned when the minister introduced it.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

I know that the gentleman and lady do not like the facts, but they are the facts.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

No. I was astonished that, prior to the election, both the SNP and the Tories had pledged to support the rural community and protect farmers' incomes by opposing high rates of voluntary modulation. Hypocritically, they have both rejected the opportunity to achieve a fairer deal for Scottish farmers by voting through the Government's almost doubling of the rate of voluntary modulation, which reduces the average farm income to just over £8,000 a year.

Why did John Scott, on behalf of the Conservatives, fail to take action and use his vote to record his opposition to the situation?

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

I have already taken an intervention. The Tories will say that they did not object—as I heard John Scott say today—because it could delay the payments to our farmers. What utter and transparent nonsense; how weak and feeble. I do not believe a word of it. The only other reason for failing to vote against the measures when they had the opportunity must either be John Scott's incompetence in standing up for Scottish farming or his deliberate decision to support the SNP Government's proposals while at the same time arguing publicly against them.

Since the result of the vote in committee would have been six to two instead of seven to one, the Tory position must be incompetence, hypocrisy or simply a wish to toady up to the Government. It was certainly not an effort to stand up and be counted in support of our hard-pressed farming industry. Once again, John Scott has been found out and, indeed, found wanting.

It is for those reasons that I turn to the Tory amendment before us today, which reeks of hypocrisy. How can the Tories be trusted on what they say here in the chamber? In May last year, they said that what was proposed was too great an increase in voluntary modulation, but they voted it through in September. Today they say that increases in compulsory modulation must be matched by

"a corresponding deduction in ... voluntary modulation."

What on earth will they vote for tomorrow?

The Liberal Democrats are absolutely clear that the difference between the Conservative Party and the Liberal Democrats in this Parliament is that we say what we mean and vote for it, whereas the Tories say one thing for public consumption and, at the first opportunity, support the SNP Government by voting through these measures.

Richard Lochhead accepted the call in our amendment for a review of the SRDP—or did he?

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

The cabinet secretary said it again. Every minister says that the SRDP is always under review. Either Richard Lochhead is so naive that he believes his own civil servants or he thinks that we are so naive that we believe his claim.

Karen Gillon once again reinforced Labour's clear position that there should be more modulation. In my view, the party's stance is misguided, but at least it is consistent and honourable.

In conclusion, I ask the Minister for Environment to confirm in his summing up that, if Parliament votes to reduce voluntary modulation, the Government will implement that decision.

Photo of Nanette Milne Nanette Milne Conservative 11:16, 29 May 2008

Given my life experiences, I probably find it easier to grapple with the complexities of a medical health check than those of a CAP health check. However, I am fortunate to have beside me advisers who are, to coin a phrase, expert in the field. We are, after all, discussing a series of proposals that could have a significant impact on the future of Scottish agriculture.

We welcome the Government's stated intention to consult not only on the EU's CAP health check proposal but on the longer-term implementation of CAP in Scotland to ensure a sustainable and competitive agricultural industry that allows farmers to play a full part in growing our economy and contributing to food security through food production and which, at the same time, lets them manage the land that provides their living in a way that sustains and enhances the environment and biodiversity that are so important to Scotland's heritage and tourism industry.

Given the growing global concern over food security, it is quite likely—and, indeed, is the NFUS's belief—that in the longer term farmers will be required to produce food as a priority. Therefore, it will be important to sustain the industry's viability until that time.

We are all aware of the difficulties that farmers have faced in recent years in achieving a realistic farm gate price for commodities such as milk. The NFUS is rightly concerned with ensuring that any altered system of CAP support to farmers does not distort the market and give retailers a further excuse to reduce the price that they pay to them. Moreover, farmers must be given the incentive to develop their businesses and increase not only their viability but their profitability by reducing the costs of food production or by adding value before food goes to market.

The Scottish Conservatives have been at the forefront of the food security debate. We led a chamber debate on it only a few weeks ago and, months before that, John Scott said on record:

"current thinking suggests Europe will need in future not just to return to self sufficiency, but also to grow food for other parts of the world's population as well."

He added:

"with world grain stocks at their lowest since World War 2 and food price inflation increasing, farmers must be given incentives to increase food production to meet growing local and worldwide demand."

As a result, this mid-term review of the CAP comes at a particularly important time for Scotland's farmers, and we welcome a number of proposals in it.

I do not intend to go into much detail on those proposals, which have been well aired by speaker after speaker this morning. I should point out that the only aggressive input came—as usual—from Mr Rumbles on my left. However, as Jamie McGrigor and others have stressed, the key issue is that given the disproportionate reduction in profitability caused by modulation increases, any increase in EU-wide compulsory modulation must be matched by a corresponding reduction in voIuntary modulation. I realise that that view is not accepted by everyone; indeed, in its briefing, the RSPB makes it clear that it sees it as a threat to rural development funding. However, in our opinion, it is vital in ensuring a level playing field for all EU member states.

We also reject any plan to introduce progressive modulation of higher payments, as such a move would undoubtedly put Scotland, with its higher proportion of large farm units, at a competitive disadvantage within the EU and would threaten good jobs in the various rural communities that are supported by large and efficient farm businesses.

Although the proposals to abolish set-aside are welcome, we must not lose the gains in biodiversity that resulted from the policy. As Peter Peacock pointed out, careful thought will have to be put into efforts to retain them. We also welcome the move towards abolishing milk quotas by 2015, and any measures that might benefit beef and sheep production in the most fragile areas of Scotland will also have to be given careful consideration.

However, as John Scott has made clear, we are not yet willing to accept a move from the historic basis of farm support to an area-based single farm payment. We believe that any such approach should be taken only after careful consideration and that, if it should happen, there should be a very gradual phasing-out.

We welcome many aspects of the CAP health check proposals. We need a proper level playing field across the EU, with support for rural and environmental development to ensure a fair deal for our farmers, who, despite producing food of a quality that, as Rob Gibson pointed out, is internationally recognised, still have to shoulder huge burdens of regulation and European red tape. I hope that one outcome of the health check will be to stop the Government interference that inhibits farmers from doing what they want to do and indeed what they do best: producing food.

We, Europe and—increasingly—the world need a successful and thriving agricultural industry, and we must fight for it in Scotland. We look forward to the consultation and hope that one of the outcomes will be, as the motion states, to ensure

"that agriculture remains a dynamic and competitive industry with farmers playing their full part in achieving ... sustainable economic growth through food production and environmental management of our agricultural land."

I hope that our amendment will receive Parliament's support at decision time. We in turn will support the Labour amendment and—believe it or not—the Liberal Democrat amendment.

Photo of Sarah Boyack Sarah Boyack Labour 11:21, 29 May 2008

We have had a good debate on the principles of CAP reform. There is no doubt that the policy needs reform; the problem is that there are many different prescriptions and that, these days, we face myriad challenges that are totally different from those that people faced after the second world war. For example, the recent extension of EU membership means that CAP as it stands is unaffordable.

In its call for support for a "dynamic", "competitive" and "sustainable" farming industry in Scotland, the motion sets out most of the issues that we need to focus on. However, our amendment seeks to put the industry into a broader rural context, because we must ensure that our farming and rural communities have a joined-up approach. The rural development plan will be crucial to that process.

We also think that the Scottish Government's food policy must play a far more proactive role in this agenda. We have very much welcomed the discussion that the Government has led on the issue, but food procurement will be central to the policy's future success. As we all know, the East Ayrshire local food procurement project was a success and I will be grateful if the Minister for Environment, when he sums up, can give us a date for rolling out the programme. After all, in allowing our schools, hospitals and local authorities to buy fresh local produce, it represents a crucial practical way of supporting Scottish agriculture. It commands the chamber's complete support and should be an essential component of a high-quality food strategy in Scotland that supports our farming industry. We also need to link farming activity to more localised processing and production; indeed, we have discussed the role of abattoirs in that respect.

We support the Scottish Government's call for sustainability and its emphasis on the positive part that farmers increasingly play in their stewardship of our environment and landscape. Indeed, the chamber must recognise their significant role in that matter. On that point, I hope that Jamie McGrigor will take another look at sustainable flood management issues. They are actually part of the solution to the problems faced by our farming industry and to the challenge of flood management in Scotland.

Photo of Sarah Boyack Sarah Boyack Labour


Any CAP reform must include a range of environmental measures that are of practical use to farmers. They should also receive financial support for implementing them; after all, as all this activity has public benefit, it requires public investment.

The NFUS has said that farmers find the process of meeting our environmental objectives cumbersome and prescriptive, and we believe that the CAP health check will provide opportunities to find ways of simplifying the process.

As Rob Gibson made clear, we must also address issues of quality. Consumers want quality from the farming industry, but at a price that they can afford. I am glad to see that consumers are beginning to reject BOGOF—buy one get one free—deals, particularly those on perishable goods. People do not have the time to prepare and eat all the foodstuffs that supermarkets are offering at those very cheap prices. The deals are not good both because they increase waste and because they affect farm income. They may be a loss leader for supermarkets, but they are a bad deal for farmers. We need to question them, and consumers are now asking the right questions.

We wanted our amendment also to highlight the fact that Scotland has in place more rigorous systems of animal welfare than exist elsewhere. Our farmers produce high-quality stock and good-quality food to higher welfare standards than those not only in the rest of Europe but in other parts of the world. Our amendment acknowledges that, and I am glad that the Scottish Government has agreed to accept it. We want to see animal welfare being delivered through the CAP health check. Scotland is delivering higher animal welfare standards and public money is being given to farmers for that. We want to ensure that, in taking on those higher standards, our farmers are not disadvantaged and that there is a level playing field across Europe.

There is not complete agreement that the single farm payment is completely out of date—the Tory view is different from that of the other parties in the chamber. Over time, the single farm payment will become increasingly out of date: it is an historical payment and it needs to be replaced by area-based payments.

Labour has concerns about both the Tory and the Liberal Democrat amendments, neither of which addresses fully the relationship between agricultural support and wider rural development support. I ask the minister for an answer to Karen Gillon's question about voluntary modulation as an efficiency saving. We have read the Scottish Government's efficiency programme and see a contradiction between what is said in the document and what ministers have said in the chamber.

Big issues in the debate need to be addressed. The rural development plan is crucial to the wider framework for supporting farmers and our rural communities, including the public interest aspect. Some superb comments have been made about the need for public support for our rural areas. John Farquhar Munro, Peter Peacock and Dave Thompson focused on the varied and tough issues that face our farming and crofting communities. Those communities need proper support and we need to ensure that that is contained in the CAP health check.

Richard Lochhead was very snippy about the UK Government's vision. He made great play of the differences between Scotland and the rest of the UK. We want to be absolutely clear that the whole point of devolution is that the Scottish Parliament stands up for Scotland when its experience is different from that of the rest of the UK and feeds that into negotiations at European level. That is why John Farquhar Munro, Peter Peacock and Dave Thompson were absolutely right to highlight the challenges that our Highlands and Islands areas face.

Scotland's perspective is slightly different from that of the rest of the UK, but Labour absolutely defends the position of the UK Government, which has led the debate in saying that the former CAP system is not fit for purpose and needs to be reformed. Karen Gillon was absolutely right to point out that the CAP takes up 42 per cent of the total EU budget. With the new additions to the EU, such a figure is simply not sustainable. Reforming the CAP is a challenge, but it is also an opportunity.

Richard Lochhead mentioned climate change, albeit briefly. The issue is one on which the UK is leading the way. Surely we need to join up our thinking on that—it involves a challenge but also an opportunity. Some of the comments and positive ideas that emerged from yesterday's NFUS briefing on climate change were spot on and should form part of the CAP reform debate. We cannot separate out the debate on climate change from that on CAP reform. We need the tools in CAP reform to enable our farmers to do the right things to address climate change. Given that that is in the public interest, farmers should get support for doing that.

On the Labour benches, we believe that we have to think about the bigger picture, too. We support the need for a level playing field for our farmers, and the need to think more globally and broadly not only about climate change but about the trading relationships that we enter into as a country. The trading relationships that Europe has set up with the rest of the world are unfair to developing countries. Those countries do not have anything like the level of support that our industries have.

We need to develop a public interest strategy that works for our farmers in Scotland, supports our industries and looks at the challenges. In doing so, we cannot ignore our wider global responsibilities. The Scottish Catholic International Aid Fund is absolutely right in its campaigning on the matter. We need to join up the issues of food support, farming support and our global responsibilities. Thinking globally needs to be part of the debate on the CAP health check.

In Europe and around the world, the big challenges are climate change, our environmental responsibilities, high-quality food production and our ability to source food locally. All of that must form part of a common debate. In debating the CAP health check, the responsibility of not only the Scottish Government but the UK Government is to represent us on those issues. We need to look forward to the next decade and not look back to the past. The question must be: where do we want to be in 10 years? Radical change will be involved and that means that it will be difficult. The overall message for our farming and rural communities should be a good one, but only if we seize the opportunities.

Photo of Michael Russell Michael Russell Scottish National Party 11:30, 29 May 2008

As I did last week in the debate on wildlife crime, I pay tribute to all members who took part in the debate—all members except one, that is. Unfortunately, I refer yet again to Mike Rumbles. The situation repeats itself. I feel as if, almost every Thursday, I enter an alternative universe—one in which I hear the world according to Mike; a world that bears no relationship to the world in which the rest of us live. It is the political version of Tourette syndrome: it starts and then goes on, and on, and on.

The serious point is that the Liberal Democrats had the opportunity today to make a positive contribution to an important debate but, in six minutes of winding-up speech, Mike Rumbles made not one new or positive statement—not a single one. I suggest that wiser heads than his in the Liberal Democrats—should they exist—consider the matter and ask whether what he says in such debates helps to achieve what the party wants to do for rural Scotland, or whether his endless playing to the gallery is destroying the reputation of not only the Liberal Democrats but the Parliament on the matter.

I turn to the positive contributions of every other member who spoke in the debate. Their speeches were done very well indeed, and I will list some of the real, not artificial, issues that were debated. Robin Harper's intervention on Richard Baker seemed almost like a speech. He was wrong to say that the Government is not considering the issue of climate change. Only two weeks ago, we published the important report by Henry Graham and colleagues on the contribution of agriculture to climate change. We will take the issue forward at the Royal Highland Show, where we will hold the first of a series of seminars on how farmers and others can contribute to addressing the challenge of climate change.

I turn to the serious, as opposed to the artificial, points that were made about modulation. The Government was asked to give an absolute guarantee that

"any increase in compulsory modulation must be offset by a corresponding reduction in voluntary modulation".

I can give that absolute guarantee. That is what the Commission intends to do; we support it. The Commission has said that that is what should take place. Members should set their minds at rest on the matter. Jamie McGrigor is one such member—although his other points, including a request for quad-bike subsidy, were not quite so well agreed.

Of course, all suggestions need to be taken into account as we debate the CAP health check. Peter Peacock's opening remark that it is important that Scotland has the opportunity to debate the matter and that the Government should listen to all the views is exactly the right point to make. Many of the points that he raised in his speech are views that will have to be debated strongly. One such issue is set-aside and whether there is any conflict between John Scott's position and that of Peter Peacock. My view is that there is no conflict between growing crops and ensuring environmental benefit. However, we have to have the debate and find out how we should go forward.

The issues that Peter Peacock quite properly raised about LFASS are issues about which I, too, feel strongly. The Scottish Crofting Foundation, among others, has made strong representations to the Government on the matter. We must look at the LFASS and see how it fits into our overall policy. Indeed, Peter Peacock tempted me to speak warmly and approvingly of Brian Wilson. That is not something that I have ever done in my life, and I do not want to start now. That said, initiative at the edge was important. One of the big reasons for that was its concentration on asking communities to face the unpalatable. It asked them to look at the issues and ask: does this community have a future? It was an important debate for a number of communities, and it will remain so.

John Farquhar Munro sensibly raised some of the issues in the Aylward plan that the European Parliament debated this week. I make it absolutely clear that we have a commitment to work with the sheep sector to find the right practical solutions to issues including tagging. We will continue to do that. The Aylward plan contains interesting material on which we need to reflect.

A range of other issues were raised in the debate, such as the SRDP. It has a monitoring committee, which can consider adjustments and does so regularly, so we will not get involved in some massive, overbureaucratic review and restructuring, particularly because the SRDP as it went to Brussels was very much a creature of the stakeholders and the previous Government. We have consistently said that we will continue to review it, because we want it to be well tuned to Scotland's demands. The point that a number of members made about how that relates to some of the issues in the Shucksmith report is interesting, and we will have to reflect on it as we take the report forward.

Sarah Boyack raised a number of points in her closing speech; I will address one of them in particular. She asked about the next stage of the food policy. We will roll out the next stage of that policy at the Royal Highland Show. There are no easy answers to some of the procurement questions, but we want to make progress on them and I hope that she will engage with us in that process as we begin to set out where we are going to go.

This has been a key discussion. We must now send out a clear message about the importance that the Parliament and Government place on the future of agriculture in Scotland. Agriculture is valued because of the important contribution that it makes to our economic life, environmental life and social objectives. We must ensure that it contributes to the vision about which Richard Lochhead and I often talk when we go about the country: the vision of profitable and sustainable businesses in a populated landscape. That is what our ambition should be for rural Scotland.

We have heard interesting and challenging speeches, but this debate is the start of the process. We hope that when we issue the consultation document, we will receive responses from throughout Scotland and that those will reflect the views of the political parties and of the many others who have no politics but who want to ensure that we are capable of achieving the vision of profitable and sustainable businesses in a populated landscape.

Sarah Boyack was also right to point out that we need to learn lessons from previous experience to find out what we can do to improve our record. Single farm payments have been in operation for three years and it is right to examine how well they function and whether any changes can be made to the system to make things easier and more productive for farmers and land managers. We take the point on progressive modulation and will have to consider it.

We stress that everybody in the Parliament will make every effort to strip out unnecessary red tape. Simplification, which is close to the First Minister's heart—as the speeches that he has made in the Parliament show—and to my heart, can be part of the CAP review, but we need to do it in the right context and we need to know where we want to go. Let us keep the vision of profitable and sustainable businesses in a populated landscape before us; if we do so, everything that we do in the health check will focus on that clear objective.

The Commission will need to hear the voice not only of the Scottish Government but of the Scottish people as they say what they want to take place in the country. Therefore, I encourage as many people as possible to take part in the consultation once we have issued the document. We must all let the Commission know what we want the future of Scotland's landscape, agricultural industries and greenness to be.

Meeting suspended.

On resuming—