My hon. Friend the Minister of State for Agriculture and Food represented the United Kingdom at the Agriculture and Fisheries Council in Brussels on 12 July, the first under the Belgian presidency.

Belgium's Federal Agriculture Minister (Laruelle) and Flemish Minister-President (Peeters-who will chair fisheries items at Council), gave an overview of their priorities for the next six months. On agriculture, there will be a continuation of discussions of future CAP in advance of the forthcoming communication; and legislative proposals on dairy, food for the needy and quality policy. There would also be other discussions on the transmissible spongiform encephalopathy (TSE) roadmap, animal health strategy and the regulatory framework on genetically modified organisms (GMOs). On fisheries there would be the annual cycle of decisions on total allowable catches (TACs) and quotas, but also discussion on CFP reform, in particular on the link between science and fisheries.

Commissioner Ciolos introduced the dairy high level group recommendations as a means to enable the EU to achieve market stability for the milk sector and pave the way for a future without quotas. There will be a legislative package at the end of the year concentrating on the first three recommendations on contractual relations, bargaining power of producers and the role of producers (POs) and interbranch organisations (IBOs).

Council was divided between those calling for more regulatory and market management Intervention, and those urging more competitive responses, using the full scope of existing provisions. Some called for mandatory contracts between producers and milk purchasers, but others, led by the UK, wanted these kept voluntary.

The UK and the Netherlands argued that no changes were needed to competition law to allow better functioning of the milk supply chain, but a number of others urged relaxations of competition rules to allow producers more scope to manage sales.

Origin labelling also featured, with a number of member states against compulsory labelling, whilst others preferred voluntary labelling, especially for imitation products. On market measures there was broad consensus that reform should continue, but still a need for some form of safety net.

There was a mixed response on POs and IBOs, with France and most southern Europeans wanting their powers extended in the milk sector.

Northern member states urged caution around changes to role of POs and IBOs, warning against with the risk of creating an IBO monopoly.

The UK stressed the need for rebalancing producer power, but noted that there was already scope to do so under current rules and that it should not interfere with free market principles. The UK also underlined the clear differences in market organisation between member states-one size solutions would not fit all, and any legislation would have to minimise burdens.

The presidency (Laruelle) plan Council conclusions to steer the Commission's legislative package for the September Council.

Next, Ciolos noted the derogation from the state aid rules which allowed the German alcohol monopoly to buy spirits from certain distillers at guaranteed prices. The German authorities accepted that the derogation could not continue and therefore it was proposed that this be phased out by 2013, although Germany would be able to continue paying state aid to the sector up to 2017. Germany concurred and in order to allay concerns about distortion to the market, highlighted that the monopoly only represented less than 1% of the EU market of ethyl alcohol and that there was free access to its market for spirits produced elsewhere in the EU. The special Committee on agriculture (SCA) would continue discussions on the proposal in September.

Under any other business, Lithuania (with some support) requested that it be allowed to make advance direct payments (from 16 October rather than 1 December) to farmers due to the exceptionally harsh winter which had led to the loss of winter crops in many areas. The Commissioner said his services would deal with any individual request made, but stressed that member states must demonstrate that the circumstances were truly exceptional.