HC Deb 22 May 1992 vol 208 cc629-37

11 am

The Minister of Agriculture, Fisheries and Food (Mr. John Selwyn Gummer)

I should like to report to the House on the agreement reached yesterday on common agricultural policy reform. This was a major step forward for Europe, for Britain, for British consumers and taxpayers and for British farmers.

The heart of the reform is a reduction in cereals prices of nearly 30 per cent. which will benefit consumers of all products derived from cereals. These include bacon, pork and poultrymeat. Prices of beef will be reduced by 15 per cent. which will keep beef competitive with other meats. All this will be of major advantage to consumers. This change in prices, especially for cereals, should have a beneficial effect on the general agreement on tariffs and trade round. The link between GATT and CAP reform should not be exaggerated, but lowering support prices and lower overall support are what is needed to ensure greater competition in world trade. The European Community has done more than GATT would demand. It is now up to our partners in those negotiations to take the steps that they asked us to take but which so far they have not taken themselves.

The reformed CAP will not now be biased against British farmers in the way originally proposed by the Commission. Larger farms, much more common in the United Kingdom than elsewhere in Europe, would have been crippled by those original proposals. None of the original discriminatory proposals of the Commission has been carried through to the final agreement. This shows yet again that we can best succeed in Europe if we fight hard within the rules.

We argued that our farmers who set aside should receive the same compensation as others. That we achieved. We argued that we should move support from the storage of beef to those who look after animals, particularly in the most difficult areas. That we achieved. We argued that there should he no discrimination against our sheep producers. That we achieved. We argued that those who care for the hills and upland areas should be more directly supported. That we achieved. In all these areas, we have safeguarded the position of the British farmer as the producer of food and the carer of the countryside. In all these areas, we have fundamentally altered the Commission's proposals and confounded those who said that we should give in.

I am especially glad that the agreement makes significant steps towards bringing environmental issues into the heart of the CAP. That was one of Britain's interests. It was Britain which pressed for that and it is Britain which will ensure that we shall build on that during the United Kingdom presidency in the second half of this year.

Finally, the Commission officially confirmed that the costs of the reformed CAP could be met within the agricultural guideline as presently constituted. There is thus no need for the increase in the base that the Commission has been proposing in the context of the Community's future financing.

Yesterday the House gave a Second Reading to the European Communities (Amendment) Bill. This outcome also shows Britain at the heart of Europe. I commend the agreement to the House.

Dr. David Clark (South Shields)

I thank the Minister for coming to the House and telling us of his approach to the discussions that have just been concluded. The fact that there were so few details in his statement emphasises the need for a full day's debate, with all the papers being available to Members. I hope that the Minister will press for that after the Whitsun recess.

I know that the Minister is in a state of euphoria and that the press have written this up as a great triumph. I put the euphoria down to a lack of sleep. When we analyse the Minister's proposals in the cold light of day, we find that this deal, too, is wanting.

We believe the reforms to be inadequate, but if they are sufficient to allow a breakthrough in the talks on the general agreement on tariffs and trade, that is important. The reforms will not be seen in any way other than as transitional. They must be seen as the beginning of a long path to reform and not as an end of reform. This reform, like its predecessors, will be doomed to failure because it is built on the defective foundations of the current inefficient farm support system.

At present, the average household of four in the United Kingdom spends £17.50 a week on agricultural support. The reforms announced today increase the taxpayers' subsidy to farmers—an increase of £3 billion, or 12.5 per cent., for the next five years at least. That does not take into account the further £1 billion that is proposed in the Delors plan. Let us get this straight: these proposals increase the cost of agricultural support to the taxpayer. As Britain pays a disproportionate amount of European tax, sadly, the British taxpayer will pay more towards farm subsidies.

The Minister has said that the consumer will benefit. All our evidence shows that the consumer will not benefit. Already the bakers and big bread manufacturers are discounting the possibility of price reductions. They are saying that the reduction in cereal prices cannot be passed on to the consumer because they have already been squeezed too tightly. If the Minister disagrees, perhaps he can tell us by how much he predicts the price of a loaf of bread will fall.

I note that the National Farmers Union has welcomed the proposals. I wonder what is in this deal for the small farmer. I heard what the Minister said about the upland farmer, but there remains the suspicion that the Minister has sold out the small upland farmer in favour of the barley barons of East Anglia.

The core of the reform is compulsory set-aside. That will not work. All the evidence shows that as farmers set aside land they increase production elsewhere. Moreover, the environment will suffer. Perhaps the Minister can give us some advice on whether a farmer may set aside more than 15 per cent. of his land. May a farmer set aside his whole farm, as at present? We find it difficult to accept the notion of paying farmers to do nothing.

Furthermore, the abolition of the co-responsibility levy means that there is no disincentive for farmers not to maximise their production on land that is not set aside. Therefore, surpluses will continue.

The CAP is nonsense. This reform, like its predecessors, is unlikely to work. It must be the first step towards the abolition of the CAP as we know it. Then we can support it. I hope that the Minister will confirm that the reform comes at a high cost to the taxpayer. It will cost British taxpayers at least £3 billion more over the next five years.

Mr. Gummer

I wonder how successful a report one would have to bring to the House before the hon. Gentleman would do one the courtesy of saying one had achieved anything for Britain. He ignored everything that we have achieved. It is amazing that a man who launched his election campaign in south Wales purposely to tell the people what he would do to protect farm incomes should complain about the protection that we are providing. It is clear to me why the people of Wales threw out the very candidates whom the hon. Gentleman sought to support by launching his campaign at that particular time.

The hon. Gentleman asked some specific questions and I am glad he did, because, in doing so, he made it clear that he had little information on which to base them.

Small farmers will certainly benefit considerably, because, instead of spending the money on support through the storage of beef, for example, the money will go directly in premiums to the farmers. Those premiums will be capped to enable those who have had animals in the past to get support continuously. That support will now be greater, and small farmers, especially in the hillsides and difficult parts of the country, will benefit very much.

Of course it is true that the taxpayer will pay a greater proportion, because the consumer will pay a lesser proportion. The only way to avoid that is to denude the countryside of population and render our farmers unable to look after the land—if the hon. Gentleman wants that. He cannot have it both ways, although he has tried to. He tells farmers in farming areas that he will fight for them, but he tells people outside those areas that he will ensure that farmers have no money.

The hon. Gentleman has played this game too often. The truth is that the Opposition do not like agriculture; they do not want it to be supported; and when we come back with a deal for Britain which everyone else in the world acknowledges, the only man who cannot say a word of thanks on behalf of the people of Britain is the hon. Member for South Shields (Dr. Clark).

Several Hon. Members


Madam Speaker

Order. I regret to have to remind the House that this is a statement and that I am looking for specific questions, not debates.

Sir Peter Hordern (Horsham)

If this deal allows the GATT negotiations to proceed, it will be a very good one indeed and I congratulate my right hon. Friend on what he has achieved. How does he estimate the net effect on the prices index of the possible reductions in prices? How much money will be saved on the social security bill? Is my right hon. Friend aware that the result may be increased production? And will he have a careful look at increasing environmentally sensitive areas?

Mr. Gummer

How the figures turn out will depend on what happens over the next three years because that is when the reductions will take place. I hope for about a 2 per cent. reduction in prices below what they would otherwise have been—

Mr. Dennis Skinner (Bolsover)

That is the qualifying clause.

Mr. Gummer

The hon. Gentleman may say that, but food prices have risen significantly less than the rest of the prices index because of the efficiency of our farmers. Some of those who attack farmers ought to remember that they do so with full stomachs because of what our farmers have done.

As for the environment, it is we who got the Commission to make a statement that it will examine and produce proposals on how to link the requirements on farmers, the subsidies that are paid to them, and their environmental needs. Because of our interest in the environment, we have insisted that farmers work to ensure that the environment is cared for and that we will be able to pay them to allow access to areas that were not previously open. That access was illegal under the old rules and it has been gained at our specific request. I am looking forward to using our presidency to take that work further.

Sir Russell Johnston (Inverness, Nairn and Lochaber)

Like all Ministers, the right hon. Gentleman is anxious to be praised; but is he aware that it is difficult to judge this announcement because it is very thin?

Will he answer the fair question asked by the hon. Member for South Shields (Dr. Clark)? As production costs represent such a small proportion of shop prices, how can he say that this will be of major benefit to consumers? Secondly, will he say more about set-aside? Finally, did the right hon. Gentleman see the statement on television by the Father of the House the right hon. Member for Old Bexley and Sidcup (Sir E. Heath) who said that if someone came down from Mars and saw farmers being paid not to produce in America and Europe and people starving in eastern Europe and many other places, he would think we were all a bit daft?

Mr. Gummer

A loaf of bread bought for 65p means that 8.5p goes to the farmer—so the 29 per cent. that people sometimes talk about does not work through. The figure will work through at about 2 per cent., although it is higher for animals, which are fed largely on grain. If grain is the major part of the basic cost of animal production, a more direct effect can be seen.

A more direct effect will also apply to the price of beef. Lowering prices by 15 per cent. will work through much more directly to shops.

I have always conservatively argued that the commentators have overdone their arguments. The price at the farm gate is only a relatively small proportion of the price at the other end.

The details of set-aside under these arrangements have still to be fixed. We have always maintained that it would be better to continue alternatives. There is now a clear acceptance that we may have non-rotational set-aside—I would much prefer that. We will base it on scientific research on the connection between the cuts in productivity under the two systems. We will then produce proposals.

I can assure the hon. Gentleman that production will be cut significantly.

Mr. Roger Knapman (Stroud)

My right hon. Friend and the Minister of State have again proved themselves doughty fighters for Britain and Britain's farmers. Does my right hon. Friend expect that with reduced surpluses we may be able to phase out intervention buying, particularly of meat products? It seems uniquely silly to buy a first-class article, to store it at colossal expense and then to dump it on the market as a third class article. If we manage to reduce surpluses, will he think along those lines?

Mr. Gummer

My hon. Friend is right to say that that is a wrong system, which is why we have changed it fundamentally. The beef proposals are now entirely different from those that MacSharry advanced in the first place. They are almost identical with those that we wanted.

The fact that we allowed the process to work in this way shows that Britain can succeed in the European Community once people recognise that we are determined to work with it. Everyone else in Europe knew that we were committed to making Europe work and they supported what we were trying to do. As a result, we got a good deal.

Mr. Martyn Jones (Clwyd, South-West)

Does the Minister acknowledge that the drop in cereal prices will have a knock-on effect on other producer areas, and will affect white meat production and help the production of chicken and poultry? That in turn will affect red meat, particularly lamb, which is produced exclusively on grass in the high areas of my constituency and others. Has he thought about how he will help my farmers, who will be squeezed by price changes in other areas?

Mr. Gummer

These proposals safeguard support for the producers of lamb and beef in these difficult areas. That is what we have fought for. The removal of discrimination against them is the most important part of this package. All our calculations show that those who produce in our most difficult areas will benefit most from these decisions. I shall be distributing the figures today as soon as we have them in detailed tabular form and I hope that the hon. Gentleman will see from them that what I am saying is clearly true.

Sir Jim Spicer (Dorset, West)

The whole House should be grateful for the work that my right hon. Friend and his team have carried out. It is a triumph for common sense and sense of purpose. In my worst nightmares I cannot imagine what would have happened had the hon. Member for South Shields (Dr. Clark) been in my right hon. Friend's place conducting the negotiations.

There is to be a cut in milk quotas. In Dorset and Somerset we have excellent cheese makers who well know that their market is expanding. What certainty is there that other countries will act to cut their quotas? Will there be tougher policing and will it be effective in the countries that we know are cheating all the way down the line?

Mr. Gummer

I am happy to tell my hon. Friend that there will be no cut in milk quotas—another of our achievements. [Interruption.] There are so many good things in the package that it is impossible to mention them all; and Madam Speaker specifically asked that the statement should be as short as possible.

Madam Speaker

And that the answers might be as short as possible.

Mr. Gummer

Multiple choice questions make for longer answers, Madam Speaker.

My hon. Friend spoke of policing. I was prepared to support the special arrangements for Spain because that country is committed to reducing its production very significantly. I and my colleagues opposed any extra milk for Italy, which refused to cut its overproduction, which has not carried out the quota system and which had the effrontery to suggest that its long period of breaking the rules should be legitimised. Until Italy is prepared to come within the system, and prove that it has done so, I am not prepared to help it.

Mrs. Margaret Ewing (Moray)

Does the Minister realise that he has won wide respect for his continued opposition to the original MacSharry proposals, which were greeted with dismay by the rural communities? I thank him in particular for taking up the issue of the headage on the ewe premium and the suckler cow premium, which are vital to the rural economy. When will he publish all the details of the package, and will it include an analysis of the costs and benefits to all concerned?

Mr. Gummer

I shall produce that information as rapidly as possible. We are working on it now. I thank the hon. Lady for her kind comments. She will be particularly pleased about the effect on the suckler cow herds, which are important for Scotland. I was conscious that we had to win that battle. She will remember that the discrimination against Scotland was particularly strong. My discussions with, and pressure from, the territorial Ministers in Scotland, Wales and Northern Ireland helped a great deal. She will also be pleased to know that, at the same time, we passed the new regulations affecting raspberry growers.

Mr. Richard Spring (Bury St. Edmunds)

I add my congratulations to my right hon. Friend on a really magnificent accomplishment and successful result. Will he comment on the elimination of discrimination against arable farmers, who are particularly important to the lifeblood of west Suffolk?

Mr. Gummer

I thank my hon. Friend and neighbour for those comments. We both know how important it was for arable farmers not to have discrimination which would have meant them setting aside 15 per cent. of their arable acreage and receiving no compensation. That was an outrageous proposal. They will now receive full compensation for every acre they set aside.

Mr. Peter Shore (Bethnal Green and Stepney)

In view of the many claims that have been made over the past 30 years of great progress in reforming the CAP, the House would be well advised to wait until it has the fine print of the agreement. From the point of view of the international community—remembering that the overproduction of cereals in western Europe has been claimed to have led to uncompetitive dumping under the heading of export restitution and the wrecking of markets for other cereal producers—can the right hon. Gentleman say that the Community has now agreed to phase out export subsidies from its cereal trade?

Mr. Gummer

The GATT talks will deal with the issue of export restitutions. We are already committed to significant reductions in export restitutions, and the reduction in grain production that will follow the severe set-aside proposals will help that. If Britain were not a full and active member of the EC, these significant reforms would not have come about. Because we are a member and believe in the EC, we are able to make that difference.

Mr. Mark Robinson (Somerton and Frome)

I congratulate my right hon. Friend on the significant proposals, which will be warmly welcomed by the milk producers of Somerset and by cheese producers. How does he think the proposals will help Britain's farmers in their desire to compete on equal terms with their counterparts in the EC?

Mr. Gummer

My hon. Friend is right to say that we must compete throughout the whole of what is now our home market. The fact that we do not have the special dairy cow subsidy, which would have discriminated against us, the fact that there is not a cut in milk quota for a country which is not self-sufficient in milk production and the fact that our milk farmers will now have the benefit of reform of the Milk Marketing Board—all of which would have been denied them had Labour won power at the last election—mean that we shall be able to compete more effectively in the European market.

Mr. Nigel Spearing (Newham, South)

Do not the proposals depend on the projected price of grain and on Mr. MacSharry's assumption that, by spending more public money in the short term, we shall have to spend less public money and give less support in the longer term? Does the right hon. Gentleman appreciate that that mathematical assumption may not work out, because if it costs a bit more to produce rather less than he hopes, the mathematical gearing will be lower? What about the world price of grain'? What assumption has he made about that on which to base his projections? Agricultural support should be based on the needs of farmers and their families and on good husbandry rather than on projections of what may happen to markets in the future.

Mr. Gummer

The hon. Gentleman is wrong. We have said that this represents a 29 per cent. reduction in the price. It could, in certain circumstances, be significantly more, because the changes open the markets to the effects of world prices much more effectively, which is why we sought it.

I urge the hon. Gentleman to wait until he has seen all the details. We did not agree all of this until the middle of last evening, which is why he does not have the full details in the tabular form in which I shall produce them, and I shall do so as openly as possible. I hope that he will then clearly see that this is a significant change and that, above all, it is a change to achieve what he wants. It significantly moves the way in which we support agriculture, from the consumer price—thereby achieving an increase at the production end—towards direct payment to farmers so that they may continue to produce food and look after the land.

Mr. Richard Alexander (Newark)

I congratulate my right hon. Friend on securing the removal of the discriminatory proposals from the original package. That will be widely welcomed in the farming community. Will he comment on farm incomes? Is he aware that farmers in my constituency and elsewhere tell me that, in real terms, farm incomes are at their lowest for 50 years? Can he confirm what Mr. MacSharry is believed to have said yesterday in a statement—that farmers will be fully compensated for the price reductions arranged in yesterday's deal?

Mr. Gummer

I thank my hon. Friend for his comments. The difficulty with general statements is that they are about average farm prices and incomes, whereas I am concerned with individual farm incomes. I believe that as a result of this change there will have to be some significant changes in the way in which farmers deal with the market, because they will be closer to it. I am convinced that the result will be to give farmers a greater degree of security, that, in particular, farmers in the most difficult areas will benefit, and that they will get the kind of stability that they have most sought. But the truth remains that, in the end, the more we open agriculture to the market, the more important it is for farmers to take advantage of the market. I believe that our farmers can do it, so that Mr. MacSharry's comments apply particularly to the United Kingdom.

Mr. Brian Wilson (Cunninghame, North)

The Minister has referred repeatedly in general terms to the good deal that has been obtained for the people operating in the most difficult areas. Will he focus on certain aspects? For example, many hill farmers and crofters are operating at the very margins of agriculture. They want to know whether it will be possible for them to continue to earn a living and whether, in particular, it will be worth their while to continue managing sheep. Will the Minister break away from the generality of the matter and give a few specifics which might offer encouragement so that those to whom I have referred may share some of his enthusiasm?

Mr. Gummer

The hon. Gentleman will find that next year's suckler cow premium will be very significantly increased. He will find that the premiums that are paid directly to farmers—in replacement, therefore, of the old system of intervention, which was a daily business rather than a safety net—will increase direct payments to farmers very significantly indeed. I shall provide the hon. Gentleman with figures that he can then apply much more effectively to individual farmers. I come back to my belief that one of the troubles in these discussions is that people trumpet generalities of figures when the individual farmer wants to see how they will affect him. That is why we are producing these figures in a form that the hon. Gentleman will be able to apply individually.

Mr. Richard Shepherd (Aldridge-Brownhills)

I congratulate my right hon. Friend on what seems to be a significant contribution to the GATT round, upon which our prosperity and future rest. Can he say what the cost of it will be to the Community budget?

Mr. Gummer

The total costs will be within the guidelines, as negotiated. That means that there will be no need for the £1.5 billion addition for which Mr. Delors asked. It was wrong of the Opposition spokesman, the hon. Member for South Shields (Dr. Clark), to suggest that that is brought into the matter. It will not be needed. Although the GATT round is very important, so is Europe; so is our success in Europe; so is our success in making Europe the foundation of our ability to complete in the world. Just as important as the contribution made to the GATT round is the fact that this agreement again means that Britain, at the heart and centre of Europe, can make a huge difference—not only for ourselves and for the whole of Europe but for the way in which Europe deals with the rest of the world. If we want to change the terms of trade, we can do it just as importantly within Europe, the largest trading business in the world, as we do within GATT.

Mr. D. N. Campbell-Savours (Workington)

Will the price of lamb produced in upland areas rise, stay the same or fall over the next five years?

Mr. Gummer

If I were able to answer that question, I should know a great deal more about markets than anybody has managed to know so far and I should be very rich indeed, so long as I resigned my job; I should be unable to carry out that arrangement if I were still Minister of Agriculture. The hon. Gentleman knows perfectly well that, when we are trying to move further towards the market, no answer to that question would be either truthful or sensible.

Several Hon. Members


Madam Speaker

Order. I remind the House that there are questions to the Minister on 4 June which are relevant to this subject.

Because of the statement, the next two debates will be for only half an hour each so that we may return to our timing arrangements.

Mr. Ieuan Wyn Jones (Ynys Môn)

On a point of order, Madam Speaker. I understand that you have difficult decisions to make when important statements are made, but, in fairness, I should make it clear that my party now represents the vast majority of farmers in Wales and I would have welcomed an opportunity to make a contribution on a very important statement.

Madam Speaker

I had seen the hon. Gentleman. I know that he has been in the House throughout the statement. I regret not having been able to call him, but he is right. I have judgments to make on these matters.

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