HC Deb 12 February 2004 vol 417 cc1585-602 1.26 pm
The Secretary of State for Environment, Food and Rural Affairs (Margaret Beckett)

With permission, Mr. Speaker, I should like to make a statement.

Last June, I had the pleasure to announce that we had secured the most radical reform of the common agricultural policy since its inception. Today, I will make a statement on how I propose to implement key features of that groundbreaking reform in England.

To place the proposals in context, it is—as I said to the House at the time—hard to overstate the importance of reform in transforming the core elements of the common agricultural policy and laying down a new direction for its future evolution. Crucially, the link between the subsidy paid to farmers and the level of production has been broken—so called "decoupling". That means that farmers' activities will no longer be dictated by what the subsidy regime requires them to produce—with all the costs and bureaucracy entailed—and frees them to farm in accordance with what the market wants.

Decoupling also reduces the environmental impact of farming by removing an incentive for intensification and over-production and by making subsidy dependent on compliance with a range of environmental standards. Moreover, decoupling of subsidy from production reduces the trade-distorting nature of the common agricultural policy and paves the way for a deal in the current round of world trade negotiations.

The challenge before us is now how best to maximise the potential benefits of the reform with our approach to implementation. In particular, which of the options available to member states should we take up? How far should we decouple? How should we apply the new decoupled scheme—the single farm payment? We consulted widely on those issues in the autumn of 2003, and received more than 800 responses. I have given careful consideration to the arguments put forward, which advocated a wide range of different approaches.

In reaching my decision, I have been guided by several key principles. They are: coherence with the Curry commission report and our own sustainable farming and food strategy launched in 2002—with the emphasis in both cases on bringing the industry closer to the market and the increasing importance of environmentally sensitive farming; consistency with our wider objectives for the CAP—including greater simplicity, transparency, minimal bureaucracy and as few deductions as possible from the basic payment available; and the need to attract the widest possible support of the stakeholder community for continuing payments to farming—which, we believe, requires moving towards a system in which public money delivers public goods. I was also determined to give as many details as I could at this stage of the scheme in order to give the industry a clear path of adjustment so that farm businesses can plan.

Those principles led me to a conviction that the more fully support is decoupled, the greater the degree of freedom farmers will be given in respect of their own business decisions. So I have decided that in England we should fully decouple all direct payments in 2005, including the new payments for milk producers. Therefore, a single farm payment will replace the plethora of existing schemes and simplify the bureaucracy that is associated with them. However, the exact form of the payment is also important. The options available included a straightforward allocation of available moneys on the historical basis of an individual farmer's receipts in the reference years 2000–02; and allocation of different flat-rate payments on the basis of whether land was under grass or under crops in 2003.

I have concluded that we should avoid a situation in which subsidy is allocated solely on the basis of past activities that were themselves undertaken in the context of production-linked support policies. For England, I do not believe that it would be right to adopt a purely historical approach. I do not believe we can justify to our public a situation in which at the end of this decade or later, farmers continue to receive aid wholly based on business decisions taken 10 or more years earlier in a very different policy context.

Instead, guided by the principles I outlined earlier, and having listened carefully to the many compelling and carefully argued cases put to me by the National Farmers Union, the Country Land and Business Association, the Royal Society for the Protection of Birds and others, I propose to exercise the option in the agreement to adopt a flat-rate payment per hectare.

Of course, a fully flat-rate system paid immediately in 2005 would have been the simplest and cheapest to implement. However, the redistribution and the immediate impact on some incomes that would result would be too destabilising. More importantly, it might act against the sort of behavioural change that we want to take place in helping the industry to become fit for purpose in getting closer to the market.

In order to mitigate these effects, I propose to introduce the flat rate progressively and to divide England into two regions: land in the severely disadvantaged areas—SDAs—of the less favoured areas; and all other land. A different flat rate will apply in those two regions. During the transition years—it will be the same period in both regions—a steadily increasing proportion of the funds available would be directed towards the simple flat-rate payment, with most farmers receiving an additional, but over time diminishing, payment related to the subsidies that they received in the reference period 2000–02.

I have also decided that the period for the phasing in of the flat-rate payments will be eight years, starting in 2005 and ending in 2012. The proportion of the available funds to be allocated on the flat-rate basis in each year will be 10, 15, 30, 45, 60, 75, 90 and 100. In other words, 10 and 15 in the first two years, after that rising by 15 per cent. a year until we reach 100. My intention is that the flat-rate payment element should be low in the early years to allow farmers time to adjust and plan for the situation that will appear by the end of the decade.

I recognise that the framework that I intend to implement will involve some redistribution of current subsidies between farmers and between sectors and areas, but it will be introduced over a reasonably extended period of time that allows farmers to adjust during the transition. We will end up with a system that is increasingly equitable between farm types; is much more market focused; has a greatly simplified bureaucracy; and can deliver a better landscape and environment, and a more sustainable long-term future for English farming.

There are many related issues that will need to be addressed over the coming months. I can say now, however, that I do not propose to take advantage of the option for so-called national envelope measures in England. Although in certain circumstances they could offer potential benefits, I judge that the accompanying complexity and loss of transparency outweigh those advantages in English conditions.

As to cross-compliance, conditions will attach to the subsidies that are payable, and we will consult on the approach to be taken in respect of those to ensure that they are implemented effectively, proportionately and, again, with the minimum of bureaucracy—an approach that we shall take to all forms of regulation. In addition, I am keen to ensure that our implementation of cross-compliance will fit into the approach of the whole farm model for regulation that is being piloted in England.

I believe that this approach constitutes a forward-looking package of measures that fits the principles I outlined earlier. It is a decisive and irreversible shift which offers huge opportunities to the industry. I know that many in the farming industry would have preferred the Government to adopt the approach of allocating aid on the basis of historic subsidies received. However, many others, including some in the farming industry, took a different view, as did some members of the wider stakeholder community; I have to take all those views into account in developing a workable system.

My Department and I will work with the industry over the coming months to implement these decisions in the best way possible, and in the spirit of partnership and co-operation with all stakeholders that has run through the Curry commission and our own sustainable farming and food strategy on the central issues here, and any other measures that might be helpful in due course.

Everybody in the farming community told us that they sought clarity in the direction of policy, and simplicity and transparency with less bureaucracy, and that they hoped that we would not implement all the options for deductions from the basic payment that were available to us. We are heeding all those calls.

I have set out today a basis for payment that I believe to be the fairest, because it moves us in the direction of public money going to support public goods across the whole of farming.

Mrs. Theresa May (Maidenhead) (Con)

I begin by thanking the Secretary of State for coming to the House to make this statement and for giving me prior sight of it.

I thank the right hon. Lady, too, for at last trying to end the uncertainly that has dogged our farmers for so long. British farming has been through the most difficult of periods in recent years, particularly in recovering from the foot and mouth outbreak, and after a great deal of uncertainty and anxiety, our farmers will at least begin to have a clearer picture of their future fate.

The right hon. Lady will know that my party has actively backed Commissioner Franz Fischler in his desire radically to reform the expensive and unwieldy common agricultural policy. We support the need to end the red tape, form-filling and over-regulation that came to embody the CAP, and we agreed wholeheartedly when he said that the reform could lead to a new, more market-focused agricultural industry under the slogan "freedom to farm".

However, it is hard to see how the scheme laid out before us today will achieve those goals. The last few months have indeed seen vigorous debate in the farming community about what method of allocation to adopt, but the Secretary of State has managed to come up with the one scheme that absolutely nobody recommended. She said that she received 800 responses to the consultation. How many of those supported this scheme?

Moreover, although the Secretary of State explained that in England there will be a dynamic hybrid model for the single farm payment, Wales will have an historical system with a national envelope, Northern Ireland will have a static vertical hybrid system, and Scotland, as I understand it, will have a different historical system. That means that there will be four different systems for farmers in the United Kingdom; and that will mean four different sets of rules with four different armies of civil servants implementing them on our shell-shocked farming industry. It is hard to see how that is likely to cut red tape or do away with bureaucracy. One of the clear aims of decoupling was to reduce bureaucracy. The Secretary of State said in her statement that her aims were simplicity, transparency and minimal bureaucracy. Perhaps she could explain how replacing one system with four is a simplification.

I am not alone in my concerns. Franz Fischler, the commissioner who was the architect of these very reforms, said in a letter to Ministers: the original intention…was that the Single Payment should be based on the historical payments…The idea was to promote competitiveness and market orientation while securing the income of farmers". He continued: I would like to point out that such a departure from the historical model could have important redistributive effects in terms of payments to individual farmers resulting in some farmers obtaining significantly lower amounts".

Franz Fischler is not alone in voicing his concerns. Sir Ben Gill, president of the National Farmers Union, said earlier this month: The hybrid option will bring the worst of both worlds, but the advantages of neither. There is no point in changing one complexity for another. That hardly sits well with the original idea of cutting bureaucracy.

Of course there may not just be four systems in the United Kingdom. As the Secretary of State said, there will be yet another scheme for disadvantaged areas. Britain's farmers compete not only on a global basis and with competitors throughout Europe. but with each other. Under the proposed systems, Britain's farmers will receive different levels of support but compete in the same marketplace. With four different systems, surely someone will be better off and someone the loser. Who is it likely to be? There will be huge disparities in the continuing support that our farmers receive in the coming years.

Let us look at the practicalities. Take two farmers, one on the Welsh border in Leominster and one on the other side of the border in Brecon, both currently growing exactly the same crop and getting the same entitlement and both continuing to grow the same produce in future. One could experience a difference of tens of thousands of pounds in the aid that they receive in future. Does the Secretary of State really believe that to be fair or amicable? Does it not encourage the perception that the English farmer will be put at a disadvantage compared with his Welsh, Scottish or Northern Ireland colleague, let alone with the French, who are doing their best to retain production subsidies?

The Secretary of State has not made clear what the announcement will mean for cross-border farms. Are we likely to see farms that straddle the border having to adopt two different systems? Will they have a choice to opt for the best one? Or has she not addressed that problem at all?

Many farmers around the country will be asking themselves today what the new scheme means for them. What figures does the Secretary of State have for possible losses to farmers in England, most notably in the dairy and beef sectors and tenant farmers, compared with other UK farmers as a result of today's decision? What, if any, mitigating measures has she put in place to deal with those problems?

The proposal is the biggest disruption that our agricultural industry will have seen in a generation. It involves a huge redistribution of support and upheaval to the lives of our farmer communities. It is essential that they know, as a matter of urgency, what the implications will be for their businesses and their families. What measures has the Secretary of State put in place to inform and guide farmers across the country about the implications for their businesses? That must be a matter of urgency. What studies have been conducted on the impact not only on farm structures but on the environment of implementing this hybrid model?

The Secretary of State said in the statement that implementation with the minimum of bureaucracy is "an approach which we shall take to all forms of regulation". She also said that she wanted to attract the widest possible support from the stakeholder community. Sadly, the statement suggests that, far from minimising bureaucracy, the Government have changed one complexity for another. Far from attracting the widest possible support, it is the one scheme that no one recommended. Far from ending uncertainty, it will leave many farmers wondering what future they have under the Labour Government.

Margaret Beckett

I am grateful to the hon. Member for Maidenhead (Mrs. May) for her initial welcome for the CAP reform proposals, although I note—and perhaps she has not caught up with this—that her view does not seem to be shared by her colleagues in the European Parliament, who have just voted against them all.

However, I am grateful to the hon. Lady, and she is right to say that we need to reduce red tape and form filling and connect people with the market. There is no question but that the biggest impact of the changes that we have negotiated is the decoupling itself, which will have a major—and, everyone believes, a positive—effect on farm incomes.

The hon. Lady said several times that none of the consultation responses supported a fully flat-rate option. That is not correct. I am afraid that I do not have the figures with me, but it is not the case that no one supported that option.

The hon. Lady dwelt at great length on the freedom for the different constituent parts of the United Kingdom to have different structures. Northern Ireland is looking at its relationship with us, and also over the border to Ireland, where there is 100 per cent. decoupling but not on the same basis. I remind her that Wales and Scotland are able to adopt a different system—it is their free choice; they are responsible for agriculture under the devolution settlement—precisely because I negotiated that freedom for them. It would be ridiculous for me, having sought to obtain that freedom, to attack them for exercising it. It is for them to make the decisions that they believe to be right in their own context.

The hon. Lady drew attention to a letter that Commissioner Fischler sent to Ministers the other day, referring to the potential advantages of a historical payments system. I have read it with care and subsequently talked to Commissioner Fischler. I have also spoken to him since we made the decision that I announced today. I note that what concerned the commissioner particularly was whether any member state would be seeking a redistribution of itself and for that reason: seeking to redistribute the subsidies that are paid. That is not what we are doing. We are seeking to institute a different system. That system brings in its wake some redistribution, but we are seeking to minimise the degree of that. That is a rather different issue.

The hon. Lady described the system as being neither fair nor amicable and said that English farmers would be at a disadvantage, particularly vis-à-vis the French. If she speaks to the English farming community—indeed, the UK farming community—which almost universally supported decoupling, I think she will find that it believes that the French are putting themselves at a disadvantage by not 100 per cent. decoupling. I remind her of the example of Ireland, which campaigned as hard as anybody against full decoupling in the negotiations. However, once its farming community began to examine the implications—keeping two sets of systems and keeping bureaucracy in perpetuity for one of those sets—Ireland speedily decided to decouple 100 per cent. I believe that, over time, farming communities throughout Europe will reach the same conclusion as British farmers, who, perhaps because of the impact of the terrible problems that British farming has experienced in recent years, were looking more acutely at their future, rather than protecting their historical position.

The hon. Lady asked me about the overall level of redistribution. I cannot give her detailed figures for each sector immediately, but we will do what we can to make information available. What I can tell her is that the overall level of redistribution will be 13 per cent. to 15 per cent. of moneys now distributed, but that will happen over eight years. She asked about mitigating measures. Of course, we are acutely conscious of the impact on tenant farmers and various of the sectors, and we will be talking to the farming community about what is available to it. Let me return to one point that the hon. Lady made repeatedly in a number of contexts. She said that Ben Gill had attacked the so-called hybrid option. That is true; he said that it was not an option that we could possibly advocate. Let me emphasise that what we propose is not a hybrid system, but a flat-rate system, towards which we are moving on a transitional basis. The two are not the same. [Interruption.] If the hon. Lady waits a second, I shall explain the big difference. When the system is completed, there will be one form, one payment date and one payment for one producer. I call that simplicity.

Mr. David Drew (Stroud) (Lab/Co-op)

I largely welcome the statement, which some Labour Members will perceive as a dynamic compromise. However, some of us believe that one element has possibly been missed out, although I appreciate that the leading farming organisations would not necessarily have argued in public for it. We continue to pay a subsidy to some of the richest people in the country. I have always taken up the cause of tenant farmers, and I should like some genuine redistribution to take place, if not in the current review, to those who need some subsidy to continue their work. Will my right hon. Friend comment on that?

Margaret Beckett

As I said earlier, the Commission would certainly have set its face against a proposal for redistribution for its own sake. However, I am grateful to my hon. Friend for reminding me that I could have said a little more about one aspect that the hon. Member for Maidenhead raised. This is obviously no more than a very general picture in terms of gains and losses, but generally speaking the flat-rate payments will redistribute subsidy from more intensive to less intensive producers and to land that did not previously receive a subsidy. However, the size of the redistribution is mitigated by having two flat rates, not one. Analysis of the farm business survey suggests that general cropping farms and horticulture will gain relative to historical payments, as will cattle and sheep, both in less favoured areas and in the lowlands, but other farm types will tend to lose. Within farm types, however, there will always be cases of individual winners and losers, so even though, for example, typically, lowland cattle and sheep farms gain as a group, it will tend to be sheep farms that gain, and cattle farms, particularly intensive beef producers, that lose. In addition, in the dairy sector, larger producers tend to lose while small producers tend to gain. In relation to my hon. Friend's general remarks about smaller and less well-off farmers, one impact of the redistribution will probably be to move income towards some of those smaller farms that have had less support in the past, particularly in the hills.

Andrew George (St. Ives) (LD)

I am grateful to the Secretary of State for advance notice of the statement, and for the statement itself, albeit after the decision is made.

This announcement represents the most significant change to agricultural support in more than a generation and is likely to have a significant and far-reaching impact on farming, as the Secretary of State acknowledges. I am surprised that the Government have not given any indication of assessments that they have made, with or without the Treasury, on the likely impact of the proposed model on a variety of sectors—not just on tenant farmers, traditional farming practices, the environment and new entrants to agriculture, which were mentioned today, but on many other sectors.

I do not know whether the Secretary of State intended it as a deliberate steer, but the statement as circulated to me, and to the rest of the House now, includes an adviser's note halfway down page 2: "Secretary of State: Andy"—I do not know whether that is a familiar reference to me— feels that, if possible, we should clarify this point about deductions". My question to the Secretary of State— [HON. MEMBERS: "And Andy."] And to Andy. My question is whether the Secretary of State can clarify the point about deductions. I noticed that it was not clarified in the statement.

The Secretary of State said in her statement that a key principle in reaching her decision was coherence with the Curry commission and the food and farming strategy. Does she not recognise, however, that one clear outcome of that commission was the establishment of the tenancy reform industry group, which was facilitated by her Department, the key objective of which was to create a viable tenant sector for the long term? Does she not realise, however, that payment based on land will shift fundamentally the balance of agricultural support towards landowners? Given that in this country 40 per cent. of land, formally or informally, is rented, does she not accept that that will have significant impacts on the viability of tenanted farms? I thought that a Labour Government would support the sons of the soil rather than landowners who will ultimately reap the benefits from this system. What assessment has she made of the likely impact, as I think that it is likely to be far-reaching?

What assessment has the Secretary of State or her Department made of the impact of this model on new entrants to farming? It is vital that we get new blood into farming, and we need a system that enables that to happen. I am not sure whether the Secretary of State has properly accounted for that in her assessment. What assessment has she made of the impact on family farming structures? She said in answer to previous questions that she believes that the proposals will favour small family farming. She must recognise, however, that it is the bedrock of many of our rural communities and it is important that we have a system that supports that fundamental part of our rural communities.

I agree with the Secretary of State that taxpayers will not tolerate for long paying farmers merely for existing. Which public goods, however, does she have in mind—access, amenity, archaeology or farming traditions? For which of those does she want cross-compliance, and how will that be measured and enforced? As the hon. Member for Maidenhead (Mrs. May) said, concern exists about different systems in different countries and about those farms that cross those border areas. How will those questions be handled? Will she consider mitigating measures for those sectors that we know will be hard-hit? The dairy sector, as we know, is particularly hard hit, and is already going through a severe crisis.

This is the most significant change in agricultural support in a generation. So that we do not conclude that the Secretary of State is treating this House with breathtaking disdain, will she ensure that she allows the House an opportunity to debate these measures? This decision has been taken, and as with genetically modified crops, decisions will be taken before we get an opportunity to debate such measures. Will she ensure that we have an opportunity to debate this measure so that we can identify the problems, influence and alter those aspects, and put it to a vote of the House?

Margaret Beckett

It is a bit odd that the hon. Gentleman should talk about treating the House with disdain when we have come here to make the statement. I share the hon. Gentleman's view, however, that this is the most significant change in farming support in a generation, and that it will impact on all sectors. There are lots of figures and graphs, which I am sure we will be able to make available to the House, but which we do not have the time or opportunity to discuss now.

"Andy" is Andy Lebrecht, the director-general of the food, farming and fisheries directorate. We indeed heeded the advice and fleshed out the section on deductions. For greater accuracy, as the hon. Gentleman asked the question, let me tell him the potential deductions that we would still have to make. One would be a deduction on some scale for the national reserve—I cannot answer all the questions about the precise figures, because those are still in negotiation, they are not agreed, and we do not have the detail from the Commission. Another would be the deduction that is made for modulation, which in future will be made across the EU—and let us not forget that in this country we began voluntarily to modulate to make a deduction from the payment to support wider rural activities, when no other member state was doing that. The competitiveness pressures that Members have sometimes identified will be eased on that basis, because everybody will have to follow the same step. There will be whatever decisions we take on national modulation. In the fullness of time, there will probably be some deduction for financial discipline. That remains to be argued out and negotiated, however, and currently it does not apply. Those are therefore the only deductions that we need to make at present.

The hon. Gentleman then talked about the tenancy reform group. Yes, it has done excellent work, and I look forward to hearing from it about what we can do to assist and support tenants in the present circumstances. I also say, however, that I of course understand—we took full account of it and considered it very carefully—the anxiety that this system of payment would shift the balance of moneys towards landowners. It seems to me, however, that potential exists for landowners to reap the benefit of a changed system, no matter what we do. I am aware that situations have already occurred in which tenancies have happened to come to an end and the renewal of the tenancy has been made conditional on the entitlement being part of the landowner's asset in the new system. That is before anyone knew that we were planning to go down an area payment route. I accept, of course, that there will be an impact, and we will want to look at it.

The hon. Gentleman asked about new entrants. In relation to the deduction to which I referred for the national reserve, that is exactly the kind of purpose for which a national reserve could be used, and we will consider it on that basis. He also talked about the need to maintain family farming structures. Of course, one of the reasons that we began to make deductions to put them into the so-called pillar 2 was exactly so that we could do other things to support rural areas and social and economic structures in rural areas. I anticipate that that shift will also continue to occur, not just in this country but across Europe. It is therefore not just through this payment that those concerns would be addressed. We are discussing cross-border issues with the devolved bodies, but again we must talk to the Commission about what and how regulations can be drawn up, and clearly, we will examine measures in mitigation.

I make one simple point to the hon. Gentleman, who is, in effect, asking why we have made this shift. The thrust of his remarks is that we should have stayed with the historic basis, which would not, for example, have caused the shift from landlord to tenant. I take the view that it would not be consistent with my duty to this House and to the farming community as Secretary of State to encourage people to believe that over the long term it is sustainable to base the farming system wholly on historic payments in England. It is one thing to say that payments will be made in 2008, 2010 or 2012 based on what a specific farmer did in 2000–02, but entitlements and land will be traded. Soon, payments will be based not even on what the individual concerned did on a farm in 2000–02, but on what somebody else did in 2000–02. Perhaps I am unduly cynical, but the British public would require a justification, and the justification that we are offering is the best that they will get.

Several hon. Members

rose—

Mr. Deputy Speaker (Sir Michael Lord)

Order. Before I call the next speaker, may I say to the House that we have had a statement on a very important matter today, and that a large number of hon. Members are seeking to catch my eye? Unless questions, and perhaps answers, are shorter, an awful lot of hon. Members will be disappointed.

Paddy Tipping (Sherwood) (Lab)

Does the Secretary of State accept that she has made some difficult but decisive and correct decisions? It is decisive to change the CAP radically, it is right to decouple entirely, and it is different to accept that less favoured areas should be compared with the rest. I am sure that she knows that the announcement will not be universally welcomed in the farming community. Will she therefore ensure that the details are publicised to farmers as quickly as possible, that the Rural Payments Agency is in a position to make the changes and. most importantly, that she speaks loudly and clearly about the reforms so that the general public know that they will benefit in terms of both public good and environmental enhancement?

Margaret Beckett

My hon. Friend echoes a remark made to me a couple of days ago by an experienced individual in the farming community, who said that in his judgment this was the most difficult decision that any Agriculture Minister has ever had to take—as hon. Members can imagine, that made me feel good. My hon. Friend said that the decision would not be universally welcome. I shall be honest with him and the House: I expect it to be universally condemned, because people who want us do more on environmental issues will say that we are not doing enough, and people who want us to do something different on farming will also say that we are not doing enough. That is life, is it not? I assure him that we have carefully discussed the matter with the RPA. Whatever we do, the RPA must begin by establishing a system based on historic payments, and the pace of transition will assist it in making the scheme work efficiently.

Mr. Michael Jack (Fy1de) (Con)

In welcoming the new opportunities for farmers to move closer to the markets, may I follow the comments made by the hon. Member for Sherwood (Paddy Tipping) by pointing out that if the Secretary of State is right to say that she wishes to introduce the proposals from 2005, nine months is a somewhat heroic timetable in which to introduce a change of such enormity? At this stage we do not know the shape of the final regulation or the cross-compliance requirements, and we have received no detail from the RPA about the procedures that will be involved. When will such details be made available to farmers, and in what form?

Margaret Beckett

I am grateful to the right hon. Gentleman, because his question allows me to clarify one or two points. The closing date for applications to take part in the scheme will be 15 May 2005. During this year, the RPA hopes to issue to all farms, particularly those who are in receipt of subsidy—obviously people who receive nothing at the moment and who will get something under the new scheme will have to apply—an illustrative outline of what they can expect to get under the new system. It hopes to begin making payments in December 2005 and issue them between then and June 2006.

Mr. Kelvin Hopkins (Luton, North) (Lab)

I congratulate my right hon. Friend on negotiating this significant change. I am one of those who were sceptical about previous statements, which did not seem to change very much, but this statement is clearly very different. I am also one of those who have called for a long time for a shift from price maintenance to income support systems for agriculture, and this statement seems to be a decisive shift in that direction, in which I hope that we will make further progress later. The statement also seems to be a step towards the dissolution of the CAP and the beginning of a gradual move towards national systems of agricultural support. I wonder whether my right hon. Friend will comment on that point. Will she also comment on how this decision might affect the rest of the world in the wake of the Cancun debacle, and on how poorer producers across the world react to the CAP and other unjustified systems of agricultural support that benefit only richer countries?

Margaret Beckett

May I begin where my hon. Friend ended, by saying that this decision will help to get across the message that a great deal is changing in the CAP? I had a conversation in Geneva in January with the Brazilian ambassador, who said that one of the reasons why countries such as his own had not fully realised or accepted the scale of change in Europe was because the negotiating mandate for the world trade talks had not changed, which is testament to the flexibility that the commissioner negotiated for himself. None of us realised that that signal had been taken in quite that way.

My hon. Friend is not right to say that this is basically the dissolution of the CAP, because there is still a great core of common provision and common circumstances. On 10 February, Commissioner Fischler said that it did not matter if different states went down different routes because that is allowed and is part of the compromise, and that the challenge was to get the best model for each situation. He also made the point that redistribution in, for example, the UK might be limited compared with that in countries with varied climates such as those bordering the Mediterranean. There is still a core element to the CAP. but I share my hon. Friend's view that the change is big and that it will be beneficial in the long term.

Mr. Douglas Hogg (Sleaford and North Hykeham)(Con)

May I remind the right hon. Lady that one of the anxieties faced by British farmers is that they are confronted with a raft of animal welfare regulations that are not matched in third countries that export products to the European Union? One of the important changes that should be made is to enable the EU to impose restrictions on imports into the EU of products that are not produced in accordance with animal welfare regulations imposed within the EU.

Margaret Beckett

I understand that British farmers are concerned about whether there are welfare requirements here that are not imposed elsewhere. I touched on cross-compliance but I did not deal with it in great detail. Every member state—there will shortly be 25—will, of course, be required to meet cross-compliance measures in order to obtain entitlement to payment. Many of those measures are contained within existing directives, but there is also the requirement to maintain land in a generally good agricultural condition. Events are moving in the direction of narrowing the previously perceived gap between standards in this country and those elsewhere.

Alan Simpson (Nottingham, South) (Lab)

The Secretary of State is right to turn her back on the historic system of funding agriculture, which was effective at shovelling bucketfuls of money into the pockets of a small number of grain barons as opposed to the larger number of working farmers. What assessment has she made of the danger of falling into the different trap of moving from funding the richest farmers to funding the richest landowners? She will know that under the proposed scheme the Duke of Westminster will probably be entitled to subsidies of £1,000 a day whether he bothers to get out of bed in the morning or not. Will she re-examine the EU proposals to impose a ceiling on the land-based subsidies so that the money clearly goes into sustainable farming, rather than sustainable and profitable landholding?

Margaret Beckett

I hear what my hon. Friend says, and obviously I am familiar with the argument on the issue. It is fairest to have a system that pays the same on each hectare—which it broadly will, within the two different regions—irrespective of the nature of the ownership. I repeat that it is the public goods that will be required for which public money will be paid. Although the SDA—severely disadvantaged area—split will make a difference to the receipts of the richest landowners, I urge my hon. Friend to look at the wider impact of the redistribution and not just at that one comparatively narrow point.

Mrs. Angela Browning (Tiverton and Honiton) (Con)

I am sure that the Secretary of State will be aware that the south-west branch of the NFU calculates that the scheme announced today will mean a reduction of £18.6 million a year in payments to the south-west area, primarily because it is a livestock and dairy area. She said earlier that some sectors would be adversely affected. Will she do an analysis of self-sufficiency in the livestock and dairy areas, and put it in the Library? The key test of the changes announced will be whether we produce more of our own food as a result, or suck in more imports. UK self-sufficiency has dropped in the past 8 years, from 75 per cent. to 65 per cent. Will the changes improve that situation or make it worse?

Margaret Beckett

Frankly, it would be hard to assess what impact the changes will have on self-sufficiency, because the effect on the marketplace will make an enormous difference. I recognise the concerns that the hon. Lady expresses about the impact in the south-west, but it will not be disadvantageous to everyone. People on Exmoor, Dartmoor and Bodmin moor, like those in the north Yorkshire moors, will benefit—

Mrs. Browning

They are not in my constituency.

Margaret Beckett

I am sorry that they are not in the hon. Lady's constituency. Unfortunately, we are not able to allocate subsidy per constituency. We have already got a lot of analysis and we will continue to do more. I am sure that everyone else will also analyse the proposals in detail, and that will illuminate the exact position for all of us. In overall terms, there will be winners and losers, as always happens when things change, but the impact of the movement of resources is anticipated to be about 13 to 15 per cent. over eight years. We will then have a system of support that is much more defensible, and that will be worth it.

Mr. Michael Wills (North Swindon) (Lab)

I congratulate my right hon. Friend on a skilful and historic statement. I also lend my support to those who have asked her to continue to explore how best that huge public subsidy can be used to support those who actually work the land, rather than simply to inflate the asset value of land. Now that subsidy has been decoupled from production, will it mean an end to export subsidies under the CAP, which have been so damaging to so many of the world's poorest people?

Margaret Beckett

I am grateful to my hon. Friend for his welcome, and I am especially grateful to him for taking that point on board. I know that he has been greatly concerned about the distorting effect of export subsidies and has expressed his anxieties about the form of reforms hitherto. He is right: what created the need for export subsidies was the overproduction for the European market. There will be no incentive for overproduction any more, so the need for export subsidies should wither on the vine. If my hon. Friend can get that message across to some of the well-meaning and honourable people who campaign against this reform, I would be grateful to him.

Mr. John Burnett (Torridge and West Devon) (LD)

Complex rules will be necessary to calculate the payments made in the transitional period, and especially to fix the base historical payment—although admittedly that will be phased out. Can the Secretary of State confirm that there will be a fair, independent and objective appeals system, so that individual farmers can appeal against determinations made by her Department?

Margaret Beckett

My understanding is that farmers in the hon. Gentleman's area will do rather well out of the changes. However, some will feel, for a variety of detailed reasons, that they will be disadvantaged. I urge all hon. Members to tell their farming constituents to provide us with as much information as they can as soon as possible, because the more information we have, and the more accurate it is, the less the likelihood of errors. Information will also assist us when we consider how great a provision we need to make for a national reserve. Part of the purpose of such a reserve will be to deal with anomalies that cannot be dealt with any other way, with hardship cases, and with unusual circumstances— perhaps land or leases changing hands in the reference period. [HON. MEMBERS: "Appeals?"] Yes, there will be an appeals system to correct the basis of payment, but just as important is a system that deals with harmful anomalies even if the payment has been assessed correctly.

Mr. John Grogan (Selby) (Lab)

Does my right hon. Friend accept that today's announcement will be particularly welcomed by the completely unsubsidised horticultural sector? Indeed, the NFU horticultural committee, under the able chairmanship of my constituent, Mr. Graham Ward, has argued long and hard that if the historic payment system had been adopted it would have created market distortions in that highly successful sector.

Margaret Beckett

I am grateful to my hon. Friend. He is right, although it is important to utter the caveat that it will not be open to people to expand the areas of enterprise that they have previously had and claim extra payment on that basis. The arrangements will be for existing areas, with some exclusions for top fruit. Generally speaking. however, he is right to say that the changes will be helpful to horticulture. Many in that sector have made the grade in an unsupported market, but the changes will make a difference for some.

Mr. John Maples (Stratford-on-Avon) (Con)

Will one of the effects of the changes that the Secretary of State has announced be that a dairy farmer who currently receives a lot of subsidy but probably does not make any money will gradually have much of that subsidy taken away and given to farmers who currently farm profitably without any subsidy?

Margaret Beckett

There will be impacts on dairy farmers, as on everyone else. At present the dairy sector receives direct support, but we are about to move towards a system with a dairy premium. It is our proposal to decouple that premium from the beginning, and to make that part of the general approach. However, there will be winners and losers in the dairy sector, as in other sectors, and we are willing to examine the redistributive effects and see what can be done to mitigate them. In the long term, a simple system such as we propose will be to everyone's advantage.

Mr. Peter Luff (Mid-Worcestershire) (Con)

I invite the Secretary of State to say a little more about the impact on horticulture. She will know that the high-quality agricultural land in areas such as south Worcestershire and the Vale of Evesham can just as easily be used to grow subsidised cereals as unsubsidised field crops such as salad onions. Can she reassure horticulturists that they will not suffer an adverse competition effect as the high subsidies paid for arable crops such as cereals have an impact on the marketplace in the transitional period?

Margaret Beckett

I cannot say that there will be no effect in the transitional period, although I shall think some more about the point that the hon. Gentleman makes. In the longer term, payment will be made on the same basis for everyone. I know that those with unsupported crops were anxious that those who received support would be able to compete, with the assistance of that payment, against those who had never been entitled to a payment. That fear cannot be totally removed in the short term, but it should be diminished.

Mr. Andrew Robathan (Blaby) (Con)

I declare a very real interest, as a farmer. The changes are a sensible step in the right direction and, as the hon. Member for Luton, North (Mr. Hopkins) said, signal the end for the CAP. Presumably the money paid under the flat rate will eventually be paid straight to the landowner. Many of my local farmers are council tenant farmers, the landlord being Leicestershire county council. How does she envisage the changes affecting the relationship between the landlord and tenant, especially in starter farms, which many people still want to take on? The proposals need fleshing out.

Margaret Beckett

I am grateful to the hon. Gentleman for his welcome. I am conscious of the fact that tenant farmers are anxious about whether some council starter farms will continue to be made available. We are looking at the issue in general terms and seeing whether we can do more to assist. I can tell the hon. Gentleman that the payment will go to the person who is farming the land.

Mr. Adrian Flook (Taunton) (Con)

The Secretary of State said that Exmoor was a probable winner under this system, and I welcome that, but as I also represent other parts of Somerset, I cannot welcome the implications of her comments. Perhaps there is one silver lining—less bureaucracy, as she described it. I accept that the system is not hybrid, but the transition appears to be so. What assurances can she give that there will not be an explosion of associated regulations and bureaucracy as we move towards 2013?

Margaret Beckett

The hon. Gentleman is right: it is not a hybrid system and ultimately it will undoubtedly be less bureaucratic. But there is a transitional period, and the same invidious choice is before the House as was before the Government—between a much more compressed transition period, with a bigger impact on farm incomes and farm planning, or an extended period that would lead to greater complexity. I regret the need to make such an invidious choice, but we had to make it and on balance, given that people will understand clearly what the pattern of transition is, it will assist them in planning for the longer term.

Mr. Roger Williams (Brecon and Radnorshire) (LD)

Many farmers will be very pleased that they now have some information on which to make planning decisions—although the devil will be in the detail. But perhaps the Secretary of State should give us some background on her decision to split England into severely disadvantaged areas and the rest. If she is serious about supporting the most vulnerable farming businesses and those that make the biggest contribution to the environment, will she be putting more resources into severely disadvantaged areas, or doing the opposite?

Margaret Beckett

I am not planning to put more resources into farming through the CAP than currently exist, but we do intend to try to make better use of the resources over time. One of the best ways to do that is by reducing bureaucracy and moving to a more simplified system. The less we have to absorb, the better.

The reason for the split is simple and straightforward: otherwise, the redistributive impact would have been enormous, and many questions and concerns would have been raised. So we considered an explicit split between less favoured areas and others, and as I understand it, the impact is minimal, except in the beef sector. As we examined this issue, it became increasingly clear that that was the best possible way to mitigate. The structure already exists—the map of SDAs was last published in 1992, so everybody knows where they stand—and it seemed the best and simplest method. It was precisely because of our wish to avoid additional regulation and bureaucracy that we did not impose some other complicated system in order to mitigate, but went instead for a split between SDAs and non-SDAs.

Mr. Roy Beggs (East Antrim) (UUP)

I should begin by declaring a small farming interest. I welcome the Government's decision to allow each of the regions to determine the way forward that is most suitable for them. Does the Secretary of State agree that the growing importance of, and emphasis on, environmentally sensitive farming may nevertheless impose additional costs on farmers? For example, when restrictions are placed on the spreading of slurry, farmers will have to invest in tanks or stores. Will grant aid he provided to encourage such investment, in addition to the single payment?

Margaret Beckett

The hon. Gentleman makes an important point, and he is right to say that there is increasing emphasis on moving towards more environmentally sensitive farming. That is why we are considering proposals under pillar 2, and the establishment of supporting schemes. As for slurry, grants are available to deal with the impact of changes that farmers will need to make in nitrate-vulnerable zones. All these issues will be considered over time, but I should point out that such developments are in the long-term interest of farming and of the wider community.

We should remember one simple point. Members who are not from farming areas often ask, "Why should farming receive support when other industries do not?" The farming community's answer is simple and straightforward: it is because farmers are the custodians of the land and the landscape, and, as such, of our environment. Indeed, 70 per cent. of our land is farmed land. The farming community is right, and we should recognise that fact. This scheme allows us to make that recognition, and to move away from the previous position.