Common Agricultural Policy: Cost (Hansard, 6 December 1993)

The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe)
My Lords, the cost of the CAP to the European Community in 1993 is estimated at £27.6 billion. The 1994 draft budget has been set at £28.1 billion.

§ Lord Jay
My Lords, now that we claim to be at the heart of Europe, is it not rather disappointing that not merely is there not to be a decrease, but there is to be a further major increase in the wasteful and extravagant expenditure of huge sums of public money?

Earl Howe
My Lords, think that the important point to make is that, following the reform of the CAP, the cut in support prices and the increase in direct payments to farmers will result in consumer savings, but increased taxpayer costs. The overall resource cost will be lower than it would otherwise have been. At the end of the reform period, annual costs imposed by the CAP on consumers should be around £1 billion lower in the UK and around £8 billion lower for the EC as a whole.

§ Lord Boyd-Carpenter
My Lords, can my noble friend say whether Her Majesty's Government insist upon obtaining a reduction in that enormous and wasteful figure?

Earl Howe
My Lords, I agree with my noble friend's premise and the Government have consistently argued that the cost of the CAP remains far too high. It hampers the efficient allocation of resources within the economy. We are pressing for further reductions in support levels so that costs can be reduced.

Lord Bruce of Donington
My Lords, is the noble Earl aware that, despite all the pressure and persuasion that the Government say they exert "at the heart of the Community" in these matters, gross contributions to this sum by the United Kingdom from the Consolidated Fund represent some £3 billion? Included in the expenditure for which the Minister has given the total, some £1 billion is wasted on a ridiculous tobacco subsidy and tobacco consideration which are quite useless to the United Kingdom and to Europe. Moreover, the sum includes £1.5 billion in respect of the storage of surplus foods in the European Comrnunity.

Earl Howe
My Lords, the emphasis of CAP reform is to reduce the reliance on intervention and storage costs about which the noble Lord feels so strongly. The thrust of the Government's position is to work over time towards a more market-oriented CAP with less reliance on agricultural support generally.

§ Lord Cockfield
My Lords, is it not the case that the cost of the common agricultural policy expressed in pounds sterling is greatly inflated by the devaluation of sterling—a development no doubt vigorously supported by the noble Lord, Lord Jay? In order to put the matter into perspective, and to assist the noble Lord, Lord Bruce of Donington, can my noble friend say how much of the money comes back to the United Kingdom in the form of agricultural subsidies, export restitution and the British budget rebate?

Earl Howe
My Lords, my noble friend is absolutely right because the switch-over mechanism under the green currency system has meant that various ERM realignments since the autumn of last year have added some £1.2 billion to the budgetary costs of the CAP. That is something which we regard as most regrettable.
745 On the other hand, our receipts under the CAP are estimated at £2.1 billion in 1993 and £2.8 billion in 1994. Our share of the receipts will rise over the full period of CAP reform to 9 per cent. of total CAP expenditure.

§ Lord Jay
My Lords, is the noble Earl aware that the cost has increased in billions of ecu as well as sterling, and that has nothing to do with devaluation? Although I am sure he is doing his best, is it really much comfort that we are now paying people to produce nothing, whereas previously we were paying them to produce too much?

Earl Howe
My Lords, the noble Lord will himself be aware that there is no doubt that the CAP, as originally conceived, fulfilled a worthwhile purpose—namely, to eliminate food shortages in Europe. With the achievement of that objective, the justification for the CAP will rest much more on its cost-effectiveness. That is the thrust of our policy, as I have explained.

§ Lord Elis-Thomas
My Lords, will the Minister agree that one of the most important aspects of the reform is the transfer of resources into agri-environment initiatives? Although those initiatives involve the reduction of production support, they mean that there is support for sustainable agriculture and a maintained countryside landscape.

Earl Howe
My Lords, I am grateful to the noble Lord because he has enunciated very well the dual thrust of the policy as it now is—namely, to ensure a supply of food as well as a well managed countryside.

§ Baroness Oppenheim-Barnes
My Lords, as my noble friend the Minister referred to the possible benefits to consumers, will he also make it clear to your Lordships' House that the CAP has cost every family in the country since the time we joined the Community an enormous amount extra, well above what we would have had to pay for food if we had not had the CAP? Can he say whether the figure of £1 billion which he mentioned will completely redress the problem or only partly do so?

Earl Howe
My Lords, there will still be a cost to consumers under the common agricultural policy at the end of the reform period. However, what I can say is that the savings that would be made in the absence of the CAP are often overestimated. If there were no CAP then world prices would be markedly higher.

§ Lord Stoddart of Swindon
My Lords, does the Minister agree with the Secretary to the Treasury that the common agricultural policy costs every consumer in this country £1,200 a year?

Earl Howe
No, my Lords, I do not agree with that figure, for the reasons that I have just stated. I believe that it overestimates the position that would exist were the common agricultural policy not there.

§ Lord Pearson of Rannoch
My Lords, I wonder if my noble friend can go a little further with an answer 746 which he gave earlier to this House and explain precisely whether the Government will be working overtime to reduce the iniquities of this absurd policy; or whether they will merely be working "over time", which I fancy might take a little longer?

Earl Howe
My Lords, we shall be working very hard indeed to see that, over a period of time, the cost of the CAP comes down.

§ Lord Dormand of Easington
My Lords, we have been told many times by the Government, and again today, about the difficulties of securing a reduction in this ridiculous amount. Does the Minister agree that the fact that the matter has been raised again by so many noble Lords today shows how much concern there is about it? On this occasion will the Minister be specific and tell the House what are the main obstacles to the reduction?

Earl Howe
My Lords, we are one member state in a Community of 12. As the noble Lord will be aware, agreement on matters of this kind should be reached as far as possible by consensus. It is not always possible to do that in the twinkling of an eye. Nevertheless, I believe that we have made real progress over the past few years, not least in the CAP reform measures of May 1992.

§ Lord Gallacher
My Lords, will the noble Earl tell the House whether the implementation of the MacSharry proposals will, in the aggregate, result in a reduction in the cost of the CAP, or will it mean in effect that, although the MacSharry proposals may reduce surpluses, there will be no reduction in the global cost of the common agricultural policy?

Earl Howe
My Lords, the MacSharry proposals as subsequently amended will reduce the cost of the CAP, if one defines the cost as the budgetary expenditure for the Community combined with the cost to consumers.