Agrimonetary Compensation (Hansard, 19 February 2001)

§ The Minister of State, Ministry of Agriculture, Fisheries and Food (Baroness Hayman)
My Lords, the Government are providing £629 million of agrimonetary compensation, of which £233 million is optional, in recognition of the pressures faced by the agricultural industry. Agrimonetary compensation is partly compulsory and partly optional. Because much of the cost falls to the British taxpayer, either directly or indirectly through the Fontainebleau abatement, decisions on whether to pay the optional elements must be taken in the context of priorities for agriculture and other expenditure.

§ Lord Kimball
My Lords, I thank the Minister for that Answer. I ask the noble Baroness: why not, bearing in mind that the amount of money will run out in the course of the next two months and the incoming government will find it even more difficult, because if the full amount is not claimed this year the amount reduces next year?

§ Baroness Hayman
My Lords, I understand the point that the noble Lord makes. However, our policy remains what it has been in the past. On every occasion when agrimonetary compensation has become available, we have looked carefully at the state of the industry and the prospects of the sectors concerned, as 501 well as at other calls on the UK exchequer. We shall examine the optional compensation, the details of which we shall learn at the end of this month, on the same basis.

§ Lord Tomlinson
My Lords, does my noble friend agree that essentially the impact of the Fontainebleau mechanism to which she referred in her Answer is that the UK remains responsible for paying the whole of it by virtue of lost income to the Chancellor of the Exchequer? In those circumstances, nowadays is it not perhaps much more effective to concentrate on fundamental reform of the common agricultural policy, which will certainly be necessary if British farmers are to survive in an enlarged European Union?

§ Baroness Hayman
My Lords, I have a great deal of sympathy with the point that my noble friend makes. It is wrong to represent agrimonetary compensation, as sometimes happens, as some kind of free good from Europe. Because of the rebate, the payment of only the EU contribution costs UK taxpayers about 71p for every pound spent, and when it involves matched funding the figure rises to 85p in the pound. As I said in response to the noble Lord, Lord Kimball, that is the reason why we have to look at whether the money is best directed at sustaining people in what are admittedly very difficult circumstances or trying to support them in the restructuring of agriculture for sustainable incomes in future.

§ Baroness Williams of Crosby
My Lords, can the Minister say whether there is any real conflict between the two? The Minister is well aware of the tremendous damage done to agriculture as a result of the difference between the high value of sterling and the cheaper euro, in addition to the BSE crisis and several others. Does the Minister agree that it is wise for the Treasury to match the funds available under the agrimonetary compensation scheme? Does she recognise that there is a very strong case for adding the problems of the agricultural industry to the five criteria which the Chancellor will consider in giving advice on whether or not this country should enter the euro-zone?

§ Baroness Hayman
My Lords, the criteria which the Chancellor will consider have been made absolutely clear in the past, and I am not sure that it would be of assistance to add to that at this stage. However, the noble Baroness makes the important point that the difference in the value of currencies has been one of the main difficulties faced by the agricultural industry. That is why £629 million in agrimonetary compensation has been drawn down in sectors like cereals, which may surprise people. However, this is public expenditure, and we must look not only at short-term support but also at the issue to which my noble friend referred—reform of the CAP—as well as at transfer into the rural development budget.

§ The Countess of Mar
My Lords, can the Minister say whether the ewe premium comes into agrimonetary compensation? Does it come directly 502 from Brussels or does the Treasury have some part to play in it? If it is the former, can the Minister confirm that last year the Ministry overestimated the British sheep flock by 1 million, which represents a considerable loss? I have worked out that the loss to British farmers is about 50p per ewe.

§ Baroness Hayman
My Lords, I am not sure about the difficulties which may arise in terms of estimates of the national flock, and on that point I shall write to the noble Countess. The sheep annual premium is the difference between a Community-wide target price and average sheep prices on the Community market. If market prices are high, the SAP rate is low. Market prices in member states are reported to the Commission in national currencies. The Commission converts them into euros using current market rates. If the euro is weak, the conversion will provide higher euro rates nearer the target price, thus producing a lower rate of premium. I understand that the Commission is concerned about how the calculation is working currently and is looking at proposals which potentially make it slightly simpler.

§ Lord Boardman
My Lords, I declare an interest as a farmer. Does not the effect of the Minister's reply mean that the agricultural community is being deprived of funds from Europe to which it is en titled and which it desperately needs?

§ Baroness Hayman
My Lords, I have tried to make clear in my responses that we are not being deprived of funds from Europe. All the mandatory agrimonetary compensation is, by definition, mandatory and is drawn down. Decisions about optional agrimonetary compensation are taken by every eligible country on the basis of national circumstances. In this country the national circumstances are such that, because of Fontainebleau, compensation involves large amounts of UK rather than EU expenditure. Therefore, questions about the proper disposition of public expenditure come into the equation.

§ Lord Dubs
My Lords, does my noble friend agree that for British farmers the best way forward would be a substantial reform of the CAP, as her right honourable friend Mr Nick Brown endeavoured to bring about during the Agenda 2000 discussions in Brussels? Does my noble friend agree that reform of the CAP would help British farmers and in achieving European Union accessions?

§ Baroness Hayman
Yes, my Lords.