HL Deb 26 June 2003 vol 650 cc443-54

3.54 p.m.

Lord Whitty

My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Environment, Food and Rural Affairs. The Statement is as follows:

"With permission, Mr Deputy Speaker, I wish to make a Statement on the outcome of the final negotiations on the reform of the common agricultural policy, which concluded in Luxembourg at 6.35 this morning, UK time.

"We approached the negotiations with two clear objectives: first, to get the best settlement we could for UK farmers, consumers, taxpayers and the environment; and, secondly, to get an agreement which could lay the foundations for a successful outcome at the WTO negotiations in Mexico later this year.

"In pursuit of these objectives, we set negotiating goals: to simplify the CAP, reducing the burden on farmers; to provide for a substantial shift of support from production to a wider range of rural and environmental activities; and to give the EU a strong negotiating stance in the WTO negotiations that reach a key point in Cancun in September. I am happy to say that the agreement today delivers what we wanted—real change.

"The key points are: breaking the link between farm subsidies and production in order to reconnect farmers to their markets, reduce damaging environmental impacts and reduce bureaucracy—this is at the heart of our approach to sustainable food and farming; cross-compliance to make subsidies dependent on meeting standards in key areas, such as environment and animal health and welfare; support prices for butter and rice are reduced, bringing them closer to world prices to the benefit of consumers; and there is a new financial discipline, which will trigger action to reduce subsidies if CAP expenditure looks to be in danger of exceeding the agreed ceilings.

"Today's settlement includes elements that were not even in the January package and therefore, in some respects, it goes beyond the initial proposals. The first is national envelopes, which will allow us to develop targeted schemes to promote sustainable and environmentally friendly farming. Secondly, we have secured a further switch of resources to the second pillar and an earlier start date for modulation. The second pillar package that we have secured is more than a third larger than was available in the January proposal. For the first time, modulation applies on an EU-wide basis, switching support from production subsidies to targeted support for environmental and rural development objectives across the European Union. Thirdly, we have succeeded in protecting UK farmers from the immediate threat of an unfair settlement as part of the financial discipline process. I will be placing a detailed summary of the agreement in the Library of the House, and I wish Members happy reading.

"The most radical and most important element in the package is the new single farm payment, which we can use to replace the plethora of existing direct payment schemes, such as arable aid, suckler cow premium, beef special premium, slaughter premium, extensification premium and sheep annual payment premium, to name but a few. This will greatly simplify the bureaucracy associated with all those schemes. But, more importantly, because that payment is no longer linked to production, farmers will be free to produce for the market rather than the subsidy.

"Farming, consumer and environmental interests have all strongly supported a move of this kind. We will, of course, consult on the detail of how to proceed, especially with use of the national envelopes and the important new provisions for cross-compliance.

"Decoupling is also particularly important in the WTO context. This deal enables the EU not only to meet but to better the domestic support targets that have been proposed in the WTO negotiations. These reforms will reduce the distortions in world markets that the CAP has caused and will accordingly contribute to a successful conclusion of the Doha development round. I hope our trading partners will recognise the scale and importance of this change and respond positively to it.

"Reaching this agreement has taken an immense and united effort, and I want especially to thank our dedicated team of officials, my many Cabinet colleagues who have actively engaged in support of our discussions, and of course our colleagues in the devolved administrations, who have been closely involved throughout. It shows what we can achieve by working constructively with colleagues in the Agriculture Council. In particular, I want to pay tribute to Franz Fischler, who showed considerable courage and tenacity in piloting through this agreement.

"It is hard to over-state the importance of this morning's agreement in transferring the core elements of the CAP and laying down a new direction for its future evolution. Giorgios Drys, who has done an excellent job piloting the council through these negotiations, said that we needed to get agreement for a new CAP—and we have".

My Lords, that concludes the Statement.

4 p.m.

Baroness Byford

My Lords, I am grateful to the Minister for repeating the Statement made this afternoon. I should like to record our gratitude to Mrs Beckett for so quickly returning to the House after the agreement was reached.

The agreement, while welcome, falls short of some of the original proposals. Three weeks of wrangling have ended up in a fudged compromise. I ask that government time be allocated to enable the House a full debate on the details and the implications of the agreement, once the details are fully known. As the Statement has shown, it really is a skeleton at this stage; I do not accuse the Minister of that—it is a fact. We must wait to see the further details which will arrive in the Library later.

We welcome the move on decoupling, which should reduce market distortion—although I understand that up to one-fifth of the modulation money may return to the European pool to be used as the Commission decides. I ask the Minister whether objections were raised to this. This would surely favour smaller, continental farmers and disadvantage UK farmers. That cannot be right; we must look closely at what is proposed.

As regards the environment, the receipts from the EU-wide modulation may be insufficient to put in place the recommendations made in the Currie report. Does the Minister accept that this is a possibility? If so, how will the Currie recommendations be achieved?

I am concerned that the implementation of the whole package has been delayed until 2005 and that some countries have the option to delay it further, until 2007. I trust that the Government fought strongly against this, but we on the Conservative Benches find it unacceptable. Does not the Minister accept that the compromise which gives other countries options to maintain links, at least in part, with production, could lead to market distortion? Might it not also disadvantage UK agriculture and—more importantly—developing countries?

Does the Minister accept that it is likely that the UK will lead the reformers? Will he ensure that we will not be losers as well, should the Government not ensure a fair deal for UK farmers?

We welcome in the Statement the aim to simplify CAP and reduce the burden—especially that of regulation—on farmers. We also look to see where the EU will give a strong stance in the WTO negotiations. I believe that that has been half achieved, although if we had managed a full swing of all countries at the same time, we would have had a stronger stance in Cancun in September.

The Statement defines clearly that,

there is a new financial discipline which will trigger action to reduce subsidies if CAP expenditure looks to be in danger of exceeding the agreed ceilings". I ask the Minister what is anticipated, and how that will be achieved.

The Statement also deals with the question of national envelopes. Is the Minister content that the national envelope scheme envisaged will in fact allow fair competition between existing EU countries and those who will shortly join us?

As regards farming, consumer and environmental interests, the Minister said, We will, of course, consult on the detail of how to proceed, especially with the use of national envelopes and the important new provisions for cross compliance". Could the Minister give us some steer as to the timetable envisaged?

Further on in the Statement, the Minister declares that, I hope our trading partners will recognise the scale and importance of this change and respond to it positively". We do too, because it is hugely important that at the WTO talks, we get the EU's move recognised and taken into consideration.

In placing the detailed summary of the agreement in the House of Lords, will the Minister remember our desire to fully debate it in parliamentary time. Instead of debating the Hunting Bill, 17th July might be an appropriate time to do so.

4.5 p.m.

Baroness Miller of Chilthorne Domer

My Lords, we on the Liberal Democrat Benches welcome the news of success on CAP reform. I congratulate Mrs Beckett and her team, and the noble Lord, Lord Whitty, too—not only for the outcome, but for their tenacity and hard work. I also record our gratitude to Franz Fischler, because he in particular should take great credit for having stuck with what must at times have seemed a thankless task.

We have as good an outcome as could be expected at this stage. We especially welcome decoupling. Future success depends heavily on how we choose to implement this at national level. An early debate in the House would be helpful, but I would also welcome comment from the Minister today as to the time-scale and extent of the consultation.

I especially welcome the greater-than-expected success in switching resources to the second pillar. Rural communities in Britain will be extremely thankful for that. One area that concerns me and which we should get right, given that we have discretion for them, involves young entrants to farming and young farmers who will inherit their families' farms. We must make sure that whatever system we devise is truly encouraging to them. It is no good to look to the future for a vibrant farming sector if no one really wants to go into it.

We should look also to the processing and marketing chapters. I particularly welcome what I understand to be a much-enhanced food quality and national assurance scheme effort and that producer groups will be able to make progress in promoting their products.

I would like the opportunity to debate all that detail in the House—especially in the light of the contribution of the noble Lord, Lord Haskins, to our countryside debate the other day. While I am sure that he will be able to streamline rural delivery, it cast a slight chill into my heart to hear that he is; still looking at too great a scale of farm, and that his vision of our future is not based on the small, family farms that are so crucial, not least to our management of landscape. All noble Lords will remember, as I do, the importance of that link between farming landscape and tourism, and the contribution of tourism to our national economy.

I welcome this progress; it gives us a brighter future to work towards. I feel much more optimistic now that we can go to the Cancun round of the WTO with our heads held higher because Europe has kept faith with the rest of the developing world. It is now clearly incumbent upon the United States to review their farm subsidy system, which is out of line with the rest of us, and to do something about it.

4.9 p.m.

Lord Whitty

My Lords, I thank the noble Baronesses for what is on balance a substantial welcome for what has been achieved in Luxembourg—not just overnight, but over months of bilateral, multinational negotiation.

I was slightly taken aback by the noble Baroness, Lady Byford, calling this "a fudged compromise" at the beginning of her remarks which ended up by being extremely welcoming and welcome.

A fudged compromise is the last thing this is. It is a clear, strategic shift after 50 years of CAP away from wasteful and often environmentally damaging production subsidies towards a system that sustains our countryside and allows farmers to produce for the market and not for the subsidy. This is a dramatic and historic change and one which should not be underestimated.

There are a few compromises at the edges. We needed to make them in order to reach the deal. That was always going to be the case. But in many respects, we have a better deal not only than anyone expected but than appeared to be the case in terms of Commissioner Fischler's proposals in January. Much of that is down to the good working between ourselves, the Commission and the agriculture Ministers of those countries which supported reform.

It is also important to note that throughout the process we have received the support of the major farming unions within the United Kingdom. That was a great strength to us and, if I may say so without disparaging continental counterparts, a great example to some of them.

The noble Baroness, Lady Miller, asked a number of questions. She asked about the modulation and the 80 per cent. Clearly, there is some skewing towards the protection of smaller farms. That was always going to be inevitable and it is much less than appeared to be the case at one point. And we get at least 80 per cent of that money back, which is considerably more than looked guaranteed. We can get more than that, but we are guaranteed to get 80 per cent back as compared with the current situation. Under the existing second pillar, under which we got back only 3.5 per cent of the money spent, the United Kingdom will get back a minimum of 11 per cent. That is an extremely substantial improvement for us.

The noble Baroness also asked about the date of 2005 as distinct to 2004. When we set out on the negotiations it was intended that we start in 2004 but, as they have taken somewhat longer than originally hoped, it is sensible to allow enough time. We do not yet have the legal regulations laid and we need to set up the new administrative systems for the operation. The sensible date seems to be 2005, and the United Kingdom ultimately supported that.

We were not happy about some countries having the opt-out to 2007, but that, too, was part of the final compromise. Far from that being to the disadvantage of UK farmers, it will mean that UK farmers are into the new system ahead of those countries which foolishly choose to delay the implementation of the new system for another two years. We will be operating in a more market-oriented and environmentally effective system before what I believe will be a minority of countries which used to take advantage of that delay. In so far as there are market distortions, their effect will benefit UK farmers who will be operating more as commercial farmers as against the minority of continental country farmers who operate differently.

In terms of the WTO effects, we believe that this puts the European Union in a strong position in relation to our trading partners and, far from the EU delaying the opening up of trade to developing countries, a successful outcome to the Doha round is a major and significant shift of the EU position which should make those talks a success. Part of that success, as the noble Baroness, Lady Miller, indicated, will be that the United States moves in the same direction. The United States, as distinct from Europe, has been moving in the wrong direction over the past few years in relation to domestic farm subsidy. It now needs dramatically to reverse that position to make its contribution to a positive outcome and Cancun.

Financial discipline relates to digressivity and the fact that we now have ceilings on the total expenditure. The arrangements from 2007 will be introduced and once expenditure gets within £300 million of that ceiling there will be a cap on particular forms of expenditure. Therefore, we cannot have a repeat of the situation we occasionally experienced with the CAP, where expenditure gets out of hand.

The national envelope is beneficial to us and we can use that flexibility and subsidiarity to the advantage of the UK countryside for our particular purposes. It provides the flexibility we are seeking and does not disadvantage the UK, as some are suggesting. There will be consultation on that and on many other aspects of the agreement, beginning almost immediately and intensively once we have tabled the regulations from the Commission. We have some time to get this right and I am sure that the farming organisations, rural interests, the environmental organisations and others will wish to be involved in those discussions.

As the noble Baroness, Lady Miller, said, one of the most important aspects of this is the increased importance of the second pillar. It is significantly larger than appeared likely at the beginning of this year. It will enable us to expend what have previously been production subsidies in a way which benefits the whole countryside and its environment.

The noble Baroness was right in saying that part of the agreement needs to be directed at making farming attractive as a commercial and profitable enterprise. Some of the provisions under the second pillar will help government to do that, but the UK Government are already committed under the post-Curry strategy, to support the industry in developing assurance schemes, processing and marketing, the development of producer groups and so forth. This move at EU level will help sustain that position, too.

Both noble Baronesses referred to the question of debating the matter in this House. I could not possibly comment on the specific suggestion that the noble Baroness made in relation to a certain date in July. Clearly, the usual channels will need to consider that. We have had a recent important debate on CAP in this House and we will have to consider whether we should do so again and at what point that would be appropriate.

I thank the noble Baronesses for their comments and underline the unity of purpose across not only government and the farming organisations, but also environmental bodies and industry at large because of its interest in the wider trade round. The United Kingdom has acted as a collective entity on this occasion and the comments in this House reflect that.

4.18 p.m.

Lord Harrison

My Lords, I want to take my cap off to this CAP reform and in so doing to thank two individuals in particular. First, I thank EU Commissioner Franz Fischler, who to my certain knowledge has attempted to resolve the issue for some six, seven or eight years. Secondly, I thank our own Secretary of State, Margaret Beckett, and her team who have tirelessly worked to ensure this success in the face of criticism from the press and "Farming Today" and others who despaired of her achieving this wonderful outcome. It will be a good outcome for farmers, for the environment and for developing countries because it enables us to hold our head high in the WTO round.

Will my noble friend accept that one other huge benefit accrues from this agreement? It is that for those of us who want to support the Government in their pro-European stance, which was announced by the Prime Minister and so proselytised, the biggest blot on the landscape for too many years has been a failure to reform the CAP. That is now being done and it is a tremendous plus for Britain and Europe.

Lord Whitty

My Lords, I gratefully accept the congratulations on behalf of Margaret Beckett, who will pass them on to Franz Fischler. Both have made a significant contribution to the agreement. It shows that when the Commission shows leadership on behalf of Europe as a whole and when leadership is shown in this country, we can achieve a positive outcome. During the whole period of our membership of the Common Market, as it was, and the European Union, as it now is, successive governments have attempted to change the CAP and the distortions that it causes within Europe to the environment, the markets and international trade. The fact that we have been able to change it in a significant way this week is a historic turning point which will benefit farmers, consumers and the environment alike.

Lord Hylton

My Lords, the Statement mentions distortions in trade. Can the Minister comment on export subsidies paid by the EU and say whether the full text covers that point? Does he agree that dumping—for example, milk powder—has had the effect of destroying local markets for farmers in developing countries? Is any timetable built into the agreement for ending export subsidies?

Lord Whitty

My Lords, this agreement does not specifically cover export subsidies. The position of the EU going into the Doha round of WTO talks envisaged a phasing out of export subsidies. The exact detail will be negotiated with our trading partners. The timescale for that will be negotiated with our trading partners in Cancun.

I agree with the noble Lord that some of the effects of the existing and past export subsidies have been hugely damaging to some developing countries. It is part of this Government's intention to ensure that they are phased out as a result of agreements to be reached in the WTO.

Lord Mackie of Benshie

My Lords, I congratulate the Government and the team for the work they have done and am glad of the agreement reached. However, the Minister mentioned that there were certain compromises. Before I read all the papers he has accumulated for me in the Library, perhaps the noble Lord can tell me what constitutes a small farm. In this country, our family farms are rather larger than on the continent. That will be important. On decoupling, can the noble Lord also say whether the subsidy—the joined-up payment, whatever one calls it—will go with the land and not the person? Finally, can the Minister say something about milk quotas? Is that one of the compromises?

Lord Whitty

My Lords, perhaps I may take those questions in reverse order. The milk regime is one of the more disappointing parts of the deal. The milk proposals came slightly later than the rest of the package; we were working on a different timetable. But we are not happy with the outcome relating to milk either on the extension of quotas in time—although not as much as was proposed in terms of numbers, which would have been helpful—or on price reduction. So milk is one sector which we would have liked to have been more decoupled than the proposals allow. However, I believe that we shall move in that direction. Certainly the commissioner has that in mind.

The decoupled single payment will go in the first instance to the producer who was producing as of 31st May this year. The quantum will be based on an earlier reference period. It will be the person who was the producer on the land, whether landlord or tenant, at 31st May this year. The full details of that are partly in the document but much of it will be spelt out later in, no doubt, a hugely complex legal form.

The payment is attached not to the land, but to the producer. If it is transferred it has to be transferred to other land which will be subject to the same cross-compliance rules. Therefore there can be no loss of land to which the subsidy and cross-compliance rules apply.

The noble Lord is right about small farms. The relatively small part of the package which is geared to small farms—the franchise from the modulation payment—will, by and large, benefit very small farms and not the average-sized British farm. However, the average-sized effective British family farm should benefit from the other freedoms that the package produces.

Lord Carter

My Lords, it is correct to say that the shift of production support away from price support began in 1990 with MacSharry. It has taken 13 years to get to the point we are at now, which is a very substantial shift in policy.

It is hard to judge the value of the outcome. Perhaps the easiest way to do so would be for my noble friend to compare the final outcome with the British opening position and, say, the French opening position to see what has shifted in negotiations.

The issue of land is extremely complicated. I believe that my noble friend gave the date of 1st May. Does he agree that it would be wise for any deals in land between 1st May and perhaps the autumn—we may then know how the regulations will look—to include some legal arrangement so that if things change from what those who are doing the deal think, they can be protected?

Lord Whitty

My Lords, on the latter point, I would very much hesitate to be a Minister advising anyone on how to deal in land now or at any other point. The date is 31st May. The person who is producing on the land and had the old, historic subsidies would be entitled to it at that point. The full legal text will be available in a few months' time. No doubt people will make their decisions in that light.

While I always hesitate in any way to criticise our French colleagues, they have their position to take and have taken it fairly robustly through this process, and we are all agreed on this outcome. It is right to say that the French have moved dramatically. They moved from a position of total opposition to any decoupling of any payment whatever to a position where the principle is decoupling of everything and there are some options on some of the regimes for them partially to recouple back—for example, 25 per cent of arable payments. But the balance is clearly much closer to the UK Government's opening position, on which we were largely supported by the Germans, the Danes, the Swedes and the Dutch, than to the position of that group of countries led by the French.

I do not wish to become triumphalist about this, but a significant shift to what has been the historic British position over the past years has been achieved over the weeks and months of negotiations.

Baroness Warnock

My Lords, before the Minister sits down, perhaps I may say that he should be a little triumphalist. It is a matter of tremendous congratulations.

Lord Whitty

My Lords, all right. Just a bit.

Baroness O'Neill of Bengarve

My Lords, before the noble Lord sits down, perhaps I may say that my father, Conor O'Neill, negotiated our original entry into the common market. It was his greatest regret that these concessions had to be made and his judgment that at that time there was no way in, apart from making this concession. I wish that he were alive to hear this announcement.

Lord Whitty

My Lords, those of us who followed those negotiations at the time recognise what a difficult task the noble Baroness's father had at that point; and how we gained an awful lot from the rest of his negotiations. This may well have been a price worth paying for that. But it is also true that he and political parties on all sides at that time recognised the need for reform of the CAP. Regrettably, it has taken us this long to get there; but we are a very significant way there now.

Lord Sewel

My Lords, is the Minister aware that those of us who have been severe critics of the common agricultural policy—as it has developed it has been bad for producers, bad for consumers, bad for the taxpayer and bad for the environment—unreservedly welcome the Statement? It marks a major change in the future of agricultural support in Europe. It also justifies totally the Government's policy of engaging positively with our European partners. I do not think that we would have been able to have what is a triumph if we had not had that positive engagement with our European partners which has marked our relationship over recent years.

The Statement clearly has major benefits in that the movement away from production subsidies, bringing agriculture closer to its markets, is wholly to be welcomed. Does the Minister agree that as we move forward there are two tests: first, how Europe is able to contribute positively to the WTO round and further developments there, in particular in relation to the still restrictive protectionist policies of the United States; and, secondly, perhaps internally, that a movement away from agriculture support per se to rural developments in the broader sense is the greatest challenge we face in relation to our rural areas?

Lord Whitty

Yes, my Lords, I agree entirely that that reflects a great deal of co-operation bilaterally and multilaterally with our European counterparts. The Government's engagement in that has led to us being able to deliver this significant change. The noble Lord is also right that we now face an even bigger challenge in terms of making a success of the WTO talks and ensuring that the Europeans have a constructive effect on those talks. We are starting from a platform that is very positive, whereas a few months ago it looked as though Europe may be going into that discussion with a negative stance.

The noble Lord is also right that we are moving away from a rural policy that is related to subsidising certain parts of food production to one that is of benefit to the rural economy and to rural communities as a whole, including fanning. That is a strong and beneficial development.

Lord Avebury

My Lords, the Minister has said that we are moving away from a system of subsidising food production. Are subsidies to be reduced also in relation to tobacco production?

Lord Whitty

No, my Lords. The position on tobacco, sugar and various other commodities was not covered by this package because the timescale of review of those changes is different. We are expecting further proposals from the Commission on sugar, tobacco and other products later this year. I expect that the same principles will begin to apply in those sectors as well.

Lord Dubs

My Lords, I join in the congratulations to the Government on having achieved a prize which, until recently, seemed almost entirely beyond reach. What will be the effect of the proposals on the budget? Can my noble friend say a little more about the effect that they will have on the situation when 10 new countries join the EU?

Lord Whitty

My Lords, clearly those two questions are connected. The negotiations redistribute, rather than alter, the ceiling on the CAP budget, although there is a small element of degressivity built in to the direct payments. Of course, that budget will have to apply to 25 countries, rather than to 15. Therefore, the cost of the budgets per country will be significantly less as a result of that. This, of itself, does not alter the total financial perspective because the ceiling was set at the end of last year in Brussels.

Lord Clark of Windermere

My Lords, I welcome the deal and join in the congratulations. It is a major step forward. As someone who has spent 30 years on the Labour Benches arguing that we need to move subsidies to farmers from production to environmental and other friendly matters, this is perhaps a red-letter day. First, what does this mean for the consumer? Secondly—I declare an interest as chair of the Forestry Commission—does part of the deal relating to the second pillar mean that farm woodland support will be eligible for support under the CAP?

Lord Whitty

My Lords, on the second question, woodland support in certain forms is available under the current Pillar 2 system. This significantly increases the total amount of funds under the Pillar 2 system; therefore, that and other schemes under the system would potentially benefit.

On the benefit to the consumer, that will mean that the European fanner—the British fanner in particular—will produce what the consumers want and not what the subsidy provides for. That should mean that the value to consumers and the ability of consumers to choose high value products that are also profitable to the farmer will significantly increase and the trading applications also mean that in the longer run the cost for any given value should also decrease. Of course, consumers are also taxpayers, so taxpayers will pay for something that is beneficial and not for something that leads to distorted production. Therefore, in many ways consumers will benefit.