Common Agricultural Policy

HC Deb 20 May 2003 vol 405 cc213-35WH

2 pm

Mr. Alistair Carmichael (Orkney and Shetland)

The need for reform of the common agricultural policy is one argument that would probably attract universal approval in the House. However, I would defy anyone in the House to expand on that argument and retain such a degree of unanimity. It is an enormous subject, which must increasingly be seen as having a degree of urgency and extensive implications for the enlargement of the European Union, and even relations between the European Union and other world trade blocs beyond the EU's boundaries.

The CAP is one of the most complex and jargon-infested areas that one can come across. In the past I have spoken to local branches of the National Farmers Union in my constituency. Even with an interested and motivated audience, once one starts talking about degression, modulation and cross-compliance, one can feel the will to live ebbing away.

With apologies to some hon. Members present, I hope to be fairly focused in my remarks today. I want to cut through some of the jargon and focus on the impact on those who are at the sharpest end of the CAP—the farmers. I know that others, such as the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz), will concentrate on some of the wider issues.

Two of the aims of the mid-term review set out last July were particularly important to farmers in my constituency and indeed throughout Scotland. They were the use of intervention as a safety net for EU agricultural policy and the shift away from payments for market support—the so-called first pillar—towards environmentally friendly practices and rural development—the so-called second pillar. As is so often the case with many things relating to the EU, there is a conflict between the general aims and the specific proposals that followed in January this year.

It seems that the two legs are particularly important for us and for my constituents. I make no apology for being island-centric. Agriculture is of huge significance to both the island groups that I represent, especially to Orkney, where we have a tradition of high-quality beef production, and to Shetland where the primary industry has hitherto been fishing, which as the Minister will know has not had the easiest of times recently. There is also a large crofting community, which produces principally high-quality Shetland lamb. I suggest to the Minister that if we remove agriculture as a significant contributing industry to either of those communities, we will engage in a downward spiral that will impact on every other aspect of island life.

My particular concern about reform of the CAP is that it will impact not specifically on mainland Orkney and Shetland but on our large number of smaller islands beyond the shores of the mainland. The impact will be particularly acute on the north isles of Orkney and the outer isles of Shetland. The anticipated reduction in production levels poses a threat because it brings with it a knock-on effect for people such as hauliers and agricultural contractors. Taking that sort of job out of the community has a knock-on effect on shops, post offices and other businesses, which then affects the availability of local schooling—and so the downward spiral goes on. It the smallest and most vulnerable communities that stand to suffer most.

I suggest that the crux of the matter is the way that reform is approached. Speaking as one who still bears the scars of the battle to reform the common fisheries policy, I know that the greatest danger is that the wrong approach will be taken. An approach based on micro-management and inflexibility from Brussels will inevitably be bad for the communities that I represent. If we get nothing else, a degree of flexibility is a must. Without it, the agriculture that underpins so much will suffer.

Mr. David Drew (Stroud)

I totally agree with the hon. Gentleman, but does not a rider need to be put in place? In a sense, we need to renationalise agriculture—it needs some national direction. Part of the problem with the common agricultural policy is that it would impose the belief that, even with 25 members, it can be made to work for fundamentally different agricultural systems. We need a return to a localised basis.

Mr. Carmichael

Yes. I have no problem with that. The hon. Gentleman alarmed me slightly when he started to speak about renationalising agriculture. It was news to me, a farmer's son, that it had ever been nationalised; and nationalisation brings with it a sense of centralised control, which runs contrary to what he went on to suggest. The approach that he outlines would be wholly consistent with the Maastricht treaty, which enshrines the concept of subsidiarity. He is right to say that a one-size-fits-all policy will always be immensely damaging and will suit no one—not even the officials who delight in its production.

Farming practices in my constituency may be larger in scale, but I suggest that they are still environmentally friendly. That is why Orkney and Shetland is home to a large number of rare and protected species that have been eradicated from other parts of the country. Those larger units are a result also of the geography with which we have to contend. Because of the distances involved, with resulting higher transport costs and tighter margins, in order to be economically viable, we have to operate in larger units. The sort of fatwa that comes from Brussels against larger-scale units is highly unhelpful.

I contrast the reaction to the January 2003 proposals that emanated from the Department for Environment, Food and Rural Affairs with that of the Scottish Executive Environment and Rural Affairs Minister in Edinburgh. The Secretary of State for Environment, Food and Rural Affairs said that the changes outlined are "on the right lines" but that they do not go far enough. She also said: they do nothing to control the burgeoning growth in the budget because they simply recycle money in the agriculture budget. We need year on year savings in the cost of the CAP. My concern is that that statement seems to treat reform of the policy merely as an exercise in cost-cutting. I would rather that the Department took a more holistic approach, treating the maintenance of agriculture and communities reliant on agriculture as a priority.

One worries when the Secretary of State says that the proposals are on the right lines. I contrast her remarks with the response of the Minister for the Environment and Rural Development in Edinburgh, Mr. Ross Finnie, who said:

My initial view is that they are unacceptable from a Scottish perspective. In their current form, they do not appear to advance our objectives in A Forward Strategy for Scottish Agriculture. The proposals on decoupling do not appear to include the necessary safeguards, in terms of cross-compliance or other measures, to address the potential adverse effects in rural areas and in certain sectors—notably suckler beef. The degression proposals are also more heavily weighted against large-scale Scottish producers than was initially proposed. Coupled with this, the arrangements for transferring money from Pillar I (market support) to Pillar II (rural development) do not make more money available to Scotland to advance rural development activity.

The Minister for Rural Affairs and Urban Quality of Life (Alun Michael)

The hon. Gentleman was contrasting a quotation from the Secretary of State with the remarks made by Ross Finnie about the impact of the Fischler proposals on Scotland. It is a mischaracterisation of the Secretary of State's position to suggest that she is interested only in financial cuts. In the context of enlargement, there is a real sense of urgency in dealing with the issue. Supporting rural economies and assisting farmers to become closer to their markets, and therefore to have a long-term sustainable future, is at the heart of what the Secretary of State has said. The recommendations of the policy commission on the future of farming and food bear that out.

Mr. Carmichael

I thank the Minister for that intervention. It is a helpful elaboration of the Secretary of State's press release. I hope that the Minister, when he replies to the debate, will indicate whether he is in total agreement with Ross Finnie's analysis, and if so how he will be advancing those arguments.

Pete Wishart (North Tayside)

I am glad that the hon. Gentleman mentioned Ross Finnie. Does the hon. Gentleman share my frustration that CAP review will be discussed and formulated without any direct Scottish voice? As a Scottish Member, is he not concerned that the same fate awaits Scottish farmers as befell Scottish fishermen last year?

Mr. Carmichael

We shall see what fate will befall Scottish farmers. I most certainly do not share the gloomy analysis of the hon. Gentleman. Whoever the new Scottish Agriculture Minister is—I certainly did not know who it was when I came here today—he or she will have a direct input. I hope that the Scottish National party's contribution to the debate will be more positive than it was to the debate on the common fisheries policy. Merely carping about who sits where does not add a great deal to the debate. Of course we have a voice; we have it through the Minister. I hope that the Minister will recognise that there are specific Scottish concerns on this matter and that those can be articulated. I hope that the approach in relation to CAP reform will be one of partnership with the Scottish Executive.

I was speaking about decoupling and degression. In January, Ross Finnie said in relation to the 2004 decoupling proposals:

The proposals on decoupling do not appear to include the necessary safeguards, in terms of cross-compliance or other measures, to address the potential adverse effects in rural areas and in certain sectors—notably suckler beef. That is a concise statement of the position. It is a matter of significant concern to farmers, particularly within Orkney. Degression will potentially operate against farmers throughout Scotland and, in particular, in Orkney. On that matter, Ross Finnie said:

The degression proposals are also more heavily weighted against large-scale Scottish producers than was initially proposed. Coupled with this, the arrangements for transferring money from Pillar I (market support) to Pillar II (rural development) do not make more money available to Scotland to advance rural development activity.

Andrew George (St. Ives)

Does my hon. Friend accept that it is important to move away from production support as quickly as possible? One of the biggest difficulties that besets farmers is that any payments, however they are made, that are received as a form of production support are inevitably siphoned out of farming and result in lower farm-gate prices. It is the supermarkets that do well out of that system.

Mr. Carmichael

I thank my hon. Friend for his intervention. He makes a pertinent point that I have no difficultly in agreeing with. Decoupling as currently envisaged is an exceptionally blunt tool. Safeguards must come along with it. That goes back to my earlier point about flexibility. There must be recognition of the fact that decoupling will have different effects in different parts of the EU and that mechanisms to compensate for that must be put in place.

Alun Michael

It would be helpful if the hon. Gentleman could say what sort of mechanisms he is talking about. As he mentioned right at the beginning, one of the problems with reform is that even though we all believe that it is necessary, agreement is more difficult to get as one goes into the details more. I am not sure which mechanisms the hon. Gentleman is arguing for, which is distinct from raising the general concern.

Mr. Carmichael

First, I am seeking to raise the general concern. The great rider that people get in every debate about the CAP is that the devil will be in the detail. I am thinking of, for example, cross-compliance measures or moves to compensate environmentally friendly farming methods, which are traditional in the parts of the country that I represent. Such methods have always been at the heart of farming practices in Orkney and in Shetland. I defy the Minister to find any farming practice that is more environmentally friendly than Shetland crofting, for example. There should surely be some recognition of that, perhaps through the cross-compliance measures. The Scottish Executive were eventually able to structure the less-favoured-area support scheme in a way that recognises the problems caused by the LFA programmes as they were previously structured, in relation to island and peripheral areas.

Let me illustrate my point about the relatively large size of farms in Scotland. Some 9 per cent. of Scottish farmers receive less than €5,000 per annum in agricultural support, as opposed to the European average of 61 per cent. Most farms in my constituency fall in the middle band of those between €5,000 and €50,000. The National Farmers Union in Orkney estimates that as things stand some £1.5 million will be removed from agriculture in Orkney between the introduction of the measures and 2012. I suggest to the Minister that that situation is nonsensical and untenable. It arises from the application of an exceptionally blunt instrument that will result in the need for some form of support for the community from another source. Such money cannot be removed from agriculture in a county such as Orkney without other consequential expenditure being made.

I am keen to allow other hon. Members to contribute, so I make my final point, which is a plea on cross-compliance. Farming is probably one of the most over-regulated industries in the country. A degree in business management seems to be more necessary than any skill in crop-raising or animal husbandry. My sneaking concern is that cross-compliance will lead to further regulation that will become gold-plated once our civil servants get their hands on it. Will the Minister please bear that in mind, and may I have his assurance that we will move away from the byzantine system of paperwork that benights our farming industry towards something that is more integrated and user friendly?

Several hon. Members

rose—

Mr. David Taylor (in the Chair)

Order. I intend to call Front-Bench speakers, as is traditional, after 3 o'clock. Three Members have indicated that they want to speak, so I ask hon. Members to confine their remarks to the 40-minute slot. That gives them approximately 13 minutes each.

2.20 pm

Mr. Mark Lazarowicz (Edinburgh, North and Leith)

I congratulate the hon. Member for Orkney and Shetland (Mr. Carmichael) on securing this debate on the mid-term review of the common agricultural policy. As a Member representing an entirely urban constituency without a single farm in it, I am glad to contribute to a debate that is seen all too often as the preserve of those with special and important interests in the agricultural sector. My constituents, like those of every other hon. Member, eat the products of the common agricultural policy, and, like many others in urban and rural areas, they pay out the money that the recipients of CAP support enjoy.

The hon. Member for Orkney and Shetland rightly pointed out how easy it is to sink into jargon whenever this subject is discussed. When it comes to questions about the Department for Environment, Food and Rural Affairs, it is not only the eyes of members of the public that glaze over but those of Members of the House who do not participate regularly in debates about modulation, degressivity and the rest. If I were to be cynical, I might even suggest that some people are quite happy for jargon to be used, as it allows some of the real issues underlying the debate about agricultural support to be obscured.

The underlying fact behind the CAP now, in the past and perhaps also in the future is that it is a gigantic, multi-billion pound, multi-billion euro scam. It takes money from consumers to subsidise a particular producer sector in the economy in a way in which no other groups of producers are subsidised anywhere else in Europe. Its burden falls most heavily on the poorest sections of society, which spend a much higher proportion of their income on food. The interests of hill farmers and other more marginal agricultural producers are promoted too often to act as a fig leaf to hide the fact that the main beneficiaries of the policy are big businesses in agribusiness and other sectors.

The policy undermines poor farmers in developing countries. Moreover, the policy is a scam that the current European Commission proposals do very little to change. All that the proposals mean in essence is that the booty is moved around a little between the bags from which it is taken. Some of the money may be taken out of a bag called market support to go into a bag called direct payments, but ultimately roughly the same amount of money will go to broadly the same farmers. The figure is staggering: since 1992, expenditure on direct subsidies for the agricultural sector in the European Union has increased from about €2.5 billion to more than €30 billion.

Mr. John Hayes (South Holland and The Deepings)

I shall leave aside proper considerations about the stewardship of the countryside, the maintenance of the rural landscape, the environment and wildlife habitats—all those things—to ask the hon. Gentleman a simple question. The smaller proportion of their income that people now spend on food does not go largely to farmers. The great bulk of the food price is absorbed by other elements of the food chain, as he surely knows. Is he defending that? Is he the ally of the so-called greedy corporate bosses that other members of his party so condemn?

Mr. Lazarowicz

I am grateful to the hon. Gentleman for that point, as I shall talk later about how we support rural development, which is a very important issue. As I said, large agribusinesses are not the only ones to benefit from the current policies: other sectors also benefit. With regard to taxation and higher prices, however, for an average family of four, the cost of the CAP is about£16 a week and the current annual cost to UK taxpayers is around £5 billion. That is equivalent to 2p on the standard rate of income tax, which even with the Government's low-tax policies could usefully be added to the Chancellor's resources were it to become available. I do not suggest that every amount could be released in that way, but it is worth emphasising the background to the realities of support for agriculture in this country.

Mr. Drew

Will my hon. Friend accept that one of the worst examples over many years is the milk quota? Until recently, people who no longer produced milk or had any relationship to the land could make great sums of money by owning the quota and flogging it off to someone else. That is the very opposite of what agriculture should be about.

Mr. Lazarowicz

My hon. Friend is absolutely right. He will be aware that one proposal that arose from the discussions would give other farmers an entitlement to subsidy even if they no longer had any connection with farming.

We should not be surprised that the consumers' interest has not taken pride of place in the current discussions in the European institutions. The European Commission's explanatory memorandum on its revised proposals discusses consumers' interests largely in terms of the possible marketing opportunities that they present for producers. There seems to be no recognition of the high prices currently paid by consumers and, indeed, the price impact on consumers of the proposals for reform is not even discussed. As much of the future price direction of European agriculture will depend upon the World Trade Organisation negotiations, that seems a reasonable conclusion but, even when those negotiations finally come to an end, the European Union will continue to subsidise its farmers more than any other part of the world, including the USA.

Those subsidies will be at the expense of taxpayers and consumers because basic food prices in the EU will continue to be consistently higher than prices in most other countries. Indeed, expenditure forecasts show that, for the 15 present members of the EU, spending on the CAP will increase in the next 10 years from €41 billion to €43.5 billion.

The proposals from the Commission will do little for European consumers, including those in the UK. It is true that they break the link between support for production and support for farmers, but it is entirely wrong that the proposals should give farmers the permanent right to a public subsidy just because they are, or, worse, once were farmers. It is a reflection of how much the terms of the debate on agricultural support have been distorted that it can be deemed acceptable for producers in one sector to get a subsidy that bears no relation to production or to other public policy objectives.

Pete Wishart

I am interested in the hon. Gentleman's urban-centric views on this matter, which are not too far away from the general nature of those of the Labour party. Can he explain where all the money is going? Is it going to the farmers in my constituency who are surviving on about £7,000 a year? What would he say to those farmers, whose pockets are supposed to be lined with masses of gold?

Mr. Lazarowicz

The money is certainly going somewhere and I will say something in a moment that will find favour with the hon. Gentleman.

To show how the terms of the debate have been distorted, we should contrast the situation in the agriculture sector of the economy with what would happen if it were proposed that people should be given a permanent payment just because they were once coal miners, or that shopkeepers should be given a subsidy to keep their shops open. In essence, that is what is being proposed for the agriculture sector. The proposals for direct payments are income support for farmers—that is the Commission's own term—with a green tinge and a few references to food safety designed to make them more acceptable to public opinion, which is rightly sceptical.

We need a much more radical approach to agricultural policy in the UK and in the EU. We should get rid of price support, direct and indirect agricultural production subsidies, quotas for set-aside and the whole edifice of agricultural subsidy. Subsidy should be directly and clearly linked to the promotion of environmentally friendly agricultural policies and to non-agricultural policies designed to maintain rural communities and promote tourism. We should ensure that more funds go to benefit the poorest in our rural society, many of whom face acute deprivation because of their isolation—and I accept that that can be worse than in urban areas—but do not benefit from the money that is spent in the rural economy in the name of economic development.

Agriculture policy at European level must also move—as we have been trying to move it in the UK— towards becoming part of a wider food policy in which the overriding priority is to provide high-quality, nutritious, safe food for consumers, rather than protecting vested interests. At the same time, we must end the practices in EU agriculture that harm some of the world's poorest people at the expense of the EU's taxpayers and consumers. Last year, the EU paid out an estimated €3.8 billion in export refunds—subsidies paid for by our taxpayers that undermine the ability of farmers in poorer countries to get an economic price for their products.

The British Government have been at the forefront of seeking reform in European agricultural policy. Sometimes they face a difficult task in trying to persuade other Governments to follow suit. One of my reasons for making these comments is to make it clear that there is widespread support in the House and around the country for a move away from the current system of agricultural subsidy and to urge the Government to continue to make reform of the CAP one of their top negotiating priorities in Europe. Recognising that one of the difficulties that they will face in promoting radical reform of agricultural policy is the power and influence of EU producers, the Government must push for major changes in the way in which EU institutions operate, so as to ensure that the consumer, the environment and food safety interests take priority over producer interests. Responsibility for policy should be transferred to the relevant directorate general in the Commission and the directorate general for agriculture should be wound up, as should the EU Agriculture Council. We all know that to pick out a particular sector in that way is one of the best ways to ensure that that sector increases its influence within government instead of the Government being able to take an integrated approach to that sector.

One good thing about the current proposals is that they would establish an integrated system that, for the first time, would make it possible for the public to be properly informed about individual farm payments Europe-wide. That would satisfy the hon. Member for North Tayside (Pete Wishart). The publication of the information would do wonders to heighten awareness across Europe of who gains and who loses from the current system of agricultural subsidy and it would provide a considerable boost to consumers across Europe, encouraging them to put pressure on their Governments to seek the type of change that many in the House would like to see. I hope that my right hon. Friend the Minister will be able to make a commitment to seek such transparency about farm payments. The public will shortly—and rightly—be able to know about the payments that we as MPs receive, so it is not unreasonable for the same to apply to payments received under the CAP.

2.33 pm

Mr. Bill Wiggin (Leominster)

It is nice to see you in the Chair this afternoon, Mr.Taylor. There can be few people who do not broadly support the overarching aim of more market-oriented, profitable and sustainable agriculture. It is a vital objective. However, the midterm review proposals do not address that aim, but will allow the detrimental effect that the CAP has had on UK farmers to continue. We must all bear it in mind that the proposals are only mid term. If we are only at the halfway point, there must be many more reforms to come. As my colleague, the shadow Secretary of State for Agriculture, said: The CAP is in need of reform. It is right to move to a world where farmers are free to respond to the demands of their customers rather than of Governments. I wholly agree with him, but fear that the current proposals will not remedy the situation.

With regard to the enlargement of the EU, does the mid-term review go far enough in preparing for the accession of the new member states next year? Reform of the CAP is vital to ensure that the EU budget is not overstretched and that the new entrants' economies are not distorted by the effects of subsidies. I am also concerned about the dairy sector, and particularly the plight of UK dairy farmers, who receive so little at the farm gate compared with the retail price. In a country that produces about 12 per cent. of the EU's annual milk production, the situation continues to be pretty dire for all dairy farmers.

I am sceptical about whether the decoupling measures will have the desired effect. There is a need for greater clarification of what the transfer of funds from pillar 1 to pillar 2 initiatives would achieve in reaching their environmental, rural and other objectives. Although we all want what is best for the wider rural economy and landscape, and acknowledge the worth of many of the pillar 2 objectives, we must not lose sight of the fact that farmers are the natural guardians of the countryside, and that without profitable and sustainable farming, the countryside will inevitably suffer.

I am also concerned that the measures implicit in the mid-term review proposals will inevitably discriminate against the UK. It is notable that bigger, more efficient farms will take the biggest reduction in payment, which will result in UK farmers being disproportionately affected. We must also be realistic in asking whether the new European states will be capable of implementing pillar 2 policies—rural and environmental management—completely, efficiently and to the desired standard.

I have some questions that I hope the Minister will answer in his summing up. Under the proposal, five farmers living in the same parish may receive vastly different payments for the same area, but will be subject to the same cross-compliance demands and will be permitted to grow any crop for any market.

Mr.Hayes

Before my hon. Friend continues his exciting peroration, will he invite the Minister to speculate on the potential effect that that will have on land values? An extraordinary situation could be created, in which there were widely divergent land values in the same area, irrespective of size of farm or soil type.

Mr. Wiggin

My hon. Friend is way ahead of me on that issue—I will come to that point later. He is right, and has put his finger on one of the difficulties that will result from the mid-term review. Later in my remarks I will mention the Blackcurrant Growers Association's comments—whose members are growers of unsupported crops, and should therefore be helped by the mid-term review—and will ask the Minister to address its concerns, one of which is the discrepancy in land value that will ensue.

Chapter 5 of the regional implementation article 58(4) states: Moreover, in duly justified cases such as, for example, to avoid distortions of competition, the Member State may…apply the regional solution. Amendment 68, title III of the same chapter states: A Member State may decide, by 1 March 2005, to apply the single multifunctional payment scheme…at regional or local level for the benefit of homogeneous production areas and substantial ecologically sustainable areas under the conditions laid down in this Chapter. Would the Government consider a regional solution even if there was no overall agreement between agriculture and horticulture? How much would it cost to administer the negative list and positive re-entry scheme by the regional payments agency?

I shall read out a statement sent to me by the Blackcurrant Growers Association: Clearly the mid-term review is an ideology developed to decouple products from payments to create a more market based environment. Whilst the philosophy might be sound enough, especially if used to present a more just face to the world market when the next round of WTO talks take place in Cancun in September, we believe it is unworkable and unfair. This proposal has been presented to the agricultural community with little time for assessment and reaction but clearly many farmers will have cause for concern and we must react quickly to present a better solution.

Mr. David Taylor (in the Chair)

Order. May I remind the hon. Gentleman that quoted extracts should be relatively brief?

Mr. Wiggin

If you will forgive me, Mr. Taylor, this is more than a quoted extract. The points I am coming to are fundamental to my argument.

The blackcurrant industry in the UK will suffer badly if the mid-term review proposal is allowed to go through. It is perverse that the very principle that the EU is trying to encourage in terms of market orientation is undermined. The blackcurrant industry in the UK is worth more than £10 million. It involves an expert grower base who have invested large sums in a high-risk crop. There is a significant amount of employment required to produce the nation's third most popular soft drink, which uses up to 100 per cent. of UK-produced blackcurrants. Consumers, like retailers, require a higher degree of specialisation than was the case 20 years ago.

It is not acceptable to argue that blackcurrant growers made the choice to exit the subsidy market and therefore should take the pain with the gain. They acted with enterprise and initiative to find a product for which they had a customer, and they should not be penalised for that. Significant areas of land were in blackcurrant plantations during the reference period, If the blackcurrant market collapsed, they would have no support or entitlement to grow any other crop.

Each blackcurrant plantation has a lifespan of about 10 years and needs to be rested for at least two years before being replanted. The growers will be severely penalised by growing combinable crops without the decoupled aid. The assured produce generic protocol specifies crop rotation and the use of land that is suited to the crop among its standards, and so does the Soil Association. Some growers have rented land from neighbours, and those neighbours would have no entitlement on the land when it was returned to them.

Growing blackcurrants requires particular land types and also space between plantations. Obviously growers would only use land that was appropriate and would rent out land that was not. That would encourage biodiversity, but they would be penalised as a result. It would also weaken their negotiating position as land values would significantly decrease. Moreover, entitled growers, who would have been receiving some sort of subsidy because they were in combinable crops when the decision was made, would have more money than those who were growing blackcurrants.

Growers will therefore face unfair competition from the UK as well as from growers abroad who could still be receiving subsidies. Poland is an example of that. New environmental legislation will force un-entitled growers to comply with improved environmental standards, but they will receive nothing for it. It is unfair to expect growers to pay for this when they will not receive the same public money as others will receive.

Decreasing land values will also have an impact on borrowing arrangements. Indeed, some banks are already looking with great concern at the high levels of borrowing of some of their customers. As a multi-annual crop, the blackcurrant industry needs flexibility to cope with problems such as lack of profitability due to climate change and new diseases. Growers need to be able to market blackcurrants and other products sensibly and without obstructions from the EU.

There is also an element of rough justice for any farmers who bought land during the reference period, as they will have no entitlement to any subsidy on the land purchased. Even those who do not receive a subsidy at the moment are deeply unhappy about the Government's proposals. I have put the case of one of my constituents who grows blackcurrants. I hope that the Minister will give the matter his most serious consideration.

2.44 pm

Pete Wishart (North Tayside)

I congratulate the hon. Member for Orkney and Shetland (Mr. Carmichael) on securing this timely debate. It raises an important issue, so I am surprised that so few hon. Members are here to take part.

The Scottish National party recognises the immense importance of agriculture to the Scottish economy— indeed, it is much more important to the Scottish economy than it is to the UK economy in general. Official figures show that, even after some dark years of decline, agriculture still employs 70,000 people in Scotland, although it is important to note that less than half of them now work full-time, such has been the impact of those dark years. None the less, agriculture is still worth £1.8 billion to the Scottish economy, and it employs 160,000 people indirectly, so it is still an important industry in Scotland. The SNP believes that Scottish agricultural produce is high quality. It also has a good reputation, although that has been undermined and demeaned by the Department for Environment, Food and Rural Affairs and by further London control.

We are aware that farming is changing and that it is likely to change significantly over the next few years. We believe that CAP reform is absolutely necessary, and no one—certainly not today—has suggested otherwise. The European Union is to have 10 new members, all of which have significant agricultural sectors, and the countries queueing up to join after them also have quite significant agricultural economies. That will have an impact on existing members and will influence what happens in future.

Our major concern is that we in Scotland have no direct voice in the process of CAP reform. As a result, the position of Scottish farmers could worsen. Commissioner Fischler's proposals have the Government's support, and it is worth quoting the remarks of the Under-Secretary of State for Environment, Food and Rural Affairs, the hon. Member for Scunthorpe (Mr. Morley). He said: The European Commission's proposals on Common Agricultural Policy reform, published on 22nd January, give us a real opportunity to set down a sustainable basis for European agricultural policy…the Government strongly supports the direction of these proposals. The proposals will have a massive direct effect on Scottish agriculture, but Scotland will have no say in formulating them: DEFRA in London has already decided the UK view. That is the nub of the problem—we were not involved.

As hon. Members have said, the decoupling of payments from production and the issue of modulation are at heart of the proposals. The problem with permanently decoupling direct payments to farmers is that it could lead to reduced production in some areas and to proliferation and intensification in others. The baseline years will also be extremely important. Using years in which incomes were low owing to BSE and foot and mouth could have a serious impact on Scottish farmers.

The second main issue raised by the proposals is modulation. We see several serious potential problems. As hon. Members have said, the original proposals suggested shifting money from the first pillar to the second pillar—from direct aid to rural development—in an apparent attempt to green the CAP. That is welcome, and those involved are to be congratulated. However, as is usual with EU reform, there has been a great deal of backroom trading. As a result, very little money will be shifted to rural development. Given the way in which development areas are defined, what little money is shifted to them is very likely to go to the new entrants, not to small nations such as Scotland and Ireland. Modulation could therefore hurt many Scottish farmers.

The lower level for modulation is €5,000, or £3,000. As a result, more than 60 per cent. of southern European farmers will be exempt from modulation, but only 9 per cent. of Scottish farmers will be. The impact is therefore likely to be much greater in Scotland than in France, Italy, Spain and Portugal, for example. Indeed, the net effect of modulation could be a ludicrous transfer of funding from Scottish agriculture to southern European agriculture, which is much more successful. The SNP will therefore not support modulation, unless the money received from it returns to Scotland for rural development schemes and to encourage positive rural stewardship.

That is not likely under the proposals, and without a strong Scottish voice arguing that case, those proposals, already accepted by Westminster, are likely to go through. That is one consequence of having a Scottish agriculture Department and, indeed, a Scottish Agriculture Minister that cannot deal directly with Europe. If people want to know how the current system treats Scottish interests, they should ask Scottish fishermen, because the lessons are there for everyone to see.

The SNP accepts that Europe plays and will continue to play a very important role in agriculture, but at times it seems that the UK Government and the Scottish Executive are determined to impose each and every control more quickly than the other European nations. We would work to protect the industry's competitiveness and maintain a level playing field by ensuring that regulations are introduced in Scotland only after implementation by a majority of EU nations. We have seen how the UK has failed Scottish fishermen. Scottish farmers are about to witness the same failed UK strategy in respect of CAP reform.

Mr. Lazarowicz

I am interested to know what the hon. Gentleman and his party want from fundamental reform of the CAP. He says that he is against decoupling and modulation and I bet my bottom dollar that he would not be in favour of any reduction in subsidy, so what elements of fundamental reform does he want? I ask him not to say that he is not in power, so he need not have a policy. I just want an idea of what he might do.

Pete Wishart

The hon. Gentleman has misunderstood and grossly misrepresented what I said. I have no problem with the principles of decoupling and modulation, but we must ensure that the money involved in modulation is returned to Scotland so that we can have the rural stewardship and look after the environmental projects that are important to Scottish farmers. We very much support that measure.

We definitely want a Scottish voice to be at the discussions to ensure that the Scottish interest is represented. Under the current arrangements, that will not happen and Scotland will be sold short again. Until we have our own voice on such important issues, the interests of Scotland's farmers and fishermen will be subsumed into a general and unsatisfactory UK approach. That has not worked for the fishermen and there is no reason to suggest that it will work for Scottish farmers. We in Scotland have our own agricultural requirements and agricultural agenda. We just need a voice to address our—

Mr. Carmichael

Will the hon. Gentleman give way?

Pete Wishart

I was about to say my last two words, but I will give way to the hon. Gentleman, given that this is his debate.

Mr. Carmichael

The hon. Gentleman appears to confuse structures with policies. What is necessary is that what is said in Brussels is right, but what is said in Brussels will not necessarily be right because it is said by an independent Scottish voice. It can be just as right if it is said by the Minister present here today. The hon. Gentleman sells himself short if he says that no Scottish voice is arguing the case, because I thought that that was part of what we were engaged in here today.

Pete Wishart

Having a Scottish voice at the discussions, dealing directly with other European nations as other small nations do could only benefit Scottish interests. I am sure that the hon. Gentleman is keenly aware of the example of the Scottish fishermen. Their situation has been so unsatisfactory that Scottish farmers will not accept the suggestion that we go through the same process again with a UK Minister leading the delegation.

Mr. Carmichael

rose—

Pete Wishart

I am about to conclude my remarks to allow plenty of time for the summing up by those on the Front Benches. We in Scotland have our own agenda and agricultural requirements. What we need to do now is find a voice to address those issues and requirements and to ensure that the Scottish voice is heard loud, proud and clear as CAP reform goes through.

2.53 pm

Andrew George (St. Ives)

I congratulate my hon. Friend the Member for Orkney and Shetland (Mr. Carmichael) not only on securing the debate, but on the fact that it is so timely. A crucial Council of Ministers meeting in Corfu is due to commence, I believe, on 11 June, and a great many negotiations are already going on between officials and Ministers on these important and weighty matters. Those discussions will have a significant impact on the future of farming not only in this country, but throughout Europe, including in the accession countries. The debate is therefore not only important but timely.

An important message to convey to the Minister, which I hope he will convey to the Secretary of State, is that the Council of Ministers should be prepared to give way if they have to on the timetable for the negotiations rather than give way on the substance or their resolve to achieve significant reform of the CAP. We have been in this territory before with the McSharry proposals, when Ministers backed off at the last moment. We have a major opportunity now for significant reform, which will be helpful to restructuring properly and appropriately. Those are perhaps not the terms that the Government have in mind when they say restructuring. They mean getting rid of small farmers, whereas I mean restructuring British agriculture for the good. I hope that the Minister and other Ministers will be able to grasp the opportunity in both hands and to take full advantage of it.

Like my hon. Friend the Member for Orkney and Shetland my constituency has islands within it, although it is not wholly an island. He made a point about the strong environmental quality within his constituency and the fact that farming has continued relatively intensively there, as it has within mine. I take mine as an example to demonstrate that over the centuries farming makes a significant, but often overlooked, contribution to the landscape and wildlife.

I have a few questions to put to the Minister that I would rather put sooner than later. There are five in total. The first is about modulated funds. The hon. Member for North Tayside (Pete Wishart) hit the nail on the head when he said that there were deep concerns in the country—whether Scotland or the UK as a whole—that the modulated funds will be taken to Brussels and UK rural areas will not obtain the benefits from them.

A strong argument is developing in this country for a national envelope for the modulated funds. We should look more closely at the proportions of the amount of money spent within each of the nation states; those resources should be modulated rather than having prescriptive sizes across all farm sectors. Many hon. Members have touched on the problem of the prescriptive approach across all nation states, irrespective of the structure and size of farms in each of those nation states. It is important that that is properly reflected in the modulated farm proposals, but that can happen only if there is a national envelope for the funds and the modulated funds are then disbursed within each of the nation states.

The second point is about decoupled payments. The hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz) gave a rather urban view of how the decoupled payments will be seen, in effect, to pay farmers simply to be farmers. There is concern within the farming sector that that may happen, which is why it is important that we follow the process that my hon. Friend the Member for Orkney and Shetland described, particularly in response to the intervention from the Minister. The decoupled payments to farmers should be seen entirely as payments to farmers for delivering public goods. Those public goods can easily be described.

The alternative to going down that route is to say that British farming will be opened up to the cold winds of world trade. If that happens, we will inevitably end up with prairies and ranches, or simply wilderness. What do we want from farmers? We are paying them for maintaining our landscape, for the amenity of the area and for the maintenance of access to the countryside on the footpaths that run across their land. That does not happen on the prairies of the United States: the prairies are the factory floor, and people spend their recreational time elsewhere.

My hon. Friend the Member for Orkney and Shetland knows full well that many historical artefacts and much archaeology are to be found in the countryside. Over the years, farmers have protected that heritage—indeed, some of the field boundaries in my constituency are thousands of years old. To achieve the sort of economy and efficiency necessary to compete in the world market, those boundaries would have to be bulldozed. We need to pay farmers to respect and protect rural traditions and historic landscape features. That is why decoupled payments need to be attached to the delivery of public goods.

I hope that the Minister is fighting hard for that. The present Government—and the previous Government, who brought in the environmentally sensitive area system—have delivered a good policy, but it needs to be developed.

Mr. Lazarowicz

I have some sympathy with the hon. Gentleman's approach. Does he agree that one consequence would be a requirement for rigorous rules on cross-compliance? That would be entirely at variance with what the hon. Member for Orkney and Shetland (Mr. Carmichael) seemed to suggest. Indeed, if I am correct, the hon. Member for St. Ives seemed to shake his head and look a little quizzical at his hon. Friend's suggestion about not being too rigorous about cross-compliance. The hon. Gentleman is trying to have it both ways.

Andrew George

The hon. Gentleman either misheard my hon. Friend or misunderstood my non-verbal expressions. I shall move on because time is pressing.

In an intervention, the hon. Member for South Holland and The Deepings (Mr. Hayes) spoke about the need to ensure that payments made to farmers do not simply add to input costs through higher land values. I hope that the hon. Gentleman will expand on that later. If that is indeed the result, we shall have wasted our time and a great deal of public money. On that, I support the hon. Member for Edinburgh, North and Leith. The Minister needs to make it clear that the payments should be made to the producer and not attached to the land. It is all very well for landowners to argue that the payments should be attached to the land, but I believe that that would be detrimental to the future of agriculture. It is important that the Minister and the Secretary of State make that clear in the negotiations; it is certainly the subject of debate in the agricultural sector.

Mr. Hayes

I am reluctant to spend long on the subject, but there seem to be two problems. One is the diverging values of land. The other is the danger that making the payment entitlement flexible will compromise investment in long-term environmental schemes. The issue is complex, which is why we need the Minister to make it clear where the Government stand on those conflicting imperatives.

Andrew George

That was a helpful intervention, and I hope that the Minister has taken it on board. I shall try not to detain the House longer than necessary in order to give the Minister time to answer.

In an intervention on my hon. Friend the Member for Orkney and Shetland, I said that because of the way in which the market operates and the way in which farm-gate prices are settled, payments made to farmers for land or production will ultimately be siphoned indirectly into the pockets of the processors and supermarkets. That is clearly undesirable.

Fourthly, I want the Government to indicate where they stand on the options being debated regarding the future of the dairy industry. The hon. Member for Leominster (Mr. Wiggin) raised that point. It is an important matter, and the Minister must give a clear message to the dairy sector, which has just been hit by Lidl's suggestion that it would reduce farm-gate milk prices by 3p a litre. A campaign against that measure resulted in Lidl's backing down only yesterday. Dairy farmers are not making any money at the current price.

Fifthly, I would like the Minister to comment on the continuing calls for farmers to have an even playing field. Farmers do not believe that the rules, regulations and payments are being applied equally and honestly in other countries. The Minister is aware that I have always argued that—in fishing as in farming—bilateral arrangements are needed between this country and others to allow us to spot-check regulatory arrangements in other countries to ensure that other EU nations meet the same standards on regulation and payments as we do.

This is an important and timely debate. The Government must be aware that we have lost many thousands of farmers, particularly in the past couple of years. Listening to Lord Haskins, one wonders whether it was Government policy to put farmers out of business. We have always struggled with the problem: over the last 250 years, farmers have been leaving the industry and we have bemoaned the fact that that has happened. Back-to-the-land movements and others have tried to reverse the trend, but the industry will not survive and we will end up with prairie, ranch and wilderness if we do not recognise that there is a need for appropriate intervention to protect rural traditions, ways of life, landscape and heritage.

3.7 pm

Mr. John Hayes (South Holland and The Deepings)

CAP reform is essential; that is a universally recognised fact, which was pointed out at the beginning of the contribution of the hon. Member for Orkney and Shetland (Mr. Carmichael), who I congratulate on securing this important debate. It is true that CAP reform is vital, but, as the hon. Member for St. Ives (Andrew George) said, we have been around this track before. The British people and British agriculture are beginning to tire of both the CAP and the constant promises of its reform, which are never ultimately realised. In that sense alone, the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz) made a valid point. I shall turn to his remarks later.

The debate about CAP reform must be seen against a background of farming in crisis. That crisis should not be underestimated. I will leave aside for the moment the issue of farm-gate prices, although it is certainly true that there needs to be a rebalancing of the food chain between those who produce the food and what they get for their work, and those who sell the product and what they get for their work. It is a nonsense that someone is paid 14p to produce a cauliflower that is sold to the consumer at £1.25, as is the case with some of the large retailers. That is not to do with the price that people pay; it is to do with where the money they pay goes. Providing those who grow the products with a fair return for their investment is not unreasonable; indeed, it is essential if we are to build a sensible and viable food chain. I will leave that matter aside for the moment, as well as the matter of bank borrowing, although we must understand that a large proportion of bank borrowing by farmers is secured on land, and the uncertainties about future land values undermine a good deal of the apparent—albeit superficial—security that is provided by that.

I also leave aside the issue of farm incomes and profits. Many farmers are barely making a profit. I leave those matters aside despite the decline in farm incomes, which is leading to under-investment. Such under-investment in the industry means that it is very difficult for farmers to plan in the medium and long term. It is having a real impact on their ability to respond to the changing pressures and it will create difficulties in their ability to respond to the new imperatives established by CAP reform. I put all those important matters to one side simply to measure the extent of the crisis by the number of people leaving the industry and the number of people joining it.

We all know that farming is dying on its feet. The average age of farmers is increasing, and the number of young people entering the industry is in sharp decline. That is a new phenomenon, of which there are many examples in my constituency. Generations of families have been involved in farming, but now the sons and daughters are not even considering entering agriculture because they cannot see a long-term future in building their livelihood and that of their family around the industry. When we detach rural communities from the land, I believe that we are doing something that is highly significant and deeply disturbing.

Let us not underestimate the scale of the crisis, or the significance of farming. It is very fashionable to talk about farming employing only a very small number of people, having only a marginal impact on the economy, or contributing only a small amount to the gross domestic product. It is true that only about 2.7 per cent. of people who live in rural areas are employed directly in fishing and farming, but that figure is misleading because farming and fishing employment is highly concentrated in particular areas. It also has a massive effect on the wider economy. It affects not only businesses directly affected by farming, such as food processing and handling, haulage and packing, which are major sources of employment in my constituency in south Lincolnshire and in many other constituencies, but businesses from the wider economy, such as the retail sector, which is very dependent in many parts of the country on the life and energy in agriculture and in agriculture-related businesses. We should not underestimate that nor the cultural and social impact of farming on communities. The hon. Member for Orkney and Shetland made that point well in relation to particularly isolated and sparsely populated communities where it is a significant factor.

Nor should we underestimate the environmental responsibilities of farmers. The landscape that we enjoy has been manufactured by generations of farmers. My hon. Friend the Member for Leominster (Mr. Wiggin) described farmers as the natural custodians of that landscape—a memorable phrase in a memorable speech. It is important that we do not understate that. The Countryside Agency talks about strong links

between the quality of the rural environment and methods of food production. Generations of farmers have created much of the countryside that we enjoy, which is a reflection of their changing responses to economic signals, technological change and their own individual enterprise. We should not ignore the impact that all that has on the availability of safe, good quality food, the best guarantee of which is shortening the food chain. It is about local produce consumed locally, and about community ownership of the business of producing food. Community consumption binds people in local communities to the places where their food is made. That is the best form of traceability that we can have.

It is pointless to put in place complex schemes for traceability when food is transported all over the world and to expect them to work as well as those that are founded, in essence, on the principle that people know where the goods are made, who made them, and how they are made. The best form of traceability is about people consuming the goods soon after they are produced. It is about farming policy on a human scale, which is what we should be aiming for if we want to achieve the best kind of traceability.

The mid-term review is relevant to all this, as the fine contributions from many hon. Members have illustrated. I sum up my thoughts about this by posing the following questions to the Minister. I do so without any partisan intent, but simply in the interests of good food production, our countryside and a viable future for British farming. Will the Minister acknowledge that 10 per cent. compulsory set-aside is unacceptable, even by his measure, particularly if it is non-rotational? I understand that that might change, but I shall let him speak for himself. Creating such an environment is not to look at the future creatively. We should aim for a smaller proportion of set-aside, with the remaining land used for things such as biocrops. I was speaking to agribusiness this morning about real, commercial-scale pilot schemes for biocrops. Those would allow our farmers to investigate the way in which they can make a positive contribution to renewable energy in the way that farmers in other European countries already do.

I turn to the scale and extent of modulation. The Curry proposals require some 10 per cent. of CAP to be modulated. Unless we achieve that target, how will the Minister fund the entry-level scheme and the other proposals that Donald Curry has made? What effect does the Minister believe that unsupported crops, and the matter of entitlement to payment, will have on land values, and how will he solve the issue of the discussions—one could describe them as debate—between landlords and tenants? Particularly, how will he deal with people's uncertainty about their payments with regard to the contract farming of land that they have previously farmed for generations? What proposals will the Minister argue for within CAP to allow farmers to add value to their product by gaining processing capacity, for example in the dairy sector, in which that is by far the best means of creating a long-term business opportunity?

The hon. Member for Edinburgh, North and Leith was right: CAP has failed farmers and taxpayers; it has failed Britain. A one-size-fits-all policy is less likely to work than a policy that is sensitive to national needs, that is involved with local demands and that is implemented by Ministers accountable to this House and this nation. We need people-sized policies and politics on a human scale, so that we can look forward to a viable agriculture—without it there can be no viable countryside.

Finally, I seek an assurance from the Minister that no bizarre and futile European grand design will take the place of a real interest in the future of British agriculture and a real commitment to building the kind of future for British food, farming and countryside for which all hon. Members should campaign.

3.17 pm

The Minister for Rural Affairs and Urban Quality of Life (Alun Michael)

I congratulate the hon. Member for Orkney and Shetland (Mr. Carmichael) on securing this debate and on the way in which he introduced a particularly interesting subject. I shall focus on his remarks and outline our position on CAP reform, while responding, as far as I can, to the issues that have been raised. I congratulate all who have spoken, particularly the hon. Member for South Holland and The Deepings (Mr. Hayes), on the number of questions that they managed to pack into their contributions. I have not a cat in hell's chance of answering all of them but, if I fail to do so, I shall write to the hon. Members who have taken part in the debate.

The hon. Member for Orkney and Shetland was right to say that there is unanimity on the need for reform, but less agreement on the specifics. That has been illustrated during the course of the debate. He is also right to refer to the urgency of the matter. Farmers need change, but they need certainty. I would say to the hon. Member for St. Ives (Andrew George), who suggested that we might tolerate a more relaxed time scale, that we need to push so as not to extend the time scales and that we should beware the capacity to let things drift and not to reach a conclusion.

The hon. Member for Orkney and Shetland was also right to talk about the jargon-ridden nature of the debate about the future of agricultural policy. I wage a personal war on initials, but I suspect that even that is referred to in the depths of the Department as the "WOI initiative".

I fully understand why the hon. Gentleman focused on the contribution of Orkney beef and Shetland lamb to his constituency's economy. It is important to make that link. I understand fully his plea for flexibility. However, although that may be a reasonable aspiration, it is always more difficult to achieve in action.

My hon. Friend the Member for Stroud (Mr. Drew) talked about renationalising agriculture, by which I think he meant in terms of national decisions rather than ownership. As has been illustrated in the debate, we have difficulty in reconciling the different forms of farming across the English regions, let alone within the United Kingdom as a whole. Getting the principles right at the EU level and getting things right at the local level is a major challenge, especially in the context of expansion. We need to aim at fairness and consistency but that, like reform itself, is easier said than done.

The hon. Member for Orkney and Shetland referred to what he described as the pressure towards larger units. However, they are not the only option. Diversification, value-added approaches and niche markets are important in ensuring a sustainable future for farming. If the point needs clarification, I echo my right hon. Friend the Secretary of State's view that the Commission's approach is generally right.

One of the strengths of our approach to CAP reform is our partnership with the Scottish Executive and the Welsh Assembly, to which the hon. Member for Orkney and Shetland referred. Those who represent the devolved Administrations raise strong voices in those discussions. I have experienced that over a number of years as Secretary of State for Wales and as First Minister. I have seen a growing maturity between DEFRA Ministers and Ministers in the devolved Administrations.

The strength of our approach cannot be reflected by those who stand and squawk on the sidelines. I was disappointed as ever by the negative voice of the lone nationalist here today. It would be more sensible to get involved. We hear, as we have heard today, engaged voices from the Labour party, the Liberal Democrats and, although not a Scottish voice in this context, the Conservative party. The best that the hon. Member for North Tayside (Pete Wishart) could do was to refer to the small number here, which is a cheek as he is the only nationalist. We have frequent debates on agriculture that are answered by DEFRA Ministers without the benefit—if that is what it is—of the nationalist presence. The negative approach to change, modernisation and modulation is disappointing.

The best that the hon. Member for North Tayside could do was to criticise decisions by DEFRA in London. However, DEFRA does not exist only in London: it is spread right across the country. We work with our colleagues in the devolved Administrations because we all have an interest in getting things right. The hon. Gentleman was also wrong to suggest that modulation would go to new members states, because the distribution is in the current EU 15. We are arguing for a fair share for UK farmers, which is quite a challenge to achieve.

To offer some assurance to my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz), we are certainly not interested in moving the deckchairs around. We want to create a sustainable and profitable farming sector that is friendly to the environment, meets public need in a variety of ways and enables farmers to be more closely linked to their customers and to the market. I am pleased to be able to reassure my hon. Friend that decoupling will not give farmers money if there is no link with the industry. The decoupling payment will be made only if the farmer is managing land—either farming it or maintaining it in good agricultural condition. Decoupling is not a question of giving a subsidy to ex-farmers.

The hon. Member for Orkney and Shetland also talked about support for traditional farming methods and about rewarding them because of the environmental benefits that they provide. He is right to point to the condition that environmental benefits should be provided, and I could give examples of farms at which that approach has resulted in unexpected profitability—I visited one such farm recently. There is more than one benefit to come out of such methods.

I certainly endorse the hon. Gentleman's view that we should not seek gold-plating in what we deliver and his aspiration for us to move on from the byzantine paper chase. I have responsibility for the Rural Payments Agency, and I know just how hard it is working. There has been massive Government investment in computer systems and so on to simplify access. Organisations such as the NFU have acknowledged that much greater electronic access would bring considerable benefits. We want to simplify schemes but that is not easy for all the reasons that make change difficult.

The hon. Member for Leominster (Mr. Wiggin) mentioned the impact on land values. Indeed, the present scheme distorts land values. It is a fair point to bear in mind. He seemed to suggest that enlargement would make a reformed CAP unaffordable. The overall costs are limited, not least by the Berlin ceilings, to 2006. There is a ceiling on the bulk of CAP expenditure after that. Degressivity is partly designed to achieve the affordability that he sought. He read from a detailed brief that raised serious issues for blackcurrant growers, which can clearly be related to producers of other unsupported crops.

To the extent that the final agreement provides elements of national discretion, we will certainly consult stakeholders on how and whether to implement those in the UK. The decision about whether we should help fruit growers under article 58 should clearly be part of that process. The hon. Gentleman's closing point was about growers who have taken over farms recently. We agreed that the Commission's model for decoupling hits those who have changed their farm since the beginning of the reference period in 2000. We are working hard with the key stakeholders to persuade the Commission to adopt a fairer system.

The hon. Member for South Holland and The Deepings argued that a greater proportion of the retail shelf price should be returned to the primary producer, the farmer. That is a fair point. Fair trade issues arise on the international stage as well as in relation to our domestic production. A great deal is in the hands of farmers themselves. They can co-operate, seek added value to increase their return and identify and relate better to their market. Such matters are part of the route map in Sir Donald Curry's report on the sustainable future for farming and food that the Government are pursuing. The hon. Gentleman might have acknowledged how much the Government are doing to create the context for success for faming and to establish strong rural economies in which farming will continue to play an important part. Although farming is a small part in terms of numbers employed, that has already happened to a great extent.

The Commission's proposals give us a real opportunity to set down a sustainable basis for EU agriculture, and we strongly support their broad thrust. They will enable us to bring farmers closer to the market, remove perverse incentives to environmental damage and provide a more internationally acceptable basis for European agriculture support. We would have liked the proposals to go further. In particular, we should like to see the phasing out of milk quotas; a less distorting mechanism for funding reforms through degressivity and modulation; a bigger and earlier switch from production-directed support in the first pillar to more targeted agri-environment and rural development policies supported through the second pillar.

The negotiations have not been easy and reaching a conclusion will not be easy, but the mood in the Council now recognises that there must be serious negotiation. There is a real drive to reach agreement next month. Timing is important because an early agreement will enable the Community to engage positively in the important World Trade Organisation trade talks at Cancun. That is why, to respond to the hon. Member for St. Ives, a more relaxed approach to time scale might not favour the UK negotiating position or British farmers. The uncertainty about the proposals particularly in relation to decoupling is damaging the farming industry and the whole land markets throughout the EU. There is widespread recognition that it is in nobody's interests, least of all those of farmers, that the process should take any longer than it has to. Farmers need to plan what to grow after this summer's harvest.

I now turn to the parts of the proposals that we like. Decoupling support for production will be a massive advance. It will improve farm incomes, because farmers will not be forced into loss-making activities to get subsidy. There are many additional points that could be made about the strengths of the UK position in the negotiations. I have indicated that I will write to hon. Members who have taken part in the debate about some of those points; I am sure that they appreciate how short a time I have had in which to respond to such a wide-ranging debate.