HC Deb 16 March 2004 vol 419 cc1-22WH

Motion made, and Question proposed, That the sitting be now adjourned.—[Vernon Coaker.]

9.30 am
Mr. Peter Atkinson (Hexham)(Con)

I am pleased to have the opportunity to debate the financial future of farming. I do not want to be unduly churlish, but the recent reforms of the common agricultural policy are among the most significant changes for farming since the last war. It is therefore a pity that we are debating the subject in Westminster Hall and not having a full-scale debate on the Floor of the House. Some hon. Members will recall that it was the practice to have regular debates on agriculture, but my memory suggests that we have not had a proper debate on the subject for a long time. Although I am grateful for today's debate, it is still the second-best option. Farming in Great Britain deserves more than 90 minutes in Westminster Hall.

The debate gives hon. Members the opportunity to raise some of the concerns arising out of the Government's decision to decouple subsidies in line with the mid-term reform of CAP. Farmers' income has increased during the past few years. In the past year, it has risen from an average of about £11,000 a year to approximately £15,000, but that is still a small amount of money. The farming industry may be only a small part of the British economy, but it is none the less important. Most people believe that the landscape that they so cherish is looked after by farmers; the role of farmers is thus far more important than the simple economic strength of their industry. That is why anything that damages the farming industry should be viewed with great concern by the British people and the Government.

One problem that farmers face is uncertainty. They have lived with it for years—it is part of a farmer's life when it comes to the weather, climate and so on. However, the financial uncertainty that has been with them for years seems to be getting worse. The mid-term reform of CAP means that we now know, in rough terms, what is going to happen to subsidies in Scotland, Wales, Northern Ireland and England. However, farmers cannot look at their books and say what their income is likely to be, or what sort of subsidy they are likely to receive. Indicative of that is the fact that, at a meeting of senior members of the Scottish agriculture department, a senior official who was asked for an estimate of farming incomes in a few years' time replied, "I don't know."

Farmers need certainty. They need to know where they are going. Farming is a hugely capital-intensive business, not only because of land prices but because of the costs of long-term investment. Farmers cannot predict the future, but if they do not have a reasonable idea of where they might be in four or five years, it becomes ever harder to make investment decisions. Dairy farmers are under the greatest pressure. The other day, they were told in no uncertain terms that unless they could reduce their production costs to below 18p a litre, they might as well pack up and go home. It is no doubt true that at least 60 per cent. of milk produced in England is sold at a loss. The reason why so many dairy farmers seem to survive against all the odds is that many dairy farms are family-run; but they seem to live on air, not money. It is because the family pitches in that farms can continue, but they had a blunt warning that if they could not reduce their costs they would go out of business—or be forced to take up another form of agriculture. That is a crucial decision for farmers. Some families, particularly those in my constituency in Northumberland, have been dairy farming for years. They are now having to consider whether to continue or join the many who have already left the industry.

I shall concentrate on one sector that has been seriously affected by the Government's decision to introduce a two-tier system of single farm payments in England: farmers in upland areas. Many in Northumberland are likely to be seriously affected by the Government's decision that there should be two payment areas—those where the land is classified as severely disadvantaged, and the rest, so to speak. The majority of hill farmers in Northumberland, the north Pennines, the Lake district, the Peak district—where the constituency of my hon. Friend the Member for West Derbyshire (Mr. McLoughlin) is—Exmoor, Dartmoor and the Welsh borders will be hugely affected.

Just over 300 farmers attended a meeting that took place at Hexham auction mart a week ago. That suggests how much worry, and what strength of feeling, the decision not to pay a full rate of subsidy in those severely disadvantaged areas has caused among those farmers.

There seems to be a misunderstanding about what is happening up in the hills. About 30 years ago the Government gave farmers a substantial grant to reclaim moorland and rough grazing. Those farmers did so, on a large scale. In areas that were categorised as severely disadvantaged 30 years ago, there has been substantial improvement in the way that the land has been brought into pasture and grazing, and looked after.

It is paradoxical that for years farmers were given money to remove heather moorland and white grass rough grazing and convert it to productive grassland, but now they are being given grant money to return it to the state of unproductive grassland and heather. In my constituency there is an experimental farm, which led the way in reclaiming rough grazing for good pasture. When the Government policy changed, the principal resigned, because having spent 30 years teaching everyone how to recover such land, he could not face the idea of having to tell people how to return it to the way it used to be.

The long and the short of it is that many acres in the SDAs are typical grassland. One farmer in my constituency has 50 acres of arable land, which he ploughs regularly, in the SDA. The impact of the decision will be marked. Farmers in upland areas will experience a substantial reduction in their income as the single farm payment switches from the historical basis to the area payment basis over the next eight years.

By way of example, one farmer in my constituency, whom I shall not name, has calculated that his total payment in subsidies, which is now £30,927 a year, will diminish to £14,625 during the eight-year transition period. His cumulative loss will amount to £78,440. In contrast, his neighbour, on the other side, has an upland farm that to all appearances is just the same as my constituent's, but that is outside the SDA line. That line on the map means that the farmer next door will gain £66,000 over the eight years. That will cause problems for the farmers affected.

Problems arise in many ways. The upland farmers—;certainly in Northumberland—have tended to be specialists in high-quality livestock. They breed top-quality lambs that sell for substantial prices in sales of breeding stock, as well as top-quality cattle. To maintain that high standard new stock must be brought in, but to improve a flock or herd, top-quality replacements must be bought in. Therefore there is competition between farmers at the auction marts for such stock. How will a farmer who has lost £78,440 compete with a farmer who has gained £66,483? The answer is that the farmer in the SDA, who relies on buying good-quality stock, will have to face being outbid by his neighbour who is in a better position to afford it.

There will be other knock-on effects. My constituency in Northumberland lies on the Scottish border. In Scotland the historical system has been adopted throughout—a fixed amount. Farmers on the Scottish side will have vastly more than their neighbours on the English side. That will apply to farmers in Wales, too. Those in the borders and the marches will be in the same predicament. One farmer will be disadvantaged in comparison to another, simply because of a geographical spread.

The decision will have an environmental impact. Many environmental organisations are deeply concerned about its impact on the look of the hills. When I met farmers the other day to talk about the matter, one of the things that they, and especially a big beef producer, said was, "If this happens, I will not be able to afford to maintain a suckler cow herd. I will simply have to sell it off and go into the business of ranching sheep. That is low cost, and would allow me to lose the man that I employ and simply run a large sheep ranch on my own and my son's labour."

Taking the cattle off the hills will change the environment because those who understand such things know that sheep graze one particular type of ground in a different way from cattle. In order to maintain the environment that we like so much in our upland areas, we need that variety of grazing. That will go and the environmental cost will be serious, not only for the appearance of the land but for wildlife. Ungrazed land in the upland areas soon becomes infested with things such as ticks. That will have a profound effect on some of the birds and animals that live there.

I pray in aid a letter that has been given to me by my hon. Friend the Member for Ryedale (Mr. Greenway), whose constituency is hugely affected by the proposal but who is sadly unable to be here today. He received a letter from the chief executive of the North York Moors national park authority, and it is worth quoting a paragraph from it as it encapsulates the environmental concerns that the change has prompted. The chief executive writes: The detail of the proposed payments does however bring with it some severe consequences for the National Park. The core of the National Park is Severely Disadvantaged Area and this land is due to receive a much lower rate of payment per hectare than the rest of the country. Not only does the Severely Disadvantaged Area encompass moorland, it also includes almost the entirety of the famous Dales of the Park such as Farndale. Fryup Dale, Bransdale, Rosedale etc plus large parts of Bilsdale and other Dales. As you know, these Dales are stunningly beautiful and they contain relatively large numbers of fairly small farms.

That at least identifies those farmers who will be hugely disadvantaged. The land is worked much more intensely than moorland. Consequently, current public subsidy is much higher than for moorland areas because the productivity is high enough.

I know Farndale quite well, because it happens to belong to a constituent of mine. It is one of the most beautiful valleys in that part of Yorkshire. The small farms do much to add to the appearance of a very attractive dale. If we knock the economic heart out of those communities, the future for the appearance of Farndale and the other dales, in my constituency and that of my hon. Friend the Member for West Derbyshire, will be bleak.

Mr. Patrick McLoughlin (West Derbyshire)(Con)

Will my hon. Friend also take time to point out that farming on some of the smaller farms, in smaller fields, with the restrictions that they have, can be much more expensive and intensive for the farmer and farm labour than in some large arable areas, which will be included in the general payment scheme? Far from helping the countryside and the agri-rural environment, as the Government say that they want to, the proposals could greatly damage the smaller farms that we often find in that part of the country.

Mr. Atkinson:

Precisely. That is exactly the problem. To make a gentle political point, it is slightly perverse that a Labour Government should seek to deprive the small, hard-working farmers whom my hon. Friend has just mentioned and to reward large grouse moor owners, such as those in my constituency and in the north Pennines. I am a great grouse-shooting enthusiast. I believe that it greatly benefits the countryside, preserves the heather moor and adds a lot to the local economy. However, I am not quite happy with the idea that an Arab prince who owns a very good moor in my constituency should receive the substantial additional payment, while the hard-working farmer that my hon. Friend has mentioned suffers. That seems perverse from a Labour Government.

There is an economic problem too, because such farms employ labour. Some of the bigger farms in my constituency employ labour directly, but the smaller farms employ people to do particular jobs. That makes an important contribution to the local economy. The money is spent in local agricultural merchants and shops. Such farmers tend to be isolated so they usually spend more money in the local community rather than drive to the nearest town for their shopping. Removing the money will seriously disadvantage that economy.

Excluding farms in the SDAs from the full subsidy will be especially damaging. I do not understand why the particular boundary line was chosen. It is a line on a map that is seriously outdated because, as I mentioned earlier, much of the land has been improved. Surely a much better way of categorising the land would be to adopt what is known as the moorland line, which is used for many other purposes and defines what most ordinary people would call moorland—heather or white grass—differentiating it from cultivated land. That would seem a much more sensible arrangement.

There have been suggestions that the affected farmers could be compensated through much higher rates of environmental payments to counter their loss in the single farm payment. That is not a solution. Although environmental payments could give more money to those farmers, they would not remove uncertainty because they can vary and depend on adjusting farming activities to meet their criteria. Sir Donald Curry, who was responsible for the Curry commission, is a constituent of mine, and knows well the problems faced by the SDA farmer. He said that giving extra money for environmental schemes is not an answer.

I urge the Government to go back to the drawing board. Like me, most farmers believe that their choice of a high-rate scheme was right. There was much criticism of that, but in the long term it is better than going for the historical scheme. The historical scheme may suit Wales or Scotland—I do not wish to enter a debate on that—but, given two difficult options, it was right to choose an area payment scheme. Ultimately, it will free farmers to be much more responsive to the market. However, it would be wrong to act over the bodies of many hundreds of hard-working farmers in the upland areas who look after the landscape that the British people most appreciate. I urge Ministers to reconsider.

9.47 am
Mr. Alan Hurst (Braintree)(Lab)

I congratulate the hon. Member for Hexham (Mr. Atkinson) on securing the debate. As he rightly said at the outset, there have not been as many debates on farming in recent times as there were when I first came to the House. That may be encouraging in some ways, in the sense that the more debates there are, the worse the state of the industry is. There is some indication that its state has improved a little during the past two or three years.

I often think that farming is somewhat similar to a slow-moving rollercoaster, except that the downs seem much steeper and more protracted than the ups. Farming is a unique industry in many ways, in that it is subject not only to economic trends but to disease, taste, fashion and, most of all, weather. These days, it is also subject to environmental concerns. In many ways, being a farmer is like operating an agricultural fruit machine—all the elements have to be up at the same time to have a successful business. There are not many times in our history when that has been so.

Governments have always been concerned about the uncertainty in farming. My knowledge of Roman history is not sufficient to say whether Romans tried to protect agriculture, but I suspect that they did. Certainly, within the past 150 to 200 years, there have been various schemes of Government intervention to protect and secure stability for farming. The Conservative party will be painfully aware of the corn laws and their abolition, which damaged the party so much and provided such success for its greatest leader, Mr. Disraeli. That showed that there is always a conflict. On the one hand, one wishes to protect, promote and secure certainty for farmers, but on the other there are manufacturers and consumers who want cheap food. That conflict is sometimes difficult to resolve.

Modern times have made things worse for the farmer, although listening to farmers, it can seem as if nothing makes things better. The coming of the steamship made the situation worse, as it brought in food from competing overseas countries that had better climates than ours. Refrigeration must have been one of the biggest curses of all. It allowed meat to be imported from the other side of the world in competition with that which was slaughtered at the bottom of the lane.

Farming prosperity has not always, if ever, been associated with national prosperity. There have been periods, such as the 1920s, when the country as a whole was doing relatively well but farming was doing badly, while in the 1930s, the country and farming were both doing very badly. It was only with the second world war and the Labour Government after it that a serious attempt was made, with the introduction of national subsidies, to provide stability and prosperity for farming. Anyone who has been in politics for a little while will have heard the story of the Norfolk farmer who in 1948 applied to join his local Conservative club. The secretary told him that he had to be a Conservative, and the farmer replied that he had always been a Conservative. The secretary then asked, "Well, why haven't you applied to join before?" to which the farmer said, "It's only since the blessed socialists have been in that I can afford the membership fees."

After the war, farming entered a period in which the Government were concerned about its future and were keen to help, not only for the industry but for national security as they believed that the country needed to produce a large part of its own food. From the 1940s until recent times, with one or two exceptions, farming has been much more prosperous than before. As national subsidies were replaced by the Common Market and the common agricultural policy, the subsidy element remained, although it started to produce problems for farmers and consumers. As we know, all newspapers—not just the tabloids—like to mention wine lakes, butter mountains and all the other things that they, in a facile way, see as the consequences of intervention. However, one wonders how much of our farming industry would still exist without that intervention, subsidy and support.

During the past few years, we have seen a particularly unpleasant depression in agriculture. I cannot speak with any authority on grouse shooting, as it is not a sport that is greatly followed in Essex, as the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) can confirm, but diversification is one way that farmers have been urged to go forward. However, there is a limit to diversification, and I sympathise with the hon. Member for Hexham. His farmers may not be able to diversify as readily as those who are situated close to large urban areas.

Farmers have also been urged to follow niche markets, and a farmer in my constituency has successfully gone into ice cream manufacture from being a dairy farmer. She has done well and is an example of a farmer successfully finding a niche market and diversifying. However, there is a limit to that, because they would not be niche markets if everyone took part in them. However much we may promote diversification and niche markets, we must be aware that agriculture is dependent on livestock and the growing of crops.

From the mid-1990s, and certainly from 1998 onwards, all sectors were in depression, which is more common than it used to be. When farms were more frequently mixed, if one sector was depressed, farmers could move to another sector that was not depressed. However, the mixed-farm principle has fallen by the wayside, so the opportunity to move does not exist, and when all sectors are depressed, it is impossible to move.

When I spoke to pig farmers in my constituency in 1998, they told me that the price that they received was about 55p per kilo, while the break-even price was 90p, so they were making a loss on every pig that they produced. Although those who stayed in production are now making more than 100p—more than the break-even price—the goalposts have moved, as they so often do. A rise in prosperity elsewhere has led to a rise in the price that pig farmers pay for feed—one sector's prosperity has cut the other's profit margins.

None the less, it is good to see improvements. Even three years ago, the price of grain was way below break-even price, but it is now profitable again. Several factors are behind that: some are climatic, some relate to the position of our competitors, but all are variable. As the hon. Member for Hexham said, the fact that the factors involved continually change makes it difficult for farmers to plan for a long-term future.

The new scheme has now been unveiled, and I agree with the hon. Gentleman that there is a general welcome in England for its broad-brush approach. However, there are questions about the details and about how the scheme is applied. I am in no position to comment on hill farmers' problems, although my parents lived in a hill farming area for several years. Whenever I visited, I dreaded going to the chapel with them on a Sunday afternoon, because the congregation consisted of hill farmers, who would invariably give me a terribly hard time. They thought that if it rained too much, it was bound to be the Government's fault, but that if it did not rain at all, it was also the Government's fault. None the less, I fully understand the problems that such farmers have faced, and the addition of foot and mouth, which was particularly prevalent in hill country and in the west country, brought devastation to them.

I think that I understand how the new scheme works, although anyone who attempts to examine economic and agricultural matters probably needs a PhD and at least five years at university. Indeed, the language involved would probably qualify as a second language in any school of linguistics. As I understand the scheme, however, we essentially end up with a lump-sum payment. Two elements are involved. One is historical, and I understand why it has been rejected. I remember from my schoolboy A-level history that one reason for Spain's decline was that its procedures were frozen so much that there could be no innovation. If the payment had been fixed to reflect what happened in the two years at the beginning of this century, those who were debating the formula halfway through the century could well have some questions about that. There can also be an element of artificiality as regards how one gets to the position when those years come in. The Government were therefore right to have the balance scheme followed by the tapering, so that the historical element will disappear over time.

The question is what follows from that. Once we say that we are paying not for production but for the guardianship and use of land, certain matters arise. I therefore have one or two questions for my right hon. Friend the Minister. What, for example, will happen to historically unsubsidised sectors? Pig breeding is historically an unsubsidised sector, but is there not a case for those who breed pigs on open land to look for payments? There is a range of non-subsidised sectors, such as fruit growing. Given the principle behind the scheme, are such sectors also to receive payments?

How can the scheme be adapted to encourage new entrants into agriculture? Some elements of the scheme remind me slightly of milk quotas, and there is obviously a financial value to farmers in passing on land that incurs payments. We need to think about how to attract new people into agriculture. Indeed, that is one of the major difficulties that we face. The average age of farmers is higher than the average age of Members of Parliament—it is an ageing profession.

Then we must consider the price of land. Have we considered the effect that the scheme will have on the price of agricultural land? In many ways, agricultural land is an artificial commodity; it is almost a mirage—I should not say that lest there is a land crash. A farmer could earn as little as £15,000 a year from 300 acres, which is an absurdly low figure. Farmers must either have the most astute accountants in the land or must be working for below the minimum wage. For a farmer, an income of —15,000 a year from 300 acres is not a good return on the land. Logically, the price of the land should be much lower, and if we worked out the cost of renting land at an economic price, I do not know how many farming businesses could make a profit.

A further question for the Minister to consider is that of cross-compliance. What connection is there between the environmental schemes that operate and on which payments will ultimately be conditional? What schemes will there be and what level of compliance will be required? Will existing environmental schemes continue or will they be merged into one overall scheme? Will additional payments be made if farmers go beyond the standard level of compliance with environmental regulations? What will be the level of inspection for compliance with environmental demands? Will it be a burdensome or a relatively relaxed regime? Will the regime make farmers feel like they are in partnership with the Government, or will they feel at odds with inspectors?

That brings us on to a matter that is always raised: what will happen about our competitors? Farming does not operate in a vacuum or, to use a jargon phrase, in a national envelope; it competes internationally. Will we operate on the same terms as our competitors? Will our competitors give environmental subsidies for compliance with environmental requirements? I hope that the Minister will reply to those questions.

Let me return to the unsubsidised sector of pigs. The Government have introduced helpful initiatives, for example the home-sourcing initiative through which allowance is made when offering contracts for the benefit to the local community and production standards. Will that be more widely and strongly encouraged? Will greater attempts be made to stimulate proper, effective labelling of products so that we know what we are buying?

I generally welcome the approach that the Government have taken, but we need more flesh on the bones so that it is clear in what direction we are going. The Government, and all parties, are mindful of the difficulties that farmers have endured over a long time, and we are pleased that times are better now than only a little while ago. I look forward to hearing the Minister's replies to my tentative questions.

Several hon. Members


Mr. Deputy Speaker (Mr. Edward O'Hara)

Order. Back-Bench Members who want to contribute might wish to know that Front-Bench contributions should start no later than 10.30 am.

10.4 am

Mr. Patrick McLoughlin (West Derbyshire)(Con)

I congratulate my hon. Friend the Member for Hexham (Mr. Atkinson) on securing this timely debate. It is timely because of growing concerns, especially in severely disadvantaged areas, on which I want to concentrate this morning. It cannot be emphasised too often that our countryside exists because of our farmers. They have looked after it from generation to generation and from season to season.

One of the reasons why so many millions of people visit my constituency in the Peak district is to enjoy the beautiful countryside that generation after generation of farmers has bequeathed to us. That can be neither emphasised nor repeated often enough. Too often we take the countryside for granted and imagine that it is beautiful because nature has made it so. However, the countryside is as it is because it has been maintained and farmed. One need only look at barren land that has not been looked after for a few seasons to realise that if the countryside and our national parks were not cared for, they would not be the attractive places that millions upon millions of people from different parts of the country visit every weekend. That is why I should like to concentrate on the Government's proposals for the SDAs.

It is essential that the Government get the policy right. I would like to believe that they have made a genuine and honest mistake, perhaps through misunderstanding the difference between disadvantaged areas and severely disadvantaged areas and the moorland line. The Government have made a mistake in their definition. The hon. Member for Braintree (Mr. Hurst) said that the issue is complicated and I have no doubt about that. Indeed, one of my constituents wrote a letter to the Department for Environment, Food and Rural Affairs to ask how the SDAs first came up. He received quite a long reply from someone working at the uplands land management branch on Horseferry road, from which it is worth quoting. The letter said: I understand that the present SDA line dates back to early the 1960s. It was then called the Hill Cow Line. Farmers within this were eligible for hill farming subsidy payments and capital grants"— as my hon. Friend the Member for Hexham said. The letter continues: The subsidy system started much earlier than this in the late 1940s but was paid, I believe on the breed of livestock rather than within a specific hill area. I shall not read the entire letter, but it goes on: In 1984 the EC changed the criteria for LFA designation and the UK reviewed the line. The new criteria included 'agricultural disadvantage' and rural areas of less than a certain population density and danger of depopulation. It was at this time that the LFA was split into Severely Disadvantaged and Disadvantaged land. The land bordering the existing LFA, now called SDA was assessed. The criteria being that it was eligible for LFA if it was suitable predominantly for suckler cow and hardy sheep rearing. Arable areas could be included if the crop was for on-farm feed. This usually corresponded to Agricultural Land Classes 3c. 4 and 5. There was a presumption against including dairy land unless conditions were particularly difficult, e.g. significantly longer in-wintering period. The SDA land was not reassessed. It was presumed that it … fulfilled these physical criteria, even though some areas would have undergone significant land improvement over the years. Again, there was still an economic advantage being in the SDA. The LFA was reviewed in 1990 and, as far as I am aware there were little or no changes of substance. The EC required the area be described by listing the parishes … that lay wholly or partly within the line drawn. These were notified to the EC in 1992. Flagg Hall farm lies at an altitude of 900–1,000 ft (270–300 m) above sea level, deeply within the SDA. Land normally at this altitude especially well away from the coast would normally be expected to be considerably"—

Mr. Deputy Speaker:

Order. The quotation is extremely long and I think that the point was well made some time ago.

Mr. McLoughlin:

The quotation helps me to make my point, but I shall draw it to a conclusion if I am out of order. I merely point out that the farm in question is now included in the SDA, yet its stocking level is compatible with areas outside the SDA.

At the weekend, I met farmers whose farms were partly inside and partly outside the SDA. That happens particularly often in my constituency. One can see on a map where the line runs through villages that only part of a village may be included. That means that neighbouring farmers are in completely different financial environments: some obtain a full benefit and others within the SDA receive a reduced amount of Government subsidy. The Government might argue that there should be no subsidy at all—perhaps they can argue that—but there is a subsidy. They have accepted that a subsidy will exist. They must therefore be sure that, when they arrived at the decision, they fully understood the whole question of the SDA.

The Minister for Rural Affairs and Local Environmental Quality (Alun Michael)

I should be grateful if the hon. Gentleman clarified what he is suggesting. It is surely inevitable that wherever one draws a line, there will be a difference between one side and the other, whether it results from devolution or the definitions of "area". Is he arguing for a single-rate payment?

Mr. McLoughlin:

I am arguing that the Government should consider whether they became confused—let me be as kind as that—between the moorland line and the SDA line. Surely they did not mean to include in the SDA line areas where there are farms that provide the same quality of service and production levels as some of the areas outside it. That is totally incompatible with what the Government are saying. I do not believe that any farms within the moorland line could produce what some farms in the SDAs are currently producing, in both quality and quantity.

I fully accept that a great deal of work has gone into the policy and that there are difficult decisions to be taken. I could say much more on the subject and I apologise to you, Mr. Deputy Speaker, if I quoted at length from a letter, but it is relevant to the way in which the old SDAs have grown up over the years. They have a huge history. Part of the Government's problem is that, if they are relying on maps that were drawn, as we have heard today, in the late 1940s and early 1950s, it is a mistake. It would be wrong for agriculture to use such criteria.

My hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale), who speaks from the Front Bench, wrote to the Secretary of State to explain that more than 5,000 farms will be in danger from the proposal. That is absolutely right. They are, in general, smaller farms and farms that require much more labour, because they are hill livestock farms and arable farms.

The Government's proposal is a mistake: it will pit farmer against farmer and divide farming communities. I very much hope that the Government will reconsider the proposal as a matter of urgency and that the Minister will comment on that today, because there have been reports that the Secretary of State will be away from London for some time, and the issue is of considerable interest to farmers in my constituency, who are very worried about their livelihood. I therefore hope that the Minister will give us an idea of the timetable to which the Department is working if a review of the system is taking place. I hope that he will reassure the farmers whom I met in my constituency over the weekend that a review is happening. They hope that the Government are taking on board the many representations that they receive.

10.14 am
Matthew Green (Ludlow)(LD)

I, too, congratulate the hon. Member for Hexham (Mr. Atkinson) on obtaining the debate, which is timely. Much of my constituency is a less-favoured area and much of it is a severely disadvantaged area. That has had a considerable impact. I have had no fewer than three meetings with the National Farmers Union in my constituency in the past couple of weeks, and received numerous letters. Farmers are not often moved to write to Members of Parliament, even when those Members have many farms in their constituencies, as I have, but I have been flooded with letters from farmers, because of the impact that the system has had on them.

I do not intend to oppose the Minister on the issue. In principle, decoupling is right. If it had been left to me, I would hope that we would not be in the position that we are today. However, I am taking it as read that we are in that position, and I hope that we can move on from it and smooth out some of the worst anomalies in the system. We have heard good examples of the problems caused by the single farm payment in the SDA areas. In particular, it is clear that livestock farming—suckler cows and dairy—in the SDA areas will be most affected. However, moving to area payments will hit livestock farming everywhere; livestock farmers will lose out the most, except those who practise extensive sheep farming in moorland areas. I would welcome recognition from the Minister that the change will affect livestock farmers the most.

I shall quote briefly from three letters from farmers in my constituency to give some idea of the scale of the problem. However, I shall not name those farmers, because the letters contain financial information. In the first letter, the farmer says: We farm 1,000 acres of LFA. You cannot class us as a moorland. We employ 4 people—they will be out of a job. We have 300 cows—they will have to go. My farm neighbours are English lowland, receiving £220 a hectare. That is the estimated figure; the farmer estimates that he will receive only £72 a hectare. He continues: My Welsh neighbours are getting even more at £300 a hectare. How can I compete with that? Another farmer says: In 1999 I myself farmed 115 ha, running 800+ breeding ewes, 35 suckler cows and growing 12.71 ha of cereal, total subsidy before HFA and ESA payments of £22,891. At current projected levels, in the year 2012 the total flat-rate payment would amount to £8,625, amounting to a reduction of 62.3 per cent. Another farmer, who has 1,300 sheep and 80 single suckler cows that are run on 229 hectares, says: Similar to many farms in the Clun Forest I have calculated a 70 per cent. drop in support payments under the proposed SFP. By 2012, 229 hectares qualifying for an estimated SDA payment of £75 as opposed to the estimated non SDA payment of £225, would see a shortfall of £34,350 a year. The impact on individual farms in my constituency is considerable.

The environmental impact has already been mentioned. Mixed farms are regarded as being good for the environment and for the appearance of the countryside. However, many farmers, when faced with such a situation, will be tempted to move away from mixed farming into sheep ranching, which would have a considerable impact on the appearance of the countryside and the environment. I do not pretend to be an expert on the matter, but I understand, for instance, that orchids tend to grow where cows graze, but that if sheep are put on the same land, the orchids will disappear. The policy has many, perhaps unintended, consequences.

I shall not follow some Conservative Members in being too critical of the Secretary of State, because I understand that the National Farmers Union has had meetings with her on the issue, and have found her quite accommodating. I believe that she is seeking industry consensus about changes to the system.

Unlike the Conservative Members who have spoken, I shall not urge moving the current line to the moorland area, but shall propose the creation of three areas by separating the current SDA moorland area into two. That would be a lot fairer. The problem for the SDA farmers is that the moorland areas have been included, so subsidy will rise for extensive sheep farming on the moorland areas, paid for by a loss in subsidy on the mixed farms in the SDA areas. Separating the two would mean that the current subsidy received by the SDA areas would stay in those areas, because the principle is that the existing subsidy on that area is examined and then is divided between the area that can be claimed on. That is my understanding of the matter, and I hope that the Minister will confirm it. In the SDA areas that would mean that, if the moorland areas were taken out, the current subsidy received by the SDA areas would stay within those areas.

Mr. McLoughlin:

Can I be absolutely sure what the hon. Gentleman is saying? Is he arguing that the SDAs outside the moorland line will still be treated differently to the disadvantaged areas?

Matthew Green:

I could stand here and argue for four areas: lowland, disadvantaged areas, severely disadvantaged areas and moorland. The biggest problem is the inclusion of moorland in the SDA areas, so I am arguing for three regions: moorland, SDAs and the others, which would be DAs plus lowland. There is a problem with separating everything from moorland, because most SDAs will continue to receive hill farm allowance. There is concern that if moorland is excluded and everything else is similar, the argument for continuing to receive HFA payments in future would be rather tenuous. I do not want to throw the baby out with the bathwater, which is what a move to the moorland line would involve.

There was a meeting of more than 200 farmers at Ludlow football club last week with Kevin Pearce, the NFU livestock expert, in attendance. At the end of the meeting, there was a show of hands. About 90 per cent. of the farmers in the room—all SDA farmers—said that they would prefer the three-way split to the boundary move from the SDA to the moorland. They believed not only that that was more achievable, as the Government are more likely to agree to it—perhaps that is why they think that—but that it also seemed relatively fair to keep the SDAs' current subsidy within the SDAs. We do not know what the figures would be, but separating the SDAs out would probably bring them fairly close to what the lowland and DAs would be getting anyway. That could feasibly be even more so if the farmers' claims about high levels of subsidy are true. We must be careful about that.

I have a series of other questions, and if the Minister cannot answer them today, I hope that he will write to me, because they are matters of concern. Like the hon. Member for Hexham, I have a border constituency. Farmers in Wales have, for understandable reasons, opted for historical payments, and if I were in their position, I should have done so too. A more difficult question for them is how long that position can be sustained. Historical payments have led to a number of cross-border issues. First, the actual border and where the farms are registered are not always similar. For instance, when I was first elected, I was given a list by DEFRA of the number of farms with confirmed foot and mouth cases in my constituency. The list numbered four, although there were actually nine. The first Shropshire farm to get foot and mouth was near the village of Chirbury in my constituency, but it did not appear on the list because it had a Welsh holding number, even though the farm, buildings and two thirds of the land are in England. Can the Minister confirm whether such farms will be in England or Wales, or will they have split land? That will make a difference to the levels of payment.

Alun Michael:

I can tell the hon. Gentleman that if the borders proposed by Owain Glyn Dwr had been observed, Exeter and most of the east of England would be included in Wales, and we would have a completely different picture.

Matthew Green:

I thank the Minister for that, but I am not sure that it will be a great reassurance to farmers now. I realise that he may not be able to give an absolute answer today, but I should appreciate him writing to me.

Secondly, there is the issue of grass keep. A lot of Welsh farmers take grass keep on the English side of the border, and vice versa. If the Welsh farmers are receiving historical payments, they will be able to afford the grass keep more on the English side. There is also the issue that many farmers will want to keep the initial 90 per cent. historical payment on as small a unit as possible. They will retreat from tenanted land in the first year, so that they can claim their historical payment on as small an area as possible, and then perhaps return to it in future. We shall see some shifting around. Will the Minister consider that point?

Thirdly, there is the issue of market distortion. I have three livestock marts in my constituency, of which Ludlow is the largest. It is a successful sheep and cattle market, and many people from Wales go there. People will be able to offer—particularly with breeding stock and suckler cows—different prices for that stock in the market. I would appreciate it if the Minister would say something about the effects of market distortion.

The effect of the inclusion of improved grassland in the set-aside rules also arises now. Many dairy farmers have relatively small farms, but if set-aside is included in the improved grassland, they will probably have to take on more land so that they can set some aside. Previously, livestock farmers were not affected by set-aside, but they will be under the improved grassland proposals. I realise that it is a European directive, and not necessarily within the Minister's control, but recognising the problem and attempting to deal with it would be welcome.

We need more details about cross-compliance. I know it is early days, but much of farmers' planning will depend on what will be expected of them in respect of cross-compliance. The Minister will probably not be able to give firm details about it now, but I hope that he will at least reassure us that they will be available as soon as possible.

In the changeover period, 90 per cent. of the potential appeals will be historical; it is very important to get the figure right for the three-year reference period. Mistakes could be made by the DEFRA, which is the body responsible for appeals. It worries me that there is no independence of appeal, and I would like the Minister to comment on that.

I shall give an example of how problems could arise. A man who farms on a relatively small scale came to see me at my surgery on Saturday. During the outbreak of foot and mouth disease, his records were stolen from his Land Rover. He had recently received some annual sheep premium and the Rural Payments Agency had back-claimed from the three years that happen to be in the reference period. He had figures for 2002 and subsequent years, and he has his premium for those years. The Rural Payments Agency checked the figures for 2002 and because his previous records had been stolen, it subsequently claimed the money back because he could not prove that he had the sheep during the important month or so in the relevant period.

I am worried that that farmer, who has been in farming for some years, could be doubly hit. I will take up the issue with the RPA to try to resolve the matter, but if we fail, he will have no historical payments because he has had his subsidy removed for the reference period. That will be serious because it will penalise him over a future eight-year period. The sum involved may not seem particularly large, but it is large to him as it is an important part of his income.

I hope the Minister appreciates that I am not trying to be oppositional. This is an important change; it is difficult to get it right and the Government are adopting an open-minded approach. I understand that the NFU is encouraged by the way the Government have responded to some of the difficulties, but I should like more assurance from the Minister that they are moving to deal with the problems of severely disadvantaged areas. I hope that the Minister will look carefully at the three-region option, which was heavily endorsed by SDA farmers in my constituency.

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

I, too, congratulate the hon. Member for Hexham (Mr. Atkinson) on securing the debate, which comes at an opportune time. I warm to his comment that we have not had a debate on the Floor of the House about agriculture and I go so far as to suggest that if there had been such a debate, some of the problems that have been encountered with the SDA might have been sorted out, or at least identified, so that DEFRA would not have to reconsider the proposals. I declare my interest in such matters as they appear in the Register of Members' Interests.

I enjoyed the short history of agricultural support from the hon. Member for Braintree (Mr. Hurst). I have been farming for a long time, but not during the abolition of the corn laws or in the 1920s and 1930s. I farmed while the system of deficiency payments was in operation, during intervention and export restitution and through the McSharry reforms and Agenda 2000. We are now looking forward to the new proposals. It would be perverse not to recognise that farming incomes have risen, albeit from very low levels. The current levels have been reached through better livestock prices, particularly for beef and sheep, and a short-term rise in corn prices, which have made farmers' incomes look more respectable, although they are nowhere near the levels of the early 1990s.

The one commodity that remains poorly recompensed is milk. For several years, milk farmers have sold their commodity at below the cost of production. Although individual farmers will have different costs regimes depending on whether they are owner-occupiers or tenants and their borrowing history, an estimate by the HSBC bank suggests that, on average, they have been selling milk at 2p below the cost of production. If that is multiplied by the amount of milk produced in the country it comes to £280 million; that is the amount by which the farmer subsidises the wholesale, retail and processing trade.

What can we do about that? I have one suggestion for the Minister. After the abolition of the Milk Marketing Board and the break-up of Milk Marque, farmers' co-operatives were reduced in size and did not have the economies of scale of a number of their competitors. It was suggested that individual farmers' co-operatives that decided to merge to give them a better competitive position in the industry would be referred to the Office of Fair Trading. Answering the OFT's questions would immediately cause huge expense for those farmers' co-operatives. That is a barrier to a better structure in the milk industry. Farmers believe that to be unfair when they consider the red meat processing industry, in which Grampian Meats has 50 per cent. of the market, having just purchased St. Mirren Meats. There seems to be one rule for the private sector and another for the farmers' co-operatives.

Matthew Green:

My hon. Friend is probably already aware that when the DTI looked at the competition implications of Dairy Crest's recent acquisition of ACCA, it considered only the impact on the retail price for the consumer, not the impact on producers.

Mr. Williams:

My hon. Friend raises an important point. In the short time that I have available, I should like to put it to the Minister that the OFT should be more transparent about what triggers an intervention. At present many farmers' organisations are afraid to go forward because of the huge expense that an OFT investigation entails.

The mid-term review is a huge opportunity for the farming industry. It will allow farmers to become business people and run their businesses according to their resources and skills, rather than being collectors of Government subsidies. It has been welcomed by the industry. We have four systems in the devolved nations of the UK. I recognise the problems on the borders between Northumberland and Scotland and between my hon. Friend's constituency and mine. Several issues will be difficult to sort out there. The devil will be in the detail. We could raise several matters here but I am sure that the Minister is well aware of them.

The SDA has caused a huge amount of concern. When the Secretary of State made her statement on the mid-term review, I was the only Member to raise the SDA, because I could see how it would affect the more intensive livestock farms as opposed to the moorland and grouse moor areas. If a Labour Government could think of any scheme to fill large landowners' bank accounts with subsidies, it would be that one.

I asked the Secretary of State about livestock SDA farms—the smaller upland farms that are the most vulnerable in terms of business, but contribute the most to the environment. They are, as the hon. Member for West Derbyshire (Mr. McLoughlin) said, situated in some of the highest-quality landscape areas, but those landscapes exist only because of the farmers' activities. British people value those landscapes. That is why they go to national parks in the north and west of England, and in Wales. Any exodus from those farms because the farmers' businesses became untenable would lead to a huge outcry from the British people, as they would see their landscapes and countryside changed beyond recognition.

There are several other issues of concern, such as cross-regional matters. Simon Gourlay, who is a past president of the National Farmers Union, and who farms on the Welsh border, suggested that wherever the main farmhouse is situated should be the designation for that farmholding. I know that he has written to DEFRA and the Welsh Assembly about that. Will the Minister comment on whether that would be a simpler way forward? I understand that most people, particularly if they are in SDA areas in England, would like to be on the Welsh side of the border at the moment.

Let me consider more technical issues concerning the mid-term review. I understand that Britain would contribute £485 million in digression and modulation funds, but would receive only £445 million back. That would not be enough to fund the agri-environment schemes as they are currently envisaged. Will the Minister comment on that?

I revert to an issue that has concerned me for many years, but about which I have always been regarded as old-fashioned: food security. It was at the forefront of consideration immediately after the war, in the 1950s, when agricultural policy was being decided. I do not think that we should ever forget that a hungry nation is a dissatisfied nation. We often talk of global warming and other issues; I hope that the modulated income will be used to ensure that support will continue for breeding flocks of sheep and herds of cattle, because there could be a time when farmers will become commodity brokers in livestock, and breeding will be so unprofitable that there will be a huge decrease in livestock.

The other day, I asked some young farmers what they would like to ask the Minister. The main questions that emerged were: why is not the Minister more proud of British agriculture? Why does not he celebrate the food that it produces and the way in which it looks after the countryside? If he did that, the relationship between the Government and the British agricultural industry would be a happy one.

10.39 am
Mr. John Whittingdale (Maldon and East Chelmsford)(Con)

I begin by joining other hon. Members in congratulating my hon. Friend the Member for Hexham (Mr. Atkinson) on securing the debate. By doing so, he has done us a service. I share the view that it is a shame that the debate was not held earlier, and that we have not had an opportunity in the main Chamber to talk about undoubtedly the biggest change in agriculture for many years. My hon. Friend is a member of the Conservative Whips Office, and was supported by the Conservative Deputy Chief Whip. Both their contributions were excellent and got to the heart of the matter.

We have had a well informed and useful debate. The hon. Member for Braintree (Mr. Hurst) is my constituency neighbour. We may have different views about many issues, but he has always shown great understanding and knowledge of farming. It is always a pleasure to listen to him talking about the subject.

The mid-term review will affect every farmer. I repeat that, in the main, the Conservatives support the principles that underline it. We have always argued for decoupling, and the fact that it will take place at last is a considerable achievement. I do not underestimate the difficulty of implementing that decision. The Secretary of State had a very hard choice to make. However, the key decision to take was how to allocate the single farm payment. Whatever the method chosen was bound to result in some being winners and others being losers. No major group rejected the method that the Secretary of State eventually chose; most reluctantly accepted that there is some logic in the gradual phasing in of a flat-rate payment system.

A flat-rate payment system should be fairer, as it removes the divide between some supported crops and non-supported crops. It should be simpler, although I share the concern expressed by the hon. Member for Ludlow (Matthew Green) that we have not yet seen the detail, particularly of the cross-compliance conditions that will be attached to the payment. We will be keen to ensure that we are not substituting one complicated bureaucracy for another. We are also concerned about the time scale that must be introduced, and whether or not the Rural Payments Agency will be up and running and ready to implement a major change. I hope that the Minister will assure us that he is confident that the RPA will be able to put the necessary mechanisms in place.

Farmers in England accept the logic of the change and the system that the Secretary of State has chosen, but there is still unhappiness that farmers will be treated differently. Obviously, there will be differences throughout Europe. We have moved towards full decoupling, but other countries have not, which will create an unlevel playing field throughout Europe. There will also be major differences in the United Kingdom. We will no longer be able to say that there is a common agricultural policy in Europe. The fact that two identical farms on either side of the Scottish or the Welsh border will receive different amounts and that, over time, the gap between the amounts that they receive will grow will give rise to the feeling that this is unfair and that there is no equity.

I accept, however, that all farms will be faced with the same decisions because they will all be operating in a world market. Nevertheless, the fact that one farmer receives a much greater payment than another for the same environmental management is bound to lead to resentment. We have heard about farms that not only neighbour each other across a border but actually straddle borders. That will give rise to even greater resentment. Some farms have some land in Wales and some in England, some of which is inside an SDA and some outside. One example that has been drawn to my attention is that of a 600-acre Shropshire dairy farmer who has 250 acres in an English SDA, 150 in the west of England and 200 in Wales. He will receive three different entitlements for those three blocks of land, and his farming decisions will be determined not by the market but by how he can maximise his subsidy.

Part of the rationale behind the mid-term review is that it was supposed to result in a situation in which farmers decided how to farm on the basis of what they could sell in the market, not on the basis of how they could maximise their subsidy payments. I am sure that the Minister will tell me that the distortions are the result of devolution and that devolution can mean different systems for different areas. However, there is the additional difference between the payments inside the SDAs and those outside, and that is wholly the Government's decision.

I understand the intention behind the Government's decision to pay a lower rate in the SDAs than outside. However, some of the biggest gainers will still be those who own large expanses of relatively uncultivated land, particularly grouse moors as mentioned by my hon. Friend the Member for Hexham. The Government have tried to meet the consequence by implementing a lower rate in the SDAs, but my concern is that they seem not to have realised that there are a large number of intensive farms within the SDAs. Those farms will see a catastrophic drop in their income.

I was concerned that, when Lord Whitty gave evidence to the Select Committee on Environment, Food and Rural Affairs, he appeared to say that no research had been done into the effect of the changes on individual sectors. He said: We know what the overall effects will be but we do not know, and have not the modelling to show, the effects on individual sectors". It is strange that we have taken such a momentous decision for farming apparently without the Government having done that research.

Yesterday, I met representatives of the Royal Association of British Dairy Farmers, who told me that there are 1,500 dairy farmers in the SDAs and that they are all likely to go out of business unless changes are made. Some of those farmers have done everything that the Government have wanted them to do. I was given the example of Wensleydale, with which I am sure my hon. Friend the Member for Hexham will be familiar. Farmers there came together to form a co-operative and are now supplying the makers of Wensleydale cheese. Those farmers have done everything that the Government have asked of them: they identified a niche market and are working together to produce a value-added, high-quality product. Half of them happen to be in the SDAs, and as a result, they will almost certainly be unable to continue in business.

That problem affects many areas of the country, including the west country, Exmoor, the Welsh borders and Northumbria, as my hon. Friend mentioned. They are some of the most beautiful areas of England, although the hon. Member for Braintree and I also see a curious charm in the East Anglian arable fields. Some of those beautiful areas depend heavily on farming for the maintenance of their environment, so the change will have a severe environmental impact as well.

My hon. Friend the Member for Hexham mentioned that one of his constituents is Sir Donald Curry, who has done great work in advising the Government and made sensible recommendations about the future of farming. However, he has said that he was not consulted about the decision: I am concerned and have had numerous calls and letters about it. The level of redistribution within the SDA is unacceptable and unforeseen. The Government should take that seriously, and I hope that they will show flexibility. When I raised the issue on the Floor of the House with the Secretary of State, there did not seem to be much flexibility, but I am encouraged by the reports that, privately, she accepts that some movement is needed.

There are various methods of addressing the situation. My hon. Friend the Member for Hexham mentioned the possibility of increasing environmental payments, the National Farmers Union advocates three tiers rather than two, and there is the suggestion that we use the moorland line. All those proposals will have costs attached to them, and one difficulty is that we do not have any analysis of how the payments in, for example, non-SDA areas would be affected if we made those changes. I hope that the Minister will be able to say a little more about that, because it is important that we have those facts. Everyone agrees that something needs to be done. The Government, I suspect, have simply not realised the effect of the decision on thousands of extremely productive farms in the SDAs, which make a vital contribution. I remind the Minister of the opening words of theFarmers Guardian editorial: Anybody can make a mistake but the true test of a person, or indeed a Government, is the way you respond to it.

10.50 am
The Minister for Rural Affairs and Local Environmental Quality (Alun Michael)

I congratulate the hon. Member for Hexham (Mr. Atkinson) on initiating the debate, and I agree with one of his early comments, which was echoed by the hon. Member for Brecon and Radnorshire (Mr. Williams) among others. He said that although the contribution of farming to the rural economy is quite small, the contribution of farming to the countryside and the environment is enormous. That is why decoupling and paying farmers for the public benefit, rather than giving them a production-related subsidy, must be the right long-term way forward.

I welcome the hon. Gentleman's support for the area payment approach, as opposed to the historic payment approach. The hon. Member for Brecon and Radnorshire suggested that there was concern among young people that we were not sufficiently proud of British farming. Perhaps that is because of the great coverage of all that is gloomy and negative about it, when there is much positive that could be said. We have every reason to be proud of the farmers—people I meet all the time—who are entrepreneurial and creative, as well as highly committed. All that the Government are doing is trying to help them to be competitive and successful, and have a sustainable future in farming.

It is worth pointing out that farm incomes should be viewed in the context of considerable public support for agriculture. United Kingdom farmers receive about £3 billion in payments under the common agricultural policy each year—£2.5 billion in direct payments and £500 million in budgetary expenditure on market support. The Government's policy is not to attempt to intervene in the market to create artificial income, but to facilitate the right economic framework to enable farmers to succeed. Reference has been made to Sir Donald Curry's excellent work on that, and the Government's sustainable farming and food strategy sets out how we mean to work in partnership with the industry in that context.

Although there are many positive things that can be said, I want to focus in the short time available on the points that have been made by hon. Members. First, the general message seems to be positive, but each hon. Member who has spoken seems to be concerned about some of the detail of the impact of the proposals of my right hon. Friend the Secretary of State.

The hon. Member for Hexham concentrated in particular on upland farmers and the effect of a two-area approach on those in severely disadvantaged areas. He makes a reasonable point. He and others, including the hon. Members for Ludlow (Matthew Green) and for West Derbyshire (Mr. McLoughlin) have argued for a different alignment in England. I stress that we shall consider all the representations and the points that have been made to us. That is the point of a period of listening.

Hon. Members must nevertheless bear in mind that change would produce a different set of winners and losers. I do not think that it would be terribly helpful to add to rumours of the possible shifts and changes. Let us engage in conversations and examine the representations. Let us consider what consensus might be reached in the industry. Then, as always, my right hon. Friend the Secretary of State will want to focus on all the information that has come in, and to take a decision.

I assure hon. Members, in answer to a query that arose, that during the period when my right hon. Friend will be representing this country in several European, and other, settings, she will be well in touch with the Department and her ministerial team and will be focused on securing the right outcomes.

The hon. Member for Ludlow also focused on specific cases with a lot of detail, but seemed to argue for a retention of the link to stock levels, when decoupling is the way forward. Perhaps that point was being made by his correspondent rather than by the hon. Gentleman, but I shall certainly respond to him on the detailed issues that he raised. For instance, he referred to a case involving the Rural Payments Agency. It is my experience that, generally, comments about the agency based on the detail of individual cases can be misleading, although I should be happy to write to him about that point.

Mr. McLoughlin:

The Secretary of State made her announcement in February and the Minister says that the Government are collating evidence and listening to all sections of the industry. Can he give us any idea of when the industry can expect a clearer way forward? What the Secretary of State announced obviously stands. However, if there is to be a review, it will be immensely helpful for those who are worried in the industry to know what time scale the Minister is considering.

Alun Michael:

The hon. Gentleman and others have rightly referred to our discussions with farming organisations, including the National Farmers Union. However, it is wrong to talk about outcomes and changes while those discussions continue. My right hon. Friend is looking to make the right decision and to understand fully the points that are put before coming to a conclusion.

The hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) acknowledged that any decision would cause problems. He also acknowledged the logic of a tapering approach that seeks to move to area payments, but in a way that gives people time to adjust to the changes in payments. He referred to the differences across the Welsh and Scottish borders, as well across the lines in England. However, the decisions made in Scotland and Wales are the result of devolution. It is understandable that such decisions have been taken, because, as the hon. Member for Brecon and Radnorshire suggested, the historic payments may look more attractive in the short term. In the longer term, however, the area payments are, in our view, much more sustainable. Those who perhaps aspire to see such arrangements across the border, such as the hon. Member for Ludlow, may therefore take a different view in the longer term.

A number of detailed questions were asked, for instance, about cross-compliance. It is necessary to consider the relationship among the higher tier scheme, which involves more complex agreements, the simple voluntary scheme that is being promoted and cross-compliance, in which the minimum regulation standards are observed. A consultation on cross-compliance is due to take place shortly. That process will bring forward the details for which the hon. Member for Hexham asked and will provide an opportunity for comment and discussion. One problem is that there is always a lot of consultation when dealing with issues that are so complex for the industry. During the consultation, people complain of uncertainty, but we cannot have it both ways. We must listen and get engaged with the sort of detail that several hon. Members have raised.

I am conscious that the time I have to respond to a broad range of issues is short. I therefore undertake to write to those who have spoken to cover the points that I do not manage to reach. For instance, the approach of the Rural Payments Agency was raised. The agency has established a programme and project management system in order to deliver single payment systems by 2005. The set-aside on grassland was also mentioned. We are still discussing the rules, but we argue that the Commission should look again at its proposals, so the issue is not closed.

On the key issue, I must tell the hon. Member for Hexham that no line will be perfect; there will be anomalies somewhere, whatever lines are chosen. We shall listen carefully and ask whether there is a better way. My right hon. Friend the Secretary of State has put forward a sensible and coherent set of proposals. Following the consultation, we shall seek to give the greatest clarity to the industry, which is what all hon. Members want. We need a process that is sustainable in the long term, in which, as we move to the simple area system, people know the graduation of payments, and that will help to provide the certainty that is necessary to underpin a sustainable future for farming and food.

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