HC Deb 11 December 2002 vol 396 cc96-116WH

11 am

Mr. Stephen Byers (Tyneside, North)

I am delighted to have secured a debate to discuss the common agricultural policy in relation to the Copenhagen summit. I follow a debate secured by the right hon. and learned Member for Rushcliffe (Mr. Clarke); Westminster Hall is clearly becoming the venue for former Cabinet Ministers to continue to tread the boards. I hope that this debate proves as interesting as the one on policing in Nottingham.

I welcome to the Front Bench my hon. Friend the Minister for Europe. Many of us were delighted by his appointment. He has shown a deep interest in Europe, not only during his time in the House, but for many years before that. I know that he will be a strong and forcible advocate for Europe both within and outside the House. I look forward with interest to his response to the debate. I think that he is covering the main debate in the Chamber later today, so it will be a busy day for him. I apologise for that.

Mr. Richard Spring (West Suffolk)

What about the shadow Minister?

Mr. Byers

I never apologise to shadow Ministers. That is one of the few things that I have learned during my time in the House.

Most importantly, the Minister will be able to deal with the CAP and the extent to which it may be debated at the Copenhagen summit. I say "extent" because, as many of us are aware, there was a fair degree of discussion about the CAP at the European Council meeting towards the end of October. Some decisions were taken there and they have set the framework within which any changes or reform will take place.

The Copenhagen summit will primarily be discussing enlargement—something that is very important for the future of Europe. It just so happens that many of the candidate countries for entry into an enlarged European Union have extensive farming interests. However, farming in those countries is outdated and inefficient. Enlargement and the nature of the agricultural sector in the candidate countries mean that there will need to be changes in the CAP. We should use enlargement as an opportunity to drive through major changes. Perhaps we should even reconsider the idea of giving subsidies for production, which has led to many of the present difficulties.

Andrew George (St. Ives)

I am grateful to the right hon. Gentleman for securing this important debate. I checked the EU website this morning and found that the CAP is not on the agenda to be raised formally at the meetings of the European Council in the next couple of days. Does he share my concern that the only debate will be in stand-up rows in the withdrawing rooms? Which language does he recommend that those stand-up rows be conducted in?

Mr. Byers

From my former experience, I know that even though there is a formal agenda at such gatherings, the Heads of State discuss a range of relevant issues. I do not doubt that there will be friendly discussions—I cannot say "comradely" now, given the nature of the political complexion in France. I have to say that the Prime Minister speaks very good French. He would have no problems speaking in French if he wanted to, but I am sure that he will speak in English. Enlargement will be raised both formally and informally in the context of the agreements made in the European Council in Brussels and I make that point because we now have the parameters for any changes that need to be made to the common agricultural policy.

I want to raise three issues in this debate. First, I want to consider the high price that taxpayers and consumers in the United Kingdom are paying for the CAP. Secondly, the way in which the CAP works at the moment threatens the livelihoods of some of the poorest farmers in the world. Thirdly, if the argument for the CAP is that it safeguards the future of small farmers in the United Kingdom, the latest figures from the European Commission show that that is not the case because they are not benefiting from the way in which it operates.

The Brussels conclusions at the end of October resulted in one decision being taken and one being deferred. The first decision was that there would be an agreement on the overall level of spending on the CAP in line with the Commission's recommendations for 2006–13. The decision assumes that there will be an inflation rate of 1 per cent.—the single European currency is working well and I doubt whether inflation will be down to 1 per cent. for all those years—and therefore there will be a real-terms reduction, which was agreed in Brussels, in the amount that will be spent on the CAP.

The clear area of disagreement was reform because, as part of the deal on the capping of spending on agriculture, it was argued that there should be no reform of the CAP before 2006, which means that the status quo should apply until 2006. That was not agreed, but it was accepted that any reform should be part of the mid-term review, which will be conducted in line with the conclusions of the Berlin summit in 1999. The mid-term review will go ahead, and reform must form part of it.

It is very important that the European Union gets its act together and makes urgent progress. We all know of the failure of the World Trade Organisation talks in Seattle, and many lessons were learned as a result. As part of the European Union, the United Kingdom Government were in the forefront of arguing that there should be a new ministerial meeting, which should consist of a development round of trade talks. At the Doha meeting 12 months ago, we managed to reestablish and restart the trade talks. The round of talks will concern development, but as part of the deal it was recognised that agriculture had to change within those trade discussions.

The European Union is the only one of the main trading blocs that has not put its proposals forward. As part of the Doha process, it has quickly to put its proposals forward for change on agriculture. If it fails to do so—it probably has to do so by the end of this year or in early January at the very latest—it will derail the Doha talks, so it must make urgent progress. Even if it happens informally, I hope that the urgency of making progress on submitting our proposals within the European Union for change to the WTO will be realised and that that will take place at Copenhagen. If we fail to do so, we will carry a very heavy burden indeed.

I mentioned that I wanted to tackle three issues. I am pleased to see that the shadow spokesman is taking notes of what I am saying; he might learn a good deal. The hon. Member for Banbury (Tony Baldry) has just passed him a pen. The fact that the shadow spokesman did not bring a pen shows his remarkable state of readiness. Even the Minister is lending a pen—a better quality one, of course. I shall speak slightly more slowly, so that the shadow Minister can take full note of my contribution.

On the cost to consumers and taxpayers, it was interesting that when I secured the debate and it appeared on the Order Paper, someone contacted me to ask, "What is the relevance of this to your constituency?" Tyneside, North is an urban area with very little farming and few farmers, so the conclusion was that the subject was not terribly relevant to my constituents. However, it is relevant. Many of my constituents are concerned about the effect of the common agricultural policy on the developing world.

A few months ago, I attended a very good meeting organised at St. Bartholomew's church in Benton in my constituency. Many people who attended were concerned about the way in which the CAP operates and its effect on the developing world. Another concern—perhaps, a more self-interested one—is the fact that people in my constituency pay to fund the CAP. About £3.30 a week for every man, woman and child in the country is paid to the CAP, either by consumers through higher prices or by taxpayers through their taxes. From my constituency, £270,000 a week goes to the CAP—a total each year of £14.9 million.

Mr. Roger Williams (Brecon and Radnorshire)

Is not it also in the interests of the right hon. Gentleman's constituents that the CAP has produced food security for several years? That is as important as the other issues that he has mentioned.

Mr. Byers

The hon. Gentleman's comments show the time warp in which some of the debate takes place. Food security may have been an issue 20 years ago when the CAP was in its infancy, but it is not the issue that it was. There is now overproduction in many parts of the world, particularly because of the way in which the CAP operates. If there is a need for a common agricultural policy, surely we could get away from a system that supports overproduction in the United Kingdom, which is dumped on small farmers in the developing world. I shall deal with overproduction shortly, particularly in the sugar and dairy sectors. If there is an argument about food security, it is one on which I have yet to be persuaded. The CAP as presently constructed does not address food security—perhaps there should be a debate about how it could be reformed to reassure the hon. Gentleman.

The pensioner and the young mother doing her shopping pay higher prices to support the CAP. That goes down badly with shipyard workers and miners who have lost their jobs, because there was no Government subsidy for their industries. They have gone through the painful process of redundancy, and have retrained, learned new skills and found work, only to pay higher taxes to support the CAP, which provides subsidies to very rich farmers in the UK. They resent paying higher taxes to subsidise the farming sector.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)

The right hon. Gentleman referred to very rich farmers, but I represent a constituency in which hill farm incomes have sunk to about £4,000 per annum. That is not rich by any definition. I hope that he is not intent on giving a false impression about farmers. I agree that there is a need for drastic reform, but it is not the case that all farmers are fat cats.

Mr. Byers

I accept absolutely the hon. Gentleman's point. For family reasons, I know his constituency very well. I shall later disclose figures that show how payments under the CAP are made to farmers in Great Britain, which will confirm the hon. Gentleman's point. Many farmers—small farmers and particularly hill farmers—are struggling in very difficult circumstances. If they receive €5,000 a year from the CAP they are doing well. Others are paid more than €500,000 a year. A few farmers and big businesses are doing very well out of the CAP, but many small farmers are struggling and are not receiving any benefit from it. That is the self-interest issue and why consumers, shoppers and taxpayers are paying heavily.

The second issue is the effect on farmers in the developing world. For understandable reasons, much of the debate about helping farmers and countries in the developing world has focused on increasing the amount of aid that we give to those countries and on writing off debt. Those are important initiatives and I do not decry them, but a greater prize is available, to us and to those countries, from liberalisation and greater trade. It has been calculated that if Africa increased its share of world exports by just 1 per cent., it would generate $70 billion going into Africa. That is five times the amount received in aid.

The issue is not just one of breaking down barriers and tariffs. I admit that it was a mistake on my part, but when I considered the matter in the past, I saw it as the European Union breaking down tariffs to open up the EU market. That is important and we are taking steps to do that. I applaud the fact that some of those tariffs are coming down, albeit a bit too slowly, but at least they are moving in the right direction. However, the real problem for many small farmers in the developing world is the way in which subsidies are used to support certain sectors of farming in the United Kingdom. The result is overproduction, which is then dumped in those countries at a low price. The two worst sectors for that are dairy and sugar. The Organisation for Economic Co-operation and Development estimates that in 2001 the European Union dairy sector was subsidised to the extent of €16 billion. That is equivalent to more than $2 a day for each of the 21 million cows in the European Union when 100 million people in Africa live on less than $2 a day. That must be the ultimate obscenity of the common agricultural policy, yet some European leaders argue for no change and want the status quo. They do so for a simple reason: their view is that change to the CAP will cost them votes. However, the message is clear: the way in which the CAP works is costing lives in Africa.

Andrew George

Further to the point raised by the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd), does the right hon. Gentleman agree that more than half the amount either supports export subsidies or goes to processors and trading companies, not farmers? Does he also agree that many of the subsidies do not help farmers in this country; they help large companies and exporters to dump on the third world and undermine the livelihoods of small farmers in countries about which we are all concerned?

Mr. Byers

Free from the constraints of ministerial office, I now have the opportunity of attacking big business, which my hon. Friend the Member for Luton, North (Mr. Hopkins) will applaud. I do not intend to do that because, rather than attacking big business, which sees a system that it can use to its own advantage, we, as politicians who are accountable to people in our countries, must ensure that we change the way in which the CAP operates. The hon. Member for St. Ives (Andrew George) is right; it rewards a few at the expense of many. I shall carry on with my speech, as many hon. Members want to take part in the debate.

Dairy products are being dumped on developing countries and Jamaica is a good example. In the past 10 years, its imports of milk powder from the European Union have increased fivefold; the European Union is spending about €4 million a year to subsidise production in Jamaica. As a result, Jamaica's own milk production has fallen by 35 per cent. in the past two years. Local producers now supply only 12 per cent. of the domestic milk market. That is a good example of how subsidies to dairy producers in the European Union act against the interests of developing countries.

There is a similar tale to be told about sugar, which was brought home to me recently when I visited Peter Makokha, who farms 10 acres of land in western Kenya, just outside a town called Mumias on the border with Uganda. He farms mainly for his own use for produce for cattle and sheep, on which his family live. He has one cash crop: sugar cane. He uses the money he gets from selling the sugar to send his children to school, for health care and to buy fuel—the simple, basic necessities. With the other farmers in Kenya, Peter produces white sugar at €280 a tonne; the cost of production in Europe is €670 a tonne. Peter's worry is that he is being denied access to his own local market. He will not be trading his sugar in the European Union or the United States. For Peter and the other farmers in Kenya, what really matters is the local market 10 miles down the road or the bigger market in a regional centre. These are the poorest farmers in the developing world.

The Minister for Europe (Mr. Denis MacShane)

In the light of his experience at the Department of Trade and Industry, will my right hon. Friend reflect that, if no more European or American subsidised products were dumped in Africa, as I would wish, and Peter, to whom my hon. Friend referred, could sell his products locally, how would we handle the problem of Australia and New Zealand, which can produce unsubsidised sugar and other commodities at even cheaper prices? The last time I checked, those two countries were not among the poorest nations in the world.

Mr. Byers

They are not, but as the figures show, when the cost of transport and so on is added, Kenya, Nigeria and other developing countries would be competitive when one compares the amount and cost of sugar coming from those other countries.

Peter is affected because the European Union is subsidising sugar. In the last year for which information is available, Kenya imported $2 million-worth of sugar from the European Union; it exported only $11,000-worth of sugar to the European Union. The effect of dumping goods subsidised by the CAP on the developing world is clear. Some people say that that is the consequence of liberalisation and open markets. What I find offensive is that the European Union is a great advocate of opening up markets and its members do so behind the comfort of pretty hefty tariffs. We tell the developing world that they must open up their markets, then we hide behind big tariffs. The reality is that immediate liberalisation—leaving it to market forces—has not worked for many of those developing countries. There must be an incremental approach—in the long term, that will be best—in which markets are opened up, but in a way that is compatible with development goals. That needs to be phased in and it needs active assistance from Government.

The third issue is that of the benefits to UK farmers from the common agricultural policy, which has already been raised by a number of hon. Members. There would rightly be concern about changing a common agricultural policy system where large amounts of money go into the farming sector. Small farmers, who have been through difficult times in recent years, are worried that they might be adversely affected by any changes to the CAP. We are all sympathetic to those concerns. We must examine where the money from the CAP goes. There is an assumption that it is spread around pretty evenly, but hill farmers in north Wales, for example, have to leap through bureaucratic hoops to receive very little.

When we dig down and get the details of where the money goes, it makes fascinating reading. This information is not easy to get hold of. Some 166,000 farmers in Great Britain receive some money from the CAP. Let us see who gets what: 41,000 get less than €1,250 a year in CAP payments. Those will be the hill farmers the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) mentioned. Another 11,000 get between €1,250 and €2,000. Another 25,000 farmers get between €2,000 and €5,000. Another 22,000 farmers get between €5,000 and €10,000. The big winners, although they are probably more agribusinesses than farmers, are the 376 who get between €200,000 and €500,000 a year. The real winners in this expensive lottery are the 80 farmers who get more than €500,000 a year.

Mr. Mark Lazarowicz (Edinburgh, North and Leith)

I am grateful to my right hon. Friend for giving way. I, too, congratulate him on raising this important issue. He will no doubt be aware that one of the proposals in the mid-term review of the CAP was that there should be a limit of €300,000 per farmer. Does he agree that that limit is far too high and that if there is to be real reform, the limit should be set at a much lower level that reflects the needs of farmers and sustainable rural development rather than the needs of a big agribusiness?

Mr. Byers

I accept that absolutely. That proposal is a sign of tinkering around at the edges, rather than the fundamental and radical reform that many Labour Members want.

Mr. Llwyd

To reinforce the right hon. Gentleman's argument, 380 farmers receive up to €500,000 per annum. The comparable figure in Italy is 70 and only 10 in Portugal. There is an urgent need in the UK for reform.

Mr. Byers

The hon. Gentleman makes an important point about the way in which the system operates here and in other countries in Europe. A small number of big businesses—sometimes multinationals—are scooping the pool while the farmers in the hon. Gentleman's constituency, who would win public sympathy, are not benefiting by anything like as much. Most people would assume that the money would go to the small hill farmer in north Wales who is struggling to make a living in difficult conditions.

Mr. Roger Williams

The right hon. Gentleman quotes some interesting figures. Perhaps he will reflect on the fact that some of the farmers who receive small amounts are not commercial farmers but people who run smallholding operations and probably have other employment too. The support for farmers should perhaps be directed to the commercial farmers rather than those who receive only small amounts.

Mr. Byers

The hon. Gentleman introduces an interesting debate about the role that farmers—even those with other interests—play in maintaining the countryside. We could begin to tackle some of those issues if the CAP were more flexible and not based solely on production and subsidies for production.

Finally, the figures show that 78,000 farmers earn less than €5.000 a year, but fewer than 500 earn more than €200,000. Under the CAP, taxpayers, consumers and shoppers are now paying billions of pounds for a failed system that benefits only a small number of farmers, who receive a significant amount of money from it. It also leads to higher prices in our shops and to greater taxes for those people who pay them.

The livelihood of small farmers in developing countries is being put at risk. About 100 million people in Africa live on less than $2 a day and any regime that spends more than $2 a day on every cow in the European Union—there are 20 million of them—is simply unacceptable and has to change. Change will not be easy; it will require political leadership. Many hon. Members and people in this country expect that political leadership to come from the Government.

11.31 am
Tony Baldry (Banbury)

I do not disagree with anything that the right hon. Member for Tyneside, North (Mr. Byers) said. Many hon. Members want to take part in the debate, so I will try not to repeat any points that he made.

For a short while, I was fortunate to have been a Minister in the Ministry of Agriculture, Fisheries and Food. On occasions too numerous to mention, Ministers made speeches about the need to reform the CAP. Of course, some Members represent fringe agricultural areas and their constituents need to be protected, but there is almost total unanimity in this House on the need for that reform. We were always being told that we should not worry: enlargement would make everything all right, because the current CAP system would not be able to cope when Poland, Hungary and the other countries joined the European Union. Many of us went along with that and hoped that the process would change on enlargement.

In his reply, will the Minister tell us what the impact of the shabby deal between France and Germany has been? To most of us, it appeared to be a disgusting attempt to stitch up reforms to the CAP. In the halcyon days when it was permissible for the Conservative party to have a close relationship with the Christian Democrats in Germany, I made a fraternal visit to the Christian Social Union in Bavaria. Franz Josef Strauss, who led the CSU, told us that Germany had been bribing its farmers for their votes for generations and did not intend to stop.

I understand that Germany and France want to continue to bribe their farmers for their votes, but that policy is costing people dear, and not only in this country. On the "Any Questions" programme last weekend, the Secretary of State for Trade and Industry said that the CAP cost a family in the United Kingdom about £16 a week. If the CAP was a cost only to us, we could make our own judgment about it. However, it costs the poorest of the poor very dear. In no way can we meet the millennium development targets of taking people out of poverty if that wholly unfair system is allowed to continue. The economies of many countries are based on agricultural production and the need to ensure that more of their agricultural produce can enter European and other developed markets.

I was fortunate enough to be Chairman of the Select Committee that visited Ghana and Nigeria earlier this year. They face not only the difficulty of exporting cocoa at a fair trade price into Europe, but the effect of dumping. Supermarkets in Ghana are full of tomato paste dumped from Italy, but Ghanaian farmers cannot sell their tomatoes on street corners. Three Secretaries of State—for—International—Development,—for Environment, Food and Rural Affairs and for Trade and Industry—wrote an excellent letter that appeared in The Independent on Sunday. That newspaper is a good one, but there is a limit to how much one can cope with on a Sunday, so I hope that the Minister will arrange for the letter to be copied to every hon. Member. I suspect that no Member would disagree with it.

We cannot keep having this conversation among ourselves, however. It is nice and friendly, gives us all a warm glow, and we go away saying that we all want to reform the CAP, but we must move on, as must nongovernmental organisations such as the Catholic Fund for Overseas Development. CAFOD must persuade the Catholic Church and Catholic NGOs in other European countries that they should lobby their Governments. Christian Aid should do likewise with the Protestant churches in Germany, France and elsewhere.

We must work out how to engage with parliamentarians in other member states, from whom we have become almost totally divorced. Members of the European Parliament have this discussion in debates in the European Parliament, but MPs do not. The International Development Committee managed to find its equivalent in every EU member state, and under each presidency the chairmen of those groups at least have a meeting. That is a slow and basic start, but it is a step forward. Parliament needs to develop mechanisms for expressing our views to colleagues elsewhere in Europe, otherwise this discussion that we have among ourselves will continue this year, next year and beyond.

We need to ensure that parliamentary colleagues in France, Germany and other member states recognise that we are appalled at the stitch-up that their countries are trying to perpetrate, not only against the consumers of Europe, but more importantly against the poor of the world. If we do not start to take that action, all the talk at Johannesburg and at other meetings about reducing the number of people who live in poverty will be for nothing. I must say to NGOs in this country that it is no good continually berating us. They are pushing at an open door and instead must help us to persuade Parliaments in other parts of the EU that the time for the reform of the CAP is long past, but it must happen now. As the right hon. Gentleman said, consumers will have lower prices, member states will pay fewer subsidies, but most importantly, developing countries will have a level playing field, and we can take more people out of poverty.

11.37 am
Mr. Kelvin Hopkins (Luton, North)

I congratulate my right hon. Friend the Member for Tyneside, North (Mr. Byers) on securing this important debate and, even more importantly, on the quality of his contribution, which was excellent. I agreed with it almost completely, which surprises me. That unanimity bodes well for the future and not only for the Government.

I shall base some of my remarks on what my right hon. Friend said. I suggest that the real subject of the debate is the abolition, not the reform, of the common agricultural policy. Reform can mean many things to many people and some of our European Union colleagues would no doubt suggest that a slight change means reform and that we can all go home and carry on with the CAP as usual. Reform is unspecific and can be relative; my right hon. Friend referred to tinkering at the margins, which is what has happened so far. The proportion of the total EU budget spent on the CAP is reduced, but it is still there, as large as life, and is still causing the damage that it has always caused. We need to abolish the CAP and repatriate agricultural policy to member states, subject, of course, to international agreements. However, if we want to sustain agriculture nationally, we can do so selectively, and using our own mechanisms.

As we have heard, the CAP grossly distorts agricultural markets. It is bad for the EU and for eastern Europe. It also puts enlargement at risk, as some countries in eastern Europe are becoming very unhappy about the CAP and could vote against joining it—today's edition of The Times even carries an article to that effect. Above all, the CAP is bad for the poor countries of the world. The developed world has been considering ways in which to assist the poor, but it has not tackled that fundamental problem.

Ann McKechin (Glasgow, Maryhill)

My hon. Friend puts forward an interesting notion. Can he enlarge on the point about allowing member states to have their own individual rights to change tariffs and subsidies for their farms? That would make it more difficult for developing countries, which would have to enter into more bilateral agreements instead of multinational agreements under the World Trade Organisation. They do not have the capacity even for multilateral negotiations; moving to bilateral agreements would make the situation worse. Given that they will be up against powerful countries such as ourselves, France and Germany, their chances of achieving any success will be even lower than they are now.

Mr. Hopkins

I thank my hon. Friend for her intervention; I appreciate her point. I shall be making some suggestions on how we can move forward. We must accept that in future we will concentrate to a greater extent on other forms of production, relative to agriculture. At the same time, we have to sustain our farming community, at least for the foreseeable future.

The perverse redistributive effects in the EU are significant. Denmark benefits enormously, Ireland benefits considerably and the United Kingdom is a net contributor. That bears no relation whatever to the relative prosperity of those countries. Denmark is a more prosperous country than the UK, and Ireland is now comparable, but they receive substantial net fiscal transfers as a result of the CAP. That cannot be right.

If agriculture is to be subsidised, member states should do it on a selective and targeted basis according to their own national needs. The hon. Member for Banbury (Tony Baldry) mentioned his friend Franz Josef Strauss and his desire to bribe his farmers. That is fine, if he chooses to do it within the confines of Germany. At the moment, however, German farmers are being bribed with money taken from the taxpayer in Britain and elsewhere and through the high prices that we pay for our food, which also goes to subsidise the farmers of Germany and other EU countries.

We should move away from price maintenance arrangements for subsidising agriculture. That is the core of the problem. If a relatively high price is set, producers know that they are guaranteed to get that price however much they produce. There is no demand curve at all; they just carry on producing and surpluses arise. The developed world wastes on subsidising agriculture resources that could and should be concentrated more on the poorer countries of the world. The former Member of Parliament for Boston and Skegness wrote a fine book saying that we were losing our industry at a rate of knots because we had failed to look after it, and that we were subsidising European agriculture when we should be tackling our industrial problems.

I am not suggesting that we should starve our farmers. Agricultural subsidies should be targeted in certain areas and based on a deficit funding system, which we had before we joined the European Common Market and the European Union. That system would guarantee income to the farmer, but would not have the CAP's distorting effects on the market. We could provide stable farm incomes, especially for hill farmers. There is no reason why we should not choose to sustain small farmers who may not be very efficient or profitable, but are essentially part of our culture and help to maintain the countryside. Small farms are important for animal life and the natural life of our countryside—hedges and so forth. The CAP has led to the disappearance of wildlife in eastern England—my region. Hedges have been destroyed and there is mass industrialised agriculture, which has caused terrible devastation to our environment. There is everything to be said for selective subsidies for our farmers.

We should be able to import cheap food if we wish. That would have a tremendously beneficial effect on prices in the shops for consumers. My right hon. Friend the Member for Tyneside, North mentioned that. My constituency, like his, contains no farmers because it is purely urban, but it has taxpayers and consumers, many of whom are poor, who are paying high prices for their food when they could pay lower prices if the CAP were abandoned. Above all, that would benefit the poor producer nations, which is the primary concern.

We can overcome the political problem of abolition if we have sensible transitional arrangements. A big bang would clearly cause a political explosion, which would not be realistic. We ought to introduce a tapering system of fiscal transfers, and we could look at the current situation and introduce a 10-year taper. The countries that are joining the European Union will be subject to a 10-year taper towards the CAP. The amount by which they will benefit from the CAP will initially be limited to 25 per cent., but by 2013 they will receive the full benefit—if one can call it that. Why not introduce a tapering arrangement in that period to overcome the problem of fiscal transfers? In time, the distribution of the budget in the European Union should be determined by the relative levels of prosperity in the different nations of Europe. The rich would pay more and the poor would benefit, in which case we would not require our rebate because the system would be fair for all nations.

In the short term, we must, of course, protect our rebate because we are unfairly big net contributors to the European budget, but we could overcome all those problems over the 10-year taper period. We know that our colleagues in France are very upset about the prospect of the CAP being abandoned, but let us consider the national effects that France experiences in terms of fiscal transfer and how they could be dealt with. It could choose to subsidise its small farmers; indeed, I hope that it continues to sustain certain elements of its small-scale agriculture, in particular the producers of good wine, which I am sure we would all continue to enjoy.

Anti-EU sentiments are growing in eastern Europe, which is a problem. As I mentioned, an article in The Times today refers to Poland, where a supermarket, which sells western European produce at lower prices than those at which Polish farmers can afford to produce, has been threatened. The threat is serious because if that idea takes off and there were a referendum, Poland might vote not to join the EU. That is its choice, with which we may or may not agree, but it is a real threat. Anti-EU sentiments are also growing in Estonia and, to an extent, the Czech Republic. If we do not deal with those problems, enlargement may be threatened. Enlargement will force us to rethink the CAP, which we should rethink now rather than later because enlargement may not happen if we do not think about it now.

I do not expect my hon. Friend the Minister to respond immediately, but I hope that my suggestions are taken seriously in the private councils of government. I hope that my suggestions will at least be debated intelligently with some of our colleagues on the continent of Europe and elsewhere in the EU. The abolition of the CAP is the way forward: we should face up to it.

11.48 am
Mr. Roger Williams (Brecon and Radnorshire)

I congratulate the right hon. Member for Tyneside, North (Mr. Byers) on obtaining the debate and on the fair and balanced way in which he put forward his case. It is clear that there is almost unanimous support in the House for the reform of the common agricultural policy because it is damaging not only for domestic agriculture, the consumer and the environment, but for third-world farmers.

The process of reforming the CAP has gone on for a long time, although I shall not take everybody back to the corn laws, which obviously predate it. The Agriculture Act 1947, which was introduced by the postwar Labour Government, was seen to be beneficial. The hon. Member for Luton, North (Mr. Hopkins) referred in passing to the deficiency payment system, which provided a substantial income for farmers, and reasonably priced food. Because Britain was not self-sufficient at that time and did not produce excess foodstuffs, the system had little or no effect on the world market and therefore had little impact on third world farmers.

Food security was an issue at that time. Although we seem to feel today that Britain has access to almost unlimited food, food security issues can still arise suddenly for nations and Governments. What with wars, rumours of wars and the full effect of climate change on food production not really being understood, food security should still command some attention.

We entered the European Union with the treaty of Rome at a time when policy was based on intervention buying to keep the price up for farmers in the EU. That was the worst system of all because it led to high prices for consumers, and specifically to the beef and butter mountains and wine lakes, and various other commodity surpluses, that were dumped on the word market with subsidies that we paid almost directly to commodity traders and food processors rather than to the farming community. The MacSharry proposals in the early 1990s started to move policy away from such support and intervention towards something less harmful to the market, directed at the breeding of animals rather than supporting a commodity.

We may now see a positive reform of the common agricultural policy. A lot depends on the Department for Environment, Food and Rural Affairs, and its work in the EU, in arguing a case along the lines that the right hon. Gentleman described. It needs to do so in a forceful, rigorous and positive way. Recent criticisms that have been made of the Department by Select Committees lead us to suppose that it does not have the heart for the job. I hope that it does, as so much depends on it.

It could be a win-win-win situation. It could be a win for farmers. Over the past few years, they have been unable to run their businesses as businesses and have been locked in a bureaucratic nightmare of accessing subsidies. A typical livestock farm in my constituency would be involved in the beef special premium, the Buckler cow premium, the sheep annual premium, the extensification premium and Tir Mynydd, which is the Welsh equivalent of the hill livestock compensation scheme. Those schemes mean that farmers are involved in retention periods for animals, keeping extensive records—quite properly as they are in receipt of public money, so an audit system is required—

Mr. Llwyd

I am following the hon. Gentleman's speech carefully and I agree with him. Does he share my concern about DEFRA's gold-plating of the regulations? I am not saying that rules should be dodged, but there is not a level playing field across the EU for the way in which the regulations are administered. DEFRA is keen to administer them, but if there is a slight mistake the subsidy is lost.

Mr. Williams

I take the hon. Gentleman's point on board. As he, too, represents a rural constituency, I am sure that he comes across tragic cases of farmers who have been deprived of support because they have made minor mistakes such as entering numbers wrongly.

Proposals to decouple support from production and use a different basis will allow farmers to run their businesses as businesses and to make commercial judgments rather than judgments on how they can access subsidies. Decoupling will also help the consumer because it will mean readier access to British markets to food from other sources, and farmers being able to compete on a level playing field.

The right hon. Gentleman said that it was up to the European Union to make its proposals for the trade round very quickly. However, he should also accept that America has almost undermined that trade round by its action in giving massive subsidies to its own farmers. At this stage, we should be more and more critical of America's double standards in such matters.

There could be a win for the environment—for the British countryside. The money that has gone to support production will now be available to farmers to enhance the environment and provide access for people to the countryside. There will also be a win for third world farmers. The right hon. Gentleman and the hon. Member for Banbury (Tony Baldry) made their points on that very well. When the fair trade lobby came to Parliament from my constituency, I undertook to write to DEFRA, pointing out the importance of CAP reform in the support of third world farmers.

Today's debate has been useful and points the way forward. Considerable cross-party support for radical reform is gathering, and we look to DEFRA to lead the country in those efforts.

11.56 am
Andrew George (St. Ives)

I congratulate the right hon. Member for Tyneside, North (Mr. Byers) on securing this debate and giving a speech, during which he took a large number of interventions, that took a consistent line. I entirely agree with that line, and strongly support his analysis. He expressed the frustrations shared by all parties that the common agricultural policy, although it has been blatantly in need of radical reform, has become almost unreformable because of the processes needed. That is frustrating for us all.

We are today again seeing the benefit of having the right hon. Gentleman on the Back Benches, especially if he is prepared to use that freedom to say some of the things about big businesses that he was not able to say before. He was very much a victim of shoddy treatment and of a tawdry media feeding frenzy of the kind that we have had to endure over the past few days. I hope that, with so many more important things going on around the world, the media will concentrate on matters of substance rather than poking their noses into people's private affairs.

The key issue due for debate during the next couple of days is not the common agricultural policy but enlargement. As the hon. Member for Banbury (Tony Baldry) said, that provides a good opportunity for reform, but there is a problem with the message being given to potential accession countries—a diplomatic issue that the Minister must deal with. The enlargement countries are getting the idea that, rather than the time scale for CAP reform being coincidental, or its being a convenient opportunity to push forward more rapid reform, it is in fact a conspiracy against them before their arrival in the EU. The Government must overcome that diplomatic problem.

Whether the EU is enlarging or not, now is the time to reform the CAP. The CAP has been blatantly contradictory and achieved the opposite of what it set out to achieve in relation to protecting and promoting the interests of rural communities, small farmers and the rural environment. The Government's official figures released about a month ago show that during the past year more farmers have been forced out of agriculture—they have gone out of business—than at any time since the second world war. More than 15,000 farmers in Britain have been forced out of business—they have not left voluntarily—during the past year. That figure is all the more dramatic because we are talking about declining numbers since the war. Most of that figure will comprise small farmers. The CAP is clearly failing, if its purpose is to defend farmers.

The Government are working very closely with Lord Haskins, who has connections with the processing business. They are being advised by him about reform of the agricultural sector. He uses the word "restructuring"—a euphemism for getting rid of small farmers. I find it rather difficult—as do the farmers—to accept the advice of a man who is intricately connected with the processing sector, which has done rather well out of the CAP.

As farm-gate prices have fallen in relation to retail prices during the past few decades, we must ask what the processing and retail sectors will do to ensure proper support for farmers in this country. I agree with my hon. Friend the Member for Brecon and Radnorshire (Mr. Williams) that it is desirable to have a policy that provides food security and an element of self-sufficiency. Clearly, we cannot be self-sufficient in bananas, but we can be self-sufficient in domestic produce. That may be desirable, but we must assess that against its cost. As it would impoverish the rest of the world and result in large taxes on consumers, it is not a desirable policy in itself. It is possible to construct an argument that moves in that direction, but we need to weigh up the balance of how we would achieve it, and the cost that we would be prepared to pay.

The key issue on the right hon. Gentleman's domestic questions is that if production supports continue into the future, we will end up with a British landscape that is predominately prairie and ranch. Small farmers will be pushed out as it becomes uneconomic to maintain small farms, field patterns and rural communities. We will have an agricultural industry that is divorced from rural communities. They will become so small in number that the farm lobby will cease to exist.

Mr. Hopkins

The thrust of the hon. Gentleman's argument is that we need nationally determined policies that can be sensitively adjusted to the needs of the third world and our own farmers, but that the answer is neither the protectionist and rigid CAP, which has all the dreadful effects he mentioned, nor the complete free market, which would destroy the farming industry.

Andrew George

The hon. Gentleman tempts me down another route, but I cannot go there. I am concerned about agriculture and landscape throughout Europe. The issues apply to Europe as a whole at present. We need to think carefully about the impact on the industry itself and on the rural landscape. The hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz) raised the issue of whether we should lower the proposed ceiling below €300,000. On the basis of the figures that were presented by the right hon. Member for Tyneside, North, there is indeed a strong argument for reviewing the ceiling.

In world trade terms, we need to move away from blue box subsidies towards green box subsidies. In other words, we need to move very rapidly away from supporting production, which can create millionaire subsidy junkies in the farming industry, to supporting the bedrock of rural communities, such as viable small farms.

The right hon. Gentleman raised several development issues, particularly in relation to the dairy sector and sugar. He made his points extremely well. It is important to recognise that some of the main beneficiaries in the dairy sector, for example, are the processing and trading companies and not farmers. Such companies receive more than €1 billion each year from European taxpayers in export subsidies alone. It is impossible to get a breakdown of those figures, because apparently the information is commercially sensitive. However, we do know that some of the very large companies do extremely well out of the system.

What assessment have the Government made of the costs of maintaining CAP subsidies, given the current levels of enlargement? Is it sustainable to maintain them? Is it the Government's position that enlargement can proceed without reform of the CAP? Have the Government taken legal advice on the available avenues for challenging the legal basis of the current CAP? If so, what was the response? How do they propose to build a case for reform among fellow member states? What efforts have they made to build a negotiating bloc in favour of reform? That reform must be rapid.

12.7 pm

Mr. Richard Spring (West Suffolk)

First, I warmly congratulate the right hon. Member for Tyneside, North (Mr. Byers) on securing the debate and putting forward a number of important arguments. I was in Kenya a few weeks ago, so I was particularly struck by his argument about market access. He was absolutely right to say that the current structures in the world cost lives. Indeed, the terms of trade have swung against primary producers in the past generation and that has led to attendant problems.

Repeatedly, it has been demonstrated that Europe cannot isolate itself from the problems of famine and agricultural difficulties in Africa and the right hon. Gentleman was right to make that point. Opening our markets is crucial. That argument was taken up by my hon. Friend the Member for Banbury (Tony Baldry), who is the distinguished Chairman of the Select Committee on International Development and who has enormous experience of agriculture in the third world. I agreed with the point about discussions with fellow parliamentarians in the European Union—such discussions have been lacking. The hon. Member for Brecon and Radnorshire (Mr. Williams) took up some of the themes relating to problems in the third world and market access and I agree with him.

The hon. Member for St. Ives (Andrew George) paid the right hon. Gentleman a rather backhanded compliment when he said that his contributions from the Back Benches are valuable. I hope that, after today's contribution, the right hon. Gentleman is soon in a position to re-climb the greasy pole.

The CAP is an important topic and the debate is timely. The CAP dominates farmers' lives and the European Union's budget. With the forthcoming enlargement of the EU, it will assume an even greater importance. As the hon. Member for Luton, North (Mr. Hopkins) pointed out, the CAP may account for a diminishing percentage of the EU budget, but that is still a colossal sum of money. We are talking about more than €44 billion: that is a vast sum.

The CAP's greatest weaknesses are that it has not produced prosperity for our farmers, it is inefficient and bureaucratic and it is harmful to the developing world. As the hon. Member for St. Ives said, the agricultural economy is effectively now in crisis and, like many areas of national life, needs reforming.

It is worth recalling that in July, Commissioner Franz Fischler presented proposals for reforming the CAP. The main tools proposed for reform were the uncoupling of subsidies from production and the introduction of compulsory modulation, which would reduce progressively all direct payments by 3 per cent. per year for a seven-year period, starting in 2004 and reaching 20 per cent. overall.

It is absolutely central to the work of the Copenhagen summit that is taking place this week that the agreements for EU enlargement should be finalised. Critical to the success of enlargement are CAP direct payments and quotas. Whether they are addressed centrally or on the fringes, they simply cannot be passed over. As the Minister will know, the Danish presidency has made its own specific proposals on how to deal with the problem of agriculture in particular and the acceptability of the European Union in the accession countries.

We must not forget that farms are businesses. Their core function is to make a profit by producing food that customers want to buy. The Commission's initial proposals to shift support from production subsidies to environmental payments are right in principle, but we all accept that the devil will be in the detail. An overwhelmingly urban and suburban electorate will be more ready to support the rural economy through taxes if payments are clearly linked to public benefits such as preservation and enhancement of the landscape.

However, elements of Fischler's package would discriminate against British farmers. That point has already been made this morning. For example, capping payments to individual farms at €300,000 would hit UK farmers particularly hard because of the size and scope of their production, whereas the smaller farms of Italy, France and Portugal would still receive the same amount of subsidy. Such inequity would be difficult to overcome.

There is a case for money for environmental schemes to be allocated locally and with as much flexibility as possible. The UK's agri-environment schemes must be reformed, as they are generally regarded as far too complex. We must have a system that reinvigorates and sustains our rural economy and environment, allows our farmers to earn a decent living and deals with the trade barriers that have been imposed on third-world farmers with devastating effect.

The forthcoming EU enlargement is the catalyst for CAP reform. We can analyse ad nauseam the faults of the CAP, but there really is a demand for leadership in the European Union and from the Government to try to resolve the problem. For example, we were told that in practice nothing could be achieved before the French and German elections. They have been held. As my hon. Friend the Member for Banbury pointed out, we were really stitched up in Brussels. We were told that the Government were working behind the scenes on the outlines of CAP reform. I am afraid that the situation in Brussels was hijacked and we were left standing on the sidelines.

The truth is that we have to grasp this nettle and that leadership is required. I hope that the Minister will have something constructive to say about this, because the vacuum that has been left is now being filled in a way that works against effective CAP reform, which is absolutely essential in the long term.

The result of not putting out clear guidelines for reform at Brussels the other day is that additional pressures are put on the accession countries. It was agreed that the CAP budget for direct payments and pillar l market support would remain at 2006 levels until 2013. That may reduce the relative amount of money, but it does not deal with the essential issue of reform. Such support will remain a huge burden on the EU's budget at a time when Germany, which is the largest contributor to the EU, is in serious economic trouble. What does the Minister think will happen to the EU's finances if Germany suffers a prolonged recession?

It is also not true that the Brussels deal is a short-term fix that will prepare the ground for a huge argument on payment distribution around 2008, when the new countries will be receiving half the standard direct payments. A limited direct payments budget will have to be redistributed among the farmers of 25, rather than 15, countries. That could be difficult and divisive.

I echo the point made by the hon. Member for Luton, North: regrettably, there is an increasing sense of antagonism towards the EU, particularly in a country such as Poland, which has to face a referendum on the issue. As was the case in the election in Serbia the other day, there is a 50 per cent. cut-off point in Poland, so the issue is important. Unless we set out the tram-lines of reform and consider with some flexibility how we will deal with that, Poland may unfortunately reject EU entry. That is why I hope that the Danish presidency's proposals, which offer a way out, can be considered in Copenhagen in the next few days. Again, I hope that the Minister will reflect on that.

We desperately need leadership on this issue. It has been a matter for discussion for many years, but we are now on the brink of enlargement and we cannot deal with it any more by avoiding central reform. Other countries such as the Netherlands and Sweden have been keen for CAP reform, but we have been unsuccessful at persuading the Germans. There is a vacuum to be filled. For those of us who want a successful and viable EU, that challenge simply must be addressed.

12.16 pm
The Minister for Europe (Mr. Denis MacShane)

I, too, congratulate my right hon. Friend the Member for Tyneside, North (Mr. Byers) on securing the debate, which has been wider ranging than some of our CAP-bashing moments in the House. I thank him for his kind words on my appointment. I share the view of the hon. Member for West Suffolk (Mr. Spring) that over the next two or three Parliaments, as Labour stays in power, my right hon. Friend will resume his place in the leadership of our national council.

In all discussions on the CAP in the House and the country, we have to start from the famous Irish perspective that it is impossible to know where to start, except that one would never have started from where one began to get where we are. Surely the fundamental point for our country is that we were not there when the CAP was born. It was born in the 1960s, when the broad outlines of the CAP were laid down, and because Britain was absent from the scene, we were not able to shape it.

The best message that the House can send to our friends in Poland is a united message, from all parties and almost all hon. Members, that EU membership and wholehearted participation in the EU is a good thing, even if on the CAP and other areas, we have criticisms. If we want to shape the rules of a club, we have to be members of it.

CAP reform is a long and arduous process. I like to run marathons now and then and have foolishly entered myself for the London marathon next spring. CAP reform must be seen as a marathon, not a sprint. In 1980, the CAP took 73 per cent. of the total EU budget. In 2002, it will take 45 per cent., so there has been a reduction. However, it is absurd that any budget that is part of the governance of all our European nations devotes almost half to just the agricultural sector.

We will keep up the pressure for reform. My hon. Friend the Member for Luton, North (Mr. Hopkins) called for the absolute abolition of the CAP. As a social democrat, I am in the reformist camp. My hon. Friend is a revolutionary figure—I mean that in a complimentary sense—and wants sharp upheavals. We have to find ways of speeding up the process of reform.

I gently urge all hon. Members campaigning on CAP reform, including the three Ministers who wrote that very good article in The Independent on Sunday to which the hon. Member for Banbury (Tony Baldry) referred, to stop making speeches or writing articles and pamphlets in English because we have won the argument in our own country. I do not have to persuade hon. Members and I do not have to be persuaded by them on the need for CAP reform. From the Socialist Worker on the far left, to The Daily Mail on the right. everyone is agreed that the CAP should go. The Conservative party thinks that the CAP needs reform, so do we, and so do members of the Liberal Democrat and nationalist parties. The Confederation of British Industry and the National Farmers Union think that it should be reformed. It is no use our talking to each other, however. We must take the argument to our friends and partners in Europe. Oxfam and the other development bodies that rightly criticise the CAP for its impact on the agricultural economy in poor countries should learn French, Spanish, Italian and even Irish and talk directly to the politicians, the non-governmental organisations and the churches in those countries and elsewhere in Europe to explain the need for CAP reform.

We also need to do more with our friends in Poland, Hungary and the other applicant countries because when they enter the European Union in 2004, as I hope will be confirmed this week, they will start sending large cheques to the agricultural multinationals and big farmers in the rich countries of western Europe, including our own. In 2004, the first full year of membership for the enlarged Europe, the new member states will contribute €990 million—a euro is about the same as a US dollar at the moment, so that is nearly €1 billion or $1 billion—to the CAP receipt of France, Germany, Italy and Spain. France is the main beneficiary. In 2004, it will receive €300 million from the incoming countries in east Europe—Spain will receive €200 million and Italy €175 million. Ireland will receive a transfer of about €50 million to its agro-industry from the Exchequers of Lithuania, Slovakia and the other poor countries of east Europe. Even Luxembourg, one of the richest countries in the world, is a net beneficiary under the CAP. Can anything be more absurd than the taxpayers of Poland and the other new member states, with an income per capita that is one third that of Belgium and Luxembourg, having to send yet more money to the farmers of western Europe?

I have been visiting applicant countries as busily as I can since my appointment and I know their sense of disappointment at not receiving a more generous cash offer from Brussels—a matter to which the Opposition spokesman, the hon. Member for West Suffolk referred. I told them that that was in part because nearly half of the EU budget of €90 billion goes to subsidise farming and to allow products thus subsidised to swamp the markets east of the Oder-Neisse line. In addition to learning to make the arguments for CAP reform in French, Spanish and so forth, we also need to teach ourselves Polish, Hungarian, Lithuanian, Czech and Slovak to explain to our new partners why CAP reform should be high on their agenda once they are full members of the European Union.

I very much agree with hon. Members' comments on the need to connect with our political parliamentary colleagues in Europe. The House allows each hon. Member to make three visits a year to the capital cities of the European Union and the applicant countries. I urge hon. Members who are interested in CAP reform to visit and make the case.

I welcome the return of Her Majesty's Opposition to the mainstream of European Conservative parties. They can now be there and argue face to face with Herr Franz Josef Strauss's political descendants on the need for CAP reform. Mr. Stoiber, the right's candidate at the last German election, is now coming out against Turkey joining the EU and, during the campaign, he was against giving American planes the right to fly over Germany in any conflict with Iraq. He is a staunch defender of the worst aspects of the protectionist agricultural policy. I urge the hon. Member for West Suffolk to go to Germany and explain how wrong-headed his opposite number is in so many aspects of politics.

Mr. Spring

We will be doing that.

Mr. MacShane

I am glad to hear the hon. Gentleman say, from a sedentary position, that he intends to do so. Well, keep it up. I hope to see all the Conservative parties of Europe supporting CAP reform in the next year or two.

My right hon. Friend provided some powerful figures on the impact of dumped CAP-subsidised products in Africa. We must think of the third world when we discuss the need for reform. Oxfam recently produced an excellent report, which I commend to all hon. Members. As I suggested in a brief intervention, we must examine CAP reform in Europe and engage with our American partners to encourage them to remove their excessive subsidies and tariffs. According to the Wall Street Journal, American cotton farmers receive a subsidy of more than $1 million a year, and we do not want them to dump their subsidised product on the cotton markets of Africa.

Mr. Byers

The Minister is touching on the American approach and we are all concerned about the farm Bill. Australia and New Zealand are major players. In the context of the Doha trade round, they all announced what changes would be made to the agricultural sector. The European Union is the only main trading bloc that has not yet made proposals. The context of world trade is critical. From his ministerial position—and, hopefully, at Copenhagen—can my hon. Friend stress the importance of the EU submitting its proposals so that the trade talks will be successful and not be derailed?

Mr. MacShane

Indeed, I can give that reassurance. The Prime Minister won the fight at the Brussels Council after it was agreed that CAP payments would be frozen at present levels plus 1 per cent. to 2013—spread over 25 rather than 15 recipient countries, that means a bearing down on the CAP budget. As I said, it was the Prime Minister who fought so hard for it. In the newspapers, it became "le row" over the need for the final declaration to refer to the Franz Fischler proposals and mid-term reviews, and the Doha round. I pay tribute to my right hon. Friend's leadership in implementing the Doha round: for the first time since world war two, agricultural subsidies are on the agenda of world trade discussions. Britain is in the van of taking that forward.

When three British Ministers wrote an article in The Independent on Sunday, making a case for CAP reform, seven European Agriculture Ministers responded with a large piece in the Financial Times a few months ago, effectively saying no to our ideas. That is why we should be engaged in Europe and why I shall continue to make the case for CAP reform. I urge other hon. Members to declare their full support for the EU and for participation in all of its economic and agricultural activities. Only by being members of the club and at the heart of Europe can we argue our case for a progressive direction for CAP reform.