Single Payment Scheme

(Limited Text - Ministerial Extracts only)

Wednesday 8th June 2011 Westminster Hall

[The Minister of State, Department for Environment, Food and Rural Affairs (Mr James Paice)]

I am delighted to speak under your chairmanship for what I think is the first time, Mr Scott, and to have the opportunity to respond to the debate initiated by my hon. Friend the Member for Stafford (Jeremy Lefroy). I am sorry that it has been only a brief and an interrupted debate, because the issues that he and other hon. Friends have raised are central to a huge part of Britain’s rural economy. The debate comes at a time when, as my hon. Friend the Member for Stafford said, a range of issues are before us. There is no doubt that there is an emerging global challenge as to how we will feed the world in the future.

The Foresight report produced a few weeks ago by the Government’s chief scientist, Sir John Beddington, considered all the challenges and how we can deal with them. It went through the statistics relating to population growth in the UK and the world that my hon. Friend referred to in his excellent speech. We are talking about something approaching a 50% increase in the world’s population by 2050. The report identified hunger and environmental degradation as key problems that we face.

Last week, DEFRA published the national ecosystem assessment, which began for the first time a full analysis of the environmental challenges that we face and how that feeds through to our natural capital and ultimately to our ability to exploit that natural capital for the production of food.

For all the reasons that have been given, we should all be able to agree that a do-nothing approach is not an acceptable option. There will be far more people in the world. Many of them will be much wealthier. In the emerging economies, people are demanding better and more extensive diets, often involving more animal protein. Competition for water, energy and land will increase as economies grow. All that is compounded by the impact of climate change. Water will be a particular issue, but some of the projections show that in addition a lot of current global arable land could be taken out of production. When we remember that one third of all the world’s arable production land is within 1 metre of sea level, we realise just how little sea levels have to change before we face serious problems.

In the meantime, we already have the price volatility to which a number of hon. Members have referred. I am delighted to say that the French Government have seized on that as a key issue during their presidency of the G20, which, as hon. Members probably know, meets in a couple of weeks’ time. We are wholly behind the French Government in their efforts to find ways of reducing the risks of international food price volatility.

There is no option but to change. Equally, there is no option but for every country to do its bit. For the last 13 years or at least for the first 11 or 12 of them, we had a Government who basically said that British food production did not matter and we could import it all. It is fair to say that in the last year or so, they changed tack, but far too late—a lot of damage had already been done. Our self-sufficiency—the proportion of the food that we consumed that was produced domestically—had fallen by some 10%, which is horrendous. We have moved on from the days when we worried about self-sufficiency in terms of every egg, every apple and every piece of wheat, because trade is so much more important and our modern diet is so much more international. However, the position does mean—my hon. Friend the Member for Stafford referred to the trade deficit and so on—that there is huge potential for our food and farming industries, which after all are part of the same industry, to do a great deal more for our economy.

There are issues to do with research. I am thinking of the development of precision farming for better use of resources, the phrase “sustainable intensification” and the concept of producing more from less. All those things are relevant, but my hon. Friend focused, as I will now, on the single farm payment and CAP reform. There is no doubt that that gives us a great opportunity, but it has to be seen against the background that my hon. Friend and I have described. There are those who advocate a return to the coupled payments that existed until six or seven years ago. Although production needs to increase, I do not believe that turning the clock back and simply linking payments to production is the best way to encourage efficiency, leaving aside the fact that that would be outside the World Trade Organisation agreements.

There might be slight dissent among my hon. Friends and me about the single farm payment. The Government believe that the CAP should provide a framework that enables farmers to raise their competitiveness and produce food, while rewarding them for their role as stewards of the environment. My hon. Friend referred to the single farm payment as doing some of that work in rewarding farmers to care for the environment. He also mentioned a number of other issues. If we look at it in those terms—of course, cross-compliance exists—it is an extremely blunt instrument. It does not focus on any form of outcome. That is why the Government take the view that reward for public goods, whether environmental or otherwise, is better achieved through what is currently pillar 2—the rural development programme for England—rather than being achieved much more bluntly and less effectively through the single farm payment.

The reform that we seek of the CAP must involve a twin-track approach. It must build the competitiveness of the industry—the ability of the industry to respond to the challenges that my hon. Friend and I have described in relation to both domestic production and increased exports—but also reduce its reliance on subsidies over time to ensure that it can better deliver the food and environmental goods that we need. The competitiveness issue is at the heart of our efforts on CAP reform. We want to be able to focus more of our resources on assisting competitiveness, which is why we believe that pillar 2—the rural development programme money—is the more effective way. As a result of the abolition of regional development agencies, we are bringing that money back in-house as of July this year, so that we can focus it more effectively on industry competitiveness.

I need to deal next with what I hope was not behind my hon. Friend’s speech but which is clearly a myth in some circles. It is that the Government are somehow calling for the abolition of the single farm payment. We are not, and I cannot over-emphasise the fact. The Government recognise, as my hon. Friend said, that the single farm payment is critical for today’s farmers. The figures that he gave were correct, and I would not dream of countering them. However, the background that my hon. Friend sketched out, and to which I have added, provides us with the opportunity to develop a trajectory for beginning to phase out the single farm payment.

The NFU is right to say that farmers cannot live without it today. However, although it is reasonable to say that, over time—I do not mean over the next seven years, but over a longer trajectory—we should be looking at how to phase out that direct form of support against the background of world shortages that will inevitably lead to higher prices. That is how we want to achieve it.

I share entirely my hon. Friend’s view that the industry needs to be more highly regarded and to have a higher reputation both here and abroad, not only because of its ability to produce our food but because it is an important part of our economy. Food manufacturing is the biggest sector of our manufacturing industry, and farmers also act as carers and managers of our natural environment, rather than assailants of it, as they were sometimes painted in the past. I emphasise that we are not calling for the scrapping of the single farm payment tomorrow, nor over the next seven years of this CAP period, but we do want genuine and far-sighted reform.

The Commission has published its early proposals. After much discussion and consultation, it will produce regulations later in the year, so we do not yet know what will happen. For the first time 26 member states are now involved, and for the first time the European Parliament is a co-decision maker, so the crystal ball is extremely murky on what will happen. However, I have absolutely no doubt that the single farm payment will be continued. Whether it is a straightforward payment, whether it will include the Commission’s proposal for a green element, whether there will be further cost compliance, whether the payment could be construed as simply paying for something that is already being done or whether it will provide real added value for the taxpayer, I do not know.

I turn quickly to some of the other issues raised during the debate. They were all relevant. My hon. Friend the Member for Central Devon (Mel Stride)—I think that it was him—mentioned dairy farming. Only yesterday, we spent an hour and a half in this Chamber debating that subject, so I do not wish to repeat myself other than to emphasise that the Government are fully persuaded of the crisis affecting the dairy industry. There is obviously a limit to what we can do. We cannot force up the price of milk; but as has been said, we shall introduce a supermarket adjudicator as soon as we can.

Hill farming was mentioned by my hon. Friends the Members for Central Devon and for Penrith and The Border (Rory Stewart). The payment is most important in those areas. Indeed, it is important to our whole livestock industry. Again, however, we believe that the right way to support it is through the use of pillar 2 payments, as targeted support for the benefits that hill farms provide the nation. Those farms are important to the social structure of rural communities in our uplands, but there are other factors. They store carbon and water in their peat and are marvellous centres of biodiversity, and the ecosystems assessment to which I referred provides us with the tools to recognise that fact.

Finally, on the question of TB, all that I can say is that the Government intend to make a full announcement on the matter before the House rises for the summer recess.