The Minister of State, Department for Environment, Food and Rural Affairs (Mr David Heath)
I beg to move,
That this House takes note of European Union Document No. 15396/11, a draft Regulation establishing rules for direct payments to farmers under support schemes within the framework of the Common Agricultural Policy, No. 15425/11, a draft Regulation on support for rural development by the European Agricultural Fund for Rural Development (EAFRD), No. 15397/11, relating to a draft Regulation on establishing a common organisation of the markets in agricultural products (Single CMO Regulation), and No. 15426/11, a draft Regulation on the financing, management and monitoring of the Common Agricultural Policy; and supports the Government’s continuing efforts to amend these proposals in order to secure better value for money for the taxpayer and establish a greener, simpler CAP that enables the development of an innovative, competitive and market-orientated farming industry and thriving rural communities.
I am pleased to have the opportunity to debate these important issues in the House today. It is particularly timely because next week the Secretary of State will be going to Luxembourg in the expectation of securing a deal on the common agricultural policy at the Agriculture Council. With CAP reform subject to co-decision for the first time, the negotiations between the Council, the European Parliament and the European Commission have been intensive during the last few months, and indeed are likely to be during the next few days as well. It is thanks to the sterling efforts of the current Irish EU presidency that a potential deal is now within reach.
As many hon. Members will be well aware, the Government’s priority on CAP reform has been to negotiate a good deal for UK farmers, taxpayers and consumers, and that means working to deliver a greener, simpler CAP that continues to orientate itself to the market, increases the international competitiveness of EU agriculture, and increases our capacity to deliver environmental outcomes.
Mr Jim Cunningham (Coventry South) (Lab)
Does the Minister agree that successive Governments have tried to reform the common agricultural policy and there has been very little progress, although in the past previous Conservative Governments have tried to make out to the public that they have actually made some progress when they have not?
Mr Heath
The hon. Gentleman is right that it is a long, hard business to reform the CAP. The sadness is that occasionally within negotiations some member states want to turn the clock back, and even to forgo the reforms that have already been accomplished, so I will not pretend anything other than that this is a long, hard process and the advantages and the movement forward that we gain are not always as far and as quick as we would wish them to be.
We want to see an efficient and responsive agricultural sector not just across the EU, but globally, and the CAP should be central to helping us achieve that. It is therefore essential that the CAP continues to reform and to reduce reliance on damaging direct subsidies that do not offer good value for money or deliver the public goods we want. The UK has worked extremely hard to engage with like-minded member states throughout the ongoing negotiations to ensure that the CAP continues on the path of reform, but we know that other member states and elements in the European Parliament are determined to turn the clock back and reverse some of the hard-won reforms of MacSharry and Fischler. We simply cannot allow that to happen.
I will touch on a few of the priority areas that will be the focus of our negotiating efforts over the next week. First, market intervention remains a prime concern. As we all know, the CAP has made great progress over the years in reducing reliance on expensive and trade-distorting measures that interfere with the market and helped to create the butter mountains and wine lakes of the past. I was therefore very disappointed when in March the European Parliament voted through amendments that would move EU agriculture away from market orientation. Those proposals would increase budget pressures for old-style market support. That is not an acceptable use of taxpayers’ money. It hits consumers twice; they pay for their food once through their taxes and again at the tills.
The EU sugar regime, for example, constricts supply in the market and adds costs for British food and drink producers and ultimately for the consumer. The combined effect of EU beet quotas and high tariffs on cane imports means that the current EU regime has driven up the wholesale price of sugar by 35% and added 1% to the food bills of hard-pressed families. Members states had previously agreed to end the restrictive sugar beet production quotas by 2015, but there has been incredible pressure to unpick that agreement. In our compromise in March, we agreed a partial extension of sugar beet quotas to 2017. I am disappointed that Members of the European Parliament voted to extend the quotas further to 2020. That is unacceptable. The situation is compounded by the lack of a level playing field for sugar cane imports, something we are working to change. We need to remain fully committed to moving the CAP in the right direction towards greater market orientation. Nothing must be left to chance. Butter mountains and wine lakes must remain a thing of the past.
I know that many hon. Members have an interest in the proposed greening of the CAP. The Government believe that the CAP should reward farmers for the public goods they deliver, such as environmental benefits and protecting and enhancing wildlife. Pillar two of the CAP is the best place to fund that, which is why at the European Council in February the Prime Minister secured the additional flexibility to be able to transfer up to 15% of our direct payments budget to fund our rural development and environmental programmes.
Miss Anne McIntosh (Thirsk and Malton) (Con)
My hon. Friend will be aware of the concerns of the National Farmers Union and a whole alliance of farming organisations in that regard, and not just in north Yorkshire. Bearing in mind that our farmers already commit to many greening policies through stewardship schemes, 15%, or even 11%, would be unacceptably high and would make our farmers uncompetitive.
Mr Heath
I am afraid that is an area where the National Farmers Union and the Government simply do not agree. I believe that we currently have extremely good higher level stewardship schemes within pillar two, and I want those to continue and to prosper. I want us to ensure that we can continue payments on some of the older schemes, where we have accrued benefit, which I do not want us to lose. I am absolutely clear that where we use the pillar two payments in the most effective way, we will be doing so to enhance the position of those who work the land and confer on it public goods. For instance, one of my priorities will be to see what we can do in upland areas, where people farm in less favourable conditions and where it might make all the difference, but I simply do not agree that the best way to distribute money is necessarily through pillar one.
Huw Irranca-Davies (Ogmore) (Lab)
Will the Minister expand on that? Farmers have expressed their concern to me in recent weeks and months over the transfers to pillar two. How can more effective use be made of the arrangements so that those farmers are not put at a competitive disadvantage? What fine-tuning can be carried out? How can we get more bang for our buck in the pillar two funding?
Mr Heath
A simple answer—I appreciate that it might be considered a simplistic one—is that we target the funding better towards the places where it will have the most effect. We have a highly efficient and effective agriculture industry and we do not need to target funding at all sectors. We need to ensure that it reaches the places where it will have the greatest effect. As I have said, this is where we part company with the National Farmers Union, which would like us to maintain the maximum funding within pillar one. We believe, however, that pillar two is the most effective vehicle for benefiting environmental interests, which are important, and for directing support to the areas of this country’s agriculture that need it most.
Barry Gardiner (Brent North) (Lab)
The Minister is absolutely right to place the emphasis on pillar two. The figure for voluntary modulation to which he referred was 15%, but can he confirm that the figure for voluntary modulation has previously been as high as 19%? Can he also expand on what the 15% figure is going to mean for farmers, and on the implications for the Treasury in this regard?
Mr Heath
I cannot give the hon. Gentleman as full an answer as he would wish. First, we have not yet agreed the deal, so we do not know whether that voluntary modulation figure will stand. Secondly, a lot will depend on the design of the schemes and on how we implement them at national level. We have been pushing the argument in Europe that, in relation to the devolved Administrations, we want as much flexibility and local determination as possible in the design of operation. We want to give Scotland, Northern Ireland and Wales the opportunity to use their own discretion on behalf of their own farming businesses, as they will know the best way of implementing the schemes in those countries. If we are successful in our objective of achieving that flexibility, as we have been so far, we will effectively have a devolved CAP.
Dr William McCrea (South Antrim) (DUP)
Will the Minister acknowledge the need for regional flexibility to allow Northern Ireland to tailor any new policy to fit the needs of the local industry?
Mr Heath
Absolutely. That has been one of our key objectives during the negotiations, and we have worked closely with Ministers from the devolved Administrations in that process. On any objective assessment, the Secretary of State has been remarkably successful in getting those elements written into the scripts that have emerged from the Council. The difficulty now is that we need to reach agreement with the European Parliament, and we want to ensure that the elements survive that process.
Sir James Paice (South East Cambridgeshire) (Con)
Surely the answer to the hon. Member for Brent North (Barry Gardiner) is no, voluntary modulation was not at 19%. It was 9%; the other 10% was compulsory modulation that applied to every member state.
Sir James Paice
The hon. Gentleman accepts my point. That arrangement created a level playing field across the whole of the EU. The reason that the NFU is concerned is that it is probably only English farmers who could lose 15%, thus making this an issue of competition.
Miss McIntosh
The Minister said that only the devolved Administrations will be allowed to tailor their schemes to the needs of their own farmers, but that would be inherently unfair on the English farmer. I hope that he will agree that this is a wonderful opportunity to revisit some of the schemes, because some of the active upland farmers, who are often tenants, have been disadvantaged by the way in which the current schemes operate.
Mr Heath
I hope that I have not misled the House in any way on this. We will bring forward our own proposals that will apply to England. I was simply making the point that the devolved Administrations would not have to conform to an English model. They will be able to devise their own schemes that will work best for them.
Mr William Cash (Stone) (Con)
I am extremely interested in the Minister’s point about the United Kingdom having policies that are relevant to our own interests. In relation to the review of competences, will he tell us whether there is any intention to repatriate the common agricultural policy?
Mr Heath
That depends on how we define repatriation. We have been arguing strongly for increased flexibility at national and regional level for those countries that have devolved Administrations. The obvious examples are the United Kingdom and Belgium, both of which feel strongly about this matter. We need the option to define some of the terms and regulations that will be put in place, so that they match our forms of agriculture. There is already divergence within this country over the application of the CAP. For example, there are still historic payments in Scotland. In my personal view, there will eventually be a need for internal convergence on that issue, but it is for the Scots to decide on the rate of change and on whether that should happen sooner or later. I believe that it is a distorting element at the moment.
The UK Government also argued, however, that we did not want a sudden, bumpy transition that would put the Scottish Government in difficulties while they were trying to achieve their objectives. So, although we want internal convergence, we have asked for as smooth a transition as possible because that will be in the interests of the devolved Administrations. There is already a considerable degree of variation in the way in which the current scheme works. We are trying to ensure that that continues and is enhanced under the new rules.
Roger Williams (Brecon and Radnorshire) (LD)
The Minister has put on record his intention to help hill and upland farmers in England. At the moment, there are three rates for the single payment, relating to moorlands, severely disadvantaged areas and lowlands. Would it not be advantageous to upland farmers if we had only moorland and lowland payments?
Wayne David (Caerphilly) (Lab)
Reference has been made to Scotland in regard to the transition. Would the situation that the Minister has described apply also to Wales and England?
Mr Heath
Wales will have the same capacity as Scotland to apply its own CAP rules within the overall rules, although the rules that will apply in Wales will not be quite the same because Wales will not be starting from the same position as Scotland. There is already an increased degree of convergence in Wales. The situation is not exactly the same, but that freedom is in the script for the settlement that we have agreed so far.
Mr Heath
I should perhaps continue with my speech for a few minutes, rather than take any more interventions.
We do not believe that the original proposal for greening direct payments offered the same value for money as our existing agri-environmental schemes, and we have been working hard to move the negotiations in a positive direction. Any greening must be meaningful, administratively simple and deliver real environmental benefits for the taxpayers’ money that is spent on it. Value for taxpayers’ money is vital, which is why I am also opposed to proposals under which it would be possible to get paid twice for carrying out the same greening measures under both pillar one and pillar two.
No decisions have been taken on how greening will be implemented but, importantly, the position we agreed at the March Council included, as I have said, increased flexibility for member states and regions to deliver greening through a national scheme, if they so wish.
Huw Irranca-Davies
The Minister is being very generous in taking interventions. Will he respond to the concern of many farmers that the flexibility that the UK Government have understandably negotiated for our farmers could be interpreted very differently by farmers in other member nations and that it could, in fact, be interpreted to the disadvantage of our own farmers?
Mr Heath
Obviously, we try as far as possible to eliminate potential disadvantages. I cannot say that we will be successful across the board, because this is a negotiated settlement. Where possible we try to make sure that we all play to common ground rules, but with local interpretation. It is clear, for instance, that lowland dairy farming in this country is very different from growing olives on a Greek island. Different criteria apply and we want to make sure that we recognise the differences as well as the common basis.
Jim Shannon (Strangford) (DUP)
I appreciate the Minister’s understanding of this complex issue. Many farmers who have had to leave their comfort zone and consider doing other things will also be impacted by the CAP changes, so will help be made available to those who wish to diversify?
Mr Heath
I am grateful for that question. A lot will depend on the local determination in Northern Ireland for the options under pillar two, which provides the capacity for supporting diversification. The relevant Northern Ireland Minister will have to decide the extent to which voluntary modulation applies and whether the pillar two schemes will be devised to support diversification. The capacity is there and the decision on whether it will happen or not will be a local one.
Dr McCrea
The Minister is being very gracious in the number of interventions he is willing to take. The UK has received the lowest EU share of the rural development budget, which will impact on schemes such as agri-environmental schemes, the less favoured area compensatory allowance and farm modernisation. Will the Government balance the reduction in rural development with funds from, for instance, pillar one?
Mr Heath
The hon. Gentleman asks a basic question about voluntary modulation. We have already indicated that we will probably wish to see significant modulation from pillar one to pillar two in England. Obviously, other structural funds could be used for those purposes, if desired. On rural development, there is a need to utilise every possible source of funding to improve the rural economy. We are not simply talking about what is available through CAP funding to support agricultural and rural development.
Mr Speaker
Order. Before the right hon. Gentleman intervenes, may I gently point out that this is a 90-minute debate? The Minister’s speech is a matter of considerable importance and we listen to it with interest and respect, but no fewer than nine hon. and right hon. Members wish to speak in the debate, each and every one of whom is present and expectant. I know that Members will wish to tailor their contributions accordingly. If Sir James wishes, nevertheless, to persist—doubtless he will—I ask him to do so with great brevity.
Sir James Paice
I will be very brief, Mr Speaker. I would be grateful if the Minister put on the record the Government’s position on voluntary modulation but the other way around. Moving on from his argument about taking 15% from pillar one to pillar two, do the Government strongly oppose those in other countries who wish to have the flexibility to move money from pillar two to pillar one?
Mr Heath
We do not believe that is a sensible position. We are not likely to succeed in preventing it, but we will look very carefully at where it may be applied and whether it will distort the agricultural market overall.
I take to heart what you have said, Mr Speaker. I was trying to allow Members to ask legitimate questions, but let me now make progress.
Simplification must be at the heart of all our CAP reforms. That is one of the Government’s priorities. Whatever the outcome, we must have a CAP that is straightforward for farmers to follow and simple for our national Administrations to implement.
We have made progress at home, through the farming regulation taskforce, in looking at unnecessary red tape and reducing burdens on farmers. It is important that we do not undo that good work with complicated changes in the CAP. I firmly believe that we should be getting out of farmers’ hair and freeing them from the burden of unnecessary red tape. We have already made significant progress. Since 2011, we have identified £13 of savings to farmers for every £1 of compliance costs added.
I know, however, that there is more to be done and I am determined to take further steps towards a more risk-based approach to inspections that will allow farmers who consistently achieve high standards to earn recognition and receive less frequent visits. We must work together to achieve this. It is important that European rules do not knock us off our course. Having made such good progress at home, I do not want CAP reform to bring additional burdens.
On regionalisation, which I have already mentioned, amendments clarifying the regional implementation of the CAP are very important. A reformed CAP must deliver benefits for farmers, taxpayers and consumers throughout the UK, and to ensure that, we must have the clarity to implement the CAP in line with our devolution arrangements. Achieving this is a priority for the UK Government and the devolved Administrations, and we will push hard to get it next week.
I cannot conclude without mentioning the CAP budget. As hon. Members will know, the Prime Minister negotiated a 13% cut in the overall CAP budget at the European Council in February. The smaller EU budget negotiated by the Prime Minister is appropriate in the current economic climate, and the reduction to the CAP budget made an important contribution in that regard. This reduction in EU expenditure will be to the benefit of all UK taxpayers.
The allocation of the CAP budget between member states has not yet been finalised, but it would appear that the UK’s share of the CAP will remain roughly equal to its existing share. How the CAP budget will be divided between the UK regions and nations is still to be agreed. Discussions between my officials and their counterparts in the devolved Administrations are now under way and I understand that a number of models for the distribution of pillar one and pillar two funds are being developed.
I hope that the motion captures the UK’s vision for a future CAP. I look forward to the debate and hope that the House will support the Government’s continuing efforts to secure a greener, simpler CAP that delivers better value for the taxpayer and enables the development of an innovative, competitive and market-oriented farming industry and thriving rural communities.
Huw Irranca-Davies
My hon. Friend, who has great knowledge of this area, is right. It is as though the Government are playing with one hand behind their back. I have great sympathy for the Minister, because although he has great knowledge and wants to work in the best interests of UK farming, his colleagues are not making it easy for him.
Mr Heath
I thank the hon. Gentleman for those kind words. I am interested to know what is the position of the Labour party today. Does it support or oppose the budget reduction? Would it have failed to argue for the budget reduction, or does it agree that the Prime Minister had a success in those negotiations?
Huw Irranca-Davies
The Minister ought to go back and look at the voting record, because the Labour party voted collectively on that matter.
The thrust of the Minister’s speech was about a more competitive farming industry. We do have a strong farming industry. The question is whether he and his Eurosceptic colleagues can carry that forward through the negotiations. I commend the work of UKRep officials in trying to get the very best outcome from a misguided ministerial approach to the EU. They have stuck their fingers in diplomatic dams, while Ministers have been digging away the foundations. I suspect that the Minister has been somewhat dismayed and has done his best among a very bad lot, but it has been a model exercise in how not to win friends and how not to influence people.
Mr Heath
I have limited time to reply to a very interesting debate, including to the rather ungenerous comments of the hon. Member for Ogmore (Huw Irranca-Davies). I always know that the more flowery his language, the more he secretly agrees with the Government. When he resorts to Alfred, Lord Tennyson, I know that I have total agreement across the Dispatch Box.
Some important points were raised. One was about the opt-out for greening measures. Yes, there is in the current proposals a penalty for opting out, but we are seeking to remove it if we possibly can, so that the penalty will be the loss of income from not applying the greening measures.
Several Members—the hon. Member for Thirsk and Malton (Miss McIntosh) and many others—talked about co-financing measures. It is our view and it is the Prime Minister’s negotiating position in the budget discussions that these arrangements will not require co-financing. It is obviously always possible for the Treasury to put more money into the pot, but I have to say that I do not see the prospects for that as extraordinarily high at the moment.
The hon. Member for South Down (Ms Ritchie) mentioned farmers without entitlement. We are continuing to negotiate on that, because we see—