CAP Budget

(Limited Text - Ministerial Extracts only)

Tuesday 26th November 2013 Westminster Hall

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (George Eustice)]

I thank the hon. Member for Banff and Buchan (Dr Whiteford) for securing the debate, which is important to all parts of the UK, but particularly her constituents in Scotland, because as she says, she has a very rural constituency.

As hon. Members are aware, the Government have recently announced the allocation of €27.6 billion in funding from the common agricultural policy between England, Wales, Scotland and Northern Ireland for the period 2014 to 2020. The vast majority of those funds will come to the UK as direct payments under pillar one of the CAP. In total, between 2014 and 2020, the UK will receive €25.1 billion in the form of direct payments and €2.6 billion in funding for our rural development programmes under pillar two. Although these are significant sums, the UK will receive less CAP funding in the next seven-year EU budget than it did from the current EU budget. The fact that the UK will receive less funding from the CAP in the future is in line with the reduction in the EU budget that the Prime Minister secured at the February European Council. That position was overwhelmingly supported earlier this year by the House of Commons and will be to the benefit of all UK taxpayers.

[Mr Mike Weir (Angus) (SNP)]

The Minister says that there is a reduction in overall funding, but he does not address the fact that the convergence uplift was specifically due to the difference between Scotland and other parts of the EU. The money was given in the budget for a specific purpose. Should it not be used for that purpose?

[George Eustice]

I thank the hon. Gentleman for that intervention, but I am one minute and 50 seconds into my speech and I have another 12 or so minutes in which I might get to those issues.

Across the EU, most member states will see reductions in their CAP budget and receipts, and it is only appropriate that the UK shoulders its share of the cut. It is worth noting that we have done better than many other member states. With a shrinking pot of money, how we allocate the funds between Wales, England, Scotland and Northern Ireland was always going to be a difficult decision for the Government. In reaching that decision however, the Government consulted extensively with the devolved Administrations. We have had to be fair to all parts of the UK; I shall explain why I think we have been. Through a collaborative process, the Government decided on the most appropriate way to allocate the funds. There was an equal and proportionate reduction in funding to each Administration. That is fair.

[Mr Reid]

The Minister says that the Government’s approach was an equal percentage reduction throughout the UK. The point was made in the debate that the uplift came to the UK due to Scotland, so surely the money should have gone to Scotland?

[George Eustice]

I was going to move on to the uplift, which is the main topic of the debate. I have heard the views of hon. Members who say that the additional funds should have been made available to Scotland, but quite simply the UK’s direct payments will fall over the next seven years and there are no additional funds to allocate. Compared with 2013, the UK will receive around €500 million less in direct payments over 2014 to 2020. It is important to note that the convergence uplift does not mean that there is an additional pot of money to allocate. It simply slows the rate at which we have to make reductions for everyone across the UK. To give more funding to Scotland—or any one region, for that matter—would have required deeper cuts to the other parts of the UK.

[Mr Weir]

Will the Minister give way?

[George Eustice]

I want to make progress; I will get to the point that I think the hon. Gentleman will address in a moment.

The point has also been made that Scotland has the lowest per-hectare payment in the UK and that, by virtue of that, Scotland should have received additional funding. There are a number of points to make about that argument. First, the so-called convergence uplift was calculated based on a UK average payment. Secondly, the lower per-hectare payment in Scotland is due to Scotland’s extensive moorland, which has yielded lower levels of production and, therefore, has historically attracted lower subsidy payments than other parts of the UK. Thirdly, it is important to note that Scotland still makes payments based on historic subsidies received by farm holdings in 2001, which means that those areas of land that had been most actively farmed, and generally still are most actively farmed, receive more money than the unfarmed moorlands.

Scotland’s low per-hectare payment also needs to be viewed alongside the fact that Scotland has the highest average per-farm payment in the UK, at about £26,000, compared with just £17,000 in England, £16,000 in Wales and £7,000 in Northern Ireland. I know that the hon. Member for Banff and Buchan said that she has no respect for that argument, but it is legitimate. Scotland has bigger farms, and the land there has historically been less intensively farmed. I think that the public will realise that if Scottish farmers are getting payments of almost £26,000 a year, they are getting far higher payments than the UK average, which is currently only about £16,000.

[Dr Whiteford]

It all depends how one cuts the figures. In fact, the majority of Scottish farmers—50% of them—receive CAP payments of less than £10,000. Obviously farming is more extensive in upland areas of Scotland, which can skew the figures, but it is important to understand the median average payment, rather than the mean average payment. Either way, it is irrelevant to the convergence uplift.

[George Eustice]

I do not think it is irrelevant. As I said, the reason why Scotland has historically had a lower allocation is that there is much more moorland, which is not farmed as intensively. One can make the argument that there are differences within that and that some small farmers get less than £10,000, but that is also the case in Northern Ireland, England and Wales. The principles are set, but Scotland’s average farm payment is among the highest in the EU. In fact, only in the Czech Republic, where there are still huge collective farms, is the average payment received per farm higher than in Scotland.

Finally, it is important to note that there have always been wide variances in the per-hectare rate paid, both between member states and within member states. Countries such as Latvia and Estonia receive less per hectare than Scotland. I should also point out that the Government’s approach in allocating the cut equally across the UK’s Administrations is consistent with the approach that we adopted earlier this year when allocating the UK’s structural funds. Of those, Scotland received €795 million, which represented an increase of €228 million compared with the amount it would have received if the EU’s formula had been used, so Scotland received an uplift of sorts when it came to the allocation of structural funds, because the UK was willing to depart from the EU formula and adopt the approach that we have taken historically. We must accept that if we are to be consistent and take the historical approach, Scotland might lose in some areas, but it might also win in others. It has undoubtedly won from our adoption of the historical approach to structural funds.

In announcing the allocation of CAP across the UK, the Government have also committed to undertake a review of the allocation of CAP funding in 2016, at the same time that the European Commission will be undertaking a review of the 2014 to 2020 EU budget. The president of the National Farmers Union Scotland, Nigel Miller, has made a strong case for us to do the review early, and I am keen to meet him to discuss some of his concerns.

Let me say to hon. Members who have raised points that I speak regularly—almost weekly—with the devolved Assembly. One thing about the farming and fishing ministerial brief is that we deal extensively with all our colleagues in the devolved Administrations. The next time I visit Scotland or other devolved Administrations, I am more than happy to discuss the issue with politicians there. I am a great believer that we in the UK are stronger working together. DEFRA has a good track record of engaging closely with our partners in the devolved Administrations.

[Mr Reid]

I am pleased that the review will take place in 2016, but my understanding is that the Government have given no commitment to implement its outcome quickly. Will the Minister leave open the option to implement the review’s outcome in 2017, rather than waiting until 2020?

[George Eustice]

A number of other things must happen at about the same time as the review, not least, particularly in Scotland’s case, moving from the current approach, which is based on historical payments in reference to 2001, to an area-based approach. Scotland will have to think about that carefully in order to get it right. One would not necessarily want a single, flat rate for all land areas; there will be a difference between lowland rates and moorland or upland rates.

It will be a big exercise for Scotland to get the rates right for different types of landscape. Only after we have seen how the transition from historical payments to land area-based payments will work can we make decisions about it. There may also be legal issues about whether things can be changed before the next financial perspective, post 2020.

I know that Nigel Miller, the president of the NFUS, has made a strong case and wants us to consider the issue. The Secretary of State has already discussed it with him, and I am keen to discuss it with the NFUS when I go to Scotland, to ensure that we engage fully with the Scottish farming industry on this important issue. The review, concluding in 2017, will be an opportunity for us to consider domestic CAP allocations and reflect on wider developments across the EU and UK as a result of CAP implementation. We might also be able to see how the different approaches taken by various devolved Assemblies are working in practice.

Throughout the CAP negotiations, which have only just concluded, the UK fought hard to ensure that Scotland and the other home nations could deliver the CAP in a manner that suited their needs and those of their farming industries. The UK has used its size and influence to deliver a series of wins for Scotland and Scottish farmers, including securing greater regionalisation of the CAP, ensuring that the national reserve is flexible enough to provide continuing support to new farmers, clarifying that farmed heather is a form of permanent grassland and extending to 2016 the designation of areas of natural constraint, which are particularly numerous in Scotland. Finally, although the hon. Member for Banff and Buchan was sceptical about the value of this, we have also secured for Scotland the ability to increase the use of coupled payments—I know that there is a strong view in the Scottish industry that that is particularly important for beef production.

Now that we have negotiated all those outcomes for Scotland, it is up to the Scottish Government to decide how they want to proceed in implementing the CAP. The UK Government have ensured that Scotland and other devolved Administrations have the ability to implement the CAP as they see fit. I know that consultations are under way in all the constituent parts of the UK. The agreement that we secured includes significant flexibility for Scotland to direct funding to those parts of the rural economy and environment that it deems appropriate. With the budget settlement recently announced by the Government on the CAP across the UK, all the devolved Administrations now have the certainty they need to start making those important decisions.

[Mr Weir]

The Minister has not addressed the point I raised earlier. He said that there was less money in the budget from Europe, which may be true, but the UK Government argued for a lower budget. The budget coming to the UK has been increased by the convergence uplift specifically because of the Scottish situation. That money was given because Scotland had a particular problem, and it is not coming to Scotland. Surely that is not right.

[George Eustice]

I think I did address that point. I made it clear that the calculation for the convergence uplift was UK-wide, not Scottish, that there are historical reasons why Scotland has had less and that Scottish farmers receive more on average per farm unit than farmers anywhere else in the UK. I do not accept that I did not address that point. We are taking a consistent approach by sticking with the historical approach, as we did on structural funds. We have achieved a lot for Scotland and other devolved parts of the UK, in terms of giving them flexibility to implement the CAP as they see fit.

[Mr McKenzie]

Perhaps I can take the question asked by the hon. Member for Angus (Mr Weir) in another direction. Does the Minister understand Scottish farmers’ frustration and anger that moneys specifically targeted at Scotland have not arrived in Scotland but have been distributed elsewhere?

[George Eustice]

As a UK Minister, I must be fair to all parts of the UK, and I think we have been fair and consistent in how we have applied this, for all the reasons I have set out. As somebody who worked in the farming industry for 10 years and who comes from a far corner of the UK, I am a firm believer that, as a UK Government, we can achieve more for all parts of the UK by staying together. It would be regrettable, for instance, if Scotland did not have the muscle that it gets from being part of the UK in European negotiations. If Scotland left the UK, it would be in danger either of being outside the EU altogether or of having negligible voting weight and being one of the smallest countries in the EU, which would not be in Scotland’s interests.