CAP Budget

Iain McKenzie Excerpts

Tuesday 26th November 2013 Westminster Hall

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

It is a great pleasure to serve under your chairmanship this morning, Mr Caton. I am pleased to see at least a few other hon. Members taking an interest in recent developments on the common agricultural policy, and in particular the convergence uplift.

Common agricultural policy funding secures the vitality of farming in Scotland, and it is instrumental in the sustainable development of our rural economy. I represent one of the most rural constituencies anywhere in the UK, where farming underpins a healthy food production sector and a range of successful agricultural industries, and supports vibrant towns and villages. The investment we make in our farming sector through the CAP generates jobs, creates sustainable livelihoods and ensures effective land stewardship. Without it, our environment, economy and communities would be immeasurably poorer.

Earlier this year, agreement was reached on the future shape and direction of the CAP. There will be some substantial changes, but most significant for the purposes of today’s debate is the requirement for more equitable distribution of CAP funding, known as external convergence, across the EU. That has enormous significance for farmers in Scotland, because historically Scotland has had very low levels of support relative to the area of land in agricultural use. Scotland receives an average of €130 per hectare, compared with an EU average of €196 per hectare. In the UK, the English average is €265 per hectare, the Welsh average is €247 per hectare and the Northern Irish average is €335 per hectare. Compared with other parts of the EU and other parts of the UK, Scotland has been short-changed on the CAP for a long time, which has put our agricultural sector at a considerable competitive disadvantage. In that respect, moves towards convergence are an important step in the right direction.

Last week, when I questioned Ministers from the Department for Environment, Food and Rural Affairs on the matter, I received a response that was based on average farmer payments, which concerned me because it betrays either a worryingly poor understanding of what the convergence uplift is or a shameless attempt to pull the wool over our eyes. Average farmer payments are completely irrelevant to the calculation of the convergence uplift. I appreciate that the Minister is quite new to his role and might not yet fully understand the technicalities of how the convergence mechanism is calculated and what it is intended for. That is why it is so important to clarify that the convergence uplift has nothing whatever to do with individual farm size, which varies across Europe, depending on the landscape, climate and model of farming. The convergence uplift is calculated on the basis of average payments per hectare and nothing else. It is intended to benefit those whose support per hectare falls below 90% of the European average.

The convergence uplift is a mechanism introduced by the EU to ensure that member states with payment rates of less than 90% of the EU average rate per hectare receive an uplift designed to close the gap over the next six years. Although England, Wales and Northern Ireland are all above that threshold, Scotland is well below it —so far below, in fact, that it brings the UK average down. That is why the EU has awarded the UK a convergence uplift of €223 million. That is money designed to level the playing field, calculated on the basis of the average payment per hectare across Europe. It is money earmarked for Scottish agriculture.

[Mr Iain McKenzie (Inverclyde) (Lab)]

I congratulate the hon. Lady on securing this important debate. She has laid out a conclusive argument for Scotland getting its fair share of the money. Does she agree that it is essential for the Scottish and UK Governments to get together and deliver a coupling deal for the benefit of Scottish farmers?

[Dr Whiteford]

I agree entirely with the hon. Gentleman. There has been an unprecedented degree of co-operation in the Scottish Parliament on the matter. DEFRA has succeeded where many have failed in creating unity among the warring tribes in the Scottish Parliament.

There was a sense of disbelief in the Scottish farming community on 8 November when the UK Government announced that they had decided to split the convergence uplift four ways, rather than using it for its intended purpose. That disbelief has quickly turned to anger and a sense of betrayal. Last week’s Scottish Farmer called it an “act of grand larceny”. Last week, when I met with Scottish farming leaders—some of whom, I believe, are here today—we discussed what representations they might make to Ministers to look again at the issue and, at the very least, bring forward the promised review from 2017 to deliver progress towards convergence over the next six years. Yesterday, along with other Scottish MPs, I received a letter from the Secretary of State for Scotland, which appears to kick that possibility into the long grass by reiterating that no changes will be introduced until after 2020. I appeal to the Minister to look again at the need for convergence in the UK. Will he consider his review timetable and get round the table with stakeholders to work out how the convergence uplift can be used for its intended purpose?

[Dr Whiteford]

I know that the hon. Gentleman shares my concerns from a constituency perspective, because his constituency, like mine, is set to suffer some of the worst impacts of the Government’s approach. He makes an important point, and I hope the Government are listening.

The UK seems to be saying that it will simply ignore convergence until the next round of CAP negotiations. We are asking the Government to listen to the voices of the farming community and to work with stakeholders to ensure that convergence happens as the EU intended and that the convergence uplift comes to Scotland. The coalition parties have enjoyed an enviable degree of loyalty over the years from parts of the farming community, but that loyalty is not blind. Trust is a precious commodity in politics, and the Minister would be wise to listen to the farming community, even if he will not listen to the hon. Member for Argyll and Bute (Mr Reid) and me.

The issue has prompted a great degree of cross-party co-operation and collaboration at Holyrood. Will the Minister commit to meeting the cross-party representatives of the Scottish Parliament—the SNP, Labour, Tory and Liberal Democrat rural affairs spokespeople—who wrote to the UK Government recently requesting a meeting? As they pointed out:

“These receipts only exist because of Scotland’s current position. All other parts of the UK are above the threshold set by the EU for external convergence, and it is only because of Scotland’s extremely low average level of Pillar one payments per hectare that the UK as a whole fell below the threshold and qualified for an external convergence uplift.”

They made the important point that

“Passing on this uplift to Scotland will also not entail any deductions at all for farming colleagues in England, Wales or Northern Ireland.”

They went on to say:

“The European methodology focused entirely on per-hectare levels of payment, and the within-UK decision must be on the same basis.”

It is important that Members of this House understand how support for farmers in Scotland compares with support for farmers in other parts of Europe, so they can see that Scottish farmers are asking not for special treatment, but for parity of treatment with their neighbours and competitors. In Denmark, for example, the area eligible for pillar one funding is less than two thirds the size of Scotland’s eligible area, but Denmark receives more than one and a half times as much pillar one funding—€964 million, compared with Scotland’s €596.6 million. That means that Denmark’s per-hectare pillar one rate is almost three times the Scottish average pillar one rate. Denmark’s pillar two rate of €31 per hectare is more than two and a half times as high as Scotland’s rate of €11 per hectare. The Czech Republic also has a smaller eligible area than Scotland does, but the Czech Republic gets one and a half times as much money to fund pillar one. Its average pillar one rate per hectare is almost twice that of Scotland, and its pillar two rate is more than 10 times higher, at an average of €116 per hectare.

Even closer to home, our neighbours in the Republic of Ireland, who have a similar amount of eligible land under pillar one, get twice as much funding as we do, which means that the average Irish per-hectare pillar one rate is more than double the Scottish average, while its average per-hectare pillar two rates are more than 10 times the Scottish average. I could go on and list every single European Union member state, because each and every one of them, without exception, will receive a higher per-hectare rate than Scotland in both pillar one and pillar two by 2019. Let us be clear: if the average rate of payment in Scotland had been increased to €196 hectare, in line with the EU average and the objective of all member states by 2019, Scottish agriculture would have benefited to the tune of €1 billion over the next six years. Instead, as a peripheral region of a member state that places a low priority on the rural economy, Scotland’s per-hectare rate will drop to €128 by 2019 and could fall as low as €108 if all the eligible land comes into the system.

The same is true for pillar two. Although our rural development budget will rise by 7.8% in cash terms, in real terms that amounts to a 5.5% cut over six years. By contrast, 16 member states argued successfully for uplifts in their rural development funding. Ireland has secured nearly €2 billion, compared with Scotland’s £478 million. Finland has secured even more. With that kind of rural development funding, we could make transformational step changes to Scotland’s rural economy. We could create more jobs, help farms to diversify, improve amenities in our rural communities and strengthen environmental sustainability. Instead, Scotland will continue to have the lowest rural development allocation per hectare in the whole European Union.

Quite frankly, it is an insult to the intelligence of our farmers to pretend that the deal is anything other than profoundly lousy. For the Government to claim largesse, by suggesting that 2% additional flexibility on coupling in some way compensates for the failure to deliver adequate core funding, has been described to me as “quite pathetic”. As one farmer put it to me, “We’re supposed to be grateful to get the crumbs from a cake that should be ours by right.” Just to clarify, the 2% flexibility on coupling brings with it no extra money. It would merely allow us to divvy up the pot differently, to target more resources at the livestock sector, where they are most critical. The serious point is that an extra 2% coupling makes a negligible difference to beef farmers in Buchan, some of whom are set to take sizeable hits under the new regime. What they want and need is the option to go up to 13% coupling, like those member states that face similar challenges and that have successfully negotiated the ability to do so.

[Mr McKenzie]

I thank the hon. Lady for giving way again; she is being generous with her time. She sets out a compelling argument for the Minister to meet the cross-party group, which supports her position, from the Scottish Parliament as soon as possible. Would she say that he needs to give the date on which he will do so?

[Dr Whiteford]

I hope that an outcome of today’s debate will be not only meetings with the Scottish Parliament, but meaningful engagement with the National Farmers Union and other stakeholders. The farmers and crofters of Scotland desperately need a resolution. The sense of outrage is palpable in rural communities, going well beyond the farming communities that are the primary producers in the agricultural economy.

The convergence uplift has come to the UK only due to Scotland’s woeful position, languishing at the foot of the international table for pillar one and pillar two cash receipts. Scotland has the lowest levels of agricultural support in the European Union, yet the Secretary of State for Scotland believes he has delivered

“a fair, positive and stable package for all parts of the UK”.

He is demonstrating plainly that, far from being Scotland’s man in the Cabinet, he is the Tory’s spokesman in Scotland, defending an utterly indefensible decision. I will be interested to see whether the Minister can stand here today—an historic day in Scotland, when we consider our future and the future of our country—and repeat the Secretary of State’s claim with a straight face.

--- Later in debate ---

[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.