Common Agricultural Policy

William Bain Excerpts

Thursday 1st November 2012 Westminster Hall

[Mr William Bain (Glasgow North East) (Lab)]

It is a pleasure, Mr Chope, to serve under your chairmanship again. I congratulate the hon. Member for Thirsk and Malton (Miss McIntosh), Chair of the Select Committee, on a superb report. It is always a pleasure to follow the hon. Member for Tiverton and Honiton (Neil Parish). I was particularly struck by his remarks about food prices. He and all right hon. and hon. Members know that there is no greater pressure on household budgets at the moment than the rising cost of food.

The CAP can do a huge amount to limit that pressure, but the EU could make a more concerted effort, through the G20, to look at the position limits that some major financial institutions hold in the food futures markets. When the Better Markets campaign visited the Houses of Parliament last year, I was struck to find out that the share of speculation in food futures markets has risen from a third to two thirds, and that the share of liquidity being injected into the market has fallen from two thirds to one third as a result. There is clear evidence that speculation at global level is driving increases in food prices. We know that that hurts consumers in Europe, and it hurts people in Africa particularly. There has been a crisis in the horn of Africa over the last couple of years when food prices rose by 70%, so I hope that the debate spurs the Government on to regulating and calling for proper position limits as the US Administration have done on food prices.

Given the increased public awareness and scrutiny of the multi-annual financial framework for 2014-20, the debate is extremely timely. Spending on the CAP has reached €55 billion a year, or 41% of the EU’s total budget, although that is set to reduce to 32% by next year. That sum has been frozen in real terms until 2013, but it is still far higher than what the EU spends on science, innovation and promoting research and development. Given that unemployment in the EU stands at more than 25 million, with low growth and weak economic demand across the Union for the foreseeable future, we must question whether that is sustainable.

Open Europe’s report in February demonstrated that there is no link in the CAP between a country’s wealth and how much it receives from the CAP. For example, Latvia receives £115 per hectare—the least of all member states—from EU direct subsidies despite the average farmer’s income being only 35% of the EU average. Lithuania, whose farmers are the poorest in Europe in absolute terms, receives the third least from the CAP. In contrast, wealthier member states such as Ireland and France continue to do well out of the CAP. Despite a series of reforms, those inequalities in the system remain, which is why the discussions and negotiations of the financial framework should be more radical.

On the environment, in the UK the share of the CAP spent on explicit environmental aims and protection is only 13.6%. That is caused partly by the fact that the CAP fails to differentiate between different types of land, and it actively channels public resources away from those areas in which the biggest environmental gain could be generated.

There are four main aims that a comprehensive reform of the CAP should attempt to achieve in this financial framework period. First, it must generate greater food security and food price stability. The Commission said, in the proposals that the Committee evaluated in its report, that there is a strategic interest for the EU in retaining significant food self-sufficiency. As Commissioner Barnier said, during his time as France’s Agriculture Minister,

“if Europe were to cut back on its agricultural production then the increase in its own food imports would contribute significantly to a worldwide increase in food prices.”

In other words, maintaining Europe’s farm outputs at current levels also contributes to the stabilisation of global food markets. There is some truth in that, but the question is whether the design of the CAP actively helps or hinders that aim.

Secondly, the CAP must remove trade-distorting barriers and enable investment in science and innovation in agriculture to increase, so that we see higher growth, innovation and productivity in the sector. Thirdly, reform of the CAP should increase the contribution that food supply chains make to the EU’s targets for reducing greenhouse gas emissions from the agricultural sector, and also improve standards of environmental stewardship. Finally, CAP reform should promote greater trade justice in the EU’s relationships with the developing world.

One approach specifically identified by the EU and the Commission is the provision of basic income support payments—which could be uniform per region, but not flat rate across the EU, based on new criteria and capped at a certain amount—and a compensatory environmental payment for additional actions that improve stewardship; that includes crop rotation, permanent pasture or even an ecological set-aside. I note that the Committee has expressed concerns about the detail of those proposals, so I hope that the Minister can demonstrate that, alongside the positive benefits that there will be from environmental stewardship, farmers will not be unduly inconvenienced by such measures.

On market measures, the Commission’s plans identify some scope for streamlining and simplifying measures, and possibly introducing new elements in terms of better functioning of the food chain. Whereas market measures accounted for 92% of CAP spending as recently as 1991, just 7% of the CAP budget was spent on them in 2009. Eliminating trade-distorting subsidies is not simply about increasing growth; it is also a matter of justice for the developing world. The combined US and EU subsidies for cotton production over the past nine years amounted to $32 billion, which has had the effect of driving down global cotton prices, reducing demand for west African cotton, and restricting that region’s ability to export its way out of poverty. The EU pays out approximately $2.50 per pound in cotton subsidies to support 100,000 cotton growers in the EU; that is far more than the market price for cotton. Fairtrade estimates that those subsidies have resulted in a lost income of $250 million a year for west African cotton-producing nations. The EU could therefore fulfil the pledge that it made during the World Trade Organisation negotiations to eliminate those unfair subsidies and ensure that the provisions from the treaty of Lisbon are implemented to assess the effect of EU policies on developing nations. That needs to happen in the CAP as well.

The CAP must be about showing how agriculture can change and improve through investment in research and development. The 2011 UN Food and Agriculture Organisation report recommended a major increase in investment in research and development. We need a CAP that rewards farmers and others in the food supply sector who make the right investments in photovoltaic cells, wind farms, better water-recycling policies, and better use of soil. It is true to say that converting a CAP that, at the moment, pays perhaps too much for pure production instead of investment will be an important part of the reforms.

Finally, I turn to the role of tariffs. Open Europe estimated that

“the average external tariff paid on imports from countries without special arrangements with the EU”—

those that do not have most-favoured nation status—

“range between 18% and 28% of the value of the good imported... This is much higher than the average 3% tariff paid on manufactured goods.”

Any proper programme of CAP reform must look at the effect that the tariffs have on imports, and particularly, on the economies of places such as Africa, where clearly, if they are to see an improvement in living standards, they need to have fairer access to our markets than our distorted trade rules provide.

Those are the aims that I believe we should have in a comprehensive and radical set of CAP reform proposals. The Government will have the Opposition’s support if they pursue a programme in Europe of securing greater partners for that, and I wish them success. However, they will face scrutiny from us to ensure that they achieve their aims and that we secure an agricultural policy in Europe that is better for the environment and for the consumer.