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Agriculture: CAP Direct Payments

Volume 720: debated on Tuesday 27 July 2010


Asked By

To ask Her Majesty’s Government whether they have reached conclusions on the findings of the Department for Environment, Food and Rural Affairs-funded Dutch Agricultural Economics Research Institute (LEI) study of the likely impact on United Kingdom farmers if common agricultural policy direct payments were removed by 2013.

My Lords, I declare an interest as a recipient of the single farm payment. The Dutch Agricultural Economics Research Institute’s report, commissioned by the previous Government, is an academic exercise to look at a hypothetical scenario. It should be noted that the data are from 2004 to 2006—a time when exchange rates were unfavourable to the United Kingdom—and fail to account for the 70 per cent increase in UK farm incomes that has since occurred. Finally, there is no chance of direct payments being withdrawn by 2013.

My Lords, I thank my noble friend for that reply, but does he not agree that the LEI report indicates that 35 per cent of farms in the UK would become financially unviable if Pillar 1 payments were withdrawn, while 83 per cent of all EU farms would remain viable? Will he seek to reverse the previous Defra policy of abolishing single farm payments, as that would save many UK livestock farms that depend on those payments for their financial viability? The alternative is land abandonment. This subject is very important.

My Lords, I acknowledge the first half of my noble friend’s contention, but in my initial Answer I explained that the report data are somewhat out of date and that there have been fairly substantial changes in the economic position for farmers since then. My noble friend is right that the financial perspective for 2014 to 2020 will be negotiated in a scenario of much more limited financial resources being available than before. The Government’s view is that Pillar 2 represents a more effective use of those limited resources. However, I am really not expecting direct payments to disappear immediately under the next financial perspective.

As the noble Lord is a member of a Government who are more and more committed to the role of market forces but is not committing himself imminently to change, what plans do he and the Government have for introducing market forces to agriculture, thus contributing to the savings that they are looking for in every other area of public expenditure?

My Lords, no one thinks that this is going to be easy. In my experience, however, there are very few farms that can claim that they have exhausted all potential for making more efficiencies, so I take the noble Lord’s point. Many would benefit from training to improve skills, especially in business management, cost reduction and better marketing strategies, such as through producer organisations. As a whole, the EU has been falling badly behind its global competitors in productivity growth over the past 30 years and the Government are working hard on how this can be reversed.

My Lords, let us hear from the noble Lord, Lord Willoughby de Broke, and then from my noble friend.

I am most grateful. Will the Minister reassure the noble Lord, Lord Livsey, and indeed the noble Lord, Lord Tomlinson, that successive French Governments have stated repeatedly that there will be no change whatsoever to single farm payments after 2013? Will he also therefore reassure the British taxpayer that they will continue to pay for French farming for the foreseeable future?

My Lords, the noble Lord is a noted cynic on this subject. I assure him that the British Government will be negotiating hard at EU level for a reform to the CAP.

My Lords, I apologise. I was slightly confused by the noble Lord, Lord Willoughby de Broke, because he said, “This side”, and the Front Bench opposite agreed with him. Will there be any move to deal with the power of the supermarkets in setting prices, which is having a detrimental effect, especially on hill farmers in livestock areas? Indeed, it is one of the major causes of depressed incomes for livestock farmers.

My Lords, I very much take my noble friend’s point. He should be aware that the coalition programme for government, which was published on 18 May, made a commitment to introduce an ombudsman in the OFT to enforce the groceries and supply code of practice and to curb abuses of power that act against the long-term interest of both consumers and farmers.

My Lords, what strategy are the Government putting in place to build up support among other member states for CAP reform and for promoting our interests? Given that the Lisbon treaty now gives the European Parliament a bigger say in agricultural policy, how are Conservative Ministers and MEPs planning to get support there beyond the small and very motley group of allies that they have at present?

The noble Baroness is right that negotiation needs to go on at EU level; indeed, I can confirm that comprehensive negotiations are continuing. She is also right that it is now a matter of codecision, so those negotiations will need to go on with MEPs.

My Lords, the Minister has already heard that land abandonment is likely to be one of the greatest challenges for a future CAP. The potential loss of upland farms could have a large impact in my diocese and, I know, in many other areas. What consideration is being given to preventing this from happening in future?

I am grateful to the right reverend Prelate for that question. We recognise that the future of the uplands is a matter of considerable concern to a great many people and organisations. We have a wide range of policies and schemes in hand—the uplands entry level scheme and others—to address individual issues raised by the Commission for Rural Communities. We recognise the potential of the uplands for generating greater public goods and we are working on unlocking that.

I declare an interest as a farmer receiving payments. Does the Minister agree that, to capture improved returns, agriculture needs to move beyond primary processing and up the value-added chain? What is Defra doing to help in this regard?

I agree with that. I have explained a bit about what we think is the right way to go in terms of competitiveness. I will leave it at that for today.