Common Agricultural Policy Reform

Roger Williams Excerpts

Tuesday 12th February 2013 Commons Chamber

[Roger Williams (Brecon and Radnorshire) (LD)]

I draw hon. Members’ attention to my entry in the Register of Members’ Financial Interests, particularly as regards agriculture and farming.

I would like to thank you, Mr Deputy Speaker, for allowing time for today’s debate on common agricultural policy reform. It is important that the House is able to discuss issues that will affect farmers across England and Wales—and Scotland, Northern Ireland and, indeed, the whole of Europe—for the seven years after 2014.

Last week’s deal to reduce the overall EU budget by €58 billion will have a considerable impact on the direct payments to farmers and on the rural development budget that makes up the common agricultural policy, now said to be worth €373 billion over seven years. The funding for the CAP will be in the region of 13% less than the 2007 to 2013 deal. Relative reductions will be made to direct payments, falling from €283 billion to €277 billion, with rural development reduced from €91 billion to €85 billion. While I am pleased that the deal has been agreed on the €908 billion budget, it is important that these cuts are applied equally across the EU.

I and farming representatives such as the National Farmers Union believe that these reforms are an excellent opportunity to simplify, reduce and eliminate competitive distortions within the common market, to continue the process towards market orientation and to encourage farmers to become more competitive. I must emphasise once again that these reductions should be equal across the single market or else distortions will disadvantage UK farmers. It is pleasing to hear that the capping proposal to limit direct payments to larger farms will be used on a voluntary member state basis.

A number of issues need to be addressed. Under the current agreement, England and Wales—and, indeed, Scotland and Northern Ireland—receive less direct payment support than our main competitors in western Europe. This gap between us and France, Ireland, Germany, Denmark and the Netherlands needs to be narrowed, or at most kept at current levels, especially if the situation is made more difficult by Department for Environment, Food and Rural Affairs proposals to remove up to 20% of the direct payment that farmers now receive, especially at a time when other member states are looking to improve farmers’ direct payments through reverse transfers.

[Glyn Davies (Montgomeryshire) (Con)]

I need to draw attention to my own entry in the Register of Members’ Financial Interests; I think my interests are similar to those of my hon. Friend. Does he agree that the issue is not so much about a reduction in the level of support as about securing a level playing field, particularly in respect of the greening policy? On a number of issues, British farmers might well be seriously disadvantaged as compared with their European competitors unless we get that level playing field. That must underpin what we do.

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[Roger Williams]

I agree. I am not arguing for an increase in the CAP budget; what I am arguing for is equality across the whole of Europe. At present, for instance, dairy farmers in the Netherlands receive twice as much support as those who farm in England.

DEFRA’s attempts to cut payments unilaterally, were they to be realised, would hit our farmers far harder than the proposed EU budget cut. In that context, I want to raise a few regional concerns that have arisen following discussions with the Farmers Union of Wales.

Although many of the draft CAP regulations and recently proposed amendments acknowledge regional administrations, others do not. Is the Minister confident that the final regulations will properly acknowledge devolved Administrations such as those in Wales, Scotland and Northern Ireland?

The impact of greening measures on the regions was also raised with me by the FUW. Greening accounts for 30% of direct payments. Analysis by the Agriculture and Horticulture Development Board suggests that Wales, Scotland and northern England would be worst hit by the European Commission’s crop rotation greening proposals. That impact is likely to be due to the particular climatic and topographical challenges faced by farmers in those areas, which, as the Minister will know, are limited in terms of what arable crops can be grown in them, and are therefore at an instant disadvantage in relation to other regions. There is a fear that the greening measures will be perceived as too prescriptive and therefore unhelpful.

I should like the Government to make allowances for farmers in higher latitudinal areas, for example, to take into account the challenge of farming in a tougher environment. I should also like them to support amendments tabled by my Liberal Democrat colleague George Lyon MEP and agreed to by the EU’s Committee on Agriculture and Rural Development, which will allow farms to be exempt from greening requirements if they undertake actions that reduce agriculture’s impact on the global environment.

It will be difficult to ensure that the greening measures that generate 30% of direct payments will have an equal impact in countries whose climates and agricultural systems vary as much as Finland and Malta. I fear that DEFRA wants to impose one form of greening on English farmers, namely the ELS-light approach in pillar one. It is one thing to say that a farmer who participates in the entry level stewardship scheme should be exempt from greening, and another to say that the only way in which he can receive his greening payment is to participate in the scheme. We see DEFRA’s approach as an interesting addition to the Commission’s proposals, but only as an accompaniment, not as a replacement. Forcing farmers in England to take part in ELS management measures when, say, Scottish, Irish or French farmers have access to choice and the various “green by definition” derogations sounds very much like domestic gold-plating to me.

I hope that the Government do not consider it necessary to use the new flexibility in the proposals to allow for voluntary modulation of funds in the region of 15% that can be made by member states between the two pillars. While it does represent a liberalisation of the voluntary modulation principle introduced for the UK and Portugal under the previous CAP regime, does the increased possible modulation not represent a threat that could undermine UK farmers’ ability to compete within a common market?

[Tim Farron (Westmorland and Lonsdale) (LD)]

Does my hon. Friend agree that, given the likely shrinkage in the overall size of the EU budget, a decision by the UK Government to reduce the amount of modulation would be one way of ensuring that livestock and dairy farmers in particular see no reduction in their single farm payments?

[Roger Williams]

I agree. UK farmers certainly need a level of direct payment to remain financially viable and to play their part in the activities in which the people of this country would like to see them play a part.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Gentleman on raising a matter that is worthy of a three-hour debate. Northern Ireland farmers have experienced a 52% reduction in their real incomes at a time when the supermarkets are not paying them the money that they need to recoup some of their losses. Does he agree that, while it is good that there has been a seven-year continuation of the CAP moneys until 2020, those moneys should have been set at a level that would help the farmer rather than penalising him?

[Roger Williams]

I agree. The direct payment protects the farmer from various things, including volatile commodity prices and poor and problematic weather conditions, which have a huge effect on profitability. Without the direct payment, many farmers would not be able to continue in business.

I, along with organisations such as the Country Land and Business Association, fear that modulation of this kind could undermine the ability of UK farmers to compete. I note the findings of the Environment, Food and Rural Affairs Committee “Greening the CAP” report. It stated:

“The competitiveness of UK farmers will be reduced if they are exposed to higher modulation rates than their European counterparts. We therefore recommend that Defra does not set modulation rates higher than other Member States that receive similar single farm payment rates.”

In terms of rural development, or pillar two, the UK receives the lowest per hectare allocation of funds because of the rebate the Government receive from Europe. A further reduction could turn farmers away from all the good they are doing in developing wildlife under the existing pillar two. The Government must make sure that as much positive management for wildlife as possible continues as we approach the 2020 deadline for improvements in biodiversity. Pillar two has delivered real improvements for the environment; the Royal Society for the Protection of Birds receives £5 million from the CAP, for instance.

For a number of agricultural sectors, direct payments make up the majority of farm income, yet under EU rules farmers cannot receive payments for undertaking environmental work. They can be paid compensation only for the losses and costs incurred as a result of that environmental work. I believe there should be a system that genuinely rewards farmers for undertaking environmental work, and I am sure the Minister agrees. A deal must be done under the Irish presidency, thereby allowing for a period of transition in which farmers can make informed business decisions before the policy takes effect.

The British and European public have great expectations for CAP reform. They expect farmers across Europe to provide quality food and increase food security, and to increase exports within the EU and further afield. They also require our farmers to be sustainable and to deliver public goods such as biodiversity, landscaping, water purity and granting greater access to farmland. These two goals can be achieved only if agriculture is profitable and successful. Farmers cannot, however, be expected to commit their lives to such a role within the sector without receiving sufficient support and investment. It is therefore essential to have a single farm payment that is set at a level that allows farmers to remain profitable and deal with the challenges they face.

Recently, the single farm payment accounted for 80% of the total profitability of English agriculture, and in this financial year it will probably account for even more. The profitability of English agriculture is therefore clearly closely linked to the income from the single farm payment.

The challenges facing farmers vary widely. Globally, prices for commodities remain volatile, and the dairy industry has seen some of the lowest prices for milk in recent times. High input costs such as for fuel, fertiliser, feed and chemicals are hitting farmers across all sectors, too. We also face increasingly inconsistent weather, which has resulted in the lowest wheat yields since the 1980s, while dairy farmers have had to keep cattle indoors and revert to winter feeding early, all at extra cost. These effects are felt globally as well as here in the UK; the United States has experienced its worst drought in 56 years, for instance, leading to poor yields and crop abandonment in some areas.

I also want to make the case for extra support for hill farmers. They find it difficult to compete with people farming more advantageous areas. The CAP does not give specific support for hill farming.

[Mr Mark Williams (Ceredigion) (LD)]

I congratulate my hon. Friend on securing this debate. The point about hill farmers leads me back to one of his original questions about the voice of regional government and national Government in the final regulations. Is he satisfied that the voice of Wales—in particular Welsh hill farmers—is being acknowledged in those negotiations and discussions?

[Roger Williams]

My hon. Friend points to a significant problem and I am not convinced at the moment that the future of hill farmers in Wales, England and the other devolved nations is secure. Will the Minister say what negotiations are taking place on behalf of the hill farming community? I do not seek to maintain the absolute level for CAP expenditure and it is far more important that British farmers are treated fairly and equitably. We operate in a single market in Europe and whatever settlement is finally reached, the terms and conditions applied to our farmers—whether the transfer to pillar two or the greening rules—must not put us at a disadvantage with our major competitors.

English farmers have already undergone substantial and radical reform through the full decoupling of direct support payments, the cutting of farm payments at national level, and the progressive move towards an area-based payments system. The combination of those policy decisions, all taken at national level by previous DEFRA Ministers, means that this year a dairy farmer in the Netherlands will receive a payment that is 91% higher than that received by an English dairy farmer. The reform should seek to narrow the gap in support levels compared with our competitors, and it certainly should not make it any worse.

I thank the Minister for listening and appreciate the size of the challenge faced by him and his ministerial team.

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[Roger Williams]

The key issue is flexibility on modulation to allow some countries—people think the UK will be one of them—to move money from pillar one to pillar two, while other countries move money from pillar two to pillar one, thereby further disadvantaging UK farming.

[Mr Heath]

As I said, what we want is flexibility to find the right solutions for our farmers. At one point, my hon. Friend praised high-level agri-environmental schemes, and we want those to continue. We may need that flexibility to ensure that we can achieve that within our pillar two framework, but at the same time I want the level playing field with other countries that he seeks, so that they do some of the same things that we do, and do well, in their domestic agriculture. I am not convinced that they are doing that yet. The thrust of our argument is: yes, we want public money to support public good, but we do not want public money to support distortions of trade and agricultural production which result in a regression across the EU.

I am clear that to achieve that we need flexibility not only in definitions, but in being able to move cash between headings. We need to make sure that we have an appropriate period of transition—it would be disastrous for British agriculture were we to move too fast and in too rigid a way to a solution that is not appropriate for many of our farmers. We need to make sure that the implementation period is sufficiently long to allow an orderly transition, so that we do not repeat the chaos of 2005 with the Rural Payments Agency—I am determined that we will not do that again. Most of all, we need to listen to what our agriculture industry needs, relate that to what our taxpayer needs in value for money, and make sure that we have prosperous and sustainable agriculture right across the UK in the future. That is what we are trying to achieve from CAP reform, and I believe it is possible to do so, but I do not underestimate the difficulties in reaching a successful conclusion.

Question put and agreed to.