Common Agricultural Policy (EUC Report)

rose to move, That this House takes note of the report of the European Union Committee on The Future of the Common Agricultural Policy (7th Report, HL Paper 54). The noble Lord said: My Lords, the report that we are debating this afternoon was published in March this year. Since then, we have received the Government’s response, which deserves full and thorough reading and, recently, the Commission’s legislative proposals on the health check. It is fair to say that anyone reading the report in the past few days would have been struck by how quickly, over the past few months, the global context of agricultural policy has changed. We are living in very fast-moving times indeed. Over the past few days, we have had the UN summit on world food security in Rome and on Tuesday the director-general of the Food and Agriculture Organisation told heads of states and governments gathered in Rome that no one understands why rich countries have distorted world markets with the £138 billion that they spend on supporting their own agriculture, clearly to the disadvantage of many developing countries. That is a fact that we must always take into consideration. The UN secretary-general has suggested that United Nations members should plan for a 50 per cent increase in food production by 2030. Rich countries are being urged to put more development aid into agriculture in developing countries. Things are changing and if, as a global community, we do not live up to the challenges that we face in ensuring food security, perhaps some of the social and political unrest that we have seen manifest itself in countries across the world in recent days and weeks will unfortunately become a more frequent occurrence. Global change has created opportunities and challenges for European agriculture. The central issue is how the common agricultural policy should develop to ensure that European agriculture is best placed to secure the benefits of those new opportunities. We must all consider that point. I turn briefly to the Government’s response to our report before considering the Commission’s legislative proposals. Let me say straight away that the Government and the Select Committee are not only in broad agreement on the general direction of policy but are also in agreement on many of the policy specifics. We both want a more market-oriented agriculture that is sustainable and makes a significant contribution to the environment, particularly in the area of climate change. I shall quote from our report. At paragraph 212 we write: "““We believe that the drive towards a more market-oriented agriculture should continue. In the long term, the CAP should aim to foster a farming sector that is capable of standing on its own feet, competing in open international markets without subsidy or special protection. We acknowledge the likelihood of greater demand for agricultural commodities in future, and believe that this presents an opportunity for the European farming industry. The distorting effect of subsidies will in our view hinder the EU agriculture sector’s ability to respond to, and profit from, the expected increase in global demand for agricultural products. The CAP should instead aim to steer the industry towards a position from which it can take full advantage of a future boom in commodities prices. In our view, this means moving away from the distortions that a managed and protected internal market for agricultural commodities creates and sustains””." That is our guiding principle against which we will judge all future legislative proposals for the reform of the common agricultural policy. We are in agreement with the Government on the future of direct payments, moving away from the historic basis, while they exist, and, more importantly, looking forward to their ultimate disappearance. On page 61 of our report, at paragraph 222, we write: "““In the longer term … we are not convinced of the justification for maintaining direct payments under Pillar I, as the market and environmental objectives that we regard as the appropriate long-term aims of the CAP can in our view be pursued adequately with the instruments available under Pillar II. We therefore recommend that a progressive flattening of payments systems in the aftermath of the Health Check should in due course be accompanied by a phased reduction in direct payments over the course of the next Financial Perspective””." There is a host of other examples where the Select Committee and the Government, through their response, are in agreement, but I should perhaps identify two areas of disagreement. The Government reject our argument that European farmers should be required to produce only to the same SPS standards as their competitors exporting into the EU market. The Government take the view that the, let us face it, relatively high production standards demanded of farmers in the EU are not disproportionately costly compared to other variables that have an impact on the competitiveness of farmers. However, we take a different view on this. We take the view that the imposition of higher internal standards distorts competition. I think that ought to be recognised. On another issue, the Government do not agree with our argument that the application of voluntary modulation in the United Kingdom causes competitive distortion. We think it does. These are disagreements of some substance, and there is no point pretending that they are not. Nevertheless, they should not distract from the wide agreement between the Select Committee and the Government. The points of agreement on the Commission’s legislative proposals are, again, easy to identify. We very much support the abolition of set-aside, we welcome the fact that milk quotas will be phased out, and we support the proposal that historical payments should no longer be the basis for single farm payments. We also welcome the simplification of cross-compliance, as we do the increased flexibility given to national envelopes, the introduction of minimum payment levels for single farm payments and the increase in the funds for rural development. On those points, we agree with the Commission’s proposals that have come out of the health check. We also strongly support the EU’s decision to commit itself to the removal of export subsidies that distort trade and particularly work to the disadvantage of developing countries. That will be a major achievement when it finally happens. There are, however, disappointments in the outcomes of the health check. We are opposed to the introduction of additional modulation for larger farmers, which in effect is a penalty on efficiency. I am sure that in many countries in which it is applied it will only increase the income of solicitors as they try to develop means by which artificial, smaller farm units can be established. Surely that is in no one’s interests. Although we welcome the extension of decoupling, we are disappointed that it has not been completed. Overall, what is the judgment? I suspect that the committee will take the view that, so far as it goes, the Commission’s proposals are going in the right direction, but that in terms of placing European agriculture in a position to take full advantage of the opportunities that now exist, the proposals are simply too timid. There is no recognition of, let alone enthusiasm for, the fact that to be successful European agriculture must engage fully with the market and the consumer, rather than continually reflect the interests solely of the producer. The Government deserve to be congratulated on securing important reforms of the common agricultural policy in the past 10 years or so, often in the face of stiff opposition. For the future, we must continue to work towards the elimination of tariff and non-tariff barriers and always be on our guard against their being introduced via the back door. Above all, however, what is needed in the Commission’s proposals—I am afraid it is missing—is a clear signal of the end of direct payments. The time has come, the situation is right, and it is sad that the opportunity has not been seized. I beg to move. Moved, That this House takes note of the report of the European Union Committee on The Future of the Common Agricultural Policy (7th Report, HL Paper 54).