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Mr. Swinney: Does the hon. Gentleman share my concern that there is a danger of two forms of restructuring: one due to the strength of sterling, which is forcing people out of the industry, and the other due to the fact that, potentially, we are sleepwalking into Agenda 2000, which favours larger holdings and forcing people off some of our most fragile land?
Mr. Kennedy: I am grateful to the hon. Gentleman for his intervention. He is absolutely right. His part of Perthshire, for example, is a classic example of an area that could be endangered in the longer term if we go blindly--sleepwalking is a very good way of putting it--into such a cul de sac. There is no viable option for many people in such areas short of some land-environment-
conservation-husbandry role in the local community. The Government have not given sufficient sustained thought to that.
Mr. Kennedy: Having been so critical of the right hon. Gentleman, it would be churlish not to give way to him.
Mr. Jack: May I ask a simple question? What is the Liberal Democrats' view of labour unit modulation?
Mr. Kennedy: That is at the heart of the matter, too. It was interesting what the Minister alluded to in his speech. If modulation is applied in the way in which it is being suggested at European level, it will be doubly damaging to UK farming interests because of the issue of size. I hope that we might hear a little more about the matter in the Minister of State's winding-up speech.
I noted that the Minister referred to the national application of modulation. I am not quite sure what he meant by that. If he meant what I hope he means, the phrase is encouraging. I hope that, as and when modulation is introduced, the Government intend there to be repatriation--that is a dirty word to use in politics due to the late Enoch Powell, but I use it in the best sense--of degrees of decision making. As the UK is evolving, with the Welsh assembly, the Scottish Parliament and, let us hope, a Northern Ireland assembly, I hope that discretion will be devolved to this member state to apply modulation sufficiently sympathetically and sensitively to UK agricultural interests.
Mr. Quentin Davies (Grantham and Stamford):
Will the hon. Gentleman give way?
Mr. Kennedy:
No, I will not--but it is very nice to see the hon. Gentleman.
I hope that the Government will take on board points made about modulation and that we are able to make common cause across the Floor of the House on it, because we recognise something of a east-west divide in Scotland, England and Wales over the issue.
We are considering a very difficult situation against the backdrop of CAP reform, and, perhaps, this debate has not so far addressed that. However, we would be wrong not to hold the Government to account or absolve them from responsibility for the extra costs that they are choosing to impose on agriculture. We know that there are already higher charges in the knackery sector. We know that there will be extra costs for pig and poultry farmers in order to comply with EU environmental and pollution legislation. Incidentally, such farmers do not receive EU support.
There are new costs for pig accommodation, new rules on calf accommodation, proposed tagging of sheep and pigs, proposed changes in standards for poultry, likely new EU groundwater directive supervision charges and unilateral rules imposed on specified risk material. Those are significant add-on costs to any business, but to impose them on agriculture during an agricultural recession is perverse.
The Government and the Liberal Democrats disagree in principle about the use of tax revenue. As they well know, we favour more largesse and, if necessary, more taxation
to provide it. None the less, we argue strongly that imposing additional charges on the farming community without introducing sufficient compensatory measures makes a very bad situation even worse. We urge the Government to reconsider.
Mrs. Anne Campbell (Cambridge):
I am very pleased to have the opportunity of speaking in this debate. I congratulate my right hon. Friend the Minister of Agriculture, Fisheries and Food on the progress that he has made in having the Northern Ireland beef ban lifted, and on the database scheme for all animals born after 1996 in the United Kingdom. Those developments represent huge progress, and belie the final remark made by the hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy) on the Government's performance in the European Union presidency.
Tremendous progress has been made, and I know that my right hon. Friend will continue to make such progress. Common agricultural policy reform is one of the Government's priorities, and I am pleased that it has the Government's backing.
Agenda 2000 is preparing the European Union for enlargement to the east, and to deal with pressure in the World Trade Organisation to liberalise European agriculture. Enlargement is desirable, and it is vital that the states of central and eastern Europe are brought into the European Union. If they are not, the likely result will be economic, political and, potentially, military instability.
Enlargement will bring two problems, the first of which is institutional design. There is growing criticism of using the same institutions to govern 20 or more member states as were used in governance of the original six member states.
Although the institutional issue has never really been comprehensively addressed, I think that the budgetary implications of enlargement are more immediate and urgent. Because of the Maastricht convergence criteria, the European Union budget will not expand significantly after enlargement, thereby putting pressure on the major item of European Union expenditure--the common agricultural policy.
I do not think that anyone would quarrel with the policy goals--which I have re-examined--incorporated into the treaty of Rome: a fair standard of living for farmers, reasonable prices for consumers, and creation and fostering of stable markets for agricultural commodities. However, the mechanism by which those goals were to be achieved is ineffective. It is certainly outdated.
The mechanism is essentially Commission central planning within a market structure. Wholesale price floors and ceilings have been established for a range of commodities. The European Union purchases intervention stock if the market price falls below the floor, and it pays export subsidies to producers when the market price rises above the ceiling. Although I am critical now of the mechanism, initially it was successful, and the sector moved into structural surplus in the 1970s.
The common agricultural policy transformed the European Community from a net importer to a net exporter, which was crucial to achieving the goals of European security and economic recovery. However, by the end of 1990, despite the export subsidy regime, there were 14.4 million tonnes of cereals, 600,000 tonnes of dairy produce and 530,000 tonnes of beef in public intervention storage. Spending on the CAP doubled in real terms between the mid-1970s the mid-1980s. Even the extra expenditure was not sufficient to control the overproduction that was inherent within the system.
Market price support is a highly inefficient way for Governments to give aid to a sector of the economy. Such support requires, among other things, very large and unpredictable levels of Government expenditure, while offering no way of ensuring that the most needy farmers receive the most subsidy. I hope that, in our presidency of the European Union, we will address that issue, which is one of the most important principles of social justice.
Mr. Peter Atkinson (Hexham):
Will the hon. Lady give way?
Mrs. Campbell:
I am not giving way, as I have only 10 minutes and should like to put as much as I can into them.
The common agricultural policy isolates producers from the market, providing a financial incentive simply to produce the maximum possible quantity, as producers know that anything that cannot be sold on the market will be purchased by the European Union. The very good brief that we have had from Compassion in World Farming states that that organisation feels that it is unacceptable to incentivise livestock overproduction, and then either to slaughter or export that livestock to limit the effect of that surplus. I could not agree more.
The CAP also raises many environmental concerns. Maximum-quantity production entails the use of large amounts of fertilisers and fungicides--chemicals to reduce plant growth, and sprays to reduce disease--which have potentially harmful effects on local water supplies and the food chain.
Soil erosion is becoming a serious problem. My hon. Friend the Member for Carlisle (Mr. Martlew) mentioned the problem when he was describing the overgrazing problem in high areas near his constituency. Soil erosion occurs also in lower areas. I well remember that--during the general election campaign, when I was driving to help my hon. Friend the Member for Norwich, South (Mr. Clarke)--I saw soil blowing off the fields because of soil erosion caused by intensive farming practices. The soil blown off fields ends up as silt in rivers and streams, which is a major cause of flood damage--an issue to which I have drawn the House's attention on a number of occasions.
Price support creates artificially high food prices in Europe, and depresses world food prices, as the export subsidy allows European Union produce to be sold below
the world price. Price support makes life very difficult for farmers in developing countries, who cannot sell their output at a fair price.
The common agricultural policy is also deeply untransparent in its financial dealings. Through price support, it makes a large resource transfer from EU consumers to producers. If its revenue were raised through direct taxation rather than high food prices, there would be huge public dissatisfaction with current policy.
The 1992 MacSharry reforms were introduced to strengthen the European Union's hand in the Uruguay round of the general agreement on tariffs and trade, trying to create a shift from price support to direct payments to farmers. Intervention prices were cut, and removed altogether for some commodities.
The reforms had some very minor effects. Arable farms were subjected to rotation or set-aside, for example, although we discovered subsequently that the practice may encourage more intensive farming methods on fields. That reform has not been successful in reducing production.
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