European Standing Committee A
Wednesday 18 November 1998
[Mr. Peter Atkinson in the Chair]
Agrimonetary Arrangements following the Introduction of the Euro
10.30 am
The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Jeff Rooker): I am pleased to see you in the Chair, Mr. Atkinson. My voice is not too good this morning, but I shall be as clear as I can.
The matters that we are considering this morning are complicated. We must, therefore, focus on the main issue: the financial system of the common agricultural policy that pays substantial sums to the agricultural industry. I have issued two explanatory memorandums on this issue, and the Select Committee on European Legislation has examined it in two reports. No one can deny that it is a matter of political importance.
The proposals for agrimonetary arrangements have important implications for participating and non-participating countries. The United Kingdom is, of course, one of the four non-participating countries. It is important for producers, consumers, traders and taxpayers that we get the right balance of measures.
The report of the Select Committee on European Legislation, dated 28 October 1998, notes that the basic changes proposed are, in principle, straightforward and commonsensical, but that they have implications for the operation of the common agricultural policy that need to be understood and addressed. To do that, the Government have consulted widely with interested organisations, and have examined the budgetary consequences of the arrangements and the practicalities of implementing them. Many of the issues raised by our examination relate to complicated and detailed problems: that is evident in the summary of industry consultations that formed part of the appendix to the explanatory memorandum of 12 October. We can discuss those problems in greater detail during our debate. At this point, however, I shall touch on the broad areas of concern identified by the Select Committee.
The first of these is the use of the daily market rate. That has evident value in achieving the UK's long-term aim of moving away from the highly artificial market support systems that have prevailed so far under the common agricultural policy. However, we recognise that that involves significant adjustments for business, and we have focused on ensuring that any technical and administrative problems have been adequately addressed. We have secured a declaration from the Commission that it will examine problems with operative events--I will be happy to define that term later--for determining rates on a sector-by-sector basis. That will help to give traders the greater certainty that was previously provided by the option to pre-fix.
We are also considering the consequences for annual direct payments if the exchange rate on the operative date is particularly atypical. Nevertheless, our overall aim is to be realistic and to have a system that is simple to operate.
On the issue of compensation, our priority has been to ensure that United Kingdom farmers do not face the full consequences of the loss of green rate protection on 1 January 1999--the birth date of the euro. Given the imbalances created by the current agrimonetary system, farmers would have faced an 11 per cent. to 15 per cent. cut in payments. That alone is an indication of the massively distorting effect of green rates. However, in the long term, compensation would undermine the whole move towards closeness to the market. We must get to the point where any compensation is seen as a safety net, rather than as an automatic response to normal market fluctuations. That is an important point for the Committee to consider during its deliberations.
Finally, with regard to payments in euros, my right hon. Friend the Minister of Agriculture, Fisheries and Food last week announced his intention to offer payments in euros for market-support measures from autumn 2000--I cannot be more precise about the date at present--and we shall examine further what could be done on direct payments. To make the option worth offering at all, the UK had to secure a change in the Commission's original restrictive proposal. The Commission has now changed its draft to minimise discrimination against euro payments in the four non-participating countries. We are now looking at the details of a system that confers the benefit of euro payments while avoiding the risks of speculation. We know what would happen if there was a possibility of speculation, and we want to avoid that.
It is inevitable that the existing agrimonetary system should be adjusted in response to the single currency; the CAP is a huge part of the European Union's budget. The proposals for making the change are taking shape in a way that seems to respond to the UK's main concern. They have the potential to minimise discrimination between the countries that are ``ins'' and the ``pre-ins'', to keep costs down, to reduce trade distortions and to increase market transparency, which the Government are keen to do. The proposals would also give the EU an agrimonetary policy that is compatible with its existing and future international commitments and with the whole market-orientated thrust of Agenda 2000.
Change is coming and we cannot opt out of that. The fact that we are not opting into the euro is neither here nor there for the purposes of the Committee. We must have arrangements that do not discriminate against UK agriculture, and we must ensure that those arrangements are transitional and fit in with the future thrust of the policy both of the Government and of Agenda 2000, which we wholeheartedly support.
I will do my best to answer the questions of members of the Committee and to enter into debate.
Mr. Michael Jack (Fylde): On a point of order, Mr. Atkinson. Last Thursday, I asked the Vote Office for the papers for the Committee. I was given a copy of the regulation and of the findings of the Select Committee on European Legislation, but the explanatory memorandum from the Ministry of Agriculture was not available. Can you, Mr. Atkinson, advise the Committee when we might have expected to receive that document? In his opening comments, the Minister of State referred at length to the explanatory memorandum, but hon. Members have had minimal time to consider that important paper on this complex matter.
The Chairman: That is not a point of order for the Chair. The Chair's responsibility is to ensure that all the papers are available when the Committee starts. However, I am sure that the Minister has heard the right hon. Member's comments.
We can now take questions to the Minister until 11.30 am. I remind hon. Members that questions should be brief. There will be ample opportunity for hon. Members to ask more than one question, and I should be grateful if they would ask one question at a time.
Mr. Christopher Gill (Ludlow): Will the Minister clarify the point about the daily market rate? When he mentioned its application to compensation--or to CAP payments--was he referring to the date on which the decision to make the payment is made, the date of the payment itself, or some other arbitrary date?
Mr. Rooker: The intention is to use the daily market rate at the time of the transaction. Many other countries have said that they might want to average out a set of daily rates over a month, but we do not think that much would be gained from that. However, if there are atypical market movements after the transaction has been agreed but before the delivery, there must be an arrangement to take account of that. It would normally be the market rate when the transaction is agreed, and I fully accept that that could be some time away from the execution of the transaction. If there are atypical market rate movements, the issues must be addressed.
We want to stick as closely as possible to the daily market rate. However, we are examining the case for smoothing out rates over a period. We do not want to build a sub-agrimonetary system inside the current system. That would happen if we started to average out rates.
The hon. Gentleman made an important point, to which there is no clear response. We intend to use the market rate on the date when the transaction takes place and is agreed. However, the commodities could be delivered or paid for several weeks or months later.
Mrs. Janet Dean (Burton): How close are we to a final decision on the new arrangements? The answer is important to farmers. I am pleased by the subject of the debate--the Committee's previous debate was on fisheries, and I represent one of the most inland constituencies in the country. Therefore, it is good to discuss a subject that is relevant to my constituency, because concern will persist until a final decision is made.
Mr. Rooker: As I understand it, the final decision will be made at the Agriculture Council in December. There is also an Agriculture Council meeting next week. The decision must be made in December, because the euro will be introduced on 1 January. Negotiations are currently taking place, but the final decision about the new system should be made before the introduction of the euro. The date of the December Agriculture Council meeting escapes me, but I suspect that it will be before Christmas.
Mrs. Caroline Spelman (Meriden): We share the Government's desire to ensure that non-participating countries should not be discriminated against. Is not the risk to our competitive position more likely to arise in the second and third years of the application of the regulations when it is at the discretion of a member state to compensate the 50 per cent. that the regulations envisage? In the light of recent experience of the Government's willingness to compensate under the agrimonetary scheme, could the Minister assure us that British farmers will not be discriminated against?
Mr. Rooker: I take the hon. Lady's point that the European Union will fund 100 per cent. of the compensation in the first year of the regulations. I detected a slight note of implied criticism of the Government in the tone of the hon. Lady's question about the second and third years. We have announced that we shall pay the full £48 million that is available under the agrimonetary compensation scheme this year. Last year, we paid all the money--£75 million--that was available under the scheme.
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