Speech by The Rt Hon Jeff Rooker at the Agra Europe Conference, London – 2 April 2008
I would like to thank the organisers for inviting me back to speak at this event for the second year.
2008 is a milestone year for the Common Agricultural Policy with the “Health Check” dominating the work of the Agriculture Council. We support the Commission’s and French Presidency’s aim of getting a deal this year, before we run into the European Parliament elections next spring.
I would like to set out the UK Government’s position on that negotiation, and announce that we are publishing today a formal response to the European Commission’s communication on the Health Check.
Ambitions for farming in the UK
We are now seven years on from the landmark report of the policy commission on farming and food, chaired by Sir Don Curry. Their vision still guides our approach to farming and underpins our position on the CAP. Indeed I see Sir Don Curry almost every week. This is what his Commission said:
“We look for a profitable and sustainable farming and food sector, that can compete internationally, that is a good steward of the environment, and provides good food and a healthy diet for people in England and around the world.”
But this is what they had to say about the state of farming back in 2001, following the major foot and mouth outbreak:
“It is our strong view that the industry is on a path which cannot be sustained ...Taxpayers are spending £3bn, consumers are paying more for their food, farm incomes are on the floor, the environment has been damaged, the social fabric of the countryside is being put at risk, consumers are concerned about food safety, nutritional standards are poor.”
Things aren’t all rosy yet, but a lot has improved.
Following Curry, we introduced a new agri-environment scheme which means over 60% of farmland in England is now under positive environmental management. We also invested considerably to improve competitiveness through benchmarking, best practice and collaboration - which farmers in England have traditionally not been very good at. Bodies such as English Farming and Food Partnerships, the Food Chain Centre and the Red Meat and Cereals Industry Fora have developed tools to help many farms improve competitiveness.
And we have made good progress on a vital element of the Curry agenda – reform of the CAP.
Ultimately, we must get to the point where farming in Europe is profitable in a globally competitive environment, without the perpetual need for public subsidy. Those subsidies have contributed to the unpopularity of the EU amongst many UK taxpayers. But it is right that the public continues to pay farmers for the benefits which society values - in particular environmental and landscape protection.
That remains our long term vision for the CAP.
The 2003 reforms were a major step forward, establishing the principle of decoupling so that farmers were free to make their production decisions on the basis of market demand. They also improved environmental benefits through cross-compliance and more rural development funding.
I am very pleased that Mariann Fischer-Boel has continued to advocate a liberalised, market oriented, and environmentally focused CAP. That shared perspective has enabled the UK to work closely with the Commission on the future reform agenda and we want to be able to give the Health Check our maximum support. Of course, it would be naïve to imagine that the Health Check will give us all we want, but the direction of travel is right.
So what role should the Health Check play in the evolution of the CAP?
Clearly we must take stock of the 2003 reforms and adjust those aspects which need improvement. But the world does not stand still, so it is vital that we also update the CAP in the face of changing challenges.
The Health Check must be as ambitious as possible in giving farmers greater control over their business decisions so that they can profit from the globalising economy. It must reduce administrative burdens and market distortion and direct a greater share of funding towards the growing environmental challenges.
Health Check specifics
The Commission see three broad elements to the Health Check: adjusting direct farm payments, reforming market price support and responding to new challenges. I will set out the UK Government’s position on each of those.
Direct payments
It is vital that we fully decouple all the farm payments which remained linked to production after the 2003 reforms. A number of Member States have retained coupled payments which prolongs distortion and undermines farm competitiveness. The Commission and Council must show leadership by setting a clear timetable for full decoupling.
And we must not reintroduce coupled payments by the back-door. Putting some Pillar 1 funding into so called “national envelopes” under Article 69 of the 2003 legislation presents one such risk. We are certainly interested in examining how national envelopes could bring greater public benefits. But we must get the criteria right. If national envelopes are used, they should not distort markets but should produce clear public benefits and be time-limited so that they do not pre-empt future reform.
The Health Check provides a key opportunity to simplify direct payments for farmers. We should rationalise the system of entitlements and give Member States the option to increase minimum payment levels. Those two measures alone would cut bureaucracy and greatly improve efficiency in making payments to farmers.
A particularly important area for simplification is cross-compliance.
We supported the introduction of cross compliance which made CAP payments dependent on various environmental, health and welfare regulations. It has improved standards but there is clearly scope for cutting the administrative burden on farmers. We should not be afraid of removing those requirements which have had little benefit. The guiding principle should be for a coherent set of measures aimed at those issues where farmer performance needs improving and which are under the direct control of farmers. We are discussing with stakeholders the specific changes needed to achieve that.
Of course, if a key objective of this Health Check is to reduce burdens, then every effort must be made to avoid introducing new ones. Limits on higher levels of farm payment, or other variations which differentiate according to farm size, would be particularly complex and distorting.
Some people have accused us of watering down our CAP reform ambitions by opposing such limits. That is absolutely not the case. Our vision for the CAP remains very clear - we would like to see direct payments to all farms phased out by 2015 to 2020, leaving just those payments which bring public benefits such as environmental schemes. However, while the income support subsidies remain, it would be counter productive to put limits on some of them.
Why? Well, in order to compete in a globalising market, farmers need to make their own decisions about the size of their business. Payment limits would discourage some from expanding to become more competitive and encourage larger farms to break up their businesses. What would be the point of limits if farms just avoided them by breaking up? It would just be a costly gesture, bringing no public or commercial benefit – it seems to me that only the lawyers and accountants would benefit as farmers tried to break up their businesses.
Market Management Measures
I’ll turn now to the market management side of the CAP.
We cannot hide from the globalising economy. On the contrary, it holds great benefits for global society, including our own prosperity and for European farmers themselves. So we must adapt. For agriculture, a key step must be the end of the market management system which has hampered global trade, raised consumer prices and made our economies poorer. The Health Check should set a clear timetable for ending all intervention purchasing, export subsidies and production controls.
With booming global demand, the opportunities for the dairy sector are particularly exciting, so it is vital that European production is not constrained. I am pleased, therefore, that milk quotas have been increased this year and will not be renewed when they expire in 2015.
The dairy sector needs a smooth transition. That means a simple phase out which gives farmers certainty to plan. Quotas should be increased uniformly at a modest rate each year for all Member States. In parallel we must phase out the other elements of the price support system such as intervention, export subsidies and the subsidised use schemes. If we don’t, we’ll see a costly return to the butter mountains of the past as production increases, making the CAP even more unpopular.
We strongly support the Commission’s proposal to end compulsory set-aside, freeing farmers to take their own production decisions. However, set-aside has brought significant environmental benefits so we support the Commission’s intention to ensure Member States retain those. We have been working closely with stakeholders on how best to achieve that.
The past year has seen a dramatic rise in prices for several agricultural commodities. For some farmers that has boosted incomes. For others, it has increased costs. Pig producers are suffering particularly and I fully support their campaign to encourage retailers to maintain a viable supply chain. It is in supermarkets’ and processors’ own long term interests to establish fair arrangements with their local suppliers, in order to continue to meet demand. As for Government, Defra has provided £2 million to promote red meat marketing in the wake of last year`s foot and mouth outbreak and we have also strongly supported Commission action to increase the supply of feed cereals.
As our farmers face the ups and downs of a freer market, it is important for them to manage price risks better, as other sectors of the economy do. Many non-distorting, market based measures are already available such as diversifying income, insurance, tax averaging, saving and borrowing, mutual funds and futures and options markets. Some Member States have called for EU funding for risk management. But the guiding principle must be for public authorities to help farmers manage risk themselves, not to manage it for them. Indeed, Defra has already provided half a million pounds to improve price risk management skills amongst arable farmers.
New Challenges
Finally, I’ll say a few words about the new challenges which the Commission have correctly identified. Climate change, bioenergy, sustainable water management and the decline in biodiversity are all significant issues for us and we support greater action to address them. But we do need to increase funding through Pillar 2 of the CAP in order to do so. That means further transfers of funding from Pillar 1 through so called “modulation”. However, we need to be sure that the details are right. The mechanism for modulation must be simple and ensure the UK receives a fair increase in its rural development budget in order to meet the priorities we have already set in our Rural Development Programmes as well as contributing to the new challenges. We need to move away from the historically unfair allocation of EU rural development funding which the UK has received.
We must also address the new challenges in a sustainable and coherent way. Let me take the example of biofuels. There is no point promoting biofuel production which does not produce greenhouse gas reductions or which destroys habitats and threatens food supplies. And we cannot use biofuels as an excuse to reintroduce market and trade distortions through production subsidies and high tariffs. A more coherent solution would be to focus on the development of the next generation of clean, sustainable biofuels.
Conclusions
I have set out our position for the Health Check but, of course, it sits within a broader context.
The WTO negotiations on the Doha Development Agenda are at a “make or break” point. Their success would be a great boost to the global economy at a time when fears are high about a slowdown. Our support is fully behind the Commission in trying to close a deal within the next few weeks.
And next year, we will get into a fundamental review of the whole EU budget. Heads of Government will be taking a hard look at how public spending can deliver most value for our societies. Our view of what that means for the CAP is clear, with the phase out of Pillar 1 and the focus on environmental protection. I am optimistic that the Health Check will keep us moving in that direction and I look forward to the debates ahead.
Page published: 7 April 2008