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Common Agricultural Policy: Financing (EUC Report)

My Lords, I, too, congratulate the noble Lord, Lord Anderson, on his maiden speech. I am sure that he will continue to make many such valuable contributions to the work of your Lordships’ House. Since its inception, the CAP has had enormous influence on our countryside—some good but some bad. On the bad side, the environment springs to most people’s mind, but I also believe that the long-term viability of our agriculture is not greatly assisted now by the drug of subsidy, which is Pillar 1. I say that as a farmer, and declare an interest as such. The problem remains how to get from a highly subsidised regime to one of greater economic reality without threatening the lives of those businesses that have to go through cold turkey. As the noble Lord, Lord Whitty, said, decoupling is a very good start. At the risk of teaching my grandmother to suck eggs, I remind noble Lords that the CAP was originally designed as a social programme to stop large numbers of continental farmers from abandoning the land and turning up in towns, where there was neither employment nor housing for them. As such it was very successful. But if one translated that aim into today’s slightly more positive political language, it might be said that its purpose still is, or should be, to maintain economically and socially healthy rural communities while ensuring that our countryside, its towns, villages, landscapes and so on are sustained to a high quality for us and our children. So if the original purposes of the CAP, which are still valid today albeit in a slightly amended form, were looked at afresh, they would be approached very differently from how they were approached in the 1950s and 1960s. Agriculture is not so important to rural economic life. Even in the predominantly rural regions of the EU 25, agriculture’s share of the gross value-added (GVA) is only 5.8 per cent. In the UK, even in the wholly rural districts, agriculture represents less than 4 per cent of employment and GVA. In the EU 25, as in the UK, over 90 per cent of GVA comes from services and industry. In the UK there are more manufacturing businesses per head of population in our countryside than there are in the towns. If we intend to attack rural deprivation and provide the profits to maintain our rural fabric, including the landscape, we should be looking at pump-priming, though not subsidising, businesses other than agriculture—everything from manufacturing to high-tech businesses—that can now thrive in the 21st-century countryside. If you think that landscape can depend only on farmers, I would say yes, but the survival of nearly all farming families today depends on there being a non-agricultural wage or income coming into that household. Other rural jobs are therefore needed to save those families and maintain our landscapes. In the context of our debate today, it is obvious to me, as to the authors of the report, that it would be of far more long-term benefit to rural Europe to ensure we have a good strong Pillar 2 budget, rather than Pillar 1. This is especially important for some of the central and eastern European countries where agriculture is practised at or near subsistence levels. All the politics and the vested and entrenched interests in the 25 member states, however, indicate that it is Pillar 1 that will be sacrosanct, and that Pillar 2 will be chipped away at over the next few years. This will continue to be the case until the financing arrangements for Pillar 1 are changed to be more in line with those of Pillar 2. Pillar 1 is currently financed entirely from the EU budget. Pillar 2, on the other hand, is co-financed by member states. This is because the Pillar 2 purposes—namely, rural development and the agri-environment—were or are regionally defined and differentiated, and it was thought there should be more local decisions made as to how much should be spent, and on what. That means that the politics of cutting Pillar 2 is now much easier than that of cutting Pillar 2. Changes to Pillar 1 have to be agreed by all 25 member states, and any budgetary pressure tends to be at one remove from the actual decision-makers, the Council of Ministers of Agriculture. Why should Pillar 1 remain centrally financed, though? It is no longer largely commodity-orientated, which required it to be universally applied in order to avoid trade distortions. In fact the Commission is now claiming to the World Trade Organisation that the single farm payment is definitely not trade-distorting. So if it is not distorting international trade, how can it distort internal trade? Also, if the long-term rationale behind the single farm payment is for environmental management—and I have heard it described as ““environmental payments-in-waiting””—surely, as with Pillar 2, a more localised decision-making process would be appropriate. The co-financing of Pillar 1 need not be at 50 per cent, as is currently the case with Pillar 2. It could only be at 20 or 25 per cent to start with. If that happened, however, we might before long get a more rational and sensible approach to the long-term financing of our rural areas.