The
Deputy Presiding Officer (Trish Godman):
The next item of business is a statement by Allan Wilson on common
agricultural policy reform. The minister will take questions at the end of
his statement, so no interventions should be made.
The Deputy Minister for Environment and Rural Development (Allan Wilson):
The common agricultural policy reform agreement of June last year provides
key flexibilities in the policy's operation. For the first time in more than
a generation, we in Scotland can influence the direction of agricultural
policy in Scotland and tailor support arrangements to our circumstances and
strategic objectives.
The consultation exercise on the implementation of CAP reform in Scotland
has been completed and received 292 responses. A summary of the outcome has
been sent to all those who responded and is available in the Scottish
Executive library and on the Executive's website. I am pleased to report
that most respondents embraced the objectives of the partnership agreement
and "A Forward Strategy for Scottish Agriculture", which of course reflect
the widely agreed strategic focus for the future of agriculture and rural
areas in Scotland.
The Executive has now reached decisions on the key high-level implementation
issues. Our decisions make full use of the flexibilities that are available
to advance our objectives. We will support the more rapid development of
environmentally sustainable farming that provides consumers with quality
products. We will shift subsidies away from merely supporting production to
recognising the economic, social and environmental contribution that
agriculture makes to rural development. We will use this opportunity to
develop land management contracts to deliver reformed CAP support that takes
account of the diversity of Scottish agriculture and its economic, social
and environmental impact. We aim to do that by fostering a spirit of
partnership and involving all interested parties in future decision making.
The essence of the CAP reform agreement is decoupling, which is the
separation of the receipt of subsidy from the need to produce. In Scotland,
the decision is for full decoupling. That means that we will not take up any
of the options to retain the existing support schemes. The decision also
extends to early decoupling in the dairy sector from 2005, which is in line
with the position in other sectors.
The decision for full decoupling is the single most important step in
achieving our strategic objectives.
The first and most important outcome is that producers will make decisions
in response to the market rather than in response to subsidy scheme rules or
incentives. That will encourage sustainable farming. The second outcome,
which is also important in its own right, will be a reduction in
bureaucracy. The form filling and bureaucracy that is associated with the
current six main support schemes will be reduced with the introduction of
the single farm payment. The payment will be based on subsidy receipts
during a reference period, which will be 2000-2002 in most cases—the
so-called "historic basis". That is the standard system envisaged in the
European Union legislation. It will provide vital stability for farmers so
that they can adapt to the major changes that full decoupling will bring.
Payment will be conditional on recipients adhering to environmental
standards and sustainable farming practices. Such so-called
"cross-compliance" will include the requirement to maintain land in
"good agricultural and environmental condition".
We have worked closely with environmental experts and land managers to
develop cross-compliance standards that are appropriate to Scottish
circumstances. I will initiate consultation on those standards very soon.
Our work to develop cross-compliance standards will ensure that farmers must
comply with demanding but fair environmental requirements in return for
subsidy. The new standards are important. My hope today is that all those
who are involved in responding to the consultation will view the standards
positively. We need to recognise that the delivery of environmental benefits
and sustainability are crucial.
There is an issue about the long-term rationale for the single farm payment.
As currently drafted, the legislation does not provide for a review date,
but we will press for one. It is also worth remembering that, although the
CAP reform provides Scotland with considerable flexibility to operate
policies in ways that are suitable to Scottish circumstances, the basis for
support payments is still determined by EU legislation. Hence, the long-term
rationale for the payments is not for us alone; it must be addressed at EU
level. For our part, we will stress the link between the payments and the
public benefits that accrue by keeping our land farmed.
Some respondents to the consultation have raised questions about the
undesirable consequences of the tradability of entitlements. The suggestion
is that consideration should be given to ring fencing certain areas in order
to prevent entitlements from coming into or going out from those areas. That
issue will be considered once the implementing legislation has been agreed
in March or April. Decisions on whether we should pursue ring fencing will
be taken in the light of further analysis of the position at that stage.
Let me turn to the national envelope provisions in the reform agreement,
which provide us with the ability to top-slice the single farm payments and
to use the money for specific types of farming that are important for the
protection or enhancement of the environment or for improving the quality
and marketing of
agricultural products. Our intention is to make use of those provisions only
in the beef sector to support quality calves for beef production. However,
final decisions on the detail of the scheme that will be introduced will
follow further discussion with the interested parties. The details will also
depend on the provisions of the EU implementing legislation, which will not
be finalised until March or April.
Among the consultation responses, there was almost no support for use of the
envelope provisions in sectors other than beef. Even the support for a
national envelope in the beef sector was guarded and qualified. A number of
respondents argued for use of the provisions as a short-term measure to be
replaced after a period by a specific environmental scheme for retaining
suckler cows in peripheral areas under the rural development regulation.
In the medium to long term, the future of the beef sector, crucial as it is
both at farm level and in downstream processing and marketing in Scotland,
will be to respond to market signals under full decoupling, as in every
other sector. The problem is that, in the short term, we do not have a
stable market position.
The export arrangements continue to be highly restricted. Hence, the beef
sector, more than any other, remains vulnerable to short-term uncertainty.
Aside from those market issues, however, there are widely held and
well-founded concerns about loss of cows from certain areas, which would
have environmental and social implications. Our intention is to consider a
scheme from the envelope moneys that addresses both the short-term market
issues and the environmental and social issues. Whether the envelope
arrangements can be used on a transitional basis will remain uncertain until
the implementing legislation is finalised—we will be exploring that
possibility as the negotiations on the legislation proceed. Our intention is
to address as fully as possible the short-term issues before deciding to
discontinue the national envelope provisions.
Finally, I turn to modulation. Our intention is to move to a combined rate
of at least 10 per cent by the end of 2007. That includes both EU compulsory
modulation, which will be at 5 per cent in 2007, and additional national
modulation. However, our intentions, including the possibility of a higher
rate, will be clarified once we know the outcome of the 2004 United Kingdom
spending review. That is because European rules mean that modulation moneys
cannot be spent without a member state contribution. Currently, that
contribution is £1 match funding for every £1 raised through modulation. We
will know the future position on match funding by early summer or midsummer
2004.
In the consultation responses, the greatest divergence of view arose over
the level of future modulation.
The rate of modulation determines the amount of funding available for rural
development measures designed to purchase the range of outputs—economic,
environmental and social—that the public want. It also determines the speed
of development of the land management contract model, which is our strategic
approach to the delivery of payments for the different outputs.
The increase in modulation by 2007, subject to decisions on match funding,
represents more than a doubling of the modulation funds that are currently
available. Our intention is to press at European level for better European
funding for our rural development measures in the next EU financial planning
period —2007-2013.
Decisions on whether to go beyond 10 per cent will depend on future match
funding decisions, on further work with all interested parties on the
options for rural development investment and on the wider sources of
possible rural development funding.
In the consultation responses, various measures and priorities were
suggested for rural development spending and the use of additional
modulation moneys. We will initiate work quickly with all involved to
develop those ideas and proposals and to identify priorities for support.
That engagement will also look at developing the work already undertaken on
land management contracts with the firm objective of using that approach as
the main vehicle for support payments in the future. As set out in the
partnership agreement, there is a lot of work to be done in that area and we
need to get down to it quickly. We also need to maintain the sense of close
co-operation between interested parties, which was apparent during the
consultation exercise. The future has to involve partnership, which is a key
agriculture strategy theme.
The decisions today represent only the start of a process. Apart from
further decisions on the use of additional modulation funding and on the
national envelope for beef, several important decisions will need to be
taken and further consultation exercises will arise as a result of the EU
implementing regulations, which are likely to be finalised in March or
April. There will be key decisions on the use of the national reserve, the
need to consider the transfer arrangements for entitlements and the question
of resolving the basic entitlements in the first place, including appeals
arrangements. Again, that will require close engagement with interested
parties. We are considering how best to engage in the most productive and
least burdensome way.
The decisions that we have taken within the flexibilities available in the
CAP reform agreement are radical and will greatly advance the achievement of
our strategic objectives as set out in the partnership agreement and the
agriculture strategy. We will have to take more decisions on the detail,
particularly when the EU implementing legislation is finalised, but the
decisions that I have announced today set the basis for a sustainable future
for Scottish agriculture and rural areas more generally.
The Deputy Presiding Officer: The minister will now take questions on the
issues raised in his statement. I intend to allow 20 minutes for the
questions, after which we will move to the next item of business. It would
be helpful if members who wish to ask a question pressed their
request-to-speak buttons now. A considerable number of members wish to ask
questions, so members should remember to ask questions rather than make
statements.
Roseanna Cunningham (Perth) (SNP): I welcome the minister's statement, which
goes a considerable way towards addressing some of the key questions and
problems raised by a number of sectors in the industry, notably the beef
sector. However, I note that a considerable number of issues remain
unresolved and much uncertainty remains. I wish to question the minister on
a few specific issues.
First, the door is obviously left open for the modulation rate of 10 per
cent to increase, but a great deal is dependent on the availability of match
funding and I presume that that depends in turn on the United Kingdom's 2004
spending review. Does the minister have an ideal percentage target in mind?
How confident is he that match funding will be made available? Indeed, how
confident is he that he will even be able to maintain the proposed 10 per
cent rate?
Secondly, the minister indicated that he wants to press for a review date
for the single farm payment. Does he have a date in mind? If so, what is it
and how confident is he of success in achieving it?
Thirdly, I note that a number of final decisions are still to be made, one
of which involves consultation on cross-compliance standards. Does the
minister have a timescale for completion of that?
Allan Wilson: I thank the member for welcoming my statement. On her point
about cross-compliance standards, I hope that Jim Wallace and I will shortly
make an announcement on a consultation. We will look forward to hearing the
member's views and those of others on that. On the negotiations with the UK
Treasury, in which we will engage with our colleagues in the Department for
Environment, Food and Rural Affairs, it would be inappropriate for me to set
a timescale or a target because the negotiations are obviously continuing
and
the timescale will become clearer as they ensue. Equally, on the EU
developments on the single farm payment, I cannot set a particular target
for when we would want to return to the matter. However, we intend to return
to it during the discussions with the EU.
Alex Fergusson (Galloway and Upper Nithsdale) (Con): I am John Scott in
another guise.
Mr Jamie Stone (Caithness, Sutherland and Easter Ross) (LD): John Scott has
more hair.
Alex Fergusson: The member is quite right; John Scott has a touch more hair.
I thank the minister for his courtesy in making the statement available in
good time prior to his delivery of it in the chamber. In general,
Conservative members welcome the commitment to full decoupling, including in
the dairy sector, to the adoption of the historic basis for the single farm
payment and to the opting at
this stage for the maximum permissible amount of modulation. However, within
that general acceptance, I have three questions for the minister.
First, what will be the reference period for decoupling the dairy sector? If
it is to be 2005 or later, can the minister explain why it cannot be
retrospective, as it is with other sectors? Does he agree that a future
reference date can only play havoc with an already distorted quota market
and lead to an inflated price for quota that may be worth absolutely nothing
in 2006?
Secondly, the use of a national envelope for the beef sector seems to be
inconsistent with the clarity and simplicity of the rest of the statement.
Does the minister agree that a far better method of support for quality beef
calf production would be through pillar 2 support under the rural
development regulation? Will he confirm that any use of the national
envelope will be for the briefest possible length of time?
Finally, on modulation, can the minister confirm that the first €5,000 of
support is not to be modulated?
Will he ensure that—in line with his recognition of the economic, social and
environmental contribution that agriculture makes to rural
development—farmers will have the first call on the re-circulation of
modulated funds? Will he assure members that, if the Chancellor of the
Exchequer is not to continue the match funding that he currently provides on
modulated funds, the Executive will not increase the burden on farmers to
compensate but will reduce it to a degree that is similar to the
chancellor's reduction?
Allan Wilson: Dairy farming decoupling is determined by EU regulations. I am
happy to go into the detail of that with Alex Fergusson afterwards.
On the two more general questions about historic payments, I am glad that
Alex Fergusson welcomes our decision, which I believe provides vital
stability for farmers to adapt and respond to market signals.
Decoupling will already involve a considerable change in thinking. To have
done other than we did would have been to create an unnecessary additional
burden on the agricultural community.
On modulation, we have said that we intend long-term growth of rural
development measures beyond 2007. Of course, funding for that and how that
money circulates within the agricultural community will depend on a number
of factors, including changes in the EU budget for rural development and
discussions with the UK Treasury on match funding. Those moneys will allow
us to make considerable progress on rural development measures, to achieve
agricultural strategy objectives and to advance the land management contract
model by which we set such strategic store. I hope that, by that process,
progress in rural development will ensure that the modulated funds return to
the wider rural community. That will, of course, include agricultural
businesses, which form a vital part of our rural development.
The new arrangements will enable applications for agri-environment funds to
benefit a wider group of people than those who currently benefit. In
Scotland, we have a much higher percentage of agricultural businesses
benefiting from agri-environment schemes than is the case south of the
border.
George Lyon (Argyll and Bute) (LD): I welcome the minister's statement, as
will farmers throughout Scotland, who can now look forward to throwing off
the crippling burden of bureaucracy and form filling that has beset the
industry since the 1992 McSharry reforms.
I have two specific points, one of which has already been raised by my
colleague Alex Fergusson. First, there is a real debate about the proper way
of addressing the industry's rightful concerns about beef production in
Scotland. To make the right decision on whether the national beef envelope
is the way forward or whether we should look to the rural development
measures to address that concern, we need good, hard information. Can the
minister guarantee that the Scottish Executive is gathering the appropriate
information on who currently produces high-quality beef calves and on the
geographic nature of where their production takes place? Without that
information, it will be difficult to come to a decision on the right way
forward.
Secondly, I plead with ministers to ensure that the linkage between the
payments and the public benefits that we expect farmers to deliver should be
based on the principle of the carrot rather than the stick. I fully believe
that the right way of encouraging farmers to provide those public benefits
is to ensure that they are rewarded for doing the work rather than penalised
for failing to do it. I plead with the minister to adopt that principle, so
that the carrot rather than the stick is used to deliver those benefits.
Allan Wilson: I am not known for my use of the stick, it has to be said.
On the objectives of a national envelope for beef, final decisions on the
scheme obviously depend on further discussion with all concerned, which
clearly includes the producers. I shall ensure that the best advice is
available to civil servants on the detailed provisions in the implementing
legislation and I assure George Lyon and Alex Fergusson that those
discussions will include all the relevant organisations representing farming
interests.
Where public subsidy takes the form of a single farm payment and is no
longer related to production subsidy, and where we seek public benefit in
terms of environmental improvement and future rural development,
cross-compliance ought to include—and must include—penalties for failure to
deliver on that public agenda.
We have to acknowledge that that is the proper way in which to proceed,
although the proposals will be incorporated into the cross-compliance
consultation when we deliver on that. However, that does not mean that we
will look to use the penalties as a first resort as opposed to a last
resort. I do not expect that we would wish to use the penalties to ensure
cross-compliance except in the event of a producer's failure to deliver on
the public benefit that modulation gives us the opportunity to take forward
in respect of better rural development.
The Deputy Presiding Officer: Before I call Sarah Boyack, I remind members
that they are supposed to ask questions. I would like to fit in the 11
members who have a question for the minister, but I will not be able to do
so if members make statements, which is unfair to colleagues.
Sarah Boyack (Edinburgh Central) (Lab): As a Labour member, I welcome the
minister's statement. This is the beginning of the end for the common
agricultural policy, against which we have campaigned for years.
Will the minister confirm that 10 per cent modulation will deliver £40
million of new investment for our rural environment in Scotland, which will
bring huge public policy benefits across the country? What plans does he
have to manage the transition period after 2007 to move us to a position
whereby spending on agriculture is founded on the needs of Scottish rural
communities? Will we deliver a much more integrated approach than the one
that we have at the moment, so that we can link up a regional focus on the
key priorities such as organic farming and forestry management and create
much more environmentally sustainable and integrated rural development? Will
he say something about the clear and measurable public objectives that will
be needed if we are going to spend this public money in a totally different
way?
Allan Wilson: As a Labour minister, I am of course proud of the fact that
the announcement that we have made today, in concert with our Liberal
Democrat partners, takes forward full decoupling and increased modulation.
The announcement is indeed a watershed in respect of future agricultural
development, better environmental management and rural development as a
whole. I can indeed confirm that the combination of EU modulation plus match
funding—less current plans—means that the additional, new money that will be
available for rural development in 2007 as a result of our decision to go
for a rate of 10 per cent modulation is £40 million. That is a considerable
sum of money. I believe that, properly utilised for better agricultural and
environmental management and better rural development, it will make a real
difference in our rural communities.
Rob Gibson (Highlands and Islands) (SNP): I welcome the statement. However,
will the minister give us a flavour of how he sees the national envelope
working to support the quality beef sector, given that the short time that
he referred to in his statement is of an uncertain length and during that
time the market for quality Scottish beef will remain highly vulnerable? Is
he prepared to guarantee that the national envelope will be used for as long
as is required to support the vulnerable communities that rely heavily on
the sector?
Allan Wilson: I thought that I had said as much in my statement. The
important point is that the national envelope will provide short-term
stability for the beef market until the export position is normalised. The
fact that the beef sector remains open to short-term uncertainties led to
our decision, which I believe is the right one, on the use of the national
envelope. That is a Scottish solution for Scottish circumstances.
The national envelope provides an incentive for cattle to be retained in our
more peripheral areas for environmental reasons as well as for the social
reasons to which I referred in my statement. That is important for the area
that Rob Gibson represents. I take the point that Opposition members have
made about the transitional nature of what I announced today. It is our
intention in the longer term, whether by the national envelope or another
mechanism, to ensure that the beef sector is protected, not only for the
benefit of agricultural beef protection, but to retain the social and
environmental benefits of keeping cattle in peripheral areas.
David Mundell (South of Scotland) (Con): The minister mentioned that the
appeals process is still to be determined and consulted on. Will he ensure
that the impact of the foot-and-mouth outbreak in 2001-02 on historic stock
levels is taken into account in that process? Will the appeals process
enable an appeal to be made on that basis?
Allan Wilson: I asked officials that question when we looked at the 2000-02
reference period as the basis for the historic payment. As David Mundell
said, issues such as the national reserve and appeals mechanisms still have
to be decided on, but I am determined to ensure that nobody will be
disadvantaged as a
consequence of the events to which he referred.
Mr Mark Ruskell (Mid Scotland and Fife) (Green): Does the minister agree
that opting for a low level of modulation effectively sends a message to
Scottish taxpayers that they must not only subsidise overproduction and
overgrazing, but pay further to tackle pollution, such as agricultural
run-off, in order to comply with, for example, the tighter standards that
are to be imposed under the Water Environment and Water Services (Scotland)
Act 2003?
Allan Wilson: No, I do not. The member should be patient and await the
outcome of the consultation on cross-compliance and the requirement to
maintain land in good agricultural and environmental condition, which is a
fundamental part of our proposals. If I thought that our proposals would in
any way damage future environmental management of our rural areas, we would
not pursue them. As for the additional moneys to be made available through
increased modulation, the £40 million to which I referred will make a
substantial difference to better environmental management in our rural
areas. The Scottish Green Party should welcome that.
Dr Sylvia Jackson (Stirling) (Lab): I recently attended a meeting of the
National Farmers Union Scotland at Gartmore. Much of what the minister said
will please its members, particularly in relation to decoupling and form
filling, which we talked about at the meeting. I will follow up Alex
Fergusson's comment on the dairy industry.
Recently, John Kinnaird —
[Interruption.]
The Deputy Presiding Officer: Do we have a question?
Dr Jackson: Yes, we do, if the Opposition is ready to listen.
Recently, John Kinnaird, the president of the NFUS, stated that an
independent report on the UK dairy sector would inform the debate on the
future of the sector after the reforms. Will the minister indicate how the
industry will proceed following his announcement today?
Allan Wilson: I know Gartmore well and I am sure that today's announcement
will be welcomed there, as it will be in farmyards throughout the country.
As for the effects on the dairy industry, the only specific decision in
today's announcement is early decoupling in the dairy sector. I trust that
that will be welcomed by people who work in the sector, because it will
bring dairy into line with other sectors. Other decisions on the dairy side,
as I said to Alex Fergusson in response to his question, will be announced
separately.
Alex Johnstone (North East Scotland) (Con): The minister said that the beef
sector has to be treated carefully, but will he undertake to do that with a
light hand, because one of the greatest environmental benefits that the
changes could facilitate would be the movement of cattle down off the hills
and back into the environmental deserts that have been created in the east
by the CAP over the past 20 years? Will he give an undertaking that money
that has been accrued through modulation will be redistributed through the
rural development regulation in such a way as to begin to eat away at the
prejudices created by a system that taxed the many and rewarded the very
few?
Allan Wilson: Alex Johnstone will find, if he reads the Labour Party
constitution, that we are all about rewarding the many and not the few. I
discussed the issue that he raises with the Secretary of State for
Environment, Food and Rural Affairs. We share the view that a light touch is
needed in respect of the regulatory regime. It is important to take that
approach, which we will discuss with the NFUS and others. As we have
outlined today, the national envelope is designed to bring stability to the
beef sector and environmental improvements to our rural and peripheral
areas. As members might imagine, these issues are finely balanced, but I am
sure that on balance people will agree that we took the right decision,
which will help to restore stability in the market.
Richard Lochhead (North East Scotland) (SNP): I have two brief questions.
First, the minister talked about seeking a review of the single farm
payments. How soon after they come into force would he like a review? Is he
talking about one, two or three years? For what timescale will he be
pressing? Secondly, on the national beef envelope, given all the uncertainty
surrounding the reforms, does he have full authority to make adjustments at
any time that he sees fit or are there obstacles that prevent him from
intervening?
Allan Wilson: That is of course a devolved matter, but we have to introduce
the schemes to comply with EU regulations. There are and will be discussions
between the devolved Administrations, the UK Government and the EU
commissioner on the final outcome of all the responses to decoupling and
modulation issues. I answered the question on setting timescales for
discussions when I responded to Richard Lochhead's colleague Roseanna
Cunningham. With respect, I announced the decisions only today, so to start
talking about when we
should review them is a bit premature.
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