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Lidington: British agriculture needs Government support

Speech to the Sentry Farms Conference

Any politician speaking on agricultural policy would do well to remember the words of the late President Eisenhower who commented that, "farming looks mighty easy when your plough is a pencil and you are a thousand miles from the corn field".

Politics is more closely intertwined with agriculture than with almost any other sector of industry. Indeed, if farmers and growers have become disconnected from their customers the prime reason is the degree to which political rather than customer pressure has dictated business decisions. Despite this, Westminster spends little time debating the subject. DEFRA's legislative programme for this year includes three Bills, on Waste and Emissions Trading, on the Water Industry and on Hunting. The last two in particular do affect agriculture, the Water Bill because of its possible impact on irrigation and the Hunting Bill because of its implications for the disposal of fallen stock. But I think that it is fair to say that the political decisions that most affect farming in the next twelve months will be those taken by Ministers at international negotiations and those incorporated in new secondary legislation or administrative rules that too often go through Parliament with little or no scrutiny.

The context for political decisions is of course that British farmers face pressures for dramatic change in their industry at a time when the worst agricultural recession in living memory means that there is little around in the way of a financial cushion to help manage the impact of reform.

In agriculture as in manufacturing and services, the trend towards a global market place seems certain to continue. These days, technology and capital can be transferred from one continent to another at the click of a computer mouse. You have only to open the pages of Farmers Weekly to read how countries in Eastern and Central Europe are now for the first time (and often with western investment and western know-how) beginning to apply modern, commercial farming techniques to their own industry. Already, developing countries elsewhere in the world are following suit. It looks likely that this year's WTO talks will see a further shift towards the liberalisation of trade. The move may well end up being less dramatic, more heavily qualified than the Cairns group of countries would like but already the language of the European Union's initial position paper, with its talk of quota and tariff reductions, indicates the direction in which the current is flowing.

Meanwhile, within Europe, Ministers will have to grapple with decisions about the future of the Common Agricultural Policy and how on earth a budget originally intended for 15 Member States is going to be parcelled out within a community of 20 or 25 countries.

Finally, but of critical importance in understanding the pressures on politicians, you need to add into the mix the activity of charities and campaign groups. Development charities like Oxfam or Christian Aid call for an end to farm subsidies and greater access to western markets for food from the developing world. Animal welfare groups and environmental organisations are equally vociferous. Single-issue pressure groups are often adept at influencing wider public opinion either through access to the mass media or through large memberships. The Royal Society for the Protection of Birds, with more than a million members, dwarfs the membership of any British political party.

It is within this context that British politicians have to try to achieve a fair deal for our own farmers and growers.

We now live in what is an overwhelmingly urban and suburban nation. So I want to start by asserting a couple of very basic truths. First, farming still matters. Yes, agriculture and horticulture these days account for a small fraction of domestic product and for relatively few jobs. But farming still matters. We rely on British farmers and growers to produce most of the food that we eat and to do so both safely and efficiently. British agriculture supplies an important food processing industry and export trade. And of course farmers created and sustain the rural landscape that is so valued by the urban majority.

Second, farming like any other business, ought to be profitable. A central aim of British policy, whether in international negotiations or in framing domestic legislation, should be to create the conditions in which our farmers and growers can again make profits. In my view that means aiming for a world where farmers are free to respond to the signals from their customers rather than from those from Government, whether that Government is based in Whitehall or in Brussels. I have far greater confidence in the enterprise and capacity to innovate of British farmers than I have that Whitehall departments or Brussels Directorates-General will be suffused with those qualities.

To get a fair deal in Europe and within the WTO will mean fighting our own corner hard.

The latest proposals from the Commission are, in some respects, an improvement on what was originally put forward. But major flaws remain. If modulation is implemented in the way that Mr Fischler now suggests, British farmers look likely to pay a far higher share of the cost of CAP reform than farmers in any other Member State, simply because we have the largest proportion of farms which would be classed as large in size. The estimate from the CLA is that while the UK currently receives some 13 per cent of total CAP direct payments, we could end up paying twice this share for the cost of the reforms.

We are still at risk of getting into a situation where Britain suffers a disproportionate loss of direct payments and at the same time sees modulated money allocated in a way that favours the poorer Member States. At the same time, the United Kingdom's share of the rural development budget could be pegged at an unfairly low level. If the Government will fight hard for a fair deal for our industry then I shall be prepared to give them my Party's support.

But I think the Government could do more to foster an informed debate about the way forward for the CAP. To take one obvious example, it is still not clear whether Britain's domestic modulation scheme would be imposed on top of any changes coming out of Brussels or whether in designing a European scheme, a proper allowance would be made for what had already happened in this country.

And we need much more information about the practical impact of a support system that focuses on the environment and rural development. I think that decoupling is right in principle but so much depends on the detail, detail that is at present obscure. As the recent report from the Commons DEFRA Select Committee pointed out, there is a lack of clarity about the relationships between the proposed entry-level scheme and the rules on cross-compliance. I will want to look constructively at the results of the pilot schemes that the Government has now put in place but I am also concerned that, more than a year after the publication of the Policy Commission's report, we still have no detailed figures from DEFRA about the impact which either the proposed CAP reforms or the home grown "broad and shallow" scheme will have on our industry. It should not be left just to outside bodies like the RICS to undertake that sort of work.

When it comes to the World Trade talks, we can be pretty sure that the negotiations will finish in the usual way with bleary-eyed Ministers engaged in frantic horse-trading into the small hours of the morning, in the hope that agreement can be reached before exhaustion finally overtakes them.

I want to suggest three criteria to help us judge whether our country is indeed getting a fair deal.

First, will the cost of measures to help the world's poor nations be borne equally by the whole of the developed world? The United States' Farm Bill was a shameless protectionist device. We must hope that, this year, Washington's free market rhetoric will be matched by free market practice.

Second, can we make certain that the quality standards and hygiene requirements that we make our own producers observe do not put them at a disadvantage when competing with other countries? There are already problems enough of this sort within Europe. In the last twelve months alone, we have had to deal with infected eggs imported from Spain and there have been further cases of beef imported from Continental Europe being found to have specified risk material still attached.

If a British supplier were responsible for such a flagrant breach of the rules, he would have inspectors galore crawling over every square foot of his premises prior to a summons to appear in court. I think that it is time for the British authorities to get a lot tougher in taking sanctions against imports of substandard food.

Third, can we ensure that British farmers are not penalised because of the high standards of animal welfare that we require them to follow? Don't get me wrong. I am keen that we should be constantly looking for ways in which to improve the welfare of livestock. But some of the ideas being talked about in Britain and in Europe, for example on the welfare of hens, risk landing us in the absurd position where we bankrupt our own producers but carry on importing food from countries and producers with far lower standards of animal welfare than those which we apply here. So I welcome the clear statement in the EU's position paper for the WTO that high animal welfare standards are a good thing and should not place countries like our own at a disadvantage in international trade.

But while this year's international negotiations are of huge importance for the future of British farming, there is still plenty of scope for domestic political action to reduce instead of add to the costs of farm businesses and to make it easier for farmers and growers to succeed and to make profits in a fiercely competitive market. So I want to say something about collaboration, about food labelling, animal and plant health and about regulation.

Collaboration is of course one of the dominant themes of Sir Don Curry's report and of the Government's strategy for farming published last autumn. What I believe we need now are practical initiatives to make it easier for that collaboration to take place. At present we have competition rules that, as the Milk Marque case showed, impose pretty strict limits on the extent to which producers may co-operate to extend their market share. We have statutory limits on the size of shareholdings in co-operatives. The need for urgent review is highlighted by what is happening elsewhere in the food chain. I am not going to comment on the merits or otherwise of particular bids for Safeways but it is clear to me that a reduction in the number of big national retailers from four to three, if that were to happen, would add to the pressures on a producer sector that already feels beleaguered. What is happening in retailing is mirrored in the processing and catering sectors, with the consolidation of a global food industry and a reduction in the number of food factories.

Our competitors are already learning the lessons. If we take milk as an example, the co-operatives in Denmark and Sweden have well over 70% of market share while in New Zealand, the exemplar of free market agriculture, the main, farmer-owned marketing organisation has more than 90% of the domestic market place.

It seems to me that we are now asking our own producers to compete in a European, increasingly in a global, market yet we are subjecting them to competition rules that focus almost exclusively on the United Kingdom alone. That is surely an approach that has now become outdated.

Next, labelling. Most consumers buy most of their food on the basis of price. But there are welcome signs of a growing interest, at least among a minority of consumers, in the quality and provenance of their food. The evidence for this includes the phenomenal growth of farmers markets, the development of box schemes and direct sales via the Internet, the emphasis which a growing number of pubs and restaurants in tourist areas such as the South West are placing on local dishes with local ingredients and the fact that the big supermarkets are now beginning to sniff a profitable opportunity in a local or regional brand.

While I applaud the efforts that have gone into the Little Red Tractor scheme, I believe that we need to find ways to distinguish food that was actually grown or reared in the United Kingdom. Of course there are complications over processed food where the ingredients may have been sourced from a number of different countries. But the broad principle is surely right, that a shopper should be able to tell at a glance whether the food he or she is buying really is British. It is downright misleading when meat can be imported into Britain, processed or packed here and the resulting product appear on the supermarket shelf with a "UK" label.

I am encouraged by the fact that the European Union, in the context of the debate about traceability, is now starting to look again at the question of country of origin labelling. And I think that we have been rather too shy in this country about testing the limits of what is permitted under European law. You can buy meat in France labelled nee, elevee et abattue en France. For that matter if you go into a supermarket in Wales you will find labels, usually adorned with a red dragon, denoting the Welsh grown food. The same is true of supermarkets in Cornwall, except that there the Cross of St Piran replaces the dragon. Perhaps the answer is to have a labelling scheme that indicates one or other of the nations of the United Kingdom. England, Wales and Scotland, after all, are not Member States of the EU.

In a couple of weeks time, my Conservative colleague Stephen O'Brien, the MP for Eddisbury, will introduce a Food Labelling Bill into Parliament under the Private Members' Bill procedure. It will seek to change the law to insist that food that is sold to a consumer should be marked with the name of the country of origin and to indicate whether the standards of hygiene or animal welfare in that country match those that we insist on here. Parliamentary rules of procedure mean that it is very difficult for a Private Members' Bill to reach the Statute Book if opposed by the Government, but this Bill will, at the very least, take the debate forward and add to the pressure on Ministers to introduce more stringent rules on labelling.

Two years ago, Foot and Mouth Disease devastated the rural economy. Many people, not just in farming but particularly in tourist businesses, are still struggling to recover. The Royal Society's report into the epidemic warned that the growth of transcontinental travel and the development of global trade was bound to make it easier for animal and plant diseases to spread around the world. Sir Brian Follett called for much better disease surveillance at both national and international level. I hope that in 2003 we will see action to implement Sir Brian's recommendations. I have to add that DEFRA's performance so far in taking enforcement action against illegal meat imports has been pitifully weak and slow. The threat from disease is both serious and urgent and deserves a much higher priority from government than it appears to be getting now.

In any meeting that I have with farmers, it is almost always regulation that comes at the top of the list of complaints. You have only to skim through the farming press at the moment to find examples of new rules that are wholly impractical to implement, like the latest European proposals on tagging sheep, or which load disproportionate costs onto small scale producers, like the rules on the stamping of individual hen's eggs. I want to suggest a number of ways in which we could improve the way in which we handle regulation. Obviously part of the answer lies in repealing or amending specific rules but I am convinced that we need to go further and bring about a radical change in the entire culture of regulation in this country.

That change should start with a wholehearted commitment by Government to openness and early consultation. DEFRA and its agencies need to involve the industry from the very first stages of discussion at Brussels or in Whitehall about some new regulatory initiative. Too often it seems, the industry is only brought into the loop when a draft has reached the stage at which it requires a super-human degree of political effort to carry amendments. Early consultation is perhaps most vital when considering regulations that are not primarily concerned with agriculture but which do nevertheless have a significant impact on farm businesses. Many of the European environmental directives fall into this category. It is unacceptable that there should still be, for example, enormous uncertainty about the meaning and intent of a piece of legislation as vital as the Water Framework Directive.

Second, any regulatory proposal needs to be subject to the most rigorous cost benefit analysis, which should be published well in advance of scrutiny by Parliament. I am attracted too by the idea of giving DEFRA a "regulatory budget" so that ministers and officials have to publish their estimate of the costs to business and to consumers of the regulations for which DEFRA was responsible and would then be given an annual target to reduce regulatory costs below that base.

Third, we in Parliament need to improve dramatically the way in which we deal with regulations, many of which take the form of Statutory Instruments passed under enabling powers granted to a Secretary of State by an Act of Parliament. More than 4000 Statutory Instruments become law each year. Only a handful of them are debated at all in Parliament and a majority of those only in a 90-minute debate in Committee. Worse, Parliament is unable to amend secondary legislation. It can only accept or reject what the Government puts in front of it. There is an overwhelming case for more rigorous scrutiny, perhaps through changes to House of Commons procedures or perhaps by giving particular responsibility for looking at secondary legislation to a reformed Second Chamber.

Fourth, we need to change the culture of enforcement in Britain. There are too many forms, too many farm visits and too much duplication of official effort. All of it takes time and energy, which could be much more productively spent on running a profitable business. Not every farm that is subject to new rules on waste or water needs an annual inspection. A risk-based system of inspection not only benefits farmers and growers but also, as the Environment Agency has recognised, means that the enforcement authorities themselves can use their resources more efficiently. We can surely reduce the duplication of visits, checks and forms, perhaps by giving different agencies access to each other's sources of data. As the House of Lords inquiry into environmental regulation recently indicated, giving the Environment Agency access to IACS data would cut out the need for them to ask further questions themselves.

So on collaboration and marketing, on labelling, on disease prevention and on regulation there is a lot that could be accomplished by way of home-grown political action during the lifetime of this Parliament.

Agriculture in Britain faces change. But farmers know better than anyone else that that has always been true. Back in the 1920s, Stanley Baldwin spoke of "the sounds of England, the tinkle of the hammer on the anvil in the country smithy, … the sound of a scythe against a whetstone, and the sight of a plough team coming over the brow of a hill, the sight that has been seen in England since England was a land, and may be seen in England long after the Empire has perished and every works in England has ceased to function". The irony of that passage lies not just in the inaccuracy of Baldwin's prophecy but in the fact that during his own premierships the rural England described by Thomas Hardy was being transformed by the internal combustion engine and the expansion of the suburbs.

Or look further back. Joan Thirsk, the leading historian of British agriculture has described how farming has for centuries had to adapt to the demands of changing economic conditions.

To say that is not in any way to minimise the gravity of the present crisis. But it is to say that this industry, when given its chance, has shown many times before that it has the ingenuity, the skill and the sheer dogged determination to win through.

To succeed, British agriculture needs Government support: support to deliver fair competition both here and in the international marketplace, and support through policies that reduce business costs instead of adding to them. It is in our national interest to have a farming and horticultural industry that makes profits by supplying its customers, at home and abroad, with food that they want to buy. That should be the underlying objective of agricultural policy.

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