Common Agricultural Policy
The next item of business is a debate on motion S2M-556, in the name of Ross Finnie, on common agricultural policy reform, and two amendments to the motion. We will take a slight pause as members clear the chamber.
I very much welcome the opportunity in this debate to underline the significance to Scottish agriculture of the CAP reform agreement that was reached on 26 June. The agreement provides, for the first time in more than a generation, genuine and real autonomy in the decisions that we can make on the main subsidy arrangements that shape Scottish agriculture. The changes have the potential to be a turning point for Scottish agriculture and for rural areas more generally. Given the degree of autonomy that we secured, I must confess that I am puzzled by the last sentence in the Scottish National Party amendment.
The agreement has three main elements: decoupling and associated flexibilities; national modulation; and market support changes. Decoupling is the central policy in the agreement. Subsidy payments will no longer be linked to the level of production. Rather than responding to subsidies plus market prices, producers will need to respond to market prices alone in deciding what to produce and how much to produce and of what quality. Crucially, the decoupled payments will be dependent on producers meeting cross-compliance conditions, including the need for land to adhere to good agricultural and environmental condition. I believe that the cross-compliance provisions pave the way for improved environmental outcomes.
The policy presents some key opportunities as well as some potential challenges. The most important opportunity is the freedom to farm. Farmers will produce for the market, not for subsidy. Consumers will say what they want through what they buy and what they do not buy. The need for flexibility in response is essential if farmers are to continue producing and at the same time remain profitable.
Simplification is another major opportunity. Decoupling will dramatically reduce the bureaucratic burdens that farmers face. Under the new single payment scheme one payment will replace the six separate schemes we have now, with their multitude of rules and regulations to which producers have to adhere, many designed to limit production, expenditure or both.
As the amount of bureaucracy recedes, will the number of bureaucrats also recede?
The member will understand that I run a very tight ship. I hope that Mr Fergusson is not implying that my department is overstaffed. There might have to be adjustments and we will have to review that. That is part and parcel of the management of any organisation and we should not allow that to detract from the central message of the opportunity that the measures bring for the reduction in the complexity that current producers face. Not only does that bureaucracy cause problems, it imposes false incentives that move production systems away from market requirements, reducing choice and creating rigidity. Ultimately such policies are unsustainable in a modern society.
Decoupling also offers scope for environmental improvement. The cross-compliance provisions attached to the decoupled payments will require adherence to existing legal standards of environmental protection, food safety, and animal health and welfare. Farmers will also have to maintain their land in good agricultural and environmental condition, and separate work is proceeding in Scotland to define that in ways that are appropriate to our circumstances.
If there are opportunities, there are also challenges to be addressed. There is a danger that decoupled payments could be characterised as farmers being paid for doing nothing. In addressing that, the key issue is that decoupling is not payment for doing nothing but payment for delivering goods that society wants. Those include all the things that are represented in cross-compliance and maintaining land in good agricultural condition. However, it goes wider than that. It is first and foremost about producing quality food for the marketplace, maintaining rural landscapes, keeping jobs in rural areas and helping to maintain rural infrastructure.
The minister invites us to endorse the objective of "A Forward Strategy for Scottish Agriculture". That document made little mention of organic agriculture. However, earlier this year the Executive brought out its own organic action plan. As we move towards CAP reform, will the minister reassure us that the Executive will use those reforms to support the new organic action plan?
The organic action plan came directly from "A Forward Strategy for Scottish Agriculture". It was mentioned in the document. We did not produce a completely unreadable and unintelligible 1,000-page report. The document was widely endorsed by the agriculture community. It is easily understood and contains a number of areas for further work. The organic action plan was part of that. We did the same with the work on environmental issues; we took it much further in a more detailed report and that is a sensible way to proceed. We stand by the organic action plan and by implementing it in full in harness with the CAP reforms.
Another threat is the potential reduction in agricultural production, which might have knock-on consequences for the food chain. That was raised particularly by the beef sector, which might be badly affected, even in the short term.
A third and more important concern is to do with the environmental implications of decoupling. There is the potential for changes in the livestock mix and reductions in livestock numbers that could adversely affect valued habitats. Again, those issues will have to be addressed.
Will the minister take an intervention?
I would like to make a little more progress but will take an intervention if it is quick.
Hill farmers have always had limited scope for diversification. What future does the minister see for Scotland's hill farmers?
I will come to that, but I do not think that hill farmers are going to be hugely adversely affected by the reforms.
The main decoupling provision involves basing payments on the individual farmer's entitlement from an historic reference period—the average of the years 2000 to 2002. Alternatively, however, the provisions and regulations provide for the decoupled payment to be calculated on an area basis. That is perfectly feasible but would result in massive redistribution and I do not believe that that was the central plank of the reform, although that option is there for our consideration.
There are also options for combining the area-based and historic-entitlements approaches. Those options are potentially complex and would add considerably to the bureaucracy. However, there are issues that are of interest. Advancing decoupling in the dairy sector is one option that that sector appears to believe may initially be helpful to it. Therefore decoupling could be implemented in that sector in 2005, as in other sectors.
The agreement makes extensive provisions for partial recoupling in the beef, sheep and arable sectors. In essence, that means the retention of some of the expenditure paid out under the existing schemes. That could undoubtedly address some of the problems that I have highlighted and some of the problems that will arise in the consultation. However, we must recognise that there are serious drawbacks to taking advantage of recoupling. Each of the recoupling options involves operating the existing schemes in exactly the same way as they operate now, with all the attendant bureaucracy. That could lead to the use of the wrong incentives, and no move forward to allowing producers to respond to the market.
There are other flexibilities in the agreement though. There is the provision to hold back 10 per cent of the decoupled money in each sector for payments to protect or enhance the environment, or to improve the quality and marketing of agricultural products. That is the so-called national envelope. In other words, it is the ability to hold back payments to use in a way that addresses some of the key problems that might be more fully identified in the course of the consultation. The advantage of a national envelope is that there is considerable latitude to design the type of scheme most suited to Scotland. There are some drawbacks because we would have to design that scheme and there would inevitably be an element of bureaucracy. Of course, we would have to take 10 per cent of the money to use for the national envelope, but it would offer us a necessary and important degree of flexibility.
The rural—
Will the minister take an intervention?
I want to move on to the rural development regulation.
The rural development regulation provides for a wide range of activities on which CAP money can be spent. They are intended to help farm businesses—that goes back to Andrew Welsh's point. Some of the measures have wider purposes. Those rural development measures are currently funded through a mixture of direct expenditure of European Union funds, modulation and commitment of the Executive's own resources. Our funding arrangements suffer from the outcome of the 2000 settlement, when we received only 3.5 per cent. By any calculation we might properly have expected 8.8 per cent. However, Scotland, in common with the rest of the United Kingdom, applies a national modulation rate of 3.5 per cent, which will rise to 4.5 per cent in October 2005. The agreement introduces, for the first time, compulsory modulation throughout the EU, starting from 2005.
The value of national modulation in Scotland is currently increased pound for pound by match funding from the Treasury. That is a huge increase in the amount available to us—that can subsist up to the 2005 modulation rates. Even when compulsory modulation is introduced in 2005, it will be necessary for us in Scotland to have at least a minimum level of national modulation to cover the programmes we already have in the rural development regulation. The key issue for us, however, is whether we wish to use higher levels of national modulation to transfer more money, and attract match funding; to increase spending on rural development measures; and to deliver the type of public goods that society wants.
The canvas is very wide. The rural development regulation specifies 24 sets of measures—including the new ones introduced by the CAP reform agreement—that meet standards of animal welfare and food quality. It provides us with a range of economic, environmental and social measures from which to choose. There are significant opportunities. We should explore a genuinely multifunctional farming approach by combining a range of different measures.
My understanding is that the national modulation scheme that the minister is talking about might lead to money being taken away from our rural areas and put into the European system. Does it therefore make sense to keep national modulation to a minimum?
I am sorry if I have caused confusion. There is compulsory modulation, which will be circulated throughout Europe. We cannot avoid national modulation. All that I was suggesting to the chamber was that it is not possible for the rate of compulsory modulation to be left as it stands, even to meet the rural development programme. There will need to be national modulation. My challenge and the challenge that faces the Parliament is the question whether we should increase it and enhance our marketability.
All those measures are part of a wide consultation that involves all stakeholders. We have set up a stakeholder group and a range of meetings are going on throughout the country. I want to assure the country that the reason for the consultation is quite simple. It is to get the views of the widest possible range of sectors in Scottish society, not just the agriculture sector but the environmental sector, other businesses, retailers and all the rest.
It is quite clear that the Executive wants to use the CAP reform to put in place measures that are appropriate to Scotland. Our solution will be based on the evidence that we are taking. I commend the motion in my name.
I move,
"That the Parliament welcomes the CAP Reform Agreement of June 2003 as a good deal for Scotland; endorses the objectives of the strategy document A Forward Strategy for Scottish Agriculture, widely agreed by stakeholders, as providing the strategic focus for decision-making on the various flexibilities available to Scotland within the agreement; endorses the wide and open consultation which the Scottish Executive has now launched to canvass views across the whole range of stakeholders before final decisions are taken, and further welcomes the Executive's initiative in setting up a stakeholder group comprising representatives of a wide range of stakeholders, farming, industry, consumer and environmental, to advise on the consultation process."
At the outset, I should say that I feel as if I have had to learn an entirely new language with the change of Cabinet brief. We will see how well I manage in terms of the linguistics.
In a debate in the chamber last week, we recognised that there are serious problems in rural Scotland that go beyond those experienced in the agriculture sector. It is important for us to remember that one sector of rural Scotland cannot be artificially isolated from any other. That is overtly recognised in "A Forward Strategy for Agriculture", although the better document that has been produced in the past couple of years is "Custodians of Change". The working group that produced "Custodians of Change" pointed out some of the current difficulties in paragraph 93, which says:
"because agricultural policy is predominantly developed within the context of CAP and environmental policy through separate EU directives, the arguments for change, particularly at an institutional level, remain polarised."
The CAP reforms allow us to begin to address that polarisation. I believe that we should welcome the opportunity to do so. However, we also have to recognise that net farm incomes overall are low and that in some sectors they are disastrously low.
While keeping the opportunities of reform in mind, we should not lose sight of the fact that we are also dealing with the livelihoods of individuals, their families and those who work for them. I hope that all of us recognise that we need to allow older farmers to remove themselves gracefully from farming and encourage younger farmers to succeed them.
I recognise what Roseanna Cunningham says. The financial returns to farmers over the past number of years have been exceedingly low. One of the fundamental reasons for that was the overvalued exchange rate, which lowered subsidy payments to farmers and lowered the market price. Thankfully, that situation has now changed. The market is beginning to pick up and more favourable exchange rates mean that we are seeing higher subsidy payments to farmers.
Unusually, George Lyon is a farmer who looks on the bright side. My experience is that farmers in general are very pessimistic about the way in which things are proceeding. Over the past few years, I know that the value of the pound has been an issue. I see that members are shaking their heads, but farmers' expectations are often connected to the way that things are going and to concerns about their industry.
I meet farmers. Indeed, I met some pig producers not that long ago who had grave concerns about what was happening in their industry. That feeling is widespread. If George Lyon has no problems, that is an issue for him. I do not think that his situation can be applied across the board.
That said, the Scottish National Party broadly welcomes the reforms. Reform was necessary because, given the imminent expansion of the EU, a policy that continued to link subsidy to production was untenable. Equally, it had become clear that food production had become distorted by the method of subsidy. Production had ceased to be linked to the market or to any real form of demand. We should also not lose sight of the international perspective. The direct production-subsidy link created barriers to producers in the developing world. Over the past year or so, that was one of the drivers for change.
The big new change that is to be brought about by the reform is that subsidy is no longer to be linked to production. Instead, the two are to be—in the jargon—decoupled. The intention is that that will allow farmers the flexibility to respond to the demands of the market. If rigorous cross-compliance requirements are put in place, decoupling will also allow a number of improved standards to be delivered, not least through the single farm payment, which will produce a much simpler support system. I note that NFU Scotland in particular is in favour of full decoupling. However, I am also aware that, now that the option of partial recoupling will be made available in a number of sectors, there has been a debate in Scotland about whether it should be taken up. I make no comment on the specifics of that on-going debate, although I will say that fears were expressed about the effect of full decoupling, particularly on the beef industry. I understand that the jury is still out in some quarters and no doubt submissions are still being received.
That said, one or two questions occur to me. For example, has the minister attempted to quantify the knock-on effect of full decoupling, particularly in the beef sector? By that I mean the effect not just on farmers but on the processing sector, the supply trade, the machinery trade, the auction marts and so on. Will any measures be introduced to ameliorate those effects and, if so, what does the minister have in mind?
Perhaps just as seriously, I had presumed that the minister was aware of comments made by both Margaret Beckett and Ben Gill of the National Farmers Union in England that retaining the link—by which I mean partial recoupling—would not necessarily be the best way forward. The English NFU is also "vehemently against" any use of a national envelope. Indeed, I have some detail about the extent to which Margaret Beckett has implied that there should be a uniform approach across the UK on the question of decoupling or partial recoupling. Will the minister assure us that, notwithstanding the fact that the UK is the member state, Scotland will be able to take a different course, or will we be forced willy-nilly down the road of UK uniformity regardless of what is best for Scotland?
We fought very hard in Luxembourg to ensure that all the flexibilities in the agreement could be delivered at a regional level. As a result, I give the member an absolute assurance that, whether or not Scotland takes up some of the flexibility to address some of the problems that she has raised, decisions on how Scotland will apply CAP reform will be taken in Scotland by the Scottish Executive.
I am grateful for that assurance. However, the problem is that farmers and people in the industry are still uncertain about whether that will be the case. They are concerned about ensuring that there will be the possibility of partial recoupling—if that is considered good for Scotland—or a different national envelope. People in the industry are still addressing that issue and perhaps the minister still has some way to go to convince them of the assurance that he has given to the chamber.
Roseanna Cunningham is joking.
Once again, George Lyon seems to think that this is very funny. He clearly needs to communicate a little more with some of the farmers who are communicating with me.
Will the member give way?
No. I have already allowed the member to intervene. I will now move on.
The question of how the single farm payment should be calculated is also giving rise to different responses. Both options—either to continue with single farm payments based on the average amount received over the past three years or to move to area-based payments—have their attractions. Obviously, making the payments simply on the basis of what has gone before has the virtue of consistency and stability. It is also supported by the NFUS.
You have one minute.
However, I do not think that we can totally ignore the potential in moving to an area-based payment. The redistributional effect of such a measure is not necessarily a negative and it would be helpful if at some stage the minister could quantify for us the effect of such a redistribution. I appreciate that he will not be able to do so today, but such information would be particularly important given the current state of farm incomes in Scotland.
I turn briefly to modulation, which has been voluntary but will now be compulsory. There is an argument about the rate that is advisable for Scotland, but it seems clear that the rate will be higher than that set by the EU. Environmental organisations are keen that the rate should be as high as possible to allow for the maximum transfer of money into agri-environment schemes. I certainly agree that additional rates should apply. Although farmers are not necessarily opposed to that, there are serious questions about the number of farmers who can get into the schemes and the minister's ability to ensure the widest possible opportunity for take-up. Concerns have also been expressed that the money held back through modulation will end up benefiting farmers elsewhere. Indeed, I think that John Scott made that very point in his intervention. Such criticisms were well canvassed in "Custodians of Change", particularly in connection with the rural stewardship scheme. Perhaps the minister will comment on those concerns in his closing remarks.
In any case, most of us will agree that an expansion of agri-environment projects should be pursued if they can be made to work well. As a result, I wonder whether the minister would consider reviewing all the available EU rural development measures in Scotland as proposed by WWF Scotland—
You will have to wind up now.
Presiding Officer, if it is not possible for us to take interventions and complete our speeches, it will be extremely difficult to progress debates in the chamber properly.
You took interventions. You are now running over your time.
Well, I took interventions because I was told that I had eight minutes. Interventions take a lot longer—
You are now taking up a lot of time and will stop someone from the back benches getting in.
I shall take the matter up separately.
Will you finish now please?
I have made a proposal regarding the WWF. The NFU is not happy with the way things are, and the WWF thinks that things could be better. If it is what—
I call Alex Fergusson. Mr Fergusson, you have six minutes.
Amendment S2M-556.1 moved,
To leave out from "welcomes" to end and insert "notes the CAP Reform Agreement of June 2003; recognises that it has the potential to deliver a better deal for Scottish agriculture and for rural Scotland as a whole than the current arrangements; believes that the range of agri-environmental measures should be expanded to promote a sustainable rural economy that will be of benefit to all those involved in Scottish agriculture as well as all those who live and work in rural Scotland, but urges the Scottish Executive to ensure that decisions about the various flexibilities are made in Scotland, on the basis of what is best for Scotland, and are not subject to external pressures dictating UK-wide uniformity."—[Roseanna Cunningham.]
Clearly I had better speak within that time limit, Presiding Officer.
The subject of common agricultural policy reform, welcome as it is, is highly complex and lends itself perfectly to the old adage that the devil will be in the detail. I have attended three meetings in my constituency that were designed to explain fully the proposed changes, but I am still a long way from a complete understanding of the complexities involved. However, it is vital that we understand the subject, because in constituencies such as mine, which are still heavily dependent on agriculture as one of the main drivers of the economy, the financial input from European schemes is of paramount importance. More than 20 per cent of the gross domestic product of Dumfries and Galloway is still derived from agriculture, so we underestimate the importance of EU input at our peril.
Although the Conservatives very much welcome the proposal to remove the link between support and production, we should not forget that studies have proved beyond doubt that payments based on headage—that is, geared towards production—have been effective in driving forward the local rural economy. As we look to change the basis of support, let us not concentrate on agriculture alone but keep a wary eye on any effect that those changes will have on the wider economy.
The centrepiece of the reforms, as everybody has pointed out, is the breaking of the link, or decoupling. That is a word that would have been almost unthinkable only a short time ago, but it is now the buzzword, and it has been an eye-opener to me to see how most farmers, sick to death of the increasing bureaucracy that so bedevils every current scheme, have embraced it. There is even a good argument that production-based payments have involved hugely increased costs at a time of diminishing market returns, and that consequently farm incomes have actually been damaged because of the support payments that were designed to bolster them. In theory, at least, a single decoupled payment will considerably reduce, if not remove altogether, most of the problems of the CAP that have attracted so much criticism over the years.
We whole-heartedly endorse the proposal to fully decouple all sectors of agriculture, including the dairy sector, from the earliest possible moment—that is, from 2005. We believe that talk of partial recoupling or the use of national envelopes to provide sectoral support for, say, the beef sector should be resisted. Such support would simply extend the entire bureaucracy of the current regime while delivering only a percentage of the current support. That would simply delay the inevitable, as full decoupling will eventually become the norm.
Furthermore, we are adamant that a single support payment, which will be the result of decoupling, must be based on the historic entitlements of each individual holding, rather than on any area-based payment. I am sure that the minister has had ample experience of the problem that redistribution of funding brings about with the switch from the hill livestock compensatory allowance payments to the less favoured area support scheme. Those problems would be as of nought if the new change were to be to an area-based payment. In any case, the reform is about changing the pattern of farm support, not the redistribution of it.
We have two areas of concern about the single support payment. The first relates to the dairy sector, which we believe should decouple from 2005, as I said. Our concern lies in the fact that support payments to that sector are not to be linked to historic production, as in other sectors, which can lead only to imbalances within the dairy sector over the next few years. I wonder whether, in summing up, the minister might explain to me why dairy payments cannot be made retrospectively in the same way as with other sectors.
Our second concern lies specifically with the suckler cow sector in the hills and uplands, which Andrew Welsh referred to. It is common practice for suckled calf producers to sell their calves on the white form. In other words, they can avoid the bureaucratic process of applying for the first tranche of calf subsidy, as they know that the buyer will add that amount to his bid. In effect, therefore, they are getting their subsidy through the marketplace. The disadvantage of that, with the benefit of hindsight, is that they will have no entitlement to what is rightfully theirs, and that flags up the desperate need for flexibility—another word that I am sure will be common in the debate—throughout the process of allocating entitlements.
The minister will be aware of a number of letters that I have written to him over the past few months highlighting constituency cases that will be anomalous when it comes to the allocation of those entitlements. Most of those letters concern very deserving cases of young people starting out on their farming careers or of others who are taking a while to restock after the devastating impact of foot-and-mouth disease. There are also several examples of people who do not deserve to be let down or ignored during the massive exercise of reform. I make another plea to ensure that the maximum amount of flexibility is shown throughout the process in order to minimise the number of people who lose out during the reforms.
Our support is a little more cautious when it comes to modulation. The EU level of compulsory modulation is set to rise to 5 per cent by 2007, with a guarantee that 80 per cent of the funding raised will be returned to the member state. I am not particularly happy about the loss of that 20 per cent, but if that has to be then so be it. Our support for the voluntary modulation that the minister has intimated he will need to levy is based more on the Treasury's pledge to match fund that resource than on any in-built love of modulation itself.
We believe that the farmer who is in effect contributing that funding should have the first refusal to reuse it within his own business. In other words, every farmer should have the option to take part in the schemes that are funded out of modulation, not only the few who are lucky enough to be able to second guess how many points the minister will require for inclusion in a particular scheme in any given year. If that can be achieved and continued match funding guaranteed, the minister will have our support.
Obviously, cross-compliance is the price that farmers will have to pay for continued support. Our plea is that reduced bureaucracy, which has often been hinted at as the benefit of CAP reform, should become a reality. A temptation for officialdom will be to see cross-compliance as a way of expanding its numbers. That must be resisted at all cost and the real potential for bureaucratic reduction, in both forms and personnel, must be grasped with both hands.
The word "potential" is perhaps the one that best describes the proposals. I have no doubt that Scottish farmers will seize the potential that full decoupling offers.
I move amendment S2M-556.3, to leave out from first "endorses" to end and insert:
"encourages representatives of the farming and crofting industries to use the consultation process to lobby for full de-coupling of support payments based on historical entitlements."
I declare an interest—I eat food.
I very much welcome the opportunity that the debate provides to talk about food. It is probably the most important policy area for any of us in the Parliament. We can and will spend hours this afternoon debating the technical points about decoupling and modulation, which is important, but I want to spend some time talking specifically about food.
I ask the minister to go back to first principles when he is thinking about what is best for Scotland in terms of CAP reform and consulting people on the issue. We cannot talk about agriculture in a policy vacuum because it is linked inextricably to several other policy areas. When I was thinking about CAP reform it struck me that we must go right back to first principles. We must seek to create a Scotland where Scots eat healthily, where they have access to high-quality local Scottish produce that is safe to eat and that is produced in a way that does not damage the environment, and where we have a thriving food industry that provides jobs in rural and urban communities.
If we are to achieve that, we must make a series of policy connections. I believe that that is beginning to happen. It is now recognised that healthy eating is central to our aim of making Scots healthy. We now have a Scottish diet action plan, a healthy living campaign and, in Gillian Kynoch, our own healthy eating tsarina, but we still have a long way to go; Scots still spend less on fish, fruit and vegetables and more on fizzy drinks. Although our health statistics are improving, they still make grim reading.
We have also made good progress on consumer information and choice in food. There is better information, better labelling and better traceability, although—again—there is still a long way to go. I pay tribute to the Co-operative Wholesale Society Ltd, which has led the way in the UK retail sector in demanding consumer-friendly labelling. It is now easier to source quality Scottish produce in our supermarkets, but there is still a long way to go.
The development of farmers markets has created a healthy sector in Scotland; 56 markets now have a turnover of £50 million a year in total.
Only about 2 per cent of the stock in most supermarkets is produced in Scotland, so there is not really the range of choice that Rhona Brankin talks about. The problem for the stakeholder is that they can buy only what they are presented with.
We have made progress, but we all recognise that we still have a long way to go and a big job ahead of us. Scottish Enterprise is rolling out a food and drink strategy and the creation of the Food Standards Agency Scotland is a welcome and important step towards ensuring consumer confidence in Scottish food.
We must make good connections throughout Government. For example, an area in which we need to be smarter is food procurement in the public sector. I seek an assurance from the minister that the Executive will consider issuing guidance to public sector bodies, including local authorities, that sets out how they can express a preference for locally produced Scottish food when issuing tender invitations within the best-value framework. I also hope that the minister will give a commitment to identify a single point of contact in the Executive to co-ordinate activity on that important issue. I believe that the will to make progress on the issue exists on all sides and that such a policy could deliver benefits to health, our rural economy and the planet.
The consultation on CAP reform is hugely important for all of us, whether we live in the countryside or the city, whether we are consumers or producers and whether we work in a factory that produces food or in one that produces furniture. Government is responsible for ensuring that building blocks are put in place that will create the healthy, thriving and sustainable Scotland that I outlined earlier. I know that Ross Finnie is committed to a food-chain approach, which I welcome. The importance of such an approach was recognised in "A Forward Strategy for Scottish Agriculture". I believe that Ross Finnie is committed to creating a healthy, thriving Scotland, but I ask him to ensure that ministers throughout the Executive sign up to that commitment.
I did not anticipate being called to speak so soon, but I welcome the opportunity to speak on a vital issue. As other members have declared their interests, I point out that I was born and bred in a rural community and that, as some members will have discovered over the years, my father was a ploughman. I have retained a lively interest in what happens in our rural communities. Age might be creeping up on me, but it seemed that life was a lot simpler in rural communities when I was young. In those days, the books had to be done—usually by the farmer's wife—and checked out by the relevant authorities. However, in the years in which I have had the pleasure of representing a rural constituency, the point that people have raised most with me, either individually or through various agricultural organisations, has been about the bureaucracy that came in via the CAP.
I will not talk about the acronyms that are involved because we could spend the whole afternoon discussing them—it would take five minutes just to list them. Members will know exactly what I am talking about. Some of the forms involved were mountainous and, for people who were up early in the morning and who worked late into the evening, to place that additional burden on them and on their families and staff was unacceptable. Inevitably, mistakes were made, which caused a great deal of bad feeling.
I welcome the concept that is suggested in the review of the CAP that there should be a single farm payment but, as always, I have reservations. The minister will agree that the devil is in the detail of every document that comes before us. I endorse Roseanna Cunningham's amendment because I want to ensure that money that is saved through the new mechanisms comes back to Scotland. I believe that 80 per cent of the savings that are made through modulation might come back to the state and I want to know how much of those savings will come back into the Scottish sector. We are not convinced that the Department for Environment, Food and Rural Affairs will necessarily be sympathetic to Scotland's rural communities, even though agriculture is a significant factor in many of our areas.
I do not want the state to take over too many decisions; I want a strong, clear role for farming communities to ensure that the producers' needs are emphasised equally in any decisions that are eventually reached. I hope that, having rid ourselves of one set of bureaucratic rules, we do not immediately walk into another, which just comes in a different format. That should be carefully considered.
In his opening remarks, the minister concentrated on market requirements. Like Rhona Brankin, I am interested in the produce that comes from Scotland and in how that produce reaches our consumers. We heard the recent arguments—I think that they were mostly restricted to the north of England—about how little of the supermarket price of a carton of milk reaches the producer. Consumers do not realise that much of the profit from the goods that are produced through the hard work of agricultural communities goes elsewhere than back into the farming sector. That has to be looked at. I endorse in particular what Alex Fergusson said about the dairy sector, which seems to have been singled out for a special position.
In relation to money coming back into rural communities, I ask the minister whether there is any likelihood that money will be provided for affordable rural housing which is, however we look at it, an aspect of rural development that we need. We have recently had debates on the subject and it should be given consideration.
The transport of live animals and how new regulations will impact on the economy in Scotland has not yet been mentioned, but the National Farmers Union in the upper Banffshire area of my constituency has raised the issue with me. We all care about animal welfare—not a single person would disagree with that—and those of us who have a rural background know how genuinely people care. There might be one or two offenders—as is the case in any group of people—but in rural communities in general we treat our animals kindly and with care. However, it has been pointed out to me that to stop for 12 hours in the middle of a journey that might take only 14 hours would be crueller to the animals than it is to complete the journey in one go. Also, under-loading of animal transport vehicles could lead to severe skewing, as the lorries go round roundabouts or travel along difficult roads. That issue is not directly related to the CAP, but the Parliament needs to look carefully at the implementation of the new directive.
The McSharry reforms of 1992 placed Scottish agriculture—indeed, European agriculture—in a straitjacket. The effect was to distort market prices, market supply and short-term land rents. The rigidity of the system prevented farmers from responding to environmental concerns and also put a bureaucratic straitjacket on the industry, which made it difficult for the farming industry to exercise any flexibility or to diversify.
The new reforms, including decoupled payments, offer us the freedom to farm for the marketplace, to respond to public concerns about environmental damage and to throw off the straitjacket of the bureaucracy that has so weighed the industry down during the past few years. The reforms are to be broadly welcomed by everyone who is involved in the industry and I hope that they will be welcomed by members from every part of the chamber.
I have not spoken to a single farmer who does not believe that Scotland should decouple and separate payments from production, although genuine concerns have been raised about how we should implement the reforms, how we should take account of some of the anomalies that might arise and how we calculate the single farm payment.
Of course, with export refunds all but abolished, producers in Europe will feel the full force of world markets for the first time since the CAP was created in 1957. The only cushion that will be left behind to support them is the single payment. That will indeed be a brave new world for many of us who have never experienced such a situation.
I will go into details that I want to discuss, but first I want to say that it is a little disappointing that milk producers have been left behind in the reform. Quotas have been left in place and milk producers face a 22 per cent cut in support prices, which has been only partially compensated through direct payments. That will add to their current financial difficulties. It is clear that they are in the arm lock of the supermarkets and face difficult financial returns from the marketplace.
On implementation issues, I want to knock down the view that farmers will give up producing food and will simply take the single payment for no return. The experience of the United States, which decoupled back in 1997 under the freedom to farm scheme, is completely the opposite. Production controls were also removed—which we are not doing, certainly on the arable side—and there was an explosion in production. Farmers did not sit back and take payments, but produced more. Therefore, I do not think that what has been suggested is likely to happen. Farmers are born to farm the land—they will not leave it unfarmed and take the single payment.
Another issue that has caused concerns and which has been debated by sectors of the meat industry is whether there will be a big fall in beef production in Scotland as a result of decoupling payments. There is no substance to that argument. Indeed, the current system has been a major barrier to increasing suckler cow production in Scotland. The 40 per cent heifer rule, whereby there can be claims in respect of non-producing females, has done more to drive down production in Scotland than any other single measure since 1992. It is nonsense that production will suddenly drop; indeed, the current system is reducing production in Scotland. If we remove all barriers, the costs of quotas and so on, there will be an increase in production. However, production might move from the west to the east and arable producers in the more marginal upland areas might think that suckler cow production is an integral part of the rotation once again and will start producing.
On calculation of the single payment, the minister should shy well away from thinking about going down the area-based-payment route. The experience of the less favoured areas scheme has left us with deep scars. I encourage the minister to consider historical entitlement as the only fair way of doing things.
Flexibility in a single payment system is needed. There is a question whether the process is an administrative process, which some countries have used to administer quotas, or whether it is a market process, which has been used for beef and sheep quotas. I favour the latter.
The creation of a national reserve to deal with new entrants, changed ownership, people who have changed farms in the interim period and hardship cases is needed. The model from 1992 exists—a scheme was set up then to deal with such people as part of the 1992 McSharry reforms.
I want to express a particular concern about west coast producers who have sold suckler calves and received the subsidy payment through the marketplace. If the calculation is done, that subsidy payment will end up with the feeder in Aberdeenshire and there will be no mechanism to pass that extra payment back to producers in the future. That issue must be addressed when things are being worked out.
I am running out of time, so I will finish. There is a fundamental problem with rural development regulations in that, historically, our base rate calculation under agenda 2000 was the lowest in Europe due to the failure of the Conservative Government to implement any of the accompanying measures under McSharry. I ask the minister whether we managed to get that rebased as part of the calculation, because I am unclear about the matter.
In conclusion, the CAP deal that has been negotiated by Ross Finnie working with his DEFRA colleagues has delivered a good deal for Scottish farmers, consumers, the environment and Scotland and it makes nonsense of the argument that the SNP constantly puts forward that only by separating Scotland from the UK can Scotland secure a good deal in Europe.
I rise to support the motion in the name of Ross Finnie for two reasons. First, there are a number of farms in my area. Secondly, I take a keen interest in what happens at European Union level in all European matters, including farming.
In rising to support the motion, I want to emphasise a point that we do not take enough account of, which is the significant influence of the World Trade Organisation and the general agreement on trade in services across all EU matters. It would be useful if we parliamentarians took a keen interest in what our European representatives say when they go to negotiate the GATS on our behalf at WTO level. Along with enlargement of the EU, which has had a decidedly important influence on events, issues relating to the WTO have been driving some of the work that has been done on the common agricultural policy. In that regard, I encourage everyone who has not already done so to read this month's Scottish Left Review, in which I have an article. It is not a publication that I regularly write for, of course, but I know that Marlyn Glen, at least, has read my article.
I congratulate the WWF and the NFUS on their submissions to Parliament. They feel that it is important to make representations so that they can influence outcomes. A number of points have been made today by members in that regard.
I have always regarded the involvement of the EU in our lives as positive. I am aware that not everyone shares that view, but I think that the setting of standards and the setting up of a good regulatory framework is beneficial. When ministers have gone to Brussels, they have come back with packages that show that cognisance has been taken of a lot of the concerns of the Scottish public, particularly in relation to the CAP. I remember speaking to a socialist farmer—there are not too many of them, but at least one is known to quite a few of us in the chamber—who told me that he would welcome the day when ministers would go to Brussels and negotiate in a way that would ensure that much greater benefit would be delivered to the rural economy by the European subsidies instead of having a situation in which some farmers have been known to have second homes in France, Greece or Spain. That has been a criticism that the public has made, although I accept that it might have been made some time ago.
I warmly welcome the fact that emphasis is being placed on getting regulations that can be used to tackle issues such as environmental benefit, methods of production and the creation of jobs.
I urge the minister to consider a point that was made in the WWF submission. I do not wholly understand the point that is being made, but perhaps the minister could explain it. Apparently, there are 20 unused measures that the Scottish Executive ought to be examining. The WWF says that most other EU countries do that. When an organisation makes such representations, we should take its points on board.
There are not many SNP members in the chamber to have a go at, so I must direct my question to Rob Gibson, who is the only person on the SNP's front bench at the moment. I know Alex Orr through my work with the European Movement and we are quite good friends, especially in relation to European issues. However, Alex Orr made a statement that leads me to ask what the policy of the SNP is in relation to subsidies. He said that he would phase out subsidies altogether and, in relation to fishing, he has called for a "no" vote in any referendum on the EU constitution if conservation of fisheries is handed to Brussels. The people of Scotland need clarification on the SNP's policy. If that is what the party is saying, it is a matter of concern.
I have one other question. Will the Tories now head for the exit door, away from involvement, participation and engagement in the European Union, and away from compliance with the new future that we look towards in Europe?
Historically, the common agricultural policy has not been a good deal for Scotland. Apart from a favoured few, it has done little for farmers or consumers, or for rural development or the environment. Currently, the 250 largest farm businesses in Scotland receive £50 million from the CAP, while 8,600 small farms take their share of just £13 million. "A Forward Strategy for Scottish Agriculture" rightly states that agriculture should play a major role in sustainable rural development. After all, agricultural land covers more than 70 per cent of Scotland's land area and the industry currently receives more than £600 million in subsidies from Europe.
I am a farmer and I know that agricultural policy is complex and frequently inaccessible. Measures such as the single farm payment should go some way towards reducing bureaucracy—although I worry that partial recoupling may cancel out that reduction. We need to be wary of the potential for abuse in the idea that single farm payments can be tradeable. I have some concerns over whether the forward strategy provides sufficient strategic focus: it does not discuss the need for more agri-environment support or for a better funded, developed and supported rural development plan; nor does the strategy adequately address organics.
Modulation is probably the single most useful element of the June agreement. Increasing the level of modulation can greatly increase support for agri-environment and rural development schemes. I should like to endorse the calls that have been made by Scottish Environment LINK and other bodies for a high level of modulation—especially when Westminster offers matched funding. Will the minister consider, as an absolute minimum, seeking 10 per cent additional voluntary national modulation?
On the news last night, I heard a farmer talking about growing his crops. He wondered why he should bother when, at the moment, he is making a loss of £15 an acre. I am looking at George Lyon as I say this, wondering whether he heard this. The farmer asked why, if he was going to continue making a loss by growing his crop, he should bother growing it at all when he gets his payment regardless. I am delighted by what George Lyon said and I hope that he is right in assuming that most farmers really do want to grow their crops.
No, I must keep going. There is a distinction between, on the one hand, the people to whom George Lyon referred as real farmers and, on the other, the people in some of the wealthier agricultural areas who run agri-businesses.
Decoupling potentially paves the way for a fundamental change in agriculture: farmers will have to earn their money for the role that they play in sustainable rural development, rather than being paid either for the production of unwanted produce or—worse—for doing nothing.
Cross-compliance is vital and it is important that we aim for a high standard. Ensuring good agricultural and environmental conditions, in addition to its intrinsic merit, can provide a competitive advantage for agriculture and other rural industries, including tourism. That vital reference condition must be properly addressed in the consultation process.
I want to raise an issue of environmental justice. This has been mentioned before, but I want to emphasise it again. The CAP has been bad news for many poorer countries. A press release from Oxfam in June condemned the reform proposals that failed to stop the EU from dumping farm produce on poor countries.
If, through maximising modulation, we take the opportunity that the June agreement provides to channel resources more in the direction of rural development and environmental measures and of promoting quality over quantity, we might be able to go some way towards shaping a future CAP that is something other than an economic and environmental disaster for all but a very few.
A constituent of one of my colleagues wrote to the Parliament to say:
"CAP reform potentially could see the biggest change in the Scottish landscape since the Enclosures."
I urge the minister to make the June agreement into a good deal for Scotland.
Only last week, I spoke in the Parliament on the Rural Development Committee's report on integrated rural development, which identified farming and crofting as being vitally important to the future of rural communities in Scotland. The fact that the CAP reforms were first proposed by EU farm commissioner Franz Fischler makes me nervous, because the same man recently presided over the disastrous common fisheries policy. Let us hope that he is more successful in finding a solution to the common agricultural policy that is in the interests of both consumers and producers. Although we must put consumer interest first, we must think of the long-term interests of Scottish consumers, rather than try to secure the cheapest food in the short term.
In my view, any country that is prepared to depend to a great extent on imported food does so at its peril. It makes itself vulnerable to price hikes and the results of monetary inflation. Although we might be in a commanding position regarding imports at present, that might only be temporary. Therefore, it is vital that we maintain a healthy agricultural sector and sustainable farming; of course, the most sustainable business of any sort is one that makes a profit.
In any negotiations on the CAP, it is important that our politicians fight for measures that give our farmers a playing field on which they have the chance to prosper. The fact that Scottish farmers have complied with quality controls over the past two decades means that our produce, especially our livestock, is of exceptionally high quality and is probably safer than any in Europe. Those quality and welfare regimes do not apply to a great many countries, such as Argentina, from which we and the rest of Europe import vast quantities of meat. It is vital that imports are carefully controlled and that there is an honest labelling system, so that consumers have a choice in what they want to buy and producers gain some advantage from advertisement of the quality of the Scottish product.
Figures show that employment on Scottish farms has fallen from 76,000 in 1982 to 68,000 in 2002. That is hardly surprising, given the drop in farm incomes. The fact that the industry is still so important to Scotland means that it is important that the CAP reforms are used sensibly, both to improve the environment and to leave a strong food-producing sector in Scotland. Scotland is famous for quality commodities and deserves to retain that reputation.
Will the member take an intervention?
In a moment.
Decoupling subsidy from production will be helpful in some ways. For example, it should lead to a more diverse livestock sector and stop the gluts that are caused by the same sort of lambs and calves coming on to the market at exactly the same time of year.
We support the move to a fully decoupled system. If that is to be a truly agricultural policy, it must be about changing the pattern of farm support, rather than about redistributing available funds to different areas, which the flat-rate area system would do. Therefore, we prefer the historic method.
According to the representatives of the National Beef Association and the National Sheep Association, to whom I spoke yesterday, the industry's biggest fear is that the cattle will disappear from Scotland's hills and that, as a result, cattle finishers will lose the source of Scotland's famous beef industry.
Will the member give way?
Not at the moment.
In addition, environmentalists are agreed that cattle on the hills are good for the environment and should be maintained to graze Scotland's hills. Therefore, it might be clever, as my friend Alex Fergusson has suggested, to provide a financial incentive—in the form of a calf subsidy—to the producers of beef, bullocks and heifers to encourage them to keep on producing. That could be done through the national envelope or, better still, if the practice is thought to be of environmental benefit, through modulation. One per cent modulation would raise more money than 10 per cent national envelope. That money could go to the beef-sector producers and the hill men who are making such a valuable contribution to the beef industry and the environment.
Will the member give way?
I am sorry—I will not.
We are told that modulation is to be compulsory throughout Europe. That is enormously unfair to Scotland and the rest of the UK, most of whose farmers will be modulated, whereas the majority in Europe will not be, because of the small size of their farms. It appears that Scotland and the rest of the UK will continue to subsidise the rest of Europe through modulation. Our minister should highlight that enormous injustice whenever possible.
If we are stuck with the clawback tax of modulation, which may also have social implications by creating unemployment, it is vital that as many farmers as possible join the agri-environment schemes. Otherwise, we will have too many contributors and too few beneficiaries of modulation money.
I will take Rob Gibson's intervention.
The member is in his last minute.
People in the north, such as those in Caithness, have felt the need to use the national envelope or modulation. I was surprised that Alex Fergusson suggested that modulation should return to the farms from which it came. Surely the member agrees that if we want beef livestock on the hills and in the north, help in that direction must go to those who are most in need.
Mr McGrigor has half a minute to reply.
I have always argued that subsidies should go to the most disadvantaged areas, if that is what Rob Gibson means. The point that my friend Alex Fergusson made was that modulation should be match funded so that if it returned to farmers, farmers would receive twice as much money.
In conclusion—
Very quickly.
I support total decoupling. We should get rid as soon as possible of all the red tape that has long crucified farmers. Farmers tell me that whatever system Scotland chooses must be similar to that of England and Wales, to avoid another bureaucratic nightmare.
Members have made pertinent points that have covered a wide range of matters from decoupling and GATS to animal welfare. It is important to recall that the common agricultural policy was established in a post-war Europe that was plagued by rationing and food shortages. It served a useful purpose at that time.
Helen Eadie talked about enlargement. If we began today with a Europe of 25 member states that had vastly divergent agricultural practices, we might not come up with the present system, but that is the system that we have been dealt, so we must consider reform.
In an organisation such as the EU, progress can be slow and is often the result of painstaking negotiation that sometimes involves give and take by all. George Lyon talked about the changes for the industry in the past 10 years and the progress that has been made. Throughout his time in office, the minister has contributed a great deal to that progress.
The minister spoke about the challenges. I will highlight two matters that are on the agenda for the Council of the European Union's agriculture and fisheries meeting in November, and on which we need further progress. I ask the minister to do all that he can in partnership with colleagues to make progress on those matters.
First, I will talk about tobacco subsidies. Rhona Brankin spoke about healthy lifestyles and the importance of policy connectivity. I agree 100 per cent with that. We know that tobacco is an addictive drug that kills. In the course of this afternoon's debate, three or four people in Scotland will die of smoking-related illnesses. Despite that, the tobacco regime accounts for 2 per cent of the common agricultural policy's budget—about €1 billion per annum. I understand that moves are afoot to support reform and that those moves include decoupling, but because the issue is sensitive for southern Mediterranean farmers, the clock moves slowly.
As I said, the issue is on the agenda for the next council meeting and the European Commission intends to table proposals with a view to applying reforms from January 2005. I know that the Government is pushing the case for reform, but the Scottish Executive has been central in promoting healthier lifestyle campaigns. If we want policy connectivity, we must consider carefully what we do on tobacco subsidies. I would like those subsidies to be banned and I would like the money from them to go into health promotion.
Think what could be done with €1 billion every year. Earlier this year I spoke in the chamber about the multimedia, Europewide "Feel free to say no" campaign, which focuses on preventing young people from smoking. The current EU tobacco subsidy would fund a campaign that is more than 160 times as large as that. Last month, the EU announced that €1 million was being earmarked to fund 19 research projects on cancer. €1 billion would fund 19,000 research projects on cancer. Add to that the fact that the tobacco that is grown in the EU is not consumed in the EU. It is third rate and is exported to third-world countries, where children often smoke it. That is immoral, and we need to speak out against that.
I turn to the sugar regime. Under the present system, EU sugar prices are about three times world prices. Maize prices are similarly affected. Despite that, the Commission, while encouraging debate, is making no firm recommendation about reform of the regime. Agra Europe has called the sugar regime in Europe
"the most protectionist market-rigging and expensive of the common market organisations for agricultural products".
The current situation is unacceptable. The big winner is the sugar-processing industry. In each of the eight sugar-producing countries in the EU, just one company controls the entire sugar quota. That monopoly means that the big losers are the farmers and agricultural labourers in the developing world, who are trying to sell their produce into a world market, where the price is a third of that in Europe. Colleagues, there is a moral imperative to act.
There is also a further reason why the present price of sugar should not be sustained. Sugar is used in manufacturing production. It is an integral component of chemical and pharmaceutical products. Production refunds are available in some sectors, particularly in the chemicals industry, but the price of sugar represents a double whammy for citizens and taxpayers, who subsidise EU prices and then have to compensate for those prices through production refunds.
It is not a happy situation for manufacturers either. They tell me that refunds are patchy and unreliable. In some years, no refunds are made at all. We need to reform the sugar regime. I trust that the minister will take that on board and ensure that, the next time the matter comes up at the agriculture council—which is later this month—he and his colleagues at United Kingdom level will press for the Commission to come up with firm proposals for reform.
The motion aptly describes the progress that has been made in Scotland. I am happy to support it, and in particular its call for stakeholders to be included in decision making.
Europe is a great thing, and it has done Scotland a lot of good. Over the past few years, however, many people in Scotland have had huge difficulties with its policies, which can usually be described with three-letter acronyms—the first letter is usually a C and the last a P—namely, the CAP and the CFP.
The view of the farming industry is that the common agricultural policy has protected it from some of the more cost-cutting measures that have been introduced by successive UK Treasuries. There is tremendous support on the part of agricultural producers for remaining in the CAP.
I thank George Lyon for that intervention, but I do not recall saying that we should pull out of the CAP. However, people have wanted to change policies, including the common agricultural policy, for a long time. Some farmers have been saying that the biggest change in land use in Scotland this century is possibly about to take place. Many farmers think that the common agricultural policy in its current form has been failing for a long time. If £0.5 billion of subsidy is being put into a particular sector, as has been the case in recent years in Scotland, and if, as they have been telling us in our surgeries, farmers are getting derisory incomes and are having to add non-farming activities to their businesses in order to survive, then we can all accept that something is clearly wrong with the situation.
That is not the only thing that has been wrong with the CAP. There have also been the food mountains—although they have been dealt with to an extent. As Irene Oldfather mentioned, there is a ridiculous situation with tobacco subsidies. The EU is trying to get more involved in health issues, so it is hypocritical for it to be involved in those subsidies. The issues around CAP reform concern not just Scottish, UK or European farmers; they concern farmers throughout the developing world. Part of the CAP reform agenda relates to promoting development elsewhere in the world, which we should not forget. Although there was a failure to make progress at Cancun, we know that liberalisation is still on the agenda, so even more pressures and challenges will be facing our farmers in the near future. Some way down the line we may lose the right to subsidise any products that are exported. These reforms are the beginning of change that will continue for some years.
One of the main changes that has been agreed is the withdrawal of export restitutions for many products that are produced here in Europe. That measure is intended to help world markets and trade.
I accept what the member says. I am saying that there is more change ahead, because liberalisation will be on the agenda again in the foreseeable future.
I turn to food security. All farmers believe that change to the CAP is inevitable and have thought so for some time. Most farmers to whom I have spoken can prepare for that change. However, food security is important to the debate, as it was the founding principle of the CAP. As a nation, we must ask what we mean by food security. Is it still an objective and is it still required? If so, how do we define it? I hope that that issue will feature in the debate that lies ahead in the next few months and that ministers will take it into account.
Everyone agrees that farmers must farm for the market and for need. As Rhona Brankin said, when determining what will be in the marketplace we must define what we mean by need. We all welcome the simplification that is on the horizon, because it will mean that farmers may not have to spend as much money on consultants—although the integrated administration and control system forms will still have to be completed and passports and movement records will still be needed. Some farmers have mentioned cross-compliance to MSPs. There is some confusion about whether new burdens will be imposed because of climate cross-compliance. I hope that the minister will refer to that, because many farmers want to know about it.
I give a very warm welcome to the new emphasis on delivering new public goods for the people of Scotland and allowing our farmers to play a central role in doing that and in protecting the environment. It is important that we raise awareness among the people of Scotland of the new opportunities that will be afforded them as a result of these changes. On the ITV news last night, a reporter discussing the CAP reforms said that they might mean money for nothing for farmers. That is a myth that we want to destroy. We want to explain what the CAP reforms mean for the people of Scotland and how they, as well as farmers, will benefit from those reforms.
A severe reduction in production may have a significant impact on downstream industries. As George Lyon pointed out, no one knows what impact the reforms will have on production. Production may not reduce at all, but there are concerns in the beef sector. If members have been reading the press over the past few days, they will know that predictions for the reduction in suckler beef cattle herds range from 5 to 30 per cent. The reforms may have an impact on downstream industries and the infrastructure of many of our rural communities, as reduced production would mean that less feed was required for animals and that abattoirs could be closed. The haulage industry and the marts would also be hit. We must take all those issues into account.
Many farmers are diversifying and that process must be supported. An impressive number of farmers are becoming involved in the production of biofuels and other forms of renewable energy. That development must be supported and encouraged. We are rising to that challenge.
There are challenges, because the outcome of the reforms is unpredictable and we will not be able to measure it. We know that our farmers are resilient and will adapt, but they will need the support of the Parliament to do so. There are many opportunities to protect our niche and premium markets and, above all, to ensure that we protect our traditional way of life in Scotland. It is incumbent on MSPs to try to attend the many consultation meetings that will take place throughout Scotland over the next few days and to hear the concerns of farmers. We can then have another debate in the chamber and move forward.
There is one speaking slot left. I propose to give three minutes to Eleanor Scott and three to Rosemary Byrne.
I will not speak fast—I will just speak normally for three minutes.
I very much welcome the consultation and hope that it will draw a wide response from all and sundry—not just from farmers and environmental organisations, as one might expect, but from everyone. I hope that people will engage with the process, because it is not just about agriculture—it is about the whole of Scotland's rural landscape.
There is general agreement that there should be decoupling, which I support. Decoupling would give farmers the freedom both to farm and to fulfil the role that they are fond of telling us they undertake anyway—that of guardians of the countryside. Without becoming heavy-handed, if we set proper conditions for single farm payments that require the land to be kept in good heart we can ensure that farmers do act as guardians of the countryside and that good practice in looking after the land is maintained. For most farmers, that may not be a problem, but it would be good to have it written into the conditions.
There is less than universal agreement on national modulation. I echo the plea of my colleague, Shiona Baird, that there should be as high a degree of modulation as possible, with the proviso that UK match funding is guaranteed. I ask the minister to say whether the match funding is guaranteed in perpetuity at whatever level we choose to set it at. We would want such a reassurance before committing ourselves to that.
In some quarters, there has been a lack of enthusiasm for national envelopes, but I want to mention the possibilities that those could hold for the crofting counties. Most crofters will be below the €5,000 threshold for modulation and so will not be affected by it, but they could gain if a national envelope were used in, for example, the beef sector to encourage them to continue to keep cattle. There has been a feeling that crofters might give up on cattle if they were not required to keep them. However, for environmental reasons, as has been mentioned, I think that we want to encourage cattle to be kept on areas such as the machair. By using the national envelope creatively, we could make that happen.
Creativity is perhaps the watchword, as the national envelope provides many possibilities for funding rural development. For example, it could be used for breed improvement and for marketing. Slaughterhouse facilities are an essential part of marketing. I wish that we could find some creative way of enhancing our rural slaughterhouse provision, which is very poor. That affects animal welfare, rural jobs and the ability to source local produce locally. We urgently need to address the issue, which is a big gripe in the rural areas.
I said that I would be brief, so let me conclude by saying that the reform gives us many opportunities to enhance our countryside, but I want an assurance that schemes such as the rural stewardship scheme are not oversubscribed. The funding must be available so that any moneys that are modulated go from direct support to agri-environment schemes. Those must be adequately funded and fairly distributed. The reform presents us with possibilities.
We recognise the need for decoupling subsidies from food production. However, we want to ensure that small farmers and crofters are protected and that they do not go out of business because of the change in the system, the bureaucracy that the system involves or the changes that will occur in less favoured areas.
Some 85 per cent of Scottish farm land is classed as a less favoured area. Therefore, it is important to emphasise the needs of the poorest farmers and crofters. For example, if the new single payment is to be based on historic direct payment receipts, will those farmers with the largest farms but a small proportion of LFA land gain more than the small farmer, the bulk of whose land comes into the LFA category?
We must also ask whether a fully decoupled system of farm support should be applied to Scotland. Decoupling for dairy payments will start in 2004. Dairy payments are made up of two elements: a dairy premium and an additional payment. Those elements must be brought within the single farm payment from 2007, but there is the option to bring forward decoupling in the dairy sector to 2005, so that it starts at the same time as decoupling in all the other sectors. There is a need for clarity on when that will happen, in order to allow farmers time to plan.
Clarity is also required on how set-aside should be operated in Scotland. The issue of whether the flexibility option should be used requires scrutiny.
Like Eleanor Scott, I want to make a few brief points about the environment in relation to the issues surrounding the CAP reforms. The Scottish Socialist Party is concerned that the list of criteria for good agricultural and environmental condition is inadequate as a framework within which to define the status of farm land. For instance, it does not cover the full range of landscape impacts or the habitat or pollution impacts on fresh water of farming—the impacts are only partly picked up.
The whole point of decoupling is to introduce environmental considerations into the awarding of farm subsidies. Good farmers have always been stewards of the countryside. That should be recognised, but we should also give farmers the tools to continue farming. The CAP reforms are necessary and welcome, but they must be predicated on an understanding of the desire for the protection of the environment to go hand in hand with a vibrant farming community.
This afternoon's debate has been characterised by the genuine support from all parts of the chamber for the coming changes in agriculture. There has also been an acknowledgement of the importance of agriculture to Scotland's economy and recognition that agriculture and the rural economy cannot be seen in isolation from other policy areas. Even those who have no interest in fields, seeds and green things recognise that, in order to sustain our cities, we need a vibrant rural economy and a sustainable agricultural sector.
In his opening remarks, the minister spoke about the potential for the CAP reforms to be a turning point for the Scottish rural economy. Most members have picked up on that and agreed with it. As well as welcoming the reforms, members have talked about the need for less bureaucracy. I saw the minister indicating his willingness to seek as much reduction in bureaucracy as possible.
Roseanna Cunningham and Rhona Brankin spoke about the need to address cross-cutting policy areas, such as environment versus production, and the conflicts between them.
The Conservatives have called for immediate and total decoupling. Nevertheless, they also called for maximum flexibility and acknowledged that there will be difficulties. The Conservatives might have difficulty in sustaining those arguments, because I cannot see how we can have total decoupling but say that there are special cases. Where do we draw the line around those special cases?
Helen Eadie and Irene Oldfather set the CAP reform in the context of the global and EU economies.
Perhaps I can clarify our position. My call for flexibility was to ensure that, in the allocation of entitlements from the base years of 2001, 2002 and 2003, there is flexibility to allow those who are currently in anomalous situations and would not receive an entitlement to do so. That is not quite consistent with the position that Christine May has described.
I am grateful for that clarification.
The key issues are the importance of agriculture to the economy, keeping existing modulation payments in rural areas as far as possible and protecting full-time family farms. I therefore have some difficulty with what Rosemary Byrne said, because there are many more large family farms in Scotland than there perhaps are in France and other parts of the EU. The proposals might affect those farms adversely. We should also consider sector competence and support, the impact on regional gross domestic product, regional tourism projects and shifts in development pressures and settlement patterns.
In my closing minutes, I will talk about Mr Farmer. Mr Farmer received £30,000 per year in the years 2000 to 2002. In future, he will receive a single payment with no requirement to keep any cattle, grow any crops or look after any sheep. I heard what Richard Lochhead said about production being sustained. During the consultation process, it is important that we pay close attention; we do not want to end up with people going once round the farm with a mower, as has been suggested. There is also a potential for the single farm payment to move with the individual. That poses the danger of farmers moving from valuable land to less valuable land, leaving the more expensive land with no support at all.
Mr Farmer, with his SFP, could start farming deer or pigs, neither of which has ever received a subsidy in the past. That would impact severely on enterprises such as Fletchers of Auchtermuchty in Iain Smith's constituency, which has never received a subsidy and has been farming deer for 30 years. I hope that that point will be taken into account during the consultation process.
We welcome what the minister and his colleagues in DEFRA have achieved. We encourage him to continue to bat for Scotland, to build a vibrant rural economy and to bring about reforms that benefit all policy areas in Scotland.
I draw members' attention to my entry in the register of members' interests, where they will see that I am a partner in a family farm that is a recipient of EU support.
I spent quite a bit of time this morning trying to position myself up on the fence beside Ross Finnie, who is there on a different issue. The Conservative amendment is designed to let us come down off that fence with a resounding thump. The Executive's motion meets with the full approval of the Conservatives and we will be voting for it, but it is important to take this opportunity to make clear where we think the consultation has to go. We grasp that opportunity with both hands.
Decoupled payments to the farming industry are to some extent transitional or residual payments. When the minister winds up, will he talk about some of future issues relating to financial support through the EU and say when he foresees payments being significantly reduced and perhaps brought to an end all together? That is an issue about which very few of the people to whom I have spoken have any knowledge and people would like to know more about it.
George Lyon and others talked about the threat to the beef sector. We need to avoid getting too bogged down in that issue, because the system that is being put in place could deliver support through the marketplace in a way that we have never seen before. One of the ironies is that, in many of the speeches that we have heard today, there has been a lack of understanding of the significance of market forces within the new regime.
Shiona Baird talked at some length about a farmer whom she saw on television, who said, "If I'm going to get this subsidy and there's no longer a need to produce, why should I produce, given that I've been producing at a loss up to now?" That is exactly how we will stimulate the market—the fact that it will no longer be necessary to produce at a loss will bolster the marketplace and ensure that those who have to purchase produce from our farms must pay a market rate for it. That will therefore create a demand that was not there before. When production was directly associated with subsidy, and vice versa, it was possible for the purchasers, the processors or the wholesalers in Scotland to buy their raw materials at a price below the cost of production, which is what got us into the position that we are in today.
The guy on the television was very much getting at cheap imports. If we can address the issue of cheap imports and get a good market price for our products, there will be an incentive to farm. That is the bottom line—we need to deal with the cheap imports.
Indeed. I strongly support that remark. However, the system will give us the opportunity to go back to market reality in food production in Scotland. That is essential for the development of our farming communities, because very little young blood is coming into the farming industry. As we all know, the traditional route into the farming industry for young blood is through the farming families, yet many of our young people go off to university and become doctors, lawyers, accountants and whatever. They become accustomed to having some control over their destiny, so the prospect of returning to run a family farm, where the only hope for success in the future is to continue filling in forms and drawing EU support, simply does not attract the best minds and the best individuals available to us. That goes for our sons and our daughters because, as I remind Christine May, Mr Farmer may well be Mrs Farmer. If Christine May had made that remark to my wife, she might have got a mouthful.
I was not being gender specific.
Indeed.
The final issue that I need to address is modulation. The farming industry is vehemently opposed to modulation. I can understand why, because the schemes that modulation has been used to fund have resulted in a large amount of people paying a small amount of money and a very small number of people actually getting money back again. We need to build confidence in the farming industry that there is a route for that money to return to those from whom it came. If we do not, we will never have the support that we need.
I have a final question that I would like the minister to address. When moving money through modulation, is it possible to underpin the LFA support scheme with the additional money that is raised through modulation? If that is possible, it might solve one or two of the problems that we have discussed today about cattle moving off the hills.
In general terms, the SNP welcomes the CAP reform. We note the effect that it will have throughout Europe to ease the market for African produce and the like. Although we want to ensure that we can supply our people in Scotland with the best Scotland-produced food, we must remember that we are talking about a wider policy, which will have a wider impact.
In particular, I welcome the process towards decoupling. The potential for a single farm payment means a reduction in bureaucracy. That will ensure that farmers can get on with what farmers must do. It is one of the biggest changes that has ever been brought about in farming in my lifetime and it is most welcome.
However, the devil is in the detail. The minister must give us some cast-iron guarantees in relation to how we support people in our less favoured areas. I know that it is early in the consultation for him to do so, but he should give us some indications today. For example, how will he ensure that suckler cows can still be produced in Orkney, Caithness or the crofting areas? I hope that he will talk about such examples today.
The policy has to address the problems of depopulation in rural areas. Highland Council is addressing the population time bomb with which we are threatened in the Highlands because of the considerable difficulties that the problem causes. Keeping people in the hills and glens does not fit with the easy definitions and solutions of the NFU at its top echelons, which are to go straight for decoupling, no modulation and all the rest of it. We have to get real about the fact that Scotland is a country with a difficult climate and a difficult geography.
I have to declare an interest as a member of the Scottish Crofting Foundation. I am obviously interested in supporting what that body says. I have also taken advice from farmers and crofters throughout our area in order to make these remarks. The SCF says:
"A reduction in agricultural activity and an overall fall in livestock numbers in the Highlands and Islands has been predicted".
Last year, Ross Finnie said in the chamber that that could mean a downturn in activity. If one job is lost on the croft or farm, that can lead to three further job losses downstream. That is precisely the kind of issue on which we need guarantees, so that we can prevent it from happening. Locally, we have seen problems with the state veterinary service, which has reduced employment. We have also seen a cutting away at the economy in the most remote areas. We must ensure that the CAP reform benefits all the communities of Scotland and not just the best-off farming sector.
I have suggested that we need to ensure that modulation is targeted in such a way as to help those who are most in need. Colleagues in the north and in the marginal areas have said that they hope that some detail can be put on the figures that have been given so far. Indeed, at the beginning of her opening speech for the SNP, Roseanna Cunningham asked the minister for some detail on the figures. The minister has to spell out the sort of rural development schemes that have the potential to be used with modulation. We need to know about the practicality of applying some of the schemes that are available through the CAP reform.
I said earlier that the devil is in the detail. We are concerned about issues such as the historic payments that were made under the sheep annual premium in 2001. The payment was low because, although the price of lamb in the UK was low that year, lamb prices were high in other parts of the European Union. We would like to press to have that low figure discounted in the process of averaging out the historic payments.
There is also concern that thousands of acres that have not been registered for IACS will suddenly become available when large sporting estates put a few sheep on to fields in order to qualify for good agricultural and environmental conditions and to apply for single farm payments. We would like to know whether such a scam can be ruled out.
We also want the minister to listen to the population out there. People are asking for a food policy that allows the Scottish public to buy food that is produced in our hills and glens. Although I am glad that the minister has brought in stakeholder groups to discuss the matter, he must ensure that consumers and others have a good deal more of a say than some of the usual suspects among the producer groups.
Although we generally support the agreement, the forward strategy for agriculture has to marry the potential for farmers and crofters to produce food with the ability of the people of Scotland to buy it.
First, I welcome Roseanna Cunningham to her first debate on the CAP and on agricultural policy in general. I am sure that all members shared my sense of disappointment that it was not Roseanna but Alex Fergusson who raised the difficulties with blue payment forms and that it was George Lyon and others who mentioned the dry heifer rule, which is something that she will come to love in due course. That said, we might get rid of it through this CAP reform. Indeed, I felt a real sense of poignancy that she did not express a view on whether we should have rotational or non-rotational set-aside. These matters have troubled me for the past four years, so she should not worry about them.
To be serious, I think that Roseanna Cunningham tried to take a different route with regard to supporting or not supporting the policy. However, her arguments were not terribly convincing. The Executive has presented Scotland with extraordinarily worthwhile opportunities and flexibilities, and I can only repeat that we will decide the policy.
Rob Gibson and Richard Lochhead suggested that we might lose production. They did not necessarily agree with George Lyon's proposition in that regard. Indeed, although George's view might well be right, the point is not that members should be saying to me, "Gosh, this is a great problem; you must give us some guarantees." Instead, they ought to be saying whether they want to use the flexibilities within the agreement to ensure that we reach a positive view about, for example, the national envelopes with which we can design schemes to ameliorate the very problems that they have raised. That is part of the consultation process and the reason why I fought for those flexibilities in Luxembourg. I genuinely believe that we will need those flexibilities to address some environmental issues. As a result, I do not want to hear moaning and groaning about what might or might not happen. Instead, I want members to put forward positive views about how they would use the instruments that are available.
The minister should be a little fairer. The difficulty lies in how we are able to quantify any potential impacts to ensure that any decisions on the various options are the right ones. Indeed, I posed that very question to the minister.
Roseanna Cunningham will be aware that some of those figures are already in the public domain and come from economists in the Scottish Agricultural College and from my own department. Quality Meat Scotland has produced figures for the beef sector. None of those figures is very different in their final forms and, as a result, figures for the key area that she highlighted are well known.
Alex Fergusson referred to the agreement's complexity. Indeed, that was nowhere better exemplified than in his colleague Jamie McGrigor's speech. Jamie demonstrated an appalling ignorance of the difference between pillar 1 funding and pillar 2 funding. I would have thought that, by now, even he would have understood that if one modulates money into pillar 2, it does not become available to support production. However, Alex understands that the agreement is complex. Perhaps he will discuss the matter with Jamie in due course.
I must confess to Helen Eadie that I have not read the Scottish Left Review. I apologise for that, even though some voices behind me indicated that it was not that widely read anyway. I understand that the comments to which she referred were made in the context of the World Trade Organisation and GATS. Irene Oldfather mentioned the tobacco and sugar regimes, and I shall talk to her later about the Lomé convention, which we both recall, and its attempt to protect the Caribbean nations.
In going through those issues, Margaret Ewing raised the question of what we do about modulation, what the levels of modulation are and what should be done with the 80 per cent of funds retained. The part of the guaranteed minimum that we will get would be used only if there have to be payments to reform other regimes. It is not a matter of syphoning off money to subsidise other parts of the country; it is a matter of paying for the fundamental reforms.
That brings me to the point made by Alex Johnstone about the financial perspective. The current financial perspective ends in 2006 and is being reviewed between 2007 and 2013. The Berlin summit has already been set and we do not anticipate that the effect of new members will affect that in the medium term. The agricultural subsidy is not designed to be degressed in that period, and that is an important point.
The challenge before us is to examine the detail of the agreement as it comes, to use the consultation period in a constructive way and to consider the opportunities that decoupling offers us. The whole question of simplification has been mentioned by others. Rhona Brankin's point that we should also see the exercise as an attempt to reform further our whole attitude to the food chain, from bottom to top and from top back down to bottom, is also important. We must understand the relationships in the food chain, and that has a lot to do with the difficulties in the dairy sector. There is a lack of understanding about who gets what in that chain, and when we compare ourselves with other mainland European nations we can see that many get a much better return from the same chain by having understood it better. The opportunities of decoupling, which can make us progressively more market orientated, also offer us great opportunities in that regard.
I repeat that it is not a question of simply saying, "Oh, there may be difficulties." I believe that we have the armoury of measures that can allow us to develop ways of ameliorating and dealing with any possibilities of transfer in production. More particularly, that approach can allow us to deal with some of the environmental degradation that could arise if we get the wrong mix of livestock on our high hills. That matter of real concern was raised by Shiona Baird and other members during the debate.
Order. There is a great deal of chatter in the chamber. I ask members to concentrate on the minister's speech.
Let me say something about the rural development regulation. The WWF has indeed put forward proposals that suggest that we do not use all the measures, but it is a question of having the money. There is no point in applying 44 measures and spreading the jam so thinly that it makes not one whit of difference. We want to be able to use modulation in an imaginative way that gives us a greater resource, which will then allow us to utilise more of the measures within the rural development regulation but in a way that actually makes a difference to the environmental condition of our rural countryside. I do not subscribe to the proposition that we should simply take a penny from each farmer and give them the penny back. It would be foolish to believe that that would make one whit of difference to rural Scotland or its environmental condition.
We must take a much more sensible view. If we want farmers to engage in the process, we cannot expect them to do so on an annual basis. We have to look over a five, six, seven or eight-year time scale and say, "Yes, you are contributing to that process and, over that time scale, you will all get your money back. Individually and collectively, you are benefiting from the improvement that that makes to rural Scotland."
Those are the main issues, but the important point to make is that the consultation does not end until January. It is therefore important that all members who have taken part in the debate and who have reflected genuine concerns on behalf of many sectors in their communities on the issues that they wish to have addressed take the ample opportunities available within the consultation process to express their concerns. We are conducting an extensive programme of meetings throughout the country. Indeed, a meeting was held in the south-west last night and more than 200 people attended, which gives us a good idea of the number of people who are genuinely interested in taking up the opportunity of contributing to the process. Once—and only once—we have gathered in those views will the Scottish Executive come to a view about how best to take the basic decoupled proposition and fashion it in a way that best meets the circumstances of Scottish agriculture.
I repeat that the reform offers us enormous opportunities to change the face of Scottish agriculture. In so doing, it also offers us opportunities to meet the aims of the strategic framework that is set out within the strategy for agriculture to deliver for our rural communities a much more sustainable form of agriculture, and for agriculture in Scotland to continue to be the primary cog in a highly successful food chain—a primary cog that supplies high-quality produce in a way that enhances our environment.
All those objectives can be met if we attend to the detail and if people respond to the Executive's call for them to participate actively in the consultation process on the reform.
I have a point of information and clarification from Alex Fergusson on the debate on the common agricultural policy that has just finished. Mr Fergusson has asked me to say that he should have drawn the attention of the chamber to his entry in the register of members' interests as a limited partner in a farming partnership in south Ayrshire.