Europe to end farms madness

Cheaper food and less intensive farming are likely to follow the most radical reform ever of European agriculture policy, according to a Brussels plan which has been seen by The Independent.

Farmers will be paid direct income support, rather than the cumbersome and hugely expensive system of artificially high prices and subsidies that has been used for 35 years - the much-derided Common Agricultural Policy (CAP).

Brussels will next week propose that guaranteed prices for farmers, the cornerstone of the pounds 30bn-a-year CAP, should be slashed by up to 30 per cent for the main crops and commodities in the initial phase of the plan, which could ultimately return agriculture to the free market.

A leaked draft of the proposals, to be published next Wednesday as a key plank of "Agenda 2000" - the package of measures to prepare the EU for expansion into eastern Europe - calls for price-cuts to farmers of 20 per cent for grain, 10 per cent for milk and 30 per cent for beef.

Prices in the shops should come down for beef, bread, milk and cheese if the proposals are implemented. Consumer groups complain that the CAP in its present form adds at least pounds 20 a week to the weekly food bill for a family of four.

Price cuts will start to take effect from 2000, with some sectors, such as grain, taking an immediate hit, but the steeper beef price cut being phased over two years.

The document assesses reforms implemented in 1992, but warns that the spectre of food mountains is looming once again, and that subsidised exports will not be an option in the future because of world trade rules. Cereal yields are forecast to rise from 201m tons in 1996 to 214m by 2005, implying an inevitable return to unwanted grain stockpiles.

The reform, as outlined in the document, involves a huge shift from indirect price support to direct income aid, channelled principally to the smallest poorest farmers in outlying regions. Its rationale is to avert a return to the days of beef and grain mountains and milk and wine lakes by forcing the big cereals producers and cattle ranchers - for whom guaranteed prices are the biggest incentive to overproduce - to compete at world prices.

The document says: "The Commission considers it indispensable to proceed with further reforms of the CAP ... Improved competitiveness will benefit consumers and leave more room for price differentiation in favour of high quality or typical products".

The proposals speak of the need to "deepen and extend the 1992 reform through further shifts from price support to direct payments and developing a coherent rural strategy to accompany this process".

Compensation for cutting guaranteed prices is built into the reform, but there will be ceilings for the biggest farms, in a bid to end the present anomaly where so-called grain barons, in East Anglia or the Paris basin for example, receive cheques for millions of pounds from Brussels each year.

Savings from the scrapping of open-ended "intervention" - the system, whereby Brussels takes surplus food into cold storage to drive up prices - will be directed into a range of new "cheque in the post" payments to farmers based on the numbers of animals they own, to prevent an exodus from the land. As a result of the new payments, it is estimated that spending on agriculture will rise by around pounds 3.5bn a year, according to the draft proposals.

To be eligible for assistance, farmers will have to adopt more environment- friendly production methods and agree to stock fewer animals per field.

"It will be a move back to supporting traditional extensive farming and away from the intensive fattening-sheds approach which the CAP encouraged in the past but which consumers have rebelled against," said one senior EU official.

In what will be seen as the erosion of one of the founding principles of the common farm policy, individual governments will be allowed to "top up" compensation out of national budgets.

Britain will back the plan, given Labour's stated hostility to a policy which, under the influence of powerful farm lobbies in France and Germany, has been designed above all else to shield farmers.