Subsidies to the beef industry of pounds 3.4bn over this year and next could not be maintained, Jack Cunningham told the Commons last night.
The Minister of Agriculture promised "exceptional, one-off help" amounting to pounds 85m over the coming year while at the same time announcing an inquiry, headed by a Lord of Appeal, into the history of BSE.
Britain should join a European scheme already operating in 10 countries to offer pay-offs to farmers to quit, he said. Too much beef was being produced and the industry must be made viable.
Officials said Britain would use its presidency of the European Union in the next six months to push for progress on large-scale reforms of the Common Agricultural Policy to bring down subsidies. The CAP had been useful when it was set up to feed Europe after the Second World War, they said, but now it was encouraging overproduction. Farming unions and other bodies would be consulted about the proposals, which would take between a year and 18 months to implement.
All EU nations apart from the UK, the Netherlands, Luxembourg, Sweden and Austria had already joined the early- retirement scheme, which is 50 per cent funded by Europe.
Mr Cunningham said the European Commission had accepted that restructuring was vital, and had already proposed radical changes. The British government believed it should start now.
"There is over-supply of beef throughout Europe, and a long-term decline in the consumption of beef everywhere ... Our long-term aim should be to reduce the scale of the subsidy to producers."
Mr Cunningham warned beef farmers that they should plan on the basis that major changes were coming. There would be fewer farmers, but consumers, the beef industry and the environment would all benefit in the long term.
The Government would use pounds 60m from an EU compensation scheme designed to offset the effects of the strong pound - something for which farmers had been pressing - to help hill farmers, he said.
The inquiry, which would be non-statutory and would not take evidence from ministers, would be headed by Lord Justice Phillips. It would look at how BSE and new variant CJD emerged, and at the action taken in response to it up to March 1996, when far-reaching measures were announced by the last government. It would report by the end of next year.
Michael Jack, the Opposition agriculture spokesman, responded: "This is a miserable little statement given by a minister exhibiting Scrooge-like tendencies. It will do nothing to enhance the safety of British beef and farmers will see it for what it is. He has lost out to the Treasury and failed British agriculture."
Beef's future, page 7
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