Blair condemns `historic' CAP reform as farmers celebrate

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THE AGRICULTURE Minister Nick Brown faced humiliation last night after the deal he reached on the Common Agriculture Policy was rejected by Tony Blair as "not good enough".

The overhaul of the 37-year-old system for supporting Europe's farmers will lead to cuts in subsidies on beef, dairy and cereals production, with dairy quotas phased out by 2006.

Mr Brown, who has to make a statement on the deal to MPs today in the Commons, said after the all-night negotiations that it would save the average British family up to pounds 70 a year.

"The deal struck is good for taxpayers, farmers, consumers and the countryside," he said.

But even before the Agriculture Minister had returned to Britain, the deal was criticised by Mr Blair who told the Cabinet it did not go far enough, and Britain would continue pressing for deeper cuts in the cost of the CAP.

Farmers across Europe celebrated that they had at least avoided more draconian cuts. The historic agreement to reform the European Union's 37-year-old farm policy had begun to unravel last night with the realisation in London and other capitals that the deal would save no money.

Tony Blair appeared to pull the rug from under the deal by suggesting the cuts did not go far enough. The reforms still have to be agreed by heads of government at their Berlin summit on 25 March in the context of an overall deal on reforming the EU's finances. "This does represent progress but it is not satisfactory in our view," Mr Blair said.

French displeasure also grew during the day. The Agriculture Minister, Jean Glavany, accused the German EU presidency of assuming the negotiations were over when they were not. The EU Agriculture Commissioner, Franz Fischler, co-broker of the compromise, said although it was "less ambitious" than the Commission's initial proposals, it represented "the most radical reform since the CAP was first established in the early 1960s".

The key plank of any deal was intended to be a cut in the artificially guaranteed price of commodities by up to 30 per cent. But the ministers backed away from such a steep set of cuts, opting for a maximum price cut of 20 per cent for beef and cereals and a 15-per-cent cut in milk, which will be delayed by three years.

The hoped-for effect is a long-term cut in the burden of supporting agriculture, and fewer milk lakes and beef mountains. By bringing EU policy into line with the demands of Europe's trading partners and the World Trade Organisation it will also allow big producers to compete in world markets, where prices are much lower.

But the big flaw is that it will cost taxpayers an extra pounds 1bn a year over the next seven years - on top of the pounds 30bn a year the CAP already costs - because farmers will have to be compensated for the price cuts with generous direct-income support payments. And because the cuts and payment limits have been diluted in the final compromise it is not sure the trade benefits of paying for reform can be fully achieved.

Critics were particularly dismayed at the failure to include any national co-financing of the CAP, as Germany had sought, or any limits on annual cash amounts individual farmers can pocket. Britain's millionaire grain barons, paid hundreds of thousands of pounds a year simply for owning vast tracts of cereals land, appeared to have escaped the threat of a pounds 100,000 ceiling on the amount they cash in EU subsidy cheques each year, after which subsidies would begin to tail off.

The Farm Minister, Nick Brown, welcomed this development. "I am pleased the ceiling is gone. We wanted to see changes in the method of paying farmers which did not disproportionately penalise the United Kingdom." But by last night Brussels officials said the means for discriminating between income support for deserving small farmers and the rich elite who cream off most of the subsidies could still be added to the final package. In contrast to the noises of dissent from London, in Brussels Britain was claiming victory for forcing Germany and France to accept some reform of the dairy sector, although Mr Brown admitted disappointment at a three-year delay in implementing the agreed 15-per-cent cut in the guaranteed milk price.

The trigger for reform was the need to find big budget savings to finance EU expansion into Eastern Europe in the next few years.

Downing Street said the deal would increase spending by 2006, not stabilise it, as the Germans had intended.

Mr Brown was still in Brussels when Mr Blair told ministers that the deal was unacceptable.