Lords committee calls for overhaul of EU farm spending policy

An overhaul of Europe's farm spending policies is proposed by a parliamentary committee today, as Tony Blair prepares to put the future of agriculture spending at the heart of a fierce Anglo-French dispute.

An overhaul of Europe's farm spending policies is proposed by a parliamentary committee today, as Tony Blair prepares to put the future of agriculture spending at the heart of a fierce Anglo-French dispute.

A report from the House of Lords environment and agriculture committee, calls for the phasing out of the biggest element of EU farm spending - direct payments to farmers - from 2013.

The document suggests dismantling the current system and replacing it with an alternative model which encourages a broader range of countryside activities.

Its findings come as Mr Blair prepares for tomorrow's summit showdown over EU financing. The Prime Minister has made it clear he will negotiate over the future of the UK's €4.6bn (£3bn) annual budget rebate only if there is a re-examination of farm spending, which costs the EU about €44bn a year - something ruled out by France which gets 20 per cent of the Common Agricultural Policy (CAP) receipts.

The Lords report calls for for massive acceleration of the reforms to the CAP that have already taken place.

The committee calls for the elimination, as soon as possible, of all export subsidies, and intervention in financial markets to support prices. Already, by 2013, only 15 per cent of the CAP will be in market support or export subsidies which have fallen in value from €10bn in 1993 to 3.4bn in 2002.

However the committee does not suggest re-opening a 2002 deal which lays down agriculture spending between 2007-13. Under earlier reforms, the incentive for farmers to over-produce has been removed and subsidies are allocated, instead, on the basis of historical receipts. The committee would like to remove this system altogether.

Instead it wants to focus cash in a new development fund which would aim to re-structure the rural economies of the countries that joined the EU last year.

Lord Renton of Mount Harry, the chairman of the inquiry, said: "The CAP is near breaking point and this tension will increase when the EU grows to 27, or even 28 or 29 member states. Drastic changes are necessary."