By Ewan Pate, farming editor

A REPORT due to be released today will draw cheers from those who want to see agriculture operate without subsidies and boos from those who want to see farming and food production protected from the vagaries of the world market.

The report follows an extensive review of the operations and future direction of the European Union’s Common Agricultural Policy.

Under the chairmanship of Lord Sewel, who was minister for agriculture in Scotland from 1997 to 1999, the House of Lords agriculture and environment committee have taken a dry-as-dust view of the CAP with conclusions very much shaped by harsh free market economics.

The committee is made up in the majority by peers with farming and rural interests, including former NFU president Lord Plumb.

In the immediate future their lordships approve largely of the proposals in the ongoing 2008 EU health check. They want to see an end to set-aside and by and large disapprove of the concept of capping payments to larger farming businesses.

However, from 2013 onwards they want to see an end to direct farming subsidies presently paid through Pillar One, primarily the Single Farm Payment, and see all rural payments channelled through Pillar Two as aids to environmental and rural development measures.

The report concludes, “We are not convinced of the long-term justification for maintaining direct payments in the present form.”

There are also passages in the report which suggest a move away from the historic basis of calculating SFP towards a flatter rate, area-based system across the EU.

Speaking to The Courier yesterday in advance of the release of the report Lord Sewel said, “It is strange how things turn round.

“I argued against production subsidies when I was minister and now it seems that it was the correct argument.”

Asked how it would be possible for farming, particularly livestock farming in the less favoured upland areas, to survive without direct payments, he said, “I believe it will be possible to steer through payments to the upland areas for environmental measures under Pillar Two.

“For example, there could be payments to maintain grazing activity. To an extent I expect market forces to provide a solution.

“Scotch beef, for example, is a premium product and the effort should go into marketing.

“Cereals have seen a fundamental change in value and I expect to see that continue and although livestock enterprises are suffering from a lag they will follow and increased prices will work through.”

Food security, which has re-emerged as a concern in recent months, even featuring in speeches by government ministers, is given short shrift in the report.

“We observe that food scarcity would be a feature of income rather than production capacity and that those at risk are therefore consumers on low incomes in the developing world,” the report says.

This could be construed as meaning that British or EU consumers were simply affluent enough to buy their way out of any food scarcity crisis, but Lord Sewel said, “ No, this is simply a counter to the arguments put forward which are essentially protectionist.

“The way that markets will operate should mean greater opportunities for farmers in the UK and EU to meet demand.

“It is very important to have free trade under WTO agreements.”

These views had been strongly put to the committee by DEFRA and by EU trade commissioner Peter Mandelson.

There is acknowledgement in the report that EU farmers will find it difficult to compete when they operate under a different regulatory burden and it suggests that there should be a reduction in red tape.

For example there should be no new additions to the cross compliance regulations and that they could in fact be reduced in number.

Lord Sewel expected that EU farmers would be able to benefit from operating to higher standards in, for example, animal welfare issues and should use clear labelling to explain to consumers where the benefits lay.

In all, this is a comprehensive report by the House of Lords which will certainly find favour with the UK Government.

However, to be effective it will need to influence thinking in the EU Commission, especially with farm commissioner Marian Fischer Boel.