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Wine

My Lords, this has been a very useful debate. I am grateful that it was called, and I pay tribute to the committee under the chairmanship of my noble friend Lord Sewel. I had the privilege of appearing before the committee, which gave me the advantage that I was able to create, as I had to do, the time to visit at least one premier vineyard in this country that has won gold medals in Paris for its bubbly wine down in Kent. I will not go further than that, but it was a very pleasant occasion. The debate is about the Government’s response to the report of the European Union Committee on European wine, A Better Deal for All. Yet, given the time constraints and with the consent of the House, I think it would be much better if I informed the House about what happened in Europe just before Christmas. First, it is clear that Europe had lost its way. It is still the case, judging by the documents produced by the Commission, that Europe is a world leader in wine. It is the biggest producer of wine, the biggest consumer, the biggest exporter and the top import market. That sounds like a paradox, but that is the case as far as Europe is concerned. In the past 20 years, the overall trend has been towards a reduction in the area under vines, with a 10 per cent drop. This is a massively contradictory development. The EU has seen a limited but steady reduction in area while its main competitors have witnessed stunning growth in their production capacity, with increases of 21 per cent in the United States, 33 per cent in South Africa, 52 per cent in Chile, 178 per cent in Australia and 360 per cent in New Zealand. There is something happening out there in the industry. Australia is now a leading supplier of wine to the UK market in volume terms. That is reflected in the choice of consumers purchasing wine. One of my ministerial colleagues said to me today that we had all started off on Blue Nun and Black Tower—I added Hirondelle—and had moved on to Pomerol and Pouilly Fumé. He said that the same would occur with another generation; they will come off the New World wines with the ordinary labels for the European wines. That may not be the case, but there is a pattern there, borne out by one of my colleagues in Defra. The agriculture council finally reached agreement on a new wine regime on 19 December. I say ““finally”” because the agreement was the culmination of almost two years’ work. It started in February 2006 with the Commission’s wine seminar, which prepared the way for the proposals in July of last year. I know that your Lordships’ report was widely read and absorbed across Europe and was recognised as providing a valuable contribution to the debate by acting as an informed counterweight to some of the sensationalist reporting of the Commission’s proposals elsewhere. The Government are very satisfied with the outcome of the negotiation, and so is the trade. I am grateful for the work of my officials, particularly Robert Manning, who has been praised by the trade for the effort he put into this. We were able to secure a number of changes in the Commission’s original proposal. There was a trade-off, and I will give an example in answer to the noble Lord, Lord Plumb, in a moment. On planting rights, for example, the Commission listened to our concerns about the potentially damaging impact that its proposals to extend the planting rights would have had on the continued growth on the very small—about a 1,000th of Europe—but dynamic wine-production centre in the United Kingdom. The final agreement provides that planting restrictions will not be introduced in future in small wine-producing areas. If you were not covered at the end of December, you are not going to be covered. It is a free-for-all for planting in the UK, and that is fine. It is a significant change. I also pay tribute to two United Kingdom Members of the European Parliament, Brian Simpson and Neil Parish, for their assistance in securing this change. They made a magnificent effort, and there was excellent co-operation between Whitehall and Members of the European Parliament. Similarly, on enrichment, two important changes to the Commission’s proposals were secured in the final compromise. First, producers will be able to continue to use sugar to enrich their wine, instead of being forced to use grape must exclusively, as originally proposed. That means a large financial saving. They do not have to use sugar, but they can continue to use it. I might add that that is a normal process. It has gone on for hundreds of years with northern European producers. Southern European producers actually use acid because there is too much sugar in their wines. It needs to be palatable and drinkable, and this is part of the accepted process. Secondly, an acceptable compromise was reached on the maximum level of enrichment that is possible in northern member states. Both changes are important to the UK production sector, as our wine makers continue to have flexibility to enrich their wines to make a marketable and award-winning product. The Government strongly supported the conclusion of the report that market measures such as distillation and storage had had their day and should be abolished. Those measures have no discernible effect in improving market outlook for the European wine industry, despite costing taxpayers €800 million a year. I am pleased to say that the final compromise provides for the phasing-out of those schemes. That will lead to an improvement in the market focus of the sector, which has been lacking up to now. Furthermore, in the immediate period, the schemes have to be funded from within the national programmes, meaning that the producer member states will need to decide to what extent they wish to allocate resources to measures such as these, as opposed to the other more worthwhile measures in the programmes. I should perhaps say at this point that the content and size of the national envelopes proved to be the most difficult element of the reform. In response to the noble Lord, Lord Plumb, I say that, in order to fund the increased national envelopes, the original transfer of funding has been reduced to maintain budget neutrality. However, the list of eligible measures in the national envelope has been expanded to include, for example, investments in wine-processing facilities. That was a necessary trade-off to achieve the final agreement. We do not say that everything is perfect, but the final agreement is excellent news for the United Kingdom. We will take a little more time, but there had to be a compromise agreement. It is worth pointing out that two important changes were secured. First, it will no longer be mandatory for export marketing schemes to be funded as part of a member state’s national programme. Secondly, member states will be able to decide to disburse national envelope allocations via the single payment scheme. We would have preferred a reduced level of funding of the national envelopes and the immediate abolition of market support instruments. However, we accepted the compromise in the context of an otherwise acceptable package of reforms. In any case, we could not have changed the vote. It met our criterion that the reform should not result in an increase in the recent level of expenditure on wine; it will see the phasing-out of market support measures and secures a satisfactory outcome for the United Kingdom. In the short time available I would also like to mention the other main elements of the agreement aimed at improving the competitiveness of the sector and improving consumer focus. The fact that the new grubbing-up scheme will last three years rather than five years will enable a quicker transition to the new market reality. There is also the extension of the single payment scheme to vineyards, including the creation of new entitlements for areas that are grubbed up under the scheme, and increased flexibility on the range of optional information that wine producers can put on labels, such as the grape variety and the vintage without a geographical indication. I have not talked to the French, but somehow I cannot see them wanting to change their labels. However, there is an incentive for them to do so. There is to be a simplified process for the adoption of wine-making practices laid down at international level by the International Organisation of Vine and Wine and an improved wine quality scheme that links directly with that for other products. The outcome is good news for the expanding and successful UK wine sector. I am not sure, but I understand that there is a vineyard as far north as Leeds successfully producing wine. It is really good news to see vineyards around the UK, and I, too, have read the reports about the French coming in and buying large tracts of land simply because they are waking up to the fact that, with climate change, we are going to be big wine producers. We are already producing tea in Cornwall, and major new products will come as a result of climate change. The fact is that our wine production sector can now continue to expand without the threat of planting restrictions, which were without question a major threat. Our producers will also be able to enrich their wines to produce a marketable product. The wine reform has been widely welcomed in the UK wine production and trade sectors. It has demonstrated the strong partnership working between the sectors and Defra to deliver a good outcome for the UK. The UK Vineyards Association estimates that the benefits to the UK of remaining completely outside the planting rights regime runs to millions of pounds in terms of the continued expansion of the sector and avoiding the imposition of new regulatory burdens. I congratulate the committee on the report. A lot of in-depth research went into it which probably required a degree of travel; it was not all done in a Committee Room upstairs. The result is a high-quality report to match the quality of UK wine.