Heated exchanges likely as Cap debate opens in Brussels

British prime minister Tony Blair's insistence on linking permanent reform of its rebate to a fundamental review of the Common…

British prime minister Tony Blair's insistence on linking permanent reform of its rebate to a fundamental review of the Common Agricultural Policy (Cap) will be one of the most controversial topics in today's talks in Brussels.

France and Ireland remain implacably opposed to any changes to Cap before 2013, while Mr Blair has spent much of his EU presidency pushing to modernise the EU budget by reducing farm subsidies.

The issue led to the spectacular collapse of the previous budget talks in June amid name-calling on both sides.

Mr Blair has consistently called Cap an anachronism because it accounts for more than 40 per cent of the EU budget while there are just 11 million farmers across the bloc.

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The EU's trade partners are also blaming the policy for deadlock in World Trade Organisation talks.

British charity Oxfam has also joined the Cap debate, arguing that subsidies paid to EU farmers penalise farmers in the third world pushing many of them into poverty.

"Cap has now become a byword for inequity and European leaders must not pass up this chance to agree a full-scale revamp of the farm payment regime," says Oxfam's Luis Morago, who argues this will be the last chance for a decade to achieve this. Oxfam is also critical of a lack of open and transparent public debate about agriculture's future as many member states have not yet disclosed who gets payments.

Ireland is one of several states that have recently released details under the Freedom of Information Act on who gets receipts from Cap.

Figures show the top five recipients in 2004 where large firms and co-operatives, such as the Irish Diary Board, Kerry Group, Glanbia and Dairygold, which shared €250 million.

These payments reflect export subsidies, provided when companies sell their goods outside the EU, and special subsidies paid to support the dairy industry in Europe.

Meanwhile, the two biggest recipients of single farm payments are the meat companies Keepak Farm and Irish Agricultural Development, the latter headed by Larry Goodman.

Farming lobby groups insist that focusing on the top recipients is unfair as the average single farm payment is less than €13,000.

"This is a red herring," says Con Lucey, economist at the Irish Farmers Association, who points out that Britain and Germany were the two countries that lobbied strongly against setting an upper limit on Cap payments in the 2002-03 Brussels reforms.

These reforms decoupled farm payments from production focusing them instead on environmental factors, such as keeping land in good agricultural condition.

"It is only in the last few weeks that farmers have started receiving their single farm payments from these reforms so it is unacceptable to be seeking further reform," says Mr Lucey.

The Government is also sticking to this line, while arguing that Cap is essential to secure food supplies and the quality of produce.

But Britain is betting that as the EU expands states such as Ireland will favour reform of Cap, as subsidies are diverted to poorer rural economies. This is why it is seeking a fundamental review of spending in 2008-09 that could lead to changes before 2013.

Many hours will be spent debating every word in the review clause expected in the conclusions of a successful budget.

If no deal is reached, expect the blame game to begin immediately over the issues of agricultural subsidies and Britain's rebate.