120. Can you tell us anything
about their relative affluence compared with the owner/occupier
sector?
(Mr Dunn) Obviously tenant farmers have to pay a rent
as well as to make a profit, but it has been said that the tenant's
rent is the owner/occupier's interest payment, so on average they
are not that much different. But, typically speaking, you find
that the tenant farmers' incomes would be lower than their counterparts
in the owner/occupier sector.
121. Briefly, on rent levels, is there anything
you would like to say about the levels that are being set at present?
(Mr Haydon) Rents, at the moment, are under pressure.
We have seen during a period of comparative affluence in, shall
we say, from about 1994, 1995 onwards, that farm incomes rose
and rents rose with them as they always do. They tend to rise
rather quickly. Now incomes are in very fast, free-fall, big decline.
We are seeing farm incomes in various sectors dropping anywhere
between 50 per cent down to 30 per cent. Rents tend to follow
them down somewhat slower. The cycle is a three-year cycle. It
is fair comment to say that we have seen very little movement
of the rents downwards until perhaps this autumn. We have many
members who are coming up for rent review this autumn. We have
a team of valuers who work for us. They will be trying very hard
this autumn to get rents down, in view of the financial situation
the industry faces.
122. Is there evidence that some of the land
agents, acting for the bigger institutional landlords, are being
more robust on rent levels?
(Mr Haydon) I think they have always been robust,
so we need to be taking them on all the time. Certainly, in terms
of decline of income, we need to fight the corner even harder
than we would normally do.
123. How many of those tenant farmers do you
represent? What is your total membership?
(Mr Haydon) Our membership is approaching 4,000.
Chairman: Thank you very much indeed. Mr Mitchell.
Mr Mitchell
124. You commented in your evidence on the draft
Rural Development Regulation. Can you tell us, first of all, what
your position is. Are you for it or against it?
(Mr Haydon) We would generally say we are for it.
We have some reservations about various aspects of it, things
like cross-compliance, modulation, area payments, and the retirement
scheme. They would be the four things we are not happy about at
all. The rest of it, broadly based, is a reasonable assessment,
but there is a feeling within the industry that Agenda 2000 will
be very quickly followed by Agenda 2001, 2002 and 2003.
125. Doing what?
(Mr Haydon) I think that whatever gets settled for
Agenda 2000 will be quickly out-of-date and will need to be revised.
126. But broadly you think the draft has the
right balance between agri-development and rural development measures?
(Mr Dunn) I think that we were very concerned before
the draft was produced, that we might find ourselves in a position
where we went too far down the rural development and agri-environment
route. What Committee Members may not understand is that tenant
farmers, particularly those under the 1986 Act, have to be farmers
by the nature of the legislation and by the nature of their agreements;
so they do not have the same opportunity to participate in the
environmental schemes or rural development schemes as our owner/occupier
brothers. We find the regulation that has been drafted does provide,
at the moment, a reasonably fair balance between agriculture and
environment, rural development and the environment. Taken together
with the broader Agenda 2000 proposals, we must be careful not
to see this in isolation with the whole package. I think there
is a fair and reasonable balance, so long as it is reasonably
implemented by the Member State governments.
127. That is a fair and reasonable balance,
bearing in mind your tenure position?
(Mr Dunn) Correct.
128. If that tenure position is going to inhibit
alternative development, because people have to be restricted
to farming to inherit, if that is changed would it be more welcoming
to rural development?
(Mr Dunn) Well, we have just had a significant change
in the tenure legislation in the 1995 Agricultural Holdings Act.
That was supposed to bring forward a greater freedom for tenants
to participate in activities on their holdings. What we are finding
in practice is that landlords, who unfortunately still have the
upper hand in negotiations, are forcing tenants to consider only
agricultural options. Very often I have seen schedules to farm
business tenancies, which were created under the Act, which specifically
state the enterprise choice that the tenant has to go under. So
it might be arable, milk or whatever. There has been a fundamental
change in the legislation already but still that is not providing—
Chairman: We will come to some of these specific
legalities later in our evidence session.
Mr Mitchell
129. It is, therefore, not a further change
in the tenancy regulations, it is a change of attitude towards
landlords?
(Mr Dunn) Certainly landlords must be more willing
to give their approval when tenants wish to do things on their
holdings beyond traditional agriculture. Sometimes we are seeing
that is not occurring.
130. They would put the rent up if other businesses
were profitable?
(Mr Dunn) Yes, but they want to make sure that they
keep the agricultural status of the holding.
131. Okay. Your expression about the Commission
not being more visionary. What do you mean? What visions would
you like to see it have?
(Mr Dunn) As Mr Haydon has said, we may see Agenda
2000 being replaced very quickly. There are many people who are
saying that the current package of reforms for Agenda 2000 and
rural development will not take us beyond the next stage of the
WTO negotiations. What we would like to see is a situation where
agriculture becomes less dependent on subsidy and freer from regulation.
We are finding that agriculture is being forced continually to
make changes to the short and medium term merely to cope with
political expediency or the fad of the day. What we should be
looking for is a long-term commitment so that agriculture can
look ahead to the future with some confidence, where regulation
is less onerous and subsidy is less important.
Mr Curry
132. On that point precisely your paper is aspirational.
It says: we are here, we would like to be there, but there is
a great gap in the middle as to how we get from here to there.
You say: "What is needed is for governments both at home
and abroad to set a future goal where agriculture can be freer
from regulation and less dependent on subsidy." We all say
amen to that. You then move to the next paragraph. You cannot
have complete liberalisation because all of these factors means
that there has got to be some element of support. I would like
to hear from you what you think the Commissioner ought to be doing.
If you were writing the reform document, what policies would you
actually introduce? Otherwise, unless we can fill in the gap between
the two storeys, we put the staircase in place but no-one gets
from one to the other. How do you see the shape, the geometry
of the system, to fulfil that aspiration?
(Mr Dunn) I agree with you entirely. It is a very
difficult thing to get from the position we are now, to the aspirational
goal we would all like to see. My concern is that the aspirational
goal has not yet been set. Okay, we have very much a United Kingdom
position, which is that we would like to see: less subsidy, freer
from regulation, and a more market oriented approach; but we are
still being asked to produce the non market benefits, the environmental
benefits, the animal welfare benefits, the consumers' benefits,
all the way along. We would like to see this goal where we do
not go through this hiatus every five years of a great upheaval;
where we know in ten or 15 years' time where we will be; and we
have a stepped process of getting there so that the politics are
taken out of the whole thing.
133. What sort of steps would you have? Let
us take a couple of concrete examples, which are relevant to your
hill farm in Wales and most of my farmers in North Yorkshire,
for example. They will be benefiting from the headage payments
for sheep. They will be benefiting from suckler payments, all
of which are modulation in one shape or form, as a matter of fact.
When you say less subsidy, do you think headage payments should
be less? Do you think the amount on which it is payable should
be less? Would it be a combination of the two? Do you think it
would be combined with more vigorous regulations on stocking rates,
for example? I am anxious to explore what you mean by the expression
"less dependent on subsidy". What do you mean by that?
(Mr Dunn) Before I let Mr Haydon jump in about the
practicalities of sheep farming, the two things must go together:
less regulation and less dependence on subsidy. We cannot just
have less subsidy because we still have the regulation very much
in place. So the two must go hand in hand. My concern for our
farming community is that every five years or so we have this
great upheaval, great uncertainty about where things are going.
Even now we have a package of reforms that we do not know, as
yet, whether they will become the new CAP, as we know it. People
know very well; they are saying that in two, three, five years
down the line we are going to have another set of reforms. So
I am not unhappy necessarily with the direction the reform takes
us in this step, but there is no aspiration for the future to
say this is where we want to get to. This is a step along the
way. However, there will come a time when there will be less regulation
and you will be freer from subsidy as well. That is my concern.
I am not unhappy with the individual steps; some of the individual
steps that we are taking. It is just that we have no future goal.
Mr Curry: Before Mr Haydon answers, if I might
just give a steer to your answer. As you know, the Commission
wishes to replace certain forms of direct subsidy with compensatory
aids. British Government—in fact, this Committee before
I joined it—said it was regressive. Now, there is an argument
for saying that we should move from production subsidy but we
need to introduce a different form of support for farming which
is much more related to environmental benefits so, if you like,
there is a sort of menu there to which a farmer can subscribe:
maybe better methods of husbandry, looking after the land. In
that form they would be permanent, they would not be production
related, so cross-compliance issues would not be relevant in the
way they are at the moment. Is that the way you are thinking and
how do you see these steps being constructed?
Chairman
134. Answer in quite general terms because Mr
Curry is moving into areas of other Members of the Committee,
so do not be tempted to answer too specifically.
(Mr Dunn) When you look ahead, certainly we agree
that the way ahead is for more environmentally related subsidy.
We would not be unhappy with that so long as there is sufficient
opportunity for all those, regardless of tenure, to participate.
For example, if I can just throw one example. Tenants cannot plant
trees. They become the landlords'. Tenants cannot get planning
permission on disused buildings as a landlord can serve a Notice
to Quit. So long as there is a sufficient menu of options, which
will enable all to participate, we have no great difficulty with
the move in that direction so long as the regulation on the other
hand is also dealt with, with the subsidy.
Mr Hurst
135. I am a little concerned about this aspiration
of less subsidy, less regulation. It sounds to me like a recipe
not only for farming disaster but an environmental disaster as
well. I can well understand that the idea of switching subsidy
from product to environment might be an aspiration but, of course,
if it is hailed, will it not by its nature be regulation? The
concept of less regulation is fundamentally unsound as a way forward.
Mr Curry was moving towards asking you to itemise how we might
move to a different kind of subsidy or support but with different
regulations. Would you agree with the concept that I am now putting
forward: that this is the aspiration rather than perhaps the free
market reforms?
(Mr Dunn) I do not agree with you that it is unsustainable.
The farming community is being urged all the time to become more
competitive, more market driven, more cost production orientated,
co-operative marketing, etcetera, etcetera. We are always being
told that we should be looking for the competitive edge. When
you are also being told that we want to make sure that there is
a high degree of animal welfare, a high degree of environmental
management, a high degree of traceability, all those things have
their cost. What we would like to see is a situation where agriculture
is allowed to respond more to the market signals that are given.
Beside that, that there is a menu of options, which are properly
priced, so that farmers can say: I will dip into that and take
money for providing that environmental option, that animal welfare
option, that type of production system, that type of rural development.
So the regulation is not enforced with the subsidy. It becomes
a choice for the individual to decide whether he wants to do that
or not.
136. I understand that. You say you are always
being told that we have to be more competitive. We are always
being told that but it may be that we are not being told correctly.
In other words, it may be a false advice that all of us are receiving.
In the end, is there not an inherent contradiction between you
becoming more and more efficient and intensive—and animal
welfare, environmental protection, the menu you have listed—to
concluding it would actually be right for you to choose from the
menu or not when, in fact, the public themselves are supporting
prices to that end?
(Mr Dunn) Clearly there is a problem about what signals
you are receiving from the government or from the marketplace,
and deciphering the ones you have to follow. I am not saying:
ban the regulation totally. Obviously, as we said in our written
evidence, there will need to be a body of written regulation.
Where we need to have more regulation, that needs to be identified
in the system of support we have. Of course, we want higher animal
welfare standards. We want environmental standards to be high.
We want to have lovely countryside. We want to have people visiting
our rural areas. All these things do not come without cost. We
are competing in a world market where other countries of the world
are perhaps not producing to the same sort of standards that we
are. We have to address that balance somewhere.
Mr George
137. I would like to push you a little bit further
on questions regarding the levels of support that farmers should
have in future under Agenda 2000. Some of the questions I will
ask have already been covered to an extent, although from a tangential
point of view. If we start from your contention, your argument,
"that agriculture remains the backbone of rural communities",
I wonder how you could justify that in the context where in most
if not all rural areas, including mine, although it has clearly
dominated the landscape and the countryside, it does not actually
dominate the economy. Most assessments put it at about 10 per
cent to 15 per cent of the workforce in GDP in the area.
(Mr Haydon) Could I come in there, Chairman. Surely
we have seen, in recent months, that the downturn in agriculture
is producing an equivalent downturn in the rural infrastructure.
We have prime examples of many agricultural businesses, machinery
dealers, livestock hauliers, livestock auction marts—two
very big ones have closed recently—and it is all a knock-on
effect of the importance of the farming industry and the farming
community. If we are doing badly all the people who live off us—if
that is the right word—are also going to do badly. You only
need to have been at the Royal Show last week to have seen the
doom and gloom of the machinery lines from that section of the
industry. A live, vibrant farming industry: the rest of the rural
community depend on it. Many other industries, above and below
us, depend on us. The catering industry, the consumers, the retailers,
all those types of industries depend on agriculture being prosperous.
In the present situation they are now beginning to suffer as we
have been suffering for the past nearly 18 months, two years.
(Mr Dunn) If you look at the BSE crisis, if there
is a silver lining to the very black cloud that BSE has produced,
it has showed the upstream and downstream links that agriculture
does have. In the early days following March 1996, and in the
months that followed it, there were many businesses in the catering
sector and the retail sector which went by the bye on the strength
of what was going on in the beef sector. The links upstream and
downstream became very apparent; if you look at the impact on
the tallow side, on people who were using tallow in their products
which we could not use any more. Agriculture provides a great
resource for industries to take up and add value to. It is, we
believe, still very much the backbone of our rural economy. It
is difficult to define what the rural economy is and put a boundary
round it. However, as you travel the country I think it is easy
to see that agriculture still provides that support.
138. Let me push it a little bit further. As
you rightly say, it is difficult to put a boundary on it or define
how far you define the rural economy and rural development but
surely, for example, last year in many rural areas we saw a prosperous
tourist industry operating in many rural areas. Service industries
continue relatively untouched by the upturns and downturns of
agriculture in many rural areas. Over time, as we have seen the
shedding of employment from agriculture, you have seen in many
rural areas—I cannot say mine but certainly in the south
of England especially—very prosperous rural areas, despite
the fact that it has become a declining interest in rural areas.
How can you justify what you have said?
(Mr Haydon) Would it not be fair to say in the example
you are quoting that in a lot of those industries the tourists
are very seasonal? They operate with great success throughout
the summer and early autumn but then they die a death throughout
the winter. Certainly a lot of farms, which do bed and breakfast,
depend on that as the icing on the cake to keep them going throughout
the winter when the harsh realities of falling incomes are hitting
them. So the tourist industry is not a full-time thing. It is
part-time.
(Mr Dunn) It is also extremely geographical. There
are large swathes of rural Britain where a tourist would not want
to set his foot. I think you need to be very specific when you
talk about the tourist industry.
139. Also pointing out that many of those areas
that experienced an upturn in tourism last year are experiencing
a downturn this year. The important point I want to move on to
is that you have tried hard to define the rural economy and the
agricultural economy in the broadest terms possible. That surely
means that in terms of Agenda 2000, you would also need to accept
that in terms of EU funding and structural funding support for
the shift from agricultural production support, you would need
to broaden that support to, in fact, a very wide economy. Would
you not agree? How far would you say that this distribution of
funds and support should go?
(Mr Dunn) Certainly we are not in the business of
saying it is only farmers and only tenant farmers who should receive
any state support. There are many other bona fide sectors
out there that do require support. However, when you look at agriculture
in the round, it takes up 80 per cent of the country. It provides
the landscape and the countryside that we enjoy, that the tourists
want to go and see, so there are many factors together which make
agriculture still a very important sector.
