Memorandum submitted by
the National Farmers' Union of England and Wales (H5)
INTRODUCTION
The National Farmers' Union (NFU) welcomes this
opportunity to submit evidence to the Committee during its inquiry
on the European Commission's rural development proposals. We place
great importance on rural development policy. The move towards
a more market orientated agriculture may have major consequences
for the structure of the industry and the many benefits farming
now provides. Therefore, there are political and economic reasons
why there must be adequate and appropriate measures to ease the
progression into a more competitive environment.
Farmers' role in managing the countryside is
well established. Many of our most treasured landscapes are the
consequence of agricultural practice; and wildlife also depends
upon on-going land management to survive. It is inconceivable
that any sector other than agriculture can meet society's concerns
about a well managed countryside. However, the countryside is
not only valued for its environmental character. It is also a
setting for a substantial leisure and tourism industry which prospers
due to an attractive environment. Furthermore, the countryside
provides a backdrop and is home to a vibrant and dynamic rural
economy which provides employment and opportunity for rural businesses,
and diversification opportunities for farmers and farm workers.
In the context of progressively greater competition
for markets, the Commission's rural development proposals are
therefore especially important. In its proposals, the Commission
outlines a wide range of socio-economic and environmental assistance
integrated within seven year rural development programmes. Individual
measures would be selected at the discretion of Member States
and the programmes would be approved and co-financed by the European
Commission.
We believe these rural development measures
are a modest but logical development of preceding measures.
In our evidence to the Committee, we have focused,
as requested, on the rural development measures funded by the
European Agricultural Guidance and Guarantee Fund (EAGGF). However,
before commenting on these measures we begin our evidence with
an overview of the context for these proposals.
CONTEXT FOR
RURAL DEVELOPMENT
PROPOSALS
Before assessing the viability of the Commission's
proposals for EAGGF rural development measures, we believe that
the Committee should first consider the context for these proposed
measures.
1. AGENDA
2000 COMMODITY REFORMS
The Commission proposes to introduce a series
of changes to the commodity regimes. Most notable of these are
the proposals that apply to all direct payments, specifically,
cross-compliance, labour unit modulation, and the payment ceilings.
All may have direct or indirect consequences for the content,
structure and funding of the Commission's rural development package.
The Commission's proposals to extend significantly
the use of cross-compliance measures cause us considerable concern.
Cross-compliance is important for it will establish a baseline
level for eligibility to agri-environment funding. It is important
that a similar level of entry is open to all farmers across the
EU.
However, our reservations about cross-compliance
also have wider relevance. If implemented as the Commission proposes,
each Member State could impose entirely different levels of requirement
with widely varying cost implications for farmers. We believe
that this would be in conflict with the Commission's requirement
that Member States should apply cross compliance (and labour unit
modulation) in a manner that avoids market and competitive distortions.
At present, the Commission's proposals only
go part of the way necessary to avoid market distortions. If the
Commission is to implement cross-compliance in a fair and practical
manner, as we would wish, then it has to establish an EU wide
reference framework that sets out a common approach to cross-compliance.
In relation to the rural development measures, such a framework's
main task would be to define EU good agricultural practice; actions
that go beyond good agricultural practice should qualify for incentive
payments.
The Commission is reluctant to define a framework
on the grounds that conditions vary across the EU and that it
is a matter for Member States. We contest this assertion—good
practice has common themes applicable to most farming conditions.
The Commission's proposals for labour unit modulation
are, in our view, ill judged and not compatible with its objective
for a more competitive sector. To some, reducing payments to those
farm businesses that employ fewer workers may appear attractive,
and compatible with the objective of retaining employment in rural
areas. However, this method of retaining on-farm labour is complex
and would penalise efficient producers. We believe a more effective
method would be for the Commission to encourage on-farm employment
by supporting diversification through the rural development measures.
Payment ceilings for individual farms are also
of concern to UK farmers. We believe that capping conflicts with
the objective of fostering a competitive industry—the reward
for growth should not be a reduced income. In the context of the
Committee's inquiry, capping payments would provide no extra incentive
for the smaller farmer, and may conflict with the extensive benefits
provided by larger holdings. Furthermore there is no indication
where revenue "saved" may be spent. There is a good
cause for all farmers to be eligible for assistance to diversify
their farm businesses, but this should be encouraged through rural
development measures and not be achieved by penalty.
2. STRUCTURAL
FUNDS REFORM
The Commission's proposals for reform of the
Structural Funds is also of concern to farmers. It is important
that the Committee keeps these proposals under consideration as
they have had significant benefits for farm businesses and rural
areas during the existing programme period. With the expiry of
the present programme in 1999, the Commission is now proposing
a simplification of the current range of development objectives
from seven to three. The Commission's new targets for structural
funds carries a real risk that rural areas, especially in the
UK, will see a large reduction in assistance, with little chance
that EAGGF funded rural development can compensate for the shortfall.
We would like to draw the Committee's attention
to the following aspects of the Commission's proposals for structural
funds:
— With the tightening of eligibility
for the new Structural Funds and the emphasis placed upon employment
measures in these new objectives, there is a real risk that rural
areas will be overlooked when new areas are designated, since
rural unemployment has traditionally migrated to urban areas.
Government should press for alternative criteria, for example
regional GDP, to be used as indicators of need. It is vital that
the UK Government secures the maximum return for rural areas from
the structures package on offer.
— The Commission proposes to implement
transitional arrangements as the "old" objectives are
phased out and the new introduced. Smooth transfer to the new
objectives will be necessary. However, we are concerned that there
is a potential risk of administrative overload and confusion as
programmes are phased out over different timescales at the same
time as new measures are introduced. (We have illustrated the
potential range of programmes that could be covered by structural
funds post-2000 in Appendix 1). It is as yet unclear how these
arrangements will be matched to the new EAGGF rural development
measures—nor how the relevant Government departments will
liaise.
— For the consumers of these schemes,
some of them farmers, the need for clarity of purpose will be
paramount. The Government will need to act in advance of their
introduction to ensure that local communities and businesses have
a clear framework and guidance on what will be available and information
on the eligibility criteria.
— We believe that there is considerable
potential for rural areas to benefit from the only "horizontal"
measure to be applied for the Structural Funds post-2000. Objective
3 will target human resources, for example, training to access
new markets. From a farming perspective training and re-training
will be important; however our experience of this type of measure
in the UK has been that it has been primarily applied in urban
areas. At a time when economic regeneration is an important priority
in rural policy, the emphasis on training and re-training in rural
areas will justify the application of Objective 3 funding.
3. NATIONAL
DIMENSIONS
A final context for the proposed EAGGF rural
measures will be the rapidly evolving institutional structures
within the UK. Already, elected assemblies have been approved
for Scotland, Wales and Northern Ireland. It is likely that each
assembly will wish to develop a distinctive approach to rural
development in their countries. To some extent the Commission's
proposals may assist in this process.
At the same time institutional structures are
also changing in England. Recently the Government announced the
merger of the Countryside Commission and the Rural Development
Commission. Both are Government's statutory advisers, dealing
with the countryside, and rural economic development, respectively.
If the merged body is to have a major role in advising on these
new rural development measures it will need a distinct socio-economic
remit and understanding.
In parallel, the new English Regional Development
Agencies will have a major role to play in developing regionally-based
development strategies. Again these bodies may have a role in
commenting upon and perhaps delivering part of the EAGGF rural
development measures. The nature of their role will clearly be
defined by their resourcing and core objectives.
With these UK institutional changes as a context,
the Committee may wish to reflect on how best the European Commission's
rural development measures are to be developed and administered
in the UK. We believe common themes in delivery should be that
rural areas obtain their fair share of available resources and
that agriculture is treated as a full partner during discussions.
Having considered the wider context for the
proposed EAGGF rural development measures we now consider these
measures, in more detail.
RURAL DEVELOPMENT
PROPOSALS
The Commission proposes ambitious plans for
a "second pillar to the CAP"—a consolidated and
reinforced rural development regulation. It proposes that this
regulation would bring together the accompanying measures from
the 1992 reform (agri-environment, afforestation, early retirement)
with support for LFAs, and measures concerning the modernisation
and restructuring of the industry. The Commission's objective
is that a single regulation should better focus community support
for rural development and establish an effective instrument to
accompany and complement the other Agenda 2000 reforms across
the EU.
The Commission's stated aims are:
— to reflect the "European model"
of a multi-functional countryside in which farmers play a range
of key roles in addition to that of food production;
— to introduce a comprehensive and
consistent rural development policy to supplement market management;
and
— to simplify the current legislation
for non-commodity provisions.
We welcome the Commission's proposal to introduce
a strengthened rural development regulation. Though it is fair
to comment that the proposal is stronger in its rhetoric than
it will probably be in reality, we endorse the Commission's vision
of an agricultural industry that provides many benefits alongside
those of food production. Up until now, these public benefits,
including wildlife and landscape management, have been provided
freely by farmers as a by-product of viable agriculture. The drive
towards a more competitive industry may have repercussions on
the natural environment.
Agenda 2000 signals a period of increasing concern
about countryside management at the same time as exposure to the
world market forces will grow. There is now an overwhelming case
for ensuring that farmers can strengthen their capacity to provide
environmental services, market their produce more effectively
and obtain the necessary training and support to diversify their
businesses. The Commission's rural development proposals have
the potential to play a significant role in this process. We would
like to highlight the following features of the Commission's proposals
for comment.
1. FUNDING
The Commission states that the new regulation
will be reinforced by new funds to assist with its widespread
application. Currently it is proposed that Member States will
be able to use funds saved through cross-compliance and labour
unit modulation to fund agri-environment schemes. In addition,
the Commission anticipates that there will be growing scope within
the Agricultural guideline to meet this objective. We do not believe
that either of these funding sources can be guaranteed or that
Member States will be able or willing to provide the match funding
to implement this regulation as widely as necessary. Syphoning
funds from commodity payments via cross-compliance or modulation
seems especially impractical as a secure source of co-financing
the rural development measures. Therefore, we believe the Commission
should explain more clearly how the strengthening of this rural
development measure is to be funded.
We are also unclear how the Commission will
target co-financing. Due to the Fontainbleu agreement and the
UK's relative prosperity we have lost out in terms of EU co-financed
schemes. As the Commission now wish to expand rural development
measures there appears to us merit in increasing the effective
co-financing of UK run schemes.
2. SCOPE OF
RURAL DEVELOPMENT
MEASURES
The Commission proposes to include a wide range
of measures within the new rural development regulation. All these
measures will be important to varying degrees in different regions.
It is entirely appropriate that Member States should select and
propose an appropriate range of measures. However, the Commission
has pre-empted this selection process by requiring Member States
to implement agri-environment schemes across their territories:
only these schemes would benefit from enhanced rates of co-financing.
We are concerned that such a bias may not be justified and is
likely to limit the application of other measures, especially
if EU, or match funding, is limited. The UK Government must propose
and implement balanced programmes that meet the Commission's requirement
that there is a "necessary equilibrium between the different
measures" (draft Article 41(2)).
We believe it is especially important that rural
development programmes should foster a diversified farm business
sector. This will be a chief characteristic of sustainable development
in rural areas in the future. To this end, measures that assist
the re-training of farmers and farm workers, the more effective
marketing of food produced on farms, new uses for farmland, such
as forestry, and assistance to add value to core enterprises,
will be especially important.
There is also a range of additional measures
available to Member States and listed in outline in draft Article
31. Some of these go well beyond the established budgetary responsibility
of MAFF, yet could provide useful additional support for rural
areas. We would not want them to be ignored as rural development
measures are implemented.
3. AGRI-ENVIRONMENT
MEASURES
In general, the Commission's proposals for agri-environment
schemes appear to propose a continuation and extension of the
established approach. Our main concern is that in comparison with
other Member States, implementation in the UK has been extremely
limited in extent, despite the fact that we pioneered voluntary
conservation schemes. There is a pressing need to increase the
coverage of farmland entered into agri-environment schemes.
One aspect of the Commission's proposals that
we believe should be re-considered is the link between income
foregone and the calculation of the scale of agri-environment
payments. Basing the calculation of these environmental payments
on that system at a time of declining farm incomes negates their
appeal. A calculation based on a combination of payments for work
undertaken and payments for providing a public benefit would produce
a more viable option. A change of this nature is needed as the
Commission's current approach binds farmers to minimum five year
contractual agreements. We propose that either the Commission
waives its requirement for farmers to remain in agreement or remove
the current limit of 120 per cent of income foregone as the basis
for calculating agri-environment payments.
4. LESS FAVOURED
AREAS
The Commission proposes substantial change for
farmers in less favoured areas. Change in these areas must be
approached cautiously as farm businesses are heavily reliant upon
direct aid for their continued viability.
The proposed shift in the payment of compensatory
allowances to an area basis is of concern to many hill farmers,
especially tenants. Coupled with the new requirement that LFA
support should assure environmental requirements and preserve
the countryside, the Commission's proposals mark an abrupt change
in LFA policy. The introduction of area payments would result
in a substantial redistribution of existing payments in favour
of larger holdings at the expense of smaller holdings, many of
which will be more heavily stocked. Tenant farmers whose farming
capital is closely linked to their stock numbers are likely to
be particularly affected by such a move. Similarly on common land,
the division of area payments could cause major disruption, as
has been our experience with ESA payments. Member States will
also lose much of the current flexibility to re-base payments
annually. It is essential that safeguards are implemented to ensure
that there is minimal disruption to the current distribution of
compensatory allowances.
Among the Commission's proposals for less favoured
areas is the addition of a new emphasis on safeguarding the environment
(draft Article 14(2)). Our understanding, based on discussion
with Commission staff, is that this objective can be satisifed
by the application of good agricultural practice. We believe this
is an appropriate level of requirement—compensatory allowances
are not a substitute for agri-environment schemes. HLCA payments
have ensured that farm businesses have been retained in the uplands
and supported farming that has justified the designation of our
national parks.
The Commission also makes interesting proposals
for LFAs to be designated outside upland areas, for example in
areas facing specific environmental constraints where farming
is required to conserve or improve the environment or maintain
the countryside (draft Article 19). Up to 10 per cent of a Member
State's area may be designated as these "extra" LFAs.
New LFAs would require new resources. However, there is merit
in considering how this proposal may be taken forward in the UK,
for example in assisting farmers in meeting minimum standards
of land management in areas designated for their environmental
sensitivity, for example EU Habitat Directive areas.
5. CONSULTATION
ON RURAL
DEVELOPMENT PROPOSALS
Farmers, and their representatives, should be
fully involved in the definition and delivery of rural development
programmes. This is an implicit requirement in the Commission's
regulation (draft Articles 39(1) and 41(1)) but could usefully
be clarified in the final text. We are strengthened in this view
following the experience of the present Structures measures, and
especially Objective 5b programmes, in which farmers were regarded
as "social" partners and not the full partners they
ought to become.
6. RURAL DEVELOPMENT
LEGISLATION
We note that one of the Commission's aims is
to simplify existing rural development legislation. Whilst this
objective is laudable, it must go further than simply seeking
to bring together the relevant instruments. As is recognised in
draft Article 32, there continues to be a need for common implementing
regulations to guide the application and assessment of these measures.
Our experience of implementing regulations for the existing agri-environment
schemes has not always been satisfactory as they have resulted
in considerable frustration and cost for both agreement holders
and the administering authorities. The Commission should ensure
that any implementing regulations are proportionate and cost effective
while causing minimal disruption for agreement holders.
An important element of the legislation will
be rules setting out eligibility for the measures. The proposed
regulation is rather unclear about who should be eligible for
support. In the draft Article 2,. it is clear that farming activities
should be the primary focus for support. However, elsewhere, the
draft regulation suggests that support should be more widely available
(for example forestry measures and measures to assist the adaption
and development of rural areas). We believe that the farming industry
should be the primary focus for assistance under this measure
either alone or in partnership with others.
SUMMARY
We welcome the publication by the Commission
of these proposals to re-enforce rural development measures. These
need to be well resourced if they are to tackle the task ahead
as farming is brought nearer to the world market. To that end,
the Commission should clarify how these expanded measures would
be funded and the UK Government needs to consider whether match
funding will be available.
While farmers' role in managing the countryside
is well understood and widely supported, it is not the only reason
for implementing the Commission's rural development measures.
Therefore it is important that each rural development plan contains
a balanced and well justified range of measures drawn from the
full range of available instruments.
Finally we are anxious to ensure that farmers
play a full role in developing and delivering these rural development
measures. We hope to be considered as full partners during this
process and to play a constructive role with Government in tailoring
schemes to local needs.
4 June 1998
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