Examination of Witnesses (Questions 80 - 97)
THURSDAY 18 DECEMBER 1997
MR JOHN
LLOYD JONES,
MR HUGH
RICHARDS, MR
MALCOLM THOMAS,
MR ROBERT
GRIFFITHS PARRY
and MRS MARY
JAMES
Mr Thomas
80. It is accepted by your members, is it not, that agriculture
receives more by way of public support than almost any other industry
in the UK? Is that accepted?
(Mr Parry) No. Some of our members have been quoting
recently the factories coming to South Wales and the amount of
subsidy and support those factories are actually getting.
(Mr Jones) I think also farmers feel very exposed
to the fact that they are so dependent for their incomes on agricultural
support. That is not a situation that we are comfortable with.
We would be far happier receiving the bulk of that income from
the marketplace.
81. I know this is a very general question but judging from
that I assume that both unions would support a substantial reform
of the CAP?
(Mr Jones) It depends how it is reformed.
(Mr Parry) Yes.
(Mr Jones) It is a bold statement to say that we would
welcome reform. Yes, of course the present CAP has limitations
but we could end up with something substantially worse for farmers.
What we are trying to get is something considerably better.
(Mrs James) Certainly we would support the moves to
move away from intervention support and export restitution, price
related supports, to a market situation but we recognise too that
there is still a need for what we call decoupled support and that
has to take various forms. It has to be in the form of socio-economic
payments, decoupled commodity support payments and environmental
payments in recognition of the different facets, as Mr Lloyd Jones
said earlier, that agriculture contributes to in terms of the
overall economy.
82. So you generally favour a move towards a market economy
in agricultural commodities but only to an extent?
(Mr Jones) Yes. The next round of WTO negotiations
means that our production based agricultural support will really
be under threat and that is why Mrs James has quite rightly said
that we are actively looking at different methods of decoupling
agricultural support from production driven support and maybe
more direct payments. Certainly that is all a matter for negotiation
for the next three or four years. The one thing I do hope is that
in the next round of WTO there is a clear European Union line
going into those negotiations.
(Mr Richards) One of the difficulties now going into
the next WTO round to start in 1999 is that the Americans have
already mapped it out with their US Farm Bill in place to protect
their side and Europe still has not started talking. We are still
awaiting the Fischler paper with regard to Agenda 2000. We were
expecting it in December but we are now told it is back to April
because he still has to consider tobacco and olive oil. Whilst
we are waiting I know that the milk part of it, the beef part
of it, is nearly ready. It is back into April or May until we
start deciding something and time moves on to 1999 and we have
not got a European view yet.
(Mr Thomas) That is absolutely crucial. The one thing
we cannot afford to do is to go into the next WTO round on the
same basis as last time which was that the European policy was
made up on the hoof as the talks progressed and it meant that
we were always in a catch-up position in relation to some of the
other major players. It is absolutely crucial for the European
Union to go into those talks with an agreed line and time is fast
running out to agree on that line.
Mr Paterson
83. Are you talking to your European counterparts? Do you
have an agreed line amongst all the European farming unions?
(Mr Jones) We are working towards it. It is true to
say that there is a difference of opinion amongst the 15 Member
States as to the need to reform CAP. Some of them would say there
is no need to reform, they are quite happy with it, others see
the danger of going into the next round of WTO with our present
system.
(Mr Thomas) I think the other problem we have is one
that is crucial not just to how we look at Agenda 2000 but also
the WTO talks. I think there is fairly general agreement that
we need to move to a far more decoupled support for agriculture
with whatever environmental benefits you can build into that.
The secret will be, of course, to ensure that in making that change
from the production led system that we have now to the decoupled
system that we are able to ensure the survival of the farming
industry in the meantime.
Ms Lawrence
84. I wanted to ask a more general question. You have stressed
all along the importance of agriculture to the rural economy,
not just in terms of direct jobs in agriculture but the knock-on
effect and certainly I know that is the case in Pembrokeshire.
Recently we took evidence from the two farming unions together
with the Country Landowners' Association and they raised the issue
of they felt the need for a Ministry for Rural Affairs. Do you
feel that is something that should be contemplated and would actually
highlight the role that agriculture plays in the whole rural economy?
(Mr Jones) Well, certainly as far as the Welsh situation
is concerned if you think about it we have actually got a Minister
for Rural Affairs. The Secretary of State is rather like the character
in The Mikado, the Lord High Everything Else! Agriculture comes
under it but also things like structural funding. They are quite
crucial, not only for farmers but for the rural economy. When
we are talking about family farms let us always remember that
a family farm consists of a family and you have a considerably
greater chance of keeping that family unit together if some of
the members of that family unit have an opportunity to earn part
of their income off the farm. Therefore, the stronger that we
can make the rural economy the greater the chances of keeping
family farming units together.
(Mrs James) The FUW is very much in support of a more
integrated and co-ordinated approach. We regard agriculture as
the core activity in rural areas and our very great concern is
that there seems to be this determination to secure jobs in the
wider rural environment without actually securing that core activity
from which these other jobs will actually come. We would very
much like to see that integrated approach but recognising, as
I say, that agriculture is the centrepiece to that wider rural
policy.
85. Do you think there is a good case for a Ministry for
Rural Affairs in the UK context?
(Mrs James) We have made that point previously.
(Mr Jones) Certainly when one looks at the relative
success of structural funding in Wales compared to what is happening
in England it seems to point directly to the fact that there are
benefits to having an integrated policy and having somebody who
has an integrated control over the whole thing. There are distinct
advantages there.
Chairman
86. I would just like to wind up with a couple of points
which are of crucial importance, both are from your memoranda.
One is the revaluation of the green pound which you both mentioned,
that is number one, in terms of the problems you are experiencing.
Are you arguing in effect that the Fontainebleau Agreement is
bad for UK farming?
(Mrs James) Yes, from the perspective that it is inhibiting
and has inhibited successive governments from going into resource
compensation that has been identified as should be payable and
there is justification for it to be paid on an EU basis. They
have recognised the need for compensation and they have set aside
the funding arrangements. Our concern is that Fontainebleau, as
far as agriculture is concerned, does mean that I suspect any
government on the current basis would be reluctant to go forward
for the funds. We need a level playing field. That is the reason
why we have been working extremely hard to actually tap into this
fund.
(Mr Jones) From the purely agricultural point of view,
yes, because any extra funding, not only agri-monetary, but it
also influences the agri«environment schemes as well when
the Fontainebleau Agreement comes into play. In terms of the general
economy, of course, there are savings. What we have been saying
is, yes, we accept that the total package is going to cost the
Government 71 per cent but how much have they already saved because
of the Fontainebleau Agreement and should not some of that money
be recycled in order to help the rural economy in this particular
crisis.
(Mr Thomas) In agricultural terms, Chairman, we would
like to see it on a balance sheet approach because it is clear
over the last year if you look at schemes like the Annual Ewe
Premium that there have been reductions of the best part of 450
million already because of movements in the green pound. We would
certainly like that to be put on to one side of the balance sheet
when we make our case for the agri-monetary compensation package.
87. I was looking at your Appendix 1 to the NFU memorandum
where you suggest that set-aside payments actually have seen a
net gain to the Treasury, if you like, of 45 million.
(Mr Thomas) The same goes with the Ewe Premium and
the Over 30 Month Scheme as well.
88. You are ahead of me, Mr Thomas, I am trying to be slow
and deliberate.
(Mr Jones) I have the same problem myself, Sir!
89. Under the Annual Ewe Premium you suggest there has been
a net gain to the Treasury of 190 million and the Over 30 Month
Scheme a net gain of 205 million, is that right?
(Mr Thomas) Yes.
90. So overall you are suggesting if that has not been budgeted
for—we do not know—that there is some money there
which effectively has already been earmarked for agriculture?
(Mr Thomas) Yes.
91. Which the Government could consider paying.
(Mr Thomas) Yes.
92. Is there any other realistic mechanism that could be
used as a halfway house between full agri-monetary compensation
which would include all the Fontainebleau problems? Is there anything
else you have looked at in that area?
(Mr Jones) One of the things that we have looked at
is the on-costs. That will not result in extra Government spending,
it is simply that we are asking for those costs not to imposed
on us. Those costs have not been given to farmers yet so if they
are not given to us then there is no saving.
93. The second big issue is the lifting of the beef export
ban. Given that in your evidence I think Mr Lloyd Jones said that
Irish beef was now relatively down from £1 to 85p equivalent
and German beef from £1 to 78p equivalent, would lifting
the export ban make that much of a difference in the present state
of the economy and the pound?
(Mr Jones) What is important is the signals that it
gives. It does mean that farmers have an opportunity to regain
those markets. We are led to believe by some importers that they
want British products. The other thing that is very, very important
is that as long as that export ban is in place there is an element
of taint on all British agricultural products.
(Mrs James) Bearing in mind the overall consumption
figures for the UK are about 850,000 tonnes, that domestic production
is about 700,000 tonnes, there is that net deficit there of some
200,000 tonnes and all the time we are importing and there is
not this free movement of goods inevitably we are sucking in imports
and unable to export. All the time that ban continues our free
trade situation is going downward.
(Mr Jones) It is worth pointing out, Mr Chairman,
that before the BSE crisis of mid-March 1996 I know there were
differences in currencies, but at that time we were actually exporting
40 per cent of our beef production from this country.
Mr Livsey
94. Do you think there is any danger of the beef industry
more or less being halved the way it is going on at the moment,
and in fact the import situation as far as beef is concerned could
have a serious impact in terms of the Treasury?
(Mr Jones) We are very, very worried. It is not anecdotal
evidence any more that many farmers who have been traditional
finishers of cattle, buying the types of store cattle that come
from Wales, are now saying "We have had enough. We are not
doing this any more" or the ones who have been buying 400
head are now saying "We cannot take the risk, we will keep
on but we will only buy 200". It is important that we realise
that the beef production in Wales is primarily store cattle for
which we need buyers.
(Mrs James) There are, of course, wider implications
too for the countryside. The fact is that cattle are an extremely
good complement for sheep. Once you get to monoculture, then you
are going to get a deterioration in the quality of your grazings
and in the quality of your environment.
95. Certainly in my experience never ever before have I seen
complete suckler herds being sold and I have seen that in the
last few months.
(Mr Jones) Certainly this is something the conservationists
are very worried about as well because, as Mary quite rightly
says, this does lead to a different type of grass sward and it
does lead to a loss of biodiversity.
(Mr Parry) I believe that the next few months are
going to be very crucial unless the trade does improve for the
beef finishers. I am a beef finisher myself and I am now in the
second year of losing money, I will not do it for a third. I just
hope that things are going to improve. It is going to come about
now that a lot of finishers will not be in the market next year
if we are having to sell the cattle again this year at a loss.
Chairman
96. It just occurred to me, ladies and gentlemen, that in
fact because we are importing so much beef now it will have an
effect on the balance of payments which is possibly a long-term
effect if you go out of business in this country.
(Mr Jones) I think people forget agriculture's contribution
towards the balance of payments. It is quite a significant contribution.
97. With that, I think we have covered a lot of ground. I
want to thank you once again for appearing together and showing
to us, and I hope to the country, graphically the problems that
you are experiencing in the livestock industry in Wales. I would
like to now close the public meeting. Thank you.
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