Examination of Witness (Questions 1 -
19)
TUESDAY 29 FEBRUARY 2000 (Afternoon Sitting)
RT HON
NICHOLAS BROWN
Chairman
1. Minister, you are a recidivist as far as
this Committee is concerned.
(Mr Brown) Already. I have not said anything
yet.
2. You just keep coming back, that is because
we invite you, that is because we count on getting something useful
from you and I am sure today will be no exception whatsoever.
We are glad to welcome you back. This is on the subject of the
Rural Development Regulation, as you know. I just want to start
by putting them in context because when you made your statement
in the House in early December you spoke of the Regulation being
an important part of the Government's rural policy. In February
you stressed that the Rural Development Plan ". . . is
only the first step towards delivering an integrated rural policy".
We are awaiting publication of the Rural White Paper and, of course,
we all know there is a comprehensive fundamental spending review
going on. If you could start by putting in context perhaps as
we stand now the Regulation we are discussing that would be helpful.
(Mr Brown) May I begin by congratulating you on your
elevation to the chair and I must say I look forward to establishing
a good working relationship with you and the rest of the Committee,
including the new Members, as I had previously.
3. I am grateful for that. I also got reselected
for my constituency over the weekend and of the two, on the whole,
the latter was a more difficult task.
(Mr Brown) I had no influence over that. It is probably
right to put that on the record. To get back to the business,
on the question of the Rural Development Regulation, it is clearly
the most significant instrument available to policy makers. Of
course, the Government wants it to sit alongside the contents
of the White Paper, of course it has to measure up to the public
spending round, just as any other policy of Government does. It
would be quite wrong for anyone to overlook the significance of
what was announced last December. As well as being a major structural
shift in the way in which we are using the Common Agricultural
Policy itself, this measure is an integral part of the Common
Agricultural Policy. The Government has agreed also to provide
new funding and to make use of the instrument of modulation so
that the compensation payments, the support payments, depending
on your point of view, that are paid under the different commodity
regimes as compensation for the price cuts are shaved to provide
more funding for the second pillar of the CAP and this modulation
is matched pound for pound by new money from the Treasury. So,
as well as it being quite an exciting range of policy instruments,
decoupled from production, that are available for Ministers to
use, there is also a substantial increase in funding. I think
it only fair to share with the Committee my ambition for the UK
model of the second pillar of the Common Agricultural Policy.
It is my hope and intention that the UK model also points the
way for further reform of the Common Agricultural Policy.
4. Would you see the White Paper in a sense
being wrapped around this Regulation, this Regulation will remain
as it is, or would you anticipate that there may be some modulation
of your proposal in the light of the more comprehensive White
Paper proposal?
(Mr Brown) Clearly this plan will sit alongside the
White Paper. Because it is a joint exercise between ourselves
and the Department of the Environment, Transport and the Regions,
the White Paper will range much wider than the support that is
available for farm businesses and the impact of these new support
measures on the broader countryside debate. I would not want to
claim more for the measure than can be claimed for it but it is
incredibly significant for these three reasons. Firstly, each
of the policy areas on which we are spending money I think can
be justified in their own terms anyway. These are things the Government
should want to do. Also, it provides significant new instruments
for policy makers to help farm businesses get through difficult
times in an economically rational way, in other words the support
measures are not coupled to the supply side of the Common Agricultural
Policy. Thirdly it is significant because it points the way forward
for reform of the Common Agricultural Policy itself.
5. It is interesting that you said, Minister,
in your three enumerations, each of those refer to farmers and
farm businesses, though I think it is called a Rural Development
Regulation, in fact this is a farm development package.
(Mr Brown) I think you are on to a fair point. All
of the different measures are farm focused in one way or another,
although some of them do range quite wide, particularly on the
economic development side, the training, the marketing grants
and the successor to the 5b scheme, what is now called the Article
33 scheme, rural enterprise.
Mr Öpik
6. Before you move on from this, someone has
to bring it up, one of the big concerns is over regulation of
the countryside, everything possibly from speed limits right through
to the farming inspections. Do you expect there will be something
in the overarching rural policy that will directly tackle that
over regulation perception?
(Mr Brown) The regulatory regime does not come directly
under the second pillar of the CAP. As you know—this is
slightly to one side but I will answer it—we did announce,
myself and Ben Gill last September, a review of all the regulatory
burdens on farm businesses and we did say we would look not just
at those that are to do with the administration of the CAP, the
Meat Hygiene Service and matters directly to do with farm businesses
but we would look across Government also at the impact of some
of the Environment Agency measures and the charging regime, we
would look at the planning regime, for example, something of fundamental
importance to our desire to use this measure to support farm diversification.
All of that work is going on within Government now.
Mr Jack
7. Whilst we are on the overall scope of the
Regulation, could you identify of the programmes that are now
within the Regulation which ones are uniquely new as opposed to
repackaged versions of existing programmes?
(Mr Brown) There have been successor schemes, previous
schemes, you are right, in almost all areas but I guess the use
of this scheme to support non- food crops, for example, would
be new.
8. Would I be right in saying in Objective 2
of the MAFF annual report there is a section in there, in fact,
which does deal with existing packages of support for alternative
crops, including energy crops?
(Mr Brown) I do not think it is a very strong point
either way. If you are making the point that there were previous
schemes, perhaps less generously funded before, that is true.
9. Let us pursue the question of funding. In
your statement to the House of Commons on 7th December you said
for England it will mean a total of £1.6 billion of expenditure,
a 60 per cent increase over seven years.
(Mr Brown) Yes.
10. I wonder if you could tell me what that
60 per cent is an increase on? How is that calculated?
(Mr Brown) It is the increase on projected expenditure,
taking the Department's base line and what we believe the European
Union contribution will be. Of course it is paid for by the use
of modulation and the matched funding which is the new money that
we have secured from the Treasury.
11. Just so I am entirely clear, that is 60
per cent over where you were because I think you published—
(Mr Brown) Yes, it is projected funding and then it
is taken as the starting point. The increase is the modulated
element plus the matched funding.
12. With respect, Minister, your annual report
shows you have not projected beyond 2001-02.
(Mr Brown) That is because of the impact of the public
expenditure round. There are four separate funding streams for
this measure. There is the European Union contribution, which
we managed to get increased by 30 per cent, although from a very,
very low base line. I still think we ought to be receiving a larger
share of that money and I shall not miss any opportunity to press
our case on that. The second share of the funding is the amount
of money that is currently in the Department's base line. That
money is in these schemes, that money is only for England and
we project it forward at a flat rate, in other words we show no
increase. Is that an entirely secure thing to do; I cannot say
that with certainty because it has to be argued for in the public
spending round but that is how we arrived at the base line. Then
to get the additional sum there is the use of modulation as an
instrument—and I guess we will come on to this it is a rising
instrument over time, the percentage we are modulating goes up—and
the matched funding increases pro rata, in other words the more
we modulate the more matched funding we get. Those two elements
are secure.
13. Can I just take you into the area of modulation
for a moment. You talked about that as being extra funding but
as I understand it what you have done is to top slice existing
Community programmes, in other words under the old regime, under
today's regime that is money that would have gone to farmers under
a variety of programmes. You have taken that back into the centre
and now you are redistributing.
(Mr Brown) It is not a variety of programmes, it is
essentially compensation payments that are paid to farmers for
the price cuts. The Regulation that underpins the compensation
payments also allows Governments to reduce those payments by a
percentage, up to 20 per cent is what is permitted by that horizonal
measure, and that money can be put into the Rural Development
Regulation. What I have done is to make modest use of that on
a rising profile over time and to ensure that every penny that
is taken from the compensation payments for the price cuts is
put into the rural development measure and moreover matched by
a completely new penny from the Treasury. The total sum involved
over the period is about £300 million.
14. I just want to establish beyond peradventure
that effectively it is farmers who are paying for what you describe
as new money?
(Mr Brown) No, I do not accept that, it is actually
taxpayers who are providing it.
15. You can play with the semantics all you
like but farmers—
(Mr Brown) The money does not come from farmers.
16. —from ways in which they would have
got their money under the existing programmes of support, some
of that is going to disappear into this Regulation, is that correct?
(Mr Brown) It is true that the compensation payments
that are being paid by taxpayers to farmers are diminished but
the sum by which they are diminished is match funded by new money
from the Treasury. All of that money is put into the Rural Development
Regulation so that the total sum being spent through the first
and second pillar of the Common Agricultural Policy is increased
because of the matched funding from the Treasury.
Chairman
17. Could I just interject, I will come back
to you Mr Jack, I am anxious to clear up this business of new
money. I am right, I think, in saying that HLCAs in your budget
line represent the level before the increments which were paid
to them?
(Mr Brown) That is right.
18. If the Government was to decide to maintain
the present level of payment, which is above your budget line,
you would define that as new money?
(Mr Brown) The position is that for two years we have
increased the HLCAs by an extra, I think, it is 55 per cent increase,
effectively it cost the Government, across the UK, £60 million.
Now we announced that as a one off measure and then repeated it
as a one off measure. In the current submission to the European
Union, and the documents we put into the public domain, I have
to show the money that I have now, and that does not—let
us be quite clear about this—include the extra £60
million. It was not carried forward as a continuing expenditure.
I know the reportage of this likes to suggest that it is, it is
somehow their money, it is not. That is reflected in these published
figures. If the question is how will we resolve this issue, there
is, as there usually is, an autumn review of the Hill Farm Allowance,
as it is now called. The issue is complicated of course because
we have moved from a headage to the area basis of payment. What
I said to the NFU annual conference, and I say here, we need to
do some very hard thinking before that review to see how we are
going to take this very important issue forward. I cannot say
to the Committee today that extra £60 million is guaranteed
this year for expenditure at the beginning of next year.
19. That is not my purpose to try and force
you to say that.
(Mr Brown) I would rather spell it out honestly and
have people think about it than to let the issue drift until there
is suddenly a row about where is the extra money then and it is
not there.
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