Examination of Witness (Questions 60 -
79)
TUESDAY 29 FEBRUARY 2000 (Afternoon Sitting)
RT HON
NICHOLAS BROWN
60. You covered the point about the idea of
having the tiered payment.
(Mr Brown) The administrative costs are very high.
The harder it bites to get the same sum of money you would have
to increase the rate of modulation for those who are paying and
thus provide an even bigger incentive for behaviourial change,
the breaking up of holdings, and this notion to avoid the effect
of the higher rate of modulation. It is very important.
61. There is one other part. With modern technology
it seems to me that the information you would need to implement
the scheme is no different from the information you would need
to have from the farmer.
(Mr Brown) It is done manually at the moment.
62. It does not need to be.
(Mr Brown) I know that. Indeed, we have two reports.
A report from Price Waterhouse to the Government, who have looked
at this whole issue about how we make payments, which recommends
a radical change. One of the three new review groups that we set
up, the one under Don Curry, also covers the same area and in
principle recommends moving to electronic transfers.
63. With that, would it be possible to have
a tiered system without too much difficulty?
(Mr Brown) We have not got it.
64. We have not but you were arguing—
(Mr Brown) Nor can I assure the Committee today that
we are getting it. Again, there are discussions going on within
Government.
65. You said that one of the key reasons for
not doing so was the administrative difficulty.
(Mr Brown) I see what you are getting at. It is not
a clinching point with me. The clinching point is to have a clear
model, a United Kingdom model of degressivity, which can apply
in our own country and which we can show to our partners in the
EU as a workable model, and a way forward they might want to consider
as a EU model when we have to look at further reform of the Common
Agricultural Policy. I said to the Committee before, it is my
view that this current structure will come under enormous pressure
well before the six-year period that it is supposed to be endured
for.
66. So am I right in assuming that you positively
prefer the flat rate rather than a tiered system?
(Mr Brown) The honest answer to that is yes.
67. Very briefly, to come to a couple of other
points. You have already basically said who you think will be
the winners and the losers.
(Mr Brown) Clearly it depends on the applications
that we receive, but the modelling work we have shows every sector
the winner because of the effect of the matched funding with the
modulated element—of course that is new money—and
because of that the sum available to farmers is higher than it
would have been otherwise; so our modelling shows every sector
as a winner except for what is described as general cropping.
The reason for that is that it is pretty difficult to see how
you could put an environment scheme in on a general cropping operation.
Chairman
68. So will this have a redistributive effect
of everything going towards the hills?
(Mr Brown) No, all sectors gain. Clearly some more
than others. If there is a change, and remember this all depends
on applications, there are probably small trends toward the livestock
sector, towards the smaller farm business, and away from the arable
sector and the larger farm business, but even allowing for that
the arable sector is a winner under these proposals because of
the extra monies.
69. I understand that but in so far as the yield
of your modulation on the arable sector will be higher than your
yield from the livestock, the applications from the livestock
country are likely to be more susceptible to be approved than
applications from East Anglia, so then there will be some regional
redistribution within the area.
(Mr Brown) We have tried very hard to avoid redistribution
within the regions. I am very keen to make sure that all sectors
are winners under this. We cannot quite get that with general
cropping.
70. It is not incompatible—?
(Mr Brown) No. I am not sure that is right but, in
any event, I do not want regional winners and losers.
Mr Öpik
71. But between the sectors, for clarity, do
you perceive what is your view about a redistributing between
the sectors?
(Mr Brown) If there are no losers some sectors might
win more than others but frankly it depends on the take-up of
the environmental measures. More than any other single factor.
72. In principle, you are not opposed to a distribution
between sectors?
(Mr Brown) Let us see how the bids come in. I am also
not opposed to bids crossing regions if regional boundaries are
at the borders, as you know very well.
73. I would not argue against that!
(Mr Brown) To some extent they are artificial. People
do not say, "Gosh, here is the Midlands boundary. I must
not organise anything with people living in that village."
That is not the way it works in practice. I want this to be as
open as it possibly can, as collaborative with other Government
Departments that we can possibly make it, and to encourage bids
which are rational in themselves. The whole purpose of this is
to try and get farm businesses through difficult times in as economically
a rational way as we can. That means getting them closer to the
market place.
74. That also means that in principle, okay,
accepting that the outcome will be determined to some extent by
the applications, in principle you do not have a problem with
redistribution between sectors?
(Mr Brown) I would not want any region or any large
industry sector to be a clear loser. We are seeking to avoid that.
I think in fairness the character of the environmental schemes
that come forward from areas where one type of farming dominates
will of course be different from the nature of schemes that come
forward from areas with very different parameters for Countryside
Stewardship Schemes.
75. Finally what would be the impact on United
Kingdom competitiveness if our EU friends choose not to introduce
modulation?
(Mr Brown) This is an interesting point. It is marginal.
That is one of the reasons for introducing modulation at a very
low rate. You could argue it both ways. You could say that very
active modulation provides a market incentive. That is not my
view but there are those who argue it. I think it is a particularly
harsh thing to argue when farm incomes are low. I do believe that
the matched funding and the large increase in percentage terms,
but relatively small in monetary terms, we have got from the European
Union is being spent in the best possible way to help the United
Kingdom farming industry get through. Changing these measures
from the old production supports on the supply side, as the Committee
itself pointed out in a previous report, is absolutely the right
way forward in the longer term. Will all of this will help enormously
to make United Kingdom farming more competitive, I do not know,
but certainly closer to the market which is not quite the same
thing. Not because the compensation payments are being modulated
but because the money is being well spent.
Mr Öpik: Chairman, thank you for your patience.
Chairman: Mr Todd?
Mr Todd
76. What have other EU States chosen to do on
modulation?
(Mr Brown) This is very interesting. The French have
also decided to modulate but they have a different model from
ourselves. Ours is essentially based on the United Kingdom model
for reform of the Common Agricultural Policy compensation payments.
The French model does have a ceiling and it does apply modulation
right the way up to 20 per cent in theory to the large farm businesses,
but there are clawbacks which the farmer can use if they meet
certain labour content tests and other tests that have been set
by the French government and at the other end the method of providing
support to the farm businesses, as I understand it, is a fixed
payment to the smaller farm businesses. In other words, they have
made use of what they call a franchise, in other words an exclusion,
and these fixed payments are for compliance with a series of environmental
tests which have been set essentially by the French government
but carried in primary legislation through the French Parliament.
That is in summary my understanding of it, but I am not an expert.
77. That would appear to be rather more aggressive
modulation than the way we have taken but with the opportunity
for derogation effectively by saying, "We will not take quite
so much off you if you do certain things."
(Mr Brown) The history of all this is different in
France and farm types and structures of ownership are different
so it is not surprising that they have devised a different model,
but the underlying principles are not that dissimilar to our own.
78. What other models have emerged so far?
(Mr Brown) A range of conversations among ministers,
a few flat refusals to use modulation and quite a lot of expressions
of interest both theoretically and some enquiries from states
that have not quite submitted their own returns yet. It is very
mixed. Let me add one point to that. The reason why it is very
mixed is that all the other states had a history of making use
of these measures before they were consolidated into the Second
Pillar of the Common Agricultural Policy. So there is not as much
that is left undone as there is here in the United Kingdom because
of our history. The French approach is, as I say, very French
and, frankly, very interesting and imaginative.
79. Because it is "very French" does
not make it wrong.
(Mr Brown) I used to think that, but go on!
| 
