Examination of witness (Questions 820
- 839)
TUESDAY 23 NOVEMBER 1999
THE RT
HON NICHOLAS
BROWN
Mr Curry
820. Apropos that, you will be aware that the
Commission is apparently seeking to knock back some of the rural
designations of objective two in the submission put forward by
the government. I hope you will urge upon your colleagues the
necessity of holding firm in that regard.
(Mr Brown) I am not aware that that is the Commission's
view. Let me give you this promise: I will have a hard look at
it as soon as I leave here.
821. The fiery cross has been carried round
North Yorkshire on the ground that the Commission is seeking to
force out of the British Government submission significant rural
areas.
(Mr Brown) I promise to have a hard look at it.
822. I just wish to enjoin upon the government.
(Mr Brown) Is this on the structural funds?
823. Yes. There has been an argument as to the
coverage to replace 5(b) and the British Government has put in
its submission. That is now being negotiated with the Commission
and my understanding is that the Commission is seeking the removal
of some of the areas the British Government would like to see
covered.
(Mr Brown) I am not the lead minister on the major
policy area but of course I am the lead minister on the 5(b) schemes.
824. Because you talked of rural development
plans, that is why I raised that. I am rather wary of this phrase
about transition. I have never come across a day in the life of
the agricultural industry which is not in transition. Even in
the most wonderful, profitable years, people have gone out farming.
(Mr Brown) I think that is fair comment. If you look
at where British agriculture was post war and where it is now,
it has been through an astonishing transformation.
825. The purpose of my question is to come back
to Mr Jack's remark about small farmers. The information you have
given us shows this remorseless fall in the number of cattle and
the remorseless decline in the number of producers. Nestle have
told us that their client producers are now over the half a million
litre mark per producer. Seven per cent of their producers have
dropped out over the last year or so.
(Mr Brown) This trend is not unique to the United
Kingdom. Wherever the agricultural regimes are relatively liberal,
the same trends are discernable.
826. I am not suggesting that it is different;
nor am I suggesting that it is necessarily bad. Do you believe
that there is a point at which this will reach some sort of ceiling?
Do you believe that the Ministry ought to have a view as to the
desirability of maintaining what we call, in terms of shorthand,
small family farms, or does a small family farm simply get bigger
and bigger because the average gets bigger and bigger? Could you
envisage a time where, if you want to survive in milk, you need
to produce a million litres?
(Mr Brown) The trends, as you rightly say, in farm
size are remorseless. That does not mean that there are not optimum
numbers or optimum numbers for a particular trading period. Because
these are essentially private sector arrangements, those who work
in the businesses should find their own optimum because the employment
of labour and the number of hours worked are also factors in this.
Do I believe it is important for the government to have a small
farm policy for reasons of broader rural policy, for reasons of
regional policy as well as countryside policy? Yes, I do. There
are also environmental issues in all of this. I believe there
are landscape issues in all of this, but I believe these policies
should be pursued by funding regimes, initially under the rural
development regulation, but looking to the future I would hope
to see the Common Agricultural Policy reshaped so that there was
a much larger funding stream through the second pillar of the
Common Agricultural Policy and the public purse could purchase
in these environmental and landscape objectives explicitly through
farm support measures. In other words, through income streams
to farm businesses, but they would be decoupled from production.
827. Do you believe that the countryside development
scheme should be or could be used in any way to inhibit or influence
the speed at which a transition was taken for economic reasons?
(Mr Brown) I think there are a number of factors at
play here, but the effect of the policies I have outlined would
be for sound public purposes to act against the trends that are
otherwise pretty obviously present in the market place. The answer
to your question is a cautious yes.
Mr Marsden
828. Does the future lie in the market differentiating
and specialising in milk products and milk itself? If so, particularly
on organic milk, what support does MAFF give in terms of conversion?
Do you think the supermarkets are giving the consumer accessibility
to that market at the present moment?
(Mr Brown) Some of the major retailers tell me in
my conversations with them that they are very keen on organic
milk and they believe this is not only a discernable trend in
the market place but that in a few years' time the organic dairy
sector will have a much larger share of the total dairy products
market than it has now. That is what they say to me. There are
retailers who are real enthusiasts for organic products. I do
not assume this is altruism on their part; I assume it is because
it is what the consumers want to purchase. The support we give
is through the conversion schemes. We try to cover the loss of
income to the farmers through the period that they are converting
from conventional to organic. I have just announced an extra £10
million, which is new money from the government, to make sure
we can clear the waiting list for entry into organic farm schemes.
There will of course under the new rural development measure be
an opportunity for a successor organic aid scheme and we are discussing
that within the organic sector now.
Mr Todd
829. One of the keys to our success in putting
together a competitive dairy sector will be the degree of integration
that we can achieve between the different parts of the supply
chain.
(Mr Brown) I believe that to be right but only up
to the point where a Minister ought to express a view on these
things. These are essentially private sector arrangements. I go
to great lengths to avoid lecturing people on how to run their
businesses.
830. Fair enough. The legacy of government intervention
in this sector has been said to be the reason for the extremely
poor relationships between the different parts of the supply chain
in the dairy sector.
(Mr Brown) I have thought about this a lot because
the current issues which the Competition Commission have dealt
with and indeed the more adversarial than I would like relationships
between the producers on the one hand and processors on the other
side historically is seen by some to stem from the changes that
were made in the early 1990s. Of course there is always a temptation
to look back and to think about what the outcome might have been
if more had been done earlier on. It is pretty difficult. I think
it is pretty unfair to be wise with hindsight. I do think the
changes that have been made will lead to a better integrated industry
and will actually give the industry a more secure future.
831. Because the history of the industry well
before the 1990s was one of significant government intervention
and regulation.
(Mr Brown) Going back to the Farm Act there was a
time when the Government set the price of milk.
832. Which led to the consequence that instead
of the normal private sector processes of competition and co-operation
and so on there was a tendency to cry foul to what they perceive
to be the referee at various points rather than concentrate on
the normal private sector tools.
(Mr Brown) I hope it is clear from what I have said
that the Government views these arrangements as moving remorselessly
to more typical private sector arrangements but I would expect
that to lead to a more happily joined-up industry.
833. Is there anything you can do to help that
happen?
(Mr Brown) I use my good offices a lot with both the
farming representatives, the Milk Marque leadership and with the
Dairy Industry Federation as well. I want the Department to have
a good working relationship with both and to do what we properly
can to help through what I think is a difficult time of transition,
but not to do more than that. I do not think there is any future
for us in trying to extrapolate from the past solutions for the
future.
834. Would you therefore view with some disquiet
the Dairy Industry Federation comments that although they welcome
the steps that have been taken since the MMC report and the voluntary
break-up of Milk Marque, they will certainly be watching closely
how these three businesses operate and reserve the right to cry
foul on the referee once more if they feel that this is not working
out?
(Mr Brown) I am aware that that is their position.
835. Hardly the basis—
(Mr Brown) Clearly you could have the opposite thing
said from the other side of the farm gate. The great advantage
of the successor arrangement to the Milk Marque from the producers'
point of view is that it ought to avoid any reference back to
the competition authority.
836. Sadly that does not seem to be the culture
that is yet set in place. There seems to be one side of this game
who are looking to the referee even now and saying, "We cannot
be sure we are playing the right game here."
(Mr Brown) I think you will find both sides are watching
each other carefully and also keeping a sharp eye on the referee.
I do think we are making progress with this although if you are
saying the starting point is not ideal—
837. It is not just the starting point but the
current position as this break-up is proceeding is still with
at least one of the sides very firmly saying, "We remain
to be convinced that this is going to work out alright" and
that is hardly the basis on which future co-operation is best
founded.
(Mr Brown) I take the point and both sides are going
to keep a sharp eye on what their trading partners are up to,
however I think it is probably wrong to overstate it. The future
for the industry is in mature co-operative arrangements. These
are not short-term investments, not for the producer, not for
the processors and not for the retailers. You are dealing with
a fresh product. Distribution arrangements are complex and capital
intensive and have to work properly on a daily basis. It seems
to me that if ever an industry needed joined-up and collaborative
arrangements it is the dairy industry but, as I say, I do not
lecture people on how to run their business.
838. It is time for the referee to put the whistle
away and tell them to get on with running their businesses.
(Mr Brown) Time for the referee, if you mean me, to
give everybody encouragement.
Chairman
839. You are not the referee, you are a Des
Lyneham, a David Coleman sitting in the commentary box.
(Mr Brown) I am trying to do a bit better than that!
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