Select Committee on Environmental Audit Minutes of Evidence


Memorandum from the National Farmers' Union

1.  INTRODUCTION

  Pesticides are an essential agricultural and horticultural input, used safely and responsibly to produce the vast majority of the nation's food.

  The NFU strongly opposes the imposition of a tax on pesticides as proposed by the Government's consultants, ECOTEC, on the grounds that:

    (i)  it will not reduce risk or use and

    (ii)  it will seriously adversely affect farm incomes and international competitiveness.

2.  APPLICATION OF THE "POLLUTER PAYS" PRINCIPLE TO PESTICIDES

  The ECOTEC report, commissioned by Government, argues that the environmental damage associated with pesticides does not arise primarily from misuse but rather that all applications are likely to cause damage. It suggests that this damage arises largely from the inability of the regulatory authorities to predict the likely environmental consequences of approving chemicals for use. We do not accept this argument. The approval of pesticides for use in the UK is tightly regulated and controlled by highly competent authorities. There is also a wide range of legislation controlling the way in which these chemicals can be applied and used. There is no evidence of a widespread failure to predict the environmental consequences of pesticide approval in the way that ECOTEC suggests. In the vast majority of situations, pesticides are applied with no effect whatsoever to the environment. Accordingly, the polluter pays principle cannot be used to justify the imposition of a tax on all pesticide use. Responsible users would be penalised unfairly.

3.  THE IMPACT OF A TAX ON THE LEVEL OF PESTICIDES USED

  Pesticides have a major impact on both the quantity and quality of farm output, so it is clear that a very large tax would be required to have any significant impact on usage.

  Producers target the minimum level of pesticide usage required to produce a marketable crop at an acceptable level of risk. If the prices of pesticides increase, they will have to choose between continuing with their present spray programmes at a higher cost, or lowering pesticide usage with a consequent higher level of risk and a need for increased management. The consequence of the revised strategy failing, however, would not be a loss of output at the margin, but an altogether more serious loss of viability of the whole crop. In the face of this, many producers will have little choice but to try and absorb the cost and carry on with their existing programme as the consequences of a crop loss are simply too catastrophic to risk.

  The imposition of a tax might also have other potentially perverse or undesirable consequences. It is entirely possible that, in some instances, the imposition of a tax would affect the relative prices of pesticides to create an economic incentive for producers to use less environmentally benign chemistry than they might otherwise have done.

4.  IMPACT OF A PESTICIDES TAX ON OTHER INITIATIVES TO REDUCE PESTICIDE USE

  Pesticide use has already been reduced substantially in the UK. We are also concerned that a tax would damage the many positive initiatives that are taking place to reduce pesticides use. Farm assurance schemes, stewardship schemes and the work of a wide range of industry-funded organisations such as LEAF, the Game Conservancy and FWAG all help to increase the profile of pesticide reduction amongst the farming and growing comminity and to ensure that the necessary technology transfer takes place. There are also industry-funded R&D programmes underway, eg LIFE, TIBRE, and at IACR and the ARCs, that are carefully testing reduced dose regimes, utilising biotechnological diagnostic aids, electronic infield measuring devices and advanced sprayer technologies.

5.  THE IMPACT OF A PESTICIDE TAX ON FARM INCOMES AND THE COMPETITIVE POSITION OF UK AGRICULTURE

  The strength of sterling and unfavourable developments on world markets has caused severe economic damage to UK agriculture and horticulture since the mid-1990s. As the aggregate farm income figure includes the returns earned by livestock producers who would be relatively unaffected by the tax, ECOTEC massively under-estimate the impact on the arable and horticultural sectors. Using Farm Business survey data, it can be shown that in 1997-98 a 30 per cent tax would have reduced the net farm income figures for cereals and general cropping farms by 27 and 29 per cent respectively. No industry can absorb this sort of blow.

  The introduction of a tax would clearly also have major implications for the UK's international competitive position. Even if the introduction of a tax could be justified on environmental grounds, we believe strongly that this sort of measure should only be contemplated at the European Union level. If the Government did choose unilaterally to impose a pesticides tax in the UK, the direct and inescapable consequence would be the export of jobs and wealth creation.

  The Report also suggests that "in the longer term, the instrument could improve job retention by promoting early adjustment to market conditions consistent with possible CAP reform". Farmers and growers will require some convincing that further cost rises are needed to encourage them to adjust to an economic climate of low prices and still lower margins. In fact, of course, the exact opposite is true. Farms and holdings are already starved of investment. Anything which increases costs at this time can only worsen their situation, further undermining UK agriculture's competitive base.

6.  COMPATIBILITY OF A PESTICIDE TAX WITH TREASURY GUIDELINES

  We believe that a pesticides tax would fail to satisfy many of the Treasury's own guidelines as to what constitutes a good tax because:

    —  Although the objective of the tax would be to deliver environmental benefits, it might well have undesirable and perverse side effects.

    —  Its introduction would discourage innovation in meeting environmental standards. Indeed, it might force producers to adopt more conservative strategies towards pesticide use and lead to a considerable loss of goodwill towards existing pesticides reduction initiatives.

    —  The tax could have very serious and undesirable distributional effects.

    —  Compliance costs could be considerable, particularly in trying to capture the first use of imports brought into the country for a producer's own use. This would be made even more difficult if a sophisticated banding mechanism was to be employed.

    —  The impact on our international competitive position would be extremely damaging.


 
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