Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Memorandum submitted by English Nature (H15)


  English Nature is the statutory body that champions the conservation and enhancement of the wildlife and natural features of England. We work for wildlife in partnership with others by:

    —  advising—government, other agencies, local authorities, interest groups, business communities, individuals on nature conservation in England;

    —  regulating—activities affecting protected species and the special nature conservation sites in England;

    —  enabling—helping others to manage land for nature conservation, through grants, projects and information; and

    —  enthusing—and advocating nature conservation for all and biodiversity as a key test of sustainable development.

  We have statutory duties for nationally and internationally important nature conservation sites including Sites of Special Scientific Interest (SSSIs), the most important of which are managed as National Nature Reserves (NNRs); Special Areas of Conservation (SACs); and Special Protection Areas (SPAs).

  Through the Joint Nature Conservation Committee, English Nature works with sister organisations in Scotland, Wales and Northern Ireland to advise Government on UK and international nature conservation issues.


  Much of England's biodiversity is associated with agricultural land, and major losses have been recorded over the past few decades. These have been primarily associated with agricultural intensification: the use of herbicides and pesticides, increased mechanisation, specialisation and loss of farmland features such as hedges. Whilst much of this change is associated with technological development and market pressures, the CAP is widely accepted as having accelerated and magnified the intensification activity of farmers and thereby the losses to biodiversity.

  The demands of a more liberalised world trade regime, and the constraints imposed on the CAP by the impending enlargement of the EU, combined with concerns over the sustainability of the current policy, are leading to irresistible pressure for change in the policy.

  In advance of the Commission proposals, the Land Use Policy Group of GB countryside and conservation agencies prepared some Reflections on the Mid-Term Review of the CAP (published at ). This provides a useful benchmark against which the Commission proposals can be viewed. The LUPG has commissioned a number of other relevant reports, chiefly on the environmental impacts of decoupling support, and these are also available at this site. .


  English Nature has provided an initial response to DEFRA on the Commission proposals published on 10 July 2002. This is published at and is attached to this submission [not printed]. In our submission to the EFRA Committee, we refer to relevant passages from our response to DEFRA to avoid unnecessary repetition.

  Due to the scope of the Commission document, and the lack of detail at this stage, our response should be not be regarded as a definitive position and is likely to evolve over the next few months as more details emerge. At this stage English Nature's overall view is that the proposals as a package should be welcomed, as a step towards a more sustainable and responsive European agriculture policy (para 1.1).

  In our response to DEFRA we commented on the three strands of the Commission proposals as follows (para 1.6):

    —  Strand 1 (Market reforms)—proposals noted, along with disappointment that no firm measure is put forward for reform of the dairy regime (para 1.7).

    —  Strand 2 (Creation of Single Income Payment)—broadly welcomed as a stage towards a reformed CAP, but with concerns about the need for effective cross-compliance (para 1.8).

    —  Strand 3 (Rural development)—emphasised the importance of a strong and equitably allocated second pillar for the CAP (para 1.8).


The extent to which the proposed reforms to the CAP address concerns about the future direction of the Policy—in particular whether they will encourage a more liberalised agricultural sector within Europe, and what impact the reforms will have on negotiations for the enlargement of the European Union.

  English Nature supports the decoupling of subsidies from the current complex set of eligibility criteria and commodity regime mechanisms, and the creation of a "single income payment" as a means of shortcutting the incremental modification of support regimes commodity by commodity. We believe it would immediately remove a number of perverse incentives to intensive production, particularly with regard to overgrazing driven by the livestock regimes. We also believe it would make support more transparent (para 3.1).

  It would appear that the proposed single income payment is fully decoupled from production and is a major step towards more liberalised European agricultural markets. We believe that they are likely to be far more compatible with the requirements of the WTO than the current commodity related payments and , if adopted, would put the EU into a strong negotiating position in forthcoming trade talks. However, we do not see a decoupling of support and the creation of a single income payment based on a historic level of subsidy as an end point in the process of CAP reform. We see the MTR proposals as an further important step in separating the market and public good functions of agriculture and in further developing the basis for EU support for farming and rural areas. It is important that the resources for decoupled Pillar I payments are progressively shifted to the second pillar—up to and beyond 2006. These should be used to reward management of existing habitats and other landscape, cultural and natural features and to ensure farmers considering enterprise changes are encouraged into environmentally sustainable activities.

  While decoupling would bring with it some important immediate environmental benefits, particularly relating to reducing the intensity of production, there are at the same environmental risks inherent in a more liberalised approach which could lead to potentially damaging land use changes. This is recognised by the Commission, which proposes that decoupling needs to be accompanied with compulsory cross-compliance measures to ensure that removing the commodity regime constraints does not lead to environmentally damaging activity. This linkage is of critical importance, and is borne out by earlier English Nature research. Other proposals in the package provide additional complementary means of ensuring environmentally positive outcomes. These include:

    —  increased resources for Pillar II measures, particularly agri-environment schemes;

    —  farm audits and transitional aid; and

    —  an explicit environmental role for set-aside.

  These measures must be regarded as an essential component of decoupling, and must be carefully thought through if they are to mitigate potential harmful environmental side-effects of decoupling (para 3.2).

  The Commission's proposals for decoupled payments also create many detailed technical problems, such as the attachment of aid to land or the producer, the transfer of the right to aid, the impact on land prices and tenancy agreements the problems of supported farmers moving into sectors that compete with established unsupported farmers. The impact of many of these are hard to quantify, but are likely to lead to significant business restructuring, which is often associated with changes to existing habitats, field boundaries and the patterns of land use. This increases the importance of securing a properly funded CAP second pillar, where the resources to mitigate the impact of these changes will be found. We comment further on this issue below. Further information on the potential environmental impacts of decoupling can be found in reports at the Land Use Policy Group website

How the proposed reforms will affect British farmers, in particular what will be the effect of capping aid for larger farms and decoupling subsidies from production levels.

  As already indicated, English Nature supports the principle of decoupling subsidies from production as a step towards a market system where farmers are paid by the taxpayer for the provision of specific public goods and are enabled to respond to genuine market signals in their production decisions. We believe the creation of a Single Income Payment represents a step in the right direction, which would immediately remove perverse incentives to production.

  However, the decoupling proposals carry serious environmental risks which must be addressed as part of the package of reforms. It is therefore essential that the Single Income Payment is made conditional on compliance with a range of standards. Although the Commission appears to recognise this in the proposals, the signals to date have not been encouraging and the Commission appears to be uncertain about the exact role of cross-compliance. There is a further, and less quantifiable risk, of rapid and uncontrolled structural change in the industry.

  Concern has been expressed about the proposal for a 300,000 euro ceiling on payments. However, it is important to recognise that this payment will now become a means of income support, and not a production subsidy. It is likely to affect at most a few hundred farms in the UK. It is also likely that affected farms will consider ways of escaping the impact of the ceiling by business restructuring. English Nature believes it is much more important for the UK to focus on the long term benefits of a further move to reform, the redistribution of Pillar II support and the immediate and significant issue of the potential impact of decoupling on the environment (and indeed on rural communities) (para 4.2.2).

What will be the practical effect of new cross-compliance conditions to be applied to the receipt of aid and whether the conditions adequately balance environmental and commercial concerns.

  Whilst English Nature supports the principle of decoupling as a transitional stage towards a system where public support is clearly linked to public benefit, we have highlighted above our concerns about the environmental risks of this approach and how these might be managed.

  There is some confusion in the Commission's text over the extent to which cross-compliance should be applied to decoupled payments. On page 16 of the MTR proposals the Commission argues for "reinforced cross compliance conditions including land management obligations", whilst later suggesting payments would be subject to meeting "statutory environmental, food safety and animal health and welfare standards" (p19) along with an obligation "to maintain land in good agricultural condition" (p21). English Nature believes cross-compliance should be based on good land management standards and not just statutory minima (para 3.2.1). We agree with the Commission assertion that "public expenditure must yield something in return". We contend that compliance with existing standards only requires farmers to respect standards that are required whether the producer is in receipt of public subsidy or not and does not represent an appropriate or equitable return for expenditure. The Commission's assertion that the main purpose of cross compliance will be to support the implementation of relevant (European) legislation is therefore unacceptable.

  English Nature considers that the decoupling proposal is welcome—but only it involves a rigorous approach to cross-compliance and other environmental measures: these are not incidental but rather integral to the proposals. It will be essential to look closely at the forthcoming European framework for cross compliance and the extent to which this will allow for Member State discretion in the standards applied.

  The Commission cites the Small Farmers Scheme (SFS) as an important precedent for reducing the administrative burden on farmers. Although the UK chose not to participate in this scheme, it is now operating within the EU on a trail basis and the Commission must be pressed for interim findings. Although the scheme varies in key details from the MTR proposals, the findings in relation to cross-compliance and attaching obligations across land-holdings will be very pertinent. While the UK was considering and consulting on the SFS English Nature raised very similar concerns regarding the importance of cross compliance and ensuring that simplification did not lead to environmentally damaging land management.

Whether the proposed reallocation of funds from direct aids to farmers (Pillar I) to rural development (Pillar II) will provide sufficient resources to achieve environmental goals and to support rural areas.

  English Nature has consistently supported shifting resources for Pillar I to Pillar II of the CAP , up to and beyond 2006, where they can be used to reward management of existing habitats and other landscape, cultural and natural features and to ensure farmers considering enterprise changes are encouraged into environmentally sustainable activities. We therefore welcome the Commission's proposal for compulsory dynamic modulation, although our support is qualified by uncertainties over the precise way this will operate and its consequences for the operation of the England Rural Development Programme (para 3.2.2). We also believe that the model proposed by the Commission is more complex to operate than the current UK model and its efficiency in transferring resources is compromised through the use of franchises for small farms. We would rather see the EU adopt a model similar to the UK system.

  Adequate resources need to be available under Pillar II and the England Rural Development Programme to reward farmers for the management of existing habitats and other landscape, cultural and natural features and to ensure farmers considering enterprise changes are encouraged into environmentally sustainable activities. This should help to address the environmental risks of a move to a Single Income Payment. The Commission's proposals for dynamic modulation must provide the UK with a sufficient share of the RDR budget to meet these needs in the medium to longer term.

  Of crucial importance for the UK will be the formula used to distribute Pillar II resources between Member States. This must be done based on an assessment of need, both for the existing RDR (which currently disadvantages the UK) and for the modulated receipts. English Nature supports the principle of the Commission's proposal to distribute Pillar II funds according to three criteria of need: agricultural area; agricultural employment; and a rural deprivation index. The majority—we recommend at least 60 per cent—should be allocated on the basis of total agricultural area as a proxy of "need": this is a good overall indicator of the overall magnitude of need in terms of resource protection, cultural landscapes and wildlife character and distribution (para 4.2.1). Since farmers will be the main route for delivering these objectives via agri-environment schemes this would tie in well with the socio-economic objectives.

  There is a particular immediate issue for the UK, in that the proposed 3 per cent annual rate of EU modulation into Pillar II is less than the proposed UK rate already agreed. If the proposed EU rate is adopted this could lead to a shortfall in the planned resources available to the RDR in 2005, seriously compromising the ability to implement many of the findings of the recent Curry Commission report. Transitional arrangements to avoid this scenario must be agreed as a priority (para 4.2.2).

  The ERDP budget must be sufficient to cover the requirement for agricultural SSSI protection, the delivery of specific Habitat and Species Action Plan targets requiring land management, the protection of further semi-natural habitats, the delivery of biodiversity on arable and improved grassland habitats, the achievement of Natural Area objectives and development of ecosystem robustness to accommodate climate change. The ERDP also needs to accommodate socio-economic and rural development objectives, which may be delivered concurrently with environmental activity or require additional funding.

  The actual sum required is hard to quantify: it will depend on the level of the regulatory/cross-compliance baseline, the economic incentive from the market, and subsidies for damaging or beneficial activities. As an indication, English Nature calculated for our submission to the Curry Commission (published at that the annual requirement for agri-environment schemes might be £1billion. However, this figure is intended to be indicative and should be used with great caution.


  In summary the Commission's proposals for the MTR represent a bold and important step forward in the process of reforming the CAP. English Nature supports the overall direction of both the Agenda 2000 reforms and the MTR proposals.

  The central, and most radical, proposal is for decoupling of aid from an incentive to produce and we welcome this as both a way of creating a more market orientated agriculture and in removing a number of damaging environmental consequences of production subsides. Decoupling, however is only part of a solution to creating a more sustainable land management and rural development policy for Europe and must be accompanied by both environmental protection measures and better funded and more effective support that rewards the provision of public goods and encourages sustainable rural development. We believe the Commission has recognised this need and it is very important that during negotiations these two aspects of the package are not separated.

  The monitoring and assessing the consequences of many of the details of the Commission's proposals will also be of critical importance in ensuring the MTR is both positive for the environment and that the UK is a net beneficiary. We have commented on some of our concerns over these details above, but it is not possible to be definitive until the Commission has published further draft legal texts later in the year. We, therefore, view the MTR as a very dynamic process that will need the UK to adopt well argued, coherent, robust and politically winnable negotiation tactics over the next few months.

30 September 2002

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