Examination of Witnesses (Questions 80
- 99)
TUESDAY 5 NOVEMBER 2002
MR MARK
FELTON, MR
ALASTAIR RUTHERFORD
AND MR
GARETH MORGAN
80. It was done to freeze the total, so it was
done so that the French farmers would continue to benefit in the
way they always have.
(Mr Felton) That is perhaps what Mr Chirac thought.
81. He is not daft.
(Mr Felton) I cannot speculate about that but that
presumably was in his mind. All I can say is that I have read
what Fischler said a couple of days later to an agri-environment
conference where he actually made it quite explicit that this
said that the same budget line, the total budget line that was
agreed at that meeting, would need to be used to cover, I think
he said, something like 70 per cent of the direct payment made
to new accession States and that actually says that France is
going to lose out.
82. That does say that.
(Mr Felton) But it all depends on the nature of the
legislation which comes out.
(Mr Rutherford) Even though the deal does set a limit
on the CAP in terms of the UK Government's aspirations to be reducing
the cost of the CAP over time, that is a disappointment. What
it does not do and the interpretation that we have of what it
does not do is say how individual Member States should be spending
that money or indeed the proportion that is spent within Pillar
I and Pillar II or indeed whether that money is paid through the
existing CAP regimes or whether it is paid through a single income
payment that has been proposed by the Commission. So, within that
budget threshold, there seems to be still considerable room for
manoeuvre on restructuring the CAP.
83. Assuming that those countries that benefit
do not take a "what I have I hold" view. They are not
going to change things about because "the present system
suits me well".
(Mr Rutherford) I think it is unclear at the moment
whether Member States will be able to do that or not.
84. That is helpful. It was a serious question
because I could not understand it. English Nature told DEFRA that,
if implemented, the Mid-Term Review package would be a useful
baseline for reforming in 2006. What do you mean by that? What
reform is necessary beyond that?
(Mr Felton) Basically, the Agenda 2000 Agreement which
was set up in Berlin in 1999 comes to an end in 2006 and there
is going to need to be another EU wide agreement about the 2007
to 2013, the overall EU budget in fact. Your previous question
has answered some of that, for example that there will be whatever
the Pillar I payment at EU level will be capped as agreed. To
some extent, Pillar I is something that we would like to see reduced
and we believe that decoupling is the first way of removing the
pressure to intensify farming and the rewards for just farming
subsidies and, if the budget is capped broadly at the current
level and it is decoupled, we still think that will reduce some
of the pressures that are causing some of the damage at the moment.
(Mr Rutherford) What we would be looking for in 2006
is the point that Mark Felton made earlier; we have decoupling
and what we will be looking for is some kind of recoupling to
rewarding farmers for providing those public goods, things that
they cannot receive through the marketplace, and that is the state
we have not recorded in the Mid-Term Review and that is why we
say it is a good starting point, it provides a good platform for
2006, but the Mid-Term Review does not mean that the process of
CAP reform is over.
Paddy Tipping
85. Let us just stick with public goods and
public benefits because I know that English Nature are very involved
with the CROW Act. In the CROW Act, one of the public goods was
greater access to walkers of wild open spaces but there were people,
I speak of myself for example, who were anxious about the effects
on bird life and bird nesting. There are clearly conflicts there
and tensions there. How do we resolve those tensions? How do we
measure the competing demands of, in an a sense, the potential
interest?
(Mr Felton) It depends to some extent whether you
are an optimist or pessimist about the pervasiveness of those
tensions, in particular between nature conservation interests
and public access. English Nature's line is that those tend to
be specific and particular to particular locations and are often
for limited periods and therefore there is no need for a blanket
pessimism and we move towards the idea that particular places
with particular objectives require particular management and for
this issue there is not a blanket answer. We need to go down a
route of appropriate subsidiarity, which would be the sort of
EU type term, but you need a framework within which that gets
done.
86. I agree with that and I am an optimist in
these things. The issue around the CROW Act was resolved but,
if you go to a site-by-site day-by-day example and I am often
in the Peak District, but you cannot micro-manage the landscape
and the habitat of each individual Dale, can you? What kind of
framework are you going to put in place that is robust enough
on a national/international scale and deliver the goods actually
on the ground? It is pretty hard conceptually, is it not?
(Mr Felton) You have identified the challenge, I think.
Can I suggest some of the frames for an answer. Our job is to
help work through a process of defining what the nature conservation
priorities are and then, while we are in the sort of world where
there is not a clear policy and we are trying to influence the
policy, you move towards the process of saying, "Given the
matter we want to achieve and we have our bio-diversity action
plan . . ." The reason we include studies across Europe is
that we want to make sure that we put forward solutions that will
work in other European countries as well because that is the only
way policy change will work. That is our European sort of angle.
Of course, we then get on to the point where "real policy
is in place" and then our job is to try and work out how
to make the best of that in the world as it stands. What the Mid-Term
Review proposes is a process of whole farm audit and we will talk
in a little more detail about it. My personal view is—and
English Nature's view would be something pretty close to this—that
you could only specify targets at a relatively local level. We
have done some work on a little species called the cirl bunting
which occurs in Southern Devon where we have shown that, on using
the available mechanisms, you can create a cirl bunting solution
which actually delivers some of the other aspects of the farming
solutions that you need there using the available mechanism, but
it is a bit different from a solution that further on in Devon
would be to conserve the Greater Horseshoe Bat. So, I am an optimist
but, providing you set your targets well, you could use farm audits
and farm plans without it being excessively micro-managed because
the micro-management gets done by the farmers. Once you have created
an environment around, "Here is what we are trying to do,
these are the objectives"—and I would argue this is
demonstrated in a few case studies of which the cirl bunting would
be one—farmers do pick this up because they know how to
run and manage their land and they know the difference between
one dale and another. Policy should not try and do that sort of
thing and the challenge is to do this in ways that encourage and
capture innovation and local knowledge from people who manage
the Dales. Farm audit is one of the ways of consulting individual
farmers.
87. Farm audit is one of good agricultural practice
or good farming practice but we are never quite sure what that
term means. It is another way of doing it, but in a sense what
is being asked for is a whole farm approach, a whole audit approach
to farming, which is light touch, which could be a tick box with
some kind of auditing system underneath that, but I think the
bottom line is, how do you reward people? What is the payment
for what Mark Felton described as market failure earlier on and
how do we judge what price we are gong to pay for those public
goods?
(Mr Felton) At the moment, we are obliged to use EU
Regulations which tells you payment must be based on profit forgone,
additional costs, and on incentive payment.
88. I am talking about the future.
(Mr Felton) The issue of price, that is what society
would be willing to pay, comes back to the challenge about, how
do you estimate what something is worth? Doubtless you could call
a bunch of economists and have an argument in front of you about
the merits and demerits of different ways of doing that. There
are undoubtedly mechanisms which I think do give you orders of
magnitude but not precise figures, so you still end up having
to decide how much you are going to pay. I do think that once
you have a target, you can start working out costs in a slightly
better way because you start knowing what the area of land is
and how much it costs to manage a hedgerow like that, and again
conservation work at Loddington Farm,[2]
Leicestershire show that broadly managing the Farm in ways that
deliver the farmland birds target for that bit costs them about
£40 to £50 per hectare additional costs over and above
running that farm like the commercial neighbours and, broadly,
that is what their package of agri-environment programmes actually
pays them.
(Mr Morgan) And that is why the Commission's
decoupling proposal is so critical because it has to be done in
a transparent way and that is the major problem that we have at
the moment because there is such a lack of transparency and you
cannot really put costs on things, so the debate cannot start.
Chairman
89. Do you think it inevitable or necessary
because there is no other way that farmers should be paid for
these goods out of public funds on a set tariff as it were or
do you believe there is a way in which the market can be introduced
into environmental goods?
(Mr Felton) If you mean by the "market",
do I think that the totality of public goods, need for the whole
area, if we do not take the farmland birds target, do I think
that every farmer who contributes to skylarks, say, can sell their
wheat that they are producing or whatever with a skylark bonus
that is sufficient, the answer is "no". I do think that
some farmers are able to package their goods and doubtless somebody
has told you how dairy farms in Devon that are managing their
land in ways that support the feeding areas for Greater Horseshoe
bats are also labelling their milk as coming from bat friendly
farming, I cannot work out whether they are getting a bonus or
getting access to the market in a preferential sort of way. You
could introduce slightly more competitive elements by saying,
"How much area do you need in this largish chunk of East
Anglia to support, say, skylarks?" and you could invite people
to bid for it and that would produce a little bit more of a market
side to it, but it is still a managed market, it is still public
payments.
90. Do you think there is a market at all where
the consumer would directly pay the farmer for certain things?
The farmer says, "I am going to create a farm which has woodlands
and walks where you can bring your horses and gallop over stubble
fields, can you pay me a fiver" or whatever. Do you think
there is a marketplace out there?
(Mr Rutherford) There are markets for that at the
moment. My wife rides a horse and she has membership of a local
farm scheme which provides rides across the countryside and that
is engaging in a market mechanism to provide private goods. I
do not think that is the only way to provide those goods and I
think we would be encouraging the use of a whole wide range of
mechanisms to secure those goods, some will be market led and
some will be by public investment.
Mr Borrow
91. You mentioned in your response to the Chairman
at the beginning of this meeting that part of the decoupling subsidies
from production would have the effect of reducing the incentive
to go for more intensive agriculture. So, the logic of that is
that agriculture is likely to become less intensive. I wondered
to what extent do you think that change in the nature of agriculture
is likely to be different in different sectors and have a different
effect in different parts of the country and have you any evidence
to support your thoughts in these areas?
(Mr Felton) I think you are right about the logic
of it as bits of it will get less intensive. It is quite interesting
to speculate what would happen, say, if you assume that wheat
prices fall, feed wheat prices that is. There is no doubt that,
say, the pork sector would become more intensive. I think it is
quite difficult to do predictions on this. We have done some work
on structural change but, frankly, this decoupling proposal was
a bit of a surprise offering on the table and we have not really
done a great deal of research on it.
(Mr Rutherford) We have done research in the past
on decoupling and DEFRA have also commissioned research more recently
on the implications of decoupling and I think you are absolutely
right in pointing out that trying to predict what the outcomes
will be in a particular sector in a particular area will be very
difficult if not impossible. However, we have an overall picture
that the net result for the environment will probably be positive.
The best example of this would be, for example, over-grazing in
the uplands. The uplands suffer from over-grazing from sheep because
the farmers are paid the subsidy in proportion to the number of
sheep they have. Therefore, to maximise the number of sheep causes
environmental pressure and over-grazing. If you turn those sheep
subsidies into a single income payment, the incentive for farmers
to maximise numbers of sheep will be taken away overnight. The
problem for us in the uplands then will be not too many sheep,
it will be about how to sustain sheep numbers to manage the habitats
that we want and therefore we have to think about, how do we change
the structure of our support payments that were already given
to farmers to move away from paying them not to keep sheep and
to be rewarding them for managing the environment in the way we
want it managed.
92. The RSPB in their submission did mention
the possibility of whole areas being abandoned from agriculture
and certainly when the Committee visited New Zealand earlier this
year, one of the consequences of the removal of agricultural support
in New Zealand was that certain marginal agricultural areas were
abandoned for agricultural use in New Zealand and that does have
public policy consequences.
(Mr Morgan) Decoupling without recoupling would almost
certainly cause massive structural change across Europe and that
is clearly identified within the Commission's analysis, so the
real question is how you recouple your payments to ensure the
reward of farming. It is not just a problem for the UK. In Spain,
there would almost certainly be a massive retreat in farming in
the sensitive environmental areas.
93. I think you have also mentioned in your
submission concern about the effect of decoupling on the environment.
I wonder if you would like to explore that a little further with
us.
(Mr Rutherford) It is not entirely clear from what
the Commission has proposed so far how its decoupling will work
in detail and I think that the question we still want the Commission
to answer is, if it is going to decouple and create this new single
income payment, then what is that single income payment for? Is
it purely a compensation for losing subsidies or is it a payment
for providing public goods, public benefits, and that is not clear
from proposals at the moment. If it is simply a compensation for
the loss of subsidies, then we definitely want to see that compensation
time limited and a transfer made as quickly as possible between
what is known as Pillar I to Pillar II. If, however, the payment
is intended to be rewarding for the production of some kind of
public good, then the Commission has to specify more clearly that
that is in fact the case and that there are conditions, that farmers
are providing these public goods if they are to be in receipt
of those payments. It is difficult to say at the moment which
road the Commission wants to go down and the response that we
would make to the Commission on the details of the MTR proposals
would essentially pose those two scenarios and say, "If you
want to go down this route, then this is what you need to do to
secure maximum environmental gain. If this is the route, then
this is what you need to do to secure maximum environmental gain."
94. If the Commission were prepared to move
money from decoupling from Pillar I to Pillar II but working within
the CAP that was agreed by Schröder and Chirac at the European
Summit, that would not constrain the EU from agreeing to changes
that the WTO want in terms of direct subsidies to agriculture
providing the overall subsidy or overall payment to agriculture
within the EU was removed in the main from Pillar I to Pillar
II. They would need to be more specific that the proposals would
come forward and would adapt. Would that be a reasonable analysis
of where we are?
(Mr Rutherford) I think the point you have made is
in relation to compatibility . . . The WTO is essentially looking
for decoupling. It does not matter what the payment is for as
long as you are not paying for production. What we are looking
for is not just decoupling, it is recoupling to the provision
of environmental goods. So, we want to go that one step further
from what the WTO is looking at. Quite how content the WTO would
be in terms of recoupling, establishing a ceiling at which it
is maintained for a long period of time, I am not entirely sure
what the WTO's views on that would be and how compatible that
would be with the Doha agreement, but we would seek the views
of our advisers on that.
Mr Lepper
95. You have talked about one kind of confusion
that perhaps exists in the Commission's statements so far and
can we take that a little further. In your advice to DEFRA a couple
of months ago on the Mid-Term Review, you were talking about cross-compliance.
You say that one part of the Commission's text seems to be arguing
for the need for cross-compliance conditions, certain land management
obligations ought to be reached, and, in another part of the text,
the suggestion on the part of the Commission seems to be that
those payments should only depend upon meeting statutory environmental,
food safety and animal health and welfare standards. What is wrong
with simply relying on the statutory minimum standards because
presumably, if they are statutory minimum standards, there is
something good about them?
(Mr Felton) Absolutely and we would certainly want
to ensure that any public payment/public funded money which goes
to farmers should be dependent upon farmers adhering to basic
minimum standards, but the nub of the question and again where
the Commission's confusion arises from, I think, is that they
are not being very specific at this point as to exactly what this
decoupled payment is for. If the decoupled payment is for providing
public goods, then the cross-compliance requirement must go beyond
basic legislative minima. You cannot say that somebody is providing
public goods if all they are doing is meeting basic legislative
standards, they must go beyond that. If, however, it is purely
a temporary compensation, then there might be more rationale for
the cross-compliance measures only to require legislative minima
as long as we had a clear timetable for a transfer of resources
from Pillar I to Pillar II.
96. Your view quite clearly is that good land
management standards should be the key and developing those good
land management standards, and you have talked a little already
when answering earlier questions about the sort of dale-by-dale,
farm-by-farm approach to things. Whose job is it to develop what
you see as those good standards? Is there an agency or a department
of Government that will be taking a lead on these things?
(Mr Felton) Government clearly do have a role to the
extent that there is a public interest in not polluting water
supplies, for example. My understanding at the moment would be
that DEFRA is actually working on this area and it seems that
the Department for Environment, Food and Rural Affairs would be
the appropriate lead department. It comes back to what are you
trying to achieve through this. Are you trying to achieve through
positive payments and rewards for going beyond that? It is basic
minimum standards and there is some form of European framework
because I think I am sensitive to the view that a business operating
here that is competing for a product that is being produced by
a business from, say, Spain, operating to different standards
may well face a cost disadvantage. So, it is quite important that
there is a framework. On the other hand, I think it is impossible
to set uniform standards across the whole of Europe, so you need
some sort of framework within which you make sure that—and
I think we say this in our evidence—there is an equal burden.
97. Can we just look at one area where cross-compliance
requirement is already happening in the existing arable area payment
scheme. Are the requirements being adequately enforced?
(Mr Rutherford) I do not have any evidence to hand
to show one way or the other whether they are being enforced.
I think that when we are thinking about cross-compliance measures,
we do need to think about how enforceable they are and certainly
the measures under the arable area payment scheme are relatively
easy to enforce because what they are about is not causing environmental
damage to certain features while the land is in set-aside, so
if a farmer digs a hedgerow out or fills in a ditch or whatever
when the land is in set-aside, that is easy to spot. I am not
aware of any figures being available on a requirement being enforced.
98. I represent a very urban constituency and
the countryside is somewhere that I visit from time to time. You
say in your advice to DEFRA that maintaining land in good agricultural
condition does not require it to be farmed and you argue that
the definition of good agricultural condition, I imagine, must
not require keeping land ready to plough and farm tomorrow. How
do you reconcile keeping land in good agricultural condition but
not keeping it ready to plough and plant tomorrow, which are the
words you used?
(Mr Felton) Perhaps I should explain where our concern
over the term "good agricultural condition" came from.
The bio-diversity action plan has set up some habitat creation
targets which will almost certainly require some land currently
in agriculture to be turned into, say, different sorts of grass
or more heath land or woodland. If that is precluded because of
the definition of "good agricultural condition", it
makes it very difficult to see how farmers are going to contribute
effectively to the building back up of habitats and I want to
make sure that that is seen clearly. It is not about putting the
clock back, it is about positively creating the sort of countryside
that we want for tomorrow because we have decided that we want
more wildlife and, secondly, because we recognise that the rural
economy to some extent depends upon and can build on a high quality
countryside which has more wildlife in it.
(Mr Morgan) I think the Commission's intention there
was to ensure that, say, if a major land use change had happened,
for example a housing estate, it becomes untenable for the farmer
of that land to be receiving money when it cannot be turned to
agricultural use and we have suggested the term "good agricultural
and environmental condition".
Mr Jack
99. Just to pick up on a point that you mentioned
later in the evidence on the same theme and I quote from what
you say, "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."
Have you any idea what the Commission actually does want?
(Mr Felton) The answer is that I do not know what
the Commission actually wants. The Mid-Term Review proposals suggest
that you should take 20 per cent of the direct payments over time
and the implication is that the rest of those payments, the standard
income payment, continue forever, in which case they would probably
want more than statutory minimum. At other times in both the text
and in announcements elsewhere, they have implied that actually
what they want is a basic statutory minimum, in other words, make
sure that you stick to a reasonable set of basic standards.
(Mr Rutherford) I think the short answer is, "No,
we do not know what the Commission wants and we can talk to the
Commission to see if they will explain what they intend and we
are hoping to do that a little later this year. To get a definitive
answer on that, I think we are probably going to have to wait
until the Commission publishes the detailed rules which are due
to be out about now, I think, but actually we are not expecting
to see them until about January.
2 Note by Witness: Managed for the Game Conservancy
Trust. Back
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