Examination of Witnesses(Questions 20-39)
MR BEN
GILL AND
MR MARTIN
HAWORTH
TUESDAY 29 OCTOBER 2002
20. You indicated that there would be a certain
amount of annoyance and aggravation in the applicant countries
as their hand for negotiation is so tightly tied. How tightly
tied are we to that figure? You said that levels of entitlement
were not yet tied up in negotiations. Will that add much or not?
(Mr Gill) If the Commission were to decide to give
them all the milk quota they wanted for example, it would have,
I would suggest, in some countries a significant increased entitlement
and I would suggest that the Commission has been quite robust
about this in saying to the applicant countries that, on the current
budget allocations for the years 2004 to 2006, they have no room
at all to increase those quota allocations nor indeed to increase
the percentages of the compensatory payments that will be paid
over those years but, in the size we are talking about, give or
take a few tenths of millions, no one can be accurate, but this
is the sort of figure we are talking about.
21. So it is fairly minimal?
(Mr Gill) Yes.
22. Finally, you say in the second paragraph
on page 1—and I am just interested in the way this ties
in with what Tony Blair was saying in the House yesterday—that
some have claimed that the agreement in Brussels makes further
discretion of the Commission's mid-term review proposals irrelevant.
The Prime Minister was saying they are not relevant and I see
that Fischler is also saying that there is still a need for reform,
where in fact this increases the need for reform. What view do
you take on this?
(Mr Gill) We would take the latter view, that it increases
the need for reform. I am at odds with some of my European colleagues,
not all of them, and I had discussions over the weekend with some
of them about this point.
23. But it presumably makes agreement on that
far more difficult now?
(Mr Gill) It was difficult to start with. What it
has done is lay down even further budgetary pressure on the whole
modus operandi of the Common Agricultural Policy and I do not
think that should be confused with the difficulty in seeking to
arrive at agreement on what were quite radical proposals in some
of the States. The decoupling element is a major change and will
give the ability of the European Union to have a far stronger
base in terms of the boxes of the world trade talks. Not that
decoupling is devoid of problems and there are real problems in
there. I would not want you to think that I am just saying, "Go
ahead, change it as you want", but I think we ought to sit
down and talk about them but we need to do that from a position
of strength, not a position of weakness.
Paddy Tipping
24. That is very helpful and you have given
us an awful lot of information. It would be helpful if you could
recap some of those because I want to come back to the point that
Mr Mitchell was just making. First of all, the deal was done without
the acquiescence, without the involvement, of the relevant EU
Commissioner.
(Mr Gill) As I understand it, he was excluded from
the dialogue.
25. And you made an interesting point earlier
on in your presentation that Pillar II rural development payments,
you are hearing from the Commissioner's Office, are not going
to be capped.
(Mr Gill) I would rephrase that slightly, that these
capping proposals do not include the rural development regulation
elements. That is not to say that there may be attempts to cap
them at some stage in the future with particular reference to
the years 2007 onwards.
26. Which leads us to the point that Michael
Jack has raised and Austin Mitchell has just been raising. Michael
Jack said that mid-term review was scuppered; Austin Mitchell
is saying that there still is the need to go forward now. I do
not think it is quite clear that the process will go forward but,
in a sense, what reality is there in the process? What degree
of bite can there be in the process given, in a sense, the parameters
that have been laid out on the agreement at the weekend?
(Mr Gill) I am not quite sure what you mean by the
word "bite".
27. Change.
(Mr Gill) The degree of change. I would see that the
elements of decoupling could still go ahead inasmuch they would
simply pay the same money in a different way. That does not address
the issue of funding of the reform of other regimes that I have
referred to, sugar, milk and others, and make significant pressure.
If we could evolve a method of decoupling that does not distort
the marketplace or in fact lead to significant redistributions
of resource or seek to put other false signals in there, then
there are significant benefits that could accrue from that that
would allow farmers and growers to benefit from better market
returns as an outcome. That must be our goal. It must be a key
goal because, without that, we are all the losers.
28. But behind that you told us earlier on that
dynamic modulation of 3 per cent through to 20 per cent could
introduce so much instability in the marketplace that, if it were
such a big change, people might back off from the mid-term review.
(Mr Gill) What I said was that maintaining the proposal
to introduce dynamic modulation by 3 per cent going up to 20 per
cent, if it was on top of degressivity, ie cuts in the support
payments per annum to fund the reforms in the other sectors, could
well be a step too far and introduce instability that was not
acceptable.
Chairman
29. If, as you suggest, the Commission had to
water down or drop the dynamic modulation proposals, where would
that leave the modulation which the British Government wish to
increase affecting British farmers?
(Mr Gill) That is a major concern to us because of
course the Policy Commission on Food and Farming made its statement
very clear that if there was not any reform of the CAP, then they
would advocate that the Government move quite rapidly first to
10 and then to 20 per cent modulation and I think I can only point
out that the raison d'e®tre of Commissioner Fischler's
proposal to harmonise modulation throughout the European Union
was made very clear and that he saw that already it was distorting
the marketplace between those countries who were modulating and
those countries who were not, albeit that it was just France and
the United Kingdom. If he saw that was the case when we were running
at 2.5 to 3 per cent population, then what distortion is there
going to be when we go up to 20 per cent? I do believe that the
Policy Commission on Food and Farming was remarkably naive to
suggest that we could go down this route without having major
consequences on our industry in isolation from those with whom
we have to compete very closely.
Mr Lepper
30. To follow that up, you say towards the very
end of your document, "A delayed implementation of compulsory
modulation could increase the risk of some countries unilaterally
deciding to adopt or increase voluntary modulation, as the UK
has already done." Could you put that comment in the context
of what you have just been saying about the UK situation.
(Mr Gill) That is aimed specifically at the UK although
it may be possibly in the case of France who may want to reinstate
modulation. Having said that, as I understand it, the new Government
under President Chirac, the right wing government, has dismantled
modulation whereas the socialist government had suspended it prior
to the election. We can go into the innuendos but the basis was
still there. What we wanted to do is put down a marker that not
only has the UK already done it but it has put up a marker there
that it intends to consider going very much stronger along that
particular line.
Chairman
31. We are always saying that there are a number
of external events which are going to make reform inescapable.
The first one was going to be enlargement, "We cannot possibly
pay new States what we were paid in the old days, we will all
go bust", but we were not right, were we? It is not a driver
at all. It is possible. The budget is not under stress. We can
move on to the next one.
(Mr Haworth) The NFU never said that. We have always
said that there was money to pay it if you wanted to and this
has proved to be the case, yes.
(Mr Gill) There is not money to pay it and reform
the other sectors and what is of course the intention of reform
is, who is going to pay for that? If it is on this basis, it is
the farming community who are going to pay for enlargement.
Mr Mitchell
32. Let us move on to more general areas. The
decoupled farming income payment: you are saying that it is essential
and that there are going to have to be tribunal arrangements to
settle all the disputes in this between landlord and tenant and
what the farm income is. Do you envisage tribunals establishing
the initial levels of decoupling farming income and how is that
going to work?
(Mr Gill) Of course, this is the unknown factor. Dr
Fischler, as is usual, has been very clever in the way he has
gone about this whole process. He has not produced any legal text
for debate, he has simply produced what I have termed as a series
of coat hooks upon which he has hung ideas to be debated and he
has made it very clear that the options in terms of decoupling
were three options: (1) you do it on an historic basis per farm;
(2) you do it on an historic basis per region; or (3) you do it
on an historic basis per country. When you do it on the per farm
basis, you get hooked into all sorts of problems of your farm
and my farm and the different rates of payments and then you get
all sorts of issues about that and you get the problems then about
the multi-commodity farms. Say, for example, a farm might be farming
half arable and half horticultural and will receive payment for
half his land, but what happens if he starts growing more horticultural
crops on half his land and how do you get into the rigidity of
monitoring if you work out a hectare over and when does a hectare
become significant, two, three or whatever it is? All this sort
of bureaucracy comes in. So you could say, "Let's go onto
a national basis and then it is fair because everybody is going
to get the same per acre." Hang on a minute, you cannot pay
the same to the upland areas of the Pennines or the South West
as you could to the beautiful fertile lands of Fylde.
Mr Jack
33. This is great stuff for tourism!
(Mr Gill) Or perhaps I might add The Wash. So, what
do you start doing then? You say, "We will go onto a regional
basis" and we know historically that, once you start drawing
lines on maps, there are people the wrong side of the Pennines
and it becomes a bureaucratic nightmare, so you come back to the
problem that you have outlined, then you go back to the farmer
basis and then is it the farmer or the landlord and how do you
do it? These are the sort of points that we need to tease out.
And whether or not then you bring into the question, do you reinvigorate?
I mentioned earlier the eminent economist Professor Tangermann,
do you revisit the concept of the Tangermann Bond concept whereby
the actual payment goes to the farmer? That suggests that you
are, in quite a dynamic way, removing the price schedule and,
at the moment, it would be inconceivable for anybody to come in
to farm without any support at all because the prices just will
not make it stack up. So, you come into that aspect. These are
the issues that we really need to thrash out. They are not insurmountable
but I can see that, in answering your specific question, we could,
as a consequence, end up with the need to have complex tribunals,
something which I am not attached to because it is more bureaucracy
coming into it.
Mr Mitchell
34. You will also have problems over the reference
period. What are the problems here?
(Mr Gill) One of the problems particularly is that
we are held in limbo. If, for example, this uncertainty about
is there or is there not going to be reform goes for any great
period, you risk freezing the country. What do I mean? Already
I am hearing that arable farms that may have chosen to let a small
proportion, 10 per cent/5 per cent, of their land on let annual
licence to grow potatoes are saying, "Hang on, I am not going
to let you have it this year because, if I let you have it, that
means my base area eligibility for arable aid will be reduced
because there is no payment for potato growing." So you get
distortions and what we need therefore is some certainty in the
system about what are the reference periods going to be. Not to
leave it for 2006, that they are introduced and they will pertain
to years up to 2006, but if you are to do that, I would simply
say, "Fix it on 2001/2002" and how do you accommodate
what has happened in between there? Really, in a way, one of the
consequences of what seems to be intended to happen last weekend
has given us the worst of all worlds. It seems that we have the
need to go on with the mid-term review but that we do not have
the ability to do it in the short-term yet potentially we can
agree to implement in 2006/2007 with all the consequent freezing
of the structure of the industry and the downside of that is the
intervening period which gives me enormous concern.
35. You are making me more and more depressed!
When you spoke about "the beautiful farming land of the Fylde",
are you envisaging some kind of Government fixing of regional
levels of payment? If you are not, how is it going to be fixed?
(Mr Gill) I think that is exactly the point because
we have, as well as the beautiful farming land of the Fylde, some
beautiful farming land in Lincolnshire and I think it becomes
impossible when drawing lines on maps. If you take my own part
of North Yorkshire, there is a strip of land north on the A1,
outside the A1, which is very good high quality land that will
produce bread making wheats. I am only 10 miles to the east of
that and I cannot even begin to grow bread making wheats. I am
not complaining; that is a factor of how it is drawn up. To pay
the same to each is a problem that you have and it is certainly
not a fair comparison. However, we do have that at the moment
of course in the arable aid payment. The arable aid payment is
the same across all of those. It just becomes more complex if
you are going to do that because you are bringing in other commodities
into the factor.
36. In which sectors do you expect production
to decline as a result of the introduction of decoupled payments?
(Mr Gill) I think it varies depending on which part
of the European Union you are in and it depends upon what you
mean by cross-compliance. If cross-compliance just simply means
that you do not have to go and pour waste materials all over the
land and you can let it go as set-aside, then you could see a
lot of the marginal lands. . . People certainly say, "Well,
we are not going to bother to farm it" and indeed, listening
to one of my Spanish colleagues last Friday at a public conference
at which I was speaking, he estimated that as much as 2 million
hectares of Spanish cereal land currently in production will come
out of production. The current thinking of the Commission is that
cross-compliance would still require them to grow a crop, which
seems to remove some of the element of decoupling because you
are required to grow a crop means that you have indeed decoupled.
One could argue that it would be in the European Union's interest
for Spain to grow 2 million hectares of cereal less because it
balances the market and that is what market is about and if it
shortens the market and leads to a better price for the rest,
so be it and something will develop from that. What it means,
if you go down the policy, is that you have to have sufficient
resources in the structural funds to balance the void that you
have left with in those areas to make sure that there is not a
social disruption to go through there which of course is some
of the thinking behind the original proposal.
37. What is the effect likely to be on the rental
market?
(Mr Gill) Again, we have been told about this and
it was very pointed that when I visited the United States in June
of this year, several senior commentators in the United States
said, "All the good the Farm Bill did for us in the 1996
Farm Bill was of no good at all to farmers, it was simply to land
owners and in the form of either capital values or in terms of
rent." I do not think that is necessarily a fair comparison
of where we are in Europe or specifically in the United Kingdom.
Why do I say that? Because I think we are already at a different
stage; we are already at that stage where we have arable area
payments anyway and I am well aware of many instances where landlords
often let farms on the basis that they will take all the environmental
payments in and then what rent would you pay on top of it? Indeed,
we know that the arable aid payment has a determinant in the rent
that has been paid, the set-aside payment that was a factor in
there. So, I do not believe it has a factor but what it should
do if the market works properly is, in the summation of the terminal
profitability of the land, the aid payment plus the commercial
activity lead you to derive a rental value rather than at the
moment where it is becoming too much focused on as a base rate.
Mr Drew
38. We have obviously gone into the area of
cross-compliance and if I may just carry on in that same vein.
Surely the problem with cross-compliance is that we cannot even
get agreement on what cross-compliance means within the UK and
you are trying to then do that across the 15 or 14 other members
and 10 new entrants. Again, is this not something that is going
to be a recipe for a lot of problems because people will define
in different ways, there will be the arguments of saying, "We
cannot really work out whether there is a degree of compulsion
on how you relate that to decoupling." So, how can we clarify
this issue?
(Mr Gill) This is a point which I raised with Commissioner
Fischler on a number of occasions, not just the subject of cross-compliance
but in actual fact how you define good agricultural practice because,
as you point out, we currently have to encompass an agriculture
that goes north of the Arctic Circle in the case of Finland down
to the middle of the Mediterranean currently in the form of Crete
and the differentials of climatic factors and social needs of
those areas are quite enormous and the need to keep people in
the Arctic Circle is a priority for Finland and who are we to
query whether that is right or wrong. We may have thoughts about
it but it is their decision. So, I see developing cross-compliance
becoming, to my mind, something that should be left to the Member
State against a set of criteria that are drawn up and you need
to draw them up. When I questioned the Commissioner in the summer
as to whether this cross-compliance was going to be a racking
up standards all the time, his response was robust and clear.
He said to me, "It cannot be because, if that were the case,
that cross-compliance is anything other than good agricultural
practice, then it destroys the concept of Pillar II agri-environment
schemes and it must be based on simply good agricultural practice."
Notwithstanding that, the point is still valid. It is a need to
prevent distortions on basic things such as air, water, soil usage
and animal welfare usage are parameters. One could question, for
example, policies in the Iberian Peninsular where they are drawing
water out of the land with gay abandon to increase certain fruit
production which is not sustainable and these are the sort of
things that need to be drawn in.
(Mr Haworth) Perhaps I could add one word there. The
Commission's thinking now seems to be that cross-compliance will
largely be compliance with existing European regulations, so that
would be a clear body of corpus of regulation which would have
to be complied with if you were to get the payments. However,
they recognise that if you choose to take your payment and not
produce something, it may be that effectively there would not
be any regulations which would apply to you and they are not talking
just about environmental regulations, they are talking about across
the piece, they are talking about health and safety regulations,
the animal welfare regulations and the environmental regulations.
If you choose not to do something, then it may be that there would
not be regulations that would apply to you. So, they are therefore
having to think that there may be some definition of not good
agricultural practice but good agricultural condition because
it says in the regulation that you have to maintain the land in
good agricultural condition though there may have to be a definition
of what that means.
39. If I can just pick up on one of those—and
I do not want to labour the point—and that is animal welfare.
It is going to be completely impossible to get some standardisation.
Mr Gill has just spoken of the national deliberation in terms
of the ability to decide the degree to which you are going to
cross-comply, but you cannot have the level of the lack of any
standardisation that exists at the moment, which is going to be
much worse with 25 countries. So, how are we going to operate
that?
(Mr Haworth) I think the answer is that they are talking
about European regulations and there are European regulations
on most animal welfare issues. The fact is that some countries
may choose to impose much higher regulations, in which case that
would not be the standard which was applied in this case, it would
just be the common European regulation and, in a sense, it is
a way of getting more uniformity, it is a way of enforcing those
regulations and, as we have often pointed out when people complain
about animal welfare, it is not so much the regulation as enforcing
existing regulations which is often the problem.
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