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

Examination of Witnesses(Questions 60-69)



  60. Perhaps in a rather naive way, I was wondering about the conversation that went on earlier about audit and how much depended upon the language in which the word we are translating as "audit" first appeared and the extent to which that bedevils.
  (Mr Haworth) These things do bedevil the process. This is a Green Paper that has come out. It is very much first thoughts and in a lot of these things there was not a lot of thinking behind the headline proposals and the audit was clearly wrong. It was produced in German where I think the word means "guidance", not an audit in the way we would think of a tax audit.

  61. Can I ask about animal welfare issues? I think you were suggesting earlier that the aim proposed by the Commission is to see greater enforcement of existing European animal welfare standards and regulations. It seems to me that the Commission was saying something rather more than that because does not the document talk about introducing animal welfare payments for efforts that go beyond the mandatory reference?
  (Mr Gill) I am not 100 per cent sure which point you are referring to, but as I understood it, I was telling the Chairman that I did tell Franz Fischler that I was reflecting on whether or not there was a case in the Court of Human Rights for the use of the word "dynamic" in the phrase "dynamic modulation" because I did not believe it was dynamic in any form. What I believe you are referring to is the suggestion that the way standards were raised in the European Union towhit the example of the proposed banning of battery egg production and these moneys could be used as a one off compensation to compensate farmers where those standards were raised. As I understand it, that would not be retrospective to cover the costs, for example, in the pig sector in the United Kingdom. There was a realisation in the original recitals there that Dr Fischler wrote that the significant burden of food legislation that we are facing did have a very real cost and that this was being passed back to the farmer in the very large part, a person who was unable to absorb the cost because of the declining situation in his income.

Mr Jack

  62. On set aside energy crops, according to the DEFRA document, it says that compulsory long term ten-year non-rotational set aside will be introduced on arable land. You have to put in an amount equivalent to the current compulsory set aside and the long term set aside has an element of cross-compliance rules that we were talking about earlier. What are the implications of locking up for such a long period of time quite a sizeable amount of agricultural land across Europe?
  (Mr Gill) We believe this is quite short sighted and totally unjustified. It would put at risk the ability to put clear water that this is a decoupling measure when you have the requirement to have set aside. How can that be the case? After all, the concept as originally portrayed was that that came out of the 1996 year when the Americans said, "That is it. We are not going to say there is going to be a certain per cent set aside." This is some of the muddled thinking that has come out of the Commission. We believe there needs to be a much more positive encouragement in the whole area of renewable and raw materials which we foresee as potentially developing a significant degree of land use. A study carried out by the new European Raw Materials Association on behalf of the European Commission analysed the market demands and suggested that by the year 2010 there would be a demand for as much as six million hectares of land used by lubricants, surfactants and polymers on top of the land that is required to produce bio-fuels which the Commission's own estimates under their inclusion factor would require of the order of a further six million hectares of land in that sort of time span. That is 12 million hectares of land and the total arable land of the 15 is of the order of about 60 to 65 million hectares. That is a sizeable amount of the land. We were at pains to point out to the Commission when we had an intensive session in early April of this year the value of this approach. We believe it was possibly as a result of those suggestions that the inclusion factor needed to have more work on it. I have raised the issue with Dr Fischler on two occasions privately and he has said to me that he sees this as a major part of developing the future and when I spoke to an official in his Cabernet over the weekend he concurred with that opinion. The potential benefits can be quite enormous and rebalance supply and demand factors, for the food sector of the market place, to give us that price that we need to have, if we are to move down the degressive route in terms of positive payments. That is the point that has been underplayed so far. If you are going to change the system, you need to have a push and pull and this push element is critical.

  63. One of the things I am not clear about is, if you have this chunk of set aside, as I have understood it, effectively you cannot put anything productive on it. It sits there and yet they are going to have this payment for energy crops. If what you are trying to say is that we do not need as much land for food crops, by all means give some encouragement to energy crops, but why take out the chunk of land altogether?
  (Mr Gill) If I give one specific example, on my own farm, I have a small element of short rotation coppice which is grown on permanent set aside, guaranteed land. Are they going to require me to say that this is no longer set aside land? That is quite a fundamental change and quite a nonsensical situation to be in. These were not legal texts. These were thought processes that needed developing. We have had dialogue with Commission officials on some more detailed points. I have made this point to the Commissioner and his staff: it is misleading to talk all the time just about energy crops unless you prescribe everything as energy based, which is technically correct. It is all energy based. We must not involve the elements I was talking about earlier which currently are based on minerals as a source of raw material which you could replace. One of the documents I came across recently was a newspaper article in The New York Times that reported that Sony have solved a problem they have been working on for ten years which meant that they could use as a 90 per cent inclusion rate polylactic acid, which they are currently taking from maize starch under their programme in the States, to make the casings of Walkmans. Indeed, Sony have just launched a Walkman with a casing made of 90 per cent maize starch. There are two benefits. One, you are using the carbon source that is bound out of the air and, two, when the Walkman comes to the end of its life, it can be incinerated without any dioxin emissions to air. I understand that in the same article it goes on to describe the fact that Fujitsu will in about a year's time be launching its laptop computer range made from the same product. Equally, one of the world's biggest carpet manufacturers is trialling using this product to make carpet tiles from it. This is all good news and needs to be encouraged, driven and pushed. That is something we are very keen to do to deliver this alternative market.

  64. Do you think 45 euros per hectare payment is sufficient, given that the markets you have described are still developing those products, to induce farmers in the UK to seriously take this up?
  (Mr Gill) I have said to Commissioner Fischler that I think the whole concept of having just a fixed acreage is difficult to envisage. Remember, he is limited to 1.5 million hectares and I have already been talking of potentially 12 million by 2010. It woefully under-copes with the situation. If you then dilute it over the whole acreage, it becomes a constraint because what is still there is a lot of bureaucracy. We believe you should grow a few non-food crops on arable land and it counts for your arable payment, full stop. If there is a need in certain crops that you have a top up, that comes out of the structural funds.

Mr Borrow

  65. Can I turn to the reform of the dairy sector? The European Commission has come up with various ideas and I wondered if you had any thoughts on how the various alternatives would affect the UK dairy industry and if you have any preference.
  (Mr Gill) The dairy industry in the UK is obviously very nervous about change and they are concerned in the short term that the quotas are maintained. It is a matter of changing in isolation, but they recognise the aspect of reform and the real down side that, if there is a reform and it excludes dairy, how can they go forward. Is it going to freeze up their options in there? We are reflecting on that internally as to how we should address that issue as and when we see the legal text and what sort of position we believe should be the case. The four options in the detailed addendum to the document are quite frightening in many respects because all of them envisage quite significant falls in milk prices over the scenarios, but they fail to take account of what I believe is a major factor, which is that they are looking at massive competition because everybody is going to want to do something with the land. If you have a situation whereby that sort of hectarage is taken out of food production and put into other useful production, then you have balanced function for supply and demand and you can think of moving along those routes. As far back as last January, I attended a major dairy conference where I postulated that in terms of the United Kingdom grass and livestock sector you would see one of the consequences of this situation in non-food crops is that there may be a bigger proportion of land going into non-food crops in the more beneficial climatic conditions of southern Europe with a lower percentage in the United Kingdom; and that allowing the United Kingdom to benefit much more from its grass land based economy and the climatic factors and demonstrate one of the founding principles of the Common Agricultural Policy which has become lost in recent decades, that of the use of comparative advantage. That is the market place. That is what we would like to see, but it is putting all these things in a line. Dairy farmers in Britain at the moment are scared stiff of any turn around in the very fragile price increases that we have managed to deliver in the last few weeks.

  66. You mentioned the sugar sector earlier on in the context of the European Council on Friday and the limitations on the budget. You mentioned that a reform of the sugar sector in line with CAP reform was not budgeted for. How do you believe that reform of the sugar sector should take place?
  (Mr Gill) There is a real problem here and a real misunderstanding about what the sugar regime is all about. I am digging deep into my statistical information and falling foul of lies, damned lies and statistics if I am not careful but, from memory, we import 1.6 million tonnes of sugar per annum. I think in most years we export four or five billion tonnes altogether. What is not understood is that the bulk of that imported sugar comes from the ACP countries in the Caribbean and some of the other island states around the world, who cannot produce sugar at world prices. If that market were taken away from them, it would affect them very severely. It would put them out of business. That is why we are in the unusual position that the sugar producing countries who have access to Europe are seeking common purpose to highlight that if the sugar regime prices are reduced significantly, this will benefit those countries, particularly in South America and principally Brazil and probably Argentina to a lesser extent, who can produce very low cost sugar but at what environmental cost? It is this factor of where we are with it and this determination to become attached to world market price, whatever that is, which is only residual in many cases. Some of the articles written quite recently about the proportion of sugar traded have been wildly inaccurate and we need to sit down on this very carefully. If there has to be a cut, there will clearly have to be some attempt at a compensation payment; otherwise, the sugar industry within Europe as a whole will be catastrophic, not just for producers but for the whole sugar industry.


  67. President Chirac says he is a wonderful defender of the interests of French farmers. He knows what he wants and sets out to get it. If you had to write a mid-term review and your mission was to do a proposal unequivocally in the interests of British farmers, what would be the four or five principal elements in the mid-term review that you would have in mind?
  (Mr Gill) All I could do is go back to the paper that was produced by a group I chaired back in 1993, which produced the document Real Choices. I think that stands reading today in many respects in regard to the long term and the need to have radical simplification, to have the payments that we receive decoupled and to focus on the market place in a way so that the funds go to encourage market place involvement and market place added value, coupled with the critical element of promotion of the whole arena of non-food crops, renewable raw materials, as a balance so that we can achieve sustainable return for the market place. That will give you the basis for the way to go ahead.

  68. The review we have now, whether it survives or not: what percentage do you give that as meeting British interests?
  (Mr Gill) In as much as it is not a legal text and it tackles subjects and those subjects are able to be changed, it does bring in, in a meaningful way, the subject of non-food crops. It totally confuses the issue of set aside and gets that wrong. It talks about decoupling but it is confused as to how it will be introduced. It talks about dynamic modulation and all the issues pertaining to that which are a distraction at best and disruptive and negative at worst. I guess on that it is about two out of four. I will leave you to draw your own conclusions. Could do better is the end of term report.

  69. Mr Gill, thank you very much indeed. You have got us off to a good start on this and we will keep watching the moving landscape very closely.
  (Mr Gill) Thank you very much for the opportunity to come and talk to you. If we can be of any further help, you only have to ask.

  Chairman: We will no doubt be doing that.

previous page contents

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 4 December 2002