Examination of Witnesses (Questions 120-139)
MR DAVID
ANSELL, MR
CHARLES COURSE,
PROFESSOR JOHN
ALLISTON, AND
MS KATE
RUSSELL
WEDNESDAY 30 JANUARY 2002
120. And none of them have done the calculations
in respect of where the modulation levels, somewhere, we are talking
about the Government's, up to 4.5 per cent, then carries ten,
and 20, and everything else? Has anybody done any real work, in
respect of, I think it was Austin who raised it, as to where this
sort of, it seems to be putting a finger in the air and saying,
"Well, it's got to be 10 per cent," or whatever; although
it says 10 per cent, there is no justification as to why it should
be 10 per cent in 2004, just the fact that obviously it is going
to raise a lot more money?
(Mr Ansell) Yes; you can calculate the amount of money
you could raise in that way, and therefore what it might enable
you to do in terms of expanding expenditure on environmental schemes,
and so on. So that side of it would be reasonably easy. I think
it would be very difficult to estimate what the effect of that
would be on the structure of the industry, which was a conversation
we were having earlier, and I do not know that anybody has done
that kind of calculation.
121. Are we saying that we are not permitted,
at the present time, to remove all direct payments under CAP,
in other words, the big bang, New Zealand method; is that what
you said, that we could not do it even if we wanted to? If we
did do that, just supposing, it is a bit hypothetical, but do
you believe that British agriculture, on the New Zealand model,
could ultimately be to the real benefit in a more medium term,
rather than this sort of slow, progressive situation which is
death by a thousand cuts?
(Professor Alliston) What I think that would do, in
the short term, would mean that we would substitute a lot of our
food with imports, over a short period of time, because there
would be a lot of shortfall in home production, so home production
would go down and we would substitute it with imports. And over
a longer period of time I think it would be very difficult to
manage effectively without having some form of planning, in the
way that we are going. We can go faster, we can go slower, with
what we are doing at the moment, but at least we have a planned
scenario, although we have got all sorts of things we are debating.
122. Just lastly on the subsidy. I think you
gave the indication that you felt that subsidies was one of the
reasons which maintained higher values of land, as such. Would
a similar situation be that, the tax breaks that were given to
film companies, ultimately, it ended up paying film stars huge
amounts of money?
(Mr Course) Subsidies have a more direct impact on
rent than they do on land values. There is a direct relationship
between subsidy and rental value, largely driven by the argument
put forward earlier about marginal economics, of taking on another
100 acres. In terms of capital value, the impact on capital value
is much diluted; when you look at the return on agricultural land
being anywhere between £60 and £90 an acre, and capital
values being £3,000, at 1 or 2 per cent return, the land
value clearly is driven by very many other factors other than
its rental value and its earning capability, and therefore the
subsidy element is much diluted. And, yes, one would have to suspect
that there would be a reduction in land value if subsidies were
taken away completely, but if you took away £80 an acre of
subsidy completely, across the board, I suspect the impact that
would be diluted down, in terms of capital values, would be pretty
small, it would be in hundreds of pounds an acre, and small hundreds
of pounds an acre, not a collapse in land values.
123. So a 10 per cent modulation in 2004 would
have precious little effect?
(Mr Course) Trivial, in my view, and I would be happy
to model it, since it is something we do model; it would have
a pretty trivial impact on land value.
Paddy Tipping
124. The consensus seems to be that we are going
to switch from subsidies on products to schemes that bring about
environmental benefits. Now the crude analysis of this is an awareness
that you have got to put money into farmers' pockets somehow;
those who are a bit more sophisticated say, "Well, we are
going to be able to measure the value of the environmental benefits,"
the public goods, as it were, and I am not sure how you do measure
environmental benefits and public goods; can you help me with
that?
(Mr Course) No.
(Ms Russell) If I had the answer, I think I would
have shared it with you earlier.
Chairman
125. If the answer is no, we will not dwell
on it?
(Mr Course) It is incredibly subjective, monitoring
of environmental goods is incredibly subjective; there is a real
danger you could spend a fortune. The CSS, the Arable Stewardship
Schemes, are already incredibly costly to administer, because
every environmentalist, every conservationist has a different
subjective view of what is good and bad; and there is a real danger
you would spend an absolute fortune on trying to monitor any types
of schemes.
(Ms Russell) And the starting-point has got to be
who defines what the public goods are, who is the public, is it
single-issue pressure groups, which we are concerned about; and
what do they want, does the public really want orchids in the
uplands, can they tell the difference between an orchid and a
buttercup, do they care if orchids die out. The vast majority
of the public, if you ask them that question, will probably say,
"Oh, yes, of course we do," but are they prepared actually
to pay for it.
(Mr Ansell) The answer to your question is, yes, there
are techniques out there which economists would claim will provide
the answers to these questions.
Paddy Tipping
126. But which economists?
(Professor Alliston) Once you have defined what the
environmental goods are.
(Mr Ansell) Any environmental economist who took on
the task, and there are methods, like willingness to pay and how
far people are prepared to travel, there are various approaches
to trying to answer those sorts of questions.
(Mr Course) It is very subjective, but I would accept
there are models to value environmental goods.
127. But the more simple question, I think,
we might be able to get some agreement about, is that the present
system of agreeing environment payment is complicated, farmers
and landowners do not really understand it, it costs a lot to
monitor, we ought to have a simpler scheme?
(Mr Ansell) Yes. As I say in the paper, it was something
like 90 per cent of agricultural land is not covered by any of
these things, and I do not think the intention is to have more
Environmentally-Sensitive Areas covering the whole country; and
a lot of the evaluations that have been done, of these, have suggested
that the benefits are costly to achieve.
(Ms Russell) I am sorry to butt in, but I would disagree
with the point that farmers and landowners do not understand the
schemes, because I think that you will find that, in most cases,
farmers are very sharp at perceiving what they can get out of
it; and in some cases it has been argued, particularly in the
ESAs, that they are being paid to continue to farm as they always
have farmed. And if the public perceives a benefit in them not
intensifying, and are being paid not to intensify, then, fine,
if that is what the public wants out of it. But, as my colleagues
here have pointed out in their submission, we have not seen very
much in the way of positive management changes, we have seen a
lot of standstill.
(Mr Course) I agree that farmers and managers do understand
the schemes. One of the problems with the current schemes is there
is no profit element in them, it goes part of the way to paying
them to do what they probably would anyway, and it is not a positive
inducement.
Chairman
128. And there is a danger, is there not, that
if you want them to be more sensitive you have got to micro-manage
them?
(Mr Course) Yes.
129. Because one dale is different from another
dale; but if you want to be simple then you have got to take away
the micro-management?
(Professor Alliston) Can I make just one point, which
follows on really from the point that was made here. Whatever
the schemes are, and whatever the way that subsidies are given,
I think there is a desire, in the agriculture industry anyway,
that we get the maximum amount of money to the end point, the
person who is actually delivering what it is we want to deliver.
And so I would go along entirely with the sentiment expressed
here, that if the scheme costs more to administer than it is putting
back then it is not worth even considering, in my view.
David Taylor
130. I wonder what Mr Course would have said
to my constituent, Mrs Patricia Stanley, who was in the Newsnight
Nottingham studio last night, talking to Don Curry about this
particular issue of environmental benefits to be gained. She and
her husband and their family, a multi-generational farm on the
urban fringes, in a very, very picturesque part of north-west
Leicestershire and in the National Forest, have long had a reputation
for providing public access, environmental benefits, forest plantation,
preservation of rare breeds, and so on. And the point that she
put to Don Curry was that, for the first time in 70 years, the
farm had actually posted a loss, last year. The best way, she
said, and I have a great deal of sympathy with this point, of
obtaining environmental benefits is from profitable and robust
farming, from farmers and their families who are sensitive to
what the public, in their own area, would like to see, and from
those profits will flow environmental benefits, I think this is
the point that is being made, at far less cost than some top-down
scheme set by, I do not know, in Nottingham, or something like
that. I sympathise with that. What would you have said to her?
She was very robust to Don Curry, I must say.
(Mr Course) My direct response would have been my
point about blunt instruments. If she is a medium-scale farmer,
as you have just described, in order to make her sufficiently
profitable to do what she is doing, if you use a blunt instrument
of payments per hectare, payments per head, payments per metre
of hedgerow, actually, take the hedgerow out, but if you are paying
it per head or per hectare, in order to give her an adequate level
of profitability, by definition, you give a disproportionately
large amount of subsidy to large other parts of where I come from,
in Eastern Counties. And I would just say, that is a very blunt
instrument to achieve what she thinks she wants to achieve. If
what society and the public around her want is her rare breeds
and her hedgerows and her environmentally-sensitive way, simply
paying per head or per hectare is an extremely blunt instrument
to achieve that, and there must be much more efficient, more targeted
ways of achieving it, if that is what society wants. If she is
right, that society wants her to have her rare breeds and her
species of grass and her length of hedgerows, there must be a
much better way, rather than having to pay her £300 per cow,
which means that somebody who has got large numbers of cows gets
an absolute fortune.
131. I do not think necessarily she was arguing,
Mr Chairman, for continuation of direct payments at the current
level, in the current way. I think she was arguing against the
likelihood of delivering environmental benefits in the way that
the Curry report suggests was possible.
(Mr Course) I think one of the fallacies, to which
I alluded earlier on, is that, with the current environmental
schemes, if she is going into the extensification schemes and
Countryside Stewardship Schemes and Arable Stewardship Schemes,
which are targeted and which work, to some extent, I think the
fundamental problem at present is that they have no element of
profit in them, and they are designed to go some way to covering
her cost. And I would concur with her wholeheartedly that there
is a scheme there, okay, it may be a bit inefficient and it may
be very inefficient in areas, but there is the basis of a scheme
there, which, if the payments included an element of profit, that
would be a much more targeted way of giving subsidy, with an element
of profit, to achieve more specifically what she wants to achieve,
which, if she is right, her local residents also want her to achieve.
(Professor Alliston) I think what you were implying,
as well, was that many farmers are doing it in some way or other
anyway.
132. In our area, that is certainly true.
(Professor Alliston) We could cite the LEAF farms,
and the FRAG advice that farmers get, and I think we would absolutely
agree with you.
Mrs Shephard
133. I wonder if I could just begin by asking
you a couple of statistical questions. We have had different figures
given to us by you about the numbers of farming businesses that
there now are, 170,000 was one figure mentioned, 20,000 was another
figure mentioned, and I think there may be some distinction between
those actually decision-making, in the industry. Can I ask, (a)
were your figures England or were they the whole country; (b)
what are the figures; and (c) what statistics do you have, if
any, at the moment, on businesses doing contract farming, share
farming, in other words, the kind of de facto, but not
described as such, co-operative arrangements that are developing?
(Mr Course) The statistics I was quoting are, as it
was then, MAFF statistics for England and Wales, and what I was
citing, when I was looking at the 173,000, that was the total
number of holdings in England and Wales. I was citing that there
were 30,000 farm businesses in excess of 100 hectares. So one
of the points I was making was, you choose your cut-off, and I
chose 100 hectares as being a relatively, it is above average,
when you take all the statistics, but I was also citing that there
are 100,000 of those 173,000 under 30 hectares, which I would
say, by any definition, almost certainly, would be part-time farmers.
Chairman
134. One hundred thousand; you said 50,000 earlier?
(Mr Course) There are 100,000 below 30 hectares, and
50,000 below ten hectares. I apologise if I misread my line of
statistics and quoted the wrong statistic.
Mrs Shephard
135. Now is there an answer, of the numbers
or arrangements that are developing in contract and share farming?
I realise it is a moving target to identify; you just may not
be able even to have a stab at it?
(Mr Course) My colleagues may be able to give you
an absolute statistic, that is recorded, from the statistics.
I am aware, from being in the industry. I have a feeling that
the others may have actual statistics.
(Mr Ansell) The last statistics that I saw, which
was not very long ago, suggested that it was really quite small,
still, in terms of the total area, it would be less than 10 per
cent of the national agricultural area are in contract or share
farming agreements.
136. Thank you. I am grateful for that. I realise
it is a difficult question, because of the definition.
(Professor Alliston) The other point that you raise
is the fact that the co-operations, I think you are referring
to, are changing in their nature so much now, as well; even things
like the Waitrose scheme, for instance, is a sort of marketing
initiative and a co-operation, and those sorts of marketing initiatives
are of very many sorts and shapes and sizes.
137. What interests me, it is just anecdotal
and a comment, is that this kind of farming has been going on
for generations in the Fens, there have been co-operatives for
marketing, for developing, for certainly as long as most Fen farmers
can remember, but very few people ever give that the kind of credit
that one gives to similar ventures, for example, in grass. And,
indeed, the lessons that many Fen farmers could give, some of
whom combine quite small-scale operations with vegetables and
other commodities with large combinable, exportable commodities,
some of the lessons they could give would be, I think, very helpful,
and are not often sought. Now I have actually got to ask you about
a description you gave of the UK farming sector as "better
than anybody else in the world" at meeting consumer demands.
Now I do not know who has made this claim and on what basis, because
it is not what is normally said about British farming, although
I agree with it. Now which—
(Mr Ansell) Can I just clarify?
138. Yes?
(Mr Ansell) What I think I was trying to do was define
what I meant by competitive, and it is not just least-cost, and
I did not claim that UK agriculture was—but what we have
to do, a competitive agricultural sector has to compete with the
rest of the world in providing what consumers want, it is not
simply a question of producing at a lower cost than anybody else.
139. Let me complete my question, which is,
in your view, which sectors of UK agriculture are, or could be,
better than anybody else, and what should policy-making in the
industry itself do to improve the competitiveness that clearly
you observe in certain sectors?
(Mr Course) One quick comment, on what can be done
to improve the competitiveness. There is one sector of the UK
horticulture industry, particularly, that has a distinct competitive
disadvantage, and that is the organic sector, in that, in many
other European countries, there is ongoing support for organically-produced
commodities, whereas in this country we have only a conversion
payment; in this country you get paid for four or five years to
convert into organic production, you do not beyond that. In many
other European countries they continue to pay levels of assistance,
in the Wider Countries Act, as I understand it, and I do not know
the details, but it has been reported and it was mentioned in
the Oxford Farming Conference. And if it is the case that there
are significant amounts of support being paid for continuing organic
production, particularly of vegetable commodities, in other European
countries, it is not surprising that 70 per cent of our organic
vegetables get imported, if they have a competitive advantage
outside of the UK. That is a specific example.
Chairman: Lady and gentlemen, thank you very
much for that evidence. We are going to move on to our next witness.
There are one or two questions about agricultural training and
students, which we would like to put to you, but what I will ask
the Clerk to do is let you have them and ask if you would not
mind replying in writing, because they are fairly factual in their
nature. But we are grateful for the paperwork you gave us, to
begin with, and the evidence you have given today. If there is
anything you wish you had said, which you have not, let us know;
if there is anything you have said that you wish you had not,
it is too late. We are extremely grateful for your attendance.
Thank you.
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