Examination of Witness (Questions 160-176)
PROFESSOR JOHN
MCINERNEY
WEDNESDAY 30 JANUARY 2002
160. I would take issue, Chairman, with the
earlier statistic given by Professor McInerney, who talked about
agriculture contributing 1 per cent to GDP and 2 per cent of people
trying to live on that, I paraphrase slightly. Obviously, members
of this Committee probably would adjust that figure to suggest
that at least 5 or 6 per cent of GDP is directly dependent, in
some way, on the existence of a vibrant and profitable agricultural
sector, particularly in rural areas, and that is why it is disproportionately
important; to measure it merely by a narrow economist's statistic
is not doing it very much justice?
(Professor McInerney) I would agree. I was merely
trying to point out, in a very simple, arithmetic way, that these
crude statistics highlight the overpopulation, if you like, in
the feeding-ground of agriculture.
Mr Drew
161. I am sorry to have missed the earlier bit;
and I pick up on that. Give us some figures; what is a sustainable
agricultural sector in the UK, what level of GDP and what level
of employment?
(Professor McInerney) In terms of how many people,
or what proportion of—
162. Let us take people, first. We had the figures
before, you were at the back, you were hearing them. The sorts
of figures that the previous group of academics and consultants
came up with, they were talking about 130,000, is that figure
too big, too small?
(Professor McInerney) There is no easy answer to it,
because it depends on people's income aspirations, and if you
can get people happily running agriculture for £15,000 measurable
taxable income a year and all the lifestyle benefits that go with
it then that is sustainable; it is sustainable to the extent that
people will happily live there without support. But if you are
saying a place in the agricultural labour force ought to generate
an income level that somehow is comparable with the mean in society,
I threw in a calculation in that paper that said, approximately,
if you look at the data, it looks as though agriculture could
generate £2.5 billion of agricultural income a year, over
the years; divide that by 20,000 and you end up with a certain
number of full-time places. Now, increasingly, more and more people
who operate a farm also have another source of income, so you
can only talk about full-time places; that may be twice as many
bodies, because there will be "also" farmers and "only"
farmers. And, it seems to me, we have, what, 220,000 people claiming
the label of "farmer", including me, because I have
a 50-acre holding, and, as I say, I just produce evidence for
the statistics on the low incomes from owning land, but I just
happen to have 50 acres attached to the old place I live in; but
technically I am a part-time farmer. I would say, if you were
looking for a sustainable population of people who could live
totally out of agriculture, you would have to be talking half
the number of people now. But we have got not much more than half
of the current farming population claim to be full-time farmers
anyway, and it is a very poor definition, because a definition
of a full-time farmer is someone who has no other source of income,
and I keep quoting Oliver Walston, who is a large farmer, but
he is also a journalist, so technically he is a part-time farmer.
So the statistics are very difficult to juggle with, and they
are not planning parameters anyway; all one knows is that agriculture,
really, unless it is going to have transfers of income in to keep
people going, is going to have to sustain far fewer people. And
the regional implications of that really are very severe; because
there are some parts of the country where you would imagine a
massive decline in the number of farmers if you took away the
supports, and the less-favoured areas, and the hill areas and
disadvantaged areas just are not the places to try to run a biologically-based
business.
163. Can I ask you just one question, which
I know sounds rather bizarre, but what do former farmers do? We
have some notion that former steelworkers can be retrained and
work in other industries, the same with coal-miners, but an awful
lot of them, because of the nature of the areas they came from,
have ended up long-term unemployed, out of work indefinitely.
Let us take the less-favoured areas, is that what would happen
to those people, or would they move, from what recent history
suggests, or would they turn their hands to other things?
(Professor McInerney) All of those. Those who manage
to sell their farm probably can buy a nice little bungalow somewhere
and retire, and I think something like a fifth of all farmers,
or something, or even more than that, are over 65 anyway. It depends,
I think, on the age group when they become a former farmer. I
know a middle-aged farmer who retrained and is now an accountant.
I know one who bought a shop and set up a shop. There are all
sorts of things you can do, as a former small businessman. The
constraint on it really is whether you can confront moving out
of your society and leaving behind your house, and the constraint
is, really, is there any alternative occupation in the rural area
where you want to stay, or do you have to go and start to run
a hotel in Torquay, which is what someone else I know has done.
I do not think you have to define the transfer occupation of people
who fail at farming, or cannot sustain themselves in farming,
any more than in any other business.
Mr Jack: Professor, you take a jolly good sideswipe,
on pages 9 and 10 of your stimulating paper, about some of the
agri-environment schemes. The delightful opening of your paragraph
G: "There is an immense amount of tosh propagated nowadays
to the effect that farming should be focused primarily on countryside
management, that agri-environment schemes should be designed to
restore the farmland biodiversity that was lost during the 20th
century," and on page 10 we get another go at this, where
you say: "The aim of regaining all environmental elements
that have been lost is not only unreal, it derives from an obsessive
concern with what has been lost in the development of modern agriculture".
Now does that mean to say that you have severe doubts about the
sort of cosy image that the Curry report points to, that it thinks
it could buy with modulation? Perhaps you could develop your thinking
about the worth of these agri-environment schemes, because pages
9 and 10 do lead us to the conclusion of a hint of scepticism,
on your part, about their worth?
Chairman
164. If I may interject, I heard you at the
LEAF Conference, at Linton, at about this time last year, which
was a little later in the year, talking about the real dangers
of accumulating a hedge surplus?
(Professor McInerney) Yes. If you read those statements,
what they say, they were picking up on very authoritative statements
that were stated, that said agriculture should now concentrate,
should now focus, on producing countryside; it should not focus
on anything, whether it is, as I say, brussel-sprouts or dairy.
That is a silly statement; as though there really is only a single
orientation for agriculture, now. It is a very diverse industry,
it will continue to be a diverse industry, it may need to change
its emphases, but focusing on something is silly. Recreating biodiversity
that is lost, is a preposterous thing to say; we cannot, and why
do we want to. What I was trying to get at is that the environmental
outputs from agriculture are simply economic commodities for which
there is a value and a demand, and we want as many of them as
we want and no more; and a surplus of bull-rushes, or a surplus
of hedges, is just as inefficient a use of countryside resources
as a surplus of wheat or milk. And the danger with asserting that
"farmers have now got to produce environmental goods"
is so imprecise as to give no guidance at all. You see, if one
said "agriculture has got to produce more food," we
might accept that, because we are accustomed to a kind of structure
of agricultural output, and no-one would imagine that if you said
"you've got to produce more food" it will all come as
brussel-sprouts, or it will all come as milk. But when people
say, "we want more environmental goods," one needs to
stop and say, "well, which ones and where?" and do we
only want more of the environmental goods that people can see,
like hedgerows, and all the ones they cannot see, like the lesser
spotted-black-legged beetle, or something, is it only a very small
interest group who wants that. And a lot of these are extremely
competitive with one another, because if we want access and we
want wildlife and we want habitats and we want nice visual amenity,
does that mean we trim the hedges very regularly and make them
tidy, or we let them grow up, because then they become a different
kind of environmental good. And the big difficulty, in the discussion
that I heard at the end, in the previous group, in the last ten
minutes, was the difficulty of knowing what exactly is this pattern
of environmental goods; sure, people have this feeling that either
they want more or they are worried they will get less, and it
is not quite clear that people want more. A lot of the response
is to a fear that unless you do something there will be none.
Mr Jack
165. Let me ask you a question. Do you think
we have got too much countryside; because, in a way, what we are
saying is that there is an economic resource which is being defined
out there by geographic boundaries, urban countryside? If you
were saying, "Well, the biological activity is now not required
as much," you would look economically at another way of deploying
those resources. But, on the other hand, when people say, "I'd
like to live out in the countryside," the planning laws say,
"We can't have too many houses;" if somebody says, "Well,
we want to develop some new forms of economic activity,"
"We can't do that, it's not compatible," are we looking
at this thing in the right way. If we are trying to be thinking,
as the Chairman said at the beginning, outside the box, do we
actually have to think, have we got too much countryside, are
we actually deploying those resources properly; or are we actually
posing ourselves the unanswerable question, "Whither agriculture?"
because we are not allowing the proper forces to redistribute
activity with those economic resources?
(Professor McInerney) So long as one does not talk
about agriculture as a uniform glob, or countryside as a uniform
glob, I think it is a very valid question to ask; and one could
say, in some areas, there is too much, or more countryside than
really people know how to value. You could well say, in East Anglia,
"The best use of this land is to knock out wheat as cheaply
as possible, and the fact that it hasn't got many trees, well,
it doesn't matter, there are plenty of other trees over there."
And one should not imagine that every piece of agricultural production
land has also got to be environmentally-valued countryside. We
do not apply that criterion uniformly to land, no-one says, "Well,
Heathrow Airport's an environmental desert, there are actually
no beetles there; what a terrible use of land," we recognise
that, some bits of land, their best economic use probably has
very few environmental benefits. And, as I said earlier, I think
a lot of the reaction in favour of more environmental goods grows
out of the fact that there is a belief that if you do not do anything
about agriculture it will actually destroy vast areas of the countryside,
which I think is tosh, to be honest. I think that you can drive
from Penzance to Thanet and you would be very hard pushed to say,
"Well, this is a totally destroyed countryside;" it
may be different from what it was 30 years ago, but sticking a
few more trees in my county I do not think is going to alter radically
anything very much to the better or to the worse. So I do not
think one has got necessarily to do much to plant trees there.
What possibly people want, in a food-secure, very mobile and leisure-oriented
society, is a lot more access to the countryside; now that is
very strongly in competition with many of the biodiversity, biological,
or even visual, elements of it. So I think that there is this
danger of talking about environmental goods and generalising them
as though they were a uniform commodity, and the same danger as
if you generalise about farmers, or about consumers, or about
academics, or MPs, or anything. We are talking about tremendous
diversity here, and we cannot deal with it as a homogeneous glob
of goods and services. And so, until we can refine what we want,
and that is what the Curry report does not do, it falls into the
trap of talking about more environmental goods, as though we all
know what they are, but what the RSPB would want from it, and
CPRE, and the Ramblers, and so forth, might be very, very different,
and yet they think they are all arguing for the same thing.
Mr Lepper
166. It is pursuing the point, I think, that
Michael Jack has raised. You say, in your paper, that the demand
for that bundle of things to do with conservation, amenity and
rural environment is not simply the insistence of interested lobby
groups, but clearly is very real, in an economic sense; and what
I wonder is, how do we measure that demand? One hears what is
said by the Ramblers' Association, or the Council for the Preservation
of Rural England, etc., and you acknowledge that, but, in terms
of public demand, how do we measure it, can we measure it?
(Professor McInerney) With great difficulty. I heard
David Ansell say, "Yes, well economists have techniques for
doing this;" but that is very partial. We can pick on something,
and I can do an expensive research study and tell you how some
footpath over the Berkshire Downs is valued, or something, but
to do it for the mass of the UK countryside, I think, is almost
impossible. That is the problem with identifying values when there
are no markets to do it, because markets have thousands and thousands
of people, all getting involved in the valuation process and sorting
it out amongst themselves. When you are dealing with public goods,
it is down to some research studies, and some civil servants,
and so forth, to try to make these decisions, and it is impossible,
rationally, any more than you can measure the demand for defence
services, or education. So there is conceptually a demand, in
the sense that there is a lot of evidence that people, when confronted
with the question, "Declare a value," in the sense that,
they would feel a loss if it disappeared; but that is very different
from being able to stick a monetary valuation on it and adding
it all up and knowing, therefore, how much money to spend on its
provision. And I do not think that it is possible to do that.
But I think it is possible to explore the components of environmental
goods and see which ones, I mean, is it really skylarks, or red
kites, or robins, or what is it that people worry about when they
think about the bird population; it is no good saying, "All
of them," because when there come to be choices somebody
has to put their money somewhere, and it is no good saying, "Well,
we want hedges, and we want this and we want that," because
you cannot have it all, any more than you can have brussel-sprouts
and milk, and so forth, all from the same area of land. And I
think that one needs to focus more regionally. I think it is a
good question; if the public want a bit more countryside, should
it be near centres of population, where they can actually get
out and enjoy it, and therefore will they care what happens up
in the flow country, because nobody goes there particularly. So
should we be looking locationally, (a) where countryside should
be encouraged, and then we need to say, there are good areas and
bad areas for trying to produce countryside. And I think probably
East Anglia is not the best, the best use of East Anglian land
is not trees and beetles and birds, whereas I would suggest in
the South West probably it is. I think it is just refining the
questions a little more and getting some more focus on the targeting
of these policies, rather than assuming that the whole of the
land area in agriculture has also got to be a land area producing
environmental goods of the same order of magnitude.
167. You suggest, however, the demand is there,
and that most—
(Professor McInerney) The statement you picked on,
that paper I wrote for an agricultural audience, and I was conscious
of the fact I was using the word "demand" as an economist
does, and not as a trade unionist does; it is not a just demand,
as it were, it was not an insistence, that we demand to have it,
so much as the way that economists use "demand" is that
I have a preference for it and we are prepared to express that
preference in the valuations.
168. I think that is the way I read it, and
as you have just explained it. You have suggested, also in the
paper, and in what you have said, that perhaps most of the current
agri-environment schemes in operation may not be appropriate for
delivering those elements of conservation, amenity, rural environment,
etc. Can you suggest any mechanisms, I know you have talked about
the regional and the local focus, that might be better at delivering
those elements?
(Professor McInerney) That is a difficulty. I think
things like the Countryside Stewardship Scheme, which are much
more targeted, have more sense to them than something like Environmentally
Sensitive Areas, which are broad areal definitions. I was part
of the discussions when Exmoor was made an ESA, and there seemed
to be some rather strange contradictions in it, like, "Well,
there's a certain budget for this, and if more than 60 per cent
of the farmers sign up we shall run out of money." So, although
you define the whole area as an ESA, really you want only 60 per
cent of the land in the ESA, which means 40 per cent of the land
in the ESA is not an ESA; and, therefore, you could get this sort
of patchwork of environmentally-protected and environmentally-unprotected
land, which makes a nonsense, it seems to me, of the whole thing.
And so I think some schemes, like that, just are not that clear
about what they are trying to achieve. The principle of economics
is that you pay a price for something that represents its value,
not what it costs to produce; so a scheme which compensates farmers
for their loss of income is not particularly a very rational scheme.
If you compensated me for my loss of income on my time input in
doing you a work of art, it would cost you a lot, but, I guarantee,
the work of art would not really be very valued, and I think one
can be compensating all sorts of farmers for things they do when
you do not value the output. So I think we have got to get round
somehow to knowing better, and until we do we cannot have sensible
environmental policies that make economic sense, I think, in terms
of sticking on an incentive price, roughly reflecting the value
of something, so that it calls forth the quantity that is required.
Now you will never get it as precise as that, as markets do, but
I think some of this kind of thinking has got to go in, in constructing
an administrative scheme, rather than saying, "Let's say
10 per cent of budget, and we'll call that the environmental budget
and then we'll just distribute it, as so much per hectare, and
that is a way of getting rid of the money, and, good, we have
got an environmental scheme."
Mr Breed
169. Surely, only one part of it, and, in fact,
a major part of it, is very simple, it does not require great
complex thinking, we want agriculture to be less intensive. It
is very easy to work out the difference between the intensive
use of certain pieces of land and the extensive use, which actually
we believe to be more environmentally sensitive; the two values
are almost precise, we can work out almost exactly what the difference
is?
(Professor McInerney) I have trouble with an assertion
"We want agriculture to be less intensive."
170. I was just about to come to that; that
is part of the perception that you are placing on this. To others
of us, who actually have perhaps more sensitivity to that, we
think the system actually is very simple to work out, on balancing
the difference between extensive and intensive, because what you
are getting out of a field or a farm actually can be measured
quite simply. I know there are going to be efficiency aspects
there which will distort some of it, but, in terms of market price,
the amount of wheat or grass that you are growing, whatever it
is, based upon an intensive or extensive method of farming, is
relatively easy, surely, to calculate?
(Professor McInerney) If you are saying there are
some areas of land where, if it were farmed less intensively,
it would not necessarily, as a result, generate much in the way
of environmental benefit, I would agree with you; and I think
there are major areas of land where de-intensifying them, if that
is a word, would just reduce agricultural output, but will not
produce very much else. The set-aside seemed to be a classic scheme.
171. You say set-aside; it is the classic example,
is it not?
(Professor McInerney) Yes; you reduced agricultural
output but it is not clear that you produced anything really valuable
in its place. So again it comes back to particular areas of land
where their possibility of producing valued environmental goods
is quite significant, and the competition between agricultural
goods and environmental goods makes the choice quite stark, and,
there, you may want to consider de-intensifying. But in other
areas, I would go back to East Anglia, I am not sure that there
is a good use of East Anglia, particularly.
172. That might be flooded in ten years' time
anyway, might it not, so we will not have to worry about that
area?
(Professor McInerney) Yes; okay. But I think this
is why, that is what I am saying, that we need to target areas,
if we may.
173. Can we just move on, perhaps in a slightly
more positive sense, in the way you say opportunities for using
the land, in other words, alternative uses of land, diversification,
and everything else, and you highlight a number of potential ways
that that may happen. Is that not actually subject to an enormous
number of potential barriers, of planning, through standards,
of all the bureaucratic aspects, down in our part of the world,
highways, as much as anything else? What are the real opportunities
for people who do that, let alone their ability to raise capital,
their ability actually to acquire the skills to run an alternative
business, and everything else, where really are there major diversification,
new opportunities for land use, other than selling it for housing?
(Professor McInerney) I think they are immense, but
they are all very small, the so-called niche markets. We did a
study on diversification at Exeter, ten or more years ago, and
we had 99 code numbers for the activities that we found people
doing, and there were not enough code numbers, in other words,
there were more than 99 different sorts of things that were taking
place on farms that were not conventional food production.
174. And how many were profitable?
(Professor McInerney) It depends how you assign charges
to them. If they are using a barn that really has not got a lot
of use and you end up renting it out for somebody to renovate
cars in, or something, fine. There is a lot of unsuccessful diversification,
in the same way as, if you charge the full price, there is a lot
of unsuccessful pig production and milk production going on, with
all sorts of marginal businesses, where the management is not
good and the resources are not good. The trouble with using, again,
diversification as a collective category is that it is presumed
somehow that there is something you can pick on, like pig production,
or going into poultry, or having a camp-site, on some of the bigger
ones; and they are all very diverse, they are very locationally-specific,
and if that guy has done it there then nobody for the 50 miles
around has a hope of doing it. Planning is a serious problem.
The reasons why planning regulations came in were not a lot to
do with easing the adjustments that economic forces bring about,
and a lot of the planning regulations relate to an era when we
were worried about loss of agricultural production capacity, which
is not particularly a worry any more. The thing about getting
capital and skills, that is no more a problem for farmers than
for any other businessman, and maybe less of a problem for farmers,
because often their businesses have such low indebtedness anyway
that if only they prepared to mortgage a bit of land, or something,
they could raise money.
175. How much do you feel there is any obligation
on society, at all, perhaps, to be more flexible, in this time
of agricultural problems, to try to assist people to do that,
perhaps by relaxing, to a degree, some of the planning, to reducing
some of the high levels of standards that we try to achieve, in
order, at least, if you like, to try to increase the flow of potential,
economically-profitable diversification exercises by people with
land, at the present time?
(Professor McInerney) There is a lot of need for this,
not to help farmers, particularly, because I do not think that
is the question to ask, but if there is a demand for various non-food
developments in the countryside that do not damage other people's
interests then, in a sense, the demands in the economy are increasingly
seeking value created in that use. So I see no reason why planning
regulations should stop these developments, in response to genuine
demands, any more than you have planning regulations that stop
you growing brussel-sprouts, when there is a great shortage of
brussel-sprouts.
176. Many rural areas, of course, they already
were the designations of areas of great landscape value, and the
ESAs, and all those to do with conservation, a huge number of
those sorts of things, which actually go against the opportunity
actually to use land, or develop land, because that is what it
is really about, what they want to do is to keep it as a green-grass
field, but to develop these sorts of businesses, or business opportunities.
Do you see that we ought to really now start to shift the balance
back a bit, that we have had over the last 25 years, perhaps?
(Professor McInerney) Very strongly. I see no reason
why you should not permit a genuine economic development on a
site somewhere on environmental grounds, as though every site
has got to be an environmentally-beneficial site; on those grounds
you would never have a housing estate, because that does not produce
a lot of environmental, well, it produces a different sort of
environment, because it has cherry trees and wallflowers. I think
it comes back to the point I made earlier. There is an assumption
somehow that every piece of agricultural land has got to be producing
environmental goods. I do not think we want that many.
Chairman: Professor McInerney, thank you very
much for coming. I am delighted that we have had a few sort of
slightly perhaps heretical moments, that is very refreshing, because
I was also beginning to get a little bit anxious about this, the
great green tide sort of sweeping over things, and thinking that,
agriculture, at the end of the day, people have got to make some
money producing food, because schemes which are all based on income
foregone are not actually going to help very much. I am also terribly
anxious about this definition of a "public" you keep
talking about; the public turns out, in practice, to be small
lobby groups, by and large, who can articulate their point of
view. And so one of the questions we keep asking for is if the
Government will just actually try to define what it means by "public
goods", and starting by defining both the public and the
goods which we are talking about. You have helped us a lot along
that road today. As I said to the other witnesses, if there is
something you wish you had said and have not, let us know; if
you have said it, it is too late to unsay it. But we are very
grateful indeed both for your written submission and for your
evidence this morning. Thank you.
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