Examination of Witness (Questions 300-319)
WEDNESDAY 13 FEBRUARY 2002
300. I was interested in this "no losers"
idea. In this brave new world of sustainable farming which is
profitable and competitive in global markets, that provides healthy
foods and maintains a good environment, within all of that I do
believe there are losers. Whether we call it restructuring or
downsizing, I cannot see that the current size of the labour force
and the number of farmers can survive. As I see it, there is no
pain-free option. I think many farmers and farmers' representatives
have come to acknowledge that. Did you do an assessment on that?
How many full-time/part-time businesses would be profitable and
sustainable in that sector? How many people will retain their
employment within agriculture? Did you look at that? Did you do
an assessment of that? Did you put a percentage figure on it?
(Sir Donald Curry) We looked at current trends and
clearly there is a restructuring process going on. It has gone
on for decades. There are fewer and fewer farmers; a number are
leaving the land; more and more part-time farmers; farms are getting
larger. That process is under way now. What is also under way
and what has been clear for the last four or five years is that
farming is not a profitable business currently.
301. And it is not attracting younger people.
(Sir Donald Curry) It is not. Absolutely. We are not
bringing in young people. We spent quite a lot of time analysing
those trends and then also looking in some detail at food security,
self-sufficiency and those issues. We concluded, after some lengthy
debate and analysis, that in the countryside, provided there was
within rural areas an encouragement for enterprise to flourish,
there is no reason why the total number of people engaged in the
farming and food industry needed to fall significantly beyond
the current trends. There are opportunitiesand we were
very impressed by how innovative some people had been in developing
alternative enterprises and in adding value to their products
in identifying niche markets. We need to encourage that innovative
enterprise within the rural economy. We also need to encourage
the adding of value in mainstream food production, and greater
integration, so that there are employment opportunities created
and so that it is not an entirely negative picture, which we are
seeing at the present time, which is a net loss of labour continuing
on a downward trend. I am not saying that will not happen in farming,
it will, in direct food production from farms, but we do strongly
believe that there is an opportunity to create employment and
business opportunities, given the right encouragement, within
302. You did not put a figure on it, other than
that you suspect the current trend will continue. There will be
no mass exodus over the next five or 10 years.
(Sir Donald Curry) We do not see any reason why the
current trend line should dramatically dip because we have lost
huge numbers of people already and the number of part-time farmers
who are finding alternative sources of income are clearly increasing.
People want to live in the countryside, they want to have part-time
farming business, so the trend will continue. We do not see any
reason why it should dip significantly from the analysis we have
303. I think we are right to not be over-pessimistic
but we seem to put great emphasis on innovation, on niche markets,
on spotting alternative business opportunities, and I wonder if
we are perhaps being a bit over-optimistic on that front.
(Sir Donald Curry) I do not think we are. I think
evidence over the last few years would suggest that actually there
is an enterprise culture if we can foster it, and that farmers
and others will find opportunities to increase their income through
Phil Sawford: I will go and tell my farmers
they have got to be more enterprising. Thank you.
304. On the day of the report's publication
you were on Newsnight with, among other people, Mr Rickard,
who was relatively fulsome in praise for much of the report but
his main criticism is one which I put to you more directly, that
you shied away from the scale of change which is necessary to
deliver sustainable agriculture. Following on from Phil Sawford's
questioning there, in fact many tens of thousands of farmers would
need to leave the industry for that to happen. That seemed to
me to be your less robust section of what you said. You were very
positive on that evening but did not answer that question particularly.
(Sir Donald Curry) I think we already have in Englandto
concentrate on what our remit wasa farm structure which
is significantly greater in terms of farm size than other European
countries. Part-time farming, family farming with alternative
income, is a given in many other European countries. We are moving
in that direction. Of course if small family farms did not have
alternative sources of income, they would find those farms very
difficult from a viable financial point of view. We are not saying
in the report that small farms producing small volumes of food
will be financially viable or sustainable, but we see no reason
why the small farm should not continue to contribute to the food
industry but with alternative sources of income with it. While
Sean's vision of getting rid of all the small farms and having
very large farming units, purely from a commercial food production
point of view, may have merits, we do not see the disappearance
of every small farm because those farms will be looking for income
305. Or a private income.
(Sir Donald Curry) Absolutely. Outside the farm.
306. Could we turn now to modulation, which
of course is the recommendation which has caused most concern
in some quarters and comment in others. First of all, can I take
it that you endorse the Government's approach of a flat rate,
and that your 10 per cent is, therefore, a flat rate and indeed
your 20 per cent is a flat rate?
(Sir Donald Curry) We recommend a flat rate.
307. Did you consider any other forms?
(Sir Donald Curry) We did. We studied the French example
where modulation is tiered. We came to the view that it was inappropriate
to consider anything other than a flat rate. To apply modulation
to a greater extent to larger farm units would be seen to be penalising,
potentially, farmers who through economies of scale have tried
to develop sustainable, profitable farming business and that would
308. So there was no consideration given at
that stage to taking some of the very small farms out of modulation
altogether. Even those whose income is very, very low are still
going to lose the 10 per cent or even 20 per cent.
(Sir Donald Curry) We think that the pro rata impact
of the flat rate is the most sensible way forward.
309. I think this goes on from what Michael
Jack was saying about the "sector specific". 10 per
cent support is going to affect different sectors in different
ways. Can you tell us what you believe the impact would be on
the various sectors? I think you have mentioned arable, but perhaps
some of the other sectorsdairy, for instance.
(Sir Donald Curry) Well, dairy does not receive any
310. Precisely. To a certain extent some of
the sectors are going to be more penalised than others, yet in
a flat rate system you are saying the smaller end should not participate.
(Sir Donald Curry) The sectors that are going to be
penalised are those which are most heavily subsidised. The unsubsidised
sectors are not penalised at all, obviously, and it is a redirection
of those production subsidies on which we focus within the report.
The impact on the different sectors needs very careful analysis.
You know, we can paint a picture for the uplands or lowland livestock
sector or the broad-based arable sector. We already have in the
uplands a very strong drive towards acreage payments, the transfer
of the LFA payments on to an acreage basis, and we see this as
an extension of that, delivering environmental goods. On the lowland
beef and sheep sector, we envisage the introduction of this broad
and shallow environmental scheme so that in the first instance
modulation will be available to them through participation in
that broad and shallow scheme, and the terms of the details of
that scheme need to be agreed and we recommend that. On the arable
sector, 10 per cent modulation will take £9 an acre off the
arable area aid and the matched fund by the Treasury will be available
for them to introduce a broad and shallow scheme. I would argue
very strongly that £9 an acre, equivalent to £3 a tonne
on a wheat crop, those farmers are going to be modulated to the
tune of £1.40 now on the current programme, without having
the opportunity of earning back, so the matched funding available
from the Treasury of participation in the broad and shallow scheme
will be of benefit to the arable sector too.
311. Can we take it that if the matched funding
was not available then you would have had a different view.
(Sir Donald Curry) Absolutely. There are two conditions:
matched funding and the freeing up of the Rural Development Regulation.
312. Can we turn to the social costs of this,
the social impact, if you like. Was any consideration given to
assessing some of those inevitable social impacts? Mention was
made of early retirement agreementonly a line and a half.
What more emphasis could have been placed on that as part of the
(Sir Donald Curry) We did discuss early retirement
in considerable detail twice. We revisited the subject because
I wanted to be absolutely certain that as a Commission we were
coming to a considered view on this subject. I have to say that
when we embarked on this I think we had the early retirement scheme
as a very serious potential recommendation. Having considered
it and considered the substantial cost of introducing an early
retirement scheme and the huge proportion of the Rural Development
Regulation funding that would be required to finance it, and from
the evidence that we had been given from Ireland particularly,
we then questioned whether this was an appropriate use of public
money, in that from the information available to us it did not
achieve the structural change that was envisaged through its introduction
in Ireland. We had to ask why farmers specifically should have
an early retirement scheme available to them when other sections
of industry, other professions, have not had that support. We
came to the view that it was an inappropriate use of public funds
and we could make better use of those funds through other channels.
313. Finally, looking at the 20 per cent potential
if CAP is not delivered, how important will it be to consider
any increase in modulation of 20 per cent or less in respect of
whether any other European countries have started down the modulation
route? Do you think that is of any significance at all?
(Sir Donald Curry) Yes, it is. It is also significant
that on the European league of profitability we are at the bottomand
you might argue that the reasons for that are the strength of
sterling and other factors, but we believe there are two important
reasons for going down this route. If CAP reform does not take
place sufficiently and 20 per cent is introduced ultimately, we
believe that is important for two reasons. One is we cannot achieve
the change that is necessary by, as I have said a number of times,
tinkering at the edges. We need substantial change in order to
improve the profitability of the farming industry and the food
industry as it is currently. To draw in the matched funding that
modulation envisages from the Treasury, is necessary to achieve
the structural change and the profitability of our industry.
314. Regardless of whether any other European
partner is changing to modulation?
(Sir Donald Curry) Yes. I understand from Franz Fischler
that he may be considering a compulsory modulation rate across
the Community. In our view we should go down this route, even
if other Member States do not progress at the same rate.
315. We are about to start a series of questions,
Sir Don, on environmental stewardship. Before we start, can I
just ask one question to clarify that. In your report on page
82 you appear to be talking about a sort of universal audit of
farms; there is an audit of every farm. You apply equally your
broad and shallow schemealmost everybody would be a subscriber
to it, because quite a lot of that would be simply conforming
to things like assurance schemes. Can you tell us how extensive
you expect that to be. Is that a sort of catch-all for everybody?
What form would a universal audit take? There are still quite
a lot of farms, no matter how fast they are disappearing.
(Sir Donald Curry) There has been some work done already
on this. The initiative in the high peaks had built into it an
environmental audit. We actually regard this as a very serious
recommendation, that every farmer should have available, free
of charge, an environmental audit and advice attached to it. We
have huge support from the Environment Agency for this approach.
The alternative is for the Environment Agency to be responsible
for policing regulation based on the worst performance. We believe
that is inappropriate. I mean, to suggest an increase in regulation
when the industry is already feeling strangled by it, would be
quite unacceptable. The evidence would suggest so far that actually
the farmers who participated in this trial initiative found it
immensely helpful to have an environmental audit carried out on
their farm. Our suggestion is that we should do this in order
to gain the information nationally that we need in terms of environmental
performance, because at the momentand the way the Nitrates
Directive is being handled is a good exampleyou use a huge
sledge hammer when in fact there may be very few nuts you need
to crack. We believe this is a much more constructive approach
to addressing what potentially could be a very serious way of
introducing the various bits of regulatory directives that have
been signed up tothe water framework directive, the soils
directive, habitats, these are all looming over the horizon. We
also see it as a precursor to participation in a broad and shallow
environmental scheme, enabled to give farmers direct advice as
to what action they can take in order to deliver environmentally
friendly practices and participate in the broad and shallow scheme
for which they would receive a payment. So there are two benefits.
One is to get a national picture of current standards that are
in place, and the second is to assist the farmers to participate
in the broad and shallow scheme through adopting some basic environmentally
friendly farming practices.
316. For many farmers, of course, the income
they get from that scheme would be significantly below the income
contributing to it from the modulation.
(Sir Donald Curry) That entirely depends on the rate
of payment that will be available through the broad and shallow
scheme. We do not envisage that being the case.
317. On page 81 of the report you say: "...
entry to the basic stewardship tier should be linked to the preparation
of a whole farm environmental plan and audit, for which a one-off
payment should be made . . . " This in a sense is further
developing Michael Jack's earlier point about the need for an
economic impact assessment. Did you have the time or did you discard
the possibility of looking at the administration costs, the set-up
costs and the running costs, if such a scheme was in operation?
Was that part of your thinking?
(Sir Donald Curry) Yes, indeed. We were very concerned
about the costs of the current stewardship schemes and the environmental
schemes and that was a serious influence on our thinking. Some
of the schemes carry with them 25 per cent admin costs and there
is clearly a loss of revenue to the entire rural economy and,
indeed, the farming industry. So we envisaged this broad and shallow
scheme as having a very light touch regulatory approach, easy
to access, simple to monitor, and cheaper to run. That is fundamental
to its introduction as a wide-spread scheme covering, hopefully,
the majority of the area in England. It is a much more sustainable
approach as far as the environmental challenges we face are concerned.
Rather than have pockets here and there of good environmental
management, we believe the entire farming industry should be engaged
in sound environmental management, and be receiving a payment
for it. So, yes, we looked at the costs. We think the IACS form
is the route through which farmers should be monitored, their
farm maps should sketch out the environmental conditions which
they are applying for, and the monitoring system attached to IACS
should be the way that that is carried out for this scheme.
318. For the programme to which I referred earlier,
Newsnight, my constituent Mrs Patricia Stanley was in the
Nottingham studio and put to you fairly robustly the view that
the National Farmers Union had presented that better stewardship
can be promoted by cross-compliance, direct payments being conditional
on good agricultural practice. Did you as a Commission consider
(Sir Donald Curry) Yes, we did. Indeed, we recommend
certainly decoupling, and cross-compliance might be the first
stage towards that, but we are not satisfied that tinkering with
some cross-compliance requirements will satisfy the need for better
environmental outcomes and may be vulnerable to WTO challenge
still as a support measure. Furthermore, cross-compliance does
not bring with it any additional resources. Farmers will be required
to cross-comply, at whatever compliance costs might be encountered
by the farmers for that scheme within the existing payments. The
benefit of modulation is that it does draw in matched funding
from the Treasury and doubles the funds available to support the
environmental scheme that we highlight in the report, the broad
and shallow scheme.
319. Mrs Stanley put to you the point, do you
recall, that you are more likely to get some of these benefitsin
the case of her own farm, the protection of rare breeds; the establishment
of footpaths; or forestry planting on the fringes of urban areasfrom
a profitable farm than you are from direct payments which will
achieve some of those aims more expensively. But you seem to reject
(Sir Donald Curry) No, we agree entirely with that
statement. We can only deliver sound environmental practices from
a farming business which is profitable. What we are saying is
that the management of the environment should be seen as a profitable
component of that business.