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

Examination of Witness (Questions 300-319)



Phil Sawford

  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 opportunities—and 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 the report.

  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 done.

  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 other activities

  Phil Sawford: I will go and tell my farmers they have got to be more enterprising. Thank you.

David Taylor

  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 England—to concentrate on what our remit was—a 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 opportunities elsewhere.


  305. Or a private income.
  (Sir Donald Curry) Absolutely. Outside the farm.

Mr Breed

  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 be inappropriate.

  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 sectors—dairy, for instance.
  (Sir Donald Curry) Well, dairy does not receive any direct payment.

  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 agreement—only a line and a half. What more emphasis could have been placed on that as part of the total package?
  (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 bottom—and 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 scheme—almost 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 moment—and the way the Nitrates Directive is being handled is a good example—you 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 to—the 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.

David Taylor

  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 that approach?
  (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 benefits—in the case of her own farm, the protection of rare breeds; the establishment of footpaths; or forestry planting on the fringes of urban areas—from a profitable farm than you are from direct payments which will achieve some of those aims more expensively. But you seem to reject that approach.
  (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.

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