Examination of Witnesses (Questions 560-573)
MS KATHARINE
WALTERS, MR
SIMON HUGHES
AND MR
KEVIN HAWKINS
WEDNESDAY 27 FEBRUARY 2002
560. What conclusions have you reached?
(Ms Walters) One example is that we should
not be in the business of producing wheat; we have been hitherto.
It can be produced more cheaply in other parts of the world so
why try and do something like that.
561. That is very interesting because many of
our arable producers might argue that with world prices they could
survive. We are roughly about there now and clearly by some mechanism
some are hanging in there. You have drawn a very interesting conclusion
that in a world of farming without subsidies cereal production
would not be for you.
(Ms Walters) Not unless we can prove
that we can add value to it. If we were just producing it as a
commodity without any differentiation between what was being grown
in East Anglia and what was being grown more cheaply in the Ukraine
and shipped more cheaply from the Ukraine into the UK, then yes
I think our conclusion would be it is not an area we should stay
in.
562. Some farmers have suggested alternative
Pillar 2 money is a crutch on which they can lean if money from
Pillar 1 gets reduced. You say rather challengingly in your evidence:
"However we do not believe that agri-environment payments
should be seen as compensatory payments for the phasing out of
production subsidies." That is pretty strong stuff. What
you are saying is from your standpoint no subsidy full stop and
if we stay in farming we bear the cost of the environmental requirements
that might be being put upon us by DEFRA and outside agencies.
Is that a summary of your position?
(Ms Walters) Can I add a subsequent sentence
to the one you have quoted. What I would say is yes that is true.
We do not want a situation where, day one, production subsidies
and cheques cease, day two, farmers receive the same amount of
money in a cheque but for something slightly different. What we
are saying is that there needs to be a fundamental review. Farmers
should look at themselves and wonder what they are doing and why
they are doing it. If we are saying that food producers should
not be subsidised we are saying at the same time that there is
a very legitimate role for farmers as land managers but it is
not just as simple, as ending one form of subsidy and substituting
it with another one.
563. Given the Chairman's earlier comments about
the pound/euro situation, we could see quite a dangerous long-term
scenario because if we were trading disadvantageously in currency
terms, if the farmers had gone through the process you describe
and decided a large amount of the stuff they could not be in in
a subsidy-free world and you are saying that environmental payment
should not be a subsidy, I cannot quite see how we are going to
develop a mechanism to pay them to do something even if it is
only land management?
(Ms Walters) Yes, we will come out of
some areas, but at the same time we are a mixed farmer and maintaining
some kind of balanced portfolio is very important.
564. What do you think you are good enough to
stay in in a world without subsidy?
(Ms Walters) I think we have to face
up to the reality that subsidies are going to come to an end.
565. I agreed with that but the question I asked
you is what do you think from Farmcare's point of view you are
feeling confident about? You are having to make long-term decisions.
In the next decade goodness knows what could happen. What do you
feel confident about at this moment to say we should be putting
our eggs into these various baskets? You have given an indication
of cereals where there is an element of doubt but what about other
areas?
(Ms Walters) Horticulture.
566. That is not subsidised at the moment so
that is not a problem.
(Ms Walters) A subsidised area? I am
afraid I will have to come back.
567. It would be very interesting to know because
this gets to the heart of what we are about. Can I ask Kevin for
an overview of UK farming. What do you think are the strengths
and weaknesses that have to be examined against the background
of reducing the level of subsidy?
(Mr Hawkins) For a start I do not see
this as being a transfer from one pocket to another of the same
amount of money. Quite clearly what goes into Pillar 2 will be
substantially less than what is in Pillar 1. Secondly, if Pillar
2 is supposed to be about protecting the environment one can see
a situation where there will be rather more beneficiaries of Pillar
2 payments in those areas of the country, the West and the North
West, where, arguably, environmental damage from farming has been
considerably smaller than in some of the big eastern counties
where I think you will find the largest number of farmers who
are willing to or are able to compete under a different regime.
I come back to the problem of size relative to European competitors
both of farming and of processing because if we do not grow—and
perhaps the collaboration board has some role to play in this—the
size of our farms and reduce the cost base by one means or another,
then I think we are not going to be competitive in a whole range
of commodity markets and, frankly, the only answer I can see to
your question as of now is a lot of British farming would be into
premium products, into products where there is a defensible position
and where they are not exposed to a lot of very low-cost commodity
producers, particularly once the EU is enlarged.
Mr Drew
568. Can we build on that point. To get larger
units you have got to get greater co-operation. I will ask Katharine
initially, why does this country not recognise the value of not
just co-operation but co-operatives?
(Ms Walters) Historically we have got
too hung up with legal structures and legal definitions and lost
sight of co-operation as a tool for better mutual understanding
and for closer working relationships, by actually focusing in
on the economy of scale issues. We farm one per cent of the land
that is farmed in the UK. You have got huge organisations providing
the machinery, the fertilisers, the inputs, you have got huge
retailers on the other side. I think what we need to do is build
trust and confidence amongst farmers so that they become much
more adept at working together at a practical level.
569. Your colleagues?
(Mr Hughes) Basically our insular nature
as a nation. We do not like to co-operate. We always think we
can do it best and if we co-operate with somebody else is he going
to nick my ideas?
570. Is that pointedly aimed at farmers?
(Mr Hughes) Yes.
(Ms Walters) Also, for too long, we have
seen our competitor as the person down the road who is farming
but not the person halfway round the world, and that will have
to change.
(Mr Hawkins) There may be something in
the cultural explanation but I prefer to look at economic drivers
and facilitators. I think over the years a lot of farmers have
not had the incentive and no great pressure to collaborate. There
has always been a chance of making money on your own, for whatever
reason. I think the subsidy reason has entrenched that attitude.
If the troubles and tribulations of the last five years, with
the general collapse in farming incomes and a lot of farmers going
out of business, have not concentrated a few minds, I would be
surprised. Secondly, if the prospect of CAP reform does not concentrate
minds even more and make the case for collaboration more appealing,
again I would be very surprised. I think the other thing, which
is a point made earlier, is that even had farmers been in a more
collaborative mood than they have traditionally been, UK competition
law would have stepped in to prevent the emergence of a lot of
the big combinations and the market share concentrations we see
in, say, Denmark and the Netherlands. It is no good giving farmers
incentives to collaborate if you do not change the law which allows
them to collaborate or prevents them collaborating at the moment.
That applies as much to processors as it does to farmers.
571. Can I look at the other side of this now.
Are you interested or worried by the notion of ethical consumption
because, as has happened with the Co-operative Bank in the marking
out of a different territory, there is a customer concern for
animal welfare and environmental concerns. I know you are going
to say that the consumer will sign up to petitions outside and
as soon as they get into your stores they will buy on price and
they will buy on ease and convenience. How much of a role do you
have in re-educating the consumer, as happened in banking and
some other areas? I start with Katharine because it is an easy
question for her.
(Ms Walters) It is less easy than you
might imagine and I might disappoint here. Ethical banking is
very different from food consumption. Food consumption happens
in a much more diverse way, purchasing a much wider range of products.
I think animal welfare, organics, use of inputs are issues to
some people but not issues to the majority of customers at all.
Clearly we have a role in terms of providing information to consumers
so that they can make a choice about what they buy, but in no
way do we limit choice to either ethical or non-ethical.
572. Simon?
(Mr Hughes) It is very difficult to teach
or train or reform customers in picking packets off our shelves.
We do respond to their comments and queries as and when they happen.
Really that is about it, I am afraid. There is no more education
than that.
573. Kevin?
(Mr Hawkins) I think we could probably
make more effort than we do to inform—I do not like to use
the word educate—those customers, minority though they may
be, of the issues that they are genuinely interested in. Again
quoting IGD research, a lot of the focus among the small minority
who are interested is about hygiene in the supply chain, animal
welfare, conditions under which animals are reared, what they
are being fed, how much pesticide is being sprayed on produce,
and so on. I always draw an analogy with dieting and healthy heating.
A lot more people are interested in dieting and healthy eating
than they are in the conditions in which livestock is reared in
terms of weighing them in customer importance, but the level of
interest on the part of a lot of customers in what we put on the
label of "healthy products" is extremely limited. Our
own research shows that one in four customers never look at the
label to start with, apart from best before date or the use by
date. Most of the others who actually look at labels have difficulty
understanding the terminology on those labels, particularly when
it relates to recommended daily amounts, how much you should eat,
what the constituent parts are, and so on. There is an awful lot
of scope for us to communicate to customers who are interested,
in language that they understand and I do not mean playing down
to them but in plain, ordinary terms some basic information about
the issues that they are interested in, assuming that we know
that. I think we have got a fairly good idea what they are interested
in. There is some progress to be made but I am not under-estimating
the complexity or hoping for quick results because we will not
get them.
Chairman: There are one or two things I think
you are going to let us have. If there is anything you would have
liked to have said, please do not hesitate to let us have it.
We may well want to come back to you for one or two bits of further
information. Thank you very much. We are very grateful to you
indeed.
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