Examination of Witnesses (Questions 1000-1019)
MR MARK THOMASIN-FOSTER, PROFESSOR ALLAN BUCKWELL, MR BEN GILL CBE, MR MARTIN HAWORTH, MR REG HAYDON AND MR GEORGE DUNN
WEDNESDAY 8 MAY 2002
1000. If compulsion is introduced it would be introduced because we have got different schemes in the countries which currently occupy that. What aspects would be most important to compulsion? Is it the level? Is it the mechanism, the formula? Is it where farming groups would be more effective? Where are the most important aspects of the level playing field in a compulsory scheme?
(Mr Haworth) I think the most important part would have to be a compulsion to move a certain proportion of money which is now being spent in the First Pillar to the Second Pillar and leave Member States free to decide how they want to achieve that.
1001. We have got a totally different scheme from France, obviously.
(Mr Haworth) Exactly.
1002. You do not think that affects the level playing field anti-competitive situation?
(Mr Haworth) It depends how you want to look at this. Either you can look at it across the industry as a whole or to individual farmers and we would prefer to look at it across the industry as a whole because if you want to make a system which is exactly equal across the whole of Europe you would have to have a uniform system. Frankly, given that we have modulation, we feel the system we have got best suits our needs, that is to say it is uniform, there are no exemptions, everybody pays at a uniform rate. Other countries have different conceptions of it.
1003. It is the least worst option?
(Mr Haworth) It is the least worst option, yes.
1004. Professor Buckwell has argued this morning that there is structural change going on in agriculture at the moment but we do not know what the effect of that structural change will be. Is anybody actually studying this, the extent of contract farming, what is going on? Are any organisations here doing that?
(Professor Buckwell) The short answer is I do not know. We have been asking that it should be. There should be more questions and surveys done to get a better understanding of this. We try and collect the information from our members but it is anecdotal and patchy. We do not have systematic data on the way these management arrangements are working, their extent, and certainly we do not have much information on what impact that has on their production system and on its environmental impact. There are a lot of unknowns out there.
1005. What about the NFU?
(Mr Gill) It is very difficult to be certain, Chairman, simply because it is not unusual for the farmer to stay in the farmhouse, to maintain a separate holding but enter into a contract farming arrangement or a shared farming arrangement and nobody would even know about it. He has a contract coming on but so what, he is still there and he is still deriving an income from it. It is very, very difficult to quantify. The best figures we have are on the employment figures which are June census figures which are usually published towards the end of the year and those are the figures I referred to earlier in my evidence which, from memory, I think, over a two year period was 44,000 full and part-time people had left the industry. That is massive, when you think about it, that is over two years, that is like closing down Vauxhall Cars twice a year for two years and that is a massive output.
(Mr Haydon) Chairman, we are noticing that there is quite a swing towards contract farming that we are seeing, apart from the tenanted sector which is under great pressure, some of the middle sized and larger farms are under pressure. It has been noted in the press in the last two or three days that two or three large landed estates have thrown in the towel and gone over to contract farming. This would appear to be the be all and end all of anything but unfortunately it is not and we have got clear evidence from some of our members in the Eastern Counties that arable farmers who came under pressure last year, many of them got together and had a big sale, sold all their equipment and handed the whole operation over to a large contract farmer. There is one individual in the Eastern Counties who farms between 6-7,000 acres entirely as a contract farmer. We have heard also that this chap has now told all his contract farmers that he has gone out of business himself because he can make no money. If a contract farmer who is there on the real margin of the scheme can make no money out of farming things are going to be very difficult in the future.
1006. I take it, therefore, that the view of the panel is that this restructuring which is rather ad hoc is a bad thing. Should we restructure then?
(Professor Buckwell) Not necessarily.
1007. Certainly that was Mr Haydon's view.
(Mr Haydon) Yes.
1008. I rather got that inference from Professor Buckwell.
(Professor Buckwell) No, no, I was trying to beand let me be clearabsolutely neutral. We do not have in our possession factual information about the extent of this or its impacts and therefore I am agnostic about whether it is a good or bad thing. The people who are doing it patently think it is a good thing otherwise they would not be doing it. It is a defensive reaction to tightening and difficult economic circumstances to farm a bigger area.
1009. Let us put the question another way. Do you have views on an appropriate structure for farming, the CLA and the NFU?
(Professor Buckwell) Flexibility.
(Mr Thomasin-Foster) Flexibility.
(Professor Buckwell) This is a judgment that the people who manage the land should take. It would be very unwise to be prescriptive about what suits individual circumstances. There is a tremendous variety of capabilities, desires, financing arrangements and so on, and we should leave it to those individuals to decide how best to run their businesses.
(Mr Thomasin-Foster) It is a matter of allowing units to exploit the resources that they have, whether they are because of size or whether they are because of a particular market or a particular expertise. Where there may be a question in this whole issue of contract farmingand Ben has mentioned thisis the loss of people in the industry. It is not only a loss of people in the industry, it is a loss of skills in that industry, the skills, the management and the techniques of the countryside. That is a loss which is very difficult to quantify.
(Mr Gill) The diversity of farming needs is extremely varied. I can envisage, say, a 100-acre dairy farmer where the farm is owner-occupied, where there are no borrowings and the farmer has 70 cows, he has no labour, and he would be far more secure than someone who had 400 acres, is a tenant farmer, had borrowed money and had labour. Again, it depends what the enterprise is. We could see change there in the future. Can I just pick up on the suggestion made there, Mrs Shephard, because I think it is important to recognise that our concerns at the moment are that the way the restructuring is going is actually leading to the people leaving the industry that we do not want to leavethe good people who, by misfortune, factors outside their control, are saying, "Look, we could do better elsewhere in the world." In one week a few weeks ago I came across two of my members who I saw as potential leading lights, one who has emigrated to New Zealand and one to Canada. This is the sort of exodus that has bad vibes for me and the future, because it is not the economic force that is drumming out the inefficient off the bottom that the economists will always tell us with a two-handed clarity that is quite blinding at times, but it is actually false factors coming in and driving them out. The final point is that diversity will be augmented as more and more farmers become more involved in added value, in the chain and involvement in the food chain.
1010. We shall go on later to talk about the food chain, but what always interests me about these discussionsand this is absolutely not your fault, because it is the way the Committee has structured its questioningis that one normally comes last to the product, instead of first. What would be really quite interesting is to have your views on the effect of the restructuring which is taking place de facto, as we have all agreed, on food production. One of the most shocking statistics I have heard during the course of being a member of this Committee was a statistic about the import of chickens; that with regard to chicken meat, five years ago 4 to 5 per cent of chicken meat was imported, and I believe that we were told in a statistic somewhere that it is now nearer 49 per cent, in such a short time. If we are having this enormous restructuring, with different kinds of objectives on the part of those who are contract farming, I was struck by Mr Gill's example. Needless to say, I know who he means. Coming from the eastern counties, I know the situation. If we have entirely different sorts of motivations, what effect is that going to have on food production and the food chain? Surely you need some sort of permanency in the departments in the food chain, rather than an ever-changing kaleidoscope amongst one of the partners?
(Mr Gill) I do have concerns about the future of farming in parts of the country which are less productive than other parts of the country at this time. Again, you cannot be prescriptive, because there is an enormous variation. What farmers need to do in Britain is actually to become more intimately involved in the food chain. There are still too many people involved in that food chain, taking costs out that sometimes do not add commensurate value to the product on which we are bent. The point I was making earlier about the structure of investment in processing is that because of the weakness of the size of our farm structure, we have no resistance to that pressure that comes down. Equally, I would have been amused, if the situation had not been so serious, to find that the Government, when they published their NVZ consultation, used as an argument that if you had 100 per cent NVZs you could pass the costs up to the consumera statement that I find quite incredible. I was trying to find the economist who worked that out, because that is demonstrably not the case. We have borne all the costs of the regulation, which has become disproportionate in the respect that it has borne down on us. So you can put together groupings of understanding to work together to shove the costs up the chain, and that is great, but we need to have size there, we need to be involved in added value as others do in Europe, we need to have marketing power in that chain to deliver it, and we need to ensure that we are actually delivering what the markets want.
1011. I think this is extremely difficult when one of the partnersif you are saying there are two partnersis in the market as a producer and one of the partners is in a state of flux. That is the point I am making, and I believe that to be the case. It would be quite useful and helpful if the organisations represented here today were in a position to provide some quantification of that, to stop yet more sanctimonious pronouncements from those in authoritynot present in this roomabout the importance of the food chain. Whom are we talking about? There is a freefall on one side and there is a kaleidoscope on the other.
(Mr Gill) The importance of the food chain to the economy as a whole is often understated. We are dismissed as 1 or Ö per cent of the economy. Those people who do that fail to recognise that food in the United Kingdom accounts for 14 per cent of the economy and, as such, is the biggest single employer. I do not think anybody could conceive that if we did not produce the food in this country, the food producers would stay here for very long, with increased globalisation.
1012. With respect, I think that is one of the strongest arguments that the farming industry has, and it is not always used as often as it should be, which is why I come back to my point about concentrating on the importance of the product. If you take away the producers and the effectiveness of the producers, you are also threatening 14 per cent of the national economy, which would make people sit up, would it not?
(Mr Gill) I think that actually it is worse than that, because I was going to say that I spent some time last year, as a result of foot and mouth, trying to establish what proportion of the economy, and particularly the tourist sector, is attributable to the countryside. This varies from region to region, but talking with a number of tourist authority chiefs there is a general consensus that they gave me that perhaps as much as 6 per cent of the economy could be attributed to rural tourism. So if you add that to the 14 per cent, then you put farming at the core, the seed, of 20 per cent of our economy and critically important in that 20 per cent. Lest anybody think otherwise that you can have a rural tourism industry without farming, I think that has been proven to be not the case, because you need to have managers in there.
1013. I am being very greedy, but perhaps I can ask one more small question. The other shocking statistic that Mr Mitchell has been told is that there are no fewer than 62 organisations breathing over and studying the problems in the rural economy of the countryside62and that is without counting elected people, councils, councillors, parishioners, parish councils and so on. One such organisation recently produced an excellent pamphlet on a case study of ten ways of solving problems, produced by Melinda Appleby, but under the aegis of the East of England RDA organisation. When I rang to congratulate those who produced the pamphlet, which happened to be produced in my constituency, I said that it was very good and to whom were they circulating the pamphlet. They said that they had not thought of that and they did not have a database of farmers. They were surprised to find that I was the MP and so onnine miles away! They had not given any thought to giving out the pamphlet. What are we saying? I do hope you will join us, the Committee, and I hope this will be a big point we shall make, Chairman, in our report. Do we need 62 organisations to tell us there is a problem?
(Mr Gill) I think the Member makes a very good point, Chairman.
1014. I think you can respond fairly monosyllabically.
(Mr Gill) Can I just add that in her own region of East Anglia we have been actively involved in trying to co-ordinate that information and dissemination, indeed, particularly in the area of training, which is a critical area for farmers and growers, and as such the organisation that has secured Regional Development Agency funding to do this is cohabiting in our regional office and works very closely with ourselves and uses our database to disseminate its information.
Chairman: Just think how lucky you are you are not in a social exclusion industry.
1015. I think we have established, have we not, that restructuring is taking place but it is taking place in a rather ad hoc way. I just wonder if we can spend a couple of minutes thinking about one of the potential levers of restructuring, early retirement schemes. I know the Tenant Farmers Association have expressed in their evidence to us some views on that. You will accept I come from a largely urban constituency but the picture I have from what you have said and what previous witnesses have said to us is of older farmers having little alternative but to stay in farming, some of those younger perhaps more efficient more forward thinking people, because of their age, are taking the alternative and either going into other industries or leaving the country and going into farming elsewhere. Do you have any figures at all or any estimates of how many farmers are currently in a position which does not allow them to retire from farming, where they have to hang on in there and how many of those, if they had a suitable early retirement scheme, would leave the industry?
(Mr Haydon) The problem mainly is in the tenanted sector. The state of the industry over the past years has meant that many people who should have been making provisions for retirement have not done so. We have many members who are perhaps in their 60s or 70s who have looked forward and set about looking for a house for retirement purposes but in the later years the downturn in income has been such that they have not been able to do this. We have got a problem. We all know, Chairman, there is an aging population in the farming industry, reputed to be an average age of around 58, and a lot of those are in the tenanted sector. They have got quite a problem because they are coming to the end of their farming life, they would like to get out but unfortunately they have not got the finance or the capability to leave the holding. What do they do? Many of them are in county council smallholdings where they are blocking any progress up the ladder there is. They tend to sit there and make various diverse arrangements, contracting the farming out somewhere, remain in the house and really getting nowhere. What we would like to see is some sort of scheme which will allow them to leave the industry with some sort of dignity. I only noticed last week that Fischler, the European Commissioner, was saying that maybe there would be an opportunity in the future to use Rural Development Funds to possibly fund retirement schemes or new entrant schemes if they were co-funded by the national government. We have been pressing for this scheme for quite a long time now. We were approached by the present administration just before the election, at very short notice, to give them details of the scheme we had done in conjunction with the CAAV. We were very pleased then to see that it was in the Labour Party manifesto. It has had support also from the Conservative Party and the Liberals. So there seemed to be an across the board support from the politicians that this scheme should be one that was going forward. Unfortunately nowand I use the word unfortunately carefullythe Government seem to be somewhat backtracking on this. We have had recent discussions with the Ministers and very little progress is taking place at the moment. I am hoping maybe this Committee will lend its weight to the fact that a retirement scheme is sadly needed in the industry.
(Mr Dunn) In terms of numbers, it is quite interesting. I have discussions every day of the week with people who are in major financial difficulties on tenanted holdings and quite a lot of those are not actually members of the Association, they are not members of the NFU or the CLA or anybody. They are living in a sort of vacuum as far as advice and information is concerned. Our estimate is that there are probably around 1,500/2,000 tenant farmers in that ballpark. If you assume, and it is a great assumption, that they are farming on average 100 acres then we are looking at something like 150,000 acres of land, which may not be a lot on the face of it but it could be a major catalyst to restructuring if that came on to the market in one year. It would probably double the amount of land let in one year if all those farms were to give up. It could be an important catalyst. It is not the be all or end all. It is important morally that we help these people out because they are in a position where they cannot make a choice because they are heavily indebted, they do not own the house they live in, they do not own the farm they work on, they need somewhere to live, they just about scrape together the money to pay the rent but that is about it, I think that in the long term it could have an effect in terms of a multiplier if that land became available.
1016. Can I just tackle one aspect of what the Tenant Farmers have said before coming to the others. I think part of the proposal that the Tenant Farmers Association had was that any payments under a retirement scheme should not be means tested for other state benefits and should be free from taxation. How can I justify that to my urban constituents who might themselves be part of or have early retirement schemes in their own area of work which would not give them those privileges of being free from taxation, free from means testing for other state benefits. It seems to me something I could not justify at all. Can I hear the justification?
(Mr Dunn) We wanted to have not only a system which helped these people morally but a system which would create sufficient impetus for economic change in the whole of the industry. To get the numbers that we want to take up the scheme we had to make it reasonably attractive for them to get into it. We felt that because of the wider economic and public benefits of a restructuring scheme which would inevitably come after the retirement scheme it was right to have a greater incentive to get the scheme going otherwise they would continue to be, if I can use the word, a drain on public resources for a long time to come because they cannot make the choices themselves.
1017. Would that be one of the sticking points with the Treasury?
(Mr Dunn) I would have to say, as my Chairman has already said, it has had cross-party support already. The proposals which were contained in our submission to you were the same proposals that we showed to all the parties prior to the election and everybody signed up to in their manifestos so I do not know what has changed in the minds of the Government but we seemed to convince them in June of last year but not May of this year.
(Mr Thomasin-Foster) Very quickly. The CLA has spent a lot of time discussing this and obviously there are problems with certain tenants who wish to retire, and we can understand that. Where it raises a difficulty is that any retirement scheme is going to be competing for Rural Development Funds and, as we well know, the Rural Development Funds available to the UK are very, very small. There is this competition angle we have got to look at and a need. What the CLA is trying to do and trying to advise its members is to make certain that tenants can retire comfortably and with dignity which very often means providing them hopefully with a house or with somewhere that is converted, a barn or something. Very often, of course, that has meant that difficulty has crept up with the planning system but indeed we are aware that there are tenants who should be retiring and we have tried to enable them to retire.
1018. You said that there was cross-party support for the retirement scheme. Do you think there is cross-party support for the retirement scheme because we want to help those who want to get out, or is it because we are keen to get new blood in? The second part of my question is this. You have mentioned about difficulty in making the scheme that was on the table attractive for members. We have talked about needing to provide a house and having the pension scheme exempt as income, so there were other benefits. I wonder if you would just explain to me the rationale of the morality of why older farmers are so different from anybody else who is self employed, where things have changedsay, people like chimney sweeps. Are we providing houses and a pension scheme for them, and all the benefits that you want? Why morally should we do that? Are we doing it to get the old ones out and put in new blood, and to keep the ones that we should be having there, as Ben is wanting to have, the sort of leading lights, or is it because we are just feeling jolly good about the farmers?
(Mr Haydon) Surely that is a very good argument that we need new blood into agriculture, because it is an industry with an ageing labour force, with an average age of 58, we are told. In the EU there is tremendous support for the new entrants, there are large grants. That is quite an incentive. We are actually seeing young tenant farmers at the moment exporting themselves to France. It might sound a bit stupid, but if you go to France as a 25-year-old out of agricultural college, with some sort of qualification and good experience, the Government will throw money at you as much as you like. There are vast tracts of the Massif Central in the middle of France where agriculture is declining, villages are being abandoned, farms are being abandoned. The Government are anxious to get the younger population into it. They will give them money from CreĞdit Agricole at discounted rates, down to 3 per cent. That is the rate at which you can borrow if you are a young farmer in France. In this country you get nothing at all. We have a declining industry. Agricultural colleges are declining. My local college has 400 students and eight of them are in agriculture. That gives you some idea of the state of the industry. So is it a bad thing to encourage a retirement scheme to enable you to get people out of an industry where they are hanging on where they should not be and encourage young blood to come in?
1019. You do not think it is. You think it is right to have this package of a house and income and a really good pension package for a self-employed individual?
(Mr Haydon) It is not a good deal.