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

Examination of Witnesses (Questions 1120-1139)



  1120. You sound like you are differentiating between the winners and the losers.
  (Margaret Beckett) I do not think you can.
  (Lord Whitty) I do not think that is the right way to approach it.
  (Margaret Beckett) You are leading up to a cunning question and I wish you would come out with it because I am still not quite sure what you are getting at!
  (Lord Whitty) What is clear is that there are huge differentials in performance sector by sector. What liberalisation would undoubtedly mean is some people dropping out of the bottom, some people rationalising, but that would be sector by sector. It would not differentially favour, say, the arable sector against the horticultural sector. Horticulture does not have the support anyway and it is to some extent dead. I think we have got a situation where we know that liberalisation will lead to some restructuring in the industry sector by sector. We believe that the range of economic information indicates that our productivity per land area or per unit of labour is in an absolute sense on a par with various other countries. That advantage may be diminishing slightly, but it is still high in absolute terms and, therefore, we are in a good position in almost every sector to compete effectively in a more liberalised regime, but that would not mean that part of our agriculture disappeared and other parts prospered. It would mean that the best in each sector would prosper and some would inevitably go under.

  1121. In terms of the demonstration farms that were mentioned earlier, who is going to decide what they demonstrate?
  (Margaret Beckett) In many ways they are. What we are going to try to do, and we are currently working on this and discussing it, we are going to try to build on some of the schemes which presently exist, but have a range of different demonstration farms. I gather some people have got it into their heads that we are talking about DEFRA sort of setting up farms. That is not what we have in mind at all. What we intend to do, and I was looking for the numbers, is to try to set up demonstrations, and obviously there will be a pilot in the first instance, on some 20 or 30 commercial farms with a spread across the sectors—dairy, arable, beef, sheep, pigs and horticulture—and the farms which we seek to engage are the farms which we believe are already showing an amount of good practice, up-to-date knowledge, good economic performance, the right balance of management of the environment and so on. What we will endeavour to do is to identify such farms and run a scheme with consultants, although of course we will evaluate it, and see how that takes us forward.

  1122. In a more liberalised world, weaker farms may well ultimately go to the wall and look for other opportunities. Do you think in those circumstances DEFRA has any obligation to assist those farmers or is it a question that natural market forces will have their way?
  (Margaret Beckett) I suspect that even under a liberalised sector ultimately natural market forces do tend to have their way, but we do not have any preconceived idea about how a certain percentage of British farmers will disappear or certain sectors will disappear and indeed I do not think anyone can.

Mr Todd

  1123. There is data available on competitiveness in UK agriculture and you will recall that the NFU published a report—I do not know whether they do it annually—but they have published a report and I assume have probably drawn substantially from Euro data which Mr Lebrecht referred to. Can you point the Committee in the direction of some of the data which you are very carefully not wishing to interpret, but which may assist us in reaching our own conclusions?
  (Margaret Beckett) We would be happy to.

  1124. One of the elements that certainly came out of my review of the data that I have seen is that there is one common strand, well two actually. One is that we are extraordinarily complacent. The data actually demonstrates that British agriculture is not a star performer in relation to many of our European competitors at all. We certainly do not necessarily rank in the top one or two in most of the sectors that we are in, and there are a variety of reasons for that, but the image which is often portrayed of the highly efficient British farmer as against some fellow standing in the corner of a field with some onions hanging around his neck is a bit out of date, if it ever was correct. The second element was the fact that land costs in the UK are significantly greater than those of virtually any other European State and that of course has a significant bearing on competitiveness in almost any sector which uses land in substantial terms. Is that a reasonable perception?
  (Margaret Beckett) I certainly cannot produce evidence to counter it. I do not know whether Andy can.
  (Mr Lebrecht) I am sure that your point about land costs is correct. In terms of the overall competitiveness, I think the figures do show that certainly over a relatively long period British agriculture was not increasing its productivity as quickly as the rest of the Continent. That has changed in the last few years partly of course because of the unfortunate pressure that the industry is under where productivity growth has risen quite substantially. I think the underlying point about the need to improve competitiveness is something that Sir Don Curry himself picked up very, very forcefully and obviously that is an issue that has evolved that we are looking at in the context of the strategy.

  1125. We are clearly not going to get an answer from you, so I will merely make the remark that any efforts to improve competitiveness do have to be focused, so generic statements about improving training and that kind of thing, although welcome, will not achieve the sort of goals that one would want out of this exercise which is a range of sectors in which British agriculture does compete effectively and, by implication, in some areas where we become either very specialised or reduce substantially our level of activity. That is what we would expect market forces to do, but we would also expect, I think, the Government to anticipate that process and to assist where it may in both softening it and sharpening the competitiveness of those who are going to succeed at the end of that exercise.
  (Margaret Beckett) We are trying to persuade the industry to do what many other British industries have had to do which is to benchmark themselves against the rest of the world, against the best of the world, to look at what steps they need to take and to give what support we reasonably can, whether it is training and in other areas, to assist and advise and encourage steps of that kind to be taken.

  1126. But much of British agriculture knows that and some of British agriculture has been doing it for a long time. They compete on a level playing field now without subsidies and assistance, so one should not put forward sweeping generalisations, but the fact is that much of British agriculture has been in at least a quasi-dependency culture based on government decision-making for quite some considerable time. Therefore, although I recognise you are right in saying, "We would like farming to behave like any other industry", yes, that is right, but they will, I am afraid, need more of a hand held than most others in moving towards more market-led and more competitive processes.
  (Lord Whitty) That is precisely why this is a food chain issue. We have focused almost all this morning on farming, farming productivity and farming competitiveness, but unless there are changes in the food chain and relationships within the food chain, then the substitution of market values and market orientation for government-dependency will not occur and that is why the food chain as mentioned in the Curry Report, the approaches of bringing the processors and retailers and others into the structure, is such an important one. That is where really the thrust of what Curry's recommendations are and particularly the recommendations for the food industry rather than government.

Mr Lepper

  1127. Before we plunge into the food chain, can I just return briefly to an issue which we have touched on several times this morning and that is the question of public goods, public benefits. The Curry Report begins with a visionary opening chapter that was remarkably in the same tone as William Morris's Views from Nowhere. Curry says, "In our vision of the future farmers will continue to receive payments from the public purse, but only for public benefits that the public wants and needs". Now, we have already heard this morning that there is a view that different people will have different views about what those public goods are. The RSPB may be claiming wetlands and for the Ramblers' Association it may be access to the countryside. Patrick Hall has referred to maintaining certain landscapes in a particular way for what amount to no more than sentimental reasons and public taste. I just wondered if we could give some thought to what the role of DEFRA is in determining what those public goods should be. I ask that really because Curry also says in that opening chapter, "The Government has a key, ongoing role in creating a market for environmental goods". Would you agree with him there and how does the Department go about fulfilling that role?
  (Margaret Beckett) I cannot remember the context of that particular remark, but in general terms—and we are talking about things like recycling and so on—yes, the Government has a role in encouraging the development of the market, and that is of considerable help. However, I think that to some extent it will be a matter of judgement and a matter of assessing what the position presently is. For example, I have already identified that we have seen quite a lot in terms of restoration of hedgerows and so on. There will have to be a valued judgement made as to whether we need more scope for more of that, whether there is another area of environmental management where there is greater need. There is, I think, quite a bit of ongoing reassessment about the issue of conventional wetlands, not just from the point of view of the RSPB and birdlife, but from the point of view of flood-plain management. So there are a whole range of issues, and it is going to be the kind of value judgement in which Governments are always engaged as to where you are liable to obtain the greatest benefit for the public money that is available.
  (Lord Whitty) If I might say so, the reason DEFRA is in a better position to deliver that framework is because we are responsible not only for agriculture and food, but for the totality of rural development and for the countryside and biodiversity, so we are the Department responsible for delivering the framework within which farming operates, and also ensuring that farming makes its contribution, through environmental goods, to the economic benefit of the countryside as a whole. As I was saying earlier, clearly a lot of rural business depends, not for sentimental reasons, on having a landscape which people want to visit and a background within which people wish to live and do their business. That seems to me as much an economic market—certainly not a sentimental market, but an economic market—as an environmental market. Some of it will be financed by public support, but other parts of it will be financed by the changed relationship between farming and the rest of the rural economy.

  1128. Do you see the balance of that funding changing over time?
  (Lord Whitty) We have said, in the context of the reform of the CAP, that we want a larger chunk of the CAP to be directed to rural development as a whole. That enables us to take a more holistic approach to what we want to see in questions of land management, in questions of rural development, so that it is not focussed solely on the production side of farming. That does mean that the balance will change a bit, yes.

  Mr Lepper: On to the food chain, Chairman.

Mr Breed

  1129. Looking at the food chain issues, Tesco told us that market signals are not getting down the food chain because it is too fragmented, it is difficult to ensure that farmers are absolutely aware of what customers and consumers are wanting, therefore it is important that those signals and messages are communicated down the food chain. The farmers, of course, would suggest that the food chain does not necessarily supply them with a fair reward for their labour or indeed a decent return on their investment, because the amount of money flowing back to the primary producers is not assisting them in their plans. How do you comment on those two rather differing views in the way in which the food chain operates and perhaps should operate in the future?
  (Margaret Beckett) I think both farmers and the big suppliers like Tesco accept that there are weaknesses in the food chain as it presently exists, and I think there is a mixture of things. Obviously the purpose of the Food Chain Centre is to do this analysis and to support whatever may flow from that, but I think that there is a feeling that there may be some links that could be not needed in the food chain. Experience again in other industries of doing similar work has been that there has been a certain amount of . . . I am trying to think quite how to phrase this. Doing this sort of analysis and work together has in other industries forced people to recognise their mutual interdependence to a greater degree than had hitherto been the case and made people work together, with much better relationships between suppliers and the end-producer, so to speak. I think there is every prospect that something similar would happen within the Food Chain Centre. If you are just one part of the food chain, whether you are a farmer where it seems that you do not what seems to be a fair return for what you do, or whether you are Tesco where you see your short-term interests as being to get the lowest possible price so you can sell at the lowest possible price, the present circumstances do not encourage you to consider the overall impact or the long-term impact of those policies. The whole idea of this sort of work is to bring people together to get better and unbiased information and analysis, and to make it available to all concerned. One of the things the Food Chain Centre intends to do is to get some sort of ground-level information about consumers' needs, consumers' demands, expectations and so on, and to keep updating that so that it goes eventually all the way down the chain.

  1130. When Sir Donald Curry came to us to speak to his report he indicated to us that he thought there was sufficient profitability within the whole of the food chain to provide that fair return to all those parts of it, yet patently that is not operating at the present time, and primary producers certainly feel that there is a great divergence between the prices that they are getting relative to the prices that are being given to the consumer as such. Do you expect the Food Chain Centre properly to tackle that problem?
  (Margaret Beckett) One of the biggest contributions that the Food Chain centre can make at the initial stages, it seems to me, is to provide unbiased information that cannot be contested. Sometimes people talk as if it is a dialogue of the deaf. On the one hand there are the major purchasers saying, "These are our problems", and on the other hand there are the producers saying, "These are our problems." I suspect that you would find that there is a dispute between them as to who is really right and what the position really is, et cetera. One of the key purposes of the Food Chain Centre is actually to strip away the undergrowth so that there is a clear, unbiased set of information that people cannot contest, and then you see where the problems actually are.
  (Lord Whitty) All these different things hang together with Curry. There is a transparency, and the Food Chain Centre can certainly help to identify some of the deficiencies and the unnecessary steps in the food chain. In addition, Curry's recommendations on collaboration and co-operation indicate that the farmers, if they were to act together, could enhance their balance of market power in relation to the processors, retailers and caterers. The operation of things like the Code of Practice, and an acceptance of that by the retailers and processors, would indicate that they recognise that in their own long-term interest a more stable balance of responsibility between the final users and the primary producers is necessary. Of course, that can really only be delivered if the whole of the food chain is engaged, so all those different parts do fit together. I think there is a coherent approach in Curry which is one of the reasons why Sir Donald has been saying you cannot cherry-pick, you have to look at all those together. That is why I think our strategy will underline and follow broadly the way Sir Donald was going.

  1131. The Government is contributing about £300,000 to set up the Food Chain Centre. What costs do you expect to contribute over the period of the three years that it is going to be set up and in terms of what measurements? What sort of criteria, what targets, do you think you will be able to measure to judge whether in fact the Food Chain Centre has been successful at the end of that period?
  (Lord Whitty) I think it is early days. We need to get the thing off the ground, and that is what we are doing this year. We need to ensure that all the industrial elements are fully engaged and that they will bear the bulk of the cost both in money and in kind, which they are prepared to do. So I think the public expenditure question is probably a residual question rather than a main one.

  1132. So they have indicated that the running costs over the three years, as opposed to the set-up costs, will be somehow funded by the sectors?
  (Lord Whitty) We are not saying there is no public contribution, but we are saying primarily the responsibility rests with the IDG.
  (Mr Lebrecht) Can I add to that and say that what we hope to be able to do is to part-fund individual projects that the Steering Board of the Food Chain Centre will want to propose. That is very much the way we will help. We have also seconded two individuals to the Food Chain Centre to help them get started and to help people work.
  (Margaret Beckett) It will not start to get moving now for several months.

  1133. There is a need for urgency.
  (Margaret Beckett) I accept that.

Mr Todd

  1134. It is familiar territory. I recall a food chain initiative by your predecessor, which attempted to bring together the various elements in the food chain to discuss process efficiencies. Have you reflected on what that achieved or did not achieve?
  (Margaret Beckett) I think you are right. I cannot remember exactly when it was, but I think it was two or three years ago. It did have some input and, in a sense, this is built partly on that experience. I think it would be right to say that at that time there was not the recognition of the need for the problems that agriculture has had and how deep-seated some of them are, and of the need to change, that there is now.

  1135. They had been through two or three years of falling income. They needed another two or three years to grasp that some further measures were required, did they?
  (Margaret Beckett) I think there was not perhaps—With respect, perhaps I should ask Andy to comment on that, because he was there and I was not, but I think perhaps there was an expectation that that would change and that people did not necessarily need to change in order to address real problems. Now I think the mood is different, not least because of the dreadful experience of FMD, is that right?
  (Mr Lebrecht) Yes.

  1136. But not everyone's mood. We had certainly one person who—and this quote may shock you—said, "I think the information exists anyway with the Institute for Grocery Distribution. I am not sure the Food Chain Centre is going to do any good because there won't be any confidential information. So again it is going to be another forum to pontificate about trade and not produce anything substantial and beneficial." That was a retailer who had that opinion, so it is not being greeted with universal plaudits as a welcome initiative, and possibly through some concern about many of these things being talked about for quite some considerable time without very much in the way of concrete results.
  (Margaret Beckett) If part of the outcome of setting up the Food Chain Centre is to force people to look up and down the length of the supply chain and see where their mutual interests in the long term lie, not everybody may be looking forward to that.

  1137. He did not quite put it in those terms; he just felt that it would be a painful process of self-scrutiny. I think he just thought it would not be a meeting that he would volunteer to go to himself, because he thought he might have better things to do with his time.
  (Lord Whitty) There is a certain amount of scepticism, but I think one of the gratifying things is that we have not found outright hostility of the kind you are picking up. Clearly a degree of persuasion for active participation is going to be needed, and the Government is standing by to twist arms. That is not hostility to the concept, it is a degree of doubt.

  1138. Scepticism?
  (Lord Whitty) Healthy scepticism, I would say.

  1139. Linked to that is the attitude, and identified within the Curry Report is the attitude, to farming co-operatives and the approach to their contribution within the food chain. There is a good deal of concern that the rules currently adopted in this country towards how far farmers can co-operate to achieve strength in the market place, or how far they can own other elements in the food chain, are rather different than the approaches taken in other parts of the European Union. Do you feel there is a strong case for rapid review of our approaches?
  (Margaret Beckett) I have taken up this issue. It is really not clear, and I do not think anybody is quite clear to what degree this is reality and to what degree it is perception. There may be some reality in it. There is certainly a lot of perception and expectation. As I say, I have taken the issue up to see whether there is anything that we need to discuss, any light that the competition authorities can usefully cast on this issue. I would also say to you that many people have said to me that although there are those who fear a different attitude to our competition laws, our general approach is that we think that our competition authorities do strive to do what is right for the customer in the market place, and that co-operatives cannot expect to be immune from that just because they are co-operatives, but equally they should not expect to be particularly penalised. While it is true that there are those who fear that there is an environment which artificially disfavours co-operation or collaboration in this country, it is also true that there are many people who highly dislike the idea of farmers having to accept that for most effective marketing they may be required to co-operate or collaborate more than they have done in the past. To what extent that is the real problem rather than that there is an artificial problem with competition authorities I think is not clear, but maybe the operations of the English Collaborative Board will make it clear.

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