Examination of Witnesses (Questions 1120-1139)
RT HON
MARGARET BECKETT
MP, LORD WHITTY
AND MR
ANDY LEBRECHT
WEDNESDAY 15 MAY 2002
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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