House of Commons - Environment, Food and Rural Affairs

Select Committee on Environment, Food and Rural Affairs Ninth Report

CURRENT REVIEW OF AGRI-ENVIRONMENTAL SCHEMES

141. The Department for Environment, Food and Rural Affairs began a review of the agri-environment schemes in March 2002. The review will address five main areas:

1. Scheme objectives: What agrienvironment schemes should be seeking to achieve

2. Interrelationships and boundaries: The relationship between agrienvironment schemes, regulatory measures, other incentive schemes and industry led environmental initiatives.

3. Scheme structure: The future structure of the existing schemes and the proposal for a broad and shallow scheme

4. Scheme rules: Including the basis for payments

5. Scheme operation: How future schemes should operate and how participants should be supported.[270]

142. Debate about the rural environment has broadened out beyond the scope of the agri-environmental schemes. The crisis of foot and mouth disease prompted discussion about the consequences of farming and rural policy in its widest sense. The Countryside Agency probably articulated the feelings of many in telling us not only about the things people expect from land managers but also by expressing dissatisfaction with the current focus of policy: "the taxpayer is getting poor value for the £3 billion per annum spent on European Union and other agricultural support. Farming remains vital to the livelihood of many rural communities and the conservation of our cultural and environmental heritage, and yet little public money is devoted to securing those goals".[271]

143. Many of the programmes to which we have referred in this section of our report come under the umbrella of the English Rural Development Programme. Given their growing importance as policy and financial vehicles to help farmers, conserve the countryside and sustain rural life the Government should publish an annual report detailing their take up and evaluating their effectiveness.

Public Goods: the Debate

144. Many of our witnesses agreed that in future farmers could not be expected to be subsidised by the taxpayer simply for farming, but instead would be paid for delivering a host of 'public goods' associated with farming. Clear agreement over definitions of those 'public goods' was less easily obtained. As the Ramblers' Association told us, "today's situation is unique in that never before have the pressures of so many varied demands and expectations of the countryside been so transparently demonstrated and recognised".[272]

145. The evidence we received on public goods, made it glaringly obvious that there is no such thing as a clear, overarching public good but a host of objectives, described as public goods, usually promoted by lobby organisations. It is not clear what role the public has in defining a public good. Some demands were clear and easily definable, for example the management of access,[273] and "stopping the external costs for the rest of society which current agricultural systems are causing".[274] Others were clear but less definable, for example places for wildlife to live,[275] and flood control,[276] whilst others seemed largely intangible, for example attractive landscapes,[277] and culture, history and heritage,[278] these 'goods' are not invariably compatible with each other.

146. A public good is something that everyone can consume but for which there is no market. Professor McInerney described the environmental outputs from agriculture as "simply economic commodities for which there is a value and a demand, and we want as many as we want and no more; and a surplus of bull-rushes, or a surplus of hedges, is just as inefficient a use of countryside resources as a surplus of wheat or milk".[279] But because there is no market, there is no measure of exactly how much is required or of what value to place on each public good. The RSPB acknowledged that there was a "trickier issue of attributing a value to some of these public goods".[280] There are various approaches and models to value environmental goods, including approaches in which assessments of "willingness to pay and how far people are prepared to travel" are used to assign values to different environmental features.[281] However, Professor McInerney pointed out that the approaches are "very partial": he thought it would be "almost impossible" to undertake such exercises for the whole of the United Kingdom's countryside. He thought that ultimately civil servants would have to ascribe values to public goods, based on research studies which showed "which components of environmental goods ... people worry about" because ultimately choices would have to be made, and that to make appropriate choices "one needs to focus more regionally".[282]

147. Once the desired public goods are identified the question then arises of securing their provision. The National Farmers' Union listed a number of ways of doing so, including regulation; promoting best practice; devoting research to develop less polluting inputs; cross-compliance (for example making direct payments conditional on following good agricultural practice); farm assurance schemes; voluntary initiatives; and publicly funded schemes to preserve, protect and enhance the environment.[283] We received a considerable amount of evidence on the role that some of these approaches could play in securing an improvement in the agri-environment in its broadest sense. There was widespread acceptance that no single approach would secure the desired outcome but that it could be delivered through "a combination of regulation, incentives, advice and market mechanisms".[284]

148. The RSPB proposed a "minimum environmental standard" for which farmers would receive a basic flat-rate area payment.[285] The Ramblers' Association told us that there was an argument "for more rigid enforcement of cross-compliance",[286] which is already a requirement of the receipt of direct payments under the CAP. Others, including the RSPB, suggested that farmers should not just rely on support from the public purse to pay for the provision of 'public goods', and argued that there were opportunities for returns through the market place as well: "a well-enhanced protected environment is going to draw people into the countryside, [hence] economic benefits are there to be exploited by farmers".[287] Similarly, the Council for the Protection of Rural England referred to beauty bringing prosperity.[288] The Environment Agency suggested that for a short period of time farmers should be assisted to attain defined levels of good farming practice that were above current levels of good practice, but after a while assistance would no longer be available and those who had failed to meet the minimum standards would be penalised.[289]

149. An alternative is to establish the objectives and then invite farmers to set the price by bidding into the scheme. The pilot programmes to devise a 'broad and shallow scheme' should include options for funding as well as the coverage of the programme.

150. As well as the problems of identifying and paying for public goods, there is the potential problem of the provision of one public good conflicting with another. The Ramblers' Association accepted that such conflicts, which they described as "tensions", were possible. It noted for example that the needs of access and biodiversity might differ, but highlighted the way in which "environmental, recreation and conservation non-governmental organisations worked harmoniously together on the Countryside Rights of Way Act".[290] The RSPB noted that, at present, it was relatively easy for these groups to work together while they were generally excluded from the agricultural policy process: but, if agricultural policy reform occurred, choices would have to be made, and priorities set. It argued that although it was not possible to put a pound sign on everything, data sets on biodiversity, for example, would lend themselves to coming up a with a rational set of priorities.[291]

151. The Secretary of State acknowledged that there were different things which could be regarded as public goods and that some of them were in conflict with each other. She then summed up the situation about paying for public goods in the following way: "there is a broad category of things for which the market will not pay, and then we have to decide - and it is through the ordinary political processes - whether the taxpayer will pay".[292] However, she stressed: "I am not interested in just putting money in for not very much outcome".[293] She also said, "I do not want to create the impression that every farmer who says, 'I am only keeping these hedges because you have asked me to' will automatically receive large sums of public money but I do accept that there is a legitimate point being made there".[294]

152. The Policy Commission, in outlining its vision for the future of United Kingdom agriculture, observed that "the Government has a key ongoing role in creating a market for environmental goods".[295] Lord Whitty appeared to concur, saying that "the Department for Environment, Food and Rural Affairs is in a better position to deliver that framework because we are responsible not only for agriculture and food, but [for] the totality of rural development and for the countryside and biodiversity":[296] that, indeed, appears to be the point of creating the new Department.

153. There appears to be a growing consensus that farmers in future will be subsidised by Government for the delivery of various 'public goods' - principally relating to the environment and conservation. The phrase 'public good' tends to be used as if its meaning were self-evident. Politicians speak of what 'the public' or 'the consumer' will or will not put up with. The fact is that 'public goods' are, in practice, defined by pressure groups which each have their own definition of what the public good is. They are not necessarily compatible with each other. Nor is it easy to set a price on a public good and to establish mechanisms for the delivery of such goods which permit both a light-touch management and meaningful measurement. We are extremely sceptical about the way in which the term 'public good' is used to justify public support for an array of different schemes and projects.

154. For example, a liberalised agricultural market may mean that some less productive land will revert to scrub or be turned over to forestry or be used for river and flood management. Some will continue to go to housing. Many smaller farms will be amalgamated into larger units. We do not accept the arguments of those who argue that losing farms and farmland is inherently bad: the cost to the public of continued financial support must be balanced against the loss of whatever 'public goods' the farm may provide and the benefits that alternative use might bring. For example, the argument that losing farms will mean the loss of historic landscape may have some weight in a limited number of cases, but not across the United Kingdom as a whole - after all, the farmed landscape is itself often a very new development. Some farmers may not be able to continue in business: but the thought that this might 'tear the heart out of rural communities' is put into perspective by the realisation that only 2 per cent of all workers are engaged in agriculture,[297] and even in rural areas only 3.8 per cent of full-time employees work in the agriculture and fishing sectors.[298] Scrub and forestry, based on native species of trees, particularly if accessible to the public, may in fact be valued more highly by them than 'pretty' fields - and such land may support greater levels of biodiversity than farms.

The Policy Commission: the 'broad and shallow scheme'

155. The report of the Policy Commission on the Future of Farming and Food was critical of the agri-environment schemes currently in place. In order that they could better deliver 'public goods', the Commission called for the current review of the agri-environmental schemes to be fundamental and recommended that "the existing suite of agri-environment schemes should be rationalised to become the upper tiers of a single new stewardship scheme, and should at least retain their current level of funding".[299] Under-pinning these 'upper tiers', it said, should be "a new, basic, 'entry level' tier, aimed potentially at all land managers and not just at a few special target zones. We believe that the different circumstances of upland areas will continue to demand a specialised approach, but that otherwise we should be aiming for a scheme which with varying prescriptions could ultimately involve all farm sectors, and farming regions in England" [our emphasis].[300]

156. The Policy Commission said that the 'entry level', or 'broad and shallow', scheme should be "much simpler and less expensive to operate than existing programmes". It would, it suggested, require "a simpler set of targets so that Government can set and monitor its requirements without a huge bureaucracy". Under the scheme "compliance ideally would be measurable remotely", and the Commission called for the avoidance of "a competitive process which while giving some security on value for money is inappropriate for a scheme aimed at mass take-up". Finally, it said that the scheme "has got to be whole-farm based".[301]

157. The Policy Commission's vision was a scheme "targeted on paying farmers for positive management over and above their legal obligations". It proposed that entry to the scheme should "be linked to the preparation of a whole farm environmental plan and audit, for which a one-off payment should be made". The Policy Commission also proposed that farmers should receive free training in the preparation of plans, maps and audits. The audit would cover natural resource protection and conservation issues, and would "examine the farm against existing and forthcoming legislative requirements" to help it to plan to meet changes in legislation. The outcome would be a farm map and plan that provided "the basis for agreement on how the prescription within that basic tier of stewardship could be applied on that farm".[302] Farms that successfully completed the audit would then be eligible for the basic level of stewardship - the 'broad and shallow scheme' - and qualify for rewards which are "available annually, calculated on a flat rate basis per hectare". The Policy Commission suggested that the rates of payment should cover costs and offer an incentive to participate in the scheme, and could differ according to regions and sectors.[303]

158. In its report, however, the Policy Commission did not make any concrete proposals about what environmental requirements would be placed on farmers by the scheme, although it noted that the RSPB, English Nature and the Game Conservancy Trust "have previously suggested prescriptions for lowland arable and livestock farms covering conservation issues".[304] Sir Don Curry, the Chairman of the Policy Commission, told the Committee that, having outlined the 'broad and shallow scheme' in the report, the Policy Commission now wanted a discussion to take place between all stakeholders who have an interest, including farmers from different areas with different farming systems, to "agree on the broad outlines of the scheme as it should apply in different farm situations. That discussion needs to take place very quickly".[305]

159. We asked the RSPB about its proposal for a basic stewardship scheme and the Game Conservancy Trust told us about its suggested conservation scheme for all arable land when they gave evidence to us.[306] The National Trust also raised the matter, producing a briefing note on a proposed model for delivering an entry-level agri-environment scheme.[307]

160. The RSPB proposed that farmers should take action in four different areas. It said that they should produce a conservation plan covering the whole farm; apply conservation management techniques to a proportion of cropped/grazed land (or be organic or in conversion); manage non-cropped land for habitat, wildlife and landscape benefits; and undertake a small wildlife project.[308] The Game Conservancy Trust proposed environmental standards for farming that required the use of obligatory set-aside as wildlife cover; detailed how weeds should be controlled on set-aside land; and laid down requirements for wildlife corridors, managing water run-off and pesticide use.[309] The National Trust proposed a points-based system: farmers would have to undertake a number of compulsory and voluntary activities, each with a points value. Scoring a particular number of points would qualify for a flat rate payment across the farm.[310] Although there are differences between the proposals, taken together they give an indication of the likely shape of any 'broad and shallow' entry level scheme.

161. We believe that farmbased plans could offer a better approach that would allow farmers to offer environmental outputs to society, and a means of verifying that the desired output is delivered before payments are made. More sophisticated use of the plans could allow neighbouring farmers to manage the countryside in a more integrated fashion.

Issues raised by the 'broad and shallow scheme'

162. The suggestion that there should be a 'broad and shallow' environmental scheme attracted a lot of support amongst our witnesses - first, as described above, from a number of environmental groups, and second from some of the groups representing farmers. But it is important that this proposal should be subject to rigorous analysis. The following issues immediately arise:

· how do we determine what is wanted - agreement on what are 'public goods' is far from universal? Will public access be part and parcel of the scheme? Is biodiversity the key, or better water management, or reduced inputs? A single, simple scheme requires a single, simple goal or package of goals, but the more the scheme seeks to apply to local circumstances and local needs the more complex it inevitably becomes, both in definition and in monitoring.

· lack of understanding of the degree to which improvements are needed - is the objective of a 'broad and shallow scheme' to improve to a particular standard, or to maintain the current situation? If the purpose of the scheme is to maintain current standards, how will the scheme avoid paying farmers for what they are already doing?

· how, then, do we make sure we have got value for money? If the scheme endorses broadly best current practice are we really getting value for money for precious little incremental improvement? If the aim is to obtain sustained higher standards, how do we price them and should they continue to be funded or eventually be required as part of normal practice?

· how central should the focus on agriculture in the rural economy be? Establishing a 'broad and shallow scheme' would mean that funding would continue to be channelled through agriculture, making little acknowledgement of the role that other parts of the rural economy can make to improving the environment and delivering other public goods.

· the meaning of 'whole farm' - is it intended that the net impact of the farm will be what is assessed? In which case, might it be possible for a farm to have 'poor' practices on 95 per cent of the holding, with environmentally beneficial practices on the remainder, and still qualify under the 'broad and shallow scheme'?

· assessment - if evaluation of each farm is to be carried out 'remotely' how will compliance be ensured?

· future developments - what account does the 'broad and shallow scheme' take of legal and statutory requirements likely to be placed on all farmers in the future, such as under the Water Framework Directive and nitrates regulations?

· how does the programme fit in with developments in the European Union, notably the Mid-Term Review proposals, which share some characteristics with the 'broad and shallow scheme'?

163. Most importantly, although there is currently a consensus amongst farmers and environmentalists about the need for a 'broad and shallow scheme', there are clear differences between their expectations of what such a scheme will involve and will deliver. It appeared from their evidence that the farming groups saw the 'broad and shallow scheme' as simply a way of replacing current subsidies and direct payments with a more politically acceptable alternative, whereas it seemed that the environmental groups were expecting farmers to deliver real changes in order to qualify for such a scheme. For example, the Country Land and Business Association said that under existing co-financing arrangements any switch of funds from Pillar I to Pillar II "has to be match funded" and "that means more money for the rural economy": the result would be "to switch the policy to a more desirable set of arrangements".[311] At the same time, the National Trust told us that the rationale behind the 'broad and shallow scheme' was "to reward positive environmental management, including existing high environmental value; to facilitate a change in attitude and behaviour, so farmers view environmental management as a core not optional part of the farm business; to make the transition towards paying for and delivering public goods as core products of farming; and to guide good business practice and incentivise low risk farming systems".[312] It said that the core aim of the broad and shallow scheme should be "to put the environment at the heart of each farming business".[313]

164. We have considerable concerns about the 'broad and shallow scheme' proposed by the Policy Commission on the Future of Farming and Food. We need particular reassurance that the introduction of a 'broad and shallow scheme', open to all farmers, will not mean that farming ends up no more able to respond to its marketplace than it is now. The introduction of a broader definition of the role of agriculture in the rural economy should not blur the continuing need for farmers to produce food and other crops which consumers want. Moreover, we are concerned that the gradual dismantling of Pillar I of the CAP to allow the creation of a new edifice - Pillar II - does not simply transfer bricks from one monolithic structure to another. Given the widespread support for Pillar II measures from non-agricultural non-governmental organisations, and the increasing support from within the farming industry, we fear that Pillar II could over time become as insensitive to the need for change as Pillar I. Pillar II measures must be constructed in such a way as to be consistent with and support, if possible, entrepreneurial farming.

165. The Policy Commission set out to make recommendations on the basis of the current level of public support going to farmers. Given the relatively brief time it was given to report in this was perhaps inevitable. However, it is not clear that the cost of providing agri-environmental 'goods' will, or should, be exactly the same as the existing costs of supporting agriculture. In shaping its response to the Policy Commission we wish to see the Government set out clearly what it means by 'public goods' and how it assesses the demand for them, and their costs, as well as the role that the marketplace and regulation should play in their delivery.

166. However, if a decision is taken that something can only be delivered as a result of Government intervention, an assessment needs to be made over whether the outcome can be achieved through one-off payments rather than on-going payments. If the 'broad and shallow scheme' is supposed to 'save' agriculture then it is in danger of providing support which substitutes itself, in part, for the marketplace. If it is set at a minimalist level it is difficult to see how it will represent real 'public good' value for money or make a real difference to farm income. We therefore believe that the approach to achieving good farming practice suggested by the Environment Agency - one-off or short-term payments in order to obtain particular improvements which are then maintained through regulation - be thoroughly evaluated alongside the proposed 'broad and shallow scheme'. However, we recognise that increased permanent regulation can be as much a barrier to market concentration as subsidies. Such an approach is, we believe, entirely compatible with the proposals relating to cross-compliance made by Commissioner Fischler in the Mid-Term Review.

167. There is an important issue about how payments to farmers are best allocated. Direct payments based on the farm itself or paid direct to the producer are administratively simple. But if entitlement to payment, or the right to hold a quota, is attached to the individual farm, then it is likely to become consolidated in the price of the land. Farmers seeking to rent or buy land will as a result face higher costs. In contrast if payments or benefits are attached to the producer, as with milk quota in the United Kingdom, then a person who no longer produces any milk may receive a revenue simply by selling quota. Thus the attainment of environmental goals may best be achieved by a third, relatively costly method: by paying directly for the delivery of environmental benefits.

168. We are concerned that a flat-rate area payment under the 'broad and shallow scheme' must not be regarded as a payment to farmers to meet the cross-compliance standards that are already required under European regulations on CAP direct payments - and also those standards which will be required in future. Cross-compliance rules could form the bottom tier of an environmental scheme without the costs and whole-farm audit requirements of the 'broad and shallow scheme'.

169. Like the Policy Commission we are, though, in favour of the existing 'deep and narrow schemes', such as the Countryside Stewardship Scheme. Much of farming is already conducted properly, but environmental improvement remains necessary and desirable and may be economically advantageous. We recommend that existing agri-environmental schemes are simplified, making it as easy as possible for farmers to benefit from them.

170. The Government has said that it will conduct trials of the 'broad and shallow scheme' before the full project is 'rolled out'. These trials really must be attempts to see if the project delivers value for money, environmental gains, easier administration, and the ability to be flexible as circumstances change. The Government must make clear that one of the consequences of the trials could be to abandon the project as failing on the above counts.

270 Review of agrienvironmental schemes in England: Initial consultation. The consultation letter is available on the internet at http://www.defra.gov.uk/corporate/consult/agrienv/letter.htm. Back

271 Memorandum submitted by the Countryside Agency, Ev 347, para 5. Back

272 Memorandum submitted by the Ramblers' Association, Ev 127, para 3. Back

273 Evidence taken on 6 March 2002, Ev 139, Q.584. Back

274 Evidence taken on 6 March 2002, Ev 139, Q.591. Back

275 Evidence taken on 6 March 2002, Ev 139, Q.591. Back

276 Memorandum submitted by the Countryside Agency, Ev 348, para 14. Back

277 Evidence taken on 6 March 2002, Ev 139, Q.591, and Ev 170, Q.652. Back

278 Evidence taken on 17 April 2002, Ev 214, Q.770. Back

279 Evidence taken on 30 January 2002, Ev 35, Q.164. Back

280 Evidence taken on 6 March 2002, Ev 139, Q.591. Back

281 Evidence taken on 30 January 2002, Ev 28, Q.126. Back