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


Memorandum submitted by the Consumers' Association (A4)


  1.  Consumers' Association (CA), publisher of Which?, Health Which? and other consumer magazines and information, is the largest independent consumer organisation in Europe. Food issues are one of our main campaigning areas and we regularly produce information on food issues within our publications. At European level, we are members of Bureau Européen des Unions de Consommateurs (BEUC), the European Consumer Organisation. At international level we are members of Consumers International through which we have representation at Codex Alimentarius.

  2.  Our memorandum sets out our concerns with the current approach to agriculture, based on subsidisation of production, and the problems that this has created. We will be examining these issues in more detail in a forthcoming policy report which will be sent to the Committee when it becomes available.


  3.  The current UK and EU approach to agriculture is unsustainable—it works against the interests of consumers, has also failed to help many farmers, and has failed to give sufficient acknowledgement to considerations such as food safety, quality and environmental protection. The problems have been highlighted by the Bovine Spongiform Encephalopathy (BSE) and foot and mouth disease (FMD) crises in particular. The prospects for agricultural production subsidies and quotas need to be seen in this context.

  4.  A new approach and emphasis are needed. The proposed review of certain aspects of the EU's Common Agricultural Policy (CAP) next year and the new round of trade discussions provide an opportunity to re-shape food and farming policy. A policy is needed that is focused on the needs of consumers, the countryside, sustainable agriculture, rural communities and the wider economy.

  5.  The establishment of the Department of Environment, Food and Rural Affairs, together with the Food Standards Agency should provide the opportunity for a different emphasis within the UK. However, any reform has to be seen in the context of the CAP. To date this has been mainly producer-focused and has failed to sufficiently recognise consumers changing attitudes and demands. Consumers expect to be able to have access to food that is safe, nutritious, of good quality and affordable and to be able to make healthy lifestyle and informed food choices. The CAP has worked against these objectives.


  6.  Although the original aims of the CAP to ensure sufficient and continuing supplies of produce, reasonable prices, an efficient and productive agriculture industry and a fair standard of living for the agricultural community are still laudable, they fail to recognise changing expectations. Policies under the CAP have been largely discredited and inadequate recognition has been given to broader issues such as the CAP's influence on intensive farming practices and its failure to give sufficient acknowledgement to food safety, quality and environmental protection for example.

  7.  The main criticisms of the CAP are that it:

    —  keeps EU food prices higher than prevailing prices elsewhere, and particularly hits low-income families that spend a high proportion of their income on food;

    —  is a substantial misallocation of resources;

    —  is inefficient and poor value for taxpayers, with a significant level of fraud;

    —  fails in many cases to provide adequate farm incomes;

    —  is anti-competitive and distorts markets;

    —  is actually in some sectors (notably sugar and dairy) a barrier to a single market;

    —  hampers EU enlargement;

    —  is an obstacle to world trade liberalisation;

    —  damages producers in less-developed countries by limiting their exports to us and by dumping surplus EU produce in their markets;

    —  encourages intensification and takes only limited account of sustainability and environmental objectives; and

    —  fails to tackle issues of food quality or to reflect animal welfare, health, diet or ethical considerations.


  8.  The policies of the CAP are complex and opaque. It seeks to support farmers by keeping food prices higher than they would be otherwise. Despite attempts at reform, this is still the essence of the CAP. Put simply, the EU fixes minimum prices for many farm products from within the EU. These prices are guaranteed. This is ensured, for example by buying and storing surplus foods (intervention) to stop prices falling. Cheaper imports from outside the EU are made less competitive by the imposition of import taxes that bring them up to EU prices. Exports by EU producers to countries outside the EU require large subsidies (export restitution or refunds) to make up the difference between the EU price and their price. This means that EU prices are generally higher than those on world markets.

  9.  Guaranteed minimum prices (support prices) are set by the EU's Agriculture Council. The mechanisms which operate are:

    —  Import quotas and taxes—Alongside the minimum price guarantee, the EU operates a system of Community preference in agricultural products. Import quotas limit how much non-EU countries can export to the Union. If prices on world markets are below those prevailing in the EU, imports are taxed to ensure that they cannot undercut EU-produced foodstuffs. If world prices are higher than EU ones, imports are subsidised, but this very rarely happens as world prices are usually well below EU levels.

    —  Subsidised exports—Surpluses produced in the EU are sold outside it. Because world prices for nearly all products are usually considerably lower than EU ones, food can only be exported if the EU pays a subsidy to reduce the price of its produce. The EU much prefers to subsidise exports than to dispose of the surpluses within the EU; subsidised EU consumption could simply mean that home demand for the produce at the full price would fall, creating yet more surpluses.

    —  Intervention—If the price on the EU open market falls below the guaranteed minimum price, farmers and traders have the option to sell to EU agencies which take the produce off the market, usually by putting it into store. This is called intervention buying. The hope is to raise the market price to at least the agreed minimum. If this happens, the stored produce is gradually put back on the market for resale. If, however, the market price remains at or below the guaranteed minimum, then the produce has to be sold at a loss or remains in store.

    —  Stock disposal—In addition, surpluses may be disposed of within the EU, for animal feedstuff production, or for the production of certain foods such as biscuits and ice cream. There are also occasional distribution schemes involving charities, hospitals and schools.

    —  Removal from the market—In the past, removal meant official destruction of fruit and vegetables. Criticism of this policy resulted in a shift by the Commission. The EU now provides financial support to farmer co-operatives, which may restrict the supply of produce to the market in order to keep prices up. The former destruction policy has in effect been privatised. The EU Consumer Committee has criticised[1] this use of public subsidies to create local monopolies.

    —  Processing—In other cases the EU insists that agricultural products are made into industrial products. Wine, for example, may be converted into industrial alcohol.

  10.  Initially, the CAP at least appeared to be serving farming interests. However, the boom fuelled by CAP support mechanisms and distortions produced by its agricultural monetary system ended in the early 1990s. This was largely due to the re-alignment of Sterling with other European currencies, combined with the BSE epidemic and more recently the foot and mouth disease outbreak. This has resulted in an income and confidence crisis which has been mainly concentrated among the smaller and more marginal farmers. The proportion of the EU's workforce employed in agriculture has fallen from more than 21 per cent to less than 6 per cent while production levels have generally risen as a result of increased use of inputs including advances in technology, increased use of intensive farming methods, greater reliance on chemicals such as pesticides and veterinary medicines and greater reliance on machinery. The broader consequence of this focus on quantity over qualify have not been effectively dealt with under the CAP.


  11.  We pay for the CAP both as consumers and taxpayers—so in effect pay twice for our food. The CAP takes up around half of the total EU budget—in 1999 CAP expenditure was around £27 billion. It has been estimated that in terms of higher food prices and taxation, the CAP costs an average family of four in the European Union around £16 per week. The current annual cost to UK taxpayers is around £5 billion—the equivalent of 2p on the standard rate of income tax. Food is still more expensive in the 15 countries of the EU than almost anywhere else in the world, but consumer choice is limited by import barriers and more than

5 billion has to be spent each year on dumping surplus dairy products, meat and grains on world markets. As low income families spend a higher than average proportion of their income on food, the CAP hits them the hardest.

  12.  We also pay for the negative impacts that result from the CAP—the detrimental effect it has on the environment for example and the cost of cleaning this up. As the CAP also fails to recognise issues of food safety and has no recognition of our nutritional needs within its objectives, the long-term health costs also need to be considered. These are very difficult to quantify, but one estimate has put the external costs of UK agriculture for 1996 at £2,343 million.


Impact on farm incomes

  13.  The CAP has also failed in its objective of ensuring a fair standard of living for the agricultural community. As a consequence of reliance on support prices, in the main, rich farmers have gained most from the CAP. This is because support prices are paid to all producers regardless of need or efficiency. Therefore larger, more efficient, lower-cost producers get considerable amounts of support: around 70 per cent of EU farm support goes to 30 per cent of farmers.

  14.  Certain groups of farmers have actually been adversely affected by the CAP. Pig, poultry and egg producers, for example, have suffered the consequences of artificially high cereal prices, as have those who farm less intensively. A lot of CAP spending also goes on subsidising and storing unwanted food and there have been serious problems with fraud and error when calculating payments due to their complexity. As price support is fixed in euros, UK farmers have been particularly vulnerable to exchange rate movements. CAP subsidies have also led to the collapse of prices in some sectors through boosting production as has been seen with sheep, where demand has not correspondingly increased.

Consumer demands

  15.  One of the concerns is therefore that while we pay through the nose for the CAP, it offers consumers no benefits and actually produces more of the food we don't want and fails to recognise our changing food demands. The table below gives an indication of how our tastes have changed over the years.


Milk and cream (ml)
Eggs (number)
Meat and meat products
Fish and fish products
Source: National Food Survey, MAFF

Nutrition considerations

  16.  Around one in three people will develop cancer at some time in their life and death rates from coronary heart disease in the UK are among the highest in the world. Official recommendations have identified changes which could help to bring down these rates. In the case of cancers, this includes an increase in fruit and vegetable consumption, ensuring that consumption of red and processed meat doesn't rise overall among the population, an increase in fibre from a variety of food sources and a balanced diet rich in cereals, fruit and vegetables. In the case of coronary heart disease, measures include: reduced fat intake (particularly saturated fat), reduced salt intake, increased carbohydrate intake and consumption of at least five portions of fruit and vegetables a day. Given the influence that the CAP has on food production, it is disappointing that nutrition considerations have largely been ignored.

  17.  While the CAP could be regarded as having a positive influence on healthy diets to the extent that it raises the price of dairy produce, sugar and red meat, which some might regard as desirable for health reasons, it also raises the price of bread, fruit, vegetables and olive oil (through higher cereal prices and import taxes) poultry meat. It also subsidises the consumption of surplus EU butter by selling it to cake and biscuit manufacturers.

  18.  Under Article 152 of the EU Treaty, there is a requirement that "a high level of human health protection shall be ensured in the definition and implementation of all Community policies and activities", but there is no evidence that health is taken into account in the CAP at all.


Animal health and food safety

  19.  While it is not possible to make a direct link between the CAP and food safety, it is clear that CAP has encouraged intensive farming practices and that these have in turn contributed towards food safety problems as demonstrated by BSE and FMD for example. As Jacques Santer, when Commission President in a speech to the European Parliament in 1997 stated: "Can we really go on claiming that BSE is an accident of nature? Is it not actually the consequence of a model of agricultural production, which pushes productivity at whatever cost?" The increased use of pesticides and veterinary medicines have also caused safety concerns for consumers—both of which are key elements of intensive farming methods. A CA survey in August 2001[2] asked about consumers concerns with modern farming practices. The aspects which more than eight out of ten claimed were of concern to them were: the use of drugs on animals, food safety problems caused by modern methods of food production, animal welfare and environmental pollution.


  20.  High support prices have encouraged agricultural production, and therefore intensive farming practices. Although some attempts have been made at integrating environmental goals within the CAP, they have had little effect. Some of these initiatives have suffered from inadequate resourcing, others such as the introduction of set-aside were designed to limit production. But although set-aside encourages farmers not to produce on part of their land, they can still receive a subsidy which may encourage them to produce more intensively on other land. Set-aside land may also be of poor quality and of little environmental interest. The effect of environmental measures has therefore been marginal. In its last audit, the European Environment Agency stated that: "agriculture remains a major source of pressure on the environment. It is becoming even more intensive and specialised". It also argues that farming "is the sector where the need to balance the dimensions of sustainable development is most evident".[3]

Impact on developing countries

  21.  The operation of the CAP also has wide-reaching implications for many countries outside the EU. Many countries face tariff barriers, such as quotas, against their produce. Subsidised EU exports can also have a damaging effect. Hardest hit have been those countries whose economies depend heavily on trade in one or two agricultural products, and therefore mainly developing countries. Some major sugar-producing countries have, for example, suffered greatly as a result of the vast expansion of EU sugar dumping, taking as much as one quarter of the world market. Although it has been claimed that surpluses help to alleviate world food shortages, European dumping and protectionism actually deter production in the areas where hunger exists. Beef, for example, has been sold in sub-Saharan Africa at one-third of the price of locally produced beef, thus destroying the market for local farmers.


  22.  Reforms in 1992 and 1999 have failed to improve the economic, social or financial efficiency of the CAP and the cost is now over a third more in 2001 than it was in 1992, when the most significant attempt at reform took place. There has been some moderation in the inflationary effect of EU farm support mechanisms for some foods, but high prices are maintained by excessive import charges and quotas (for sugar, butter, bananas, bread wheat, beef and fruit and vegetables) and by the continued dependence on the intervention system, for dairy products and beef.

  23.  The MacSharry reforms in 1992 were aimed at switching expenditure away from maintaining market prices towards direct payments to farmers. This should have resulted in lower prices for food producers and consumers, lower internal and export-subsidy budget costs, and a reduction in trade-distorting influences. Schemes were also introduced offering payments for non-production objectives, such as environmental objectives. But these measures did not apply across all CAP areas including the dairy sector, and the sugar regime. Direct payments were introduced in the livestock sector limiting the amount of EU subsidy based on herd and flock numbers, but they were accompanied by only minor adjustment of price support and market intervention and export subsidies still continued. The main emphasis was on the cereal sector: the target market price level was cut by almost a third between 1993-97 and producers were compensated for this potential loss of income through direct payments, provided that they agreed to set-aside an agreed percentage of arable land.

  24.  The reforms had a very limited effect. Set-aside only reduced production for a year for example and by 1996 the wheat area was back to its 1991 level. Production actually increased and at the same time, expenditure from the new subsidies increased the cost of the CAP—but this was mainly going on direct subsidies rather than export subsidies and market intervention.

  25.  The Agenda 2000 proposals promised a more radical approach, however they served largely only to create a number of concepts that continue to be used to defend the status quo. These include the idea that there is a uniquely European model of agriculture, that agriculture is "multifunctional" and that maintaining the European model and its multifunctionality requires the kind of measures included in the CAP—subsidies and agriculture protection.

  26.  Our concern is that while there is no doubt that agriculture is multifunctional—and can affect the surrounding environment, landscape and rural economy—the EU's assumption is that these non-production aspects can only be achieved through support for agricultural production. This ignores the detrimental effects that the intensive model of farming that the CAP encourages has on the environment, and the fact that agriculture is not the primary source of income and employment in many rural areas. We consider that it is more efficient and effective to provide these rural benefits through specific policies rather than through subsidising agriculture.

  27.  The outcome of the Agenda 2000 proposals was largely a modest adjustment of the 1992 reforms in order to meet the increasing pressure of trade commitments under the Uruguay Round Agreement on Agriculture. These attempts at reform therefore did nothing to reduce wholesale food prices, mainly because they didn't succeed in reducing import charges or other barriers to food imports by any significant amount, and the maintenance of intervention buying and export subsidisation for major animal product foods. As a result the burden on taxpayers has actually increased with a shift towards direct compensation payments without any offsetting gains in terms of tackling the strain which modern agriculture imposes on the environment. The shift has also failed to help incomes and employment in rural areas, and has left the larger farmers as the major beneficiaries under the CAP. Given these failures, far more radical change is necessary.


  28.  The EU is particularly badly placed as it goes into the new round of trade negotiations. Although most developed countries subsidise and protect their agriculture, they don't do it as much as the EU. While many countries are scaling down their subsidies, the EU is seeking to defend its system on the grounds of subsidising the "multifunctional" aspects of agriculture.

  29.  In the new trade round, the Cairns Group of major exporting countries (including the US, Australia, New Zealand, Brazil and Argentina) will be looking to reduce subsidies and open up import access. There is also likely to be pressure to redefine the categories of domestic support so that further limitations of subsidies can be agreed.

  30.  In this context, the Agenda 2000 proposals will appear particularly weak due to: a lack of intention to reduce the size or influence of direct production-linked subsidies to farmers, and instead to increase them; too small a level of price adjustment to remove the need for export subsidisation at least until 2005; and the failure to reduce domestic support prices.


  31.  The Committee is considering the prospects for production subsidies and quotas, against the backdrop of world trade liberalisation and the mid-term review of the Agenda 2000 reform of the CAP and the opportunities and difficulties faced by agriculture as a result of possible reductions in production subsidies. Consumers' Association is strongly of the view that the type of changes that are needed cannot be achieved by tinkering with the CAP: major reforms are needed.

  32.  The long-term costs of intensive practices need to be considered in terms of their environmental and public health consequences, not merely in terms of short-term economic benefits through increased outputs. These problems can only be addressed through greater focus on the end user and on the broader implications of food and farming practices. Nutrition policy for example has to be integral to decisions about food and farming, taking into account the role that diet can play in preventing premature death. Consumers need to be given more information about what they are eating and how it is produced, but also need to be involved in discussions about the type of sustainable agriculture and food production systems that are needed.

  33.  The starting point for reform has to be to ask what sort of food consumers want and how this demand can be met. Some of our key survey results are summarised below. These show that taste, quality and safety are consumers' main priorities when buying food and eating out.

Important factors when buying food:
% stating that

very/quite important
Healthy eating
How produced
Where produced
Base: 1002
Importance of factors when eating out:
% stating that
very/quite important
How produced
Healthy eating
Where produced
Base: 1002


  34.  CA considers that food and farming policy should be radically reformed. The CAP in its present form should be abolished. It should be replaced with a market-oriented policy in which farmers are free to produce the foods that consumers actually want. The provision of high quality, nutritious, safe food should be the priority for policy making, with a shift towards a broader consumer-focused food policy instead of a producer-driven agricultural policy. Price support, direct and indirect agricultural production subsidies, quotas, export subsidies and set-aside should be abolished and replaced with green measures designed to encourage environmentally friendly agricultural practices, and non-agricultural policies designed to maintain rural communities and promote tourism. CA recognises that transition will be difficult and would support measures such as bonds to assist those who wish to leave farming to do so.

  35.  The EU's role should include ensuring food safety, the provision of appropriate consumer information and the promotion of a competitive single market in both food and primary agricultural produce which can deliver the range and quality of products, value and choice which consumers demand. An essential aspect of this shift towards a consumer-focused food policy should be a European Food Authority with a broad remit including nutrition issues, adequate resources and sufficient powers to enable it to influence EU policy.

  36.  The EU should adopt a negotiating mandate for the trade negotiations that is directed towards securing an effective agreement on the dismantling of domestic support of agricultural production. This should specify phased annual reductions of existing level of support in the developed countries, with specific annual reductions of support on every major agricultural commodity.

  37.  The rapid phasing out of export subsidies and credits, and the rapid scaling down of import tariffs should be agreed within the framework of current WTO negotiations, so as to allow the entry of a wider range of foods from third countries.

  38.  More specific measures, including interim arrangements, that we considered are required to bring this about, including interim arrangements will be described in our forthcoming policy report.

Consumers' Association

4 December 2001

1   EU Consumer Committee (a consultative committee of the Commission): Opinion on the CAP, 8 December 1998. Back

2   1,002 adults aged 15+ were interviewed in-home between 10-16 August 2001. Back

3   Environmental signals 2001, European Environment Agency. Back

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