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


Memorandum submitted by Water UK (A30)


  Water UK is the representative body of the water industry in the UK. Because of the links between land use and water resources, the future of UK agriculture and the future of the water industry are inextricably linked. The water industry has a direct interest in agricultural subsidies as they influence the way in which the land is managed, which in turn affects the quality and availability of the nation's water resources. Therefore we welcome the opportunity to submit evidence to this inquiry.

  Water UK believes that agricultural policy should contribute to sustainability. This requires not only affordable high quality food production, but also a cohesive rural society, vibrant rural economy and enhanced natural environment.

  Agriculture in the UK is currently unsustainable and therefore we believe there must be a radical rethink of agricultural subsidies and this will require changes to the CAP. However, we are concerned that a reform of the CAP may provide the right answer to the wrong question—namely, how can we make CAP better. Rather than asking a different question—which is how can we best meet the social, environmental and economic needs of rural Britain (or indeed Europe). The best way to achieve these objectives may be to completely scrap CAP subsidies and build a new environmental subsidy regime which is open to all sectors.

  Put simply, it is our view that agricultural production subsidies should be ended. In their place we would like to see payments for positive land management, enhancement of biodiversity and protection of natural primary resources and if necessary payments to ensure a sustainable rural economy. These payments should not be explicitly linked to farming, but could include payments to farmers if this is seen as the best way to meet social and environmental objectives.


  The current approach to agriculture in the UK is unsustainable.

  The UK Government should push for the CAP to be replaced by a non-sector specific support scheme that supports rural sustainability.

  Until the CAP is replaced, it should be reformed to shift farm subsidies from production to environmental stewardship and enhancement.

  Payments for livestock should be based on area not headage to prevent overstocking and therefore reduce soil erosion.

  The current demand for agri-environment grants falls far short of their availability. Greater Government investment in agri-environment would raise farm incomes and benefit the rural economy.

  Agri-environment schemes must be developed that specifically focus on water management and the prevention of diffuse pollution.

  The Government should go further than cross-compliance and also make subsidies conditional on water, nutrient and energy audits for farms. Practically this could be done by allowing a general binding rules approach so that those farms within Assured Produce schemes could be exempted if the schemes have similar standards.

  Substantial Rural Development Regulation grants should be made available for farm improvements, which have environmental benefits, such as winter storage reservoirs, improved organic waste stores and efficient irrigation/water reuse systems. These would benefit those sectors of farming that are currently unsubsidised.

  Subsidies should be used to enable farms to deliver services such as urban flood protection, pollution attenuation and biodiversity enhancement, and promote alternative uses of land such as industrial crop production, energy crop production and sewage treatment.

  The Government should provide free advice, guidance and training for all farmers, similar to that previously provided by ADAS.


  Consumers pay in three ways for the current CAP system. Firstly they pay through taxation, as over 40 per cent of the EU budget goes on the CAP. Secondly they pay in higher food prices, as the CAP inflates the price of certain foodstuffs up to 20 per cent more than the world market price. Thirdly they pay through the cost of cleaning up the off-farm environmental impacts of subsidised farming.

  If we look specifically at the UK, it is estimated that the CAP costs consumers £10 billion a year directly through higher taxes to pay for subsidies and higher food costs arising from quotas and tariffs. They also pay indirectly for the CAP through water bills and taxes for the costs of cleaning up the impacts of agricultural pollutants, this has been estimated at £172 million each year. In addition to these costs there are environment and social costs arising from the CAP, which has lead to a subsidy dependence culture in sections of agriculture and has lead to loss of biodiversity and environmental degradation in the British countryside (the cost of this damage is estimated at £1,323 each year).

  The environmental problems we need to address are, inter alia, water pollution, soil erosion, over grazing, habitat destruction and flooding. In more detail the sort of effects that farming can have on the environment in general and the water environment in particular are:

    —  the management of land used for farming and food production has a direct impact on the hydrological cycle, this affects resource availability for the water industry in terms of groundwater levels and surface water levels, it can also increase the likelihood of flooding;

    —  high stocking densities can lead to soil erosion, loss of biodiversity, increased flooding risk and diffuse pollution;

    —  increased production levels can lead to diffuse pollution from crop protection products and fertilisers, which have an impact on raw water quality and has cost, energy and quality implications for the water industry;

    —  biological contaminants from livestock farming and untreated manure spreading, such as viruses and bacteria, can adversely affect water quality; and

    —  methods of ploughing and types of crop production can affect soil erosion, which can lead to turbidity in watercourses. They can also affect run-off patterns which can contaminate groundwater and in extreme weather may also contribute to flooding.

  The current system of subsidies does very little to mitigate these effects and in fact in increases the likelihood they will occur.


  Clearly farmers and the rural economy should continue to play a major role in food production, however UK agriculture must have a more environmental focus. Current production subsidies are unsustainable and should be removed, indeed by 2004 subsidies could be challenged under the GATT rules. Both the MacSharry and Agenda 2000 reforms improved the CAP but did not address the fundamental problem. The fundamental problem is that the CAP was designed to maximise production, and it has been so successful that we now over-produce all subsidised commodities (even with set-aside and quotas we are on course to return to the pre-reform days of surplus lakes and mountains). We now need a totally new system and the reforms are merely adding a green element to a system that is still geared to maximum production. Introducing set-aside, modulation etc is similar to stepping on the brakes whilst keeping your foot fully on the CAP production accelerator. However, any new system should address the problem of eco-dumping, in which domestic production is replaced by imports from countries with much lower environmental, employment and animal welfare standards.

  Even if we fully convert the CAP to a farm support system with no links to production we should still ask why we are supporting farming to a level that would not be countenanced for any other industry. The answer may be that since farming is an activity that uses 80 per cent of the land in Britain that farm subsidies are a method of funding land management. If this is the case then perhaps it would be better to totally decouple the subsidy from the farming industry by scraping the CAP and link subsidies to countryside management. This would open funding up to other sectors, such as providing funds to NGOs for managing nature reserves, or paying water companies for catchment management. This may sound extreme but many of the UK's Natura 2000 sites lack sufficient funding for appropriate management and diverting money from farm subsidies to countryside subsidies could ensure adequate protection for these sites whilst the associated conservation jobs would provide rural employment.


  Despite the need for removal of the CAP and its replacement with a subsidy regime that promotes sustainability, we understand that the power of the European farming lobby and the Qualified Majority Voting system, mean that the reform of the CAP is likely to be slow and gradual. Therefore, in the absence of wholesale reform, we would like to see an increase in the second pillar of the CAP. Whilst the Agenda 2000 reforms have generated a lot of discussion they are in fact very modest and the non-production element of the CAP is still only around 10 per cent of the total budget. The reform of the CAP must be complementary to the UK and EU objectives for environmental policy, in particular in relation to the Water Framework Directive.

  The CAP should aid the growth of multi-functional agriculture that has additional benefits other than food production. Farmers who receive support under the CAP must meet the standards of good farming practice and farmers should be eligible for additional levels of support where they deliver environmental benefits by going beyond these standards.

  CAP reforms should continue to move towards de-coupling subsidies from production and increased funding for rural development and agri-environment measures. Much of the CAP funding has no environmental benefit and a number of the CAP subsidies support environmentally unsustainable actions. For instance, we believe that CAP subsidies for maize production should be ended. Despite the environmental initiatives by the UK maize growers association to limit environmental damage, maize production leads to higher levels of pesticide use, greater nutrient leaching and increased soil erosion on slopes, than other forms of fodder production. There should be a review of all subsidies to assess their environmental impact.


  It is concerning that the UK does not appear to be maximising the possible environmental measures permitted under the CAP. The level of agri-environment schemes, the amount of set-aside, the level of the organic conversion scheme and the way in which modulation has been applied in the UK, do not maximise the environmental potential of the Agenda 2000 reforms. In the absence of scrapping or reforming the CAP we would like to see the Government at the very least taking every opportunity to green the CAP to further DEFRA's environmental aims.

  We believe the amount of environmental spend in the UK under the CAP is woefully inadequate. For example over the next seven years the planned spend on Countryside Stewardship schemes is £566 million. By contrast, each year the water industry spends at least £100 million on the operational costs of removing pesticides from raw water and over the past 10 years it has spent £1 billion on pesticide removal infrastructure. It is a similar picture for nitrates from agriculture where companies spend around £14 million each year treating or blending water to meet drinking water standards.

  It is our understanding that current CAP arrangements allow for up to 20 per cent of funds to be allocated to second pillar activity and that the allocation is close to this level in a number of EU countries. However in the UK the level of spending under the second pillar is closer to 5 per cent, given the need to lessen the environmental impact of farming and given the over-subscription of agri-environment schemes, we find it difficult to reconcile the current funding situation with the statement from DEFRA about sustainable farming.

  There should be an expansion of the agri-environment scheme programme. There are currently no specific agri-environment schemes for water management or the prevention of diffuse pollution. A number of the schemes have incidental water benefits, but the enhancement and protection of the water environment in its own right is not recognised in the funding regime. We recognise that spending on second pillar activity requires match funding by the Member State however, we believe the establishment of water and pollution agri-environment schemes is essential to meet the requirements of the Water Framework Directive.


  Assisting farmers in moving from bad to good practice is hampered by the lack of a coherent framework to water management at the catchment level and a lack of funding mechanisms. It is also hampered by the lack of a free on farm information service. This was formally provided by ADAS but now there is no independent free advice service.

  There are specific actions that should be funded such as payments for winter storage reservoirs to reduce the impact of farm abstraction on water resources, or the provision of on-farm storage for organic wastes.


  The current aims of farm water management are to drain water from the land and into the sea as quickly as possible. Separation of rivers from their floodplains has had a significant effect on their hydromorphology. The CAP subsidies for increased production have led to an increase in hard flood defences to enable the use of riparian lands for year-round high value agricultural production. This has meant the removal of wetland ings and floodplains which has restricted the capacity of rivers to deal with increased flows. This has compromised the natural regulating function of wetland ecosystems and contributed to the catastrophic flooding of recent years. In the past, rivers were much wider and more variable than their current state. A study of current riparian areas shows that most ings or floodplains are not under agricultural production and a number of riparian wetlands have been drained. Farming up to the edge of watercourses both adds to pollution risk and disconnects the river from its floodplain. If the funding structure were changed agricultural land could play a significant role in attenuating flood hydrographs.

  However, one of the major obstacles to funding for recreation of riparian wetlands for multi-functional flood storage is the level of CAP funding. There should be an expansion of the agri-environment scheme programme. There are currently no specific agri-environment schemes for water management or the prevention of diffuse pollution. A number of the schemes have incidental water benefits, but the enhancement and protection of the water environment in its own right is not recognised in the funding regime. We recognise that spending on second pillar activity requires match funding by the Member State, however, we believe the establishment of water and pollution agri-environment schemes is essential to meet the requirements of the Water Framework Directive.


  The water industry believes in the "polluter pays principle". We believe that water customers should not have to pay higher water bills to clean up fertiliser, pesticide and pathogen pollutants from farming. We are concerned that the water industry is targeted by the Environment Agency over point source pollution, whereas diffuse pollution from farming is not being addressed.

  However, we also understand that there are difficulties in addressing diffuse pollution and that farmers are not intentional polluters. We believe that the current system of subsidies provides farmers with no incentives to tackle diffuse pollution. On the contrary, payments based on maximised production (set-aside is still only a small part of the CAP budget) and high stocking densities leads to increased diffuse pollution.

  This is sending the wrong signals to farmers. Farmers should be being incentivised to reduce diffuse pollution, this could be done through increasing the amount of payments available for set-aside. There has been some practical progress with the Government allowing 10 metres (rather than 20 metres) set-aside strips for water course protection, but there still needs to be a lot more work done to address this issue.


  The farming industry uses 80 per cent of the land in the UK and as such has an impact on the environment. In particular it has an impact on the water and water related environment. The current agricultural subsidy system focuses on providing production subsidies and gives scant regard to mitigating the environmental damage caused by farming.

  We believe that in the long term the production based subsidy approach should be scrapped. However, we recognise that this will be difficult, both practically and politically. In the short term the current subsidy system needs to be greened as much as possible and we should not on principle be paying subsidies to farmers who cause environmental damage. Indeed the Government should be making better use of funds within the CAP to promote environmental stewardship.

14 December 2001

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