APPENDIX 22
Memorandum submitted by Water UK (A30)
INTRODUCTION
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.
KEY POINTS
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.
COSTS OF
THE CURRENT
AGRICULTURAL SUBSIDY
SYSTEM
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.
REMOVING THE
CAP
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.
POSSIBILITIES FOR
REFORM OF
THE CAP
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.
REFORM WITHIN
THE UK WITHIN
THE CURRENT
CAP STRUCTURE
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.
ON-FARM
WATER MANAGEMENT
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.
MULTI-FUNCTIONAL
FLOOD STORAGE
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.
DIFFUSE POLLUTION
CONTROL AND
SOURCE PROTECTION
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.
CONCLUSIONS
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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