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


Memorandum submitted by the National Consumer Council (A43)


  UK and EU agriculture has developed over the last four decades around a Common Agricultural Policy (CAP) which acts against the interest of the consumers and the environment. Agricultural policy is out of step with the demands of consumers—including those on low income—for quality, wholesome foods that are affordable and produced with due regard for the environment.

  The Select Committee's inquiry is timely given the forthcoming Agenda 2000 mid-term review, and the external pressures of trade liberalisation talks and EU enlargement. There are also internal pressures at work. These include the demands for a more consumer responsive and environmentally sustainable agricultural policy. The Policy Commission on the Future Farming and Food, established by the government to advise them on how to achieve a sustainable, competitive and diverse farming sector, is due to report at the end of January 2000. We look forward to robust recommendations.

  We have long argued for reform to the CAP. In particular we have pressed for the abolition of price support in favour of more direct payments for environmental measures. The MacSharry (1992) and the Agenda 2000 reforms have gone some way towards achieving this. However, much more needs to be done to bridge the gap between what agriculture policy provides and what consumers want. The shift from Pillar 1 to Pillar 2 measures should continue.

  The UK government could encourage farmers to improve stewardship in the way it interprets the CAP measures such as by increasing the amount of money available through "modulation" from 4.5 per cent to 20 per cent. They could also provide government resources for training and advice to improve environmental management.

  We believe CAP reform will bring benefits to society as a whole, including consumers and the environment. It should provide opportunities for farmers in finding ways of meeting consumers' needs. Farm assurance schemes have the potential to bring farmers closer to the market. We are looking at how these schemes could work better to raise consumer confidence.


  The National Consumers Council's purpose is to make all consumers matter by putting forward the consumer interest, particularly that of disadvantaged groups. We research, campaign and work with those who can make a difference to achieve beneficial change for consumers. One of our key objectives is ensuring that markets and public services work for everyone. To this end, we have been campaigning for many years for reform of the CAP to make the agricultural market work better for consumers.

  We have long argued that the CAP acts against the interests of consumers because it restricts their food choices, and causes them to pay more for their food than they would otherwise. It also encourages intensive production that is out of step with consumers' demand for quality, wholesome foods. It puts pressure on animal welfare standards, and damages the environment. Future agricultural policy should address these concerns.

  We welcome the opportunity to contribute to this Select Committee Inquiry, Future of UK Agriculture: farming beyond subsidies? It takes place against the backdrop of the work of the Policy Commission on Farming and Food which provides an opportunity to consider the creation of a sustainable, competitive UK food and farming sector. We look forward to the Commission's report—and the government's subsequent response—and to robust recommendations that will address many inadequacies in the agricultural sector.

  Below, we consider the topics identified by the Committee. However, we believe they are rather narrowly drawn. In line with our view about agricultural policy, we are responding to these topics more broadly, with a strong consumer—rather than industry—focus.


  We have long argued for the abolition of price support in favour of more direct payments for environmental measures. There has been a gradual shift in this direction resulting from both the CAP reform process (the latest being Agenda 2000) and the pressure of trade liberalisation. However, there are other forces driving these changes including consumer needs, a requirement to safeguard the environment, and EU enlargement. At the UK level, we hope that further pressure will emanate from the Policy Commission on the Future of Farming and Food and subsequent government policy. We consider each of these below.

The Consumer Perspective

  Research into consumer attitudes towards food and farming shows that consumers expect safe, wholesome, affordable food of good quality. Many consumers also want food that has been produced with due regard for the environment, and to high animal welfare standards.


  Cost is one of a number of factors consumers take into account when buying food. Price is particularly important for those on low incomes who spend up to 25 per cent of their average weekly income of £96 on food (Department for Environment, Food and Rural Affairs, National Food Survey, 2001). The CAP impacts on consumers' costs through support prices, intervention, export subsidies and border measures. It is estimated that EU agricultural policies cost the individual £187 per person per year1 through increased prices and higher taxes, and most of this cost is down to the CAP. The CAP continues to make food prices higher than they would otherwise be.

Production Methods

  Consumers are becoming increasingly concerned about the way food is produced—in particular, its effect on food safety and quality. Some are also concerned about the effect of agriculture on the environmental and animal welfare standards. This shift in attitudes has largely been influenced by the number of high-profile food safety crises that have occurred across the EU over recent years, such as BSE and Salmonella.

  A number of recent surveys illustrate consumers' concern. To pick two examples:

    —  77 per cent of consumers were very or fairly concerned about food production methods.2

    —  Consumers are concerned about the effects of pesticide use and particularly where they could harm growing children (77 per cent), harm themselves (73 per cent) and pollute generally (74 per cent).3

  Even though intensive production may produce food at an apparent low cost, consumers pay in other ways. For example, consumers pay indirectly through their water bills for the cost of removing pesticides from drinking water.

Low-income Consumers

  The National Consumer Council recently initiated a project to find out the views of consumers on low incomes. This involved two workshops—in the north-east and south-west of England—carried out over a weekend. Our partners were the Food Standards Agency and the Department for Environment, Food and Rural Affairs (DEFRA). The consumers who participated expressed concerns that ranged far beyond ensuring that food was affordable. Indeed, they cared deeply about the food they ate and how it was produced. They believed, for example, that it was important to invest in maintaining the countryside and that farmers should be paid as guardians of it. They also called for a simple logo scheme to enhance the trust in the food they buy. A report of the project, Feeding in to food policy, is submitted as additional material to the Committee along with a video compiled by participants of the north-east workshop.

  More government funds should be released to assist farmers to convert to organic production. Even so, many consumers may never be able to afford organic food and yet they are clear that they would like food produced more extensively and sustainably. If the UK farming industry is to ensure that the needs of low-income consumers are met, it will need to develop a range of foods produced by a variety of farming methods at different prices.

Food quality

  Food quality standards suffer under conditions where the market price is manipulated through guaranteed prices and intervention buying. This is because producers tend to look to the EU's low common standards for food products bought into intervention rather than to the standards demanded by consumers.


  At the same time, general awareness of the environment and the damaging effects of intensive agricultural production systems—promoted by the CAP—have contributed to consumers' demand for more environmentally sustainable farming. The types of damage resulting from intensive agricultural practices include: reductions in water quality and pressure on quantity; air pollution; soil erosion and degradation and loss of biodiversity.

  We have long argued that CAP reform, with sustainable agriculture as a main objective, is essential if Europe is to meet key environmental challenges over the next decade.

EU enlargement

  The first wave of EU enlargement is expected to take place in 2003 at the earliest, and will incorporate Cyprus, the Czech Republic, Estonia, Hungary, Poland, Slovenia and possibly Malta. This poses enormous challenges to the CAP. Farm sectors in many of the candidate countries are much larger and their integration will lead to a potential 55 per cent increase of the agricultural workforce and an additional 25 per cent in the EU agricultural land area.4 The potential for massive increases in production of cereals (one of the main crops produced) and livestock will serve to compound the existing problems.

  Future development of the CAP therefore needs to be compatible with the objectives/challenges of enlargement as well as the consumer and environmental pressures within the EU.

Globalisation and world trade

  World Trade Organisation (WTO) negotiations impact on the CAP—the EU is the world's largest importer and second largest exporter of agricultural products. It is in the EU's interest to ensure that the development of global trade is based on clear, acceptable trade rules.

  The EU's proposal for WTO negotiations (September 1999) includes explicit commitments to continue to reduce export subsidies, import tariffs and domestic support, provided other WTO members do the same. The proposal also stresses the need for negotiations to recognise the social and environmental role of EU agriculture.

  At the fourth WTO Ministerial talks in Doha in November 2001, the EU agreed to negotiate further reductions in trade distorting domestic support, improvements in market access, as well as reductions, with a long-term view to eventually phasing out export subsidies. Negotiations regarding "non-trade concerns" in agriculture, such as animal welfare and environmental protection were also agreed. These are developments that we support.

Agenda 2000

  The first interim review of Agenda 2000 reforms is planned for 2002-03. (The Annex contains the main components of the CAP since these reforms.) However, the European Commission has indicated that this review will be fairly minimal and only likely to consider the beef and arable sectors. The dairy, sugar and wine sectors are unlikely to be reviewed at this stage. It is our view however, that the internal and external pressures as discussed above, accelerate the need for much more radical reform of the CAP. The mid-term review of Agenda 2000 needs to go much further.

  We recommend it should:

    —  further decouple CAP support from production, including arable area payments, livestock headage payments and market price support;

    —  elimination of export subsidies and reduction of import tariffs;

    —  shift existing Pillar 1 CAP resources to fund Pillar 2 measures which includes wider structural, environmental and rural development aspects of agriculture.


  Production subsidies and quota have had their day. The internal and external pressures for reform can no longer be ignored. The most recent CAP reform—Agenda 2000—is built on the 1992 MacSharry reform. It continues the shift away from market price support towards more direct payments. This is a shift we strongly support. It should lead to a reduction in farm gate prices for most commodities. But further reform is needed to ensure that farm policy is more focused on consumers' needs. We also believe that the needs of low-income consumers need to be taken into account to ensure they have choice beyond cheap, poor-quality food.


  Agricultural policies need to change at both the EU and UK levels to promote better stewardship of the land, to give farmers greater incentives, and, at the same time, provide what consumers want.

EU level

  At the EU level there has been a gradual shift away from subsidies which promote over-production and support inflated prices. Modest resources are being used to fund schemes which reward farmers for more sustainable agricultural practices. This shift from Pillar 1 to Pillar 2 needs to be dramatically increased.

Shift funds from Pillar 1 to Pillar 2 of the CAP

  Under Agenda 2000, 90 per cent of the CAP budget is allocated to Pillar 1 measures while only 10 per cent is spent on Pillar 2. By shifting funding from Pillar 1 to Pillar 2, consumers will benefit from reduced market prices. Taxpayers will also get a better deal in the form of the environmental and social benefits from farming.

Consider increasing the EU rate of co-financing for Pillar 2 measures

  Pillar 2 measures are partly funded by the EU and partly by member states. In contrast, Pillar 1 measures are fully funded by the EU. The requirement for co-financing of Pillar 2 measures has benefit in that it helps to promote shared ownership and accountability for the schemes among member states. It also helps to ensure schemes that are specifically linked to local or national needs. However, if these levels of co-financing are retained insufficient resources may be devoted to environmental and rural development programmes. If the EU share was increased it could promote more take up of Pillar 2 measures which in turn could improve land stewardship.

Consider broadening eligibility criteria to include all land managers.

  The majority of Pillar 2 funds are allocated to farming activities. We believe there is a case for extending the eligibility criteria so that all land managers can apply for Pillar 2 funding.

  CAP reform is inevitably a slow process. In the meantime, there are a number of changes that could be implemented at the UK level within the existing policy framework.

UK level

  There is a range of measures that the UK government could take to do more to promote stewardship of agricultural land. We propose:

    —  increasing the UK's rate of modulation to the EU maximum of 20 per cent. The current UK proposal is to "modulate" at a rate of only 4.5 per cent over six years. The UK government should increase the rate of modulation to the maximum EU rate of 20 per cent, phased in over the same period. This will serve to decouple some CAP funds from production and provide an incentive for producers to practise more sustainable forms of agriculture.

    —  providing better support for producers wishing to convert to organic or other extensive systems of production. The UK organic sector has received relatively low support compared to that in other member states with the result that the UK's organic sector has been under-developed and up to 75 per cent of organic products sold in the UK are imported.5 The proposed organic action plan to be implemented in 2002 is a step in the right direction.

    —  providing more government resources for training and advice for farmers in order to assist them to improve or adopt environmental management and rural development practices. Farm business and environmental support and advice given to farmers and land managers are very fragmented at present and more needs to be done by the government to integrate and better resource advice and training programmes.

    —  providing more transparent information about the relative cost of different agricultural production systems. Comparisons of food costs rarely consider all the "external" social and environmental costs involved—the cost of removing agri-chemicals from drinking water and environmental degradation, for instance. Consumers pay for these costs indirectly (through their water bills and other charges for environmental clean-up) not in the price of the food they buy. This may distort food choices in favour of food products from more intensive systems.


  In seeking to promote better stewardship of UK agricultural land, reform of the CAP is urgent. We believe that funds should be redistributed from Pillar 1 to Pillar 2 to promote sustainable agricultural practices rather than over-production and inflated prices. In the meantime, the UK government can implement a number of measures to meet the demands of consumers and society in general.


  The development of Pillar 2 of the CAP and the proposed promotion of rural development and agri-environment measures, represents a shift away from production-related payments to measures aiding industry restructuring and benefiting rural economies and the environment.

  Despite the current short-term economic difficulties facing UK farming (due to BSE, Foot and Mouth Disease, value of the pound against the Euro), the industry has a potentially positive future, given the opportunities to restructure and diversify. We believe, too, that CAP reform will bring some significant benefits to society as a whole.

Opportunities for farmers

    —  Better integration of EU agriculture into global markets. Cuts in production support will help UK and EU agriculture to become more integrated into global markets. It will allow farmers to respond better to price signals from world markets and to adjust their production accordingly.

    —  New sources of income for farmers will be created. Reducing production subsidies and shifting the funds to rural development measures will provide new sources of revenue for farmers.

    —  Opportunity for more equitable distribution of CAP funding. The system of production subsidies has led to problems of inequity where higher levels of support are provided to a relatively small number of producers. In addition, the current system does not offer financial incentives to producers who provide the environmental and social benefits demanded by consumers.

    —  Development of farm assurance schemes. There is a range of these self-regulatory schemes which operate in the UK. They have the potential to raise consumers' confidence in the agricultural products certified by the scheme but current schemes fall short in many ways. They have received much criticism, not least by the farming community, for failing to offer any more than the legal minimum in terms of food quality, safety and environmental standards. If farm assurance schemes of real value to consumers were developed, it could help farmers find their niche in the market and bring them closer to what consumers want. We are currently looking at the effectiveness of these schemes using our knowledge of the principles of self-regulation.

Benefits to society

    —  Development and promotion of more sustainable, multifunctional, agricultural systems. The reduction of production subsidies and shifting of funds to agri-environment measures will encourage producers to farm in ways that are less damaging to the environment and promote higher animal welfare standards. Such sustainable agricultural systems would be more responsive to the social and economic needs of rural communities. For instance, depending on the blend of measures that are adopted, rural development and employment opportunities are likely to be improved.

    —  Reduction in consumer prices. Reductions in market support should lead to lower prices for consumers. If reductions in farm gate prices are passed on to consumers, then the benefits are expected to be significant. DEFRA estimates that the annual food bill of a family of four would be lower than without CAP reform by about £65.00 (2 per cent off the retail food price index) and that the overall economic benefit will be worth £1 billion per year.6

    —  Improvement in food quality standards. The shift away from market support and intervention buying will mean that to improve their competitiveness, farmers will have to be more responsive to consumers' needs for quality food. (The food chain and in particular retailers, will also have influence on the quality of production.)

    —  Improvement in trade relations outside the EU. With reduced market disruptions and distortions, trade relations with both developed and developing countries will also improve.

    —  Increased transparency. Price support is opaque. Transfers from taxpayers, on the other hand, are transparent. Increased use of direct payments—which are funded through taxes as opposed to higher prices—will make farming subsidies more transparent.

Potential difficulties faced by agriculture

    —  Reduced support for some producers. Proposed reductions in production subsidies are likely to lead to reduced support for some farmers, particularly larger scale producers who benefit most from production support. But as we have argued earlier, there should be alternative sources of funding available in the form of Pillar 2 measures.


  We believe reductions in production subsidies will present many opportunities and comparatively few threats for UK and EU agricultural sector. This policy shift will provide many benefits to society as a whole. These include the improvements in food quality standards and expected reductions in consumer prices as well as the promotion of a rural development policy that is more focused on the broader demands of society and so better value for money for taxpayers. There will also be an opportunity for more equitable distribution of CAP funding and the development of more sustainable, multifunctional agricultural systems.


  The current pressures for reform provide an opportunity for agricultural policy to catch up with what consumers—and society in general—wants and expects. This could well result in significant changes in the agricultural sector, some of which could provide some new opportunities. But it is high time this change occurred.

  Below we summarise what we believe could and should be done at the EU and UK level.

EU level

    —  The internal and external pressures discussed in topic 1, accelerate the need for much more radical reform of the CAP. The mid-term review of Agenda 2000 needs to go much further. We recommend it should:

    —  further decouple CAP support from production, including arable area payments, livestock headage payments and market price support;

    —  elimination of export subsidies and reduction of import tariffs;

    —  shift existing Pillar 1 CAP resources to fund Pillar 2 measures which include wider structural, environmental and rural development aspects of agriculture;

    —  co-funding of Pillar 2 measures: The EU should consider increasing its share of co-funding Pillar 2 measures. This should result in better adoption of them, so encouraging sustainable development practices and better stewardship of the land;

    —  consider broadening eligibility criteria to include all land managers. There is a case for extending the eligibility criteria so that all land managers can apply for Pillar 2 funding.

UK level

    —  Increase the UK's rate of modulation to the EU maximum of 20 per cent rather than the 4.5 per cent it proposes;

    —  Improve support to farmers wishing to convert to organic or other forms of extensive production;

    —  Provide more resources for training and advice to assist farmers to adopt environmental management;

    —  Provide transparent information about the relative costs of different forms of production including the social and environmental costs;

    —  Encourage the development of farm assurance schemes that inspire consumer confidence in agricultural products.

18 December 2001

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