APPENDIX 32
Memorandum submitted by the National Consumer
Council (A43)
EXECUTIVE SUMMARY
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.
FUTURE OF
UK AGRICULTURE
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.
TOPIC 1: THE
PROSPECTS FOR
PRODUCTION SUBSIDIES
AND QUOTA,
AGAINST THE
BACKDROP OF
WORLD TRADE
LIBERALISATION AND
THE MID-TERM
REVIEW OF
THE AGENDA
2000 REFORM OF
THE CAP
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.
Price
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.
Environment
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.
Conclusion
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.
TOPIC 2: HOW
BETTER STEWARDSHIP
OF AGRICULTURAL
LAND CAN
BE PROMOTED
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.
Conclusion
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.
TOPIC 3: THE
OPPORTUNITIES AND
DIFFICULTIES FACED
BY AGRICULTURE
AS A
RESULT OF
POSSIBLE REDUCTIONS
IN PRODUCTION
SUBSIDIES
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.
Conclusion
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.
CONCLUSIONS AND
RECOMMENDATIONS
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
| 
