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


Memorandum submitted by the Royal Institute of Chartered Surveyors (RICS) (A48)

  The RICS welcomes this opportunity to submit written evidence to the Committee on the future of UK farming. RICS members are professional managers and advisers on property and the environment and as such the Institution is well positioned to advise on matters relating to land use.

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.

  RICS has for a long time advocated reform of the CAP which would mean a gradual reduction in support for food production, with subsidies instead redirected to the second pillar of the CAP therefore providing support to farmers and land managers for rural development and environmental management work. RICS is also firmly of the view that market distorting tools, including quotas and price subsidies, should be phased out but that this needs to happen over a period of time.

  Whilst supporting a redirection in the payment of public subsidies for production, RICS is only too aware of the pressures facing farmers and landowners, particularly in the light of the foot and mouth crisis which itself has come on top of the worst crisis in British agriculture for 70 years. RICS also recognises that farmers should not be unfairly penalised for attempting to get the best out of a system which supports over production. The Institution therefore believes that product price support should be maintained in the short term as producers adjust to market conditions. Failure to do this would impact unfairly on many producers who do not have the necessary capital to alter their business strategies in a swift amount of time. We believe area and set aside payments should also remain attached to land during this transitional period.

  RICS believes that incentives should be available for producers to provide some non market goods and that these incentives should be related to the benefit enjoyed by the public from these goods. Producers have, to a certain extent, received a bad press in recent years from members of the public who perceive that they are paying farmers for little or no benefit, whilst at the same time many farmers are seen to be damaging the environment. Although isolated cases exist, in many areas, farmers and land managers are actively seeking to protect the environment and to produce in an environmentally sensitive way. Such behaviour needs to be nurtured and encouraged.

  Modulation is one tool that can be used by member states in order to redirect subsidies under the second pillar and the UK Government has signalled it's future policy intentions by deciding to modulate CAP monies to rural development programmes. One of the RICS's main concerns is that there has been only a limited amount of research conducted into what the effects of increasing modulation may be on the rural economy as a whole. If the ultimate aim of reform of the CAP is to support producers whilst simultaneously maintaining and improving the natural environment, it is important to get the balance right so that all aspects of the rural economy are receiving maximum benefit. RICS is currently in the process of tendering for some research to be done into this very issue. Further information is needed into the level of modulation which will be of the most benefit, providing assistance to the environment, land managers, local businesses and communities.

  In particular our members are concerned that without this research too high a level of modulation may have an impact on the capital value of land in some regions of the UK. RICS's concerns are that too high a level of modulation may lead to some farmers in areas where there is not a great potential for rural development producing food more intensively in order to maintain their incomes.

  The reform of the CAP cannot be viewed alone in the context of European agriculture. There are two other key pressures at this time driving change. These are enlargement of the EU and the current round of World Trade talks. The UK Government must look at its agricultural and rural policies in the wider context of all three of these events. In addition, there are other pressures on the current system to reform, namely:

    —  The introduction Euro and its effect on the national and international markets

    —  Advancing technology including the role of GMOs

    —  Consumer demand

    —  Regulation and specification for imports and exports

    —  Environmental care

    —  Climate change

    —  Water supply and use

    —  Pollution

    —  Population increase

    —  Skills shortages and an ageing population in rural areas

  All of these pressures need to be considered by Government when deciding upon future policy for UK agriculture within a European and global context.

  As stated above, an area of concern to the RICS is the effect modulation may have on land prices. A copy of the RICS Farmland Market Survey is attached [not printed] to this submission for background information as to how the market stands at present. On the whole farmland prices have held up surprisingly well in recent times despite fears that the reverse may occur. The FMD crisis though, is likely to lead to the farmland market seeing an increase in available land as more farmers come to terms with the economic realities in agriculture. This will in turn lead to a downward pressure on land prices. However, RICS does not anticipate a crash as the increasing tendency towards larger farms will provide some support to land prices in the near future.

  A downward pressure on land prices though, will affect farmers' ability to invest in their businesses and in many cases, may prevent producers from diversifying. The ability to borrow depends on the underlying value of farm assets and, as these decrease, so does a producers ability to access money. In addition to this, the longevity of the current crisis has meant that many farmers have already borrowed money and as such there is little spare capital to be had.

  A lack of money to invest will make it practically impossible for many farmers to take the financial gambles necessary to switch their methods of production in order to satisfy new criteria for support. This only adds weight to our comments above calling on any transition from food production support to support for socially desirable goals to be gradual. The effects of different levels of modulation must be thoroughly investigated to ensure that the result is not a reduction in environmental and social benefit.

Opportunities and difficulties faced by agriculture as a result of possible reductions in production subsidies.

  The drive to decouple subsidy payments away from food production will clearly result in public money instead being used to create and maintain the non-market benefits of farming—socially desirable goals such as safe food, cross compliance and public access. The emphasis will switch to rewarding farmers for the broader benefits that they are able to deliver to the rural economy in terms of environmental, conservation and recreational activities. A switch of this nature would be unlikely to happen very quickly. Indeed, were it to do so many farmers who are already struggling to maintain their livelihoods would be unable to do so. As stated elsewhere in this submission the issue is therefore one of transition from a system based on commodity price support to one based on public goods.

  An issue arising from this transition is that of set-aside. Around 20 per cent of the proportion of land set aside under the CAP is currently used to bring considerable environmental benefits including the creation of valuable habitats. A swift transition in support could result in the abandonment of set aside which could in turn result in these environmental gains being lost. RICS calls on DEFRA to ensure new policies are therefore introduced to help maintain these gains as set aside is phased out.

  Support under a new system of subsidies may well end up being diverted away from the larger farms towards the smaller units. This could also have a potentially negative environmental impact as large farmers, unable to maintain their current incomes owing to a drop in production subsidies, instead intensify production.

  A clear benefit to producers that a switch is payments could deliver is in the arena of farm incomes. Farming incomes have been declining for many years now and it is a huge problem for many producers that a basic income cannot be guaranteed. Such fluctuations can mean it is difficult for producers to borrow money as they have no guaranteed income with which to pay it back. Farm incomes can fluctuate from year to year as a result of the unstable market conditions. If there is a switch to a system under which farmers are paid for environmental benefits, they will have a certain base guaranteed income from which to work. This should help to stabilise the industry.

  Areas most likely to gain from such a reorientation are those where the costs of production are high but the perceived value of non market goods is also high. Such areas will include upland areas, rural areas easily accessible to urban populations and, of course, Areas of Outstanding Natural Beauty.

  RICS is concerned that any reform of the UK agricultural industry must take account of all pressures facing agriculture over the medium to long term. The Government must seek reform which is acceptable to the WTO and which meets the demands of world governments concerned about issues such as water consumption, pollution, and the growing global population. Failure to incorporate all these pressures into a future policy would be shortsighted. Clarification will need to be sort as to whether switching subsidies away from production and into the second pillar of the CAP is acceptable to the WTO in its aims to create global markets without support. It is possible that this new payment could be viewed as "hidden farm subsidies". In reality many countries find ways in which to support their agricultural industry. Low diesel prices and subsidised water bills are some methods used. However, it would be unfortunate if CAP reforms were found not to be suitable to the WTO and had to be rethought.

  There is a lack of clarity with regard to the Government's long term objectives in terms of the extent to which it is willing to support the UK agricultural industry. DEFRA Ministers have spoken of the large amounts of tax payers' money currently used to subsidise production. However, decoupling subsidies will not necessarily reduce the total amount of money spent in rural areas. In fact it is possible the total amount of money spend may increase. If the loss of production subsidies is not compensated for by increases in support for non-market goods then there could be a significant shift to part time farming with farming families seeking to supplement their incomes from other sources. Indeed many farming families already send one partner out to work which can put a strain on family life and rural communities.

  Whilst RICS is supportive of initiatives which help rural farm businesses to diversify, thought must be given to the various businesses already in existence in rural areas, such as hotels and other tourist attractions, who may feel unfairly penalised if farmers seeking to diversify are seen to be given benefits. Strengthening one sector of the rural economy whilst at the same time putting another out of business is obviously not desirable. Careful thought needs to be given to planning issues in rural areas to ensure new businesses are suitable and do not flood the market.

  The recently published Planning Green Paper contains a range of proposals to provide for faster and more consistent planning decisions, the benefits of which will be felt by both rural and urban communities. The proposed "Local Development Framework" is likely to be more responsive to differing local needs whilst allowing for greater flexibility, which will certainly assist rural and farming communities. In particular, action plans will ensure that local communities have a greater say in local planning issues, particularly with the introduction of village/community plans. However, rural businesses, particularly farming, would be benefited if the Government were to consider greater flexibility toward permitted development rights for temporary uses.

  Farms seeking to diversify may benefit from whole farm/estate plans which can be beneficial in terms of ensuring that farmers are more aware of the potential and limitations off all their assets, providing the information likely to be increasingly needed for the assessment of grants, integrating conservation and recreation objectives into land use considerations and providing a context against which development decisions related to diversification can be made. These whole farm plans can also contribute input to local plan formulation.

  Finally, we would like to see a high standard of environmental awareness established as the norm for all agricultural land. An increasing number of areas are being designated as environmentally sensitive and we would like to see the standards applied in such areas to be generally accepted.

Royal Institute of Chartered Surveyors

19 December 2001

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 6 November 2002