APPENDIX 37
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
— Regulation and specification for
imports and exports
— 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
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