Examination of Witnesses (Questions 47-59)
MR DAVID FURSDON and MR NICK WAY
WEDNESDAY 26 JUNE 2002
47. Now we have the Country Land and Business Association. Mr David Fursdon, Vice President, and Mr Nick Way, Director of Policy and Advisory Services, welcome to the Committee. I will just repeat what you have no doubt been told ad infinitum. We are not inviting you to decorate a Christmas tree with all the things you wish the Department would do, but is the Department well founded? Is the concept right? Does it know what it is doing and, if it knows what it is doing, is it able to do it with the machinery and equipment it has got? That is the thrust of what this inquiry is about. Can I start by perhaps asking the question I have just asked of your predecessors? If we were two years down the road as opposed to now, what would be the three criteria you would publish to judge whether DEFRA was useful?
(Mr Fursdon) Shall I start by saying first that I would like to see that there were opportunities for rural businesses to be profitable and that I would include agriculture in that list. That first and foremost would enable a lot of other things to be delivered, such as landscape and environmental effects. I would say that an opportunity for profitable activity within the rural sector would be my first.
(Mr Way) I would put forward as the first of the other two a development in DEFRA's approach to implementing EU legislation which at the moment is very much through the regulatory role. We note that the Environment Agency is looking at more incentive and advice based methods to achieve its pollution prevention and control objectives. We are interested in that and by two years' time we would like to see progress having been made so that action taken by businesses, including farmers, in agreement with the Environment Agency achieves those ends with less need for costly regulation. The third one would be clear signs of increased influence from DEFRA on the policies of other Whitehall departments, in particular in the delivery of rural service standards, the access to services in rural areas.
48. The Department, when it was set up of course, there was a big old fight because the word "agriculture" did not appear and a compromise was found by putting the word "food" in. Do you think that is symptomatic of something and, if so, what is it? In your submission you say that there is no sign of vision as to the importance that profitable farming plays in a thriving countryside, so you are implying that it is rather more than finding a sort of nifty acronym for what it is saying about government priorities and that that is a mistake, like the chap who turns up at a wedding without a tie.
(Mr Fursdon) From our point of view the Ministry was obviously seen as a champion of farming. Whether or not it was all the time that is how it was seen. As such, through the original Ministry it was very difficult to get objective analysis of what was being done because it was almost as if you could see where it was coming from. A number of us have had to diversify into other activities in rural areas and we needed recognition that there was a department that also had a rural remit to parallel what was happening in rural areas and the sorts of concerns that people had. From my point of view, yes, the lack of a title is not a specific problem but in making that move there is a danger that the actual farming aspects are not being given a high enough priority.
49. Can I ask finally the question that again I asked the previous witnesses, which is, to what extent do you think that down the pyramid, or the bit of the iceberg underneath the water, things have changed? Are people competent? I am sorry to ask such a brutal question, but are they competent? Is there major need for re-training? Are there middle management problems in the Department?
(Mr Fursdon) It comes back to the first answer I gave you about priority. One of our concerns is that there is sometimes a lack of understanding of what is involved at the front line, a practical understanding of how businesses have to operate and the things they have to cope with. A number of comments have been made about secondments and that sort of thing. I feel sometimes that there is a lack of understanding of quite what decisions you have to take if you are trying to run a business, in other words how to balance the decisions you have to make. I have experience in the south west and in general the feeling has been that there is a great deal of goodwill to try and help but sometimes a lack of understanding of the practicalities that face a farmer or a rural businessman on a day to day basis.
(Mr Way) The officials who came to DEFRA came principally from MAFF and DETR and on the MAFF side in particular came with a considerable knowledge of the workings of an interventionist agricultural policy, and on the DETR side with particular experience either from the Countryside Directorate or from environmental pollution prevention and control. What we are asking DEFRA to develop now is a coherent rural policy within the rural affairs part of its remit. In order to do that we see that there are certain essential elements that must be present if the rural area is to be successful. One of those would be agriculture but others would be other land based businesses and conservation and the provision of rural services. To us the policies for each of those are inter-linked in that they have effects on the others. What we have yet to see in DEFRA, as you say, as it works down the pyramid, is a comprehension which I think must come out of contact with outsiders and local contact of the nature of those inter-relationships and why, for example, farming is important, not only for producing food but for being the basis of stewardship, etc. If an objective is set only for faming in terms of productivity and the real price of food in the shops then another objective of farming, to provide enough capacity to provide stewardship and indeed employment in rural areas, may be lost.
50. But you also indicate the fact that food manufacture and the food service industry will move offshore unless British agriculture remains profitable. To what extent is that just rhetorical rural monte and to what extent is it based on evidence?
(Mr Fursdon) We were quite careful about how we worded that comment. We feel that it is a gamble. We do not have evidence that this will definitely happen but we feel that the consequences of it would be so damaging that it is a risk that is probably not worth taking and we are not sure that it would be very many governments that would take the risk of losing that.
(Mr Way) I would put in one example, I think, and one contentious example to come. The one example is what is going to happen in the dairy sector where we have seen increased imports of semi-processed and processed products, and the other one perhaps in the future is what is happening in our egg production industry where the government may be taking a decision to put the industry on a different footing in terms of regulation from much of the rest of Europe. Certainly the egg production industry have voiced their concerns that sourcing of materials from outside the UK will be followed by, at least initially, the semi-processed stage of production of egg products.
51. That is because of economics; it is not especially regulation. In the main this is a threat you are conjuring up to frighten government on the grounds that the farmers cannot roll up the ground and leave with it but the manufacturing side can. There is no need to help the farmers particularly because they are stuck, but the manufacturers are a different proposition.
(Mr Way) What we are saying is that whilst there is still a worldwide (at least amongst the developed world) system of agricultural production support, and we have made recommendations over the years as to how that might change, so long as that is there, one consideration or one factor in the profitability of British agriculture will be the extent to which government supports UK agriculture compared with how other developed countries support their agriculture and amongst those other developed countries we have certainly seen a desire to maintain that support partly because of their fear that food manufacturing would disappear. The fear that we have is not only our own.
52. That is true, but the main threat to profitability in agriculture, as in food production, is the exchange rate, not regulation.
(Mr Way) We would cite both as the biggest threats to profitability.
53. The main one?
(Mr Way) We would put the exchange rate top.
54. I want to go on to that because you are saying in terms of regulation that the department's vision needs to be adjusted to achieve policy objectives in a non-regulatory fashion, and particularly under Kyoto the implementation of European legislation on environmental protection, conservation of landscape and biodiversity can be best achieved by non-regulatory methods or broad stewardship. First, you do accept those objectives, do you?
(Mr Way) Yes.
55. So you think that a stewardship scheme is the best way of achieving them rather than direct regulation, but of course those regulations would also apply, wherever they come in here, on a European basis, so that is no inducement to fiddle our way through it here, whereas it has been imposed on other European countries. We cannot opt out in other words. I am saying we will have to do our own thing.
(Mr Fursdon) the regulatory approach is sometimes not European-wide. To take one example from hedgerow legislation, which was introduced in order to preserve hedges, which I think we would all want to see, the problem with it is that it does not always do the trick because in practice you will see that there is legislation, however you try and word it, that tries to protect hedges, but in practice hedges require maintenance and what happens is that the sheep start to run the hedge down and they run it down a bit more and at no stage has the farmer done anything wrong but there is a slow decline in the value of that bit of the environment. If, however, you look at the other end of the scale, I stayed in a farm bed-and-breakfast last week with somebody who was the tenant farmer who had completely been converted to the whole idea of environmental stewardship. He was in the Countryside Stewardship Scheme, he was proud of what he was doing, he was taking people who were staying in bed-and-breakfast on guided walks across his farm, and the whole idea and approach was a very different one from the sort of approach you get when faced with regulation and the sort of bristling that you get with people saying, "Well, okay, I am not allowed to do it but I am certainly not going to put myself out". You just accept the regulation. There is a whole educational concept which we would be in favour of about involving people in this way of dealing with regulations.
56. Nobody is against stewardship, nobody is against co-operation. They are good things. The basic problem is whether you can achieve the objectives in terms of Kyoto and in terms of environmental protection without intervention and without regulation. In dealing with hedges you are getting, if you will forgive me, the trimmings. That is comparatively a minor matter. The basic issues can only be forwarded by regulation and your objective is really a kind of laissez-faire economic objection to regulation rather than a statement that the objectives could be achieved without regulation.
(Mr Way) Can I put some more flesh on the bones because we have put our heads above the parapet on this one? There already is legislation about pollution prevention and control. We are not proposing to replace that. Indeed, agriculture is strictly regulated in this regard. When we talk about Kyoto and conservation and stewardship and so on, we are talking about how to achieve government objectives to enhance and maintain the environmental quality of landscape and biodiversity. On Kyoto, for example, we produced last year a document which attempted to relate the impact of climate change to the rural economy and to provide some ways in which active players in the rural economy could mitigate climate change and provide some benefit to the wider public. We put forward three in particular. One, agri-environment in terms of soil management practices, we believe could be a practical way to improve the carbon balance of farming and carbon in the soil. Secondly, on water management and indeed flood management, we have proposed that washland agreements between land managers and public authorities are a better way forward to organise emergency storage of water in case of flood to protect cities and others than an approach which is directed entirely by the Environment Agency. Thirdly, we talked about carbon sequestration in trees. A lot more work needs to be done on this but we do believe, and we are doing quite a lot ourselves, that trees offer, so long as they are properly managed, a way forward for carbon sequestration. These are a way of achieving government objectives, not by saying, "Thou shalt not", but by guiding the way in which people behave. We have seen a development of this approach in SSSIs and positive management agreements, which we support, and now we are seeing the Environment Agency developing their approach to actually meeting existing regulation. At the risk of boring you, may I mention one example which I think shows what we are talking about and has happened in practice? Before Sweden and Finland joined the European Union they already had in place a more developed agri-environment system than we had and this has enabled them to meet the terms of the Nitrate Directive without having to take further regulatory action. That is a good example of how positive schemes can meet objectives of regulation, as you put it.
57. That is interesting. So you say you would like European regulation to work in that direction?
(Mr Way) Absolutely, and we would like it Europe-wide.
58. Fine. Is there an incompatibility between having DEFRA commit itself at one and the same time to ensuring that agriculture is profitable, objective one, and that the rural economy is competitive? Are these two objectives compatible?
(Mr Way) In our view they are not only compatible but necessary. We do not see agriculture as being divorced from the rest of the rural economy. We see it as needing to be integrated within the rural economy. This means that agriculture will have to provide more than just food in the future. It also means that some farming businesses, as we have already seen, will have to provide more than agriculture to survive but we think that there are complementarities there and not conflicts, so that one side benefits the other. We see agriculture as a backdrop for rural tourism and for inward investment, not as in conflict with those two. There are cases where it has been in conflict but in future we want to see it working together with the aims of tourism and we do see it as being an incentive to inward investment. We have seen that in the way that businesses like to set up in rural areas. That is where employees like to work in many cases.
(Mr Fursdon) I think there is a danger that unless there is some benefit built into the system for the environmental activities carried out by farmers you could end up with a situation where, if you are asking agriculture to be entirely competitive on a world market, it is unrealistic to expect it to do so and maintain and deliver the environmental benefits that everybody wants. That is the concern.
59. You gave a couple of examples earlier of industries that might be moving offshore. I can see your point on egg production. In dairying the dairy sector regularly exceeds its quotas. There is no evidence of a fall in supply, I think, within our farming economy. Presumably therefore you are concerned about the downstream activities which must be affected by a combination of two factors. One is the exchange rate, as Austin has rightly pointed out, and the other is simply the competence of our processing sector to take up market opportunities.
(Mr Way) I suppose we are surprisedperhaps we should not bethat so many milk production businesses are continuing at, in many cases, 13p a litre.