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WEDNESDAY 15 MAY 2002 __________ Members present: Mr David Curry, in the Chair __________ Memorandum submitted by the Department for Environment, Food and Rural Affairs Examination of Witnesses RT HON MARGARET BECKETT, a Member of the House, Secretary of State, LORD WHITTY, a Member of the House of Lords, Parliamentary Under-Secretary (Lords), MR ANDY LEBRECHT, Director General, Food, Farming and Fisheries Directorate, Department for Environment, Food and Rural Affairs, examined. Chairman
(Margaret Beckett) I think I almost certainly said to you on the first occasion that I was before this Committee that people had been talking about CAP reform for all my political life, and I am very conscious of the fact that these things come and go. If you mean have I given up, no - for two reasons: one is because the realities - the EU realities and the world realities - remain with very, very substantial reason why we should pursue reform, and, also, because although you are quite right in identifying that we have an uncertain situation in France at the moment and that there are, as you again rightly identify, uncertainties elsewhere in Europe, the figures, the numbers and the costs have not changed. I think those are the things which are the key ingredients. We have never, ever said that we are certain of success; all we have said is that we are in a time period when we probably have the best chance of substantial reform for many years, and very probably for many years hence. That remains my view. (Margaret Beckett) I do not think, in particular, Doha is threatened. If that were the end-date of the negotiations then I would say that obviously makes it more uncertain, but because it is the starting date I do not think it makes it more uncertain. Also, Commissioner Fischler is looking towards these things, as the rest of us are, but I have heard him say, quite recently, that one of the reasons that the Uruguay round was not good for the European Union was because the European Union went into the Uruguay round simply wishing to defend the ground that it held and not wishing to approach radical change, and that that was a mistake that we would do well not to repeat at Doha. I accept your point - indeed, I have had this conversion on a couple of occasions with members of the United States' administration, including the Secretary for Agriculture - about the US Farm Bill. The administration has made it very clear to us and, indeed, they have made similar remarks publicly that this is not the Farm Bill that they would have chosen. I know there are those who say "In that case, President Bush should not have signed it" but that seems to me to be wholly against the facts of life in an election year in the United States in a way that you cannot expect any sensible politician to do. However, it still remains the case that the US has grounds on OECD figures for arguing that the European Union subsidises its farming industry to a greater extent than does the United States, and the administration are adamant that it has changed neither its approach nor its determination to pursue reform in the context of the World Trade Organisation talks and of the framework agreement reached at Doha. So a lot of the underlying realities have not changed. We may find a different set of politicians having to grapple with them from the EU side, but as I said the realities and the numbers are still there. (Margaret Beckett) Just what the Committee would expect me to tell her, Mr Curry. I made it plain not only that this was extremely disappointing - and she herself was very disappointed - but that it was extraordinarily unhelpful to the prospects for reform since everyone who is unenthusiastic about, or indeed outright opposed to, reform, whether it is the CAP or any other agricultural structures, would be using this as ammunition. The American administration understand that very well. All I can say to you is that they remain adamant that their purpose is unchanged. Phil Sawford (Margaret Beckett) As you rightly say, that has been the approach for the last 50 years. Farmers have been encouraged - indeed, I think, you could almost even say that the structure of the industry and the framework of legislation and so on, has forced farmers to agree to the position where that was their relationship with the support provided from the state. There are increasing numbers of farmers who are less than happy with that relationship, who would like something different and more productive and who recognise that farming needs to become profitable; it is not necessarily assisted in becoming profitable by the maintenance of a structure of subsidies, particularly of the kind and nature that comes through the CAP. I think it is just one of those historical realities that we all have to recognise. That is the basis on which farmers have been encouraged to run farming. (Margaret Beckett) We certainly want to see in the proposals for mid-term review, or for reform of CAP generally, subsidies decoupled from production. We want to see those subsidies reduced and, as we have said at the beginning, there are those who argue that the structure has been damaging, and that is certainly what the Policy Commission argued. They said that the existing framework and structure of CAP has been actively damaging to the environment and, in the long-term, to the interests of farmers because it cuts them off from the marketplace. (Margaret Beckett) First of all, yes, I recognise that the exchange rate is a source of difficulty for British farming; perhaps to a certain extent even more than for manufacturing because everything is structured in euros. So I accept that is a difficulty. Do I regret that the Policy Commission did not say more about it? Frankly, no, because if the Policy Commission had said something dramatic about the euro nobody would have covered any of the other things that they said. Mr Jack (Margaret Beckett) I think we would take the view that we would like to see subsidies reduced, wherever they are paid. There are, of course, some sectors which are no longer supported because support has gradually been removed, so in general terms we would like to see all subsidies phased out and removed, and the market-distorting subsidies, in the way that they are paid at the present time. We do recognise that there are some things which are in the public good, such as the environmental good, where there is not a market rate and which the market would not support but where there is a legitimate case for saying that if the public wants those things then the public should find some way of supporting them. In terms of a particular commodity that requires support, I could not say that I would single one out and say there is a different approach to that commodity. (Margaret Beckett) I have not got it at my fingertips. I do not know if either of my colleagues have it. (Lord Whitty) We have recently produced a study in relation to not exactly the production subsidy but the removal of quotas in milk, for example, just in the last few weeks. Chairman (Lord Whitty) Which indicates that British agriculture would do relatively well in a European context out of its removal of quotas over a phased period. Similarly, of course, it depends over the time-scale and quite which subsidies are removed first, and in what manner they are phased out. In general, our belief is still - despite the distortion as a result of the parity issue - that UK agriculture would do relatively well within Europe against a phasing out of production subsidies in the CAP. Of course, we are still talking, as Curry is still talking (your namesake here rather than you, Mr Chairman), of shifting the degree of support into an area which is basically supporting land management and environmental objectives. So there would still be some support into those sectors of agriculture. (Mr Lebrecht) May I just add one point, which is to say that we are doing the work that Lord Whitty has referred to, but what we have not done is look at the question of overnight removal of subsidies, because that is not the policy. Mr Jack (Margaret Beckett) I take your point, but to be honest it seems to me it would be highly speculative. I am not sure it would tell us very much at this moment in time because it all depends on the shape of any likely proposals. We might have a better idea after we see what Commissioner Fischler proposes. Chairman (Lord Whitty) Mr Chairman, you are not going to get me into that area, I fear. (Lord Whitty) The milk study makes a range of assumptions about the pound to euro relationship but it does not assume a single optimum level of parity, and the results of that relate to assessing the impact at that range. More generally, we have not approached this, as Mr Lebrecht was saying, on an across-the-board basis because you can only really get a snapshot effect of removing all the subsidies at a particular rate. The rate would vary over the period in which you were phasing them out, so it is not a very easy calculation to make. As the Secretary of State said, we have got a position where we will, in a few weeks' time, have a proposition from the Commission for, hopefully, some changes in the subsidy regime in different sectors. We can then make a proper assessment as to whether that would be beneficial to UK agriculture or not. I think we need the proposition before we can effectively test it out in the way I think you are suggesting. (Margaret Beckett) The working assumption, as much as anything else, goes back to the proposition of the Policy Commission, which is that it is in the interests of the long-term health of British agriculture to move it away from subsidy and to encourage it to look at how it prospers in the marketplace. That is the basic principle of the approach. Then, of course, as and when we get a set of propositions, we will have to look at how you can steer the best possible course in that particular direction, if that is what comes out of the Commission's proposals. Paddy Tipping (Margaret Beckett) I think that there is much to be said for the examination of whether or not such a level of payment would in any event be justified. I think it is inconceivable that any finance ministry in the European Union would allow consideration of major changes of this kind without also having consideration of whether that level of support should continue to be paid and, if not, what level of support there should be, based on a different set of premises about what it is you are supporting. (Margaret Beckett) Whether or not that is achieved remains to be seen, but we think it would be very unwise to say that we can rule that out - because, after all, the basis, as I understand it, of the first agreement was that we were seeking to cap and reduce agriculture spending. (Margaret Beckett) To be allowed to move some resources as much as we can, from Pillar I to Pillar II, yes. (Margaret Beckett) My target at the present time is to encourage those who have to put forward propositions to behave radically. I do not want to pre-judge what is likely to be the outcome of that and set a target that we cannot possibly meet. (Margaret Beckett) Twenty per cent is within the present framework approach. What Curry has done is propose that we aim for that earlier. That, of course, is against a background of what he suggests we should consider doing in the UK if there is not CAP reform. If we are able to secure agreement to some overall programme of CAP reform then we would have to look at such a proposition in that context - and, also, of course, we would have to consider how we treat the advice from Sir John Curry that even if there is not CAP reform then the United Kingdom should take steps. That is all part of what we have to consider as we look at our own strategy. (Margaret Beckett) It depends. The thing that goes hand-in-hand with a wish to remove resources is also a wish to free-up the circumstances in which those resources can be used. To be honest, we would be not nearly so enthusiastic (I would not, anyway) about moving resources if we thought that we would still be confined to the restrictions on what the money could be used for and, also, on the way in which the scheme is administered, which exists at the present time. I am moderately hopeful of getting changes in this direction because at the recent informal Agriculture Council we had a discussion on rural affairs, rural development and, with the exception of the odd person who argued that all we need is to keep the existing structure of CAP and put a great deal more money into it, pretty well everybody who spoke - I think I am right in saying - argued for a change in the bureaucracy, the administration and the restrictions on present funds. However, the two do have to go together. There is a genuine issue here and a genuine question. One of the reasons that Commissioner Fischler has spoken about the advantages of compulsory modulation across the European Union is because he put the argument that if it is only done in individual Member States (and, at the moment, it is us and France, the Germans have a proposal for a scheme to start in January and the Portuguese, too, I understand are doing something next year) there is a possibility that farmers in those Member States could be at a competitive disadvantage to other farmers because they are not having access to the same level of payments in the usual way. So there is a genuine and serious issue to be considered there, and that is why we are not rushing to judgment and we will see what the Commissioner comes up with. (Margaret Beckett) My instinctive reaction is that I would be wanting to look at being able to do more on rural development and the wider rural economy and, within that, on environmental issues as well - land management and so on. To be honest, however, I do not have a fixed view as to what the priorities ought to be and whether more ought to go on one or the other. Where the money could be best used is what would interest me; I am not interested in just putting money in for not very much outcome. (Lord Whitty) One call on that money would be the proposition that we supported in John Curry's report of a broad and shallow, accessible environmental scheme for land management. That would be one call on it. Broader rural development would be another call on this, I suppose, as the Secretary of State said. There is a whole issue of flexibility, both in terms of scope and in terms of variability of schemes that we would need to address in that process. There is also the issue of making sure that the UK gets its due share of that money. (Margaret Beckett) We are discussing with a whole range of stakeholders what the form of the broad and shallow scheme could be and how realistically one could begin to look at it and develop such proposals. As you say, a lot of these things are linked to the outcome of the spending review. (Margaret Beckett) So will we. Mr Breed (Margaret Beckett) No, frankly, we are not looking at any scheme to replace agri-monetary compensation. If I can remind the Committee, agri-monetary compensation was not addressed by our predecessors, and since 1997 the total sum of £785 million has been paid in agri-monetary compensation. As you say, the scheme has now expired. We are not planning to pursue the issue of an alternative and, frankly, I am not sure we would get any agreement to do it any differently. (Margaret Beckett) I accept that there are many farmers who would like us to do something more to address it, but I simply say to you that until 1997 that did not happen. We did take substantial steps, but that scheme has now come to an end. Mr Borrow (Margaret Beckett) I think you are bringing me back to part of the conversation that we had earlier on, in the sense that our long-term goal is to see farming in the marketplace and making its decisions in the way that any other business would on market circumstances and how they identify consumer demand and how they satisfy consumer demand. However, we also recognise that there is a special contribution that farmers make as custodians of the land and land managers, and that is a public good and that it is right for that public good - which would not attract support in the marketplace - to be supported from public funds. Farmers, of course, do not like you calling it subsidy anyway, but I take your point that that would still mean resources from public funds going into the sector which we describe broadly as farming. It is a form of income support in order to reward people for doing things that the public wants them to do, and that does seem to me to be a reasonable and better proposition than what we have now, where we are often rewarding them for things they do not do. (Mr Lebrecht) Could I just add a word on this, that there is a WTO angle as well in relation to this. One of the key differences between Pillar I and Pillar II is that Pillar I payments fall in either the amber or the blue box and are, therefore, required to be reduced over time, whereas Pillar II payments are in the green box and are, therefore, not so required. Clearly, if the community wants to buy public goods on a permanent basis it has to devise schemes that are not, or are minimally, trade-distorting and therefore get into the green box. That is an important safeguard in this respect. Mr Jack (Margaret Beckett) I repeat that we will look at that in the context of whether or not we feel we can make better use of any such resources, because the framework for how you can budget (?) modulation procedures changes. It would be a genuinely very difficult issue to address if that framework does not change. They would have to consider whether we could get value for money putting substantially more into a modulation scheme. If we do get that greater freedom from the new money we would simply start with the Curry proposal and discuss that with stakeholders. Why invent another proposal when there is one on the table already? (Margaret Beckett) In the long-term it will be an economic choice, yes, but it does go back very much to the context in which you could use those resources and whether that context will change. (Mr Lebrecht) Two comments on that: firstly, that the application of modulation in this country is divided as between England, Scotland, Wales and Northern Ireland, so there is a regional phase across those boundaries. Secondly, we do, as a matter of course, evaluate the schemes that we operate under the rural development programme. Of course, it is still relatively early days but we are in the process of beginning to construct those evaluations. (Mr Lebrecht) The agri-environment schemes, in particular, need, according to community law, to be evaluated by 2003. (Mr Lebrecht) Perhaps in a broad sense. We obviously know from where modulated moneys come (that is an easy calculation to make), and in broad terms we can see where the money is going in terms of agri-environment schemes. What we cannot do is predict in advance, because these schemes are competitive and they depend on farmers' willingness to apply for schemes and then to win the competition. (Margaret Beckett) We are also cautious about using it as a predictor of what would happen in a wider scheme, simply because of the point I made before; there is a certain amount - and I am not sure if it is more than anecdotal - of anecdotal evidence that there are people who would be interested in taking part in bidding for schemes under modulation who are put off by the bureaucracy and the restrictions and so on. Even the information we can get will not be as good a predictor as we would like, at this stage. (Margaret Beckett) I do not know, Mr Jack. We will write and tell you. Chairman (Margaret Beckett) I agree with you. The only thing is that I cannot think of an alternative way of shorthanding the description as to why it is okay to make some funds available when you are saying you want to remove subsidies, for example, from production. Yes, I accept there are different things, some of which people may not think are public goods and some of which are in conflict, but I think there is a broad category of things for which the market will not pay, and then we have to decide - and it is through the ordinary political processes - whether the taxpayer will pay. (Margaret Beckett) No, they do not but they do talk about how much they hated it when they saw hedges disappear and they do talk about liking to see some of the things in the landscape that they have enjoyed preserved. They do talk about those things, but I agree they would not think of describing them as public goods. Paddy Tipping (Margaret Beckett) I do not think it can be a given. It does depend on what you do and how the scheme is designed. I think there are understandable fears. People who have a certain structure of subsidy and so on now fear they will lose out in a different scheme. I am not aware of any evidence to suggest that there is a particular group or sector that is bound to lose out under any theoretical sets of proposals. (Lord Whitty) What Curry is talking about and what we are discussing with the various stakeholders is an accessible, broad and shallow scheme, which means accessible to all types of farming. There are no built-in presumptions, either by size of farm or type of farm, that one sector would benefit more than others. Mr Todd (Margaret Beckett) Not as such. Certainly we see advantages in producing the best of what British agriculture can produce, but we have always been a country that has traded substantially and that has drawn in food from elsewhere, and I accept we always will be. (Margaret Beckett) It is not an intrinsic concern of mine. I am cautious about this. I recognise that it is something that will concern some people and I am prepared to consider and discuss that, but I am always extraordinarily mindful of the fact that the reason we have got the CAP that we have is because - I think I am right in saying - people put food security above all else, and that led to the CAP. When people say is food security a prime part of policy I say no, not necessarily. (Lord Whitty) What is a prime part of policy is that we want to see an agriculture and food industry which is competitive, both in terms of its export markets and against import markets. Whilst we may not have a figure with which to see a sort of settled figure of self-sufficiency we can see a competitive industry, and that is indeed part of the economic sustainability ---- (Margaret Beckett) If you take the view that there should be a market approach to British agriculture then it seems to me to be incompatible with having a fixed view as to what percentage of what Britain consumes should be produced within the UK. Andy has just reminded me that, of course, those figures in any case will have been influenced by BSE and by FMD and will not be typical. (Margaret Beckett) Indeed, yes. Nobody is disputing that. (Margaret Beckett) No, I think there are risks inexorably, and I think that particularly post-September 11 we have to recognise potentially some of the vulnerabilities that that creates. I also think that we have been - almost, perhaps, for centuries - moving inexorably in this direction; that the whole thrust of the marketplace in which agriculture has to operate is a free trade and that that will continue to be the case. (Margaret Beckett) When I was a student - which shows you how many years ago that was - there was only one place in Manchester, where I was studying, where it was easy to get things like courgettes and aubergines, and that was at the delicatessen. By the time I moved to London they were already on sale in the corner shop, and that is true universally. There is an amazing shop in Brixton where you can go in and see things that you have absolutely not the faintest idea what they are. So, yes, all of that has changed, and consumer tastes too. (Margaret Beckett) A mixture. I think the core of our problem is the CAP. There is not any doubt about that. (Margaret Beckett) I would not entirely say that and, of course, the whole approach has got to be better regulation, in the sense that we have to recognise that there are some issues that we very much want to regulate because of food safety or environmental standards. It is a matter of trying to find the best way of doing that which is effective but is not over-burdensome. There is a simplification initiative. The Commission has a CAP simplification initiative with a working group reviewing that, and that, for example, is looking at a pilot scheme which is particularly geared to small farmers. Leaving aside the fact that it is harder for small farmers to meet any of these requirements, if you get a really small farm you still have to go through huge bureaucratic hurdles that clearly can be quite burdensome, so people are looking at these issues. (Margaret Beckett) They may have seen the light! (Lord Whitty) There are two other dimensions. One is that a lot of the apparent bureaucracy and doubling of bureaucracy as compared with certain other industries is due to the fact that they have to qualify for subsidies. If we made the whole access to subsidies simpler through the Curry proposals there is an automatic simplification of that. We are also, even within the present system, trying to rationalise the IACS procedures and indeed the Environment Agency procedures. What Curry wants is to get, and we would agree with this in the longer-term, to a more holistic approach to regulations on farms, so that you work on the whole farm rather than having to deal with several different regulators, sometimes in conflict but always increasing the bureaucracy. I think in that respect we do need to make a significant change. It will take a bit of time to get there but we are certainly looking very hard at how we can deliver an approach to whole-farm plans and whole-farm certification. (Lord Whitty) Partly, yes, but it is also true that some of the individual allegations of over-regulation and over-bureaucratisation do not actually stand up in terms of what actually operates in other countries, in that there is, for example, in the meat hygiene area, at least a greater degree of regulation in France as there is in the UK. It may be conducted in a slightly different manner but in terms of actual bureaucracy we are not by any means out on a limb in bureaucratising what are already bureaucratic procedures when they emanate from the EU. Nevertheless, we do recognise it is one of the major tasks to get this on a more user-friendly basis and one which does not get in the way of farmers making proper economic decisions. (Lord Whitty) Yes. (Lord Whitty) If it was available to everyone or even if it there was some restriction on it, it is primarily a Pillar II scheme. There is a parallel here about cross-compliance as long as we have the production subsidy regime, so that we could green some of Pillar I in the transition. (Lord Whitty) If the main support for farming is to deliver the environmental and land management values we are looking for, then we do not necessarily need to reduce the total amount of money going into that. It is a different question as to whether you want to ratchet up what that minimum access level should. Over time we would hope we did indeed ratchet up ---- (Lord Whitty) Indeed. Of course, you are talking about an approach to the totality of the CAP where we want some degressivity built into the total quantum. (Margaret Beckett) With great respect to the Chairman and his dislike of the words, if you are looking at something that is there to support public goods, there is not an automatic assumption that it is degressive. (Lord Whitty) Yes. We put a high priority on the broad and shallow scheme, so within an overall reduction of the quantum of CAP we would tend to keep the broad and shallow scheme as a priority expenditure. Chairman (Margaret Beckett) I accept that, and that may sometimes be true, but it depends a little bit on the nature of the scheme. Even under Countryside Stewardship what tends to happen is people come in ----- (Margaret Beckett) If I can just go back a second to the nature of your question, it all depends on whether you accept the argument - and to a certain extent I do - that one of the reasons we have the landscape that we have in many parts of the UK is because it is a managed landscape. If you leave a managed landscape to itself after X years it will revert, it will not stay as that landscape that you want to see. If, for example - and it is only an example - what you are supporting is the facility to manage that landscape so that it stays in, broadly speaking, that condition - whether it is wetland or whatever - then it may be something that you would want to continue to support. It may not, but I think we can all rest assured that the Treasury will keep a beady eye on it at some stage, and so I do not think one could rule it out. (Margaret Beckett) I do not know that I would use the word "salvation". Destiny, maybe? (Margaret Beckett) If I can go back to your proposition, I am aware of many, many attempts by different journalists to get Sir John to say how impatient he is with the pace of change, and to get him to say how disappointed he is that there was not more in the budget, when he said at the very beginning that he never expected there to be anything in the budget. (Margaret Beckett) It is the latter. It is only being competitive and profitable that is a viable future for UK agriculture, but I think Sir Donald would be the first person to say that. Mr Borrow for agriculture would be phased out and I think there was a date fixed for that, but that seems to have become somewhat fuzzy now. To what extent do you think that the Agriculture Council of the EU have adopted a substantially radical negotiating position in the WTO current Round on agriculture? (Margaret Beckett) Well, it was before I was a member of the Agriculture Council, but of course the negotiating mandate for Doha was that, as was agreed, we should phase out export subsidies, production subsidies, trade-distorting subsidies and so on, so to that extent the Agriculture Council did take what was quite a radical view. Having done so, I think it would be only fair to acknowledge that there are some who now perhaps are less enthusiastic than they might be, but there was unanimous agreement, as I understand it, to that negotiating mandate, and that is the basis on which we are in the European Union approaching the Doha talks. Andy, you were there. (Mr Lebrecht) I think there was a big difference between the way the Community is approaching the present Round as compared with the Uruguay Round where basically in the Uruguay Round it tried to resist change almost all the way through. What it has agreed for the present Round is that it is prepared to get engaged in reductions in production subsidies, it is prepared to negotiate on reductions in exports and it is prepared to negotiate on increased access to imports. The other side of the coin as far as the European Union is concerned is that there must be some movement of what are called "non-trade concerns", which is basically recognition that parts of the world, like Europe, do have wider anxieties about the contribution that their farming makes to society than just the multi-functionality issues and, therefore, what the European Union has said is that it is ready to get engaged in all these issues and to negotiate seriously and that is a step change from where we were last time round. (Margaret Beckett) Well, the two go hand in hand to a certain extent, but yes, it could well. (Mr Lebrecht) I think the answer is it is inevitable. I think the movement on the production subsidies, the import access and the export subsidisation would all require reductions in Pillar I support, but the other side of the coin is that acceptance in the WTO of the importance of the non-trade concerns would accept recognition of the importance of Pillar II, so the two are very much hand in hand. (Margaret Beckett) Well, as I said earlier, it is certainly helpful to those who would rather resist change, but earlier this year I spoke in the States to some people who were the prime sponsors of the Farm Bill in Congress and in the Senate. Congressman Stenna, I think it was, was refreshingly frank. He said, "We are going into these negotiations in the Doha Round. We are committed to trying to phase out subsidies. You, the European Union, subsidise your agriculture far more than we do", and there was an argument about that, "and, as far as we are concerned, we know there is room for manoeuvre in the budget, there is a certain amount of headroom, it is money we can assign and we think that if we put up the money, we are certain to find to the maximum amount to take account of the headroom that we have in the budget, then it strengthens the United States' negotiating hand because we can negotiate down more than you will be able to if we were not putting that much in". One can say, "How disappointing", but that was his approach. The more we have at the moment, the better our platform for negotiating down, and I accept the underlying case he was putting, that of course it makes the environment political(?), but his argument was, "At least we have a better platform from which to come down and a more comparable platform from which to come down to the European Union than we had before", so we are really helping the Administration in its negotiations, but the Administration is grateful. Well, that was his argument. We know that it is an election year in the United States and that the states which are marginal are farm states. (Margaret Beckett) I can assure you that I endeavoured to persuade him of the error of his ways, but I merely report to you what his argument was. (Mr Lebrecht) There is just one point and that is just to recall that the United States is a major exporter of agricultural products and its interests are not just in respect of getting countries to reduce their domestic support, but they also want to get them to reduce their export subsidies and to improve market access, so the United States does have material objectives to achieve in those areas and presumably will have to make concessions elsewhere if it is going to achieve them. Mr Simpson (Margaret Beckett) Not about to be and we are working on that project now. When I say "not about to be", not for the summer recess. If I can just pick up one of your underlying points, you say that there has been a lot of activity and not action, but I do not think you could say that the ERDP and the development of the ERDP is not action. There are quite a lot of schemes now under way and I think making a useful and valuable contribution, but it is certainly the case that in the aftermath of a series of disease outbreaks that we have had, the Government did decide that it was right to have the Policy Commission and to take a much more long-term view, and of course we are very mindful too that the mid-term review would be coming up this year and that there would be pressures with the WTO Round and so on, so we agreed that it was right to take a look at the long-term future of agriculture and to try and draw the strands of what has been a very wide-ranging debate together. Now, we are in the process of not consulting about the Report itself in the sense of what it said, but consulting with a whole range of stakeholders as to how we actually could implement the kind of vision of those kinds of proposals. We have had eight regional consultations and we have the others scheduled to run into the summer. Larry is about to work with a contact group to draw the strands of that together. There will be other more detailed, separate consultations and so on and the whole idea of all of this is indeed to produce a long-term strategy proposal in the autumn of the Government's approach to agriculture policy, so that is where we have got to. Now, I take your point to some extent, but I think in a sense you put your finger on part of the answer yourself. Everybody recognises that there are problems in UK agriculture, and most people would like those problems to be addressed, but it would be just as irritating if the Government went off and did it on its own and then came back and said, "Here you are. This is what you do". People do want to be engaged in those discussions and they are. (Margaret Beckett) Well, the core elements will be much the things that the Policy Commission have identified. We will be of course pursuing CAP reform separately and we shall be looking to see what proposals we can make about the broad and shallow scheme, and we have not completely decided yet whether we make proposals in the absence of CAP reform or how we will address that issue in terms of what the Policy Commission said about modulation and so on, but basically the key will be to try to identify ways in which we can help put British farmers more back in touch with the marketplace. We know that we have already facilitated the setting up of the Food Chain Centre and the English Collaborative Board has, I think, had its first meeting or is about to have its first meeting, so we will be going in that continued direction to try to open up British farms to the marketplace and to encourage them to be more competitive and profitable. (Margaret Beckett) My inclination is that it will be a departmental paper. I accept part of your case that one can consult forever and the hope is that we will have reached a sufficiently clear amount of common ground to be able to put something forward and make it work. Mr Simpson: Secretary of State, can I congratulate you on that. It is nice to see a Secretary of State putting their head above the parapet. It is an old-fashioned term and it is called leadership, not management. Chairman: I think I am supposed to berate the Committee at that point! Mr Simpson (Margaret Beckett) Well, I have referred to the process of discussion over the summer which leads to the discussion document and that is a great bulk of the work, but the things which we announced on the 26th March, and we can send the Committee a note fleshing this out if it would be helpful to your work, is the launch of the Food Chain Centre. We have started work on it and already had quite a good large-scale meeting of people to discuss action on illegal imports and we have commissioned a risk assessment which we expect quite soon, the end of May, I hope, because one of the things which came out of that session was that everybody agreed that the prime tool that we needed was a high-quality risk assessment to know where best to direct efforts. We could guess, but we would like more information, so that is under way. We have instituted some Agriculture Development Scheme grants to try to help improve marketing and that is about £5 million. We were able help to secure access to a DTI scheme to improve competitiveness so that there is a DTI grant for the red meat sector of about £1.5 million to help them to improve competitiveness. We have announced the development of the Food and Farming Action Plan and that too, I hope, will be published in the not too distant future, and on regulation, to try to get a better joint approach to regulation. The Collaboration Scheme, the English Collaborative Board, that is an industry-led proposal and that again is something that we have encouraged and we are looking at and we hope to try to be able to establish a pilot for the demonstration farms proposal, which Sir Don and his colleagues put forward, by the end of the year, so those are the things that we did as a kind of starter which we were able to do, which we had the freedom to do at that stage. Now, obviously we are looking in the long term in this process of consultation. (Margaret Beckett) A very neat way of trying to get me to explain our spending bill, which I feel I ought to resist, Mr Simpson, because it has always been my view that exposing these issues to the light of day does not always help you with the Treasury and, to be honest, at the moment, deeply though I admire and respect you on this Committee, my attention is more taken up with being nice to the Treasury than being nice to you. Chairman: He is going to say that he admires you for that as well! Mr Simpson (Margaret Beckett) Sir Don Curry's outline of broadly what his Commission thought would be the effect of some of their proposals was to identify what the key was of an order of magnitude of about £500 million over three years, I think I am right in saying. Obviously we have tried to make some kind of assessment and it is not easy at the present time. To a certain extent it does depend on the outcome of the Spending Review. He has put forward a set of proposals which he would like us to pursue and he has given an outline indication as to what he thinks it might cost to carry out those proposals. We then have to undertake our own negotiations and then we have got to see where we can go and how we can fit them in the framework which he has identified, but I cannot really say any more to you than that. (Margaret Beckett) Well, obviously he put in place some key proposals and he suggested what he thought they would cost. I think in fact it is undoubtedly true that they did not make any specific proposals for funding for tackling illegal imports, but one of the things that I hope we will get out of the risk assessment is some kind of understanding as to whether we actually need a great deal more in the way of funding or whether we need to better target the funding that is available. The most effective thing we can probably get in terms of dealing with it is intelligence. It is possible that there are other things that one might seek to do which might be effective and which might have greater expense, but we would have to look very carefully at whether they really are effective and where the greatest risk is coming and whether that would be the most efficient use of money, so I think while recognising that yes, that is an area we did not identify, I do not think it automatically follows that it is an area where we are just going to put in greater sums as opposed to using them in a different way. Mr Todd (Margaret Beckett) I totally agree with that. (Margaret Beckett) I think all I can really sensibly say at this time is that you are right to say that I think there is no merit in going to the Treasury to say, "Well, we would like you to give us some more money because we have some problems". (Margaret Beckett) That has to be something that the Treasury can identify and discuss as to what the taxpayer will get back for such investment. I am very encouraged that in other previous administrations the whole idea of actually investing to save as opposed to just cutting costs to the bone has been better understood and accepted and then there comes the discussion as to whether or not there is a viable, long-term project, whether or not putting resources, say, in capital investment, as any business does, is something that will pay back and over what period of time and so on. That is the nature of the discussions that everyone has, but the Treasury is not a sort of goodwill charity. (Margaret Beckett) Well, to some extent that does depend on the farmers and what we are able to achieve in terms of the mid-term review, but yes, obviously we look at the whole picture and what the potential is. Also of course is the other side of the coin which you did not identify which is a sort of precautionary approach. Let's take a different area from farming itself, let's take investment in flood defences. If we get that right, then that is to the overall long-term benefit and helps to some extent how fast you can move as a matter of practicality. (Margaret Beckett) There are substantial costs or potential substantial costs if one does not make that investment, so all of those different arguments are part of the case which can be the only sort of legitimate basis of any proposal one makes to the Treasury. Patrick Hall (Margaret Beckett) Well, that decision has not been made. The key thing at the present time is to identify the broad approach of the strategy and to set it out, and whether or not we will be able to attach numbers on what clearly is ahead when the Spending Review itself only looks three years ahead even though, in concrete terms, it is more than before, so I will think about that one, but we have not yet made that decision. (Margaret Beckett) Well, in order to indicate the scale of what he thought might be required. I do not think he necessarily thought that these were the kind of hard and fast numbers. I doubt if the Commission have the capacity to do that at the moment. (Margaret Beckett) Well, they are, if you like, numbers in orders of magnitude. (Margaret Beckett) I take your point. (Margaret Beckett) I think that is not impossible. I do not want to create the impression that every farmer who says, "I am only keeping these hedges because you have asked me to" will automatically receive large sums of public money, but I do accept that there is a legitimate point being made there, that what ordinary, most efficient farm management will require can change as circumstances change. I also do accept the base proposition. I was just looking for, and not finding, some figures somewhere for what has been done in terms of hedgerow replacement and things of that kind and these are exactly some of the purposes for which funding is made available even now and I think that is a very good example of the sort of legitimate argument which can be put. Now, obviously one looks at it, as one always does, on a case-by-case basis, so I think it is a valid point which is being made. (Lord Whitty) The dichotomy you are describing is just what Curry is trying to get over, in other words, we would be persuading farmers by the change in the subsidy structure to regard their output as in part environmental and in part market, whereas at the moment they regard the environmental side largely as a constraint of the market and your question suggests the same, but we are saying it is a legitimate output for society to recognise from farming, that the various environmental goods or the minimisation of environmental imbalance is part of the output of those who have care of our landscape. I think you need to broaden the issues. It is not an either/or, but it is part of the total operation of the farm and subsidy will help that, but it is also the approach of our farmers as to what their task is and the role of farmers in the rural economy. What foot and mouth did show us was that if you shut down farming, the knock-on effect is that the tourist trade and other businesses in the area are severely damaged. In order to maintain that, you need to maintain a high standard in the landscape and, therefore, the economic benefit in a wider sense is there, albeit that to get the farmer to produce it, we may have to give them a public subsidy. (Margaret Beckett) Let's not be too unkind to the Treasury. Even under existing circumstances, and I have found the figures now, under the Countryside Stewardship Scheme there are something like 16,000 agreements where 8,000 miles of hedges have been restored or planted and 13,000 miles of grass-lines. Also the Treasury agreed, and is quite keen on, PSA targets for the Department which include trying to restore biodiversity in farmland birds, so it is not quite as restrictive, the approach they have taken, as people might sometimes assume. Mr Jack (Margaret Beckett) Far be it for me as a former Leader of the House to attempt to commit my successor, but if you are saying to me do we, as the Department, accept that there is a legitimate case for such a debate once we have been able to publish the strategy so that people will have time to assess what is involved, then of course we accept that there is such a legitimate case. I would also accept that there is always a great deal of pressure on government time. (Margaret Beckett) I have never engaged in quite that kind of discussion. Certainly there are a number of us who are very keen, for example, to stick to the agreement in principle that was mentioned today about milk quotas because we do believe that it is undermining the competitive position of British farmers and they could take advantage, particularly in the value-added end of the market, if those quotas were phased out. I have never engaged in a discussion of quite the kind you suggest, although I will ask Andy in a minute to say whether he has because he has been involved in these issues for much longer than I have. I would be a little cautious about it because there is always the danger of other Member States saying, "Well, we do this terribly well, so the rest of you had better not do it at all", and I would be reluctant in any way to sort of get engaged in a discussion as to how you should fetter the choices that British farmers wish to make because somebody else in another part of the European Union says that it is easier for them to do it. (Mr Lebrecht) All I would say is that I do not recall any explicit discussion of the type that Mr Jack has suggested, but the issue actually underlies the whole debate within the European Union as between the liberalisers who accept the logic of comparative advantage and those who wish to maintain production controls and restrictions who would resist that, so I do not think it has ever been brought out explicitly in the way that you suggest, but it is there underlying the discussions. (Margaret Beckett) Again I will ask Andy to comment on any specific studies, but what I would say to you is that I do not think it is alright that there is a role maybe only to some extent for our farmers and one of the things which I think is extremely encouraging is that in the development of the Food Chain Centre and the English Collaborative Board, the basis of much of what they are doing is seeking to establish benchmarks and to encourage best practice and in many ways I think it is, as much as anything, for the industry itself and if and as the industry becomes more market-oriented, the market will do that for it. We will help to set for them what are the benchmarks, what are the bottom lines, "Are you really competitive? If you are, then you must be able to sell into the marketplace", so I think it is not necessarily just for us as government to do. (Margaret Beckett) Sometimes there are relatively simple facts like, for example, in the organic sector where we know a very high percentage of the organic produce in the United Kingdom is being satisfied from overseas, so there is a clear simple fact there and you do not need a major study. I cannot give you a list of them, but I am sure we could write to you. (Mr Lebrecht) Clearly we do look at the overall performance of United Kingdom agriculture and that can be compared with how agriculture in other Member States may be doing because Eurostat collects quite a lot of data, but I think I would come back to the Secretary of State's point, that at the moment there is a highly regulated and managed European agriculture which results from the policies which have been in place for a very long time and it is only through changing them and allowing different parts of British agriculture to compete that you can actually get a definitive answer to your question. (Margaret Beckett) It seems a bit elaborate, if you don't mind my saying so. Obviously we recognise that there are sectors and sometimes it is due to a whole range of different factors as to where there will be a particular weakness from time to time. We recognise that there is a general case for training to be available in order to increase the skills-base of farmers and give them greater opportunity, but really I can only go back to what I said before. We are not trying to look at agriculture to say, "Here's a sector that needs particular support more than others and here's a sector which has particular weaknesses". There is a general approach to try and strengthen people's marketing capacity, to try to make farmers think about themselves as businesses and to look to what their future market opportunities might be and how they could satisfy those market opportunities. There is not a sort of master plan and I am not sure we feel there ought to be a master plan which says that we should put more money into a particular sector. (Margaret Beckett) We are back to, "Will some sectors of British agriculture disappear?" I cannot tell you. (Margaret Beckett) Well, everybody who runs a successful and competitive business, and those who are not able in the long term to run a successful and competitive business will not, but I cannot categorise ---- (Margaret Beckett) I do not think you can. (Lord Whitty) I do not think that is the right way to approach it. (Margaret Beckett) You are leading up to a cunning question and I wish you would come out with it because I am still not quite sure what you are getting at! (Lord Whitty) What is clear is that there are huge differentials in performance sector by sector. What liberalisation would undoubtedly mean is some people dropping out of the bottom, some people rationalising, but that would be sector by sector. It would not differentially favour, say, the arable sector against the horticultural sector. Horticulture does not have the support anyway and it is to some extent dead. I think we have got a situation where we know that liberalisation will lead to some restructuring in the industry sector by sector. We believe that the range of economic information indicates that our productivity per land area or per unit of labour is in an absolute sense on a par with various other countries. That advantage may be diminishing slightly, but it is still high in absolute terms and, therefore, we are in a good position in almost every sector to compete effectively in a more liberalised regime, but that would not mean that part of our agriculture disappeared and other parts prospered. It would mean that the best in each sector would prosper and some would inevitably go under. (Margaret Beckett) In many ways they are. What we are going to try to do, and we are currently working on this and discussing it, we are going to try to build on some of the schemes which presently exist, but have a range of different demonstration farms. I gather some people have got it into their heads that we are talking about DEFRA sort of setting up farms. That is not what we have in mind at all. What we intend to do, and I was looking for the numbers, is to try to set up demonstrations, and obviously there will be a pilot in the first instance, on some 20 or 30 commercial farms with a spread across the sectors - dairy, arable, beef, sheep, pigs and horticulture - and the farms which we seek to engage are the farms which we believe are already showing an amount of good practice, up-to-date knowledge, good economic performance, the right balance of management of the environment and so on. What we will endeavour to do is to identify such farms and run a scheme with consultants, although of course we will evaluate it, and see how that takes us forward. (Margaret Beckett) I suspect that even under a liberalised sector ultimately natural market forces do tend to have their way, but we do not have any preconceived idea about how a certain percentage of British farmers will disappear or certain sectors will disappear and indeed I do not think anyone can. Mr Todd (Margaret Beckett) We would be happy to. (Margaret Beckett) I certainly cannot produce evidence to counter it. I do not know whether Andy can. (Mr Lebrecht) I am sure that your point about land costs is correct. In terms of the overall competitiveness, I think the figures do show that certainly over a relatively long period British agriculture was not increasing its productivity as quickly as the rest of the Continent. That has changed in the last few years partly of course because of the unfortunate pressure that the industry is under where productivity growth has risen quite substantially. I think the underlying point about the need to improve competitiveness is something that Sir Don Curry himself picked up very, very forcefully and obviously that is an issue that has evolved that we are looking at in the context of the strategy. (Margaret Beckett) We are trying to persuade the industry to do what many other British industries have had to do which is to benchmark themselves against the rest of the world, against the best of the world, to look at what steps they need to take and to give what support we reasonably can, whether it is training and in other areas, to assist and advise and encourage steps of that kind to be taken. (Lord Whitty) That is precisely why this is a food chain issue. We have focused almost all this morning on farming, farming productivity and farming competitiveness, but unless there are changes in the food chain and relationships within the food chain, then the substitution of market values and market orientation for government-dependency will not occur and that is why the food chain as mentioned in the Curry Report, the approaches of bringing the processors and retailers and others into the structure, is such an important one. That is where really the thrust of what Curry's recommendations are and particularly the recommendations for the food industry rather than government. Mr Lepper (Margaret Beckett) I cannot remember the context of that particular remark, but in general terms - and we are talking about things like recycling and so on - yes, the Government has a role in encouraging the development of the market, and that is of considerable help. However, I think that to some extent it will be a matter of judgement and a matter of assessing what the position presently is. For example, I have already identified that we have seen quite a lot in terms of restoration of hedgerows and so on. There will have to be a valued judgement made as to whether we need more scope for more of that, whether there is another area of environmental management where there is greater need. There is, I think, quite a bit of ongoing reassessment about the issue of conventional wetlands, not just from the point of view of the RSPB and birdlife, but from the point of view of flood-plain environment. So there are a whole range of issues, and it is going to be the kind of valued judgement in which Governments are always engaged as to where you are liable to obtain the greatest benefit for the public money that is available. (Lord Whitty) If I might say so, the reason DEFRA is in a better position to deliver that framework is because we are responsible not only for agriculture and food, but for the totality of rural development and for the countryside and biodiversity, so we are the Department responsible for delivering the framework within which farming operates, and also ensuring that farming makes its contribution, through environmental goods, to the economic benefit of the countryside as a whole. As I was saying earlier, clearly a lot of rural business depends, not for sentimental reasons, on having a landscape which people want to visit and a background within which people wish to live and do their business. That seems to me as much an economic market - certainly not a sentimental market, but an economic market - as an environmental market. Some of it will be financed by public support, but other parts of it will be financed by the changed relationship between farming and the rest of the rural economy. (Lord Whitty) We have said, in the context of the reform of the CAP, that we want a larger chunk of the CAP to be directed to rural development as a whole. That enables us to take a more holistic approach to what we want to see in questions of land management, in questions of rural development, so that it is not focussed solely on the production side of farming. That does mean that the balance will change a bit, yes. Mr Lepper: On to the food chain, Chairman. Mr Breed (Margaret Beckett) I think both farmers and the big suppliers like Tesco accept that there are weaknesses in the food chain as it presently exists, and I think there is a mixture of things. Obviously the purpose of the Food Chain Centre is to do this analysis and to support whatever may flow from that, but I think that there is a feeling that there may be some links that could be not needed in the food chain. Experience again in other industries of doing similar work has been that there has been a certain amount of ----- I am trying to think quite how to phrase this. Doing this sort of analysis and work together has in other industries forced people to recognise their mutual independence to a greater degree than had hitherto been the case and made people work together, with much better relationships between suppliers and the end-producer, so to speak. I think there is every prospect that something similar would happen within the Food Chain Centre. If you are just one part of the food chain, whether you are a farmer where it seems that you do not what seems to be a fair return for what you do, or whether you are Tesco where you see your short-term interests as being to get the lowest possible price so you can sell at the lowest possible price, the present circumstances do not encourage you to consider the overall impact or the long-term impact of those policies. The whole idea of this sort of work is to bring people together to get better and unbiased information and analysis, and to make it available to all concerned. One of the things the Food Chain Centre intends to do is to get some sort of ground-level information about consumers' needs, consumers' demands, expectations and so on, and to keep updating that so that it goes eventually all the way down the chain. (Margaret Beckett) One of the biggest contributions that the Food Chain centre can make at the initial stages, it seems to me, is to provide unbiased information that cannot be contested. Sometimes people talk as if it is a dialogue of the deaf. On the one hand there are the major purchasers saying, "These are our problems", and on the other hand there are the producers saying, "These are our problems." I suspect that you would find that there is a dispute between them as to who is really right and what the position really is, etcetera. One of the key purposes of the Food Chain Centre is actually to strip away the undergrowth so that there is a clear, unbiased set of information that people cannot contest, and then you see where the problems actually are. (Lord Whitty) All these different things hang together with Curry. There is a transparency, and the Food Chain Centre can certainly help to identify some of the deficiencies and the unnecessary steps in the food chain. In addition, Curry's recommendations on collaboration and co-operation indicate that the farmers, if they were to act together, could enhance their balance of market power in relation to the processors, retailers and caterers. The operation of things like the Code of Practice, and an acceptance of that by the retailers and processors, would indicate that they recognise that in their own long-term interest a more stable balance of responsibility between the final users and the primary users is necessary. Of course, that can really only be delivered if the whole of the food chain is engaged, so all those different parts do fit together. I think there is a coherent approach in Curry which is one of the reasons why Sir Donald has been saying you cannot cherry-pick, you have to look at all those together. That is why I think our strategy will underline and follow broadly the way Sir Donald goes. (Lord Whitty) I think it is early days. We need to get the thing off the ground, and that is what we are doing this year. We need to ensure that all the industrial elements are fully engaged and that they will bear the bulk of the cost both in money and in kind, which they are prepared to do. So I think the public expenditure question is probably a residual question rather than a main one. (Lord Whitty) We are not saying there is no public contribution, but we are saying primarily the responsibility rests with the IDG. (Mr Lebrecht) Can I add to that and say that what we hope to be able to do is to part-fund individual projects that the Steering Board of the English Collaborative Board will want to propose. That is very much the way we will help. We have also seconded two individuals to the Food Chain Centre to help them get started and to help people work. (Margaret Beckett) It will not start to get moving now for several months. (Margaret Beckett) I accept that. Mr Todd (Margaret Beckett) I think you are right. I cannot remember exactly when it was, but I think it was two or three years ago. It did have some input and, in a sense, this is built partly on that experience. I think it would be right to say that at that time there was not the recognition of the need for the problems that agriculture has had and how deep-seated some of them are, and of the need to change, that there is now. (Margaret Beckett) I think there was not perhaps ----- With respect, perhaps I should ask Andy to comment on that, because he was there and I was not, but I think perhaps there was an expectation that that would change and that people did not necessarily need to change in order to address real problems. Now I think the mood is different, not least because of the dreadful experience of FMD, is that right? (Mr Lebrecht) Yes. (Margaret Beckett) If part of the outcome of setting up the Food Chain Centre is to force people to look up and down the length of the supply chain and see where their mutual interests in the long term lie, not everybody may be looking forward to that. (Lord Whitty) There is a certain amount of scepticism, but I think one of the gratifying things is that we have not found outright hostility of the kind you are picking up. Clearly a degree of persuasion for active participation is going to be needed, and the Government is standing by to twist arms. That is not hostility to the concept, it is a degree of doubt. (Lord Whitty) Healthy scepticism, I would say. (Margaret Beckett) I have taken up this issue. It is really not clear, and I do not think anybody is quite clear to what degree this is reality and to what degree it is perception. There may be some reality in it. There is certainly a lot of perception and expectation. As I say, I have taken the issue up to see whether there is anything that we need to discuss, any light that the competition authorities can usefully cast on this issue. I would also say to you that many people have said to me that although there are those who fear a different attitude to our competition laws, our general approach is that we think that our competition authorities do strive to do what is right for the customer in the market place, and that co-operatives cannot expect to be immune from that just because they are co-operatives, but equally they should not expect to be particularly penalised. While it is true that there are those who fear that there is an environment which artificially disfavours co-operation or collaboration in this country, it is also true that there are many people who highly dislike the idea of farmers having to accept that for most effective marketing they may be required to co-operate or collaborate more than they have done in the past. To what extent that is the real problem rather than that there is an artificial problem with competition authorities I think is not clear, but maybe the operations of the English Collaborative Board will make it clear. (Margaret Beckett) I am familiar with that argument, and it is a very long-running and long-standing, almost philosophical debate which runs much wider than in this sphere. I am familiar with the examples that you give, and I agree that there are striking examples. One cannot dispute that. All I would simply say to you is that if we are in a position where there is any collaboration and co-operation, to say that we are not going to start because if we do and we go to 90 per cent, the competition authorities will stop that, is probably stretching the argument a bit. There is a genuine and general argument about the role of competition authorities and what market place they should be judging, which runs right through the whole area of competition policy, and always has. We can go back to the days of Michael Heseltine at the DTI: should we be judging this industry, should we be aiming for a market leader in Europe as opposed to elsewhere? It is a very, very difficult issue. Chairman (Margaret Beckett) Unquestionably British agriculture has a future, and potentially a very successful future, as long as British farmers want to make it so. (Margaret Beckett) Absolutely - competitive and profitable. Chairman: Secretary of State, Lord Whitty, Mr Lebrecht, if there is anything you wish to add, no doubt you will let us know. There are one or two more technical questions we will pursue with you rather than taking time before the Committee. We are grateful to you for your attendance. |