APPENDIX 11
Memorandum submitted by National Consumer
Council, Scottish Consumer Council, Welsh Consumer Council and
General Consumer Council for Northern Ireland (NCC, SCC, WCC and
GCCNI) (H11)
1. SUMMARY AND
RECOMMENDATIONS
The European Commission's proposals for the
mid term review of the Common Agricultural Policy although, in
some respects, radical do not go far enough to meet the challenges
facing EU agriculture or the needs of consumers.
The big pluses in the proposals are:
— The proposed replacement of the bulk
of commodity linked compensation payments with a single payment
per farm based on historical receipts; and
— The introduction of compulsory "dynamic"
modulation of 3 per cent a year until it reaches 20 per cent so
shifting some resources from Pillar I (market and price policy)
to Pillar II (environment and rural development policy).
Other positive points in the proposals are the
broadening of the scope of Pillar II to include:
— the provision of support for the
development of assurance schemes; and
— the provision of support for rolling
out farm audits.
On the negative side:
— 80 per cent of the resources devoted
to direct payments will remain in Pillar I;
— Some new product linked payments
are being introduced, for example, rice and dried fodder;
— Some quantity controls remain in
"reformed" regimes, for example, set-aside;
— There are no clear proposals to reform
some of the regimes which impose high costs on consumers, for
example, milk for which an options paper has been produced.
RECOMMENDATIONS
In the forthcoming negotiations NCC, SCC, WCC
and GCCNI call on the UK government to push for much greater progress
in moving the Common Agricultural Policy in a more sustainable
direction including:
— A clear timetable for phasing out
all remaining commodity specific supports and integrating them
into the new decoupled direct aid.
— A clear timetable for phasing out
intervention, export refunds and quantity controls, such as set
aside and dairy quotas.
— A commitment to continue and intensify
the process of dynamic compulsory modulation beyond the immediate
implementation period until the bulk of resources are transferred
to Pillar II. If the proposals for capping direct payments are
weakened, implementation of a greater annual percentage for modulation.
— The implementing regulations to contain
clear mechanisms for monitoring and reporting on implementation.
These should include: clear rules on the reduction of direct aids
for non-compliance with food safety, environmental, animal welfare
and labour safety regulations; a requirement for member states
to develop compliance monitoring systems and report annually on
the results of implementation; a mechanism for reporting and sharing
best practice on Pillar II schemes.
2. INTRODUCTION
The National Consumer Council and its sister
organisations in Scotland, Wales and Northern Ireland, have a
long history of campaigning for reform of the Common Agricultural
Policy (CAP). In 1986 the NCC were given a remit by government
to examine the impact of the CAP on consumers. The final report,
published in 1988, concluded that:
". . . the CAP, as currently operated,
acts against the interests of UK consumers and of consumers throughout
the European Community. It grossly overcharges consumers for food;
it reduces consumer choice; it has an adverse affect on food quality;
it disregards nutritional advice; and it harms consumers indirectly
by contributing to environmental damage and the disruption of
international trade. And it does all this without bringing appreciable
benefits to any but the largest farmers . . . We therefore call
on our own government and those of other member states, the European
Commission, and the other institutions of the Community to unite
in a programme of reform. This reform should aim at a major rebalancing
of the policy with much greater emphasis on structural, social
and environmental policy measures. It requires the gradual separation
of price policy from income support policy, with market forces
being the main driving force of price policy and direct payments
being used to achieve social, regional and environmental objectives."
(National Consumer Council, Consumers and
the Common Agricultural Policy, HMSO, 1988)
Since then there have been some shifts in this
direction. The MacSharry reforms of 1992 shifted some aid from
price support to direct payments. The Agenda 2000 package built
on the MacSharry reforms with a further shift to direct payments
but the bulk of these direct payments remained compensation payments
for price cuts rather than payments to achieve rural development
or environmental goals. However, small steps along the lines we
advocated were introduced in the new Rural Development Regulation
(which requires member states to draw up seven year Rural Development
Plans and offers co-funding for schemes in the plans particularly
agri-environmental measures) and the Horizontal or Common Rules
Regulation (which allows member states to attach environmental
conditions to compensation payments and to "modulate",
ie reduce, compensation payments by up to 20 per cent and use
the savings for agri-environmental schemes.
However, these changes have been totally inadequate.
Consumers continue to pay higher prices for their food1, CAP market
mechanisms continue to encourage quantity over quality and ignore
health and nutrition needs, markets remain distorted, intensification
encouraged by the CAP continues to damage the environment and
the distribution of the benefits of the considerable expenditure
on farm policy remains inequitable. Public confidence in the industry
is at an all time low in light of the BSE crisis and the recent
Foot and Mouth Disease epidemic.
NCC recently asked low-income consumers for
their views on the future of food and farming2. Despite being
on low incomes there concerns ranged far beyond affordability.
Indeed, they cared deeply about the food they ate and how it was
produced. Among other things, they called for: food safety issues
to be addressed; better information and labelling; more encouragement
for "natural" farming methods; and better means to maintain
the countryside and rural life.
The Agricultural strategies of Wales, Scotland,
and Northern Ireland and in England, the Curry Commission report,
have all recognised that a new approach is needed which recognises
the integral role that farming plays in the development of rural
areas and communities, the consequences it has on consumers and
public health, and its impact on the environment and animal health
and welfare.
All four strategies have recognised the need
for producers to reconnect with their markets and consumers and
see the achievement of this as being rooted in moves towards greater
market orientation of the industry. They see diversification and
the development and promotion of value-added locality produce,
rather than competing on commodity markets, as the means to modernise
the industry, tackle the problems associated with declining rural
areas and economies, and to move forward in a sustainable way.
Each country has also made a commitment to develop programmes
of action to promote organic farming and other more environmentally
friendly extensive farming systems.
The need for greater collaboration in the food
chain has been emphasised in all four strategies as a means of
cutting costs, improving efficiency and encouraging long term
profitability and high quality produce. Following on from this
all four strategies stress the need for the further development
and modification of farm assurance schemes, and improving food
safety features prominently. Improved systems of traceability
are seen as core to increasing consumer confidence and the links
between agricultural policy and healthy eating are recognised.
All four Councils' (NCC, SCC, WCC and GCCNI)
have contributed to the development of these strategies and have
welcomed the overall shift in approach outlined in them. However,
crucial to the success of these strategies is fundamental reform
of the Common Agricultural Policy.
3. MID-TERM
REVIEW OF
THE COMMON
AGRICULTURAL POLICY:
THE EUROPEAN
COMMISSION'S
PROPOSALS AND
THE CONSUMER
COUNCILS' RESPONSE
PILLAR I: PRICE
AND MARKETS
POLICY
Decoupling of direct aids
We welcome the Commission's proposal to introduce
a single decoupled income payment per farm. The Councils' have
long argued for the decoupling of income support from production.
Whilst payment on the basis of past subsidy can not be justified
in the long term we see it as a useful transitional measure as
it does remove distortions caused by different product payments
and assists in the process of making farmers more market orientated.
We welcome the proposal as a step in the right direction.
However, although the proposal does cover the
bulk of direct payments (initially arable crops, beef and sheep
meat, grain legumes and starch potatoes), it does not cover them
all. The Commission proposes that the revised payments for rice,
duram wheat and dried fodder will be integrated into the scheme
and suggests that other sectors could follow but no timetable
is suggested. And, contrary to the overall direction of the reform
proposals, some new product linked payments are being introduced.
It is our view that there should be plans, and a clear timetable,
to bring all direct payments into the decoupled farm aid.
While Pillar I support exists we welcome proposals
that payments (or at least part of them) will be conditional on
compliance with statutory environmental, animal welfare, labour
safety, and food safety standards. However, to be effective it
will be essential to build into the regulations rules, and a requirement
for member states to have effective monitoring and enforcement
arrangements.
Our comments on the proposals for the individual
commodity regimes are outlined in the box.
INDIVIDUAL COMMODITY
REGIMES
Crops
We welcome the abolition of intervention for one cereal—rye.
However, this should be extended to all cereals. The proposal
for compulsory long-term set-aside (10 years) of arable land for
supply control reasons runs counter to the overall direction of
the reforms and clearly shows that there will be oversupply as
long as there is intervention and export refunds whether support
is decoupled or not. The proposed 5 per cent cut in the cereals
intervention price is insufficient. A clear timetable needs to
be agreed for phasing out intervention, export refunds and quantity
controls.
The decrease in the rice intervention price to world market
levels and compensation via direct aid as part of the "everthing
but arms" initiative to improve market access for developing
countries is welcome. It will also improve prices, and so access
for EU consumers, particularly those on low incomes. The direct
aid should be integrated into the decoupled aid from the start.
The payments for dried fodder (linked to historic quantities)
and the area payment for nuts should also be integrated into the
decoupled direct aid immediately.
We question whether the introduction of a non-crop specific
aid for energy crops (a carbon credit) is the right approach to
developing this market. It runs against the thrust of the proposals
as it is a coupled direct payment.
DAIRY
The dairy regime is long overdue for reform. We support the
Commissions suggestion that the timetable for introducing the
modest reforms agreed in the Agenda 2000 package, which was delayed
by the European Councils, should be accelerated.We also welcome
the proposal for greater cuts in the butter intervention price.
But these changes are insufficient; the regime imposes significant
costs on consumers3. A clear timetable must be agreed for phasing
out quotas, intervention and export refunds.
BEEF
The beef regime also has negative impacts on consumers4 and
it has been a sector in which there has been significant food
safety, environmental and animal welfare problems. We welcome
proposals to integrate direct payments in the beef regime into
the decoupled direct aid. We also welcome additional controls
on exports of live animals. However, it is essential that intervention
and export refunds are also phased out.
PILLAR II: ENVIRONMENT
AND RURAL
DEVELOPMENT
Compulsory dynamic modulation
The Councils' welcome the proposal for compulsory
dynamic modulation. We believe that it is of utmost importance
that substantial progress is made on shifting resources from Pillar
I to Pillar II at the mid-term review. This shift is essential
for developing sustainable agriculture which makes a positive
contribution to protecting and enhancing the environment and rural
development, and is responsive to consumer needs. We also see
merit in the use of ceilings and floors.
However, a 3 per cent reduction in direct payments
(coupled and decoupled) and the timetable proposed will mean that
at the end of the implementation period most support will still
be through Pillar I mechanisms. A much greater shift is required.
A commitment to continue and intensify the process of dynamic
compulsory modulation beyond the immediate implementation period
until the bulk of resources are transferred to Pillar II is needed
if the vision for agriculture outlined in the Commission's paper
and the agricultural strategies of Wales, Scotland, Northern Ireland
and England is to be achieved.
It is argued by some that the proposals amount
to asking farmers to pay for rural development. This is not so.
Taxpayers are being asked to pay for rural development, just as
taxpayers and consumers have been paying for an agricultural policy
which has so spectacularly failed to meet society's needs. It
is also argued that ceilings are unfair. What clearly is unfair
is the current distribution of the benefits of taxpayer and consumer
support—most of which goes to the larger/higher income farms.
The proposal is thus an attempt to reduce that unfairness.
Clearly the precise redistributive impacts will
depend on the detailed implementation proposals and criteria for
redistributing the resources released by modulation. We hope the
UK government will resist the temptation to view the proposals
purely in terms of UK receipts and look to the benefits in the
shift to a more sustainable policy that releasing resources from
Pillar I to Pillar II will provide. It is the short-term, the
nationalist approach of member states in the Council of Ministers
that has made the Common Agricultural Policy the unweildy, inefficient
and inequitable policy it has become. If the proposals for capping
direct payments are weakened implementation of a greater annual
percentage for modulation should be agreed.
BROADENING THE
SCOPE OF
PILLAR II
We welcome the proposal to broaden the scope
for support under the Rural Development Regulation (currently
limited to agri-environment, less favoured area, afforestation
and early retirement schemes) to include a new food quality chapter
to encourage farmers to participate in quality assurance and certification
schemes by providing funding for schemes. We believe that assurance
schemes have the potential, if properly developed and enforced,
to help to promote consumer confidence in the integrity of the
food chain. They are an important part of all four national strategies
in the UK.
However, many current schemes in the UK fail
to deliver much for consumers. They fail to meet NCC's criteria
for the governance of self-regulatory schemes, often offer no
more than the legal minimum in terms of food quality, safety and
environmental standards, and have poor monitoring and compliance
mechanisms. It is essential that the resources are used to develop
schemes which provide tangible consumer benefit.
We also welcome the proposal to increase the
co-financing rates for the agri-environment chapter of the Rural
Development Regulation. Broading the scope of this chapter to
include animal welfare chimes well with consumer concerns. However
the proposal for a meeting standards chapter providing the possibility
for temporary and degressive aid to farmers to help meet EU legal
standards on environment, food safety and animal welfare, seems
to run counter to the cross-compliance proposals.
NEW FARM
AUDIT SYSTEM
We welcome the proposal to introduce an EU wide
system of farm auditing, with financial support under the rural
development regulation. Such a system is essential to the development
of Pillar II and the roll out of the national strategies in the
UK.
September 2002
REFERENCES
1. The OECD estimates that just under half
(47 per cent) of the Euro 299 (£187) that agricultural policy
costs each European citizen comes from consumers via food prices.
Agricultural Policies in OECD countries: monitoring and evaluation,
Organisation for Economic Co-operation and Development, Paris,
2001.
2. NCC research (partnered and co-funded
by DEFRA and FSA) conducted in autumn 2001. Feeding in to food
policy: a submission to the Policy Commission on the Future of
Farming and Food on the views of low-income consumers, National
Consumer Council, November 2001.
3. The OECD estimated that consumer subsidies
represented 38 per cent of dairy producer prices in 2000. See
reference in 1 above.
4. The OECD estimated that consumer subsidies
represented 65 per cent of beef producer prices in 2000. See reference
in 1 above.
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