APPENDIX 21
Memorandum submitted by Mrs Pippa Woods,
Chairman of the Family Farmers' Association (H24)
MID-TERM
REVIEW OF
THE CAP
Eleven committee members of this Association
discussed this Review in some detail soon after it was issued.
Follows the gist of their comments, slightly influenced by the
reactions of other organisations in the meantime. For instance,
there has been hardly any comment on how farmers are to manage
without the 20 per cent of their income, which is to be removed
by "modulation".
By way of summary, our main concerns were the
likely impossibility of arriving at a fair and just "single
payment per farm"; the lack of specifics on the proposed
"farm audit"; and, most importantly, the lack of any
measures to improve farm profitability, which is so woefully lacking
in Britain. We approve the concept of capping the largest payments,
but feel that a tapered subsidy system would be more useful.
In short, we applaud the stated objectives,
but found it very difficult to relate these to the actual measures
proposed.
We have responded to DEFRA's consultation paper,
but not in this form.
To answer your particular points is difficult,
as the review gives so little detail on many of its proposals,
but I will try.
Point 1: Those who are glad to see CAP dwindle
away, and much farming with it, must approve many of the proposals.
So many of them will make farming more of a gamble, less profitable
and generally more difficult. It is stated that "the approach
will facilitate the integration of the new member states".
We could not find any indication of how this would be so. As the
new member states have no history of CAP subsidies, will one be
invented for them, or does it mean that they will have no right
to payments?
Point 2: As mentioned above, the reduction in
subsidies up to 20 per cent will have a very serious effect indeed
on British farmers. There will be an eventual diminution of cash
incomings of 20 per cent. This must lead, in most cases, to a
straight reduction of disposable farm income of an equal 20 per
cent. It is well known that farm incomes are already so low as
to be unsustainable in many cases. This 20 per cent reduction
must lead to more farmers giving up the struggle. (I append details
of the subsidies receivable on my fairly typical 80 ha farm).
It is quite possible that the main effect of
decoupling on farmers will be to remove any incentive for them
to produce food if subsidies are completely decoupled. Food production
could diminish to a considerable degree, causing problems for
the food manufacturing and processing industries. The stated expectation
that their raw materials will be cheaper is not encouraging for
producers of basic foods. Presumably it is assuming the substitution
of cheaper imports for locally produced food. Is this a desirable
objective?
We believe current theories on the virtues of
decoupling to be of doubtful validity. The main beneficiaries
of it are the traders. Subsidies, decoupled or not, enable traders
and food processors to buy their raw materials at below the cost
of production. They do this in the knowledge that governments
will step in and provide farmers with just enough subsidies to
keep at least some of them alive. To decouple subsidies from food
production is to remove the incentive to produce food so long
as prices received are below costs of production. If food security
is of no consequence and we are happy to have our food produced
in other parts of the world where it can be produced more cheaply,
or direct subsidies remain, decoupling is an excellent way to
achieve this end.
It is said that capping will only affect some
600 British farms. It appears to be government policy that smaller
farms are of no value. But doubts have been cast on the economics
of this opinion by a recent study showing that very large farms
were making no profit at all. (Tenon, quoted in Farmers Weekly,
30 August). There can be no moral justification for giving more
than EUR 300,000 to any one enterprise. Apparently there is no
economic justification either. The cap should be lower.
We have always advocated, and I believe explained
to your predecessor committee, that subsidies should be tiered
or tapered. One advantage of a single payment is that it would
make this easier. If farmers are entitled to an income comparable
to industrial workers, modulation should not be applied below
EUR 10,000 entitlement. Each successive EUR 10,000 could then
have progressive modulation, perhaps 5 per cent per EUR 10,000.
(ie the amount between 10,000 and 20,000 would be modulated by
5 per cent, that between 20,000 and 30,000 would lose 10 per cent
and so on). Obviously the exact percentage to be applied is a
matter for debate.
Point 3: The "cross compliance" is
described as compliance with various "statutory requirements"
including "mandatory environment standards". The implication
seems to be that many farms are not so complying, but there should
not be too many problems here. The danger is that the "farm
audit" may be used by our government as a means to implement
a licence to farm. Who knows what standard might not be expected
by those looking for an excuse to reduce the number of productive
farms, especially the smaller ones? If the standards expected
are to be similar to those recently suggested for our Farm Assurance
schemes, very highly qualified people will be needed to carry
out the "audit" and many farmers will feel it is not
worth the effort to carry on if they have to pass a strict examination
at regular intervals.
(Present "audits" for various types
of production do not require any particular onerous activities,
but are mainly a sum total of innumerable details which add up
to considerable aggravation. Especially the records expected,
most of which seem pointless, and/or can quite easily be invented
anyway! Checking that all is in order, including an incredible
number of documents, is time consuming and diverts attention from
essential husbandry).
Point 4: The re-allocation of funds to Pillar
II gives rise to considerable concern. It is unclear how these
will be allocated between member states; it is quite possible
that Britain will not be considered to need a large share. (The
fact that we already have only a small share of environmental
payments could be used either way). Given the best scenario, with
all our deductions returned in the form of environmental payments,
it is hard to see how these could be made to benefit farmers who
are already farming virtuously—ie giving the best possible
care to both land and animals. These are the very farmers whose
profitability is likely to be most marginal and who can least
afford to lose 20 per cent of their income.
We would like to comment on some other worrying
matters. As mentioned, the Review does not appear to recognise
that farming in Britain is in a parlous financial state. It talks
about setting farmers free to produce for the market, what market?
Nearly all our prices are at rock bottom, below the cost of production.
The demand for premium quality and organic food is limited. For
the main staple foods there are unlimited quantities being imported
at much lower process than we can produce for. Mr Fischler takes
a very rosy view when he makes remarks such as "market prospects
for cereals appear positive". This when cereal process are
at an all time low, with no apparent reason for them to improve.
He is also probable over-optimistic about milk
prices. However, the paper does at least recognise that the abolition
of milk quotas could cause chaos in the dairy industry and it
suggests caution. Even the dairy processors appear to be less
keen on quota abolition than they used to be, and it is to be
hoped that wise counsels will prevail so that small and medium
sized farms are able to continue to milk production. (We have
written much on the necessity to improve the administration of
milk quota, so that it is no longer a financial burden, but this
is probably not the place to elaborate on that).
If farming is to survive in this country in
anything resembling its present pattern, there is an urgent need
to take steps to improve its profitability. This can probably
only be done by altering the powers of the WTO. There is a growing
opinion that this must be done alongside renegotiation of the
CAP. Thinking people who care deeply about the future of farming,
and with it the countryside as a whole, recognise that farming
needs protection. Unfortunately these people are not usually to
be found either in government, nor yet in positions of authority
in the more powerful NGOs.
A major problem which does not seem to have
been recognised is the appalling difficulty there will be in establishing
a fair and just "single decoupled income payment per farm
based on historical payments". The size of this payment will
determine each farm's viability whether the farm will provide
a living, and what sort of a living. It will affect the rent payable
on the land to which it is attached, and likewise the value of
the land. Will it be index linked? If not, it will eventually
become valueless sooner or later according to inflation rates,
which may not always stay at their present unprecedentedly low
levels. Will the payments have the same purchasing power regardless
of whether the recipients deal in euros or another currency?
Many farmers' activities and outputs have varied
greatly of recent year, sometimes by choice and sometimes by force
majeure. There are a few who have newly entered farming and have
no "historical basis". Subsidy rates have also varied,
so it will not be possible to take an average of a period of several
years; a single year could be grossly unfair. Will it really be
possible to make the payments stick to specific areas of land,
which is the laudable intention?
When milk quotas were introduced, which were
equally important to dairy farmers, there were endless disputes
about the fairness, and even the legality, of the allocations.
I believe the original intention was for them to be definitely
and permanently attached to land, but clever agents fairly soon
found ways of circumventing this. History could be repeated. At
what season will this single payment be made? At present the various
subsidies at various times of year, which helps the cash flow.
Except when they are very much later than they are scheduled to
be, as is the case now in some instances.
We strongly applaud the concept of a "European
model of agriculture" and sincerely hope that it can be preserved.
However, we feel that its most essential element is that it is
not competitive in the way so many countries are now turning to
farming on a large industrial scale. If we are to keep our present
values—environmental care, animal welfare, fair wages etc
we cannot possibly survive unless we are protected from the products
of large scale, industrialised farming which cares nothing for
such niceties.
This paper has commented on the major issues
by the Mid-Term Review. There are, of course, many points of detail
which we have not tackled. Some are laudable and some contradictory.
There are also minor points we are not happy about. But to pick
the whole Review to pieces would distract from our major concerns,
which we have attempted to explain in some detail.
We hope the Committee will take these possibly
unorthodox views seriously. Unfortunately there are few other
organisations representing ordinary small and medium sized working
farmers.
The significance of subsidies on my 80
hectare (200 acre) farm
| For cattle: | 20 steers sold/year BSPS @ £90.13 20 x 2
| £3,605.20 |
| Super extensification @ £48.07 x 20 x 2
| £1,922.80 |
| Slaughter premium steers @ £48.07 x 20
| £961.40 |
| Slaughter premium Heifers x 10
| £480.70 |
| Slaughter premium cull cows x 12
| £576.84 |
| | |
| Arable Area Payment (Actual received in 01 for 10ha approx)
| £2,105.45 |
| Milk (subsidy seems to vary, this is notional)
| £500.00 |
| Total for one year, after 3 per cent modulation
| £10,152.39 |
This total well exceeds my 2001 audited profit. It is £126.90/ha
or £50.76/acre
20 per cent of the original entitlement—the proposed
"modulation" = £2,091.35
(These figures depend on exchange rates guessed at. They
could be marginally inaccurate, but should be adequate for demonstration
purposes).
I have 21 hectares already in Stewardship. Under present
rules, this would be disallowed for any new area payment. Therefore
a higher area rate would be needed than that given above to equal
my present subsidy income.
For comparison, Stewardship rates are £8.5/ha ordinary
non-fertilised grassland and £250/ha for old orchards; £150/ha
for winter stubble for ciri buntings.
Discussion: I have a fairly typical, not too intensive, livestock
farm. (We rent some grass keep). A serious reduction in subsidies
would make it unviable as now farmed. (20 per cent reduction would
seriously increase my cash poverty). It could be intensified,
but this would jeopardise much of its present environmental value,
which already earns extra income through Stewardship and extensification
payments, making it just viable if a low income is acceptable.
As I believe my animal and environmental care is good, it is hard
to see how I could benefit from any Pillar II payments.
My diversification is the old age pension. We are not geographically
placed to open a farm shop; in any case we have no spare time
and do not wish to invest capital in any speculative new venture
which would inevitably be high risk.
The intention of this paper is to demonstrate by a practical
example the ridiculous situation that has arisen whereby food
is being produced at a loss and farmers are totally dependent
on subsidies for survival. So is the production of food in Britain.
(All beef sold collects subsidies as above, except the extensification
payment in the case of intensive beef. Direct sellers and organic
producers would be hard pressed if they had not these same subsidies).
As long as cheap food from abroad is allowed to depress our prices,
it is hard to see how farming in Britain can continue unless ever
more subsidies are paid.
September 2002
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