Memorandum submitted by English Nature
INQUIRY INTO IMPLEMENTATION OF CAP REFORM
IN THE UK
1. INTRODUCTION
TO ENGLISH
NATURE
1.1 English Nature is the statutory body
that champions the conservation and enhancement of the wildlife
and natural features of England. We work for wildlife in partnership
with others by:
— advising—government, other
agencies, local authorities, interest groups, business communities,
individuals on nature conservation in England;
— regulating—activities affecting
protected species and the special nature conservation sites in
England;
— enabling—helping others to
manage land for nature conservation, through grants, projects
and information; and
— enthusing—and advocating nature
conservation for all and biodiversity as a key test of sustainable
development.
1.2 We have statutory duties for nationally
and internationally important nature conservation sites including
Sites of Special Scientific Interest (SSSIs), the most important
of which are managed as National Nature Reserves (NNRs); Special
Areas of Conservation (SACs); and Special Protection Areas (SPAs).
1.3 Through the Joint Nature Conservation
Committee, English Nature works with sister organisations in Scotland,
Wales and Northern Ireland to advise Government on UK and international
nature conservation issues.
2. BACKGROUND
2.1 In our evidence to the Committee in
September 2002 we pointed out that much of England's biodiversity
is associated with agricultural land. We highlighted the major
losses that have been recorded over the past few decades, primarily
associated with agricultural intensification. English Nature has
recently published a report on the condition of SSSIs in England
which reinforces the continuing problems of inappropriate grazing,
diffuse pollution from agriculture, use of herbicides and pesticides.
At the same time agricultural changes such as specialisation,
intensification and deterioration of farmland features continue
to put pressure on important species and habitats identified in
the Biodiversity Action Plan for England. We broadly supported
the latest reforms of the CAP at EU level because of the opportunity
they afford to the UK to start to address and reverse some of
these trends and because they represent an important step towards
transforming the CAP into a more sustainable rural and agricultural
policy for the EU.
2.2 However, decoupling of support in itself
does not provide a sustainable agricultural and rural policy and
should not be seen as the end of the CAP reform process. The deal
agreed in the summer was disappointing in that momentum on a progressive
shift in EU policy from Pillar I to Pillar II support has been
lost. Decoupling will bring negative as well as positive environmental
impacts and will lead to considerable uncertainty on the effects
of the reforms on various sectors and unpredictability in the
way individual farmers respond. The UK government negotiation
on the reforms helped secure a number of measures that can be
to used to help construct a more environmentally positive outcome
(cross compliance, national envelopes, a Farm Advisory System
and set-aside management rules). It is essential that these are
now implemented so that the potential environmental benefits are
realised.
2.3 These measures, however, are not a substitute
for further reform. A clear and progressive shift of support from
Pillar I to Pillar II is essential, both to help the farming industry
respond and adapt to a new more competitive and market orientated
future, and to ensure that resources are available to pay for
the delivery of a wide range of environmental public goods. The
new Single Farm Payment, whichever way it is paid or redistributed,
does not give the industry an unambiguous signal about the need
for a more competitive and market orientated future nor does it
redirect support towards the delivery of environmental public
goods: two cornerstones of the conclusions of the Policy Commission
on the Future of Farming and Food. Whilst effective delivery of
the reformed CAP in ways to meet government objectives is very
important, the UK government must not take its eye off the medium
term objectives for further reform. Opportunities to influence
this are already upon us.
2.4 The remainder of our submission is based
around the three key questions the Committee has posed.
3. FOLLOWING
WHAT PRINCIPLES
AND BY
WHAT METHOD
THE UNITED
KINGDOM SHOULD
IMPLEMENT THE
PROPOSALS CONTAINED
IN THE
REGULATIONS FORMALLY
ADOPTED AT
THE COUNCIL
MEETING IN
SEPTEMBER 2003
3.1 PRINCIPLES
OF IMPLEMENTATION
3.1.1 English Nature believes the key principles
that should underpin the implementation of the new CAP horizontal
regulation 1782/2003 are:
— maximising contribution to existing
government objectives, in particular PSA targets and the Sustainable
Food and Farming Strategy;
— overall cost effectiveness, not least
cost delivery;
— better regulation, not minimal regulation;
and
— legal compliance, but not an overly
narrow and restrictive interpretation.
3.1.2 Each element of the reformed CAP,
and the package as a whole, should be evaluated against these
principles. Using them as a framework, the government should implement
the package in ways that contribute to delivering its objectives
where these do not put at risk the long-term strategy for further
CAP reform.
3.2 Maximising contribution to existing
government objectives, in particular PSA targets and the Sustainable
Food and Farming Strategy
3.2.1 The key elements of implementation
where the options available could make a difference to delivery
of government environmental objectives are:
3.2.2 We address these in more detail in
our answer to the third question (below).
3.3 OVERALL
COST EFFECTIVENESS
3.3.1 At the time of writing this submission
we have not seen the detailed criteria by which Defra will evaluate
the costs and benefits of different approaches to implementing
this reform, or the details and results of any evaluation. We
believe an analysis of the whole package is critical to ensure
we maximise the potential benefits of the reform. We believe a
cost benefit evaluation should separate deadweight costs of implementation
from the on-going administrative and monitoring costs that will
make the delivery of the package more effective in delivering
the government's objectives. For example, our analysis of the
pros and cons of implementing the Single Farm Payment concluded
that:
"The issue of costs of implementation is
most compelling reason, on the basis of available evidence, to
adopt a regional average approach. However, Defra's assessment
of costs is contradictory and too narrowly focused, leading to
inconsistencies between what are seen as the unacceptable costs
of delivery of cross compliance and other instruments that could
be used to help meet Defra's objectives and the apparent willingness
to absorb a large and avoidable deadweight cost of implementing
the SFP to avoid some degree of redistribution of subsidy to the
industry."
3.4 BETTER
REGULATION
3.4.1 In our evidence to the House of Lords
Select Committee looking at "Environmental Regulation and
Agriculture" we set out in some detail our views on this
issue. We presented the evidence that farm environmental performance
as a whole had to improve, and stated that our primary concern
lies in securing realistic solutions to these problems. We believe
that an effective system of farm regulation, where the industry
is helped to adapt and respond to future demands, is more important
for the environment, of benefit to farmers and supportive of the
need for a more competitive industry, than a minimalist approach
to regulation.
3.4.2 The new Horizontal Regulation requires
farmers to maintain Good Agricultural and Environmental Conditions
(GAEC) and introduces cross-compliance with certain environmental
Directives as a condition of receipt of the SFP. In one sense
this introduces no new regulatory burdens since compliance with
Directives is already a legal requirement. We think that the definition
of GAEC should be primarily focused on avoidance of environmental
damage and erosion of environmental capital. The standards should
be easy for farmers to understand and should not impose unreasonable
costs on individual farmers or the industry. They should not penalise
farmers who have retained significant environmental assets, but
should protect these from damage. More ambitious environmental
management requirements which impose significant costs would be
more appropriately encouraged through incentive schemes. The two
approaches must be designed to complement each other as far as
possible.
3.4.3 The recent English Nature SSSI condition
report highlights the impact of inappropriate grazing on SSSIs.
We therefore think that GAEC should include a provision to avoid
gross undergrazing and overgrazing of valuable grasslands and
other semi natural habitat. A minimal approach would be to set
very broad national maximum and minimum densities of grazing animals.
To get the most environmental gain however, an approach tailored
to individual circumstances is required. This may be more expensive
to administer, but offers greater flexibility for farmers and
better environmental outcomes. Similarly, GAEC requires a baseline
standard of soil management to be established. We favour an individual
farm approach to this issue, rather than uniform soil management
prescriptions on all farmers uniformly.
3.4.4 We accept that the more ambitious
approach to cross compliance we advocate will be difficult to
implement by January 2005. We therefore see advantages to a phased
introduction over a specified timetable. The first phase would
see the introduction of basic standards moving towards a more
sophisticated approach. This would not only reduce the immediate
administrative burden on Defra and its delivery agencies, but
would also allow for more effective systems to be developed and
give the industry time to understand and adapt to what was being
required of it. However, a phased approach must not be used as
an excuse for delay and must be accompanied with a clear timetable
and commitment to delivery from Defra.
3.5 Legal compliance
3.5.1 There is considerable uncertainty
over what will be permitted and required in the various Implementing
Regulations yet to be produced by the Commission. This makes Defra's
task in developing an effective and legally robust approach difficult.
However, it is important not to limit the potential gains by adopting
a restrictive interpretation of what may or may not be legally
acceptable at this stage. Defra should clearly signal its desired
positive approach to implementation and be proactive in negotiating
these with the Commission. For example Defra has commissioned
some very valuable work on the economic rationale for the use
of National Envelopes and the options to help address a range
of environmental and marketing issues. This work should be used
to inform Ministers decisions on the use of National Envelopes
and to influence the Commission's thinking before it starts drafting
the relevant Implementing Regulations.
3.6 Adopting a flexible approach to implementation
without undermining the longer-term commitment to further CAP
reform
3.6.1 The government should restate a clear
intention to make further progress on CAP reform, particularly
the development of a system of agricultural and rural support
to reward the suppliers of identified public goods in a transparent
way. It will also fulfil the recommendation in the Policy Commission
report about the need to send a clear signal to the industry that
in future the industry will need to be more market orientated
and that public support will be for the supply of public goods
and for a transition to a higher level of basic environmental
performance.
3.6.2 A restatement of objectives for further
reform should make clear the government's view about the long-term
sustainability of the Single Farm Payment. An answer to our rhetorical
question to the Committee in previous evidence on the Mid Term
Review, "What it the SFP for?" cannot be found in the
Council Regulation. It is currently best defined by what it is
not:
— it is not a social or income payment
since most money goes to the richest recipients;
— it is not an environmental payment
as it is not linked to delivery of environmental goods;
— it is not a support for food production
since it is fully decoupled; and
— it is not a compensation for change
in a policy regime since it is not time limited or degressive
to a new system of support.
3.6.3 English Nature contends that is best
understood as being a device by which EU level support for decoupling,
mainly to meet international trade objectives, could be secured.
The government should therefore make clear that it sees the SFP
as an interim arrangement and give an unambiguous signal to the
industry that future policy will be for a more market orientated
agriculture with public support for delivering public goods and
to facilitate the transition to higher environmental standards.
4. What impact will implementation have
on the agricultural sector, particularly when taking account of
approaches to CAP Reform in other European Union Member States
4.1 Economic analyses by Defra and others
indicate that this reform will be of immediate economic benefit
to farmers and will offer longer term opportunities to the sector
if it re-orientates to the new policy environment.
4.2 However, decoupling and the greater
opportunities this creates for farmers will also have considerable
environmental consequences, both positive and negative. We previously
indicated to the Committee that decoupling could give rise to
"major changes in farming patterns across the EU". This
is amply confirmed by Defra-commissioned studies, which indicate
that decoupling may result in significant environmental problems.
4.3 The key messages about the environmental
impacts of the reform are:
— the uncertainty of the actual outcomes;
— the dynamic nature of the changes;
and
— unpredictability of how any particular
farmer will respond.
4.4 It is therefore essential that Defra
monitors the impacts of the reforms on farm businesses and the
environment to inform the development of policies to manage change.
Monitoring will also ensure that policy instruments, such as farm
advice, agri-environment schemes, national envelopes and cross-compliance
are used effectively and efficiently to address real needs, exploit
opportunities and address threats to the government's objectives
and targets. This would be in line with the Policy Commission
on the Future of Farming and Food's recommendation on reviewing
data collection to better monitor and manage change in the industry.
5. What progress has been made in implementing
the proposals made by the Policy Commission on the Future of Farming
and Food, and how that work meshes with wider reform of the CAP
5.1 The Policy Commission proposals
5.1.2 There are a number of key proposals
in Curry and commitments in the SFFS that could be significantly
progressed through judicious implementation of the reformed CAP.
In particular we highlight:
— ensuring baseline standards are delivered
by the industry through a whole-farm approach;
— increasing modulation to introduce
an entry-level scheme and enhance higher-level schemes; and
— using national envelopes to encourage
environmentally desirable changes in practice.
In addition we have already noted other recommendations,
such as the review of statistical collection.
5.2 Ensuring baseline standards are delivered
by the industry through a whole-farm approach
5.2.1 The reformed CAP introduces compulsory
cross-compliance with environmental Directives, a requirement
to maintain GAEC, and a Farm Advisory System (FAS).
5.2.2 The government should work with the
European Commission to harmonise these new standards with existing
Good Farming Practice as required for payments under the ERDP.
This would establish a clear baseline standard for farm environmental
performance, above which payments will be available for delivery
of specific more positive environmental outcomes requiring positive
management. This would be an ideal moment to start to clarify
what this baseline will be, and to establish a timetable for phasing
it in to allow farmers time to adapt.
5.2.3 We have already made clear that we
believe there is a need for integration between farm advice and
the effective implementation of cross compliance requirements.
Farmers need to know what is required of them, what the requirements
mean for their particular holding and what they need to do in
order to meet these requirements. The government also needs to
be assured that farmers do know what they need to do. This advisory
requirement will be needed from 1 January 2005. The FAS, however,
does not need to be operational until 2007 and Defra's various
strands of work and reviews on farm advice and objectives for
a Whole Farm Plan approach have timescales for implementation
beyond 2007. We have not been able to identify a clear Defra strategy
for farm advice and planning that links the immediate needs for
advice on implementation of the reforms with the Department's
longer term plans which also incorporates the obligation to have
a FAS in place by 2007.
5.3 Increasing modulation to introduce an
entry-level scheme and enhance higher-level schemes
5.3.1 The agreement reached in Luxembourg
lost both the principle of making the Single Farm Payment degressive
(reduced over time) and also the principle of a progressive shift
of CAP resources to Pillar II. This could create serious problems
for the approach set out by the Policy Commission which recommended
a progressive transfer of resources towards the reward of environmental
benefits and for transitional aid to help the industry adapt to
a new policy and higher environmental standards. The government
should keep up pressure on this issue in the run-up to the next
Financial Perspective of the Rural Development Regulation and
the Structural Funds. The UK's objectives for this negotiation
should include:
— a more equitable distribution of
the total RDR budget, based on objective need-based criteria;
— higher rates of compulsory modulation
to shift more resources from Pillar I to Pillar II; and/or
— the reintroduction of additional
voluntary modulation, so that Member States that wish to make
greater shifts from Pillar I to Pillar II can do so.
5.3.2 Meantime the UK should exploit as
far as possible the potential for national modulation up to 2006
in line with the Policy Commission recommendation to increase
national modulation to 10% from 2004 and 20% from 2007. This will
send a useful signal to the industry that the SFP should be seen
as a transitional measure and in future farm support will be offered
for the delivery of specific public goods. Modulation will also
be necessary to generate resources to deliver the Entry Level
Scheme (ELS) and an expansion of higher tier schemes.
5.3.3 English Nature fully supports the
aims and objectives of the ELS as a scheme which strengthens environmental
protection and provides a valuable component of the environmental
delivery system in the countryside. The pilot ELS, if modified
in line with Defra's proposals, which we support, should deliver
environmental benefits that meet the aims of the scheme and thus
provide good value for money. Because it is a new type of scheme,
careful monitoring of the outcomes will be essential against targets
like the farmland birds PSA and various BAP targets.
5.3.4 Taken together with a fully revised
set of Higher Level Schemes (HLS) and a new set of cross-compliance
requirements, a modified ELS provides an essential component in
a totally new approach to the management of the English countryside.
This approach will be central to delivering the government's targets
for both designated sites and the wider countryside as well as
meeting new environmental challenges and opportunities of a more
competitive and market orientated agriculture. Funding for the
new suite of schemes, however, remains inadequate and one of our
key objectives for the next two years is to make the case for
a much larger share of the total EU budget for agri-environment
and rural development when this is renegotiated in 2006.
5.4 Using national envelopes to encourage
environmentally desirable changes in practice
5.4.1 The Policy Commission welcomed the
principle of the sheep envelope as a precedent for creating flexibility
within existing CAP payment schemes to pursue more sustainable
objectives and wanted the government to press for similar flexibility
in other regimes. The new provision for national envelopes across
all of the commodity sectors creates this opportunity. We have
been working closely with Defra in developing a clear economic
rationale for the use of envelopes and a set of potential options
for consideration by Ministers. These include:
— maintenance of grazing for protection
and enhancement of biodiversity;
— support for marginal dairy farming;
— environmentally sensitive arable
farming;
— energy crop management;
— farming and resource protection;
— reconnecting farmers to markets;
— membership of farm assurance schemes;
and
5.4.2 We do not expect all of these possible
options to be implemented, and do not consider them equally important.
We do, however, advocate the pragmatic use of this tool to encourage
environmentally responsible practices whilst not undermining the
longer term shift to a more targeted approach through Pillar II.
We also support the way Defra is currently exploring and assessing
the options and will continue to work with them in further developing
these.
English Nature
December 2003
| 
