Examination of Witnesses (Questions 20-39)
PROFESSOR SIR
JOHN MARSH
14 JANUARY 2004
Q20 Joan Ruddock: When you were describing
the future of British agriculture as possibly bigger units and
fewer of them, I could not help thinking how very different—even
more different—it would make us look to some of our continental
neighbours. I would like to take you on to look at the discretion
that exists in implementation and what you think the effects of
that will be. Do you think that it is useful that Member States
have that discretion, or do you think that it was just one of
those compromises that had to be cobbled together?
Professor Sir John Marsh: Let
us go back to the premise to start with. Certainly the UK is,
and almost inescapably for the foreseeable future will remain,
distinctive in relation to other member countries of the European
Union—although some of the differences are becoming slightly
less, in the sense that some of the eastern European countries
now coming in also have relatively large units. It is also true
to say that if one is looking at the businesses as distinct from
the boundaries of farming activity in some European countries,
these are relatively bigger than one thinks simply by looking
at areas of land and this sort of thing. So that is, if you like,
a preliminary. Does it matter that countries operate in different
ways? I have to answer that question by going back to a slightly
different question which is, "Why do we have a Common Agricultural
Policy at all?" The object of the Common Agricultural Policy
essentially was to bring agriculture within the European Economic
Community, as it was then. It was a very difficult area, because
of the differing levels of policy, differing levels of support,
which spilt over into distortions in internal trade for the member
countries of the Community. In a certain sense, for all its faults,
the most important achievement of CAP was that it enabled these
countries to come together and secure the particular goal they
had set themselves. Then one says to oneself, "What does
this policy do that is relevant to that?" Essentially what
this policy does is to set a price regime within the Community
which will be internally competitive, because trade will take
place across Community frontiers, as it does now. It will probably
become a much more satisfactory price level, because of the greater
degree of liberalisation of trade over time. There are then a
number of things which countries wish to pursue in relation both
to environmental and safety issues and to social concerns, which
do not map evenly across the Community. People have different
values, different preoccupations and different levels of problems.
It seems to me that there is a real benefit to the Community and
its cohesion from allowing those issues to be addressed by the
countries concerned. It is a matter of concern for the Community
as a whole, because some of these countries—particularly
after enlargement—will have very big adjustment issues and
relatively few resources. It may well be in the interests of the
Community as a whole, the larger Community, that we help them
make these adjustments. Essentially, however, what this reform
does is to make that sort of possibility much more realistic than
it has been in the past.
Q21 Joan Ruddock: Does that mean that
you do not think there will be distortions in intra-Community
trade? I understand why you are saying it is desirable, but what
is the effect on trade? Is it distorted?
Professor Sir John Marsh: A great
deal depends on how effectively the Commission monitors the behaviour
of countries. If the Commission does its job in relation to a
country which operates a system that significantly distorts trade—and
almost any activity you do in relation to some aspects of agriculture
has some margin of impact on trade—if you have a Commission
which is looking at this carefully and saying, "That environmental
policy is seeking a goal which could be achieved with much less
impact on volumes of resource used if you do it this way rather
than that, and therefore you must not do it", then these
sorts of trading distortion will not happen. The fact is that
countries play this game in a rather un-communitaire way.
It is a sad issue, actually. In the long run, that frustrates
good things for lots of us. I suspect that we therefore have two
roles to play. One is to make sure that the Commission does its
job; the other is for this country, its government and its industry
to be vigilant and, if things turn up which are distorting, to
make this clear and to make it an issue. What we do not want to
do is to join the brigade of those who try to distort this way.
Q22 Joan Ruddock: It begs the question
whether the Commission has either the will or the determination
to do this.
Professor Sir John Marsh: It has
the responsibility. If it does not have the will, then we should
do something about it.
Q23 Joan Ruddock: It has the responsibility
and power. Finally, do you think that there would be problems
if you had implementation of different single farm payments in
the four countries of the UK itself—which I think is a possibility?
Professor Sir John Marsh: I think
that would be a very interesting situation. There will be a number
of obvious difficulties, where people have land on boundaries
and land both sides of boundaries which they run as a single business,
and all these sorts of practical issues, which I am not expert
on at all but which I can well recognise. In principle, I do not
have too many problems with different parts of the United Kingdom
doing things in different ways. The United Kingdom is made up
of quite dissimilar chunks of area, with different priorities
and different concerns. From a purely academic point of view,
it would be a lovely experiment. From the point of view of the
people in the business, it might be rather hair-raising at times.
Q24 Mr Liddell-Grainger: I find this
slightly unusual, because France and Germany have acted pretty
despicably over the whole Common Agricultural Policy all the way
through. They have made it very clear that they have five million
farmers and two million farmers respectively, and "We will
do what we want". Do you honestly think that the European
Community, or whatever it is called nowadays, is going to have
the guts to take on these two enormous countries? They are going
to distort it, are they not?
Professor Sir John Marsh: There
are several things to be said about this. One is that there is
a culture in this country of looking at things which are done
in France and in Germany in a way which is critical and sceptical,
and not looking at ourselves sometimes with an equally critical
perspective. Take the emotion out of it, forget that they are
big countries, forget that there is all of this story. They have
to interpret the rules. There are some classical examples where
particularly the French have failed to apply the rules in relation
to them. I think the answer to that question is that if they refuse
to apply the rules, then the Community cannot function. What is
at risk here is not the Common Agricultural Policy but the Community.
It is a different and a political question.
Q25 Mr Liddell-Grainger: Is that not
the crux of the whole reform of this? If it is not policed, it
will not work.
Professor Sir John Marsh: That
is true of any part of policy working.
Q26 Mr Liddell-Grainger: We are discussing
the implementation of the Mid-Term Common Agricultural Policy
review.
Professor Sir John Marsh: Yes,
but I am prepared to make the assumption that while there are
examples, which are troubling examples, of the failure of individual
countries to apply the rules adequately and legally—and
it is not only the French, there is a whole history of litigation
in the European courts—
Chairman: I think that we must now turn
to Candy.
Q27 Ms Atherton: Most of my questions
have been asked, but what implications do you think that the proliferation
of all the different models across the EU will have on the future
reform of the CAP?
Professor Sir John Marsh: If one
is looking to the future of the reform of the CAP, again one has
to think in terms of timescale here. The immediate future will
be a process of settling down, of making these rules functional—picking
up the sort of problem which you were referring to, actually.
The longer-run future is how do we articulate the huge opportunity
which exists for European agriculture in a global situation, given
that it is an agriculture with significantly good natural resources
in many areas; it is a very substantive, buoyant market; with
a research and scientific community capable of developing new
ideas and applying them; and with a market which is rich, interesting
and diverse. How can one develop that? I think that there are
things which then have to be looked at in terms of policy. Where
do our policies get in the way of that process? Much of the discussion
in the longer term is how do we, in a sense, get out of policy
and into creating a context within which a market-based industry
actually functions. That is talking about the future of agricultural
policy. That is not talking about the future of environmental
policy, which is a quite different business.
Q28 Mr Mitchell: Pursuing Joan's points,
will it not produce a distortion? After all, it is now a common
agricultural policy. That is to say, common prices to a large
degree. If this is to be subject to individual national implementation,
under the principles you are enunciating you will have a kind
of bonanza for big agribusiness in this country, which will be
able to survive and do quite well out of it. I would imagine,
however, being naturally suspicious of the French, that they will
continue to pump money into agriculture as they always have done,
because the system is theirs, they benefit from it, and the whole
of the French countryside is run as a kind of machinery for financing
farmers. If they continue to do that, they have to be much more
competitive, particularly against a British business which is
hung down with a huge capital cost of land.
Professor Sir John Marsh: Several
things: first, I do not think that you should assume that what
I am talking about is a bonanza for big farmers or big business.
This is a very tough process of adjustment, in which they will
have to take some pretty difficult decisions.
Q29 Mr Mitchell: Which big business is
better able to survive.
Professor Sir John Marsh: It is
a survival strategy, not a bonanza that I am talking about. The
second thing is that the French actually have some extremely efficient,
very competitive and tough farming businesses. They also have
an attribute of combining themselves together to be effective
in a marketplace. So do not underestimate their capacity, on the
grounds of sheer technical economic efficiency, of being there
and being successful. What they also have, of course, is a tradition
and a culture of supporting the countryside. There are several
things about that. First of all, provided they do that in a way
which does not spill over into changes in the price levels in
the system—distorting the prices—if they do it at
their own cost, out of their own resources, I do not have any
particular problem about that. If the French choose to pay to
keep people—I was going to say "playing boules in the
streets"—that is a very pleasant activity which I shall
go and witness with delight once a year. That is good; that is
fine. If you look, for example, at a country like Switzerland
or Austria, where clearly the farming activity is supported as
part of the tourist business, as part of the entertainment activity
if you like, I have no problem about that—provided that
it is paid for by the people who are seeking to benefit from it,
not by the consumer of food in the UK or the taxpayer in the UK.
That is not sensible. The role as to where that distinction comes,
between what is done which is non-distorting and what is done
which is distorting, is difficult to define and is an area of
immense importance for the Commission to be busy about. I think
that is really what we must be looking for. If they do not do
their job, we should be saying that they are not doing it.
Q30 Mr Breed: Can we turn quickly to
cross-compliance? The Government are obviously very keen to use
all sorts of instruments to get the electorate to do all sorts
of things, not least now paying money on speed fines to provide
compensation. We are very much seeing farmers being forced to
comply with all sorts of legislation and being told, "You
are not going to get some of these direct payments unless you
do". As I read your paper, you do not believe that this whole
area of cross-compliance is a particularly efficient tool to deliver
the public goods—which is somewhat at odds with what Lord
Whitty was saying at Oxford.
Professor Sir John Marsh: Yes,
indeed. I hate to disagree with him, but there we are.
Q31 Mr Breed: I am sure you do. I am
sure that we all do.
Professor Sir John Marsh: The
truth is I believe that this particular way of funding environmental
improvement, if you like, is a wholly illogical way. It is based
on the accidents of the distribution of money in the past for
quite unrelated purposes. If you want to do this, therefore, the
first thing I would say is that if there is evidence that some
particular activity is damaging to the environment, the agricultural
industry, like any other industry, should bear the cost of that
and take remedial action to prevent it. To my mind there is no
question that agriculture is special in some sense and that it
is not free from being at fault if it damages things. Secondly,
I think that there are an authentic number of things, which we
loosely call "public goods", that people would wish
to have which cannot be bought by the market privately; that in
that situation there is a role for the State in buying those goods
from people; that on the whole it should seek to buy those goods
in the most efficient way—
Q32 Mr Breed: Openly and transparently?
Professor Sir John Marsh: Openly
and transparently, yes. So that, in a sense, you bid to supply
those goods.
Q33 Mr Breed: Touching on what you were
discussing with Austin, is it your view that some UK farmers,
in having to comply with government regulation and being penalised
if they do not, might therefore be operating in a difficult or
a different marketplace to many of its European competitors?
Professor Sir John Marsh: Yes,
there is a good reason why that might be true. If you were to
map the things which would be environmental priorities on particular
pieces of land in different parts of the Community, you would
come out with a different list. That would be an authentic list,
not something you have done artificially. But the effect of supporting
that would have different implications for the other parts of
the businesses carried on on that land, so that there would be
an element of difference emerging. Whether you regard that as
a distortion—because you could well say, "What we are
looking at is the aggregate value of the output of this business:
its value market-wise plus its value public payment-wise"—it
is an argument which would say, "Okay, so it looks distorting
if you look at one part of the question but not if you look at
it in total".
Q34 Mr Breed: In the round, however,
the more and more legislation and regulation that the Government
pile upon the producers—the costs of that will make the
so-called level playing field even more distorted.
Professor Sir John Marsh: The
costs of administration are a very serious aspect of this total
activity, including the costs of monitoring, of course.
Q35 Paddy Tipping: You made some very
interesting points about the use of the countryside, environmental
benefits, the reasons that people go to the countryside. Clearly,
if you want a countryside that people want to visit—the
Swiss landscape, the Yorkshire Dales, or whatever—you have
to find a mechanism to pay for that. I thought that I heard you
say, "I don't want the taxpayers to pay for that" but,
when you were talking to Mr Breed, I was not quite clear whether
that was what you were saying. In a sense, there are two arguments,
two ways forward. One is to modulate much more severely and ensure
that the aggregated environmental schemes meet that need; the
other is that the visitors pay to create the kind of landscape
that they want to visit. Just talk me through your thinking on
that.
Professor Sir John Marsh: Modulation
is obviously attractive to governments. It gives them resources
with which they can do things. Often if they do things, they hope
people will feel grateful. They are often disappointed, but nevertheless
that is the way the world is! My preference in practice would
be that the first thing you do is to see what the market can deliver.
In other words, you say, "Is there an asset here which we
can actually sell?" Visiting permits or camping permits or
whatever else. It is when you have done that and you then look
at it and say, "There is something happening here which is
not getting sufficient attention but is much in the public interest.
For example, we would like this area of land to be planted in
such a way as to hold more water back, in order to prevent floods
taking place further downstream". I cannot imagine visitors
wanting to pay for that.
Q36 Chairman: You said, "We would".
Who is the "we" in your example?
Professor Sir John Marsh: I think
that this is the political body, actually. It is another interesting
question. Do you define the "we" at the level of UK,
of England, of Northumberland, or at the level of a parish? Because
all those answers can have affirmatives for different sets of
questions.
Q37 Chairman: To develop that line of
thinking, are you suggesting that instead of having the broad
and shallow scheme, which seems to be the gate-keeping exercise
as to whether you get any money or not under the new regime, you
would devise a much more sensitive tool for the purchase of environmental
attributes? One of the things I am not clear about is that we
are bolting on, if you like, or putting in place a new floor in
the way in which we buy environmental goods. Above that, we already
have environmentally sensitive areas and countryside stewardship,
and probably a plethora of other, smaller-scale environmental
schemes, which are already there and, by definition, would have
to coexist with the broad and shallow scheme. If you ditch broad
and shallow, what sort of democratic mechanism would you then
put in its place to make the determination as to what it was you
wanted to preserve and use a public resource to buy?
Professor Sir John Marsh: There
are two components to this, in my thinking. The first is that
we have to discover what it is that people want to buy. In a sense,
we need to make people articulate what they wish to see in their
particular environment. That brings me down to a much more local
perspective than the nationally aggregated schemes. Secondly,
you have to be prepared to put some resource into this with which
they can buy it, and which they can choose to use in different
ways. I am not even sure that I would want to ring-fence this
as a defined set of environmental things. I would like to say
to people, "You have this money, which you can spend to improve
the quality of life in your society. You might do it by spending
it on getting a better car park, or you might do it by spending
it on persuading somebody to plant trees in this particular place"—but
a much more hands-on, close thing, run by local people with local
interests, with the local community, and facilitated by the State.
Take the basic position that you outlaw the damaging activities—that
is the starting point. You are not now talking about remedial
activities; you are talking about, "What do we enhance with
this?" The difficulty about most of the other things is that
they go for the big, emotional, attractive schemes—things
which will say, "We have so many more badgers, so many more
birds of one particular variety or another"—when in
fact the people living in the community may well have quite a
different set of values. It is actually to enable them to articulate
those.
Q38 Alan Simpson: Can I thank you for
drawing the Committee's attention to the inadvertent effect of
distorting land values that different approaches to the new formula
might have? It reminded me of the heady days in which, as economists,
it was legitimate to have serious discussions about the case for
the common ownership of the land. I would just like to leave that
back on the table! Essentially, it seems to me that your papers
almost make a different case, the case for liberalisation, which
is inevitably going to head towards oligopolies on the land. I
am not interested in that at all. I am interested in the distorting
effects—particularly the scope for that in the national
envelope. I actually like France, in distinction to my comrade
and friend here. I like France; I like Italy. I like in particular
the way in which they have developed very strong, localised food
markets and food systems where, as far as consumers are concerned,
the issues of food accountability, the freshness, the choice,
and a different sort of food market structure is part of a food
system that they take pride in. Is it your reading that the only
scope we will have for developing such local food systems will
be found in the use of the national envelope?
Professor Sir John Marsh: I do
not see what is stopping developing local food systems in this
country, if people want to have local food systems. If there is
a real interest by consumers and that interest is sufficient to
pay the additional costs involved in sourcing food locally, I
do not see any reason why it should not happen. Indeed, supermarkets
tell me that they do this sort of thing. I do not go round and
inspect their behaviour to see whether they actually do it, but
I am assured that they do. I think that what you are looking at
here is a different historical culture of the way in which people
have sourced their food. I too like going to France, wandering
round French markets, and also French hypermarkets sometimes.
The reality is that these things develop in response to emerging
changes in society itself. Our food system today is utterly different
than it was 25 years ago. The whole development of not only the
food itself, the products which are available, but the structures
through which those products reach the consumer is unrecognisably
different than it was in 1980. It has moved forward so fast. That
process is going on and will go on across the Community. It is
partly a question of increased affluence; it is partly a question
of changed communications, of electronics; it is partly a question
of people moving around; it is partly a question of new understandings
about health, diet, and these sorts of issues. I see this as a
dynamic in which I do not want to lay down rules about what people
do.
Q39 Alan Simpson: Would you accept then
that the use of the national envelope has to be distorting if
as a Government what we wanted to be promoting was sustainable
food systems?
Professor Sir John Marsh: It depends
what you really mean by a sustainable food system. Are you talking
about sustainability in terms of infinity? Clearly not, because
that is absurd. You are talking about avoiding the sorts of things
which lead to medium-term damaging consequences which prevent
you continuing to supply the stream of food which you think you
are going to need. Would that be true?
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