Examination of Witnesses (Questions 260-274)
LORD WHITTY
AND MR
DAVID HUNTER
11 FEBRUARY 2004
Q260 Paddy Tipping: In a sense if the
announcement very shortly were to choose a hybrid model that was
also dynamic, in a sense one has to set some parameters operating
here because over a period of time, the dynamic element is going
to change year on year. Is there a confidence that that can be
achieved without major difficulties? I guess what I am saying
is that people have always said to us, "Stick with the historic
model because it's easy", so if one were to choose a dynamic,
hybrid model, can it be delivered by the RPA without major problems?
Mr Hunter: My experience of washing
machines is that the more programs they have, the more prone they
are to playing up on you and I think the more complex an agricultural
support scheme, the more the risks increase of mechanical failure
at some point. I do not think that this scheme, however it is
constructed and whatever the dynamic elements, is beyond the ability
of the RPA systems to deliver in time. It would be unwise for
anybody to sit here and say today that we will have a fault-free
system in place at the beginning of next year. Our collective
target, my colleagues in the RPA, is to have in place a system
which enables farmers to make their first application for the
new single payment scheme in whatever guise ministers choose to
present it on 15 May next year.
Q261 Paddy Tipping: The hybrid model
finalised by Lord Whitty's Oxford Conference Speech, just remind
me, in all the consultation documents that the Department put
out, including the last one, I think, in October, the hybrid model
was not mentioned at all, so when did that come into the fray?
When did it become a real policy option?
Lord Whitty: Well, there are two
aspects of hybridity, are there not? There is the aspect of whether
you treat different sectors in different ways or different types
of land in different ways, and there is the question of whether
over time you change from one system to another. Now, changing
from one system to another arose as soon as it was clear that
there was an area payments option. The hybridity by different
sectors was introduced very early on in the response to that consultation
and indeed you will know that the CLA, which I have already mentioned,
went for a particular form of hybrid and there were other hybrids
suggested during that process, so it is not a new thing and our
model may well have an element of hybridity, it may well have
an element of dynamism.
Q262 Paddy Tipping: Or both.
Lord Whitty: But not necessarily
both, but either way, in respect of the RPA, we are not moving
from a simple historical basis to a simple area basis or a complex
area basis, but we are moving from a system which had 21 different
regimes, all of which changed every year because you had a different
number of sheep or a different number of hectares under grain
every year, and of course the problems about changing land tenure
and who owns what will exist under whatever system we are operating.
The only additional complication of going in for an area payment
is if there is some land which is not in the system which might
come into the system, but apart from that, we are dealing actually
with a less complex system than the one the RPA have had to operate
on occasion with some difficulty in the past.
Mr Hunter: Can I just add that
in terms of the options for implementing the Single Farm Payment,
there was a period in the autumn when a lot of people were discussing
what was known as Option G. Option G happened to be, I think,
the penultimate of a series of families of options that my staff
and colleagues had devised for the purposes of discussion with
the industry and in a sense we, if you like, have been the victims
of our own creativity. We have attempted to test the envelope
in the Regulations to see precisely where the limits are in what
can be devised and we have had a range of options which we have
discussed with stakeholders through the autumn and the early part
of this year.
Lord Whitty: I remember on that
thinking that all the options which the staff would put up were
all of equal value and being told in the middle of a carrot field
in Leicestershire that we were all going for hybrid Option G,
so it was pretty widely known amongst the farming community that
these options were being considered.
Q263 Alan Simpson: Paddy Tipping said
that the RPA was not without its critics in the farming community.
I think it is fair to say that neither the RPA nor Defra have
been without their critics in terms of the openness of the information
that is available to the public and although David Hunter mentioned
the issue about the IT systems and the database, can you just
say why it is that at least in England we are not making the information
about where the current subsidies go as open as the system will
be in Scotland where freedom of information will actually be able
to identify where the subsidies are going in most of the same
way as regional development grants or grants to industry? Why
are we so secretive about where the subsidies are going at the
moment?
Lord Whitty: Well, in principle,
we are not any more secretive than anybody else. We do not identify
the individual farmers, but we do pretty much publish the type
of subsidies that are going to different sectors, which regimes
they occur under and there is a regional and even a sub-regional
breakdown of that, so I do not really accept that we are being
non-transparent.
Mr Hunter: There is a mass of
information that we publish in places like Agriculture in the
UK and in the Farm Business Survey and other material which
is publicly available and we have from time to time answered questions,
I think, about the total volume of subsidy going into particular
regions of England and that we have done in some of our analysis
in this case.
Q264 Alan Simpson: Well, I think the
point about this is the criticism that actually in farming we
are far more sensitive about non-disclosure in terms of subsidies
going to farms than we would be in respect of regional development
grants or to industry and that certainly does not apply in the
United States where the subsidy per farm is a matter of open access
as part of their Freedom of Information Act. I think there is
this sense that the public accountability about where public subsidy
is going is not a matter of whether there can be a sort of comfortable
agreement between the Government or the subsidy distributing body
and those who are its recipients, but the question is how accountable
is that to the public?
Lord Whitty: Well, I am not sure
that I accept the premise of the question because the way in which
we provide, and the European law provides, subsidies is an entitlement
to farmers who meet certain criteria. It is somewhat different
from a grant given by a regional development agency for a particular
purpose or a particular development. Now, you can argue whether
or not that is right or wrong, but it is a different sort of subsidy
and there is no secret about the total amount of money that we
give out, as both David Hunter and I have said, and, to make the
analogy, we do not put into the public arena how much everybody,
as an individual, receives in social security. That is not in
the public arena. That may be an inappropriate analogy, but we
are talking about entitlement.
Q265 Alan Simpson: Let me feed into then
the structure. I am not asking you whether a new announcement
will be launched within 45 minutes or whatever—
Lord Whitty: Getting close!
Q266 Alan Simpson:— but you will
be aware that amongst the non-farming submissions which are coming
to you, one of the submissions from Oxfam specifically sought
to take you up on the issue of sustainability, not of the system,
but of agriculture both in a national and an international context.
Can you just say to the Committee whether, in the framework of
what you are going to be announcing, the sustainable system you
are going to try and develop would address any of the key points
that Oxfam tried to set out, namely that there should be a cap
on payments to individual producers, and they are suggesting £50,000
to begin with, scaling down to £20,000, that there should
be an increase in spending on environment and social priorities
under Pillar 2, that there should be full disclosure of payments
and that the shift should be towards the investment in extensive
agriculture rather than intensive agriculture? Is that the sustainability
element that will go into the new model that you are going to
be announcing?
Lord Whitty: Well, we do not either
accept or seek to address every aspect of Oxfam's criticism. Oxfam
are looking at, as befits them, the bigger picture as to how the
impact of the way we subsidise and operate in European farms hits
the world as a whole and particularly the developing world, but
it will hit quite a number of them. After all, production subsidies
which were related to quantity inevitably subsidise in Europe
much more than they do in the developing world and even more than
they do in the United States, although they are reducing in Europe
whereas they are increasing in the United States. To that extent,
they discriminate against and distort the trade opportunities
of developing countries. Once you move the subsidy away from maximising
production, then that distortion reduces and in WTO terms it moves
from a production and trade-distorting subsidy to what they call
a "green box", so we are addressing that central issue.
We are also, I think, addressing sustainability in the sense that
the outcome of an area payment and to some extent the outcome
of the historic payment, if we were to adopt that, is attached
to cross-compliance arrangements which meet, by and large, environmental
criteria and, therefore, in a local sense we are addressing a
sustainability issue. We are not addressing in this package, if
you like, the social redistribution of putting a cap on payments
to individual producers because under a system of support which
is, by and large, to support the existence of farming and to make
operations to improve the environment, then it is not particularly
relevant whether it is a small farmer or a large farmer who is
operating or owns that particular field or is the tenant on that
particular field. There may be other social reasons for doing
this, but we are not using it for a social policy in that sense.
I heard you discussing as I was coming in some issues of balance
between tenants and landowners which is one dimension of this
which we may need to address, but not in the crude sense that
Oxfam are suggesting we shift the balance towards smaller farmers.
We were just discussing the issue of the identity of the recipients
and I have really got nothing to add to that, which is another
one of Oxfam's demands.
Mr Hunter: Perhaps I can make
two points in relation to that. If one were to look at the question
of limiting the level of subsidies payable per farm or farmer,
I do not doubt that there are plenty of very able solicitors around
who could advise people on how to rejig their business to avoid
such a cap being effective and there is experience in that area
where people have rejigged their business rather artificially
to maximise their subsidy take. The second point is in relation
to the international standing of the CAP and its impact on developing
countries. The Doha Round negotiations are still in process and
agriculture will be a significant part of that outcome and we
are working with colleagues across the community to try and produce
the most positive outcome in that respect that will benefit the
developing countries. There are a number of regimes under the
CAP which are not covered by this reform, but which are still
under negotiation, cotton and tobacco, for instance, which are
of acute interest to a number of developing countries and they
will come under the umbrella of reform in due course.
Q267 Mr Lazarowicz: On the question of
identification of recipients of payments, presumably there is
no technical difficulty in providing this information and somewhere
there is a list within Defra of to whom and what payments are
made, or within the RPA? Presumably there is no technical difficulty
in doing that?
Mr Hunter: Well, we will have
to have such a database in order to start this new system up and
running.
Q268 Mr Lazarowicz: So there is no problem
in doing it, it is just a policy decision?
Mr Hunter: Yes.
Lord Whitty: We have not had one
hitherto in that sense because you were paid under different regimes
for different purposes, so there is not necessarily a consolidated
list for somebody who receives an Arable Payment, the Sheep Premium
and so on, and this is one of the historic bits, whichever way
we go down, where the RPA have to assemble each of those things
to establish what the historic entitlement of a business was,
but that does not automatically arise from the existing data,
but we are having a go through that and we are reasonably confident
that the RPA will manage to do that, although of course the configurations
of businesses are also changing all the time.
Q269 Mr Lazarowicz: One area of complexity
will be the national envelope. The impression from the consultation
document certainly is that it is not a question of whether it
should not actually be introduced in the UK, but how it should
be introduced. If that is the case, can you tell us what are the
main options that you have been considering for the use of that
provision?
Lord Whitty: I think at the time
of the consultations, we did believe that the national envelope
was rather more flexible than I think the rules actually allow
it to be and that it could address and may still be able to address
some issues of offsetting negative distribution either in the
historic model or in the area model, or addressing some of the
environmental problems or helping certain sectors to get closer
to the market, and that if you took the national envelope, which
is basically creaming off the top and redistributing it, then
we could meet some of those structural problems or some of those
particular environmental problems. The way the Regulations are
already written, this is without the final, technical Regulations,
you can only redistribute through a national envelope to the sector
that you took it from which somewhat limits the usefulness of
national envelopes. I think we regret that and if we do use national
envelopes, it would probably be for environmental outcomes in
particular sectors, but the argument for using them across the
board is rather less than I think we felt at the time of the consultation.
Mr Hunter: It is from milk to
milk, from beef to beef or whatever else in terms of the money
raised and the purposes to which that money can be applied are,
broadly speaking, either to assist with certain environmentally
valuable kinds of farming or environmentally sensitive sorts of
farming or better marketing of the products of that farming.
Q270 Mr Lazarowicz: Can we assume that
a firm decision will be announced on this aspect along with the
rest of the decision which will be announced at some stage in
the future?
Lord Whitty: A position on the
national envelopes will be announced.
Q271 Mr Lazarowicz: It will be a question
of further options and there will be a firm decision?
Lord Whitty: One of the other
limits on the national envelope is that it appears in the Regulations
that you have to decide now on how you use the national envelopes
or by August how you use the national envelopes and you cannot
leave the option open for three years down the line which is again
a limitation because that is the point when you might actually
need them. I think I can assure you that the national envelopes
or the Government's position on national envelopes will be clear
from the statement, but there are limits on what we could do with
them.
Q272 Chairman: Can I ask, if we are shortly
to get some form of announcement, would it be accompanied by some
form of document to explain in more detail the conclusion that
you ultimately reach and to give an indicative plan as to how
the new arrangements, whatever they turn out to be, are actually
going to be introduced? Clearly the sense I get is that you may
very well have decided on the broad-brush framework, but there
is an enormous amount of detailed work and, therefore, by definition,
for farmers and landowners a lot of practical questions which
they will seek answers to and where people will seek an understanding
of the basis of your decision and will want some analysis. Is
all of that going to be made available?
Lord Whitty: There will be some
background documentation issues, as indeed there already are,
in the public domain, but you are right that if the announcement
is likely to be about the basic architecture of the proposal,
there will be some details that will not be clear in that announcement
and indeed some of them cannot be clear because we have not got
the full Commission Regulations and we may not have them for some
time.
Q273 Chairman: But, for example, when
the first consultation document came out as opposed to the process
of consultation, hybridity was not one of the options, from what
I can gather, and it subsequently emerged as something which you
may well have had to look at. I think people would be very interested
to know how the decision, whatever it ultimately turns out to
be, was reached and will there some analysis made available of
your then assessment of the economic impact on UK farming of,
first of all, the proposal for the Single Farm Payment and, secondly,
the subsequent effects particularly in the context of the movement
of monies from Pillar 1 to Pillar 2 and, if you do decide to have
some kind of envelope, the sectoral impact of that?
Mr Hunter: Perhaps I can comment
on a couple of points on that. We have shared with many of our
stakeholders quite a lot of economic analysis that has been done
over recent months. It has always been our intention to try and
pull that together into a single, coherent document and put it
on the Defra website for anybody to look at. We are in the process
of finalising that document now and one reason why it has not
been finalised before now is that there have been sort of iterative
processes in all of this with new ideas coming forward, which
we are attempting to analyse and reflect in that paper. It will
be some 50-odd pages of analysis and data. The second point I
would make in this context is that it is important to remember
that the fact of decoupling is the bigger single driver of change
in all this rather than the form of the payment that is eventually
to be made. In very round terms, I think our estimate is that
the fact of decoupling should or could lead to something like
a 5% increase in total income from farming in the UK compared
with the figures for last year. Now, those are always estimates
we make that people can choose to question, but it is the fact
of decoupling which is the biggest issue here and the form of
the payment is in one sense a secondary issue.
Q274 Chairman: Well, we are prepared
to wait with bated breath to hear or read or possibly even be
involved in questioning the Secretary of State once this announcement
is made, but just before, Lord Whitty, you go, I would like to
raise another matter with you on behalf of the Committee. It may
well be that your bedtime reading in recent days has not been
the annual report of our Committee for 2003[2],
but in paragraph 15 of that document, we raised what we considered
to be a very important point. In paragraph 15, it begins with
this sentence: "Defra failed to respond to our recommendation
last year that the Committee should receive advance notice of
major appointments in case it wanted to talk to such appointees",
and amongst those that we cited in this context, for example,
were the Chief Veterinary Officer, filled on the 24 November last
year, the Chairman of the Advisory Committee on Releases to the
Environment, the Chairman of the Agricultural Wages Board, and
the Chairman of the Advisory Panel on Air Quality. The conclusion
that we reached was, "Once again this year we have not been
specifically informed by Defra in advance of any of these appointments
to posts in non-departmental public bodies. We recommend, as we
did last year, that the Department put in place procedures to
inform us in advance of all major appointments". I do not
think that is an unreasonable request for a House of Commons Select
Committee to raise and, therefore, it was with some concern that
I learned, because I happen to get hold of a copy of your Department's
news release dated 3 February, that first of all Defra had appointed
a new Science Advisory Council and you yourself said, "The
new Council is made up of people who are highly distinguished
in their own fields", and you go on to talk about it, and
we discover that Professor Roy Anderson has been appointed to
chair that. Now, no notice of that was given to this Committee
and clearly no opportunity was afforded to us to talk to Professor
Anderson. Can I ask you, if people do go through our Report and
if that is not an unreasonable request, why were we not told?
Lord Whitty: Certainly people
go through your reports and I have to say I do think that it is
a reasonable request and I do not know why it is not a matter
of routine that you are not so informed, and I shall make enquiries.
As to whether the persons involved should automatically be available
to you to interview, I think that is a slightly separate point,
but certainly you should have been informed and we should have
taken that request, which is a quite reasonable request, seriously
and I will endeavour to ensure that we put in procedures which
ensure that happens systematically.
Chairman: Well, I think it would be helpful
to the Committee because, as you know, science underpins your
Department's working and it often forms a very important basis
for many of our inquiries, so perhaps you might be kind enough
to write to the Committee and advise us in a little more detail
on the type of work that this Council is going to be doing and
perhaps give us a signpost or two as to the areas of its potential
investigation. With those words, can I thank you most sincerely
for coming today, We are very pleased that you were here. We were
not looking forward to the possibility of an empty chair because
we would much rather have seen you and heard from you than wonder
why it was, for whatever reason, you were not able to join us,
but you have been able to and I think we have found it very interesting
and obviously we look forward to the implementation soon as far
as the announcement is concerned, and our thanks also go to Mr
Hunter for his contributions to our proceedings. Thank you very
much.
2 Environment, Food and Rural Affairs Committee, Second
Report of Session 2003-04, The Annual Report of the Committee,
HC 225 Back
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