|
UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC (1250-i) House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE ENVIRONMENT, FOOD AND RURAL AFFAIRS COMMITTEE
"VISION FOR THE COMMON AGRICULTURAL POLICY"
Wednesday 14 June 2006 MR DAVID FURSDON, PROFESSOR ALLAN BUCKWELL and DR DERRICK WILKINSON
DR MARK AVERY, DR SUE ARMSTRONG-BROWN, MR TOM OLIVER and MR IAN WOODHURST Evidence heard in Public Questions 1 - 105
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Environment, Food and Rural Affairs Committee on Wednesday 14 June 2006 Members present Mr Michael Jack, in the Chair Mr David Drew James Duddridge Lynne Jones David Lepper Sir Peter Soulsby David Taylor Mr Roger Williams ________________ Memorandum submitted by Country Land and Business Association
Examination of Witnesses
Witnesses: Mr David Fursdon, President, Professor Allan Buckwell, Chief Economist and Head of Land Use, and Dr Derrick Wilkinson, Senior Economist, Country Land and Business Association, gave evidence. Q1 Chairman: Good afternoon, ladies and gentlemen. Welcome to our further evidence session on the Committee's inquiry into the UK Government's vision for the Common Agricultural Policy. We welcome old friends of the Committee, the Country Land and Business Association, and in thanking them very much for their comprehensive and interesting written evidence we welcome David Fursdon, their President, Professor Allan Buckwell, the Chief Economist and Head of Land Use, and Dr Derrick Wilkinson, their Senior Economist. Gentlemen, one of the things which has been going through my mind as I have looked at the evidence for this inquiry was - and indeed the Committee had the pleasure of visiting Poland and Romania last week in pursuit of further background for this inquiry - what actually do we think the purpose of the Common Agricultural Policy is, because the "Vision" document is strong on drawing up lists of what a reformed Common Agricultural Policy might look like and it lists some of the things it would like to see coming out of it, but it made me ask myself the rather more fundamental question, what should this Common Agricultural Policy's purpose now be? Perhaps you might like to supply me with an answer? Professor Buckwell: Thank you, Chairman. If I could kick off on that one, in a word, changing. The purpose of the CAP is changing and that is the difficulty in a sense and the reason we are having a debate. The objectives are laid down in Article 39 of the Treaty of Rome, which is all to do with agriculture, food production and ensuring the standards of living of those engaged, stabilising supplies, and so on. Those were objectives which were absolutely understandable in the late fifties, early sixties, when it was set up and even for one or two decades thereafter, but what has happened since then is that we have added significant other demands which society places on its rural areas and its agriculture, and that increasingly involves delivering environmental services. So this did not figure at all in the original Articles, but it is now a core part of the current and future purpose of the policy, whilst at the same time trying to stimulate and encourage the industry to deliver food supplies, because that is what the fundamental job of agriculture is, and to improve quality, to improve marketing, and so on, but now increasingly to deliver these wider what I would call environmental and cultural landscape objectives. Q2 Chairman: Do you think it is quite important in a way that before one gets into the detail, the delivery mechanisms - which is what the "Vision" does in its long, what I call shopping list analysis - I looked around to see if they could define with some degree of clarity what the CAP's purpose actually is and it is very fuzzy. I could not quite get to the definitive paragraph. I have lists of what it might look like, but they talk about, in paragraph 1.32, "Against this background a sustainable CAP would comprise," and then there is a long list of what it would comprise of, but you are still left asking the question, what is the purpose? Professor Buckwell: We felt exactly the same, what is the purpose of this document? It is not a vision for agriculture, it is not a vision for land management or the countryside, which is where you might have thought we would have started with our vision for that and then said, what policy do we need to deliver that? This document does not provide this. To our reading, this is a list of what the Treasury and some Defra officials think is wrong with the current financing of the CAP. It is a rather narrowly focused document about the financing issues, and there is a very strong thrust in this that they want to significantly reduce the public expenditure cost of the countryside, which we think would be a huge mistake. Q3 Chairman: Did you make a cockshy yourself at remedying that failure of the document? I know you have produced your evidence, but you have been kind enough, if you like, to follow the mantra we laid down and answer the questions we put down. I just wondered if you had come back to a simple question of what is the purpose of the CAP? You have talked about the delivery of environmental goods - and we will come on to discuss that in some detail - but everybody talks about these environmental goods as if there was a pre-determined list of what it was we wanted. Professor Buckwell: You are absolutely right, Chairman. That is a complicated question to answer, if you want to start it now, but in terms of the purpose of the CAP there is a requirement - it is perfectly reasonable and sensible that the largest economic block in the world, the European Union, would want to have a policy for secure, stable supplies of its food, of high quality and food safety, and so on. So it is not at all surprising, particularly within a single market, that the European Union would want to have a policy covering that area. This is the basic needs of the population. When you add to that that Europe is unusual in many parts and most regions of the world in that its rural areas are also its playground. A huge amount of tourism and recreation takes place in the countryside. It is a managed countryside very largely, particularly in this country, less so in some of the other Member States but still to a high degree, and so of course this policy nowadays, given what society expects from the countryside, we would expect to have a very significant element of how that countryside is managed. I do not just mean agriculture, but of course that includes agriculture. Q4 Chairman: I suppose what was at the back of my mind was how common the policy needed to be, because one of the things which comes out from a lot of the evidence is that when you had a CAP which was production-focused then a common approach had some appeal. But now you have decoupled, if you like "doing your own thing" becomes more appealing as opposed to acting on commonality. Professor Buckwell: There are two reasons why we would be very cautious about that. First of all, as more of the policy is justified in environmental terms and as most of that environmental regulation is European - these are European standards, rightly, within a European market because you are regulating businesses within an open market - that is part of the justification. A huge element of these environmental concerns is trans-boundary. Insects, birds, and so on, do not respect national boundaries and water flows across national boundaries. These are the fundamental reasons why a very strong element of commonality is justified, but likewise we would be suspicious because there is a much stronger taste in other Member States to put public expenditure into agriculture per se, but it is necessary to have a common policy to hold the ring for competition reasons within the single market. Therefore, it is vital, in our view, that we cannot just simply walk away from a common policy, from where we are now within the European single market with all its regulation. Q5 Chairman: This document sort of came a bit like a bolt out of the blue. Why do you think it was produced when it was produced? Mr Fursdon: It was very surprising to us the way it arrived, the fact that it arrived without any prior consultation, without any obvious attempt to take the stakeholder group with them on this, and it was produced at comparatively short notice for us during the period of the UK presidency, and no doubt there were lots of political reasons why it came out in the way it did, but for us that was one of the big problems with it. Allan has already said that it was not a document about a vision for the future of agriculture, but for an awful lot of people in agriculture to suddenly have this document appear at the same time as - they had just gone through the mid-term review and the proposals from that - the Prime Minister was taking every opportunity to say that we needed further reform, when we had just been through it, this actually was part of the problem. It just heaped one sort of set of difficult circumstances on another for the farming industry. So it was a strange emergence for the paper, I have to say. Q6 Mr Williams: For the sake of clarity, I would like to put on the record that I am a member of the Country Land and Business Association, but I hope that will not deflect me from the questions I am going to put to you. You are critical of the paper for a number of reasons, but one in particular is that there is a lack of analysis as to the effect the "Vision" will have on the UK farming structure, employment, output, on the upstream and downstream effects of these changes and what will happen to the environment. Although you are critical, actually when we talked informally to the authors of the paper they felt that actually all the literature tended to show that the effects would be fairly minimal. How would you react to that? Dr Wilkinson: I wish they had put that evidence in the document then. It is clearly not here. There is a chapter, chapter 3, the implications of further CAP reform, which I assume is where their analysis on the consequences of their view lies. Let us, for example, talk about the upstream and downstream linkages, the implications for the rural economy. In paragraph 3.34 they begin by citing an OECD study of the region in England which concludes that agriculture has strong rural links, and then with the sleight of hand of a magician in the next paragraph suddenly in fact OECD available evidence says that this is all fairly stable or even increased in a number of Member States. So from one paragraph to the next they have got this sort of sleight of hand. Their entire analysis of the upstream and downstream linkages is, what, five short paragraphs and it cites three studies, only one of which relates to England, notwithstanding the fact that Defra has commissioned a lot of studies and it is quite capable of commissioning the relevant studies. They go on to talk about the consequences for the environment. We are treated to, what, four paragraphs on the environment where they do not seem to quite know whether or not they think that further CAP reform would lead to further intensification or not, but they certainly do not cite any work one way or the other. So we are talking there about the consequences of their vision for the rural economy, the English landscape and countryside, and we have got a total of nine paragraphs out of this entire document. I do not think that that is an appropriate analysis, quite frankly. What they are suggesting, if we have a look in here, is that agricultural spending should be reduced to the current levels of Pillar 2 funding, that is to say a 90 per cent reduction in support over a 10 to 15 year period. What are the consequences of that? Absolutely no analysis whatsoever. That seems to me, if it is not too strong, a dereliction of their duty as a department to put forward policies which are based upon careful, well-thought out and balanced analyses. This, sadly, is lacking. Q7 Mr Williams: So what would your assessment be of the impact if the "Vision" was implemented as far as the CAP is concerned? Dr Wilkinson: Quite clearly the CLA does not have the resources of Defra and the Treasury combined, so we are not in a position to offer you a clear analysis of that. What we could say, I think, at this point is that we do understand the imperatives in terms of the budget and the changing needs of society, and so forth, but we also understand that the Pillar 1 funding, the support, if you take that away from farmers right now - the core business of farming lost £500 million last year. It loses money year in and year out, that is the core business, without support. We all buy into the fact that farming needs to be better connected to the market, it has to find market opportunities for a sustainable future, but over a ten year period? Is there any analysis anywhere which suggests that market returns to farmers, whether from commodity production, from diversified activities, or even indeed from the new non-food opportunities, are going to provide an increase of, let us say, two to £3 billion a year on a stable basis over the next few years? I have not seen any of that analysis. What we would like to do is engage in that discussion to see some of that work being done and to have a sensible debate about what the future for farming and the countryside is. Q8 Mr Williams: I think some of the models which were put forward by the academics were of countries where agricultural support had been eliminated or greatly reduce, that there was not much effect really on agriculture? Dr Wilkinson: Indeed. Q9 Mr Williams: I guess we are looking at New Zealand? Dr Wilkinson: Correct. Q10 Mr Williams: Could you suggest any other countries? Dr Wilkinson: No. New Zealand is an interesting example on several counts. First of all, it is a small country. Nobody else has ever done it or even tried, or even contemplated it. We have to remember, when we are talking about New Zealand, it is different. There are differences and those differences are not often brought out. For example, when they did their overnight liberalisation, withdrawal of support if you will, they also did a number of other things. They did provide exit grants for those who wanted to leave, but - and this is crucial, and interestingly not mentioned in here when they went on at some length about New Zealand - if you have a look at the exchange rate (and remember 90 per cent of New Zealand's farm output is exported so the exchange rate is critical), as you lead into that it was very, very low. The New Zealand dollar was very low, so farm incomes were reasonably good. It then peaked in about 1988 when they did this liberalisation. Quite how they timed it, I do not know, but it was brilliant timing. They had this lovely run-up of good farm incomes up to a peak and then it went right down again. There was about 15 per cent devaluation within 12 months, which stayed there until only about two years ago. So the exchange rate really worked for them. They also have a government and a ministry which supports them, which is actually proud of them and tries to help them. It has got a competition policy which allows their companies to grow up to world-scale, such as Fonterra, where we do not have that here. So there is a number of differences which need to be borne in mind. Yes, as I said, we do understand that farming needs to be more engaged with the market and get better market returns, we all want that, but we have to be realistic about it. Q11 Mr Williams: When the Committee visited Brussels recently, senior members of the European Union Commission were critical of the "Vision" document in the sense that it did not give an indication of how farm structures would be involved as a result of this implementation, if it was implemented. That is critical to our understanding of rural communities, particularly in some more rural countries like France, for instance. Have you got any ideas? You have not got the capacity of Defra, but you might have the imagination to tell us how farm structures could be affected by these proposals. Dr Wilkinson: Probably the beginning assumption is that the trends in farm structures would accelerate very, very rapidly, and those trends briefly, as far as farm size, are that we have got a very, very rapid growth of the very tiny, what some people call "hobby farms", and a fairly stable number of the very large farms, although they are getting bigger. They are the ones which produce 80 per cent of the food supply of this country. There are about 10,000 of them. We are losing that middle ground, the family farms. That will accelerate under this type of scenario. There are some 550,000 jobs, farmers and jobs directly in farming. The loss of farmers and farm workers will accelerate. The knock-on in the broader rural economy is that we have got about 50,000-odd in the food supply chain - I am thinking there of the farm suppliers and the wholesalers, just one away from farms - and clearly they are going to get hurt as well. So there is going to be a lot of unemployment, a lot faster unemployment, and we have to remember that while those figures might not seem very large in the scheme of things, this is going to be largely out in the more rural areas where there are fewer opportunities for people to do things there, so then they will have to leave those areas, and again you are going to end up with all the problems of people having to leave the countryside because they cannot afford to be there any more, and so on and so forth. There is a number of working assumptions we could begin with, but, as I say, we have not been able to do the analysis. We want to see the analysis done and we want to see the debate begin. Q12 David Taylor: It is about one per cent of GDP, is it not? Dr Wilkinson: It is less than that, actually, it is about 0.7, 0.9. It depends which year we are talking about. Farm incomes have fallen back again the last three years in a row. Mr Fursdon: Chairman, could I just add one point to that? Part of what lies behind this whole thing is that it will be better for the environment if we go down this route, and yet you would expect also some analysis to have been done on how the effects of these changes in structure might affect the environment as well, and the assumption that if people are going to have to compete in a world market they are not going to be intensive and that the only intensive agriculture is associated with the CAP supported agriculture is, I think, simplistic. Q13 Mr Drew: If I could just take up your point about your views on the "Vision" document, the problem is that in a sense the historic contradictions of the way in which the CAP has operated, and will operate, inevitably means that you have got a very divergent series of countries now within the CAP. Why is it we cannot look at options including, on the one hand, complete repatriation of the monies to national agriculture and, on the other hand, something to the extent that we might have a fully integrated market where you give every encouragement to those less developed countries to change their agriculture rather than a dependent income and production-based scenario, one which actually moves in the direction we all seem to want to go, which is to pay farmers to do things which are public goods and produce the alternatives to food production which everyone seems to crave after? Is that something the CLA has been interested in and done some work on? Professor Buckwell: Yes, we are interested in that and, yes, we have done work on this. You made some very important points there. First of all, that there are quite different requirements around the European Union. This is absolutely true and it is quite hard, as the Chairman was saying earlier, to see what is the commonality. My answer is that we need a common framework, and insist on that, but in fact it is not the current CAP. There has to be a common framework all the while we are in a single market with common regulation. The point about repatriation - and I do not like the use of that word - is that it has been agreed, we thought, in principle, and we are shocked at the way Defra and the Treasury threw away the principle in December that Pillar 2, in a sense the good CAP, the rural development, the agri-environment part of the CAP, was traditionally co-financed and the principle was precisely because the requirements amongst the various measures offered in Pillar 2 are different. The different Member States choose differently from the menu there and they should, of course, quite reasonably tip in some of their own funds to ensure that they only go in for programmes which make good value for money. Q14 Mr Drew: As usual, when it came to the budget renegotiations, it was the rural dimension which was the main - Professor Buckwell: It was cut. Q15 Mr Drew: That is where all the cuts were across the board. We in Britain were as guilty as the traditional agriculture subsidy nations and unless you can change that mindset - and to be fair it is totally unhelpful, going through Romania and Poland last week, to be leading them in a direction in which we do not want them to go, but they have to go there to move in our direction later, which seems a completely barmy way of undertaking policy. Professor Buckwell: I quite agree, which is why we put on the table for discussion last summer, when these discussions were still at an early stage, that rather than reducing the co-financing of Pillar 2 we should talk about increasing the co-financing of Pillar 1, and then the Member States such as France and Spain, who are some of the biggest beneficiaries of it, might take a different attitude if they had to pay more for it themselves. That is one of several ingredients which will certainly be discussed in the next review in two or three years' time, but the fact is that the opportunity to do that was not taken this time and instead we have gone almost in the reverse direction, reducing the co-financing in Pillar 2, which we are very upset about for the same reasons as Mr Drew mentioned. Chairman: We will come back and look at this matter again a little later on. Q16 Lynne Jones: In terms of reducing the spending on Pillar 2, the Government says that that was not their idea and it was the inevitable consequence of trying to negotiate for a budget reduction overall and it was a presidency compromise. Do you accept that position? If so, did the Government have any alternative? Professor Buckwell: It is an incredible way of describing it. The reality was that there was a decision to reduce the overall budget and there was an acceptance that Prime Ministerial agreement had already been made to maintain the Pillar 1 budget, so therefore the consequences of that was inevitably a slashing of Pillar 2 funding. It was as sure as night follows day that would come from those two policy decisions which this Government took, so there can be no pretending that we were surprised and we were not really wanting that outcome. It was a deliberate contrivance or outcome of the decisions it had made. So the question is, what do we do about that now? This is why we are saying what we do not like about this whole "Vision" document is that it is just hell-bent on reducing public expenditure on the countryside, instead of standing back and asking the question which the Chairman did at the outset, "What do we want the policy to do?". We in the CLA have certainly said that the way we are supporting the countryside has to change. Q17 Lynne Jones: So you are saying that the Government should have predicted that that would be the inevitable outcome and therefore to blame the presidency is really disingenuous? Professor Buckwell: They were the presidency, as far as I know. Q18 Lynne Jones: To blame the Commission, sorry. Professor Buckwell: Yes, I agree. Q19 Lynne Jones: Moving back in terms of Pillar 1 and Pillar 2, the Government's line is that spending directly on targeted agri-environment schemes is more effective in providing environmental goods and services than the imposition of cross compliance measures for Pillar 1. Do you accept that as a point of principle? Professor Buckwell: We accept that the payment for public services is going to be a major part (not the whole part, but a major part) of the enduring public support for rural areas. The question now is, how do you do that? The problem, as we see it, is that you would not start from where we are, but the trouble is we are where we are. We are paying large sums of money, roughly £200 per hectare in England, on the Pillar 1 schemes. It is a bit less than that after deductions, but as a round figure. We are paying £30 per hectare for entry level stewardship, and then varying larger sums on a much more selective basis for the higher stewardship. Those figures do not make any sense. Had the £200 per hectare in the Pillar 1 payments not been there, you would have had to have paid an awful lot more than £30 per hectare to have got the delivery from the basic stewardship scheme, but the reason why you only need £30 is because you are giving them £200. Trying to unravel that knot is the challenge and all we are saying is that you do not unravel that mess by just saying, "Slash Pillar 1, end of story." We have got to find a way of either targeting the environmental payments in Pillar 1 or switching the money to Pillar 2, but there are all these co-financing problems about doing that. That is the knot we are trying to untie. Q20 Lynne Jones: You say that it is difficult to estimate the actual amount of money you would need to spend on ensuring environmental goods and services. Why is it difficult, and should somebody be actually trying to find out what sort of money we need for these goods and services? Professor Buckwell: Yes, absolutely, we are, but it is like any public expenditure; it is difficult to know how much to spend on health, police and education. Q21 Lynne Jones: It does not mean you automatically say you should spend £200 per hectare. Professor Buckwell: No. Exactly. Q22 Lynne Jones: £30 is too little, but £200 is too much. Professor Buckwell: Precisely, so it should be to do with what are the costs of producing these goods, how much of them, where are they produced and what are they worth. Q23 Chairman: You are coming down a bit on that, because one of the things I was interested in was where you were sort of glibly saying, "We want to purchase environmental goods, but we do not seem to analyse what goods it is we want to buy and there is not much about how much value we put on that." Professor Buckwell: I think there is an increasing body of evidence. In terms of what they are, we have public service agreement targets for some of them, such as farm land birds and for Sites of Special Scientific Interest in favourable condition. In a sense, these are the signals as to precisely what it is environmentally that is produced and managed by farmers and land managers that we want to buy. The challenge is how much of them and what rate per hectare or anything else we have got to pay to get them, starting from where we are with sustainable businesses, because most of these services do not come about when you just walk away from the land. So if you want people there managing it, then you have got to find a payment rate which makes it attractive for them to be there. That is a complex issue, but it is not insoluble. It is no more difficult in principle than deciding how many and what kinds of health services, and that is something of constant debate and refinement. It is a "suck it and see" approach, do a bit and then ask yourselves, "Are we doing enough or too much?" It is plain to us that at the moment our spending on this area of activity under Pillar 2 is in order of magnitude smaller, we say, based on Defra's figures for the value of these services than can be justified. So we know in which direction we want to move. Q24 Lynne Jones: Do you think there is already evidence out there to be going on with, or should there be further research carried out? Professor Buckwell: There will be a non-ending need for research because society's demand for these things is not static and it will adjust, depending on how much of these services they have got, but there is a body of work. Again, it was a shocking thing that Defra do not cite their own data, which they have spent a lot of money collecting, on the worth of these services in this document. They published a document in 2004, a very comprehensive survey done by the best academics in the land, in the world, on green accounting, the late Professor David Pearce, on what the values of these things are in a comprehensive way and then ignore the results. Q25 Lynne Jones: So they could have done more in producing this document? Professor Buckwell: Absolutely. Q26 Lynne Jones: Although perhaps even more work would need to be done? Professor Buckwell: Yes. Q27 Lynne Jones: What would your view be of the impact if there was a phasing out of spending under Pillar 1 over the ten year period without adequate compensation through increases in Pillar 2 spending? Professor Buckwell: It is a complex thing because it will affect the arable areas, the horticultural areas and the hill areas in quite different ways, but to take some of the areas where there would be real concern, the grazing areas, which is a large part of central and western England and Wales and other parts of the UK, you have just taken away what those people are living on by removing over a period of ten years the Pillar 1 supports and if there was nothing - Q28 Lynne Jones: There is a proposal for some one-off compensations, is there not, which could be invested? Professor Buckwell: Yes, but we do not really understand how big that was and to whom it was directed, and so on, so we would need to look into what was meant by that. If that is all that was done, you would find that there would be a huge de-intensification of production. Who would be keeping cattle, particularly in those areas? The stock per hectare would fall. The number of people looking after them would diminish. Their ability to manage those flocks and herds would diminish. You would see landscape change within ten years, that is for sure. You would see it within three years, and the change you would observe is that it would be a much less open countryside, a less open landscape. You know that if you leave a field for two or three years - the President can explain this in great detail, he has got one or two he showed me - in one or two years it is impenetrable. You have changed an open landscape into a scrub. In the fullness of time, who knows what the climax for vegetation is, but that takes a very long time to achieve. Mr Fursdon: There is an assumption in the paper that really very little will change, apart from maybe one or two areas in the hills, and so on. It does seem to me that it actually merited some further consideration and some further analysis to see what actually would happen and what the impact would be, and what the impact would be environmentally as much as anything else on biodiversity, and so on. We all know that in certain parts of the country even now under the countryside stewardship, the equivalent of the HLS scheme, there are requirements to graze at certain sward height, and so on, but if you actually have not got the stock there you cannot do that. I would have thought that some sort of measures of loss in environmental terms, and also actually in landscape terms - an awful lot of the landscape benefits are unquantified at the moment and it would be nice to feel that some attempt had been made to quantify what those benefits might be and what might be lost in those circumstances. Q29 Lynne Jones: Some reduction in intensification could actually be beneficial. I have just been on holiday to Greece, where they have got flower meadows to die for, and within agriculture it is much less-intensive. So if we get the balance right in terms of de-intensification, that could actually be beneficial to the environment? Mr Fursdon: You could be right. I think one of the points which is often missed is that at the moment - and obviously this is all changing - the Pillar 1 payments are what are providing the core to enable the farm to continue and then to actually offer the environmental services with the Pillar 2. I am involved with, as I say, a countryside stewardship scheme at home and the costs of the countryside stewardship work that I do is very often underwritten by the main core business, and if it had to stand on its own as a separate business it would be very difficult to make that work viably. Q30 Lynne Jones: As you know, the Government has got approval to move 20 per cent of the funds from Pillar 1 to Pillar 2. How important is it that the UK match-funds any national modulation? Are your concerns other than in terms of income grounds, that obviously the single farm payments will be reduced by up to 20 per cent, affecting income? What are your concerns if that happens without match funding? Mr Fursdon: If there is not a match funding for Pillar 2, then it is going to be very difficult for people to actually achieve the aims which are set under Pillar 2. It is key in terms of the cash, but it is also key in terms of the commitment and the signals which it is sending out. If you are trying to plot your way forward in agriculture and you are saying, as we are constantly being told, that there must be an environmental dimension to that, and then the environmental dimension is something which is going to work if it is co-financed, and then the co-financing does not come forward, it is sending out all the signals that the Government does not really believe in Pillar 2 and does not really believe in the environmental solution and, not surprisingly, that sends the farmers back into their shells and it makes them want to hang on then to Pillar 1 for dear life because that is seen as being the only way in which they are going to be able to achieve what they are being asked to achieve, and also for them to have a future. Q31 Lynne Jones: You want to see more objective criteria in determining the allocation of rural development funds. To what extent do you think the Government, the UK, is going to be able to negotiate for a larger share of the EU's rural development pot? Professor Buckwell: The answer is that we found out two weeks ago that they have not, that the objective criteria were not used and the criteria which is being used is the historic distribution from 2000 to 2006, so in a sense the UK therefore continues to have its miserable 3.5 per cent of the RDR budget with 11 or 12 per cent of the land area. This is part of the failure of their negotiating strategy, that they put their number one requirement to get the overall budget down, and this is one of the consequences. Seven or eight other Member States negotiated special deals which gave them extra pots of RDR money. I do not even know whether we tried, but we did not get any. Q32 Lynne Jones: You think that was because we were so determined to reduce the overall budget, because of the unpopularity of the CAP? Professor Buckwell: Yes. Q33 Lynne Jones: And that in the end we perhaps got a worse deal for our country - Professor Buckwell: Certainly they did. Q34 Lynne Jones: -- than if perhaps the budget had not been reduced to the same extent? Professor Buckwell: If this had been the prime negotiating target, to have a reasonably objectively-based share out of the second Pillar funds, we would get a lot more than 3.5 per cent. Q35 Lynne Jones: You are arguing for more money to be spent on the CAP? Professor Buckwell: Through that, yes, of course. Q36 Lynne Jones: Which would not be politically very popular, so you can appreciate the Government's difficulty? Professor Buckwell: Yes, of course. Q37 Chairman: Presumably the corollary of that is the fact that we have got this 20 per cent ability now in terms of self-modulation, I presume to make up for the deficiency in the Pillar 2 pot, if we want to, from own resources? Professor Buckwell: Yes, that is the mechanism that is there. Only the UK would use it, and it would be very difficult to persuade farmers that they are being treated on the same fair basis as the rest of the European Union, whatever the arguments are about these being decoupled payments. The overwhelming feeling amongst farmers, if and when we modulate at a much higher rate than the rest of the European Union, will be that they are being disadvantaged. That will be the overwhelming feeling. Q38 Chairman: It is a subtle form of repatriation? Professor Buckwell: It is. Dr Wilkinson: Just a point of clarification. We are not really looking for more money for the CAP, there is enough money there, so let us be clear about that. What we are looking for is that it is distributed differently, both within Europe and within the UK. Q39 Lynne Jones: That is what the Government wants to achieve as well. Dr Wilkinson: No, that is not at all what the Government wants to achieve. The Government wants to achieve a very substantial reduction in the budget for the CAP. We are saying there is enough money there to do the job, as we understand it now, and we have yet to define the job, as we were saying earlier, what the new purposes are. So far, we are quite satisfied there is probably enough money there to get the job done, but it just needs to be re-organised. If we are going to be doing it on a land management basis, then the land which is being managed should be a factor in the distribution of the funds. It is not. The share of the rural development, the 3.5 per cent, is just the historic amount that we got - Q40 Lynne Jones: Sorry, I thought you meant the overall spend. Dr Wilkinson: No, we get that because of the rebate issue, and all the rest of that, which is probably why they did not fight particularly hard to get some more money. It is about how we take that pot of money, which is part Pillar 2, as Allan said, part ELS and part HLS. There are all these little pots of money all being distributed, and if you think of it from the land management point of view, it is a pretty peculiar sort of situation we are in now and it is because we are moving from one policy which was all about feeding a starving Europe and developing a rich source of a wide variety of high-quality foods, et cetera, to a different set of policy objectives, and we are in that transition right now. So things perhaps do not always make sense when you are in a state of transition. That is what we are trying to get the clarity on. That is why we need the debate. But so far as the total funds are concerned, I would say our starting point is that it is not the quantum which is an issue, it is the distribution which is the concern. Q41 James Duddridge: The "Vision" paper states that the value of the direct payments is perhaps already capitalised within the land, so the benefits of the payments do not actually accrue to the farmers, they actually accrue to the landowners. Do you actually accept that analysis? Professor Buckwell: Defra's own analysis which they cite in there is that 26 per cent of the value of the support is capitalised in the land, 36 per cent accrues to the other input suppliers, machinery, fertilizers, crop protection councils, and so on, and there is 26 per cent which is economic waste and 10 per cent farm income. So they have got a statement that most accrues to the land and their own tables to support that shows it is 26 per cent, so they do not even describe their own data in a correct way. Of course, some of it accrues to land, but as David will explain, because he is a land valuer, it is a bit more complicated than that. Mr Fursdon: Yes, I am a rural surveyor as well and I learnt at college how you value land and when I went out in practice I tore all that up, because it is completely different. I learned that you value land in terms of whether it is grade 1, grade 2, grade 3, what its productive capacity is and all the rest of it, and you look at the likely income you are going to get from the land and actually take a proper economic look at it. In practice, what you do when you look at the value of land is you look at the neighbours, you look at who has bought a house in the area, you look at a whole lot of other issues and you value it on that basis, and that is how people pay for it. There is this simplistic idea in this paper that the CAP support has all been moved into land values. Land values vary across the country and yet the support, up until now, has been uniform. So if that is the case, then there cannot be as close a correlation as is given here. Yes, of course land values reflect a variety of things and your ability to earn something from that land must be a relevant factor, but there are so many other things which override that in practice in terms of land value that I think that is a little bit simplistic. The other thing which I think is a bit depressing, if you like, about the paper is that it sort of paints a picture that landowners in receipt of money are the bad guys and the farmers in receipt of money are the good guys. There is an interaction between land ownership and farming. We have a tenancy sector in this country. There is a landlord and tenant system which works to the benefit of both, where very often successful tenants are able to develop entrepreneurial businesses and landlords reinvest money in capital equipment, and so on, on those holdings in order to enable that to happen, and that is given no acknowledgement at all in the paper here. The final thing I would say is that a number of these statistics in the paper are based on the old coupled payments, and it says so in the paper. Now that we are in an era of decoupled payments, I think we have now got a situation where as a landlord in terms of direct payments you cannot receive direct payments unless you are doing something in terms of keeping the land in good agricultural condition yourself. I think it is a much more complicated analysis than this paper gives us. Q42 Mr Williams: Although the new payments are decoupled from agricultural production, they are still coupled to land, are they not, because you need to have the land to get the entitlements? Mr Fursdon: Yes. Q43 Mr Williams: So the land value is reflected really by the entitlements that it earns? Mr Fursdon: But the entitlements are marketable and there are tenants who have their entitlements, which they have and are still able to sell separately - Q44 Mr Williams: They can only sell it to somebody who has got land, because without the land you cannot use the entitlement. Mr Fursdon: I accept there has to be land elsewhere to move it on to. I accept that is part of the process, but there are still occasions where it is moved away from the land. The landowner has no ability to prevent the tenant, provided the tenant has land elsewhere, from moving those entitlements elsewhere. So it is a much more complicated issue than is suggested here. Professor Buckwell: We suggest that a major part of the purpose of the payments, even the Pillar 1 payments, is that ultimately it is an environmental purpose and that reflects the environmental value of this land. Of course, some of that value you would expect to be reflected in the price of that land. That is a normal economic shared relationship. So in our argument, which does not involve demolishing the whole support system but changing it, we would not expect such a dramatic impact on land value. Q45 James Duddridge: If you are saying land values only relate to about 26 per cent, yet s.1.3 of the report actually says they are going to compensate landowners for the reduced value, is there not something in it for your members if Treasury has done the wrong calculations? This is good news for you, surely, not bad news, if I am reading it correctly? Mr Fursdon: It is a very broad statement, compensation for loss of value. I think one would need to see what actually was involved there. It is an easy sentence to say and, to be honest with you, past history would not suggest that that was necessarily going to be the answer. It is one of the examples of bald statements in the "Vision" paper with no consultation with organisations like ours and others which might represent the people involved. If we had actually been part of a discussion which said, as you have put the question to me, "How would you feel about this? What level of compensation would be appropriate and how would one deal with that?" and so on, we might have a different attitude to it. The fact that it has actually been bounced on us and with a bald statement like that, which we know nothing about - we do not know how much money it means, we do not know whether it is actually going to compensate or not - makes it very difficult for us to answer that question. Dr Wilkinson: I could perhaps throw a little light on it. If memory serves me correctly, and I stand to be corrected on this, the Defra figures suggest that the total value of farm land which is in ownership is somewhere over £100 billion. If we are talking of, let us say, a ten per cent reduction in value, that is £10 billion. Are we suggesting the Treasury is going to stump up £10 billion to compensate these people that they have spent all this time slagging off? It does not really ring true somehow, so I would be deeply suspicious that we would get anywhere near a fraction of the sort of changes they allege would happen. Q46 James Duddridge: Has the report already set tenant farmers and landowners at one another's throats, or in discussions, because if the Government is saying that all the money is going to the nasty landowners because the capitalisation is in the land and the tenant farmers are being left out - Dr Wilkinson: But it does not. Q47 James Duddridge: But that is what the Government is saying. It is saying the money is capitalised in the land value, is it not? I am not disputing the fact, I am just - Professor Buckwell: To the extent that it is true, it is a once for ever thing, is it not? The current support system merely replaces the previous support system which has been around for donkey's years, so any capitalisation has long been, in a sense, absorbed and reflected in all the ways that it can be. We are not talking about a new change until and unless they eliminate the support, and there will be some impact of that, but not huge, we estimate. So at the moment, there is nothing between landlords and tenants. We are both equally unhappy with the thought that the Government is contemplating simply removing support - the tenants will speak for themselves - rather than changing it, which is our view. Mr Fursdon: I think what would have been fantastic would have been if this report had actually looked at the landlord and tenant system, for example, and asked, has this actually got something to offer for the way forward for agriculture in this country? I believe it has, but we have not gone into that sort of detail. Admittedly, it was a vision for the CAP and not a vision for agriculture, so I have to be careful what I say there. Nevertheless, I think a constructive look at the way in which capital is involved in the future of farming is a valid thing which needs to be looked at, and whether it is capitalised into land values or whether it is actually made available to entrepreneurs in order to develop a good system of agriculture for the future is a very relevant subject for us to be discussing at the moment and in the future, and what would have been great would have been to have started to have that sort of discussion in the context of this "Vision". Dr Wilkinson: You are not only capitalising in land values, you are just capitalising in all sorts of things. Tractor prices are higher than they would be if that support was not there, and feed prices. There is a whole range of things, if you follow that argument through. Q48 Mr Williams: You have already mentioned co-financing of CAP and I understand that you have advocated co-financing of Pillar 1, or a percentage of Pillar 1. Perhaps you could tell us what you see are the advantages of co-financing? Professor Buckwell: This was offered as a contribution for discussion in the context that if the desire is to reduce the EU budget component, the public expenditure on agriculture, then here was a way of doing it, because the justifications for not co-financing Pillar 1 have vanished. When it was market support, it was essential that it was funded centrally because the actual costs would appear wherever the surplus product appeared, and yet the benefits are felt throughout the Common Market. Now that it is a decoupled payment, that justification has disappeared. So we are saying if you wanted to reduce the total expenditure that is one of the options for doing it and it would spread the cost of the CAP more equitably around the Member States. The losers, of course, would not be expected to see this point. Q49 Mr Williams: Yes, but if co-financing is a good thing, why would it not be better to have 100 per cent co-financing than 10 per cent co-financing? Professor Buckwell: In a sense in principle because that was offered. It was difficult enough to get anybody to take that suggestion seriously with a small element co-financing and it seems to me that in Europe the way you get change in the policy is to introduce a principle at a low level first so that it does not hurt the losers too badly, and then in a sense crank it up later. That is bound to happen. If ultimately we are talking about a policy which is essentially a Pillar 2-type policy, then I suspect it will all be co-financing in the fullness of time. So if we are going to end up there ultimately, why not start talking about it now, which is all we were saying last summer? But that has gone off the agenda. At the earliest, that will come back on the agenda in 2008. Q50 Mr Williams: In terms of the UK's approach to the EU budget, presumably one way we could encourage people to go down the co-financing route would be to give up our rebate? Have you any idea about how much we would benefit from co-financing, giving up the rebate? Professor Buckwell: Those calculations were done and the whole point of them was obviously to arrange equations which made the UK better off, but certainly no worse off. That was perfectly possible. Q51 Mr Williams: The National Farmers' Union is not very keen on that? Professor Buckwell: No, it is not. Q52 Mr Williams: Can you tell us why? Professor Buckwell: To be honest, you will have to ask them. They prefer to have the payments cut rather than, as we would, just have them financed differently. Q53 Mr Williams: Do you think it is possible under the EU legislation to have co-financing? Professor Buckwell: Yes, perfectly possible. All policies, apart from Pillar 1 and the CAP, are co-financing. It is the norm in Europe. Mr Williams: Thank you. Q54 David Taylor: Chairman, exactly 15 minutes ago - I wrote down the time and quote - Dr Wilkinson said, "There's enough in the CAP to get the job done," and then he weakened that slightly to say, "There's probably enough in the CAP to get the job done," but the problem was that it needed to be distributed differently within the EU and within particular countries. Presumably you had in mind the UK. Looking forward then in terms of justifying future payments, do you see them as something akin to income support which should be targeted at need, or a payment for the provision of services and environmental goods? Dr Wilkinson: Very much the latter. I think we have to get away from the idea that there will be a model for the future. There will not be. It is going to be a tapestry of all sorts of little bits and pieces which will come together and create the possibility for somebody to do this thing called farming, which might look very different from one farm to another. Some people will be getting more money from selling food to retailers, some might be selling food to people in the farmers' markets, some people might be selling stuff to power stations, some people might be selling environmental services to the Government, but in a whole different range of ways will be providing different goods and services and will have a range of different markets. Whether or not we call that provision of goods and services to the Government, or whether we call that government money a subsidy, I do not think it is. I think it is a fee for service. I think we have just got to make sure that we get these things packaged right. Even within that there will be a range of different things on offer. There will be some things which you are just not able to define sufficiently to put them into a contract or relationship, so they will probably be provided on a sort of flat fee where you get so many pounds per hectare for doing X. Other things will be a little more bespoke. There will be a whole different range, but this is precisely the discussion which I think we need to be engaging in. It is not that we are able to show you a blueprint for what the future financing of the countryside and of farming looks like, it is that we are trying to articulate what the exam questions are and what some of the beginning propositions are. Q55 David Taylor: Some of your members have tried - and I know that my friend, the Member for Stroud, has - to get information on this in terms of the payments which are received at almost the agri-industry end of the spectrum. They are very, very substantial indeed, are they not, and they are probably difficult to justify in some circumstances? I wonder whether you saw the FT article a week ago today, right on the front page? I will bet Professor Buckwell has the FT and reads it before he reads the Daily Mail every morning. The title of it was, "Move to cap EU farm relief targets gentry's rich pickings." Did you see that article Professor Buckwell? Professor Buckwell: The capping issue, of course, has never gone away; it is bound to be there. But you mentioned agri-industry. You are absolutely right that various businesses which export dairy products, cereals and sugar receive export subsidies. Who on earth did anybody think export subsidies were immediately paid to? They were there as part of the market support arrangements of the old CAP. There is now a commitment to abolish them, so they will tail away to nothing. They have already shrunk. Beyond that, there are some very large payments to some very large landowners. Q56 David Taylor: Yes, that is the point I want to make now. Professor Buckwell: There is one of them sitting behind us, called the RSPB, and there is another one called Farmcare, and then there is a lot of - Q57 David Taylor: There is the cooperative movement. I understand that. I am not thinking that they are all the Duchy of Cornwall, but the fact is that the proposals by Franz Fischer in 2002 were put to bed, so it was thought, and they have risen at night and here we are again with almost the scenario of Commissioner Fischer Boel's suggestion, which will be attractive to many, that from next year there be a capping, which is tentatively suggested at €300,000, is it not? Professor Buckwell: Yes. Q58 David Taylor: That would not affect too many individual enterprises or organisations in the UK, would it? There are fewer than one in 2,500 in receipt of payments who would be affected by that ceiling and only 20 per cent of those, fewer than 400, would be in the UK. Surely that would demonstrate a fairness and an equity which the taxpayer at large would be happier with, would it not? Professor Buckwell: To the extent that these are described in any way as income payments, that would follow absolutely, I have not quarrel with that, but our whole argument is that we have moved away from this and these are, as Derrick Wilkinson just said, payments for environmental services. If you deliver a lot of environmental services, you get a lot of payment. I am not suggesting the present arrangements are precisely what I have just described, but what I have said is that there is a commitment which we share, and we think the Government shares, that that will be the ultimate long-run justification, in which case to have a cap would suggest that anybody who delivers more than a certain number of hectares' worth of environment does not get paid for a very large area. That would simply bring about a restructuring of the farms. RSPB would change their holdings so that they were not caught by the cap, so would as many of our members as could do that. Q59 David Taylor: So you would advise families to disaggregate their holdings for individual members and then have virtual farms for which they are responsible to keep them all beneath the cap? Is that what you are saying? Professor Buckwell: That is what happened in the US. Q60 David Taylor: Is that what you would be saying to your members? Professor Buckwell: You would not need to say it to them. They are intelligent operators who know how to run a business, so they do not need any advice from me on that, but our point is, do not let us do it, please, because if you are moving the money into payments for services and you are encouraging businesses to expand - the way most of these surviving commercial land management operations are surviving is by having big areas under their control. They do not own most of it, they rent it in, they contract it, they share-farm it. There are very complex and sophisticated arrangements out there and you do not want to set that process in reverse, which is what capping would do. Q61 David Taylor: So you are pretty relaxed about large estates that are prosperous and well-to-do in every sense and are taking away cart loads of money every year, at least a quarter of a million pounds or more? That is not something which fazes you at all? Professor Buckwell: And delivering a quarter of a million pounds worth of environmental services. Q62 David Taylor: I would like Mr Fursdon to react to that. Are you one of the 380 in the UK who will be better off? Mr Fursdon: I wish I was, but sadly I am not. One of the things about the capping is that it seems to me that a lot of the discussions about capping start to go beyond the point which Allan has just been making about what the purposes of these payments are there is a whole load of circumstances which people may or may not be in. You have just made all sorts of suggestions about the people who are receiving them and yet in many other ways, such as the tax process, and so on, people look at what people's net worth is and try and work it out. This is a very simplistic way of dealing with what is a complex problem. Q63 David Taylor: It is this a problem then, the inequity, as Dr Wilkinson acknowledged, of the distribution of funds made available by the taxpayer? Dr Wilkinson: No. Q64 David Taylor: You said that there ought to be a redistribution, I think, Dr Wilkinson? Dr Wilkinson: Not in the sense you are talking about, no, I certainly never said that, because I frankly think that the capping is a piece of propaganda of the worst sort. The simple fact is that people were, under the old policy, given a support payment in order to provide food. The more food you provided, the more support you got, and that is why the ones who provided the bulk of the food got the bulk of the payments. Now we are moving to a situation where you get paid to provide landscaping, environmental goodies, and all the rest of that. Those who provide the most of it should get the most payment. I find it really quite remarkable that you would not think it at all sensible if you said, "We are going to cap government spending on computers" - Q65 David Taylor: I think you have picked the wrong example there! On consultants, say, or on PFI? We could cap that, could we not? Dr Wilkinson: Whatever it might be, but nobody is suggesting doing that, because they are providing some service and we are paying the market rate. This is what we are trying to move the farming and countryside managers' businesses towards, a more business-like relationship between them and government in the provision of these particular goods and services which the market cannot really deal with in ordinary terms. Q66 Lynne Jones: We would have consultants advising how to break up the land and get the money against the land! Dr Wilkinson: Yes, exactly. Chairman: Before it gets too much like a party, Mr Drew has told me he has a short question. One sentence for you and one for Mr Williams, and then we will wrap it up. Q67 Mr Drew: Can we look at the other end of this, in terms of a single farm payment and the fact that you have got 50 per cent more people claiming a single farm payment. Again, I was interested because obviously you were persuaded by the area scheme. Did you anticipate that huge increase, and is that fair? Dr Wilkinson: Yes. Mr Fursdon: And in so far as there were environmental conditions attached to that land, there was an appropriateness in the land - Q68 Mr Drew: But these are not farmers? Dr Wilkinson: So what? Chairman: That is more than one question. Mr Williams. Q69 Mr Williams: You made a case against capping, but tapering is another issue which would reflect the economies of scale of either producing food under the old system or environmental goods under this system? Professor Buckwell: I have no problem with debating that. Of course, if we are saying they are justified by payments for services then they have got to relate to the cost of delivery, and if there are economies of scale, of course we have to discuss that. Therefore, you need an evidence basis to do that, not a €300,000 cap where the 300,000 is plucked out of the air. Q70 Chairman: Gentlemen, you as an organisation have relations with others in Europe. Do you sense there is any mood for change amongst those you talked to on the other side of the Channel for any of the kind of package which is put forward in this "Vision" document? Professor Buckwell: With the Swedes and Danes there was a flicker of recognition and with everybody else blank amazement. Chairman: Gentlemen, thank you very much indeed for your contribution, both in your answers today and in your written evidence. We much appreciate it. Memoranda submitted by Royal Society for the Protection of Birds and Campaign to Protect Rural England
Examination of Witnesses
Witnesses: Dr Mark Avery, Director of Conservation, and Dr Sue Armstrong-Brown, Head of Agriculture Policy, Royal Society for the Protection of Birds; Mr Tom Oliver, Head of Rural Policy, and Mr Ian Woodhurst, Senior Rural Policy Officer, Campaign to Protect Rural England, gave evidence. Q71 Chairman: We welcome our second set of witnesses for this afternoon's inquiry and for the record, from the Royal Society for the Protection of Birds, Dr Michael Avery, their Director of Conservation, and Dr Sue Armstrong-Brown, the Head of Agriculture Policy; and for the Campaign to Protect Rural England, Tom Oliver, Head of Rural Policy, and Ian Woodhurst, Senior Rural Policy Officer. You are all very welcome. Can I thank you for your written evidence and for being here to join us this afternoon. I would like to ask you the same question I started with with our previous witnesses, which is, what do you actually think, in the light of this think-piece and commentary from Europe now on the changed nature of the Common Agricultural Policy? What actually is its purpose? Mr Oliver: Chairman, Mark is very kindly letting me go first, although I am not sure if it is kind. I think the purpose henceforth must be to maximise the sustainable management of land to public benefit, in one sentence. I think that includes things which have been very thoroughly discussed already this afternoon, semi-natural habitat, landscape character, the quality of the environment, which includes the quality of water, its velocity, its volume, but it also includes the capacity in the longer run to use land productively. Q72 Chairman: How does the RSPB see that? Dr Avery: I think that is a good answer. Although we have had a while to think about this, since you asked the CLA, it is a difficult and probing question. I think their answer was that you might not start from where we are now and that the reason for the CAP is changing. We would say that the future for the CAP has to maintain a farmed countryside, because I think we do need farmed countryside with farmers in it. Maybe it is unrealistic to expect the same number of farmers as we have now, but a farmed countryside, but that the basis for public support has to switch increasingly towards producing these things which we call public goods, which are things like wildlife, landscape, access, clean water. The trick is starting from a system invented over 40 years ago, which was for one reason, to support the production of food, and moving it over a period of time to a completely different system. I do not know whether we are in the middle of it, but we are in that process still. Q73 Chairman: I said at the beginning that the Committee has had the pleasure of visiting Poland to see how a new Member of the European Union was getting on and to a possible new Member in the shape of Romania, and you see in those two countries, particularly in Romania, a very diverse and different type of agricultural challenge, rural challenge, than the remarks which you have made, which very much reflect, if you like, a United Kingdom sophisticated farmed landscape background. I just wonder if, in terms of the international context which you have respectively had, you felt there were any other existing partners within the European Union who might share your vision of what should be happening to the farmed landscape? Mr Oliver: The Government made a very welcome move in February when it signed the European Landscape Convention, and I hope very much that it is ratified in due course. We will not be the first country to have signed and ratified it, and there is a very large number of countries in Europe which recognise the huge public benefits of landscape, its cultural and health benefits as well as its biodiversity and aesthetic benefits. I would suggest that the issue is not so much which countries share the vision but which interest groups within the countries control the policy? The interesting thing about Eastern Europe is that there is such an explosion of enterprise and a desire for freedom that the movement from, if you like, the most old-fashioned forms of agriculture, which are often very beneficial from a biodiversity point of view, is being propelled often by external investment from Western Europe, while a lot of the collective farms under the Soviet aegis are actually on land of very little value in terms of biodiversity. So there is an interesting polarisation, which in a way matches the polarisation in England between CAP-generated productive farmland and more traditional farms. Q74 Chairman: This is the point. This is, if you like, my own debate churning in my mind for exactly that reason, that you have in places like Poland large, certainly hundreds of thousands of hectares of relatively under-exploited landscape and yet the pressure is exactly, Mr Oliver, as you describe it. It raises the interesting question as to what should be the policy objective of the Common Agricultural Policy. Do you actually want to replace that by modern, efficient farming? For example, in Romania the minister tells us that he wishes to remove 2 million of his fellow citizens from farming and he says, "Bigger, more efficient units, that is the way we have got to go, the end of subsistence." It does raise some quite interesting questions. Mr Oliver: At the heart of the answer rests the critical importance of continuity of management. I think our analysis - and I think this is true to say of the RSPB as well, though I am sure they will confirm it if it is true - is that you can have a coexistence of productive farming with much better public benefits of the kind we have all described if the policies are correct and if the funding is adequate for the purpose. It does not mean it being the same as the funding today and I think in these circumstances, in particular with the international influence of RSPB, for example, is incredibly valuable to see the value of landscape and habitat across the Continent as well as England. Dr Armstrong-Brown: Can I perhaps come in on that? You may already know that the RSPB is one of the partner organisations of BirdLife International and we have the RSPB equivalent in every country in EU25 who share a common agriculture policy. We work together with our partners and the view we express in our written evidence to you is that of BirdLife International. It is interesting in the way in which this links to the question of a purpose for the Common Agricultural Policy, because Pillar 1 is in the fairly unique position of not having any policy objective attached to it any more since decoupling, whereas Pillar 2 has a number of very important internationally-recognised policy objectives, including the Lisbon agenda, which does attempt to address this question of economic and social sustainability in rural areas, which is particularly important in the new Member States, as well as the objectives for halting the decline of biodiversity by 2010, and so on. All these objectives provide a very good and comprehensive purpose for the Common Agricultural Policy but they are linked exclusively to Pillar 2, which is where this "Vision" document comes in, because it starts to move in the direction of adequately funding those policies and expressing that purpose but does not in fact flesh out exactly what is needed. There is no need analysis attached to those policy objectives so far. Q75 Chairman: Why did they produce this document? Mr Oliver: As I understand it, they produced it in order to make easier their passage through the negotiations in December in Hong Kong. Q76 Chairman: That is a new and novel perspective. What does the RSPB think? Dr Armstrong-Brown: We cannot really speak for the Treasury's or Defra's purpose - Q77 Chairman: No, I want you to speak for the RSPB. When this thing arrived there was little warning, it just dropped on the desk. What was your first reaction to it? Why did you think they had done it? Dr Armstrong-Brown: My reaction was that it was an attempt to break the deadlock in Europe over Pillar 1 and the revision of the CAP policies, but was produced as a largely English, not even UK document, that will be a start for debate but a lot of work needs to be done to take that forward in Europe, as has been discussed earlier today. Q78 Mr Williams: The RSPB states that the effects or the implementation of the "Vision" would depend upon the funding available for Pillar 2 and the way in which there was integration between the environmental objectives with mainstream farming and economic policies in the future. Can you explain what you mean by that exactly? Dr Armstrong-Brown: Yes, of course. Much has been made, I think, in the debate (not only today but since the publication of the document) of the impact of changing Pillar 1 subsidies, but we must not forget that these are decoupled subsidies, so any impact they have on farming at the moment is largely down to the individual choice of the recipient of the subsidy. If they choose to invest that money in farming operations, then that has an environmental impact, but a lot of it need not be. At the moment, we do not really know, to be honest, what the consequences of decoupling are going to be on a farm by farm scale because it depends upon the state of denial of the individual landowner concerned. Q79 Mr Williams: From the CPRE standpoint, you say that the effect on the landscape will depend upon the continued viability of the farm businesses. Can you expand on that a bit? Mr Oliver: Yes. I think we all agree, as I think the CLA has said, that the effects will be variable and there are all sorts of things in the mix. There is the age of the farmer running the business. There is the likelihood of succession if he/she is a tenant and the kind of tenancy. There is the burden of reinvestment required in order for the farm buildings and farm machinery to operate effectively. I think one of the most fundamental questions is the uncertainty which the individual farm business feels, and of course there are about as many variations of farm businesses as there are farmers and most of them have now diversified in some shape or other. So for all these reasons - and that (diversification) partly depends upon the planning regime in the local authority, where they are, it partly depends upon whether they are in a nationally protected landscape which gives them greater access to grants and also greater access to tourist interests - there is such a range of issues that at the moment it is very difficult to predict, as Sue has said. I think probably the crucial point is, though, that there is a sort of philosophical chaos reigning, which means it is very difficult to have a coherent vision rolled out across the country. One thing we all are unified by in particular is that we regard the 9.7 million hectares of English land to be crucially important. It is just not good enough for there not to be a clear sense of the value of that land in all its respects, including natural resource management and climate change, against a time when we will want it for all sorts of different reasons. Q80 Mr Williams: Previously the CLA gave us this threat of land abandonment and scrub invasion. Is that a bad thing? Mr Oliver: It depends. It is a very good question. In Huntingdonshire, in 1939, there were 60,000 acres of scrub, which there had not been in 1918. By 1944 it had all disappeared. Was that a good thing or a bad thing? Well, there were lots more Nightingales in Huntingdon in 1939 than there were in 1918 and almost none now. So yes, in one respect scrub can provide benefits, but of course the reading of the landscape and the morale of the management of that landscape are both directly affected by how viable the farming is. It is also interesting to reflect on the fact that the recession in farming between the wars was basically an arable recession, not a livestock recession. Today, although presently animal prices are quite good, one of the greatest difficulties is getting the world to understand the importance of grazing as a process for delivering landscape and habitat and the variations on that, in some respects the need for reductions in grazing that you are suggesting, but also in other places the need to maintain it. Q81 Mr Williams: Would you like to comment on scrub and whether it is beneficial or not? Dr Armstrong-Brown: Not on scrub and Nightingales, he has done a good job of that. I think where your questions are leading and what Tom has mentioned so far all point to the sort of missing link, perhaps, in some of the explanation in the "Vision" document, which is that you may get a certain range of impacts by changing or removing Pillar 1 subsidies, but that is actually a process which has already started and it is going to be very hard to stop in the longer term. What the real debate is around is how you manipulate the current and future suite of land management practices through Pillar 2 so that you can either stimulate or block scrub development, if you chose to, in Huntingdonshire via agri-environmental measures which either delivered that or did not. That really is the debate. It is not whether if you just abandoned farming support you got a certain range of abandonment or intensification, it is whether, given the likelihood of any of those things, you wanted to manipulate them through the rural development schemes which are set out to be the future of land management support. Of course, there is cross-compliance at the moment, which does contain a suite of environmental conditions. Only three of them are not legal requirements already, and they are very important and we are greatly supportive of them. These things can help, certainly, and they do in some way provide a little bit of value for money for Pillar 1, but in terms of really managing the landscape to create a vision for the future they are probably not going to be an adequate tool. Q82 Mr Williams: The agricultural depression in the 1920s and 1930s enabled lots of Welsh farmers to move from Wales into the Midlands and do some missionary work up there, but in terms of abandonment do you see it the opposite way round now, that arable would survive, perhaps, and livestock farming would be the one that would suffer? Dr Armstrong-Brown: We are seeing different patterns. For example, in some of the large contract farms in arable areas we are seeing the start of fallow appearing in rotations again for the first time for decades, and that is where they can just withhold the cost of any kind of input into the land in a particular year. So with large contract farms you are already seeing land abandonment one year in three, which is great from our point of view. It is like extended set-aside. That would not apply if you saw a massive reduction in extensive grazing in the uplands, which is also, as Tom has pointed out, a very vulnerable sector and one which is incredibly important for conservation there. Any form of abandonment or something like it would be very undesirable. Q83 Mr Williams: In terms of landscape, it is very subjective, is it not, and people value the landscape they have come to know and enjoy, but is one sort of landscape any worse than another sort of landscape in that sense? Mr Oliver: I think it is fair to say that there is a general understanding that landscapes which evolve over very long periods of time, mostly through human intervention and interaction with natural processes, are strongly recognisable by and large. The Countryside Agency and English Nature, working now with English Heritage, have developed very good characterisation maps. There are 159 Joint Character Areas in England and it is a joy to read them. I have just a few of them in front of me here, "pastures of low agricultural quality but high nature conservation interests..., patches of heath land common..., strong patterns of hedgerows, hedgerow trees...". Those are things which come about because people decide they are going to be there, and have done so for hundreds or even thousands of years. So changing those through abandonment or intensification, which happened a lot over the last 40 years, is profound and does have very significant consequences for public benefits (of landscape) as well as biodiversity and climate actually. One example there is that carbon capture of upland saturated soil is infinitely more effective than tree growth in lowlands. So there are all sorts of things going on, increasingly recognised. When it comes to the relative effects of the decline in different livestock sectors or in the arable sector, one of the things which I think applies to both sectors is the need for critical mass of the support services. If you do not have big animal vets anywhere near you, it is irresponsible and probably foolish from a business point of view to have cattle. We have quoted in our evidence the fact that in four months in one part of south-east Essex four big animal vets have given up and decided to merely do some suburban veterinary work. That is a very serious issue, but the same would apply to grain merchants and the availability of expert advisers for fungicide protection, and that sort of thing, with arable crops. So it does not really matter, both systems are very vulnerable. One of the things we said, and I think we all agree about this, is that we do not know what resilience the farming community has to these sorts of changes and in the CAP "Vision" document there is talk about transition, there are sort of kind words, but until we have some facts we are not in a position to know whether it will work. Q84 Chairman: Could I just interrupt my colleague for a second and just ask you, in the previous evidence reference was made to a large body of research work which Defra had which attempts to value the environmental outcomes, but this document, apart from one sort of chart on the population of wild birds from 1970 to 2003 is a bit light on what environmental outcomes are required. The contrast was made in the CLA evidence that they suspected that what this was was an attempt simply to reduce the budget on expenditure on the countryside. Do you feel that we have got a clear and up to date definition of what these public goods are which we keep talking about? You, from your respective points of view, have a very clear feel for what you would like to see, but in terms of being able to say to the Treasury, "Here's the value of the public goods. The public has given this list of priorities" - because I have not seen anybody going out and saying to the public, "What things do you want to prioritise?" - "What worth do you put on it, you guys? Therefore, Mr Treasury, this is what we need as a sum to deliver this," there is nothing which is quite as mechanical as that that I have ever seen. Does it exist? Dr Armstrong-Brown: No. This is actually quite an issue. It is not completely costed. The most comprehensive piece of work which has been done is a very recent Defra-funded costing of what it would take to fund the UK biodiversity action plan, and there the findings are that for the section that would be delivered by agriculture the current funding is about £200 million short of what is required. Q85 Chairman: That is a study of the cost to deliver an agreed programme, but there is not a parallel piece of work which says what would the public put as a value on achieving it, is there? Dr Armstrong-Brown: There are many, many different attempts to get public valuations. There is one study which showed that every household in Cambridge would pay £48 a year for biodiversity benefits which they could see. There is quite a lot of different ones, but I do not think there is any one which is universally accepted as the one. The CLA referred to some work by Dr Pearce, which we referred to in our written evidence, which shows that the environmental services of agriculture were valued between 0.6 and £1.8 billion. That was an academic study. Q86 Chairman: Is there a need, though, given the direction of travel of the "Vision" document, to more rigorously address that issue? Mr Oliver: Emphatically, yes. If there is one message that would be very, very helpful from our point of view for the Committee to transmit in capital letters, underlined in red, it is that this is a very serious issue which requires very serious analysis and it is absurd that it has not received that so far. Q87 Mr Williams: The public really do value biodiversity in landscape and it is easier to sell that concept, but what role should food security play and what does it play in your policy to talk, or could we manage huge ranges of land just for biodiversity, just for appearance? Dr Armstrong-Brown: This is something which we have not spent a lot of time on in our written evidence, but it is clearly crucially important when you are talking about agriculture. The most important point when considering food security is to recognise that we have never had food security as a nation and sometimes the debate is muddied a little bit by nostalgic tinges, "Once upon a time we dug for victory and now we are being very foolish in moving away from that." In order to achieve food security we would need to achieve security of all the imports necessary to produce that food, too, which sometimes gets missed in the argument, but is mentioned in the "Vision" document. Clearly having vast tracts of land which are unable to produce food might in the long term not be a great idea, but Tom has already mentioned that we do not believe delivering environmental targets is incompatible with producing food. Mr Oliver: And indeed other commodities and some energy. I just want to go back to your previous question about the valuing by the public of the public goods and the question of meaningful figures. CPRE has just completed a research project with the NFU, the first ever joint project between the NFU and CPRE, which has been designed specifically to look at the public benefits and the cost of "ordinary farming", and my colleague, Ian Woodhurst, can tell us a little more about that. Mr Woodhurst: We undertook this because there is a deficit of data on how much time it takes to manage some of these features and we wanted to try to address that deficit. We hope to publish that research quite shortly. We are still working on the final figures, but it is quite clear that there is a substantial amount of time which goes into managing features beyond the day to day farming practices which farmers undertake. If it would be helpful to the Committee, we would be happy to submit that as later evidence. Q88 Chairman: Thank you very much. Dr Avery: Could I just add on security, I think this is always raised as an issue, but I am not entirely sure under what circumstances we should be terribly worried about this. RSPB nature reserves could be ploughed up next year and be growing wheat in a year's time if they really had to. Q89 Chairman: You are not advocating that as a policy, are you? Dr Avery: We would not be terribly keen on it, but if we were really pushed there is an awful lot of land which could be got back into production fairly easily. Certainly the amount of environmentally-friendly farming funded through Pillar 2 of the CAP is not going to completely stultify our ability to produce food. Q90 Chairman: In your evidence, in paragraph 8, I noted this Delphic sentence: "There is much to be done to rationalise the food chain which the Vision does not address." What did you mean by that? Dr Armstrong-Brown: There is a range of things there. There is a widely-aired debate over whether farmers get a fair price at the supermarket and the issues around monopolies rules, which do or do not allow farmers to compete properly, is one area. The assurance schemes until recently made claims for environmental standards, which they have had to completely withdraw because they now require lower standards than cross compliance even. There is a wide range of issues associated with the food chain which are not in the realm of Government policy but in the market chain and how it regulates it, whether the market is itself geared up to providing a sustainable agriculture footing, which are very much worthy of further development. Mr Oliver: Chairman, I did not answer your question about food security. The short answer from our point of view is that it is a bit like the direction of travel you referred to in the document. If there is no interest in food security as an aspiration at all, ever, two things will happen. One is the morale of the farming industry and its technical innovation and those interested in farming for technical and, if you like, technological reasons will decline, dangerously so, and it is very hard to get that back with all the commensurate problems with support services. The other thing that will happen is that the pressure for development of land which is of very limited biodiversity and landscape appeal and amenity will greatly increase, and one of the most worrying things about Government planning policy at the moment is the absence of any recognition of the value of land in an era of climate change as a deliverer of natural resource management itself, whether it is producing food or not at the time. Q91 Lynne Jones: I think somebody said earlier that there is no policy objective behind Pillar 1. I do not think that is quite true because of obviously cross compliance, which does achieve some environmental objectives. In terms of providing environmental goods and services, do you agree that the imposition of cross compliance measures to single payments is less effective than more targeted agri-environment schemes? Dr Armstrong-Brown: That is a very interesting subject area because it gets you into, is it better to agree in Pillar 1 or invest in Pillar 2? In terms of your first comment about whether cross compliance constitutes an objective for Pillar 1, I think it is more a condition on the receipt of the subsidies which do not in themselves have an objective because at the moment if the subsidies were payment for meeting cross compliance standards, once you have taken out the things which were legal requirements anyway, (which you would not be paying in addition for farmers to meet,) you would be paying very, very much over the odds. On the RSPB's own farm it costs us in the order of £50 to meet cross compliance standards, but our subsidy cheque is vastly in excess of that, so there is a thought! Q92 Chairman: When you say it costs £50, £50 for what, per hectare? Dr Armstrong-Brown: No, over the whole farm for us to amend our practices so that they met cross compliance. That was the total. Q93 Lynne Jones: It costs £50 per hectare? Dr Armstrong-Brown: No, for the whole farm. Q94 Chairman: So what size of farm is that? Dr Armstrong-Brown: 200 hectares. This will vary from farm to farm, depending upon whether they were operating good practice. Q95 Lynne Jones: Therefore, the answer to my question is definitely yes? Dr Armstrong-Brown: To your second question of whether the cross compliance conditions themselves had a value, if I am paraphrasing it correctly, yes, they do have because what they provide is a definition of the minimum standard and it is crucially important that people can see what is expected of them, but this is in a sense something which you just require anyone to do. You do not pay people not to break the speed limit either, you just say that they should and there is the limit. Cross compliance sets that kind of standard. It defines how you should protect the environment. The Pillar 2 schemes do a different job. They provide targeted additional incentives to support or enhance, or do more work than is the basic minimum. So I think you can achieve very important things with both mechanisms, but they are different things. Mr Oliver: Can I just come back on that? One of the things which is most important in considering regulation versus incentive is the capacity of the farmer to deliver, so it is very important, if you are going to pay farmers more money, that they know what to do and that it is well-researched as a process, and that is something which the RSPB has done a lot of work on. Another thing which matters very much is that they are still there to farm, and therefore it is crucial that the background arrangements for their competition, if one considers, for example, animal welfare standards (which are very welcome but nevertheless quite onerous on our farmers by comparison with many), have to be taken into account in deciding how to reconcile regulation with competitiveness across the world with increasing liberalisation. So it is not simply a question of whether one is more effective than the other, it is also what the effect on the farm business is, how that motivates the farmer. Also, and this is a very worrying implication in the CAP "Vision" document, it suggests that by ceasing subsidy for production somehow that is restitution for the damage done through 40 years of intensive farming, and that is simply not the case. The damage done, for example through eutrophication, through phosphate in the soil, lasts for thousands of years and in order to achieve serious benefits for biodiversity and landscape as well you cannot simply let it rest, having farmed the guts out of it for a very long time. So land which has been subject to intensification needs active management back to more interesting habitat and landscape. It is not something which simply can be achieved through, if you like, ceasing the damage. Q96 Lynne Jones: Yes, but in both of your submissions you are implying that the Government is - well, I think you are probably correct to say it over-simplifies, but does the Government not have a point when they argue that if you spend less money on Pillar 1 and you shift money into Pillar 2 you do not actually need to spend as much to achieve environmental objectives? Would you agree with that, even if it is more complex? Dr Armstrong-Brown: This is very difficult because, as we have said, the objectives in Pillar 2 have not been costed. What we can say is that there is a shortfall currently, there is not enough going into it to achieve even the current objectives. And, as has been said, with the increasing emphasis on water quality and on climate change demands the demands are only going to go up in Pillar 2, so clearly there is inadequate funding in Pillar 2. Whether that is going to be equivalent or less, or more than the amount in Pillar 1 is unknown because we do not know what we are comparing it with, but what we can say for the moment is that we are getting some delivery of environment goods through Pillar 1 because of the points which Tom has made. By being there and doing what they are doing, there is a service being provided, but it is a fairly inefficient way of supporting those things. So for the services which are being provided indirectly through Pillar 1 at the moment you are likely to get an efficiency saving by funding them more directly through Pillar 2. At the same time, there are some costs which will go up because they are not currently met through Pillar 2, or because we are going to have to start doing things like paying for systems to continue, and extensive beef grazing is one example. Most of the payments at the moment are based around trying to get people to extensify, but if you are trying to perpetuate a system which might disappear altogether, that will have a different cost basis to it. So if we had to hazard a guess, we would say Pillar 2 will have to be a lot bigger than it is at the moment. It might be slightly smaller than the total budget, but we would not like very much to have to put a margin on it yet. Q97 Lynne Jones: So you do not see that there is scope for substantial savings by having more efficient achievement of your environmental objectives through targeted schemes than through Pillar 1? Dr Armstrong-Brown: We would not argue with the principle. One thing which concerned us a lot when the document was written was that that seemed to be the primary objective, so while we do not want any more than anyone else to see poor value for money from any kind of expenditure and unnecessary spending, we would really rather that did not lead the argument. Leading with cost saving is not the point. You may get cost saving, which should be a side effect and a benefit, probably, if you invested that money somewhere else, but that is not the principal point of reforming the CAP, in our view. Mr Oliver: We say in our evidence that the fund should be of a scale equal to the opportunities which exist. One of the very complicated things about the single payment is its crudeness, oddly. For example, what happens with upland land management services, which are benefiting cities and costal districts because of flood prevention and water quality management? How do you quantify those costs, which at the moment are not even considered in the Hill Farming Allowance, which is rightly interested in landscape and the social effects of the payment? There is no consideration of the fundamental issues about water management in an era of uncertainty about water, and indeed an era of crisis about water in certain parts of the world. I think it may well be that we find that some components of public benefits from funding land management actually become more expensive as time goes on. We do not know, and the crucial thing is, neither do Defra or the Treasury, and they need to before they make very substantial changes. I think in that respect we are rather behind Mrs Fischer Boel's comment that we need to see how the present reforms bed in before we start radically going down another road without knowing what the consequences will be. Dr Avery: And of course the budget agreement before Christmas, which was touched on by the CLA, seems to take things backwards because the amount of money available for Pillar 2 will be reduced, and that is not the direction which the Treasury/Defra paper suggests we ought to move in and it certainly is not the direction we would want to see, and it must be very unsettling for farmers, too. As well as not getting your single farm payment cheques through the post, you now hear that the direction of reform of CAP is actually taking a step backwards. So what type of signal does that give to an industry which is going through a difficult stage and is going to go through some more difficult times in terms of restructuring? Q98 Chairman: On this question of Pillar 2, the thrust of the conversation has been that Pillar 2 monies can be spent, by and large, to deliver environmental goods because of targeted environmental programmes. But then the Commission has effectively said you have got to have a spread of some of this expenditure, and the other Member States have a different view. They would not recognise the kind of discussion we are having. They would say, "Pillar 2 is all about restructuring the rural economy." So you have a different driver for the debate about Pillar 2, which we have all admitted is lacking in the "Vision" document, but in terms of actually delivering the type of reform CAP, if one to two is the direction of travel, any thoughts on how you rationalise the different perspectives throughout, by that time, probably the 27 plus Member States, who would all becoming at what they think Pillar 2 is from very different backgrounds? Dr Armstrong-Brown: This is something we have done some consultation on with our BirdLife partners. The view - and admittedly this is from the conservation lobby across Europe - is that land management is what makes rural rural, if we are talking about rural development. There is a wide range of other things to do with economies which would operate in any event anywhere, but the things which make rural rural are the links to the land, and therefore access to the land management schemes must be the most important part of any spread of funding. Obviously there are competing interests and some of those voices are stronger in some areas than others. Mr Oliver: I totally agree with that. One of the things we have been quite concerned about is the difficulty of successive generations of young people farming. To some extent that issue has been ameliorated by the rise of the new generation of people who buy land are who are interested in farming but who do not rely on it as their principal or even one of their major parts of their income, but there is still the question which arises (we again refer to this in our evidence) that we do not know whether the average age of farmers being 59 is a crisis or not. The Government would have us believe that the average age of farmers has been 59 for ever. That is a colourful, interesting and amusing comment, but I do not think it is terribly helpful, nor do I think it is substantiated by the facts. So it is a good example of the need for some thought on helping new people into farming and also helping some people retire from it, and here I pay tribute to the work of people like the Rural Stress Network and the RABI, who recognise the crucial difficulty which many people who appear to be delivering landscape and wildlife for us all face when they are facing ruin. So there is a crucial need for some money to be directed towards transition for individuals and, as we have said before, there are as many farmers' circumstances as there are farmers. Q99 James Duddridge: Looking beyond the land, what would be the effects of the UK Government's proposal on the broader rural economy? Mr Oliver: One area which is quite interesting, which English Heritage has done work on, is the relationship between building conversions and farm incomes, and we can pass you an interesting chart which illustrates how very close the decline in farm incomes is with an increase in interest in planning applications for conversions to listed buildings. There are 30,000 listed farm buildings in England and there are something like 500,000 traditional farm buildings, so probably this is the tip of an iceberg and because buildings which are not listed have much less protection probably there is an awful lot of activity going on and already has. In fact, English Heritage has said that something like a third of all traditional farm buildings have already converted. That suggests there is a ready market for diversification in rural areas. However, Government policy, quite rightly, is to discourage reverse commuting from towns and cities to the countryside because the average distance of those commutes tends to be longer, and that is unsustainable while they are interested in reducing emissions from traffic. It also has consequences for the landscape character and tranquillity. So in the event that farm incomes substantially decline, it is likely that there will be resort to more diversification and that the diversification which farmers will seek will be high value diversification, which tends not to be linked to land-based industries, and we can submit a document to you at the end which will help, I hope, to illustrate this, which is research we did with Oxford Brookes University. So the consequence is a great pressure to find new activities which yield a lot of money, either because they are basically urban activities benefiting from broadband, or because they are large-scale leisure activities such as golf courses, paintball, go-karting, the sorts of things which you see increasingly when driving along main roads in this country. So the consequence is likely to be a plethora of applications for leisure activity and high-value manufacturing and information management, which will make it very difficult for farming to co-exist if all the buildings have been taken over for those sorts of things and the holdings fragmented, as the GFA research has shown, which suggests that as uncertainty over farming continues there are many, many more very small holdings, sort of mini green belt, private green belts around farmhouses which have been dislocated from farming practice, large areas of land which are held on grass keep or on very rudimentary farm business tenancies with very little interest in their long-term management. Q100 Mr Williams: In terms of modulation, there is compulsory modulation but there is also an opportunity for countries to use voluntary modulation and the UK negotiated an increase, so it could be up to 20 per cent, but I do not think any other nations actually make use of any facilities for voluntary modulation. In your view, you say that the Government ought to, as I understand it, take up the 20 per cent modulation to be used for environmental schemes. Do you think that modulation should be match-funded by the UK Government? Dr Armstrong-Brown: Yes, this is a very interesting area. We do support modulation in principle because it moves money from Pillar 1 to Pillar 2, which, as has been said, is the direction of travel for the wider CAP policy. The current debate is in a sense forced by the cut in rural development funds, which has been mentioned, and it is unfortunate that it is having to be taken forward like this because of all the associated trauma and stress which is accompanying it. It is becoming a much more emotive issue than a sensible policy evolution. That is one comment. On match funding, in fact in the longer term if you insist on match funding Pillar 2 subsidies you disincentivise many Member State from moving money into Pillar 2. So in the longer term there is now less justification for insisting on match funding. Now it is an optional measure anyway, so we see in the short-term that there is a crucial need to match fund it simply because of the shock to farm businesses as they adjust. We do support modulation to the maximum extent needed to fund the schemes because they are existing commitments and, as we have already said, the budgets for Pillar 2 are too small to meet the objectives they already have. So there is no way around it, modulation is going to have to happen, but to minimise the impact on farmers and to keep the farming community with the programme, to enable them to support it, a signal of investment from Government in the form of match funding is important as a message. It is also important economically to reduce the impact in the short-term on farm businesses. Mr Oliver: Our view is fairly similar. The issue really is that only by meeting existing commitments for environmental stewardship that is not really addressing the targeting issues for high-level stewardship, for example the national priorities are National Parks and Areas of Outstanding Natural Beauty, and of course the wider countryside is equally as important. So I think by standing still we are not really going to move forwards either in terms of farming policy or supporting that through agri-environment schemes. You would be right in detecting there is a bit of a tension for us between the sort of pan-European view which says the sooner this is all coming out into Pillar 2 the better and the view which is, if you like, a more English view, which is that the more modulation the better because again the more money there is looking after landscapes outside AONBs and National Parks the better it is for the population as a whole, because many people do not live near AONBs and National Parks. I have a letter here from Jim Knight, which expresses aspiration for the health agenda to be more directly met by agri-environment schemes on the edges of towns and cities, where farming is difficult but where open space is very valuable and where one does not want to have to commit local authorities to expensive management of country parks. The obvious solution is to make it easier for farmers to farm extensively in an interesting way, encouraging access close to where people live. That is an area where modulation will be enormously valuable, but there is not even a whisper that that is actually going to happen, and in the meantime the public benefit of landscape which is within walking distance of suburbs and urban expansions is just lost. You only have to look at any town where the last house on the edge of the town is left and there is a boundary and a fence and then there is an intensive field right up to the fence, so there are all the issues of access and sprays and a lack of connectivity between the people who live there and the landscape next to them. All that could be a thing of the past if we were to modulate more with greater aspiration for change that was not simply to do with the best land going into schemes. Q101 Mr Williams: Encouragingly, you both talk about keeping up the morale of the farming community and the enthusiasm as being vital to achieving your objectives, but if you have a 20 per cent modulation in this country and just the compulsory level of modulation in the other European countries, will that put British farming at a disadvantage and affect the morale and enthusiasm which you value so much? Dr Avery: I think it will certainly do the latter. I think there are two perspectives which are worth bearing in mind on this. One is that across Europe farmers receiving support get that support in varying proportions from Pillar 1 and Pillar 2, depending on which European country they are farming in, and in the UK the preponderance is for that support still to come from Pillar 1, so our farms are differently positioned than other farmers. The other perspective which I think we would have to advance is that that graph of declines of bird numbers in the UK, which I think would be a good indication of a decline of biodiversity on farm land in the UK, if one had the data for plants and insects. You can produce that graph for every European country and when you do the loss of birds, farm land birds in the UK is greater than it is in any other European country because we have clobbered our farm land, not because farmers have done it but because the way we have enacted the Common Agricultural Policy over decades has taken the wildlife out of our countryside. So as a result of that there is an urgent need for us to move money into the good bits of CAP as much as we can, but that is going to be more difficult and more morale-sapping for UK farmers than it would be in other parts of Europe and we need a plan to do that in a way which is most sensible and sensitive while still getting the job done, because in this discussion we have kind of said, "Well, this is okay, this vision." Let us remember how awful the effects of the CAP have been on the environment, the landscape, and it has not been great on consumers and farmers either. So we have to change and the direction of change I think is right, it is just that it is going to be very uncomfortable. It is going to be uncomfortable for politicians, who are going to have to make some difficult decisions and for farmers. It is the job of politicians to make it a bit easier for farmers, I would say, and we absolutely do want farmers to stay on the land. Q102 Chairman: Let me just ask you, because some of this involves some quite complex dynamics. Ultimately, if we start from the point of view of the money, this discussion has been about moving out of Pillar 1 amounts of money into Pillar 2 and you made a very interesting point, Dr Avery, that in those areas where, if you like, there is the biggest deficit of environmental goods - and you chose bird numbers as your proxy for that - you might argue that, say, the intensive arable areas of the United Kingdom might be the potential biggest beneficiaries of income in a Pillar 2 situation not necessarily to see that money flow to areas where you might, if you like, intuitively think, "Oh, they will go to the Lake District or to the Welsh hills. But hang on a minute, they've had lots of special schemes already to achieve these objectives. The clobbered areas are the ones which have got the biggest deficit." So the question I was groping towards was whether in fact if you were gong to restructure Pillar 2 you have got to have some method almost where you say to farmers, "You guys have got to have first refusal at bidding for the cash, because if you're going to have it taken out of Pillar 1 that's off the bottom line of the farm, so there is some money moving around." But if the farmer said, "Well, okay, I think I can put together an environmental package for my farm because these nice people from the RSPB have identified where the clobbering and the deficit is. I'd like to have first chance to re-deliver these environmental goods," then at least some of that resource goes back into the farm's accounts, but I do not see anybody having thought about that kind of dynamic situation. Dr Armstrong-Brown: Actually, we have done a bit of thinking about that. In fact, I think an earlier question to the CLA was also the future model for financing the CAP, and we do have one. It is not one that we can allocate all the cost to all the landowners who would participate in it yet, but it is basically a model for support through Pillar 2. It is a little bit like the environmental stewardship scheme now, if you are familiar with its structure, which is support for everybody at the lowest level, so every single hectare can deliver for the environment and should be able to receive support for doing that if the budgets were sufficiently large. Then where people can deliver more, where there is the potential to do specialist recreation or enhancement work, that landowner should also be assisted to do that. That will be patchy. Not every single landowner or every single hectare has the capacity to do more than just something. Every hectare can be good for the environment, but not every hectare can have an SSSI on it or be part of a designated landscape, or a wonderful wildlife-rich walk, so that will then limit the number of people as you go up this pyramid idea. That is our model for support through Pillar 2, which would not necessarily smooth out the distribution. We are not talking about either the people who get the money now getting exactly the same amount as they used to get via a different route or a completely flat rate distribution rate for everybody, but it would be distribution on merit rather than on any kind of historic allocation. Mr Oliver: Can I just contribute to that answer? I think one crucially important point is that whatever the system is, it is clearly to the greatest public benefit. One of the most damaging things about farming policy for the last six years has been the drift away from recognising the public benefit involved in the taxpayer funding it. The other point is the one which has been very well made by the Woodland Trust in particular, which is that if you are going to most effectively accumulate new habitat which is resilient to climate change it is actually very important to target critical areas. The work of Peterken on woodlands, for example, is very useful on this, but also other people, which suggests that it is very good to target new, higher tier scheme activity as well as entry level scheme activity to places which give critical mass to areas of habitat. In landscape terms the story is a bit different, but it is an area where I think CPRE is content to recognise that climate change is so pressing that there may be some areas of habitat which are so precious that they require, if you like, special recognition. Without that, maybe SSSIs and local nature reserves will be of increasingly little value because of their lack of resilience. So I think that is an added element in any new scheme and if we criticise the Government for not taking account of climate change, we also must make sure we do. Q103 Lynne Jones: I was surprised to hear you say that in other countries there is a higher proportion of funding going under Pillar 2. Could you tell me where those are and how that occurs? Dr Armstrong-Brown: Yes. It is the new Member States which joined after the UK did, so Austria, Portugal, Sweden. They were not allowed under WTO rules to receive large Pillar 1 payments, so the money was diverted via Pillar 2. Q104 Lynne Jones: So it is just the new Member States? Dr Armstrong-Brown: Yes. Q105 Mr Williams: One thing which worries me is that if we go down the transfer from Pillar 1 to Pillar 2 we put in jeopardy food security, to give it a shorthand expression, and at the same time we go into schemes to promote biodiversity and landscape quality and those schemes actually do not succeed. What evidence have we got that the sorts of schemes which are being proposed, Ty Goral in Wales and a lower entry and higher entry in England, actually will succeed in doing what they set out to do? Dr Armstrong-Brown: That is an extremely good question because there is quite a live debate in Europe over whether agri-environment schemes actually work and a researcher called Kline has recently published a second study which goes through some of the weaknesses. We think there is a lot to be learned from this and the bad examples are in places where the scheme has been used as an alternative to Pillar 1 subsidies, in fact just to deliver money to farmers via a route which is legally okay under WTO rules. There is a scheme in Germany which pays farmers €100 a hectare not to use growth regulators on their cereals, which to my knowledge has very little environmental benefit. So there are certainly bad agri-environment schemes out there, but we know of a set of principles which will make them work well. And because of the very, very good development process which has happened in this country and the extensive use of a whole suite of environmental expertise in designing environmental stewardship we believe this scheme is fit for use, and subject to sufficient funding it will deliver its objectives. We have already got some extremely good examples. One is the Cirl Bunting special project, one element of the agri-environment schemes in Devon, which has more than met its targets, in fact it has tripled the number of Cirl Buntings. It has gone up by 300 per cent actually. So if the schemes are well-designed, well-targeted and delivered according to the things which Tom has outlined about having sufficient advisory support, then they will work, certainly. Mr Oliver: I would draw the attention of the Committee to the Land Management Initiative, which was reported on by the Countryside Agency quite recently, with a series of projects which were to do with cultural inheritance, historic landscape, biodiversity and landscape quality in a whole series of projects using the mechanisms available and they are fully reported on and very positive. Dr Avery: I think the UK can be proud of its track record in agri-environment schemes. They are not all that perfect, but they have not been around for all that long. Many of them have absolutely met or exceeded the targets they have set. Elsewhere in Europe, the schemes have been badly designed and it is not surprising that they have not met their targets and they have actually been a complete waste of money. But that is not the case in this country and it should not be the case going forward. Mr Oliver: It would also be helpful if there were PSA targets for an increasingly sophisticated and ambitious range of issues. One of the things, for example, we are very, very keen on introducing is a PSA target for landscape quality, which would be entirely possible to achieve in an era of an RSPB-style mechanism for funding. Another one would be a more sophisticated view of biodiversity measurement. It has been critical that the Birds Directive has been at the forefront of everybody's mind, but I would draw the Committee's attention to Butterfly Conservation's report, The State of Britain's Larger Moths, which shows how very worrying the condition is of large numbers of invertebrates, which often have rather different dynamics to birds. This is in no sense undermining the importance of the Birds Directive, but it is making the point that actually we are pretty crude at the moment in looking at the value of our inheritance and we have a vast number of skilled farmers and skilled conservationists who have spent a lot of time working out how to do this well and, unlike the rest of Continental Europe, we are raring to go. Chairman: I think, as I draw this to a conclusion, the exchanges of in particular the last few minutes perhaps illustrate the environmental deficit in the "Vision" document, in other words there is a lot about change but changing into what? Your comments about the fact that we have well quantified results for agri-environment schemes perhaps should encourage the Government to take some leadership for being able to demonstrate what a more environmentally sustainable, friendly Pillar 2 might look like with some good arguments, but sadly those are not arguments which are deployed with the degree of sophistication and knowledge which you have done in the "Vision" document. Thank you very much for opening up that further and interesting perspective to our inquiries, and again thank you for your written evidence. We much appreciate it. |