Examination of Witnesses (Questions 189-199)
MR CHARLES
WREFORD-BROWN,
MR JEREMY
MOODY AND
MISS ALICE
RUSSELL-HARE
8 MAY 2006
Q189 Chairman: We now move on in our
quest for the truth, as they say. The Committee is joined by the
Central Association of Agricultural Valuers, Charles Wreford-Brown,
their President, Jeremy Moody, their Secretary and Adviser, and
Alice Russell-Hare, the Professional Assistant to the Secretary.
May I say at the outset how grateful the Committee is for the
very considerable amount of additional material which the CAAV
has very helpfully submitted. As you might have noticed, with
the line of questioning that we have just had, the diary of events
is of particular value in trying to put into context some of the
information that we have just heard and also the notes from the
stakeholder meetings. We recognise that these are not a verbatim
report but they do give some very important insights into some
of the processes that are involved, and the Committee is also
very grateful that you are happy that this information be entered
as evidence into our inquiry, and for that we are very grateful.
Starting with a very simple question to all of our witnesses,
just to get them revved up and in the mood for answering the more
detailed questions, who do you think is to blame for the mess
with the RPA and the Single Farm Payment scheme?
Mr Moody: You start with the decision
to choose a hybrid system, and it probably matters not which hybrid
system but any hybrid system. Having taken an option which was
self-evidently the most difficult of those available, it then
falls to those that have to deliver it to will the means to deliver
it, and that seems to be the point where things have fallen apart,
that a challenging hybrid was put in place without necessarily
the attempt to deliver it or to understand the world in which
it had to be delivered. You heard previously from the CLA how
they sought to represent it; we too sought, as you will see from
some of the papers that are before you, to represent the kinds
of stimuli and process that were set in place by a dynamic hybrid,
and it is dynamic not only in its own system but that it is dynamic
in creating stimuli for people to react to it. It is inherent
in the area option and anything that relies on the area option
that it turned on the 2005 facts of land occupation. It was desperately
important that whatever decision was taken was taken as early
as possible, and this particular time it was taken two or three
months later than the industry would have wanted, but, as it was,
it gave 15 months' notice to everybody of the rules by which they
could maximise their positions. It created its own dynamic and
that would seem not to have been appreciated. As was discussed,
I think, earlier this afternoon, Defra did clearly lay out, fairly
early in this process, for their own purposes, quite detailed
management programmes and various sorts of management jargon pertaining
to this, and so forth, but for the delivery of consultations,
decisions, SIs, and so forth, by no means, for all sorts of reasons,
did they hold to that. That process then seemed to stall. As was
said earlier on, there was effectively a handing over of discussions
after the May 15 forms went in, in 2005. All our discussions effectively
then, the focus of them moved, as with the CLA's, from Defra to
the RPA, and that is the point where the IT systems, or the management
of it, or whatever, have got us to where we are now.
Q190 Chairman: If we go back in time
to when the discussions first started, do you have any feedback
as to, I suppose, how Britain conducted the negotiations? I think
what I am getting at is that some of the problems have been referred
to in the context of "us not realising what it was we had
agreed to," in other words, the volume argument. If one winds
back the clock, when Ministers were sitting there in the Council
of Ministers and they were discussing the new Single Farm Payment
arrangements, most of the Regulations that I have ever been involved
in usually sketch out in general terms what the territory is and
what you can do and what you are allowed to do. Did you get the
impression then that Britain understood what it was it was signing
up to?
Mr Moody: I think, very clearly,
the British negotiators were among the more competent of those
negotiating the process. We put in an enormous amount of effort
with the active policy officials on this one, hammering out definitions.
Our suspicion was that only the Swedish Government was making
a similar level of effort. There is a story that somewhere round
about the beginning of June 2003 the Belgians sent a junior Foreign
Minister who thought this was only a minor review and was sharply
disabused as to where things had got to at that point. I think
the level of input from British policy officials, certainly, and
then, in those June 2003 negotiations, from Ministers was very
strong, was competent and delivered a large number of national
goals. The problem was then we changed our mind about what we
wanted from it. There had been no internal discussion, no thought
at all that as the area option began to emerge in the very late
stages of the negotiations we would ever take it. It was regarded
as a bit of an amusement, faintly entertaining, that it was there.
We understood the reasons why the Germans had some desire to have
it, because of competitive issues vis-a"-vis Poland, and
so forth, but it was seen as a bit of an oddity. The luxury of
debate opened up when round about late May or early June 2003,
in the closing stages of the negotiations, because of the lack
of awareness among many of the other Member States, the implementation
date for this moved from what was clearly very demanding but I
think the date that people wanted, which was 2004. All of a sudden
an extra 12 months was given and, to an extent, that took the
tightness out of a lot of the debate. We were on a very tight
run to deliver for January 2004, a very tight run indeed, in the
light of hindsight. Suddenly having space opened up, opportunities
for people to talk then about other options and ways of doing
it. We moved from a Regulation where if you wanted to understand
it from the farmer point of view you started at Article 33, halfway
through the Regulation, to the point where, so we started on this
back to front, then we turned it inside-out to make it all run
from Article 59, and some minor paragraphs of Article 59, in trying
to apply the regional area option, and then do so with the hybrid
model. In practice, the British Government very competently delivered
something that did not answer the questions it subsequently chose
to ask.
Q191 Chairman: Would you have thought
that, in the briefing of Ministers, and I am trying to put this
question to you as neutrally as I can, United Kingdom Ministers
would have been briefed by those officials who had worked with
other officials within the Council of Ministers, that the Minister
sitting down to agree the Regulation would have understood what
it was they were agreeing to?
Mr Moody: I think the Minister
would have understood that she was agreeing to a historic option.
That was the mainstream, that was the central architecture of
the Regulation. It was the one which it was presumed that Britain
would follow, and that if there was a byway, with interesting
little arguments about how what were then called the "negative
list" crops, the fruit, vegetables and potatoes, were to
be handled, this was a little bit of continental arcana that did
not really trouble us very much, save insofar as it affected coalition-building
within the Council of Ministers. The interest in areas blew up
in late summer, and by then we had gone into hybrid three. Within
England, not the UK at all, it blew up in late summer 2003, hybrids
emerged as a feature of the discussion once the problems of pure
area were identified, in mid October, running through November
and on. The negotiations on the political agreement were all closed
by 26 June.
Q192 Chairman: What do you think
it was that was the catalyst to this sudden interest in area payments
and the then need to introduce them with a dynamic hybrid model?
Was it the campaign that was run by various elements within the
National Farmers' Union to bring horticultural land into payment
for the first time, or was it something else?
Mr Moody: I think, probably, if
you are looking for an organised campaign, it most probably came
from the environmental bodies, which were anxious to draw in all
land for cross-compliance. Somehow they saw the theory of what
now I suppose you would call double decoupling, not only decoupling
from production, which is the core, even fundamental, economic
reform that comes with the Mid-Term Review, but also that if you
decoupled people's future subsidies from past activities that
was somehow even more virtuous, though it delivers the same economic
effect, that production decisions remain driven by the market
rather than by subsidy. That seemed like a bridge too far from
where we sat at the time, but they seemed keen to run it. They
seemed frustrated, in discussions, with our emphasis on looking
at the practicalities of operation, the practicalities of its
effects on business. I think there was concern from certain arable
landlords, who were used to a land-based system for arable aid.
There was always this tension running back into the autumn of
2002, when after the Commission published its Reflections
papers as to whether it was to be a land-based or a claimant-based
system, and effectively livestock had been claimant-based, arable
had been land-based and so there was a tension whichever way you
jumped. They were concerned, though I think actually wrongly,
that moving to a claimant-based system could prejudice their economic
position. You had those two angles. The particular angle of the
horticulturalists was coming in as a little bit of a sideshow,
I think, at that point, but I think it complicated matters within
the NFU, in terms of the clarity with which only ultimately they
were able to put their position. What seemed as much to have struck
Ministers, and I think, if you look at Lord Whitty's Oxford Farming
Conference speech but also our notes on the meeting we had with
him on 13 November, were two things. You could see a world in
which obviously entitlements were going to move between farmers,
and I think he quoted the Hungarian Minister as saying, "I
can see why I might have so many entitlements because I had 20
cows, but why after a period of transfers should I have an entitlement
based on the fact that you had 20 cows?" I think that was
part of the debate and he was almost quixotically anxious about
what would be the right decision for five years' time. Clearly,
he went through a process of agonising, one of the reasons why
I think the decision took so long to arrive at, and ultimately
he chose perhaps the purity of theory over the practicality of
delivery.
Q193 Chairman: It is not often that
ministers have such sort of blinding flashes of inspiration. It
is usually that officials and/or lobbyists come and suggest these
things and they are digested in the form of submissions to ministers
and then ministers read them and think, "Well, that might
not be a bad idea." Have you got any idea how this sort of
sudden interest in this intense detail, the legacy five years
hence, got through to Lord Whitty?
Mr Moody: That is why I explained
it; I think, starting with various interests and then reached
Ministers as they began to focus on the issues.
Q194 Chairman: The ability to respond
to such lines of argument, fortuitously, from Defra's point of
view, had already been agreed. The reason I am asking this question
is, Ministers have said they were taken by surprise by the volume
of applications. Is it because they alighted upon a way of satisfying
a line of argument that you have just put to me and, in actual
fact, when they alighted upon that bit, which you said earlier
on was something continental and not of great interest to us,
certainly they said, "Well, it now is of great interest to
us," but, in alighting upon that, almost by definition, they
had not worked out what the consequences would be for its adoption
in the United Kingdom at the time when the Regulation was agreed
in the Council of Ministers?
Mr Moody: I think, if we are looking
for rational policy-making, we would assume that they accepted
the consequences of the decision they adopted. How far they understood
the dynamics of that, how they actually understood the flexibility
of the British farming industry and landowners, Allan Buckwell
said their data can be a little ropey, we would subscribe to that
view, and how far they actually understood these issues, which
our members do because we are handling it day to day, in practice,
advising all parties, and so forth, I think is a perfectly open
matter of discussion, but in taking that decision they accepted
those consequences and we had done what we could to lay those
consequences before them.
Q195 Chairman: You backed the historic
model, as an organisation, going back to this point about visiting
yesterday's decision on the future: why did you back it?
Mr Moody: We backed it for a number
of reasons. The point that a number of people since have requoted
from us, which is that if you offer to pay for area you will get
area; do not be surprised about the amount of area that you do
not know about in England which will materialise. We backed it
because we perceived, just as Allan Buckwell outlined earlier
this afternoon, the enormous injustices that would flow from the
radical redistribution of support overnight, which was what an
area system would have meant. Bear in mind that when we started
this the hybrid system was not on the table. Bear in mind also
that arguing over the hybrid system was rather like wrestling
with a bar of soap; it started in one place and by the time you
got an answer on that it was somewhere else in the bath. It was
peculiarly an elusive concept, and one quite difficult to deal
with, but inherently it included within it substantial operational
issues that by bringing more land into play, within the already
refined definition of agricultural land, we drew attention then
to the extent to which this would simply distort decisions over
land occupation.
Q196 Chairman: Can I just pick up
on a point, when you said the redefinition of agricultural land,
the redefinition from what?
Mr Moody: The Regulation as a
fundamental part of 1782/2003, that being a farmer is defined
as being one of two things and they can be mutually exclusive.
He can be someone who grows, rears, breeds agricultural produce,
so the traditional farmer; or, and it is absolutely, in Article
2, an "or", he is somebody who keeps land in good agricultural,
environmental condition. That decision, at that point, in the
26 June 2003, political agreement, as then enshrined in the September
Regulation, set the stage. That liberty is there in Wales and
Scotland but, because they have worked on a historic basis for
allocating entitlements, those definitions are less tested, less
pressured in practice. In England, we gave the issue full rein,
because we chose an area option based on the facts that were then
15 months in the future.
Q197 Chairman: Would I be right in
saying that if the Ministers' briefing, when they finally came
to seek political agreement in the Council, had not said "The
Ministers should be aware that agreeing the keeping of the land
in good agricultural order will potentially admit X thousand hectares
into possible payment which heretofore had not qualified under
the old system," that might have been a missing ingredient?
Mr Moody: It would have been tangential
though only with the historic option, because the historic option
said, "What was the area used to support claims in 2000-02?"
That was a fixed, defined issue, based on people's forage area
and arable area.
Q198 Chairman: Only if you keep it
with the express intention that the second bit was not going to
be applicable?
Mr Moody: Yes, which I think was
the British position. Remembering back into discussions in that
period as the area option emerged, it was seen as something conceded
to suit German circumstances, just as there are little appendices
to suit Portugal over Madeira and the Azores.
Q199 Chairman: Given what then has
transpired, was there a point when Defra could have postponed
the introduction in some way to have allowed more time to get
the administration in better order, to get it right, however you
describe it, for what was now a more complicated arrangement than
perhaps they had been preparing for?
Mr Moody: There are legal options,
of course, and the French have exercised theirs, in particular,
to delay, and I think Italy has on the milk side of the reform;
there are legal options there. Firstly, the British Government
was a very firm supporter of reform, and therefore wished to proceed
with it as a flagship, so in her July 2003 announcements, the
first statement to the House after the 26 June agreement, Mrs
Beckett made it clear that the UK as a whole would move for reform
in 2005, take it up early, before, of course, any of the discussion
on area had started. Quite what manoeuvring room there was then
to turn round and change the decision I am unclear, but from the
industry's point of view I think it needs to be understood that
this had been an exhaustingly long game. This is a reform with
one of the longest time-frames I suspect that anybody can think
of. Even if you take the mainstream architecture, people getting
their first payments in 2006, under whichever model you take,
would be doing so in part on what they claimed in 2000. The reference
year period stopped at the end of 2002. Some people will have
been assessed on what they had been paid in 1997-99, some people
will be assessed on what they had been paid in 2004, but if you
look at the mainstream farmers the clock stopped for them, as
regards their history, at the end of 2002. The land market froze
at the beginning of 2003, and lettings froze, and so forth, because
of people's uncertainty about the position. They went through
2003, the additional year of 2004, which was an uncovenanted extension;
they were actually desperate to be able to get on and move on
with their lives. Postponing this process further would actually
have been damaging to the industry, its flexibility, its certainty,
its confidence in Government, and so on and so forth. The decision
had been taken and actually the industry needed to move on.
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