Memorandum Submitted by the Environment
Agency (CAP 17)
SUMMARY
The Environment Agency welcomes this opportunity
to comment on the HM Treasury & Defra "Vision for the
Common Agricultural Policy" published December 2005. Our
general comments are:
1. We accept the Common Agricultural Policy
(CAP) is a far from perfect policy tool, for all the reasons set
out in the paper (eg paras 1.4, 1.9). It has led to significant
environmental degradation, with subsequent economic and social
costs.
2. We have some concern with the comment
that agriculture should (eventually) be treated no differently
from other sectors of the economy (para 1.29). This philosophy
ignores the fact that agriculture is multi-functional ie it produces
more than just food. It influences landscapes, wildlife, natural
resources, rural employment and the quality of life.
3. We consider that radical change (para
1.33) is both unlikely and unwelcome. A carefully managed transitional
period is critical if farmers are to adjust their businesses.
4. We agree that the agricultural industry
needs to be sustainable on all three fronts—environmental,
economic and social. We endorse the recommendation for a common
European policy, but want a policy that aims to secure sustainable
land management in light of European Union (EU) commitments on
climate change, water and biodiversity (para 1.36). This will
require adequate funding.
5. We welcome the positive emphasis in the
Vision on rural development: "There would be a central rather
than a peripheral role for rural development measures including
those targeted on protection and enhancement of the rural environment"
(para 1.36).
6. The Vision suggests a significant cut
in EU spending on the common policy. It portrays a sustainable
CAP as one where "EU spending on agriculture would be based
on the current Pillar II" (para 1.32). However, the recently
agreed EU budget for 2007-13 significantly decreases the proportion
of the CAP spent on Pillar II, by over 20%. An ability to introduce
up to 20% voluntary modulation with no match-funding is positive,
but the UK farming unions are strongly opposed to this approach
unless the Treasury agree to match-fund. However, current Pillar
II expenditure plans in the UK will not be sustainable without
significant top-up from state aids and/or voluntary modulation.
The implications for successful delivery of the Water Framework
Directive (WFD) are significant.
1. INTRODUCTION
Almost three quarters of the land in England
and Wales is used for agriculture. Whilst there are positive outcomes
from farming, there are as many negative outcomes and costs. For
example, almost half of groundwaters used for public drinking
water supplies now require some form of treatment whilst monitoring
and/or removing pesticides from water costs £120 million
pa. It has been estimated that agriculture contributes to 14%
of total flood events costing £128 million pa. Taken individually,
very few farms create huge environmental problems—however
there are a lot of them. The combination of small problems from
over 160,000 farms adds up to a significant environmental impact.
The Environment Agency considers that tackling these issues requires
a whole spectrum of solutions, ranging from regulation to advice
and including the justified use of incentives, and our work programme
seeks to influence all of these issues to improve environmental
outcomes.
2. RESPONSES
TO CONSULTATION
QUESTIONS
Our response to specific questions in the consultation
are as follows.
Q1. Expenditure on Pillar I of the CAP: The
Government's vision questions the justification for existing expenditure
in Pillar I of the CAP and recommends phasing out all support
by 2020. The EFRA Committee is interested in the likely impact
of these proposals, with specific reference to:
1.1 Food security—does the Government
remain committed to UK food production?
Farming and hence food production has shaped
the countryside in terms of landscapes, wildlife and natural resources
over hundreds of years. As such, many farmers have an innate knowledge
of their own farm and how best to manage the land. If food production
in the UK is no longer a primary driver of land management, and
alternative policy drivers and support are not put in place that
deliver the positive aspects of farmland management, then it is
likely that this knowledge and expertise will be lost as farmers
leave the industry.
Whilst the Vision does briefly discuss the "food
miles" debate, it fails to mention the significant environmental
and social implications of air freighting (as opposed to shipping)
fresh produce, particularly that which can be grown in the UK,
from all over the world to UK consumers. It also overlooks the
fact that food customers who value local food production will
value the farmed environment, which is critical if we are to justify
the continued use of public funds for the provision of public
goods. This was a key message in the Curry Commission report,
which stated "The key objective of public policy should be
to reconnect our food & farming industry: to reconnect farming
with its market and the rest of the food chain; to reconnect the
food chain and the countryside; and to reconnect consumers with
what they eat and how it is produced".[24]
1.2 Potential distortions and inequality of
treatment of farmers across the EU
No comment
1.3 Possible environmental consequences of
the proposals
The Vision rightly recognises the many environmental
consequences of the CAP to date and also that some steps have
been taken to rectify the situation, including the introduction
of agri-environment schemes. The EA is supportive of the principle
of using public money to deliver public benefits. We were closely
involved in the development of Environmental Stewardship, the
new suite of agri-environment schemes in England. Farmers can
now be rewarded for good soil and water management as well as
wildlife conservation, landscape maintenance and countryside access.
Agri-environment schemes are rightly underpinned by cross compliance
and regulation, and voluntary initiatives where these contain
adequate environmental standards.
Agri-environment schemes will be a critical
tool in helping to deliver the Water Framework Directive. They
are a positive mechanism for engaging with the farming community,
and form part of the toolkit for tackling significant environmental
issues such as diffuse water pollution from agriculture. Entry
Level Stewardship will help improve the general environmental
performance of farms across the country whilst Higher Level Stewardship
will deliver greater benefits albeit in a highly targeted way.
However, the success of these schemes is dependent on voluntary
participation by farmers, which measures are adopted and sufficient
funding. It is too early to comment on the effectiveness of either
scheme, and HLS is also severely constrained by funding. The EA
wants to see more resources going into agri-environment schemes
and an expansion of resource protection measures in the new England
Rural Development Programme for 2007-13.
Whilst in principle we are not opposed to the
Vision's proposal to phase out the existing policies of Pillar
I of the CAP, we envisage a more ambitious EU sectoral policy
that aims to secure sustainable land management in light of EU
commitments on climate change, water and biodiversity. This would
require a significant proportion of the Pillar I budget being
redirected towards Pillar II, not being phased out.
The Vision suggests such a common European policy
(para 1.37) but also a significant cut in EU spending on the common
policy. It portrays a sustainable CAP as one where "EU spending
on agriculture would be based on the current Pillar II".
However, the actual EU budget for 2007-13 brokered by the UK government
in December 2005 significantly decreases the proportion of the
CAP spent on Pillar II, by over 20% in total and over 30% for
the EU-15. A large share is also reserved for the new Member States
(MS) and accession countries of Bulgaria and Romania. This will
put particular pressure on the rural development budget allocation
for the UK. Current Pillar II expenditure plans in the UK will
not be sustainable without significant top-up from state aids
and/or voluntary modulation.
A voluntary mechanism to modulate Pillar I payments
under the CAP (mostly Single Farm Payments) at the national level
was possibly the only positive outcome of the financial negotiations.
This will be permitted up to a maximum of 20% with no limit on
the time period, no requirement for national co-financing (a current
requirement) and no constraints on expenditure between the Axes
of the new Rural Development Regulation. Theoretically therefore,
all the additional resource could be diverted to Axis 2 (land
management axis that includes agri-environment schemes).
However, the mechanism rules will need to be
agreed before this is operational. The Commission, which has been
hostile to this proposal, needs to make a proposal and the Council
to agree it. UK farming organisations have also expressed a strong
opinion that they will only support voluntary modulation if the
Treasury match-fund.
In addition, the financial settlement appears
to have retained Pillar I expenditure at the minimum compatible
with the October 2002 EU financial agreement. This means that
Bulgaria and Romania will have to be accommodated inside the sum
available. This will squeeze the Pillar I budget quite hard, even
if the two new accession countries come in a year late. It may
mean a significant cut in MS allocations through the "financial
discipline" process (1% ceiling on the annual growth of the
CAP budget). Cuts of 7% in MS transfers by 2013 have been mentioned.
This, and the operation of compulsory modulation, will limit the
political room for voluntary modulation in the UK and elsewhere.
Reductions in the Pillar I budget will also reduce the value of
modulation.
There is a commitment to revisit the budget,
including the CAP, in 2008-09, but it is unclear whether this
is likely to result in changes ahead of 2013 (the French Foreign
Minister is reported as saying "there will not be reform
of the CAP before 2014"). Evidence from this negotiation
round suggests that the 2002 deal to protect Pillar I spending
until that date is proving extremely resilient.
Alternative scenarios will have to be found
if the funding to underpin Environmental Stewardship is not secured.
There may be more radical proposals such as making elements of
ELS a component of cross compliance. This may be something to
consider in due course but should be the outcome of objective
evaluation, rather than an economically driven decision. The review
of EU spending in 2008-09 presents a further opportunity to influence
UK and EU thinking about the CAP and delivering environmental
commitments.
1.4 The extent to which the proposed changes
to the CAP would result in lower food prices and (through reduced
public spending on the CAP) a lower level of taxation
We have no comment on the relevant figures provided
in the HMT/Defra document. However, a reduction in public spending
on the CAP and any subsequent decline in food prices must not
be at the expense of the environment. Consumers and taxpayers
are beneficiaries of a well-managed countryside delivering an
improved quality of life, clean water and air, flood risk management,
healthy wildlife populations and diverse landscapes. As the predominant
land use in the UK, these benefits are delivered by farming. The
market does not support the delivery of these public goods, hence
we are reliant on public funds. A significant proportion of such
funds is currently channelled to farmers and land managers via
Pillar II, and agri-environment schemes in particular. If we are
to deliver sustainable land management, including a range of EU
and national environmental commitments, then sufficient funding
for such mechanisms is required.
1.5 How such a revised CAP would enable the
EU's farmers to be more competitive
Recent work commissioned by the EA aimed at
providing "Business As Usual" projections for agriculture
to 2015 in England and Wales, as part of the economic analysis
required under the WFD, suggests that major changes in terms of
land cover are unlikely.[25]
This was despite the industry agreeing that commodity prices are
not likely to increase markedly up to 2015. Land use change in
the UK has been a gradual process and that 10 years is relatively
short term in this sense. However, this scenario masks significant
changes within sectors. For example, forecasts of livestock number
changes are significant and implicitly the stocking density in
2015 is assumed to be markedly lower than at present, particularly
in the uplands. In contrast, for cropping the intensity of production
is not predicted to change radically but a more evolutionary reduction
in input usage is envisaged. Other key assumptions to come out
of the study (which included extensive discussions with the farming
industry, academics and other commentators) included:
— Continued pressure on input prices,
but no major increase in costs.
— Restructuring will lower fixed costs
and make more production viable at current prices in the face
of decoupling.
— More land becomes available under
a variety of rental agreements enabling more efficient farms to
expand, making more production viable.
— Farmers have more objectives than
simple profit maximisation and therefore may produce even if they
are not covering their current full economic costs. This is for
the following reasons—using the Single Payment Scheme to
cross-subsidise production, continuing to produce in the hope
of increased prices in future, and that such a decision is too
major to take on short-run returns.
— The reaction of farmers to future
economic and policy drivers is highly dependent on the individual
situation of business. In particular:
— Age of farmer (related to succession).
— Whether owner-occupied or tenancy.
— Whether has own machinery or contract.
— Age of buildings and equipment (especially
in Dairy sector).
This is the scenario assuming the CAP remains
unchanged from the 2003 reforms. Whilst this may be an unrealistic
assumption, this study does indicate farmers are adaptable.
We would argue that any "competitive"
economic activity needs to be designed within natural resource
constraints. A high quality environment can be a social and economic
asset, giving businesses a competitive edge and improving the
quality of life for both the rural and urban population. We welcome
the suggestion in the Vision that one of the ways Government can
assist farmers through a transition to lower levels of support
is through investment in human capital (para 3.27). A clear message
coming out of a number of research reports is that training, information,
facilitation and advice are essential to help inform change, and
that investments in improving human potential are a critically
important aspect of improving the competitiveness of farm businesses.[26],[27]
The use of facilitation and advice is recognised as an essential
characteristic of successful rural development schemes in many
EU and non-EU countries.[28],[29]
A study for the National Audit Office suggests that in many cases
it is not lack of capital that is the barrier to farmers adapting
their businesses to future needs, but a lack of advice and support
in taking forward such adaptation. To deliver environmental priorities,
however, the nature of this support must not be dominated by business
advice and training but should seek to include the environment
as an integral part of sustainable business development.
1.6 How the proposals would differently affect
the tenanted and non-tenanted sectors across the EU
No comment
1.7 The implications of the proposals for
the applicant countries to the EU
The Vision notes that the CAP sits uneasily
with the needs of many of the new MS and, it can be assumed, for
the applicant countries. The CAP does not prioritise rural development
and provides strong incentives against agricultural restructuring
(para 2.16). Any new European common policy for rural areas needs
to maximise opportunities both pre and post accession to deliver
regional, national and EU environmental priorities in ways that
also strengthen the economies and quality of life in rural areas.
We need to demonstrate that a high quality environment can be
a social and economic asset, giving businesses a competitive edge
and improving the quality of life for both the rural and urban
population.
Q2. The rural economy: The Committee is interested
in how the UK's rural economy would fare under changes proposed
in the report
As the Vision identifies (para 3.3), agriculture
has important direct downstream linkages (food transportation,
processing, marketing) and upstream linkages (farm input suppliers).
The Vision does not mention however that there are also many indirect
linkages, including tourism and recreation. Nationally, tourism
accounts for some 4% of UK economy (agriculture accounts for 1.2%),
and employs two million people, whilst visitors spend £12
billion per year in the English countryside, supporting some 380,000
jobs.
The outbreak of Foot & Mouth disease (FMD)
in 2001 highlighted the constructive linkage that exists between
the availability of countryside access opportunities and the economic
well-being of rural areas. For example, 80% of accommodation providers
nationally had their business affected by the FMD outbreak, with
business down by a half or more in some hotels. The worst of these
impacts were on small independent establishments in rural areas.
In the Lake District and Peak District, retailers of outdoor clothing
and equipment had their turnover reduced by up to a half; whilst
80% of licensed outdoor leisure centres had to close. Losses associated
with riding, livery stables and trekking centres ran at an estimated
£29 million per week.[30]
This reinforces our argument that any future common policy needs
to bear in mind that rural land produces more than just food.
Q3. International issues: The Committee is
interested in the report's assessment of the impact of CAP reform
on developing countries, and its conclusions about the erosion
of trade preferences and the potential benefits of a liberalised
agricultural market in the EU and other OECD countries. The Committee
is also interested in the effect the proposals would be likely
to have on the global economy more widely
No comment
Q4. The wider debate on future financing of
the CAP: The EFRA Committee is interested in how the reforms proposed
in the report could be achieved in practice, and how these changes
relate to the ongoing debate surrounding the future financing
of the CAP. What barriers might be put in the way of implementing
such reforms by other EU Member States?
See comments under "1.3—Possible
environmental consequences of the proposals".
3. CONCLUSIONS
The Vision for the CAP as set out by HM Treasury
and Defra contains a number of positive recommendations. However,
the general premise that agriculture is no different to any other
sector of the economy and should (eventually) be treated as such
is of concern, as it is widely accepted that agriculture performs
a multi-functional role in society. We accept the proposal for
a common European policy, but want a policy that aims to secure
sustainable land management in light of EU commitments on climate
change, water and biodiversity. This requires adequate funding,
an issue that is inadequately addressed in the Vision and further
threatened by the recent EU budget agreement. The implications
for successful delivery of the Water Framework Directive (WFD)
and other significant environmental issues such as climate change
are significant.
February 2006
24 Farming & Food: a sustainable future.
Report of the Policy Commission on the Future of Farming &
Food, January 2002. Back
25
University of Cambridge & Scottish Agricultural College (final
draft). BAU projections of agricultural activities for the WFD:
Phase II. Back
26
National Audit Office (2004) Helping Farm Businesses in England.
Report by the Comptroller & Auditor General. HC 1028 Session
2003-04: 16 September 2004. Back
27
ADAS Consulting & SQW Limited (2003) The Mid Term Evaluation
of the England Rural Development Programme. Report prepared for
Rural Development Division, Defra. December 2003. Back
28
IEEP (2002) Europe's Rural Futures-the nature of rural development
II-Rural Development in an Enlarging European Union. IEEP Report
for LUPG. December 2002. Back
29
IEEP (2005) Environmental Priorities in UK Rural Development
Programmes. IEEP report for LUPG. October 2005. Back
30
Countryside Agency website (http://www.countryside.gov.uk/LAR/Recreation/NCAF/NCAF11_3.asp) Back
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