Examination of Witnesses (Questions 40
- 59)
WEDNESDAY 14 JUNE 2006
MR DAVID
FURSDON, PROFESSOR
ALLAN BUCKWELL
AND DR
DERRICK WILKINSON
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% of the value of
the support is capitalised in the land, 36% accrues to the other
input suppliers, machinery, fertilizers, crop protection councils,
and so on, and there is 26% which is economic waste and 10% 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%, 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.[8]
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%, 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 10%
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% co-financing
than 10% 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% 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.
8 See Ev 17 Back
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