Further memorandum submitted by the Tenant
Farmers Association (CAP 23a)
INTRODUCTION
The Tenant Farmers Association has previously
submitted written evidence to the Select Committee by way of its
memorandum of 27 February 2006. The Association was invited to
provide an update on its current thinking prior to providing oral
evidence to the Committee on the 18 October 2006.
This supplementary evidence focuses primarily
on two aspects. Firstly, the TFA's view of, and aspirations for,
the Common Agricultural Policy in the medium to long term and
secondly, reflections on possible issues for consideration in
the forthcoming CAP Reform "Health Check" in 2008-09.
TFA VISION FOR
THE COMMON
AGRICULTURAL POLICY
INTO THE
LONG TERM
The TFA believes that the fundamental justification
for any agricultural policy which supports primary producers should
be to correct apparent market failures. In this respect the TFA
does not believe that the debate on agricultural policy can be
starkly defined on the basis of CAP or no CAP. The issues are
far more complex than that. The TFA believes, with all its failings
that the CAP is essentially attempting to address market failures.
The question ought to be how the CAP should change to adequately
address those failures rather than taking the UK Government's
line that the CAP should effectively be abolished because of its
inefficiencies.
The TFA believes that there are five principle
areas of market failure that any agricultural policy should seek
to address:
1. As economies grow and individuals become
more prosperous, they will tend to spend a diminishing proportion
of their disposable income on food. This means that those who
are responsible for producing food (ie farmers) will see a decreasing
proportion of national income spent on the products which they
make. This is why farmers as a group find it difficult to reap
the benefits of economic growth enjoyed by others in society.
2. The structure of food marketing, particularly
in the UK, has become such that producers face an unfair and wholly
unbalanced platform upon which to do business with processors
and retailers. For example, in the sugar sector there is one,
single, monopoly processor in the UK which, of late, has used
its monopoly position to the disadvantage of sugar growers throughout
the whole of England. In the milk sector, there are only a handful
of processors and a handful of large retailers purchasing milk
from those processors. Evidence produced by the Milk Development
Council shows that both processors and retailers have managed
to maintain or increase their margins over recent years while
producers have seen reductions in their margins. Across the whole
range of agricultural products, producers face a very small number
of large, retail outlets. This unbalanced structure leaves most
producers unable to pass increased costs of production up the
food chain. Whenever farmers are thrust with new regulations on
animal welfare, animal health, environmental issues or health
and safety matters, they are unable to reflect the costs of compliance
with those in the price that they obtain for their commodities
and this leads to the market place not fully recognising the benefits
to the nation of the new practices being employed by farmers and
growers.
3. The Market cannot deal effectively with
issues of long-term food security. The UK is already in a position
of only being able to satisfy 70% of its temperate food needs
from domestic sources. There is no indication from Government
as to when it would begin to get worried about the level of food
security nationally. The TFA is concerned that the current structure
of food marketing takes too much of a short-term approach to this
issue and feels that there needs to be a more adequate expression
of the Government policy towards food security in the long term.
4. It is inherently difficult for the market
to factor in increased animal welfare and environmental benefits
into the pricing structure for food. UK farmers, as noted above,
are facing a large degree of regulation in these areas and they
are unable to pass the costs of this up the food chain. Many farmers
are working hard to meet environmental and animal welfare standards
and yet they have to compete for retail space with producers from
elsewhere on the globe who do not necessarily have to meet those
standards.
5. Connected with the fourth point above,
there is a general lack of awareness amongst consumers about the
differences in quality of the products which they are purchasing
when comparing UK sourced and internationally sourced products.
Whilst they might see beef from Ireland, Brazil or Argentina as
beef with a different label, it is the case that products from
those countries are not perfect substitutes because they have
been grown under different conditions and different regulations.
More effort needs to be put into making sure that consumers are
aware of these differences when purchasing their food.
THE FORWARD
VISION
The TFA believes that given the issues outlined
above, support through price and income should remain a key feature
of the CAP for a long time to come. It will, however, need to
deal with some of the issues of inefficiency including the problem
of capitalisation of subsidy payments into land values. In this
respect the TFA has always preferred the idea of a bond scheme
to area payments as this ensures that the benefit of support goes
to the recipients and is not filtered away into other parts of
the system. The TFA believes that in any future reform proposals,
the concept of an agricultural bond scheme should be given prevalence.
The TFA also believes that the EU should set
down common rules for Member States concerning the appointment
of a food industry regulator to ensure that relationships between
producers, processors and retailers are fair and reasonable. The
regulator should be charged to ensure that no part of the chain
is making abnormal profits in comparison to other bits of the
chain.
The TFA also believes that Members State Governments
of the European Union should be allowed and indeed required to
set food security standards for their own countries. Common rules
should be drawn up as to how this should be implemented at Member
State level, but it should be a cornerstone of a renewed CAP.
The EU's rules on state aid should be relaxed
as to their impact on para-fiscal money, such as levy money, collected
by the likes of the Meat and Livestock Commission, Home Grown
Cereals Authority and Milk Development Council. Currently, these
bodies are restricted in how they can use levy payers' money so
as not to fall foul of EU State Aid Rules on domestic promotion
of domestic production. These rules should be relaxed to allow
producers through a statutory scheme, like the MLC levy, to market
their own produce to their consumers.
The EU should argue for globally recognised
standards for production of food on the basis of health, welfare
and environment. These should be the standards by which every
country should be required to produce and those standards need
to be audited at national level. Where countries are unable to
reach those globally agreed standards, then other nations should
have the ability to restrict trade from those nations. Once those
international standards have been achieved, if the EU or national
governments wish to apply higher standards domestically, then
producers should have access to direct funding from the state
to help them meet those higher standards.
CAP REFORM HEALTH
CHECK
There appear to be five issues under active
consideration in relation to the CAP reform health check to take
place in 2008-09. They are:
1. A possible ceiling of €300,000 on
direct support payments.
2. Tighter rules on voluntary modulation.
3. Abolition of dairy quotas.
4. Abolition of compulsory set aside.
5. Full decoupling of direct aids.
The TFA sets down its views on these issues
below:
CEILING ON
DIRECT PAYMENTS
This, of course, is not a new concept as it
did form part of the negotiations around the 2003 CAP reform package.
Having previously rejected the idea of a ceiling on payments,
the TFA believes that there is now merit in considering how such
a CAP could be applied taking into consideration the different
structure of farming in each of the 25 Member States of the Union.
The TFA would be minded to support a ceiling so long as it was
assured that any money saved by this process was filtered back
into the industry through other accessible means.
VOLUNTARY MODULATION
The TFA has always been concerned about the
ability of Member State Governments to set voluntary levels of
modulation. We are aware that the UK has been arguing for maximum
flexibility for Member States to use voluntary modulation. The
TFA's concerns about voluntary modulation are the lack of required
matched funding from the Member State wishing to use voluntary
modulation and the distortions that can be caused between Member
States operating different levels of voluntary modulation. We
are also aware that the UK has been arguing for the removal of
the €5,000 franchise below which modulation does not apply.
The TFA has concerns about this aspect too. The TFA believes that
rates of modulation should be set at an EU level and Member States
should only be able to derogate from those where it is giving
an assurance that matching funding will be provided from the Member
States exchequer.
ABOLITION OF
DAIRY QUOTAS
The TFA believes that there is merit in considering
the removal of dairy quotas with compensation for their capital
value. We would however wish to be assured that it would not leave
dairy producers exposed to unhealthy pressure from milk processors
and retailers who may wish to manipulate production to restructure
its production base. This is an area which we believe the regulator
would have authority to deal with.
ABOLITION OF
COMPULSORY SET
ASIDE
The TFA has always supported the abolition of
set aside particularly in the context of a single payment scheme.
The TFA does not see the logic of the Commission wishing to keep
its foot on the brake when it has already taken its foot off the
accelerator. It is no longer a useful supply management tool and
should, in our view, be abolished at the earliest possible opportunity.
FULL DECOUPLING
The TFA believes it is right to insist that
Member States fully decouple their direct aids in the way that
the UK has done. The TFA believes that a major weakness of the
2003 reform package was the ability for Member States to opt in
or opt out of various bits of decoupling and to delay decoupling
in their national interest. This is clearly causing distortions
across the EU and a move to full decoupling would be supported.
October 2006
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