Examination of Witnesses (Questions 360
- 367)
WEDNESDAY 18 OCTOBER 2006
MR GEORGE
DUNN
Q360 Chairman: The reason I am being
very pragmatic in asking the question, we have now got 25 countries
in the European Union. We have got the new entrants on a simplified
area payment scheme. At the other extreme we have got the French
who have got a bit of decoupling and still some of the old system.
We have got us in the middle and we have the potential for quite
high levels of voluntary modulation. I am looking at the practicalities
of how you are going to gather up the finances that are involved
in all these different models because if I have understood it
correctly, the bond scheme would have to work universally throughout
the European Union. I am saying to myself, "How do we get
to a position . . . ?", and I think you basically said we
would have to get to a unified system of area payments before
we could start to do this, but then you are going to say to each
Member State, "You are going to have to fund this".
If I have understood it correctly, Member States are going to
have to roll up a series of forward entitlements into a financial
instrument that would then provide some form of income to farmers
of different categories, is that right?
Mr Dunn: Mrs Fischer Boel has
already said that she would like to see simplification for a flat
rate scheme across the whole of the Union. We are saying, "Why
not go the extra mile and completely decouple so rather than have
it as an area payment have it as a bond payment". It is not
a million miles away from a flat rate simplified system across
the whole of the EU. In terms of funding, once you have created
the bond the Member State concerned would not have to get involved
in buying the bond or providing the capital element for the bond,
they would continue to provide the annual payment in respect of
the share that was part of the bond scheme. If the person who
owned the bond or the share within the bond wanted to capitalise
that they would have to sell it in the marketplace, so the money
for the capitalisation would come from selling it within the marketplace
or those people who were able to buy or sell shares in the bond.
Q361 Chairman: It is a bit like the
gilt repo market where you are selling the stream of an interest
rate away from the capital which forms the basis of the gilt edged
security. Is that right?
Mr Dunn: Correct.
Q362 Chairman: All I can say from
my time in the Treasury is it was unbelievably complicated. You
think this is a genuinely deliverable and sellable concept with
the whole of the European Union? Have you tested it out?
Mr Dunn: Chairman, better minds
than I have thought about this for a long time. Indeed previous
and maybe even existing advisers to this Committee have thought
about it long and hard before. I think it does have the intellectual
rigour to stand.
Q363 Chairman: You happen to be the
person who has written about it in terms of our evidence so that
puts you in the hot seat as far as that is concerned. Do my colleagues
have any other further points they want to raise? I just wanted
to raise one small point going back to an issue which James Duddridge
raised with you. On the second page of your supplementary evidence
you say: "The TFA also believes that Member State Governments
of the European Union should be allowed and indeed required to
set food security standards for their own countries". What
do you mean by that?
Mr Dunn: I think I answered that
question earlier when I said our concern is that the Government's
document has no concern about food security within a reformed
CAP. I believe food security must be an element within the regulatory
framework and that Member States should be required—and
we need to have the debate about the constraints within which
Member States should be able to do this—to ensure that it
is looking long-term to its food security in developing policies
to ensure they can maintain their food security.
Q364 Chairman: I got that bit, it
was these "standards" implies some kind of prescriptive
list, some objective statement by which you could rate whether
you were food secure or not.
Mr Dunn: Our thinking on that
has not been developed to that extent. All we are saying is we
need to find a set of common standards within the Common Agricultural
Policy which would allow Member States of the Union to have regard
to their own food security long-term.
Q365 Chairman: For clarification
let me also go to page three of your supplementary evidence where
you say: "The EU 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". Can you
tease out, for the benefit of my understanding, exactly what that
means? What do we mean by relaxing state aid? For example, there
are some people who have observed that in countries like France,
Spain and Italy their governments have always funded the promotion
of their nation's foodstuffs in many ways, so you could argue
that is a state aid. It is a bit like having the old nationalised
marketing boards for whatever it was. Is that the world in which
you wish to direct to form the CAP?
Mr Dunn: Absolutely not. What
we were talking about in this regard was if you look at the Meat
and Livestock Commission, the Milk Development Council, the Home
Grown Cereals Authority and the others who are all now going to
be reformed into one new levy board, we understand, they are statutorily
required to levy primary producers so they can use that money
for developmental research and other requirements. That money
is not coming from the Member State, it is coming from those people
in the marketplace who are trading in livestock, trading in cereals
or whatever. When that money hits the coffers of the MLC, the
HGCA or whatever, it is treated under the state aid rules as if
it were public money, and therefore you are not allowed to use
that money freely in terms of supporting your own producers, in
terms of promoting products from Britain, which is why we have
`Beefy' and `Lamby'. We do not necessarily have British beef,
British lamb, we have `Beefy' and `Lamby' supporting British meat.
What we are saying is let us roll back the rules on that type
of money. Yes, it is collected by statute but this is industry
money which is being held.
Q366 Chairman: It is more flexibility
for farmers' money basically?
Mr Dunn: Correct.
Q367 Chairman: It is helpful to have
that. Thank you very much indeed. As always, you have given us
some very stimulating and challenging thoughts. I sense a little
bit of work in progress.
Mr Dunn: You are dead right.
Chairman: It is certainly very helpful
as far as our inquiry is concerned. Thank you very much indeed.
Again, our best wishes to Reg for a speedy recovery.
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