Examination of Witnesses (Questions 368
- 379)
WEDNESDAY 18 OCTOBER 2006
DR HELEN
PHILLIPS, MR
DAVID YOUNG
AND MR
POUL CHRISTENSEN
Q368 Chairman: Natural England are
our final set of witnesses. Can I welcome Dr Helen Phillips, Chief
Executive Officer, Poul Christensen, the Deputy Chair who very
kindly looked after us when we came to the Royal Show and we looked
at your instant piece of meadow land and various other environmental
features which we enjoyed very much, thank you and Mr David Young,
the Executive Director of Strategy. I indicated to you that we
are under a time constraint because in 29 minutes the House will
vote. We will try and rattle through our questions as quickly
as possible. I do not know whether you want to make any kind of
opening statement, that might be a good way to do it. Dr Phillips,
would you like to start?
Dr Phillips: Thank you very much.
I suppose the first thing to say is that Natural England agrees
with the UK Vision document in as far as it goes and, in particular,
we support the critique of Pillar 1. Recent reforms have done
much to eliminate the damage caused to the environment by Pillar
1 but it is still producing relatively little benefit. Good agricultural
and environment condition in reality goes little above and beyond
the requirements of regulation. The Vision does not go far enough
in describing the mechanisms by which competitive market orientated
agriculture can be combined with the effective stewardship and
conservation of the natural environment. Where we disagree is
that the Vision assumes that the environment can be safeguarded
through a combination of free market, regulation and the current
very modest levels of expenditure on Pillar 2, and we are far
from convinced that that can work. We believe that there is a
requirement for the strengthening of Pillar 2 alongside the reduction
of Pillar 1 payments and that is to ensure that the environment
is protected whilst farmers adapt their farm enterprises. That
is going to require public support for a considerable period,
in our view beyond 2013. However, we do believe that it should
be possible to make some financial savings from the reform albeit
we have work to do to quantify what they would be. Our faith in
the effectiveness of Pillar 2 is based mainly on the proven track
record of both the agri-environment and forestry schemes which
have delivered a range of tangible benefits since their inception
in 1987. Characteristic landscapes have been protected, access
has been improved and with that the economic benefits that flow,
in particular from tourism and from recreation. Of course, it
is the intrinsic value of the natural environment that attracts
that economic activity. Agri-environment schemes are delivering
for both habitats and species. I know the RSPB in their evidence
cited to you the population increase of cirl bunting. I would
add to that: bringing stone curlew back to central southern England
from the brink; contributing to 69% of SSSIs now being in favourable
condition; slowing, and in some cases reversing, the 30% decline
in butterflies on farmland. We believe a progressive shift from
Pillar 1 to Pillar 2 is in the interests of all Member States
but we recognise that not all countries need, or, indeed, are
in a position to make the journey at the same rate. Voluntary
modulation is going to be a vital tool to allow Member States
to make the same journey at different speeds. If it is not available
then, of course, the effectiveness of the next rural development
programme in England will be seriously compromised. We recognise
that the impact of Pillar 1 payments has varied across Europe
and in some areas they have helped maintain and improve the environment,
particularly where we have small scale and traditional farming
but even in these areas, Pillar 1 cannot safeguard against future
change. Voluntary modulation is going to be a vital tool in the
short to medium term but we hope can decline in importance as
other Member States agree to the higher rates of compulsory modulation
that Commissioner Fischer Boel said she favoured in her evidence
to you on Monday. There may also be a role for Pillar 2 in helping
to support the structural adjustments that farmers and land managers
will need to make to comply with the suite of new environmental
obligations and we would suggest that might be a legitimate focus
for payments under Axis 1 and Axis 3 of the rural development
programme. In summary, our view is that the long term direction
of CAP reform, as discussed by Commissioner Fischer Boel, to increase
compulsory modulation should be more strongly supported than is
the case in the current UK Vision document and in the shorter
term, that we ensure the resources are sufficient and available
under Pillar 2 to fund the full range of public benefits envisaged
by the rural development programme which we estimate to be in
the region of £500 to £700 million per annum
by 2013. We would encourage you to be both supporting and advocating
voluntary modulation as a flexible tool for all nations in Europe
to adapt to new and emerging challenges on the industry, what
we would describe as one journey, several speeds.
Q369 Chairman: You put a lot of emphasis
on resources. I suppose you must think it is a bit sad really,
you have just come into existence and had £12 million knocked
off your budget from those nice people in the Treasury who you
think have got a proper vision as far as the future of the CAP
is concerned. Have you taken a cockshy yourself at responding
to the question I have asked everybody, what do you think the
purpose of the CAP should now be? What do you think it should
be?
Mr Young: I think building on
what Dr Phillips has said, we see really that the long-term evolution
of the Common Agricultural Policy needs to be towards a funding
of public benefits.
Chairman: It looks like the vote has
come a little earlier. We will try and come back in 10 minutes.
The Committee suspended from 5.07 pm to
5.23 pm for a division in the House
Q370 Chairman: Mr Young, I hope your
mid sentence point can now be resumed.
Dr Phillips: Just before we go
to that, if I may, you asked about our view of the purpose and
future direction of CAP which David was just about to respond
to, I have just twigged that you referred to those nice people
down at the Treasury, just for the record, so we are absolutely
clear, we are very supportive of parts of the UK Vision, namely
the critique of Pillar 1. Much less so in the not going far enough
to grow Pillar 2 and provide a basis for looking after the environment
at the same time as helping restructure. There we part company
with those nice people down at the Treasury.
Q371 Chairman: That is all right.
I usually say at the end of each evidence session that you cannot
undo that which you have said but if you wish to add, you can,
so you have managed to cheat me out of my little end bit so thank
you for that clarification.
Mr Young: Thank you. I will start
from the top. Basically, we think the purpose of CAP should be
to ensure that European taxpayers' funds are used for public benefits,
including environmental benefits, and in particular that farmers
and land managers are incentivised to deliver the wide range of
environmental goods and services that they are starting to do
across Europe through agri-environment schemes. In the long-term
we think that the CAP reform should progress to essentially establish
a sustainable land use funding stream and how that is connected
to land or to the farming or the land based enterprise is perhaps
to be determined but we have some ideas on that. We think that
there is a need for both a vision but also a pathway because there
are significant changes that are ahead for the agricultural sector
and land management in general. As has been given as evidence
by others, farmers are increasingly having to compete on global
markets and when combined with the pressures of climate change,
we think there is a need for a Common Agricultural Policy to provide
a level of investment certainty to underpin both the structural
adjustment necessary for the agricultural sector but also to provide
the certainty of outcomes for the environment which we might note
at the moment are only rented rather than secured for the long-term.
We think that in practice to do that, as we have articulated,
there is a need for the progressive move of funding from Pillar
1 to Pillar 2 as outlined in the vision but that we should pursue
the line Commissioner Fischer Boel indicated which was to expand
the compulsory modulation substantially with ultimately perhaps
the complete reform of the Common Agricultural Policy just to
be centred around a revised Pillar 2.
Q372 Chairman: Can I stop you there
and say what you seem to be describing is the evolution of not
a Common Agricultural Policy, but a common environmental policy.
Mr Young: A common sustainable
land use policy because I did draw the earlier distinction that
we recognise the need for significant structural adjustment in
the way that the agricultural sector operates and we are not sitting
here only saying that this is all about the environment. We recognise
the context in which the natural environment is protected and
the role that farmers and land managers play today and will continue
to play in the future in delivering those environmental goods
and services. It is a vision that sees land managers and farmers
as part of that delivering a suite of environmental goods and
services as well as the products of agriculture.
Q373 Chairman: One of the issues
about environmental goods which has been raised is that those
who are outwith of the European Union but seek to supply agricultural
products to the Union, and this is a general statement, do not
adhere to the same kinds of high standards environmentally that
we do. It is a very interesting issue because it is an issue which
I suppose treads on to the question of protection of Europe's
markets to enable the model you have described to be sustained
but, on the other hand, that gets into the difficult areas in
the WTO where to date they have found it very difficult to take
into account things like environmental protection and high animal
welfare standards which do not easily lend themselves to quantifiable
discussion. Have you given thought to that external dimension
in the context of the future role of the CAP?
Mr Young: Yes, the risk of reform
which simply exports environmental degradation beyond the boundaries
of Europe is something that we are very alive to and, in fact,
our whole proposition around a significantly expanded and, indeed,
redesigned Pillar 2 centres on achieving competitive agriculture
in Europe whilst at the same time providing those environmental
safeguards. It would be our assertion, and we think many in the
farming sector's assertion as well, that competitive agriculture
and sustainable practices are not mutually exclusive.
Q374 Chairman: I do not want to put
words in your mouth but is it a necessity for an element of sustainability
to become part of the operation of the WTO, for example?
Mr Young: I do not think we would
have a position on it except to say that currently we are very
aware that World Trade Organisation's rules do not permit that
and world trade law would not sustain arguments around that, in
fact, cases have been brought against countries that have done
that.
Q375 Chairman: You talked in general
terms about the objectives of the revised policy and you specifically
said that the budget for Pillar 2 should be enlarged over time
to between £500 and £700 million a year, by 2013 was
the figure that you put down. That implies that you have done
some kind of modelling to suggest how you get to £500 to
£700 million as being the right numbers and you equally will
have decided what we would get for this expenditure. Could you
expand a bit upon that and help us to understand, is that what
you think should happen within the United Kingdom by the adoption
unilaterally of an aggressive modulation approach or is it something
which you feel should be the general direction of travel within
the European Union?
Dr Phillips: If I can start at
the first bit of that, our commitments to existing agri-environment
agreements for 2007-08 are roughly £347 million from recollection.
Obviously it is important that we have an estimate of what the
requirement in the longer term is and that figure I have given
you of between £500 and £700 million is just that, an
estimate. There is a lot more work to be done to narrow that down
and refine it. It covers the delivery of all the basic requirements
in terms of biodiversity and natural resource protection that
is outlined in the consultation document on the rural development
programme for England. More worryingly, in terms of our estimate,
it does not cover delivery of the additional Biodiversity Action
Plan targets currently under discussion with Defra, nor indeed
an element of what I would describe as climate change proofing
of some of that biodiversity delivery. On the one hand you could
say it is a pretty wide estimate, on the other hand you could
say there are things that you could reasonably be looking to Pillar
2 of CAP to deliver that are not included in it. We have given
it to you as a necessarily wide estimate, it does need refining.
I think it also ignores the fact, and a point that was made earlier
in the NFU's evidence, that Pillar 1, in effect, provides a lot
of the infrastructure on which some of the benefits that we get
through Pillar 2 are delivered. That additional requirement would
really need to be added to that figure and we have not got the
confidence to give you precisely what the magnitude would be other
than to say that we anticipate that there would be reform dividend
in that it would be less than the total of about £2 billion
per year going into CAP.
Q376 Chairman: The reason I am probing
that is we have got the short-term agenda of what happens in the
period up to 2013 when a substantial change could come about and
thereafter, or in the run up to 2013, how the policy should be
developed that would be applicable throughout Europe to achieve
some of the objectives which you have described in the United
Kingdom context. One of the issues that has to be addressed is
re-nationalisation of the CAP and most of our continental interlocutors
do not like the idea of re-nationalisation. I suppose in terms
of the 20% modulation proposal which our Government has put forward,
that represents a fairly extreme form of what the current policy
allows, or that is what they would like to have but that is met
with certain resistance from our continental counterparts. How
much do you see the problem in terms of developing the Pillar
2 and the agri-environment schemes, taking into account that there
does not appear to be in the discussion about reform any move
away from historic keys as determinants as to how much Pillar
2 money would come to us. The Commissioner in Helsinki last week
made it very clear that she had no intention of advocating a change
in the basis of Pillar 2 funding from European Union sources so
by definition that means a deficit that has got to be met from
national funding. Have you given thought as to this sort of deficit
argument and how it might be met if that is the direction of travel
of reform of the CAP?
Dr Phillips: You referred to our
financial circumstances in your opening remarks and clearly the
greatest uncertainty around that is the practical implications
of the December 2005 CAP budgeting where there is still toing
and froing between the Parliament and the Commission on the voluntary
modulation regulation. We have yet to get a clear line of sight
on the rate that the UK Government will apply and indeed the level
of co-financing that will go alongside that. When you put that
together with the uncertainties around voluntary modulation will
the same level apply across regional and devolved administrations
together with a requirement to spread the proceeds across the
three axes and the complexity around the franchise, it becomes
rather an uncertain picture. Within those uncertainties it really
brings us back to some of the central planks of our opening statement
to you about us needing to have that flexibility which voluntary
modulation provides so that we do not have to step back from a
European vision about CAP. That is where the biggest gaps in the
UK Vision come because it is so much a UK vision rather than something
we can be legitimately and hopefully expect European partners
to buy into. I think it is going to require the amendment and
refinement and perhaps some sophistication around those arguments
about if it is not voluntary modulation, what is the mechanism
where we can get that convergence towards a single vision but
recognising that not only the environmental elements of the rural
development programmes but the social and economic ones will require
that degree of flexibility.
Q377 Chairman: Just out of interest,
we have got various measures of environmental degradation in this
country and in sustainability targets which the Government has,
an indication of some of the ways they would like to repair that
situation. As an organisation, have you done any work to compare
the relative state of the agri-environment, if I can put it this
way, between ourselves and other "agricultural" members
of the European Union. Are we better, worse or whatever. What
is the overall position?
Mr Young: I think we are safe
in saying in many cases worse. The impact of the previous coupled
agricultural support payments pre-reform had devastating impacts.
Just to give you some statistics, since the 1930's, 97% of species-rich
lowland grasslands have been lost, lowland heaths have suffered
82% loss of area from the 1800s to the 1980s with more than a
40% loss since the start of the Second World War.
Q378 Chairman: That is in the United
Kingdom?
Mr Young: Yes, that is right.
We have transformed our landscapes in Britain, and in England
in particular, on a very vast scale. In other parts of Europe,
for example, the Spanish were able to put a very significant physical
area of Spain into the Habitat's Directive largely because they
have semi-natural environments on a very large scale which are
being farmed or used in low intensity low impact ways. I cannot
sit here and confidently say we have got empirical evidence giving
exact comparisons but certainly we know the degradation that has
occurred in the UK and we see less problems in some of the countries
of Europe.
Chairman: The reason I asked that question
as to whether you thought it might affect the climate of discussion
is because whilst there has been a lot of talk about movement
of resources from Pillar 1 to Pillar 2, if you have already got
quite a lot of environmental goods, you might be less attracted
to put more resource into that particular route than if you have
a big repair job to do on the natural environment. That is enough
observation from me, Madeline?
Q379 Mrs Moon: I am going to simplify
my questions, if I may, because time is going on. You have talked
a lot about what your vision of the CAP is. Dr Phillips, I wonder
if I could take you back to your introductory remarks and also
the written comments you made in terms of the need to look at
the negative impact of division and one of the things that is
of concern is that we have had areas of high nature value, cultural
landscapes you referred to, we have had grazing in areas in the
UK that might otherwise not have been brought into use thanks
to funding from Pillar 1. One of the issues that the Commissioner
raised with us was an issue of concern about land abandonment.
Do you see land abandonment as being a consequence of the Vision
document and if you do, where do you think it will impact both
in the EU and in the UK? Where can you see that happening?
Mr Young: I think we see a significant
difference between the UK and Europe. I think in Europe it is
a real possibility. The uncoupling of the Pillar 1 payments from
production subsidy has created a somewhat unstable environment
where it is unquestionable that some of the agricultural industries
in Europe are not trading economically and there is going to be
substantial change facing them going forward and that may lead
to land abandonment. It is also why we believe our vision for
an expanded and redesigned Pillar 2 is essential at a European
scale because it will be necessary to have such an instrument
to prevent that land abandonment in Europe. In the UK we do not
think that is going to be such a significant problem and particularly
not in England. There will be changes in patterns of land use
but not abandonment.
Mr Christensen: Can I add to that,
if I may. I am speaking as a tenant dairy farmer in Oxfordshire
so very much at the sharp end, and a lot of George's comments
resonated very much with me. In terms of abandonment, if you go
back to the 1920s and look at the pattern of what happened then
in the previous real Depression, it was also a period of great
opportunity for a lot of farmers. A lot of the farming dynasties
that we see today were formed at that time of opportunity because
people went out and started from scratch so there is an element
of potential abandonment which other people see as an opportunity.
To answer your question more directly, where would it happen,
it would happen on the land of the lowest natural inherent fertility
so the South Downs, some of the Brecklands, you go up into the
hills and we have seen the stone walls go up and down the hills
over the centuries and at the moment they will be coming back
down again very fast, that is where it would happen. We would
lose, particularly on the Downlands, some of our most treasured
and valuable habitats where there is a multitude of diversity.
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