Examination of Witness (Questions 200-240)
DR JOAN MOSS
19 JANUARY 2011
Witness: Dr Joan Moss,
Principal Agricultural Economist, Agri-Food and Biosciences Institute
(AFBI), and Senior Lecturer, Queen's University, Belfast, gave
evidence.
Q200 Chair:
Dr Moss, good afternoon. Thank you very much indeed for joining
us. You are most welcome. May I at the outset just ask you a
general question, about what the Commission is trying to achieve
in its reforms? You will remember that when the Common Agricultural
Policy was created, there was always an understanding that there
would be a fair standard of living and a sustainable income for
farmers, and that now is still in the Commission statement. What
the Commission is trying to do is to pursue these two things of
sustainable development in rural areas, but still maintaining
a fair standard of living for farmers. Do you think the Commission
is going to succeed in both greening up the CAP and ensuring farmers
a good standard of living going forward?
Dr Moss: Well certainly
in the original settingup of the CAP, the fair standard
of living for farmers was there as one of the objectives, but
starting with the MacSharry reforms of the early 1990s and then
the Fischler reforms, there was not such an emphasis on income
support. There was much more of a move towards the market ruling
and controlling the surpluses that had built up with the type
of supports there had been previously. So this reintroduction,
almost, of income support in the Commission's documentation is
losing the momentum that was there towards a more market-orientated
agriculture. I could understand if they were talking about having
price support measures in periods of market crisis, maybe for
income stabilisation, but the fact that income support is attracting
attention now is a definite change, in my opinion, in the way
that the CAP has been moving.
Q201 Chair:
Having noted that there is a change, do you think the Commission
will be able to achieve both aims?
Dr Moss: Well,
for so many of the small farmers, even with Single Farm Payments
and the returns from the market, which may in many cases be very
modest, they are unlikely to achieve a viable living wage or a
wage that would support the farm family and, as such, many of
the smaller farmers, particularly in the more remote or the upland
areas, already are turning to either on-farm diversification or,
more often, off-farm employment. It is not possible to deliver
every single farmer in Europe an acceptable standard of living
via the CAP.
Q202 George Eustice:
We have seen some of the slides you have done on the basic economic
modelling of different scenarios.[1]
I wondered firstly if you could say what your overall conclusion
is about which way to go in the light of that modelling. We see
lots of graphs, all of which look quite similar. Secondly, how
have you actually constructed the model that makes these projections?
What assumptions are in there? How much of it is based on actual
experience that is real from the recent past, or how much of it
is based on assumptions and guesstimates?
Dr Moss: The modelling
system has been built up over the last 13 years. It is econometrically
estimated; it is based on data. We started with one or two key
sectors, so we have built it up in terms of adding sectors to
it. The model is part of the FAPRI (Food and Agricultural Policy
Research Institute) European model; it is not free-standing in
that sense, so it solves at the European level so that the results
are consistent across Europe. It is not a model that we just
build and use and then occasionally just re-estimate; each year
it is re-estimated and recalibrated. That is done in very close
consultations with panels of industry people. This is one of
the key features of the whole FAPRI methodology, because no matter
how much information and data we have, we cannot possibly hope
to capture everything that is important that is going on in the
agricultural sector. That is why we have this opportunity to
recalibrate in consultation with industry. It is a very key factor.
Q203 George Eustice:
When you say that it is based on data, does it basically look
at what the impacts of previous CAP reforms have been? Is that
it, fundamentally?
Dr Moss: Yes, that
is all the data.
Q204 George Eustice:
What are the main drivers of it? What are the key criteria that
influence, for instance, what the price of milk might be if you
remove x amount of direct payment?
Dr Moss: Yes, it
is based on past experience; observable changes.
Q205 George Eustice:
And is it just European experience or does it look at other countries
like New Zealand, where they have taken more radical—
Dr Moss: No. We
concentrate at Queen's and AFBI on the UK element, which is the
four countries that make up the UK, and that is embedded within
the European model. I do not want to get too technical, but when
we do this baseline projection once a year, which is running forward
with what our model is saying for 10 years, that is linked in
with the FAPRI global model and we have a lot of macroeconomic
assumptions in there.
Q206 George Eustice:
And that makes use of other countries?
Dr Moss: So, for
example, if we are saying that there will be an increase in imports
into Europe, the global model has established that there is supply
out there that could come into Europe. So in that sense, we also
have assisted FAPRI with some European aspects of their work.
In fact, that is how we initially got involved in this collaborative
research with the University of Missouri. They were looking for
agricultural economists who spoke English that they could easily
work with, who had experience of the Common Agricultural Policy.
They were having difficulty getting their heads round the intricacies
of the Common Agricultural Policy, and that is when we first started
this collaborative research. Initially, it was just for Northern
Ireland, but in the last number of years it has been for all the
administrations and is funded by all the agricultural administrations.
Q207 George Eustice:
Right. And the second part of the question was about your basic
conclusions from the modelling.
Dr Moss: Yes, I
have turned to the last couple of slides that I have presented
on that. I apologise for providing so much information.
George Eustice: No, it
is always good to have more.
Dr Moss: But I
was asked for it; it came in as a request later on. What we modelled
was ostensibly option three, which is the most extreme version
of CAP reform proposals. The way we do our scenarios is that
we build them up. We started with the Health Check, then we had
assumptions; WTO Doha round compatible trade liberalisation assumptions.
Then at the beginning of the scenarios, we went full decoupling
across Europe and that is what I want to talk about in the conclusions.
Scenario four was further trade liberalisation, which would bring
agriculture to the position of the other sectors in the economy,
where it was not getting special protection; there were no sensitive
products. Then the last step was that plus phasing out the Single
Farm Payment. In our models, we assumed that funding would be
in Pillar 2, for agri-environmental measures.
Our conclusion was that the full trade liberalisation
was creating the big changes, even before there was the removal
of the Single Farm Payment. The big changes were to be found
in the beef and sheep sectors and to a certain extent in the dairy
sector; very little in the cereal sector, because already cereal
prices are very much in line with world prices. The dairy sector
was a little bit influenced, but the biggest impact was on the
beef and sheep meat sectors, where production would be down about
a quarter for the beef and just under 20% for the sheep meat;
a big reduction in production. That was a result of removing
the trade protection and the inflow of imports. I feel, having
had to talk on many occasions to the farming industry, your average
farmer is not as aware of the protection that is there with the
export subsidies and the import restrictions, but that is really
what is maintaining the prices in many cases for Europe. I think
there is this idea that we are becoming much more marketorientated,
and certainly that is the trajectory of recent CAP reform, but
that trade protection is still there and even if what had been
proposed in Doha had been accepted, there was still significant
protection. It is only when that existing protection is removed
that you start to see a big knock-on effect on the beef and sheep
meat sectors particularly.
Q208 Chair:
You referred to production going down. Are you actually saying
that farmers then are going out of business or could potentially
be forced out of business?
Dr Moss: That is
a very interesting question, because we would anticipate there
would be structural reform.
Q209 Chair:
Which is politely saying that there will be fewer farmers?
Dr Moss: No; not
if being an active farmer still secures Single Farm Payment.
In other industries where you have innovation, innovating entrepreneurs
will increase their production and will be able to have lower
costs because they are adopting new technology—this is a
very simplistic model—and this will ultimately drive down
prices. For those producers who have not adopted the new technology
and are on higher cost production systems, they either have to
adopt the new technology or they will be priced out of the market.
Agriculture is rather different in that, particularly because
of the unique position of land and the finite area of land, if
farm businesses are to grow and take advantage of economies of
scale or size in modern technology, they have to get the land
from somewhere else, either in terms of buying it or of taking
in land, letting land, or entering into new sorts of farming partnerships.
The farmers who are most likely not to innovate are probably
those smaller farms, and if we think Europe-wide rather than just
in the UK, there are a lot of these small family farms. And if
I could refer to work I have done at the micro-level looking at
farm businesses—work I have done with Dr Claire Jack from
AFBI and Dr Michael Wallace from University College Dublin—it
is totally rational in economic terms for these small farmers
not to sell their land.
Q210 Chair:
Are you talking specifically in this country?
Dr Moss: No, I
am talking at this stage just about work I have done on Ireland,
but the principle still holds that to exchange land for money
in the last decade would not have been a very rational thing to
do. Thinking in specifically UK terms, if the family's wealth
is embodied in the land, you have agricultural relief so it can
be handed on without the predation of inheritance tax, land has
not only maintained but increased its value despite the recession,
and the rational thing to do is to hold on to that, and perhaps
because there is a very small family farm income augmented with
off-farm employment. If by maintaining farming, albeit at a very
extensive level, you secure your Single Farm Payments on top of
that, then again that adds to the rationality of remaining in
farming. So as I said, unlike other sectors, there is a stickiness
there that I referred to in my notes; you do not get the rapid
structural change. Now that is not to say that structural change
is not occurring; of course it is occurring, but at a far slower
rate than you would get in other sectors. And if I could just
refer to when I lectured to students at Queen's on structural
adjustment issues, I used to point out to them, from a rural development
point of view, where social cohesion in these upland areas may
be a priority—and of course this is one of the objectives
of the CAP as well—that the one thing worse than having
lots of elderly small farmers would be having lots of young small
farmers who were having to get additional sources of income in
these areas. Sorry, that is rather a long answer.
Chair: No, that was very
helpful. Thank you.
Q211 Neil Parish:
Carrying on along the same lines really, on your scenario modelling,
how dependent are UK farmers on the current level of income support
in the direct farm payment? Does this vary between the sectors
of agriculture as to how much they are?
Dr Moss: Yes, very
much so. I know for England the Single Farm Payment is now in
trajectory to be area-based, but for the other parts of the United
Kingdom, there is still a strong historical element, and the main
direct payments, which were decoupled and became bundled up in
the Single Farm Payment, were attached to the beef and sheep meat
sectors. So where you have these farmers in these sectors, they
will usually have larger Single Farm Payments per hectare than
elsewhere. So there is a difference among the sectors in terms
of their reliance on the Single Farm Payment, and if you think
of our intensive livestock sectors—our poultry and pig meat
sectors—farmers in these sectors are not getting Single
Farm Payments at all.
Q212 Neil Parish:
Yes. And going back to what you were saying a while ago, there
is an argument that the Single Farm Payment does increase the
price of land and also increase the rental value of land. So
how do you square those circles?
Dr Moss: Well going
right back, I suppose, to the Second World War—in fact before
it; in the 1930s—any agricultural economist I think would
agree—they don't always agree on many things—that
support to agriculture ultimately ends up capitalised in land
values. Even where you have a tenancy arrangement and the payment
may be going to the tenant as the active farmer, the land owner
will obviously take that into account in the setting of the level
of the rent. So I think the issue at stake really is that the
Common Agricultural Policy in general and the Single Farm Payment
in particular are being asked to address a number of objectives,
and if you take just one of those objectives—any one of
them—you would say, "This is a very blunt instrument.
It is not addressing in an any way perfect or efficient manner."
It raises the question, of course, if you take the totality of
the objectives, it may be the least worst option if you have this
single instrument called the Single Farm Payment, but there is
definite conflict between going for market efficiency and having
something that is actually impeding structural adjustment.
Q213 Amber Rudd:
Does your analysis suggest that reducing the level of direct income
support could actually have an effect on EU food production?
Dr Moss: Yes, it
does show there would be a reduction, particularly in the beef
and sheep meat sectors; a significant reduction in production.
Q214 Amber Rudd:
So in those particular sectors?
Dr Moss: They are
particularly affected because it is the farmers in those sectors
who have most to lose.
Q215 Amber Rudd:
Your written evidence notes, "The level of production in
a globally competitive UK agriculture would not necessarily even
match current levels."
Dr Moss: That is
because, as I have already said, the structural adjustment that
for other sectors would lead to the least efficient producers
leaving the sector and taking advantage of new technology—you
could expect to have an increase in supply—does not necessarily
happen in the agricultural sector.
Q216 Neil Parish:
So should we target the money more towards the beef sector, then?
Dr Moss: I'm sure
the beef farmers would say, "Yes please." Sorry, that
was a flippant answer; I apologise.
Q217 Chair:
Is there not already a danger, though, that we are already larger
scale farmers than the rest of the European Union and that is
reflected often in the Commission proposals? From what you are
saying, are we drifting towards a situation where there are going
to be bigger and bigger units in this country through efficiencies?
Dr Moss: I work
with agricultural economists in America, and there is already
some incidence of large dairy units with many thousands of cows
or a large beef unit; I have observed these in the United States.
Apart from the local objections there may be to that sort of
a set up, it is difficult to see how, if we are talking about
global competitiveness, we can attain that so easily here in the
UK in these livestock sectors. I am reminded of a comment from
one of my American colleagues in relation to the role of international
American agribusiness in South America. He said, "If you
have cutting-edge technology, cheap land and cheap labour, it
doesn't matter which card game you are playing; you are probably
holding a winning hand." So I distinguish between global
competitiveness and EU competitiveness. If you stand back and
look at Europe, with its high land prices, with all the support
over the years capitalised in land values, expensive labour because
of the standard of living that we aspire to in Europe, and a farm
structure where there is this predominance of the family-run farm
and the reasons I have already given why they may not be operating
solely like businesses, it is hard to see how Europe will be the
bread basket for all the additional population that is projected
over the next 50 years. I might say that when people talk about
the 9 billion plus people, I think what is more important than
the actual number of people will be the purchasing power of those
people in the emerging economies. That will have a greater impact;
not just the fact that there are going to be more of us, but that
many more of us will have more money to spend on food. This is
my personal view. That is not to say that we cannot be competitive
in certain aspects of agriculture, but that I find it hard to
see how the great increase in food that will be required will
be produced by European farmers, certainly with the Common Agricultural
Policy that we have and are likely to continue to have.
Q218 Mrs Glindon:
So overall, on balance, from the consumer's perspective, would
reducing the level of the direct income support make food prices
lower?
Dr Moss: They may
make food prices lower, but I think from the consumer's point
of view, food security also becomes an issue. While I am not
for a moment suggesting that Europe should be self-sufficient
or should be increasing its level of self-sufficiency—in
fact, in the UK we have been reducing our level of self-sufficiency
latterly—strategically, food is very important. As a young
researcher, I worked in east Africa and I was exposed to economies
where purchasing food is paramount; either you have to be self-sufficient
in terms of producing it yourself, or you have to be able to secure
the income to purchase it. So from a consumer's point of view,
we have not had to think that way for many years here, but strategically,
I think it is important that Europe retains a significant degree
of self-sufficiency in food for strategic reasons. Very simply—again,
what I would have told my students—we can opt not to buy
a motor car, we can opt not to have fancy clothes or live in fancy
houses, but food is of absolute importance; imperative importance.
Even now, in parts of Europe and in parts of the
developing world, the current high food prices are causing political
agitation. I often used to tell my students, "If you hear
in the news that there is a riot in some country in some less
developed part of the world, nine times out of 10 it will be to
do with food prices." I think for consumers what is more
important than getting the cheapest possible food is knowing that
we have security of food. That does not mean I am arguing that
we should be producing physically as much food as we could, but
I think that is very important. I think also consumers are concerned
about the quality of their food, but at the same time I feel that
it can be used, this thing about the quality of food and the poor
quality of imported food, as an excuse to be keeping out imports.
Certainly many of the physical attributes of food can be checked
to make sure they do not have pesticide residues and things like
that in them.
Two areas are very difficult to address from the
consumer's point of view: one would be animal welfare. It is
very difficult to be assured; you cannot tell by the egg you are
eating or the meat you are eating whether or not an acceptable
level of animal welfare was observed. The other one goes to the
much broader issue of addressing climate change and whether or
not the rainforest has been cut down in order to produce the feed
that this animal was fed on. That is going way beyond my remit
here, but those are issues that will be of concern to consumers.
But undoubtedly, already we have seen quite an increase in food
prices over the last year in the UK, and that is reason for concern.
That is coming from global pressures; the global market. I do
not know if I have fully answered your question, but I think it
is not just price that is the issue for our consumers.
Q219 Mrs Glindon:
Do you think that would even continue over the next few years
by people seeing the economic squeeze, or do you think that will
change?
Dr Moss: Well there
is the economic squeeze and I know that if you ask people whether
they are concerned about price or quality of their food, everyone
says it is quality, but if they are observed—except for
the niche, which is usually associated with high-income, highly
educated people—people will go for cheaper food. I appreciate
that, but I think there is every indication that, as I mentioned
earlier, given the increasing population of the world, many of
them will have increasing purchasing power and a lot of the long-term
projections are for strong international food prices.
Q220 George Eustice:
You spoke just now about the strategic importance of a strong
farming industry, and the two ways you can safeguard your industry
are either through direct payments or some sort of subsidy, or
alternatively tariffs to try to protect it against international
competition. Which do you think is the biggest threat to farm
incomes? Is it trade liberalisation or is it the removal of subsidy
support?
Dr Moss: One is
hitting the pocket that the market revenue goes into and the other
is hitting the pocket that the direct payment goes into. They
are both important, but certainly our modelling results showed
that the significant reduction in beef and sheep meat supply and
prices will occur with full trade liberalisation. But I must
add that that is not a scenario that is likely to occur. I cannot
see Europe pursuing trade liberalisation to that extent.
Q221 George Eustice:
Right. That is quite interesting, because as part of the negotiations
of the Doha round, they have made some quite sweeping offers to
cut tariffs by 60%.
Dr Moss: You can
cut a lot off a tariff and it is still effective. The term that
is used is that there is a lot of water in the system, in that
if you have a very high tariff, you may cut it by what looks like
a very large amount, but it is still acting as a barrier and giving
protection. We do not know if the Doha round will be achieved,
but what was being negotiated under WTO Doha was our scenario
two, which did not have those very big impacts. But what we are
saying is if it is taken to the point where agriculture is treated
like any other sector, at that point the trade protection falling
would definitely have a big impact.
Q222 George Eustice:
Which do you think is the right way to safeguard
the farming industry in this country? Is it through maintaining
those tariffs or through subsidies?
Dr Moss: As an
agricultural economist, neither are attractive, for lots of reasons
in our basic training. Professor Swinbank behind me is laughing
at that comment.
Q223 George Eustice:
But if you accept that an industry like that has a strategic importance?
Dr Moss: Well I
think that probably a bit of both is required; I do not think
it can be one or the other, again because of the multiple objectives.
While there are social objectives tied in with economic cohesion
and keeping people in areas that otherwise they would be leaving
and there are local environmental objectives—as opposed
to climate change environmental objectives, which of course are
global—then I think there is a role for some measure of
direct payments being retained. My other answer is I do not think
we would get to the point—again because food is strategic—that
we would want to be in a position where we did not have a measure
of trade protection. I'm sorry if I have not given you a direct
answer.
George Eustice: No, it's
fine.
Q224 Thomas Docherty:
Just following up on George's question about protectionism, so
I understand correctly, you would suggest that it would be wrong
for us to abandon protectionism for farming within the EU?
Dr Moss: Well there
is a difference between abandoning it and reducing it.
Thomas Docherty: Right.
Dr Moss: Well,
we have looked previously as well at the Doha agreements; I would
not have any objection to that. But to end up treating agriculture
like any other commodity I think could threaten the strategic
importance of food and domestically supplied food, yes.
Q225 Thomas Docherty:
That's fine. Going back to the earlier remarks about modelling,
I do appreciate that you said, if I heard correctly, that you
had not done a great deal around cereals—
Dr Moss: Sorry,
I beg your pardon. We did the work, but it has very little impact;
that is why I have not produced it in the results.
Q226 Thomas Docherty:
Right, sorry. That is helpful. Correct me if I am wrong here,
but my understanding is that around about 2008, there was a bit
of a spike in the global wheat price and it is my understanding—again,
tell me if I have got this entirely wrong—that we are likely
to see a further spike in the relatively near future.
Dr Moss: Well we
already have strong cereal prices at the moment.
Q227 Thomas Docherty:
Right. If that continues, what impact would it have on the wheat
policy within the European Union if the world wheat prices do
continue to drive up?
Dr Moss: Well for
those cereal farmers of course, it is good news, because it is
augmenting their revenue. But because cereals in general are
also feed and as such are an input into the intensive and the
grazing livestock sectors, high cereal prices cut the margin—cut
the profit—for those farmers who are having to purchase
them to feed to their animals. By and large, European policy
has been more concerned when the prices have plummeted, rather
than when the prices have risen, and that is why in the past we
had intervention buying, where we have export subsidies to dispose
of surpluses on to the world market. It has not so much been
a case of what Europe will collectively do when there are very
high prices.
Q228 Barry Gardiner:
We are being bombarded from all sides, as you can imagine, on
this Committee. We have the Commission telling us they think
we should put more money perhaps into Pillar 1; we have Defra
saying that perhaps it might be better to put more money into
Pillar 2; we have the NFU telling us that, "Oh no, no, no;
we don't like this greening of Pillar 1." Now I wrote down
something that you said earlier on that I rather liked. You said,
"It is not possible to deliver to every single farmer in
Europe an acceptable standard of living through the CAP".
There would seem to me to be a great element of realism in that.
Given all the different views that we are being bombarded with,
what do you believe the function of the CAP should be, what do
you think is the correct balance between Pillar 1 and Pillar 2,
and should there be additional elements in either?
Dr Moss: Well,
I am sure you will appreciate that from the perspective of leading
a team that analyses agricultural policy, in order to retain our
credibility we have to remain impartial.
Q229 Barry Gardiner:
So you're not going to help me out here?
Dr Moss: I am not
using this as a scapegoat, but I have to start by saying that
we do not advocate specific policies, because obviously the next
time a raft of policies came round, we would be assumed to have
an inherent bias there. Policymakers, and ultimately yourselves
as parliamentarians, have an incredibly difficult task. As I alluded
to right at the beginning of my response, the CAP has a number
of competing objectives. Pillar 1 is the main CAP. We talk about
Pillar 1 and Pillar 2 as if they are equal in some way, but the
vast bulk of the funding is channelled through Pillar 1 and most
of that is via the Single Farm Payment, which is the bundling
together, certainly for us in the UK, of these decoupled direct
payments. That is a very blunt instrument to address these issues
of environmental protection, the social objectives of keeping
people in rural areas and at the same time delivering a marketfocused
agriculture that we hope will be as efficient as possible in the
production of food. I am not using this as an excuse for not
answering your question, but it is a very difficult question.
As I also said earlier, if you look at the income
support element of the CAP, most people think of income support
as a welfare issue. But if you use the Single Farm Payment for
income support reasons, the vast bulk of Single Farm Payments
are not going to recipients who by any stretch of the imagination
would qualify for welfare under our normal meaning of welfare
where you have these transfers from taxpayers to recipients of
welfare grants. So if it was to just be income support for those
in need, it is a very blunt instrument. That is one issue.
Q230 Barry Gardiner:
May I pursue you down that rabbit hole first perhaps and then
we will go through the other one? I recall that when the NFU
were giving evidence to the Committee they were very strong on
this issue of Pillar 1 being necessary. Now, they did not quite
put it in terms of social welfare for poor farmers, but what they
did say was that it was necessary to make up for the inequalities
in the playing field as they competed in a global market. Is
that something that you would agree with? Or perhaps you can
comment on that statement in the light of the actual purchasing
contractual relationships. Where does most of our food go? Does
it actually compete with that in the rest of the world or does
it not?
Dr Moss: Well European
agriculture, as I said earlier, is still protected a lot via our
import tariffs. As far as I am aware, most of our farmers are
not directly competing in the global market anyway. Most of what
is produced is consumed within Europe. I am not sure where the
evidence exists of these different costs; I know there is the
issue of very high compliance costs with various regulations.
Some of these regulations are there to protect society, and I
have heard it said, "Do you pay people not to break the law?"
There is one counter argument that could be used. All industries
are subject to environmental controls and certainly if we are
talking about, say, greenhouse gas emissions, which is something
my team has also been looking at, agriculture potentially has
an important role to play in the mitigation of greenhouse gas
emissions. The environmental protection or the animal welfare
protection, or whatever other regulations are put in place, are
there specifically to address the concerns of European consumers
and they go beyond what is being asked for elsewhere. This may
be justification for our trade protection, for example. That
is a way of protecting; it does not have to be through Single
Farm Payments.
Q231 Barry Gardiner:
Thank you; that is extremely helpful. Going back to trying less
to get you to state opinion rather than research, what does your
modelling show about the impact that would occur on farmers if
more was delivered through agri-environment schemes rather than
through direct payments?
Dr Moss: As it
stands at the moment, Portugal and the UK are the only two Member
States that took the option of additional modulation of Single
Farm Payments, so we have voluntary modulations apart from the
compulsory modulations. By and large that has been used with
matched funding for environmental measures. That is not just
taking Single Farm Payment out of one pocket and putting it into
another, because there are high compliance costs in environmental
management, which we have to take into account in our models.
Whereas the Single Farm Payment comes as the proverbial brown
envelope in the post, about 70% of money given to farmers for
environmental management, where there is actual work being undertaken,
will go in compliance costs. So in the production of the environmental
good, there are costs involved. But of course, if those costs
are paying for the labour on the farm as opposed to materials
that may be required, this is augmenting the income of the farm.
But I think we have to make that distinction.
Q232 Amber Rudd:
Could you expand on the concern that you expressed about the environmental
specification needing to be very carefully set out to avoid seeming
populist?
Dr Moss: Well because
of the heterogeneity of rural areas, what is an environmental
priority in one area may be very different from what it is in
another area, which may be very close at hand. So if we are talking
about, say, the protection of habitats or ecosystems, that has
to be very site specific and it is hard to see how that sort of
environmental protection or enhancement could be incorporated
within the general cross-compliance for Single Farm Payment, which
by its very nature has to be fairly broad brush.
I must start by saying that not being an environmental
scientist, I am speaking in a somewhat amateur way here, but where
what is being asked of the farmer is something very specific like
maintaining rare bird populations or something like that, obviously
that has to be done separately from Single Farm Payment. That
sort of measure is not possible. But where it is maintaining
the land in good agricultural standing, I think that is very important
in the long term. I know they say a week's a long time in politics
and the CAP looks at things for four or five-year cycles, but
that is still actually very short term when we are talking about
the strategic importance of food for the United Kingdom. We have
to be thinking not just decades ahead but much further ahead,
and as I have stated in my submission, maintaining the agricultural
land is very important. How intensively it is used at any one
time is not as important as making sure that we are retaining
our potential for food production in the future, because we are
facing a very uncertain future, not just in terms of climate—although
I have heard some argue that the UK as a whole may be advantaged
from climate change in terms of our production of food, although
we do not know what plant or animal diseases we may encounter—but
in terms of global political issues, population growth and various
instabilities in international politics. I think it is very important
that we are maintaining our agricultural land, and if that means
paying people to retain land that may otherwise not be kept in
agriculture, I believe that is a price worth paying. Just what
level that payment is is another matter, but it cannot be in terms
of guaranteeing satisfactory levels of income to people who, by
virtue of having relatively small farms, cannot hope to get all
their income from their farm holding.
Q233 Mrs Glindon:
Some of our witnesses have felt that the retention of voluntary
coupled payments in some sectors, which the Commission has suggested,
could distort the common market. Is this suggested in your analysis?
Dr Moss: Well,
we have worked on the assumption that where we are applying a
new policy scenario, it is applied uniformly across the EU of
27 Member States. Certainly, certain sectors historically had
more direct payments, so those sectors retain the decoupled payments.
Are you saying that if we move to area level payments, some sectors
will be affected more than others? Is that what you are saying?
That obviously would be the case, because England is already
of course in transition to area-based payments, which means that
farming sectors that previously had the highest historic payments
are net losers in that. If this is happening Europe-wide, I am
not sure I see where the distortion within the single market would
come.
Q234 Chair:
I think we have been told that it is happening in certain Member
States and perhaps not here.
Dr Moss: I couldn't
answer that, I am afraid. Certain Member States have not as yet
decoupled; that is true. If they were allowed to remain coupled,
obviously their farmers would be at an advantage. Just to follow
on from that, I said earlier that I think we have to distinguish
between global competitiveness and fairness in terms of a level
playing field within Europe, and I can see that one of the issues
is that, if significant chunks of the CAP were renationalised,
you could very easily see a situation where there would be an
uneven playing field, if I could just make that additional comment.
Q235 Mrs Glindon:
We have talked about the global market, but could I just ask what
measures you think the Commission could introduce that would enhance
agricultural competitiveness?
Dr Moss: Well,
speaking as an economist rather than in terms of the research
I do, the market is an effective mechanism for enhancing competiveness.
The workings of the market usually drive efficiency. Now that
is very much a first year economic textbook answer, I fear, but
generally, as an economist I would have to say that subsidising
a sector may impede competitiveness in the long run if it leads
to people not adopting new technologies and not responding to
new technologies as they become available, or remaining in production
where otherwise they would not. That is very much a textbook
answer, I fear, but I think that is how I am going to answer it.
Mrs Glindon: Did you say
that it could impede competitiveness?
Dr Moss: Yes.
Q236 Thomas Docherty:
If I understood correctly the evidence that you have given us
in writing, you are concerned that the Commissioner's intention
to end the historical basis of payments could have an adverse
impact on Wales, Scotland and Northern Ireland's structure. If
that is the case, could you very briefly—in view of the
time—just outline what measures could be used to try to
mitigate that impact, whether that be, for argument's sake, transition
periods or modifying the payment scheme?
Dr Moss: I have
to go back to your earlier assertion that I referred to the loss
of the historical payments, because from my dealings with the
devolved administrations I think that there is a recognition that
these area-based payments are coming. The devil will be in the
detail of how these monies will be distributed. At its simplest,
you could have every hectare of agricultural land in Europe all
getting the same direct payments. In my opinion, that is not
going to happen and there is very good reason why it should not
happen. You will want tiering to take account of low-quality
land, where it takes very much more of it to produce a certain
amount of agricultural production. I think you also would want
to take account of purchasing power in different countries; that
is also an issue.
But if we could park those concerns for a moment
and just look at the United Kingdom, taking the total amount of
Single Farm Payment and the area that is claimed for it in each
of the four countries and looking at it simply that way. If we
were just pooling all the Single Farm Payment in the UK and then
divvying it out per hectare, there would be big changes. For
example, Northern Ireland would lose about 30% because of the
preponderance of beef and sheep production. The simple per hectare
payment, if it was area-based for Northern Ireland, would be about
30% above the UK average. Scotland, because of its very extensive
farming systems, has a lower per hectare payment, so Scotland
would benefit. This isn't talking about EU-wide level payments,
but just within the UK.
There is a further issue with Scotland, which was
drawn to our attention by our Scottish funders, and that is that
there may be—and this is where the whole concept of active
farmer could be very thorny—up to 1.6 million hectares of
land in Scotland that could come into play with areabased
payments that currently are not registered for Single Farm Payment,
taking them from something like 4.4 million to 6 million hectares.
This is only an issue for Scotland; it was not drawn to our attention
that there were large areas of land in other parts of the UK that
could be brought into play. So I think it is widely accepted
that there will be a move to these area-based payments, if for
no other reason than it was very difficult to justify to taxpayers
the payment that is based on what you produced 10 years ago.
I think there is this recognition, but it will lead to significant
transfers of funding and that is why I think the negotiations
over how this area-based payment will be brought into play will
be very protracted and very contentious among Member States.
Just in the way that farmers do not want to lose their Single
Farm Payments, Member States or regions within Member States do
not want to lose what they currently have. I think they will
be very, very difficult negotiations.
Q237 Chair:
Returning to what you said about global competitiveness, could
some of the balance be restored if there were grants for innovation
or research and development?
Dr Moss: So much
of the new technology for agriculture involves GMOs, which is
pretty well a no-no for Europe, so I am just wondering which areas
of innovation you would be thinking of, Chair.
Q238 Chair:
I just wondered if you had any thoughts.
Dr Moss: It is
not an area that I would have expertise in.
Q239 Chair:
I was taken by your remarks where you mentioned we were becoming
less self-sufficient.
Dr Moss: Well,
that is just a factual statement.
Q240 Chair:
Does it worry you that we are importing more and exporting less
than we did, say, 10 or 20 years ago?
Dr Moss: As an
economist, not necessarily, other than that I think we do not
want to get to the position where we have such a low proportion
of self-sufficiency that it becomes a strategic threat. But I
do not see that. I am aware, because I have observed it elsewhere
in the world, for example in cereal production, there are very
large economies of scale and size associated with modern, cutting-edge
technology, and a lot of the farms in Europe just are not of a
scale to take advantage of that. We have all seen the photographs
of the 50 tractors side-by-side, all satellite controlled, whether
for planting or applying fertiliser. That is agribusiness. When
I think of European family farms and then I think of cutting-edge
agricultural technology, so much of the cutting-edge agricultural
technology is large-scale agribusiness, rather than family farms.
Chair: Thank you for being
so generous with your time. We apologise for both running over
and for the late start because our private business took us on,
but it has been a great pleasure to hear from you today. We hope
we can keep in contact in the future. Thank you very much indeed,
Dr Moss.
Dr Moss: Thank
you.
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