Examination of Witness (Questions 327-352)
BRIAN PACK
26 JANUARY 2011
[This evidence was taken by video conference]
Chair: As you probably
know, Brian, we're meeting in public here and, obviously, the
evidence you're giving us will be on the record. We're most grateful
to you for joining us. Just for the record, would you like to
say who you are and your official title?
Brian Pack: Brian
Pack, Chairman of the inquiry into Future Support for Agriculture
in Scotland.
Q327 Chair:
Excellent. Just as a lead-off, Brian, how closely involved have
you been with Defra in the negotiating process and how closely
involved do you think the Scottish Government have been with the
negotiating process?
Brian Pack: Well,
clearly, I haven't been involved in the negotiating process.
I've been involved in collecting evidence, which Defra has been
helpful in. I had two separate meetings with them to actually
gather evidence. As part of that process, I was in Europe twice
also, and then analysing records and the state of the industry
in Scotland. So, that's been the involvement with Defra, so it's
discussing with them the current scheme and what the issues for
Scotland are.
Q328 Chair:
In your inquiry, Brian, you say that you're unashamedly pro-farming.
Would you say that the Commission proposals are equally pro-farming?
Brian Pack: I would
say yes, definitely. I got a lot of comfort when the Commission
document came out in November that they recognised that food production
was the primary purpose of agriculture, and that's a view that
I very much share.
Q329 Chair:
And in terms of the Commissioner speaking of legitimising the
CAP in order to defend the budget that is spent on the CAP, do
you agree with the Commission that that's necessary to do so?
Brian Pack: I missed
the first bit of your question.
Q330 Chair:
Do you think that the Commission needs to legitimise the Common
Agricultural Policy to justify the amount it's spending on the
CAP?
Brian Pack: Yes.
I have to say I got to the same conclusion as the inquiry progressed
that I think, clearly, there's a need to support agriculture in
its role as food production, but equally society needs more in
return from agriculture, and I think that we have a win-win situation
because there are things that agriculture can deliver for wider
society, but agriculture itself needs support to be viable. Therefore,
if you can move for more outcomes from that support, then you
can actually have a win-win. I think my concern is that, particularly
in Scotland, agriculture is not viable without public support,
and that's demonstrated by our income figures, where, in most
years, agricultural support is greater than the total income from
farming, so the industry needs the support but, in return, society
needs agriculture to deliver more. I think, in common with the
Commission, the challenge has been: how do you look for more outcomes
from direct payments? That was the challenge I found. That's
where the top-up fund—it's in the report—fits in,
which, in some way, corresponds with the Commission's greening
of direct payments.
Q331 Mrs Glindon:
Could I ask: which of the Commission's three options do you think
is the most appropriate and politically achievable?
Brian Pack: I think
the most appropriate is the second option. I think the first
option doesn't take us anywhere, and the third option, I think,
would be a disaster for Europe and particularly Scotland. So,
I think option two is the one where the energy has to go, because
that takes us forward, whilst, at the same time, ensuring that
we maintain agricultural production.
Q332 George Eustice:
Defra has said that the single farm payment makes farms less competitive,
and Caroline Spelman has recently stated this again at the Oxford
Farming Conference. Do you agree with that? That, actually,
in the long term, while you continue to make these farm payments,
you're not going to get improvements in competitiveness while
that support remains?
Brian Pack: I believe
we have to be very careful with the word "competitive",
because we can mean such a wide range. What do we actually mean?
Do we mean competitive on the world stage? If you're in that
environment, then natural advantage plays an enormous role. With
our situation, particularly in Scotland, with 85% of Scotland
being Less Favoured Area, it's impossible to believe that that
could be competitive with some of the really productive parts
of the world, which also have other advantages.
In terms of our own market, then clearly there's
competition within Europe, and that's why a Common Agricultural
Policy is so important, so that we're actually competing on a
level playing field. And obviously, coming back to Britain, there's
clear competition between farmers in Britain, but once again we
have to bear in mind the particularly disadvantaged areas that,
in a strict sense, will never actually be competitive food producers
with the best in the world. So, if we actually believe that unfettered
competition is the solution, I believe that Europe will have a
major issue in food security in the coming decades.
Q333 George Eustice:
You're obviously a clear supporter of maintaining direct payments—that
was clear from your report as well—but what do you think
would be a sensible thing to replace the single farm payment,
if anything? Because obviously there's this problem that the
only thing we base that on is the historical reference point of
the subsidies those farms used to receive. Should we replace
that with something different; a different set of criteria?
Brian Pack: I think
that the current situation, particularly in Scotland, becomes
less defendable by the day, because we're now working out 10 years
back for a dynamic industry that has moved a long way in that
10 years. So, I think the historic base payment from a 10-years-ago
reference period is not defendable and, therefore, we have to
look at what else we can do, and that was obviously part of the
work I did, to try to recommend a future system.
What became very clear is a simple area-based payment
does not work for the poorer areas of Scotland. When you move
into the less favoured areas in particular, they're rough grazing.
Some 65% of Scotland is rough grazing. When you actually think
you might convert that to an area-based payment, you have enormous
variations in the production from that land, so a simple area-based
payment would, I believe, be unproductive in terms of what outcome
it could achieve. So, I looked at Scotland and divided it into
two areas: one with the non-LFAs, which is comparable with the
majority of England, where choice is available to producers, where
the market should drive the outcome, and area payments fits this.
And equally to your situation in England, area payments would
be right for that area. But I felt the area payments should also
have a slightly more outcome-focused element to them, and that
is what I call the top-up fund, which would actually be designed
to produce a more sustainable agriculture. I think, moving forward,
it's not just production, but it's sustainable production we need
to achieve if we are to have a future in terms of food security,
and also for Scottish agriculture. So, that would be the non-LFA.
In terms of the LFA, I saw support being divided
into three parts, which, in some way, were very similar to what
the Commission are suggesting in their second option. The first
is a very low basic payment, which would be an area payment; the
second element of it would actually be coupled support, with a
calf and a lamb scheme, to ensure that we don't get abandoned
land, which is already starting in Scotland. We've lost large
numbers of suckler cows and ewes, and that's led to parts of the
West Highlands in particular being abandoned, which is clearly
not what anybody would want. And the third element—quite
a substantial element—is a top-up fund based on standard
labour requirements. Standard labour requirements, I believe,
are a much better guide to what these businesses can contribute
to a more sustainable agriculture. Area, because of the wide
range of land capability and production in the range, would not
be a good guide to what a business could contribute, but I believe
standard labour requirements would be.
Q334 George Eustice:
Just picking up on that, with hindsight do you think it was a
mistake to fully decouple subsidies from production?
Brian Pack: I do.
I think it went too far. Because we introduced a historic-based
payment, then we almost protected the industry, but since that
time we've seen quite a change. I believe that, particularly
for Scotland and parts of England, I would guess, ruminants are
very important. The only way we can convert 65% of our landmass
into food is via ruminants, and I think we're all aware of the
difficulties of running profitable suckler cows in particular.
Ewes have changed in the last couple of years, but we had a massive
reduction in ewe numbers in Scotland, due to the lack of profitability.
I think one of my, I guess, concerns is that, if you have totally
decoupled payments, and suckler cows actually need support to
be there, then they will disappear, and I think that would be
quite wrong for Scotland in particular, and right across Europe.
The same pattern is being repeated in various areas of Europe,
so I think it will be really important to find an ability to have
a level of coupled payments in the future.
Q335 Neil Parish:
Your inquiry set out a future system of support for Scotland in
particular, and how confident are you that Scotland's voice will
be heard among the 27 Member states? Because you have to take
in your regional objectives, and you've been talking about coupled
payments: are you confident you can carry on enough coupled payments
for the sheep and suckler cow sector?
Brian Pack: Well,
I would like to hope, in particular, that the UK identifies the
issues for some of the devolved regions of the UK, where it's,
I would suggest, much more important. I'm clearly no expert on
the English situation and wouldn't try to portray to be, but I
understand the different pressures in the different areas. But
I felt that, since I first went to Brussels back in the autumn
of 2009, to spring of 2010, and now the production of the Commission's
report, I would say coupled payments are receiving a much more
favourable treatment, and I think there's a realisation across
Europe that coupled payments will be important.
Q336 Neil Parish:
One of the arguments against coupled payments is that, if you've
got coupled payments in one Member state and not another, you
distort the market. What is your view on that?
Brian Pack: I think
that, as long as the opportunity is there for a Member state to
use coupled payments, if they see that as important to their industry
and their economy, then that to me must be the basis for a decision.
In our situation the suggestion is that we have coupled payments
with our LFA. As outlined before, our LFA production could never
be competitive with some of the better areas, and particularly
the length of our winter. So, our proposal is that we need coupled
payments to balance the playing field.
Q337 Neil Parish:
Can I ask you: at the moment, what percentage of your payments
in total is made to suckler cow producers and sheep producers?
What percentage of your overall CAP payments is actually coupled,
then?
Brian Pack: Just
over 4% of the Scottish ceiling is coupled payments. It's very
small at the moment.
Q338 Neil Parish:
And you'd be looking to try to increase that, would you?
Brian Pack: Indeed.
I think, to be effective, there needs to be more than that.
The proposal in the report is more than double; about treble the
existing payments. So, under the current rules, but of course
we've all the new regulation to come, we would require Europe
to either up the bar or we would be dependent on the UK ceiling
to allow Scotland to have their level of coupled payments where
the report believes it's necessary.
Q339 Neil Parish:
While I agree with you that some coupled payments—I have
a West Country constituency, so Exmoor, Dartmoor and Bodmin moor
would probably help with some direct coupled payments—I
think one of the arguments about coupling it completely is that,
sometimes, in the previous policies, we had too much production
and over-stocking.
Brian Pack: Yes.
Clearly, it's a danger, and I think, mentally, we are all attuned
to the fact that that's exactly what happened previously, where
we had very high levels of suckler cow premiums in Scotland, and
very high ewe payments, and neither actually had to be productive,
which gave us the first problem. But my view is that you would
not keep a suckler cow for €140 a year - about the proposed
payment per calf; you wouldn't keep an extra cow because you got
€140. We must remember, when we distorted the numbers, the
payments were well over €400 a cow, so I think it's all about
the amount of money, and we must never get back to the fact that
an animal is kept for the subsidy.
I was at pains to point out in the report: the important
bit about coupled payments is to help the enterprise to be profitable,
but you must still have the drive within the enterprise to be
as profitable as possible, and actually produce the animal. The
recommendation is it's only paid for the calf or the lamb, so
an abandoned cow or abandoned ewe would not collect money, and
I think that is vital. Also, it's a fixed pot of money, so the
number of calves born gets divided into the pot, rather than,
if we do see an increase, then the budget just keeps going up,
which is where we were before, and I think that that was quite
wrong.
Q340 George Eustice:
I wanted to pick up on another area of your report, which related
to paying more to more active farmers, which has had some criticism
from some of the environmental groups, who say that you're in
danger of rewarding old-style, more intensive agriculture. Do
you think there's a tension there between what you suggested and
what the Commission say, which is that subsidies and direct payments
should be more about income support rather than encouraging intensive
agriculture?
Brian Pack: When
I say that we should encourage active agriculture, the area of
Scotland that will produce the most food is obviously a non-LFA,
and the recommendation there is for an area payment, so I see
no reason why that would lead to more intensive agriculture.
Where I see much more a link to activity is in our LFAs, where
we have massive challenges, but again I've suggested that we need
a minimum level of activity, but the minimum level recommended
is 0.12 livestock units per hectare, which equates to about one
ewe per hectare. If you're only at half the 0.12 per hectare,
then it actually halves the area rather than the situation being
that you fall out, so I don't see that as being an incentive for
more intensive agriculture.
And I also believe that approved environmental schemes
must qualify for the payments. We must ensure that we don't destroy
the habitats and better areas—non-productive areas—that
were generated for environmental reasons, and I believe they must
still receive payment. I'm sure that there's nothing in the recommendations
I made that would actually generate a much more intensive agriculture.
Q341 George Eustice:
Okay. And you said that these more active farmers face the greatest
challenges in delivering sustainable growth. Could you explain
what you mean? Are you saying that because they're in less favoured
areas and, therefore, they have lower incomes? Is that the point
you were making?
Brian Pack: Sorry,
could I hear that again?
George Eustice: I think
you said that more active farmers face the greatest challenges
in delivering sustainable growth. Why do you think that they
face a greater challenge than other farmers?
Brian Pack: I think
they're clearly the ones who use more inputs and, therefore, immediately
the whole water and energy challenge is there. The climate-change
challenge is also there, because I was at pains, I guess, in the
report to define what I meant by more sustainable agriculture,
so, if you'll forgive me, I'll read this particular bit, and that
is: "It's an agricultural sector that is innovative and competitive,
and has food production as its primary purpose, but also delivers
a range of other benefits, which help to meet the global challenges
of food security, climate change, water, energy supply and biodiversity."
So, to me, businesses producing the most food face the larger
challenges in meeting the global challenges, and they need to
do that. If they move from where they are down the path of being
more sustainable, then they deliver much more to society and,
therefore, the additional payments are justified.
Q342 George Eustice:
I think, in your report, you say that the direct payments are
almost a form of compensation for the fact that we've got higher
standards of animal welfare and higher food-production standards
in Europe. Some would say that the correct way to compensate
for that is through trade tariffs, which already exist against
those third-world countries that have lower standards. What would
you say to those critics?
Brian Pack: I think,
in the interests of wider society, it's right that Europe has
these high standards but, as I suggest, they incur higher operating
costs for our producers, who need compensation for that. If we
shut ourselves off from supplies of food in the world, I think
that could be a very short-term policy. I think we're all well
aware and concerned about food security, feeding our own folk
over the next decade or two, and I think it would be very risky
to shut ourselves off from sources of food.
Q343 Dan Rogerson:
Having heard what you've said about the balances of where the
money should go and what that should incentivise, both you and
the Commission have said that you think there should be money
shifted towards the provision of public goods, particularly environmental
protection. Where do you agree with what the Commission has had
to say, and where do you disagree with what they've said?
Brian Pack: Well,
I think, in principle clearly we agree. I think it's how you
actually achieve direct payments that deliver more public benefits.
The Commissioner has suggested greener, non-contractual and annual
environmental actions. I query— how this will work. I'm
really interested in this—when they will take that work
forward and how they actually believe that it will deliver outcomes.
My largest challenge in trying to come up with recommendations
was that, clearly, it needed to be more outcome-focused. The
direct payment had to be more outcome-focused, and I think that
is what the Commission are saying, but then how do you make it
more outcome-focused, because you've also got the challenge that
they wish to simplify the scheme?
I've admitted in my report that I've compromised
the simplification angle to actually ensure we deliver outcomes,
and I believe that's what we've got, and at the moment I think
the Commission have not actually addressed that. It's work in
progress, and they're going to tell us in future. We could look
also at the work of the European Parliament and their report,
and they suggest that an element of the direct payment could be
paid for climate change, and for mitigating carbon emissions,
but again they're totally devoid of any detail of how that might
work. And I spent a lot of energy—one of the committee
was a particular expert on the carbon area, and we find it difficult
at the moment to actually recommend how that can be achieved.
But what's happened in Scotland is that a group is being established
to see how the top-up fund could actually be delivered in a manageable,
minimally bureaucratic way.
I think, while I'm on that particular subject, it
will be really important that Europe changes its attitude to auditing,
to actually have a Common Agricultural Policy that's meaningful.
The way it's designed at the moment, I would say, is very unhelpful
to actually delivering outcomes. We have the crazy situation
where farmers who do nothing run much less risk of their payment
than those who are busy. And equally, for Member states, and
I think England have the scars, the way they actually audit and
disallow money, I believe, is particularly unhelpful to actually
folk trying to deliver an outcome. So, if a Member state is bent
on actually using the money sensibly, the worry is that Europe's
auditing policy will make that a dangerous road to go, and I think
we need to see that solved this time round.
Q344 Dan Rogerson:
Thank you. The Commission has proposed some measures, coming
back to this issue of public good and environmental-protection
issues. They've talked about crop rotation and set-aside; you've
been less specific in what you've had to say. Would you like
to say anything about that? Is that something you're still considering?
Brian Pack: Well,
I think, where the report is, it's much more ambitious than where
the Commission has put it. In the three examples given, I struggle
at the moment to see how that will deliver a more sustainable
industry. I'd be fascinated to see the detail but, at the moment,
I don't see that, if we introduced that in Scotland, we would
actually achieve this move to a more sustainable industry. I
would repeat again: I think that the big opportunity for all is
that we can actually use the reformed CAP to move our industry
to being more sustainable.
Q345 Dan Rogerson:
Thank you for that. In our previous evidence session with George
Lyon MEP, we were talking about this balance between sustainability
and competitiveness, and he was saying that he thinks that the
two can be tied together and there aren't such contradictory pulls
there. How much of your proposed top-up would go for measures
to enhance competitiveness, and how much would be targeted at
sustainability and enhancing sustainability?
Brian Pack: At
the moment, that's not spelled out. The report's position was
that they recommended that an expert group be formed to look at
how it could actually work. So, I think it's very much work in
progress. It's a principle established, but I would agree with
George; I don't think competitiveness and sustainability are antagonistic,
but I think the future definition of being competitive will be
being sustainable also.
Q346 Neil Parish:
The Commission has suggested that payments be made to active farmers
only, meaning only farmers that produce agricultural goods. Would
you agree with excluding land being managed solely for environmental
purposes?
Brian Pack: No,
I think land that's actively managed for environmental purposes
should qualify. I think there's a concern that everybody has
about this whole question of activity. I think the Commission
has been very clear that only those conducting active farming
should receive payments, but it could be the farmer or the business
that they're referring to rather than the land. I think, under
the health check regulations, under article 28, they introduced
the opportunity to exclude businesses from receiving single farm
payment if their main activity was not agriculture. I think that
would be a particularly unhelpful situation to go to. It would
obviously create, firstly, a lot of work for lawyers where businesses
are restructured.
It would give us major problems, for instance, if
you think of our crofting situation, then a crofter with a substantial
off-farm income is a very important person to what's achieved
in that area. There are lots of other situations. A number of
our farmers have invested in wind generators. You could almost
argue that, where that farm business has a substantial wind generator,
its primary purpose is not agriculture, and that would clearly
be silly. So, I think where we must concentrate: the land must
be actively managed, and I think, if that's for environmental
purposes, as long as it's approved, then it should receive payment.
Q347 Neil Parish:
Yes, because it could be argued on Scottish hillsides where there
are no sheep; where they've come off and it's not being farmed.
Do you actually believe that they should still be able to carry
on claiming a payment on such land?
Brian Pack: No,
clearly, and that's where the minimum stocking rate would come
in. As a crofter, I have a minimum stocking rate, and it's a
very low figure that's recommended, at 0.12. Some of Scotland
can only achieve 0.04, but in that case it would get a part of
the payment, because you'd take up part of the area to get the
payment. But I think, where land has no active human intervention,
then it should not receive a payment. We have a situation in
Scotland where our utilisable agricultural area that was identified
as 6 million hectares. Currently, we have 4.36 million hectares
of entitlement, so it suggests there were at least 1.6 million
hectares unproductive in the original reference period. Our work
suggests that the figure that should receive the money is about
4.6 million hectares, and I think that's quite important right
across the board. If we divide by 4.6 million rather than 6 million,
we have more chance of having a meaningful figure. And I think
just paying for land that sits there, with no human intervention,
is quite wrong.
Q348 Richard Drax:
Mr Pack, how does the Commission deal with increasing price volatility
in the future, and is more market regulation the answer?
Brian Pack: I think
it's one of the enormous challenges that our agricultural industry
faces, and society in general. We've seen now two grain-price
spikes and what that means. I think there's no effective market
support or control now in Europe and, in many ways, that's correct,
because we don't want to go back to the situation of producing
stock just to store it, but I do believe that we certainly need
an effective safety-net pricing system, so that, if we have catastrophically
low prices, it's a way of supporting the industry. So, I think
effective safety-net intervention would do that.
I think we also need to look more widely at market-risk
instruments, where folk can maybe hedge or take a forward position
and try to minimise their risk, but I also believe that part of
the reason for the direct payments is to provide financial cushion
to a business against those. Since we have no effective market
support, then the business needs a financial cushion, and I think,
under normal ups and downs of the market, then that cushion should
enable the businesses to continue, but where we have a real catastrophic
collapse, we need a special mechanism. Europe is suggesting that
we maybe develop a WTO-acceptable income support mechanism, almost
a disaster income for situations in which income is a disaster,
and I think I agree with that. But I do think there's scope to
look more at products with a mechanism for managing risk we can
develop. It's not particularly widespread in agriculture and,
as you move across Europe, there are clearly quite massive challenges
to introduce them in smaller businesses—and in our own situation—
there are many, many businesses you could not expect to get involved
in these complex instruments, so we need to find a way of actually
helping. And again, I think it's drawn attention to the issue
of producer organisations, and the need to provide a way of giving
them more power in the market, so that we have more balance in
the supply chain.
Chair: Can we keep the
answers just a little bit shorter, Mr Pack, I'm sorry, just to
get them on the record? Just slightly shorter answers, if you
could.
Brian Pack: Okay.
Chair: Do you want to
just conclude that answer, Mr Pack? I didn't mean to cut you
off?
Brian Pack: No.
I think there is a challenge, as you rightly suggest. I could
likely go on for the next two hours on the matter.
Q349 Chair:
Well, we have the benefit of your views. Could I just revert
to an answer you gave to Mr Eustice? You said it's important
that we compete on a level playing field. Do you think we'll
ever be in a position to compete on a level playing field across
Europe?
Brian Pack: Well,
I think it is a massive challenge. I think, clearly, there are
issues about pillar one, and particularly the new member states,
and I might add in that Scotland has the fourth lowest payment
per hectare on pillar one direct payments. We would like to believe
that there will be some more equity across the UK, but clearly
there has to be equity achieved across Europe. The difficulty
is defining what that word "equity" means, because various
considerations will be needed to actually pitch the level of payments.
Until the equity issue is addressed, then there won't be a level
playing field, and I think my great fear is that, if we rely more
on pillar two, which is co-financed, then there'll be even less
equity across Europe, because—and we've seen that already—new
member states cannot afford their share of the finance; therefore,
they can't draw down the European money. And I think making pillar
two dominant would ensure that we'd have a very uncommon market.
Q350 Chair:
You have touched on flexibility and equity between the regions,
and in particular between Scotland and England. Do you believe
that the Commission is proposing sufficient flexibility at the
moment?
Brian Pack: Well,
at the moment, what we've got would suggest that there could be
enough flexibility. I think that would be a very important part
of the negotiations. He's very sensitive to different territories
and very different needs, and wanting to see that they can all
function and deliver local food, so I'd like to think that the
sentiment's there, and it will be quite interesting to see how
it translates into more detailed regulation.
Q351 Neil Parish:
There are two ways of talking about having a level playing field,
and I don't blame Scotland for the system that they brought in,
but England brought a system in where, certainly, the livestock
sector lost out significantly, the sheep and the intensive beef
sector, because of the spreading of the payments, so isn't there
a danger, if you have too much flexibility, even in the UK, that
you don't even have a level playing field across the UK?
Brian Pack: Well,
I think you've identified my major concern: if Scotland ended
up with that outcome, it would be disastrous, not just for agriculture
but for the Scottish economy. Whatever needs to be done needs
to be done to ensure that's not the outcome in Scotland. And
I'd like to think that, with the benefit of hindsight and the
knowledge you've now gained, this will give you an opportunity
in England to correct some of that balance, and that would then
allow us, I think, all to move forward.
Q352 Chair:
Mr Pack, I think that's a very good note on which to end. On
behalf of all my colleagues here, can I thank you very much indeed
for being with us this afternoon through the video-link, and I
hope we can continue to explore the dialogue between us in the
context of this report. Thank you very much and God bless.
Brian Pack: Thank
you very much indeed.
Chair: Thank you very
much indeed, Mr Pack.
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