Written evidence submitted by Country
Land and Business Association (CLA)
CLA GENERAL VIEW
OF THE
REFORM PROPOSALS
1. The CLA's 35,000 members in England and
Wales are all directly or indirectly affected by the Common Agricultural
Policy. We have been heavily involved in the debates over the
last two years leading to the publication of this Communication.
As the paper was only published on 18 November we have not been
able to consult our members so these comments are provisional.
2. The CLA's public reaction to the document
has been to say that is broadly on the right tracks. The paper
suggests three rather sketchily explained options: (i) some adjustment
and more equity; (ii) major overhaul of the policy and (iii) far
reaching reform to move away from income support and market measures.
It seems clear to us that the right option is the middle one
and indeed this is the only one on which any ideas are explored
by the Commission. The status quo in option 1 does not respond
to the real reform pressures, and option 3, what has been describes
as the "British/Swedish" vision of eliminating Pillar
1, has plainly commanded no general support despite being on offer
for five years.
3. The main indication of the direction
of Commission thinking is in the section entitled future instruments.
The Commission is adamant that the CAP must retain the
two pillar structure but we have suggested not being dogmatic
about the character and purpose of the two pillars or talking
about good and bad Pillars.
4. A key part of Commission thinking is
that the new CAP must do more for public goods, and furthermore
that this should be focussed in the next reform by an overhaul
of Pillar 1. They are not proposing further shift of resources
to Pillar 2. There is no suggestion of more modulation - compulsory
or voluntary. This marks a significant change in direction to
the strategy since 1999. Second the paper seems to be suggesting
that the "targeting" in Pillar 1 should have two components.
The first a general approach across the whole territory (perhaps
akin to English entry level stewardship, or the Austrian base
level of stewardship), and the other is support for farming in
what we currently call the Less Favoured Areas.
5. These broad ideas were more or less exactly
the approach suggested to the Commission in the CLA response in
July through our European organisation. So we naturally applaud
that this is the Commission's suggested direction.
6. This said, the paper is very light on
details and there are many very important points with which we
have serious difficulty. These concern: payment ceilings, any
narrowly defined concept of active farmers; the balance between
the proposed new components of the single payment; the obsession
with annual payments for multi-annual commitments in Pillar 1;
the treatment of LFAs; the lack of detail about any redistribution
of funds within and between the pillars and the fate of modulation,
and the scope for distorting competition by remaining coupled
payments. We also point out that our support for the broad direction
of reform and commitments to providing more public eco-system
services is conditional on the appropriate resources being available
to cover the real costs of their delivery.
TURNING TO
THE QUESTIONS
POSED
Impact on UK's agriculture's capacity for being
internationally competitive?
7. The main CAP measures helping competitiveness
are in the current axis 1 of pillar 2, there are no new measures
spelled out in the document. So the proposals are broadly neutral
in this regard. It is of course of concern to farmers that if
they are asked to provide non-market environmental or indeed 'social'
services in addition to being competitive producers of food, fibre
and energy, then they must be properly paid for such services
or this could indeed impede their international competitiveness
in agricultural products. But also see paragraph 10 below.
Do the proposals ensure fair competition within
the single market?
8. They have to. This is imperative and
it is the Commission's job to ensure that fair competition in
the Single Market is maintained. This is one reason why it is
right to consider putting the broad-application, basic, stewardship
programme into Pillar 1. This ensures it has common rules across
the EU as proposed in the mandatory Greening component. But of
course the more the CAP is involved in the complex business of
paying for environmental co-products of agricultural production
the more complex this task inevitably becomes. This is why it
is vital that there are common programmes and standards applied
within a common agricultural policy. Inevitably
farmers in each country will always suspect that EU rules are
being more rigorously applied in their own territory than in other
Member States.
Will the proposals achieve the right balance between
productivity and sustainability?
9. There is no structural reason to suggest
these ideas will prevent this right balance being struck but there
is plenty of scope for the negotiation process to push too far
in one or other direction. The big underlying proposition in
this reform is that the current balance in the CAP is insufficiently
weighted in the direction of environment sustainability. However,
we must remember that agricultural produce are highly tradable
and many other big agricultural producing and exporting regions
are seemingly not as concerned with the sustainability agenda
as the EU. There is a very real danger that we could overload
our producers, impeding their economic competitiveness and thus
sustainability. Again it gets back to the appropriate resources
for delivering the higher environmental services mandated. The
resource question lies outside the CAP reform in the EU Budget
debate. Our fear is that the UK will set extremely high ambitions
and expect them to be delivered from an unreasonably low budget,
which will merely export the unsustainable food production somewhere
else.
Will the proposals redress the imbalance in support
to different sectors created by historic supports?
10. The difficulty in answering this question
is that there is no strong consensus about what the ideal balance
of support should be. There will be disagreements about the distribution
of supports as between the crop and livestock sectors; between
the uplands and lowlands; between paying for environmental services
and agricultural production. Also the proposals are encouraging
further discussion about small versus large farms, and of course
the "equity" of the distribution between member states
and, by extension, between regions within member states. As
a member organisation with members crossing all these divides
it is very difficult to be definitive. There is no doubt that
these distributional discussions will be at the heart of the discussions
of this reform. There will inevitably be losers and gainers from
the reforms; that is the nature of redistribution and so differences
in view about whether imbalances have been redressed.
What aspects of the proposals should be common
policy and which left to the Member States?
11. The CLA considers that all aspect of the
new proposals in this document must be part of a common policy
because repatriation of measures will lead to market distortions.
Note that there is no contradiction between this statement and
the present feature of Pillar 2 that the balance of measures adopted
from menus of options are selected by regions and member states
and adapted to their conditions. The CAP has long developed the
capacity to create common frameworks within which local requirements
can be fitted.
Can the proposals be implemented simply and cost-effectively
within a short time scale?
12. They have to be. There is no choice in this.
Note that what the CAP is seeking to do is not simple. It is
perhaps misguided to elevate simplicity to be a top-level objective.
The present Single Payment System at its heart was a simple replacement
for a bewildering battery of commodity price supports. The core
of new proposals is to better target these payments referring
to sustainability. Sustainability is a subtle and complex mix
of economic, environmental and social objectives. The environment
itself contains some really complex interactions between biodiversity,
landscape, heritage, water and soil protection and climate stabilisation.
To expect this to be simple is to create false expectations.
Regarding timeliness, it is vital that any new legislative proposals
are agreed by the end of 2012 because we have learned from bitter
experience that the Defra needs plenty of time for the administrative
and IT preparations to implement changed regulations.
December 2010
Supplementary written evidence submitted
by the Country Land and Business Association (CLA)
1. Your evidence expresses concerns about
payment ceilings. How would you change the negative public perception
about landowners who receive very large CAP payouts?
By explaining and demonstrating with examples how
large land managers contribute enormously to UK, EU and global
food security and how they also provide large scale environmental
management. We can cite the miles of hedgerows, hectares of copses,
ponds, field margins and corners devoted to biodiversity and so
on for large farms and estates.
2. Could you expand your statement that the
existing EU regulations are sufficient to prevent non-agricultural
land, eg golf courses, from receiving subsidies—do you mean
as applied in the UK, or across all Member States? How does this
sit with the EU Court of Auditors (2009) recommendation?
We attach a note on Active Farmers we are in the
course of preparing - that cites the EU regulation and the UK
implementing rules which, in our view, very adequately prevent
patently non-agricultural land being claimed for single payment.
The UK rules based on the EU regulation could in principle be
applied everywhere.
Our understanding is that one of the kinds of possible
abuse could involve tenants who have stacked historical entitlements
onto small areas they own. They may have given up their (usually)
livestock business on the original rented land on which their
historic claims were based, and may have effectively given up
farming. This leaves the formerly grazed land devoid of support
payments. The move away from historic entitlements will put a
stop to this, so no change in definition of active farmer are
necessary.
Another example of possible abuse of the system is
from the millions of landowners who have had their land resituated
to them in the land privatisation post- communism, but who are
living in cities and not farming.
We suggest none of these sorts of cases are likely
to apply in England where we are moving to regional payments.
In England there has been reference to situations where the landowner
makes the Single Payment Claim, yet he is not the owner of the
animals grazing his land. This certainly can be the case where
short term grazing licensees or people with commoners grazing
rights are the keepers of the animals. But in such cases the graziers
have the rights solely to graze. The roads, fences, drainage,
water provision, hedge maintenance, heather burning and other
grazing management, and all other environmental management can
only be carried out by the active land manager, the owner. Therefore
it is perfectly legitimate in principle that he can be the payment
claimant. This is why it is important to have the full details
of the rights and responsibilities of all parties before jumping
to conclusions.
Another situation where some discussion might arise
is where there is a contract farming arrangement in place. This
is now extremely common in British arable farming. Here the tractor
work, cultivations, planting and harvesting may be done by the
contractor (who may well be a neighbouring farmer who owns or
rents his own land), but the owner of the farm in question is
the SPS claimant. This is perfectly sensible specialisation and
division of labour involving each party deciding what aspect of
his assets and management skills and interests to deploy in the
business. The owner/claimant is actively involved in the management
and risk taking in the farming business and he also will generally
be ensuring all the farming infrastructure; roads, drains, fences
and other needed plant and equipment are in place. He also will
be taking care of the environmental land management. Note that
the division of the public receipts will then be "shared",
as they should be in a market economy, as a result of market negotiations
between the parties according to the contributions and risks borne
by each. There is absolutely no need or utility in EU regulations
getting involved in such arrangements.
3. You referred to EU level research on the
funding needed to support environmental schemes, could you supply
the reference and/or report?
The three main pieces of research we are aware of
are detailed below.
(i) An internal Defra project conducted in 2009-10,
as part of their Pillar 2 planning, to think through what environmental
services we want from UK agriculture, what sort of policy measures
would be optimally deployed to deliver such services and the overall
cost of delivery. To our knowledge this enlightened and innovative
piece of research to which we gave prominent reference (with Defra
blessing) in our paper "Public Goods from Private Land",
was never published but they may be able to tell you about it.
(ii) A paper, Estimating the scale of future
environmental and land management for the UK, conducted by
ADAS and SAC for the Land Use Policy Group (LUPG) in December
2009 examines the costs of farmers providing the desired environmental
services in the UK. The conclusions of this research were that
the costs were approximately three times greater than the current
UK expenditure on delivering public goods through environment
schemes, ie about £1.98 billion compared to about £700
milliion on agri-environment.
(iii) We have informally heard that there is
a currently a DG Environment project which has similar objectives
as the LUPG study but for the EU27. There are no results available
from this study which we understand is still underway.
This sort of research is of course very difficult
and has to be based on difficult assumptions. But nevertheless
we strongly believe that rational decision making should indeed
start from the goals society wants; estimates of what it might
cost to deliver such goals and then decisions about budgets allocated
to different tasks.
4. Do you think the sort of compulsory environmental
activities proposed by the Commission, such as crop rotation or
set-aside, will deliver real and demonstrable environmental benefits?
Across the EU27, certainly they would provide significant
and worthwhile environmental benefits. We are in no doubt about
this. There are farming systems in operation in a number of parts
of the EU where these basic practices are not used so the mechanisms
listed under the Mandatory Greening (MG) could improve environmental
performance.
Our point is that some Member States—including
the UK—especially England—already have well developed
entry level stewardship schemes which already do most of these
things and are thus already seeing their benefit. Indeed we would
claim ELS goes well beyond what is proposed for mandatory greening,
especially if the Campaign for the farmed Environment is then
added. We would not want MG therefore to cause difficulties for
precisely the countries (UK, Austria and Sweden for example) who
are already doing the right thing to have the greatest difficulty.
Our view is that this greening s best done in voluntary, multi-annual
contractual arrangements and not as the Communications speaks,
of mandatory, annual non-contractual arrangements. There is much
to play for here to protect UK interests, but we don't quarrel
with the Commission's aims.
5. Your evidence refers to the role of the
CAP in paying for the provision of public goods, specifically
environmental, by land management. By extension, where do you
draw the line between land managers that are not necessarily farming,
and other activities that use land and may provide some public
goods as well?
We have tried to address this in our answer above
on active farmers. In essence we should let the land manager decide
what mix of food production and environmental services he will
supply. The market determines the price of food and collectively
through the processes of determining the CAP budget and payment
rates for environmental public goods the "public" decides
how mush to incentivise the delivery of the public goods. This
is fundamentally no different than the way we decide how much
public health or educational services we are going to deliver,
except here the environmental public goods are competing for land
use and managerial time with food production.
Our point is that there will be some farmers who
almost exclusively produce food (eg on the very best land or in
protected crops) and at the other extreme there will be environmental
land managers who almost exclusively provide environmental services
(but just have some animals to provide the grazing to maintain
grassland swards and the treading function - eg to keep bracken
down). Most "farmers" lie between these extremes depending
on their conditions and mix of land types. The policy and payments
can in principle deal with this whole range. But we must not in
a decoupled payment system try to dictate the mix to the person
who knows best and who is taking the business risks, the land
manager.
6. Do you think that the "food security"
(referring to quantity and quality) needs of European citizens
are better served through increasing EU production, or enhancing
trade networks?
Both, there is no either/or here. European contribution
to global food security demands we protect and develop our food
production capacity (not our current production. The latter is
decided by the commercial decisions of farmers based on current
costs and returns). Our production capacity is based on keeping
our agricultural land in good agricultural and environmental conditions
(a very intelligent phrase in our view), and keeping our farming
infrastructure in good order, plus our knowledge and skills base
and the flow of Research and Development. But open trade networks
are also an intelligent global food security mechanism. Climate
induced food shortages will generally not all happen everywhere
in the world at the same time so the more developed is the infrastructure
for trade (roads, ports, handling facilities, shipping, insurance)
then the faster the global system can react to shortage wherever
it occurs.
Of course anything which inhibits trade slows down
this response and makes it harder for markets to ration out the
available supplies. Note that whereas twenty years ago some of
the biggest inhibitions to trade were pernicious import restrictions
like variable import levies (long since abolished in the EU),
and state trading systems, now the biggest source of trade instability
is the use of export restrictions—and potentially land grabs
which try to take trade outside conventional international trading
systems.
7. What criteria could be used to allocate
national ceilings, both for pillar 1 and pillar 2, more objectively
between Member States?
Because the criteria have to be based on robust data
which is available for all 27 Member States we think that the
obvious criteria are based on agricultural area (utilised agricultural
land), a proxy indicator of costs of living or wage levels like
GDP per head, and perhaps if the policy goal is increasingly emphasising
the public goods the environmentally designated areas or areas
engaged in environment schemes. If greening is to apply more to
Pillar 1 in future (it is already in there, and is of course the
main part of axis 2 of Pillar 2), then there is little point in
using different criteria for the two pillars. Indeed we urge a
very pragmatic approach to these structures. They should serve
policy goals not inhibit them.
January 2011
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