Environment, Food and Rural Affairs Committee - Minutes of Evidencehc 745

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House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Environment, Food and Rural Affairs Committee

CAP Implementation 2014-2020

Tuesday 15 October 2013

Dr James Jones

Paul Wilkinson, Abi Bunker and David Baldock

Evidence heard in Public Questions 1 - 64

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Environment, Food and Rural Affairs Committee

on Tuesday 15 October 2013

Members present:

Miss Anne McIntosh (Chair)

Richard Drax

Mrs Emma Lewell-Buck

Iain McKenzie

Sheryll Murray

Neil Parish

Ms Margaret Ritchie

________________

Examination of Witness

Witness: Dr James Jones, Farmer and Consultant, gave evidence.

Q1 Chair: Good afternoon, Dr Jones. You are most welcome. We are very grateful to you for being here and contributing to our inquiry. I wonder if, just for the record, you could give your position, please.

Dr Jones: I am a farmer and consultant these days. I left a teaching job at the Royal Agricultural College, as it was then known, back in March, so I am an academic as well. I am the Chair of the Executive of the Agricultural Economics Society; I am on the Countryside Policies Panel of the RICS; I am also involved with the Institute of Agricultural Management; and I still have links with the Royal Agricultural University, with the CCRI, and also with Cumulus Consultants.

Chair: Thank you. I should have done some housekeeping. If I may, I would like to refer to my declaration of interest on the Register, and I will just ask if there are any other colleagues who wish to do the same.

Neil Parish: I will also refer to mine, please, Madam Chairman.

Richard Drax: May I refer to mine too, please?

Q2 Chair: Thank you. Dr Jones, Commissioner Cioloş has described the CAP deal as a "paradigm shift" in emphasis, focusing more on greening and the delivery of public goods, yet others who are particularly involved on the environmental side have described it as a missed opportunity. It strikes me that we are probably about where we should be, but what is your view, as an expert in this field?

Dr Jones: Without sounding too flip or too rude about it, I would call it more in the nature of an image makeover than a fundamental paradigm shift. There are changes to the function of Pillar I, changes to the structure of direct payments and quite big changes to added requirements in Pillar II, but I would not say that fundamentally it is a particularly radical reform. I do not think it will be seen that way in historical context.

Q3 Chair: If you look at my own constituency where there is a large upland area, do you think that certain upland and hill farmers may be disadvantaged if they no longer receive direct payments under the reformed CAP?

Dr Jones: They will still receive direct payments, and there is the possibility, which has been discussed in the Defra consultation, that some of those payments may be moved up the hill, and they might get more basic payment than they are used to getting in the form of a single payment. It has to be said, though, that it looks likely in England that the Uplands Entry Level Scheme will go along with the Entry Level Scheme itself, and therefore they might gain on the one hand with some extra direct payments and lose on the other with some agri-environment payments. There is also the possibility of a new form of less-favoured area payment in the form of the ANC payments, but Defra are suggesting in their consultation that they would rather restructure the regional values of direct payments than try to introduce a new strand to the payment structure.

Q4 Chair: Would you describe what has been proposed so far as a good deal for the whole of the UK?

Dr Jones: That is a tricky one. I think anything that preserves the Common Agricultural Policy and the flow of money that it represents into the farming industry is a good deal for the farming industry. There is a very heavy dependency on funding from the CAP in agriculture throughout the UK, and indeed throughout Europe. Therefore, if it is necessary to make these changes in order to preserve the concept, then they are worth doing. Does that represent value for money for the man in the street, the taxpayer, the person who is paying VAT and ultimately seeing that money go to Brussels? That is a rather different argument altogether. If you are looking at the change from where we were to where we will be, there are some negative aspects to this reform in the sense of it becoming more complicated and possibly more bureaucratic in the way it is being delivered. It is hard to see where the big positives are. There are some, but it strikes me that they are somewhat outweighed.

Q5 Chair: Initially, it was going to be simpler and easier to administer. Given the history behind the last reforms and the difficulties in administering them, particularly through the agencies that were responsible for both payments and crosscompliance, where do you envisage the greatest difficulties and bureaucratic hurdles will come in the round that has been described so far?

Dr Jones: There is no doubt that there is a lot more work in this for the RPA and the agencies because, whatever their requirements are at the moment, they are going to be added to by requirements such as determining the age of a young farmer and whether they are eligible for that slice of the payment. There are the greening measures, and in particular the detailed mapping exercise that will have to be done to back up the determination of whether a farmer has 5% EFA on his holding as part of the arable area. There are quite a lot of things you can point to that are going to represent a lot of extra work. Not least of those might well be the reissuing of all entitlement, the force majeure cases and all that sort of thing that goes with it, so a great deal more administration is certainly on the way. Knowing how much it has cost the RPA to deliver, and the problems that they have had, it makes one quite apprehensive about what the effect of all that is going to be. That is without our seeing the farming industry try to react to the changes and mitigate the effect, which might also add to administrative difficulties for the RPA. This is one of the most concerning aspects of the reform.

Q6 Chair: We will go into more depth, but can I just ask whether there is the potential for a double whammy against English farmers competing both with farmers in the other regions of the UK and other farmers in the rest of Europe?

Dr Jones: The nature of direct and decoupled payments is that they should allow the farmer to be able to react to market forces. That is part of the benefit of it. One can argue about the distribution of that money and the level of support they get, but it is not quite the same thing as not giving them too many opportunities to find their own way. I am not too worried about the situation within the UK, although there might be a redistribution of funds with more of it ending up in Scotland than was the case previously. There is perhaps a bit more concern on a European scale because there is external convergence as part of the package, and that is likely to redistribute money within Europe. It does not look like the UK is going to be a particularly large loser under those circumstances, though. It looks to me that its distributive and anti-competitive effects are going to be fairly mild.

Q7 Ms Ritchie: Should Defra decide to transfer 15% of funds from Pillar I to Pillar II, what impact will that have on English farmers in terms of their ability to compete with their counterparts elsewhere in the UK and across Europe?

Dr Jones: The first point to make is that there is already this disparity. The modulation rates are lower in other parts of the UK than they are in England. As a result, whatever effects expected from that you would imagine have already happened. On the percentage rates that are being discussed, up to 15%, whilst I am not going to say that it is an insignificant amount of money, it is well within the range of the effect that you can have in terms of currency exchange rate changes and so forth. I do not think it is quite as sensitive as that, but there are disadvantages. If you go to Northumberland, on one side of this rather tenuous border you are getting direct payments for suckled calves, and probably getting a higher level of payment because it is a different system. On the English side of the border, you get quite a lot less. Has that meant massive problems on the border between Northumberland and Berwickshire? I don’t think so.

Q8 Sheryll Murray: How should the Government determine who is an active farmer in terms of minimum activity? Do you foresee the active farmer test creating any problems, such as the relationship between tenants and landowners?

Dr Jones: That is an interesting question. When the Commission originally designed their ideas of who was going to be an active farmer and had the test for what proportion of income, there were quite a number of what were going to be unfortunate cases. There were going to be people who were running a farm shop and doing all the things that they had been implored to do to add value to their product that got them a high turnover on something that is nonagricultural. There were institutions such as the Royal Agricultural University with their college farms where, important as those college farms are to their purpose of agricultural education, the amount they receive in a single payment will nevertheless be less than 5% of their turnover. The way that it is now being couched, which is to put it into a rather limited negative list of institutions, is putting it into a much smaller box in terms of impact. I would imagine it is going to be relatively light touch. Defra’s proposals are showing no appetite for wanting to try and increase that list or make it bite any harder.

Q9 Sheryll Murray: Do you support calls for an end to the dual use?

Dr Jones: Dual use is another issue, where a landowner is claiming payments, normally Pillar II payments, and a tenant, or possibly a licensee, is claiming the Pillar I payment. In a way, I can see what the Commission is concerned about there, because they have a complete anathema about landowners receiving payments. That is an important point.

Q10 Sheryll Murray: Do you think this might undermine the goal of landscapewide agreements?

Dr Jones: I do. What I was coming to really is that, despite the fact that the dual claim situation seems untidy and incorrect in the eyes of the Commission, nevertheless it allows landowners to ensure engagement with agri-environment schemes and so forth, but then have a fluid relationship between who the occupier is and who is farming it. From a practical point of view, that is actually very useful. In the eyes of the Commission, it is untidy and inappropriate, so we have a problem here, and I think we are going to be under pressure to go down a single use route.

Q11 Chair: Are you aware of particular problems on common land between graziers, landowners and tenants, and do you have a solution?

Dr Jones: I am personally not that familiar, but I was representing the RICS as a stakeholder during the CAP Reform process in 2004 and 2005. Common land was a very big issue then, and I am not sure it has been completely resolved. It is a big problem. It is an example of where a dual use situation could be quite convenient, where the owner of the common makes an undertaking, with the consent of all the active commoners, to put the common into an agri-environment agreement, but they are not farming it. They are leaving that to the commoners, in which case that is a good way in which dual use is being conducted. Commons do not fit very well with the concept of the single payment. The problem I have always had with the single payment and the way it is implemented, and a lot of the administrative complications, come from the fact that the Commission is wedded to the idea that you should have entitlement and land, but the two shall never be linked. I personally do not see why we could not do away with entitlement, and simply allow the occupier of the land that qualifies to claim a payment. It would simplify the whole situation and it would get away with some of these slightly weird rules that have to apply about "use it or lose it" and rotate it and trade it and move it around, and landlords and tenants and all the rest of it. However, the Commission is totally wedded to this approach because it does not want to see landowners receive payments directly.

Q12 Iain McKenzie: With the term "active farmer" in the test that is applied, would you say that there is there an opportunity to miscategorise a farmer as being inactive because of the diversity of the land that he farms? A lot of it may be difficult to farm and some of it may be easier; therefore, the easier areas are farmed; the majority that are difficult would be left and categorised as being inactive. Is there a great opportunity for that?

Dr Jones: There could be. It depends on the definition of what farming is and what an appropriate level of farming is. When we had the old LFA Scheme, it was a requirement to be a farmer, and the original scheme made payments for cattle and sheep on a headage basis; so the more you farmed the more you got. When that was converted to an area basis, it became "you must have cattle or sheep", but there was no specification about how many. I suspect that is probably where we are going with this active farmer test: you have got to have some in order to qualify.

Q13 Iain McKenzie: It is an inexact science, this test. It is not exactly going to be able to apply across the country evenly and be looked upon as not being flexible.

Dr Jones: Absolutely. That is the issue really: what is appropriate, as well as what is necessary, in order to prove you are an active farmer. I am surprised that this element has made it through the reform process, because my understanding was that it would not be compliant with the WTO green box definitions, and that simply any sort of requirement that forced anybody to farm in order to receive the payment would endanger the Commission with having their payments reclassified from green box to amber box, which would blow the whole thing open in terms of compliance with the WTO Uruguay Round.

Q14 Iain McKenzie: Would it be any easier to identify or categorise an inactive farmer?

Dr Jones: Possibly, but of course there are quite a lot of farmers-well, dare I say it, there may be even some walking around the streets here in London-that might seem inactive to you or I, but managed through the offices of a good agent could seem very active indeed.

Q15 Richard Drax: The Government could choose to reduce direct payments above €150,000 by more than the minimum 5%, or even cap payments above a certain level in order to top up Pillar II. How would that affect agriculture in the UK?

Dr Jones: The biggest effect there would be on the very large farmers. The outstanding examples of that would be the Cooperative Wholesale Society, which is a very large single farmer. The National Trust is a very large farmer and a very large claimant. Because of the requirement, even where these institutions have land in different places where they are farming in quite a discrete and separate way, they nevertheless have to be regarded as one entity. It is just one holding as far as the EU is concerned. Those are the institutions or farmers that are going to be most affected, particularly by capping, but still by digression by the 5% reduction.

My understanding from the Defra consultation is that there is not much appetite for applying the cap, and that it will simply be the minimum requirement of the 5% digression over €150,000. That €150,000 is net of the greening component of the basic payment. In an exercise that was done by Andersons Consultants, they gave an example of a 3,500 acre cereal farm, admittedly with some allowance for offset of salary costs before the digression starts and affects the threshold figure. Nevertheless, on a farm of that scale, which is a large farm even by East Anglian standards, there was little or no effect. It has to come only really at the very highest level in terms of the very largest farm holdings in the UK before we are going to be seeing much effect at all.

Q16 Iain McKenzie: Are there particular aspects of the Commission’s green proposals that give you concern, or you think may add complexity without delivering environmental public good?

Dr Jones: Actually, I am very concerned about them, not so much in the way they are now likely to be implemented, because there are signs that the way in which they might be implemented will mean that for most farmers there is perhaps not going to be all that much effect. I think it is the fact that there is some sort of trade-off here with the greening measures, which are very basic. It is quite hard to see where the environmental benefit comes, particularly from the crop diversity measure, but across the piece, perhaps with the exception of the eco focus areas. You are trading off some very basic forms of greening, albeit standardised forms of greening, against voluntary and nuanced agri-environment measures. It would be sad if, in effect, what this reform has done is trade off broad and shallow agri-environment against greening.

Q17 Iain McKenzie: Let me just give you an example on what you have just touched upon. Could greening disincentivise farmers to implement agri-environment schemes, or on the other hand lead to farmers currently in the Entry Level Stewardship (ELS) schemes being paid twice for delivering the same public good?

Dr Jones: I think it is clear that they will not be paid twice. I have a specialist interest here, which I should have mentioned at the outset, which is that an independent expert is required to report on the payment structure of the agri-environment schemes, and that is the role I have been playing in England since the 2005 reform. It has been my task to look at the baselines. You see, there is the potential at the moment for a modest level of greening that comes from the crosscompliance measures that could potentially overlap with the agri-environment. It does not, though, so we ensure that the baselines are quite clear, and that therefore the payments are only going to compensate farmers for what they do over and above the baseline set by cross compliance. They will not compensate them for the cross compliance bit.

Q18 Iain McKenzie: Would you say that the Government should devise its own certification scheme, or do you think that would just add a layer of bureaucracy and increase the risk of disallowance?

Dr Jones: It is an attractive option in a way, in the sense that it gives us more flexibility, it allows us to move away from these rather blanket, basic and blunt greening instruments towards something that is a bit more nuanced and so forth. There are plenty of examples of that in the Defra paper. You are right to mention disallowance, because there has to be equivalence. The test that seemed to be applied to ensure that there is equivalence heightened the risk to the UK in using a certification approach, and I think there is a fair chance they will trip over it and they will get disallowed.

The second thing is that Defra have pledged in their consultation not to gold-plate, not to go beyond the basic requirements. It is hard to see how they will do that by implementing a certificated route.

Q19 Iain McKenzie: With that in mind, do you think English farmers are being asked to do more than their rivals, and therefore are at a competitive disadvantage?

Dr Jones: It has not been decided what they have been asked to do yet, but there is all the potential for that in the proposals here. Certainly, if these were implemented as they have been set out, it does look to me as though there would be quite a lot more than basic greening would allow. I think that is inevitable, because basic greening does not offer much in the way of environmental gain. As I have said before, the crop diversity measure is a bit tenuous as to what it is contributing. The permanent pasture measure is very similar to what we currently have. You are mainly looking towards the eco focus. Many environmental organisations, including, I am sure, the speakers that you are going to be talking to next, will certainly not be entirely happy that that is going to deliver what they are looking for. It is not going to be equivalent to what we could have had through the voluntary measures that we currently have.

Q20 Neil Parish: Given the pot for agri-environment schemes is likely to be much reduced, what are the main areas the new schemes should focus on? It is quite a broad question, really.

Dr Jones: I suppose they should focus on trying to maintain the gains we have already had, in particular in the farms that have been successful in the competitive arena of getting into Higher Level Stewardship (HLS) schemes, so a continuation would be one of the priorities. Obviously, we have a bigger menu of things that we want to achieve in Pillar II. We have focused very much in the past on biodiversity as the principal gain. Coming into that, we are now having more on a landscape scale. We are also looking more at water quality, quantity and other measures. You end up trying to do a lot more with a lot less, which is quite a tough thing to do.

Q21 Neil Parish: Can I move you on to upland farming, in particular hill farming? How are we going to particularly help them?

Dr Jones: Through the Pillar II?

Neil Parish: Yes.

Dr Jones: Obviously, there is the additional support that they might get through Pillar I by moving their money up the hill. At the moment, I do not see too many proposals specifically targeted at the uplands to try and achieve more, but I suppose that is what this consultation is about. It is a question of priorities and priority setting.

Q22 Neil Parish: If you want to be basic, if you want to green the CAP, surely the upland farming is one of the greenest parts of it. Do you feel that upland farmers are missing out somewhere?

Dr Jones: You could argue it is one of the greenest parts of it; there are some that might want to debate that with you. The important thing about the uplands is not only is it important environmentally, but it is fragile economically. Therefore, it is the most dependent on sources of income from both Pillar I and Pillar II. Most people would feel that that was important.

The issue is one of balance and what you are trying to achieve. There is no doubt that decoupling the payments has opened the door to extensification, and the upland farming economies are starting to look a bit fragile in the sense that there are a lot of hill farmers that, when they retire, are not being replaced by the younger generation. That may or may not be an issue depending on whether your interests are social and economic and community or whether they are environmental. It is something that we should be concerned about.

Q23 Neil Parish: You have alluded to the fact that Defra is putting forward the idea of taking non-seriously disadvantaged areas and combining them with seriously disadvantaged areas in order to take a little bit more money up the hill, so to speak, or certainly on the lowland part of the hills. Would you favour that? I have rather put you on the spot.

Dr Jones: It depends what it is an alternative to. I can see a potentially rather messy situation developing here where we have a re-emphasis of the use of the EFA boundaries, which the Commission themselves are getting countries to redefine as ANC boundaries, which are somewhat different. If we are not careful, we will find that we keep on defining, re-defining, re-shaping and re-mapping and pushing these monies around.

Q24 Neil Parish: If you were just combining the two areas, you would not necessarily have to redefine the maps other than just taking out the boundary in between. Could one not argue that this is simplification?

Dr Jones: Yes. One of the issues that has not really been spoken about very much is the dominance of common land in the SDA. When Defra did the exercise on the regions, there were only 40 farms in England purely in the moorland SDA. They are all combinations of the two. As a result of that, there have been distinct winners and losers, because in the common land story you get your money dependent on what proportion of the land you have control over. Now, there are some commons where there are a lot of inactive commoners who in effect are taking that common land and saying, "We are not taking any money for that." That means that the more active commoners, who are probably farming all the rest of it and, therefore, are quite heavily stocked on the common, are not getting the money, and vice versa: you are getting commoners who have a big area; they are the only commoners who have commoners’ rights. They may not be stocking them very heavily, but they are drawing all the payments themselves.

Q25 Neil Parish: Do you have any sympathy for the NFU’s argument that some of the higher level schemes pay farmers to take land out of production, making farmers less productive and more dependent on the CAP? Therefore, they are not linked into the market but being taken further away from it.

Dr Jones: I do not know in detail. You are back to the uplands question. In the lowlands, I would not agree with that contention. They might well have a point in the uplands. Subtly, HLS agreements that were focussed on trying to reduce stocking and control the problems of over-grazing have almost had to be turned on their head and actually reintroduce some stocking. You are quite right that, if you are not careful, just setting upper limits means that you have to come back in a few years’ time and set some lower limits instead. They might have a point.

Q26 Mrs Lewell-Buck: In terms of transition arrangements and those farmers whose ELS schemes are expiring in 2014–15, what do you think would be the impact of a gap in funding?

Dr Jones: There will still be funding, and, as I read it, there is an obligation to see out these schemes. There is not going to be a successor to ELS, so if their ELS agreement comes to an end during that period, effectively that will be the end of it. I do not think there is going to be a replacement for that. For those whose schemes are still ongoing, they will still get their money until the schemes run out. That is my reading of the situation.

Mrs Lewell-Buck: As you see it, there is going to be no gap in funding at all.

Dr Jones: There is a period of no-man’s-land, it seems to me, where we are still running under the old rules but in a new funding period. We have not come up with the new schemes as yet. I have been involved in the background work on NELMS, and it will be there, but the process has been delayed. There is going to be a gap between winding up old schemes, introducing new schemes and the money being rolled over from the current period. However, I do not foresee a complete gap in funding in that way.

Mrs Lewell-Buck: You do not foresee a huge impact from that.

Dr Jones: I do not think so, but perhaps you need to address that question to your witnesses from Defra.

Q27 Mrs Lewell-Buck: Do you think the existing entitlements should be rolled out or new ones allocated?

Dr Jones: Personally, I favour the continuation of the existing entitlements, simply because of the potential difficulties that exist with starting again and, therefore, tempting landowners to get rid of whoever the occupier is, so that they are the person in place, and so forth-the issues of redistribution of funding and the value that is tied up in entitlements. Part of the scenario, if we do stick with our existing entitlements, is to in effect write off or confiscate any entitlements that are in excess of the land that is available, and that will mop up the surplus of entitlements. It is a game of musical chairs that is played every year between those who have land without entitlement and those who have entitlement without land. However, as things stand, if we opt to continue, in 2015 those who hold entitlement but do not hold land are going to lose that part of it. In a way, that might focus their minds a bit and allow some redistribution to take place.

Q28 Chair: I have just a couple of short questions. In our previous uplands Report, we looked at water-management schemes rewarding farmers in upland areas for retaining water. Do you think there will be scope in the reformed CAP for this type of activity?

Dr Jones: I think the honest answer is there will be scope but little money. If we had more money and if there was more scope to achieve more with Pillar II, then yes. Cross-compliance, as I understand it, if anything, is going to become lighter touch rather than stronger. Things like the Water Framework Directive might possibly have come in as part of the SMRs, but I do not see things like that coming in in the short run. The answer is there is scope for it, but I am not sure there is going to be much in the way of money.

Q29 Chair: We also concluded in that Report that we were not convinced by the Government’s arguments for ending coupled payments. Obviously, coupled payments continue in other parts of the UK. Do you have a view?

Dr Jones: Selectively, and for the right purpose, retaining the option at least to use coupled payments could potentially be beneficial. I know there are many who would criticise me for saying that, but, for example, they are used in Scotland to try to incentivise farmers to retain native breeds of suckler cows and higher value animals in the chain, and support a traditional form of hill farming. That is probably not a bad way of doing it. I know it is retrogressive and what we have moved away from, but coupled payments in the right form and the right place could have some value, certainly at the level at which they are being proposed.

Q30 Chair: Should farmers seeking to claim under Pillar II be concerned that there is no co-financing-that there is no transfer of funding?

Dr Jones: They should, and this is where the farming industry will be the loser if cofinancing is not available at a reasonably generous level. The problem about modulation is that it does not come with the same degree of compulsion about co-financing, and we would not want to see exclusively modulated money used. We would want to see some co-financing as well.

Chair: You have been incredibly generous being here today, and we are very grateful to you, Dr Jones. Thank you very much.

Dr Jones: Not at all. It is my pleasure.

Examination of Witnesses

Witnesses: Abi Bunker, Head of Agriculture Policy, RSPB, David Baldock, Executive Director, Institute for European Environmental Policy, and Paul Wilkinson, Head of Living Landscape, The Wildlife Trusts, gave evidence.

Q31 Chair: Good afternoon and welcome. Could each of you in turn say who you are and where you are from?

Paul Wilkinson: I am very pleased to be here. I am Paul Wilkinson, from the Wildlife Trusts, and Head of Living Landscape.

Abi Bunker: Hello. My name is Abi Bunker. I am Head of Agriculture Policy at the RSPB, and thank you for inviting me to come along.

David Baldock: My name is David Baldock. I am the Director of the Institute for European Environmental Policy. Thank you for the invitation.

Q32 Chair: You are all very welcome, and we are very grateful to you for giving up your time to participate in our inquiry. To begin with a general question, do you recognise the value of farmers as custodians of the countryside?

Paul Wilkinson: It is a very simple, straightforward yes. As organisations and as an organisation, the Wildlife Trusts work very closely with farmers and landowners, and we are farming and landowning organisations in our own right. We certainly recognise that and give thousands of days of advice to farmers every year. We certainly recognise that role.

Abi Bunker: I would endorse and add to that. If we do not recognise and work to support and embrace the work of farmers as owners and stewards of the countryside, and work with them to make the changes necessary, we will fail to deliver what we want for the environment in terms of our priority bird species, habitats and wider environmental delivery. Farming covers 70% of the UK countryside. If we want it to be a healthy, thriving environment, rich in wildlife, our farmers are a critical part of that.

David Baldock: I would agree with that. One thing our Institute has done is to help develop this idea of high-nature-value farmers to get people to understand, all through Europe, that farming is one of the ways in which we produce environmental benefits, so the answer is "yes". Farmers’ relationship with the environment varies, as it does for the rest of us.

Q33 Chair: How would you describe the proposal for the next round of CAP reform in its present state? Would you describe the deal on the table being negotiated at the present time as a good deal for the UK Government, farmers or environmentalists?

Abi Bunker: On balance, the deal negotiated in Brussels has not been in line with the direction of travel we had in previous rounds of reform, which was slowly but definitely showing a move towards something about using public money to deliver public goods. There was a direction of travel, and the results from this reform have muddied the waters. I would agree with some of what the previous provider of evidence said: in many ways, it has complicated things; it has added complexity where it was unnecessary. For example, greening could have been done through an existing mechanism of cross-compliance-just enhancing the baseline across farming of things you wanted to deliver. That route was not chosen.

David talks about high-nature-value farming, which is a concept that we are working hard to make people aware of. It is not just in Romania and Bulgaria that you have high-nature-value farming, where there is an intrinsic link between the environmental delivery and the farming system itself. It is a concept that we have in farming systems and habitats in the UK. That has fundamentally failed in this reform as well; we argued very strongly that there should be greater support targeted on high-nature-value farming systems across Europe, and we were unsuccessful.

David Baldock: Can I add a couple of points? Some of the Commission’s original impulses were correct. They tried to bring greening into the whole of the CAP because they were trying to get a public goods delivery mechanism that delivered on all farms. One sensible aspect of that is trying to reduce the problems of administration and a lack of a level playfield-trying to have simple rules-and there is a lot of pressure for that. Of course, trying to do it in practice in relation to the Pillar I rules proved to be a lot more difficult. In the end, we have ended up with a situation that is in many ways disappointing, but I would not say the impulses behind it were all bad.

On the UK, it is worth emphasising that one aspect of the deal that in our view is not satisfactory for the UK is that, because the Treasury-for reasons good or bad-prioritised the UK rebate during the MFF negotiations, the UK has ended up with a relatively small Pillar II and a relatively small share of the CAP budget. We are now facing some very difficult choices, which have been brought about by our negotiating strategy over the budget. I am not saying that was right or wrong, but there is a price to pay for it now. It is not all the making of the EU; it is the way that we in the UK went about pursuing those negotiations.

Paul Wilkinson: Picking up on the mainstreaming point-the impulse and the mainstreaming of environmental land management, and breaking down the cultural divide between what we see as farming and what we see as conservation-it is around environmental land management and achieving a range of outcomes from that. In terms of the deal overall, effectively we have less of a Pillar II budget and weakened greening, and we potentially, therefore, have to compensate for that in other ways, which I am sure we will come on to discuss.

Q34 Chair: To clarify, are you saying that the inequalities that exist within the United Kingdom, and between English farmers and other EU farmers, could possibly increase?

David Baldock: If you are talking about equality of payments from the CAP, which I think you are, there are huge disparities already in what farmers get in different parts of Europe. UK farmers get less per hectare than some in Northern Europe and more than others in Central and Eastern Europe. Because the UK has a relatively small Pillar II budget-smaller proportionately than several other member states, such as France-you could say the gap between the payment pot available to UK farmers and others has increased in the process, although not massively.

Abi Bunker: In terms of the proportion of our allocation in Pillar II, which is the Rural Development programmes, this time around in this country it is about 9% compared with 91% in Pillar I. The average across the EU of the amounts under Pillar II is about 24%. That is unfortunately despite assurances that, under Pillar II, we would have allocations to individual countries based on objective criteria, which failed to materialise. Once again, we have a very small pot of money in Pillar II compared with the rest of the EU. As in previous reform, there is the necessity of pushing up that pot of money in the UK through modulation from Pillar I to Pillar II.

Q35 Ms Ritchie: Given the rising cost of food and concerns over food security, should the Government not direct as much money as possible into Pillar I to support food production?

Paul Wilkinson: My starting point is what underpins food production and food security. We are increasingly aware that healthy, functioning ecosystems, soil and water availability are going to secure the long-term viability of farming. My starting point is what we need to do to support the long-term future of those resources and how we restore and rebuild the functioning of those systems. My argument would be that we need to maximise the amount of money going into the schemes that support those higher environmental outcomes to secure the future of those farming systems.

There is this false argument around a focus on short-term competitiveness and food production over the long-term viability of the whole way in which we produce food and the systems that underpin it, that is our soil and water, and the way in which particular species interact to enable us to produce the food that we need. That would be my starting point. Therefore, absolutely you need to transfer the maximum 15% from Pillar I to Pillar II. Any less than that and you are undermining the viability of future environmental land management schemes. There simply will not be enough in the pot to meet existing commitments, let alone future needs.

Abi Bunker: I agree wholeheartedly with what Paul said. It has been unfortunate that there has been a very narrow focus in the debate as to what food security means. If you define it as just short-term increases in yield, I do not think that is the right understanding. That is not what food security is. Food security is a very valid objective of Government policy and policies like CAP, but delivering enhanced, long-term sustainable food security from which people will benefit is about investing in our ability to continue producing food safely and in an environmentally sound way for the long term. Being resilient to shocks to that system is also part of it; it is not just about producing more. I would agree that, just as with competitiveness, the kinds of activities you can do through Pillar II, such as agri-environment schemes, are about increasing environmental and food security.

David Baldock: I agree with a lot of that. The only point I would add is that, when one is thinking about longerterm food security, like feeding possibly 10 billion people by 2075, the key thing is using your resources well and having the technology available. Importantly, the impulse was there in the CAP to try to increase the emphasis on innovation and Research and Development, and rolling out technology. It is not a very large proportion of the whole, but there is a forward-looking element in there. That also contributes in the long term to food security-building a robust agriculture-more than just slinging some more money into Pillar I.

Q36 Ms Ritchie: Does the additional greening of Pillar I reduce the need to transfer the maximum amount to Pillar II? To what extent would maximum modulation impact on the ability of England’s farmers to compete with their counterparts in other regions of the UK and other EU countries?

David Baldock: We believe for a number of reasons there is a strong case for continuing with modulation in the UK, starting from the rather basic point that we already have a number of environmental objectives, as well as innovation, we cannot meet. These are quite well measured. Abi can talk about some of these more than I can. If you look at the Pillar II objectives that now have been augmented in various ways, including having more specific climate mitigation objectives, it is very difficult for us to see how you can deliver these obligations in the UK without having the maximum-level obligation. Considering that the main drive, strongly supported by the UK Government, behind the changes in the CAP was to emphasise more public goods for public money, it is difficult for us to imagine an outcome whereby we are producing potentially fewer public goods by scaling back on the resources available. It is quite difficult to explain to the public.

On the competitiveness point, one can sympathise with the NFU that payments vary inside Europe, but it is not particularly clear where the evidence lies. In 2009, we did a piece of work for DG AGRI on the impacts of modulation with the Dutch Agricultural Economics Research Institute. We did some modelling exercises, and I can send you references, if it is any use. It showed the impacts of modulation on farm competitiveness to be extremely small. Farmers continue to receive money through Pillar II; it does not disappear out of the agricultural system. One would not say there were zero effects, but they were not significant on this evidence.

Abi Bunker: The connection between greening and agri-environment schemes is a false one; it is a very worrying connection if people view delivering greening across farming as some kind of argument that less is needed in agri-environment schemes. It is important to note that, although the impulse for greening may have been a good one for getting greater public goods delivery across the payments, by its very nature Pillar I is not suitable for delivering public goods. It is not multi-annual; it does not require ongoing activity over several years, which is exactly what is required through agri-environment schemes. It is not contractual; there is no contractual obligation to deliver between the landowner and farmer and the Government. It does not require the delivery of certain objectives.

Pillar I is not a suitable place to try to deliver the kinds of things that we know very much from the evidence on the current programme are totally possible and have been delivered through good agri-environment schemes. We have some things to learn from our experience of agri-environment schemes this time around, and things to improve. There is good evidence, particularly from England, on how much they can deliver for the environment and for taxpayers. In order of magnitude, if we want to deliver for the environment, numbers one, two and three are maximum modulation so that we can do as much as possible through high-quality, well targeted schemes in agri-environment.

Chair: We have to keep the answers a little shorter, or we simply will not get through our work this afternoon.

Q37 Iain McKenzie: You mentioned healthy, functioning water and soil. I can get my head around how a farmer can improve the soil, but how can he improve the water? I thought the main problem with water for farmers at the moment was that there was too much or too little.

Paul Wilkinson: It is not just what the farmer needs; it is the impact of the farming process on water quality and availability. Farming and food production require large amounts of water-certain crops certainly do-and farming system inputs can have impacts on water quality. However, if we channel some of the targeted schemes, we can invest in creating habitats and restoring wetland systems that can purify our water.

Q38 Sheryll Murray: On cross-compliance, what impact will the reduction in cross-compliance requirements have on the environment, and should they be mitigated by measures put in elsewhere, such as greening?

Abi Bunker: Some of the reductions in cross-compliance are worrying. For example, elements of the Birds and Habitats Directives have been removed from cross-compliance, which means we could see landowners breaking the law in terms of committing serious wildlife crime but continuing to receive their single farm payment, which, as a taxpayer myself, I find quite disturbing. There are other elements that have been removed because it is considered that greening will pick them up. The key point is that, as part of the negotiations in Brussels, so many exemptions to greening were agreed that it is not universal across our farmers, whereas cross-compliance is. There are some really big and worrying questions about the environmental impacts of the removals from cross-compliance. Yes, I agree.

Chair: If we are all agreed, we can move on.

Q39 Neil Parish: Talking about England now, should the regional allocation of direct payments be adjusted to increase support to upland farmers, and what might be the environmental impact of doing so? We have a table here that shows that the non-SDA land is some 6,717,000 hectares, and SDA not moorland is just 500,000 hectares. It would have the knock-on effect of not taking too much money away from the non-seriously disadvantaged farmers and giving a bit more to those farmers on the borders of the uplands. What is your view on that matter? This is single farm payment; this is Pillar I.

Paul Wilkinson: It almost links in some ways to what your colleague was saying about the importance of the uplands and the services that those farms provide. They provide a lot of the services that have no market value at the moment, in terms of supporting water quality, soil retention and climate change adaptation. Having some greater support for upland farming within the direct payment is certainly something we would support. We have to be clear about the purpose of that and the outcomes we are trying to achieve, and then work out the best way of doing it.

Q40 Neil Parish: Do you recognise that stocking on hill farms is necessary and that you have to have some more support in order to keep the sheep and cattle there? Do you see a benefit in that, or not? Are you determined to have the hillside with nothing on it?

Abi Bunker: Absolutely not.

David Baldock: No. We would all agree that it is important to keep the stock on the hills. They are a very important part of environmental management, as well as a good way of using the resource and keeping upland communities going. It is potentially a win-win-win. Certainly, speaking for my organisation, we would have some sympathy with the principle of moving support up the hill for that reason, but the trouble is we need an evidence base for this to say, "Actually, the effect is going to be", because you do not know how the incentives will play out. There needs to be some data to mess about with, which is not in the Defra consultation, so it would be quite helpful to be clear what the impact and the conditionality would be on those payments, but we accept there are issues of under-stocking in some areas.

Q41 Neil Parish: I suspect I will know the answer to this next one. Would moving money uphill negate the need for an uplandspecific agricultural environment scheme?

Abi Bunker: It is an interesting way that Defra are going about it. In principle, I think removing the support targeted at certain areas with environmental conditions, via an agrienvironment scheme, is a backwards step to something that potentially, unless they are very careful about it, is without conditions. They would really need to look at how an uplift to a direct payment would work. There was real value in having an uplift scheme, although I think it was unfortunately dumbed down later on as it was developed. It has not delivered as much as it could have done, had it had greater rigour in it. We think it would have been better to work on the quality of UELS rather than move away from it.

Q42 Neil Parish: Do we need an upland-specific agri-environment scheme or not?

Abi Bunker: Either you do it through an uplift to direct payment and ensure through cross compliance, implementation, maybe through the application of a national certification scheme of greening that you attach the environment conditionality. There may be scope for that.

Q43 Neil Parish: I link the last two parts of the questions together. How else might the Government use CAP to support farming in the uplands? Also, should the Government seek to reduce large payments by more than the minimum amount of 5% and then spread that money across? I am playing devil’s advocate here. What would you like to see? Don’t take any notice of Richard Drax next to me.

Abi Bunker: From the RSPB’s perspective, the most important thing would be high quality, well targeted, advice-led agri-environment schemes, such as HLS. We have seen examples of how that has really provided enormous benefits in the uplands in terms of environmental quality, species and habitats. It has also leveraged in a lot of other funding, for example through the water companies, for investment in these areas. High quality, well targeted, advice-led HLS-type agreements or landscape-scale-type agreements for agri-environment is the number one priority.

Q44 Richard Drax: Will the active farmer test have any impact on the environment, particularly the minimum level of activity test?

Paul Wilkinson: It is fair to say that we have some concerns around the active farmer test. We are quite pleased in terms of the negative list, and we can see the reasons why we want to reduce the number of railways and sports grounds receiving the funding because there is such a limited amount. We need to make sure it is used in the best possible way. We do have concerns that there are still organisations that might be captured by that list that are trying to deliver the outcomes that the Government desire.

For example, we might be captured by the fact that we have lowintensity grazing, lowintensity management, which might mean that we are captured by the fact that we do not meet the minimum activity threshold. As organisations that are seeking to deliver many of the outcomes that the Government desire, it would seem counterproductive and counterintuitive to capture us. If organisations who are trying to deliver those environmental outcomes are captured by it, then yes, there would be impacts on the environment because you would be cancelling out those organisations that are trying to deliver high-end environmental outcomes.

Abi Bunker: As farmers, more so than organisations like ourselves, many of what we would consider high-nature-value farmers are extremely extensive. We know that work done in Scotland has shown that hundreds of farming businesses would be excluded on the basis of a stock intensity of below 0.02 livestock units per hectare. That is worrying, because those farming systems tend to be the most environmentally valuable.

Q45 Richard Drax: Finally, do you support the call for the end to dual use? I think you know dual use is: the landowner claiming for different subsidies on the same area of land.

Abi Bunker: The RSPB does not, no. We support dual use, and it is something we utilise ourselves on the land that we either manage or own, where the tenant farmer would receive a single farm payment, and because the RSPB is doing fairly high-level conservation management as part of an agri-environment scheme, we would receive the agrienvironment payment. We find that it is really useful and works well. Clearly, it needs to be based upon a very strong and close working relationship between the tenant farmer, the grazier and ourselves. However, it is something that in the future would lead to problems, not just for ourselves but probably for everybody.

Paul Wilkinson: I agree. We would not support prohibition of dual use for the same reasons.

David Baldock: We would not either. We understand the Commission’s impulse at a European level, what they are trying to achieve. However, when you confront it with actual practice where it works well, it would be counterproductive to insist on that.

Q46 Iain McKenzie: Continuing the theme of what you may or may not support, do you support the Government’s aim not to make use of the coupled support?

David Baldock: We do sympathise with Defra’s approach to try to contain the use of coupled support throughout the CAP negotiations, which they did pretty vigorously. There were some respects where coupling has been introduced on a much larger scale than anybody envisaged, so I think that was a correct position. It is therefore logical to be very sceptical about using coupled support in the UK. In principle, we would not want to rule out coupled support ever being useful in any circumstances, but we say the general principle of strong presumption against it is correct.

Abi Bunker: We would agree. We would not support coupled support and headage payments because we are still seeing environmental problems caused by that system that drove management that was counterproductive and ended up degrading the environment. As a principle, it is not something we would support.

Paul Wilkinson: Likewise. We have redefined the outcomes we are trying to achieve through the CAP. The coupled support was there for a particular purpose, and we have realised that it does not necessarily work and can be counterproductive and pretty damaging. As David said, we would not rule it out absolutely, but do not support it.

Q47 Mrs Lewell-Buck: Do you support Defra’s current proposals to raise the minimum claim size, which would remove 16,000 claimants from the system?

Abi Bunker: This is the minimum claim size from one to five hectares. Yes, it is worrying that there would be a whole swathe of businesses, and again potentially some of our most valuable in terms of looking after our precious species and habitats, that may fall out of that. As with looking at the impact of putting money up the hill, I think they need to do some research fairly quickly to look at what the impact of this might be.

David Baldock: I would like to see the evidence from Defra.

Sheryll Murray: If this did not happen, where do you propose the extra money would come from to keep those claimants in? There is only one pot.

Chair: You could think about it and perhaps work it into an answer later. Can I just say there is going to be a vote at 4.30? We will interrupt, for which we apologise in advance, and I would just like to ask for your patience, and invite all colleagues to please come back after the first or second vote as quickly as we can. Thank you for your understanding. That is why we are trying to make progress.

Q48 Ms Ritchie: Do you foresee the greening criteria set out by the Commission as being able to deliver environmental benefits that represent value for money for the taxpayer? Are there any that give you particular concern?

Paul Wilkinson: We have been quite clear from the beginning that we feel the key mechanism within the greening is the ecological focus area, if that is deployed in the right way, in a smart way, where we look at the way those ecological focus areas operate across the landscape scale. Through not just randomly allocating 5%, but actually looking at how we can connect up between farms, how we can link together various habitats that are created, there is some gain to be had. We are concerned by the permanent pasture measure because there is insufficient definition around permanent pasture, which is not refined enough to identify the difference between a wildflowerrich meadow and a field which has been ploughed five or six years ago and improved, but still is down as grass. There are some issues there, but I think the ecological focus area does have potential and that is the area we would want to focus on.

Abi Bunker: I agree. Something could be made of the environmental focus area, and that will be down to Defra, particularly in how it can deliver for pollinators, which are vital for productive farming. Not only are they a lovely, beautiful and valuable part of our biodiversity; they do a damn good job. As somebody pointed out, if we have pressure on our Pillar II and agrienvironment, we know the scale of need from the state of nature is enormous, and way beyond what we have already. Asking and trying to make EFAs deliver for our widespread declining wildlife, such as some of our farmland birds, would be absolutely vital. The ideal way for Defra to do that is through the development of a national certification scheme.

David Baldock: Briefly on the permanent pasture, we think there is an important issue there. Unfortunately, it has not been treated in exactly the right way in the final version, so you could get too much effort going into something that was not really producing the outcome you wanted. It has already encouraged farmers to plough up permanent grassland, so that is quite worrying, to answer another part of your question. It is a question of what Defra does now to translate this into something that works well in the UK.

Q49 Ms Ritchie: Would devising a certification scheme as an alternative to the Commission’s proposals risk adding a layer of bureaucracy and increase the risk of disallowance?

David Baldock: Can I start off with that?

Chair: If you all agree, you do not all have to speak. You can nominate someone each time.

Abi Bunker: We will tell you whether we agree.

David Baldock: I will keep it very short. There will be some administrative upfront costs in a certification scheme to set the whole thing up, because you would have to have a fresh scheme. Beyond that, it is not clear to us it would be more administratively demanding than another type of scheme. It is a bit unclear how the policing and monitoring of it would work at this stage. It could have certain advantages. It is an open question at the moment whether it could lead to disallowance. We would have to see the implementing rules. On any aspect of greening, Defra would point to the danger of disallowance.

Q50 Ms Ritchie: Do you accept English farmers’ concerns that they have been asked to do more than their rivals and therefore are being put at a competitive disadvantage?

Abi Bunker: Are you talking particularly about greening?

Ms Ritchie: Yes.

Abi Bunker: David made this point in the corridor earlier. We do not yet know how the other Member States are going to do greening. We are presupposing that England is going to do this way better than everyone else, which I think is slightly obnoxious.

Richard Drax: We always do.

Neil Parish: We have that potential.

Abi Bunker: Again, I go back to the principle of this public money delivering greater value for money when we are living in a time of constraints. Every sector of industry and every part of our public service is taking cuts. None of the bodies taking cuts are taking cuts in areas they feel they should be, I suspect. It is a case of making choices. I think we absolutely need to be getting much more in terms of public goods delivery, and greening needs to be utilised as much as it can. I do not believe it will create those competitiveness issues that others do.

Q51 Ms Ritchie: How might greening in Pillar I complement agrienvironment schemes in Pillar II? Could greening disincentivise farmers to implement agrienvironment schemes on the one hand, or lead to farmers currently in ELS schemes being paid twice for delivering the same public good on the other?

Paul Wilkinson: I will kick off and be very quick, Chair. It links to your question earlier around the links between the greening and agri-environment. The greening really is providing the baseline. It is about lifting the expectation and the environmental baseline around what individual farmers/landowners are delivering. In terms of the dual payment, the previous witness provided a robust answer on that as to how those payments would be made. The key thing, really, is around them looking at the agri-environment scheme. The landscape scale approach that Defra are taking is really beneficial. That is a progressive step that needs to be supported by advice and facilitation if it is going to achieve the outcomes that Defra are looking for.

Chair: Does anybody disagree?

David Baldock: No. One thing that is important in the second Pillar schemes is it needs to have the right amount of advice, information and support for farmers supporting them in a way you will not necessarily get under the first Pillar.

Q52 Richard Drax: Agri-environment schemes I want to ask you about now, and the anticipated environmental benefits. If they have not worked, how could they be better targeted? Can I just made one little addition here about the farmland bird index, which is declining-butterflies, moths and many other species too? It could be argued that the £450 million spent has failed. What single measure under the new CAP do you think would be most effective in reversing this, as part of this effectiveness?

David Baldock: We should be a little bit careful about saying agri-environment schemes have failed. They have multiple objectives. A lot of them are not about biodiversity, which is probably the most difficult bit to get right, and you have to do learning by doing. We do not know what the counterfactual is: what would happen without them. We would certainly say we could do better, but I am nervous of your saying they failed. That is going a bit too far.

Q53 Richard Drax: How do we do better?

David Baldock: They could do better by having more ambitious objectives and bettertargeted measures, which are essentially based on a better understanding of exactly what we want. There needs to be more focus, including an area-based approach as well as an individual-farm-based approach. We might want to be more innovative and experimental, and try some different approaches.

Abi Bunker: We have seen a flattening off of the farmland bird index over the last few years, but we have not seen the recovery that we need to see. However, I think there is good evidence to show that a lot of the problems with ELS are that there are a lot of options that are, forgive me, money for old rope. There are a lot of options that have been taken up that are not as high quality and evidence-based as they needed to be. The most important thing if we are going to do something that is open to all-and I do hope that there will be an agrienvironment scheme that is technically open to all-is that the quality is ramped up, they are well-targeted and that they require the actions we know from the evidence will deliver in the right combinations and in the right places. Through doing that, at Hope Farm we have delivered a 200% increase in our farmland bird index, whilst also increasing our yields.

Q54 Richard Drax: Is this more oversight of farmers, more rules, more regulations, more areas? Is that what you are saying?

Abi Bunker: No, absolutely not. It is in the upfront design of the schemes and the way that you take farmers through so that they make the right choices-they are either required to make the right choices or guided to make the right choices-that will deliver for their farm, but also for the biodiversity or for the other environmental objectives that are ultimately the objective of that scheme.

Paul Wilkinson: I would agree in terms of the targeting, advice and support. The proposal to introduce a facilitation fund in order to then support farmers to develop the best package of measures for their particular landholding is a really positive step, and something that I hope carries forward in the consultation.

Q55 Richard Drax: An inspection regime-is that working, do you think?

Abi Bunker: I do not think it is working in terms of water quality. My understanding is that there are quite a lot of problems that are to do with not agrienvironment, but complying with cross-compliance rules. The evidence that is coming out from Scotland and across England is that we have a lot of cross-compliance breaches, as agencies are walking river courses, so inspection and enforcement is a problem that needs to be addressed.

Richard Drax: And the other two gentlemen agree with that. Thank you.

Sitting suspended for a Division in the House.

On resuming-

Q56 Richard Drax: Do you have any sympathy with NFU’s argument that some of the higherlevel schemes pay farmers to take land out of production, making farmers less productive and more dependent on CAP money?

Abi Bunker: No, I do not.

Richard Drax: You have no sympathy.

Abi Bunker: Yes. There is an enormous amount of evidence from across the country that HLS has enabled farms to become more productive across a range of services. It is not just about food production. It has embraced and allowed these farms and the land management to deliver a greater range of products for society.

Q57 Richard Drax: What are these greater range of products, out of curiosity?

Abi Bunker: For example, the SCaMP Project, which has had a wodge of HLS funding, which leveraged in further funding, was all about re-wetting the peat and restoring the peat land to its former glory. The main aim of it, and why united utilities and water companies were involved, was to stop carbon leaching out of the soils into water, which of course then colours the water and needs to be cleaned up, the cost of which is transferred into water customers’ bills. That was the main aim, but it was utilised as a multifunctional project, so not only was it able to address discolouration of water, but by building and restoring the peat through blocking of the drainage to restore the peat as a carbon sequester, it delivered climate change benefits and a biodiversity habitat.

Paul Wilkinson: I agree. It was a broader range of services, but it was also a competitive scheme. People entered it because they wanted to enter it. They were not forced to enter it. I think they entered it because they saw there was value for their business in receiving that funding to deliver that range of things that Abi described. We are talking in a very narrow definition of production in terms of your question. We are trying to describe a broader range of production.

David Baldock: On a more generic level, some de-stocking has occurred because the stocking was only there as a perverse response to stopping subsidies in the first place. If we go ahead and accept that we want public goods, we are going to have to pay for it. I would accept that ultimately farmers will be dependent on public money for some things, and that is okay. The public should be paying for it if they are getting the benefit from it. Although I can see where NFU are coming from, I do not think we should be frightened of the principle of actually saying certain things you have to live with and pay for. It is not what the farmer or I would do in my back garden either without some payment, so I think we will have to get comfortable with that idea eventually if we want the kind of countryside that meets all our objectives.

Q58 Neil Parish: As a supplementary to that, do you not feel that perhaps there was over-stocking with the previous system that supported the headage payment, but there is almost an argument now that the stocking density is too low in some cases, and there may be need to support them? Do you see that or not?

Abi Bunker: It is an interesting question and has there been a lot of anecdotal evidence on this for some time. That is why we decided, the year before last, to ask Cumulus Consultants to undertake a piece of work across the UK to actually try and get to grips with what is happening. Is it over-stocking or under-stocking? Is it over-grazing or under-grazing? The conclusion of that, which involved talking to farmers and land managers through questionnaires and focus groups as well as looking at the data, was the issues are extremely localised, and extremely different across the picture. We can see that there have been some quite fundamental changes, not just in stocking densities, but in the types of livestock and breeds that are used.

Q59 Neil Parish: I am concerned about the potential gap in funding for those farmers whose ELS schemes expire in 2014–2015. Do you see a danger of some of those farmers not going back into a scheme at all?

Paul Wilkinson: We are generally accepting that there will be less money, hence the need for us to put more money across in terms of modulation. We accept that we need to reach a broader range of objectives. The new scheme will mean there will be potentially fewer people receiving that funding, although we would support it being an opentoall process. There will be a phasing out of people in the current schemes, and I do not think that is a bad thing because some of those schemes are not necessarily delivering what we needed them to deliver. A lot of these schemes are delivered in a way that is focused more on the outcomes, looking at the landscape scale and the higher environmental outcomes, and that is not necessarily a problem. That is just part of the process. We have less money and want to do more with it, so I would not necessarily see there being an issue with the gap. It is more of a fact that we are moving towards a different-

Q60 Neil Parish: Defra is talking about coming up with a mediumlevel scheme. Have you seen anything of this, and what is your view on that?

Abi Bunker: Whether it is called an entry-level scheme plus or middle-whatever it is called-if that first scheme is open to all, my understanding is that they wish to work and encourage work at a landscape scale. Whether that will be a default criterion for anyone entering-you have to enter at a certain scale either because you have got a large enough estate yourself or would be working in collaboration-I do not know. I think if they can provide funding to help, as Paul says, facilitate that kind of arrangement, it would be incredibly useful, as long as it learns the lessons from ELS in terms of designing in and requiring certain quality.

Q61 Neil Parish: Do you think it is better to encourage farmers down a route, rather than beat them with a stick if they don’t necessarily do it in the right way from your point of view?

Abi Bunker: Clearly, encouragement has a really important role to play. Although the CFE did not meet its specific targeted objectives within the timeframe, it has shown that, where there has been investment in certain regions, ownership of the issues and action have started to increase and the quality has improved. That is clearly desirable and we do need to win hearts and minds, and it does need to be us working together. Unfortunately, we are not in an ideal world, and the evidence shows a combination of voluntary and requirement.

Q62 Chair: Can we just bring the threads together? At the beginning, you said you thought this was, to put words in your mouth, a "missed opportunity" in the sense that they could have got the baseline plus. Would you start by saying that it is a missed opportunity? Where do you think the greatest difficulty is in implementing both of those on the crosscompliance side and on the payments side?

David Baldock: One difficulty would be dealing with the conflicts between, on the one hand, trying to have more targeted schemes and better results, and on the other hand, a shrinking administration and trying to simplify the thing. It is quite difficult to manage those conflicting pressures. A second difficulty will be to do with trying to understand exactly what the nature of the disallowance threat is, and get the policies to work in proportion to those, because there is a danger of just running everything to avoid disallowance, and therefore having policies which do not deliver enough goods. There are certainly IT issues, but the final thing I would say is that there will be a one-off need to do a significant amount of mapping, and I know some agencies are worried about the costs and so forth. That is an inevitable one-off adjustment when we start directing agricultural policy more towards environmental outcomes. We are just going to have to do the mapping, and it is unfortunate to have to bear the costs at one time, but I do not see that we can avoid it.

Paul Wilkinson: I was going to say that one of the critical things is the fact that Natural England retains the agri-environment management. There is a really important need, in order to make sure this is not a missed opportunity, that there is advice linked to the agrienvironment schemes to make sure they are achieving what they need to achieve. Natural England has the expertise, evidence base and research to know what the key items and measures might need to be within individual schemes. Working with organisations like ours, we can make sure that those schemes are delivered to their best extent. The concern is that, as you will well know, the agencies are still facing further severe cuts, so there is a risk that the administrative support within the agencies could be even more limited in future in order to administer this scheme.

Abi Bunker: In Defra’s ability to turn this into something better than it looks like at the moment from the EU, the biggest threat is that they put effectiveness at the bottom of their list of the trio of things that come out repeatedly about simplicity, affordability and effectiveness. It is absolutely vital that they are effective. I am concerned about the underlying deregulatory agenda of this Government, which is potentially going to unpick a bunch of key underpinning stuff in terms of environmental protection.

Q63 Neil Parish: So you would like more regulation?

Abi Bunker: Absolutely not. I would like better regulation.

Q64 Chair: We can have better regulation here. Just a very quick question: out of 10, what mark do you give Defra’s communication and consultation on this stage of the CAP reform?

David Baldock: Gosh. Their communication has been pretty good with most of the main stakeholders.

Abi Bunker: I think it has been pretty good too. I would have liked earlier consultation, and it is a bit worrying that we still have not seen any consultation.

Paul Wilkinson: I will give you a seven.

Chair: Thank you very much for accommodating us. We are trying to get our Report out in time, and this had to be made before the final decisions are taken, so we are very grateful to you for being so generous with your time and accommodating our disappearance for the vote. Thank you very much indeed, and to the Committee as well for coming back. We stand adjourned, and reconvene tomorrow.