UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 745 - v

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Environment, Food and Rural Affairs Committee

CAP implementation 2014-2020

Tuesday 5 November 2013

RICHARD Macdonald

Evidence heard in Public Questions 326 - 382

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Oral Evidence

Taken before the Environment, Food and Rural Affairs Committee

on Tuesday 5 November 2013

Members present:

Miss Anne McIntosh (Chair)

Richard Drax

Sheryll Murray

Neil Parish

Ms Margaret Ritchie

________________

Examination of Witness

Witness: Richard Macdonald, Chair, Farming Regulation Task Force Implementation Group, gave evidence.

Q326 Chair: Good afternoon and welcome. A particular welcome to you, Mr Macdonald. Thank you very much for agreeing to return.

We would like to put questions to you under two headings, if we way. One is our last evidence session preparing for the CAP reform and its implementation, which is the thrust of our inquiry this time; then secondly, we would like you to update us on the work of the Farming Regulation Task Force. That is how we are proposing to divide the afternoon up. We are not sure, but there may be a vote. If there is, we will just adjourn for a short period, if you could bear with us, but you are very welcome indeed.

Bearing in mind that the present reform is meant to be simpler and easier to administer, where do you think we are in terms of simplicity in implementing what will be the revised CAP?

Richard Macdonald: Thank you very much, and thank you for inviting me back. I should say for a bit of context that for the first time in any CAP negotiation I have not been involved, which I have to say has been a mild relief. I am not directly involved, but looking from the outside and being a reasonably informed observer, and looking at it through the eyes of the task force and better regulation, I think it is fairly well chronicled, and I would agree that it is not simpler. There is still clearly quite a lot of implementing regulations to go. Often on these things the devil is in the detail, and the burden is often in the detail, and there is still quite a lot of detail to be negotiated. However, my overall read is that this is more complicated and not simpler, sadly.

Q327 Chair: Do you think it might result in an increased, rather than a decreased, regulatory burden on farmers?

Richard Macdonald: That is a very good question. At face value, yes, there are more requirements and demands. If you look at the cross-compliance conditions in the broadest context, and the greening and various requirements that are going to be made of individual farmers, then it is more complicated.

The reason it is an interesting question is that at the same time-you may want to come on to this-my reading is that the Government, the RPA and the whole advance of online technology and use of digital is very significantly better and more prepared, and indeed more advanced, than in 2005, when frankly it was very poorly delivered and illconsidered.

Q328 Chair: One of the issues in 2005 was that the computer system was being changed. Does it alarm you that they are again intending to introduce a new computer system prior to the reforms taking effect?

Richard Macdonald: I guess we all have alarms or concerns when any big new computer system is going in. I am not directly involved, but I have been quite closely connected to the DEFRA CAP delivery team, and through that we have asked a lot of questions about RPA. I have also made a point of asking other stakeholders about what they see and what their involvement is, and have had regular reports from Mark Grimshaw, the chief exec of the RPA.

These are always famous last words before something is implemented, but my view is that they have done a pretty good job. I can draw direct comparisons. I am one of those who were around in 2004/2005, and frankly it was very badly done then. It was self-evidently very badly done. You could tell that at every step of the way. We had a senior management of the RPA, which again is well chronicled and has been through this Committee, that was in a significant state of denial about what was happening. This is a very transparent process and quite a modular process. It has been very significantly trialled and is being trialled. One of the really good things is that it has had a very significant involvement of stakeholders and, to take the terrible jargon out, of farmers. They have gone out, tried this around kitchen tables and applied it, so all the signs look pretty positive to me.

Q329 Chair: Where do you think the biggest challenges will come in terms of delivery, compliance, inspecting and making the payments?

Richard Macdonald: I am hopeful. Even if there was not a new IT system, we have a new payment system, so there has to be a completely new programming of it. At any stage where there is new programming there must be some additional risk to the continuation of the status quo. I am neither an IT expert nor on the inside, but all the signs I am getting are that the preparation for a different programme for different payments, even in a new IT system, is good.

The whole inspection regime is potentially the most complicated. There are two broad issues that have bothered farmers-you are all very familiar with this-in the last seven or eight years. One is the delay in payments and all the difficulties around payments. That is particularly exacerbated around the fringes with complicated cases, such as those involving people with multiple land holdings and so on. Those fringe issues are just not simple, but I am hopeful that that will be significantly better on the basis of the information I have been given.

Inspections is the other issue that always irritates farmers, and it is about proportionality, the length of time on farm and how much microscopic attention to detail there is. They are all issues that have a propensity and capacity to carry on, and they are still very much on my radar. Some of those issues, as we laid out in the original Task Force report, are issues for the implementing regulation, so that is what I refer to among the things that have still got to be really nailed down, as I understand it. I could give some examples of where it would be easier or more difficult if you want.

Q330 Chair: If you could do that in writing, that would be very helpful. Obviously we will not be consulted on the implementing regulations, and I always prefer when it is on the main face of what is being agreed that we can see and hold the Department to account.

Richard Macdonald: The point I am making is that in looking at it now, there are still issues that will make a significant difference between achieving simplicity and not doing so. Frankly, once the big arguments are over about how much money there is, whether it is allocated from Pillar I and Pillar II, in a year’s time everyone will have forgotten that. What everybody will be paying attention to is the detailed delivery.

Q331 Ms Ritchie: You are very welcome. Is there a risk that the drive for simplification may make the Government more risk-averse and less focused on delivering public goods for the taxpayer?

Richard Macdonald: There is always that balancing act. I do not envy anybody in trying to get it absolutely right. We should not in any way underestimate. You will be aware that I was Director General of the NFU going back, and I always used to push for things. I probably did not give sufficient consideration to some of the disallowance questions. The disallowance is big money. I cannot remember the figures, but from memory, on this issue alone, it is getting on for £1 billion. Any Government that does not take proper account of disallowance and the need to do that is probably verging on irresponsible and would be in front of the Public Accounts Committee, let alone this Committee, in short order.

There is a whole dimension of different greening and environmental conditions that you could argue deliver a bigger breadth of public good. I would argue on core Pillar I payments that, every time you do that, you add more complexity, and in doing so increase the risk of disallowance, which is I suppose the answer to your question. You also make it more complicated for farmers. Is that better regulation? I would probably say no. The whole drive of everything I have said on this is "Keep it simple," and often keeping simple is not adding additional conditions.

Q332 Ms Ritchie: As a supplementary to that, do you think applying the Commission’s three greening measures in England will deliver sufficient environmental benefit to justify the huge spend of public money?

Richard Macdonald: I suspect the benefit of it is relatively marginal, if I am candid. Therefore there must be question marks as to whether or not it justifies the complexity and the additional spend. That is a personal view.

Q333 Chair: The cost of the first year, I think it was, when the current CAP came into effect in England, was £1,700 to process each claim. Presumably, even with disallowance, we will not come anywhere close to that figure going forward.

Richard Macdonald: I am not involved in it, but I would be extraordinarily disappointed if the administration figure did not come down very significantly. After all, we should have learnt huge lessons over the last seven or eight years. Although this is different, it is in many ways a continuation of the past. We are on a hybrid; it is a regional payment. It is not that great big huge change that occurred in 2005, and we do have the benefit of IT. The sooner we can get into complete delivery online, online application and frankly Digital by Default with all the difficulties around that, the better, as far as that is concerned. You are not interested in Wales and Scotland, but they will have a lot of those difficulties that were around in 2005.

Q334 Neil Parish: Wales and Scotland were delivering it on a historic basis anyway, so not a regional basis. As far as England is concerned, you have said that, from a bureaucratic and administrative point of view, taking 16,500 claimants out because they have five hectares or less is a good thing, but are you a little worried about the greening aspects of it and taking them out as far as cross-compliance is concerned from an environmental point of view?

Richard Macdonald: My judgment is as good or bad as your own as far as this is concerned. When the original Task Force made that judgment, and it is the five hectare one that the Government are going to recommend, the judgment we made was that the vast majority of those claimants were not economic units. They were, in lay parlance, hobby farms. They were not the sort of units where there would, frankly, be significant change either way, ripped up or changed. They were what they are and will stay that way.

The very small number of economic units would be largely intensive poultry, pig and horticultural units, where candidly a few hundred pounds on the turnover of those would not make any difference. As you know, I am very involved in a big poultry business in Moy Park, and none of those units candidly would make the slightest bit of difference in any sense. In fact, probably most of those intensive economic units would choose not to apply for it because of all the bureaucracy around it. It would not be worth the £1,000 or thereabouts.

Q335 Neil Parish: The National Parks were a bit concerned when they came to see us because 40% of their claimants are five hectares and below. Do you have any sympathy for their position?

Richard Macdonald: I am not sure I share the same concern. I do not know whether that is being sympathetic or not. Candidly, and this is a judgment based on 35 or 40 years of experience in the industry, I am not sure there will be much impact for good or bad on that. By dint of what happened in 2004-05, we have added a great layer of bureaucracy that was never there beforehand. None of these people claimed or were in environmental schemes beforehand.

Q336 Neil Parish: I think that answers the question. From a bureaucratic point of view, you can see the benefit of taking out 16,500 applicants. The next question: the Task Force recommended that mapping for the single payment scheme should be made simpler. Are you content with the approach of the RPA in taking from the new CAP? One of the things I am worried about is that we did have a very complicated mapping system. It seems to have taken nine years to get there. Are you confident that, if we change that system, we will not have another load of problems?

Richard Macdonald: Confident is probably a strong word. I have been given information by RPA, and also by stakeholders and other people that have looked at it; the view coming to me is confident. I am being told by the CAP delivery team and stakeholders that it is a robust system. There is nothing sitting worrying me, as there was on previous occasions, that there is something about to go wrong there.

Q337 Neil Parish: I have a supplementary on that. As the Task Force Implementation Group, have you been involved in discussions with the Rural Payments Agency on implementation of the new CAP?

Richard Macdonald: We have done it through DEFRA and their CAP delivery team. We have had regular reports from RPA via that, so we have done it through the DEFRA team, who include RPA as part of that. It is maybe something that I would consider or should do in the weeks ahead, but I have not thought there was a particular value of going to Reading and looking at the microscopic detail. I have made a point of trying to talk not just to the people who "would tell me, wouldn’t they?" but also to the stakeholders involved, so to NFU and CLA.

Q338 Neil Parish: Are you confident that DEFRA and RPA have actually talked to real live farmers about the real issues when they have gone through these stakeholder processes?

Richard Macdonald: From everything I have seen, yes. One of the points we made in the Task Force, which is a broader point but it applies to the CAP, was that DEFRA and its agencies must get out there and engage with real farmers, not just do it through the usual stakeholder groups. From what I have seen, they have done a pretty good job of that. There is a massive reputational risk to them all if they do not do that, so they would be pretty stupid if they have not.

Chair: You alluded to it earlier as well. As you say, it has been road-tested.

Neil Parish: I just wanted to double-check that.

Q339 Ms Ritchie: Do the proposals on cross-compliance satisfy the recommendations of the Task Force?

Richard Macdonald: If you gave us a free run at it, we would probably simplify more and take one or two things out that are still there as cross-compliance conditions. I do not particularly want to see a reduction in standards; there is a really important argument about public benefit and that this should not be just a payment to do nothing. However, I was really pleased to see that there is a proposal to reduce the cross-compliance conditions because I thought some of them were unnecessary. Some of the cross-compliance conditions have been not taken out but changed; some of them are outcome rather than process driven. The obvious example is soils, which is a really good change as far as that is concerned.

Q340 Ms Ritchie: Therefore, do you believe the Government could do more to reduce regulation in this area?

Richard Macdonald: This bit is really difficult for me, and probably for you, to make a judgment on. All the signs and noise that I have had are that the Government have been very robust in their attempts in Europe to simplify and to reduce unnecessary cross-compliance conditions. It would appear to me that much of the complexity and lack of simplification arises because of where the Commission has started and where other member states are.

I am aware from my previous involvement in CAP negotiations that they are a haggle. Chairman, you will know that from your European Parliament days. Therefore, you have to decide what is really important and what you will give up. I am not in the middle of that. Are the individual cross-compliance conditions big issues in a haggle? I would say individually no. There are probably more important things that you have to try to achieve out of that. As far as that is concerned, if it was just the Government doing this, I would say you should go a lot further. In the context of the negotiation, they have probably got as far as they are going to get.

Q341 Ms Ritchie: Are you concerned that replacing aspects of crosscompliance with greening measures will mean fewer claimants are bound by the obligations?

Richard Macdonald: I am not sure I know the answer to that, to be frank, but I have a general concern that greening measures add a complexity that I am not sure, frankly, is necessary in terms of the benefit to the cost. However, all the indications I have are that it is a done deal as far as that is concerned.

Chair: We are investigating what is happening, but it is unacceptable having this noise while we are taking evidence from you, so we are doing our best to find out what it is.

Q342 Sheryll Murray: The Task Force argue that guidance on cross-compliance be overhauled and field-tested. What steps have you taken to ensure the Government acts on this recommendation and produces guidance that is acceptable?

Richard Macdonald: We have renamed ourselves from the Task Force to the Implementation Group, or rather DEFRA has renamed us. One of the things that the Implementation Group has been most strong on, and you may want to go onto this in the broader context, is about reducing process. Some of that is about moving from paper to online, which I think is a huge step forward and we should drive that more. Some of it is about driving greater clarity. Less is more, generally. The aspirations as far as the CAP guidance are good. The proof is still probably in the pudding in terms of whether or not that is actually going to happen.

Q343 Sheryll Murray: Could we then turn to a proportionate response to non-compliance? The Implementation Group recommended that cross-compliance enforcement could be made proportionate. Is there any evidence of this happening?

Richard Macdonald: Some of this is getting into detail that I am probably not the world’s greatest expert on, but from the two or three bits I have seen there have been some improvements in proportionality. I was looking at the cross-compliance conditions on soils. The penalties on that have been reduced and are more outcome-driven, which I think is really good. I suspect some of this is still going to be in the implementing regulations: the inspection regime; who is inspected; whether that is risk-based; and what the penalty regimes are. These things are intensely irritating to people, and we can get massively wrapped up in a huge amount of detail on them.

Q344 Sheryll Murray: The NFU told us that there is a yellow card process where, for the first minor breach, farmers can be given a warning without penalty. Have you discussed this step with the RPA and DEFRA?

Richard Macdonald: It is something that the Task Force and the Implementation Group have felt is a very good idea. There is a question around a massive, very overt breach as to whether you should yellow card or not, or whether you should to go, to continue the analogy, straight to a red card. In my experience, though, and this is not only with the Task Force but beyond, the vast majority of breaches are not deliberate. They are usually out of ignorance or inefficiency, if I can put it rather bluntly, and therefore I think a yellow card system is a really good one.

Q345 Chair: During the course of the evidence that we have heard, we have learned that Natural England is not allowed to give advice to farmers on their applications and on cross-compliance. Would it not seem nice and beneficial that Natural England, rather than just castigate, could actually advise them how they would qualify and how they would not? It certainly seems surprising to me that they are not allowed to.

Richard Macdonald: I must admit I did not know that, so I am very happy to look into it. I must say, when I looked at the guidance proposals that were referred to earlier on, and the online application process, one of the things I thought was very good was the way that you could actually step-by-step go into it and see difficulties, disallowance or tripwires as you came along. I think the electronic system, for both application and guidance, appears to be very good in giving farmers guidance to do that.

I do not know the answer to the Natural England question. One issue for them is simply about resources, and I do not know whether that is driven by that.

Q346 Chair: If you could, it would be interesting to know.

Richard Macdonald: I will happily look into that. As a general rule, the more that we can engage farmers not only to comply, but to do the right thing and provide good value for public money, the better.

Q347 Neil Parish: The Task Force recommended that the RPA allowed claimants to submit their applications earlier. I think the beginning of May is the European deadline. Have you discussed this with the RPA?

Richard Macdonald: I have discussed it with the DEFRA Implementation Group, and made the point again that I think it would be a very good thing to do. The principle of it is agreed, so I do not think anybody is arguing about the principle of allowing people to apply earlier. There is an important cross-condition to it that is if you go in early you do not put yourself in the firing line for inspections. The Government needs to clarify that otherwise people will not apply early. I am not aware that there is any significant issue to that happening, although it probably still has to be confirmed in the implementing regulations.

Q348 Neil Parish: In an ideal world-I do not think we can probably get there-farmers could submit their applications early, and then if there were very obvious mistakes they could be rectified. I suspect that is probably difficult to do under the European rules, is it?

Richard Macdonald: I think the second half of your point is. In the ideal world, given the fact that the rules do not allow for mistakes to be rectified afterwards, what we would do is have a wide window and a terrific guidance process so that everyone got there step by step so there just were no mistakes. I am repeating myself, but in terms of doing it online as opposed to paper, it frustrates us enormously when we do online applications, a red sticker comes up and says "send it back and start again", but all of those things are a good process to avoid disallowance in every sense.

Q349 Neil Parish: I have one final question. A sore that I have got is that, going back to 2005-06 and onwards, if the RPA made a mistake, they seemed to be able to rectify it. If a farmer made a genuine mistake, it was almost impossible to put it right. How do we deal with that one?

Richard Macdonald: I think you and I are in the same place.

Q350 Chair: Have the RPA moved on since then?

Richard Macdonald: I totally agree with you; we could probably have a competition to see how many times we have been irritated and who has been irritated most on it, and we both have been irritated a lot. Given where the Commission is-once you have submitted, that cannot be turned around-what it tells me is that all the effort has to be in getting the original application right. Therefore, the application process, the advice and guidance into it, the engagement of all the other stakeholders to do it, and keeping it as simple as possible are critical. One of my observations and the Task Force recommendation about the need for simplicity is because, if you do not have simplicity, things go wrong.

Q351 Richard Drax: Will the active-farmer test increase the regulatory burden, and how might it be avoided?

Richard Macdonald: Inevitably, it will increase the regulatory burden. The Task Force did mull over this for a long time and eventually made a recommendation that there should be an active-farmer test. It made the recommendation on the premise that it was better regulation; in other words, it was poor regulation to be allowing people who are not farmers to be claiming a farming payment. You might argue that is a fairly tortuous or semantic point, but I do not think there is any doubt in that however you do it, you increase the regulatory burden and you make it more complex by having an active-farmer test.

Looking at the way that the Government appears to be providing for it, if I make assumptions out of the consultation document they have done, they are probably going to do it as simply as they can, but there we should not be in any doubt that that will add complexity.

Q352 Richard Drax: Can you suggest how it might reduce the regulatory burden in any way, very simply? Have you got any ideas as to how it might reduce this regulatory burden?

Richard Macdonald: I do not think it will. By putting a further cross-condition on a payment, it adds another inspection requirement and something every farmer has to ask himself and put himself through the hoop about. Is that right? It is a really difficult policy point. Was it right to be paying a Common Agricultural Policy payment to people who are not farming?

Richard Drax: Madam Chairman and Members, I refer people to the Register of Members’ Interests, because I came in late, just so that it is on the record.

Chair: I think we all declared it at the start of the inquiry so it is covered.

Q353 Ms Ritchie: Why did the Task Force oppose the cap in payments?

Richard Macdonald: For two reasons. We started with a premise-and the activefarmer test is probably the one where we broke away from our own rules-to say everything needed to be put through a simplicity test. Everything that adds complexity both to the Government system and to the requirements of farmers is not a good thing. This will do that; there is no doubt in my mind. I can go through all of these proposals and go, "More simple, more complicated, more simple, more complicated". This is more complicated. That is one reason.

The second is that we tried to apply a broader test about better regulation in the broader sense. We felt it was poor regulation, in the context of trying to ensure that we had competitive farming, to be putting in essentially something which has a social as opposed to economic dimension to it.

Q354 Ms Ritchie: Are larger farms able to take advantage of economies of scale? If this is the case, does that not mean they should be more reliant on taxpayers’ support than smaller farms?

Richard Macdonald: You are probably taking me into policy areas rather than being a terribly dull better regulator. Yes, it is true in just about every walk of life that businesses are getting bigger or niche. There is an inevitable truth about that. One of questions on this is: what is the payment trying to do? I am going outside what I should be talking about, but the payment is there for public good; to create environmental good. Therefore, you are paying per acre and trying to do that, and we are trying to encourage economic success. I am not sure that capping it is going to do that, but that is off my formal brief and into personal view.

Q355 Chair: It causes a problem where there is common land. The evidence we heard from the NFU was that there is difficulty where entitlements for common land were not properly registered. For many of those that should be entitled, the claims have gone unclaimed because the rights recorded on the common land do not sit with the active graziers. It was certainly music to my ears that your report declares in favour so closely with what the NFU are arguing, that there should be a single payment to the appropriate commoners association. How do you believe that view can be best put forward, and how can the Government address the problem of how common land is treated under the CAP?

Richard Macdonald: It is entirely a matter for the Government to negotiate with the Commission. There is a complexity in it in that commoners associations do not hold entitlement and are not land keepers in their own right. However, as you know from your own constituency, we have a very significant area of common land in this country. My view is it should be entitled, and indeed there is a public benefit from making payments in those areas, to the single farm payment. I remain very strongly of the view that the recommendation of the Task Force, and I think the view that this Committee has expressed beforehand, is right. Because I am not involved in the inner negotiations, I find it difficult to make that-

Q356 Chair: I think it was your recommendation in paragraph 7.21. I just want to press you on this because it is unfair that graziers should be required to go to law and to require legal representation on something that so clearly should be their entitlement, as you have so eloquently said in your conclusion. We had earlier concluded in the uplands report that there should be a dispute resolution mechanism. Would that not be an appropriate way forward? There are very few instances of this. It is particularly painful, and I am acutely aware of problems in my own area and parts of County Durham, Northumbria and Cumbria where these problems exist. Surely the right should come down on the side of the grazier, and it is not for the landowner to say that his consent should be required.

Richard Macdonald: I could not agree more.

Q357 Chair: What is happening at the moment is it is going by default, as I understand, but I may have got it wrong, to the landowner. They are entering into an agreement, creaming off sometimes 70%, it is said, in administrative costs, so the grazier who is actually doing the work and should have the entitlement is only getting the crumbs under the table.

Richard Macdonald: I agree with that. There are other cases where nobody is getting it, so there is no benefit to anybody. You could argue in terms of public benefit, therefore there is no payment going in to achieve cross-compliance conditions and environmental benefit.

Q358 Chair: Are you minded to press your recommendation home, though?

Richard Macdonald: I have only relatively recently seen the difficulties that the Commission have expressed about this. It is a point that I do intend to press and I am very happy to give that commitment.

Q359 Chair: That is a very welcome commitment. If we could proceed now to the core task of the Farming Regulation Task Force -I think you said the title has been changed, but for the purposes of today, we will call it that.

Richard Macdonald: It is much easier to do that.

Chair: This is the first opportunity we have had, and it is a very welcome one. You just mentioned public good, but there was a lot of talk earlier, when you were first before us, about earned recognition. Can you explain to the Committee whether there is a discrepancy there? Are we talking about the same thing? If farmers have the Farm Assurance Scheme that they are in and they have got the recognition, do they still have to go through the full cross-compliance?

Richard Macdonald: In the context of cross-compliance, it is an issue that-continuing the shorthand-the Task Force have continued to press, to ask DEFRA to measure whether or not farm assurance gives sufficient additional reassurance that farmers will be compliant to use farm assurance as a means of reducing the cross-compliance inspections. I hope that makes sense. My secondary view on that is that we must be led by the facts and by the science of it. In other words, if there is no evidence that farmers who are farm assured are any more compliant than those who are not, then I do not think we should press for earned recognition on that. That work is currently being done by DEFRA. It has taken quite a long time to do it, and I think a submission on that is likely to go to the Secretary of State, and indeed I will see it as well, relatively soon. Clearly, I am hopeful that we would be able to find some way of introducing some sort of risk assessment of better farmers to ensure less inspection. That is cross-compliance, and then there are a whole load of other possibilities beyond that.

Q360 Chair: On the public good, my concern is that on the hills you really need farming-you need sheep and livestock there. The public good is a very amorphous, tenuous concept that is very difficult surely to quantify.

Richard Macdonald: Yes, some of it is very difficult to quantify. Some of it is less so. It depends what you define as public good.

Q361 Chair: Who will define the public good?

Richard Macdonald: In the context of cross-compliance, if you define adherence to the cross-compliance conditions as public good, then it is measurable in part. Some things are more measurable than others. For example, compliance to animal identification and losing ear tags is much easier to measure then some of the environmental conditions. By and large, though, with cross-compliance you have a breach or you do not have a breach, and therefore you can measure that. The animal ID one is probably one of the big acid tests in the middle of this about whether or not there is a difference in farm assurance.

Q362 Chair: How would you describe progress since we last met you in the Committee? How much progress has there been towards deregulation and accomplishing what the Task Force set out to do?

Richard Macdonald: Generally?

Chair: Yes.

Richard Macdonald: Quite a lot. An agricultural friend of mine described it as like pushing slurry uphill. That is probably a bit uncharitable, but most regulations, as I said when I came here, have an original purpose. Therefore, the supposition that people came up with and landed on my plate when I first took this on was there would be a bonfire of regulations. It is difficult because they have a purpose, and a lot of them are enshrined in Europe. Again, as you know all too well, they are quite difficult to unravel; Mr Parish knows that as well.

A lot of our focus has been on reducing process and inspection, bringing in earned recognition for rewarding the good and penalising the bad. There has been really quite significant progress on that. How is that measured on the farm? I imagine I am talking to a receptive audience here. Farmers tend to not necessarily appreciate improvements; they move on to the next thing. There have been quite a lot of things done that are less burdensome. Some of them have been quite high profile and some have just happened.

Q363 Chair: If we may go through some of them, my particular pet would be: can we get rid of the six-day rule?

Richard Macdonald: It may be just worth saying that I have agreed with Ministers that I am going to do a report that will have a sort of overall, "How have they done?" front to it, and then literally a recommendation-by-recommendation report on that. My intention is to publish that in January or February. I have literally just started writing it. I should also add that I have agreed with Ministers that that is my sign-off as far as this is concerned. You can only keep going round the buoys on these things so many times.

At the moment-I am not sure how this will end up-I am putting green ticks on things, and orange lights and red crosses. The whole livestock movement has probably got a red cross on it at the moment. It is a disappointment to me. Of the three or four big issues that came to me repeatedly when I first took this on, particularly from the North of England, one was how the whole livestock movement system was bust in many ways. As I said to you beforehand, it was bust not only for the farmers, but actually worryingly bust for the state in terms of its risk management of diseases. Some of that has been put right, or is being put right, by the move to electronic tagging of sheep, which had not necessarily made me popular, but I think is a good move in terms of disease management.

The six-day stands still, and that has not changed. As I understand it, the Secretary of State has some proposals from DEFRA at the moment to consider on that, so it is not dead, but has taken a fair old time to get here. Those proposals do have a cost to them, because some of it requires quite a significant change. As is self-evident from the changes that I recommended and the Government accepted, they require quite a significant change in the whole data management of it, and, dare I say it, some new IT. I imagine what the Secretary of State will need to be considering is two questions. Can he afford it, and does he want to do it all at the same time that the CAP changes have taken place? I remain fairly robust on this. In hopefully a friendly and positive way, I have said that is not really my problem. My problem is to ensure that we have good regulation.

Q364 Chair: When you have a red mark and a green mark, it causes a lot of confusion on the sale of livestock and what farmers are permitted to do.

Richard Macdonald: We could be here for a long time agreeing that the system does not work.

Chair: We will have a drink another time.

Richard Macdonald: It has a whole load of problems with it, including being a significant economic restraint to people who do all of their trading at a very narrow window. I do not know all of your constituencies, but they will be in at least two or three of them.

Q365 Chair: Were you consulted, and are surprised that DEFRA has launched a red tape challenge for agriculture when you have not completed your work?

Richard Macdonald: I do not know about consulted, but I knew it was coming. In fairness to DEFRA, and I am entirely independent of this, this is largely coming from Cabinet Office. It is part of the whole sequence of red tape challenging. What I would think and hope is that a significant part of the better regulation job has been done by the Task Force and all the implementation requirements that the Government agreed on that. In the whole of the Task Force, you may recall, I went to where I thought there were problems, so I did not bother with regulation that was maybe bad, but just had no impact. I suspect that quite a lot of this secondary exercise is tidying up all those statutory instruments that mean nothing and impact on nobody, but I do not want to upset Mr Letwin in saying that.

Q366 Sheryll Murray: Are there any areas you can identify where perhaps we could cut the red tape and bureaucracy that you have not already made suggestions about?

Richard Macdonald: If I am candid, they are not significant. Stop me if I am going off at a tangent, but in my mind the most important part of our Task Force recommendation was to help DEFRA get into a state where it is fit for purpose to better regulate. I have described that maybe slightly rudely as being a culture change in the Department so that it was really au fait with agriculture, worked in partnership with the industry and a whole load of other things about culture change. I will report on this in detail when I do the report, but that is happening. Like all culture changes, though, it is pretty slow. It takes time to change a huge Department.

My view is that, if you get that culture change right, and everybody there is really trying to force through the principles of better regulation and every time something comes in front of them asking, "Is this fit for purpose? How is this going to land on the ground? Are we reducing the impact?" and so on-I have got a stock 20 questions I ask on all these things-we could all be comfortable or reasonably comfortable that literally anything that came in front of the Department would go through a process with people who are accustomed to it, and we would get a good regulatory outcome.

I am really boring about lots of stuff on this, but getting the Department in a state where it is really in tune with agriculture, and where the industry is also doing its bit to deliver in partnership, I think means that we will all have a lot less to debate about, and good regulation in the future.

Q367 Sheryll Murray: I have a very quick supplementary. Do you think there is good communication between the regional levels and the Department based in London as far as getting the regulations and tidying this up, then?

Richard Macdonald: I do not think there are bad communications. There is a degree of inevitability about a large Department, based in the middle of London-being candid-with people who live in London, regulating and involving themselves in an industry that is very far from London. That is just a fact of geography rather than a criticism. One of the things that I recommended in the Task Force that is happening, and I think it is really pleasing that it is happening, is significant numbers of DEFRA staff are getting out on the farms and going into factories. I heard recently that some have been on agricultural courses at Cirencester and so on. I think that is really good.

Q368 Ms Ritchie: In relation to the environment, why is the Implementation Group pushing for the nitrates directive to be removed when nitrogen pollution has a harmful impact on environmental and public health?

Richard Macdonald: This is an issue that you and I are both familiar with in the context of Northern Ireland as well as England. To be really clear, we are not pressing to avoid regulating on diffused pollution, but we think the nitrates directive is a blunt weapon. My view is it is 20 years out of date, and what we should be doing, under the new water framework directive, is dealing with diffused pollution in the whole on a catchment basis. If you look at this through the eyes of a farmer, what none of us would do is look at this as being nitrates. We would look at this as nitrates, phosphates and the application of what we are doing in a field. I think we need to turn the spotlight round so it is nitrates, phosphates, soils, pesticides-the whole works.

Q369 Ms Ritchie: A lot of regulations exist to protect the environment. To what extent are environmental bodies represented on the Implementation Group?

Richard Macdonald: They are not. They were in the Task Force. In terms of the Implementation Group, the RSPB were involved. They decided not to be on the Implementation Group not because they fell out with me or objected to me, but largely it was just a question of their resource allocation and whether they could put time into spending hours and hours on regulatory issues, an awful lot of which were not environmental issues. I am not aware that there was any policy fallout as far as that is concerned.

If it helps in terms of reassurance, there are two things. One is that I am really clear that this is not about dropping standards. This is about how you do things. The second is that I think, and I hope, I have been-and again it will stand the test of time in terms of the final report I do-completely transparent about what I am trying to do. We do not have any secrets about what we are trying to do, and I am perfectly open to any criticism, including that we are not sticking to environmental standards.

You are right, there are environmental issues, but the reality is most of the regulatory issues that we have got our teeth into are not environmental ones.

Q370 Neil Parish: We are meeting on 5 November, so therefore a bonfire of red tape might be quite useful. I am not sure we have had enough yet by any means. The question is earlier this year the Tenant Farmers Association expressed concern that "the approach being taken on earned recognition may do little to reduce the burden of regulation". In their words, "it may in fact enhance it". Are you satisfied the Government’s approach will reduce the burden of regulation and administration?

Richard Macdonald: On earned recognition, yes. There are, in very broad terms, 31 significant inspection regimes on farms. 14 of those at the moment have got some form of earned recognition. There is a handful more where we could do quite a lot more, and reduce regulation. To put it simply, as we are in simple regulatory stuff, I disagree with the TFA. Earned recognition reduces the regulatory burden, but, probably more to the point, it rewards the good and penalises the bad. That seems to me a really good principle of better regulation. I have had that discussion with George Dunn, and we disagree.

Q371 Neil Parish: Turning the question almost on its head then, is the Government’s plan to reduce inspections and introduce earned recognition sufficiently ambitious? It is completely the opposite question, really.

Richard Macdonald: There is more that can be done. Ministers are very ambitious about this, and there are certainly three or four areas where we could, should and will do more.

Q372 Neil Parish: Would it be fair to say that civil servants are not quite as ambitious, or would that be unfair?

Richard Macdonald: I thought you might read that into what I was saying. I am not here to defend anybody in particular, because I am just my own man on this, but that is a little bit unfair.

Neil Parish: Yes, a little bit harsh.

Richard Macdonald: Some of it comes back to the earlier question about trying to help people understand what it is. Some of this is very new to people. The second is-and I have levelled this comment to the industry as well-that there is a responsibility to the industry. I have challenged the NFU, the CLA and the TFA to come forward with "Where do you want earned recognition? Where do you think you can put forward assurance schemes or other external, third-party accreditation that will do it?" If I am really honest, they have not come up with much. Without blowing my own trumpet, because I have no reason to do that, most of the earned-recognition proposals that have come forward have come from me. If I am honest, that is a bit disappointing for me to say that.

Q373 Neil Parish: Sometimes farmers are very good at moaning about the regulation but not necessarily giving much of an idea of what to do about it. Has the Government done enough to ensure that the assurance schemes out there are robust enough so that they can take the place of official inspections? Sometimes, perhaps, some tweaking and alteration to the assurance schemes could take away inspection.

Richard Macdonald: Forgive me, but that is a very good, broad question to which there are 25 particular answers.

Neil Parish: We do not necessarily have time for 25 answers.

Richard Macdonald: No, but let me just illustrate. I promise you I will not go through 25. I can bore on this, but I promise you I will not go that far. On a particular individual thing-let’s say on livestock movements, for the sake of argument-it is not a general Government requirement. It is for the person in DEFRA on livestock movements saying, "I think I want this technical spec or requirement" to then have that negotiation with the assurance schemes, and to then have the support of the farming community to do that. Quite often, that does not come because-you will be as familiar as I-asking farmers to add additional measures into assurance schemes does not go down well.

Q374 Neil Parish: If you traded that for an inspection, it would.

Richard Macdonald: I totally agree but it is a pretty long discussion before you get there, and some of those things do take time.

Chair: May we move on, because there may be a vote?

Q375 Richard Drax: Is the use of a risk profile to determine inspections being linked with the IT system that the RPA are developing for managing the new CAP?

Richard Macdonald: No, it has not, and it is a really good and interesting question as to whether it should. So far, there is not a central IT system that identifies the good, the better, the not-so-good and the poor. It would be quite a task to do so. The general feeling so far has been that to put it in one place is difficult, but it is a very, very interesting point.

Q376 Richard Drax: Can I move on now to tenancy reforms? The taskforce recommended that there should be the option for disputes within agricultural tenancies to be settled by an independent expert where the matter does not relate to a notice to quit. What progress has been made on this recommendation?

Richard Macdonald: There is a group called Tenancy Reform Industry Group or TRIG. I asked them to go through this, to discuss it with DEFRA and to put it into a state where the statutory instruments could be changed. Recommendations are with Ministers at the moment on that. Fingers crossed, I would hope that could be implemented and see no reason why not.

Q377 Chair: We have just a couple of questions at the end, if we may. Fly-tipping is a tremendous problem on private land and, obviously, it is the responsibility of landowners to remove it. Have you made any progress in that regard?

Richard Macdonald: Limited. DEFRA have taken a reasonably high profile on this. They have had a summit on fly-tipping, have engaged with the LGA, and have identified and sponsored some pilots in a number of district councils on good practice. I think there is an overall wish, and there are some good individual improvements. I doubt that fly-tipping across the country has significantly reduced on the back of all of that. One of the difficulties on this is it is a very individual thing-by "individual", I mean individual district councils and unitary authorities-and all central Government can do is increase the penalties and get tough about the general message. Ultimately, my view is that a lot of it is done at local authority level.

Q378 Chair: You alluded to the regulation from Europe, certainly in terms of the water framework directive and the urban waste water treatment directive. Do you think there is scope for us to be more questioning before we sign up to these, and should DEFRA be taking more of a lead? Should they have a little group that are focussing on early engagement with these regulations at the earliest possible stage before we sign up to them?

Richard Macdonald: You raise two questions there. One is on water. There is a water framework directive, so a lot of it is persuading the Commission and Europe that we are doing enough and would do enough under the water framework directive to remove the nitrates directive. That is about agenda-setting. It is about being good at what we are doing. I hope that is happening; I would be very disappointed if it is not. If I am speaking to Ministers, I say to them, "This should be one of your high-priority issues."

In terms of engagement with Europe, one of the things the taskforce said and which I believe very strongly is that we are very good at reacting in this country and we are great at doing the detail and all that, but we are not proactive enough about agenda-setting. I do not think we do that enough in partnership with the industry, because, again, the industry can do things that DEFRA cannot-for example, the European Parliament-and I still think there is work to be done on that.

Q379 Chair: In terms of your recommendation on GAEC 1 and the Soil Protection Review, have you made any progress in that regard?

Richard Macdonald: As I understand it, the soil framework directive is not going to happen, so I think that is a big green tick.

Q380 Sheryll Murray: Just very quickly on the European scrutiny, do you think we should be more proactive in looking at proposed regulations and proposals, and consulting with the industry, in a different way? I know we do, but it does not seem to generate the results. Should we be doing that as a Parliament more?

Richard Macdonald: My personal view-and, I think, the view expressed by the taskforce-is that it goes a step before that. Generally speaking, once you get a proposal you are in difficult territory.

Sheryll Murray: Yes, it is hard to change it.

Richard Macdonald: You are negotiating around the edges.

Q381 Chair: You were agreeing with the question earlier.

Richard Macdonald: Part of the view that I expressed about the industry and DEFRA needing to work together is that it should be about going in and, for example, talking to Barroso’s cabinet about smart regulation and setting out a whole load of proposals. If you set the proposals out and you do it before anybody has thought about it, you drive the agenda.

Q382 Chair: Are you confident that you will have made, in your report, good progress when it comes to January/February?

Richard Macdonald: If I could choose my own words-forgive me-I think we have made progress. What I have to do in the next couple of months is just try and write all of that down. Sadly, it is not just a simple bonfire and, sadly, it is not three silver bullets. By definition, the report had getting on for 200 recommendations, so it is lots of bits. Am I confident that we have made progress on lots of those bits? Yes. Is there a huge amount still to do? Yes. What I see as my end report as I ride off into the sunset is to comment on, in total, what it looks like and, individually, what it looks like, recommendation by recommendation, and then what I am hoping to do is set some views about what should happen in the months and years afterwards. Even though I have been doing this for three years, to turn this around is probably a six-to-seven-year agenda.

Chair: We thank you for what you do and we are particularly grateful to you for being with us and being so generous with your time and the way you have answered our questions this afternoon. Thank you very much indeed.

Richard Macdonald: It is always a pleasure.

Chair: We wish you every continued success.

Prepared 7th November 2013