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Select Committee on European Communities Report


Memorandum from the Department of Agriculture, Fisheries and Food

  1.  This memorandum sets out the Government's response to the 18th Report of the House of Lords Select Committee on the European Communities, HL 84, Session 1997-98, on CAP Reform in Agenda 2000 The Transition to Competition: Measures for Rural Development and the Rural Environment.

  2.  The Government welcome the Committee's report on the European Commission's communication "Agenda 2000: For a stronger and wider Europe" and its impact on rural development and the rural environment in the UK. This is timely, as detailed proposals following the Commission's communication have now been received and negotiations on the rural development regulation have recently begun.

  3.  In large measure the Government welcome the Commission's proposals in relation to rural and agri-environment policy. The Government have argued that more resources should be devoted to targeted environmental schemes and Agenda 2000 endorsed this approach. The rural development regulation which has now been tabled would set a framework for the future of rural development policy though, unless and until the direct compensation payments under the commodity regimes are phased out, there are unlikely to be substantially increased resources for rural development. In the light of the Committee's recommendations, the Government will be seeking to negotiate flexible and effective measures to assist rural development, including the rural environment.

  4.  The Government's response to the points in the Committee's summary of conclusions and its recommendation is set out below.


Creating a competitive EC agriculture

  EC agriculture must reorientate to compete in world markets without protection. In failing to prepare the industry for this situation Agenda 2000 is a disappointment (paragraph 64).

  5.  The Government agree that the Commission's proposals do not go far enough to develop an EU agricultural industry able to compete effectively on world markets without subsidy. But the Commission's proposals are, at least, a step in the direction that the Government has been advocating for some time.

  Compensation payments must be degressive and time-limited if they are not to frustrate and delay structural adjustment (paragraphs 65-6).

  6.  Agreed.

  Modulation of compensation would further impede the restructuring of EC agriculture (paragraph 67).

  7.  Agreed.

Rural environment

  Agriculture, like all industries, should operate within a basic regulatory framework which protects the environment and this should apply across the Community. It should ensure that those who damage the environment are made to pay for remedies (paragraphs 69, 76).

  8.  The Government agree that effective regulation is a key element of agri-environment policy, alongside other mechanisms such as advice and appropriate incentives. Agricultural businesses are already subject to a considerable body of environmental regulation and new measures are being introduced such as legislation to implement the EC Nitrates Directive and the Directive on Integrated Pollution Prevention and Control.

  9.  The Government support the introduction of EC legislation to apply the "polluter pays" principle. However, much agricultural pollution is diffused and it is often difficult to attribute responsibility to particular individuals. In such cases voluntary approaches—to persuade farmers to "own" the problem and deal with it—may be more successful at controlling pollution.

  Policy and appropriate funding are needed to secure rural environmental goods which the market alone will not provide. Policy must ensure that such goods are provided in the most effective manner and at least cost (paragraphs 70, 77).

  10.  The Government agree that, subject to public spending constraints, funding should be available to secure rural environmental goods which the market alone will not provide. Effectiveness and efficiency in delivery are of prime importance and are examined in regular evaluations and policy reveiws.

  We support the Commission's intention to simplify policy, but the same approach is needed at Member State level. Support for the environment should be offered via a single menu. We advocate a horizontal, prioritised approach which ensures that the most valuable environmental goods are funded first (paragraphs 71-2).

  11.  The Government believes there are advantages in integrating schemes where the schemes have proved their value and where amalgamation will bring efficiency benefits and assist farmers.

  12.  MAFF operates a wide ranging package of voluntary incentive environmental schemes aimed at conserving the countryside and its wildlife. In 1998-99 MAFF will be reviewing the pilot Habitat, Countryside Access and Moorland Schemes, with a view to integrating successful elements into the Countryside Stewardship Scheme. This scheme will continue to run on the basis of targeting priorities which are determined at a local level, in consultation with MAFF's Statutory Advisers and partners organisations. The English ESAs have proved effective, though MAFF will reflect on whether in the longer term they could be amalgamated with the Countryside Stewardship Scheme, alongside other options such as promoting closer compatibility between agri-environment schemes.

  13.  In Wales, a new agri-environment scheme is being developed which will replace the ESAs, Tir Cymen, Habitat, Moorland and Access Schemes. The Organic Aid Scheme will remain. The new scheme will embrace the best practices from the existing schemes, although the scope will be expanded to help meet the Government's biodiversity commitments. Like ESAs and Tir Cymen, it will be a whole farm scheme but it will be available to farmers throughout Wales. Subject to EC approval, it is intended that the new scheme will be open for applications during 1998-99.

  14.  In Northern Ireland it is intended that the existing ESAs will be complemented later in 1998 by the new Countryside Management Scheme which will target priority habitats on farms outside ESAs. At an appropriate later stage the workings of both schemes will be examined with a view to their integration in order to optimise benefit to both farmers and the environment.

  Some environmental goods benefit the entire Community, others are much more local. There should be several sources of decisions and funding. Co-financing should apply where there is a benefit to the Community as a whole. The primary source for funding should in general be Member States or regions. Funding should be based on environmental merit, not on geographic area (paragraphs 71, 74-8).

  15.  The Government believe that it is important to have a common framework for agri-environment measures throughout the European Union. In this way each Member State can choose to apply measures most appropriate to their own situations without concerns being raised about the scope of payments in each Member State. This should be subject to oversight by the European Commission, as currently happens and is proposed to continue in the Commission's proposal on "support for Rural Development under the European Agricultural Guidance and Guarantee Fund". The Government believe that in these circumstances co-financing between the EC and Member States is appropriate.

  16.  The Government recognise the important contribution which capital works make to the agri-environmental schemes. It is worth noting that the European Commission's proposal would now permit co-financing of non-remunerative capital works.

  17.  The Government agree that environmental measures ought to be targeted and that funding should reflect this. In their proposal the Commission have linked maximum rates of co-financing with the rates applicable to the Structures Funds. However, the proposal also allows for co-financing rates to be 10 per cent higher "for specific measures of special merit from the environmental viewpoint".

  Environmental payments must not be production subsidies in disguise. Decoupling is important for WTO acceptability and to ensure real environmental benefit (paragraph 73).

  18.  Agreed. The most effective way of providing environmental benefits is through specific, well-targeted environmental objectives. However, as explained below, full decoupling of environmental measures from production may not be possible.

  Monitoring must be strengthened to prevent fraud, to ensure that schemes represent environmental value for money and that they are fully decoupled (paragaph 79).

  19.  The Government agree that a clear, centrally-agreed framework for the operation of schemes and effective monitoring by the Commission are essential to ensure the efficient use of CAP resources, to reduce the risk of fraud and to minimise the risk of distortion of competiton. Some schemes may, however, require a particular form of agricultural production (eg grazing by livestock) to produce environmental goods; in such cases, full decoupling will not be possible.

  There are arguments in favour of cross-compliance, but stronger arguments against. There should be a synchronised process of reducing production-related compensation payments and building up an environmental policy justified by its own merits. We note the current wide difference in funding for agri-environmental measures on the one hand and the production regimes and compensation payments on the other (paragraphs 80-2).

  20.  The Government agree and remain committed to the phasing out of production-related farm support and the redirection of some of the savings on CAP expenditure towards support for the environment and rural development as our preferred option.

Rural development

  Rural development policy must seek to ease the social and employment problems which result from the continued decline in agricultural employment as well as from wider changes in the rural economy. The contribution which policy can make depends heavily upon the performance of the economy as a whole (paragraphs 83, 87, 94).

  21.  The Government are determined to pursue sound economic policies for the benefit of the country as a whole and to help ensure a healthy and diverse rural economy. The creation of employment is one of the Government's principal priorities and rural development policy must assist in creating sustainable employment opportunities. This involves a combination of national programmes and specifically targeted measures. National initiatives such as the New Deal for the unemployed are intended to help both urban and rural communities. The merger of the Countryside Commission and the Rural Development Commission will provide a national overview on rural economic and social issues. The new body will play a central role in the Government's objective of developing a sustainable living countryside.

  The development of alternative economic opportunities must be supported, including aid for small-scale enterprises, conversion of redundant rural buildings to new business uses, on-farm diversification and new technology skills training (paragraphs 85-6).

  22.  The Government agree that further diversification of the rural economy is a desirable objective. The kind of actions which the Committee recommends are those which have been supported under the Objective 5b programmes and domestic programmes. The Government will consider what future measures might be necessary in the context of the Agenda 2000 proposals currently being negotiated.

  The national planning process has an instrumental role in rural development (paragraph 93).

  23.  Agreed. National planning guidance is kept under regular review to ensure it remains relevant and up to date.

  24.  The Committee has referred to a suggestion that a national body akin to the RDC might advise on the merits of applications for the conversion of redundant farm buildings. The Government has announced its intention to merge the Countryside Commission and those parts of the Rural Development Commission not transferring to the Regional Development Agencies (RDAs), to create a new countryside agency with effect from 1 April 1999. One of the many issues which will require further consideration as a consequence of merger is the new Agency's role in relation to the planning process, for example as a statutory consultee for certain types of planning applications. Creating an additional national body would be inconsistent with the Government's objective of streamlining the number of agencies involved in the delivery of rural policies and programmes.

  25.  The Committee refers to the role of RDAs. From April 1999, the RDAs will take on the rural regeneration programmes of the RDC, including Redundant Building Grants, together with the associated staff of the RDC. By bringing together within a single body the separate regeneration programmes of the RDC, English Partnerships and the Government Offices for the Regions, RDAs will be able to provide a better co-ordinated approach to meeting the needs of their regions.

  We welcome the proposal to use funds from the Guarantee section of FEOGA to support an horizontal rural development measure, provided it is flexible enough to support off-farm, non-agricultural development (paragraphs 89-90).

  26.  The Government agree with the benefit of such flexibility.

  We support bottom-up approaches to development and note enthusiasm for the LEADER scheme. Rural development requires expertise, as exists in the Rural Development Commission. It is important that this expertise is not lost in the move to regional development agencies (paragraphs 89, 91-2).

  27.  The Government also support the bottom up, community based approach as demonstrated by the LEADER II programme and consider that such programmes have developed useful partnerships. However, Community Initiatives are administratively burdensome and sufficient flexibility should be allowed under the new Objective programmes for them to incorporate the successful parts of Initiatives. The Government recognise the valuable work of the Rural Development Commission, particularly at a local level and are determined to make full use of this expertise. Many of the RDC's staff working on regeneration issues will transfer to the Regional Development Agencies. RDAs will have a specific remit to serve the rural areas of their regions and, outside London, each Board will have at least one member who can contribute a strong rural perspective.

  There should be no presumption that savings produced by CAP reform should automatically be used in other ways in rural areas (paragraph 90).

  28.  Agreed, although in the Government's view, part of any such savings should be diverted to specific targeted agri-environmental and rural development measures.

  The test of success of rural development policy is that after a time it becomes unnecessary. We recognise that the time period will vary according to location throughout the Community. This must not distract from the fundamental need for the policy to be temporary (paragraph 94).

  29.  Agreed. The aim of rural development programmes under Agenda 2000 should be to enable the rural economy to cope better with adjustments to the economic base of and quality of life in the targeted areas but such rural development aid should not be open-ended. As now, programmes will continue to be monitored for effectiveness and designed to be flexible to allow room for adaptation as circumstances require.


  The Committee considers that the rural development and environmental aspects of Agenda 2000 raise important questions to which the attention of the House should be drawn, and makes this report to the House for debate.

  30.  The debate has been arranged for 18 May 1998.

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