Memorandum by the Agricultural Law Association
This is the response of the Agricultural Law
Association to the Committee's Call for Evidence published on
30th April 2007 in respect of its inquiry into the future policy
direction of the Common Agricultural Policy (CAP).
ALA is the UK's premier independent cross-disciplinary
organisation dealing on an agenda-free, non-partisan, non-political
basis with all matters arising in connection with rural business.
Our membership of over 1,000 across the UK includes solicitors,
barristers, surveyors, valuers, accountants and other professionals,
whose common characteristic is a commitment to rural affairs and
the rural community.
The CAP is, by definition, at the core of the
business of ALA and our Members and we are pleased to have this
opportunity to contribute to the debate.
We retain the Committee's headings for ease
of reference.
OVERVIEW
The legal starting point for any discussion
of the CAP is Art 33 of the Treaty, whose objects, paraphrased,
are:
— to increase agricultural productivity
by technical progress and optimum use of the factors of production,
and thus to ensure a fair standard of living for the agricultural
community;
— to stabilise markets, assure
stability of supplies and to ensure that those supplies reach
consumers at reasonable prices.
Those objects were fixed in 1957. There are
those who say that the modern rural world fits uncomfortably with
agricultural drivers of that era and they would be correct. However,
if one changes the emphasis of "agriculture" from "farming"
to "rural business", the objectives still have much
merit.
For example, previously, increases of production
of agricultural products might have been obtained through intensification;
nowadays, increases of economic prosperity—production of
another sort—in rural communities may be obtained through
encouragement of diversification. Support for the standard of
living of those communities is increasingly provided through funding
of rural business projects rather than direct market support,
and so-called public goods—in short, a clean and attractive
countryside—are encouraged through the various agri-environment
schemes.
We support the trend away from market support
and towards the development of rural business in the wider sense.
However, there are two other issues of present times which the
policy ought to look to protect—food security and energy
security.
In our view, there was an opportunity lost,
in the formulation of the Treaty for a European Constitution,
to revisit Art 33 and Title II in general. However, even if that
opportunity cannot be regained, there is enough in the current
legal requirements for the policy to support the current public
agenda for a policy providing an adequate supply of affordable
food and a pollution-free environment, which includes measures
necessary to manage the effects of climate change. The emphasis
must be on changing the substance of the Policy; a change of label
by comparison is decoration.
THE REFORMED
CAP
The Single Payment Scheme (SPS) has the capability
to be a smooth, elegant and streamlined mechanism for the support
of rural business. The Reports of the House of Commons EFRA Committee
of 21 March 2007 and of the National Audit Office dated 18 October
2006 have dealt with the shortcomings of the process of implementation
in England and we shall not comment further.
However, in terms of the reform on an EU-wide
basis, the present system results in anything but a common policy.
The system proposed by the Commission in 2003 involved a fully
decoupled single payment calculated on the basis of a historical
reference period or of area, at the option of the Member State.
What resulted from the Council agreement of June 2003 was a hotch-potch
of historical, area and hybrid systems, partial decoupling and
national envelopes, which mean that farmers across the EU are
not competing on the same basis. Any environment in which one
producer receives production subsidy at a greater rate than another
will lead to unfairness.
Indications are that those who campaigned for
derogations are not taking advantage of them. Had that been so,
one might have expected to see around 50% of payments remaining
decoupled to some extent; in reality, according to the figures
published in Regulation 1156/2006, that applies to only just over
10%, and that mainly in France and Spain. We suggest that the
system, if it is to continue, should become fully decoupled and
those derogations should be abandoned.
The overriding objective should be to ensure
that the same framework applies across the Union, with only such
limited local discretion as is justifiable on the basis of geographical,
climactic or economic conditions.
SINGLE PAYMENT
SCHEME
Much of what we have to say is covered above.
In general, the foundations of the scheme are sound. However,
it should be implemented as simply and with as light an administrative
touch as possible, subject only to those measures necessary for
the authorities to comply with their obligations to the EAFRD.
The difficulties being experienced in England arise not from the
scheme itself but from the vertiginous complexity of the chosen
method of implementation and the overbearing and inconsiderate
way in which it is administered, to the detriment of the scheme's
beneficiaries.
There is much that could be said about the attitude
of compliance officers, which ignores the fact that, for the vast
majority of farmers, their farm is their livelihood and they do
not therefore deliberately devalue it by neglect. A starting premise
of "good farm/bad farm", with a tolerance permitted
where the overall standard is good and a more rational approach
to the application of reductions, would be a more acceptable method
of proceeding. However, we accept that technical discussion of
those issues is outwith the scope of this inquiry.
The fundamental concept of paying farmers to
comply with Statutory Management Requirements and keeping land
in good agricultural and environmental condition is sound. However,
a decoupled system must be allowed to function in free market
conditions, and, both as a matter of policy and of enforcement,
cross compliance should not be a barrier to that.
MARKET MECHANISMS
The concept of the SPS proposed by the Commission,
as indicated above, involved full decoupling of support from production.
Farmers were to be allowed access to a free market and were to
be expected to operate and develop their businesses accordingly.
We have said that coupled support should be withdrawn; so should
all production control measures.
Intervention buying, private storage aid and
export refunds distort the market. What were designed as safety
nets have been so ingrained into consciousness that some now perceive
them as a legitimate outlet for produce. Yet they have no place
in a decoupled system. The provisional agreement to abolish export
refunds by 2013 should inspire their reduction to nil by that
date.
Similar comments apply to set-aside. It is unreasonable
to expect farmers to respond effectively to market conditions
and at the same time to require them to take part of their production
capacity out of service regardless of the market. We are aware
there are those who have suggested the retention of set-aside
on the grounds that it has had a beneficial effect on wildlife
and that its abolition would be detrimental to it. With respect,
we do not consider that the mechanism of set-aside is the correct
vehicle to deal with that issue. If it is accepted as policy to
encourage wildlife and biodiversity, it should be achieved by
encouraging farmers, through agri-environment and similar schemes,
to take land out of production, not by penalising them for putting
it into production.
We take the view that all of the above—intervention,
PSA, export refunds, set-aside—together with milk quotas,
which fall into the same category and have no longer any useful
function, should be abolished as soon as possible. Allowance may
have to be given for a phasing out period (or, in the case of
milk quotas, for the fact that they are by regulation in place
until 2015) but that should not detract from the need for abolition.
RURAL DEVELOPMENT
The public consciousness more easily accepts
the support of rural businessmen from the public purse for the
delivery of a clean and attractive countryside than it does for
product and income support. This drift has been apparent at political
level also in the discussions in Council over several years.
We view the distinction between what are presently
known as Pillar 1 (market support) and Pillar 2 (rural development)
to be unhelpful, since it presents them as alternatives to one
another rather than as parts of a composite whole that is the
CAP. However, we will continue to use those terms since they are
most readily understood.
The balance between Pillar 1 and Pillar 2 must
be resolved. The financing arrangements are presently muddled.
The introduction of the EAFRD was a positive move, providing a
common fund from which all payments may come.
However, the fixing of Pillar 1 payments under
the budgetary accord of 2002 has led to Pillar 2 suffering the
full weight of budgetary cuts in 2006. Modulation is an artificial
mechanism to restore the balance, although it does so to nothing
like the required extent; it should not be necessary in circumstances
where the Member States can freely make a decision on the balance
of funding. It is to be hoped that in the budget discussions of
2008/09 this can be addressed.
Voluntary modulation is emphatically not the
solution. It distorts the market and militates against the commonality
of the CAP, which should be applied in as uniform a way as possible
across the whole Union. To have a situation where different rates
of modulation apply in different Member States—and even
in different regions of the same Member State, viz UK—puts
farmers at a competitive disadvantage with their counterparts
in other Member States. Worse, in this country, they are disadvantaged
as between themselves. That is counterproductive.
Access to rural development funding in England
should be simplified. Under the former RDP, the conditions required
to be fulfilled before an application for certain grants—eg
Processing and Marketing or Rural Enterprise Scheme—could
be entertained were time-consuming and expensive. Whilst it is,
of course, quite reasonable to expect a rural businessman to be
prepared to invest time and money in his project, many saw that
as an unacceptable gamble and, as a result, many perfectly good
schemes to improve the lot of both the businessman and his community
did not get off the ground. It is to be hoped that mistake will
not be repeated in the next RDP.
Attention should also be given to a greater
uniformity of approach across the regions of England. It is reasonable,
of course, that each region should have a discretion to apply
those elements of policy best suited to its circumstances, but
the service received from RDAs and Rural Hubs depends too much
on the ability and enthusiasm of the persons involved and not
enough on common standards and shared experiences. There should
be greater inter-region communication and exchange of ideas.
WORLD TRADE
Development of the CAP is irrevocably bound
in with the development of WTO's international rules of governance.
The pressure to ensure a fair competitive environment for all
nations is bound to influence policy development at a supra-national
level.
The greatest single benefit that will ensue,
in our view, is the independence of rural businessmen to make
those decisions best suited to their place in the market. The
resultant restructuring is bound to have consequences: for example,
less productive areas will be vulnerable to abandonment; food
production may become concentrated upon fewer but larger farms.
It is the moral duty of any community to mitigate so far as possible
the impacts of such changes and this can be achieved through the
CAP with proper focus of funding, eg the use of retirement support
for those leaving the industry.
ENVIRONMENTAL PROTECTION
AND CLIMATE
CHANGE
We doubt that cross compliance has made any
contribution to improvements in the level of environmental protection.
Cross compliance does no more than increase the penalty for non-compliance
with pre-existing legal requirements by reducing the transgressor's
level of single farm payment. It is the underlying legislation
that improves environmental protection, not cross compliance.
It is important to maintain a proper perspective
on climate change. Climate change is a reality and under the control
of the planet, not of mankind. The behaviour of man may have influenced
its degree and may assist in its management, but to suggest that
even global, still less local, policy can somehow prevent or control
it is hubris. The focus must be on managing its effects, for example
helping farmers cope with changes in weather systems, crop types
and growing cycles to ensure adequate food supply.
Biofuels provide one tool in the management
of climate change—they are not a cure-all; they may not
even be the best alternative to fossil fuels. If growers are to
be left to the market, they will produce biofuels according to
demand. If, as a policy decision, greater production of biofuels
is required, that may entail interference with the market to achieve
the result. CAP might be used to that end to provide the necessary
financial incentives. Such a move, however, would go against the
prevailing trend to reduce market interference.
A balance must be struck between food and energy
security, both of which have implications wider than the CAP.
Both are necessary, but finite availability of land and competition
for its use, amongst other issues, will influence how far policy
can and should go to regulate either.
Whilst reduction of output of greenhouse gases—not
merely CO2—is important, it must be integrated with proper
management of the land and the ability of the Union to feed its
citizens. In that connection, we believe that too much credit
is given for the ability to import foodstuffs in the assessment
of the Union's food security. The guiding principle in judging
the contribution of imports ought to be the carbon footprint of
doing so as opposed to producing at home. Account should also
be taken of the effect on the ability to import of potential reductions
in availability of transport fuels at economic prices.
FINANCING
Any policy will benefit from further funding
provided such funding is properly applied. As indicated above,
we believe the greatest difficulty to be in the mismatch between
the stated political rhetoric in respect of wider application
of funding to rural communities and the actual budgetary agreement
which restricts the width of that application in favour of outdated
and outmoded support measures. For that reason, as much as for
its overall level of funding allocation, we agree that the December
2005 agreement was unsatisfactory.
ENLARGEMENT
Simplistically, enlargement has altered the
cohesion balance between Member States and therefore the position
of the EU-15 in relation to the average of the EU-25/27. This
has led to a redistribution of funds amongst Member States and
can be expected to lead to further redistributions in future.
SIMPLIFICATION AND
OTHER ISSUES
The Commission's current proposal to amalgamate
21 common market organisations into one is an example of what
can be achieved in terms of operational, or technical, simplification.
The introduction of the Single Payment Scheme—in spite of
the disasters that have befallen our country by reason of maladministration—is
an example of the same philosophy in action in a political sense.
However, there is a danger—which applies
in every policy area and not just to the CAP—that constant
tinkering with the rules of engagement leads to an inability properly
to assess the performance of the policy in the medium to long
term.
What is needed above all else at the present
time is a period of stability. We have just witnessed, and have
still to come to terms with, the most radical reform of the CAP
in its 50-year history. Time must be given for that reform properly
to establish itself and for its effect on the market and on rural
communities to be properly assessed before further significant
changes are contemplated.
The so-called Health Check in 2008 provides
an opportunity, in effect, to complete the 2003 reforms by doing
what should have been done at that time—the various measures
which we have mentioned in this response. It should emphatically
not be used as a platform for further upheaval.
The House of Commons EFRA Committee, in its
report of 16th May, suggested that the government should "grasp
the fresh opportunity presented by the CAP `health checks' and
make it the time for the UK to direct the debate towards scrapping
the existing CAP and replacing it with a `Rural Policy for the
European Union'". We see that as being in keeping with the
application of a sledgehammer to a nut and we do not, for reasons
which will be clear from the above comments, believe that it will
be remotely necessary.
We will be pleased to offer further assistance
to the Committee should it be asked of us.
11 June 2007
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