Examination of Witnesses (Questions 102
- 119)
WEDNESDAY 18 JULY 2007
Mr Peter Kendall, Mr Martin Haworth and Ms Carmen
Suarez
Q102 Chairman:
May I welcome you and thank you for coming along to help us with
our review of CAP, with the two elements—the health check
immediately and then looking further forward to further reform
of the CAP. I will start by saying that this is obviously a formal
evidence session. There will be a transcript available, which
we will send to you afterwards, and you can see if there are any
corrections that need to be made. Also, we are being webcast;
so there is a possibility that somebody somewhere might be listening
to what we are saying. Do you want to start by making any opening
statements of a general nature? Or would you prefer to get on
with questions and answers?
Mr Kendall: I think you have had our submission.
I am more than happy to pick up questions about what we have already
said.
Q103 Chairman:
In your evidence, you made the obvious point that the factors
behind the CAP have changed very much from when it was originally
put together. Now, you state, those main drivers are "an
amalgam of food, energy and environmental security". Can
you talk briefly on how you see those factors coming together
and influencing the development of the CAP, particularly towards
the future?
Mr Kendall: Thank you very much indeed for the
invitation to be here today, particularly for having the chance
to expand on some of the questions regarding our evidence. I think
that it has happened in a remarkably short period of time that
we have seen a very major shift in how we view agricultural production
and land as a resource. I have not been involved in the NFU that
long, but I was Deputy President three years ago. In that period
of time we have seen an enormous change of emphasis, looking at
land, whether it is producing food, energy, the environmental
agenda, with climate change coming to the fore; whereas, when
we embarked on CAP reform in 2003, we were still looking at how
we managed some of yesterday's problems rather than the challenges
of tomorrow. When we reflect back on the origins of the CAP and
coming out of seeking food security within Europe, there are now
those additional dimensions. We are looking at the fact that we
have a more volatile climate; we have new demands on land use
from energy; and we could have a very long debate on the rationale
behind the use of renewable energy, energy crops and biofuels
in itself. The major dynamic evident in the dairy sector at the
moment is the global drivers of population growth and dietary
change. There are countries like India and China, where we have
seen a bigger increase in milk prices—and global skimmed
milk powder would be the best indication of that—and we
have seen it in cereal prices in the last years. We are now seeing
a whole load of global drivers which mean that we have to look
differently at how we view the CAP going forward. Rather than
just reducing agricultural support, I think that we now need to
have a policy which makes sure that our agricultural land is in
the best condition and is a valuable resource that is available;
because I believe that we will need it more than we have done,
probably since that post-war period.
Q104 Chairman:
That gets us on to the future role of government, does it not?
You make the point in your evidence that you think that, because
of the strategic importance of farming, governments are unlikely
to reduce their level of intervention. Intervention has two elements
to it, does it not? One is policy intervention and regulation;
the other is financial intervention. Again, what do you see as
the nature of government intervention? How will governments intervene
in farming in the future, in the context of interventions that
do not distort competition?
Mr Kendall: I think that is enormously challenging,
as we sit here now with a United States' Farm Bill at a fairly
developed stage at this moment in time. Some of the soundings
we are picking up are that it might actually have more of an interventionist
role than a less interventionist role, coupled with their driver
for renewable fuels. It tells me that the world will be a very
difficult place to evaluate, going forward. How we call upon the
Government or the EU to be involving itself in those markets is
therefore incredibly challenging. When we look at why we have
support payments from within Europe, why we have a Common Agricultural
Policy, we have to examine some of the differences we have within
Europe, our environmental challenges and responsibilities—and,
probably more importantly, the irresponsibilities we have—and
the protection, the cross-compliance we put on our farmers. I
am a cereal grower from East Anglia, and there is also the fact
that my markets are distorted by agricultural policies around
the globe. Although there may be some really positive signals
coming through for alternative uses, I am convinced that we will
see volatile markets. When new land comes into production, you
will see some years when it all clicks, you will get very high
yields and you will see prices fall. You will still see the impact
globally where countries will be placing those surpluses on to
world markets; we will be paying export restitutions to distort
the global marketplace. We do have to look at an agricultural
policy which helps with some of our additional challenges in our
environmental management—in how we make sure that we preserve
and look after the countryside in the way we have done as an industry,
I think pretty impressively, in recent times; but also to make
sure that we are not disadvantaged through other countries' policies.
That also brings me to the CAP, where I think that we have made
some very good commitments on removing export restitutions, on
making commitments on reducing tariffs on imports, on opening
our markets up to imports from developing countries. However,
we have ended up with a CAP which, to me, is less "common".
Certainly in my farming memory—for the 24 years I have been
farming—we do have, even within the island of the United
Kingdom, four different systems. We also have a very varied system
in Europe, where we see France, with 40 per cent of all suckler
cows, maintaining full coupling on beef production. When we look
for the market to send the right signals to my members within
the UK, therefore, we will not see those true market signals.
We therefore need to see an agricultural policy that helps us
to meet those environmental challenges and that actually puts
right some of the distortions which are occurring in the global
marketplace.
Q105 Chairman:
You have said "put right some of the distortions in the global
marketplace". How do you put right those distortions?
Mr Kendall: I am looking at the fact that we
do have a role for a payment system and support for farmers. It
would be crazy if we damaged our production base because, over
a number of years, a country that had a surplus was placing it
on the world markets. You would see a small percentage of global
production traded in the marketplace driving and dictating those
global prices—which would cause me either to under-invest
or take land out of production, because of other countries' distortions.
I therefore think that there is a role for supporting agriculture
while those distortions exist on a global basis.
Q106 Lord Bach:
Let me press you on that a bit because, as My Lord Chairman has
said, it is a crucial point. The question in principle is: why
should government provide financial support to farming? Of course,
we will all agree that they should provide support for real disadvantage
and poverty in rural or urban areas, and perhaps also to assist
in making our environment a better place. But what other private
industries enjoy this level of taxpayers' financial support—or,
indeed, any financial support these days? You talk about extensive
government involvement, and of course there is; but that applies
to many other industries as well. How, in 2007, can there in principle
be any case at all for having taxpayers' money paid to support
farming in this country?
Mr Kendall: I would personally love the idea
that I was in an industry that was entirely on its own, no one
coming to me and saying, "You are receiving handouts or support
from the Exchequer". I can tell you that there are many,
many of my members who would feel that would be a great place
to be. I have recently been out in Herefordshire with suckler
cow farmers, looking at the situation they face. As I do, I repeat
the example of what the French suckler cow industry is having.
I also see some of the statements coming out from the new President
of France about wanting to build more and stronger red lines around
certain sectors of their industry and agriculture. If we are going
to lose some of our critical mass in the United Kingdom while
other people distort and have a role in those marketplaces—it
is the same with the United States, which up to now, through their
food aid programmes, have had a significant impact on global marketplaces—I
think that our land as a resource, our farming industry—and
I am not going to say "farmers" because that could be
interpreted as being self-indulgent—and the way we manage
it will be a really critical resource. We should be looking at
ways in which we do not see the industry either under-invest or
scale back or actually export that production in the short term.
I therefore think that there is a role for government to play.
Whether it is on the same scale, whether it is in exactly the
same form, is where we should be having an adventurous debate,
going forward. However, I think that it is crazy if we run an
experiment in England—not even in the UK but just in England—that
could see some of our very good infrastructure, some of our very
skilled practitioners, go and do other things, because we underestimate
the value of what they do.
Q107 Lord Bach:
"In principle" is my question. In principle, there cannot
be any justification, can there, for taxpayers paying for private
farming? If somehow distortion, which seems to me to be the only
argument put forward now for continued financial support, was
lessened or even removed altogether, would you agree that there
would be absolutely no case at all for financial support from
the taxpayer for farming in this country?
Mr Kendall: I think the distortion is a big
part of it. There is the aspect of—Carmen, as our chief
economist, has reminded me—the role of public goods, in
the fact that we are managing our environment in a very different
way. I have a number of fields on my farm in Bedfordshire that
are nine or ten acres, surrounded by large hedgerows, with footpaths
across them. I can promise you that the management and looking
after them in that state is very different to if I were prairie
farming in Iowa, for example, in very different environmental
conditions. So I do think that we offer a number of benefits through
looking after the countryside. We look after 70% of the land area
in the United Kingdom. A debate that we should be having, going
forward, is that a public good should also be in preserving that
land in a good productive capacity; that we do not just leave
it to the market entirely. I have had some really quite concerning
emails and pictures from the North East at the moment, where whole
potato crops have been absolutely wiped out because of extreme
weather. I am not going to say whether this is climate change
or a symptom of climate change, but we do seem to be seeing more
frequent extreme weather conditions. How we look after and maintain
that land in a good productive capacity, because of those increasing
challenges coming round the corner—whether it is climate
change, energy security, population growth, demand challenges—is
important, and I put that as a public good, as well as the environmental
management that I think the farming industry provides so competently.
Q108 Lord Bach:
Do you think other industries could argue a like case from their
own points of view—how fundamental they are, how they are
faced with all kinds of difficult problems, and how the community
would be affected badly if things went wrong? Why should they
not argue the same case?
Mr Kendall: I think that some have in the past.
Q109 Lord Bach:
But they have failed. They do not get the money now.
Mr Kendall: But we do have government intervention
in certain areas of our lives, whether it is health, transport,
education, and we do have a role for government. I think that
the land is an important resource. It is something that we should
be looking at now. I acknowledged earlier as to whether it should
be in a reduced role; but, as we look at the role of government
in agriculture, I do press very strongly that it should be across
the trading area in which we operate, which is Europe, and not
just in England or the UK, as some sort of experimental type of
policy.
Q110 Lord Plumb:
Looking across the role in Europe—and obviously we have
to make comparison between the situation here and in other European
countries—I think that you have already referred to many
of the important effects that the reform has had. You make the
point very clearly, quite rightly of course, that it is incomplete:
it is an ongoing situation. Most of the evidence that we are receiving—and
you will not be surprised at this—is suggesting that there
should be a transfer of money from Pillar I to Pillar II. In other
words, there should be concentration on the areas where farmers
can be seen to be more environmentally friendly. I think that
consumers might respond better if that can be explained to them.
Yet the trend is already confirmed that there is a widening food
trade deficit, as part of the overall trade deficit. How concerned
are you when consumers regard cheap food as a priority? Does the
reform of the CAP fit well as far as you are concerned? Does it
benefit consumers in this country? How does it compare in other
European Union countries as against in the United Kingdom? If
so, why and how?
Mr Kendall: It is quite a complicated question,
which I would expect from one of my predecessors!
Lord Plumb: I might say in passing that
the question you had three times over from a former minister was
one which I received many times, many years ago!
Q111 Lord Bach:
And look what has happened now!
Mr Kendall: Perhaps I could pick up on the first,
rural development—the Pillar I to Pillar II transfer—and
then maybe Martin will want to pick up on some of the benefits
of the cheap food policy. It is an interesting experiment that
is already going on—the transfer from Pillar I to Pillar
II—and again I can pick England out as an example of what
is going on. My business will have 17% sliced off my support payment
this year. This is a difficult area for me because I represent
farmers in England and Wales. In Wales it will be 0% on top of
the EU modulation. Instead of 5% with 0% national, I will have
12% English and then 5% EU. I think that this current year it
is going up to 19% in England, within two years. We have done
some figures comparing the impact this might well have on a standard-type
farm, if you compared an 80—hectare dairy farm with a million
litres in Scotland with, say, Northumberland, or even going into
Holland. Over the period of the next rural development that will
affect a farm in England over one in Scotland by £25,000,
compared to one in Holland by £30,000—over that five-year
rural development period. When they have the challenges of a nitrate-vulnerable
zone regulation coming, they will have to make a lot of investment
in how they handle dirty water, slurry storage, et cetera.
To me, that is a distortion that I have real concern about. Farmers
who may be just as skilled, just as creative, as between one country
and another, because we have made that decision and have moved
money from Pillar I to Pillar II here, but not in those other
countries, we will create almost unintended consequences. If I
meet a young guy in his early thirties saying, "Actually,
I do not have that £25,000 to make that investment",
I will be disappointed, because I want my farmers to be competing
with the very best in Europe, planning for the future and doing
so wherever possible on that—and I know it is a widely overused
phrase—level playing field. I think that there is a case
for the moving of money from Pillar I to Pillar II. We have grave
concerns over how effectively that money is spent. I would be
very concerned about how it might happen at different speeds in
different countries, because of the very poor historic allocation
of rural development money. If we started with a blank sheet of
paper and looked at rural development spend, we can see the UK
having 7% rather than the just over 3% we currently have. That
will put us in a much better place and we will have a much lower
need for the modulation we currently have. I know there are arguments
for moving that money very quickly and I think we should do it,
if it happens evenly throughout Europe. However, we should also
make sure that it is well spent and used to preserve that productive
capacity, because I think the challenges facing us are very important
and I would be concerned. You may have seen the comments, written
in a lighthearted way in the farming press, where I have suggested
provocatively that thatching bus shelters where buses no longer
run is not of great use. We need to worry about our productive
capacity, our investment in our structure and also in our agricultural
capability, and I would not want to see that lost too much.
Mr Haworth: Lord Plumb mentioned that the CAP
has been associated with a cheap food policy, and that has obviously
benefited consumers. Our view is that that period may now be coming
to a close and that we are in a period where food prices are likely
to be higher, and possibly sustainably higher. If that does prove
to be true, it also links back to the question posed by Lord Bach.
Obviously, the case for ongoing support, at least at its current
level, would be less if that does prove to be true. We in the
NFU did support the CAP reform in 2003, and indeed advocated it,
because we thought that it would help to make farmers more focused
on the market rather than on trying to get the maximum support
that they could, even though that is not what the market or consumers
were requiring or asking them to do. To some extent, the reform
has succeeded in that; but it has not succeeded to the extent
that we hoped it would, for a couple of reasons. One is that we
had wanted to see this policy applied uniformly across Europe,
and that has not proved to be the case. It has been implemented
in different ways in different countries and, unfortunately, a
degree of coupling has remained in some countries; and that has
led into the distortions that Peter mentioned. The second unfortunate
thing that has happened is that, because of the way that the policy
was implemented in England and the problems that we had, a lot
of farmers have been concerned, or their mind has been on the
difficulties of implementation and the lateness of payments, rather
than on the market and how they should respond to that new system—and
that is obviously extremely unfortunate. We do therefore see that
the policy has not been uniform; it has impacted in different
countries in different way. We can argue about who has benefited
and who has lost out of the process, but for us a priority now
is to get back to a more common policy—and a simpler policy.
Mr Kendall: Could I make one comment about cheap
food? I have a real concern that some of the policies, some of
the ways that agriculture has behaved globally, have delivered
food that is too cheap. I think of the very public riots in Mexico,
as they were painted, as an indication of a policy where the Americans
had been supporting more and more production of maize within the
United States, making counter-cyclical payments that made sure
that the farm incomes were high but the global price was low.
Therefore, those other developing countries, like Mexico for example,
had not been able to afford to produce their own maize. We have
been talking about some of the renewable energy dynamics that
are driving prices at the moment. Many of the African states we
talk to are actually wanting higher global prices in some of these
staple products, so that they can bring their agricultural land
back into use, so that they can make that investment. I think
that cheap food and a cheap food policy globally have significantly
damaged not only the development of countries but also the investment
in core agricultural production.
Q112 Lord Plumb:
Still on food policy, you speak a little confidently in your paper
on possible improvements in the milk sector. Is that really so
at the moment? Is one not concerned about the growing imbalance
in agriculture? The cost of feed at the moment is increasing by
30%, and that of course is making it more difficult for the producer.
In that context, I understand that the gap at the moment between
the cost of production and the price paid to the farmer is something
like 4p a litre. When I go into the supermarket, as I did last
night to pick up a litre of milk, they charge me 85p for it. I
know that is a supermarket and I know that it is after normal
hours, and so on. Nevertheless, there seems still to be a huge
gap, and a total misunderstanding therefore by the consumer of
what the producer actually receives and what effect it is having
on the imbalance, as I see it, of the industry.
Mr Kendall: I think that, when you held my job,
Lord Plumb, you were a mixed farmer. My job becomes more challenging
because I am now purely an arable farmer. I have enjoyed the benefits
of the recent price hikes but, as my brother reminded me this
morning, it is no good having these high prices until you get
it in the shed—and it is looking incredibly flat and weatherbeaten
at this moment in time. Prices may go higher therefore, if we
fail to get this harvest completed and gathered in. On the issue
of milk, however, I do have some real optimism for the dairy sector,
when I see people looking to divert milk from perhaps cheese production
to skimmed milk powder, and they can be paid over 26p a litre
for that. While farmers are still receiving 17p or 18p, and I
know there have been some good movements recently, it is how you
move from those long contracted arrangements, some of which last
a year into the future at those lower prices. What is happening
in the marketplace, which is strongly driving milk prices up,
will take some time to come through. Most of the dairy farmers
I meet at the present time see those very strong global dynamics
and those strong market signals. Cheese prices are already moving;
skimmed milk powder has moved enormously. My challenge to both
retailers and processors is to make sure farmers get that return
sooner rather than later. Otherwise, faced with the increased
food prices and other challenges they face, they will not be here
for the long term and they will make short-term decisions. I believe
that the long-term signals are much stronger and much more encouraging.
Where we do have a problem with the high grain prices at the moment
is particularly in the lamb and beef sector, where the markets
are not responding and where we have real challenges on a global
basis. Again, we are trying to represent to retailers the need
for pigs and poultry—where the chains are quite short, where
they do see those impacts quite quickly—that they are remedied;
that those price changes respond in that case, and are passed
back to the farmers and the producers. I am, like you, Lord Plumb,
worried that we see an increase in one sector or one part of agriculture
and—because of the imbalance in the balance of power between
retailers and producers—that is not passed back quickly
enough, to ensure that we raise all of the sectors into a profitable
position fast enough.
Q113 Lord Plumb:
Should the EU intervene in the relationship between the different
sectors? How does COPA see this? Obviously this is a matter that
you discuss with all your colleagues in Brussels.
Mr Kendall: For those who are not aware of how
COPA works, we now have 27 countries. That makes forming a collective
view within Europe challenging, to say the least. I have a French
president of COPA—and I am now a vice-president—who
usually starts a sentence with "Non". That is
how he usually approaches a response on most subjects.
Q114 Lord Plumb:
Nothing new in that!
Mr Kendall: We try to say, "How can we
develop the argument or work with people to find a solution?"—which
is hopefully how, within the NFU, we try to work policy. We want
the marketplace to work as effectively as possible. I think that
there is a role for the Competition Commission in the balance
of power between retailers and producers, and that is a role which
we encourage. For example, how we look at the dairy market in
the European perspective rather than just the UK perspective.
However, I do not think that the European Commission should be
involved in trying to balance up different sectors. It should
encourage the market to work fairly and effectively.
Q115 Chairman:
Can we ask a very quick specific question, in relation to what
you said about milk and your optimism there, and take that in
the context of the health check? I assume therefore that you are
quite content to see the abolition of quotas?
Mr Haworth: Yes, we accept that the abolition
of quotas will take place in 2015. There does not seem to be an
agreement at European level to stop them before that or after
that. We think that there does need to be a period to allow us
to exit from what has been in place as a policy for more than
20 years, but we fully accept that they will go. Of course, if
these high prices remain, it will be much easier than if we were
in a period of low prices. I think it is worth noting here, with
the CAP, that we have been accused for a long time of maintaining
prices way above world prices. It is worth pointing out that,
if the world price was operating in the dairy sector at the moment,
producers would be getting over 27p a litre and the actual average
price is 17p—which is a remarkable turnaround. For the first
time ever, there are no stocks at European level and there are
no export subsidies operating at the European level; so we are
in a quite remarkable turnaround period.
Q116 Lord Plumb:
Does that mean a world shortage?
Mr Haworth: Yes, it does. It means that, because
we have the rising demand, particularly from China and India,
there is effectively a world shortage, particularly of skimmed
milk powder, where the price has increased in a dramatic way in
the last six months. More than 50%, I think.
Ms Suarez: Yes.
Q117 Viscount Brookeborough:
Mr Kendall, you are an arable and possibly a grain baron! I was
wondering whether you could tell us very briefly, along the lines
of what you have just said about milk, about the grain price—forgetting
for one moment the bad weather, which will obviously have an additional
effect. Could you tell us about grain prices, where they are going,
and are you doing better?
Mr Kendall: A number of our organisations start
by telling you about how the costs have escalated, and you could
put it in that perspective. To start with, I have not suffered
so much from the bad weather as many people have. In many respects,
I am in a much better place than I was two years ago. I think
that there is a lot of distortion in what is causing the current
changes in grain prices. I am picking out wheat and barley—grains
as opposed to maize—on a global basis. The maize price has
changed enormously because of the drive for ethanol within the
United States. Within the wheat market particularly, probably
less than three million tonnes of wheat globally would go into
ethanol production. The main driver of the wheat price, therefore,
would be the fact that, if you go east of Berlin, they have had
very severe droughts, very poor crops, and there was the Australian
drought of last year where production fell from 24 million tonnes
to less than 9 million tonnes. Those have been the key drivers.
Even this year they are expecting that we will have the third
biggest wheat harvest ever, but it will still be significantly
below consumption. I think that the drivers of the wheat price,
therefore, are global demand coupled with areas where drought
has impacted on meeting that increasing challenge. Where is it
going to go? I probably would not be the President of the NFU
and would be working in the money markets or trading grain if
I knew where they were going to go! I have risk management tools
in place in my business. I carry options for next year already,
to make sure that I protect myself against downturns in prices.
We are aware that there is significant land that can come into
production in other parts of Eastern Europe and around the world.
You are seeing from the response of things like phosphate prices
and nitrogen prices that people will be using more inputs globally
to step up production. If that all clicks, I can see the prices
returning to lower levels; but, as you say, climate change seems
to deliver us more volatile growing conditions. It is very difficult
to predict. I can already get in excess of £100 a tonne for
my wheat for November 2009. I have made some coverage for 2008
harvest, which I have not even planted yet, but I will be looking
to 2009 at some point.
Q118 Lord Bach:
A question on partial decoupling. You make a strong case—I
believe, anyway—for the ending of partial decoupling. Can
you give us some examples of the ways in which continued coupling
in specific Member States has disadvantaged our farmers? If payments
were fully decoupled, would the problem then arise of the coexistence
across the EU of payments based, on the one hand, on area production
and, on the other, on historic production? Would that be the next
problem? Would that come to the fore, as it were, if we got rid
of coupling?
Mr Kendall: We are already in discussions with
the Commission about the Health Check for next year and how they
will respond, but we have made strong representation on the need
to remove partial coupling from the system, because we think it
distorts decisions. There is the example I gave about the French
suckler cow premium being kept in place. I would even include
in that the Irish, where they are using their rural development
budget to give a top-up for the keeping of suckler cows to be
termed as a coupled support payment, which goes with that keeping
of animals in Ireland. They have very generous rural development
budgets, as you are well aware. I am already picking up worrying
comments from the Commission that, maybe in areas such as beef,
they would permit full coupling to remain in place following the
Health Check, and going even further forward. That bothers me
because, if it means that people are not making the right rational
choice on what they are doing with their resources—and they
do have 40% of the suckler cows in France—that will impact
on some of the decisions that my farmers and members are making
within the UK. That is a concern, and the beef one is a good example.
On the grain one, for example in Spain and again in France, you
receive less money if you do not produce. That was therefore impacting
on some of the decisions made within those countries, but I think
that the global prices have moved those sectors that were only
partially coupled in grains—in, say, France and Spain—to
be less of a problem, less of a hindrance on the marketplace.
When we look at how that might impact on the existence of area
versus historic payments, we have to look at the fact that the
Commission has encouraged the new Accession countries to keep
their simplified systems, rather than moving to our system. That
indicates to me that the Commission are moving, or want the original
15 to move, towards an area-based system that is based on a regional-type
payment rather than the historic. I see it from a very difficult
perspective, as I have said, because I represent Welsh as well
as English farmers. I can understand, having seen how some of
the transfers have occurred in England—and we have had many
discussions on some of the challenges in getting that money sorted
and the implementation of the complicated system we had in England—my
members in Wales are very keen to keep a simple, historic system
until they can see how easy it is or whether it is possible easily
to implement a regional hybrid or a regional system, as we have
in England. The appetite for that in Wales, therefore, is not
strong—I can promise you that. However, there is a feeling
within Europe that that is the logical way to go, looking then
at certain levels of agricultural production in those countries
where you would have different regions, as we do in England now—the
two lines of three regions—to represent the sort of agriculture
that is going on in those areas.
Q119 Lord Cameron of Dillington:
This is really a continuation of that question, concerning the
Single Farm Payment. Obviously, that has not gone very well in
this country. One of the suggestions you make is that the minimum
area should go from 0.3 ha to 5 ha, which I suspect is an opening
bid to the Commissioner. I think that he said 3 ha. You may like
to comment on that. My main question, however, is this. If, as
you are suggesting, in the long run we get to an overall area
payment across the EU—which I think that certainly most
of us would favour—how would you allocate that? Would it
be the same area payment in every region, allowing for the differential—as
we have in England with the less favoured areas? Would it be the
same in Eastern Europe and new Member States as the old Member
States? How do you think this is going to work? Also, what do
you think the reaction of the WTO would be to the whole question
of farm support in a decoupled way like this?
Mr Kendall: I will pick up the first comment
you made about the 3 ha and the Commission, because I was being
accused of being a cereal baron from East Anglia and it may be
perceived to be difficult for me to make that comment from the
NFU's perspective. However, one of the big challenges we have
had as an industry is the 40,000 new claimants that came into
the SPS system. A friend of mine in the grain trade who owned
half a hectare where I live gleefully told me how he had spent
£1,000 to get a cheque for, I think, £50 in his first
year. I think that we are seeing lots of those sorts of complications,
where people have had really complicated systems to map and sort
everything out for very small "pony paddocks", which
has not been the most efficient use of resources; particularly
when some of our members—and I am very keen that we see
younger people coming into farming, building, looking forward,
looking at the industry for the long term—sometimes have
not had the money six months after their counterpart might have
had it in Scotland, Ireland or in Europe. Where we can simplify
it, where we can make the system work well, so that people can
plan and build businesses—I think that is incredibly important.
Comments on how we might look at the European perspective and
the WTO I will leave to Martin.
Mr Haworth: We have always said that we see
CAP reform as an ongoing process. We would see it as a series
of transitions, if you like. We, the NFU, were not actually favourable
to going to an area payment in England in the first instance.
Although we do accept that that was a sensible place to get to,
we would prefer to see that happen in some sort of equal transition
across Europe, rather than our going alone, as it were, even in
the UK. We would therefore see this as a series of transitions.
We do therefore see the next step as moving to the whole of Europe
going to some sort of area payment. The logic that is applying
here is that you cannot justify a historic allocation for very
long. If that is true, you cannot also justify the historic allocation
of the budget for very long, because it is based on historic production
levels. Therefore, we would see a movement towards a common European
level of payment. Whether that will be by every country having
the same or every country dividing up its region into different
qualifies of agricultural land, as we have done in England, or
regions, as they have done in Germany, I do not know. However,
we do see this as a series of transitions. Of course, there is
the other transition that might happen, which goes back to the
question by Lord Bach, that we may see all this being phased out;
so there may come a period when we are not talking about very
much anyhow—but that might be over a longer period of time.
Ms Suarez: As to the last question concerning
WTO, under the current definition there is in principle nothing
that would prevent having different levels of payments in different
countries or having, as we have in the case of England, different
levels of payments within the same country. The current definition
of what are Green Box payments allows for that. When we talk about
how the Green Box might be defined in the future, we are talking
about the next round of negotiations, not the current round. Taking
into account the current impasse in the Doha Round, we are probably
talking about quite a bit further ahead and, as Martin has indicated,
maybe at that stage we will be discussing other issues.
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