Examination of Witnesses (Questions 205
- 219)
WEDNESDAY 24 OCTOBER 2007
Mr David Fursdon, Professor Allan Buckwell, Mr Andrew
Douglas and Mr John Don
Q205 Chairman:
Good morning. Can I first of all welcome you and thank you for
finding the time to come to talk to us? We are doing this inquiry
into the health check but really looking forward as well to the
new CAP. If you could just briefly introduce yourselves and then
perhaps make a short general statement on your overall position,
then we will go into a question and answer routine. What I do
not want to do, to be quite honest, is to put a specific question
to the English and then a specific question to the Scots. I think
it is much better if we can have more of a general discussion.
The other thing I should point out is that this is a formal session,
there will be a transcript, you will have the opportunity of looking
at the transcript and revising it before it is released. We are
web cast and actually we do have evidence that people do listen
to it. That is all I am prepared to say on that one!
Mr Fursdon: Thank you. I am David Fursdon, President
of the CLA. To my left is Allan Buckwell our Chief Economist and
essentially the plan was that I would give the introductory statement
and I would take some of the practical questions and anything
too difficult I would give to Allan to answer. Obviously we welcome
this opportunity to explain our vision for EU land management
and we basically see the EU policy and the budget review over
the next few years as absolutely fundamental. We want to try to
encourage a strategic and long term view of this. Indeed, we notice
that this is what the Budget Commissioner asked for last week
in Brussels, a frank debate without any preconditions or taboos
on the challenges and risks for the EU going into the 21st century.
That is really what motivated our paper. The UK produced its vision
for the CAP in December 2005 (produced by Defra and the Treasury)
but it did not seem to us to address many of the questions that
we want to ask questions about and which lies behind what we are
trying to produce through our policy. From our point of view,
as we have said before, the EU and the world face two enormous
challenges which are feeding the world—the growing population
in the world—but at the same time making a significant change
to the environmental impact of agriculture. We are increasing
the positive externalities (in economic speak)—landscapes
and habitats—but actually reducing the negative externalities—pollution
of soil, water and the atmosphere. That is very complex and they
are interrelated. Obviously farming affects the environment and
the environment affects farming; it goes both ways. These are
big enough challenges on their own but when you add climate change
to that as well then we see this as really very fundamental. We
maintain that the EU is such an important zone just in terms of
its population and its sheer size, economic power and so on, that
it has a self-interest as well as a moral interest in looking
at what are global challenges. We cannot ignore the effects of
our policies on the rest of the world. Climate change and bio-diversity
loss are global problems and we cannot just push them away and
forget about them because they will affect us whether we like
it or not. Food and environment are established core competencies
of the EU and therefore as the challenges faced by these policies
grow and the EU itself will grow in the years ahead, we start
from the proposition that you cannot conceive of an EU budget
not dealing with these issues and if it is going to deal with
them we cannot see how this budget can contract as the EU expands
and the problems increase. We argue that we must step out beyond
the narrowly focussed discussions of things like compulsory and
voluntary modulation and all that sort of thing, to look more
fundamentally at our food and environmental policies and how we
should tackle them. Our summary is, as we have said to you, that
we need a European food and environmental security policy. Only
once you get the broad objectives of that agreed can you then
move on to the budgetary consequences of that.
Q206 Chairman:
Thank you, that is a very impressive statement of high ideals.
Would you care to make an opening comment, Mr Don?
Mr Don: Thank you. I speak as the immediate
past Chairman of the SRPBA. I am a low ground farmer in Aberdeenshire.
Q207 Chairman:
Whereabouts in Aberdeenshire?
Mr Don: About dead centre; half way between
Inverurie and Huntly. On my right is Andrew Douglas who farms
right on the top of the Scottish border with Northumberland. He
is Chairman of our Primary Industries which covers agriculture
and forestry and other primary industries. We do welcome this
opportunity to come down to London and give our evidence to you.
I think it is an especially important time because we should not
interfere with the run of the 2003 reforms and they should be
able to run their course. We strongly believe that agriculture
and other primary industries need a period of stability following
what has been a massive change. However, since we gave our evidence
there have been quite a number of considerable changes, all of
these changes tending to increase the effects of globalisation
and liberalisation of trade. We have, for instance, seen the demand
of agricultural commodities rise considerably to the point where
supply and demand are much more closely balanced. This may have
helped the arable sector but it has certainly not been all that
helpful to the grazing livestock sector, Scotland, as you know,
is a very pastoral country relative to the rest of the UK. The
growing change from food production to fuel production is exerting
even more pressures on both agriculture and forestry and the management
of the environment. On top of this we are seeing even more clearly
the effects of climate change. We have only to look at situations
in other parts of the world with the all important result of water
being a key resource. Yet despite these points that I make, we
continue to see budgetary pressures not only on the existing CAP
but also other measures covering the environment—such as
Natura 2000—and minimal support for forestry. We believe
that the new policy direction should recognise clearly the strategic
importance of food and fuel production, and timber production.
We believe that there is a need to create a core fund for primary
industries that will keep farmers and foresters in production,
especially when they face what might be termed natural disasters
(whether they be disease, floods, storm or whatever). We also
believe that policy direction should be keyed into encouraging
land based initiatives in both agricultural and diversified businesses
as well as supporting such issues as cooperation and the rural
communities through social enterprise and related infrastructure
measures. Thus this will help prepare primary industries face
the increased exposure of the world market place. We also strongly
believe that capping will actually have the opposite effect on
that. We also believe that the way forward is for land managers
to be rewarded for the non-market public goods they deliver especially
with regard to the environment. Furthermore we think it is very
important that there is a sound funding regime for the less favoured
areas. 85% of Scotland currently sits in the less favoured area.
Natura 2000 is again very applicable to us in Scotland. We believe
that there should be a transition period in the system and in
that transition period a core funding to ensure that primary production
is kept in production. We believe that this is an unparalleled
opportunity to make radical changes as long as this happens in
a beneficial way, and as long as the politics of the budget and
the negative dogmatic views of some do not dominate the negotiations.
I have to say that we saw that (at the time of the British Presidency
in 2006) which did not help the cause of rural development. There
is a chance to establish, as my colleague on my left has said,
a creative framework that not only supports sustainable food,
fuel and timber production, but also a sustainable eco system
that delivers a wide range of bio-diversity and recreational benefits.
This will hopefully safeguard our security as well as our natural
and cultural heritage. What we are looking for in the future is
a food, forestry, fuel and environment policy for Europe.
Q208 Chairman:
Thank you very much. I hope you do not mind if I adopt at this
stage a relatively challenging tone and pick up some of the points
you made in your evidence and actually appeared in your opening
statements as well. The Country Land and Business Association
in your evidence argue—as you argued in the opening statement—that
the CAP should focus on global food and environmental security.
I think the question there must be why? Why should European tax
payers be expected to finance a CAP regime which has as its focus
global considerations rather than European considerations? There
might be a sound moral argument but that is not always a sufficiently
powerful argument when we are dealing with the nuts and bolts
of getting individual Member States to represent their own interests.
If I can take out something from the Scottish presentation, the
evidence in particular, you suggested that the objectives of the
CAP should be a competitive and market orientated agriculture.
What I am not clear about is what would that actually mean for
Scottish agriculture? What would Scottish agriculture look like
if it were viewed in terms of a competitive and market orientated
agriculture? What would be the structure of agriculture in Scotland
in that context? What would that do to the role of agriculture
in the wider rural economy? Would that result in agriculture becoming
in a way more or less important?
Mr Fursdon: We do not believe that you can separate
the two, especially since climate change has come along. A lot
of the effects of climate change are international and actually
what we do in Europe and what we do in the world are interrelated
in a way which they have not been interrelated before.
Mr Buckwell: We are not arguing that the EU
should have a global food security policy; we are arguing that
the EU should have at the core of its agricultural and environmental
policy the objectives of food and environmental security and these
things are interrelated. By European food security what we mean
is protecting the long run food production capacity of the European
Union. We are not talking about European self-sufficiency; we
are talking about the capacity to produce. For example, a key
consideration for the single payment at the moment is keeping
agricultural land in good agricultural environmental condition.
This seems a highly intelligent thing to do and those who are
wanting to wave goodbye to the single payment had better explain
how they are going to ensure that all of Europe's agricultural
land is kept in good agricultural and environmental condition.
We are not talking about European self-sufficiency—Europe
is the world's largest food importer—but what we are saying
is that if Europe insists on having higher and higher environmental
standards as it is, which we support, and wants to liberalise
trade and implicitly reduce its production, who does it think
these additional imports are going to come from and with what
environmental impacts? It is at that level we say that Europe
is big enough and important enough and influential enough to want
to care about the global environmental impact of its European
policies as well as the local impact. European citizens care about
bio-diversity loss worldwide, not just in Europe. European citizens
worry about climate change which, as David says, has a worldwide
impact. If we simply displaced European production and produced
it somewhere else and had the same climate change impact we have
gained nothing. That is why we need an integrated European food
and environmental security policy.
Mr Don: It is important to recognise that, in
future agriculture will have to remain competitive in Europe if
it is going to survive vis-a"-vis competition beyond European
borders production. Therefore all measures should be designed
to encourage competitiveness. In the past we have seen production
subsidies which have done perhaps the opposite. I think that is
really the basis of what we were arguing. The effects of this
for Scottish agriculture will be a continuing pressure on individual
businesses and they will tend to get larger rather than smaller.
At the same time, as colleagues have said, there are a number
of other pressures coming from other directives of the EU that
put us to a disadvantage and that has to be recognised in future
policy.
Q209 Chairman:
Would you like to say a little bit more about how you would be
disadvantaged?
Mr Don: For instance, the EU Water Framework
Directive has a huge impact on land management and a considerable
increase in costs as it takes effect, likewise the Nitrate Vulnerable
Zone. These pressures are going to make life difficult if society
wants the benefits of these directives vis-a"-vis our competitors
in the wider world.
Q210 Lord Cameron of Dillington:
I would like to address the whole question of single farm payments.
I have heard it said that single farm payments are environment
payments in waiting and I just wondered, from the CLA's point
of view, if they were converted into environmental payments what
impact do you think this would have on food production and the
whole question of food security? Turning to the SRPBA, in your
introductory remarks, Mr Don, you said you want to keep core funding
to ensure that core farming is kept in production. Actually, the
thing about the single farm payment is that it does not actually
ensure that farming is kept in production. You can take the money
and not do anything. I wondered, if the Scottish farmers only
went for the market place where it was competitive, what changes
would take place in Scotland, particularly bearing in mind that
the payments are inevitably going to change to area payments in
Scotland?
Mr Fursdon: I will start on the single farm
payment as an environmental payment. I think one of the practical
effects of the single farm payment is that it provides a steady
income stream; it may be transitional but it actually enables
businesses to plan and know where they are going. That component
of what they get they know they are going to get. There have been
some hiccups at the start of the scheme but now at least it is
on stream. In terms of the environmental payments, that has been
less certain particularly with some of the budgetary problems
in this country we have had with environmental payments and certainly
with a lack of certainty for people who are in a countryside stewardship
scheme and are facing an uncertain future when those come to an
end. Part of the problem is the consistency of income stream for
planning for your business. It depends how you interpret your
question, but if they were, if you like, in what one might call
Pillar I and therefore a part of a steady income stream then that
is easier to cope with perhaps, but if it is in a Pillar II environment
where it is perhaps less easily accessible then I think there
are some uncertainties and I think that those uncertainties, particularly
in the livestock sector which are the areas where I think there
are most concerns, particularly at the moment, and in disadvantaged
areas, I think the effects on agriculture will depend on the way
in which they turn into environmental payments and the way in
which Pillar I and Pillar II interact.
Q211 Lord Cameron of Dillington:
Are you saying that if Pillar I had had greater cross-compliance
to get your environmental element in that would be something that
you would welcome?
Mr Fursdon: There is already a lot of cross-compliance
and it is a question of how much further you move that. I think
we are saying that actually that has probably moved as far as
it needs to be in order to have good agricultural condition. If
you start moving it into greater environmental schemes which may
well be related to climate change and others then actually you
are probably moving into a different form of income. What we are
trying to do is to look at what form that different income might
take and not have it bound by the rules and regulations that apply
to Pillar I and Pillar II at the moment. In other words, in an
ideal world one would be looking for a Pillar III but we do try
to live in the real world so we recognise that that may just be
impossible. I think it is a question of how you work those environment
payments in the future.
Mr Buckwell: The production effects of change
in the single farm payment are quite well analysed now. There
is plenty of analysis of this. The Scenar 2020 study commissioned
by the European Commission looked at this and they show that you
can change the single farm payment; you have a big impact on incomes
but a much smaller impact on production. They did not analyse
the environmental impacts or hardly analysed at all and that is
where, if you take the UK vision of slashing the single payment
and being pretty silent on what you are doing on Pillar II, you
will have a big impact on incomes, you will not have such a big
impact on production; the environmental impact is the one I think
we would be extremely concerned about. This is why in a sense
we have to get straight what is the big picture, how much resource
are we prepared to put into paying for environmental services
in Europe and how and where. Then it is a secondary detail in
our view as to whether it is greening Pillar I or shifting to
Pillar II and at the moment this gets snarled in the technicalities
of co-financing which is seen very differently around the Member
States of Europe.
Mr Douglas: I am a hill farmer and you did mention
you were concerned about the future of the upland rural community.
As you know in Scotland we are an 85% less favoured area and we
have had the less favoured area payment for many years. We have
always argued that that payment is a payment to keep people in
the glens and valleys. When the people go the schools close which
has been happening over the last few years. I am glad to say that
I have employed some people recently with young children and the
school buses are back running in our valley which is all good
news. Those people are required to be there to carry out all the
environmental changes that government and other organisations
would like to see happen. I know you are arguing that we cannot
have people there doing nothing so we are having people carry
out environmental change. Although hill farming at the moment,
sheep industry in particular, is going through a very difficult
period over the last three months the likelihood is that sheep
will go from the Scottish hills this autumn. There is a great
future we believe for forestry in some of these Scottish hills.
The Forestry Commission have told me already that Sitka spruce
which we have a lot of would be acceptable even now for carbon
sequestration. That is one piece of good news. Also I understand
that one major retailer is planning to use Scotch blackface lambs
this January instead of importing from New Zealand. They are already
making enquiries through hill farmers in Scotland. If we are going
to be market orientated we need the people there to produce these
lambs. If one retailer moves to Scotch rather than New Zealand
we are hopeful that many others will change as well.
Mr Don: I think we would all admit that the
single farm payment is not the most perfectly honed instrument,
but what we are arguing for is some form of core funding, as my
colleague Andrew says, to keep people in production and to keep
businesses in production. If we are looking at what is going to
happen to support the rural communities and the rural land management
rather than just CAP in the future then I think we need a basis
of core funding so that people can actually plan their businesses
with a degree of security because, as I said earlier, we have
all these other pressures of non-market forces on our businesses.
Q212 Chairman:
Can I be absolutely brutal? Why should we keep producers in production
if there is no market for the product that they are producing?
The other point is, if we look at the Scottish rural economy we
find that there is dependent upon agriculture but an increasing
proportion of the Scottish rural population is actually employed
in non-agricultural activities, so the people remain in rural
Scotland for reasons other than agriculture.
Mr Don: In answer to your first question of
why we should keep people in production, I think that although
it is currently probably not fashionable I believe it is going
to become increasingly important that we have a strategic supply
of food and fuel in European production. That is the long term
view and we can see the pressures on fuel for instance but also,
as I said in my introduction, I see the pressures from the third
world on the food supplies. It has always been an important policy
to try to have a secure supply of food which does not impact heavily
on the retail price index. I think there are issues around which
indicate that we should support in a long term way the continuation
of primary production throughout Europe.
Mr Buckwell: Can I add a flavour from England
and Wales? In my view I would put a different gloss on it in addition
to what John Don has said; the production of what is the question
and in my view it is the production of environmental services
for which we value the hills and the uplands and the point is
that a great deal of those environmental services are inextricably
bound in traditional livestock grazing systems. These systems
have created the landscape where people want to walk every single
weekend of the year; that is what they want to see. Some agricultural
production goes with the provision of these services. Then when
you add to that water management and carbon management and the
management of upland peat (there is a lot more carbon in the peat
of the United Kingdom than there is in most of the forests of
western Europe), how that is managed can bring a significant contribution
to this country's carbon management. We have to understand the
technicalities and the incentives required to bring about that
desired management.
Q213 Viscount Ullswater:
My question really is to the SRPBA because it came out in your
evidence. Whereas you accept that the existing market mechanisms
should be withdrawn—production subsidies I gather from that—you
do say that in the absence of a strategic approach to income stabilisation
(which is obviously something which you are concerned about) that
there might be a need for emergency intervention. I just wondered
if you could give us a view of what criteria should be judged
for emergency intervention and where it would be funded from.
Mr Don: To answer your second point first, it
should be centrally funded by Europe and co-funded possibly. I
think it is important to have a protection because our businesses
are so long term and a disaster such as flooding or disease can
have such an immediate effect (you can see how foot and mouth
has decimated the Scottish sheep industry). In these circumstances
we believe that Europe and our own government should protect us
to keep us in business for the long term, for the strategic reasons
I have already suggested.
Q214 Viscount Ullswater:
So it would not be attached to any environmental scheme; this
is really just emergency relief for the industry when it runs
into a crisis.
Mr Don: I think so, which we do not really have
at this point. It is not embodied in the present CAP and the present
policy for land management and we would like to see that.
Q215 Viscount Ullswater:
Does that have a reflection for England or Wales?
Mr Fursdon: I do think we have to be responsible
as farmers in the first place. In terms of bio-security and disease
protection and so on we cannot expect to be bailed out without
doing our own bit ourselves. I think that is pretty crucial. I
think there are also other mechanisms—market mechanisms
or some form of protection—that need to be thought about,
certainly in terms of farmers down in my part of the world in
Devon. Some of them understand about how to play the futures market,
some of them certainly do not. In terms of how to protect themselves
against market volatility and risk we need to make sure that we
are doing a bit ourselves. It may well be that in part of what
we are looking for in the new policy—whatever one might
call a re-run of Pillar II or something like that—money
is spent on helping the industry to help itself in crisis situations.
That is important, rather than always expecting to be bailed out
all the time. I think we have to stand up and be modern and forward
looking in the agricultural industry and try to do it, but there
will be some things which go beyond what we can do however good
businessmen we are.
Mr Buckwell: To add to that, nobody has the
right answers. This is a worldwide problem. The United States
and Canada put a huge proportion of their farm support into stabilisation
mechanisms and yet you would say that the United States has the
most sophisticated risk managing capable farmers and the most
sophisticated private instruments for dealing with that and yet
still they feel the necessity to pump huge public resources into
price stabilisation. They have not solved it, we have not solved
it; we need to discuss it more. I think simply sweeping it under
the carpet will not work because volatility is increasing. Animal
diseases, floods, environmental disasters, market problems are
going to increase with market liberalisation not diminish so this
will become a bigger problem.
Q216 Chairman:
Is the problem not the balance between the role of the state,
the role of the industry and the role of the individual producer?
They all have to make a contribution to deal with something like
emergency impacts.
Mr Buckwell: Yes, and we have not found the
mechanisms yet.
Q217 Chairman:
There is no future in just looking towards the state.
Mr Fursdon: We are definitely looking for help
in standing on our own two feet and not expecting the state to
do the whole lot.
Mr Don: I totally accept that. I think it is
an issue that has not been properly raised in looking forward
to 2013 and beyond.
Q218 Lord Plumb:
You refer to the producer and the state but there is another element
to this of course and that is the body that is handling the product
after production and support or otherwise from the state. In trying
to solve the problem in this country and around the world surely
all parties have to work together to try to find a solution.
Mr Fursdon: Absolutely.
Q219 Lord Palmer:
First of all I need to remind you that I am a member of your organisation
and for many years represented the SLF—as it was in those
days—on the ELO. I have been very heavily involved in alternative
energy for quite a long time and in your evidence you stress that
future agricultural policy must be considered in the context of
changes in energy policy. You also suggest that the potential
of bio-fuels can best be realised within the context of market
orientated agriculture. You did touch on this a little bit earlier,
but what changes in land use in Scotland do you anticipate in
response to demand for energy from biological sources?
Mr Douglas: We now have Set Aside coming out
so there is obviously going to be more energy crops grown in Scotland,
but I have a note here that we found in research that Scottish
Power would like 12% of Scottish agriculture to go into bio-fuels.
Whether that is going to be acceptable by the agricultural community
is questionable. That would be a major change in the Scottish
landscape.
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