Examination of Witnesses (Questions 280
- 299)
WEDNESDAY 14 NOVEMBER 2007
Mr Murray Sherwin
Q280 Earl of Dundee:
Very roughly, what is the percentage of your forestry which is
publicly owned and that which is privately owned?
Mr Sherwin: In plantation forestry now, which
is the guts of the commercial forestry sector, very little is
publicly owned. My own ministry is responsible for probably about
15%, but that is largely government owned forests or trees on
mostly Maori-owned land. The process is to establish strong commercial
forests and put them back fully in Maori hands as the rotations
roll through, but it is quite small. Most of it is privately owned.
Q281 Baroness Sharp of Guildford:
I enjoyed an extended holiday in your country in the spring this
year, and certainly the issue that you raised in terms of moving
over to viticulture was very obvious. There are two questions
at the time I thought about and I might as well raise with you
now. First of all, is there not a danger of you overdoing that?
Mr Sherwin: Almost certainly.
Q282 Baroness Sharp of Guildford:
Secondly, the whole question of irrigation, because a lot of the
land requires irrigation: it struck me that at a time when we
are worried about climate change whether it was really sensible
to move into areas that required persistent irrigation.
Mr Sherwin: To go back to that first question,
almost certainly it will be overdone. At what point is that predicted?
If we look at it right now, there are areas that are expanding
in viticulture—
Q283 Baroness Sharp of Guildford:
I found it amazing that in the Canterbury Plain south of Christchurch,
which was very rich arable country, you should be shifting over
to viticulture there.
Mr Sherwin: Viticulture is much more profitable
and even more so in parts of central Otago, in the Queenstown
area, which one might never have expected to be suitable for producing
grapes.
Q284 Chairman:
We have had quite a lot of evidence on the New Zealand vine industry
when we were doing our inquiry into wines. If you are overdoing
it, do not be tempted by distillation subsidies!
Mr Sherwin: I think there is very little danger
of that but some of these people will get it wrong. I think we
have about 500 vineyards now. It has grown hugely and I think
the smaller ones are feeling the squeeze; others are desperately
looking for more wine because the international demand is there.
We cannot predict where that is going to work out, but it will,
and no doubt for those who overdo it, there will be an adjustment
in asset values and it will sort its way through somewhere. Some
of it will no doubt be pulled out at some stage. On the question
of irrigation, we are not hugely dependent on irrigation in viticulture
but in some areas certainly it is important. New Zealand typically
does not have a shortage of water. It is not always in the right
places at the right times. I think that will become more pronounced.
In the Canterbury Plains area in particular I think we are giving
a lot of thought to irrigation. It is a much bigger issue in the
dairy industry than it is in viticulture; the bodies required
are much larger and the impacts are much larger.
Q285 Lord Cameron of Dillington:
Just carrying on with the New Zealand experience and bringing
it up to date, you said that you do have some emergency funding
for disaster, for R and D mostly, you said.
Mr Sherwin: No, not quite.
Q286 Lord Cameron of Dillington:
I am just wondering, but certainly in particular in relation to
the disaster fund, who decides when it should be paid out and
what is the methodology of arriving at who should receive it?
Mr Sherwin: We can give you policy statements
on that. There has been quite a lot of work done on it of late.
The general principle is that we try not to get involved. The
motivations to become involved are where there has been an event,
whether it is floods or droughts or wind or whatever, that has
gone well beyond the capacity of the local community to cope on
its own. Support is typically directed for farming to uninsurable
loses. If it is insurable, then that is your problem as a farmer.
Then there is an insurance-type principle which is applied. We
are looking largely here at, say, pasture damage which cannot
be insured, some infrastructure (fences, tracks and things) but
most other things can be insured and farmers are expected to insure
them. The first $10,000 or 10% they wear themselves and then there
is a 50% subsidy on restoration up to a cap. That is essentially
triggered where, as I said, the scale of the event is too large
for a local community to cope on its own. We try to keep quite
tight criteria on that. In terms of allocating it to particular
farmers, typically we build a rural trust and essentially it is
local farmers or local community leaders making those judgments
with their peers. We have found those to be very effective. Farmers
are typically the toughest judges on who has taken appropriate
care and who has not and all the processes run behind that. Typically,
that has been very effective.
Q287 Lord Cameron of Dillington:
I notice that there is no social safety net? It does not come
out of any agricultural budget that is on the side supporting
farmers in trouble?
Mr Sherwin: No. For those whose income has gone
completely for a season or whatever, they may have access to the
standard social welfare income support networks.
Q288 Lord Cameron of Dillington:
Turning now to the Common Agricultural Policy, you are proposing
that we should limit agricultural assistance to transitional,
structural aid only. At the moment, there are huge sums of money
going from various Member States into other Member States and
our very own dear Treasury gets very upset about this. I was wondering
how we get from here to there in your scenario?
Mr Sherwin: It is not easy. Again, as I have
said, context is everything here. I would be the last one to try
to set myself up as an expert on how to do this in a European
context. I think the issue is around establishing long-term directions
and moving towards those over whatever timeframe is judged appropriate,
but with a good deal of certainty and persistence in that process
so that farmers have the time to understand how their settings
are going to be changing and how to adjust to that.
Q289 Lord Cameron of Dillington:
You quite rightly say that there is a huge potential for growth
and productivity in new Member States.
Mr Sherwin: And even in existing ones.
Q290 Lord Cameron of Dillington:
Possibly, but I would not like to comment. Do you think exceptions
should be made for the Member States, somewhere like Romania for
instance, that will need quite a lot of extra funding to bring
their agriculture up to standard?
Mr Sherwin: My understanding is that there is
essentially a contract written as they join, which is well established.
Again, I would not like to get into the detail of how one would
do that, but there are transitions to be made. It is important
that they are transitions. I think the notion that there should
be permanent, ongoing subsidies is where the real damage starts
to be incurred.
Q291 Viscount Brookeborough:
You are very cautious about rural development funds and how they
should be used. You indicate that they have the potential indirectly
to affect output and argue that such funds should be targeted
at specific needs rather than setting up a channel through which
to continue supporting agriculture. How far would you accept that
some of these specific needs, such as protection of landscapes,
cannot be delivered without continuing farming activity? To put
it another way, how would you counter the argument that continued
farming activity should be supported in this way?
Mr Sherwin: I can only talk about it again in
the context within which we are trying to deal with these issues
at home because it is not as if we had a free market, open approach
and are totally disinterested in environmental, social and other
outcomes. Our point is that we need to be very clear about the
outcomes we are trying to create and very clear about how we are
targeting those and what polices we have available to target those.
We have a great deal of interest in New Zealand in issues around
water quality in particular. Our approach to that is to try to
understand the externalities that are being created by decisions
on land use and particular techniques applied on the land and
as much as possible to find devices that will channel those externalities
back into the pocket of the decision makers so that they are wearing
the costs of their own decisions. There are other regulatory approaches
as well but for us that is operated largely through local government
but not with direct support. If there are negative consequences
from decisions being taken by farmers, then farmers need to be
aware what those negative consequences are and what the costs
associated with those are and, as far as possible, build them
into their own decision making. That is the approach that we take.
Q292 Viscount Brookeborough:
To what extend do you support rural development financially compared
with what you used to when you were supporting agriculture?
Mr Sherwin: We do not provide any support.
Q293 Viscount Brookeborough:
You do not provide any support at all for diversification in the
countryside?
Mr Sherwin: No.
Q294 Viscount Brookeborough:
Would you say that farmers or agricultural people who wish to
diversify meet problems in the planning process. Here, if you
talk to people who wish to diversify, very often they are inhibited
by the planning process which says that they may not use their
farm buildings for an alternative use other than agriculture.
Mr Sherwin: Again, it is my understanding that
is much less of an issue in New Zealand given the lower population
densities, different history, different settings. Local decisions
are run through local councils, local government, and under a
comprehensive piece of legislation called the Resource Management
Act. It is outcome based rather than prescriptive as to what people
can or cannot do. My sense is that it is probably rather less
intrusive, although there are plenty of people in New Zealand
who would argue otherwise, in terms of the capacity for people
to shift land use around. It is one of the issues that local regional
government is debating with central government right now as we
move into a more comprehensive climate change response policy
and their concerns are that that may prompt land use changes quicker
than they can adjust their planning procedures. It is just part
of that process that they have to work through.
Q295 Viscount Brookeborough:
You note in your evidence that as a result of reforms in New Zealand
marginal and easily erodable land has been taken out of production.
Could you tell us a little more about this process and explain
how you reassure those concerned with abandoning it?
Mr Sherwin: New Zealand is a much younger country
physically. Many of those hillsides have been exposed only in
the last hundred years or so, having had their indigenous forest
cover or scrub cover removed. It has been discovered that in fact
the soils are in unstable under pasture and they need to go back
into some sort of forestry cover or other use which provides the
soils with more protection and in doing so protect the rivers
and so forth. There has never been an issue of seeing that as
abandoning the land. Some of it will go into plantation forestry
and will be very successful in that form. Others in the last few
years have been beginning to look at the carbon farming opportunities
which exist there, but as an issue in rural development or rural
depopulation or abandoning the land, that has never been a particular
issue publicly for us.
Q296 Viscount Brookeborough:
During the wine inquiry, which we have just finished, tremendous
arguments were put up by users of marginal land in Italy and Spain
about erosion taking place. In actual fact when that land went
out of wine production there was enough scrub and enough things
growing on it that it really was not as big an issue as they said.
Is that the way that you would look at it?
Mr Sherwin: Yes.
Q297 Earl of Arran:
Just going back to forestry for a second, out of curiosity, is
it mostly softwood or hardwood that you grow?
Mr Sherwin: Pinus radiata is softwood,
relatively rapidly growing, about 25 to 30 year rotations, originally
a native of the Monterey Peninsula but very adapted to New Zealand
conditions. There has been quite a lot of genetic selection over
the period that we have been working with it to produce the characteristics
which will suit our needs.
Q298 Earl of Arran:
So it is a 30 to 40 year rotation?
Mr Sherwin: It is 25 to 30 years, and at that
level—and I speak with some close familiarity—you
can expect internal rates of return of 7 or 8%, as a forest owner
and grower.
Q299 Earl of Arran:
I am not sure whether that is good or bad. I am told it is good.
Mr Sherwin: That does not mean to say that everyone
has always received that return, but it is possible.
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