Examination of Witnesses (Questions 684
- 699)
THURSDAY 6 DECEMBER 2007
Mrs Mariann Fischer Boel and Mr Poul Skytte Christoffersen
Q684 Chairman: Good
morning.
Mrs Fischer Boel: I am very pleased to see you
here on the day when we have started the conference on the Health
Check with representatives from all the different stakeholders.
It was a very lively, very frank and open debate. It is a good
way to kick off the discussion. Your visit is very timely and
I would like to tell you what intentions we have in the Health
Check.
Q685 Chairman:
First of all, Commissioner, thank you very much indeed for finding
time to see us. It is always a delight to come and talk with you
because it is very helpful for us in preparing our reports to
take evidence directly from you. I have to go through a little
rigmarole saying this is a formal evidence session of the Sub-Committee,
so a note will be taken, but if you would like to go off the record
please say so. Obviously a transcript will be available shortly
and you will be able to revise it. Would you like to make an opening
statement and then we will get on to questions and answers after
that?
Mrs Fischer Boel: I think it would be useful
just to give you the headlines of the Health Check. First of all,
I continue saying that the Health Check is not a new reform but
it is more than just fine-tuning. The reason for this Health Check
is because of the fact that the world has changed since 2003.
We now have 27 Member States, 12 new customers. We have a changing
globalised world. Throughout the last six or 12 months we have
seen that agriculture has changed from being a surplus production
with intervention stocks with too high production to a situation
where at this stage there is even a shortage in some areas, but
it is a much more balanced market. I think it is a very positive
situation for agriculture, it makes it much more positive and
it is much more fun for farmers to see that they can respond to
the market. In the Health Check we would like to look at the market
tools. Do we need export refunds? Do we need intervention systems?
What about the set-aside that we have abolished for one year because
of the shortage of cereals? The whole quota system is now to be
discussed. I have sent some very clear messages on dairy, that
we need to increase from April 2008 by 2% so that we do not spoil
the market. There is a shortage in some countries, not in the
UK because you do not produce up to 100% of your quota. The Single
Payment Scheme has been implemented in many different ways in
many different Member States and personally I think we should
work towards a more flat rate system, a less complicated system,
where you have a payment of the same value, or entitlements of
the same value, linked to the area. Within the regions in the
UK it would be England, Wales and Scotland where you could diversify
but it would be the same payment. From a psychological point of
view, I think we will face difficulties in 2013 or 2018, just
to mention a year, explaining why two neighbouring farmers get
different payments with the same conditions for production because
the former owner had dairy production in 2002. That is going to
be difficult to explain to taxpayers. We need to move towards
a more flat rate. We need more decoupling. There is no reason
for maintaining a partial coupling in the cereal sector. Cross-compliance
should be simplified but maintained. I have introduced the idea
of a progressive reduction of the payments and a discussion on
the very small farms. I do not think 0.3 hectares is a farm, by
the way. I can guarantee that golf courses have never been eligible
for payments and they never will be eligible for payments, just
to make it crystal clear.
Q686 Chairman:
That is one question out of the way then.
Mrs Fischer Boel: We know that we will have
to respond from agriculture to climate change. We know that we
need some sort of risk management and water preservation, bio-energy
and biodiversity. We need solutions to all of these new challenges
and solutions require money. That is why we have suggested increasing
the compulsory modulation which will mean if we can agree with
those countries that have introduced the voluntary modulation
they should reduce when we increase the compulsory modulation.
We have proposed an increase of 2% which means 8% before the end
of this financial period. Then a reopening of Article 69. This
Article gives Member States the possibility to take up to 10%
of the direct payment without co-financing and use it for different
new challenges. I am open to discuss how. It already exists but
it is very narrow. Today, if you want to use Article 69 you can
take it from the dairy but then you have to use it in the dairy
sector, so it is very complicated. I consider the Health Check
to be a stepping stone for discussions on what is going to happen
after 2013. That was a very short introduction.
Q687 Chairman:
Thank you very much. There are a number of detailed points that
you have raised that we have got questions on and we will come
back to those. Can I start by looking beyond the Health Check,
as you indicated in your last sentence virtually. Your Communication
praised the degree to which the combination of the 2003 reforms
have made EU agriculture much more market-oriented and, as you
say, makes it more fun to be a farmer engaging more directly with
the market. The success of 2003 linked with what has been happening
on world markets and the boom in agriculture really does create
an environment where is it not worth trying to be even more ambitious
in terms of reform.
Mrs Fischer Boel: In the Health Check?
Q688 Chairman:
No, looking beyond the Health Check. At least setting a medium-term
policy objective that is more radical than we are used to thinking
about.
Mrs Fischer Boel: When you look at the budget
available for agriculture, it was decided by Heads of State in
2002 to put a limit on the expenditure. It is a decreasing trend
because the budget is only regulated by an inflation rate of 1%,
which means in the real world it is going down. Secondly, we are
now financing the accession of Romania and Bulgaria under the
same ceiling and, therefore, we have a budgetary discipline which
means when we hit the ceiling, minus 300 million, then we have
to reduce the direct payments to the farmers. We already have
a decreasing scale plus we have introduced the modulation into
the direct payment. The discussion on what our policies are going
to look like after 2013 is part of the mid-term review of the
Financial Perspectives that takes place in the Commission in parallel.
In our first discussions internally here in the Cabinet,
we would have liked to have had the Health Check and a mid-term
budgetary review in parallel. We had already created the headline,
"One Vision, Two Steps". We did not manage to convince
the 13th floor that this would be an idea to pursue. We have had
to concentrate on our Health Check and now there is a Communication
from the Commission on the mid-term review of the Financial Perspectives
but in much broader language where they introduce the idea of
co-financing, not specifically linked to agriculture but in general.
My personal view on co-financing of the first pillar is that it
is the first step to a total re-nationalisation of the Common
Agricultural Policy. Could you imagine if we decided that Member
States had to pay 40 or 50% of the value of the first pillar.
It would be very, very difficult to get agreement in the Council.
If it was voluntary for Member States to co-finance I know two
countries that would be very hesitant, the UK and Denmark, to
co-finance one single cent. Then you would have no level playing
field for European farmers any more.
Q689 Chairman:
I will try something else on you. What about actually saying now
that really our ultimate objective is the abolition of direct
payments and what we will concentrate on is dealing with issues
like the environment and rural development, and even if necessary
take them out of the CAP and have completely new mechanisms to
deal with those issues?
Mrs Fischer Boel: That is exactly what I am
trying to do in the Health Check, to say we need more money for
the environment, for animal welfare, for competitiveness, for
rural infrastructure, for the Internet, for everything in the
rural areas. We need more money and, therefore, we want to increase
the budget for rural development by reducing the direct payments.
Q690 Chairman:
Just abolish it!
Mrs Fischer Boel: But that will be over my dead
body. We need a common policy in agriculture. I am totally on
the same line as you. The budget for agriculture will not remain
at the same level that we see today after 2013. We need a common
policy because we need to respond to the demands of the consumers
and taxpayers. We need to be able to say to our farmers that we
have certain requirements on environment, on animal welfare, on
high standards of production, and we know that we have higher
costs of production in Europe than in South America. If we reduce
completely without any security net in the market tools then I
fear it will end in a situation where we will see a very, very
industrialised agricultural sector. By the way, this was one of
the ideas in a programme that Gordon Brown launched when he was
Chancellor. I do not want an industrialised agricultural sector
in Europe. I want to see a diversified sector where there is room
for the small ones, for those who want to specialise in fruit
and vegetables, organic or whatever, and the big competitive ones
as well. If you take away all the direct payments we have no way
of securing that we can maintain diversification.
Q691 Chairman:
What we are saying is that the role of direct payments in the
future is going to be much more as a form of compensation, which
is the wrong word but nearly the right word, to pay for the enhanced
standards that we require of European agriculture so that it is
not disadvantaged in the world market.
Mrs Fischer Boel: Then we should try to encourage
quality and quantity. We are presenting a Green Paper on quality
next year. If you look at the competitiveness of the European
agricultural sector we will never be able to compete with Brazil
on certain production and, therefore, we need to find some niches
where we can be strong, where we can take our share of the markets
when we look eastwards at the new emerging markets in India and
China, and we can only do so because we can do something else.
We have a very, very high level of food safety in Europe. We have
spent hundreds of millions of euros to win the battle on salmonella,
just to mention one. We have specific strict rules on imports
of product from hormones, SPS issues, where our consumers do not
want to have hormone beef. From my point of view, we should try
to keep the European model of agriculture which is a diversified
agricultural sector with lots of small producers in niche production
and lots of competitive bigger farms. I would like to keep it
like this without preventing the sector being dynamic to meet
the new challenges. On climate change we need to contribute as
well. By the way, agriculture has been reducing the CO2 emissions
since 1990, mainly because of the fact that we have reduced our
production, but we need to encourage more innovation and more
research in the second generation of biofuels because the first
generation is a step on the way to the second generation. If not
it is clear that in the future this competition between feed,
fuel and food will not be sustainable. Where we can use surplus
from our forest sector, where we can use straw, grass, slurry,
slaughterhouse waste, that will be the future. Innovation should
be at the top of our list. I hope you do not consider me a very
conservative Agriculture Commissioner, I try to move things and
sometimes I feel agriculture is a super tanker and you do not
turn it around just like that, but I think we have been moving.
Q692 Chairman:
You certainly have.
Mrs Fischer Boel: I have 27 customers sitting
around the table in the Council and they have very, very different
views on the agriculture sector and I need a majority.
Q693 Viscount Ullswater:
Commissioner, can I get back rather more to the detail particularly
about the Single Farm Payment. In your very interesting paper
you appear to regard the decoupled payment as a success, quite
a substantial reform that was introduced in 2003, and yet there
is a little hesitancy in it in that some areas, and I think you
mentioned suckler cow premiums and perhaps durum wheat, need intervention
of some sort or another. I would be interested to know how you
propose to identify those particular circumstances which might
need this sort of support. Might it not be easier to cope with
these problems under the Pillar II way of financing so that you
can manipulate that a little bit more according to the market
needs over this longer period rather than deal with it in Pillar
I?
Mrs Fischer Boel: I completely agree with you.
First of all, I do not think there is any reason to maintain coupled
payments in the cereal sector. On the other hand, I do not underestimate
the difficulties that some regions of Europe with suckler cows,
which you mentioned, would face with totally decoupled payments.
Q694 Viscount Ullswater:
You mentioned suckler cows.
Mrs Fischer Boel: Then they would disappear.
We have no interest in the disappearance of those. It could be
sheep, by the way, as well because lawnmowers are much more expensive
to manage and there is a shortage of labour as well. We need something.
This could be solved in the best way in the rural development
policy. There is no difference of opinion on this.
Mr Christoffersen: One of the reasons why we
might need some kind of coupling in particular cases, which have
to be examined region by region and it has to be very much a regional
approach, is that we want to keep Pillar II green in the WTO context.
That means we cannot introduce coupled payments into Pillar II
because we would destroy the green value of Pillar II. That is
why if we want to preserve, for instance, animals or cows in a
particular region we have to seek another solution.
Chairman: Upland pasture payments.
Q695 Viscount Ullswater:
An extensive farming payment or whatever.
Mr Christoffersen: We do not want to pollute
Pillar II.
Q696 Chairman:
You cannot say beef or sheep but you can say maintenance of pastures,
can you not, environmental pastures?
Mrs Fischer Boel: You can make agri-environmental
schemes—
Mr Christoffersen: But not one linked to a particular
production.
Mrs Fischer Boel: No. We will be open to ideas.
Mr Christoffersen: It is the only way forward
to preserve those objectives.
Q697 Viscount Ullswater:
Can I develop that a little further. At the moment with the change,
and we are still pretty early in this reform and some countries
have only just introduced decoupled payments, I would anticipate
that most farmers think the Pillar I payment is part of their
income from farming, they would just consider that is due to them
for having given up coupled payments, but that is probably the
wrong way for farmers to approach that. I know there is cross-compliance,
but in the arable sector you have now got the rewards from the
marketplace being much more substantial and that means people
have ploughed up their set-aside in order to gain that financial
advantage. Do you think we ought to move quicker in shifting the
money from Pillar I into Pillar II and rewarding farmers for the
public benefit that they do through Pillar II rather than just
giving them a blanket payment and saying "Carry on farming,
please"?
Mrs Fischer Boel: The rural development policy
is where the music will be playing in the future and that is the
reason why we have to continue from the 5% modulation we have
today, plus what the UK and Portugal has introduced. We have to
do it in a way that means we will get support from Member States.
I know there are some stakeholders who would like to see a 20%
modulation. We have to try to find a solution.
Q698 Lord Cameron of Dillington:
A happy medium.
Mrs Fischer Boel: Yes.
Q699 Chairman:
17½%?
Mrs Fischer Boel: With the plus 8% and a possibility
to reopen Article 69, which is very attractive for Member States
because that is not co-financed whereas rural development is co-financed.
If we manage to get through with plus eight then it would be one
of the greatest victories we have ever had. It will be extremely
difficult. In the 2003 reforms it was 20% as the first proposal
and it ended up at five. I could have re-launched 20 but then
Member States would have said, "She's crazy". We saw
last time it didn't fly so we might end up with almost nothing.
This is credible. I would like you to come and join a Council
meeting because then you will get an impression of the huge differences
between 27 Member States. I was the Minister for Agriculture in
Demark when we were 15 and I would not say it was easier but it
was more manageable than with 27. There are such huge differences.
Romania is a good example of a country where their farming is
a big strong sector but they are lagging behind now.
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