Examination of Witnesses (Questions 700
- 719)
THURSDAY 6 DECEMBER 2007
Mrs Mariann Fischer Boel and Mr Poul Skytte Christoffersen
Q700 Chairman:
Is there not the danger that as they become more and more integrated
into the benefits of the CAP, and certainly on direct payments,
you get direct payment dependency amongst those agricultures?
Mrs Fischer Boel: Yes, but imagine if you took
in new members and excluded the direct payments, that would not
work. You saw the difficulties with the phasing in from 25%. We
see this very clearly today in Poland, that you capitalise the
value of the direct payment and, therefore, it is going to be
very difficult to cut the direct payment because it has been part
of the business. On the other hand, it is a disadvantage for young
farmers because the land is so expensive that it is very difficult
to start from scratch without any ancestors or a rich uncle.
Q701 Lord Greaves:
Can I take you to the question of capping the Single Farm Payment
which you have been suggesting should take place. Can you give
the justification for this? What are the reasons why you think
it is a good idea? What is your answer to people who say it is
going to be penalising more efficient, successful farms and farmers
or, in some places, those which employ a large number of people
relatively and would therefore have social costs if it affected
that employment?
Mrs Fischer Boel: First of all, it is not a
capping. It is not as in the previous 2003 reforms that when you
had received €300,000 then you got nothing more. This is
a progressive reduction which means even if you are very big you
will only be reduced by 45%, so you will continue to get payments
until the very end. It is a completely different set-up from the
previous one where you were really punished after 300,000. You
can explain that there is an advantage of economies of scale in
agriculture. To meet the reduction requirements in fertilisers
you need to have the machinery that is modern technology to place
the fertilisers in the drill to have the optimal use of your inputs
and this is possible only if you have a certain size. After this,
you can explain that there is an economy of scale in the bigger
farms. I know it is a very controversial discussion and, therefore,
at the other end of the scale I have introduced the idea to see
whether it is possible to reduce or get rid of support to the
very small farms. In the UK you had so many new beneficiaries
that it killed your system actually.
Q702 Lord Cameron of Dillington:
Yes.
Mrs Fischer Boel: We will see whether this 0.3
hectare is really a farm or we can find another level. With 0.3
it is more expensive administratively to pay the direct payment
than the money you would receive. It is controversial in some
new Member States, Romania among others, where they have very
small plots and they have not yet been through the changes in
their agriculture sector. I have also clearly said that if the
result of this progressive reduction is only that we make a better
living for lawyers then I will take that into consideration, of
course.
Q703 Lord Greaves:
Can I divert from that question a little bit and pick up on what
you said about Romania. In our previous meeting we had some interesting
discussion about the need for structural change, and Romania is
a classic example, although there are very many of the other new
entrants where this is the case. It is difficult to see, whether
or not there is a Common Agricultural Policy in 20 years' time
as we would recognise it or not, how the agricultural market within
Europe can function properly while there is such a huge disparity
in the types of farms and systems. The need for structural change
in a country like Romania is glaringly obvious but how on earth
is it going to be achieved and where is the investment, the funding,
going to come from?
Mrs Fischer Boel: When we look at the results
of the enlargement in 2004 with ten former Central European countries,
it has been working extremely well both to the benefit of the
new Member States and the agricultural sector in those new Member
States and the old EU-15. It has been a win-win situation. Lots
of investments are taking place in the new Member States, not
always investments from the country itself but from people coming
from other countries, not buying the land but renting the land
with the present domestic legislation bringing new know-how. In
general I think it has been a huge success. Romania is a very
big agricultural country and we had our doubts as to whether they
would be able to manage the payment and, therefore, we introduced
a safeguard. As we have not got evidence that everything is working
well we still have the safeguard in place and the possibility
to reduce the direct payment by 25%. We are aware of the difficulties
in Romania. When I visited Poland in 2002 and when I go there
now it is a completely different atmosphere, a much more dynamic
country and Poland has these very, very small farms. They have
now been through the structural changes necessary, as you say.
I do not underestimate the difficulties with Romania but I am
sure that we will manage.
Q704 Lord Greaves:
When you say they have been through the changes, it is certainly
true, as I understand it, that changes are taking place but there
is a huge amount of change still necessary. Are you really saying
that is going to happen without any very significant intervention
at a European level or at a national level from the government,
it is simply happening because the markets are taking care of
it? Are you really saying that is the case?
Mrs Fischer Boel: We started paying the support
funding to the ten new Member States but also to Bulgaria and
Romania to make them able to fulfil their requirements within
the agricultural sector. We know that new Member States have to
apply to the same rule on SPS issues, sanitary and phytosanitary,
and therefore there are dairies and slaughterhouses in new Member
States that are not able to sell into the market from the very
beginning but have the possibility to invest with this support.
I do not remember how much money we have spent in Romania to improve
their sector but it is significant. There is a willingness in
most of the new Member States to improve the quality of their
internal production. With the experiences that we have had since
2004 it has been more positive than we could have expected. I
was on the Budget Control Committee and we are finding more difficulties
with Greece than with some of the new Member States. They have
been doing well because of the fact that eight of them introduced
this simplified system, the SAPS system, which is a flat rate
system. That was the reason for not facing too many difficulties.
Q705 Lord Plumb:
I think you rehearsed a very good speech for the Oxford Conference,
if I may say so. A lot of what you have said is important. I would
like to pick up one point if I may, first, which just concerned
me a little. You said in relation to globalisation, and we are
seeing Peter Mandelson later on so we will be talking more about
WTO and so on, that we are in a situation where there is a much
better balance at the moment. We heard from the Danish representative
yesterday of the desperate situation in the pig industry in Denmark
and the fact that a number of places are closing and so on and
so forth. I know I am bringing this a bit more local.
Mrs Fischer Boel: No, that is fine.
Q706 Lord Plumb:
We have got the same situation in Britain and it is happening
in other countries too because of the surprising take-off of grain
prices which is affecting the red meat industry in a very big
way and the words are "fuel, fibre and feed" and arable
farmers are doing exceptionally well but for the livestock farmer,
particularly with foot and mouth, bluetongue, TB and so on, it
has made it difficult. It worried me a little when you said the
balance is better. My colleague reminded me that in the old days
we used to talk about horn and corn and up a bit on one and down
a bit on the other, and it must be very difficult to get it back.
My question is more on managing the market and milk quotas. I
know you announced your decision realising the ending of milk
quotas presumably by 2015 at the latest and you are announcing
an increase of 2% which, as you said earlier, will affect more
countries than the United Kingdom for obvious reasons. I would
have expected you to put it up a bit more actually to make a softer
landing when you do decide to remove it. How do you see that working?
Do you see a take-up by farmers and what effect do you think it
will have on the whole of the milk industry?
Mrs Fischer Boel: First of all, the discussion
on dairy quotas was part of the 2003 reforms and it was decided
to abolish the quota system by 31 March 2015, so this decision
has already been taken, this is not a new thing. I said more than
a year ago that we need to find a soft landing otherwise we will
see a situation where in some Member States the price of the quota
will remain very high until the very last moment because there
will be people out there saying, "Ah, don't believe in this
quota ending, it has been prolonged before so it will probably
b prolonged again". I have a certain weakness for young farmers
and they would pay a very high price and then there would be zero.
That was the reason for introducing this soft landing. For me,
a soft landing is to increase slightly the quotas without destroying
the market. Then I got a strong signal from the Council in September
as to whether it would be possible to increase before 2009, which
was our initial idea, 2009-13, the gap that the Health Check is
covering. We made an impact assessment and we could clearly see
an increase of 2%, which was the idea in 2003, would not destroy
the market and we will present to the Council in December a proposal
to increase by 2%. Further discussions on the quota system for
dairy will be part of the Health Check. If we look at the whole
period up to 2013 we need a further increase but we will have
to be careful to find the right balance because if we increase
too much we will see these cycles. Predictability for farmers
is extremely important, that they know when they invest more or
less—there are always risks—what the political level
will be deciding and what their future could look like. To abolish
the quota system before 2015 will probably be legally impossible
because there might be some farmers who would say that they had
legitimate expectations and, therefore, we would probably face
difficulties. That is the idea in the dairy sector. We have invited
all stakeholders to a conference in Brussels on 11 January only
to discuss dairy because there are many ideas floating around
to get rid of the super-levy and other interesting and strange
ideas.
Q707 Lord Plumb:
From all countries?
Mrs Fischer Boel: The UK does not produce up
to their quota.
Q708 Lord Plumb:
I am sorry, at the stakeholders' meeting.
Mrs Fischer Boel: From all over Europe, yes.
This morning there were representatives from all countries via
the COPA membership.
Q709 Chairman:
Could we just go back a little bit on intervention. You said no
intervention on cereals but you have made an exception about bread
wheat. Why have interventions on bread wheat?
Mrs Fischer Boel: Because there are some anxieties
in the public outside that bread is a fundamental product in agriculture
or is a daily need for consumers. That was the reason for maintaining
the possibility of an intervention system.
Q710 Viscount Ullswater:
So it is strategic?
Mrs Fischer Boel: Yes, exclusively. It is not
to manage the market because those days are gone completely. We
do not want to use the intervention system to manage price levels
in the cereal sector, no way.
Q711 Lord Cameron of Dillington:
So the more expensive bread gets the more you put into intervention
logically. If it is strategic, if food is getting too expensive,
you put more into intervention.
Mrs Fischer Boel: That would be very difficult
because when we talk about intervention you would maintain a certain
amount for intervention in bread wheat. In the other sectors it
will be zero intervention but in wheat, if necessary, we would
buy wheat. It is obvious in a market where prices are high that
people would never sell for intervention because the price would
be much lower than they would normally be able to get in the free
market.
Q712 Chairman:
But if prices were to go down and you had intervention that would
really produce a distortion, would it not?
Mrs Fischer Boel: If?
Q713 Chairman:
If cereal prices generally were to go down and you kept intervention
for bread wheat, people would flock into bread wheat for the intervention
price and that would produce an enormous distortion.
Mrs Fischer Boel: No.
Q714 Chairman:
You do not think it would?
Mrs Fischer Boel: No.
Q715 Lord Plumb:
The yield is so much lower anyway.
Mrs Fischer Boel: You have to take into account
that bread wheat requires a special way of producing it. It is
more difficult to produce bread wheat than other wheat because
of the contents of the starch. The starch part has to be high
and with the present reduction that we have in the country and
the use of fertilisers because of the Nitrate Directive it makes
it very difficult to produce bread wheat. It is not that easy,
therefore I do not think it will happen that everybody will go
into bread wheat.
Q716 Chairman:
It is a food security issue.
Mrs Fischer Boel: The yields are lower in bread.
Q717 Lord Cameron of Dillington:
I have two questions, one a detailed question and one more forward
looking. The detailed one is on set-aside. We totally approve
of zero set-aside and, in fact, the abolition of set-aside, but
you did say in your Communication that you felt there were other
ways of dealing with the environmental problems that come along
with the abolition of set-aside. Have you got any solutions to
dealing with these environmental problems?
Mrs Fischer Boel: We had a discussion this morning.
I said that set-aside has never been an environmental measure.
Q718 Lord Cameron of Dillington:
No, but it has turned out that way.
Mrs Fischer Boel: There were lots of people
from Birdlife International.
Q719 Chairman:
We know them.
Mrs Fischer Boel: They reacted immediately.
It is not a total abolition of the set-aside, it is simply we
do not have any compulsory set-aside so farmers can still maintain
areas, and I know they are going to do so. If you are a farmer
and you have a forest you would never plant close to the forest
because nothing grows there anyway, so why not keep it? A lot
of farmers would like to go hunting as well, so it could be nice
in some areas. I do not consider zero set-aside as the outcome.
We have to find solutions in the agri-environmental schemes if
we can make it interesting for farmers to say, "Yes, we would
like to take this scheme up". The problem is if we make it
compulsory then we cannot use rural development. We have to make
an attractive agri-environmental scheme that can take over the
environmental benefits that there have been from set-aside.
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