Examination of Witnesses (Questions 900
- 919)
WEDNESDAY 23 JANUARY 2008
Lord Rooker and Ms Sonia Phippard
Q900 Baroness Sharp of Guildford:
Perhaps that explains why the Commission feel they do not have
enough funds to carry this one through as they would wish to.
Lord Rooker: Yes.
Q901 Viscount Ullswater:
Perhaps I could turn to what might come up in May with Article
69. The Commission look as if they wish to reopen this particular
argument, where you can via 10% spent on these various sectors
for direct payments, as long as the money is kept within the sector.
Do you suspect that in May the Commission might come forward and
say, "Actually, you can spend this on other sectors"
and are you in favour of that? What is the view of the Government
on that particular matter? It could become quite wide, could it
not?
Lord Rooker: We want to understand more about
the Commission's views on this. We are not particularly clear
ourselves. As I said in my opening statement, whatever they do
seek to clarify, in terms of where the national envelopes might
be used, we would be very keen to make sure that they are not
used as a back-door method of production support. It would be
so easy to make a case, in different parts of different Member
States, for all kinds of schemes which, when looked at, are basically
supporting something that is inefficient and which perhaps should
not be going on. We do not want new distortions, therefore. I
understand the national envelopes might be used to address different
activities, whether it is water management, climate change or
biodiversity. There is a range of issues but, until we know more
about their thinking, I am not in a position to give a view. As
I say, we are not against it but we will be very watchful. 10%
is a lot of money, because you are dealing with big budgets here.
Scotland has taken advantage of the current arrangements, but—
Q902 Viscount Ullswater:
Which I take it they would not like to give up?
Lord Rooker: No, I am absolutely certain they
would not like to give up. However, we are watchful. First of
all, we want to know more about the Commission's thinking. Secondly,
we would not want it to be used as a back-door method of production
subsidies.
Q903 Chairman:
Does not a lot of it, in the southern states, go into olive oil
producers? The argument being that, if you do not support the
people to produce olives, you will get desertification. That is
the old argument—but it is a straightforward production
subsidy.
Lord Rooker: It is, but then you have to see
whether it is a production subsidy in that sense or—and
I do not know the issue in detail—would it be part of an
environmental benefit? I do not know whether or not southern Europe
will become a desert under climate change, but these are issues
that will have to be dealt with in the future in terms of the
environment. However, that is our general principle on this. First
of all, we do need to watch this, to be careful about the way
they could be misused; but we are not saying that they do not
have a purpose.
Q904 Baroness Sharp of Guildford:
The same argument could be levelled at hill farmers, could it
not? If you are going to have to pay to keep the olives in the
landscape—
Lord Rooker: Precisely. The economics in the
hills particularly—a really severe disadvantage in any definition
of farming—isolated communities; but without millions of
sheep on the hills the landscape will be transformed. As I keep
saying, the first people to complain about that will be the city-dwellers,
who use it as their playground and their green lung. When they
say, "Where's it all gone?" we say, "You didn't
buy the lamb. The industry collapsed", and therefore there
is an argument for maintaining it; but how do you do it? Do you
subsidise it as meat production or do you subsidise the pure environmental
goods or the individual families in those areas? It is a very
difficult decision, but the principle is exactly the same.
Q905 Lord Plumb:
Voluntary modulation has not been very popular with producers
here, believing that there is competitive disadvantage with their
competitors from other parts of Europe. We understand, of course,
that if that is reduced it does not necessarily follow that compulsory
modulation will be increased—although we know that the Commission
are bidding for an increase. Would it mean that, if it is increased,
you would reduce the amount of voluntary modulation to make up
the difference? Also, we understand that environment organisations
say, and have told us, they rely on some of these funds for many
of their activities. We wonder, in that event, whether the reduction
in voluntary modulation accordingly would help in the overall
use of funds.
Lord Rooker: I have to say that I find modulation
an incredibly complicated issue to get my head round. The long
and short of it is that, first of all, there is only us and the
Portuguese making use of voluntary modulation. You say it is unpopular.
Without it, though, we would have far less money for our Rural
Development Programme. There is an historical element to this
as to why we need voluntary modulation, simply because we had
very small programmes in the past. Also, I understand that there
is a mechanism where we swap from voluntary modulation to relying
on compulsory modulation. At the present time, we get far more
bang for our buck out of voluntary modulation than we would do
if we swapped over. Pound for pound, we would lose 20% to start
with, because there is some mechanism with the compulsory modulation.
There is no mention of voluntary modulation in the health check
document. We are not really certain, therefore. There is obviously
a discussion to be had there. We think that it is good value for
money, but I understand that it is unpopular amongst the farmers
who are seeing their single farm payment top-sliced, as it were.
There is a benefit to the rural economy, and there is no question
about that. At the moment, there is a greater benefit from voluntary
modulation than the straightforward compulsory. We get a bigger
bang for our buck, as it were.
Q906 Lord Plumb:
It is very difficult to explain that to farmers who have just
had a 17% reduction in their single payments through modulation.
Lord Rooker: Yes, it is to an individual farmer,
directly. It is not easy to paint the greater good of the rural
community, because obviously they are seeing it in the bank balance.
On the other hand, people have to make connections—with
families and networks in rural areas. In the rural economy, not
everybody depends on farming. Members of families work in different
businesses and are involved in different kinds of organisations,
some of which are supported through Rural Development Programme
measures. But they see it directly, and I fully accept that. They
see it on the cheque that comes in. It is not as though it is
a surprise to them. We discussed this thing fully before we did
it, and we have ended up, as I say, with a large programme for
rural development. We think that is for the greater good and,
basically, the farmers have to be encouraged, and they are being
encouraged, to get closer to the market and be more competitive.
Q907 Lord Plumb:
It is difficult to explain it to them on Sunday mornings.
Lord Rooker: It certainly is. I find it not
easy to explain when I am up a six-mile, cul-de-sac valley, where
there is no end; where there are a couple of farmhouses; when
they are looking at whether the offspring want to stay in farming,
and what the future of the hamlet is. It is incredibly difficult.
I fully accept that. I have been there. It is true, and I grieve
for your difficulties on Sunday mornings—but they are nothing
as compared to mine!
Q908 Chairman:
Is not the root of the problem in the need to rely on voluntary
modulation to fund a Rural Development Programme the historic
low level of funding?
Lord Rooker: Yes.
Q909 Chairman:
Is there a way of tackling that historic low-level base?
Lord Rooker: We made the case in Brussels. We
have 12% of the viable land of the 15 Member States and we get
3½% of the money. I think that is the reality. However, I
freely admit that there is a historical issue here of the UK—and
this goes back under both governments—not paying sufficient
attention to rural programmes. So when it came into Brussels and
someone had the bright idea of doing this, they had to look at
the historical cut-off point of what Member States were doing
and then apportion the money based on what had happened in the
past. We were actually at an incredibly low level. It was in 1990,
or something like that. That is a long time ago. We ought now
to be saying, "Let's look at, say, even the last five years.
Let's reapportion this amount of money". We would end up
getting a lot more than 3½%.
Q910 Chairman:
That is a live issue now.
Lord Rooker: It is a live issue, yes.
Q911 Earl of Arran:
My Lord Chairman has already touched upon this, and I am suspicious
of what the answer might be. So far, the Treasury have felt disinclined
to come and talk to us about how the CAP will feature in their
policy on the forthcoming EU Budget, saying that their policy
was still being formulated. I suspect that is the answer you might
give, Minister, but I would be interested to hear what your answer
is.
Lord Rooker: I have not come here to cause problems
between myself and the Treasury! The fact is that the size of
the CAP as a percentage of the EU Budget is enormous, and it will
be a really big issue. There is no question about that. The Treasury
is in the position of formulating what the response is going to
be. No decisions have been taken, and that is why the Treasury
were obviously quite content for me to come here and say that
rather than a Treasury minister. Your Lordships' House does not
have a Treasury minister, as you know. I cannot recall whether
there has ever been one, but it is not as though you have a captive
member of the House who is a member of the Treasury team. I have
no explanation, other than what you have had in the letter from
the Economic Secretary.
Q912 Earl of Arran:
Would you hope that, when indeed they have formulated their policy,
they might come to talk to us?
Lord Rooker: I think that when people have really
good policies that they are proud of, they ought to take every
opportunity of coming to Parliament to boast about them. That
is my view.
Chairman: Then we look forward to seeing
you again, Minister!
Q913 Earl of Dundee:
We note that you were concerned about the possible introduction
of new EU risk management measures. We also know that these reservations
are shared by the EU Trade Commissioner, Peter Mandelson. Why
do you take this view and where do you see risks?
Lord Rooker: Our view is that farmers and those
working on the land, looking after the landscape, are really businesses.
Let us not put too fine a point on this. There is the odd hobby
farmer, and I suppose there are others who do not do it themselves.
However, they are all businesses, and all businesses are duty-bound
to take cognisance of the risks that are involved in the business
they are running. I am not quite sure where the issue of risk
management comes in. It could be potentially—and I only
say "potentially"—another area where back-door
subsidies will be the order of the day. Other businesses—non-farming,
non-agricultural—have to take account of the risks of running
their business, whether it is manufacturing, petrochemicals, woodworking,
whatever. They are duty-bound to do that as part of running the
business. We see it as no different for farms; so we are a bit
suspicious of the concept of, let us say, a new scheme of risk
management—because anything with the word "scheme"
in usually has a pound sign or a euro sign at the end of it. In
other, narrower areas, particularly in disease control, we are
having discussions and have just published a consultation paper,
where those who look after food production animals have to be
fully aware of the risks involved in that and take account of
it. We are not certain that every animal-keeper is fully aware
of the risks that are involved. We know that from the recent outbreaks,
frankly. Therefore, we try to bear down on making sure that companies
are taking account of the risks. We do not have a great push for
this. Getting insurance, I fully understand, is not easy. Crops
in the ground cannot be insured. I have talked to insurance companies
about insuring food animals. It is not easy; though it can be
done at the margins. In terms of bearing down on managing the
risks, we see that as a matter for the industry, not for Brussels
to come along and impose some scheme or some regime of risk management—when
other industries cope with it perfectly well, and from professional
point of view as well. This is not us, by the way, saying that
we are not interested or saying that it is not our responsibility.
We are clearly saying it is the responsibility of the industry.
Q914 Earl of Dundee:
On your suspicions and caveats here, how much solidarity do you
expect to get from various of our EU partners, such as the German
Government perhaps?
Lord Rooker: I do not know about particular
governments. Maybe very little. We are trying to modernise and
trying to avoid mistakes of the past. It may be, in trying to
explain to some of the accession states, we say, "Actually,
we did it this way in the past and it didn't work. It is best
that you don't spend 20 years creating the same kinds of problems
that we had with the CAP to start with". I am not certain
about individual countries, however. This is something that will
have to be discussed. I am just giving the UK Government's view
on this: that this is one where we do not want issues brought
in to distort trade, distort competition, and to be used as a
back-door method of further subsidies. Sonia can provide the German
position. You asked about Germany, so something must be known
about Germany.
Ms Phippard: It is simply to confirm what the
Germans said at the Agriculture Council on Monday, which was that
they can see that Member States might want to use Pillar II mechanisms
to encourage risk management provisions where they are not there
at the moment; but they are completely opposed to using Pillar
I for risk management, which is where the French, for instance,
are coming from.
Q915 Chairman:
The Pillar II approach would be to help the industry set up its
own mutual insurance scheme, would it not?
Ms Phippard: Yes.
Q916 Lord Plumb:
Which Germany has at the moment. They have an insurance scheme;
they have a stock insurance scheme, which started years ago.
Ms Phippard: They do in certain parts of Germany.
In Bavaria, I believe.
Q917 Viscount Ullswater:
Perhaps I could go back to your risk assessment analysis, Minister.
If it is a single business, if it is your own business, you can
comprehensively understand the sort of risk that you are likely
to take; but sometimes you are overwhelmed by things, particularly
like foot-and-mouth, which is not of your own choosing, or bluetongue,
which is a new risk that I do not think people could have taken
into account. Although that particular disease might not have
struck you personally, it can destroy the marketplace for your
animals, because of movement restrictions or whatever it is. Is
there a way that the industry could be encouraged, with government's
backing, to set up insurance schemes, if there is not to be any
form of direct replacement values given by the Government?
Lord Rooker: In some ways that is the very issue
we want to discuss with the consultation document that we put
out in December on cost and responsibility-sharing. That is the
very issue. There are some practical difficulties, but we are
consulting on the issue and not on a policy, because we then want
to formulate a policy. Europe itself is discussing these issues,
particularly regarding disease in animals, to formulate a policy.
But you are quite right, because I discovered during the foot-and-mouth
outbreak that, where it first started, the three farmers who were
first affected—the two who had foot-and-mouth and the other
one where we slaughtered on suspicion—were model farmers.
They were doing everything that the UK Government would expect
from farmers. They had diversified; they were running other businesses;
they were getting value-added. They were model farmers. One of
them was even insured for interruption of business. Unfortunately,
the small print made it clear that it did not work when it was
foot-and-mouth. The interruption of his business was his farm
shop. If it had burnt down or a lorry had gone into it or it had
been flooded, he was covered for loss of his goods and stock and
interruption of the business while it was put right. Because it
was foot-and-mouth, he was not covered. I think that is outrageous,
in a way. It was not as though it was his animals. He may have
been a farmer and not affected; he could have been the next-door
farmer. That is the very issue that we want to discuss with the
consultation on cost and responsibility-sharing. Only about 15%
of animal and crop farmers in the UK carry any kind of insurance,
some of which is there only to top up—in other words, it
is fixed in with the government compensation for slaughter of
animals. Obviously we pay compensation where we slaughter compulsorily.
Bluetongue is a different issue. The issue of bluetongue for later
this year, which we fully expect to come back, will be serious.
Once we classed bluetongue as being there, we did not slaughter.
Because we do not slaughter, we do not compensate. That is a thorny
issue, and we are in ongoing discussions with the industry regarding
bluetongue over this very issue of what farmers do. I was at a
farm in Lincolnshire post-floods, to have a look at the consequence
of flooding. The destruction of the crop in the fields was terrible
to see. One of the farmers had an ancillary business of potatoes.
He had a large factory, preparing, scrubbing and washing, and
all kinds of things. As he said, if his factory had been struck
by lightning or had burnt down, he was fully insured; all his
risks were covered for that. The crop in the field—nobody
will insure him for that. He wanted to cover the risk but could
not; there is no mechanism for that. As you can well appreciate,
the cost of disease control can be enormous. This is something
we have to discuss with the industry, therefore. That is what
we are doing now. It is a narrow part of it, in terms of animals;
but, with climate change, new diseases coming and, I might say,
endemic diseases—we still have the issue of bovine TB—with
the exotic diseases, where we have different policies for operating,
we want to share the risks and the responsibility with animal-keepers.
That work is ongoing now, quite separate to the health check,
quite separate to this analysis. However, our experience will
form part of our discussions in Brussels, as and when a proposal
has come forward from the Commission.
Q918 Lord Palmer:
Before we leave risk, you would accept, would you not, that farming
is completely different to any other sort of business when it
comes to risk, in that you have this problem of the weather? For
a purely arable farmer, the right weather at the right time can
make an entire difference in yield—which, particularly with
wheat at £160 a tonne, can mean an enormous amount of money.
You would accept that, would you not?
Lord Rooker: I accept that agriculture is different
to many other businesses and industries. When you have a factory
that is stable in one location—goods in and goods out, people
turning up at the same place—it is also quite different
to, let us say, the construction industry, where you have a peripatetic
workforce and you never know where you will be working. There
are differences there. The weather affects a lot of businesses.
It is difficult to mitigate it because the landscape is not covered,
for a start. I have met farmers who quite rightly say to me, "Jeff,
we expect this land to flood in the winter. We take account of
it with what crop we put on there. We are now in the middle of
July and it is under three feet of water. We don't normally expect
it to flood in the growing season. This is a bit of a problem
for us, you must appreciate"—and I certainly do. Because
in this country the primary producers do not, as in other countries,
have a big enough stake in the rest of the chain—by co-operative
marketing and advance preparation—they are extremely vulnerable,
both to the weather and also to the market. We have seen that
in the summer. To that extent, I do accept that it is completely
different to any other industry, yes.
Q919 Lord Palmer:
Could you expand on your reservations about capping? Do you think
in reality that these proposals will continue, bearing in mind
the strong opposition that they face, not only from our own Government
but also from the German Government?
Lord Rooker: We are very opposed to upper limits.
All that will happen—and we are beginning to see this anyway
in the threat of capping of the single farm payment—is that
people will spend money on lawyers, dividing up their businesses.
For some it will be very difficult. I do not want to go into individual
details but, for the largest farmer in the country, it is almost
impossible but not completely out of bounds, and actions are being
taken. This is not a good use of resources. It is barmy. We are
opposed to it, and therefore we hope that it will not see the
light of day. I have not come with a figure of the distribution.
There are some incredibly large payments. Everybody knows; the
figures are all published anyway. The largest recipient of the
single farm payment is the Co-op—the largest farmer in the
country, almost by definition. There are very few large ones.
There is a big bloc in the middle and, of course, there is this
huge tail. We are certainly opposed to capping at the upper limit
but we certainly want to have a bigger de minimis at the
lower level, if you like—to chop out a few tens of thousands
of recipients, which I consider to be a complete and absolute
waste of money, of resources of my department, in the structures
that we have had to set up to make those payments. Hopefully,
the penny will drop that simply capping will not have the effect
that those who propose it may think. All it will do is cause land
parcels to be divided up; and the only people gaining out of that,
as far as I can tell, will be the lawyers, preparing the necessary
documentation.
Chairman: It may now be an appropriate
time to move into a more off-the-record, informal session, Minister.
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