Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Examination of Witnesses (Questions 80 - 99)



  80. It was done to freeze the total, so it was done so that the French farmers would continue to benefit in the way they always have.
  (Mr Felton) That is perhaps what Mr Chirac thought.

  81. He is not daft.
  (Mr Felton) I cannot speculate about that but that presumably was in his mind. All I can say is that I have read what Fischler said a couple of days later to an agri-environment conference where he actually made it quite explicit that this said that the same budget line, the total budget line that was agreed at that meeting, would need to be used to cover, I think he said, something like 70 per cent of the direct payment made to new accession States and that actually says that France is going to lose out.

  82. That does say that.
  (Mr Felton) But it all depends on the nature of the legislation which comes out.
  (Mr Rutherford) Even though the deal does set a limit on the CAP in terms of the UK Government's aspirations to be reducing the cost of the CAP over time, that is a disappointment. What it does not do and the interpretation that we have of what it does not do is say how individual Member States should be spending that money or indeed the proportion that is spent within Pillar I and Pillar II or indeed whether that money is paid through the existing CAP regimes or whether it is paid through a single income payment that has been proposed by the Commission. So, within that budget threshold, there seems to be still considerable room for manoeuvre on restructuring the CAP.

  83. Assuming that those countries that benefit do not take a "what I have I hold" view. They are not going to change things about because "the present system suits me well".
  (Mr Rutherford) I think it is unclear at the moment whether Member States will be able to do that or not.

  84. That is helpful. It was a serious question because I could not understand it. English Nature told DEFRA that, if implemented, the Mid-Term Review package would be a useful baseline for reforming in 2006. What do you mean by that? What reform is necessary beyond that?
  (Mr Felton) Basically, the Agenda 2000 Agreement which was set up in Berlin in 1999 comes to an end in 2006 and there is going to need to be another EU wide agreement about the 2007 to 2013, the overall EU budget in fact. Your previous question has answered some of that, for example that there will be whatever the Pillar I payment at EU level will be capped as agreed. To some extent, Pillar I is something that we would like to see reduced and we believe that decoupling is the first way of removing the pressure to intensify farming and the rewards for just farming subsidies and, if the budget is capped broadly at the current level and it is decoupled, we still think that will reduce some of the pressures that are causing some of the damage at the moment.
  (Mr Rutherford) What we would be looking for in 2006 is the point that Mark Felton made earlier; we have decoupling and what we will be looking for is some kind of recoupling to rewarding farmers for providing those public goods, things that they cannot receive through the marketplace, and that is the state we have not recorded in the Mid-Term Review and that is why we say it is a good starting point, it provides a good platform for 2006, but the Mid-Term Review does not mean that the process of CAP reform is over.

Paddy Tipping

  85. Let us just stick with public goods and public benefits because I know that English Nature are very involved with the CROW Act. In the CROW Act, one of the public goods was greater access to walkers of wild open spaces but there were people, I speak of myself for example, who were anxious about the effects on bird life and bird nesting. There are clearly conflicts there and tensions there. How do we resolve those tensions? How do we measure the competing demands of, in an a sense, the potential interest?
  (Mr Felton) It depends to some extent whether you are an optimist or pessimist about the pervasiveness of those tensions, in particular between nature conservation interests and public access. English Nature's line is that those tend to be specific and particular to particular locations and are often for limited periods and therefore there is no need for a blanket pessimism and we move towards the idea that particular places with particular objectives require particular management and for this issue there is not a blanket answer. We need to go down a route of appropriate subsidiarity, which would be the sort of EU type term, but you need a framework within which that gets done.

  86. I agree with that and I am an optimist in these things. The issue around the CROW Act was resolved but, if you go to a site-by-site day-by-day example and I am often in the Peak District, but you cannot micro-manage the landscape and the habitat of each individual Dale, can you? What kind of framework are you going to put in place that is robust enough on a national/international scale and deliver the goods actually on the ground? It is pretty hard conceptually, is it not?
  (Mr Felton) You have identified the challenge, I think. Can I suggest some of the frames for an answer. Our job is to help work through a process of defining what the nature conservation priorities are and then, while we are in the sort of world where there is not a clear policy and we are trying to influence the policy, you move towards the process of saying, "Given the matter we want to achieve and we have our bio-diversity action plan . . ." The reason we include studies across Europe is that we want to make sure that we put forward solutions that will work in other European countries as well because that is the only way policy change will work. That is our European sort of angle. Of course, we then get on to the point where "real policy is in place" and then our job is to try and work out how to make the best of that in the world as it stands. What the Mid-Term Review proposes is a process of whole farm audit and we will talk in a little more detail about it. My personal view is—and English Nature's view would be something pretty close to this—that you could only specify targets at a relatively local level. We have done some work on a little species called the cirl bunting which occurs in Southern Devon where we have shown that, on using the available mechanisms, you can create a cirl bunting solution which actually delivers some of the other aspects of the farming solutions that you need there using the available mechanism, but it is a bit different from a solution that further on in Devon would be to conserve the Greater Horseshoe Bat. So, I am an optimist but, providing you set your targets well, you could use farm audits and farm plans without it being excessively micro-managed because the micro-management gets done by the farmers. Once you have created an environment around, "Here is what we are trying to do, these are the objectives"—and I would argue this is demonstrated in a few case studies of which the cirl bunting would be one—farmers do pick this up because they know how to run and manage their land and they know the difference between one dale and another. Policy should not try and do that sort of thing and the challenge is to do this in ways that encourage and capture innovation and local knowledge from people who manage the Dales. Farm audit is one of the ways of consulting individual farmers.

  87. Farm audit is one of good agricultural practice or good farming practice but we are never quite sure what that term means. It is another way of doing it, but in a sense what is being asked for is a whole farm approach, a whole audit approach to farming, which is light touch, which could be a tick box with some kind of auditing system underneath that, but I think the bottom line is, how do you reward people? What is the payment for what Mark Felton described as market failure earlier on and how do we judge what price we are gong to pay for those public goods?
  (Mr Felton) At the moment, we are obliged to use EU Regulations which tells you payment must be based on profit forgone, additional costs, and on incentive payment.

  88. I am talking about the future.
  (Mr Felton) The issue of price, that is what society would be willing to pay, comes back to the challenge about, how do you estimate what something is worth? Doubtless you could call a bunch of economists and have an argument in front of you about the merits and demerits of different ways of doing that. There are undoubtedly mechanisms which I think do give you orders of magnitude but not precise figures, so you still end up having to decide how much you are going to pay. I do think that once you have a target, you can start working out costs in a slightly better way because you start knowing what the area of land is and how much it costs to manage a hedgerow like that, and again conservation work at Loddington Farm,[2] Leicestershire show that broadly managing the Farm in ways that deliver the farmland birds target for that bit costs them about £40 to £50 per hectare additional costs over and above running that farm like the commercial neighbours and, broadly, that is what their package of agri-environment programmes actually pays them.

  (Mr Morgan) And that is why the Commission's decoupling proposal is so critical because it has to be done in a transparent way and that is the major problem that we have at the moment because there is such a lack of transparency and you cannot really put costs on things, so the debate cannot start.


  89. Do you think it inevitable or necessary because there is no other way that farmers should be paid for these goods out of public funds on a set tariff as it were or do you believe there is a way in which the market can be introduced into environmental goods?
  (Mr Felton) If you mean by the "market", do I think that the totality of public goods, need for the whole area, if we do not take the farmland birds target, do I think that every farmer who contributes to skylarks, say, can sell their wheat that they are producing or whatever with a skylark bonus that is sufficient, the answer is "no". I do think that some farmers are able to package their goods and doubtless somebody has told you how dairy farms in Devon that are managing their land in ways that support the feeding areas for Greater Horseshoe bats are also labelling their milk as coming from bat friendly farming, I cannot work out whether they are getting a bonus or getting access to the market in a preferential sort of way. You could introduce slightly more competitive elements by saying, "How much area do you need in this largish chunk of East Anglia to support, say, skylarks?" and you could invite people to bid for it and that would produce a little bit more of a market side to it, but it is still a managed market, it is still public payments.

  90. Do you think there is a market at all where the consumer would directly pay the farmer for certain things? The farmer says, "I am going to create a farm which has woodlands and walks where you can bring your horses and gallop over stubble fields, can you pay me a fiver" or whatever. Do you think there is a marketplace out there?
  (Mr Rutherford) There are markets for that at the moment. My wife rides a horse and she has membership of a local farm scheme which provides rides across the countryside and that is engaging in a market mechanism to provide private goods. I do not think that is the only way to provide those goods and I think we would be encouraging the use of a whole wide range of mechanisms to secure those goods, some will be market led and some will be by public investment.

Mr Borrow

  91. You mentioned in your response to the Chairman at the beginning of this meeting that part of the decoupling subsidies from production would have the effect of reducing the incentive to go for more intensive agriculture. So, the logic of that is that agriculture is likely to become less intensive. I wondered to what extent do you think that change in the nature of agriculture is likely to be different in different sectors and have a different effect in different parts of the country and have you any evidence to support your thoughts in these areas?
  (Mr Felton) I think you are right about the logic of it as bits of it will get less intensive. It is quite interesting to speculate what would happen, say, if you assume that wheat prices fall, feed wheat prices that is. There is no doubt that, say, the pork sector would become more intensive. I think it is quite difficult to do predictions on this. We have done some work on structural change but, frankly, this decoupling proposal was a bit of a surprise offering on the table and we have not really done a great deal of research on it.
  (Mr Rutherford) We have done research in the past on decoupling and DEFRA have also commissioned research more recently on the implications of decoupling and I think you are absolutely right in pointing out that trying to predict what the outcomes will be in a particular sector in a particular area will be very difficult if not impossible. However, we have an overall picture that the net result for the environment will probably be positive. The best example of this would be, for example, over-grazing in the uplands. The uplands suffer from over-grazing from sheep because the farmers are paid the subsidy in proportion to the number of sheep they have. Therefore, to maximise the number of sheep causes environmental pressure and over-grazing. If you turn those sheep subsidies into a single income payment, the incentive for farmers to maximise numbers of sheep will be taken away overnight. The problem for us in the uplands then will be not too many sheep, it will be about how to sustain sheep numbers to manage the habitats that we want and therefore we have to think about, how do we change the structure of our support payments that were already given to farmers to move away from paying them not to keep sheep and to be rewarding them for managing the environment in the way we want it managed.

  92. The RSPB in their submission did mention the possibility of whole areas being abandoned from agriculture and certainly when the Committee visited New Zealand earlier this year, one of the consequences of the removal of agricultural support in New Zealand was that certain marginal agricultural areas were abandoned for agricultural use in New Zealand and that does have public policy consequences.
  (Mr Morgan) Decoupling without recoupling would almost certainly cause massive structural change across Europe and that is clearly identified within the Commission's analysis, so the real question is how you recouple your payments to ensure the reward of farming. It is not just a problem for the UK. In Spain, there would almost certainly be a massive retreat in farming in the sensitive environmental areas.

  93. I think you have also mentioned in your submission concern about the effect of decoupling on the environment. I wonder if you would like to explore that a little further with us.
  (Mr Rutherford) It is not entirely clear from what the Commission has proposed so far how its decoupling will work in detail and I think that the question we still want the Commission to answer is, if it is going to decouple and create this new single income payment, then what is that single income payment for? Is it purely a compensation for losing subsidies or is it a payment for providing public goods, public benefits, and that is not clear from proposals at the moment. If it is simply a compensation for the loss of subsidies, then we definitely want to see that compensation time limited and a transfer made as quickly as possible between what is known as Pillar I to Pillar II. If, however, the payment is intended to be rewarding for the production of some kind of public good, then the Commission has to specify more clearly that that is in fact the case and that there are conditions, that farmers are providing these public goods if they are to be in receipt of those payments. It is difficult to say at the moment which road the Commission wants to go down and the response that we would make to the Commission on the details of the MTR proposals would essentially pose those two scenarios and say, "If you want to go down this route, then this is what you need to do to secure maximum environmental gain. If this is the route, then this is what you need to do to secure maximum environmental gain."

  94. If the Commission were prepared to move money from decoupling from Pillar I to Pillar II but working within the CAP that was agreed by Schröder and Chirac at the European Summit, that would not constrain the EU from agreeing to changes that the WTO want in terms of direct subsidies to agriculture providing the overall subsidy or overall payment to agriculture within the EU was removed in the main from Pillar I to Pillar II. They would need to be more specific that the proposals would come forward and would adapt. Would that be a reasonable analysis of where we are?
  (Mr Rutherford) I think the point you have made is in relation to compatibility . . . The WTO is essentially looking for decoupling. It does not matter what the payment is for as long as you are not paying for production. What we are looking for is not just decoupling, it is recoupling to the provision of environmental goods. So, we want to go that one step further from what the WTO is looking at. Quite how content the WTO would be in terms of recoupling, establishing a ceiling at which it is maintained for a long period of time, I am not entirely sure what the WTO's views on that would be and how compatible that would be with the Doha agreement, but we would seek the views of our advisers on that.

Mr Lepper

  95. You have talked about one kind of confusion that perhaps exists in the Commission's statements so far and can we take that a little further. In your advice to DEFRA a couple of months ago on the Mid-Term Review, you were talking about cross-compliance. You say that one part of the Commission's text seems to be arguing for the need for cross-compliance conditions, certain land management obligations ought to be reached, and, in another part of the text, the suggestion on the part of the Commission seems to be that those payments should only depend upon meeting statutory environmental, food safety and animal health and welfare standards. What is wrong with simply relying on the statutory minimum standards because presumably, if they are statutory minimum standards, there is something good about them?
  (Mr Felton) Absolutely and we would certainly want to ensure that any public payment/public funded money which goes to farmers should be dependent upon farmers adhering to basic minimum standards, but the nub of the question and again where the Commission's confusion arises from, I think, is that they are not being very specific at this point as to exactly what this decoupled payment is for. If the decoupled payment is for providing public goods, then the cross-compliance requirement must go beyond basic legislative minima. You cannot say that somebody is providing public goods if all they are doing is meeting basic legislative standards, they must go beyond that. If, however, it is purely a temporary compensation, then there might be more rationale for the cross-compliance measures only to require legislative minima as long as we had a clear timetable for a transfer of resources from Pillar I to Pillar II.

  96. Your view quite clearly is that good land management standards should be the key and developing those good land management standards, and you have talked a little already when answering earlier questions about the sort of dale-by-dale, farm-by-farm approach to things. Whose job is it to develop what you see as those good standards? Is there an agency or a department of Government that will be taking a lead on these things?
  (Mr Felton) Government clearly do have a role to the extent that there is a public interest in not polluting water supplies, for example. My understanding at the moment would be that DEFRA is actually working on this area and it seems that the Department for Environment, Food and Rural Affairs would be the appropriate lead department. It comes back to what are you trying to achieve through this. Are you trying to achieve through positive payments and rewards for going beyond that? It is basic minimum standards and there is some form of European framework because I think I am sensitive to the view that a business operating here that is competing for a product that is being produced by a business from, say, Spain, operating to different standards may well face a cost disadvantage. So, it is quite important that there is a framework. On the other hand, I think it is impossible to set uniform standards across the whole of Europe, so you need some sort of framework within which you make sure that—and I think we say this in our evidence—there is an equal burden.

  97. Can we just look at one area where cross-compliance requirement is already happening in the existing arable area payment scheme. Are the requirements being adequately enforced?
  (Mr Rutherford) I do not have any evidence to hand to show one way or the other whether they are being enforced. I think that when we are thinking about cross-compliance measures, we do need to think about how enforceable they are and certainly the measures under the arable area payment scheme are relatively easy to enforce because what they are about is not causing environmental damage to certain features while the land is in set-aside, so if a farmer digs a hedgerow out or fills in a ditch or whatever when the land is in set-aside, that is easy to spot. I am not aware of any figures being available on a requirement being enforced.

  98. I represent a very urban constituency and the countryside is somewhere that I visit from time to time. You say in your advice to DEFRA that maintaining land in good agricultural condition does not require it to be farmed and you argue that the definition of good agricultural condition, I imagine, must not require keeping land ready to plough and farm tomorrow. How do you reconcile keeping land in good agricultural condition but not keeping it ready to plough and plant tomorrow, which are the words you used?
  (Mr Felton) Perhaps I should explain where our concern over the term "good agricultural condition" came from. The bio-diversity action plan has set up some habitat creation targets which will almost certainly require some land currently in agriculture to be turned into, say, different sorts of grass or more heath land or woodland. If that is precluded because of the definition of "good agricultural condition", it makes it very difficult to see how farmers are going to contribute effectively to the building back up of habitats and I want to make sure that that is seen clearly. It is not about putting the clock back, it is about positively creating the sort of countryside that we want for tomorrow because we have decided that we want more wildlife and, secondly, because we recognise that the rural economy to some extent depends upon and can build on a high quality countryside which has more wildlife in it.
  (Mr Morgan) I think the Commission's intention there was to ensure that, say, if a major land use change had happened, for example a housing estate, it becomes untenable for the farmer of that land to be receiving money when it cannot be turned to agricultural use and we have suggested the term "good agricultural and environmental condition".

Mr Jack

  99. Just to pick up on a point that you mentioned later in the evidence on the same theme and I quote from what you say, "There is some confusion in the Commission's text over the extent to which cross-compliance should be applied to decoupled payments. On page 16 of the MTR proposals the Commission argues for "reinforced cross compliance conditions including land management obligations", whilst later suggesting payments would be subject to meeting "statutory environmental, food safety and animal health and welfare standards." Have you any idea what the Commission actually does want?
  (Mr Felton) The answer is that I do not know what the Commission actually wants. The Mid-Term Review proposals suggest that you should take 20 per cent of the direct payments over time and the implication is that the rest of those payments, the standard income payment, continue forever, in which case they would probably want more than statutory minimum. At other times in both the text and in announcements elsewhere, they have implied that actually what they want is a basic statutory minimum, in other words, make sure that you stick to a reasonable set of basic standards.
  (Mr Rutherford) I think the short answer is, "No, we do not know what the Commission wants and we can talk to the Commission to see if they will explain what they intend and we are hoping to do that a little later this year. To get a definitive answer on that, I think we are probably going to have to wait until the Commission publishes the detailed rules which are due to be out about now, I think, but actually we are not expecting to see them until about January.

2   Note by Witness: Managed for the Game Conservancy Trust. Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 20 December 2002