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

Examination of Witnesses(Questions 20-39)



  20. You indicated that there would be a certain amount of annoyance and aggravation in the applicant countries as their hand for negotiation is so tightly tied. How tightly tied are we to that figure? You said that levels of entitlement were not yet tied up in negotiations. Will that add much or not?
  (Mr Gill) If the Commission were to decide to give them all the milk quota they wanted for example, it would have, I would suggest, in some countries a significant increased entitlement and I would suggest that the Commission has been quite robust about this in saying to the applicant countries that, on the current budget allocations for the years 2004 to 2006, they have no room at all to increase those quota allocations nor indeed to increase the percentages of the compensatory payments that will be paid over those years but, in the size we are talking about, give or take a few tenths of millions, no one can be accurate, but this is the sort of figure we are talking about.

  21. So it is fairly minimal?
  (Mr Gill) Yes.

  22. Finally, you say in the second paragraph on page 1—and I am just interested in the way this ties in with what Tony Blair was saying in the House yesterday—that some have claimed that the agreement in Brussels makes further discretion of the Commission's mid-term review proposals irrelevant. The Prime Minister was saying they are not relevant and I see that Fischler is also saying that there is still a need for reform, where in fact this increases the need for reform. What view do you take on this?
  (Mr Gill) We would take the latter view, that it increases the need for reform. I am at odds with some of my European colleagues, not all of them, and I had discussions over the weekend with some of them about this point.

  23. But it presumably makes agreement on that far more difficult now?
  (Mr Gill) It was difficult to start with. What it has done is lay down even further budgetary pressure on the whole modus operandi of the Common Agricultural Policy and I do not think that should be confused with the difficulty in seeking to arrive at agreement on what were quite radical proposals in some of the States. The decoupling element is a major change and will give the ability of the European Union to have a far stronger base in terms of the boxes of the world trade talks. Not that decoupling is devoid of problems and there are real problems in there. I would not want you to think that I am just saying, "Go ahead, change it as you want", but I think we ought to sit down and talk about them but we need to do that from a position of strength, not a position of weakness.

Paddy Tipping

  24. That is very helpful and you have given us an awful lot of information. It would be helpful if you could recap some of those because I want to come back to the point that Mr Mitchell was just making. First of all, the deal was done without the acquiescence, without the involvement, of the relevant EU Commissioner.
  (Mr Gill) As I understand it, he was excluded from the dialogue.

  25. And you made an interesting point earlier on in your presentation that Pillar II rural development payments, you are hearing from the Commissioner's Office, are not going to be capped.
  (Mr Gill) I would rephrase that slightly, that these capping proposals do not include the rural development regulation elements. That is not to say that there may be attempts to cap them at some stage in the future with particular reference to the years 2007 onwards.

  26. Which leads us to the point that Michael Jack has raised and Austin Mitchell has just been raising. Michael Jack said that mid-term review was scuppered; Austin Mitchell is saying that there still is the need to go forward now. I do not think it is quite clear that the process will go forward but, in a sense, what reality is there in the process? What degree of bite can there be in the process given, in a sense, the parameters that have been laid out on the agreement at the weekend?
  (Mr Gill) I am not quite sure what you mean by the word "bite".

  27. Change.
  (Mr Gill) The degree of change. I would see that the elements of decoupling could still go ahead inasmuch they would simply pay the same money in a different way. That does not address the issue of funding of the reform of other regimes that I have referred to, sugar, milk and others, and make significant pressure. If we could evolve a method of decoupling that does not distort the marketplace or in fact lead to significant redistributions of resource or seek to put other false signals in there, then there are significant benefits that could accrue from that that would allow farmers and growers to benefit from better market returns as an outcome. That must be our goal. It must be a key goal because, without that, we are all the losers.

  28. But behind that you told us earlier on that dynamic modulation of 3 per cent through to 20 per cent could introduce so much instability in the marketplace that, if it were such a big change, people might back off from the mid-term review.
  (Mr Gill) What I said was that maintaining the proposal to introduce dynamic modulation by 3 per cent going up to 20 per cent, if it was on top of degressivity, ie cuts in the support payments per annum to fund the reforms in the other sectors, could well be a step too far and introduce instability that was not acceptable.


  29. If, as you suggest, the Commission had to water down or drop the dynamic modulation proposals, where would that leave the modulation which the British Government wish to increase affecting British farmers?
  (Mr Gill) That is a major concern to us because of course the Policy Commission on Food and Farming made its statement very clear that if there was not any reform of the CAP, then they would advocate that the Government move quite rapidly first to 10 and then to 20 per cent modulation and I think I can only point out that the raison d'e®tre of Commissioner Fischler's proposal to harmonise modulation throughout the European Union was made very clear and that he saw that already it was distorting the marketplace between those countries who were modulating and those countries who were not, albeit that it was just France and the United Kingdom. If he saw that was the case when we were running at 2.5 to 3 per cent population, then what distortion is there going to be when we go up to 20 per cent? I do believe that the Policy Commission on Food and Farming was remarkably naive to suggest that we could go down this route without having major consequences on our industry in isolation from those with whom we have to compete very closely.

Mr Lepper

  30. To follow that up, you say towards the very end of your document, "A delayed implementation of compulsory modulation could increase the risk of some countries unilaterally deciding to adopt or increase voluntary modulation, as the UK has already done." Could you put that comment in the context of what you have just been saying about the UK situation.
  (Mr Gill) That is aimed specifically at the UK although it may be possibly in the case of France who may want to reinstate modulation. Having said that, as I understand it, the new Government under President Chirac, the right wing government, has dismantled modulation whereas the socialist government had suspended it prior to the election. We can go into the innuendos but the basis was still there. What we wanted to do is put down a marker that not only has the UK already done it but it has put up a marker there that it intends to consider going very much stronger along that particular line.


  31. We are always saying that there are a number of external events which are going to make reform inescapable. The first one was going to be enlargement, "We cannot possibly pay new States what we were paid in the old days, we will all go bust", but we were not right, were we? It is not a driver at all. It is possible. The budget is not under stress. We can move on to the next one.
  (Mr Haworth) The NFU never said that. We have always said that there was money to pay it if you wanted to and this has proved to be the case, yes.
  (Mr Gill) There is not money to pay it and reform the other sectors and what is of course the intention of reform is, who is going to pay for that? If it is on this basis, it is the farming community who are going to pay for enlargement.

Mr Mitchell

  32. Let us move on to more general areas. The decoupled farming income payment: you are saying that it is essential and that there are going to have to be tribunal arrangements to settle all the disputes in this between landlord and tenant and what the farm income is. Do you envisage tribunals establishing the initial levels of decoupling farming income and how is that going to work?
  (Mr Gill) Of course, this is the unknown factor. Dr Fischler, as is usual, has been very clever in the way he has gone about this whole process. He has not produced any legal text for debate, he has simply produced what I have termed as a series of coat hooks upon which he has hung ideas to be debated and he has made it very clear that the options in terms of decoupling were three options: (1) you do it on an historic basis per farm; (2) you do it on an historic basis per region; or (3) you do it on an historic basis per country. When you do it on the per farm basis, you get hooked into all sorts of problems of your farm and my farm and the different rates of payments and then you get all sorts of issues about that and you get the problems then about the multi-commodity farms. Say, for example, a farm might be farming half arable and half horticultural and will receive payment for half his land, but what happens if he starts growing more horticultural crops on half his land and how do you get into the rigidity of monitoring if you work out a hectare over and when does a hectare become significant, two, three or whatever it is? All this sort of bureaucracy comes in. So you could say, "Let's go onto a national basis and then it is fair because everybody is going to get the same per acre." Hang on a minute, you cannot pay the same to the upland areas of the Pennines or the South West as you could to the beautiful fertile lands of Fylde.

Mr Jack

  33. This is great stuff for tourism!
  (Mr Gill) Or perhaps I might add The Wash. So, what do you start doing then? You say, "We will go onto a regional basis" and we know historically that, once you start drawing lines on maps, there are people the wrong side of the Pennines and it becomes a bureaucratic nightmare, so you come back to the problem that you have outlined, then you go back to the farmer basis and then is it the farmer or the landlord and how do you do it? These are the sort of points that we need to tease out. And whether or not then you bring into the question, do you reinvigorate? I mentioned earlier the eminent economist Professor Tangermann, do you revisit the concept of the Tangermann Bond concept whereby the actual payment goes to the farmer? That suggests that you are, in quite a dynamic way, removing the price schedule and, at the moment, it would be inconceivable for anybody to come in to farm without any support at all because the prices just will not make it stack up. So, you come into that aspect. These are the issues that we really need to thrash out. They are not insurmountable but I can see that, in answering your specific question, we could, as a consequence, end up with the need to have complex tribunals, something which I am not attached to because it is more bureaucracy coming into it.

Mr Mitchell

  34. You will also have problems over the reference period. What are the problems here?
  (Mr Gill) One of the problems particularly is that we are held in limbo. If, for example, this uncertainty about is there or is there not going to be reform goes for any great period, you risk freezing the country. What do I mean? Already I am hearing that arable farms that may have chosen to let a small proportion, 10 per cent/5 per cent, of their land on let annual licence to grow potatoes are saying, "Hang on, I am not going to let you have it this year because, if I let you have it, that means my base area eligibility for arable aid will be reduced because there is no payment for potato growing." So you get distortions and what we need therefore is some certainty in the system about what are the reference periods going to be. Not to leave it for 2006, that they are introduced and they will pertain to years up to 2006, but if you are to do that, I would simply say, "Fix it on 2001/2002" and how do you accommodate what has happened in between there? Really, in a way, one of the consequences of what seems to be intended to happen last weekend has given us the worst of all worlds. It seems that we have the need to go on with the mid-term review but that we do not have the ability to do it in the short-term yet potentially we can agree to implement in 2006/2007 with all the consequent freezing of the structure of the industry and the downside of that is the intervening period which gives me enormous concern.

  35. You are making me more and more depressed! When you spoke about "the beautiful farming land of the Fylde", are you envisaging some kind of Government fixing of regional levels of payment? If you are not, how is it going to be fixed?
  (Mr Gill) I think that is exactly the point because we have, as well as the beautiful farming land of the Fylde, some beautiful farming land in Lincolnshire and I think it becomes impossible when drawing lines on maps. If you take my own part of North Yorkshire, there is a strip of land north on the A1, outside the A1, which is very good high quality land that will produce bread making wheats. I am only 10 miles to the east of that and I cannot even begin to grow bread making wheats. I am not complaining; that is a factor of how it is drawn up. To pay the same to each is a problem that you have and it is certainly not a fair comparison. However, we do have that at the moment of course in the arable aid payment. The arable aid payment is the same across all of those. It just becomes more complex if you are going to do that because you are bringing in other commodities into the factor.

  36. In which sectors do you expect production to decline as a result of the introduction of decoupled payments?
  (Mr Gill) I think it varies depending on which part of the European Union you are in and it depends upon what you mean by cross-compliance. If cross-compliance just simply means that you do not have to go and pour waste materials all over the land and you can let it go as set-aside, then you could see a lot of the marginal lands. . . People certainly say, "Well, we are not going to bother to farm it" and indeed, listening to one of my Spanish colleagues last Friday at a public conference at which I was speaking, he estimated that as much as 2 million hectares of Spanish cereal land currently in production will come out of production. The current thinking of the Commission is that cross-compliance would still require them to grow a crop, which seems to remove some of the element of decoupling because you are required to grow a crop means that you have indeed decoupled. One could argue that it would be in the European Union's interest for Spain to grow 2 million hectares of cereal less because it balances the market and that is what market is about and if it shortens the market and leads to a better price for the rest, so be it and something will develop from that. What it means, if you go down the policy, is that you have to have sufficient resources in the structural funds to balance the void that you have left with in those areas to make sure that there is not a social disruption to go through there which of course is some of the thinking behind the original proposal.

  37. What is the effect likely to be on the rental market?
  (Mr Gill) Again, we have been told about this and it was very pointed that when I visited the United States in June of this year, several senior commentators in the United States said, "All the good the Farm Bill did for us in the 1996 Farm Bill was of no good at all to farmers, it was simply to land owners and in the form of either capital values or in terms of rent." I do not think that is necessarily a fair comparison of where we are in Europe or specifically in the United Kingdom. Why do I say that? Because I think we are already at a different stage; we are already at that stage where we have arable area payments anyway and I am well aware of many instances where landlords often let farms on the basis that they will take all the environmental payments in and then what rent would you pay on top of it? Indeed, we know that the arable aid payment has a determinant in the rent that has been paid, the set-aside payment that was a factor in there. So, I do not believe it has a factor but what it should do if the market works properly is, in the summation of the terminal profitability of the land, the aid payment plus the commercial activity lead you to derive a rental value rather than at the moment where it is becoming too much focused on as a base rate.

Mr Drew

  38. We have obviously gone into the area of cross-compliance and if I may just carry on in that same vein. Surely the problem with cross-compliance is that we cannot even get agreement on what cross-compliance means within the UK and you are trying to then do that across the 15 or 14 other members and 10 new entrants. Again, is this not something that is going to be a recipe for a lot of problems because people will define in different ways, there will be the arguments of saying, "We cannot really work out whether there is a degree of compulsion on how you relate that to decoupling." So, how can we clarify this issue?
  (Mr Gill) This is a point which I raised with Commissioner Fischler on a number of occasions, not just the subject of cross-compliance but in actual fact how you define good agricultural practice because, as you point out, we currently have to encompass an agriculture that goes north of the Arctic Circle in the case of Finland down to the middle of the Mediterranean currently in the form of Crete and the differentials of climatic factors and social needs of those areas are quite enormous and the need to keep people in the Arctic Circle is a priority for Finland and who are we to query whether that is right or wrong. We may have thoughts about it but it is their decision. So, I see developing cross-compliance becoming, to my mind, something that should be left to the Member State against a set of criteria that are drawn up and you need to draw them up. When I questioned the Commissioner in the summer as to whether this cross-compliance was going to be a racking up standards all the time, his response was robust and clear. He said to me, "It cannot be because, if that were the case, that cross-compliance is anything other than good agricultural practice, then it destroys the concept of Pillar II agri-environment schemes and it must be based on simply good agricultural practice." Notwithstanding that, the point is still valid. It is a need to prevent distortions on basic things such as air, water, soil usage and animal welfare usage are parameters. One could question, for example, policies in the Iberian Peninsular where they are drawing water out of the land with gay abandon to increase certain fruit production which is not sustainable and these are the sort of things that need to be drawn in.
  (Mr Haworth) Perhaps I could add one word there. The Commission's thinking now seems to be that cross-compliance will largely be compliance with existing European regulations, so that would be a clear body of corpus of regulation which would have to be complied with if you were to get the payments. However, they recognise that if you choose to take your payment and not produce something, it may be that effectively there would not be any regulations which would apply to you and they are not talking just about environmental regulations, they are talking about across the piece, they are talking about health and safety regulations, the animal welfare regulations and the environmental regulations. If you choose not to do something, then it may be that there would not be regulations that would apply to you. So, they are therefore having to think that there may be some definition of not good agricultural practice but good agricultural condition because it says in the regulation that you have to maintain the land in good agricultural condition though there may have to be a definition of what that means.

  39. If I can just pick up on one of those—and I do not want to labour the point—and that is animal welfare. It is going to be completely impossible to get some standardisation. Mr Gill has just spoken of the national deliberation in terms of the ability to decide the degree to which you are going to cross-comply, but you cannot have the level of the lack of any standardisation that exists at the moment, which is going to be much worse with 25 countries. So, how are we going to operate that?
  (Mr Haworth) I think the answer is that they are talking about European regulations and there are European regulations on most animal welfare issues. The fact is that some countries may choose to impose much higher regulations, in which case that would not be the standard which was applied in this case, it would just be the common European regulation and, in a sense, it is a way of getting more uniformity, it is a way of enforcing those regulations and, as we have often pointed out when people complain about animal welfare, it is not so much the regulation as enforcing existing regulations which is often the problem.

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