Examination of Witnesses(Questions 60-69)|
TUESDAY 29 OCTOBER 2002
60. Perhaps in a rather naive way, I was wondering
about the conversation that went on earlier about audit and how
much depended upon the language in which the word we are translating
as "audit" first appeared and the extent to which that
(Mr Haworth) These things do bedevil the process.
This is a Green Paper that has come out. It is very much first
thoughts and in a lot of these things there was not a lot of thinking
behind the headline proposals and the audit was clearly wrong.
It was produced in German where I think the word means "guidance",
not an audit in the way we would think of a tax audit.
61. Can I ask about animal welfare issues? I
think you were suggesting earlier that the aim proposed by the
Commission is to see greater enforcement of existing European
animal welfare standards and regulations. It seems to me that
the Commission was saying something rather more than that because
does not the document talk about introducing animal welfare payments
for efforts that go beyond the mandatory reference?
(Mr Gill) I am not 100 per cent sure which point you
are referring to, but as I understood it, I was telling the Chairman
that I did tell Franz Fischler that I was reflecting on whether
or not there was a case in the Court of Human Rights for the use
of the word "dynamic" in the phrase "dynamic modulation"
because I did not believe it was dynamic in any form. What I believe
you are referring to is the suggestion that the way standards
were raised in the European Union towhit the example of the proposed
banning of battery egg production and these moneys could be used
as a one off compensation to compensate farmers where those standards
were raised. As I understand it, that would not be retrospective
to cover the costs, for example, in the pig sector in the United
Kingdom. There was a realisation in the original recitals there
that Dr Fischler wrote that the significant burden of food legislation
that we are facing did have a very real cost and that this was
being passed back to the farmer in the very large part, a person
who was unable to absorb the cost because of the declining situation
in his income.
62. On set aside energy crops, according to
the DEFRA document, it says that compulsory long term ten-year
non-rotational set aside will be introduced on arable land. You
have to put in an amount equivalent to the current compulsory
set aside and the long term set aside has an element of cross-compliance
rules that we were talking about earlier. What are the implications
of locking up for such a long period of time quite a sizeable
amount of agricultural land across Europe?
(Mr Gill) We believe this is quite short sighted and
totally unjustified. It would put at risk the ability to put clear
water that this is a decoupling measure when you have the requirement
to have set aside. How can that be the case? After all, the concept
as originally portrayed was that that came out of the 1996 year
when the Americans said, "That is it. We are not going to
say there is going to be a certain per cent set aside."
This is some of the muddled thinking that has come out of the
Commission. We believe there needs to be a much more positive
encouragement in the whole area of renewable and raw materials
which we foresee as potentially developing a significant degree
of land use. A study carried out by the new European Raw Materials
Association on behalf of the European Commission analysed the
market demands and suggested that by the year 2010 there would
be a demand for as much as six million hectares of land used by
lubricants, surfactants and polymers on top of the land that is
required to produce bio-fuels which the Commission's own estimates
under their inclusion factor would require of the order of a further
six million hectares of land in that sort of time span. That is
12 million hectares of land and the total arable land of the 15
is of the order of about 60 to 65 million hectares. That is a
sizeable amount of the land. We were at pains to point out to
the Commission when we had an intensive session in early April
of this year the value of this approach. We believe it was possibly
as a result of those suggestions that the inclusion factor needed
to have more work on it. I have raised the issue with Dr Fischler
on two occasions privately and he has said to me that he sees
this as a major part of developing the future and when I spoke
to an official in his Cabernet over the weekend he concurred with
that opinion. The potential benefits can be quite enormous and
rebalance supply and demand factors, for the food sector of the
market place, to give us that price that we need to have, if we
are to move down the degressive route in terms of positive payments.
That is the point that has been underplayed so far. If you are
going to change the system, you need to have a push and pull and
this push element is critical.
63. One of the things I am not clear about is,
if you have this chunk of set aside, as I have understood it,
effectively you cannot put anything productive on it. It sits
there and yet they are going to have this payment for energy crops.
If what you are trying to say is that we do not need as much land
for food crops, by all means give some encouragement to energy
crops, but why take out the chunk of land altogether?
(Mr Gill) If I give one specific example, on my own
farm, I have a small element of short rotation coppice which is
grown on permanent set aside, guaranteed land. Are they going
to require me to say that this is no longer set aside land? That
is quite a fundamental change and quite a nonsensical situation
to be in. These were not legal texts. These were thought processes
that needed developing. We have had dialogue with Commission officials
on some more detailed points. I have made this point to the Commissioner
and his staff: it is misleading to talk all the time just about
energy crops unless you prescribe everything as energy based,
which is technically correct. It is all energy based. We must
not involve the elements I was talking about earlier which currently
are based on minerals as a source of raw material which you could
replace. One of the documents I came across recently was a newspaper
article in The New York Times that reported that Sony have
solved a problem they have been working on for ten years which
meant that they could use as a 90 per cent inclusion rate polylactic
acid, which they are currently taking from maize starch under
their programme in the States, to make the casings of Walkmans.
Indeed, Sony have just launched a Walkman with a casing made of
90 per cent maize starch. There are two benefits. One, you are
using the carbon source that is bound out of the air and, two,
when the Walkman comes to the end of its life, it can be incinerated
without any dioxin emissions to air. I understand that in the
same article it goes on to describe the fact that Fujitsu will
in about a year's time be launching its laptop computer range
made from the same product. Equally, one of the world's biggest
carpet manufacturers is trialling using this product to make carpet
tiles from it. This is all good news and needs to be encouraged,
driven and pushed. That is something we are very keen to do to
deliver this alternative market.
64. Do you think 45 euros per hectare payment
is sufficient, given that the markets you have described are still
developing those products, to induce farmers in the UK to seriously
take this up?
(Mr Gill) I have said to Commissioner Fischler that
I think the whole concept of having just a fixed acreage is difficult
to envisage. Remember, he is limited to 1.5 million hectares and
I have already been talking of potentially 12 million by 2010.
It woefully under-copes with the situation. If you then dilute
it over the whole acreage, it becomes a constraint because what
is still there is a lot of bureaucracy. We believe you should
grow a few non-food crops on arable land and it counts for your
arable payment, full stop. If there is a need in certain crops
that you have a top up, that comes out of the structural funds.
65. Can I turn to the reform of the dairy sector?
The European Commission has come up with various ideas and I wondered
if you had any thoughts on how the various alternatives would
affect the UK dairy industry and if you have any preference.
(Mr Gill) The dairy industry in the UK is obviously
very nervous about change and they are concerned in the short
term that the quotas are maintained. It is a matter of changing
in isolation, but they recognise the aspect of reform and the
real down side that, if there is a reform and it excludes dairy,
how can they go forward. Is it going to freeze up their options
in there? We are reflecting on that internally as to how we should
address that issue as and when we see the legal text and what
sort of position we believe should be the case. The four options
in the detailed addendum to the document are quite frightening
in many respects because all of them envisage quite significant
falls in milk prices over the scenarios, but they fail to take
account of what I believe is a major factor, which is that they
are looking at massive competition because everybody is going
to want to do something with the land. If you have a situation
whereby that sort of hectarage is taken out of food production
and put into other useful production, then you have balanced function
for supply and demand and you can think of moving along those
routes. As far back as last January, I attended a major dairy
conference where I postulated that in terms of the United Kingdom
grass and livestock sector you would see one of the consequences
of this situation in non-food crops is that there may be a bigger
proportion of land going into non-food crops in the more beneficial
climatic conditions of southern Europe with a lower percentage
in the United Kingdom; and that allowing the United Kingdom to
benefit much more from its grass land based economy and the climatic
factors and demonstrate one of the founding principles of the
Common Agricultural Policy which has become lost in recent decades,
that of the use of comparative advantage. That is the market place.
That is what we would like to see, but it is putting all these
things in a line. Dairy farmers in Britain at the moment are scared
stiff of any turn around in the very fragile price increases that
we have managed to deliver in the last few weeks.
66. You mentioned the sugar sector earlier on
in the context of the European Council on Friday and the limitations
on the budget. You mentioned that a reform of the sugar sector
in line with CAP reform was not budgeted for. How do you believe
that reform of the sugar sector should take place?
(Mr Gill) There is a real problem here and a real
misunderstanding about what the sugar regime is all about. I am
digging deep into my statistical information and falling foul
of lies, damned lies and statistics if I am not careful but, from
memory, we import 1.6 million tonnes of sugar per annum. I think
in most years we export four or five billion tonnes altogether.
What is not understood is that the bulk of that imported sugar
comes from the ACP countries in the Caribbean and some of the
other island states around the world, who cannot produce sugar
at world prices. If that market were taken away from them, it
would affect them very severely. It would put them out of business.
That is why we are in the unusual position that the sugar producing
countries who have access to Europe are seeking common purpose
to highlight that if the sugar regime prices are reduced significantly,
this will benefit those countries, particularly in South America
and principally Brazil and probably Argentina to a lesser extent,
who can produce very low cost sugar but at what environmental
cost? It is this factor of where we are with it and this determination
to become attached to world market price, whatever that is, which
is only residual in many cases. Some of the articles written quite
recently about the proportion of sugar traded have been wildly
inaccurate and we need to sit down on this very carefully. If
there has to be a cut, there will clearly have to be some attempt
at a compensation payment; otherwise, the sugar industry within
Europe as a whole will be catastrophic, not just for producers
but for the whole sugar industry.
67. President Chirac says he is a wonderful
defender of the interests of French farmers. He knows what he
wants and sets out to get it. If you had to write a mid-term review
and your mission was to do a proposal unequivocally in the interests
of British farmers, what would be the four or five principal elements
in the mid-term review that you would have in mind?
(Mr Gill) All I could do is go back to the paper that
was produced by a group I chaired back in 1993, which produced
the document Real Choices. I think that stands reading
today in many respects in regard to the long term and the need
to have radical simplification, to have the payments that we receive
decoupled and to focus on the market place in a way so that the
funds go to encourage market place involvement and market place
added value, coupled with the critical element of promotion of
the whole arena of non-food crops, renewable raw materials, as
a balance so that we can achieve sustainable return for the market
place. That will give you the basis for the way to go ahead.
68. The review we have now, whether it survives
or not: what percentage do you give that as meeting British interests?
(Mr Gill) In as much as it is not a legal text and
it tackles subjects and those subjects are able to be changed,
it does bring in, in a meaningful way, the subject of non-food
crops. It totally confuses the issue of set aside and gets that
wrong. It talks about decoupling but it is confused as to how
it will be introduced. It talks about dynamic modulation and all
the issues pertaining to that which are a distraction at best
and disruptive and negative at worst. I guess on that it is about
two out of four. I will leave you to draw your own conclusions.
Could do better is the end of term report.
69. Mr Gill, thank you very much indeed. You
have got us off to a good start on this and we will keep watching
the moving landscape very closely.
(Mr Gill) Thank you very much for the opportunity
to come and talk to you. If we can be of any further help, you
only have to ask.
Chairman: We will no doubt be doing that.