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

Examination of Witnesses (Questions 120-139)



  120. And none of them have done the calculations in respect of where the modulation levels, somewhere, we are talking about the Government's, up to 4.5 per cent, then carries ten, and 20, and everything else? Has anybody done any real work, in respect of, I think it was Austin who raised it, as to where this sort of, it seems to be putting a finger in the air and saying, "Well, it's got to be 10 per cent," or whatever; although it says 10 per cent, there is no justification as to why it should be 10 per cent in 2004, just the fact that obviously it is going to raise a lot more money?
  (Mr Ansell) Yes; you can calculate the amount of money you could raise in that way, and therefore what it might enable you to do in terms of expanding expenditure on environmental schemes, and so on. So that side of it would be reasonably easy. I think it would be very difficult to estimate what the effect of that would be on the structure of the industry, which was a conversation we were having earlier, and I do not know that anybody has done that kind of calculation.

  121. Are we saying that we are not permitted, at the present time, to remove all direct payments under CAP, in other words, the big bang, New Zealand method; is that what you said, that we could not do it even if we wanted to? If we did do that, just supposing, it is a bit hypothetical, but do you believe that British agriculture, on the New Zealand model, could ultimately be to the real benefit in a more medium term, rather than this sort of slow, progressive situation which is death by a thousand cuts?
  (Professor Alliston) What I think that would do, in the short term, would mean that we would substitute a lot of our food with imports, over a short period of time, because there would be a lot of shortfall in home production, so home production would go down and we would substitute it with imports. And over a longer period of time I think it would be very difficult to manage effectively without having some form of planning, in the way that we are going. We can go faster, we can go slower, with what we are doing at the moment, but at least we have a planned scenario, although we have got all sorts of things we are debating.

  122. Just lastly on the subsidy. I think you gave the indication that you felt that subsidies was one of the reasons which maintained higher values of land, as such. Would a similar situation be that, the tax breaks that were given to film companies, ultimately, it ended up paying film stars huge amounts of money?
  (Mr Course) Subsidies have a more direct impact on rent than they do on land values. There is a direct relationship between subsidy and rental value, largely driven by the argument put forward earlier about marginal economics, of taking on another 100 acres. In terms of capital value, the impact on capital value is much diluted; when you look at the return on agricultural land being anywhere between £60 and £90 an acre, and capital values being £3,000, at 1 or 2 per cent return, the land value clearly is driven by very many other factors other than its rental value and its earning capability, and therefore the subsidy element is much diluted. And, yes, one would have to suspect that there would be a reduction in land value if subsidies were taken away completely, but if you took away £80 an acre of subsidy completely, across the board, I suspect the impact that would be diluted down, in terms of capital values, would be pretty small, it would be in hundreds of pounds an acre, and small hundreds of pounds an acre, not a collapse in land values.

  123. So a 10 per cent modulation in 2004 would have precious little effect?
  (Mr Course) Trivial, in my view, and I would be happy to model it, since it is something we do model; it would have a pretty trivial impact on land value.

Paddy Tipping

  124. The consensus seems to be that we are going to switch from subsidies on products to schemes that bring about environmental benefits. Now the crude analysis of this is an awareness that you have got to put money into farmers' pockets somehow; those who are a bit more sophisticated say, "Well, we are going to be able to measure the value of the environmental benefits," the public goods, as it were, and I am not sure how you do measure environmental benefits and public goods; can you help me with that?
  (Mr Course) No.
  (Ms Russell) If I had the answer, I think I would have shared it with you earlier.


  125. If the answer is no, we will not dwell on it?
  (Mr Course) It is incredibly subjective, monitoring of environmental goods is incredibly subjective; there is a real danger you could spend a fortune. The CSS, the Arable Stewardship Schemes, are already incredibly costly to administer, because every environmentalist, every conservationist has a different subjective view of what is good and bad; and there is a real danger you would spend an absolute fortune on trying to monitor any types of schemes.
  (Ms Russell) And the starting-point has got to be who defines what the public goods are, who is the public, is it single-issue pressure groups, which we are concerned about; and what do they want, does the public really want orchids in the uplands, can they tell the difference between an orchid and a buttercup, do they care if orchids die out. The vast majority of the public, if you ask them that question, will probably say, "Oh, yes, of course we do," but are they prepared actually to pay for it.
  (Mr Ansell) The answer to your question is, yes, there are techniques out there which economists would claim will provide the answers to these questions.

Paddy Tipping

  126. But which economists?
  (Professor Alliston) Once you have defined what the environmental goods are.
  (Mr Ansell) Any environmental economist who took on the task, and there are methods, like willingness to pay and how far people are prepared to travel, there are various approaches to trying to answer those sorts of questions.
  (Mr Course) It is very subjective, but I would accept there are models to value environmental goods.

  127. But the more simple question, I think, we might be able to get some agreement about, is that the present system of agreeing environment payment is complicated, farmers and landowners do not really understand it, it costs a lot to monitor, we ought to have a simpler scheme?
  (Mr Ansell) Yes. As I say in the paper, it was something like 90 per cent of agricultural land is not covered by any of these things, and I do not think the intention is to have more Environmentally-Sensitive Areas covering the whole country; and a lot of the evaluations that have been done, of these, have suggested that the benefits are costly to achieve.
  (Ms Russell) I am sorry to butt in, but I would disagree with the point that farmers and landowners do not understand the schemes, because I think that you will find that, in most cases, farmers are very sharp at perceiving what they can get out of it; and in some cases it has been argued, particularly in the ESAs, that they are being paid to continue to farm as they always have farmed. And if the public perceives a benefit in them not intensifying, and are being paid not to intensify, then, fine, if that is what the public wants out of it. But, as my colleagues here have pointed out in their submission, we have not seen very much in the way of positive management changes, we have seen a lot of standstill.
  (Mr Course) I agree that farmers and managers do understand the schemes. One of the problems with the current schemes is there is no profit element in them, it goes part of the way to paying them to do what they probably would anyway, and it is not a positive inducement.


  128. And there is a danger, is there not, that if you want them to be more sensitive you have got to micro-manage them?
  (Mr Course) Yes.

  129. Because one dale is different from another dale; but if you want to be simple then you have got to take away the micro-management?
  (Professor Alliston) Can I make just one point, which follows on really from the point that was made here. Whatever the schemes are, and whatever the way that subsidies are given, I think there is a desire, in the agriculture industry anyway, that we get the maximum amount of money to the end point, the person who is actually delivering what it is we want to deliver. And so I would go along entirely with the sentiment expressed here, that if the scheme costs more to administer than it is putting back then it is not worth even considering, in my view.

David Taylor

  130. I wonder what Mr Course would have said to my constituent, Mrs Patricia Stanley, who was in the Newsnight Nottingham studio last night, talking to Don Curry about this particular issue of environmental benefits to be gained. She and her husband and their family, a multi-generational farm on the urban fringes, in a very, very picturesque part of north-west Leicestershire and in the National Forest, have long had a reputation for providing public access, environmental benefits, forest plantation, preservation of rare breeds, and so on. And the point that she put to Don Curry was that, for the first time in 70 years, the farm had actually posted a loss, last year. The best way, she said, and I have a great deal of sympathy with this point, of obtaining environmental benefits is from profitable and robust farming, from farmers and their families who are sensitive to what the public, in their own area, would like to see, and from those profits will flow environmental benefits, I think this is the point that is being made, at far less cost than some top-down scheme set by, I do not know, in Nottingham, or something like that. I sympathise with that. What would you have said to her? She was very robust to Don Curry, I must say.
  (Mr Course) My direct response would have been my point about blunt instruments. If she is a medium-scale farmer, as you have just described, in order to make her sufficiently profitable to do what she is doing, if you use a blunt instrument of payments per hectare, payments per head, payments per metre of hedgerow, actually, take the hedgerow out, but if you are paying it per head or per hectare, in order to give her an adequate level of profitability, by definition, you give a disproportionately large amount of subsidy to large other parts of where I come from, in Eastern Counties. And I would just say, that is a very blunt instrument to achieve what she thinks she wants to achieve. If what society and the public around her want is her rare breeds and her hedgerows and her environmentally-sensitive way, simply paying per head or per hectare is an extremely blunt instrument to achieve that, and there must be much more efficient, more targeted ways of achieving it, if that is what society wants. If she is right, that society wants her to have her rare breeds and her species of grass and her length of hedgerows, there must be a much better way, rather than having to pay her £300 per cow, which means that somebody who has got large numbers of cows gets an absolute fortune.

  131. I do not think necessarily she was arguing, Mr Chairman, for continuation of direct payments at the current level, in the current way. I think she was arguing against the likelihood of delivering environmental benefits in the way that the Curry report suggests was possible.
  (Mr Course) I think one of the fallacies, to which I alluded earlier on, is that, with the current environmental schemes, if she is going into the extensification schemes and Countryside Stewardship Schemes and Arable Stewardship Schemes, which are targeted and which work, to some extent, I think the fundamental problem at present is that they have no element of profit in them, and they are designed to go some way to covering her cost. And I would concur with her wholeheartedly that there is a scheme there, okay, it may be a bit inefficient and it may be very inefficient in areas, but there is the basis of a scheme there, which, if the payments included an element of profit, that would be a much more targeted way of giving subsidy, with an element of profit, to achieve more specifically what she wants to achieve, which, if she is right, her local residents also want her to achieve.
  (Professor Alliston) I think what you were implying, as well, was that many farmers are doing it in some way or other anyway.

  132. In our area, that is certainly true.
  (Professor Alliston) We could cite the LEAF farms, and the FRAG advice that farmers get, and I think we would absolutely agree with you.

Mrs Shephard

  133. I wonder if I could just begin by asking you a couple of statistical questions. We have had different figures given to us by you about the numbers of farming businesses that there now are, 170,000 was one figure mentioned, 20,000 was another figure mentioned, and I think there may be some distinction between those actually decision-making, in the industry. Can I ask, (a) were your figures England or were they the whole country; (b) what are the figures; and (c) what statistics do you have, if any, at the moment, on businesses doing contract farming, share farming, in other words, the kind of de facto, but not described as such, co-operative arrangements that are developing?
  (Mr Course) The statistics I was quoting are, as it was then, MAFF statistics for England and Wales, and what I was citing, when I was looking at the 173,000, that was the total number of holdings in England and Wales. I was citing that there were 30,000 farm businesses in excess of 100 hectares. So one of the points I was making was, you choose your cut-off, and I chose 100 hectares as being a relatively, it is above average, when you take all the statistics, but I was also citing that there are 100,000 of those 173,000 under 30 hectares, which I would say, by any definition, almost certainly, would be part-time farmers.


  134. One hundred thousand; you said 50,000 earlier?
  (Mr Course) There are 100,000 below 30 hectares, and 50,000 below ten hectares. I apologise if I misread my line of statistics and quoted the wrong statistic.

Mrs Shephard

  135. Now is there an answer, of the numbers or arrangements that are developing in contract and share farming? I realise it is a moving target to identify; you just may not be able even to have a stab at it?
  (Mr Course) My colleagues may be able to give you an absolute statistic, that is recorded, from the statistics. I am aware, from being in the industry. I have a feeling that the others may have actual statistics.
  (Mr Ansell) The last statistics that I saw, which was not very long ago, suggested that it was really quite small, still, in terms of the total area, it would be less than 10 per cent of the national agricultural area are in contract or share farming agreements.

  136. Thank you. I am grateful for that. I realise it is a difficult question, because of the definition.
  (Professor Alliston) The other point that you raise is the fact that the co-operations, I think you are referring to, are changing in their nature so much now, as well; even things like the Waitrose scheme, for instance, is a sort of marketing initiative and a co-operation, and those sorts of marketing initiatives are of very many sorts and shapes and sizes.

  137. What interests me, it is just anecdotal and a comment, is that this kind of farming has been going on for generations in the Fens, there have been co-operatives for marketing, for developing, for certainly as long as most Fen farmers can remember, but very few people ever give that the kind of credit that one gives to similar ventures, for example, in grass. And, indeed, the lessons that many Fen farmers could give, some of whom combine quite small-scale operations with vegetables and other commodities with large combinable, exportable commodities, some of the lessons they could give would be, I think, very helpful, and are not often sought. Now I have actually got to ask you about a description you gave of the UK farming sector as "better than anybody else in the world" at meeting consumer demands. Now I do not know who has made this claim and on what basis, because it is not what is normally said about British farming, although I agree with it. Now which—
  (Mr Ansell) Can I just clarify?

  138. Yes?
  (Mr Ansell) What I think I was trying to do was define what I meant by competitive, and it is not just least-cost, and I did not claim that UK agriculture was—but what we have to do, a competitive agricultural sector has to compete with the rest of the world in providing what consumers want, it is not simply a question of producing at a lower cost than anybody else.

  139. Let me complete my question, which is, in your view, which sectors of UK agriculture are, or could be, better than anybody else, and what should policy-making in the industry itself do to improve the competitiveness that clearly you observe in certain sectors?
  (Mr Course) One quick comment, on what can be done to improve the competitiveness. There is one sector of the UK horticulture industry, particularly, that has a distinct competitive disadvantage, and that is the organic sector, in that, in many other European countries, there is ongoing support for organically-produced commodities, whereas in this country we have only a conversion payment; in this country you get paid for four or five years to convert into organic production, you do not beyond that. In many other European countries they continue to pay levels of assistance, in the Wider Countries Act, as I understand it, and I do not know the details, but it has been reported and it was mentioned in the Oxford Farming Conference. And if it is the case that there are significant amounts of support being paid for continuing organic production, particularly of vegetable commodities, in other European countries, it is not surprising that 70 per cent of our organic vegetables get imported, if they have a competitive advantage outside of the UK. That is a specific example.

  Chairman: Lady and gentlemen, thank you very much for that evidence. We are going to move on to our next witness. There are one or two questions about agricultural training and students, which we would like to put to you, but what I will ask the Clerk to do is let you have them and ask if you would not mind replying in writing, because they are fairly factual in their nature. But we are grateful for the paperwork you gave us, to begin with, and the evidence you have given today. If there is anything you wish you had said, which you have not, let us know; if there is anything you have said that you wish you had not, it is too late. We are extremely grateful for your attendance. Thank you.

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