Examination of Witnesses (Questions 960-979)
MR MARK THOMASIN-FOSTER, PROFESSOR ALLAN BUCKWELL, MR BEN GILL CBE, MR MARTIN HAWORTH, MR REG HAYDON AND MR GEORGE DUNN
WEDNESDAY 8 MAY 2002
960. Chairman, welcome. The usual all-male agricultural turnout. All of you have been here before, so you are all old hands at this and we do not need to do any introductions to it. You know what we are inquiring into. May I emphasise that this is not an analysis of the Curry Report and although we may well want to refer to it I do not regard it as essential that the entire discussion revolves around it. I just want to make that clear from the start. We are going to try and crack on at a reasonable pace. I usually find that by the time we have been going for a reasonable time we have got all we are ever likely to get. If you agree with someone just say you agree rather than explain why you agree. Can I begin by asking you to comment on a point which has struck me rather forcibly. The title of this inquiry is Farming Beyond Subsidies?. I find that almost all the responses we get are really about how can we find a different sort of subsidy to replace the sorts of subsidies which people want to get rid of now. Could you envisage farming without subsidies?
(Mr Gill) Thank you, Chairman, for such a simple question to start the proceedings with. My apologies for the fact that we are an all male team. We will reflect on your comments in future and see what we can do to accommodate you. The question, can I envisage us ever being without subsidies, of course gets into the semantics of what are subsidies? The fact is that farming is more than just food production. It performs services to the general good, of which there is a whole raft now of environmental schemes. It depends whether you include them as subsidies or not. The general tenor at the moment is that at the moment the CAP support mechanisms get in the way of the market place. The CAP needs to be reformed. We have to do that in a world environment in an increasingly shrinking economy which we have to consider. Coming, as your question does, in a period of world history where the Americans have done complete U-turns on subsidies and with the proposals for the future Farm Bill, we will indeed probably be subsidising their arable farmers at a level that is higher than European arable farmers, it makes life very difficult to envisage how we can have unilateral disarmament on the subject of subsidies around the world. Notwithstanding that, it is in farmers' best interests to achieve a better return from the market place. What I find everywhere I go round the country is a determination that that is the better route to follow for the way ahead in the more medium to long term, but to contemplate doing it unilaterally will be suicidal. To contemplate doing it at such a time as we are in now, where farm incomes are at an all-time low in the United Kingdom, for reasons that I will not go into at this stage but can elaborate on if you want me to, would be doubly suicidal because there is just not the slack there. There seems to be some thought that you have revenue, you have costs, you have the net farm income, which is currently two billion pounds below the sustainable level per annum, you can just take away subsidies and everything is happy. Of course it does not work like that. We have to find that money from somewhere else.
(Mr Thomasin-Foster) Of course Ben talked about subsidies and semantics. There is a semantic point possibly on farming because farming is of course much wider than just commodities and producing those commodities. It is a matter of the management of the countryside and therefore at the present time subsidies which are received are very much wound up with the overall management of the countryside and so one has perhaps to untangle that slightly with the question that you asked: can one envisage farming without subsidy? Whilst there is a long term goal and a possibility of farming of commodities without subsidies, there are many other questions to deduce from your original supposedly simple question.
(Professor Buckwell) Can I add to the list? Can we envisage farming beyond subsidies? Not only can we, but we do, and we have actively been promoting these concepts in the CLA for a number of years. What we are saying is that there is still a strong collective public role in agriculture and land management and that role is to provide the things that Ben and Mark were referring to: the production of public goods. It is also dealing with market imperfections, it is dealing with the extreme volatility that farmers face because of the biological and climate related activity they are engaged in. There is a strong stabilisation role which is very evident in the US and there is also a role in dealing with the demands that society has for extremely high (correctly) environmental, animal welfare and other standards which impose costs which are not necessarily incurred in competing countries in a liberal trade situation. For these reasons, whilst there is an agenda out there to reduce production-coupled subsidies, there are some very strong reasons as to why we do not expect Government to decouple from land management for these reasons.
(Mr Dunn) It is probably interesting to look at the question the other way round. Will the market provide for all the things that the public want from farming and the rural economy and to private individuals as well? The answer to that question is probably no in the current context. Call them what you will: transfer payments, subsidies, support payments, agri-environment schemes, etc, they are going to be an essential part of the future whether we like it or not.
961. There is a great deal of thought at the moment about the public good in connection with agriculture. I am still trying to meet members of the public who define this good. Could you tell me what you think the term "public good" means?
(Mr Dunn) Public good is an issue which many people would define in very different ways. If you were to ask the public whether there is a good in national defence or in some element of research into microbiology or whatever, the public would find it very difficult to articulate what is the public good. The public good is best demonstrated by the collective responsibility of all of us through the Government who decide what in the interests of good science, good husbandry, is the best for society as a whole. I do not think you would get a member of the public articulating in the way we would like them to what they perceive to be the public good from the countryside. We need to have some sort of collective responsibility which is a national one.
962. So "public good" is what the Government says it is?
(Mr Dunn) I am not saying that. We elect Governments to govern and Government is taking on board the views of the nation in the various ways it does when it needs to make decisions as to what is in the public good.
963. Let me rephrase the question. Has somebody else got a better idea of the public good?
(Professor Buckwell) A set of additional ideas, certainly. With regard to public goods, we are talking about market failures, as George has explained, and they are pervasive, we would assert, in rural land management. If you said what are they, I am surprised that you talked to the public and they do not speak of these things. We are talking about the natural landscape and various man-made heritage features in the landscape, we are talking about biodiversity and habitat maintenance. We are talking about certain elements of resource protection and these are services that are produced deliberately or inadvertently or alongside the production of agricultural output. This produces a green environment which the public certainly regards as good and when they are denied it it raises enormous economic stress, as we saw last year when the public felt it was denied access to the countryside. We can add those things up. I would also add such aspects as water management where there is the capacity, depending on how land is managed, to do good to towns that would otherwise be flooded. There are issues such as locking up carbon in soil and trees which are non-market services, potentially provided and actually supplied by land managers, not paid for by the market. There is a very wide range of these services which the public cares about and which land managers can deliver if they are given the appropriate signals.
(Mr Thomasin-Foster) You can sum that up, Chairman, quite easily in sustainability: what are we trying to do? We are trying to make certain that our countryside is sustainable for future generations. It does not matter how you say it; it is sustainability and it cannot be the public that defines that sustainability and then works out what is needed in that sustainability.
964. Let me rephrase it. It is generally accepted that we are going to see a significant increase in the value and the volume of payment of environmentally beneficial tolerant practices. Some people seem to regard this as "the salvation" of agriculture, as if the ideas have been put forward to be implemented and somehow with one jump Jack is free. What do you think is the salvation of agriculture? Is this shift from production related subsidies to non-production related public good a benefit? Is that where we are going to "save" agriculture? If it does not, what will?
(Mr Gill) I do not believe that that will be the critical part of farming. If you want to take a ten-year horizon, it will be an important part, it will be a significant part, and I would envisage that in the 2010-2020 horizon that level will be superseded, there will be changes and there will be consolidation of the environmental schemes where it will only occur for specifically set-aside environmental schemes, a relatively small percentage of the total. There will be requirements on the whole of environmental schemes. It is not going to solve the problems. Problems revolve around lack of profitability which is lack of return for the products that you produce with a higher cost than others with whom we have to compete. What will be the big driver for change to my mind that has not been fully appreciated is climate change, of global warming, that is undoubtedly going on. While we see reports published in the last few days that the Government is on target to achieve its 25 per cent level reduction in CO2 levels, I do not think anybody seriously believes that that is in itself going to stop the problem of climate change. It is far bigger than that. The only way you can essentially stop CO2 levels rising is to stop burning off mineral oil the way we have. How do you do that without putting society back a hundred years? You use plants as the only alternative raw material for industry. Conservative estimates would suggest that by the year 2010 there could be as much as six million hectares in Europe devoted to raw materials from industry. I am not including in that acreage biofuels, biodiesel, bio-ethanol. That is on top of that. This is a significant area of the land mass in itself and that is with all the disincentivisation which currently takes place within the CAP which does not encourage developments in this way. There is enormous potential. I believe that by 2020 a quarter of our land mass, a quarter of Europe's land mass and the broader world will be taken up in non-food production. Add to that the level of land that is in environmental schemes and then you have a significantly different balance in the food production which has the potential to restore some degree of balance in supply and demand to deliver a price that is above the cost of production for the primary producer which is what we desperately need.
(Mr Haydon) The industry will never be sustained by getting a return from environmental schemes. We are constantly being told by the Government now, "You must get back to the market place. The market place is where you will be. We want to decouple support from the market", and the other schemes which there will be a bolt-on. But if one looks at the market place at the moment, the market place has never been worse. If you take a basic commodity such as cereals, for instance, the current price for cereals for this harvestthe last time it was at that level was in August 1974. We have got a milk price now which has dropped down to a level which is what the Government forecast it will be at the end of milk quotas in 2010, so we have got the bad news eight years early. The situation is very bad in the market place. All these bolt-on environmental schemes which will come along, and they are going to come whether we like it or not, will be a help and they will be part of it but what we have got to get back is profitability into basic farming.
(Professor Buckwell) Two comments to your question. We accept your prediction that a good deal more of the support will come from environmental payments and less from production support. Is that a salvation? First of all, it is necessary in its own right that this is why we are doing this, because it is needed. We feel this as land managers, the public patently feels it because that is all we read about day in, day out in the papers, and it is necessary and it is a way of legitimising an agricultural policy which in a sense has not adapted sufficiently to the demands that society puts on it. That is one main reason why we are positively engaged in this process, because it is right to do it. These environmental outputs are right. We want them. The next point: is that the solution to the economics of farming? No, of course not. As Ben and Reg have said, we happen to be in a historic dip in the profitability of agriculture brought about by a combination of three factors which are largely outside the control of farmers: the value of the currency against the euro, the international commodity market and, third, the incident of some horrific, big animal diseases, BSE and foot and mouth disease. These are unprecedented historic events that have all come at once. What is the salvation of agriculture? It is the avoidance of those three horror stories: the diseases, the low commodity markets and the inappropriate exchange rate. What can we as farmers and land managers do about those three things? The third one we can do something about and are doing something about. The other two we can do very little about except hope and pray and try to make the case that there is some public role here in providing safety nets and dealing with instability which patently American farmers have persuaded their government about. We do not necessarily admire the way they are doing it but the fact that they are doing it is an important signal. You know as well as we do the story on the euro. That is not an agricultural issue. International commodity markets do not always stay down. There will be an economic recovery. There are some signs of it. The third issue of animal disease, I guess we will come on to later on in the discussion.
965. There is an interesting discussion going on here with Reg saying that the environmental drivers are bolt-ons, whereas I thought Professor Buckwell saw them as more mainstream, more significant, but certainly the CLA a moment ago seemed to be stressing the importance of farmers and landowners to manage the landscape for a wider public good. I am not at all clear where the NFU stand on this, Mr Gill. If you accept that environmental payments are going to grow over a period of years, the issue is, how do we pay for them? Where is the money going to come from?
(Mr Gill) I was answering the question, are environmental payments going to be the saviour of British agriculture, which I do not believe anyone can say. The point I was making was what were the drivers for the future. There is undoubtedly a lot of, if I can use the phrase the Chairman has introduced, public good which was very clearly illustrated in the last 12 months by the consequences for the tourist industry when the countryside was closed down. It was fascinating last year, in spite of repeated attempts by the media to split farming and the tourist industry, to see how the interdependence of the two proved very much stronger and the recognition by the tourist authorities that we had to get rid of the disease because that was critical in bringing tourism back into Britain to show that we were a countryside that was moving forward. The beauty of that countryside can always be adapted but it is a managed countryside. It is managed by farming practice and that countryside is very different in the United Kingdom than it is in continental Europe where they have different drivers for their own different beauties. What we envisage is that the environmental schemes will assume a greater importance but they are not going to be the only thing. There are issues about cross«compliance, whether that should be brought in or not. It depends on the detail in all these aspects. There is no doubt that farmers should be subject to good agricultural practice. They are at the moment. There is no doubt that we are going to be subject to a whole plethora of environmental regulation where I have enormous concern that they are going to be implemented in a heavy-handed, gold-plated manner in the United Kingdom, if past track records are to be believed, in such a way that they run the risk of drumming some parts of the farm sector out of business, the last of which we have seen with the nitrate vulnerable zone legislation which is quite incredible, as has been suggested, and the question why it is there. The Habitats Directive, the Waste Directive and other water legislation that is going on have enormous concerns for us. What we need is proportionality in all our regulation that is commensurate with the risks and the problems involved and not over the top. We take the environmental concerns very much to heart, we see the market place as a critical factor there, we see a base of good agricultural practice involved which is of environmental concern, not least of which is using the farm assurance mechanisms that we have been instrumental in introducing, and we see certain parts of the countryside maintaining and developing on a concentrated basis the environmental schemes that are currently in place using set-aside, for example, as part of that mechanism for the future.
966. You have set out a whole plethora of environmental work and Professor Buckwell went through a long list of public goods. What I am not clear about is two things. First of all, public goods can be incompatible and I have had a very wide ranging discussion over the years with the CLA over access to the countryside. Some people argue that access is against conservation and one needs to balance that and the Ramblers Association and, say, the RSPB, may have different views, but the more important question, the very detailed question, is, how do we measure public goods? Professor Buckwell is right that the public want a landscape to visit and Mr Gill has stressed the importance of tourism. How do we set up systems to pay for that? How do we put a value on these things?
(Mr Thomasin-Foster) Surely this is going to be a judgement of degree. I mentioned a few minutes ago the whole issue of sustainability and it is very difficult to get indicators that give you a full idea of that sustainability. That sustainability also has to have an economic aspect to it. Therefore, public good means, I believe, something which is going to produce what we want from our landscape in a system which is even-handed, which maintains that landscape in its diversity, in its productive capacity, in its economic capacity, and so therefore, if you can devise the necessary indicators to achieve that, then perhaps we can measure public good, but it may well have to be a situation where politicians lead because the general man in the street is not going to be able to manage it. Someone has to lead that and it may be through the partnership that exists within all our organisations and all the statutory organisations with politicians doing their best as well.
(Mr Gill) You asked the question, who is going to pay for it? In the absence of some simplistic method of making the public pay directly for their benefit from it, this is where the expression "public good" comes from and it is logical that it should come from the Exchequer. I was involved in the technology foresight exercise that started in the early 1990s. I remember that one of the scenario planning exercises then that was put forward conceived not just road tolls coming into cities, but once you have introduced the concept of road tolls coming into London, it is a very simple step where you have got a boundary of a national park that if you have a tag on your car, if you are a resident, you are not charged, but if you are not a resident you have to pay. With the development of IT that is possible in the future. Whether that is something that the public would want to do or not is a debate but that is one option that is there. You mentioned also the thorny problem of tensions and access and the suggestion that access should be open to everybody. I read somewhere in the press cuttings yesterday about the Ten Tors Walk, which is in the south west and there is a suggestion that this will be the last one this year simply because of the environmental damage to bird populations. This is a real tension that is going on there and everybody has to recognise this in the countryside. Remember that the countryside, as I have said before to this Committee, is not that benign, water-colour, whatever the artist is, everything living in harmony and in its place. There are real tensions in there and it is living, it is vibrant, and people going in there alter in themselves the dynamics of that countryside and we need to have that balance. There will need to be regulation in there.
967. The point was made just now that politicians ought to take a lead on this. I agree with that and I think what is going to happen is that politicians will say, "That is what the public want; they want that landscape; they want better access; they want to protect bird life and, by the way, the way to do that is to reduce direct payments to farmers." I think that follows as night follows day. Those are the real consequences for your members. What is going to happen?
(Mr Gill) First of all, what is "better"? It is the use of the word "better". Better landscape? The public judge landscape at the moment by the vast numbers that flock out there every weekend of the year and in the summer periods throughout the week to see it. That is not to say we cannot improve it, but you do not actually improve that public good, maintaining stone walls, hedges, planting new features, the buildings in the Yorkshire Dales, the stone buildings there, ponds, other features in there that you might want to have, by cutting the support that goes to public good. In fact, if you do that, that is part of the problem that farming faces at the moment with an income of the TIFF figure (total income from farming) of 1.7 billion or thereabouts, which is about two billion below what the clearing banks would estimate is a sustainable level just for the type of investment. People have not got the money to invest in public good of their own right in the quantity that they should have. You cut the subsidies and you make that worse.
968. None of you has got behind with the production subsidies as such in as much that Paddy's last point suggested about if you make the move towards other forms of payment you have to take the money from somewhere. If you were to reduce production subsidies how are you going to secure supply given that some segments obviously do not get production subsidies anyway? Is that a good thing and what are the consequences going to be on different sectors of the industry?
(Mr Gill) As far back as 1993 we published a paper in the NFU called Real Choices which envisaged the decoupling of support payments away from production to avoid all the misguided messages that they send round. They range from the absurd to the ridiculous at times. In the sheep sector, for example, where the production subsidy is so constrained at the moment, it prevents me from exploiting the best market prices at Easter for any redundant breeding sheep I may have simply because of the retention period. The problems of the beef sector are even worse with premiums that are so-called extensification premiums which actually become so farcical in their complexity that people throw their hands up in the air. The IACS payments, I am currently going through that hurdle at the moment with my annual IACS application, making sure you get all the bits right. I have done it now for nearly a decade but it is something that tests one, particularly when they change the columns and forms every year and you have to ask basic questions of yourself. They do not facilitate non-food crops, renewable raw materials, for reasons I can go into if you want me to. The concept has been to move towards decoupling of payments. The first step logically to discuss would be to some form of acreage payment. That has problems because there is a lot of frictional cost in that to farmers because there are winners and losers, as we saw last year when we had the hill farming change when we moved from a headage to an acreage payment. In the extreme there were some people who were gaining several hundred thousand pounds and others were losing big sums of money. That is a nonsense as well. We have to find a way through that which can be done with some degree of moderationI nearly used another word therewith regard to historical payments that have been made to individuals to find a way through the middle.
(Mr Haydon) Ben has touched on that subject very well, but if you look at subsidies in depth they are all coming down. I farm in the lowlands, I have also got a hill farm in Wales, and I am in the HFA and in the last two years I have seen a 15 per cent reduction in my so-called income. The hill farmer is the most vulnerable person that we have got in the industry and the hill tenant farmer is even more vulnerable, I can tell you. Those subsidies are gradually switching to an area basis. In the TFA we have been violently opposed to that because some of the capital then transfers to a value in the land which reflects back to the landowner, not to the person who is occupying it and trying to get a living there. There are many changes but all these subsidies are coming down. The IACS are coming down. The sheep subsidy has come down. The HFA payments have come down. The trend that you are all looking for is already happening. None of us is getting any more out of the job; we are all getting a lot less. There is already a start in this business of reduction in direct payments. They are being slowly but relentlessly decoupled from the market place and we are all likely to be looking at less. Maybe a new system needs to be thought out. We have supported the producer bond and perhaps George will have a word to say on that.
(Mr Dunn) We have never taken the position that the industry can survive without support. We believe the industry needs support into the long run for a range of reasons. What we have said is that the current support structure through the CAP has simply inflated the cost base against which we produce and therefore there is no benefit to us. If I take one small example, the set-aside payment and the removal of the two-year qualifying rule on set-aside where before you had to farm the land for two years before you could claim it as set-aside land, now you do not have to have that constraint. Landlords in the eastern counties are expecting tenants to pay at least the set-aside payment if they are going to take that land on a tenancy. Automatically then that payment gets locked into the cost of producing food. We have proposed a complete decoupling through an old system called the agricultural bond which effectively would be a contract with producers for a period of years, renewed after that period of years, and they would receive a fixed sum of money each year over the period of that contract for producing against a set of guaranteed targets and objectives. We believe that while you would not remove all the transfer of payments into the cost side of the equation, it would help significantly.
(Professor Buckwell) Can I add one or two points to what has been said? When we are talking about changing production support we have to be careful what production supports we are talking about. There is one story about direct payments, there is another story about the other forms of production support, the intervention system and the border controls, quotas and so on. We have to start getting into commodity sectors to have a coherent discussion. George says that he wants to switch these direct payments to a bond. My question is this. As we move down this decoupling road we very quickly face the question, what are these decoupled payments for? We had better have a good answer to that. That is why we in the CLA have been saying that our answer to that is that a very large part of what they are for, and we are back to previous questions about how do you measure the value of the environmental outputs, is justified in the long run for environmental delivery. In that sense it does not make any sense if you believe that story to convert them to a bond where there is a presumption that there is a finite end point in the way those bonds are paid. Again, I think there is some difference in what we mean by the bond scheme. To answer the question, what is the impact of the cut in production support, under whichever heading it appears, we cannot answer it unless we know how much we are putting in on the other side for payments for these non-market services because ultimately what we are talking about is rural businesses which have a stream of income either from the market , from the Government through existing support arrangements or from the Government in order to deliver public environmental services. Unless we know what the total streams are under all of these headings, then I cannot make a very intelligent prediction of the input, on the structure, farming, output, or anything else. In order to answer that question we have to be a bit more precise about what is the policy framework that is replacing what we are currently doing. One final remark. Of course, we are not talking about abolishing all production support, I do not think, within the time frame I assume of this Committee or any other committee, ie, the next decade. That is simply not on the agenda around Europe so let us not waste breath talking about it. We are talking about some marginal change from where we are in an improved direction, we hope.
(Mr Dunn) We have never said that the public good is simply about environment and rural structure. It is also about the continuance of guaranteed supplies of good quality and safe food for our nation which I think is going to become increasingly important as we move into an uncertain global context. Look at what is happening in the Middle East, look at what might happen in Iraq. People should welcome the fact that they have got available a supply of food which is very reasonably priced and which is safe. We need to build into the public good that aspect as well. We have never said that bond should be terminable. We have said that it is for a period of years and then renewed thereafter for another period of years and so on based on negotiation.
969. If we accept that there is going to be some form of subsidy, and I agree entirely that we have to be clear what level of subsidy is going to be available and how the scheme will run, let me look at a different line of inquiry. Are we paying the right people at the moment the appropriate level of subsidy? The accusation we make is that the better off you are in terms of the larger the production you deliver the more subsidy you get at one extreme, and yet at the other extremeand I can do this today; I can buy five sheep and I can put in for my sheep subsidythere are some strange problems in the industry and it is outwith your control in that sense, but to the public they get these perceptions that it is an industry that is not really doing the things that it should be doing. Ben is smiling because he knows what I am getting at, but you have those extremes. You have got the barley barons, let us put it on the table, with all these accusations thrown at them, but also the hobby farmer. The number of farmers is increasing every year. Let us get rid of this myth that the number of farmers is decreasing (a parliamentary answer to me). That is causing enormous problems in as much as this: if there is a finite amount of money going around and you have got more people claiming it, the people who desperately need it are obviously going to have less available. What are your comments on that?
(Mr Gill) That is a very fair point and I presume, Chairman, that Mr Drew was not suggesting that he should have an extra payment as an MP.
970. I have enough trouble, as you know.
(Mr Gill) You are quite right in terms of farming structure that the big farming numbers are marginally increasing, the middle people are decreasing the hardest and the so-called small farmer is increasing, but that so-called small farmer is a very diverse population. It ranks from people you describe as people who have made sufficient money in the City to come and afford to farm for a short period to those who down-size and perhaps realise some of their capital assets by selling land off, and hence have been able to invest money in for their pension and have an income. Should they suffer as a result? I looked at this some years ago but what you immediately come to is where do you draw lines on maps? They may not be geographical maps but they may be lines on social maps or they may be lines on income maps. Once you start drawing lines on maps you get into big headaches and that is the problem. You can stop people from coming into the industry who have the money but that would be totally stupid as well. The reality is that you have a problem there in that bridge. How do you describe a person who derives his income principally from farming? When you also look at the statistics of interest in the equipment he has bought, it is similar to France where only about 50 per cent of those describe themselves as farmers work 100 per cent of their time on the farm. The broad structure from Eurostat figures is quite interesting because it is almost identical for France and Britain. Fifty per cent, 32 per cent as between 100 and 50 per cent, and 17 per cent less than 50 per cent. Would you disbar me because I spend so much of my time working for the NFU? The Chairman is looking interestingly at the thought. I obviously upset him at some other proceedings. You can see that there are all sorts of other anomalies come in when you start looking at that. It comes back to the point that Allan has been making. What is the purpose of the support? Then you attribute the support that way. Can I make one other comment? I would be very concerned if we go down the route of unilateral action. We are in a world economy whether we like it or not. We may not think we are exposed to the effects of what happens in America but we are. Take a subject such as eggs. You would not think eggs would affect us with America, but increasingly there is a trade in the world commodities of dried eggs. You do not see it but that is what goes into the catering sector. An American caged egg production will affect and compete into our catering sector which assumes a greater proportion of the food market every year, and it undermines our shell egg market quite significantly when that product is coming in. To do anything unilaterally, even though we all have the best of intentions, exposes our farmers to economic pressures that can be quite significant and indeed terminal and we all need to be aware of that.
(Mr Thomasin-Foster) On using modulation in its truest form, which is what you are talking about, Mr Drew, in that situation the CLA remains absolutely against any kind of size or turnover modulation. We have an industry which is restructuring, as has been said. It needs to be restructured, and to try and introduce a sort of social pseudo control of that restructuring would be wrong. We are trying to restructure an industry for the future for the good of this country and for the economics of this country and to try and twist that socially I am sure is wrong.
(Professor Buckwell) This question about the distribution of support is a very difficult one, to bring about any redistribution of the support, not only within England or within the United Kingdom but particularly within the EU and obviously, as Ben says, we do not seek to put ourselves at a disadvantage in this process. There is a very real danger that we are going down the route of locking existing payments exactly where they are for all time and yet if the purpose of the payments changes then of course the distribution may have to change and adjust and, as Ben says, with some degree of cushioning to make it possible for people to absorb that. To illustrate what I mean by this, there is a terrible danger that we are compartmentalising the payments. We are now talking gaily about national envelopes for beef and sheep and this for that, for the other. We are simply locking money into tiny little pockets which is no use to man or beast and is not going to help us to bring about the policy shift that we are talking about. The other point is that if we are accepting that a significant part of the total support in the future is for the payment for the public goods, then of course if you deliver a lot of these public goods you get a lot of payment. That is the same in any delivery of public services and that is why we are opposed to this concept of trying to add in some social engineering on what ought to be the straightforward payment for land management in relation to the amount of land that is being managed.
Mr Mitchell: After making the point with precision you are just giving me a depressing, negative impression of a group of subsidy-bludgers all giving different excuses for their addiction. Country landowners are saying, "We have got to have a subsidy to conserve the environment", although I would have thought any decent factory owner would want to conserve his plant and have it efficient, whether it is indoors or outdoors. Ben Gill is saying, "We have got to have subsidies because everybody else is having them", which is the excuse that muggers in London use. The tenant farmers are saying, "We have to have food security". You do not advocate security in steel or coal or textiles or anything else. These are really just excuses. You should, I would have thought, take a bolder position and say, "We are an efficient, competitive industry. Given proper conditions we can compete with the world. Those proper conditions include an exchange rate which will allow us to be competitive and, given that, we want to get rid of subsidies, have a cold turkey treatment because subsidies direct our production into getting subsidy, not into serving the consumer and not into what is producing what we can produce best in this country". Given the removal of subsidies you will go down both those paths and be a really competitive, effective industry instead of whingeing for the continuation of more subsidies.
971. We may not all agree.
(Mr Haydon) Chairman, we have got no control over exchange rates, we have got no control over world production. What you say all makes a lot of sense but we are hampered. We cannot move in the world you would like to see us move in.
(Professor Buckwell) Could I ask Mr Mitchell to turn round and look at the picture behind him?
972. Those are burial plots.
(Professor Buckwell) This is a rather denuded landscape. Somebody thought it was beautiful and there it is. I assume they did. It does not seem to have been contoured ploughed, the hedgerow looks rather thin and could be better managed to improve the biodiversity. These are very real things and it is not just us as land managers who are saying this because we happen to live there and enjoy that beauty. We hear it daily from every environmental NGO in this country and many others who are pointing out that biodiversity is declining, that the treasured landscapes are being eroded. The public wants these goods. They do not come for nothing; that is the point. It is the main justification for the existing support and has been for many years and we are simply saying, let us tune the support to deliver those outputs rather than some goals that were relevant 30 or 40 years ago.
973. That is another excuse for subsidy, is it not?
(Mr Thomasin-Foster) Can I just say one thing? You wanted us to be positive. What is so interesting is, following the foot and mouth disaster, the positiveness of those farmers who suffered and who not only had stock taken but stock closed up, they are there wanting to farm on. I think that, given the opportunities, there is a tremendous amount of enthusiasm and determination in those people. I do not see it negative. I see it positive. I think we have got a tremendous section of the community to play on and use in the management of our countryside.
974. I do not think we should put together all those who have had their stock taken out and those who have not. Their circumstances are very different.
(Mr Gill) I did not want the opportunity to pass to reply to Mr Mitchell and I will try and do it as briefly and as succinctly as possible. The last part of what you said is what I have been trying to say. Let us be blunt. Farmers across the length and breadth of this country are fed up with the constraints of the CAP that do not allow them to get close to the market place. We want to drive a fairer share of our final price back to the farm gate. That is why we have pushed forward the subject of collaboration, not a new concept, I know, but quite often the old ones are not so stupid after all. When you look at what is happening elsewhere in Europe there are enormous benefits to be had. One of the milk co-operatives, for instance, recently published in its circular a price comparison between prices obtained on average in Britain for last year and prices obtained in one of the co-operatives it is competitive with in Europe. There is a price differential of between two and three pence per litre. That is real money that we can deliver back to the farm, but against that backdrop we have to recognise, and I know Mr Mitchell knows this, that we are in a global economy because governments are forcing us down that route, rightly or wrongly, which you may want to debate. I personally get very angry when my members, who have worked hard to produce strawberries of the best British quality, are subjected to imports of California strawberries in mid season at below the cost of British because the American authorities do not tackle the subject of water availability in California and the American farmers there still stick to and have God-given rights to free access to water all the year round. I think that is grossly irresponsible of the American Government in the actions of the world in which we live in which water is going to be one of the key issues that we and you will have to face as representatives of the public in the future, and the sooner they wake up to that the better. The fact is that if we just do that do cold turkey, as you say, and do my members out of business is not going to help that one little bit.
975. Thank you for that. It was the most sensible thing you have said all morning. Let us move on to my appointed question. Are the Government's objectives clear to you and to what extent do you support them?
(Professor Buckwell) They are not completely clear. Part of them are clear in that they want to switch support from coupled production supports to payments for environmental services and that was echoed by the Curry Report which we support. What is unclear is their motives in the total magnitude of support. It is back to this question of the size of these public services, how we measure it, which I did not get a chance to answer, but it is paragraphs 70 and 71 of our submission to Curry.
(Mr Dunn) As Allan said, they are not clear and I think if you were to look at the objectives of this Government against any government of the past 20 or 30 years the objectives are broadly the same in that they want to reduce the amount of taxpayer support for agriculture in whatever way they can do that, and that seems to us to be what is behind most of this current agenda for agricultural policy. To refer back to your earlier point, we need to look to see what happens in a free market context where people become efficient, you need to look at what happened to pigs and poultry because they have not had the benefit of the subsidy. They still suffer at the hands of the global market and also with the egg production side, as Ben has said. I am not sure that we want that sort of framework for arable, livestock and dairy production.
(Mr Haworth) I agree with the last two speakers. They are not clear and the reason is that successive governments have always said that they want a radical reform of the CAP knowing perfectly well that it was more or less unachievable because this would happen in a European context. Recent developments have meant that there is now much more national discretion about some of these items and therefore we have come into a situation where it is possible for the British Government to do certain things unilaterally within the European Union. It has not been made clear to what extent they are willing or want to take that route, so that is one of the main sources of the lack of clarity.
976. Can I just ask you about the producer bond? George Dunn has already given us some detail of it but is this not going to be a sum of money handed to the tenant to hand back to the landlord in these rents? What do you envisage happening to it? Is it going to be aggressive and tail out or is it going to be a permanent sum that is given every year? How is it going to work?
(Mr Dunn) I would argue at the moment that if you look at the subsidy system we are already passing on part of that back to the landlord in rents and I have tried to explain one small aspect of that within the current regime of set-aside. I also said that it is impossible to try and stop all leakage back into the land if you are supplying farmers with money from the state. It is as decoupled as you are going to get and the person that is receiving the money is receiving it in return for a contract which he signs with society which says he will do X, Y and Z and receive his annual payment for that. The rental question will obviously depend on negotiations between the landlord and the tenant in relation to the productive capacity of the land in terms of the open market value of that land, but the tenant will obviously put in his expertise, his investment, and will expect to make a return as well. Yes, there will be payments to landlords and there should be payments to landlords in terms of rent, but we want to make sure that the occupier of the land has a fair crack of the whip in terms of the return that he can get from the land as well.
977. Can I ask Ben Gill the views of other European farming unions? How far are you all agreed? What are their views on the prospects for CAP reform?
(Mr Gill) There is a changing momentum at the moment. In terms of reform of the CAP there will be a common perch between ourselves and Danish farmers, and there is a lot of common ground with the Dutch farmers, although that has moderated a bit. There is common ground with the Swedes, and with the Italians. The Italians are split. There are differing farming unions. There are the big ones and the smaller ones and there is another lot there; they moderate. The Spanish are split as well because there are so many different farming unions and one will say, "Jump" and another will say "Fall down", just as a matter of principle. The French are very much more on the basis that they want just to go back and bury their heads in the sand, although within the French farming unions, if you talk to the wheat growers, there is a federation of farmers, the AGPB, who would be very much along the lines that we have adopted for some time. The Germans, as a result of the outbursts of Renate Kunast, have had to take very serious stock and privately the Germans recognise that there needs to be change but they want to fight it off as long as they can.
978. This Government likes, indeed adores, performance indicators, especially those that it sets itself. What assessment would you make of your credibility and ability to represent your members? Was it not the NFU that was so keen to see us into the CAP in the first instance and did not the NFU conspire with Government on the lunacy of the mass culling which has led to many of the problems that we have had in terms of foot and mouth? Do you really have any qualities which you can put to this Committee which show your environmental awareness, your economic astuteness, your alertness to issues of quality and other matters that are at the centre of this whole debate? Are you not a busted flush?
(Mr Gill) If you look to the entry to the Common Agricultural Policy and the entry to the European Union, that was done of course at a time when there were different priorities. At the time of entry into the European Union in the early seventies the priority was to increase food production. Reference has been made already to that. I left the country to work in East Africa in January 1972. The price of wheat and barley on my father's farm was £19 a tonne. I came back in February 1975 in the intervening period that we had joined the Union and I could not believe it. The price was getting tripled to £57 a tonne in that short period. That was the incentive to increase food production. It achieved it far more effectively than anybody ever thought it would do. It formed the economic driver, but that was what the public wanted or Parliament wantedthat was what everybody wantedat that time. The fact that things have changed is a fact of life and we have been at the vanguard of saying that that change needs to happen in the CAP. There is a public document Real Choices that we published nine years ago saying that that needs to be changed by economic analysis. With regard to the point you make about conspiracy, I am afraid I reject very strongly any suggestions of conspiracy. I do not want to kill any animal for foot and mouth. I actually take great exception to your saying there was a conspiracy. What we wanted was the quickest resolution to the problem with the minimum number of animals killed in the long term and I think now all the evidence points to the fact that those decisions were right and the Government Chief Scientist has even said last October with the benefit of hindsight that he was wrong in what he was recommending and that the outturn was the best way ahead. That was from a situation that was totally unacceptable and was confused and could have been moderated, yes, and we wrote to the Government. I personally wrote to the Prime Minister on April 5 last year with a moderated view which was subsequently accepted as an alternative to reduce the number of animals killed. Yes, and we did change. I do not accept in any way or form that we are, as you put it, a busted flush. We are prepared to recognise the need for change and will state it unequivocally as time goes on.
979. I will put it very briefly, Chairman, that the evidence does not in fact point in the way you have suggested in the totality and when talking to farmers in the semi-rural constituency that I represent who farm on the urban fringes of towns in the East Midlands, their view, the smaller and medium sized farmer, is that the NFU does not by and large represent at national level the views that they hold or advocate the values in which they believe. They believe that they are detached from you and you are detached from them.
(Mr Gill) I will go by the level of representation that is in the public domain on the membership figures that we have and the area of land that we represent in the United Kingdom. Yes, there are people in semi-rural areas that have the sort of interests that Mr Drew was referring to that do not have to depend on farming as a main income stream and they have different priorities. They have that luxury, whereas the reality is that many of my members have to depend on farming full time for income and we have to take that perspective from them. The membership will show that and the outcome of the Andersen Inquiry and the Follett Inquiry will show very clearly the veracity of what we have said in those areas.