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

Examination of Witnesses (Questions 240-259)



  240. You have got a new Department and I am a tomato grower, a lettuce producer, a fruit man and I am saying to you, "Minister, what is new DEFRA going to do for our industry that hasn't been done before? Where is the gain from DEFRA in having you looking after our industry? What are you going to do for us?"
  (Lord Whitty) With respect, that is exactly the wrong question that I have been telling farmers and growers who have been in the old relationship they should get away from, so I do not want to bring horticulture into asking me that question. What the Government owes to horticulture is to recognise its important position mainly in the rural economy and to ensure that the context, the framework in which it operates does not operate to its disadvantage. There are issues relating to regulation and issues relating to taxation which I think we need to look at in relation to horticulture. We have made a temporary arrangement, for example in relation to the Climate Change Levy, which has protected horticulture to some extent and we need to recognise the rather special nature of the way horticulture operates, but we are not going to tell horticulture that there is a whole new tranche of subsidies for you or a whole new area of government intervention which is going to move you further away from the market rather than the rather good relationship with the markets that you have. Because it is a competitive industry and parts of it are subject to quite severe competition from the rest of Europe, horticulture has probably suffered as much, if not more, than other parts of agriculture with the decline of the euro against the pound recently. That is a particularly difficult economic situation but not one I can address directly except by improving the framework in which they operate.

  241. I would find it helpful if subsequently, Lord Whitty you might like to flesh out on a piece of paper with more specificity some of the areas you mentioned. You have been kind enough to identify areas where you feel more should be done by your Department and I would be quite interested to know how that agenda is going to be taken forward. I was very interested in your comment where you alluded to the overall economic performance of horticulture because one of the criticisms that has been put to us in the context of this particular inquiry has been for example the CLA told us there was no sign in your new Department's vision of the recognition of the importance that profitable farming plays in a thriving countryside. Would you care to respond to that challenge? Should you revise your vision to give greater prominence to the question of profitable agriculture in the same way that you allude to the need for horticulture to be economically successful?
  (Lord Whitty) I would have thought that all our pronouncements on the sustainability of agriculture address that. Every time I address a farming audience which might be sceptical in the same way that your question implies, I say that economic sustainability means profitability means money back into farming. That dimension of sustainability subsumes the need to get farming in the long-term back to a profitable situation.

  242. If that is what you have been saying to farmers, then perhaps the National Farmers' Union remain to be persuaded. They told us they were deeply concerned about DEFRA's failure to give proper weight to the future of farming. They coupled that with comments about the slow response to the Policy Commission. I will come on to that as a separate subject because I think it has enmeshed itself in the announcement of the mid-term review and I would like to take those two items together. Have you you had any feedback from the NFU about this particular subject because that is what they have told us? You think you have convinced them that farming is a high priority for DEFRA but they are telling us it is not.
  (Lord Whitty) Let me say it is, but it is profitable farming which is operating within a new context and one which some members of the NFU do not fully accept. The NFU operates like most trade associations and trade unions in a way which has both a sophisticated dimension and a crude dimension. The crude dimension is quite often the one that gets in the papers which is effectively saying we need to be profitable, we are not profitable now and therefore government give us more money. As I was saying earlier, that is not the kind of relationship we can have let alone want to have with the agriculture sector. A lot of questions from farmers, including from representatives of farmers, is along those lines. The more sophisticated version of that does chime better with what the government is thinking which is we need more money back into farming, we need a larger share of the value of the food chain going back to primary producers one way and another, we need to ensure that the structure of farming is closer to the market and closer to what the ultimate consumer is prepared to pay for, all of which, as you will know, are strong themes of the Curry Report as is profitability a strong team of the Curry Report, and we have clearly endorsed that objective.

  243. You have been carrying out a further consultation. I know you have travelled the country to take the views of farmers about the Commission. Just so we can get some idea in terms of your future activities, when do you expect DEFRA will give some kind of definitive statement on Curry and will that definitive statement contain a work programme so that we can identify with those bits of the Commission's findings that you wish to be associated with as a Department, how you are going to take that forward or will that agenda be identified by some kind of resource manpower implications? This inquiry is concerned about your future and your activities and it would be nice to be able to say, "This is what DEFRA say about Curry and this is how they are going it achieve it." Will your response be as comprehensive as that?
  (Lord Whitty) I intend it to be. The process to which you refer is not so much a process of new-found consultation because the Commission themselves went in for a pretty hefty consultation process. We have said that we support the broad strategy of Curry with one or two qualifications. We will try to engage the sectors at regional and national level in the delivery of the Curry consultation process rather than to re-open all of the issues but, nevertheless, some of them need to be defined a bit more and in particular we need, before we reach that definitive statement, to take on board, frankly, the amount the money we are going to get out of the SR 2002 and what is the likely outcome or at least the general direction of the European proposals on the mid-term review. We need those two things out of the way before we can produce a definitive report. The timescale of the definitive strategy will be in the autumn and it will, I hope and believe, contain assessable and measurable items of how far we can progress down that road taking on board Curry's recommendations.

  244. Does not the Commission imply two things. Firstly, with Herr Fischler's proposals it is quite clear that the politics of the German elections are going to slow up any meaningful discussion about these particular matters. His proposals contain quite a substantially different model of modulation plus degressivity from the proposals in Curry but they travel a parallel route. Does that effectively mean that what your report in the autumn is going to do is it will pick out the bits you can associate yourself with now and leave the central part of Curry on ice until some time in the future when the Community comes to a decision about the Fischler mid-term review?
  (Lord Whitty) I do not think it is quite as either/or as that. Of course, the difficulties in negotiations are substantial and elections are always a bit of an inconvenience in this process, but Commissioner Fischler and the Danish Presidency are aiming to get political agreement by the end of year on this package. Okay, we can be slightly sceptical about that but we are certainly working with them to try to make sure we do get to that by the end of the year. There will be details which will have to be sorted out beyond that but we will by the time we produce our strategy be pretty clear how far Fischler's initial proposals are likely to get.


  245. I just want to clarify this. Even assuming that, let's say, in the Spending Review you get whatever amount of money you are going to get, you could not really announce in the autumn, could you, a Curry package with a ten per cent level of modulation for example, without knowing what the outcome of the Fischler negotiations would be because, as Michael says, they are pushing in the same direction but with different mechanisms. You could not ask farmers to deliver a ten per cent modulation if then they are going to be faced with the conversion of their support into a fixed sum which then becomes degressive with a cut-off point to it. The timings just do not work, do they? It is not an approach, it is saying in terms of the coincidence of the two negotiations, you could not deliver Curry until the Fischler thing has been cleared and that has got to be the first consideration?
  (Lord Whitty) There are issues of timing and issues of precisely how that dimension of the Curry package and the Fischler package actually work. Both Curry and Fischler are looking at a period, roughly speaking, two years hence before this new process operates. There is a question of whether it is a compulsory modulation, as proposed by Fischler, or a unilateral modulation, as recommended by Curry, and to some extent as we have already taken the decision to go down that road. The likelihood of the Fischler proposal coming out will partly determine the timing as to some extent, no doubt, will the Spending Review. Whether or not we go down the compulsory modulation or unilateral modulation route is a second order question. Providing we go down the unilateral road, we will produce greater flexibility for how we use the modulated money than is currently the situation. If we do that we do not necessarily need the compulsory modulation as proposed by Fischler. Either way we would be moving money through some sort of modulation propose away from the first pillar to the second pillar. The precise terms of that may not be yet clear in the middle of the autumn but at least the general direction will be clear.

Mr Jack

  246. What are you going to do to enable us all to understand more clearly both the effects of Curry and Fischler in terms of what I would describe as the winners and losers' game because in different parts of agriculture and different parts of the United Kingdom some people are going to have to give up something and other people are potentially, in the case of pillar two projects, going to be the gainers and all so far we have had are what I call broad brush, global assessments on the impact on UK farming as a whole. It would be very interesting to know in more detail how these proposals are going to affect different parts of the country and, going beyond the current subsidised sector of agriculture, which will be, by definition, the losers because they will give up something and which people in subsidised or non-subsidised rural development will be the winners. Are you going to provide us as a Department with some meaningful analysis so that we can get to grips with the implications for the UK of the Fischler proposals particularly?
  (Lord Whitty) We will obviously provide a degree of greater analysis than has been possible so far, but the problem about doing it in the way you describe is that there are swings and roundabouts for individuals as well as whole groups. Farmers who currently are receiving substantial subsidies for production, whether it is sheep or grain, if they adapt their methods as appropriate, they might be losers on that front but gainers on another front so you are not necessarily saying there are whole groups or geographical areas of sectors of agriculture which will be winners or losers. It depends how good and effective particular farmers and particular quarters of land management are.

  247. Are you going to be producing any kind of discussion because a document crossed my desk—and I forget immediately who sent it I think it was Harper Adams Agricultural College—which tried to assess the impact on a series of case studies and, quite rightly, they picked up on the point you just picked up on that farmers may adjust their cropping mix to take into account a new set of circumstances. These are major changes. Are you going to be doing anything in terms of the request you made for officials to guide you about the line to take when you go to the Council? To negotiate this you are going to have a picture as to these various matrices of movement and impact. Is that something you are going to prepare and is DEFRA planning to make it public so we can get a better understanding of both the modulation impact out of Curry and indeed the similar proposals out of Fischler?
  (Lord Whitty) Clearly part of the Ministers' briefing as they go into these negotiations will be the differential economic impacts and differential environmental impacts of different potential mixes of the Fischler package. This will be a moving programme during the negotiations, so I suspect that is not document which will be very meaningful to anybody who is not directly involved in the process. Certainly there are economic assessments going on as from today when we got the detail of Fischler as to how that would impact on different sectors of agriculture, and there will be different views from different sectors. There may be different views from different parts of the United Kingdom as to what the balance of advantage is. In broad brush terms then that will be communicated. If you are asking will every dot and comma of the shifts in negotiations be reflected back in a public document, that would be quite damaging to us in negotiation terms and probably impossible to do. At the end of the process there should be something that indicates, "Okay, that is the package we expect to see and that is the impact we expect to see on British farming."


  248. It will be important for policy because there are some large dairy farms which will find themselves within that 300,000 euro ceiling which at the moment would not be counted towards it. The policies themselves might need changing.
  (Lord Whitty) I have indicated some hesitations about that particular aspect should that choose to be the position in two minutes' time.

Mr Borrow

  249. During the evidence that the Committee have got on this report we seem to have received two batches of ideas. We have had comment from the CLA and from the farmers saying the new DEFRA is ignoring farming and Michael Jack referred to that. We have had a number of other organisations that have made a comment and if I read a quote from CPRE, which is typical of many we have received, it says, "This will be a particular challenge given the cultural `inertia' that appeared endemic in the former MAFF and the dominance of staff, in terms of numbers and resources, focused on the agricultural sector." There seems to be from many organisations the perception that DEFRA has not really changed from the old MAFF with another brand name focused on agriculture, yet from some of the farming lobby perception the new DEFRA is very new and is ignoring farming. What do you think is the correct perception for the Committee to arrive at at this point in time?
  (Lord Whitty) I think the correct perception is that if they both feel that at this point in the process then clearly we are taking a fairly balanced approach to this. The fact that none of them see quite where we are getting to means that the process is relatively new. I read the whole of the CPRE evidence to you and glanced at it and it did start out by staying there was a clear sense of direction from the top but their concern was that this not reflected through the organisation as a whole, which I think is fair. I think it is also true that a lot of farming elements do not relate easily to a department which is no longer a department for farming. I think the more progressive amongst the farmers recognise that was not possible to maintain in any case and it is situation to which they are going to have to adapt. As to the internal culture, there are structural and superstructural lags no doubt but we have given for the ministerial and management board level a pretty clear sense of direction. We want that broader department. We want those who are very heavily involved and focused on agriculture to take a broader view. We also want those in other parts of the Department to recognise the importance of farming in delivering our broader objectives.

Mr Mitchell

  250. People are getting fed up with the Common Agricultural Policy because every party at every election promises fundamental reforms of the Common Agricultural Policy and nothing ever happens. I just wonder what DEFRA's position is. Does it have a fall-back position or an alternative approach which can be urged on Europe because each time we get even a moderate reform from the Commission, like Agenda 2000, it is promptly vetoed by Chirac at the Berlin Summit and then this morning on Radio 4 I wakened up to Commissioner Fischler proposing a quite sensible reform package and then somebody with a French accent coming on saying, "It is a load of rubbish and it will not work," and we are clearly back in cancellation mode again. Here we are mutely hanging on with no alternatives of our own, sitting there awaiting the outcome of these struggles in which sense and reform have always lost out in the past.
  (Lord Whitty) I think there are two, possibly three, changes in the situation which are going to make a complete French veto of these propositions very difficult. The first is that the looming prospect of enlargement is going to put a serious strain on the Common Agricultural Policy as is. The budget cannot sustain simply transferring the Common Agricultural Policy to Poland and other countries in its present form. At roughly the same time they are going to have to try to reach agreement on CAP reform, they are going to have to take a decision on enlargement. You cannot have compatible decisions—you can but not on such a big issue as that at a European level. The second is within the WTO although there are elements in Europe using the United States' Farm Bill, which is pretty much a disaster for those who want a more liberalised world trade, as an excuse for saying liberalised agricultural trade is never going to happen. I do not believe that to be the case and the Americans will be committed to liberalising trade and you have got to have a WTO trade negotiation pretty much advanced during the course of this year and that will involve a removal of production-related subsidies. Part of what Fischler is about is to take the kind of subsidies which the EU give at the moment, which will be out of compliance with the WTO, into an area of general support for rural areas, which would not be out of compliance with the WTO, quite apart from the need to reduce the total burden. Those two are huge issues which we are coming up against the rocks on. The third is that, despite President Chirac's position in the French elections and so on, across Europe and across political parties in Europe there is a view that the electorate will not sustain much longer the direct subsidy of farmers and that in the long term, if we are to continue to support the farming industry in land management, it has to be on a much broader basis than has been the position in the past and not a subsidy for production. That probably applies more in the Northern European states than the Southern European states but even in states like Italy and Portugal there is some recognition of that direction as well. That will not click in as soon as the other two but it is an important perspective on the views of the other Member States as well as the UK. Therefore I think the situation is qualitatively different. I would accept, however, the issue is how fast but I do not think the issue is any longer what is the direction. The direction will be along the lines that Fischler is proposing although some of the details will be argued about. Hopefully, from the British point of view, certainly from the DEFRA point of view, a significant amount of that will be achieved through the mid-term review. If it is not in the mid-term review it will be in 2006 and it will be more complicated to do it then because of enlargement. That is the direction; it is only the question of pace with which that is the produced. So there has been a sea change over the last 20 years. It is the nicest thing I have ever heard Mr Fischler say about the European Commission.

  251. That is right—and I hope it is—but it does mean that our negotiating position is essentially Fischler's. We do not have an alternative or a fall-back position. We are not proposing to up the ante by putting forward a strong alternative or mobilising, for instance, consumers across the Community against this monstrosity.
  (Lord Whitty) If you are saying do we have a complete plan B if this completely stalled—and my last answer said it will not be stalled; it may slow down compared to what we would like but it will not stall—part of plan B in any case is the Curry Commission. Even within the present mechanisms (very marginally adjusted) of the Common Agricultural Policy we can do a lot and that is what Curry was telling us we could do, and therefore we do in that sense have a plan B, But plan B is in the same direction as plan A.

  252. Let me move on to the other monstrosity, the Common Fisheries Policy and DEFRA gives us platitudes on that. It says "a reformed Common Fisheries Policy giving a sustainable future for our fishing is a key concern", which is right on, passionate stuff but what progress has been made with building up alliances with other states to reform the CFP in the way we like it to go, which is often very different to where Spain would like it to go or even Denmark would like it to go?
  (Lord Whitty) I think the proposals on the CFP review were to a large extent in the direction in which we would wish to move and they were of course blown out of the water by the Spanish Presidency. Before they got to that point there was a majority, probably not quite a QMV but a majority of Member States supporting that view and it was only the Spanish Presidency that stopped something like that being adopted. We have had recent discussions with the Danish Presidency and although there are respects in which the Danish fishing interests are not quite the same, in general the Danish Presidency want to try and resolve this one and I think therefore we are still on course, if not exactly on time, in producing a fairly fundamental reform of the fisheries regime as well. It is, as you are only too well aware, one of the substantial disaster areas of the management of the EU and we put a high priority on getting it cleared up, regrettably too late for many British fisherman and some fish stocks. It is something we do give big attention to.

  253. The worry would be again while we have got devout wishes we do not have a clear alternative set of proposals and just as fishing now seems to be relegated to a minor part of DEFRA's interests and preoccupations so when it comes to the British Government's preoccupations it is an even smaller and less important thing and one on which the Government is always inclined to make concessions to gain ground in other areas. Whether it is asylum speakers or an argument over regulations, fishing is always the card that is sacrificed.
  (Lord Whitty) I do not really accept that. It was not a negotiation during the Spanish Presidency; the Spanish Presidency effectively just blocked it. It was not there was a tradeoff or anything else. Most of the difficulties on the fisheries front have been within the Fisheries Council itself; they have not been traded off against other things. I think to some extent the proposed changes to put fisheries and agriculture together will release us from that solely fishing interests' determined approach to fisheries, but it is also true that if we do not get agreement on fisheries then it is very difficult to see what the direction of the British fisheries communities will then be because they are being seriously squeezed at the moment and unless we adopt a general approach to stocks both the environmental and economic effects will not be good. When you say it is a small part of DEFRA's responsibility, in some areas it is a very big part of DEFRA's responsibility and a very big part of the devolved administrations' responsibilities as well. Both the communities and the management of marine resources feature quite large on our agenda.

  254. That is true certainly but the worry is it is being abdicated to the devolved department in Scotland which is playing a much more active role in defending fishing and supporting fishing. There was £25 million provided for decommissioning there compared to £6 million for the fishing industry here, which is only half as big as the Scottish industry, and indicates a different sense of proportion and a more strenuous pursuit of the interests of fishing in Scotland than by DEFRA?
  (Lord Whitty) The fisheries industry in Scotland does loom larger on the political horizon than in England, that is undoubtedly true, but that does not mean proportionately we do not take consideration of the interests of fishery communities and their future. I have seen figures which suggest—and I cannot quote them directly to you—that the balance of the sums of money given in Scotland and England are closer than the 25:6 would suggest because of the nature and age and size of boats in Scotland compared to England. I would not like to go much further on that but I will provide you with some information that I hope sustains that argument. It is certainly true that fisheries is a bigger political issue in Scotland than it is in England, that I would accept. What I do not accept is that DEFRA have lost sight of it.

Mrs Shephard

  255. Could we turn to the question of food. The British Retail Consortium said: "The importance DEFRA placed on the promotion of a competitive and integrated supply chain which is responsive to the needs of consumers is welcome." Talking of platitudes, I wonder what you think that means?
  (Lord Whitty) It probably means more or less what it says, that the food industry, at least most of the food chain is in a competitive situation, both in terms of internal structure and internationally.

  256. I am sorry, I just do not understand that statement.
  (Lord Whitty) It means that we want to see it succeed as a competitive industry and that insofar as there is a government role in this we will help it to succeed in a competitive sense. I imagine that was why they welcomed it.

  257. How are you going to do that?
  (Lord Whitty) There are a number of respects in which we need to ensure that, for example, regulations adopted in Europe do not differentially hit the British food sector. There are some areas of concern in that regard. We provide as far as possible that the structure of the food industry is a competitive one and that the export opportunities are given support from the various Government agencies relating to exports. Really the non agricultural part of the food industry is a very big employer and a very big investor and a very big contributor to the GDP but the relationship between us and most of the food industry is not any different from the relationship, say, of the DTI with the engineering industry. We want to see a free market thriving industry which is internationally competitive and provides what consumers want. That is really all that means and it is the relationship the industry want with us.

  258. It seemed to us, certainly, when we were taking evidence from other organisations, and in particular the retailers, that your new organisation, which is to do with the supply chain, would help educate consumers. Is that your vision?
  (Lord Whitty) It is part of it, yes. Part of the Curry Commission Report is that we should look at the food chain as a whole and look at inefficiencies and lack of transparency in the food chain would both help us eliminate economic problems in it and also ensure that the various stages of the chain could see what the reality of costs and quality was, and that particularly involves the consumer. Curry was concerned, very clearly, with quality indications to the consumer. Sometimes there was confusion from the various assurance schemes and the various labelling schemes and it made certain recommendations to try and tidy that up to the benefit of British produce.

  259. When we talked to the retailers they were quite enthusiastic about consumer surveys that they had done. They were rather modest about the size of the surveys, in other words rather modest about whether or not we could take them seriously, but they tried to tell us that their consumers were overwhelmingly concerned with supply chain issues rather than price. Would that be your impression?
  (Lord Whitty) I think what the consumers are interested in is value for money, they are not interested necessarily in going to the lowest common denominator and the lowest price.

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