UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1654-i

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Environment, Food and Rural Affairs Committee

Greening the Common Agricultural Policy

Tuesday 22 November 2011

Peter Kendall, Harry Cotterell and George Dunn

Evidence heard in Public Questions 1 - 36

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Oral Evidence

Taken before the Environment, Food and Rural Affairs Committee

on Tuesday 22 November 2011

Members present:

Miss Anne McIntosh (Chair)

Mrs Mary Glindon

Neil Parish

Dan Rogerson

________________

Examination of Witnesses

Witnesses: Peter Kendall, President, The National Farmers’ Union, Harry Cotterell, President, The Country Land and Business Association, and George Dunn, Chief Executive, The Tenant Farmers Association, gave evidence.

Q1 Chair: Good morning and welcome. First of all, may I thank you for accommodating our slight change of plan? We are very keen to take your comments on the record, and we do thank you. A little bit of housekeeping from me to begin with: I would like to invite my colleagues to declare their interests in this inquiry, and I would like to bring attention to my register of interests on the member’s register. I do not know if there are any other colleagues who would like to formally declare an interest?

Neil Parish: I declare an interest.

Chair: Mr Parish also. Just for the record, perhaps you might introduce yourselves and give your positions in the organisations you represent.

George Dunn: Thank you very much. My name is George Dunn, and I am the Chief Exec from the Tenant Farmers Association.

Harry Cotterell: I am Harry Cotterell. I am President of the CLA.

Peter Kendall: Peter Kendall, President of the NFU.

Q2 Chair: You are all very welcome, and can I thank you for participating in our inquiry on the greening of the Common Agricultural Policy? We have just given the memorandum of evidence that we received in relation to the reforms of the Common Agricultural Policy. It struck the Committee that this is the most contentious area, but we will be looking at the written evidence and reporting on that in our conclusions and recommendations. But on the greening payments, do you believe that the Commission has got the balance about right in its proposals, or would you disagree?

George Dunn: In the greening proposals themselves? No, absolutely not; the balance is completely askew and in the light of what we are hearing on a day-to-day basis in relation to the evidence being presented by Professor John Beddington about the challenges we face coming forward, we think that the greening elements of the CAP reform proposals are completely against the sorts of ideas and concepts we need to have put into place for that. Our brief response is absolutely not: the balance is completely wrong.

Harry Cotterell: We would agree. To add to that, there are other elements that concern us significantly. Greening is going to be the bulk of this reform in terms of the way it goes forward. Our most specific concern is the impact that the greening will have on the Pillar 2 schemes, which are something that this country can be proud of; we have got agrienvironment as right as anybody has in Europe. The way greening is currently proposed has the potential to seriously disrupt the scheme going forward. That would be our particular emphasis. I am sure Peter will make other points that we will agree with as well.

Peter Kendall: We certainly believe the greening will form part of the reform as it occurs. However, I would support George and Harry on the balance of how we address that. Certainly through our involvement in Copa, the European farm organisation, we want to come up with some proposals in the next month or two where we look at winwins. We address the John Beddington perfect storm challenge of producing more food in a sustainable way, sustainable intensification, but at the moment these are negative measures, and not ones that are able to deliver winwins, where we can become more productive and produce more food as well as protect the environment. That is where we think the biggest failure is in these three issues that are proposed.

Q3 Chair: I do not know if we come on to food security, but do you believe that food security, from the farming perspective, should have been included?

Peter Kendall: In the introduction, the analysis of the challenge they seem to get the analysis spot on-it is as if it was written by somebody else altogether. What was rather tragic was the recommendations that follow it seem to be pointing in a different direction altogether. We believe it is more about justifying the money rather than helping fulfil the diagnosis of the problem and challenge we face.

George Dunn: From our perspective, the greening proposals as they stand are very process driven; they are not focused on the outcomes we want to see. Allowing people to tick the sort of boxes that the greening proposals seem to suggest is not, from our perspective, going to provide the sort of benefit we are going to see across the whole of the 27 member states of the Union. Food security is clearly a key element of ensuring that the CAP is doing what it was set up to do in the first place.

Harry Cotterell: We have always argued that food security is one of the vital components of this reform. We do not see a huge amount for it. It depends; it is too early to see the real detail, the way it is going to pan out, but we are very concerned that, if you get a worst-case interpretation of these proposals, food security could be impacted, yes.

Q4 Chair: The greening proposals do not seem to have received much support from the European Parliament or the Council of Ministers. Do you think, from your contacts in Brussels, they are likely to be in the final agreement?

Harry Cotterell: There are bound to be greening measures; there is no doubt about that. Our concern would be that the existing proposals get through unaltered. That could be disastrous. But if you do not have greening, you have nothing in this reform. You have very little. I am sure they will come through. I am sure you are all aware that parliament debated a proposal from Dess that was watered down to such an extent that their proposal was virtually meaningless in the interim stages. We do not know how they are going to react further downstream, apart from to know they are going to have a significant effect on the outcome.

George Dunn: I would agree in terms of the support for the current measures within the package. At the last Council meeting only Finland gave it a plug; the rest of the member states were either wholly opposed or very concerned about the complexities involved and the way it was put together.

I would disagree with Harry to a certain extent: we think food security is a big element of this reform, and we need to give food security a ride in the light of the challenges we face as a globe. It is not all about greening, from our perspective. Greening and the environment are clearly important aspects of the package of things we want to achieve, but food and energy security, etc, are also important aspects.

Peter Kendall: There is not a lot I can add to the comments that have been made, other than the fact we work very closely with our European partners. I think the biggest mistake that has been made-and this is more an observation-is that in trying to please everybody they have managed to please nobody with what they have proposed. That is a real shame, and I go back to my previous comments: where is the vision? They analysed the problems and what they have come up with are just efforts to please opinionformers, rather than have a vision to continue the journey of previous reforms, which was about market focus and helping industry become more competitive. That seems to have been abandoned.

Q5 Chair: In terms of other member states’ farming organisations, are there any disagreements between your approach and theirs?

Peter Kendall: If I can be brutally honest with you-and I might as well, as you all have very good contacts in the farming world-if it does not seem to affect you, then you are less worried than if it is going to affect you. When these were initially proposed it was fascinating, when we were in Brussels, listening to the other farming organisations saying, "We do all this already; it will not bother us." Then they saw the proposals and thought, "Good grief, we do not want this." As I said, there were initial proposals that people thought they could twist to their own benefits. If farmers do not believe it is going to impact on their current practice, they say, "This is fine; I am going to get the money and carry on farming as I am." The truth is, as it stands everyone sees-now more analysis has been done-real unintended consequences of these proposals-that would be my underlying message-if we look at the three crop rotation. There are unintended consequences that really worry us quite profoundly.

Harry Cotterell: The difficulty from our point of view-and we have talked to our sister organisation in Brussels, the ELO, about this-is that you are trying to take the greening element of the reform and deal with Estonia to Portugal, which is virtually impossible along the lines of rules that are going to be applied across the 27 equally and fairly to achieve an objective. Whilst we have no problems with the objective, we believe it is going to be almost impossible under the current proposals to achieve what they are setting out to achieve.

George Dunn: We are not as well connected across Europe as my two colleagues, so we would not be able to give you a first-hand account of other farmers in other member states.

Q6 Chair: I would just like to ask a question on "one size fits all" policies in two parts, if I may. One alternative would be to let member states decide how the money allocated to greening would be spent. First of all, would you support that approach; secondly, would your members prefer if the money allocated to greening under the draft proposals was used to fund Entry Level Stewardship schemes instead?

Peter Kendall: I am again going to be candid and honest, because I know so many of you and your knowledge of the industry. On the first part, about national flexibility, we are between a rock and a hard place. Do we think the UK Government is going to goldplate when they talk about meaningful greening and we are going to end up with more measures to get the greening element? Or do we put our trust in the European Commission to make sure these are more uniform and they therefore cannot be goldplated? We need to have a longer debate with Defra about what they want to achieve out of this, because when you look at the agrienvironment schemes we have talked about already, the Campaign for the Farmed Environment, the voluntary environmental work that goes on in England at this moment in time, there is a real concern that increasing pressure for more and more environmental action could mean that we get meaningful greening that the Government talks about here, we get the goldplating and we have to do much more for our green topup than other member states. We need more feedback from the UK Government on its position before we move forward.

To the critical part of your question, about using that money to fund ELS in Pillar 1, I worry about the complexity of that. The ELS is a scheme that has a lot of different options and allows farmers to choose what fits their farming circumstance best. The idea then that the RPA would have to police an ELS as part of your Pillar 1 would make it incredibly bureaucratic. At the moment, when we get something wrong on an agrienvironment scheme you probably have a deduction on your agrienvironment scheme. If it was part of your Pillar 1 the implications are much greater for the Government having to police what you are delivering as part of that Pillar 1. We firmly believe that agrienvironment schemes should be placed in Pillar 2, where there is an incentive.

The second point I would make is that some farms would chose not to do that greening. It might not suit a purely potato farm on the Fens that moves its land around. To make them do ELS is something that could cause unintended consequences, as I mentioned before. Farmers might find they do not take part in the scheme at all. We believe environmental measures need to be targeted, farmers need to select what is best for their farms, and, much better, to be something you buy into rather than something you are forced into to get the right outcomes.

Q7 Chair: Just before I move on to Mr Cotterell, do you think that the takeup of ELS schemes has been as high as the Government expected?

Peter Kendall: We are certainly seeing a fall-off at the moment. There has been a dropoff in the number of acres that have come in from August through to October. Why? Because farmers are looking at them at the moment-I have one sitting on our desk at home-thinking, "If I sign up now, and then we get reform measures in place on either 1 January 2014 or 2015, will this greening 7%-whatever it might mean-be on top of that?" I have my plans for my ELS, the lands are already pencilled in, but I want to know, as a farmer, that either it counts towards it or I can get out of the agrienvironment scheme without having to repay the money. Defra are working very hard to seek clarification on that, but it is understandable if farmers are holding back at this moment in time, and we believe, despite what we have been told by other people, that farmers are either withdrawing their applications or holding them until they get more clarification.

Harry Cotterell: I would preface my remarks by saying we are at such an early stage of this process that we have not memberproofed anything I am going to say. We are reasonably comfortable with the prospect of some form of member state flexibility, because we feel that, if properly implemented, it will get us out of the problem Peter has just outlined. We take it further in terms of agrienvironment. We have a feeling that there is a role for the agrienvironment schemes in the delivery of greening, in that we think the idea that they are delivering is worth exploring-they are delivering over and above crosscompliance.

Q8 Chair: But in which Pillar?

Harry Cotterell: We have never been too wound up about the architecture. If you are talking about the single farm payment and the greening element remaining in Pillar 1-which is plainly what is going to happen-then there is a suggestion we might be exploring-and again, this is still work in progress in our organisation at the moment-that if a UK farmer is in an agrienvironment scheme, he automatically qualifies for the greening topup. That raises a possible issue about what you do with the Pillar 2 element of the payment, but I am sure it cannot be beyond the ken of politicians to sort that one out at a later date. We do feel that may be a way of taking the greening forward, and it has advantages of being fairly simple; it has schemes that are already in, so from an administrative point of view it might be quite attractive. But most importantly, the huge benefits that the agrienvironment schemes have offered up, the environmental benefits, will not be lost in the way that Peter has outlined. He is having doubts about his own personal scheme. It is an area that we are currently exploring, but, as I say, I make the point it is not full policy yet: we are exploring it, and it is of interest at the moment.

George Dunn: It is absolutely right that there should be conditions attached to public money that is being paid to the farming community. Our members within the Tenant Farmers Association would say that those conditions must respect all the objectives of the CAP, not just the environmental objective: the objective of ensuring a fair standard of living; the objective of ensuring adequate supplies of food-all of those things must be considered, whatever conditions are applied.

In terms of the member state flexibility, of course it must be sensible for every member state of the Union to have the flexibility to decide what conditions apply to the payments that are being made in their member states. But you have to be careful to ensure there is an appropriate balance-that individual member states are not using it to hide particular production supports, and that other member states are not being harsher on their farmers than others are in the process.

In terms of Pillar 2, we have always had a concern about it. Clearly in the vast majority of cases, landlords and tenants are able to come to arrangements within which agrienvironment schemes can take place. But there is a significant minority of cases where landlords and tenants are not able to agree, either because of the length of term of the agreement the tenant has, or because the landlord, him or herself, has decided they are going to enter the agrienvironment scheme instead. We do not see Pillar 2 as the perfect solution.

Before Harry comes back, I agree that in the vast majority of cases things are working, but we need to find a way of dealing with those hard issues. Uplands ELS is an example of that; a third of the applicants of HFA have disappeared. We do not know the makeup of that third, but I bet your bottom dollar a lot of them are tenant farmers.

Q9 Chair: As you know, I have been directly involved in constituency cases in that regard.

Peter Kendall: The concern we have most strongly is that we have a UK Government that says it wants to be the greenest Government ever-it talks about wanting meaningful greening as part of the CAP reform-and yet I know the other governments, Ireland for example, basically want to say whatever they are doing now qualifies them for the money. It is that conflict that we might have, and if we take the proposition you just outlined about putting ELS into Pillar 1, when you think that this Government is driving a deregulation agenda, the bureaucratic and regulatory burden we would have to have as individual farmers to demonstrate that we were doing ELS as the conditioning in Pillar 1 I think would be enormous. It would blow their deregulation agenda out of the water bigtime.

Q10 Neil Parish: We are looking forward to this deregulation agenda. Carrying on with the greening, at the moment farmers choose to take advantage of a Higher Level Stewardship scheme if they want to and some do not. The Commission proposal, of course, is very much that 7%, in some shape or form, will be either set aside or some sort of green set aside. What are your views on making it compulsory across all farms? At the moment, I believe, some farms do not take part in very many greening measures.

George Dunn: The current proposals from the Commission indicate that the greening element will be compulsory, so those individuals who are taking the direct payment, the basic payment, will also be subject to the greening element. It is clear from the proposals at the moment that they are compulsory.

From our perspective, we are a bit concerned about this policy, which is now rather aged, getting Alzheimer’s in terms of the number of objectives it has been asked to look at and the number of ways it has been asked to face. Would you ask the NHS, for example, to take 7% of its productive capacity and look at something else? Would you ask Tesco to take 7% of its production capacity and look at something else? Tenant farmers pay rent on every acre they take from landlords, and if they are therefore required to take 7% out of production, that is a big ask when they are paying rent on that. Also, the tenant farmer is in a different position to many owneroccupiers, because owneroccupiers will have woodland, rivers, etc, other bits and pieces; the tenant farmer normally only has the productive agricultural land within his tenancy. From our perspective the tenant farmer will be hit more harshly by 7%.

Harry Cotterell: We are now happier with the 7% than George, it has to be said. The first thing we say is that it is absolutely crucial that, if they are going to calculate it, it is on the claimed hectarage, and yet you can use unclaimed hectarage to cover, because this is about delivery of environment, and if it is about a mathematical mapping exercise, it will become incredibly difficult to administer. We do not like the number 7% either; we think it is much too high. I am sure that is quite clear to everyone.

In terms of the voluntary element, we as an organisation have always been in favour of the voluntary approach, and we think that there are plenty of examples within the industry-the Voluntary Initiative, Campaign for the Farmed Environment-that are delivering. Farmers like to take responsibility. The agrienvironment schemes are also obviously voluntary. There is a lot of voluntary stuff now. If we can persuade the Commission that the greening element should be voluntary, you would have no complaints from the CLA. But as George said, we are slightly worried about the word "mandatory" in the proposal at the moment.

Peter Kendall: We do not know where it will end up, or what the definition of the 7% will be, but I have to be really blunt: I just think it is madness to pull such arbitrary figures out without looking at the measures. If you look, and you had the Game & Conservation Wildlife Trust in here, they have a large number of scientists doing a lot of work on positive, proactive environment management. Their recommendations are that having between 1% and 2% of our farms managed in a specific way would deliver significant environmental gains. Where do we get the 7% from? What do they mean by that? From all the work we have done with other partners in the industry on CFE, I know we take our environmental responsibility very seriously. It is a prerequisite of what we do. But to just pluck figures out like 7%, of condemning permanent pasture for anything over five years, the behaviour on longterm lays will have negative unintended consequences that are enormous. The three cropping equally would have impacts on the sort of people that it should not. It is probably aimed at larger arable farmers like me and Mr Parish, as he often draws analogies to, from your part of the world.

Q11 Neil Parish: Surely not.

Peter Kendall: Where the impact will probably be worst is on mediumsized family mixed farms, who have not got the flexibility to grow three crops. It is ill thought out, and it is not scientific.

Q12 Neil Parish: There is an argument on the permanent pasture proposals that people will plough up permanent pasture in advance of these proposals if they were to come in. That is the danger; that needs to be sorted. The old adage is you can take a horse to water but you cannot make it drink; do you believe that greening proposals are better done on a voluntary basis, rather than making it mandatory? There are various organisations that would like it to be made compulsory. What do you think is the best way to manage the land from a green perspective?

Peter Kendall: Unfortunately some of these organisations come from one single perspective. They are not looking, as all three of us look, at how we manage our farms, both for the long term, which means environmental management has to be right at the heart of our thinking, but for food production as well. We really do believe that organisations that just say regulate-force people to take their land out of production-are missing the important part of the equation that enthusing and rewarding gets better results than cajoling and regulating. The work that is being done at the moment through CFE, working with different routes to market with agronomists, understanding the challenges, trying to make sure they are trained in biodiversity matters as well as just what products to put on a crop at a certain time, using meetings where we are talking about new crop varieties for different years, to explain different ways of managing farms for the environment, is a novel way of doing things. It is much better and smarter than these blanket regulations that I think will get farmers to say, "That is a poor bit of land; I will just leave it." That is not about positive management; it is not about thinking that we use our margins that we might already have out of production to protect the watercourse: can I cut into it pollen and nectar mixes? Can I put wild bird cover into those so that those grass strips have more bangs for the buck? That is the imagination we need.

Harry Cotterell: I entirely agree with Peter. The only thing I would add is to strongly support that there has been a change of attitude in agriculture since the arrival of the agrienvironment schemes, and people are enthused. They are not enthused, I do not think, by £30 a hectare; they are enthused by the fact there is a positive element they can engage with and take on. I very much agree with what Peter is saying.

George Dunn: There has to be a balance between compulsory elements-which compliance deals with-and voluntary elements, which Pillar 2 deals with. Crosscompliance obviously has to be applied in a way that understands the environment within which people are making decisions and the way in which things can change very quickly, so it is not just a tick-box culture. The voluntary element is important.

However, I speak to members every day of the week, and it is those members that are the experts of the farms they are managing: they have been managing them for years; some of the families have been managing them for years. What they get frustrated about more often than not is that they will have-as I referred to before-a process-driven agrienvironmental framework that says, "We are going to do X, Y and Z," and the farmer says, "X, Y and Z is not going to work on my farm because of A, B and C." The answer is: "The computer says no; we have to do X, Y and Z." I know engaging at a more individual level is hard in terms of the resource that would be required to do that, but it is learning from the experts on the ground as to what is going to work for their farms environmentally.

My members, Harry’s members and Peter’s members will all be absolutely delighted with the amount of environment they have on their farms and wildlife, etc-they enthuse about these things-but their views are often not taken into consideration in development of packages of support. It has to be voluntary, but it has to be engaging with people on the ground.

Q13 Dan Rogerson: Good morning, gentlemen. Mr Cotterell, in your evidence you say that greening proposals must not impact on competitiveness or productivity, so I am continuing on the line we have just been discussing. Given the importance of looking after the environment, particularly for longterm food security, there are those that say a small drop in productivity is an acceptable price to pay. What is your response to that?

Harry Cotterell: In some years I think it probably will be, but in others it will be a disaster, for both farmers and-if you take it across the country-the food security of the nation, food prices and the rest of it. We stay with what we said.

George Dunn: To back Harry up, as I said before, would you expect the NHS to take 7% of its production capacity and use it for something that was not within the core remit of what the NHS had to be doing? The answer is no, you would not do that. Would you require a dairy farmer who has 10 hectares of maize to grow three crops? No, you would not. These things simply do not make sense. We ought to be ensuring we have what Professor Beddington calls sustainable intensification, rather than looking at these process-driven solutions.

Peter Kendall: Just on the 7%, I think those comments have been made well and I am not going to add any more to them. On the three crop rotations, as I have mentioned, the AHDB have done some analysis of this and they have shown that it would have a negative effect on the profitability and gross margins of about 60% of farms in East Anglia. It would affect 40% to 50% of farms on the Midlands and other areas throughout the UK. These are not helping farmers make decisions for what is best and what is required for the market; it is having farmers growing crops that someone in Brussels as a bureaucrat has decided should be grown in a given year. Productivity versus competitiveness: we should let farmers produce for the market, and if the market signals are "take your foot off the throttle" you do that. The environment is really important to us. Farmers are not in this for two years; they are usually in it for two or three generations.

Q14 Dan Rogerson: Thank you. Talking about the AHDB and their analysis of this, they have calculated that gross margins on combinable crop farms will fall by up to £48 per hectare as a result of the ecological focus area measure. Can you explain how big an impact this would have on the profitability of farm businesses.

Chair: Who wants to go first? Mr Kendall, everyone is looking at you.

Peter Kendall: I have not got any exact figures for you; I am sure we can let you have the figures if you want. It is a big hit. I have not worked it out for my business. The point is we have driven CAP reform in the past to try to have farmers managing for the market, not having bureaucrats having intervention and all those unintended consequences. Why do they want to get in and micromanage what we are doing on our farms again and have us do the wrong things?

The big fear on the three cropping-I have talked about it having bad impacts on mixed family farms-is where you have specialist farms, growing vegetables, for example, or farms doing contracting, as I do. What you will end up with is people swapping land parcels. Where I do 100 acres for one farmer, growing five acres of beans, 25 acres of rape and 70 acres of wheat, I will grow all wheat and I will transfer land parcels around, which will put the RPA in exactly the mess it has been in for the last five years. I used more colourful language in other venues. We can do without us being driven, because we will do what is right for our business, we will try to keep them efficient and productive, but we will end up shifting pieces of paper around and another disaster awaits.

George Dunn: It is also about competitiveness and efficiency. Another driver of this reform is, apparently, competiveness and efficiency. We talked about the gross margin, but we need to look at the net margin as well. People will still have the fixed costs associated with running those businesses, which will be spread over fewer acres in terms of the production they are making. I say again, the tenant is paying a rent on every acre of land that he is farming; if he has to leave that doing something that is nonagricultural, it is a big hit.

Q15 Mrs Glindon: Just going a little bit further in relation to this aspect, many farmers will have to grow additional crops to meet the crop diversification requirement. How do you think this will affect the functioning of the market for those crops?

Harry Cotterell: Shall I have a go at that? I do not know; it is difficult to know what impact it will have on the market, but it must have some. It is going to reduce in some areas, and reduce quantities in some crops whilst adding to others, obviously, because if people are not growing for the market, they are growing for the subsidy. One thing I think we all agree on as part of the sustainable intensification agenda is that we all do what we do better, and we get more out of the land we are farming at the moment. That is going to be extremely difficult if we have to grow to the subsidy by producing small areas of crops that we not necessarily particularly good at or geared up to do. I have every sympathy with a continuous wheat man in the East who does it as well as anyone and is just going to be messed around for the subsidy for no particularly tangible environmental benefit.

The other guy who is going to be significantly impacted-and I do not know whether it will have any effect on the market-is the small stock farmer, who is only doing his little bit of barley for his own use. What is he going to do? He may only be able to grow barley. I do not see how he gets round that particular problem. I cannot see the benefit, and I can see significant problems throughout.

Peter Kendall: The Commission is using a sledgehammer to crack a nut. In one or two small isolated parts of Europe they have monoculture, where people are just growing maize, or they might be growing continuous cereals of some shape or form, but it is not on a big scale. Therefore their reaction to going around and asking the general public-which seems a strange way to devise an agricultural policy as specific as we need to address here, especially with the Beddington challenge-is to say, "We do not like monoculture, therefore we will make sure people have three crops." As I said, it is a sledgehammer to crack a nut: there is only a small instance of this happening. Show us where the damage and the consequences are, and address them at local level. Let us not make sure the whole of Europe ends up with a bureaucracy and the complications that Harry has just alluded to.

George Dunn: We have not thought about it too much, because it is unthinkable that it would be implemented in the way that it is. It is completely barmy to be implementing it the way it is. To use my analogy of someone who is growing 10 acres of maize for his diary cows, will he have to grow 0.5 of an acre of spring barley and 0.5 of an acre of wheat? What is that going to do in terms of the quality of the crop he is producing? Does he have the agronomy skills to grow those things? Does he have the soil to grow those things? The whole thing is completely barmy. The impact at a global scale in terms of production is unthinkable.

Q16 Mrs Glindon: You have obviously given those examples of the small farmers who have predominantly one crop, but do you think the crop diversification requirement will make it less likely that farmers who are able to would rotate their crops between seasons?

Peter Kendall: There is a view from some of the Commission we have had discussions with that there might be a prospect of saying that block of 100 acres I talked about earlier on could be asked to have one crop one year and show it has had a diversity of rotation over a three-year period. That is not as the proposals stand at the moment, and I imagine policing that would be quite a headache.

I am an arable farmer, 40 miles north of London, and I grow wheat and rape, because it is the best thing that heavy soil produces. If the Commission decides they want me to grow beans as well, I will do it, as I can have some storage that can put a field of beans in a separate area due to the size of my business. It will not be as profitable; it will have some benefits the Commission deem desirable, but I am not sure whether growing a spring crop on heavy clay in a wet year is the right thing to do. As Harry and George have said, the more mixed family units will have real problems: having to keep products separate; breaking fields down into subdivides; having the equipment to grow a number of crops because the Commission deem it to be the right thing to do. I share George’s point: it is so mad we have not put a lot of effort into seeing what impacts it will have on the marketplace.

Q17 Neil Parish: Going back to the 7% of land the Commission want to set aside for an ecological focus, on a lot of farms there would be some land that is not productive. Have you got any type of figures on existing farms at the moment as to how much has some form of ecological benefit?

George Dunn: We have a very small list from the Commission as to what would be considered. It strikes me-again, from the tenanted perspective-that there is going to be very little of this type of land on tenanted holdings up and down the country, so we have some big concerns about that.

Peter Kendall: It is really important, one, whether the environmental management that is already going on counts. That is the real crux for this, Mr Parish. At the moment we know there is 156,000 hectares uncropped, which would possibly be used towards that. That might bring the 7% down to 5%. The telling bit to me is even in the Commission’s impact assessment, they talk about it being reflected in higher prices. It talks about 3% increase for sugar beet, barley up 12%, and-this is the killer for me-it talks about incomes for pigs and poultry as being down 25%, because they will be paying higher prices for feed.

Q18 Neil Parish: They are already paying higher prices.

Peter Kendall: It has come off a bit; I follow it quite closely. There has been quite a significant decline in recent weeks in grain prices. The European economy is in a mess. Why on earth do we want to produce more pigs and poultry somewhere out of Europe, when we can do it here? Why do we want to make our suppliers face higher costs at this moment in time? It will happen: the EU impact assessment shows a 25% reduction in profitability to those farms. They have to think very hard about this.

George Dunn: That highlights what I was saying earlier about policy Alzheimer’s here: we are expecting this policy to hit so many targets that it does not know where it is looking. We have to be very focused on what we want this policy to be doing.

Harry Cotterell: On the uncropped land, the CFE are currently recording 134,000 hectares uncropped, which is significant. It is a lot of land, but it is chosen by the farmers-it is voluntary. It is certainly not 7% claimed area.

Q19 Neil Parish: You raise some interesting points there, especially the one about the pig and poultry industry, because they are of course completely unsubsidised, and therefore they are not getting the benefit of the single farm payment, whether it has 7% ecological set aside or not. Therefore, if you make their situation worse, that really is a counter. I agree with you: at a time when we need more food, it seems absolute nonsense to start setting more of it aside. The question is: if you have set aside land to an ecological focus, how difficult is it to bring it back into production if they later see the errors of their ways?

Harry Cotterell: It depends on how they write the rules, I am sure. In the old days of set aside it used to be a requirement to keep it in GAEC: Good Agricultural and Environmental Condition. It had to be available. We would be appalled-as I am sure everyone would-if we started losing the capacity to produce, even if we were not producing on that. The regulation should make it clear that it can come back into production as soon as possible. I think it would be a disaster if it did not.

Q20 Neil Parish: Hopefully we will not get there.

George Dunn: I absolutely agree, obviously, but if you plant trees on this stuff, bringing that back in is going to be a problem. But yes, I would agree with Harry completely.

Peter Kendall: I have managed land in the past where it has come out of five, six year set aside. It is not something you do instantaneously. It does take time to build the structure back up, and it is not always easy to do that. I suggest it takes up to three years to get land back into productive capacity. You mention, Mr Parish, the need for more food. I think we need more jobs, more economic activity, more exports. That is what the European Economy needs at the moment, and we as a farming industry want to play a part in that.

Q21 Chair: Looking at the impact of the greening requirements on food production, the RSPB pointed out to us in their evidence that there is a joint CLA NFU briefing paper on anaerobic digestion, stating that a 3.5% fall in wheat output would be a "modest change". Is that correct, and is it therefore safe to assume that greening will not have a significant effect on food production?

Harry Cotterell: First of all, we make the point that this briefing note was not included in our evidence, but-I think this is important-land would not be coming out of production: it will be producing but producing for a different market. I do not really like to make a distinction between the two. I do not see the point in making a distinction.

Peter Kendall: It is a red herring. As I see what has happened in Germany, and we saw price spikes in 2007-08, where the Germans had 3,000 biogas farms up and running, it meant, having made that investment, they scavenged harder to find waste products to put in them, and they had the agricultural land or the maize to go into livestock. It had a more flexible supply chain rather than a more rigid one where the crop is not being planted. It is trying to compare apples and pears, and it is a deliberately false comparison.

George Dunn: I know that I was not party to this august briefing note. We obviously face challenges of food security; we also face challenges of energy security, and we are currently trying to grapple with how we become more energy secure as a nation and as a globe through various means. Is it not right that agriculture should be playing its role in that, to be providing some solutions? AD is still a relatively new technology that we are looking at. It is a very reasonable thing that agriculture should be trying to play a role in finding solutions to energy security as well as food security.

Q22 Chair: Would each of you agree that the ecological focus area definition is key to the understanding of the Commission proposals, and should Defra therefore press for an agreement on this definition before the final regulations are agreed?

Harry Cotterell: Absolutely. At the moment I think it is described as "Land left fallow, terraces, landscape features, buffer strips and certain forested areas". That could be anything. It is potentially a nightmare: we need to go a lot further before we can make any really significant comment.

George Dunn: I would just sound a note of caution that trying to define something that we do not want in the first place-i.e. this 7%-is setting in stone something that is going to come back and bite us in the backside. We need to understand a little bit more about what the outcomes are that we want to achieve and then look at the whole policy in the round, rather than accepting the 7% and trying to define what that means.

Peter Kendall: I share those reservations: more clarity, but what are we trying to achieve by this? We should go back and redefine what greening is trying to achieve, rather than pluck these figures from thin air.

Q23 Chair: Do you think there will be support from both the farming organisations and the Commission for that?

Peter Kendall: Certainly within Copa, the farmers’ organisations in Brussels, we have regular meetings. My Deputy President Meurig Raymond is meeting MEPs tomorrow and will be pushing the case as well. The fact that we have codecision this time round creates an opportunity. It will put some real challenge, and also some imaginative alternatives, forward to help us move this debate forward.

Q24 Neil Parish: You might tell me that we do not want to discuss this next question as well, but the Commission has proposed three basic activities in return for the greening payments at the moment. Can you suggest any other activities that they should have proposed instead?

Harry Cotterell: To tie in to my original comments, if we were to engage the agrienvironment schemes as the requirement for greening, there are 67 options in the agrienvironment schemes, 61 of which we think, on a fag-packet analysis, really deliver significant benefits, significantly more benefits, virtually each of them, than are delivered by any of the three proposals. I just leave that with you.

Q25 Neil Parish: I certainly do not see how the crop rotation fits into it.

George Dunn: If you look at other bits of work that are going on, we have had the National Environment White Paper; we have had the Farming Regulation Task Force review; we have had discussion about having outcome-driven policies; we have issues of our own recognition. Farmers are involved in their own schemes or even with their own landlords in trying to promote certain types of biodiversity and wildlife. Should they not have their own recognition to be able to tick that box to say they are doing what they can on their particular holding for the benefits we want to see? A little bit more of the flexibility is what we are looking for, rather than lots more prescriptions.

Peter Kendall: It is a combination of both those two. The fact that agrienvironment schemes need some acknowledgment, and that is going back to almost what Albert Dess was proposing in the parliament-unlocking that greening. There are the options of certified production systems, where there is a farm assurance, an AFS certificate with a greening element, a bit like LEAF. LEAF, for example, could unlock that. If we were looking at longer lists, we again want to make sure we do not end up disadvantaging UK producers. Very important to everything I say here, picking up George’s point, is whether there is an element of the management plans we had in the old agrienvironment schemes, where you were being asked to demonstrate what you were doing. We are involved in so many voluntary schemes now, whether it is Tried & Tested around nutrients, whether it is Greenhouse Gas Action Plan, whether it is the Voluntary Initiative on pesticides, whether it is the Campaign for the Farmed Environment. Submitting a yearly update on how you are progressing your farm business on those areas-nutrient management has to be good, the whole Greenhouse Gas Action Plan, reducing your carbon footprint-is a smart way of making sure as farms we are managing ourselves to be in a better position for the future. That strikes me as a better route than just saying, "Take that out of production," or "Have rotations."

Q26 Neil Parish: Do you believe the Commission is taking enough notice of the environmental schemes, the stewardship schemes we have in place already?

Harry Cotterell: Not the way it has drafted this reform, because without flexibility virtually all of them are in severe jeopardy. No, I do not think they have taken account of what we are doing.

Q27 Mrs Glindon: One suggestion is for farmers in agrienvironment schemes to automatically receive the greening payments that the draft regulation proposes for organic producers. Would your members think this approach is fair?

Harry Cotterell: Yes.

Peter Kendall: As long as it sits in Pillar 2, it is a voluntary measure and it is not forced into Pillar 1 and made compulsory for everyone. It needs to be that I choose on my farm to go and sign up to an Entry Level scheme, but it then ticks the box in Pillar 1. We think that is absolutely fine, in the same way that organic farming unlocks it. In fact we can go wider: it could be LEAF, it could be farm assurance plus an environmental module or other ways of doing this. But it does need to be an optin in Pillar 2, rather than forcing that into Pillar 1.

George Dunn: I would say "yes, but". The "but" is resolving the issues I was talking about earlier in terms of the ability for tenants to access the agrienvironment schemes, or in situations where their landlords are the recipients of the agrienvironment scheme benefit and they are not in the scheme. If we can sort that out, and maybe there is something you could do around the active farmer issue, so we are not allowing people who are not actively engaged in the management of that land access to agrienvironment schemes. That might be a way forward from our perspective. So "yes, but".

Harry Cotterell: I agree entirely with Peter. I was wondering how long it would be before active farmer came up, and it took 55 minutes.

Chair: We will come on to them at the end.

Harry Cotterell: I am not convinced that is the solution. I do not think we want to get into active farmer now, Madam Chairman, I hope,.

Q28 Neil Parish: Why not?

Harry Cotterell: How long have you got?

Peter Kendall: I should sit between them I think.

Chair: I am going to turn to Mr Parish, if I may.

Q29 Neil Parish: I have been told to stick to the greening issue and not diverge from it; I had better not in that case, however tempting it might be. Going back to the permanent pasture again, an alternative to the requirement to retain permanent pasture is instead to offer an additional payment for farmers that do retain their permanent pasture rather than making it compulsory. Would you support this type of alternative?

Peter Kendall: No, we would not at this moment in time, without knowing a lot more details about what would be proposed. If you have a farm-and my deputy Meurig Raymond runs six seven-year rotational layers-I am not sure you could compensate anybody enough to say, "You are not going to have flexibility in how you manage that land in future." Not only do you lose the ability to manage it but you probably significantly devalue it as well, because it lacks that flexibility going forward. I am concerned about where this money might come from, how it would be administered, what sort of quantity would be required to have farmers making the wrong decisions? We have been very clear, as an organisation: we have been going out pleading to people not to jump in and make rash decisions on the back of rather poor proposals and start ploughing up grass. We need to have really clarification on this pretty urgently.

I was talking in Wales last night: farmers might want to expand into livestock production at this moment in time because the markets look good. Will they do that and plant more grass if they are told in five years’ time that they cannot take it out ever again? It strikes me as a really perverse message at a time when we want farmers to be producing for the marketplace. That would be another reason for moving away from topups, because it is trying to send counter-signals to the market. But we do; we know we have rules already that protect ecologically rich grassland from being ploughed anyhow.

Harry Cotterell: I entirely agree with Peter. Our members have made it quite clear that there are a large number who are involved in grass rotations of significantly more than five years, and they are now at risk. That rotation is at risk, at the moment, while this proposal is in the air. We are very concerned about it.

George Dunn: No dissent from what they have said. We run the risk of tacking bits of wood to shoddy foundations.

Neil Parish: And also, going back to a comment I made earlier, there is a chance this may be counterproductive in terms of people ploughing out grassland that they may not have done otherwise.

Chair: We will turn to alternative pastures.

Q30 Mrs Glindon: In relation to *Pillar 2*[11.59.15], NGOs are concerned that farmers will plough their permanent pastures before 2014 in order to avoid the greening payment. Do you know how many of your members have said they are considering doing this?

George Dunn: We have had no response from any of our members saying that they are going to do it. Like Peter and Harry, we have been putting out the message that, "This is, at this stage, a set of proposals. Please do not do anything precipitous on your farms in relation to these proposals because they could change markedly." We have no evidence that people are doing that. There is more evidence of people holding off applying for agrienvironment schemes because of their concerns of what might come, but there is no evidence of them taking the sort of action you are talking about.

Peter Kendall: Farmers are rational business people: we care passionately about the environment, and longterm, ecologically rich pastures are very different to a six- or seven-year lay. I would be amazed if, in a year and a half or two years’ time there has not been clarification of these rules, a farmer would not take out a longer term lay. They have to think about the flexibility of their businesses; they have to think about the benefits of moving to shorter lays against being folded into something very rigid. If we do not get urgent clarification on this, I suspect there will be a very high amount of land ploughed out to those longer term lays, even if it is only done as part of a rotational ploughing out, of shortening those lays down from being six or seven years to four. It is not great for the agronomy and the way they are trying to manage their business, but they would do it to avoid fossilisation, which would be the outcome of these rather bizarre proposals.

George Dunn: Peter makes a very valid point: the closer we get to the intended date of implementation, and if these proposals continue to be part of the package of reforms going forward, the more likely it is people will take those sorts of actions. But there is certainly no evidence of it at the moment.

Q31 Chair: In your written evidence, Mr Kendall, you say that the NFU is concerned about the Government’s approach. What is your understanding of the Government position on greening?

Peter Kendall: I made some comments earlier on about wanting meaningful greening, and whether this is going to cause disadvantage within the UK. We are seeking urgent clarification of exactly where the UK Government sits-that would be useful-not only in terms of whether it wishes to move away from its position that more and more money should be moved from Pillar 1 to Pillar 2 because it realises it is quite a lone voice on that argument. Therefore does it, as we hear from sources around the Treasury, because it cannot move money from Pillar 1 to Pillar 2, want to move measures from Pillar 2 into Pillar 1, which, as I said earlier on about regulatory burden, would be phenomenal, enormous and blow their regulatory work out of the water, I suspect. Or do they want to keep modulating English farmers more and more, so they carry on driving the greening in Pillar 2? We need clarification from the UK Government, because at the moment it just says lines like, "We want meaningful greening; we want to drive the environment." My comments of the last few weeks have been I think the environment is doing pretty well: we are doing a lot of good things in biodiversity management, proactive management of the countryside. What we need to be looking at is our productivity crisis, which is going to be more pronounced in 20 years’ time. We have to start addressing that from Government’s announcements and campaigns, rather than just looking at biodiversity and moving money from Pillar 1 to Pillar 2 for that purpose.

Q32 Chair: Mr Dunn, are there any general concerns of the position of tenants under the proposals that you would single out?

George Dunn: As Harry railed at me earlier on, the active farmer issue is a big one for us. Whilst the Commission’s proposal is completely unworkable in its current form, we think it is quite right that we should be looking at ensuring only those actively involved in the management of the land are able to access both Pillar 1 and Pillar 2 schemes. That is a big issue for us. Of course, we have the issue of landlords land banking between now and 2014: there are a lot of landlords who are able to meet the qualification criteria of having been an applicant in 2011 who will have the flexibility to hold land back from the marketplace. That is a big concern for us. It happened in 2003, and then we had a lot of seven-year agreements as we saw the history bled out of the SPS. There is obviously a concern that it is going to happen again, and we need to put in place measures to ensure that does not occur.

Q33 Chair: If I asked each of you if there was one aspect of the Commission’s greening policies you could change, which would you think to change?

George Dunn: All of it.

Harry Cotterell: Can I just make a comment? Funnily enough, George and I agree on the fact that the existing proposal is completely unworkable in terms of active farmers, but we do not see a need to change the existing definition under the last reform, which we were perfectly comfortable with and we do not think is causing a significant problem. Can I also make a quick point on 21.2, which George mentioned, with which we do have significant problems? This reform is quite a long way away, and 21.2 is the requirement to have claimed in 2011 to be able to claim in 2014, which is effectively fossilising the claimant structure as per this year. Firstly, there are a lot of landlords that are coming out of agriculture between now and the reform date. That sort of closes it down. They should not be penalised for that. George may want to penalise them, but they should not be penalised. This is a market decision, and that should not happen. But secondly, it creates a golden ticket for claimants in 2011, which is an asset you should not really have: it has created a badge, "I am entitled to claim in 2014 and consequently I may not retire next year, or the year after, or hand on." It is going to distort both the land and rental markets. Although in some cases it may be advantageous to George’s members, as often it will be disadvantageous. We are very concerned about that particular point. I am sorry to bring that in.

Q34 Chair: There was quite a bit in your written evidence, all three, on entitlements. That has been well made. Mr Kendall, is there any single issue you would change?

Peter Kendall: The greening proposals. We accept that greening will be part of the CAP reform, but all the measures, as they stand, have significant unintended consequences, and that causes us concern.

Just picking up, if I could, on the active farmer, while everyone else is having their two penn’orth on that issue, we have 27,000 of our nearly 50,000 members in the NFU who have tenancies as one of the issues they raise. What I try hard to do is keep a focus on what is going to make sure there is opportunity for more tenancies to be coming in the pipeline. We are supportive of the idea that this the money should go to farmers and not pony paddocks, where it costs more money to make the payment than they receive. We are great advocates of that. But I do worry that, if the Commission tries to tie this down too much, what you will do is cut off opportunities and flexibility in land management arrangements. We have to keep that at the back of our mind.

The reason why the 2011 claimant date is in there is to try to stop people who are farming at this moment in time being turfed off. We like the idea of some continuity and protection for people who are farming now, but the active farmer one is one that if we are not careful-I spoke to Harry on this-could have unintended consequences, because the more you tie it down, the more landowners will be inclined to keep it in their occupational possession, rather than having flexible and dynamic relationships with, hopefully, up and coming new entrants into farming.

Q35 Chair: Is this problem unique to the United Kingdom?

Peter Kendall: Our landlord system is probably more pronounced. Harry would have a better idea of that around the rest of Europe, but we certainly have a larger degree of those let holdings than other parts of Europe.

George Dunn: One of the issues is that we have never had a revolution, so we still have big landlords.

Q36 Neil Parish: Are you suggesting one?

George Dunn: No, not at all. It is a very England and Walescentric issue-the TFA is in Wales, obviously. But we are not looking for this to be too tied down to create the sort of problems Peter is talking about. We have given in our written evidence some suggestions as to how the active farmer test could apply in a more reasonable and reasoned way.

Chair: You have been very generous with your time. Thank you very much for both accommodating the change of time and contributing to our inquiry. We are very grateful indeed.

Prepared 30th November 2011