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

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Environment, Food and Rural Affairs Committee

Greening the Common Agricultural Policy

Tuesday 17 January 2012

RT HON CAROLINE SPELMAN MP, MARTIN NESBIT and ARIK DONDI

Evidence heard in Public Questions 143 - 262

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Oral Evidence

Taken before the Environment, Food and Rural Affairs Committee

on Tuesday 17 January 2012

Members present:

Miss Anne McIntosh (Chair)

Thomas Docherty

Richard Drax

George Eustice

Barry Gardiner

Mrs Mary Glindon

Neil Parish

Dan Rogerson

Amber Rudd

________________

Examination of Witnesses

Witnesses: Rt Hon Caroline Spelman MP, Secretary of State for Environment, Food and Rural Affairs, Martin Nesbit, Director, EU, International and Evidence Base, Defra, and Arik Dondi, Deputy Director, Environmental Land Management, Defra, gave evidence.

Q143 Chair: Secretary of State, welcome. Just before I introduce you, there is some housekeeping. I would like to register my interest: receipt of a modest Single Farm Payment. Would any other colleagues like to declare an interest?

Neil Parish: Just to mention the fact that I am a farmer. I do not directly receive Single Farm Payment, but I have a farm holding.

Richard Drax: I have a farm holding too, and the trust that runs it receives Single Farm Payment.

Chair: I draw attention, obviously, to my register entry as well.

Secretary of State you are most welcome, and we are delighted that you are with us today and contributing to our inquiry into greening the Common Agriculture Policy. For the record, would you like to introduce your guests, please?

Mrs Spelman: Yes, although I think they are probably familiar to you, because certainly Arik has been a witness on a previous occasion. They are Arik Dondi from Defra and Martin Nesbit, who is my helpful aid; every time we are in a Council meeting I can rely on Martin to know the history, going back a long way, of negotiations on the CAP, but he has an official title.

Martin Nesbit: I am the Director responsible for EU and International Agriculture.

Mrs Spelman: There we are.

Q144 Chair: You are all extremely welcome. Secretary of State, could I just ask a couple of general questions at the beginning? Do you believe that the Commission has got the balance right between greening the CAP and the Government’s aim of developing secure, sustainable food production?

Mrs Spelman: I do not think the balance is right generally at the moment. We are at a very, very early stage of these negotiations. I am on the record as saying the Commission rightly identified the twin challenges of food security and climate change in its communiqué. In the proposals that have come out, I honestly do not think that they are ambitious enough to tackle the scale of those challenges. But we are very, very early on in the process, and my view is a view echoed by other Ministers. We have had a two-hour roundtable discussion on greening at a very general level. It is quite difficult to form a final view at the moment about the balance, but I think there is a lot that can be done to improve what is proposed.

Q145 Chair: That is very helpful. Obviously, to be successful in ensuring that the Government’s negotiating position is successful, we need allies across the European Union. I appreciate that we may have different allies on different themes, and we can explore that.

Mrs Spelman: We do, yes.

Chair: Could you broadly tell us at the outset who our main European allies are for the purposes of reforming the CAP?

Mrs Spelman: On the purposes of reforming the CAP, it absolutely depends by topic. On the capping proposal, for example, our natural allies are the Scandinavian countries, the Germans, and the Dutch, and interestingly enough new member states like the Czech Republic, Slovakia, and Romania until recently, but their position may be changing on capping the CAP; that is because of the legacy of the former Soviet Union, which created large collective farms, which would be caught on the size restriction. On greening, the straight answer is it is only just beginning to emerge. You can imagine after a two-hour roundtable discussion-because that is how long it takes to go round 27 member states, each making an intervention of three minutes-it is early days in ascertaining where the firm allies are.

I would say at this point in time that we have a clear alliance with Germany, which shares our view about the importance of a strong Pillar 2 and delivering greening through Pillar 2. Slovenia has a history of quite sophisticated agri-environment schemes and is a strong supporter of that. Once again, there are the traditional allies, like the Scandinavian countries: Denmark, Sweden and Finland. Then it is hard to tell, but countries like Austria that have particularly high incidence of organic farming in their member state are looking for much more meaningful greening that works with their systems of agriculture. It is too early to tell where the firm allies are. I think what the initial discussion showed is there is a real lack of consensus about what greening looks like. If you compare it with a very clear bloc that has formed on capping, or the almost unanimous view that we need to do more for young farmers even if we do not like the Commission’s prescription, it is actually very different on the greening. It is very unclear at the moment what is going to emerge.

Q146 Barry Gardiner: Secretary of State, I am focusing here on expanding the agri-environment scheme under Pillar 2. This is really not just an issue about what constitutes greening, is it? It is actually a financial issue as to who is prepared to cofinance. How are your colleagues in the Treasury on this? They are fully signed up to us expanding Pillar 2 presumably, because that is the Government’s position, but to what extent? What limits have they given you to which you could push your European colleagues?

Mrs Spelman: Our position is very clear. On the EU budget, the Prime Minister has set out a very clear position about that being at 2011 levels, and I have called for a substantial cut on Pillar 1. But of course the Treasury perfectly understands that Pillar 2 provides the best value for taxpayers’ money.

Q147 Barry Gardiner: Absolutely, but what limits are you working within?

Mrs Spelman: I have got flexibility to negotiate within that envelope. Obviously no Minister of Agriculture in the whole of the EU expects expenditure on agriculture to go up. I am sure you can perfectly understand that. Actually, we do not get to decide that. Finance Ministers in Europe will decide what percentage of the EU budget is spent on agriculture. Heads of State have already agreed what the size of the EU budget should be. The job of the Ministers of Agriculture is then to get the best deal for their farmers, taxpayers, consumers and the environment, out of the envelope that we have been given. But we have not yet been given Pillar 1 and 2 allocations. You cannot tie it down too precisely at the moment because we do not know.

Q148 Barry Gardiner: The problem here then is that you are robbing Pillar 1 to pay Pillar 2, or vice versa. Those countries who want to see their farmers get the 78% that is in Pillar 1-the guarantee for doing, as we would look at it, not really quite enough, because we are supportive of additional measures in Pillar 1-are going to want to keep that money in Pillar 1, aren’t they? You are losing this argument in Europe.

Mrs Spelman: How can you say we are losing the argument after two hours? It has hardly begun. It is far too early to make a statement like that.

Q149 Barry Gardiner: That is an extraordinary way of looking at it, though, Secretary of State, isn’t it?

Mrs Spelman: It is not extraordinary at all because it is going to last 18 months.

Q150 Barry Gardiner: It is not what happens around the table, is it? We all know that.

Mrs Spelman: Of course it is.

Q151 Barry Gardiner: It is what happens in the bilaterals when you go to meet your colleagues in advance of those roundtable meetings. The positions emerge at the roundtable meetings.

Mrs Spelman: Fine. Do you want to tell me how it works or would you like to hear my answer?

Q152 Barry Gardiner: I am disagreeing with the answer that you gave me.

Mrs Spelman: Well, you have not given me a chance.

Barry Gardiner: It is not simply a matter of what happens around the table; it is what work you are doing to create a coalition.

Mrs Spelman: That is always true of any European negotiation. You know that, and I know that, and I said earlier what alliances we have already formed firmly on capping of the CAP, because the proposal is much clearer. The problem is that the Commission’s proposals, although they are out, are not receiving the broad consensus the Commission might hope, but it is quite clear that there is going to have to be quite a lot of change. Of course there are meetings inside and outside the Council meetings. That is why it is a huge advantage to be multi-lingual, which I am sure the Chair of the Committee understands with her long time in the European Parliament. Sometimes meetings take place formally, where there is simultaneous interpretation, but a lot of discussions take place informally, in bilateral, and we do both. We are building alliances.

Q153 Chair: It would have been helpful to have been in a bigger, broader grouping like the European People’s Party.

Mrs Spelman: That is a separate issue. That is to do with the European Parliament, and it is not for the Defra Secretary to make a determination on which political party my party should have joined. We are part of a coalition of two parties, whose coalition agreement states very clearly that we are going to be a positive participant in Europe. I have never left an empty chair at any Council meeting.

Q154 Barry Gardiner: Given that that, as you say, is irrelevant, let us not spend time discussing it, Secretary of State. Let us focus on what your strategy is for building the necessary alliance to get the changes that you want to see and getting additionality into Pillar 2. How have you developed your strategy? What is it?

Mrs Spelman: Both before and after the publication of the Commission’s formal proposals on 12 October, I took a number of bilateral meetings with countries I thought would be susceptible to supporting our view that Pillar 2 is a good vehicle for the delivery of agri-environment schemes. I spent a significant amount of time with Germany, not just with the Minister Ilse Aigner but the German Rapporteur Albert Dess, who is responsible for a report to the European Parliament that exactly set out our view about the benefits of greening through Pillar 2. As I indicated, we have a historic alliance with the Scandinavian countries, and with all of those-Denmark, Sweden and Finland-of course, as you would expect, I have taken the trouble to make sure that, with new proposals on the table, they were supportive of our view that the greening ought to be more ambitious.

In addition to that, we have systematically explored the views of the other member states, even those that we know might not be susceptible to us. In bilateral meetings with France, Spain or Italy we have been testing out the reactions of the different member states to the Commission’s proposals. The straight answer is it is quite difficult at this stage because they, like us, are at an early stage of negotiations without an absolutely firm view. All there has been is a preliminary discussion, at one Council meeting, of those views.

To be fair, for the record, I should not take all credit for the bilateral engagement exercise. That has been shared by Defra Ministers. In particular I should mention that the Minister of State, Mr Paice, has gone out of his way to build a good alliance with Poland, even prior to the Polish Presidency, and continues to have a really good working relationship with Minister Sawicki, who continues after the general election in post as Minister of Agriculture. We systematically work at these engagements, but I think all the member states are still forming their view. It is early days.

Q155 Barry Gardiner: It surprises me that you think the UK is unique in having a view and that others are still forming theirs.

Mrs Spelman: I did not say that. When did I say we had formed our view? We are still forming our view.

Q156 Barry Gardiner: Sorry. I thought the Government’s view was that environmental benefits could be best delivered through expanding agri-environmental schemes in Pillar 2.

Mrs Spelman: Yes, but that is not a comprehensive view of the Commission’s greening package. There are lots of elements of the package, for example our attitude towards crop diversification.

Q157 Barry Gardiner: But I am only asking you about this-

Mrs Spelman: One dimension.

Barry Gardiner: -fundamental principle and how you are building a strategy amongst other countries on this issue.

Mrs Spelman: We take a strong view on that aspect of the greening, because we have a very strong track record with our agri-environment schemes conducted under your Government, last time. We are recognised in Europe as having some of the most sophisticated environmental protection measures operating alongside production of food anywhere in Europe. So you would expect me to make the case for them.

Q158 Barry Gardiner: I am delighted that you are-absolutely delighted. What I am concerned to examine and elicit before the Committee is the strategy that you are adopting and the potential success of that strategy to get other countries in Europe on board to that position.

Mrs Spelman: It is, as I have outlined, identifying systematically which of the member states might be supportive of the view that greening and the support for agrienvironment schemes should continue under Pillar 2. We have identified who has a fairly firm view about that.

Q159 Barry Gardiner: That you would say is: Germany, Slovenia, the Scandinavian countries, and Austria.

Mrs Spelman: For the moment, but these are negotiations. And the new member states: Slovenia, Slovakia, and the Czech Republic, and then it becomes less clear. It is quite hard sometimes to work out from a three-minute intervention from a Minister of Agriculture in another country what their comprehensive view of the greening package is. I am sure you would understand that.

Q160 Chair: So there was no pre-meeting with centre-right parties before you went to the roundtable?

Mrs Spelman: No.

Q161 Chair: Would that not normally be the procedure to follow?

Mrs Spelman: Nobody told me any procedure like that exists. What we did do, off our own back, is go to the European Parliament-I have done that on more than one occasion-and meet with a number of key figures within the European Parliament. I mentioned Albert Dess; I met Paolo De Castro, who is the Chairman of the European Parliament agriculture committee. I met with Jo Leinen, from not a centre-right party but the SPD.

Q162 Barry Gardiner: Perhaps Mr Nesbit, who is the fount of historical knowledge on these issues, as you introduced him, could tell us what sort of advance lobbying-advance bilaterals-has gone on in the past?

Mrs Spelman: Remember that the proposals were only issued on 12 October by the way.

Q163 Barry Gardiner: Well, we have had our position on greening for quite some time before 12 October.

Mrs Spelman: I do not really know what point you are trying to make. Surely it is for the political parties, isn’t it? It is hard to ask a civil servant whether a Conservative politician should be actively-

Q164 Barry Gardiner: I am asking what the Department has done in the past to lobby in advance of roundtable meetings.

Mrs Spelman: In 2005, you mean?

Chair: Yes.

Mrs Spelman: And probably in 2003. It took a long time to get round to that. Were you there Martin?

Martin Nesbit: I was there in the negotiations in 2003. I was not there for the negotiations on the health check, but essentially the process that the Secretary of State has described is one that we would normally encourage Ministers to adopt: to make contact bilaterally with their counterparts in other member states and to seek alliances with groupings of member states in developing in advance of Council. As the Secretary of State says, it is probably not appropriate for me to offer comparisons between different Governments, but of course it is very dependent on the willingness, interest and time made available by Ministers. Clearly, both the Secretary of State and the Minister of State have made significant time available for this sort of activity.

Q165 Barry Gardiner: Mr Nesbit, I was not suggesting that you offer it; I asked for it. Perhaps we could have a note to the Committee about the bilateral meetings and the lobbying that took place the last time this happened.

Mrs Spelman: We have at present, systematically, a 27 member state readout of where we believe member states stand on greening at this point in time. That is a moveable feast.

Q166 Barry Gardiner: Are you in the ascendant on that readout?

Mrs Spelman: We are in the largest group.

Q167 George Eustice: When we visited Denmark at the end of last year, one thing that was quite striking was they had a stance that, because they had the EU Presidency, they had to very much be the honest broker, which I found quite surprising. I always thought that the EU Presidency was something countries coveted so that they could try to influence the agenda. Do you feel that the Danish are being, for want of a better term, a little bit too Scandinavian about the way they are approaching this?

Mrs Spelman: No, I think it is something completely different. They are stymied by the fact there is most unlikely to be any CAP decision reached before the French Presidential election in May 2012. They know they are most unlikely to get an outcome on their watch. That does not mean that they are not going to try. They are interested in progressing the debate on greening because they have a natural alliance with green parties at home. They have a particular interest in developing the debate on greening. It is at such an early stage; it has hardly been explored yet-one roundtable-so I think they see that as a priority. A lot of work needs to be done in sequential Council meetings to progress this to the point where member states could say more firmly whether they file for or against. It will definitely be a key part of their Presidency. I think realistically we are looking, as we have often said, to a conclusion on the overall CAP between the French Presidential election in May 2012 and the German general election in October 2013.

Q168 George Eustice: Do you think they are being realistic in not wanting to push the idea of expanding Pillar 2 too hard at this stage?

Mrs Spelman: That is not a view they have articulated to me. They might have articulated it to you, they might have articulated it in other spheres, but neither in bilateral meetings nor in a formal meeting have they articulated that view to me.

Q169 Barry Gardiner: Secretary of State, we have heard from Professor Benton that what is the best strategy for one-sorry, not your colleague.

Mrs Spelman: I am really sorry. Could you just tell me, who is Professor Benton representing?

Barry Gardiner: He is an expert in agri-environment policy. He has told the Committee that what is the best strategy for one landscape, with its geographical setting and mix of farm enterprises, may not be the best strategy for another. The optimal management strategy will vary with landscape context. This poses us a problem for the greening of Pillar 1, doesn’t it, because of this whole one size fits all?

Mrs Spelman: Absolutely.

Barry Gardiner: Given that there is a trade-off between wanting to achieve what is right under Pillar 1 for the landscape and the environment, and also wanting to ensure that countries do not artificially bend their requirements under Pillar 1 to suit their own farmers, which they cannot do because it is a one size fits all, how do we get round that policy in a 27 member state Europe?

Mrs Spelman: I could see where you were heading with your question straight away, and I think it is a very pertinent question. The Commissioner is fixed on what he calls convergence. That is his term for one size fits all. He wants the measures to be doable by everybody, everywhere. But actually, as the Professor says, that is a sub-optimal outcome for the environment. We will be pressing very hard for a much greater degree of flexibility. There should be flexibility. I sit between Estonia and Malta in the Council meeting; it is difficult to imagine a bigger range. I think it would make a lot more sense for the taxpayer, the farmer, the environment and the consumer if there was more flexibility. We are trying to get the Commissioner to think more in terms of a menu. It is very, very clear that we must account for every penny of taxpayers’ money that is spent. It must be clear that the measures on the menu are really going to add value and they do provide additional public goods. That is one of my tests that I apply to this. At the moment, what is proposed lacks ambition, even though it might be doable in every country, and I am not convinced it provides taxpayer value for money; this is too rigid an approach.

Q170 Barry Gardiner: I do not want to stray into the territory of valuation of natural capital or things like that, but is there a way in which the scientists from each of the countries working together could identify things that provided equivalent environmental benefit, so that no country felt their farmers were being short-changed and their money was being used to subsidise people for little environmental gain?

Mrs Spelman: Absolutely. Defra has done some work on that. As you know, we are blessed with an exceptionally good Chief Scientist who oversees high-quality scientific work by the Department. They have done some work on what in essence is a bit of a point system, if you like, so you have some equivalences. Instead of a rigid one-size-fits-all approach, where everybody is forced to do the same thing with some terrible unintended consequences as a result, a good way forward would be to look at some sort of a menu that had flexibility and equivalence to guarantee to the taxpayer that they were providing the money and it was providing good value for that money, but also scientifically we were genuinely making a difference for the environment. We will be sharing that work, of course.

Q171 Barry Gardiner: That is what I was going to ask: what is your strategy for building an alliance behind that? It seems to me that, if you are to going to resolve that problem of Pillar 1, you have to have countries on board saying, "This makes sense to us."

Mrs Spelman: Having broadly established where the member states stand in relation to the greening proposals, I think we can go back in now with some counter proposals and see what sort of support we get from others. I am talking of wider than those who would just be supportive of the Pillar 2 proposals.

Q172 Barry Gardiner: Indeed, these are separate discussions. Can I just ask one further question here? Instead of the UK presenting its points-based system, have you considered at this stage, once you have a draft of that, inviting scientists from those countries to contribute to that, so that you can have something jointly to present to the Commission?

Mrs Spelman: I think, step one, I have to identify some willingness on the part of other member states to be open to the kind of proposal that we are suggesting. We have not yet had the time to do that. I think once we have, and there is a meeting coming up next week, we can proceed to the second stage. I think it would be unseemly for a Minister of Agriculture from one member state to barrel in and talk to the Chief Scientist of the Landwirtschaftsministerium without some introduction. Do you want to add to this, Martin?

Martin Nesbit: Yes, certainly. I think the point that the Secretary of State has been making about the importance of flexibility for member states is critical to getting genuine delivery of additional environmental benefit from a greening of Pillar 1. As member states start to look at the proposals the Commission has been putting on the table, and the shortcomings of those proposals, I think flexibility is something that is increasingly becoming of interest to member states. There will be some member states who see flexibility as an opportunity to remove the environmental substance from the proposals, and others who are genuinely interested in achieving progress. We will need to ensure that we get as much equivalence as possible in the negotiations.

I think the sort of mechanism you are describing, of inviting Chief Scientists to get round a table and come up with a sort of technocratic set of answers, would work in an ideal world. In practice I do not think the negotiations will provide us with time for that. It is also the sort of thing that I think only the Commission would have the convening power to ensure. It might also be something that the European Parliament wants to look at.

In terms of contacts with other decision makers in the EU, the Minister of State had a visit to the European Parliament last week and met the rapporteurs on all of the dossiers from all of the major political groups. Interestingly, flexibility for member states was a subject that was unusually something that MEPs seemed to be willing to contemplate and to see as a potential solution to these negotiations. That also was encouraging.

Barry Gardiner: Good. We started locking horns, and we end up linking arms. That is very nice, thank you.

Q173 Chair: Secretary of State, it would be immensely helpful if you were able to share with the Committee in writing the background from the Chief Scientists, if you were able to do that. On this point of the European Parliament, obviously you recognised that there is a change; this is the first time that reform will be by co-decision.

Mrs Spelman: The power of co-decision, absolutely.

Chair: What impact do you think that will have on the decision-making process and the ability for changes to be made to what we see before us today?

Mrs Spelman: Very significant I think, although this is new territory for the Ministers of Agriculture. The last the time the CAP was renegotiated, the power of codecision did not exist. The European Parliament had an opinion, but this time it is the power of codecision. From a very early stage we have gone out of our way to establish our contacts in the European Parliament, because we are going to need them to get what we think is in the UK’s wider national interest. It is interesting to me that, across the political spectrum, we are finding support for our point of view. It is a new experience for UK Ministers in negotiating a big policy, like the Common Agriculture Policy, to actually play out on two stages simultaneously: with the Commission in the Council, and in the European Parliament. But that is what we are going to need to do. We are all feeling our way with that. There is no evidence to me that other member states have got a handle on how to do this better than we have. Everybody is embarking on this exercise of co-decision.

Q174 Amber Rudd: We heard earlier that you are hopeful of working with other member states about introducing flexibility on greening issues in different member states. Can you give us some examples of where the level would be, i.e. what would be at a national level and what would still remain at a member state level?

Mrs Spelman: Again, that is really too much detail to go into at this stage of the proposals. We want to see the agri-environment schemes that we have in this country maintained. Most other member states do not have anything quite as sophisticated as that, although in some member states there are measures that are quite close to our entry level schemes. Therefore, in any points-based system, higher level and entry level would have to have different rankings and ratings, if you like. In other member states, the measures taken are much less demanding than that. It is quite difficult to answer your question at this stage. I can only tell you that is what we are working towards. Do you have any specific examples?

Q175 Amber Rudd: What about the principle of where to draw the line, because obviously different countries will have different views?

Arik Dondi: I think the current proposals, which try to create some measures that can apply to all countries, have come up with the measures that they have come up with because there is not that much you can do in all the 27 member states. You can see, for example, how one might create a menu of broadly equivalent measures from which member states could then pick and mix, more or less.

Amber Rudd: À la carte.

Arik Dondi: That would be one approach. I think that is very early thinking.

Mrs Spelman: It is early thinking, but the vehicle obviously that lends itself to this best, under what the Commission are proposing, is the ecological focus area vehicle. The one that does not lend itself so well to this are their proposals for permanent pasture and crop diversification, because when those apply in different parts of the EU, they have very different-and sometimes serious-unintended consequences. If you take the concept of ecological focus areas, which is a new name in large part for what we used to know as setaside, it becomes interesting to look at what you could do that would be different and better, learning all the lessons from the past and most importantly getting things that work well to count.

I looked at some of the discussions you have had with other witnesses in this area, and I thought it was quite significant to see the role that hedges play in the United Kingdom in terms of protecting biodiversity. As Mr Parish said in reply to one of the witnesses, you only have to pop up on the other side of the Channel on the Eurostar to realise that, where hedges have been eradicated, it is a very different landscape, and it is going have a very different national ecosystem assessment as a consequence. One of the interesting things for us is to get proper recognition for what we do here and what we do well, to make sure those things are recognised and on the menu, and actively to promote the things that we know scientifically work well-for example, hedges provide excellent habitats for wasps, as your witness said to you the other day-and try to broaden that menu so that it is attractive to farmers to do as much as they can to protect and enhance biodiversity in the concept of the ecological focus area.

Q176 Amber Rudd: Do you think too many locally tailored solutions will undermine the principle of a single market, which is where we start with this?

Mrs Spelman: I think it entirely depends on how they are properly assessed. This is this point of equivalence. It is striking the balance between recognising that 27 member states have very different geology, geography, climate even, and taking a one-size-fits-all approach results in sub-optimal solutions. I think a better approach is to have some flexibility, providing that you have the scientific base to know that the equivalence is there. In the end, the farmers are going to be paid for doing it, and the taxpayer wants the assurance that what they have paid for genuinely provides value for money.

Q177 Mrs Glindon: Minister, with regard to greening, Defra is very keen on additionality. You have been talking about the differences between the member states, so given the variation among the member states and their current standards of good agricultural and environmental practice, how would you implement this recommendation fairly?

Mrs Spelman: Well, we have not got a formal recommendation yet. We are not talking about anything that is crystallised out yet. However, I support the principle of additionality because I think the taxpayer has every right to expect other public goods for the subsidy they provide. I have said that over and over. What farmers want is an assurance that they are not going to have a double whammy, where it costs them to provide environmental protection and then they get penalised because they have done it. That is what we have to guard against. We have given an undertaking that we would do that.

Q178 Neil Parish: Good afternoon, Secretary of State. The Commission’s proposals are supposed to balance between greening and food production. One problem is that, in the Commission’s proposals, the farmers who do not carry out the greening measures will face an additional penalty. Given that non-compliant farmers already lose 30% of their direct payment, do you think taking away a further penalty is warranted? Are we potentially taking very good land out of production?

Mrs Spelman: I think we need to be very careful with that question of taking good quality land out of agricultural production. That links to the answer I gave before last, which was that meaningful greening, through the vehicle of an ecological focus area, would help concentrate efforts on the parts of the land that are perhaps not ideal for food production but play a very important role in terms of protecting biodiversity and natural habitats, and adding value to the natural capital. Therefore, if you can get the parts of the farmland to count where you would not necessarily grow crops like the hedges, not only will you protect the hedges and the species that inhabit those hedges but you would continue to protect the good quality farmland beyond the hedges where you get the highest yields. Striking that balance is very important. We must not underestimate it. There will be an extra billion people in this world to feed within 13 years. People sometimes get carried away by the 2050 figure of 9 billion, and it feels sufficiently far off that it is quite difficult to feel the impact of that. But an extra billion mouths to feed in 13 years does focus the mind on the need to protect the best and most versatile agricultural land.

Q179 Neil Parish: I could not agree with you more. You made the point that, as I always say, you drive from Calais to Berlin and you do not see a hedgerow. Are you getting the Commission to recognise that these hedgerows and margins around fields are one of the most essential and best parts of nature conversation that we have? The trouble is that one size fits all does not seem to recognise what we specifically have that is so valuable, and yet they are still talking about a 7% so-called setaside.

Mrs Spelman: In your question, quite interestingly, deliberately or not, you used the word "Commission". I think one of the important points here is that our efforts are not just focused on the Agricultural Commissioner, Commissioner Cioloş; of course we must remember that there are two Environment Commissioners, Hedegaard and Potočnik, with whom we work with very closely, and who are looking to the reform of the CAP to deliver some progress on their environmental agendas, whether that is sinking carbon and mitigating the impact of climate change, or protecting and enhancing biodiversity, reversing the loss of species, and they have an interest in how we green the CAP. I have worked hard to play them in, in the college of Commissioners, to make sure that this point comes across.

Q180 Chair: Before we move on, if I may I would like to draw your attention to the memorandum you very helpfully provided the Committee with. You do say in paragraph 17 that the cost of implementing greening varies considerably between member states. Is it fair to say that the cost of implementing the Single Farm Payment in England is considerably higher than other constituent parts of the UK and other member states, Mr Nesbit?

Mrs Spelman: It is £1,700 on average per transaction; I know that. I do not know how it compares with other member states.

Q181 Chair: Is that a fair comment?

Martin Nesbit: I am afraid I do not have the comparative details, but certainly, anecdotally, I think it is relatively higher.

Mrs Spelman: With respect, not knowing the answer, is it not a commonsense answer to that question: it is bound to be because we are the first member state to apply area-based payment, and we all know the terrible consequences of being an early market entrant into that exercise. Even though other member states will have to move to an area-based payment system and invest in IT systems accordingly, I sincerely hope the painful experiences we have made with that could save them some of the costs. The chances are we have a high cost of single payment administration. It stands to reason.

Q182 Chair: You do go on to say that the payment will almost double per hectare-you accept that this is a rough estimate-from the £30 per hectare cost of entry level stewardship to £50 or £60 per hectare. My concern is that our costs should be reducing, if I follow the logic of your argument, Secretary of State, whereas your own memo says that the costs will double.

Mrs Spelman: Are we confusing two things there-Single Farm Payment and entry level stewardship payment? Again, it is very early days in the CAP reform negotiations, but if you stop and think about the complexity attached to the definition of active farmers, which requires member states to ascertain where all the alternative sources of income a farmer has are coming from in order to decide whether or not he should be paid on the basis of the Single Farm Payment, there are really significant additional administrative costs associated with that, which all member states are pointing out to the Commission. Sadly, at the moment I think the complexity is likely to increase cost. Do you want to add to that?

Martin Nesbit: Yes. Chair, I think the figures you were talking about in terms of the per hectare payment were not around the costs to the administration of implementing the payment; they were the payment that would have been received by the beneficiary. I think it is very important for us all to focus on the potential risks to administration costs, both for the beneficiaries themselves and also for public administrations. That is something we have been very keen to discuss with the Commission and with other member states, and share some of the, in a sense, hard-earned knowledge of changing implementation in England that we have acquired.

Q183 Chair: Focusing on England for the moment and the position of tenants, might the position of tenants be made slightly better under the reforms?

Mrs Spelman: That is the point of consulting. You know we have a discussion paper out at the moment with all the stakeholders to get their take on this. The view of the tenant farmers in all of this is very important. You have taken evidence from them, which I have had a look at. Again, I think that is the kind of view that I want to gather in. My job will be to represent their views in negotiation when we get to that aspect of it. That has not come up in the negotiations so far.

Q184 Neil Parish: You have talked about how the future CAP must deliver a meaningful greening. What do you actually mean by meaningful greening? Do you think that greening is better done in Pillar 2 than it is in Pillar 1 in the very prescriptive way the Commission is coming forward with?

Mrs Spelman: Our concern is that, in pursuit of a one-size-fits-all approach, the Commission has lit upon crop diversification and permanent pasture as two key measures of greening. The fact is, though, in this country we have been rotating our crops and leaving our land to permanent pasture since the Middle Ages, so it is not really new. We actually expect much more of our farmers. For a country that has a maize monoculture-and there are some with farmers that have just a monoculture of maize-requiring permanent pasture or crop diversification would represent progress. But to be meaningful across all member states we have to look for measures that are additional and provide the taxpayer with those other public goods that I think they have every right to expect. That is what I mean. That is one of the reasons strategically why we have called for a strong Pillar 2, because our more sophisticated measures, over and above crop rotation and permanent pasture-our agrienvironment schemes-are provided for under Pillar 2. We are keen to promote meaningful measures of that kind.

Q185 Neil Parish: Are you worried that the Commission’s proposals at the moment, especially on permanent pasture and what have you, may actually stop farmers entering entry level schemes and generally keeping that pasture there because they are worried that they are going to be then tied into the Commission’s proposals further down the road? I think that a lot of their proposals are counter the environment.

Mrs Spelman: There are a lot of unintended consequences. When I took a delegation of devolved Ministers with me to meet the Commissioner in November, as part of the Respect Agenda and making sure that our devolved Administrations do get proper access to the Commission throughout the negotiation, I found it was very important to see the Commissioner’s reaction to the Ministers for Scotland, Wales and Northern Ireland explaining what the unintended consequences of those measures might be. You might find yourself as a farmer ploughing up high-value permanent grassland. The Commission seemed quite surprised as they understood what it meant in those areas. In these early stages of negotiation, it is very important to bring out the unintended consequences.

Neil Parish: That is where the flexibility is essential.

Mrs Spelman: Absolutely.

Q186 Barry Gardiner: I absolutely take the point that Neil and you have just been outlining. Your example is of a maize monoculture, where under Pillar 1 they might be doing things that are environmentally very valuable, but that are hardly novel, innovative or helpful in the UK. Very often when trying to get a level playing field across Europe, what happens is we go for the lowest common denominator. Can you assure us that what we are trying to get here is a highest common denominator?

Mrs Spelman: Of course. I think we are rather beginning to repeat ourselves: that is exactly the point of our strategy from the outset. Basically, permanent pasture and crop diversification do not pass my additionality or value for money tests. That is why we want to focus on the ecological focus area definition and why we want some flexibility so that the greening can be meaningful in the member states, all the time accepting an equivalence that I think is at the heart of the psychology of where the Commissioner is coming from. We are working very hard to try to get greening that is meaningful, that will work in all member states without unintended consequences, and deliver what we want for the environment, taxpayers, and the farmer. It has to pass all those tests.

Q187 Barry Gardiner: Great. I am with you so far. As far as the NFU are concerned, though, there is another test that you have to pass, and they have expressed real concern that increasing pressure for more and more environmental action-this is on flexible Pillar 1-could mean that we get meaningful greening that the Government talks about here, we get the gold plating, and we have to do much more for our green top-up than other member states. They are very afraid of flexibility. The reason that they are afraid of flexibility in Pillar 1 is because they believe that, in the UK, Defra is going to try to impose stronger requirements upon them, or they are going to gold plate in some way. What can you offer the NFU that is going to reassure them that flexibility is not a charter for gold plating?

Mrs Spelman: I understand that. First of all, the coalition Government is dedicated to prising gold plating off wherever we see it. We are not about to install new gold plating. I think the strongest assurance I can give to the National Farmers Union is the one that we have given: that the important thing is to make sure that the sophisticated measures the farmers already take do count, and that they are not penalised for that. We need to get that properly recognised. As part of the negotiation, that is a very clear endeavour.

Q188 George Eustice: Coming back to this issue of crop diversification, which I know you touched on briefly with Neil Parish, what else could they do there apart from say, "You need diversity," and hope that leads to rotation? Is there another, better way that you could secure rotation in a meaningful sense?

Mrs Spelman: Absolutely. This comes back to a proper scientific base for equivalence. If you are in southern Germany, and there is a high preponderance of maize monoculture on the small farms in that part of the country, obviously in terms of a points system, persuading those farmers to diversify away from the monoculture is in equivalence terms as important as a measure here that may be completely different but also adds to the biodiversity: the replanting of hedges in a part of the country that is perhaps short of hedges, for example, or a replanting of trees where there is a shortage of trees in that locality. It is getting some scientific equivalence for those measures that are meaningful and measurable, and give the assurance to the taxpayer in each member state that the value for money and the deliverable outcome for the environment have been achieved.

Martin Nesbit: I think one of the difficulties that the Commission has imposed upon itself is not just the application of the same measures to all member states but also the annuality that comes with Pillar 1. Ideally you would have a crop rotation measure that looked at what was happening in a particular field over a succession of years. Because they want to ensure that this is checkable on an annual basis, and you can look in a given year and see if a farmer is complying within that given year, they have ruled that out for themselves. They have come up with crop diversification as a second best. I think one of the problems is that they have not, getting back to Mr Parish’s line of argument, looked enough at the behavioural responses of farm businesses to the sorts of measures that they will put in place. The impact assessment is quite weak on behavioural responses. For example, there is a significant risk that the response from mixed farms will simply be that those keeping livestock decide to get out of keeping a few fields of arable land because it becomes too complicated and too restrictive of their business decisions.

Q189 George Eustice: You would even have some plots where a farmer might rotate cauliflowers, cabbages, and oilseed rape; he has got his three crops, but there would no value in that because they are all brassica. Has that been factored into their thinking?

Martin Nesbit: They have been a bit cagey so far in the precise definition of what "crop" will mean in the diversification. That is something I think we will need to put a lot of effort on, both in terms of species and also the time of year at which the crops are being farmed.

Q190 Chair: My concern is that, if our farmers are already rotating, are they going to be asked to do more?

Mrs Spelman: Yes, they would.

Q191 Chair: On the World Trade Organisation, I understand that the agrienvironment schemes and the so-called Green Box has to be income forgone. The Commission is coming at this from another angle, describing it as an income-support scheme, which could again presumably penalise our famers. Again, I would like to be clear what our negotiating position is going to be and what support we have from other countries for it if we are currently the only ones rotating.

Mrs Spelman: All member states have to be WTO compliant. The Commission has to be WTO compliant. That is a requirement. Whatever comes out of the melting pot of the next 18 months of negotiation has to be WTO compliant. That is not optional. We have to get to that. We are all still trying to work through what is a very highly prescriptive description of the Pillar 1 proposal for crop diversification; it is very prescriptive on certain percentages-over-prescriptive, frankly. We are still working through what the unintended consequences are of that. Again, at the meeting that we had with Commission Cioloş in November, I found it quite interesting that they had not understood some of the consequences for the large-scale farming that we have in this country. I think they envisage very much, when they are thinking about this, farms that are on average much smaller, and they have not thought through some of the implications for this different scale of farming. This was to do with the planting of forage crops.

Martin Nesbit: Exactly. In a sense, that was the mixed-farming issue that I was referring to. I think it is also going to be important for us to ensure that we understand internally the range of business models and how they are potentially affected by the crop diversification measure. For example, a horticulture business that is renting a different area of land each year may actually be complying with a rotation objective but, because it is just farming one crop at any given time, would not meet the Commission’s diversification requirement. Although they are doing fine in terms of rotation, they would perversely be caught by this requirement on diversification. That is part of the reason for the paper we put on the Defra website asking for views from stakeholders: so that we get a full understanding of the potential impacts on businesses in England, but also with our colleagues in devolved Administrations across the UK, and can feed that into the Commission.

Q192 Chair: We just gave back some of the views that we heard from the NFU, and I do not think you have put my mind at rest that our farmers are not going to be discriminated against. It strikes me that we are already greening quite substantially in this country. The way that the Commission is interpreting "meaningful greening" is not as ambitious as you would like.

Mrs Spelman: No, absolutely. But as I made clear at the beginning, it is too early to say that we are going to be discriminated against. What the Committee needs to hear is that the UK Government is going out to make sure that we are not. This point, for example, about the horticulture rotation was one we raised at the meeting with Commissioner Cioloş and the devolveds in November. The Commission did not immediately have an answer to that unintended consequence. That is what 18 months of negotiation are about. They are about teasing out the negative consequences of something that is well intended but may have an undesirable side effect. That is what this iterative process is about.

Q193 Neil Parish: Isn’t one of the other ideas of the Commission to reduce the amount of bureaucracy and red tape? Isn’t most of what they are proposing actually going to increase it?

Mrs Spelman: I tend to agree with you. Actually, all Ministers of Agriculture in all 27 member states agree on this: what we need is simplification not complication. As you know-I think it is a matter for the public record-Commissioner Cioloş, faced with a unanimous call for greater simplification, wrote to all Ministers trying to assure us that it would be. The fact is that the Commission’s impact assessment tends to support our concern that it is not. It is the overly prescriptive nature of what is proposed that is causing that administrative burden to rise.

Q194 George Eustice: We talked about permanent pasture earlier and how it could be adversely affected as an unintended consequence. Have you also considered things like established apple orchards?

Mrs Spelman: Yes, for example. We raised those. We raised those to the Commissioner.

George Eustice: That is another example. If you created an incentive for farmers to scrap established apple orchards, you are actually destroying the countryside.

Neil Parish: We have to protect our cider.

Mrs Spelman: It is terribly important. Again, we raised horticulture, orchards, vines, other examples of crops that are grown in a certain way for a purpose, which is different from crops that are grown in natural arable rotation for a purpose. At the moment the proposals do not differentiate between those different types of agriculture and horticulture.

Q195 Dan Rogerson: This ties in with a view that we ought to be focused more on outcomes than processes, which is something that, as a Committee, we have sent back before, but I appreciate the difficulties that you are having on that. On a more specific level, about this issue of trying to account for what we have already done in this country, there is a view that the Pillar 2 investment in agrienvironment schemes-entry level stewardship, for example-ought to count towards greening. First of all, is it something that you support as a concept?

Mrs Spelman: Yes.

Q196 Dan Rogerson: What discussions have you had with others about that?

Mrs Spelman: It is a view that we take. We have discussed it with other member states because I think we, not just the Government of which I am part but also the previous Government, can hold our heads up and demonstrate that it was successful in getting the industry to really take on board the opportunity of agrienvironment schemes to offer something far more sophisticated to the environment in terms of environmental protection at the same time as producing food sustainably. It is important that we do not undo all that good work. The take-up rates for entry level stewardship are high; we would like them to be even higher, but to provide a disincentive so that the next generation of farmers think in some way that we need to go backwards would be a real mistake. It is recognised by the Commission that the UK is out there more or less in a league of its own, particularly with higher level stewardship schemes, which make very strong demands on farmers to address very real needs for biodiversity. They can see that we do not want a set of proposals that cut across that. My point is that, under the ecological focus areas, there may be a way forward to get proper recognition for what our farmers do, and to continue to provide the incentives so that more farmers and new farmers are attracted to that kind of vehicle.

Q197 Dan Rogerson: You support it; that is good. In terms of building partnerships to pursue that line of reform, are there other member states out there that have made steps, even if they have not gone as far as we have? Perhaps they have gone further than we have in some respects.

Mrs Spelman: Yes.

Q198 Dan Rogerson: Who are the allies there and what discussions have you been having?

Mrs Spelman: It is the group I outlined at the beginning. It is the same people. It would be Germany, who are a strong ally in this area, not least because they continue to want to make progress with their farmers where there is not such an endeavour towards environmental protection. It is the Scandinavian countries, the Netherlands, Slovenia, which has a long history and many Natura 2000 sites, and the Czech Republic. It is the Austrians, interestingly enough, for a different reason. There is a very high level of organic farming in Austria. There is a great deal of attention to the whole question of biodiversity. They might have slightly different schemes, but the principle of incentivising the farmer to protect the environment and simultaneously produce food to a high standard in a sustainable way is something that there is a lot of support for.

Q199 Dan Rogerson: So the Pillar 2 activities could be taken into account when it comes to the greening of Pillar 1 on a specific basis. Mr Nesbit seems to be looking to you on that point. Is there support for that amongst some of the countries?

Mrs Spelman: I think you are getting ahead of where it is at the moment. I think we need to remember that we have had one twohour conversation about the general principle of greening. A lot of other member states do not have stewardship schemes like we have. You cannot in a three-minute conversation persuade 26 other member states that they need to do it like we do. It does not work like that. First of all you have to establish who is really interested in meaningful greening. Then you have to establish whose agriculture systems are susceptible to benefit from greater flexibility to include the kind of approaches we take. I could not just say today, "Oh yes, we have signed them all up to exactly the way we do things."

Q200 Dan Rogerson: No, I was not expecting that. I was just wondering about this question we keep returning to about what discussions you have had so far on getting us ready for that, so that we are ahead of the game rather than waiting for the next discussion.

Mrs Spelman: I would say where we are at the moment is it is crystal clear there is no consensus on greening. I think the Commission needs a bit of help with this. If we are going to have a CAP reform, we have to reach an agreement on what greening is. At the moment what is proposed is too prescriptive, there is too much emphasis on one size fits all, and there is not going to be agreement on that basis. We now embark on the next phase, which is to come forward with something that may work more effectively. We are at that early stage of testing the waters with people about taking that kind of approach. My desire is the same as yours, which is to make sure that the efforts our farmers have put into entry level stewardship, and subsequently higher level stewardship, is not lost-that it is recognised, becomes achievable, and is incentivised under the reform that the new CAP takes. Martin was poised to say something, so we should let him.

Martin Nesbit: I think it was essentially the same point, but also other member states are unlikely to listen to us if we go to them saying, "You must design the regulations in this way to deal with our particular issue on environmental stewardship and entry level applicants." We need to come up with ideas for how the regulations can be crafted to meet our objectives around entry level stewardship and, at the same time, provide the same sort of flexibility for those member states as well. We are not going to be going out there and saying, "You must protect entry level stewardship in the commitment."

Q201 Dan Rogerson: I suppose that is the broad question about Pillar 2 counting when we are considering the greening of Pillar 1-that we do not, as the Secretary of State was saying, lose the incentive to sign up for optional schemes because they think, "Well, I have to do this crop rotation. I do not particularly want to do it, but I have to do it in this prescriptive way, so there is no way I am going to do that as well because I am restricting my flexibility to run my business."

Mrs Spelman: Absolutely.

Dan Rogerson: And you answered that. However, bringing it back domestically again, in preparation for that, if we are going to have to meet them part way on something, what changes might have to happen to the stewardship schemes?

Mrs Spelman: We have made some provisions for that, which I think other witnesses have explained to you, in writing to farmers to make sure we get no falling off arising from the uncertainty, in that new entrants to the stewardship schemes benefit from clauses that would not penalise them if there is some huge change in the CAP that they feel deterred them from signing up.

Q202 Dan Rogerson: I understand that. I just meant changes in the way that the scheme operates so that it might meet Pillar 1 greening, as much as being a specifically Pillar 2 activity, so there might be a slight merging in order to allow this to happen so that we can secure the good work that has gone on.

Mrs Spelman: I think it is the other way round at the moment, isn’t it? It is trying to make sure there is sufficient flexibility under a menu of proposals under Pillar 1, so that our entry level stewardships might be taken into that wider menu. That is what we are striving to achieve.

Q203 Dan Rogerson: So you do not think there would have to be any changes, necessarily, to the way that the stewardship schemes operate?

Martin Nesbit: I suspect you would have to make some marginal changes, because some of the requirements might now be met by Pillar 1 rather than Pillar 2.

Q204 Dan Rogerson: That is what I was trying to get to: the scheme might have to change, but you are at an early stage at the moment of thinking about that.

Mrs Spelman: Yes.

Q205 Amber Rudd: It is very encouraging to hear what you are saying about ELS schemes-that they could be fungible, potentially, with the menu that is being proposed. You referred to the good works that the farmers are doing, but what we have heard too is that it is important to maintain their good will for the effort that they have put in, and they are watching nervously to see if the effort that they have put in, which they feel has been good and good willed, is going to be recognised so that they can move on from that.

Mrs Spelman: Jim has publicly stated at the Oxford Farming Conference that we really understand that, and we are going out of our way to make sure that they get proper recognition for what they have done, that they are not penalised in any way, and it does not count against them. We have heard that loud and clear, and I assure you on that front we are doing all we can to make sure that is the case. It is acknowledged at this early stage of the negotiations that what we do here is extremely good, and the Commissioner understands; he does not want to stop farmers doing that. That is quite clear.

Q206 Richard Drax: Secretary of State, may I say that the road to hell is paved with good intentions.

Mrs Spelman: That is a cheery start.

Richard Drax: Listening to all this, it is extraordinary to me. Can I just touch on the greening a bit further? I think you have already touched on this yourself, but just reassure us that English farmers who opt out of these agri-environment schemes will not be penalised.

Mrs Spelman: The new entrants, yes. That is to deal with the point that has just been raised by Mr Rogerson and also by Mr Parish. We are very conscious of the uncertainties around the transition from the existing CAP to the new CAP. What you do not want is a dropping off or falling off as a result of the uncertainty.

Q207 Richard Drax: So you would not sign anything that is going to penalise farmers coming out of these schemes.

Mrs Spelman: There are new clauses for new entrants that give them some protection.

Q208 Richard Drax: What about those who are in it at the moment?

Mrs Spelman: The new entrants from now. The new CAP is not coming into effect until 2014.

Q209 Chair: Could we just hold that for one minute so that I can understand it? If a farmer is in a current ELS, it is the automaticity. Do you believe, Secretary of State, that they should qualify?

Mrs Spelman: I did not quite hear what you said. Sorry, I am a bit deaf this morning from a cold.

Chair: If a farmer is currently in an ELS, an entry level stewardship scheme, should there be an element of automaticity in qualifying for the new greening measures so they are not going to want to suddenly undo all the good work that you have done-successive Governments-in creating these ELS schemes, and have a mass rush for the exit? Is there going to be an automaticity?

Mrs Spelman: It is a five-year renewable scheme. In saying that the new entrants benefit from-

Chair: No, I am not talking about new entrants. A farmer currently will be in a transition scheme effectively because he is currently in this five-year scheme that he has signed up to-it could be me; I have no idea. A farmer in my constituency who is in a scheme suddenly may feel he wants to get out of that scheme because he will no longer be deemed to be greening and you are going to force him out, or the Commission is going to force him out.

Mrs Spelman: We do not know yet, of course.

Q210 Chair: No, but we want to know if you are going to fight to protect.

Mrs Spelman: Of course I will fight for them.

Q211 Chair: All credit: we are ahead of the game so we want to encourage those to stay in the scheme, to see them to the end, and then talk about new entrants.

Mrs Spelman: Might I just explain to you how we have changed the scheme to cater for this situation?

Chair: Not for those currently in the scheme.

Martin Nesbit: On the automaticity point first of all, and this goes back to what I was saying to Mr Rogerson, we are unlikely to be able to design the European legislation so that it says, "Anyone in ELS, tick." It will not be that automatic, but we need to ensure that we get as many of the sorts of things that are done under ELS to count as possible. The other issue is around whether someone who is already in an agrienvironment agreement, if that changes substantially because of a change between the boundaries of Pillar 1 and Pillar 2, then has the possibility of saying, ‘Well, no. Looking at this afresh, I no longer think this makes business sense for me." The expert on this hopefully will nod as I say the policy intention has to be that you give someone that possibility to walk away if the agreement has changed substantially.

Q212 Chair: Without penalties?

Martin Nesbit: Without penalties-without having to repay money for the receipts and so on.

Q213 Chair: Does Mr Dondi concur?

Arik Dondi: Environmental stewardship has a long-term agreement at its foundation, which is one of the things that we like about it and that we do not like about any provisions that are renewed from year to year. Our intention would be to maintain as much of that long-term agreement even into the next CAP period. The provision we have in the existing agreement is to protect the agreement holders from any changes that they would not want to go along with. It is not to enable us to suddenly end lots of existing agreements; that is not something that we think would make sense, because we need them to be long term in order to get the environmental benefits.

Q214 Chair: Surely you are trying now to encourage new entrants to sign up to the existing ELS schemes. Why should they if they have this big question mark hanging over them?

Mrs Spelman: They have new clauses that make it crystal clear that they will not suffer any penalty if they come out. This allows me to make a wider point, which I would like the Committee to know because it is very important for everyone to know this. As I am told, the last CAP reform, the implementation of which was delayed, caused really significant problems for the industry in terms of the transition from the one before last to the one we have today, with cash flow implications as it changed payment method. We signalled to the Commission already in 2011 that they need to be thinking now about making provisions so that the industry does not suffer on the changeover from the old regime to the new. We have flagged that up with them at the very earliest opportunity. There are some practical things they could do now that might help prevent any difficult gear change at the moment of passing from one to the other.

Q215 Richard Drax: If these farmers, for whatever reasons, are alarmed by these greening schemes and do not re-enter or enter, could this undermine your ability to deliver the aims of the Natural Environment White Paper in any way, shape or form?

Mrs Spelman: The Natural Environment White Paper has a lot of aims, of which the role of landscape-scale management in the interests of environmental protection and biodiversity is one part. There are lots of facets of the Natural Environment White Paper that are proceeding that are totally unrelated to the CAP: nature improvement areas, biodiversity offsetting and so on.

Q216 Richard Drax: Do you think that, if the farmers do not go into the schemes, it could affect the aims of the White Paper?

Mrs Spelman: It is a hypothetical question. It is too early in the negotiations on the CAP for me to be able to comment. Since the Commission’s proposals were published, we have monitored each month the uptake of stewardship schemes by new entrants, and we are not seeing any evidence that interest is waning.

Q217 George Eustice: I want to move on to the issue of food security and how these proposals sit with that. One concern I have always got is that the CAP reform process is so slow that they are always in danger of fighting the last battle. Some of the evidence we have received says that not enough weight is being put on the issue of food security and food production, and that the greening proposals do not take enough account of that. Where do you stand on this? Do you think anything could be done to persuade the Commission that actually food security is important and these proposals, as well as doing some greening, have to recognise the importance of that?

Mrs Spelman: I think we touched on this already. I do believe it is very important. The Commission were right to identify food security and climate change as the two greatest challenges that agriculture is facing. They are interrelated of course, because the increasing frequency of extreme weather events is undermining the capacity of the industry to deliver the increased production of food on a sustainable basis that we have identified as a priority in our business plan. The drought conditions that we are going through at the moment are a very good illustration of that. If we do not get significant rain, that is going to affect the ability of farmers to irrigate the crops for next year’s food supply. These things are inextricably linked.

The interface with greening is very important. It comes back to my point that, if you take the Commission’s concept of ecological focus areas and you provide a sufficiently flexible menu for how the farmers could deliver meaningful greening through EFA by such measures as retaining or replanting hedges, planting trees and buffer strips-many of the things that our farmers already do that are not necessarily that widely undertaken in other parts of the European Union-you are not compromising the ability to increase food production sustainably at the same time as improving environmental protection. That has to be the objective that we are trying to achieve.

Q218 George Eustice: That is quite a challenge. You mentioned earlier that ecological focus areas are set-aside by another name, effectively. You are effectively saying that, providing there are other mitigating measures taken to improve habitat, you could still produce off that land; is that your starting point?

Mrs Spelman: That would be my starting point, because we have the clear scientific evidence here that you can do it. There has been significant replanting of hedges by farmers whilst continuing to produce more food sustainably. Buffer strips have demonstrated their benefit to wildlife, whilst not compromising the ability of the farmer to fulfil his contracts, improve his yields and produce food to a high standard at a price we can afford. I think we are in a strong position. The UK can provide real leadership in this area. If we could get the other member states to share our vision for that, we would have helped to achieve a significant improvement in those twin objectives of protecting the environment whilst producing more food to meet the demands of food security.

Martin Nesbit: On environmental focus areas, I think one of the things that we might need to do is move away from looking at a crude percentage application of them and start thinking about what sort of active management is taking place. The environmental benefit of land in environmental focus areas will not be just linked to a percentage of a farm holding; it will be linked to the nature of the activity that is going on in that area-the active management that the farmer is putting into it.

Q219 George Eustice: So you would not support a hard and fast 7%? You are much more for an outcomes-based approach?

Mrs Spelman: I now gather that is something the Committee shares a view on. Yes, it is very important. When the Commissioner is worried about proving to the taxpayer that additional public goods have been provided by public subsidy, one of the questions we ought to be asking as taxpayers is: is there evidence that there has been active management of this ecosystem to produce this outcome? That is what we want to know, not a sort of crude proxy for whether taxpayers’ money is being spent in a certain way without asking the question: did it produce an outcome?

Q220 George Eustice: Leading on from that, where do you stand on this idea of non-productive landscape features? This is non-productive land where nothing can be done on it. It will not surprise you to know that the NFU and the RSPB have taken quite opposite views here. The NFU say that any non-productive land should count towards their 7% if that is the route you are going to go. The RSPB say that would be meaningless; it has to be an additional 7% over and above the existing non-productive land. Have you got a side that you take on that, assuming we ended up still being stuck with the 7%?

Mrs Spelman: I have listened to both their views, but I think in the last answer we have the right answer, which is that public subsidy is going to be provided because we believe a public good will be provided for that money. That means a measureable outcome, and I think that means the farmer demonstrating that an outcome has been achieved on the non-productive land. I think that is where the solution lies.

Q221 George Eustice: Going back to what we were saying earlier about flexibility and giving member states more, is determining what constitutes an ecological focus area something that you would like to see decided and determined at a national level?

Mrs Spelman: It needs to be a common standard, doesn’t it? To achieve a sort of equivalence, we have to have some sort of agreement. The measures that you might take in Estonia, which might be different from the measures that I take in England, have to have a degree of equivalence for it to be fair. The UK is in the luxurious position of having developed scientific tools of a very high standard that can answer that question. Our national ecosystem assessment tool will actually be able to tell whether a different measure in a different country is producing the amount of natural capital equivalent to a different measure taken in another one.

Q222 George Eustice: You are talking about an equivalence of outcome rather than equivalence of procedure, in effect.

Mrs Spelman: Yes, absolutely, because it is very different. Back to my point: the taxpayer wants to know whether we delivered what we said we would, not did we follow the rule.

Q223 George Eustice: The logic of more flexibility and giving individual countries more ability to implement to deliver common outcomes seems sensible, and we keep coming back to asking what we are doing to argue the case and to try to make that happen. I suppose what I find quite surprising is the difference from what seems to have happened on the Common Fisheries Policy, where for some reason the Commission seem to be quite boldly going down a route of saying, "Let’s try to devolve power down and let individual countries take it."

Mrs Spelman: They have not done it yet.

George Eustice: Well, they have not done it yet, but the intention seems to be there, whereas on CAP the Commission seem remarkably inconsistent with the approach. I wonder why you think that is. Is it because there are more countries involved, and different counties-the Eastern European countries? Or is it just that the Commissioners are different?

Mrs Spelman: That is a very big, sweeping, philosophical question. In my limited time in post I have seen a huge temptation for the Commission to be overly prescriptive, and a push back from the member states, who want to see greater devolution so that the solutions are fit for purpose at a local level. The same is true of fisheries. It was Mr Drax who said the road to hell is paved with good intentions. The intention to devolve needs to be followed up by the practice of devolution. I think that we would be a strong proponent of doing that. Whether it is fishing or farming, I think that it makes sense, and a scientific basis can be found to demonstrate that it can be done more effectively, with some flexibility that produces a better outcome that we can measure.

Q224 Barry Gardiner: Could I just clarify something on this? At the moment the current proposals say that the definition of features for the EFA will be for the Commission to decide, don’t they? So as things stand, you will not be able to impose a definition from Defra.

Mrs Spelman: Yes, but this is at the early stage of negotiation, where we are persuading the Commission of how to widen the definition of features. When you bring the unintended consequences before them that they have not thought of, with their existing constraints, they are forced to take a step back and rethink what these things should be.

Q225 Barry Gardiner: Just for clarity, would you rather that member states have the ability to set them themselves, permitted by the Commission, or would you agree to, as it were, nationally based ones that the Commission say would be appropriate for different countries? Again, I am trying to feel my way forward here. What is the strategy that you are pursuing? What is your objective?

Mrs Spelman: The strategy is the one I think we have been talking about on and off. There is no consensus around the greening. Everybody is in completely different positions, and the Commissioner will not succeed with the present set of proposals in getting an agreement. We are trying to be helpful here, and we believe there is a better way forward by introducing greater flexibility into the definition of ecological focus areas, but making sure there is an equivalence that is objectively measureable so that member states are given a degree of flexibility over which measures count as part of the ecological focus areas and can prove to the Commission that they are of equal weight. That is our strategy.

Martin Nesbit: I think that is right. In technical terms the broad parameters would be set down in the legislation that is agreed by Council and the European Parliament. Where it refers to Commission decisions, the Commission would have to bring forward proposals to a committee of member states. They would then be discussed in that committee, and the committee would then vote on them. In a sense it is a way of policing the Commission’s use of secondary legislation in the European context.

Q226 Barry Gardiner: Can I ask about the way in which these features and the EFAs will link up with the Natural Environment White Paper, and the desire within the White Paper to create landscape-level ecological networks. We heard from the Wildlife Trusts; they say that there is no mechanism within the proposed reforms for achieving this. To quote them fully: "There is huge potential for using this kind of ‘land sparing’ to protect, expand, and link areas of value for nature to create ecological networks and restore healthy and fully functioning ecosystems. There is no mechanism within the proposed reforms for achieving this, and the risk is that we end up with a scattering of disconnected fragments of land scattered across the landscape." We are all agreed that what we want is connectivity here. How are you proposing to introduce that? How would that, on a points-based system, get additional value of recognition?

Mrs Spelman: That is relatively simple to answer. The agrienvironment schemes are an excellent opportunity to provide a network of wildlife corridors and what are known as stepping stones in the environment to allow the migration of species and protect and, indeed, enhance the biodiversity. We would throw the weight of the agrienvironment schemes behind our endeavour in the Natural Environment White Paper to achieve those wildlife corridors and networks. Obviously that is one of the reasons we are fighting very hard to make sure that, in the new CAP, the agrienvironment schemes continue and, indeed, are enhanced. We believe that if we can get them recognised more flexibly across Pillar 1 and 2, in whatever forms those take in the future, it should be a very important part of us delivering that aspect of the Natural Environment White Paper. It is a bit too soon to say that is definitely going to happen. Absolutely it is in the concept that is behind the strategy that we are taking in relation to the greening of the CAP.

Martin Nesbit: The only thing I would add is that it is very difficult to get that kind of targeted environmental benefit from a broad-brush Pillar 1 scheme. We would need to be able to explain to a farm business what the rules are that they have to meet. I do not think a system that involves Defra officials, Natural England and the RPA going out to the farm and telling them precisely where they had to craft each piece of EFA would work. That is the sort of thing where you get significantly greater benefit through targeted expenditure under Pillar 2, and where it is the long-term commitment to that particular land management choice that you want to underpin. Again, the long-term nature of Pillar 2 is important.

Mrs Spelman: And the multi-annual nature of Pillar 2. That is the big thing we must not forget. That is one of the reasons we are strong advocates of a strong Pillar 2.

Q227 Chair: Would it encourage farmers in areas of water stress to retain water?

Mrs Spelman: Absolutely, that ticks all sorts of boxes. It helps the food security. Measures in river catchment areas have huge advantages in terms of the challenges of climate change and food security, whilst at the same time protecting and enhancing biodiversity. That is one of the reasons why those are very attractive bids from farmers under higher level stewardship. In fact, if you look at the water stress across the whole of Europe-I speak now with my Environment Minister hat on, attending a different Council meeting-that kind of measure is precisely what the CAP reform should be promoting. If I have one frustration, it is that the challenges of climate change and food security were correctly identified, and yet those very real challenges are being missed by what is proposed. It could be such an important opportunity in all the river basins across Europe to make a step change in terms of the way farming is conducted in those catchment areas and to incentivise the farmers to do that as part of the CAP reform.

Q228 Chair: Have we not got a little local difficulty in that it is deemed to be a reservoir, so it falls right slam into the Reservoirs Act, so it will not happen?

Mrs Spelman: I am not sure what you mean.

Q229 Chair: Well, Pickering reservoir, retaining water upstream. It was deemed to be a reservoir and falls under the safety mechanism. We are just wondering when we are going to hear the revised guidelines.

Mrs Spelman: Perhaps not in the context of a Select Committee meeting, but as local MP I am very happy to come back to the question of specific propositions.

Q230 Chair: I think we are all keen to encourage our farmers to do this-

Mrs Spelman: Absolutely.

Chair: -and Mr Parish is champing at the bit to come in on this, but they fall at the first hurdle. In this country it simply cannot happen.

Mrs Spelman: The specific scheme in Pickering-

Q231 Chair: No, any over 10,000 cubic metres will fall slam within the safety regulations of reservoirs.

Mrs Spelman: The specifics of the Pickering scheme failed on value-for-money criteria.

Q232 Chair: Take Pickering out of it, but anybody who wanted to do it in the Somerset Levels is going to fall foul of the reservoir safety rules.

Mrs Spelman: There are other river catchments, where we are seeing the uptake through higher level stewardship schemes, that are having the benefit of-

Chair: Which are currently going ahead at the moment?

Mrs Spelman: Under SCaMP and South West Water. I have been to see them myself on Dartmoor. We have evidence of where it is working well. In relation to Pickering, I am quite happy to take this offline and look specifically at it again.

Q233 Neil Parish: I absolutely agree with where you are coming from, Secretary of State. One of the arguments in Somerset is to actually pay farmers more to take the water, because the trouble is if you take the water for a greater length of time, you have much less availability to use that land for growing grass even, because of the length of time it is flooded. Of course, you can then help save the towns from flooding, probably at Bridgewater and Taunton. Is there any way we can look at enhancing the payments, rather than just giving loss of earnings, as they are at the moment?

Mrs Spelman: I suppose if I were to stand back from it, this round of CAP reform ought to move to payment for ecosystem services. Given the scale of the challenges that the industry is facing, correctly identified by the Commission, of climate change and food security, the Commission has not proposed payment for ecosystem services. I think probably the CAP reform after this one ought to be the one that makes the transition. This is a bit of a missed opportunity. However, with 18 months to run, we can go on pressing this case. We do it here; it is making a difference here. I think it is something that everybody can understand. The taxpayer can understand. If you explain to the taxpayer the benefit of paying the farmer to farm in a certain way so that it costs less later to clean up the water, or that they are less likely to be flooded, that is something that every taxpayer can understand the benefit of. I would love to see it in this CAP reform, but these are not my proposals; these are the Commission’s proposals. I will do what I can to get them to take account of it, but we are not yet there. What is interesting, as I mentioned, is other Commissioners looking at the amount of the EU budget spent on agriculture. Commissioner Potočnik in particular looks at this opportunity as a really significant opportunity to make some progress in that area. We need allies beyond DG AGRI if we are going to get that change.

Q234 Dan Rogerson: I think I know the answer to this question, but I will ask it for the record anyway. The funding of agri-environment schemes through RDP or whatever depends on modulation. Are you intending to press for the continuation of the current state of affairs?

Mrs Spelman: I know what you are saying. The answer is yes.

Dan Rogerson: That is the short answer.

Mrs Spelman: It is a short answer. It is a little complicated by the fact that, as you know, the Commission wants to put an end to the modulation. What we have managed to achieve so far in terms of improving the original proposal is to increase from 5% to 10% the amount the Commission’s formal proposal says we can take from Pillar 1 to Pillar 2. But the short answer to your question is "yes, of course".

Q235 Dan Rogerson: So yes, but so far at a lower level than England has been currently doing.

Mrs Spelman: Absolutely, but, as you know, this is a negotiation.

Q236 Dan Rogerson: If yes then, as it is in your response there, the criticism from farmers, who are over our shoulders here putting questions to you, is about competiveness. If other farmers elsewhere in the EU are not having that part of their payment taken away in terms of modulation from Pillar 1, that affects their competitiveness because there is more payment disappearing from Pillar 1 for our farmers. How do you respond to that?

Mrs Spelman: Perhaps the others would like to come in, but of course the payments for market orientation and competiveness are through Pillar 2. You have to secure the funds for Pillar 2 if you are going to support innovative measures for competition and market orientation. I think they have a motivation in helping us achieve that. That has been part of our strategy. Do you want to come in on that, Arik?

Arik Dondi: Only to say that competitiveness is something that we try to promote through Pillar 2.

Q237 Dan Rogerson: I am sure, but you have the objective of increasing agricultural exports from the UK.

Mrs Spelman: Yes.

Dan Rogerson: There is the argument that this is an unlevel playing field because more of the payment is going from our farmers than from others’.

Mrs Spelman: The competiveness measures under Pillar 2 help farmers increase production and help them to be more market orientated and take advantage of export opportunities. Without those measures in place under Pillar 2, those are resources they would not otherwise have. I think it is important to try to fight for those resources to be available. That has been what is behind our achievements so far to increase the amount that we can move from one Pillar to the other. We are not alone in seeking some flexibility; there are other member states.

Q238 Dan Rogerson: Finally on this, do you think there is yet more of a battle to convince farmers of how the money is used? If I talk to farmers, they will talk about the stewardship schemes. They might have in the past been a bit hesitant to join higher- level schemes: they were worried about the complexity and so on, and the amount of effort that was involved in those applications. I think that has improved. Despite all the teething troubles and birth pangs of the system for the main Single Farm Payment, we are getting to a place where farmers at least understand what they are getting and why they are getting it. Where I do get complaints, though, is where we lose all this money in modulation. What are we getting for it? Where is it coming back? Undoubtedly, there is some good work being done, but clearly I think there needs to be more done to get that across to farmers. Would you agree?

Mrs Spelman: Yes, I would agree with that. I think we are being helped by the articulation clearly by industry leaders of the importance they attach to stewardship schemes, increasing the uptake of those schemes, and increasing the uptake of measures that help farmers produce their competiveness and their market orientation, and sharing our vision that there is a world out there that needs feeding, which the UK can play its part in, particularly in emerging markets. I think that it is improving all the while, but it never hurts to re-emphasise what the benefits are of having some resource for competiveness and market orientation. In that regard, I welcome the Commission’s proposals for improved innovation, because I think that, again, part of making the whole industry more competitive, more market orientated, is encouraging it to be more innovative. There are resources in the proposals for that.

Q239 Dan Rogerson: But we are going to have to do it out of 10% rather than 19%.

Mrs Spelman: At the moment. This is a negotiation-the early stages of a negotiation.

Q240 Dan Rogerson: Would you like the flexibility to go higher?

Mrs Spelman: I would like greater flexibility; I think flexibility is to our advantage.

Q241 Neil Parish: Carrying on from Mr Rogerson’s question, the simple answer is, if we are using 18% or 19% modulation at the moment to pay for our higher and entry level schemes, how are we going to fund the gap between 10% and the virtually 20% I think it is now?

Mrs Spelman: I do not think it is as high as 18%. As I say, this is a negotiation, so the proposals have already come up from 5% to 10%, and there is a long way to go on this one.

Q242 Neil Parish: It is certainly quite a way over 10%. I think it is 17% or 18%. Do you have the figures?

Martin Nesbit: I do not have the figures in front of me at the moment. One of the things that clearly will be considered in these negotiations is the allocation of funding under Pillar 2, and a more objective allocation of funding under Pillar 2 would lead to the UK having more money available for Pillar 2 schemes.

Mrs Spelman: That would help us with your problem. The UK got a very poor settlement in 2005, and essentially that device of modulation was to correct the poor outcome of that CAP reform negotiation. We sincerely hope that, by calling for a stronger Pillar 2, we can do better than that, and that would help resolve the problem you are describing.

Q243 Chair: Can you give us a heads-up as to when you are going to know what the allocation is?

Mrs Spelman: I would love to know, but the Commission will not tell us. There is quite a little frustration amongst Members.

Q244 Chair: Returning to Mr Eustice’s point, the general understanding is that there is going to be a great deal of progress made under the Danish Presidency. Then under the Cypriot Presidency-

Mrs Spelman: Whose understanding?

Q245 Chair: Are you saying today that there will be decisions taken under the Irish Presidency for sure, and that includes the three-month period of common position?

Mrs Spelman: The Danes know that they are stuck with the problem that the French are not in a position to make significant progress until their election has taken place in May. That leaves the Danes with one month of their Presidency. They are hoping to make progress on greening and some of the other issues. The Irish are hopeful of getting the deal on their Presidency; everyone who has the Presidency wants the kudos of getting the deal. It could be under the Cypriot Presidency. I cannot tell you when it will be, sorry. What Ministers of Agriculture have said to the Commission is we want the Pillar 1 and 2 allocations. I think the original plan had been to give Pillar 1 but not Pillar 2 until later. Well, it is a package. As you would expect, I am part of the unanimous call for those allocations to be made known together.

Q246 Chair: There would still have to be the common position statutory period, and that will kick in presumably at the end of the 18-month period, or at what stage would you expect that to kick in, Mr Nesbit?

Martin Nesbit: Can I make some wild speculations about the timetable?

Chair: Yes. We are not going to hold you to account, but it would be helpful to know.

Martin Nesbit: The European Parliament is obviously thinking about its timetable for adopting its first reading opinion. It looks likely that will not be until the second half of this year. There is also a debate within the European Parliament about whether it should adopt an opinion in advance of the Heads of State and Government agreeing on the multiannual financial framework, or whether it should wait until that clarification of the overall budget numbers and then decide. One option is that they would adopt a position in advance but say that it is dependent on the level of budgetary resources that the Commission has suggested in its draft multi-annual financial framework. At some point, possibly the second half of this year, we will have a first reading opinion from the European Parliament. I would then expect quite rapid progress towards a common position in Agriculture Council because, of course, there will have been discussion in parallel. Then the process of co-decision kicks in.

Mrs Spelman: This is where we started with Mr Gardiner’s question about whether we are working with other European member states. I think it is fair to say in front of Mr Nesbit that he has already started working very hard to help the Cypriots with their Presidency. A lot could be achieved under the Cypriot Presidency, but you need the support of other member states to create the right circumstances in which that can occur. We have very good bilateral relations. It has involved quite a significant amount of time travelling to and from Cyprus.

Martin Nesbit: Do not underestimate the technical skill and ability of the Cypriot agriculture ministry. They have some very good people there.

Chair: I was not; we are simply in new territory, with it being the first ever. Trans-European networks and others have been very different; it was just to give us an idea. Mr Parish has the last formal questions, and then we have some informal questions as well.

Q247 Neil Parish: I want to go back to the fact that we do not think that this proposal is going to be any form of simplification. In fact, we think it is going to be a complication. Now we have to look at the Rural Payments Agency and their ability to administer yet another policy. Can I be quite blunt and say that we are not entirely convinced, even after six or seven years, how good they are at administering the complex policy set up by the last Government? Where are we on this? Are you confident that, one, they will have the resources, and, two, they will have the ability to be able to deliver a new policy? What we do not want is the huge debacle that we had for years last time.

Mrs Spelman: That was a very unhappy chapter for the last Government, and I think everyone in this room should not underestimate the difficulty of unscrambling the problems. However, you would expect to hear that, in the interests of using tight resources prudently, we have very carefully allocated moneys to the RPA for the future options, which in any circumstances we would have to invest to be sure of the ongoing ability to pay farmers on a regular basis what they are due. The difficulty is not knowing in advance whether we will definitely have an area-based payment system, but I think it is pretty clear now that we will, which is actually helpful to efforts to try to get that system working well. In fixing the problems at the RPA, we have to be very, very careful to spend additional resources on the features we are definitely going to need in the future.

Q248 Neil Parish: The UK coordinating body has particular concerns about the crop diversification, because they are going to have to look at all the farms and whether they have the grassland and whether they have the different crops. Then we were talking about the ecological focus areas, and at least 7% of that has to be there. The administration costs of this could be enormous, complicated, and previous experience of the RPA is that they have not got a hope in hell-excuse my language-of actually delivering it.

Mrs Spelman: We should not underestimate the fact that, although it was a very painful experience for the United Kingdom to go ahead of the pack and establish an area-based payments system, it was for a very good reason. The motivation was absolutely right: to make sure that the people actually doing the farming got the money. That was the right motivation to have. The good news is, compared with all the other member states who have to transition to area-based payments, we have done a huge amount of the work: the mapping and the preparation for the next round. The one that really worries me, Mr Parish, is the definition of an active farmer. We have explained to Commissioner Cioloş that he has no idea how complicated it would be to mesh the data from Her Majesty’s Revenue & Customs on all the individual funding streams that a farmer already has, in order to establish what percentage of his income comes from farming, with an area-based payments system. Quite frankly I do not think the Commission has thought that through either, nor the anomalies such as the National Trust, which is a huge landowner with very diverse funding streams. It might fall foul of the definition of being an active farmer. That is what the negotiations are about. They are about pointing out to the Commission the practical problems that would be presented by the proposals as they stand, and ameliorating those as far as possible, so those problems do not present in the outcome.

Q249 Neil Parish: Do you feel other member states also believe that this is going to add a huge amount of complexity?

Mrs Spelman: "Active farmer" produces as much of a hubbub of discontent as the greening does at the moment. There is unanimity on simplification. There is a lot of support for measures for younger farmers. There is support in principle for greening, but no broad consensus. There is a lot of concern about the complexity of the active farmer definition. These are early days, but that is where it stacks up.

Q250 Amber Rudd: In terms of reducing complexity locally, one of the things that the Government instituted was the Richard Macdonald review, which of course we and farmers were hoping was going to have some timetable for implementation. Could you just give us an update?

Mrs Spelman: You will have to watch that space. Imminently, you will hear the Minister of State make an announcement.

Q251 Chair: Could we have an indication of time?

Mrs Spelman: Imminently.

Q252 Chair: This month, next month?

Neil Parish: How imminent is imminent?

Mrs Spelman: Within a month.

Neil Parish: Within a month.

Mrs Spelman: I cannot do the exact sums, but approximately a month.

Chair: Approximately a month?

Mrs Spelman: Yes.

Barry Gardiner: I am glad you said what you said about active famers, because it does seem an absolute nonsense, this 5%. There may be certain farmers who have a lot of income from elsewhere historically, hereditarily even, who spend 99% of their time doing nothing but farming. I am glad that you are on top of that one. I am worried about what you said about young farmers and small farmers-not height-challenged farmers. What I am concerned about here is that the definition you say is getting a lot of traction around Europe is for under 40 years of age. Surely one wants to attract new entrants into farming, but to say that they have to be under 40 years of age-

Mrs Spelman: I have not said that.

Q253 Barry Gardiner: No, but that is the proposal as it is at the moment, which you said there was a lot of traction for and that the UK is agreeing with.

Mrs Spelman: There is for the principle, but there is a lot of concern about the prescription. Everyone agrees that we need to attract new entrants into farming and that young farmers find it difficult to get into farming. I do not think there is any dispute about either of those statements. The prescription the Commission has-this has nothing to do with greening now; it is the wider context-is not receiving the broad consensus that the Commission would like. There is a lot of work to do on that yet. We have not actually formally discussed that.

Q254 Barry Gardiner: I take you point about getting the mechanism right; obviously that is critical. But the definition, it seems to me, will fall foul of our age discrimination legislation. It would be very interesting to know what legal rulings the UK has taken on that issue.

Mrs Spelman: The line that we are taking on young farmers is that we agree with the principle that you want to attract more young farmers.

Q255 Barry Gardiner: Can we talk about new entrants? I think that is the principle.

Mrs Spelman: You want to attract new entrants into farming, but precisely because what often deters them is the fiscal and legal landholding regimes, which are not within the competence of the Commission, it should be devolved for a local solution to that challenge. You are not going to solve the problem of bringing new entrants into farming when you have diverse inheritance laws and diverse fiscal regimes regarding inheritance of land. That would be my stance. I am happy to use the language of "new entrants".

Q256 Barry Gardiner: On a simplified payment scheme for small farmers via a lump sum, it says "irrespective of farm size". This is insanity, isn’t it?

Mrs Spelman: I would not dare use quite such an extreme word in my negotiating capacity, but I have very serious concerns around that. 2.3 million farms would be brought into the definition that the Commission presently has. It has not been negotiated or discussed yet, but it is something around which we need to have a serious discussion.

Q257 Barry Gardiner: I remember under the Austrian Presidency they got one of their young farmers to come in and talk to Ministers. He explained, very eloquently, that he managed an orchard, which was two or three hectares, and six cows, and he had a wife; how could we possibly expect him to be able to do all of that unless he had the support of these payments?

Chair: I am very anxious to allow in those two remaining colleagues who want speak.

Barry Gardiner: If we were trying to do this sort of pork barrelling in the UK, we would be told that this is a measure that is to be under Pillar 2 and it has to be for rural social purposes. It could never happen in that way, and yet it seems to be gaining traction.

Mrs Spelman: We have not yet in Council had a substantive discussion on small farmers. We need to, and your concerns would be concerns that I share. I will be articulating the UK’s concerns on that once it comes onto the agenda.

Q258 George Eustice: Just coming back to the new entrants, I think it is important because it is a startling figure. Something like 70% of all farmers are over 60. Have you done anything to appraise the Welsh Government’s scheme on this? They have a new entrants support scheme.

Mrs Spelman: Yes.

George Eustice: Also I know in Cornwall they piloted something called the Fresh Start scheme.

Mrs Spelman: Both the Welsh and Scottish Governments, and as I said earlier, the deterrence to new entrants is often to do with the inheritance laws or the fiscal regime of the country that makes it particularly difficult for new members to come in. For example, in Scotland one of the problems is it is fiscally more interesting for an aged landholder to hang on to the land than to subcontract to a tenant when they lose out under a fiscal measure. There are things I believe that we could do domestically, and should do, to try to encourage new entrants into farming. It is not a unique problem that we face. Right across Europe the age profile of the industry is increasing. Given the challenges of food security and climate change, it should be a subject of concern. We certainly can do certain things domestically, and we need to look closely at what is proposed under CAP reform to operate at an EU-wide level to see whether it will help us in our endeavour to encourage new entrants into farming.

Q259 George Eustice: Do you think the answer is to perhaps encourage share farm agreements?

Mrs Spelman: I do not want to be that specific. As I say, the discussion paper is out there on our website for everybody to put their own views forward as to what, in their view, from their experience in the nation they live in in the United Kingdom, would help bring new entrants into farming, because that is what we would like to see.

Q260 Chair: Bringing you back to my earlier question about tenant farmers, how will the definition of an active farmer affect tenants and landowners in this country? Would you be minded to press for a proposed definition of an active farmer making clear whether tenants or landowners should receive Pillar 1 direct payments? There is a particular background to that question, of which you might be fully aware.

Mrs Spelman: The definition of active farmer ought to help the tenant farmers because the outcome we are after is paying the person who actively manages the land, which is a tenant. That ought to help the tenant farmers who may feel disadvantaged with the way things are at present or, indeed, the way things are proposed at present, until such time as the proposals are ameliorated.

Q261 Thomas Docherty: Secretary of State, you mentioned in passing earlier the discussions you had had with devolved Administrations. Can I press you briefly to set out in a little detail the nature of those discussions and how you will ensure that the interests of all four nations are heard in Europe?

Mrs Spelman: I think I have explained to the Select Committee before that, when the coalition Government was formed, we agreed to the Respect Agenda, which defines the relationship between us and the devolved Administrations. It is of particular interest to Defra, because we probably have more interaction than any other Government Department. Systematically, at Council meetings, in my case two meetings a month-Environment Council and Agriculture Council-I extend an invitation to the Ministers in the devolved Administrations to attend. In most cases they do. We meet together before the Council meeting usually to discuss what is coming up. They have ample opportunity to brief me and make sure that I cover all the points that they want to cover in any specific Council meeting. In addition to that, several times a year we have either bilateral meetings where I go to them-I was in the Scottish Parliament last Thursday and met with Richard Lochhead-or indeed they come to London. I think it is important that the Respect Agenda means that we travel to each other in both directions.

Once the October Commission proposal was out, we had a formal meeting of all devolved Ministers at Defra to help prepare the UK response to those formal proposals before Council had its first meeting on those proposals. I think it is fair to repeat to the Committee what the devolved Ministers said at the joint ministerial committee on the devolveds, which was that their experience of their interaction with Defra was better than with any other Government Department, partly because of the frequency with which we meet but also the efforts to which we go to make sure that they are involved in the decisions that we make. Thank you for giving me the opportunity to set that out.

Q262 Chair: Thank you very much for being so generous. There has been quite an emphasis in some of your replies, Secretary of State, on this being an early stage of negotiations or a matter of negotiation. If we are to invite you back, which we very much would like to do in a year’s time, how much movement do you think there will have been in both your negotiating position and agreement amongst the 27?

Mrs Spelman: I would expect a lot of movement. I think that the pivotal point is the June after the French Presidential election; I think we will really start to see some movement at that point. I would expect the Danes to make quite a lot of progress on the greening agenda. I am more than willing to meet again at a time when significant progress has been made and share with the Select Committee where I think we are at that point, and what else we are still trying to achieve. It is an iterative process. It moves a bit each month. I am confident that, when we meet again, we will have made significant progress.

Chair: Thank you very much indeed to you and your team for being so generous, and being with us this morning.

Mrs Spelman: It is a pleasure.

Chair: Thank you very much indeed.

Mrs Spelman: Thank you.

Prepared 23rd January 2012