Select Committee on European Communities Eighteenth Report



  15.    Competition in agricultural markets was widely acknowledged by witnesses as a desirable target for European agriculture[20]. Payment for production was no longer sustainable[21]. Several groups provided a catalogue of the CAP's current inadequacies[22]. Mr Merricks, a farmer and conservationist, considered that competition was the only possible way forward for agriculture (p 28) and that the United Kingdom must seize the opportunity it presented. The Government noted that Agenda 2000 was "a relatively modest step" in the direction of competition and decoupling of support from production (QQ 287, 304), a direction which they much favoured (Q 315).


  16.    While Dr Fennell, of the University of Oxford, was in favour of modulation (Q 92), the National Farmers' Union of England and Wales (NFU) and perhaps more significantly the European Landowners' Organisation (ELO) were ardently opposed (pp 50-1, 239). The ELO saw the policy as one opposed to efficient farming and as impeding adjustment to competition. They were concerned that the measure was slanted in favour of small farms. Strutt & Parker made a full study of the policy's likely effects and came out firmly against (Q 202, p 114).

Compensation payments

  17.    The Government argued that payments should be degressive, time-limited and decoupled from production (QQ 288, 315). The NFU argued that such payments should not be made degressive until agreed in the WTO as to do so in advance would be a tactical error. The Royal Society for the Protection of Birds (RSPB) considered that at present "the compensation payments appear to have no really clear objective" (Q 44).

Adequacy for the next WTO round

  18.    The NFU argued that Agenda 2000 would force the Community to adopt a needlessly defensive stance in the next WTO round and that another round of CAP reform would be needed after Agenda 2000 (p 239). Even the arable reforms proposed would not be adequate for the WTO (p 49). The Commission almost argues the opposite, saying that cutting prices now did not mean paying in advance for the outcome of the next WTO round[23].


  19.    A distinction must be drawn between the effects of Agenda 2000 and full exposure to international competition. It was noted by the Countryside Commission that, Agenda 2000 or no Agenda 2000, agriculture is in decline as a land user, wealth generator and employer and is likely to remain so (p 183). Strutt & Parker considered that restructuring and the rate of people leaving the land would increase as a result of Agenda 2000 (Q 214) and that employment on the farm would further decline owing to an increase in contracting (Q 202). Inputs would not vary as commercial farmers already examine these very carefully. The Young Farmers felt that restructuring of holdings was not desirable (p 245), but most witnesses acknowledged its necessity.

  20.    The CLA noted that for many agricultural areas in the United Kingdom the arrival of competition would be an opportunity, but that only competition itself would truly reveal which sectors of the industry and areas of the country would flourish (Q 100-1). MAFF were optimistic about the United Kingdom's ability to compete. In particular they considered that production of commodities not covered by the CAP might expand, for example pigs, poultry and horticulture (Q 283). While noting the difficulty of predicting the changes which would occur, MAFF sketched a move to larger farms, reduced employment and increased part-time farming. The broad pattern of current production would continue (Q 283). The degree of adjustment required for each sector is likely to be in inverse proportion to current levels of protection. It should be noted that the success of the Community's agriculture in international markets will be determined by independent factors such as world prices and exchange rates as much as on the removal of quotas, internal restructuring, environmental policy and the Community's natural and human resources.

  21.    On the environment, predictions varied as to whether the removal of production subsidies would in itself produce a net gain or loss for the environment. The RSPB pointed out that the experiences of New Zealand and Eastern Europe gave different answers to the question (Q 41). They considered that the end result might be positive. Mr Merricks disagreed: while he could flourish even with reduced inputs, inferior land to his own could suffer from increased inputs, with their environmentally harmful effect, or even worse the land might be abandoned (Q 63).

  22.    Strutt & Parker considered that the value of the pound affected farmers far more than anything implied by Agenda 2000 (Q 202). The Rural Development Commission considered that many English rural regions had fared well of late (Q 267), but amongst others noted the problematic effects of rural immigration (p 115).


Why pay for environmental measures?

  23.    The Environment Agency noted that while agriculture may not be the mainstay of the rural economy, it was still, and would remain, the Community's major land use (p 225). Mr Merricks noted that while land may be privately owned it was a perpetual national resource (p 27). He argued that farming was different from any other industry in that it (and perhaps forestry) was the only industry which could provide environmental goods: "If I run a steelworks I should not pollute the air or water, but those works will produce negligible environmental benefits". (Q 62). The Local Government Association considered that environmental payments were the sole way of re-establishing the political validity of payments to farmers (p 234). Environmental improvements could have economic consequences in increasing tourism potential (Environment Agency p 225).


  24.    Witnesses' main complaint was that funds were going to be insufficient to achieve significant good (QQ 162, 206, pp 19, 47). The Environment Agency was not alone in noting that at present environmental policy is seen as but an optional add-on to agricultural policy (p 226). English Nature considered that because of the limitations of funding, current measures did little more than persuade marginal farmers not to resort to intensive production techniques. The Council for the Protection of Rural England (CPRE) argued that the Countryside Stewardship scheme was effectively a targeted scheme because of insufficient funds to apply it more widely. The CLA and Countryside Commission noted how oversubscribed such schemes were with worthwhile projects (pp 47, 186). The Government considered that the Countryside Stewardship scheme (budget £5,000,000) was 60 per cent oversubscribed, and that if more funds were available then many more applications would be made (Q 294). To encourage Member States to apply schemes, the Countryside Commission wanted co-financing to increase from 50:50 to 75:25 with the 75 burden falling on the Community (p 192). This was supported by the NFU (p 242).

  25.    No one denied that there was scope for the schemes' considerable expansion, but (in contrast to the NFU (p 237)) Professor Buckwell, of Wye College, University of London, considered that funds could be made available only as they were released from the commodity regimes (Q 20). Professor von Urff, of the University of Münich, Germany, agreed with this and pleaded that better use be made of existing funds before increasing the budget (Q 399). The Government were ready to contemplate transferring commodity savings to development and the environment, but (in contrast to the Commission's analysis) did not consider that Agenda 2000 would provide many savings, and thus opportunity for this (Q 290).

WTO acceptability

  26.    The CPRE argued that without proper monitoring, the WTO was unlikely to accept environmental payments (Q 190) and advocated the method adopted for Environmentally Sensitive Areas (ESAs). The RSPB considered that a scheme ought to be acceptable to the WTO if, amongst other things, it was properly monitored. Monitoring should be independent and there should be targets set, not solely for uptake but for genuine performance and results (Q 53). Professor Buckwell and the RSPB argued that so long as payments were genuinely for environmental services and did not form a covert subsidy then they would be acceptable to the WTO (Q 20, p 20).

Environmental policy delivery

  27.    Witnesses called for a much broader approach to be taken in this reform round in relation to the rural environment. Dr Fennell considered that a start should be made by clarifying the role of the environment in relation to agriculture (p 39). This was supported by the Countryside Commission (p 185) and Mr Merricks (p 27). The Countryside Commission did not consider the current multi-annual programmes to be the only way forward and advocated, as did others, the concept of tiers[24] (pp 190, 216, 189). The RSPB noted however that where tiers were currently applied, the more demanding tiers were not well subscribed (p 19). The NFU acknowledged that not all society's environmental expectations would be met through voluntary means alone (p 237).

Market failures / environmental services

  28.    Subsidies should address "market failures" (the negative environmental consequences of international competition). This was vital to ensure that long term environmental gain was not sacrificed to short term profitability (p 183). The RSPB put this forcefully: "to allow market forces to run riot across the landscape would probably result in a considerable environmental catastrophe" (Q 42). The concept of payment may be expressed positively as payment for "environmental services". This is not a new concept, but received much favourable attention from witnesses (pp 51, 228). Nature conservation and positive environmental benefits should be paid for as if they were crops (p 27). Mr Merricks noted that a degree of public access was the inevitable consequence of the receipt of public funds (Q 72, p 30).

  29.    "Sustainability" was an environmental concept used by several groups[25]. The RSPB argued that if the market would not deliver the sustainable use of resources then public funds should be used (pp 17-18). The Farming and Wildlife Advisory Group (FWAG) argued for farmers to receive compensation for loss of income suffered as a result of good environmental practice (p 228). The local government officers [26]considered the environmental picture to be bleak if farmers did not receive such payment (Q 166). The NFU argued that compensation had to be adequate. The National Audit Office's 1997 report on Environmentally Sensitive Area showed that payments were set at rates below that necessary to compensate participating agreement holders for their average profit forgone (p 238).


  30.    FWAG suggested that the principle of no net environmental loss should be enshrined in all elements of rural policy (p 228). Dr Fennell advocated penalties for non-observance as opposed to payments for compliance. She failed to understand why the principle of "the polluter pays", applied to all other industries, could not be further extended in agriculture (pp 38-9). The Countryside Commission were concerned that payments should be positive: that payment should be made for gains as opposed to compensation to prevent poor performance. The RSPB argued that the carrot and stick should work together and saw potential for an increased use of regulation (Q 45). Mr Merricks sounded a cautionary note. Regulation, he maintained, was useless unless obeyed and would require much investment in monitoring-especially in some other Member States (Q 60). Strutt & Parker noted that small farms would find compliance with regulation harder and more expensive than larger enterprises (Q 204). Perhaps more importantly, Mr Merricks warned against the use of regulation without clear analysis of its environmental role-there should be a very good reason before any constraint was imposed on agriculture (p 28).


  31.    "Regulations never planted a hedge" (RSPB Q 45, Mr Merricks Q 60). It was the Countryside Council for Wales'[27] opinion that if the environment is to be paid for then the aim must not be to prevent bad but to achieve good (p 196). Incentives should be available for environmental restoration and improvement (p 228). The Countryside Commission noted that at present the agri-environment regulations fund only multi-annual programmes. The regulation should be broadened to include one-off capital enhancements, for example linear features (hedges and walls) (pp 186, 192). The inclusion of such capital projects was supported by the NFU (p 238) and the Government indicated that they might support such a move (Q 313).


  32.    The point was frequently made that farmers generally have no vendetta against the environment; they have no desire to harm it; indeed they positively value it. This did not mean that farmers were always aware of the impact their actions had on the environment (p 226). The NFU argued that farmers needed help to achieve more environmentally friendly practices (p 237) and this was reiterated by the RSPB (p 19) and the Countryside Commission (p 183). FWAG advocated the positive role of advice, as demonstrated by its officers' visits. One farmer "bitten by the FWAG bug" was Mr Merricks, who noted that the whole farm plan aspect adopted by FWAG was appreciated by many more farmers than the association could help (Q 59). The CPRE thought this approach admirable, and advocated not only horizontal coverage of the United Kingdom but the taking of a whole farm approach. All environmental aspects should be considered and not just, for example, specific habitats in specific schemes (QQ 190, 193). Such an approach could not be imposed: what was needed was to harness the enthusiasm of the farmer (Mr Merricks Q 70, p 30).

20   QQ 39, 105, pp 28, 46, 48-9, 183, 239.  Back

21   pp 46, 181, 185, 215.  Back

22   Local Government Association p 233 is the most expressive; see also Strutt & Parker p 112. Back

23   European Commission Directorate-General VI, "Argumentaire Agricole Agenda 2000", 17 July 1997,

question 23. Back

24   See glossary. Back

25   pp 17-18, 181, 225. Back

26   Mr Peter Murnaghan and Mrs Rosalind Rutt of Hampshire County Council and Mrs Jane Woodward of West Oxfordshire District Council. Back

27   The administrators of the Tir Cymen agri-environment scheme. Back

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