75. CAP REFORM IN AGENDA 2000THE
TRANSITION TO COMPETITION: MEASURES FOR RURAL DEVELOPMENT AND
THE RURAL ENVIRONMENT (18TH REPORT, SESSION 1997-98)
Memorandum from the Department of Agriculture,
Fisheries and Food
1. This memorandum sets out the Government's
response to the 18th Report of the House of Lords Select Committee
on the European Communities, HL 84, Session 1997-98, on CAP Reform
in Agenda 2000 The Transition to Competition: Measures for Rural
Development and the Rural Environment.
2. The Government welcome the Committee's
report on the European Commission's communication "Agenda
2000: For a stronger and wider Europe" and its impact on
rural development and the rural environment in the UK. This is
timely, as detailed proposals following the Commission's communication
have now been received and negotiations on the rural development
regulation have recently begun.
3. In large measure the Government welcome
the Commission's proposals in relation to rural and agri-environment
policy. The Government have argued that more resources should
be devoted to targeted environmental schemes and Agenda 2000 endorsed
this approach. The rural development regulation which has now
been tabled would set a framework for the future of rural development
policy though, unless and until the direct compensation payments
under the commodity regimes are phased out, there are unlikely
to be substantially increased resources for rural development.
In the light of the Committee's recommendations, the Government
will be seeking to negotiate flexible and effective measures to
assist rural development, including the rural environment.
4. The Government's response to the points
in the Committee's summary of conclusions and its recommendation
is set out below.
Creating a competitive EC agriculture
EC agriculture must reorientate to compete in
world markets without protection. In failing to prepare the industry
for this situation Agenda 2000 is a disappointment (paragraph
5. The Government agree that the Commission's
proposals do not go far enough to develop an EU agricultural industry
able to compete effectively on world markets without subsidy.
But the Commission's proposals are, at least, a step in the direction
that the Government has been advocating for some time.
Compensation payments must be degressive and
time-limited if they are not to frustrate and delay structural
adjustment (paragraphs 65-6).
Modulation of compensation would further impede
the restructuring of EC agriculture (paragraph 67).
Agriculture, like all industries, should operate
within a basic regulatory framework which protects the environment
and this should apply across the Community. It should ensure that
those who damage the environment are made to pay for remedies
(paragraphs 69, 76).
8. The Government agree that effective regulation
is a key element of agri-environment policy, alongside other mechanisms
such as advice and appropriate incentives. Agricultural businesses
are already subject to a considerable body of environmental regulation
and new measures are being introduced such as legislation to implement
the EC Nitrates Directive and the Directive on Integrated Pollution
Prevention and Control.
9. The Government support the introduction
of EC legislation to apply the "polluter pays" principle.
However, much agricultural pollution is diffused and it is often
difficult to attribute responsibility to particular individuals.
In such cases voluntary approachesto persuade farmers to
"own" the problem and deal with itmay be more
successful at controlling pollution.
Policy and appropriate funding are needed to
secure rural environmental goods which the market alone will not
provide. Policy must ensure that such goods are provided in the
most effective manner and at least cost (paragraphs 70, 77).
10. The Government agree that, subject to
public spending constraints, funding should be available to secure
rural environmental goods which the market alone will not provide.
Effectiveness and efficiency in delivery are of prime importance
and are examined in regular evaluations and policy reveiws.
We support the Commission's intention to simplify
policy, but the same approach is needed at Member State level.
Support for the environment should be offered via a single menu.
We advocate a horizontal, prioritised approach which ensures that
the most valuable environmental goods are funded first (paragraphs
11. The Government believes there are advantages
in integrating schemes where the schemes have proved their value
and where amalgamation will bring efficiency benefits and assist
12. MAFF operates a wide ranging package
of voluntary incentive environmental schemes aimed at conserving
the countryside and its wildlife. In 1998-99 MAFF will be reviewing
the pilot Habitat, Countryside Access and Moorland Schemes, with
a view to integrating successful elements into the Countryside
Stewardship Scheme. This scheme will continue to run on the basis
of targeting priorities which are determined at a local level,
in consultation with MAFF's Statutory Advisers and partners organisations.
The English ESAs have proved effective, though MAFF will reflect
on whether in the longer term they could be amalgamated with the
Countryside Stewardship Scheme, alongside other options such as
promoting closer compatibility between agri-environment schemes.
13. In Wales, a new agri-environment scheme
is being developed which will replace the ESAs, Tir Cymen, Habitat,
Moorland and Access Schemes. The Organic Aid Scheme will remain.
The new scheme will embrace the best practices from the existing
schemes, although the scope will be expanded to help meet the
Government's biodiversity commitments. Like ESAs and Tir Cymen,
it will be a whole farm scheme but it will be available to farmers
throughout Wales. Subject to EC approval, it is intended that
the new scheme will be open for applications during 1998-99.
14. In Northern Ireland it is intended that
the existing ESAs will be complemented later in 1998 by the new
Countryside Management Scheme which will target priority habitats
on farms outside ESAs. At an appropriate later stage the workings
of both schemes will be examined with a view to their integration
in order to optimise benefit to both farmers and the environment.
Some environmental goods benefit the entire
Community, others are much more local. There should be several
sources of decisions and funding. Co-financing should apply where
there is a benefit to the Community as a whole. The primary source
for funding should in general be Member States or regions. Funding
should be based on environmental merit, not on geographic area
(paragraphs 71, 74-8).
15. The Government believe that it is important
to have a common framework for agri-environment measures throughout
the European Union. In this way each Member State can choose to
apply measures most appropriate to their own situations without
concerns being raised about the scope of payments in each Member
State. This should be subject to oversight by the European Commission,
as currently happens and is proposed to continue in the Commission's
proposal on "support for Rural Development under the European
Agricultural Guidance and Guarantee Fund". The Government
believe that in these circumstances co-financing between the EC
and Member States is appropriate.
16. The Government recognise the important
contribution which capital works make to the agri-environmental
schemes. It is worth noting that the European Commission's proposal
would now permit co-financing of non-remunerative capital works.
17. The Government agree that environmental
measures ought to be targeted and that funding should reflect
this. In their proposal the Commission have linked maximum rates
of co-financing with the rates applicable to the Structures Funds.
However, the proposal also allows for co-financing rates to be
10 per cent higher "for specific measures of special merit
from the environmental viewpoint".
Environmental payments must not be production
subsidies in disguise. Decoupling is important for WTO acceptability
and to ensure real environmental benefit (paragraph 73).
18. Agreed. The most effective way of providing
environmental benefits is through specific, well-targeted environmental
objectives. However, as explained below, full decoupling of environmental
measures from production may not be possible.
Monitoring must be strengthened to prevent fraud,
to ensure that schemes represent environmental value for money
and that they are fully decoupled (paragaph 79).
19. The Government agree that a clear, centrally-agreed
framework for the operation of schemes and effective monitoring
by the Commission are essential to ensure the efficient use of
CAP resources, to reduce the risk of fraud and to minimise the
risk of distortion of competiton. Some schemes may, however, require
a particular form of agricultural production (eg grazing by livestock)
to produce environmental goods; in such cases, full decoupling
will not be possible.
There are arguments in favour of cross-compliance,
but stronger arguments against. There should be a synchronised
process of reducing production-related compensation payments and
building up an environmental policy justified by its own merits.
We note the current wide difference in funding for agri-environmental
measures on the one hand and the production regimes and compensation
payments on the other (paragraphs 80-2).
20. The Government agree and remain committed
to the phasing out of production-related farm support and the
redirection of some of the savings on CAP expenditure towards
support for the environment and rural development as our preferred
Rural development policy must seek to ease the
social and employment problems which result from the continued
decline in agricultural employment as well as from wider changes
in the rural economy. The contribution which policy can make depends
heavily upon the performance of the economy as a whole (paragraphs
83, 87, 94).
21. The Government are determined to pursue
sound economic policies for the benefit of the country as a whole
and to help ensure a healthy and diverse rural economy. The creation
of employment is one of the Government's principal priorities
and rural development policy must assist in creating sustainable
employment opportunities. This involves a combination of national
programmes and specifically targeted measures. National initiatives
such as the New Deal for the unemployed are intended to help both
urban and rural communities. The merger of the Countryside Commission
and the Rural Development Commission will provide a national overview
on rural economic and social issues. The new body will play a
central role in the Government's objective of developing a sustainable
The development of alternative economic opportunities
must be supported, including aid for small-scale enterprises,
conversion of redundant rural buildings to new business uses,
on-farm diversification and new technology skills training (paragraphs
22. The Government agree that further diversification
of the rural economy is a desirable objective. The kind of actions
which the Committee recommends are those which have been supported
under the Objective 5b programmes and domestic programmes. The
Government will consider what future measures might be necessary
in the context of the Agenda 2000 proposals currently being negotiated.
The national planning process has an instrumental
role in rural development (paragraph 93).
23. Agreed. National planning guidance is
kept under regular review to ensure it remains relevant and up
24. The Committee has referred to a suggestion
that a national body akin to the RDC might advise on the merits
of applications for the conversion of redundant farm buildings.
The Government has announced its intention to merge the Countryside
Commission and those parts of the Rural Development Commission
not transferring to the Regional Development Agencies (RDAs),
to create a new countryside agency with effect from 1 April 1999.
One of the many issues which will require further consideration
as a consequence of merger is the new Agency's role in relation
to the planning process, for example as a statutory consultee
for certain types of planning applications. Creating an additional
national body would be inconsistent with the Government's objective
of streamlining the number of agencies involved in the delivery
of rural policies and programmes.
25. The Committee refers to the role of
RDAs. From April 1999, the RDAs will take on the rural regeneration
programmes of the RDC, including Redundant Building Grants, together
with the associated staff of the RDC. By bringing together within
a single body the separate regeneration programmes of the RDC,
English Partnerships and the Government Offices for the Regions,
RDAs will be able to provide a better co-ordinated approach to
meeting the needs of their regions.
We welcome the proposal to use funds from the
Guarantee section of FEOGA to support an horizontal rural development
measure, provided it is flexible enough to support off-farm, non-agricultural
development (paragraphs 89-90).
26. The Government agree with the benefit
of such flexibility.
We support bottom-up approaches to development
and note enthusiasm for the LEADER scheme. Rural development requires
expertise, as exists in the Rural Development Commission. It is
important that this expertise is not lost in the move to regional
development agencies (paragraphs 89, 91-2).
27. The Government also support the bottom
up, community based approach as demonstrated by the LEADER II
programme and consider that such programmes have developed useful
partnerships. However, Community Initiatives are administratively
burdensome and sufficient flexibility should be allowed under
the new Objective programmes for them to incorporate the successful
parts of Initiatives. The Government recognise the valuable work
of the Rural Development Commission, particularly at a local level
and are determined to make full use of this expertise. Many of
the RDC's staff working on regeneration issues will transfer to
the Regional Development Agencies. RDAs will have a specific remit
to serve the rural areas of their regions and, outside London,
each Board will have at least one member who can contribute a
strong rural perspective.
There should be no presumption that savings
produced by CAP reform should automatically be used in other ways
in rural areas (paragraph 90).
28. Agreed, although in the Government's
view, part of any such savings should be diverted to specific
targeted agri-environmental and rural development measures.
The test of success of rural development policy
is that after a time it becomes unnecessary. We recognise that
the time period will vary according to location throughout the
Community. This must not distract from the fundamental need for
the policy to be temporary (paragraph 94).
29. Agreed. The aim of rural development
programmes under Agenda 2000 should be to enable the rural economy
to cope better with adjustments to the economic base of and quality
of life in the targeted areas but such rural development aid should
not be open-ended. As now, programmes will continue to be monitored
for effectiveness and designed to be flexible to allow room for
adaptation as circumstances require.
The Committee considers that the rural development
and environmental aspects of Agenda 2000 raise important questions
to which the attention of the House should be drawn, and makes
this report to the House for debate.
30. The debate has been arranged for 18