UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 745-iv

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Environment, Food and Rural Affairs Committee

CAP implementation 2014-2020

Wednesday 30 October 2013

James Bailey and George Dunn

Harry Cotterell and George Winn-Darley

Evidence heard in Public Questions 226 - 269

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Oral Evidence

Taken before the Environment, Food and Rural Affairs Committee

on Wednesday 30 October 2013

Members present:

Miss Anne McIntosh (Chair)

Mrs Emma LewellBuck

Mrs Mary Glindon

Sheryll Murray

Neil Parish

Ms Margaret Ritchie

________________

Examination of Witnesses

Witnesses: James Bailey, Federation of Yorkshire Commoners and Moorland Graziers, and George Dunn, Chief Executive, Tenant Farmers Association, gave evidence.

Q226 Chair: Good afternoon and welcome. First of all, can I welcome you both and thank you very much indeed for contributing to our inquiry on reform to the CAP and implementation of this round of CAP reform? I thought, for the purposes of the record, I would ask you each to introduce yourselves and give your formal titles. I am sure you can do it much better than I can.

George Dunn: Thank you, Madam Chair. My name is George Dunn, and I am the Chief Executive from the Tenant Farmers Association.

James Bailey: I am Jim Bailey. I am a farmer in the North York Moors National Park. I am also part of the Federation of Yorkshire Commoners and various other guises.

Q227 Chair: Excellent. I am particularly pleased to welcome Jim here today as being one of my local councillors as well. You are both very welcome, though, thank you. Could I just ask a couple of general questions, if I may, at the outset? Do you believe that the current deal that is being negotiated is a fair one and a good deal for UK farmers, and particularly for tenant farmers? How do you view the current deal as it is presently on offer?

George Dunn: There are elements of the deal with which we still have some fundamental difficulty, for example, the way in which the Commission has decided to put in the greening measures. The Council and Presidency have obviously agreed with us, as has the Parliament, but it does present us with some major problems.

We understand why it was done that way: because they wanted simplicity and something that might provide some environmental benefit to the CAP. However, the three measures do not appear to sit very well with an outcome driven policy of trying to get really good agrienvironment outcomes for the whole of the country. The greening elements do cause us some concern, but in the main it was probably the best deal that we were going to get, and it has given a large amount of discretion to Member States, so a lot will depend on how Member States decide to take things forward. Of course, in the UK, we have England, Scotland, Wales and Northern Ireland taking different views on each aspect of the policy, so there is still much to play for in our view.

Chair: Mr Bailey, is there anything you would like to add?

James Bailey: I concur with that, Madam Chairman. Since the last deal was struck the world has changed. Agricultural production is something that is far more important to us now than it was in 2005, so it is important that we maintain a level playing field as far as possible. Of course, I fully believe the CAP needs to be publicly acceptable, and we need to make sure that we have the support of the general public in that.

Q228 Chair: In the course of our earlier inquiry and our recommendations for upland farming, we recommended that there should be a dispute resolution mechanism for situations possibly arising between landowners and tenants. Is that something that you feel would be welcome? I was slightly surprised yesterday when one of the departmental officials told us that it is not something that the Department could get involved in. We were also told during the course of the inquiry that Natural England itself is not able to give advice on these agreements as they go through. Do you have a view about whether there should be a mechanism for dispute resolution, and what form that might take?

George Dunn: Madam Chairman, over the years, we have seen a number of occasions where there have been disputes between, in our case, landlords and tenants, over who is the rightful applicant for both Pillar I and Pillar II payments under the CAP. There has generally been a reluctance on the part of DEFRA, the RPA and National England to get involved in trying to resolve those disputes. In a number of cases we have persevered through those various agencies and Government Departments, and in a number of cases we have managed to get National England and RPA to rule on one side or the other on the basis of the evidence provided.

We think there is merit in these organisations actually taking a clearer view on who is right and who is wrong in accordance with the rules. After all, they are responsible for taxpayers’ money and giving that out within a policy environment. If one individual is claiming incorrectly, then surely the Government Department or agency has an interest to ensure that that individual cannot capitalise from their activity. We would absolutely agree that there must be something within National England, RPA or even DEFRA to find a way through these issues.

James Bailey: I would agree with that. On common land, there is a slightly different dynamic, but I agree with the tenant farmers that the recourse for landowners generally is through the rent and not through directly taking a payment that supports a particular activity or outcome. It would clearly seem to be wrong for the active person on the land not to get that support payment if that is what it is designated for. For example, on common land, it is not like a tenant and landowner business, because the commoners own their rights in perpetuity. It is not like you actually have a tenancy; commoners own their grazing rights, and of course the landowner owns his rights as well. Where those rights attract various or different public support, then there is a difficulty in getting that relationship sorted out. On that in particular, we do need a mechanism for ensuring that the money is paid onto the ground to the people who are actually doing the job. I am not sure that has always been the case in the current situation.

Q229 Chair: Where would you both foresee the biggest challenge under the new revised CAP implementation for those charged with the inspection, the checking compliance and the making of payments under the reformed CAP, the next round?

George Dunn: That is a big question. From my perspective, there are four areas of principal concern. One is the greening elements that we have already discussed, and making sure that they actually deliver something meaningful whilst not providing too much of a burden on the industry going forward. Secondly, there is the vexed question of the balance between Pillar I and Pillar II. Although the Secretary of State has promised an early discussion on that, I think that conversation is yet to begin, let alone be well developed. There is the whole area of active farmer and deciding who should be the eligible and rightful recipient of support through both Pillar I and Pillar II.

A big concern for us is the Government’s drive to digital communications. We know that the RPA is developing the new system for both Pillar I and Pillar II schemes on a Digital by Default basis, but from our perspective it would be gold-plating to require individuals to be applying for schemes online. We would want to see a continuing option for individuals to apply on paper, particularly where they are in situations where broadband connections are pretty poor or they do not have the skills themselves to do that. Those are the four areas I think are the biggest challenges.

Q230 Chair: On that last point, you would like to continue to see manual applications until such time as-

George Dunn: Yes. Obviously we see the advantages of a digital system. We are quite happy to encourage our members to go for the digital solution. We are bringing RPA with us on our road show of meetings with members next year to encourage members to switch to digital because we see the advantages. Frankly, there are a large number of individuals who will not be able to make the transition, and they should not be penalised because of that.

Q231 Neil Parish: Good afternoon, Mr Dunn, Mr Bailey. Talking about English payments, how should the regional allocation of direct payments be adjusted to increase support for upland farmers, and is this the best means of moving money uphill?

George Dunn: The TFA has always taken the view, right back to the 2003 reforms that were implemented in 2005, that what is known as the SDA area and the lowland areas should have been at the same rate. We campaigned for that at the time, and we know that there have been various discussions already with DEFRA over what happens for the new regime. We would say that now is the time to align the payments for the SDA and for the lowland areas.

We would, however, say that we would wish to retain the moorland rate where it is, but to provide instead a specially developed Pillar II scheme for moorland graziers, which targets agri-environment benefits of mixed grazing systems in moorland areas. There would then be a recognition of the real advantage that grazing could bring to the moorland areas, so the payments are not being taken away by grass moor owners and those involved in sporting, and it is actually supporting the types of activity that encourage biodiversity in those areas.

Q232 Neil Parish: And increasing suckler cows and the like, not just sheep?

George Dunn: It is not just sheep: mixed grazing systems, suckler cows and breeding ewes in those areas, definitely.

Neil Parish: I very much agree with your comments.

James Bailey: I support that view in principle, and I do believe that some of our stewardship schemes are getting over-prescriptive. The basic management that has been secured is upland grazing. Also, though, upland grazing does not happen in a ring on the moorland line; it happens in a farmed unit, which usually crosses onto the moorland line and has other land as well. Being too prescriptive can actually have side effects for other land as well, so it is important if it is basic agricultural support that we are looking at, with added environmental benefits, that that is looked at as a viable unit as opposed to just being specifically SSSI. Interestingly, in the North York Moors National Park, I understand £148 million worth of HLS money is going onto the moorland, and I think £2.3 million worth is going onto all the other schemes. A big percentage of that money is maybe not for other things as well as grazing. Maybe a UELS or lower-level type of agricultural support could deliver the grazing in those SSSIs for less money than is being spent at the moment.

Q233 Neil Parish: Thank you for that answer. If you reduce the number of sheep on the hill, then that does not actually reduce the amount of grazing. What happens is they concentrate on one particular area, and then the other areas get out of control. Has that been your experience?

George Dunn: Absolutely. Some of the schemes that have attempted to reduce livestock numbers have been misguided. We are reaping some of the whirlwind for that when you look at what is happening to some of the ecosystems in those areas. It would be interesting for the Committee to know that, in discussions we have had already with DEFRA and National England, there does appear to be somewhat of a reluctance to use Pillar II money in the way that we have suggested for those grazing systems in the moorland. The view appears to be that, if we slap a little bit more Pillar I money up there, then the job will be done. I do not think that is the case. We need to have something rather more thought through for that.

Q234 Neil Parish: On the Pillar I money being moved, are you just slightly worried-and this is particularly to Mr Dunn-that it might increase the rent levels? If the single farm payment levels go up, will that affect the rents?

George Dunn: Of course, single farm payment is a relevant factor in a rent review process. We cannot avoid that; it is part of the return that the farmer gets from farming the land. We take an old-fashioned view, though, and say that the return to the landowner is the rent and should not be the subsidy, so we do reject those situations where subsidy finds its way directly into the back pockets of landlords. There is a discussion to be had between the tenant and the landowner as to the right rent to be paid. We have never shied away from the fact that the payments received are relevant factors in the rent review process.

When you look at agri-environment payments, they tend to be paid for income forgone. So long as landlords and their agents do not double-count that when they are trying to get rent from individuals, when they see how much individuals are getting through Pillar II, because they are actually having to have extra costs to do that, then there is a reasonable discussion to be had between landlord and tenant as to what the rent should be.

Q235 Neil Parish: Is there a risk that changes to Pillar II schemes, such as removal of the separate upland scheme, may undermine increased support under Pillar I? You may gain on one hand and lose on the other.

George Dunn: You are right; there is obviously a pendulum here. You move it one way and you take from the other, so there is a concern. There is only a set amount of money here, but there needs to be a proper thought-through scheme that targets the sorts of benefits and land management that we want for those areas.

Neil Parish: Mr Bailey, do you have anything to add?

James Bailey: I know that some of my colleagues are keen on having the maximum amount of Pillar II money, but we do also need to be mindful of the amount that we need to do what we require. We should not just get as much as we can. We should clearly be modulating the amount that we need to deliver what we think is required. There is a sum that needs to be done there, I believe.

Chair: I omitted to refer to my entry on the Members Register. I apologise for that.

Q236 Sheryll Murray: Would you transfer the maximum of 15% from Pillar I to Pillar II? Would it advantage or disadvantage English farmers, and why?

George Dunn: That is not exactly the right question, whether or not you transfer the maximum. What we do not know, as I said at the beginning, is what the programme is for Pillar II. Until we know that, and how much we need to spend through Pillar II, you cannot have a reasonable discussion about how much you need to be transferring. It might be 15%. We do not think that it is, but I do not think you can have that discussion without really knowing the programme of work to be taken forward. As Jim has rightly said, we should not transfer any more than we need to provide the benefits that we are looking to achieve. There are some question marks over whether the existing schemes are providing the benefits that we really want to achieve in any case, so that is an unanswerable question until the Secretary of State tells us what he thinks he wants to do under Pillar II.

James Bailey: I answered the question before they asked it, George.

Q237 Sheryll Murray: Do you have any idea of an ideal percentage, perhaps, from the Pillar I budget that the Government should transfer to Pillar II?

George Dunn: The answer again is no, because we have not yet seen or had a discussion or a debate with the Secretary of State about what Pillar II will look like.

Q238 Sheryll Murray: When do you anticipate having a debate with the Secretary of State?

George Dunn: The Secretary of State did promise in the summer it would be an early debate, and here we are in mid-autumn without yet having that debate, so we are waiting with bated breath to have it. There has been some stakeholder engagement, but we have not yet seen a proper programme of costed proposals. Of course, the Secretary of State has the option of setting one rate this year and coming back for a second bite of the cherry in future. If the Secretary of State is not in a position to tell us exactly how the money should be spent, then he should perhaps take a conservative position and have a lower rate of modulation for this year and then come back to it again next year when he is in a better position to tell us what he wants to do.

Q239 Sheryll Murray: Do you think it is important that our farmers, then, are operating on a level playing field with the farmers from other Member States?

George Dunn: There is certainly a need to ensure that we do not disadvantage our farming industry. Of course, as I alluded to at the beginning, we have differences between the four countries within the United Kingdom, so there will be issues in ensuring that we do not have a system that disadvantages UK farmers in comparison to the other Member States of the Union.

Q240 Sheryll Murray: Going back to your previous answers, have you a date for any meeting with the Secretary of State, or have you met with the Secretary of State up to now?

George Dunn: Meetings with the Secretary of State go on all the time, and there is a great amount of stakeholder engagement. That is great, but there is a danger that you have lots of activity but not much achievement. There is quite a lot of activity at the moment; I am not sure how much achievement we are yet seeing, and we are still waiting for the publication of the official consultation document on implementation. Yes, there is a lot of discussion, but it is still much awaited.

Q241 Chair: Are you surprised that the Government has not launched the consultation document yet? Do you think that four weeks is long enough in which to consult?

George Dunn: I am surprised, but given that we had a reshuffle of Ministers, clearly officials will want to make sure that the new team of Ministers are up to speed with what the Government wish to propose.

Q242 Ms Ritchie: This question is to Mr Dunn of the Tenant Farmer Association. In your evidence, you put the case for a payment cap. Is there a risk that such a cap might encourage larger farms to break up in order to continue claiming large sums of CAP support?

George Dunn: Of course there is a danger, and no doubt there will be smart firms of land agents around the country already putting together plans to advise those large landowners and landholders to put in place whatever schemes they can. In fact, the regulations, as I read them, provide that Member States have to guard against such activity, and it would be how RPA addresses the issue of individuals wishing to split up their businesses in order to gain greater support through the CAP. There is a mechanism already in place to allow that to happen, and we know who these individuals are. In the evidence, I referred to the answer given to the Member of Parliament on the 174 individuals who are above what we consider to be a reasonable cap of €300,000. You can keep an eye on 174 individuals and what they do, I would have thought. It seems relatively straightforward to make sure that if they do split businesses, they are doing it for the right reasons and not simply to take advantage of the payment cap.

Q243 Ms Ritchie: Why might a farmer need more than €300,000 of taxpayer support?

George Dunn: I am perhaps not the right person to answer that question, because we would argue that they do not need it.

Ms Ritchie: I thought you might have some suggestion.

James Bailey: I will just add a little bit to that, because I am supportive of a cap at the right level. It is about getting the detail right, isn’t it? You could also say that maybe you should have an incentive at the bottom level, so you could load the first €100,000 instead of stopping at the second. There are different ways of getting the same thing. It is difficult to say, if you want a level playing field, that a cap should be had, but I do believe that in general that makes the whole CAP more acceptable to the taxpayer. I do think at the largest end of the scale in some of our most productive land, reliance on the taxpayers’ money to get those outcomes is not as important. Still, in the less productive land, moving into the uplands and specially designated areas, special protected areas, clearly you have extra constraints where economic activity in agriculture is less beneficial, it is still a lot cheaper to support agriculture than it is to try and manage those places in other ways. These days, thank goodness, as a farmer, we do need the produce.

George Dunn: The politics of this is quite interesting, because here we have a Secretary of State in a Government Department that is pretty anti-Pillar I payments. The Tenant Farmer Association is not in any way anti-Pillar I payments. We think they continue to be a very important source of funding for the industry, and for a very long time to come, but here is a Government Department that has espoused its antithesis to Pillar 1, and yet it is not interested in capping payments under Pillar I and putting the money that would be saved from that into Pillar II, where it appears to be really excited about and wanting to do business with Pillar II. Why do we have a Secretary of State that is in that position of being pretty antiPillar I, but not wanting to take money from the top recipients and stick it into Pillar II, which is a policy he appears to like?

Q244 Sheryll Murray: Do you think that, if you did cap at €300,000 or even less, it might stop the incentive for people to want to grow their businesses?

George Dunn: The incentive to grow businesses is a complex beast.

Sheryll Murray: I am just playing devil’s advocate.

George Dunn: No, but if we are saying that the only reason that people are growing businesses is to capitalise on CAP support, I am not sure that that would be supported in the marketplace. If you look at some of the sectors that are not supported, such as poultry, pigs etc, there are some very large businesses in those sectors that do not get the support of other sectors and do not appear to be restricted in their patterns of growth. I do not think it would necessarily follow.

Q245 Mrs Lewell-Buck: How should the Government determine who is an active farmer? What problems do you see occurring between tenants, graziers and landowners?

James Bailey: There are two questions there. I will let George deal with the active farmer, and then I will have a go at the second one.

George Dunn: We already have, within the European regulations as being drafted, a stab at what it means to be an active farmer. There are some issues that are highlighted as individuals who should be on a negative list. However there is also, as we said in our evidence, the flexibility for the Secretary of State to add to that list of individuals. Of course we want to have a system that is workable and does not provide too many burdens on the sector or the Government Departments in implementing it. We believe that added to the negative list of individuals who should be precluded from being defined as an active farmer are those who are not in occupation of land or rights of common, those that are not taking an entrepreneurial risk and not in day-to-day management control of that land. This would preclude quite a lot of individuals who now are able to claim subsidy through sorts of sham agreements such as contract farming and share farming partnerships, where they are pretending that they are in occupation and taking an active interest and entrepreneurial risk, but they are not. We think there should be an added element to the negative list of those individuals.

James Bailey: Clearly, on the question of the relationship between the tenants and the landlords, the tenant/landlord situation is a contract, is it not? We also need to remember that there are many other dynamics between the tenant and the landlord when you are delivering an outcome for agricultural support. There can also be other dynamics that can influence that bargain, if you like. We do need to make sure that, so long as the person meets the requirement for agricultural support, that goes to the person doing the job. In many cases, a tenant may be beholden for family jobs or other situations within their locality, and so we need to be careful that it is judged by the agricultural work they do and does not get subdivided by other pressures.

George Dunn: If we put commons on one side for the moment, and just look at the landlord/tenant in an occupation, there is a twilight zone where within the landlord/tenant situation, quite clearly it is the tenant who has the land at his disposable, and is able to claim under the Pillar I scheme. We might come onto dual use a bit later, but there are situations where tenancies are being brought to a conclusion and decisions are being made about how those tenancies or that land should be farmed going forward. In some instances, we are seeing previous tenants being offered other arrangements such as contract farming arrangements, share farming arrangements and grazing licences in order to try and attempt to put the landowner in a poll position to be able to claim whatever comes in 2015. In a lot of cases, sadly, some of the agreements that have come to a conclusion have contained clauses that require the outgoing tenant to pass the SPS entitlements to the landlord for little or no consideration in comparison to their value, so the landlord is very much in poll position when he gets those in his hands. We think there is work that needs to be done on the active-farmer definition to stop that twilight zone.

We do not think it is necessary for applicants to have to submit vast amounts of information and evidence at the point of the application. These things can be checked on inspection to see whether or not people are passing the active-farmer list. It will be a deterrent as opposed to something that will add a burden.

Q246 Mrs Lewell-Buck: So you would like to see some safeguards in place, but you think that that needs to be regulated.

George Dunn: Yes, there needs to be regulation about it. We do not foresee there needing to be vast amounts of information at the point of application, but individuals who make an application need to be clearly aware that, should they have an inspection, they will be asked to provide evidence at that stage that they are actually the active farmer.

Q247 Mrs Lewell-Buck: You feel that the Government should do that inspection.

George Dunn: Definitely.

Q248 Chair: Can I just ask a couple of questions on this? Do you think that tenant farmers are treated in a particular way in England as opposed to the rest of the United Kingdom, and as opposed to the rest of Europe?

James Bailey: I could not answer that because I do not know much about the rest of Europe and tenancy, I am afraid.

George Dunn: I am not so sure what you are driving at, Madam Chairman, but I would say obviously-

Chair: I remember having conversations with Franz Fischler and Marianne Fischer Boel on behalf of tenants, when I was an MEP, just trying to explain the particular circumstances of tenants.

George Dunn: I would tend to suggest that there is a difference in the way that tenants are treated in England, depending on who their landlord is. Sometimes we find that the oldmoney landlords, the dukes, earls and lords are the better landlords because they have been landlords forever and want to be landlords forever, and develop good relationships with their tenants. In some cases, they have in-hand advisers. Sadly, it is the newmoney landlords, who take very little interest in their estates and employ big firms of agents to do the management on their behalf, where we have the difficulty. I do not think there is necessarily a difference of treatment across member states, but there is a difference of treatment depending on who your landlord is and who is helping them manage those units.

Q249 Chair: We have heard reports during the course of this inquiry that some landlords are taking 70% of an agreement in administration charges. Do you have any evidence of that happening?

George Dunn: I am not aware of those sorts of arrangements coming across my desk. Obviously, we are aware of many situations where landlords’ agents are taking a pretty aggressive approach in rent reviews, and also in these new arrangements that I was talking about. I am not aware of that particular figure being quoted at me for the administration charge.

James Bailey: In the Pillar II stewardship schemes, that is an issue, but in the general landlord/tenant schemes, clearly it is the person concerned with the land that should be getting the support, because if the landlord takes the support payment then there is no incentive to put in the investment that you need to run a viable business in the longer term. Clearly, it is important that this is what goes to the base of the investment, and any extra profit from that should come out through the rent. When it comes to dual use or common land, as you say, then the issue is that the person doing the work that qualifies for support should be the one getting the support.

Q250 Chair: Could you confirm whether there are situations, or would you say there are no situations, in Pillar II stewardship schemes where landlords/landowners are taking up to 70% in administration charges?

James Bailey: Madam Chairman, I just have a draft report here from the national Foundation for Common Land, which is the apportionment of agri-environment schemes and monies on common land in England. That has been compiled out of a questionnaire of 200 English commoners. There is a lot of detailed information as to how those various agreements have been reported here, but it does conclude that there is a wild variation in how that happens from maybe a 50%50% split. The figures are quoted in Cumbria that 95% of the money goes to the grazing. The figures in Durham are that 50% goes to the grazing. I have to say, my own experience of those schemes is that, when it comes to the actual apportionment of multi-stakeholder schemes, Natural England have not been prepared to get involved to ensure that the money goes into the hands of the person doing the prescribed job. To be honest, I think that is tantamount to an abuse of the taxpayers’ money.

Q251 Chair: Would you be able to submit that?

James Bailey: This is a draft. Do you want me to send it as a draft? I do not think there will be many amendments to it, and it will be coming out soon. You heard it here first, Madam Chairman.

George Dunn: When you rephrased your question slightly, you said up to 70%. We are aware of situations where tenants have had to seek consent from their landlords for entry into agri-environment schemes, either because the tenancies preclude them or they have not got a long enough agreement in order to fulfil the commitments of the scheme, where payments have been asked for by landlords for the consent being offered either in the form of additional rent or in payments themselves. However, they are wide and various and I could not give you a set figure for what they are.

Q252 Chair: You would not suggest that that is what was intended under the current wave.

George Dunn: Clearly not what was intended, but when you throw a subsidy into the system, and you have a landlord/tenant system that seems to jar with it now in the way that it does, then inevitably both parties are going to try and seek as much value as they can from the system.

Q253 Neil Parish: Mr Dunn, you talked about dual use payments. Should the implementation of the new CAP bring an end to the practice of dual use payments?

George Dunn: We have said for a long time that we think the dual use had had its day. Of course, in Wales they have already decided to bring dual use to an end a little while ago. However, we have said that we want people to have as much notice as possible that the arrangements are coming to an end. We would see that, in implementing the new regime from 2015, it should be the case that dual use is no longer accepted as a feature going forward, but that for the remaining years of the current regime, dual use continues to allow people to put in place whatever measures they need to make adjustments.

Q254 Neil Parish: What do you consider to be the negative impact on the tenant of dual use?

George Dunn: We have seen many situations where sadly, the landlord is the applicant for the agri-environment scheme, and has certain conditions that need to be met for that scheme to be maintained. Those conditions are then passed down in a contract of tenancy to an individual, who is then required to adhere to those, but without getting the benefit of the subsidy, which goes to the landowner. The argument is, of course, that the market and the rents will adjust, but we know that the rental market is really quite thin. There is a great demand for individuals, particularly from young people looking to get a start in the industry, so regularly you could have 60 or 70 people interested in a farm, holding or block of land either to increase the size of their business or to get a foothold on the ladder. Sadly, people do therefore get themselves into positions of signing up to agreements that may not be in their best economic interest. The ability for landlords to be able to do that fuels that cycle, so we would say the ability of a landlord to claim Pillar II payments should be removed in a situation where he is letting the farm as a tenancy.

Neil Parish: Do you want to add anything, Mr Bailey?

James Bailey: It is an important distinction. I am not sure I am 100% with the tenant farmers on this, but I am about 95%. The point is that going into an agri-environment scheme often is at the cost of production and efficiency. If that ability is taken away from a land user before he gets his land, then clearly he has to operate within a reduced efficiency. The key to it is that the criteria for being able to access those schemes needs to be the same, so then there would be levels of scheme. Particularly in Pillar II, for instance, capital payments are something which we have sadly lost in agricultural support. The ability to maintain field boundaries and things like that are very simple public goods that agricultural businesses can take advantage of.

If there was support, particularly in designated or sensitive areas, or landscape designations for enhanced environmental, and hence landscape, benefits that a farmer could take on, he could choose to take those levels of extra investment, and, if you like, buy public goods with public money.

Q255 Neil Parish: The final part of my question is, if you have a large estate, would ending the practice of dual use undermine the goal of landscapewide agreements with estates, and are you more likely to have the capability to deliver in a co-ordinate way? If you have a large estate delivering environmental schemes, are you best placed to do that rather than the individual tenants?

George Dunn: Clearly if you have landscapescale outcomes that you are trying to obtain, the easiest way to do that is to pay the person who owns the whole of the landscape in order to do that. We are saying that this is a Common Agricultural Policy that has elements of supporting agriculture and agri-environment schemes to individuals who are farmers in their own account. Inevitably, the policy has to be that you have to work for those landscapescale issues through the farmers who are farming that landscape rather than the person who owns it. It is easy for the Government to get what it wants by doing what it is doing, but we do not think it is the right thing to do morally because the farmers are the ones who should be getting the support.

Q256 Neil Parish: I suppose, putting it the other way round, the tenants could get together and pay the landlord or whomever to do the schemes throughout the whole. Then the control would be in the tenant’s hand and not necessarily the landlord. Is that how you see it?

George Dunn: We have said, and I have said in this room, we take the oldfashioned view that the landlord’s return is the rent. The tenants should be able to utilise the land for productive purposes and claim schemes etc, and remunerate the landlord through the rent. We get concerned when the landlord has already pocketed the support payment and then starts the negotiations.

Q257 Ms Ritchie: Is the Government right to consider setting five hectares as the minimum claim threshold?

James Bailey: I think so.

George Dunn: Yes, I would agree. When the single payment scheme was introduced in 2005 we suddenly found 40,000 new applicants to the system. Many of them were basically pony paddock owners that filled up the whole of the RPA system, so it is right that we should have a reasonable threshold. Five hectares seems reasonable, from our perspective.

Q258 Sheryll Murray: Can we turn to commons?

George Dunn: Then I can shut up.

Sheryll Murray: Are there any problems with the way common land is treated under the current CAP system? If so, what might the Government do to address this under the new deal?

James Bailey: How long have you got?

Sheryll Murray: Like Madam Chairman, I have got some commoners in my constituency as well.

James Bailey: Indeed we have. I think there are problems. The fundamental difference, as I said earlier, is that the grazing on commons belongs to the commoners, and the land belongs to the landowner. The landowner never has owned the grazing of the commons. Under the feudal system, it was given to landowners subject to the rights of our commoners. That is how we are, so we need to make sure that those two interests do not foul up the delivery of the management that the common agricultural policy is seeking to get. That is my only slight reservation. When you say "dual funding" I am not sure whether it is two separate schemes that we need, or whether it is just a better framework for delivering one scheme to the different stakeholders. Clearly there are instances where extra requirements are placed on one side or the other, which are not part of the scheme. In a sense, why should the taxpayer be providing those?

Q259 Chair: If I could press you, Mr Dunn, I think you referred earlier to the position of graziers on common land. Is there anything you would like to elaborate on?

George Dunn: I would not pretend to be an expert, Madam Chairman, on the commons issue, so I will keep my counsel on that front.

Q260 Chair: Could I just put one question that I think is in the NFU memorandum rather than yours? We are told by the NFU that the way that the current single farm payment is implemented in relation to common land is causing significant problems for some farmers in the hills and uplands. Some were not allocated the correct amount of entitlements for the common; others were told they could not claim at all. Some commons areas have gone unclaimed because rights recorded on the Common Land Register do not sit with active farmers. Do you believe that these issues should be redressed, and do you think there will be the opportunity to do so through this reform of the CAP?

James Bailey: I sincerely hope, Madam, Chairman, that this Committee will bring the opportunity for that to be looked at, because it does need to be looked at quite carefully. There is always going to be a difficulty because of the wide variation. I refer to this report, which is quite interesting, given that variation. Of course, there needs to be a far better prescription as to who is entitled to what part of the payment for doing which job.

As I referred to in the first instance, I do not know up and down the country, but in the North York Moors the Pillar II money on the SSSI designation, I think, is £124 million. The question is, if that is a SSSI, if we had management control over that for the last 20 something years, are we getting good value for that £124 million? Would a grazing scheme produce the same outcomes for less? I think it perhaps would.

Moving down the line, sooner or later when you have a management designation, you have to manage that in the taxpayers’ interests. Would you say to someone going through a 30 mile per hour speed limit, "You should be compensated for reducing to 30 miles per hour"? I do not think you would. Sooner or later, we need to be using those designations to say, "Well, where there is economic viability, then controls can manage that. Where there is not economic viability, we need to use support, particularly in upland grazing, to encourage that activity." I think the outcomes we are getting from the money need to be looked at again.

What I would add about the single farm payment is that it is quite a basic support, and there is a real danger on common land of being too prescriptive. As I first said, you have to look at a farm business as a unit: maybe a partner on common land, maybe a partner not on common land. If it gets too prescriptive in saying that, "You must only get paid for every beast that is on the common and never shall you be paid when it leaves the common," it will stop farmers from producing in an efficient fashion.

The final outcome is that whoever is delivering those schemes needs to be more involved in putting the money that the taxpayers give into the hands of the people doing what the taxpayers expect to get for it.

George Dunn: I hesitate to stray into the areas of commons when there is a real expert sitting beside me, but I think what DEFRA and the RPA probably did do under the last scheme was to put common land in with the "too difficult" pile to be brought back to attention later, and never really got round to it. Having been a member of the Future of Farming Group under David Fursdon’s chairmanship, one of the conclusions we made was that DEFRA needs to bone up on the sort of business structures that exist in rural communities and agriculture, which is sadly lacking within DEFRA. Commons is a key element of that. the knowledge about common land within DEFRA is severely lacking, and we definitely need to find a way of resolving that issue and other business structures so that the CAP reform implementation understands and is intelligent about the way in which agriculture takes place in this country.

One side issue is, of course, there are rights of common, as Jim has explained, but we also have tenants that are using landlords’ surplus rights under tenancy agreements, who are not listed on the Commons Register, but are still necessarily using those rights. We need to make sure in any scheme that we are including those with rights in perpetuity on the register, and those who are using landlords’ surplus rights as well.

Q261 Mrs Lewell-Buck: Moving on to greening, are there any particular aspects of the Commission’s proposals that are causing you concern?

George Dunn: All of them, but principally the three-crop rule is going to cause some major difficulties for some of our members. There are some derogations in that but I think that that is going to be a particular problem for us going forward. If we have the permanent pasture situation operated at a national level, that will clearly ease some of the concern with that particular provision.

On ecological focus areas, we have a particular concern from the Tenant Farmers Association because, when you are a tenant farmer, you wish to rent in the productive areas of the landlord’s holding, and many of the issues that may be considered to be EFA might be reserved by the landlord-woodlands and buffer strips etc. For a tenant farmer to find the relevant amount of EFA, it might be more difficult for an owner-occupier to find the same amount of EFA, so we need to have a discussion with DEFRA as to what is going to qualify as an ecological focus area item. We have some concerns with that, but the three-crop rule particularly is one that we are very concerned about.

Q262 Mrs Lewell-Buck: You might have already answered the question I was going to ask, but would you prefer the Government to opt for a certification scheme or would you want them to stick with the standard measures put forward by the Commission?

George Dunn: I do not think it is an either/or; it is both. The Commission provisions are there and they should be available for individuals to choose if they so desire, because other member states, as was said earlier on, will be using those situations. We are very interested in talking to the Secretary of State about developing a parallel line which has some equivalence to the greening measures to provide another flexible route for achieving the benefits that we want to see through the greening elements.

Q263 Mrs Lewell-Buck: You are looking for some flexibility and common sense to match the needs of the farmers.

George Dunn: Yes, it is not an either/or; it is both.

Q264 Mrs Lewell-Buck: The National Parks argue that the permanent grassland should be assessed at farm level rather than at national or regional level. Would this involve a costly remapping exercise for the RPA?

George Dunn: I would say so, and we are arguing for it to be looked at at a national level, so we would reject, from the TFA’s perspective, that aspect of the National Parks report. Jim, you might have a different view on that.

James Bailey: As Chairman of National Parks England, I should have, but I am not exactly sure what it is. It is important that we make sure we get suitable public goods from taxpayers’ money in those places that do not impinge on the viability of the businesses using that land.

Q265 Mrs Lewell-Buck: What kind of measures can the Government use to assess whether greening is delivering for the taxpayer?

James Bailey: If you take the whole dynamics of agricultural support, that greening does make it more acceptable to the taxpayer. I fully believe that we should have nothing to fear from the taxpayer. We should be able to go and say to any reasonable taxpayer that they are getting good value for their money, and I truly believe that. However, if you ask whether a huge, intensive, multinational agri-business delivers good environmental value for the taxpayer, maybe not; its priority is delivering produce, economics and efficiency. Clearly, the more traditional mixed-farmed landscape and the social benefits that kind of go with that, in less productive areas, do deliver public benefits. Maintaining that as best we can does make the whole system more acceptable to the taxpayer. It should not be a burden on production, but there is a lot of production going on which is greener and more acceptable to the taxpayer, and we should support that and recognise it.

George Dunn: I also think that we make a mistake if we think that Pillar I is not delivering public benefits. Pillar I is certainly delivering public benefits. My members use the profits that they make, both from farming the land and from the receipts that they get from the Government, to ensure that their holdings are maintained and that the environmental assets that they are managing are maintained as well. I have many conversations with my members when they are delighted about seeing wildlife, biodiversity and species-rich grasslands in their farm, which they are funding themselves through the profits that they make from the whole farming system. I think we should not make the assumption that Pillar II is delivering everything that we want and that greening is going to provide lots more. I think the greening elements confuse matters.

Chair: I am going to move it along, because we will have a Division shortly.

Q266 Neil Parish: Talking about greening, and given that the pot for agri-environment schemes is likely to be much reduced, what should the new schemes focus on and what are your main concerns about the present proposals? You talked a bit about the schemes earlier on.

George Dunn: You are right: there is pressure on the Pillar II pot, which, again, going back to an earlier question, underlines the importance of using the capping so that you can put more money back into Pillar II to provide the budget that you want and not take as much through modulation. It is important we have schemes that are outcome-driven, and our concern with the schemes that we have traditionally known and loved over the past seven or eight years have been very process-driven. We need to have a grown-up discussion with the Government about what it is they want achieved and what outcomes they want. The best people to articulate how best to get those outcomes are the grassroots farmers themselves. We need a two-way dialogue between those who are looking for the outcomes that are required by taxpayers and the management that might achieve those at a grassroots level. You might have two different management regimes across two holdings providing the same outcome, so I think there needs to be a-

Q267 Neil Parish: Can I press you on that point? Are you sure at the moment that grassroots farmers are getting their message through to DEFRA and the Ministers?

George Dunn: No, I do not think they are. In a previous incarnation, I was involved in reviewing schemes like the ESA schemes when I was an economist for MAFF. One of the conclusions that we reached at the time was that the best schemes were those where there were great project officers who knew their farming community, had dialogues with the farming community and could develop schemes, almost on a bespoke basis, to reach the outcomes that they wanted. Sadly, I think we lost that over time when engagement has become more process-driven.

Q268 Neil Parish: What is the optimum length of time for an agri-environment scheme, in your view?

George Dunn: It would be different for each outcome. If you are looking for a salt marsh, you are going to be looking for a long period of time. If you are looking for a capital scheme, it may be a very short period of time. You cannot be prescriptive about that.

James Bailey: Clearly, capital schemes are a very important bit of what comes next, and I do think some of the schemes we have now are overly prescriptive, to the point that they are not being terribly efficient in delivering what is expected of them.

Q269 Neil Parish: How do you rate the performance of the present schemes and Natural England, in terms of both advice and inspection?

George Dunn: From my perspective, I think Natural England have come a long way. Certainly, our engagement over time has much improved. In times past, we have had some difficult conversations with Natural England, and they have taken particularly difficult stances on issues, but, over time, they have learned the importance of engaging productively with farmers at a grassroots level. The way in which they have managed to deal with the budget cuts that they had was quite sensible. They took out the middle-management tier, if you like, but kept the frontline people who were engaging with the farming community. We have seen Natural England come into its own.

Chair: Mr Bailey, we do need to speed up because we are limited for time, but do contribute.

James Bailey: I was not going to disagree with that. What I would say is that the current batch of schemes are overly complex, and I think we would get better value from something that was a bit simpler, particularly giving access to capital funding for environmental benefit.

Q270 Ms Ritchie: Is the potential for a gap in funding for those farmers whose ELS schemes expire in 2014 and 2015 a concern?

George Dunn: For brevity, yes, and it needs to be addressed as soon as possible.

Q271 Mrs Lewell-Buck: The Government has indicated that Local Enterprise Partnerships will be responsible for delivering part of the rural development budget. I am sure you are aware that LEPs often do not operate in rural areas, so I am just curious as to whether you think they have the expertise and accountability to be able to do so.

James Bailey: It is a big question. LEPs are clearly not what the RDAs were, and I do not think that they have the same capacity to deliver a lot of the rural stuff that they did do. However, there are other partners that they can work with to do that. Probably the LEPs would not be involved in agricultural support; it is more to do with the higher-level stuff. There might be an umbrella incentive for getting landscape-scale advantage, beyond a single landowner or business. They have a role to play but there is a capacity issue that we need to see.

Q272 Mrs Lewell-Buck: Do you think that, if the LEPs incorporated other people to the table and brought people who did have the knowledge and expertise, it could work that way?

James Bailey: Either that or to, if you like, second or employ those people to deliver on their behalf: National Parks, AONBs and the NFU. Who knows? Clearly, there are people out there with that expertise, should they need it.

George Dunn: From my perspective, I am yet to really appreciate what benefit LEPs bring. I am always wary of putting gatekeepers in the way between those who are delivering and those who are seeking the policy outcomes. I go back to what I said earlier: you can have lots of activity but not much achievement, and there is a lot of activity and talking in those institutions, but not much delivery.

Q273 Mrs Lewell-Buck: It will be interesting when you have a rural/urban constituency and you have the LEPs trying to work together from two completely different viewpoints. That is when it will be quite interesting.

George Dunn: That creation of gatekeepers is unhelpful.

Q274 Chair: In terms of something you said earlier on the Digital by Default, do you believe that the LEPs could have a role in putting pressure on both the county council, in the example of North Yorkshire, but also the provider, BT, in bringing digital sooner and faster speeds to rural areas where the farm is very far removed from the cabinet?

James Bailey: I must say that there has been a lot of talk about who should do this or why it has not happened. Clearly, the fundamental point of this is the viability. As the viability of digital keeps increasing, the bit that is left, which the taxpayer has to support, gets less and less attractive, and nobody is prepared to pick up that last 5% of connectivity. LEPs could do it but it is passing the buck. Somebody just needs to get hold of it and say, "Let us get this done."

George Dunn: This Committee’s own report has looked at that issue, and there are some great local schemes out there that are doing it, despite the broadband commitment of the Government. I am not sure that we need LEPs, necessarily, to do that job.

Q275 Sheryll Murray: Madam Chairman, I will very quickly incorporate this into my question. In previous work, we have been quite critical of LEPs because of their lack of accountability and the resources that they have. What do you think about that? Finally, could I turn to the recommendations of Richard Macdonald task force and ask whether the enforcement of compliance has become noticeably proportionate and risk-based following the recommendations of Richard Macdonald?

George Dunn: On the first question, I would agree with you: I would question the benefit that we get through the LEP structure. On the second question, the answer is that there is a lot more that could be done to implement the Macdonald recommendations. The first-year report that the Macdonald implementation group provided shared some of the fluctuation with the lack of progress that there has been in putting in place-

Q276 Sheryll Murray: Has anything changed?

George Dunn: Not much has changed.

Q277 Sheryll Murray: Could you give us some examples of what you think has changed and what could change?

George Dunn: What has changed is there has been a lot more talk about how earned recognition is to be defined and used, but we have yet to see it come to any fruition. In other work that I have been involved with in the Tenancy Reform Industry Group, we managed to make great progress on certain of the areas that Richard said that we should, but the Government sits on the regulations that we drafted for them and they are yet to be implemented.

Q278 Neil Parish: Government is slow.

George Dunn: Yes.

James Bailey: On the point about the LEPs, I do think that the point that we have slightly missed is that there is a job to be done in levering in European money and in getting the best value out of our European situation, and the old rural development agencies used to do that very well. It is all about a workman and his tools, and I am sure that the LEPs could do that, but there is a bit of a gap there that people are not really picking up on in terms of whether we are getting the maximum that we could out of the European funding that is available in the pot. I am just not quite sure who is picking that tab up. Certainly, we are missing it in North Yorkshire at the moment.

Q279 Sheryll Murray: If I could just ask a supplementary there, some of the old RDA areas were very large. Coming from Cornwall, I am very aware that we are different, because we have Objective 1, but do you not think that the LEPs can deliver more closely to the stakeholders than, perhaps, the old regions?

James Bailey: I sincerely hope so.

George Dunn: Evidence today would say otherwise.

Q280 Neil Parish: We have Richard Macdonald coming in next week. What should we be asking him to get rid of in the way of rules and regulations? You have one minute.

George Dunn: I might write to you on that one.

Q281 Chair: As regards the LEADER programme, are you as relaxed as you appear about the transitional arrangements?

George Dunn: No, we need to get the transitional arrangements sorted, and sorted pretty quickly. I was agreeing that we needed action on that fast.

Chair: You have both been extremely kind and generous with your time before the Committee. We are most grateful.

Examination of Witnesses

Witnesses: Harry Cotterell, President, Country Land and Business Association, and George Winn-Darley, Moorland Association representative for the North York Moors, gave evidence.

Q226 Chair: I now take the opportunity to welcome our next two witnesses: Harry Cotterell, who is well known to the Committee as President of the CLA; and George Winn-Darley from my own area, so a particularly warm welcome to you, George. Would you like to each present yourselves, as the other witnesses did, just to give your name?

Harry Cotterell: Harry Cotterell, President of the CLA.

George Winn-Darley: George Winn-Darley. I am a landowner in North Yorkshire, rural chartered surveyor and valuer. You have me down as a representative of the Moorland Association for the North York Moors, which is correct, but I do not lead on CAP reform and agrienvironment schemes for them. That is done by the Secretary, but you wanted me instead of the Secretary, so I am very happy to do what I can to help today.

Q227 Chair: You are both very knowledgeable. Thank you very much for participating in our inquiry. Just a general question to begin with: do you believe that the proposed deal that is being negotiated is a good deal for UK farmers and landowners?

Harry Cotterell: If you go back to 2007, the agricultural political landscape at that time was pretty bleak in terms of the CAP regime, from our point of view. Now, the settlement that we look like reaching and the implementation that DEFRA looks to be going through with is a reasonable settlement. Obviously, farmers will be doing more for less, but that is broadly the direction of travel in this policy and so, yes, broadly speaking, we are reasonably content with the settlement as it looks like finishing up.

George Winn-Darley: We need farmers and land managers, especially in the hills, particularly if they are to optimise the many side benefits that they provide, such as biodiversity, public access, the landscape backdrop for tourism, archaeological preservation, drinking water supply, climate change mitigation, carbon storage, flood storage and management, the vital economic support for rural communities, as well the principal output of most farmers, which is food production. Support from upland farmers and land managers is needed. The wide range of public benefits that flow from their management is undervalued. Yes, the CAP does represent a good deal for the taxpayer.

Q228 Chair: It is well known, and we have heard again during the course of the inquiry, that the 2005 arrangements initially led to a cost of an individual farm payment application being processed of £1,700 in England. Where do you both foresee that the most difficulties will arise with the bodies being charged with inspecting and checking compliance, and making payments under the new revised CAP?

Harry Cotterell: I would preface any remark on this subject by pointing out the incredible difference between the RPA five years ago and the RPA now. Our organisation, which really was almost snowed under with complaints and problems relating to the old RPA, is now virtually running with hardly any complaints. Quite a lot of them are user error, rather than necessarily RPA error. That is through effective management. We would like to see that effective management continue.

In terms of the RPA, the priority initially must be to get the IT system absolutely right. That was the cause, I suspect, of the majority of the problems at the outset of the existing reform period. We would like to see more joinup between the RPA and Natural England particularly. I find there is too much duplication, and it would make the inspection regimes a little clearer. Broadly speaking, good management from those organisations will actually deliver a lot more than possibly being too prescriptive about how they carry out inspections.

One final point: it is unclear at the moment what is going to be required, because the management of ecological focus areas is as yet not decided. We would be very concerned if we have to go into a complete remapping exercise. The cost of that for the RPA will be pretty horrendous, so that is a major concern. It looks like, the way EFAs are shaping up at the moment, that is a likely outcome and that makes us nervous.

George Winn-Darley: Digital by default is going to be a challenge for those in rural areas who have not yet got adequate broadband coverage. I echo what Mr Cotterell said: that IT must be fit for purpose on this, and that is key. There is a desire for more of the Pillar II money to be delivered competitively. This means that significant resources will need to be expended in preparing applications that will fail. There needs to be a quick and simple screening process to achieve that competitiveness, so that time and resources can be committed to working up detailed applications, which will be guaranteed to be rewarded with a completed scheme.

The young farmers scheme will be an added complication, collecting the data to prove that, for instance, an applicant is the firsttime head of a business. That will be open to interpretation. There is a particular problem with entitlements on commons, even assuming they can be rolled over. Especially in the uplands and commons, there is much land that does not have entitlements, due to the problems of mapping and allocation of entitlements stemming from 2005. There should be the ability to claim entitlements without having to buy them from the marketplace to meet this demand, and ensure the occupants get their fair share.

Q229 Chair: That might even relate to the question I asked at the end of the last evidence session about many of those entitled to common land not being registered. Are you agreeing that where they have existing entitlements they should be properly registered?

George Winn-Darley: That is absolutely right.

Q230 Chair: We heard yesterday about people being asked to make their own arrangements in the 10% or the 5% hardest to reach areas for broadband, where it is not expect to get superfast broadband before 2016. Are you aware of any arrangements, particularly locally in my area-it would be good to get it on the record-but more generally Mr Cotterell, where farmers are having to make their own arrangements through satellite and other companies at vast expanse? Is there anything you would like to share with us?

George Winn-Darley: I am aware of the problem and, in the part of the world that you and I come from, we have NYnet. I have worked and met with them to try to help resolve this problem. It is the final 7% in that particular case that is causing a challenge.

Harry Cotterell: As you know, Madam Chairman, we have been very vociferous on broadband for 11 years now. Our concerns are not specific particularly to the single farm payments and the CAP regime; they are across the whole board. Effectively, if you do not have broadband, you are significantly disadvantaged in the modern world at the moment, and that is only going to get worse.

Yes, a lot of our members make alternative arrangements. A lot of our members will pay very large sums of money to bring broadband into commercial developments and that kind of thing, just because it is the only way you can let them. I personally have invested in a satellite, which is unbelievably expensive, only moderately efficient and I would much prefer to be on the kind of system that is available in London. George Dunn from the Tenant Farmers Association was right: in hardtoreach areas where you cannot get broadband, it is only fair that you can fill in a paper copy. That has to be accepted, because it is unreasonable to make a farmer go out and pay for broadband access, or for an agent to do it, for the simple reason that he needs broadband to achieve the fillingin of a claim.

Q231 Ms Ritchie: To Mr Cotterell, and maybe, Mr WinnDarley, you have a view: in your written evidence, you propose more than doubling the payment rate for moorland. What is the justification for this?

Harry Cotterell: I think the difficulty is that, firstly, the uplands have existed under a myriad of subsidy regimes for a number of years. For the last half/third of the period of this reform, they have been operating under UELS, which has been a reasonably effective scheme. That is almost certain to disappear, going forward, everyone accepts. Therefore, we believe that it is better to give the uplands some certainty for the period of this reform and to basically take away the disparity between SDA and nonSDA areas, and to move a certain amount of money up the hill above the moorland line, which will then give them some certainty going forward. This Committee is well aware and does not need me to tell them of the huge benefits and difficulties of farming in the uplands. We believe that that is the best and simplest way of dealing with the problem.

George Winn-Darley: I set out the list of benefits in an earlier answer today and I echo the points made by Mr Cotterell on this. I would go further to point out that the uplands were badly treated in the last CAP reform, and there is a strong argument for now moving a greater proportion of the money back to the moorland and SDA areas. Furthermore, NELMS will not be as available and will not be available to the more environmentally marginal holdings, which would have benefited from the UELS money that Mr Cotterell referred to. However, if their Pillar I money is supplemented by the moorland and SDA uplift, it will make that money available to support those more environmentally marginal holdings.

Q232 Ms Ritchie: Supplementary to those, is there a risk that increasing funding for upland farmers through Pillar I may feed into land and rental prices?

Harry Cotterell: It is very difficult to say. There are a lot of factors that determine rental values and this is only one element of it. You are losing UELS, so that is money that has gone, and you are introducing an increased single farm payment. Hopefully one will roughly cancel the other out, and so I would expect it not to be hugely significant in terms of that aspect of rental values.

George Winn-Darley: I do not have any more to add on that.

Q233 Ms Ritchie: Is it fair to reduce payments to lowland farmers, when they are already going to be most affected by the introduction of greening and the end of ELS schemes?

Harry Cotterell: Our view is that it is never easy to say that payments need to be reduced. We would not say that they need to be reduced. The numbers that are being talked about at the moment lead to something like a 2.7% reduction in the single farm payment in the lowland areas, so that is the sort of alteration in the Pillar I pot, if you see me. We think that that is acceptable in this instance. To be fair, we have asked quite a lot of our lowland members and they have not been too concerned about that aspect. Within the country as a whole, there is an understanding that the uplands, because they have few production solutions and provide all the benefits that Mr WinnDarley has already outlined, really do need the support.

George Winn-Darley: I would point out that the relatively small reduction in the lowland rate, if you want to call it that, could be severalfold increased or reduced from that level purely by the changes in the exchange rate. There is a degree of proportionality that needs to be looked at.

Q234 Chair: Could I just ask you, on the back of that, to respond to something Mr Dunn said? He does seem to have a point that the landowner receives the rent, so it would be expected that the tenant received the payment for the activity performed. Does that not seem very sensible?

Harry Cotterell: The last bit of your question is right: whoever performs the activity should receive the payment or, if there is another mechanism utilised, it should be reflected in the rent. Our concern is that the CAP will get too hung up about landlord and tenant when, in fact, the thing that should be dealing with landlord and tenant is the rent and the contract.

If you start trying to tinker too closely with the CAP system to deal with landlord and tenant, you are almost certainly going to cause some unintended consequence elsewhere, which could take away all the benefits you are trying to achieve. Broadly speaking, we would like to see the landlord and tenant system outside of the CAP, so that there is maximum flexibility in terms of its utilisation. The point you made right at the beginning is absolutely right: whoever does the work or, in the terms of the Pillar I payment, whoever is occupying the land-has the land at their disposal is a perfectly reasonable definition-is the one who should get the payment.

George Winn-Darley: I would only add that landlord and tenant very often work in cooperation to get the best out of the system. For instance, landlords will help tenants get into agrienvironment schemes. For instance on capital works, landlords might actually go out and do some of the capital works-hedge restorations, dry stone restorations-that the tenant perhaps is not so interested in doing. The tenant, through the scheme that he is in, will claim the capital payments and pass those through to contribute towards the landlord’s costs. That sort of partnership working is very important.

Q235 Chair: Do you watch Downton Abbey?

Harry Cotterell: Certainly not.

George Winn-Darley: I do. It is very popular.

Q236 Chair: Do you believe that you both pass the Downton Abbey test that you are in a partnership with your tenants, a landlord/tenant partnership?

Harry Cotterell: Completely. It is a complete anomaly for landlords and for landowners not to seek a good working relationship with their tenants. Quite frankly, it is madness not to. Everyone’s objective should be identical, which is maximising profitability for both parties and I am sure George Dunn of the Tenant Farmers Association would totally agree with me on that.

Q237 Chair: In our uplands report, we concluded that there should be a dispute resolution mechanism, which currently does not exist, if there are the types of disputes arising that can so easily arise. We have alluded to that in this evidence session and the previous evidence session. Would you both welcome such a dispute resolution mechanism?

Harry Cotterell: To be completely honest, Madam Chairman, I do not have a view on that at the moment. I am sure we do. Can I give it to you in writing?

Chair: Yes, that works.

George Winn-Darley: On HLS schemes, we have actually achieved something in the region of 95% of SSSI and moorland having ended up in an HLS scheme. That is due to a great deal of hard work by a lot of people. I am not aware that that resolution process has a huge demand, if we are getting a 95% success rate.

Q238 Chair: Who is "we"? You said, "We have achieved a 95% success rate."

George Winn-Darley: 95% of SSSI and moorland is in an HLS scheme, and that has delivered 96% of heather SSSI moorland being in recovering or favourable condition, which exceeds the Government’s target. The "we" is part of the partnership working that we are talking about.

Q239 Chair: I do not think either of you would object to such a dispute resolution mechanism if it was deemed to be appropriate. You would not object.

George Winn-Darley: I do not know what the proposal is to object to. There are a number of-

Chair: It would be good to know if you have some ideas on this. I am accused of leading the witnesses.

Harry Cotterell: I know you are not trying to catch me out, but I am just concerned about the crossover with any dispute resolution mechanism that you might be talking about. I am not completely clear about the crossover between that and the Tenancy Reform Industry Group. I do not want to say something that-

Chair: We could get very excited about that-tenancy reform.

Harry Cotterell: The Tenancy Reform Industry Group on which we and several stakeholders sit. I do not sit on it personally, but I do not want to say anything that would be-

Chair: It was not a leading question; that was not intended.

Harry Cotterell: Absolutely.

Q240 Mrs Lewell-Buck: With regards to the transfer between Pillar I and Pillar II, would transfer of the maximum 15% be a good or bad thing for farmers?

Harry Cotterell: I would refer to Mr Dunn’s earlier remarks; we think that the programme should be costed before the percentage rate is set. I would agree with Mr Dunn’s remarks that, actually, 15% would be too high. We hope that 15% would be too high.

George Winn-Darley: The Moorland Association would prefer more money in Pillar II, as it would be targeted but, if it is in Pillar I, then it needs to be fairer. Having done the detailed costing that both Mr Dunn and Mr Cotterell have referred to, if the answer is that 15% is the right answer, then that looks reasonable to me and to the Moorland Association.

Q241 Neil Parish: Good afternoon, Mr Cotterell and Mr WinnDarley. Carrying on with the environmental schemes, given the pot for agrienvironment schemes is likely to be reduced, what should the new environmental land management schemes focus on and what are your main concerns about the proposals? It looks like ELS is going to go; what should it be replaced with?

George Winn-Darley: HLS agreements need to be considerably simplified. They should run for five years. I think that is part of the question you are wanting to ask.

Neil Parish: That has answered my second question, yes. Carry on.

George Winn-Darley: Except for in particular cases such as common land, which are complex to get into and which should run for longer, probably the existing 10 years is appropriate. Better value may be obtained by 10year schemes, but applicants should have the option to break after five years to give them the confidence to enter it in the first place. NELMS should provide an effective upland management system and this should include factors such as a reduction in the risk of wild fire, effective heather regeneration, rewetting and water quality.

Harry Cotterell: Targeted outcomes, I think, Mr Parish, in the first instance, and they must be tangible. In terms of targeting, we would not like to see it being targeted in geographical areas. We have concerns that, if nature improvement areas, for example, are used as a criterion to push schemes further up the list, farms and land outside of NIAs will be disadvantaged for no other reason than it is outside of an NIA. We are concerned about the geographical aspect of targeting. We are quite keen to see farm-specific schemes continue. We think that that is a good way of delivery; it is simple and there is little crossover. We are quite taken by the idea that is coming in, in Wales at the moment, which is partfarm schemes, so that farmers can put their environmental delivery land in one area and production land in another, without the two having to significantly cause crossover.

Neil Parish: Flexibility, then.

Harry Cotterell: Maximum flexibility, I think. The real difficulty is going to be the gap between greening and NELMS, the New Environmental Land Management Scheme. We have high hopes that this will be delivered by farmers in the Campaign for the Farmed Environment, which we have been supporters of for a number of years. This has a significant role to play in terms of farmers delivering environmental outcomes on the ground, going forward.

Q242 Neil Parish: The final part of my question: Mr Dunn was very supportive of what Natural England has been doing and how they have been managing the present schemes. In terms of advice and inspections, how would you like Natural England to go forward with the new proposals? Are you happy with what they are doing at the moment or what?

Harry Cotterell: I do not deal with it. I will hand over to Mr WinnDarley in a minute, because he deals with them much more on a facetoface basis. Our principles are that advice and aftercare should be built into the design of the scheme and, therefore, take in the inspection regime as well. Mr Dunn said that the fact that the men on the ground have remained in place is a good thing. We would agree with that. A lot of the relationships between farmers and landowners on the ground are completely driven by the often perceived quality of the Natural England operator on the ground, whose job it is to liaise.

Q243 Neil Parish: Do you feel these people are getting enough advice from Natural England?

Harry Cotterell: In terms of going forward, we have a bit of a concern, but the actual delivery on the ground, in most places, has been fairly reasonable. Mr Winn-Darley goes head to head.

George Winn-Darley: They have undergone a dramatic restructuring and they have lost most of their expert staff. On the applicant side, there is usually one advisor who is expected to deal with all issues, from getting the detail of the RLR mapping correct to identifying the appropriate potential conservation benefits of a particular holding, with reference to the character area targets of that and the implications of those on the farming system; and to be able to understand the practical implications of the detailed administrative process to drive it through to completion.

On Natural England’s side, these roles are all dealt with by numerous different people in respect of that same application, which is hugely inefficient. I believe that a frontofhouse officer who deals with the applicant should be given overall responsibility for delivering the scheme, and any aspect that is delegated to colleagues to do is just that-delegated-i.e. the frontofhouse officer should have the overall charge and responsibility for the backroom staff, who should be answerable to them as their team leader. These frontofhouse team leaders need to be suitably qualified and trained to be able to fulfil these roles and take on this responsibility. This would have a massive impact on making the process simpler, quicker and more efficient. The same principles apply to the delivery of the single farm payment by the Rural Payments Agency.

The suggestion in NELMS that farmers’ trusted advisers will be paid by Natural England to deliver some of the roles previously done by them sounds to have excellent potential for success, but the detail needs to be got right.

Neil Parish: Thank you very much. You make some very interesting points there, because having one person see the whole application through would be a huge benefit, both in environmental schemes and the RPA, single farm payment.

Q244 Chair: You are both essentially saying that it should be as simple and easy to administer as possible and, like the previous witnesses, not too prescriptive. Without leading you to that conclusion, would you agree?

Harry Cotterell: I would agree with that.

Q245 Ms Ritchie: Should the implementation of the new CAP bring an end to the practice of dualuse payments?

Harry Cotterell: In our view, no. We support dual use, because it is part of the flexibility to which I have already referred earlier and we are pleased that DEFRA seems to be taking a stance. We think it incentivises more land to be put into agrienvironment schemes, because you have two parties that are capable or could possibly bring the scheme to a head. We appreciate that the introduction of greening into Pillar I could cause difficulties, but we cannot believe that it is impossible to design a greening scheme so that it does not impact, so that there is a clear definition between who is providing the Pillar I work and who is providing the agrienvironment work. We would be disappointed if dual claims were ruled out.

Q246 Ms Ritchie: I am moving on to a supplementary, which is based really around the ethics. Why should people receive payment on land for which they do not bear the entrepreneurial risk?

Harry Cotterell: Because they are providing the delivery of a public good. The agrienvironment schemes are payment for provision of services and loss of-

Ms Ritchie: Agriculture?

Harry Cotterell: Yes, in the lowlands. The person who is doing the work should receive the payment so, if it is the landowner in the uplands who is doing the dry stone walling, the hedge work or whatever it happens to be, he should be paid to do it. Let us keep the landlord and tenant system out of the CAP. Let that be resolved by negotiation and rent.

George Winn-Darley: Dual use is a good thing. Dual use is perfectly possible and simply requires proper care with the documentation. If you want to maximise the nonfoodproduction outcomes, then the systems should be set up to be capable of accommodating dual use. The landlord/tenant relationship very often divides between these two interests and, effectively, partnerships can operate better by the landlord delivering the conservation biodiversity benefits, managing hedges and field corners, for instance, whilst the tenant concentrates on his food production business enterprises in the middle of the field. However, the RLR mapping rules prevent one from being able to separate fields up like this into two separate parcels, so it is impossible to comply with the schemes without a dual use of the same RLR parcel.

Ms Ritchie: The ethics question as well: in you view, why should people receive payment on land for which they do not bear the entrepreneurial risk?

George Winn-Darley: I think Mr Cotterell has answered that very well. The money should follow the responsibility for delivering it.

Q247 Neil Parish: I want to talk about grazing now. What should the Government do to improve the way common land is treated under CAP to ensure that payments go to those who are actively grazing? When you had the 200405 reforms, you moved the support from sheep and cattle to area payment. There has been a huge problem with those with common rights ever since, and it never really was sorted out properly in the ensuing years. What is your solution to this?

George Winn-Darley: I hope that the new system is not very different from the one we have just come through. It has taken a long time for all parties involved, including DEFRA staff, to work it out. I would urge the minimum of changes. The old system worked surprisingly well, as long as all concerned are prepared to recognise all legitimate interests. As I mentioned earlier, 95% of moorland SSSIs leading on to the favourable condition bears testament to that hard work by many people.

Harry Cotterell: I broadly agree with that. We are very reluctant, as are the Government, to see a recoupling of support with stocking numbers and grazing numbers, because we think it will lead to artificial sheep: sheep which are there for subsidy reasons as opposed to for economic reasons. We all know what decoupling leads to.

Q248 Neil Parish: I have met quite a lot of unhappy commoners over the years, who believe that they are not getting their due recompense. Is that your experience, perhaps Mr WinnDarley in particular?

George Winn-Darley: A typical HLS scheme covering SSSI Natura 2000 designated sites over a common will have a management plan and various specifications, which typically run to 40 pages of text, plus about nine sets of plans and appendices and perhaps another 10 pages of general parcelbased summaries and administrative details. Of all this, only about four pages in total set out issues which are within the gift of a common right holder who has a registered right to graze a set number of animals. All the other obligations are the responsibility of the freehold owner or the common to deliver, so that puts it in perspective perhaps, in a slightly crude way.

Q249 Chair: Just to be equally crude back, that potentially is a matter of dispute. At the moment, we come back to this fact that we do not have a dispute resolution mechanism. If I look at paragraph 33 of the CLA, Country Land and Business Association, evidence, it says here that "The key concern on the implementation of the single payment system for common land is that many available entitlements have not been claimed on, simply because some common right holders do not engage in agricultural activity and, therefore, see no need to claim SPS." For many of the graziers that Mr Parish and I seem to have been meeting, over recent months and years, the difficulty seems to arise from whether you actually allow sheep grazing to be recognised as an agricultural activity. That should not pose an issue, should it? Sheep grazing, for those graziers who have rights in perpetuity on common land, is an agricultural activity, which should benefit under this particular scheme.

Harry Cotterell: Presumably, though, if it is an agrienvironment scheme, the grazing of the sheep is only one aspect of a number of other management requirements to deliver.

Q250 Chair: For example, shooting is not recognised as being an agricultural activity, is it, whereas grazing is?

Harry Cotterell: Yes, but the two are not mutually exclusive.

Chair: I would agree. Do you agree, Mr WinnDarley, that the two are not mutually exclusive?

George Winn-Darley: They are not mutually exclusive, no.

Chair: Do not feel inhibited by keeping to a script. Please do feel that you can talk freely.

George Winn-Darley: I am slightly confused by your question. Common land is a very complicated-

Q251 Chair: I have rehearsed what the CLA memorandum says, and then the NFU memorandum says, at paragraph 34 of the NFU brief on page 77 of our bundle of evidence, many farmers-"farmers actively involved", not "many", so I am putting words into the statement that are not there-"Farmers actively involved in the management and grazing of upland commons may not currently receive their fair share of the SPS" and the NFU believes "that DEFRA should consider ways in which future national reserve can be used to allocate additional payment entitlements to farmers affected by these problems." That is as regards the SPS. I think we are possibly looking at a situation here of a stewardship scheme, where active farmers are losing out and the graziers, to my certain knowledge, have great difficulty in accessing the funds. That should not be the case, should it, Mr WinnDarley?

George Winn-Darley: I do not agree. The statistics I gave you are that 95% of moorland SSSIs are in an HLS scheme. They are accessing the payment through that. If they are an active grazier carrying out an agricultural activity within that, they will be getting the share that they have negotiated within that scheme. It will be different. All commons are very different, so it is very difficult to be prescriptive on this, which is the reason why I urge that there is very little change on the commons side. There is no easy answer. There are many commons in your constituency, in North York Moors, where essentially the common rights holders simply have the right to graze. There are other commons in Cumbria where the common rights holders actually have many more rights and, indeed, might even own the freehold amongst themselves. Obviously the situations are completely different as to who has the responsibility of delivering different aspects.

Chair: I accept that

George Winn-Darley: Therefore, the money needs to follow the responsibility.

Q252 Chair: If 70% of the agreement of the stewardship scheme funding is going towards administration costs, it does not leave an awful lot of money for the graziers.

George Winn-Darley: I am not familiar with that figure at all.

Harry Cotterell: I have to say, Madam Chairman, on the administrative costs, one assumes in this example-and I must admit I have never heard of it-that it is 70% of the annual payment for presumably the first year to get the thing done and implemented.

Chair: We will have the written evidence, because we are going to receive the report. Mr Parish would like to come in on this one.

Q253 Neil Parish: Just one final pop at this one really: basically, if you own the land or you farm the land, as a tenancy or an owner, you have an area payment, either for a stewardship scheme or for the single farm payment. The problem with common land is that you have so many people grazing across a big area. The argument comes as to who owns what, how many cattle or how many sheep, and so what percentage of that land area do they actually have and then what payment comes back to them? That is what it seems the argument is about. Perhaps I am simplifying it too much.

George Winn-Darley: There should not be an argument about how much people have got, because the 1965 Commons Registration Act required everyone to register precisely with a number how many rights they have to graze. We have moved on from that and we have that. The difficulty comes if we are then talking about Pillar I and the single farm payment money.

The difficulty comes in the system that DEFRA set up for doing this. They started out by only looking at the rights that were registered. They would go the county council, look at how many rights were registered and then they assumed that everybody who had a registered right was going to claim. A lot of those rights were not claimed on. In North York Moors, sometimes as much as two thirds of those rights were not claimed on at all, so the single farm payment that travelled was targeted at those areas and ended up not reaching those areas and the uplands missed out, as a result of it.

There are then complicated rules about surpluses and whether or not the owner of the freehold, who has a right to graze as well, which is secondary to the registered common right, should get something. In most cases on the North York Moors, there are so many rights registered that there is no surplus available to the owner, so they completely lose out on the basic calculation. In other areas, particularly on the Pennines, the number of registered rights is much closer to the carrying capacity of the common, which is what they use as their threshold. Therefore there is a surplus quite often available to the owner. It is very detailed and very complicated, and every common is different.

Q254 Neil Parish: Perhaps we could have some written evidence from you, can we, on this particular item?

George Winn-Darley: I am very happy to supply that. If you would like to supply the details of this 70% figure, I will happily comment on that too.

Q255 Chair: I might be on my own here, but I am slightly confused why we are all talking about SSSIs when we are talking about common land.

Neil Parish: They are a target in the SSSI.

Chair: It would be helpful to put a little bit more flesh on the bones there.

Q256 Ms Ritchie: Thank you, Madam Chair. Moving on the activefarmer test, how should the Government determine who is an active farmer?

Harry Cotterell: The three tests engaged in production, keeping land in good grazing condition and then the minimum level of activity we are reasonably comfortable with. It will be the job of the Government or DEFRA to define the level of minimum activity, and we believe that, if you are engaged in production or maintaining land in grazeable condition, it is sufficient. We would be concerned about the setting of a stocking density for reasons I have already covered, as a trigger for the active-farmer test.

George Winn-Darley: Active farmers must include land managers who, for instance, are not exercising grazing rights as they could do, but are still delivering good agricultural environment condition, partly as a result of that decision. HLS schemes, or NELMS as we will get into them, involving grazing usually have a minimum stocking level, and that is the appropriate place for the minimum stocking density to be set.

Q257 Ms Ritchie: Do you foresee the active-farmer test creating any problems, for example on the relationship between tenants and graziers and the landowners?

Harry Cotterell: Is this for the single farm payment or is this for agrienvironment?

Ms Ritchie: This is around the whole area of the active-farmer test relating to single farm payment.

Harry Cotterell: Relating to single farm payment only, by the time the regulation is drafted and clear, I do not see that there will be significantly large issues in the Pillar I aspect of this. Do you?

George Winn-Darley: No.

Harry Cotterell: I think it is going to be fairly clear in Pillar I by the time the regulation is drafted.

Ms Ritchie: What is your view, Mr WinnDarley?

George Winn-Darley: As I said, I do not envisage a particular problem with this in Pillar I either.

Q258 Chair: On Pillar II, are you concerned that the lack of cofinancing will be an issue, if more money is moved into Pillar II?

Harry Cotterell: The Pillar II budget is such a difficult one, because we were really supportive of the Government’s principal lobbying priority, and I remember saying that to you in my first appearance in front of your Committee, Madam Chairman. We supported the Government’s principal lobbying position, which was a fair deal for British farmers from Pillar II, because that had not been achieved in the Beckett reforms. Here we are with actually a very poor deal from Pillar II for UK agriculture. We have always known, or we have certainly known for a couple of years, that cofinancing is not going to be realistically available in the current economic climate, and we have to accept that. That is going to have significant impacts on agrienvironment schemes and Pillar II funding. At the moment, about 80% of Pillar II funding ends up in agrienvironment schemes. We would like to see that number maintained. Whether that is related to the cofinancing aspect of your question or not, we think that we would like to see agrienvironment funding being the priority of Pillar II spending.

George Winn-Darley: I was going to say something about public access, which suffered due to the cuts on the cofinancing. The new NELMS are being targeted at landscapescale schemes, and permissive access would be well suited to be delivered on those sorts of landscapescale schemes that they are talking about trying to achieve. It was a great pity that permissive access under the HLS scheme was so badly delivered by Natural England, so that there was so little publicity about the permissive access that was available. I would encourage that that be properly addressed and we consider bringing permissive use access agreements back in. It gives taxpayers ultimate value for money.

Q259 Mrs Lewell-Buck: Similar to the questions that were asked of the previous witnesses, should the Government seek to reduce payments above €150,000 by more than the proposed 5%?

Harry Cotterell: No.

Mrs Lewell-Buck: Why is that, Mr Cotterell?

Harry Cotterell: We feel that capping discriminates against UK agriculture as a whole. We feel that we are the country that would be most greatly affected. As far as I can gather, so do all political parties in this country. I have not heard any of them come out in favour of a cap for precisely that reason. The direction of agriculture over the duration of this reform period will be into fewer farms farming more acres. That is a fact of life and that process will be significantly inhibited, if you start hitting a capping level at that level. I understand that it is quite an attractive proposal, but we feel that the overall impact on UK agriculture would be pretty negative as a whole.

George Winn-Darley: After the last CAP reform in 2005, we were told that this was a transitional phase towards removal of the CAP and that we should use the money to help restructure businesses, so that they maximise the chance of being able to be financially viable without CAP support. Inevitably, this means that unless the price of food commodity is going to increase manyfold, which seems both unlikely and politically unattractive, holdings need to become bigger and more efficient. Capping acts as a penalty against this. Penalising larger operators, which are the ones most likely to pioneer and put the investment in to pioneer better solutions, such as improving hill livestock breeding, seems to be a retrograde step to me.

Q260 Neil Parish: Can I just say that, in the end, the Government has to pay for greening, HLS schemes and others? We have to either modulate all of agriculture, the whole payment across the scheme, or we target the larger farms. Now, there must be some economies of scale in larger farms. You cannot actually sit there and tell me that somebody who is receiving €300,000 to €500,000 cannot actually take a 5% hit.

Harry Cotterell: The point is that area is the way that we have chosen to deliver this scheme, just like in the old days it used to be headage. Our concern about capping rates is this: George brought out a number of people who were affected; it is not very high at the moment, but once they are introduced there is only one direction that capping rates go. While the threat is there, as an entrepreneurial farmer who is trying to grow his business, you look with some concern about whether you are getting up towards the capping rate. Are you going to be affected if they bring it down by 30%, have a midyear review or whatever it happens to be? That would be our concern.

Q261 Neil Parish: You do accept the argument, though, that you have to get the money from somewhere. Do you actually feel that 5% on €300,000 is going to be hugely detrimental to a business of that size?

Harry Cotterell: It is the principle, Mr Parish, and I have articulated our concerns.

George Winn-Darley: I am comfortable with the level at 5%, but I would hope that it would be recycled into schemes to address better livestock breeding regimes, in conjunction with EBLEX and the agricultural colleges. That would be a very positive outcome for it all, because this is a huge challenge for the future of the uplands.

Neil Parish: In an answer from the Secretary of State, we have got quite a lot of flexibility on how we can actually spend any capping of the large payments that we do.

Chair: Following the logic through, we could allow more for the graziers, which would be excellent.

Q262 Mrs Glindon: On greening, how should the Government implement greening to deliver most value for money for the taxpayer?

Harry Cotterell: Probably not in the way it is going to be made to do it at the moment, I am afraid. We have significant concerns with the crop diversification measure. We do not think that is going to deliver a great deal, and we think it is going to impact on two types of farmers: firstly, the farmers who are just over the 30hectare threshold, who are going to be made to produce three different crops. They are going to produce an amount of probably two crops, which they are virtually unable to sell, because it is going to be too small an impact, so it is going to have a negative impact on those farmers, who are at the smaller end of the scale.

On the other hand, it is going to have an impact on the larger farming businesses that are operating in conjunction with their neighbours in pooling machinery and that kind of thing. Therefore, they bloc up their crops into individual holdings, and we feel that that will make it difficult if you have to extend that into three crops. It is bound to increase, firstly, contract costs, because the sprayer operator or the drill is going to have to go from one farm to the other, to satisfy nothing more than a requirement to have multiple crops on a holding. Secondly, it will challenge efficiency and, I suspect, have a carbon impact, with additional travelling on the roads, which, of course, is never popular. Agricultural vehicles on the roads, in my part of the world, at this time of the year, are an horrendous issue. If you are moving farming businesses and their tack around for no other reason than to reduce their efficiency, it slightly grates.

We have problems too with EFAs-ecological focus areas-but I do not know if you want to talk about those at the moment. We are concerned about the mapping of ecological focus areas. We want them to bring in the widest part of the farm, bearing in mind Mr Dunn’s comments relating to the tenants. The mapping of farms for the single farm payment has been incredibly tight. Land has been "lost" every time we have been remapped. Basically, it is going to be very difficult, utilising existing mapping systems, to try to establish how you are going to deliver ecological focus areas in the arable landscape. That is a big concern. Having said all that, greening is a good thing. It demonstrates the direction in which the CAP is going. It is a good thing for this particular reform, because we do understand that the public need to see some justification for the size of this policy.

Mrs Glindon: Mr Winn-Darley, do you agree?

George Winn-Darley: I have nothing to add to that.

Q263 Mrs Glindon: You have talked about some of your concerns as well. Would you prefer the Government to opt for a certification scheme?

Harry Cotterell: We are ambivalent about that. We would support a certification scheme, if it was not too complicated, with too many options, because you are going to get into this challenge between flexibility, simplicity and cost of administration. We are totally aware that it is the easiest thing in the world to ask for everything and then suddenly find out that it is costing more to deliver each single farm payment than the last scheme did. We would also be concerned if the national certification scheme was the only way that greening was to be delivered. We would like to see the three greening measures available as well, if farmers were not able to meet the requirements of the certification scheme. I am asking for flexibility but I am well aware of the challenges of delivering flexibility.

Q264 Mrs Glindon: You touched on the EFA scheme. How should greening work alongside agri-environment schemes in Pillar II?

Harry Cotterell: That element is going to be quite difficult. I think there is going to be a gap left by the removal of ELS-the entry level scheme-and the bar is going to be raised. Access to the new scheme, NELMS, is going to be significantly higher than it is for ELS at the moment. Whilst greening will deliver to a level, there is going to be a gap between what greening is achieving and NELMS, and I think we would like to see that taken up by the Campaign for the Farmed Environment in trying to persuade farmers to voluntarily deliver environmental measures. We were pleased to see that that has received funding for another year. We would like to see a commitment to fund it for, say, the period of this CAP reform, so that it can play a significant part in the delivery.

Q265 Mrs Glindon: Is there a risk that this round of CAP will deliver less for the environment than its predecessor?

Harry Cotterell: It is very difficult. As I said at the beginning, farmers are going to have to do more for their money. They are going to have to do more, and the money is going to diminish. The overall answer is no, but it does depend on how effective the NELMS is, what the take-up is and the budget that is available.

George Winn-Darley: Generally, we should aim for greening to get more environmental benefits and to position UK farming in the vanguard of sustainable agriculture. If you want to get the most out of biodiversity on a particular farm, you have to have the maximum flexibility to work with the farmers, landowners and managers of that land to be able to deliver the optimum that you can there. We are slightly stuck, in that the EU is passing down to us some fairly stringent rules on greening. We just have to make the best of it in those principles.

Q266 Mrs Glindon: Is the Government right to consider setting five hectares as the minimum claimed threshold?

Harry Cotterell: Yes. We are well aware of the remarks that Madam Chairman made about the cost of implementation. We agree that five hectares is a reasonable threshold.

Q267 Neil Parish: The National Parks are not very keen on this, because they think a lot of people will be excluded from payment. What do you consider about that? It is something like 30-40% of claimants in National Park areas, so quite a high figure. I agree with you in many respects, but the National Parks are-

Harry Cotterell: They are probably not what you or I might call farmers, I suspect.

George Winn-Darley: It seems practical to remove the administrative burden of applicants below five hectares, which is, essentially, around or less than £1,000. If it is costing £1,700 to process an application, it does not seem to provide very good value for money for the taxpayer.

Neil Parish: It is £1,250, I suppose, if it is £250 a hectare.

Q268 Chair: We do not want to discriminate against small or large farmers, do we? Are you concerned about the transition arrangements, particularly under some of the rural development funding?

Harry Cotterell: Yes. We have been doing a lot of road-shows trying to test our members’ feelings about the CAP. A lot of people who are in agri-environment schemes, and particularly ELS, do not really understand the fact that they are not going to get a renewal if it expires in the next two years, and there is little or, I think, no chance of any new entries. We are keen that Natural England get out there and engage with them as a matter of urgency, to try to ensure that all applicants to agri-environment are well aware of the situation as it stands at the moment. Let us not wait until the new scheme is designed and all the rest of it because, by then, quite a lot of people will have already been disappointed. There is going to be an issue on the crossover between what happens afterwards. It is inevitable.

George Winn-Darley: Some farmers will be disadvantaged, and the environment and the outcomes will also suffer. Most upland HLS schemes end after 2014, so this is not such a significant issue. I think it will be more of an issue in ESAs. Advisers who have set up businesses to deliver agri-environment schemes will also suffer. They are key people for DEFRA to achieve their delivery targets, and it is unfortunate that there is going to be this gap.

Q269 Chair: Just one final question: the LEPs-the local enterprise partnerships-are going to be asked to deliver part of the rural development programme. Are you comfortable with that? Do you believe that they have the expertise to deliver on that and that they are fully accountable?

Harry Cotterell: Some certainly have. Some are very rural-facing, which is good news. Particularly in the South West, we are getting some strong feedback from a lot of LEPs, and we would be quite comfortable with them. It will depend on the competencies of each individual LEP-there is no doubt about that. However, it certainly gives LEPs a raison d’être as well, which is a useful thing. Since the Heseltine review, the observer’s view of LEPs has gone from a potential talking shop, which I know is an issue that you have had within this Committee, into something that tangibly could have a significant funding-delivery job on the ground. We are trying to ensure that our members who are involved with LEPs start sharing best practice around the country in terms of how they engage with the rural areas beyond just CLA-type issues, but also in terms of the countryside and the rural economy at large.

George Winn-Darley: We need to be careful. Reflecting comments made by yourself and your Committee members earlier, the Common Agricultural Policy needs to be targeted at land-based activities. Having said that, in the North of England, farmer networks have been very successful and, if there were more of those, that would be welcomed.

Chair: We look forward to receiving the additional written evidence that you very kindly promised to give, but we thank you both. Mr Winn-Darley, Mr Cotterell, thank you very much indeed for being with us and for participating in our inquiry. We are very grateful indeed. I thank the Committee also and the staff. We stand adjourned until next week.

Prepared 1st November 2013