WEDNESDAY 11 JULY 2007

Dr Mark Avery, Dr Sue Armstrong-Brown and Mr Harry Huyton

  Q46  Chairman: Good morning. Thank you very much for coming along and helping us with our inquiry on the CAP, the Health Check and the slightly longer term future as well. Let me explain, although you know the ropes as well as I do. We are taking evidence in a formal session. There will be a minute taken and you will get an opportunity of looking at the record and doing any factual corrections which are necessary. We are also being sound broadcast, so it is possible that somewhere in some distant place someone may be listening to us Would you like to start by making any opening comments and then we will go straight on to questions and answers?

  Dr Avery: Let us go into the questions. We are here to answer your questions.

  Q47  Chairman: Thank you very much. I was wondering if you could kick off by explaining your vision of the CAP as we look forward and what you see achievable in the relatively short term through the 2008 Health Check, and what you see as taking longer, coming into the context of the post-2013 period?

  Dr Avery: Absolutely. The Common Agricultural Policy has been around for a long time and it is changing a lot. Clearly, it started as a mechanism to provide funding for production and it is moving away from that. Where we are at the moment is that there are the remnants of production subsidies enshrined in a Single Farm Payment, which is now a payment without a policy aim, we would say, but there has been movement from Pillar I to Pillar II and we would like to see that movement of public funding continuing to move towards Pillar II to deliver these things called public goods. We think that has to happen in a way which keeps farming in the countryside. The RSPB is very much in favour of the farmed countryside, and the thing which makes this industry different from other industries is the public benefit which derives from farming. Public benefit we might get on to later, but it includes things like landscape and wildlife, which are important side-effects of farming. They are things which come out of farming but there is no market for the song of the skylark, even though the song of the skylark is a wonderful thing which comes out of the way that we manage the countryside. So we would like to see the emphasis of public funding moving towards rewarding land managers for those public goods and away from incentivised production, because that is what the market should deal with. So in the short-term the big prize in the 2008 Health Check is to have modulation up to 20% to continue that movement and retain voluntary modulation as well, so that individual Member States can do more of this, and we would like to see the UK continuing to lead in this area. In the longer-term, I think quite a lot of reform of CAP comes down to Treasuries looking at the budget and just wanting to reduce it. There is a danger in that because we do want to see farming continue and we do want to see public support, but we want that public support to be tied into those public goods. So how one moves further in that direction is clearly difficult and what everybody has to struggle with.

  Q48  Chairman: That seems to be a defence of present levels under the CAP?

  Dr Avery: For Pillar II to do as much good in delivering environmental and other public goods as it could do we believe that that money has to continue to go in there, and in the UK there is not enough money, we would say, at the moment going into agri-environment schemes. So many farmers will be disappointed that they cannot sign up for higher-level stewardship schemes at the moment because there is not enough money there, and that does seem to derive from the 2005 budget agreements which the UK engineered under our Presidency. So they seem to cut the good bits of CAP and leave the bad bits of CAP.

  Q49  Chairman: I have got to ask you, I suppose, what you think the level of support amongst the other Member States is for the type of policy direction you are advocating?

  Mr Huyton: I think there are an increasing number of Member States who are looking to Pillar II of the CAP as the future of public support, but it is clear that a lot of the big players are not yet on-side. Here the UK has got a clear role to play in leading this agenda at the EU level. The RSPB is a partner of Bird Life International and we work closely with them, so I work with the RSPB equivalent in the 26 other Member States. We have recently agreed a joint revision for the future of the CAP which we will be launching in Brussels, with the Commissioner's help in fact, this year. I think that shows that there are people throughout the EU who subscribe to this model and it is about giving them a louder voice and helping them to get this message across.

  Q50  Chairman: Are the Poles enthusiastic supporters?

  Mr Huyton: Some of them are more enthusiastic than others, that is true! Pillar II is playing a role in Poland. They do have an agri-environment scheme in its early stage which will be delivering public benefit and we hope that will highlight how effective this mechanism can be.

  Dr Avery: I think it is clearly a challenge for a Europe-wide policy to deliver the different things which are needed in terms of public goods in different Member States. From the wildlife point of view, which is the one we understand the best, the UK has experienced some of the biggest declines in farmland biodiversity. We know particularly about farmland bird declines, which have been greater in the UK than elsewhere in Europe. So sitting here in the UK we would like to see Pillar II mending some of that damage which has been done to the UK countryside. If you go to Poland, that has not started yet—well, it has started, but it is at a very different position. It is a wildlife-rich country and yet it has the CAP as well, so it is quite a challenge for policy that a whole EU policy measure can do good in very different situations at different ends of Europe.

  Chairman: Thank you very much. Let us move on.

  Q51  Lord Plumb: You said that you were concerned that we maintain a viable farming industry and you want to see, therefore, environmentally friendly farming and environmental issues fitting well into this particular pattern. You refer in your evidence several times to one of the causes of the difficulties and that one of the results of the CAP in the past has been a move towards more intensification. I would submit that there has been de-intensification since the 1990s and there is a faster move in that direction now than there was. Do you not accept that, whilst there have been income difficulties in farming over recent years—which you well understand, I am sure—for many farmers, the object of farming is not exclusively profit? There is plenty of land and farms around which include sporting activities and residential comfort, and therefore surely it would be very helpful to explore further the possibilities of how environmental development can be maintained in those areas and how it can be developed further? I believe there are many, many farmers who are now becoming much more interested in the carrot which is being held out for them for moving much more into the environmental interests of the whole field. To what extent do you see this developing as time changes?

  Dr Avery: We would agree with you that many farmers are interested in participating fully in environmental schemes and that farming is not solely a business for making money. If it were, then lots of people ought to have left this industry in past years, although of course at the moment wheat prices at least are picking up quite dramatically. We would say that there are many opportunities for farmers in taking a more environmentally friendly approach to their farming. Part of that is through signing up to the schemes, but there are other ways that farmers can make money from a good environment as well—through tourism, through diversification, bed and breakfast, and all those types of ways of making money out of a good environment.

  Dr Armstrong-Brown: It is a very interesting area that you have raised there, and I think a better understanding of the interplay between a land management business, for whatever purpose, and the environmental good it can deliver is essential as we go forward, particularly so in the new Member States, where we are actually actively trying to raise the question of how to have a different model for agricultural development in those areas which does capitalise much more so than in the past on these other benefits. At the moment these countries have a choice between staying as they are, which is in a very undeveloped state with a poor quality of life in some areas in the countryside, and following the historic western agricultural development model. But that does have downsides, as we have learned, as well as benefits. So it is an excellent time to be exploring these issues and trying to seek a better way of these countries developing and getting the quality of life benefits, the production benefits, and so on, that are required but also retaining some of the environmental delivery they are currently doing. I do think it is crucial to ask this, and ask it in Europe, and get that debate going now ahead of the Health Check and the Budget Review so that some decisions can be made with those questions in mind.

  Q52  Lord Plumb: If farming is to remain viable, then obviously farmers have got to look more so (and welcome the opportunity of doing so) at market forces because that is where their income, hopefully, is going to come from. Are you concerned about the balance of farming, though, because market forces are already showing that in the arable sector farmers are going to do much better this year. That is going to be, of course, at the expense of the livestock sector, because there is a 30% increase in the cost of the feed going into animals at the moment and that, of course, is going to be a further burden in the livestock area? Is this not a problem from your point of view of the lack of balance, or further lack of balance that there might be in the development of agriculture in the future?

  Dr Avery: That must be good news for farmers, that some of them -

  Q53  Lord Plumb: Is it good news for birds?

  Dr Avery: I will come on to that. It must be good news for farmers that their commodity prices are going up, although, as you say, in some sectors of agriculture that will be bad news because they are customers of another sector of farming. I was quite surprised at the Royal Show last week, whenever it was, that I was being told by people in milk that things were looking up for dairy farmers.

  Q54  Lord Plumb: Really?

  Dr Avery: Well, I was told that by people in the milk industry and I expressed the same slight surprise that you do, but I am not an expert on this. I suppose our worries are that profitable farming does mean that many farmers, because they are environmental enthusiasts, will put more of their own money back into environmental improvements in their farms, but we cannot be sure of that. The other aspect of rising commodity prices is that agri-environment schemes look less competitive compared with growing winter wheat if you are getting £120 a tonne for it. So there is a very difficult and unpredictable balance there, and that is why we believe the public funding for agriculture should be much more directed at delivering those public goods so that it is clear that there is a mechanism to allow many farmers who want to do great things for the environment to do it. Now, if the price of commodities rockets, then it will be more difficult for those environmentally-friendly schemes to compete and that might get us to a position eventually where regulation might have to come in to assist. But at the moment we are wedded towards a voluntary agri-environment scheme and we know that lots of farmers want to join those schemes. At the moment, the problem is that there is not enough money for the schemes to allow all those farmers who wish to participate to do so.

  Mr Huyton: We know at the moment that, where farmers have got into schemes, those payments have been worthwhile. We did a recent evaluation of them and one of the options under the entry-level stewardship schemes, skylark plots, found that even at the current wheat prices they are competitive. The important thing is that we continue to have that balance and that these options continue to be competitive, and I think to do that we need to regularly review the payment levels, which are all based, of course, on an income for GOM calculation, which will change when you are at different commodity prices. So as long as we keep that under regular review and keep agri-environment competitive, there should not be a problem.

  Q55  Chairman: Let us just check. Your view on the Single Farm Payment is that the environmental requirements behind the Single Farm Payment just do not actually deliver, is that right?

  Mr Huyton: I think when you take an EU—level look at cross-compliance, it has not quite delivered its promise as being a consistent baseline across the Member States for environmental protection, which is what I think we all hoped it would be. So in some countries where cross-compliance has been implemented, let us say thoroughly, it has provided that baseline and we would put England and the UK in that category, but in other countries that has not happened. What we have seen is that the legislative part of cross-compliance, the complying of existing European law, has been translated by many countries in such a way that makes it pretty much impossible to apply at the farm level because it is so vague, and then the good agricultural and environmental condition part of cross-compliance has been implemented very differently in different countries. One of the key things in that part of cross-compliance was the protection of landscape features like hedgerows, stone walls, and such like. Here, Germany, Sweden, Ireland have all implemented that literally. We have said, "OK, those features are now protected and we cannot remove them." Other countries have not. Some have simply ignored it and others have again adopted such vague language that anyone could find their way around it. So cross-compliance allowed Member States a significant level of subsidiarity and it is clear that that level was to much and we have not got that consistent baseline.

  Dr Avery: Cross-compliance in this country has been very easy for farmers to meet. There was a whole lot of fuss about cross-compliance from the CLA and the NFU about how terrible it was going to be, and it is easy for practically all farmers to meet cross-compliance. So I think the lesson there is that industry over-reacted to it. It is dead easy and it is not much more than meeting legal requirements, so that is fine. But we cannot say that it is doing very much at the moment.

  Q56  Viscount Ullswater: Some people have suggested that farming is going to split in two directions, one towards the commercial area of farming where it can survive on world prices; and, if the prices of growing particularly increase, whether it is for food or biofuels, you can see the eastern side of the country becoming a sort of cereal-growing area, and because production subsidies have been reduced you can see the livestock area having to be supported by the rural policies, which you have talked about before. What do you see, therefore, as being the balance on biodiversity, which obviously you are concerned about, whether the East of England is going to be devoid of that and the West of England is going to have all the bird life? Is it something which you recognise as being a concern?

  Dr Avery: We recognise that further polarisation of agriculture may happen. We would not agree with your painting of the picture where the wildlife would be under those scenarios, because in terms of agri-environment schemes they will still play quite a big part even in the cereal parts of the country, and the agri-environment schemes we have at the moment are quite good at dealing with many of the needs of wildlife in cereal-dominated areas. So we would not say that all the birds will disappear from the east of the country. If anything, I think we would be more worried about the west of the country, which looks attractive—I grew up in the West Country—the fields are still green and there are still hedges. But actually the intensity of grassland management is so great there at the moment that that is one of the places where wildlife is disappearing. It is more difficult to hear the song of the skylark or to find nesting lapwings on the western side of the country than it was when I grew up there, or on the eastern side of the country. The polarisation in wildlife will not be quite the same, and we need to avoid that happening, but I think there are other ways that livestock farmers can tap into markets. Locally grown meat is one real opportunity which livestock farmers have which a cereal farmer does not have. A cereal farmer is growing a commodity and you do not care where the wheat which goes into your bread comes from really, whereas I do go and buy my lamb from the local farmer in Northamptonshire, and I hope he remains a livestock farmer because I like him, I like his farm and I like being able to buy my food locally. Now, he has moved his business to tap into people like me and there is more scope for more farmers to do that, I think.

  Mr Huyton: Yes, and that is exactly the kind of thing that Axis 1 of the Rural Development Regulation can help support, setting up the local supply chains, helping farmers add value to their products because of the added public benefit they are delivering on their farms. So there is something very positive that Axis 1 can be doing there.

  Dr Avery: There may be other ways of making money from land as well. There is a lot of talk about the eco-system services that land management delivers, which is the kind of new jargon, but things which are included in there are things like flood alleviation. So, if you are a farmer on the Somerset levels, then it may be more difficult to make your money out of producing milk—maybe—but in future perhaps you will get paid to allow your land to flood so that Bridgewater or Taunton does not. We have had floods recently. Perhaps public money directing land use in different directions will create new opportunities for farmers to tap into that. In the uplands there is an awful lot of carbon in the peat soil and there maybe different forms of land management. Maybe we will be paying farmers to farm carbon instead of farming sheep on the tops of our hills in future. So it is not certain. The future of farming has never been certain. It is probably more uncertain now, but there are things out there which might lead to new income streams for farmers if the agricultural industry is prepared to adapt and change.

  Q57  Viscount Ullswater: I gather from what you are saying that you cannot see a time when agriculture or land management can rely entirely on the marketplace from its outputs and that there will need to be a form of public money going into it in order to preserve not only the physical aspects of the countryside but also the biodiversity that you require?

  Dr Avery: I think there are two things there, and I think it would be rash for farmers in this country to think that they could compete brilliantly on world markets when the price of land and the price of labour in this country are going to be much higher than in other parts of the world. So it is going to be difficult. The playing field is not level, for a start, but from the point of view of biodiversity we definitely do not think that the market alone will deliver wildlife in the countryside because all the experience of the last few decades shows that it did not and there is no reason to assume that it will in the future. That is why we think that agriculture is different from other industries. Agriculture produces wildlife, landscape and other public goods, providing you get the right type of agriculture, and it is fair for the public to support farmers to produce that because there is no market for farmers to tap into through the song of the skylark. So, yes, we would like to see public support providing it is the right type of public support.

  Q58  Lord Bach: The right type of support is the crucial question, is it not? Reading your paper, the single payment scheme is not the right type of support because it is effectively, you would argue, a continuation of paying for production? Is that how you see it? It is a double question. The way you would see it is that the only way in which farmers should be paid is not for producing in any sense at all but that it should be so that real environmental benefits can be gained from the land and it should not have anything at all to do with production, or do I read you wrongly?

  Dr Armstrong-Brown: Yes, there are two elements there, as you said. We do see the Single Farm Payment as a stepping stone. It was a step away from production-related payments and compensation payments, but it does need to move on from being that. It was put in place for a reason, which we understand, but in some respects it was a political fix which was needed to move away from that system, as well as being something which served its own goal as well. We recognise that it was necessary, but we do not think that it has any longer a very strong tie to any policy objective in the EU. It is not even an income support payment in any real sense because of the way it is distributed. That said, we do not want to see it whisked away, leaving us with just Pillar II alone as it currently stands, and we do see a need for further movement in a phased way so that in relation to the support which is given to farmers through Pillar II there is not a sharp change from Pillar I. Currently the whole system is geared towards having some sort of "income support payment" through Pillar I. We do see the need for that to change. You mentioned, though, whether we support any kind of production payment. There are very clear World Trade Organisation drivers against that kind of payment which need to be adhered to. The one place where we see a specific payment for an environmental benefit or another public benefit—it could be a social benefit—not being as clear cut is in most cases, in the agri-environment system, in high nature value farming areas, where these areas are in a fairly traditional state and not really particularly able to take up agri-environment payments just at the moment. Also, the way in which agri-environment payments are calculated, as you know, relies upon income from growing and, if you are talking about incredibly low income areas, you are left with a zero sum gain. There is not very much you can pay them for in the agri-environment system. There we do see a role for payments for high nature value systems to sustain them until they are in such a state that there can be more explicit payments for individual public benefits.

  Q59  Viscount Ullswater: Are you saying that you need to keep sheep on the uplands and cattle on the marshes in order to get the orchids and whatever are the requirements?

  Dr Armstrong-Brown: Yes. There are particular land management techniques—cattle grazing is a very good example—which are required to deliver the environmental benefits you might want, but there it is very delicate. You would not be allowed any more to say, "We are paying you to produce beef on this land," but you can pay for the environmental benefits that come from producing beef on that land.