WEDNESDAY 28 NOVEMBER 2007

Ms Fiona Bryant and Mr Ian Baker

  Q380  Lord Cameron of Dillington: This is on a primary basis presumably?

  Ms Bryant: Yes. And if I may, the other point is that in terms of Axis 4, which we have sort of mentioned, the RDAs are responsible for managing and overseeing the Leader approach. We are very keen to ensure that we should be able to deliver an integrated approach and I think the decision to restrict the use of Axis 2 funding through the Leader groups is extremely unfortunate on that basis.

  Chairman: Lord Palmer.

  Q381  Lord Palmer: As a farmer I have to admit to being a little taken aback when you state that agriculture needs "to adapt to being treated much the same as any other industry rather than continuing to have special solutions devised for it". Would you not accept that agriculture has a much larger impact on the natural environment than any other sector and therefore its activities have much larger and more diffuse externalities? Of course it must not be forgotten that farmers have little control over their own destiny, and of course the right weather at the right time, if you are an arable farmer, can make a great difference, and it is totally outwith the farmer's control. Surely this means that agriculture will always have to have some special label attached to it, would you not agree?

  Mr Baker: I think the answer to the question is how special? And what parts of the relationship between the state and the agricultural land based sector should be managed through a separate mechanism, and those things where, the agricultural business needs to be treated like any other business. There are many other businesses that have a whole range of externalities. We do obviously accept—and my family are farmers as well so I understand the sector reasonably well—that they have externalities on the natural environment. However, we believe that some of the potential developments within the agricultural sector are being held back by the fact that farmers have historically regarded themselves as being separate and being provided with separate support, a separate government department and separate business support. If you look at your average farm business and if you asked it to rank its top ten needs I bet you that seven or eight out of those would be the same as your average business in the wider world—it would be about how you manage people, it would be about cash flow, it would be about business management skills, for instance. Providing those through separate and special agricultural sector mechanisms is not always the best way of doing things because it means that you are not getting the cross-fertilisation of ideas that, perhaps, if you sat a farmer down in the same room as a chocolate producer, a logistics manager, a health sector provider they may start to get ideas running between them that lead to new business opportunities. That is not to say, particularly with a natural environmental relationship, the farmers do not have a very special relationship and the country depends on them to steward that land very well and to provide a whole range of things like access to the countryside, which nobody else can provide and it has to be through their actions. So there is a need for a direct relationship with farmers as a group. So it is about getting that balance right. We feel that historically the balance has not been right and it is still too much towards that the farmer should be regarded as a special sector, and we believe that the opportunities which exist, the sorts of things around climate change adaptation will only be fully realised if farmers themselves are talking to other people in those same supply chains, and the people who essentially manage the markets where their produce is going. There are ways in which we can help farmers to work together to create bigger businesses that have more impact in those market places, so they are not always in the position of being price takers but they can actually create their own impact within the market place as well. But doing that just for the agricultural sector on their own will continue to not really achieve the opportunities that exist. That is the contention.

  Ms Bryant: I think our written submission was specifically around the business support area, or in particular around the business support area, which Ian has mentioned. Certainly managing the Business Link contract, which the RDAs do now as a single portal, we have already seen the benefits of opening up opportunities to the farming industry to wider areas of support that they had not recognised before because they were used to feeding into the specific support that was there for them. On the other hand, all the RDAs have put considerable investment into the Business Links to ensure that there are people in there that recognise and understand specific issues that relate to businesses in rural areas, for example including farming. Certainly EDA have just finished or are just finalising a report which was done on CAP analysis on the specific requirements for land based industries and other rural businesses where the supply database or the supplier base has not identified a relevant delivery at the moment. The other thing is that we believe that in some cases the public perception of the industry has actually been damaged more by the explicit reference to it being a particular industry, a special industry and protected in some sort of net than it should have done. There is obviously coverage of things like FMD but I think that in some cases the public perception has actually been altered by the fact that it is referred to so much as an industry over here as opposed to the rest of the world. I actually think that that has affected it and restricted it rather than the other way around. So, as Ian said, there are both sides of the fence but we need to make sure that where it needs to be it recognises that it is part of a wider industry and has a potential to succeed.

  Q382  Viscount Ullswater: I would rather like to take issue with you on this concept because over the years, in particular since the war, the farming industry has responded very much to all sorts of activities that the government has done. First of all they wanted to produce a lot of food and so they encouraged a lot of food to be produced. We were very much encouraged to really plough up the hedgerows in order to increase the most amount of good we could do. We did it. We then produced too much food or too much food in the wrong place or the cost structure was wrong. Also, now the farming, the land based industry is responding to the other constraints which are now being placed on it, whether it is through the Soil Directive or Water Directive in nitrate sensitive areas, or the environmental things which are now impacting on the farming and land based industries in a way that is very responsible. What I take issue with is the fact that you are suddenly critical of the way that the farming industry is not reacting to the stimuli which are put in its way. What I am really saying is that farming is in a way nationalised, except it is done on the private sector, but very much the stimulus comes from government—or the restraints come from government as well.

  Ms Bryant: I think we are actually agreeing with you; I do not think we disagree. Certainly in terms of my job we are very well aware that the farming industry has responded very much to a national directive, if that is the right way of putting it, and is continuing to respond. I think where we agree with you in terms of, for example, the business support, is that if you have been put in the position, as the industry has been put, where you are being driven in a particular direction you tend to look for guidance from that direction, and perhaps the maximisation of the opportunities in looking outside that have not been realised as much as they should have been. I think they have been realised to a certain extent because there tends to be that top-down and possibly some bottoming up, but it is a very special relationship in that way. All of the things we have said about moving the industry to a market driven approach rather than the necessarily supportive approach will actually move out of that and allow the industry to get away from what might be seen as a restrictive policy driven approach and allow them to maximise the opportunities. There are times—and you mentioned the Water Framework Directive and the Soils Directive—where there are requirements in those that are put in place, but I think it is disappointing that they are sometimes seen as regulatory driven challenges rather than opening up opportunities to business to be seen as exemplars in providing goods and services which match or exceed their requirements. I think sometimes the relationship between policy and business practice has actually increased the potential to see it as an issue that has to be dealt with rather than an opportunity that could help move more businesses forward.

  Q383  Viscount Ullswater: I think from what you have been saying—that you have demonstrated to me anyway—is that it is still a special industry and therefore needs special treatment. If we were looking at an industrial process there is not much public benefit in an industrial process and not much public benefit in a rural industry—apart from the employment that it might give—whereas a lot of the things which you said earlier in answer to other questions, the quality of the land, the recreation, the tourism, is delivered by farming and land based industries.

  Mr Baker: Our contention is that it is going to be best delivered by viable businesses and we want to ensure that appropriate support is in place. We want to ensure that farmers have their fair share of the generic support, the support that is available for all businesses because I do not believe that farmers have had that fair share because they have tended to say, "What is MAFF providing? What is Defra providing?" That support is there provided for all businesses. So if you are going to enable our land based businesses to be strong and sustainable they need to have all the tools at their disposal with which other businesses are being provided. We are saying yes, that the farming sector is a special sector because of the whole range of things that it does produce, but when you are talking about the business itself those businesses really need to see the generic support that is available for developing all those businesses, and they are in the same position as all the other businesses who are around them. In our region, in a county like Warwickshire, where less than 2% of the businesses that are in the land based sector, we cannot provide specialist support for 2%.

  Q384  Viscount Ullswater: Should dairy farmers give up farming because they are not producing milk economically because they have quotas, all sorts of things which are restraints on an open, level playing field for farmers as against other industries? There seem to be a lot of things which farming does and continues to do over the years, which have actually yielded a very poor return. It is very nice that the price of wheat has gone up to £180 a tonne but it was not quite so happy when it was £60 a tonne a few years ago. It was quite difficult then to have that outlook which I think you are trying to put forward.

  Ms Bryant: There are opportunities. You said that industrial priorities just do not provide public benefit but what about the management and processing of waste, for instance, to reduce landfill? That is an industrial process which can. Dairy farmers, for example, have huge opportunities in terms of not only addressing some of their particular business needs in terms of the use of slurry and making more money, making more profit out of slurry as well as milk, if you like, and maximising the use of their waste potential, but also in acting as a location for, for instance, anaerobic digestion, taking in food streams from the local food suppliers and actually dealing with that waste. That is an industrial process and farmers have a huge opportunity to do it. But it is also linked to other factors and what they need to do is to make sure that they are integrating with those sectors; they are shortening the supply chain and dealing direct with their markets. We believe that they will do that, given the opportunity to be seen as an important industry sector alongside others in the right place, rather than just being seen as a special case the whole way along.

  Chairman: I am going to bring in Baroness Jones at this stage.

  Q385  Baroness Jones of Whitchurch: I was beginning to feel a little sorry for the farmers as you have been talking. You are laying big expectations on them from what you were saying and they are already, as we have heard, a complicated market system anyway. What you have described appears as part of a continuum, so we will have secured food produced, we will have better environmental standards, we will have better waste management, we will have quality of life issues—all of that you can say is part of the continuum. On top of that you have to be responsive to the market, and I think there are more contradictions in all of that than you are really facing up to. If I could give you an example, I went to visit an anaerobic digestion unit on Monday and it is great and it does all the things you are talking about in terms of more efficient waste disposal and so on, and that is of benefit to the local farmer. But then the local community has all the lorries trundling in with the food waste from the surrounding towns. The farmer there has changed his farming practices so he has become a single type of style of producer and so that idea of a more diverse kind of farming goes out of the window and therefore your idea of food yards rather than food miles does not fit easily with that. I think there are lots of contradictions in what you are proposing. I would like to know what would be your idealised farming community in an area because I think you are being quite hard on them at the moment.

  Mr Baker: We are not saying that everything has to happen everywhere at the same time and all at once, and certainly with the Rural Development Plan for England we just do not have in our hands on enough resources to facilitate that scale of change. You will see that what we are talking about is a longer term vision for change. What we can do with the current programme period is to demonstrate what those changes might be, and there are enough resources to help us put some pretty good demonstrators in place, but certainly not to help those changes in all the places where they have the potential to take place. So we absolutely agree with you, and if what is coming over is that we want tomorrow a vision of a very different land based sector then we absolutely understand, and most of our colleagues are from a land based sector from around the country. So we do understand the speed at which it is appropriate for land based businesses to respond. So I do absolutely take your point. What we are saying, not that there is a long list of must-dos but there is a long list of opportunities and we would like to see the redevelopment programme as a mechanism to help foster those opportunities and not to be seen as a rather inflexible set of schemes which fit where they touch. I would not use the word contradictions but there are going to be some real conflicts and balances. The example of anaerobic digestion, which will mean change in an area, is a good one and we cannot give the notion that this is a no-change agenda—but that the land and the landscape will continue to change as it always has done.

  Q386  Chairman: My understanding of your basic approach is something along the lines of when it comes to traditional agricultural products and food production then that ought to be much closer to the market, more market driven, but the public support for agriculture should be really constrained and limited to the production of public benefits. You have a wide view of public benefits and of course there is always the difficulty of knowing who decides whether it is a public benefit and how much the public is prepared to pay for the benefit. Putting that to one side, is that roughly it—that market driven food production, the state coming in to support public benefits that would not otherwise be provided? Is that a rough summary?

  Mr Baker: Yes, but I think the written evidence we have given also makes it clear that we would not want to see too much market distortion with regard to the rest of Europe as well. So what we are not advocating is a go it alone approach within England, and that our farmers need to be able to compete.

  Q387  Chairman: Before I bring in other colleagues can I take it one step further? The end of the day is not your position, at a European level, to say something like, "Okay, we will have a relatively limited amount of money swilling around Europe for CAP. We will not actually put it into Pillar II because we do not think that Pillar II delivers the type of rural development that we want and what we really want is a totally divorced rural development programme, divorced from agricultural support entirely?

  Ms Bryant: I think Pillar II could deliver what we wanted if the right policy drivers were in place, though I am not sure that we would advocate that. I think with the current position the answer is what we want is the flexibility to be able to deliver full rural development, regionally and locally built solutions to meet regional and local needs.

  Q388  Chairman: But if it is coming through CAP it will be tied much more closely to farming and agriculture than a broader rural development programme would.

  Mr Baker: What we are not saying is that we want to have a go it alone policy for rural areas. What we are saying is—and this is substantially about the land based agricultural sector—that there is a whole set of roles it can play but there is a process of change which we feel needs to be supported. Those businesses need to be strong and sustainable. So those are the sorts of priorities we would set for new Common Agricultural Policy. If you are setting Common Rural Policy, if you look at the rural economy of our region it is pretty much the same as the economy of the whole of the rest of the region as a whole—we have roughly the same proportion of manufacturing businesses, construction businesses, administration and organisation. So we are not talking about a set of measures supporting all those other sectors but we are keen to see measures which create better connections from the agricultural sector to its markets, be they local, regional or national and beyond.

  Chairman: Viscount Brookeborough.

  Q389  Viscount Brookeborough: Just to go back for one second, I think you said that in the different areas between 37 and 90% of farms were diversified?

  Mr Baker: 37% in our region.

  Q390  Viscount Brookeborough: And the high end is about 90% in others.

  Mr Baker: 73% of farm businesses have diversified in the southeast. In West Midlands 90% of our diversified businesses (ie 90% of the 73%) are focused on letting out buildings as diversification.

  Q391  Viscount Brookeborough: And diversification is obviously very important in rural development?

  Mr Baker: Absolutely.

  Q392  Viscount Brookeborough: To what extent do you have to do something different to be considered diversified? For instance, you said that 10,000 people have gone out of farming in the last ten years and therefore presumably there is less requirement for cottages for the farming community, and if you let a cottage on a long let to a family that were in business elsewhere that would be slightly different from letting it on a holiday let and going into diversifying into tourism. To what extend do you have to do something entirely different to be considered in those figures of diversified farmers? I find it very difficult to come to terms with exactly what those figures mean, but might it not be more important to say what percentage of income earned by farmers comes from diversified business?

  Mr Baker: It comes from the June census returns; that is where the information is from.

  Q393  Viscount Brookeborough: What do you have to do? Is a wind farm diversification?

  Ms Bryant: Yes.

  Q394  Viscount Brookeborough: Give me some examples of what people do in order to get into that diversified category in a small way?

  Ms Bryant: I think in general terms there are two areas in terms of the EU definition of diversification. One would be what they euphemistically call diversification on the farm, which is looking at something like an alternative crop; so, for instance, instead of growing traditional crops where that is combinable, it would be looking at something like lavender, for example, but it is still effectively growing a crop. The second thing would be diversification, as they call it, off farm, which would be away from production of a crop or livestock, so it could be selling produce from a farm shop, it could be moving into equine and livery, it could be moving into tourism accommodation, but it is away from what might be seen as a traditional agricultural activity such as growing a crop, or livestock.

  Q395  Viscount Brookeborough: That is interesting. I would have personally thought that diversification was something other than farming of any kind, whether it be tourism or whatever.

  Mr Baker: It is a new enterprise. I can make the report available to the Committee so that you can see the information behind the figures.

  Q396  Viscount Brookeborough: Because this gives a colossal figure of different methods of farming just because somebody changes their crop origin. You compare the EAFRD favourably with past policies in terms of the level of integration and the development strategies that it allows for. Are you satisfied that the level of integration that it makes possible will meet the diverse needs of the English regions? When you talk about integration are you concerned about integration or control by RDAs? For example, how well does the new approach enable planning decisions and the implementation of the Water Framework and Soils Directives to be incorporated into strategies for rural development? And on planning decisions, not just on wind farms, do you feel that planning is flexible enough for on farm diversification of the type that I talked about as an entirely different enterprise?

  Mr Baker: How long do we have?

  Ms Bryant: I think in terms of the integration we have already given our views in terms of the policy supporting integration and perhaps the implementation procedures actually restricting it. We are not precious; we happen to understand the responsibility for delivering socioeconomic elements of it. I think our interest as RDAs would be seeing the right framework in place and seeing the right framework which would support the ability to drive forward sustainable development in the countryside, and that is both on farm and that maybe support for new and efficient ways of food production as well as diversification on farm, or whatever we are talking about. And in terms of support which allows better alignment between the industry and other industries, but also with other funds.

  Q397  Viscount Brookeborough: You talked about Leader and you did not necessarily all see eye to eye.

  Ms Bryant: So we are not previous as RDAs and it is not about RDAs managing the farming sector or anything like that; this is about the wish to see sustainable, competitive businesses in the countryside, both for farming and other businesses. In terms of integration with other European funding, for example, there is an issue about the match funding and demarcation particularly. For example, we have had to put forward very detailed demarcation plans between the regional development funding in the regions and the rural development funding in the regions, and as with last time my main concern over that is that we do not want to see duplication—we want to see alignment but we do not want to see a gap. In terms of requiring a detailed demarcation without the ability to need to do that before you have actually moved in and without the flexibility to actually do that on a audit and transparent process can mean that there are issues and in certain regions the ERDF is almost taking the urban versus rural approach because the RAP is expected to do rural, and I think that is really dangerous and really unfortunate because I think the contribution of rural areas to the development of the wider areas is really important. I think the other side of it is that at the moment RDPE is still very much driven as a national programme. We have been allowed some more flexibility this time and we have had the opportunity to develop regional implementation plans, which are then fed into the national programme but it is still a very national driven programme overall, whereas ERDF is actually regional programmes, and if we were honest we would like to see the flexibility of perhaps regionally driven programmes for RDPE in future to allow better alignment on that policy basis.

  Mr Baker: Viscount Brookeborough asked a couple of supplementaries about meeting the diverse needs of regions and RDA control. The potential is there in the mechanism and I think with the sort of alignment that Fiona refers to having regional programmes for both of the mechanisms we could achieve much better alignment. Planning decisions with single regional strategies for economic development and planning, there should be greater alignment but at the moment that alignment is not great and we see problems between the economic development strategy wanting to put certain things in place which are then countered by local planning approaches. RDA control, we have a very delegated approach to delivery and virtually everything that appears within the regional economic strategies in our corporate plan is delivered by somebody outside the RDAs themselves. So whilst we are responsible for strategy and the sub-national review makes it that much clearer that is our role, that is much more about getting the priorities of things right at the regional level and then that delivery is controlled by a whole range of other people, particularly local authorities.

  Chairman: Lord Plumb, modulation.

  Lord Plumb: Modulation is in a sense continuing the same theme, I think. Modulation should be about re-balancing the whole industry, one from another—taking from one and giving to another, and of course you make the position absolutely clear as far as the shift of funds is concerned. You expanded on that by being specific on the sort of things that could be supported—supported financially, that is. I could suggest to Mr Baker that there is a digester not far from where he is, in Kelsall, and no encouragement has been given by the local authority to use it since there is no slurry to go into it any longer. So if he would like to work on the local authority and then come and see the farmer concerned it might help! Forgive me, Chairman for raising this! It was very interesting; therefore I took an even greater interest in your particular comments.

  Q398  Chairman: Special pleading is not part of this Committee!

  Mr Baker: I am happy to take forward your query outside the Committee!

  Q399  Lord Plumb: Modulation—this question comes up every time we receive evidence. There are those who want more modulation, either voluntary or compulsory, and there are those who want less modulation. We would like to hear your views on that because those who have stressed the importance of this have suggested diverting resources away from the industry and others say that it may help the industry. What are your views?

  Ms Bryant: If I might start on that? I think in terms of the RDA position in looking at the ability to better support longer term sustainability of the industry through Pillar II, then obviously we would see modulation as an aid to increasing the speed with transferring payment from Pillar I to Pillar II. In terms of your second point, it is very important to us that we understand the reaction of people in the industry when they have concerns about modulation moving the money away from support for them, but I think we would say that actually a lot of what is done through Pillar II provides direct benefit to farming businesses without necessarily investing directly on individual farms. If I can give some examples of that, investment in a collaborative company on a location which is not on any individual farms could provide not only costs to input on the individual farm members of that cooperative business but also opens up new market opportunities realised through the economies of scale and the collaboration which would not be realised by those individual businesses. That is not money going direct on to the farms but it is going direct into their profit lines. Money support into, for instance, training providers is not going direct on to the farms but it is providing free training and advice for those farmers, which will extend their capacity to be able to meet business requirements. The same with things like investment and food distribution hubs is opening up markets. So we would say that actually it is the targeting of the funding towards business sustainability that is important and if that is better done through Pillar II then we still feel very strongly that it is providing direct support to farming businesses, but in a way which actually maximises their opportunity to contribute to the wider economic and rural development.

  Mr Baker: Can I add two points, please? Firstly, I think our presumption is always towards compulsory modulation because voluntary modulation does have a distorting effect and it is compulsory on the farmer. Secondly, I think it is beholden on those in the public sector who are making use of the modulated resources to ensure that they are making absolute best use of those resources in achieving a proper benefit and challenging themselves that they are not providing another form of income support through unchallenging measures, and we certainly have some concerns about entry level stewardship from that perspective. Before imposing further modulation we need to ensure that our house is in order in those terms.

  Chairman: Viscount Ullswater, on the budget.