WEDNESDAY 5 DECEMBER 2007

Ms Kirsten Holm Svendsen

  Q441  Chairman: Many thanks for coming. Let me formally say that we are a Sub-Committee of the House of Lords Select Committee on the European Union. We are carrying out an inquiry into the Health Check and looking beyond the Health Check at the future shape of the CAP. This is a formal evidence session so there will be a note taken but clearly the opportunity arises to go off the record if you wish to. You will get a copy of the evidence so you can correct it or revise it. The best thing is if we go through and have a conversation around the questions, is that okay?

  Ms Svendsen: That is fine.

  Q442  Chairman: We are looking forward but to look forward it is always a good idea to look back a bit. Go back to the 2003 reforms and what was the impact in Denmark? What sort of changes did it make to the way your agriculture operates?

  Ms Svendsen: I think the major impact in Denmark has been further concentration. A lot of farms have closed down in the period, but that was foreseen and we were already on that track. Further concentration, larger farms. This process is still going on and a lot of people have gone out of business and only the very large, professional people are able to compete now. Of course, there are still some smaller farms but they will have to specialise. The trend now is that a lot of new enterprises are popping up in the countryside, like small dairy farms with their own shops, their own dairies, specialising in organic or niche products. That is the way for small farms to survive. On a large scale, as you probably know, Denmark is a big pig farming country with a large export of pig meat. That is our bread and butter in the farming community and these farms are very big and are now so big it has become an environmental problem. We are at the point now where we have to do something about that otherwise we will not be able to allow the farms to become any bigger for environmental reasons. That is the general picture but, of course, there are exceptions. The general picture is concentration and more intensive farming going on.

  Q443  Chairman: So you felt the pressure really of market forces, consolidation?

  Ms Svendsen: Yes, certainly. It was foreseen and also the farmers knew this was going to happen. We are a very small country and are producing much more than we can use ourselves. We are dependent on trade. We knew that we had to become even more competitive at a point. The situation is the same at the moment where the government is on the liberal side in the European Community and also in the Doha Round. We do see trade liberalisation as a must for a country of our size in the globalised world. That is the broad picture.

  Q444  Chairman: Having gone through that, what would be your attitude to capping?

  Ms Svendsen: I must say here that the Danish Government has not made its position clear yet on capping. We are looking at it. From a personal point of view I would say the probability is we would not be very happy about capping. Looking at the way our policy is going and our liberal way of thinking, you encourage people to become more competitive, to extend their farms to become more competitive, and once they extend their farms you cap them. On the other hand, there is also the point of view the Commissioner has brought forward that there are economic advantages in being a large farm. I do not know whether there will be some kind of balance struck. From a strictly personal point of view I think the general attitude of the Danish Government will be to not like capping very much.

  Chairman: I have strayed into Lord Arran's area.

  Q445  Earl of Arran: In particular on the Health Check, the case-by-case move towards full decoupling, as you have yet to decouple fully what is your view on this element of the Health Check?

  Ms Svendsen: I think I can say at this point that we do want full decoupling. There is only a small amount still coupled in Denmark. The effects would not be very hard at this point in time because prices are what they are. We do see decoupling as a part of the market orientation process. I think I can quite firmly say that the government's position will be that we will pursue full decoupling.

  Q446  Earl of Arran: You mentioned a lot of farms and you were generalising when you said that many farms in your country have closed down. Are they mostly dairy or arable?

  Ms Svendsen: We do not have that many arable farms.

  Q447  Earl of Arran: It is the dairy?

  Ms Svendsen: Also pig farms, the smaller pig farms. Pig farming is the majority and the smaller farms cannot survive. They are still closing down at the moment because of the cereal prices.

  Q448  Earl of Arran: Indeed, yes.

  Ms Svendsen: That is happening in our country too.

  Q449  Chairman: I think there was a survey in Britain which found that a significant number of people, particularly young people, thought that bacon came from an animal called "Danish"!

  Ms Svendsen: I would believe that.

  Q450  Viscount Ullswater: We have not really talked much about these different pillars yet and you have not really identified what the position of the Danish Government is towards Pillar I and Pillar II, but if I could ask about Pillar II that might reflect on your views on Pillar I. Do you see that move has been successful in Denmark? Are the funds there separate and distinct enough to be able to create the encouragement you need for rural development? Perhaps in this whole area, do you support the increase in modulation in order to move those funds from Pillar I to Pillar II?

  Ms Svendsen: That is a fairly broad question.

  Q451  Viscount Ullswater: It is.

  Ms Svendsen: Let me start by pointing out that there is a parliamentary decision in Denmark saying that in the long run we should abolish all direct support to farmers. This is the basis for the government's thinking. Of course it has some conditions attached to it. It has to be on an even footing with our competitors, of course, and it also links up with the WTO negotiations. That means we place great emphasis on the activities in Pillar II, but at the same time it is fair to say our thinking at this moment is the way it is construed is not efficient enough for a country in our position. Again, I have to emphasise that it is probably different from the British background because we are a very small country producing a lot of agricultural products that we have to export. We would like to spend a lot more funds on innovation, for instance, research, to make sure that all the industries in the countryside can still live there and develop. Maybe not basic farming because a lot of that technology is in place, but there is still a lot to be done. We would like to spend a lot more on developing technology and techniques in the farming community and in the processing industry. There is also a point of view on the environment. We are working with some ideas that maybe we could use Article 69 in Regulation 17/82—I do not know if this makes sense to you—but that Article is a little bit rigid and if it was made more flexible maybe you could use that for more environmental purposes and you could spend more funds on innovation and research in this area. This is just the thinking that is going on, it is not a firm position. That is what we are working on, trying to develop more technologies and on the environmental side. For instance, in relation to the problem with climate change, which is also emphasised in the Health Check, maybe we could use technologies in the countryside to store CO2 or develop something along those lines, broader ideas on spending the funds efficiently. I do not think I can be more specific here because it is early days to be talking about that. Those are the general ideas we are working on within the Danish Government.

  Q452  Viscount Ullswater: Do you think with the particular environmental problems with pig farming on a big scale in Denmark that the Single Farm Payment is required in order to assist with those problems if the market price at one time or another dips or the costs of production, like the increase in grain prices, make it much more difficult to cope with the environmental problems and Pillar I payments are, in fact, an assistance to farmers to get through it or improve their environmental handling of the slurry and all that sort of thing, or could it all be done through Pillar II?

  Ms Svendsen: The general position is we would rather spend the money on developing technologies to solve these environmental problems. I can safely say that is the government's position. It is also the farmers' own position that they would rather not have direct support because it does give them a political problem in Denmark to be on the receiving end of support and they would rather be free of it, but it depends on the situation and whether the competitors are on an even footing, of course. Again, that explains why we work very hard for more trade liberalisation and getting rid of support everywhere else. Coming back to your question about modulation, it is clear from what I have said, I hope, that we would be supportive of increased obligatory modulation.

  Q453  Lord Plumb: But not voluntary?

  Ms Svendsen: No, thank you. Not voluntary.

  Q454  Lord Cameron of Dillington: What percentage of the rural economy in Denmark is agriculture? In England it is only 4% or 4.5%, even in rural England. In terms of Pillar II funding, ie is there a lot of other business and entrepreneurial activity going on in the countryside?

  Ms Svendsen: Yes, there is, because agriculture is such a concentrated business. I cannot say how many farms we have, about 30,000 these days, but there is only one slaughterhouse covering the whole of Denmark. There are some very small ones but there is only one major slaughterhouse that opened just two years ago. It is really huge. It is very, very modern with robot technology and all that stuff. It does show that the concentration is what it is all about here.

  Q455  Lord Cameron of Dillington: That is just agriculture but with broadband and other businesses the countryside is full of other businesses.

  Ms Svendsen: It has other businesses, of course, but as in other smaller countries it tends to concentrate on the outskirts of the larger cities because that is where you have the infrastructure for it. The picture in Denmark is that the smaller communities are dying out, the villages, the smaller towns, they are losing all their shops. We have just had a reform of the whole county set-up in Denmark and all the little communes have been merged into larger communes and that has an impact on how things are done because they close the little town halls and they close the libraries. There is a need to do something in the countryside and we do see the Rural Development Programme as a tool for supporting and boosting life in the countryside.

  Q456  Lord Greaves: Why should that be European level funded activity? If rural development like that is necessary in communities in Denmark, why is that not a matter for Denmark? Historically, the CAP started because Europe thought that it was necessary to support food production. It continues because it is politically impossible, or so far it has been politically impossible, not to continue it because of political pressures in some of the larger countries. If the trend is towards reducing direct subsidies all the time, and you are saying doing away with them completely, why should there be any funding left at all at the European level?

  Ms Svendsen: The general view of the Danish Government is if you do want to have a Common Agricultural Policy it has to go on being common because re-nationalisation of support is not something that would be helpful to us at all. We all know the theories about state aid and competing via your Treasury but it is not a situation where we would be a winner because we are just a small country with a very small economy. We do support the view that if we do have a common policy it has to continue to be common. Then again the whole philosophy behind the switch from Pillar I to Pillar II is if you make the farms more efficient, more competitive, they have to become larger and that means there will be some activity in the countryside that you cannot have, but that is not a structural development, that is very healthy for the economies. That is not just the case for the Danish economy, it is the same for everybody else because you have other industries in the countries, and let me just mention tourism. If there is no activity in the countryside the tourists will not come there because they need to have ice cream and have a meal or whatever, something to look at.

  Q457  Lord Greaves: I understand the whole environmental side of Pillar II and why that is to do with agriculture and why that might make it necessary to keep a Common Agricultural Policy going not to support agriculture but to make sure that agriculture is doing things in the right way, but I do not understand why a Common Agricultural Policy at a European level has anything to do with keeping libraries going in towns or developing non-agricultural businesses or supporting tourism or any of this stuff. I can see lots of reasons why this should take place but I do not understand what it has got to do with a European level Common Agricultural Policy.

  Ms Svendsen: I do not know whether it is out of my remit to answer that question because it is highly political, of course. This is a personal point of view. The reason I see behind it is that it is balancing the effects of removing support from agriculture. I suppose we do feel since we are doing this to agriculture we have to do something to take away the bad effects. I must say this is something that is more of a personal view because we are getting to a point where I think you should have higher level officials answering these questions.

  Q458  Lord Plumb: Nevertheless, it is a very interesting point. Do you find in the process of some of the farmers leaving their farms and so on, that people are moving from industrial areas to buy those farms to convert the buildings for other use into the possibility of small businesses? We are finding that is happening in Britain.

  Ms Svendsen: Yes.

  Q459  Lord Plumb: It is regenerating the village in many cases. At least they are taking capital into those areas and so on. Is that happening in Denmark or not?

  Ms Svendsen: Not very much. At the moment the main picture is one of abandonment.