Rural Affairs, Climate Change and Environment Committee

Meeting date: Wednesday, March 7, 2012

Official Report 463KB pdf

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Common Agricultural Policy

Under agenda item 3, the committee will take evidence on the common agricultural policy from the United Kingdom minister. We have done a lot of work on the CAP over the past few months: we have heard from members of the European Parliament and stakeholders; and we have held a committee debate in the chamber on the proposals. At next week’s meeting, we will take evidence on the CAP from the Cabinet Secretary for Rural Affairs and the Environment; today, we will hear about the UK Government’s position.

I welcome to the meeting the UK minister, Jim Paice, and his official, Martin Nesbit, who is European Union, international and evidence base director in the UK Government. I invite the minister to say—briefly—anything that he wishes to say before we ask questions.

Good morning, and thank you for the opportunity to join the committee today. It is not trite of me to say that it is always good to come to Edinburgh: I have family up here and I spend quite a lot of time in Scotland.

The next seven years of the CAP have great potential for British agriculture. They are set against a background of increasing global populations, increasing prosperity in some of the largest countries of the world, and climate change, which will make some parts of the world much more difficult to farm. Right through to 2050, we have the prospect of immense opportunity and responsibility, as described in the Foresight report. The overall picture of increasing global demand means that there is a responsibility on all countries to play their part in maintaining and increasing food production, not in terms of self-sufficiency—those days are past—but in terms of their capacity and trading ability to export what they are good at.

My big disappointment is that the European Commission’s CAP proposals do not seem to reflect that. They refer to things such as increasing productivity, but when we study them, we find them to be very disappointing. I will not go into all the individual aspects of the proposals, as committee members will no doubt wish to question me about them, but we think that there has been a missed opportunity so far to develop a CAP that looks forward to the prospects that I have just described and which would create the opportunity for farmers across Europe, and particularly in the UK, to take on the opportunities and challenges through producing food in an ever-increasingly sustainable way, as that is part and parcel of the challenge.

We need to increase our ability to compete because, even if prices are rising—and that is the long-term prospect—salvation is not automatically in the hands of the market. Farmers will still have to compete with producers from elsewhere in the world.

We feel that the opportunity is not yet being grasped, but the general approach to our negotiations is that that is the right way forward.

Thank you. I invite Graeme Dey to begin our questions on the UK and Scottish Government views in general.

11:15

Good morning, minister. My questions relate principally to funding. What progress is being made towards confirming the size of the CAP budget? What are your views on the fairness of the distribution of that budget across the EU and the likely distribution across the UK, given the fact that Scotland receives the fourth-lowest level of pillar 1 funding and the lowest level of pillar 2 funding in Europe? What is your thinking on the balance between pillar 1 and pillar 2 and the need for modulation, and for how long do you think that pillar 1 funding will be required?

This will not be a short answer, as you might appreciate. I will begin with the easy bit. We have no clear idea of when we will have budgetary figures. The general expectation is that, following the pattern of last time around, the CAP budget will be fixed by heads of Government at the summit in December. The last time, they set not just the CAP budget but the balance between pillars 1 and 2. I cannot give you a timetable, but we believe that that approach will be repeated. There is no doubt that the absence of figures makes the negotiations very much harder. That is particularly true in relation to the funding for pillar 2, which is an issue of great concern. We cannot make a lot of the decisions on our negotiating stance in the absence of those figures.

I know, from reading the Official Report of the debate that you had a few weeks ago, that you are well aware of the UK Government’s view that there should be a substantial reduction in funding for the CAP. We believe that that is right in terms of overall European expenditure and the pressures that are faced by countries right across the EU. We also believe that it would encourage farmers to look to the market for a greater share of their income, given the background that I have described. I emphasise that we are not suggesting a big cut today or tomorrow. Nevertheless, we think that a trajectory should be set for a decline in direct payments—currently, the single farm payment under pillar 1.

You asked about the balance between pillars 1 and 2. We believe that there should be a reduction in pillar 1 funding and an overall increase in the proportion of the CAP that goes into pillar 2. We believe that pillar 2 provides much better value for the taxpayer, the environment and all the other public goods that it pays for and that it can be more effectively targeted at what we need to spend money on.

Your other question—please intervene if I have misunderstood—was about the distribution of funding within the EU and within the UK. As you know, the Commission has proposed convergence criteria. The feeling about that around the table at the Council of Ministers is extremely divided, as you might imagine. Those who would see a reduction in funding say that they could not afford it, and those who would see an increase in funding say that it would not be enough. The UK is roughly in the middle, so we can listen to the arguments on both sides. We are sympathetic to the proposal for an element of convergence. However, we think that total convergence—which is not what is being proposed—would be excessive at this stage, because we fully understand that the newer members of the EU, primarily, feel that they are getting a poor deal and would continue to do so until 2020.

To be frank, as far as distribution within the UK is concerned, until we know what the figures are and the basis on which funding will be allocated across the EU, we cannot speculate. At that time, all four devolved Governments will have to sit down and work it out together. As you know, the money that we receive is entirely based on historical funding and if there is a different allocation in future, we will have to take that into account. I am sorry; I cannot speculate today about what those allocations might be.

Thank you.

Good morning, minister, and thank you for coming to our committee. As my colleague mentioned, Scotland is the fourth-lowest recipient of pillar 1 funding. How can the UK Government’s position, which appears to advocate a global reduction in pillar 1 funding across the EU, be viewed as being in the interests of Scottish farmers?

I will make two points. We have to be quite straightforward about this. You say that Scotland is the fourth-lowest recipient of pillar 1 funding, but the allocation is done on a per hectare basis equally across all Scotland’s land when we all know that a large area of Scotland is of significantly less agricultural value than some of the rest of it. If you allocate on the per hectare basis, you are right about Scotland receiving the fourth-lowest level. However, it is interesting to note the Scottish Government’s suggestion that it does not want to pay people in parts of Scotland for doing nothing and that it wants to take that land out of the subsidy scheme. It seems odd to include it all when you work out how much subsidy you are getting.

The second point is about overall funding levels. As I said in my opening remarks, we believe that the global background is such that, in the coming years, there will be clear opportunities for farmers to get a significantly greater proportion of their income from the marketplace. What has been happening during the past few years shows that that is not just a projection; it is beginning to happen. We have seen significant rises in the price of most commodities and, although I do not want to forecast that they are all going to stay as high as they are, very few pundits believe that they are going to fall back to where they used to be. The trend is clearly upwards and I believe that it will continue in that way. It is not reasonable to expect the taxpayer to continue to pay large sums of money against a background of increasing opportunities in the marketplace. That is why we believe that support for the industry, which is essential—I stress that—should gradually move across to pillar 2 so that it can be more targeted at paying for those things that the public demands from our farmers but for which there is no market.

I will be brief, convener; I know that many of my colleagues wish to put questions.

The marketplace will vary from sector to sector and, in any event, surely food security is the overarching issue. If we look back to the CAP’s early days, we can see that food security has informed CAP development. That remains true to this day, particularly in places such as Scotland. I am sure that the minister is aware of conditions here so it is important to bear food security in mind during this crucial debate.

You are assuming that a reduction in the single farm payment will mean a reduction in production. That must be the assumption behind your comment about food security. I entirely agree with you that food security is hugely important—the UK Government puts it right at the top. Increasing British food production is part of our overall business plan. However, the assumption that we need to continue to pump large sums of money in through the single farm payment to maintain food security is a leap too far. If farmers increase their competitiveness and improve their productivity, coupled with the opportunities that I have already described, there will be greater opportunity for them to generate income from the marketplace, which will stimulate production.

Of course there are other issues, such as funding for research; the Commission is proposing a significant increase in that, which is good. I am not suggesting that farmers can make the changes automatically overnight. All I am suggesting is that our approach will mean a long-term journey—that is the phrase that we have used—towards a day when farmers can operate more closely to the market without significant levels of direct support. I do not know a farmer who does not want that to happen, in time. They are just frightened about what will happen in the period before they get there.

I would like to take you back to your point about the Scottish Government thinking about all land. With regard to beef production, for example, the beef started off on the hills and ended up being fattened on the better land. In the 18th century, people talked about Highland bone and Norfolk grass. I think that it is quite right that the Scottish Government should take into account all the land of Scotland in terms of thinking about its productive capacity. Do you agree?

I entirely agree that you can take it all into account. I was simply pointing out the apparent contradiction between the Scottish Government taking it all into account and also wanting a system that allows it not to pay for large areas of it.

We sympathise with the position in relation to slipper farmers. However, there is also an issue about the quality of the land in any given area. That issue is not unique to Scotland; all that is unique to Scotland is the proportion of land that we are talking about. Many countries have many areas with natural constraints, to use the new term, and I do not believe that simply taking the whole area of the country, dividing it by the subsidy and using that as a comparison provides an accurate result. I think that it would be better to consider in a more accurate fashion the types of farms that are being supported.

Farmers in areas with natural constraints need support. There is no doubt at all about that. We believe it to be the case in England and we believe it to be the case in the UK. There is just the question whether there should be a direct single payment or a more targeted approach, which can be done under pillar 2.

Given that you have 17 per cent of the less favoured areas and we have 85 per cent of them, you can understand why NFU Scotland says that its position on the reform of the common agricultural policy is pretty much the same as that of the Scottish Government. It recognises that coupled payments and so on are an important part of the production of beef and cattle. Given that you would possibly accept a 5 per cent level of coupled payments, what would be your view if we in Scotland decided that the level should be between 10 and 15 per cent?

The important thing to note is that we do not want there to be any reversal of the major reforms that were made last time around. I do not think that many people would disagree that they were the right reforms, in that they moved subsidy away from production. That is why we do not want measures that could allow for a recoupling of support where that does not exist at present. I am well aware of the Scottish scheme. It needs to be recognised that Scotland is already spending considerably more than 5 per cent because I decided to allow Scotland to use some of England’s allowance. If Scotland wishes to continue with a coupled payment for beef, along the lines of the current system, that may well be a final conclusion of the matter. As I have said, we have made arrangements within the United Kingdom to allow you to do that. As far as I am concerned, that is part of working together. If that is how it works out, so be it.

I think that it is probably in the UK’s interests that those arrangements are made, given that, as I mentioned, we have a large measure of the less favoured areas.

Arguably, yes. I fully recognise your point about the beef industry. I learned all about that and the stratification of the beef and sheep sectors at agricultural college 40 years ago. I just draw your attention to my earlier point, which was that I do not think that you can necessarily say that the best way of keeping people farming in those disadvantaged areas is by making a blanket payment, which is what the single farm payment is. There are other ways. In England, we are doing it through the uplands entry-level stewardship scheme, which is not related to production at all. Of course, we are not dealing with the same scale that Scotland is dealing with, but the point is that there are other ways of getting that money to where it is needed for public good.

I guess that we will come back to that issue. Thank you, minister.

Margaret McDougall has a point on funding.

11:30

As I understand your response to the question about distribution within the UK, you said that you could not consider the issue until you knew how much you had. I do not see why you could not consider—

Not only how much we had but the basis on which it had been allocated.

Ah, right—on the basis on which it had been allocated rather than the actual pot.

I agree with you. If it was just an issue of how much, maybe we could sort it out now. The issue is the convergence criteria in the Commission’s proposals, which is about gradually narrowing the gap between the highest-paid member states and the lowest-paid member states. Until we know how that will work out we will not have a framework against which we can make our own judgments.

We move back to process issues. I ask Jim Hume to take the lead.

Good morning, minister. Things have changed with the reform proposals, and we now need agreement from the Commission, the Council of Ministers and the European Parliament. You said in your opening remarks that you are disappointed with the proposals as they stand. It would be interesting to explore your relationships with ministers from other member states and with the European Parliament itself in progressing your view of where we should be with the reform. I am interested in how many friends you have out there.

That is an important point. The first point that I should make is about a decision that the coalition Government made right at the beginning about engagement. Whatever your individual views about Europe are, engagement is the key issue. If we are going to make any progress in getting things through in the British interest in Europe, ministers and civil servants have to get stuck in and negotiate.

We also need a negotiating position that is seen as reasonable by the other member states. The previous Government wanted to abolish the single farm payment overnight—that had been its position for most of its period in office—and we know that that meant that the British view was just laughed out of court all the time because it was never seen as realistic. I have previously discussed this, so I will not repeat all of it, but that is why we radically altered that perspective to one of having a long-term plan to phase out the single farm payment, as much as the industry can accommodate that. That is the first point.

The second point is that, as far as agriculture is concerned, the secretary of state and I—and, in the case of fisheries, my colleague Richard Benyon—therefore spend a great deal of time not only attending council meetings, which is the relatively easy bit, but in bilateral and multilateral meetings, sometimes in the context of a council meeting. The secretary of state and I have made a number of special visits to other member states to build up relationships and partnerships. That approach is continuing. We are working with other member states to put forward alternatives, particularly in the greening context. It is not just individual member states that are talking; groups of like-minded states are talking and putting forward alternatives.

It is important to point out that you will not always get the same—dare I say it?—coalition on different issues. Sometimes a group of countries will agree on one thing but not on another, then some of them will agree on another thing. It is a variable geometry.

You rightly refer to the European Parliament. Suffice it to say that there, too, we are engaging as much as we can. I spend quite a bit of time there. I liaise with UK MEPs across the piece, including Scottish MEPs, and with Paolo de Castro, the chairman of the Committee on Agriculture and Rural Development—and I have met all his rapporteurs. We are engaging as much as we can.

Looking inwardly—not outwardly—I think that it would be interesting to hear your views on where we are with securing a consensus among all the devolved interests in the UK. I guess that the fact that you are here shows that you have an interest in Scotland, but—

I am passionately interested in Scotland. All the devolved ministers are entitled to attend all agriculture council meetings with us. Richard Lochhead attends the most; the other ministers might attend slightly less frequently, but they still send officials. Before a council meeting, we always get round the table early that morning, talk through the position that the UK minister will take and, where possible, find common ground to ensure that everyone is happy. Outside formal council meetings, we have regular meetings and telephone discussions with all the devolved ministers either as a group or, more often, individually to ensure that, wherever possible, we speak not only for the UK but generally for all legislatures within the UK. Inevitably, we will not always agree on certain issues but overall I think that the positions that we adopt are largely accepted by all the devolved ministers.

It is interesting to hear that devolved ministers have the right to attend council meetings.

They certainly do.

Obviously we hope that all the reforms will go through and be agreed by the end of next year. However, given the number of bodies, commissions, Parliaments and ministers that have to reach agreement, will there be contingency funding via DEFRA—the Department for Environment, Food and Rural Affairs—to meet any likelihood that the new CAP might not be in place?

The sting is in the phrase “via DEFRA”.

Or via another body.

Originally, the plan was to have the new CAP decided by the end of this year to ensure that it was in place for 1 January 2014, which would allow a year for implementation procedures. Although no one realistically expects that timetable to be met, the Commission still stands by the view that it will come into being on 1 January 2014. I do not know whether you are planning to interview anyone from the Commission, but it is really up to that body to justify its view; I certainly do not think that many other people believe that the timetable will be achieved. Because of the situation that I described with the budget at the end of this year, being realistic, we do not expect the CAP agreements to be finalised until towards the middle of next year and, in our view, that would not give member states the time to set up the necessary information technology systems for their payment agencies or to put together all the secondary legislation and so on. Being realistic, I believe that we will start the new CAP on 1 January 2015.

As for the interim period, I should highlight two aspects. First, we have already raised with the Commission the fact that, because of the way we allocate funding in the UK, there will be an interval in pillar 2 money and we are seeking its agreement to carry on the funding process over the one-year gap that we would have next year in any case. If no CAP agreement is reached in time for a 2014 start, that will be a pan-European funding issue—not, as you implied in your question, just a funding issue for DEFRA—and Europe will have to do whatever is necessary to roll over the current programme.

So you reckon that there will be a rollover and that the situation with the interim year will be the same as that under the present CAP.

That is what I am presuming. The obvious point to make is that, as things stand, there is no power and no money for anything to happen that year. We cannot just assume that there will be a rollover; the fact is that all the previous CAP decisions effectively die at the end of next year. We need the European budget to be set first and then some decisions to be taken at a European level to roll the current process over in some way.

Martin Nesbit may have something to add to that.

The technical position is that pillar 1 payments would continue and roll over in the way that the minister described, but the legislation that underpins pillar 2 programmes applies only to the end of 2013, so the legislation would not be in place and the programmes would not be in place or agreed with the European Commission. We would need to find a way of bridging the interim problem for pillar 2 payments—for agri-environment schemes, less favoured areas and so on. We are conscious of that, as is the Commission, although it does not want to say anything about that publicly yet.

If no interim mechanism was in place, that would be of concern, especially in less favoured areas in Scotland.

I have a question before we reach the end of discussing process issues. You said that ministers from the devolved Administrations were involved in Council meetings with you. As we know, we will come to the big debate about the final arrangements, which might be at the end of the year, as you said. In the crunch negotiations in the room, the European Commission and the presidency will be on one side and the member states will be on the other side. Will UK ministers allow a Scots minister to be alongside them in thoughse talks?

I cannot give a general answer, because that will depend entirely on the situation at the time. None of us has been through the process before as ministers—it comes up every seven years, and few of us have such a lifespan in the job.

We certainly expect all the ministers from devolved Administrations to be actively involved and we expect to have discussions with them. However, the UK is the member state and it must ultimately take the lead and have the discussions.

In the hypothetical case that you talked about, in which a bilateral discussion perhaps takes place between the commissioner and a member state, the Commission might not want anybody other than the member state minister to be in the room. I cannot give you the guarantee that you seek, but I assure you that we want to involve all the ministers from the devolved Administrations as much as possible, right up to decision time.

I am not entirely sure that it would be for the Commission to veto a member state’s delegation desires. We take your point about the lifespan of an agriculture minister, which the committee found quite amusing, but I point out that the Scottish Government’s Cabinet Secretary for Rural Affairs and the Environment, Richard Lochhead, is probably the most experienced agriculture minister in the British isles. I would have thought that it would be a help, not a hindrance, to have such experience ready and waiting at your disposal in such crunch negotiations, which will have a huge impact on the Scottish agriculture sector.

I hear what you say and I am aware of Richard Lochhead’s duration in office and his experience. As for your first point, the Commission and the presidency have the power that I described. Often, they say that the room should be cleared and that the debate will involve the presence of just one minister from each member state. That happens at Council meetings now, so the precedent for them to require one minister for each member state is there.

Good morning, minister. I reiterate our appreciation for your attendance. I understand that the negotiations have stipulated a cap of €300,000 per year on the support that an individual farm would receive under the basic payment scheme. My understanding is that the funds that are saved would be retained by the member state for use in the rural development programme. That is significant in relation to the public good and the wider benefit to our country. Will you comment on the possibility that the cap will be set at that level and give your views more generally on the capping?

11:45

First, I confirm that you are right. Any money that is saved from capping will stay in the member state, and in this context we believe that it would stay in Scotland.

The capping issue is a challenge. As “Panorama” showed the other night, there is clearly a populist view that we should not pay too much money to people whom some people perceive to be wealthy, but we need to look behind that to consider some important points. First, if we start to put a limit on the amount of money that anybody can get, that is clearly anti-competitive. It is a discouragement to businesses to grow and expand.

Secondly, the single farm payment was brought in as compensation for the move away from production support, which was clearly based on area, tonnage, litrage or headage. If it is a form of compensation, why should it be limited according to the size of the business?

Thirdly, to be frank, we should consider whether capping would lead to any gains at all, because all that it would mean is, as I have sometimes put it, a lot of money for lawyers as they find ways of breaking up businesses so that they get down below the limit. Would it achieve what we are trying to achieve in the first place?

The final point is that the figures—I am not sure that the ones you quoted are accurate, but we need not worry about the particulars—might seem high at the moment, but once we have put the system in place, there is nothing to prevent it from being reined down to lower levels, where it would have a lot more impact. Some 35 farmers are believed to be affected in Scotland, but many more would be affected if a future determination dropped the limit to a lower level.

Other members might want to pursue that, but in the same context, I ask you to comment on the possible definition of an active farmer. That is a topical issue and indeed an important one, given the public’s perception of the industry and the injustice, in my view, of what has been demonstrated to be happening in relation to transference, or what slipper farmers are able to sell on. It would be helpful to have your comments on that.

As I expect you know, the Commission has made two proposals. One is that subsidies should consist of at least 5 per cent of non-agricultural income, and the second is that the person should be doing something actively on the land. The UK Government has considerable sympathy for those concepts. We believe that the money should go to people who are actually doing farming work and carrying the risks.

We oppose the idea of linking subsidies to income. The idea that, in our case, the Rural Payments Agency computer would speak to the HM Revenue and Customs computer to sort out how much of a person’s income was subsidy sends shivers up my spine, frankly. Added to that, revenue figures often run two or three years behind the times, particularly in corporate organisations, and it would largely be such organisations that were affected. We do not believe that the Commission’s proposal is the right one, although we sympathise with the approach.

We strongly agree that people should have to do something for the money; people should have to actively manage the land in order to receive the single farm payment. The Commission’s proposals are now much closer to our thinking, but we are not entirely convinced that they are right. We will almost certainly see much more national discretion on both aspects, and member states will define things according to their situation. However, the Government’s overall approach is strongly sympathetic to the idea that money should go only to people who are doing the work.

I presume that that is why the agriculture commissioner has agreed to a Scottish clause in the definition of active farmers in the new CAP. Do you agree that that is a good approach?

As I have just said, the commissioner’s overall proposal takes a two-pronged approach, and we appreciate what he is trying to achieve. Obviously, the problem is not unique to Scotland; across the EU, a number of other member states face similar problems.

We have talked about types of land. Should the definition of greening be extended to include unproductive but potentially environmentally important features?

We have strong reservations about the proposals on greening as they stand, and I cannot answer your question without addressing that point. As you know, there are three aspects to greening. First, there is permanent pasture, and we believe that the definition would exclude heather and moorland arrangements. If land is being actively managed—in the way that I have described—we think that it should be included. We would therefore like the definition to be altered.

I shall leave the issue of rotation to one side and come back to it in a moment. It is less relevant up there.

The third aspect is ecological focus areas. We think that a figure of 7 per cent, applied across the board, is the wrong way forward. If there is to be added value for the taxpayer and the environment, you need tangible and managed environmental measures—such as those that are offered by our stewardship schemes. A few other countries take similar approaches. If land is being actively managed, whether for farming or the environment, we feel that it should be classified as part of greening—whatever the final greening mechanism. However, I stress the word “actively”. We do not think that people should get money just because they happen to have certain features on their property.

Permanent pasture and crop-diversification measures in Scotland could have negative environmental and economic impacts. What alternatives is DEFRA exploring?

A lot. We have pressed the commissioner on the issue of permanent pasture. At the English and Welsh NFU’s annual conference two weeks ago, the commissioner said specifically that reseeding could be part of dealing with permanent pasture. The Commission is thinking about a period of five years, but we feel that that time is not adequate. Many farmers may reseed only once every nine or 10 years. The commissioner appeared to accept that. We do not have that in writing, but we have it in words.

On the issue of rotation, if someone is not growing any arable crops, they will clearly be outside the rotational requirements anyway. If they are growing a small area of fodder for their livestock, we would contend that that should fall outside the requirements as well. It is early days, but we think that the Commission is sympathetic to such ideas. What the Commission is trying to stop, in particular, is the large-scale monoculture of maize that appears in parts of Europe.

Stakeholders in Scotland are seeking a longer turnaround for permanent grass reseeding—perhaps 10 years rather than five years. We agree that that might be acceptable—

Are you suggesting that 10 years is not enough?

Well, 10 years is the kind of—

That is what we want.

That is good; we agree on that. What are the benefits and risks of the environmental focus areas? You have said that you are concerned about them on farms. In the pillar 2 area of rural development, those might well be the areas in which environmental focus brings public good.

Yes. Our fundamental view is that pillar 2 is where we should be funding greening and conservation measures through targeted payments to farmers and landowners for delivering specific things for the environment. However, it is abundantly clear not only that it is proposed that greening funding should be in pillar 1, but that that is going to happen. We must find a way to ensure that it achieves value for money for the taxpayer and a genuine advancement in the environment.

When one talks to the commissioner, one cannot help but form the view that what he is trying to achieve is almost the lowest common denominator—something that everyone in Europe can deliver without much problem. He talks about hedges, ditches, tracks and things like that. When one asks what happens if there is not enough of that land—if it does not come to 7 per cent—the suggestion is that more land will have to be taken out of production. We do not think that that gives the impression of any real activity for conservation and the environment. We think that, if 30 per cent of the budget is to be directed towards green measures, there must be some development and improvement. That is why I said what I did a few minutes ago about the need for managed conservation.

Last week, at the NFU conference, the commissioner referred to us as the champions of conservation. I like to think that some of our schemes demonstrate active management rather than the ballpark figure—the source of which we know not—of 7 per cent. We would much rather see farmers rewarded for doing something positive. That is why the proposition on which we are working with like-minded member states and sharing with devolved Administrations is a menu of equivalents. A list of options would be available, which would have an environmental equivalence with what the commissioner is trying to do, and member states could choose the right ones for their farmers. That would move us away from the one-size-fits-all idea. Taking 7 per cent of black fenland in my constituency out of prime agricultural production is a different proposition from taking out 7 per cent of barren sand somewhere in the south-west—I will not use Scotland as an example.

I am pleased about that.

There should be equivalence, in that any measures should achieve an equivalent environmental gain.

In those measures of equivalence, should the current agri-environment activity count towards the greening?

Very much so, yes. I am sorry to keep returning to what the commissioner said a fortnight ago, but that was his most recent appearance in the UK. He referred to us as the champions of conservation and agreed that such activity should count. The challenge will be in whether he agrees to equivalence in quality or in quantity. I fear that he is still thinking in terms of quantity. For example, if a farmer has taken headlands out of production as part of an environmental stewardship scheme but that land does not add up to 7 per cent of the farm, they will have to take more land out of production. We would argue that properly managed headlands need not amount to anything like 7 per cent of a farm to have a far better environmental impact than other measures.

Thank you. Let us move on to new entrants.

I will take the lead on that subject. Before I do so, however, I welcome much of what the minister has just said on the issue of greening. I was beginning to think that he must have read my speech in the recent debate to which the convener referred, but I suspect that it is more likely that I read one of his speeches before I thought about my own. I very much share the view that the place for greening is in pillar 2 rather than pillar 1, and I was pleased to hear the minister reiterate that.

We have a significant issue in Scotland around new entrants. Forgive me, but I am not sure whether there are similar—

It is not the same south of the border, but I am aware of the issue.

There are a number of issues that exacerbate the situation. Under the EU proposals, there are measures that I think might refer more to young entrants than to new entrants. The two appear to have been conflated. What are your views on the definition of young farmers, and the fact that the measures that will be put in place will be confined to people who are under 40 years old?

12:00

My background is one of active membership in the young farmers movement, and I strongly support the idea of help being given to young farmers. Across the industry, however, “new entrants” is a better phrase than “young farmers”. Some people would question whether someone who was 40 years old was a young farmer. From where I sit, that is very young, but that might vary, depending on who you are.

We believe that there should be assistance for new entrants. The Commission proposes that we should have the ability to pay them a 50 per cent enhancement of their entitlements, up to a certain level—I have forgotten the precise level, but Martin Nesbit can give us the details. Again, like so much of what the Commission does, that is a one-size-fits-all approach. That might be fine if someone has taken on an extra 3 hectares in Poland, but for most UK farmers it will not add up to a row of beans, frankly. We think that the means by which new entrants are helped should be left to the discretion of the member state, which will be able to decide the best way of doing it in its own territory.

You say that it should be up to the member state. However, as you have already accepted, the situation in Scotland, at this point in time, is different from that which exists throughout the rest of the UK. How would you address that?

I will not pontificate on what would be right for Scotland. As I understand it, the problem with getting young people into farming in Scotland is much more to do with land tenure legislation than it is in the rest of the UK. As an avid reader of the Scottish farming press, I see that issue being explored every week. It would be impertinent of me to comment on what is the right way forward.

My personal view with regard to young people in farming, regardless of country, is that the ownership of land has to be separated from the farming of that land as a business. There should be opportunities for young and new entrants to be able to come to an arrangement with someone who owns the facilities—which is to say, the land—that they need, in order to find a way to share the income and so on. That might be a tenant arrangement, a contract-farming arrangement or the share-farming arrangement that exists in New Zealand. I believe in that sort of freedom of opportunity. However, that is a generalised approach, and I will not say what is the right way forward for Scotland.

I might well agree with you, but I think that we will have to leave the issue for another day.

One of the issues that we have is the number of farmers who have entered farming since 2002 and who find themselves without entitlements. We are now talking about a requirement for people to hold a 2011 entitlement in order to be able to claim whatever support mechanisms are put in place.

What view does DEFRA take of the need for the continuation of a national reserve after 2014? I suppose that the issue comes back to land tenure, but what alternatives might be available to ensure that tenant farmers are protected from landowners being tempted to take back land in hand in order to meet that 2011 requirement?

If they have not yet met the 2011 requirement, they are too late, of course. Our view is that we are unlikely to end up with that 2011 requirement but, in terms of the proposal, the die is now cast.

With regard to people who have joined the industry since the beginning of the present scheme, we believe that that issue needs to be resolved. There should be an on-going national reserve. We take the view that, however much we try, there will be some unintended consequences as a result of the conclusions. However hard we try to prevent it, there will be some inherent unfairness and I think that a national reserve is necessary to deal with that.

My understanding is that the Commission’s proposals are for new entitlements, which means that people who might currently be farming naked acres, because they have come in since the original date, might be able to establish entitlements on that land for the future. Am I correct in that understanding, Martin?

Yes.

So that would apply to people who have come into farming in the past few years. Figures that the Scottish Government made available recently show that, over the past five years, roughly 200 farmers a year have gone into the sector without any support whatever. Are you suggesting that, following the reforms, they should be able to access entitlements?

On the basis of the Commission’s proposals, if they activated an entitlement in 2011, they can secure entitlements in 2014 on the basis of the entitlements that they claim for in 2014. If they did not activate an entitlement in 2011, they will not be participating in that new allocation of entitlements. That does not entirely resolve the problem that you have referred to, and I think that we need to work with colleagues in the devolved Administrations to ensure that we have a mechanism that is capable of doing that, possibly using the national reserve or perhaps through amendment of the slightly complex approach that the Commission has proposed to the allocation of entitlements and the link to 2011.

DEFRA is willing to work towards a solution to that issue.

Absolutely.

I want to address another transition issue, which we missed earlier. Scotland still operates the historic payment system, and England has an area-based system. Given the experience of England’s messy transition, what are your views on the timing of a move to area payments and how that should be achieved?

We believe that it is right to move to area payments—I need to emphasise that. However, as you rightly say, we bear the scars of that process. That is one reason why we do not want implementation to be rushed next year, or whenever it will be—I refer you to my earlier comments.

As you know, the Commission proposes a 40 per cent transition in year 1. We believe that that is wholly unrealistic. We have already given a commitment to the Scottish Government and the other devolved Administrations, all of which face the same issues, that we will make the case to the Commission that the transition should be more even—in fact, we have already begun to do so.

That is helpful.

There has been a suggestion about small farmers receiving an annual payment set at between €500 and €1,000. Those who were taking part in the scheme would not be eligible for other pillar 1 schemes and they would not have to comply with the greening measures or the good agricultural and environmental conditions requirements. What is the UK’s position on that?

We think that it is up to individual member states if they want to have a small farmer, de minimis-type of scheme, but we do not believe that those farmers should be exempt from the greening requirements.

I declare an interest, in that I am a member of the Scottish Crofting Federation, which is not keen on the proposal at all, as it sees it as a limiting factor. There does not seem to have been much support for the proposal from any sector in Scotland. I presume that that might be reflected in the UK’s position.

Yes. I am not aware of any strong support for it within the UK at all. I think that people understand the idea of having a simple scheme for basic levels—I do not have anything against that myself—but it should not absolve someone from the responsibilities that apply to other farmers, not least because, if you add up this lot over the whole of Europe, they come to several million farmers. If you exempt them from the greening proposals, you have driven quite a large hole through your policy.

Annabelle Ewing has a question on areas with natural constraints, which are a slightly related issue.

On the discussion that we had earlier, I believe that the Pack report made a recommendation of 15 per cent relative to the national ceiling.

What is DEFRA’s thinking on the protection of high nature value farming systems in particular?

Sorry, on high nature—

On high nature value farming systems, where there are particular social and environmental considerations to be taken into account, as is the case in relation to some livestock systems. The issue has been raised by various stakeholders, and I wondered what DEFRA’s view is.

It is not a phrase that I am particularly familiar with—it is certainly not one that we use in England. I thought that we were talking about the areas with natural constraints, which is the new terminology.

Yes, and stewardship and so on.

As I said earlier, we strongly believe in the provision of public support for farmers in areas with natural constraints, which we used to call LFAs. In an ideal world, that would be paid for out of pillar 2 funding. We provide funding through the entry-level stewardship scheme, which pays farmers for the environmental benefits that they provide in the uplands.

As an aside, I hope that the national ecosystems assessments, which we published last summer, will, in time, come into play as a mechanism for putting real values on environmental aspects. In the uplands and Highlands, such an approach will be particularly relevant because it tries to put a value not only on social aspects but on water retention, ecosystems, carbon sinks and other elements. All of that can then be built into a scheme. We have not yet reached that stage, but that is where I want us to go.

We believe that it is right for farmers to receive that funding, because their role is vital to the rest of the community. Because there is no market for what they are doing, we think that such activity is best funded from pillar 2. If, as is currently proposed, it is to be funded with top-level pillar 1 money, so be it; quite frankly, we will not oppose the idea. However, the question of affordability arises; as I understand it, it would take a very large sum of money to pay the minimum €25 a hectare to all of Scotland’s areas with natural constraints. There are issues that we need to resolve, but the principle of identifying and funding those areas is fine.

If I understand you correctly, you are saying that if Scotland wishes and feels it appropriate to have the option of accessing pillar 1 funding to whatever agreed ceiling for areas with natural constraints, the UK will not seek to do anything contra that. Is that right?

That is a non-question in as much as the issue does not arise. As I understand it, the payment from pillar 1 proposed by the Commission will be, if you like, a third top-up: there is the base level, the greening element and then the area with natural constraints top-up, which would be given to every farmer in the area. I am not sure that we need to answer whether we are for or against that for Scotland. If that system is brought in, that is what will happen.

DEFRA and UK ministers do not make any implementation decisions in relation to Scotland. Clearly, if Scotland chose to do what you suggest with part of its pillar 1 payment ceiling, that would be possible.

Maybe I should rephrase the question. Would the UK actively lobby against such a proposal?

No.

Margaret McDougall has some questions on rural development.

As we know, changes are going to be made to structural funds. What are the benefits of greening pillar 1 instead of using pillar 2?

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I am probably not the right person to answer that question, because our view is that the real benefits come through pillar 2. As I have said, in an ideal world, all greening funding would be provided from pillar 2 to landowners and farmers for carrying out clear, specific and targeted activity to help the environment. I am not saying that we in England have got it entirely right with our stewardship schemes, but I think that we are pretty well on the way.

Indeed, that is how it should be. This is only my perception, but the Commission’s reasoning for greening pillar 1 is, first, that it believes—quite rightly—that the taxpayer is entitled to think that farmers who get single farm payments are also looking after the environment. Secondly, I think that the Commission recognises that there are large areas of Europe that do not even pay lip service to conservation or the environment, which need to be brought into the framework. That is why I used the phrase “lowest common denominator”—something that most areas could deliver relatively easily. Thirdly, I think that the Commission is trying to enshrine greening publicly in the CAP. It is enshrined in pillar 2, but the Commission thinks that putting it in pillar 1 makes it more of a headline issue. As I said, we do not think that it should be in pillar 1, so I am not the right person to defend its position there.

How much support, if any, are you getting on that from other EU member states?

Some, but almost certainly not enough. Some member states—the Scandinavian states and Germany—take the same view as we take. However, we are pretty clear that it will happen in pillar 1 and therefore we must work a system that will deliver.

We talked about LFA; some 85 per cent of farmed land in Scotland comes under that heading. Is maintenance of LFA support an important part of DEFRA’s CAP strategy?

Yes, it absolutely is.

Thank you for that short answer. What transitional provisions are being considered, to ensure that there is a smooth transition between rural development programmes?

As you might imagine, we are in favour of a smooth transition. We have discussed the possible financial hiatus that could occur for funding of pillar 2 if, as we suspect, the next round of CAP is not resolved until the middle of next year. I do not think that I can add to that. We will have discussions with the Scottish Government and the other devolved Administrations and we will work with them to ensure a smooth transition across the piece. In England, we have no desire to alter radically what we are doing. We want to roll forward our pillar 2 rural development programme roughly as it is; other member states or countries might want to do something slightly different.

That takes us back to the early part of the discussion, when I said that we do not know how much money we will get in pillar 2. The Commission has said clearly that it will not give us an indication of allocations until the budget is set at the end of the year. We think that that is a great pity and many other member states feel the same way, but so far the Commission is being robust in its reluctance to give us figures.

Nigel Don, who is a substitute member of the committee, wants to ask a question.

Thank you, convener. It is good to see you, minister. This is my first appearance as a committee substitute, so it occurs to me that I should make the customary declaration and refer members to my entry in the register of members’ interests—although I do not think that I have particular interests in the subject matter.

My interest in the issue is in the context of rural development in general. We are talking about money that is principally spent in rural communities, in that it goes to farmers, who have a duty to protect the rural environment. Is there any thinking about protecting and sustaining rural communities, minister? The issue is relevant to parts of England and certainly to remoter parts of Wales, as well as to Scotland. There are places and communities that need to be protected, where I suspect that there is not a great deal of agricultural activity, given the natural constraints, but where the funding that you have at your disposal is probably the single largest stimulant to the environment and the economy.

As far as the next CAP, which is what we are largely discussing, is concerned, the Commission’s proposals for pillar 2 are still fairly vague, beyond the fact that it will get rid of the current three axes. I will come back to the matter, if you like, but there are three axes in the current pillar 2 and the Commission is getting rid of those. There is talk of introducing a minimum spend of 25 per cent on the environment. We do not have a problem with that and we certainly welcome the flexibility created by getting rid of the three axes.

You are right that rural communities are part and parcel of the debate. Within the current rural development programme—in other words, what pillar 2 funding can be spent on—a lot of discretion lies with member states. It can be spent on things to do with the rural economy generally, such as the support of start-ups, the extension of a business or some community activities. The current rural development programme has three axes and within each axis there is a long lists of options from which member states can choose. Each member state, or in this case each devolved Administration, was able to narrow down the list of options if they wished to, and submit it to the Commission. That caused some delays for Scotland, England and others, but there is immense flexibility.

There is also something that is not strictly a fourth axis but is seen as such by some. It is funding for what is called a LEADER activity, which is for rural groupings, and it is awarded by local action groups. They can spend money on the sort of things that you describe.

We can go into very fine detail if you wish, but the principle of what you talk about is part and parcel of the rural development programme now and we would want to see that continue.

My concern is to see it continue and, at one level, be enhanced to ensure that we have, and you have, the appropriate discretion to do sensible things for places that can turn out to be very disadvantaged, but which we recognise as being important communities. Those communities are part of our country. I encourage you to ensure that you retain that flexibility.

We wish to.

I come back to a point on which I seek clarification. I maybe picked you up wrong, but I think that you said that the condition for someone qualifying, of needing to hold an entitlement in 2011 and lodge it with their integrated administration and control system form, might not stand. Will you expand on that? Did I pick you up incorrectly?

You picked me up correctly. I was reflecting on the fact that nothing is decided yet. All that we have is a set of proposals from the Commission. I know that quite a lot of member states feel that there is no logic in using 2011 as a start date or threshold date. That is what I was reflecting on.

Do you know when other member states think that the threshold date should be? Do they consider that it should be whenever the new CAP starts?

Yes. Most member states seem to think that it should be closer to when that starts.

That is interesting.

That information is useful.

In your opening remarks, minister, you referred to the significance of climate change. Can you make any more general remarks on how DEFRA, and you as the minister, are addressing the significance of UK-wide climate change targets? Will you also comment on the concern about the biodiversity targets, which obviously fit in with the rural development side but also more broadly with both pillars? How do those targets fit into the negotiations?

Yes. DEFRA has two strands of policy. First, through industry itself, there is the greenhouse gas action plan to deliver on those targets. An industry-based group that represents farmers, landowners, the agricultural supply industry and a few others is developing an action plan for the significant reduction of emissions from agriculture.

Secondly, we are working on an adaptation plan, because we must all recognise that, to a greater or lesser extent, climate change is happening and we need to adapt to it. I cannot put a precise date on it off the top of my head, but DEFRA will publish an adaptation plan later this year.

You are right that biodiversity and the biodiversity action plan targets often figure strongly in pillar 2. As far as we are concerned, we are working on biodiversity primarily through our stewardship agreements. We have three strands of stewardship. One is the entry-level scheme, which is a broad and shallow scheme to which 70 per cent of farmers belong. The high-level stewardship scheme is much more targeted and is moving more towards targeting specific ecological gains, which in many cases involves measures to promote individual BAP species and assist in their conservation and population growth.

Thank you very much. We have now gone round most of the houses, but I am sure that there will be another round of discussions later on. I thank Jim Paice for his expansive answers, which have been very helpful to our deliberations, and Martin Nesbit for his advice.

12:26 Meeting continued in private until 12:45.