Helping Farm Businesses in England (HC 1131-I) Public Accounts Committee 13 Oct 2004

Evidence given by Sir Brian Bender KCB, Permanent Secretary, Mr Peter Cleasby, Head of Skills and Rural Enterprise Division, and Mr Martin Nesbit, Head of Rural Development Division, Department for Environment, Food and Rural Affairs.

Sir Brian Bender: Although if I may say, and I hope the Committee will not regard this as point scoring, I think at least two members of this Committee engaged in questions or correspondence to our ministers encouraging them to apply this decision --

Q34 Chairman: That is point scoring!

Sir Brian Bender: In that case I withdraw it, Chairman!

Q35 Mr. Gerry Steinberg (City of Durham): Who are the members?

Sir Brian Bender: I would have to look at my brief.

Q36 Mr. Gerry Steinberg (City of Durham): How do you know there were two?

Sir Brian Bender: It may have been more.

+++

Q46 Mr. Gerry Steinberg (City of Durham): Could I quote from page 10, paragraph 1.7? "Although farming has been in decline for years, and now employs less than two percent of the United Kingdom workforce and accounts for less than 1% of the economy" - "less than 2% of the workforce and less than 1% of the economy". One could draw a completely different conclusion from this report than the NAO do. My conclusion would be why do they get any subsidy at all? They do not need it. Why can they not work in the free market and those that are successful would be very successful and those that would fail would fail, just like any other private enterprise? Why do they need these huge subsidies?

Sir Brian Bender: Our ministers did ask this question in the run-up to the publication of our own sustainable farming and food strategy, as I mentioned earlier. What is the difference between farming and cold steel shipbuilding vehicles, and the answer is they look after 75% of the land mass and therefore, even in a perfect world where we could decide freely exactly what we wanted to do, there is a public good in terms of the additional cost and burden of looking after the environment effectively that is worth the spend of some taxpayer money. So that is the primary difference. There is also a secondary question of vibrancy of rural communities and the role that farm businesses may play in that, but I think 94% of people employed in rural areas are not employed directly in farming.

Q47 Mr. Gerry Steinberg (City of Durham): Following on, you have basically mentioned the next point I was going to make because further on it does say, "maintaining an attractive landscape, keeping natural resources like water and soil in good health, and preserving wildlife habitats", and the total subsidy is £3 billion a year into the farming industry. It is a hell of a lot of money to pay. Presumably it could be done a lot cheaper than that?

Sir Brian Bender: Quite a lot of the subsidy, at least until next year when the decoupling happens has, as I said earlier, been directly linked to what a farmer produces but that sort of argumentation is why the government some years ago decided to use this device for modulation and take some of that subsidy and use it on environmental benefits, and it is why, in response to Mr Curry's line of argument, the government decided to introduce rather more rigorous requirements on this thing called cross-compliance, which a farmer has to do in order to get the new decoupling subsidy, than happened in Scotland and Wales. So the government is very conscious of that and is trying to address it within the constraints of the regulations.

Q48 Mr. Gerry Steinberg (City of Durham): The Chairman mentioned New Zealand and I was on a CPA visit in New Zealand at the beginning of the summer, and this question of subsidy was discussed there, and the problem was it was a political decision. Somebody had to have the nerve and the audacity, if that is the right word, to bring this policy in because clearly the New Zealand farmers at the time receiving subsidy did not want to lose it, but once somebody grasped the nettle and made that decision and after the interim period of problems which you always get when you have a dramatic change, everybody now is in favour of it including the farmers. I have farmers in my constituency, one who I am particularly friendly with, and believe it or not he is very supportive of the New Zealand way. He says he does not want to have these dammed subsidies, and he would prefer not to have them and work within the free market.

Sir Brian Bender: But I wonder whether your farmer you spoke to would be happy to do that if France did not, because the benefit New Zealand has is it is a relatively isolated market. It has Australia next door, and clearly what we do has to have regard to what other close trading partners do, so we need to operate. We have something call the Common Agricultural Policy but whether or not we had it we would need to operate in a framework of what our major trading partners are doing as well.

Q49 Mr. Gerry Steinberg (City of Durham): Will there ever be a move towards the abolition of total subsidy?

Sir Brian Bender: I think the World Trade Organisation negotiations, if successful, will get an end-date for export subsidies and that will be hugely important and will open up more access to develop country markets as well. The sealing for overall subsidy was set up to, I think, 2012 by the European Council a couple of years back so we are on a long path here to zero.

Q50 Mr. Gerry Steinberg (City of Durham): Moving on, the next point I wanted to ask you about was regarding the grants themselves. Do you intend to continue to give grants in the next rural development schemes when they are introduced?

Sir Brian Bender: I might ask Mr Nesbit to respond in more detail but I would expect us to have some grant schemes. I think exactly what we apply would depend on the regulation allowance and what our experience is but I would be surprised if we moved completely away from some grant schemes for business development.

Mr Nesbit: Yes. Certainly I would expect that the future rural development programme to be heavily focused around grants. There are questions about whether you focus those grants on capital expenditure or advice or facilitation. I think that is one area we ought to look at very carefully.

Q51 Mr. Gerry Steinberg (City of Durham): I was moving on to the fact there are two ways of looking at this. If you give grants to successful innovations, one could argue and say, "Well, they would have been successful anyway so why give grants to something?" On the other hand you could argue and say, "Well, you should only give grants to those who are less well off and not doing so well", but if you argue that why should public money be given to people who are inefficient and are failing to be successful?

Sir Brian Bender: We are dealing with an industry going through potentially massive change and massive transition, so the question is what is the role of the public taxpayer subsidy to help them through that, and if we can get them through that subsidy process, through the payment process, to look at their business better, to invest in different ways, to invest in innovative ways, that is of benefit over this period of massive transition.

Q52 Mr. Gerry Steinberg (City of Durham): I come out on the side that one should perhaps reward those who are the most successful, and if there is an innovation then support that innovation to ensure it is very successful but one should not be giving grants away willy nilly to those who are basically not providing a successful business?

Sir Brian Bender: But it may be more than innovation --

Q53 Mr. Gerry Steinberg (City of Durham): What I am saying is why should the taxpayer subsidise just somebody for the sake of subsidising them, which appears to happen in many cases in the farming industry?

Sir Brian Bender: The business development schemes here are selective, rather like regional selective assistance which I am sure you are very familiar with, and issues arise as to whether they are creating jobs, whether new products are being created --

Q54 Mr. Gerry Steinberg (City of Durham): Give us some examples of where that is happening, can you?

Sir Brian Bender: I can give you some innovation jobs, and I shall read from my briefing, if you will forgive me, "using membrane technology and reverse osmosis to capture waste, processing hemp into industrial fibre products, using new solar power hot water system and wind turbine energy and dairy processing business..." --

Q55 Mr. Gerry Steinberg (City of Durham): Are these creating all new jobs or just sustaining jobs that are already there?

Sir Brian Bender: Well, there will be a mixture. The figure I have in front of me is that by March of this year the processing and marketing grant scheme had resulted in over 5,000 jobs being created or safeguarded.

Q56 Mr. Gerry Steinberg (City of Durham): Moving away from that now to something that David actually touched on but I do not think you responded. At page 34, paragraph 4.10, David mentioned regional development agencies and that Lord Haskins had suggested that there be decentralisation. It seems to me that whether you like it or not, and I am not sure but I suspect, there is going to be a "yes" vote in the north east of England for regional government and presumably if that happens and you do decentralise then regional government is going to be responsible for what the regional development agencies were. Have you planned for this?

Sir Brian Bender: We are planning for its present continuance. That is to say, you are right. If the vote is yes, 1 North East will become a body of the elected regional assembly, and therefore our relationship instead of being with 1 North East, as it is at the moment, will need to be with the elected regional assembly.

Q57 Mr. Gerry Steinberg (City of Durham): You say you are looking into this and working it out; you must be further down the road than just doing that because it is not very far away now, is it? The referendum is early next month. Presumably you are not going to have much time after that. Are you saying that regional government will take over the total role of the regional development agencies in terms of agriculture and rural communities?

Sir Brian Bender: Firstly, the regional development agencies in these areas have a single pot, as you probably know at least as well as I do, and what is going on in Whitehall at the moment is to work out what is called a tasking framework to ensure that the way they use that money reflects central government objectives, and in the case of Defra we are ensuring that within that tasking framework sustainable development, rural communities and sustainable farming and food is reflected. That will pass to the north east assembly.

Q58 Mr. Gerry Steinberg (City of Durham): Lastly, David said there were four different systems in the country, or there will be in the United Kingdom when all this is settled. Will there actually be five different systems?

Sir Brian Bender: In one respect there will be eight or nine, because it will be up to each regional development agency --

Q59 Mr. Gerry Steinberg (City of Durham): Once you have an elected assembly and you have politicians taking over the running of something, they are not going to be told by Whitehall, are they?

Sir Brian Bender: No, but nor is local government. Local government has its own --

Q60 Mr. Gerry Steinberg (City of Durham): The regional development agencies at the moment are not local government?

Sir Brian Bender: No, but the regional development agencies and local authorities have to work together on the delivery of some of these socio economic schemes. Of course, it will make a difference: the point I was trying to make is that the whole point of devolution is that what is done without a regional assembly in the south west could be different from what is done without a regional assembly in the East Midlands. That is part of the purpose --

Q61 Mr. Gerry Steinberg (City of Durham): But you could draw the line in there. You will not be able to draw the line in once you have a democratically elected assembly?

Sir Brian Bender: It comes back to setting national priorities and then using the influence under local circumstances but, as this Committee itself said in the hearing in May on regional development agencies, Whitehall does not know best on these issues.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee. Neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.