The House of Lords European Union Committee’s Environment and Agriculture Sub-Committee

Inquiry into Less Favoured Areas: Call for Evidence

The CountryLand and Business Association

January 2009

CLA Submission to

The House of Lords European Union Committee’s Environment and Agriculture Sub-Committee

Inquiry into Less Favoured Areas

Country, Land and Business Association (CLA)

The CLA represents the interests of 35,000 land managers and rural businesses who between them own and manage 50% of all the rural land in England and Wales. Our members both live and work within LFA areas and operate a wide range of businesses including both land based businesses e.g. agricultural, horticultural, forestry/woodland and other businesses which can only be found in rural areas e.g. rural tourism, equestrian, fell walking etc. The redesignation of LFAs is therefore extremely important to us.

Summary

  • The CLA are extremely concerned that strong policy adjustments will be necessary within the English and Welsh upland areas if we are not to witness a severe depopulation of the hills of both livestock and farmers with the knowledge and skills to manage these vital areas in order to deliver environmental goods and agricultural products. Redefined LFAs are certainly part of the solution, but these must be based on sound scientific evidence and ensure sufficient flexibility for Member States to direct funding to those areas that need it. We do not believe the suggested biophysical criteria can achieve this.
  • The LFA measure has contributed to maintaining viable rural communities. With changes in policy mechanisms the LFA measure is now less effective than it was previously and has no transparency since member states have so much flexibility in deciding how to use it. However LFA payments are vital to those agricultural businesses within LFAs and it is these businesses which already deliver or have the potential to deliver the environmental outputs that society desires.
  • The CLA suggest that it would be possible and highly desirable to develop criteria which relate to the second part of Article 50, 3(a) that would focus on the positive side of the concept of LFAs namely the extensive farming systems which are a vital part of the management of these semi-natural habitats and landscapes, and thus to the environmental and landscape characteristics we wish to maintain. Thus if we were to start from the landscape character and specifically the fact that they arise because of grazing management systems then we may have another way of arriving at an appropriate definition of Less Favoured Area.
  • The CLA believe that income forgone in farming is not a sufficient mechanism to keep people farming in LFAs, as this does not adequately reward farmers for their time or delivery of public goods.Looking at either these earnings in nearby towns or alternatively looking at the monetary value of the public environmental and cultural landscape services would be a more fruitful line which the Commission should be investigating.
  • The CLA consider that there is scope for the creation of new private markets for the delivery of environmental goods and services in the LFAs and believe the Commission should encourage market mechanisms to create a sustainable agricultural system in LFAs which would complement the support payments available. We are thinking here especially of water and carbon management services.
  • The CLA view is that there is little point in redefining the LFA areas and measures any further within the current perspective until there is a more comprehensive agreement on the basis for support payments.

CLA concerns regarding LFAs

1.1 The CLA are extremely concerned that the current deep recession in the upland grazing areas (as evidenced by the recent farm income figures released by Defra[1]), may be entrenched and thus strong policy adjustments will be necessary if we are not to witness a severe depopulation of the hills of both livestock and farmers with the knowledge and skills to manage these vital areas. Redefined LFAs are certainly part of the solution, but these must be based on sound scientific evidence and ensure sufficient flexibility for Member States to direct funding to those areas that need it.

1.2 As a result of decoupling payments through the Common Agricultural Policy (CAP) reform, many farmers have now removed stock from the high upland areas in the UK. This has relieved pressure of over grazing from some areas, but has gone so far that environmental benefits of grazing animals are already being lost in other areas. For those continuing to farm in these areas the loss of neighbouring farmers and livestock has added increasing pressure to struggling businesses. For example the loss of ‘hefted’ flock’s mean the remaining flocks are spreading over a greater area leading to greater time needed to shepherd them for no extra income. Similarly the loss of neighbouring businesses can increase the costs of inputs due to companies transferring the costs of delivering to one farmer rather than several to their customers.

1.3The University of Exeter[2] has reported England’s Hill Farms Farm Corporate Income (FCI) operates at a deficit of between £4721 - £20648 (i.e. a negative income) when the unpaid family labour of operating a hill farm is accounted for. This figure is likely to worsen as farms within the Severely Disadvantaged Areas of the LFA receive a net reduction in their Single Payment Scheme (SPS) payments up until 2013. LFA payments are a critical element in the income base of many UK upland farm businesses.

1.4 In summary the threats to farming within LFAs include: the loss of rural community services and infrastructure thus causing the loss of successors to the farming system, increased costs set against low returns for livestock products, lack of markets for produce (it costs more to shear sheep than is achieved through the wool price) , increasingly complex and costly legislation to comply with (for example electronic identification), and the likelihood of shouldering more costs of animal disease.

1.5 In order to address these issues there is a need to encourage sustainable rural communities with local infrastructure in place to support those living within these areas. There is a need to develop profitable markets for farming systems within LFAs. The CLA does not necessarily mean that commodity products from these areas should be supported as this would be trade distorting, rather we wish the Commission and the UK government to consider developing or supporting markets for more of the ‘public goods and services provided by upland land management systems’. For example 70% of the drinking water in England is filtered through LFAs and it would be beneficial to reward farming practices that reduce the need for water treatment by water companies.

Question 1:The strengths and weaknesses of the LFA scheme thus far

2.1The core objective of the LFA measure was ‘to ensure continued agricultural land use and thereby to contribute to the maintenance of a viable rural community.’[3] The rationale behind this objective was that viable rural communities were at threat without a viable agricultural industry since agriculture is the dominant land use in LFAs.

2.2Since the LFA objective was set the agricultural industry and associated rural communities have significantly changed. Agricultural holdings across Europe have amalgamated and increased in size whist technological advancements have reduced agricultural workers. Some of the trends in the UK agricultural industry can be attributable to the reduction in prices received for agricultural products such as store cattle, lamb, wool etc whilst the costs of agricultural inputs have been increasing.

2.3The effects of the LFA measure cannot easily be viewed on their own. For example when the CAP payments were linked to agricultural output such as headage payments, overgrazing with some associated environmental damage was widespread across Europe including LFAs. However now that these payments are no longer linked to outputs, the LFA is noticing a greater problem in undergrazing and depopulation. This cannot be accredited solely to the LFA payments but to the wider policy decisions that have been implemented, together with market developments.

2.4In summary the LFA measure has certainly contributed to maintaining viable rural communities to some degree. With changes in policy mechanisms the LFA measure is now less effective than it was previously and has no transparency since member states have so much flexibility in deciding how to use it. Few countries use the LFA mechanism solely to address environmental concerns since the objective of the scheme has only recently been revised and there is potential for much overlap with the agri-environment mechanism. We suggest that LFA payments are vital to those agricultural businesses within them and it is these businesses which already deliver or have the potential to deliver the environmental outputs that society desires. It is essential that these businesses with their associated expertise are not lost whilst there is an interminable debate about how best to use the LFA mechanism in future.

2.5It is abundantly clear that revenues from agricultural markets alone cannot sustain farming in the marginal, remote and mostly upland areas we have designated as Less Favoured. These farms already have access to the Single Payment Scheme and the classic environmental schemes. Even with these payments included income levels are extremely low. Adding value to products to try and market local distinctiveness, and economic diversification into rural tourism or any other suitable activities have been encouraged over many years under numerous schemes. Still incomes are low. But society is not prepared to accept that the solution is therefore to accept a gradual depopulation, reduction in management leading to abandonment from management. Why not? Partly for reasons of loss of communities and partly because of los of management. The presumption is that the unmanaged hills reverting quickly to impenetrable scrub and bracken and eventually to low grade scrubby woodland would result in loss of access, loss in landscape amenity and loss in biodiversity. If these assertions are accepted then the logic of Less Favoured supports, or more accurately the totality of the LFA supports and all the other supports, is to pay for these non-market community and environmental services. The rate that has to be paid is the rate which maintains the desired level of management.

Question 2:Is it appropriate to set common, EU-wide biophysical criteria for delimiting LFA areas, as suggested by the Commission in its consultation paper?

3.1No. The European Union (EU) land mass is vast and contains a tremendous variety in physical and climatic conditions. Whilst one set of criteria would enable greater transparency for the Commission to assess that the LFA designation were being applied effectively, the actual biophysical criteria could cause LFA payments to be re-distributed to areas previously considered ‘agriculturally productive’.

3.2If we consider England as an example, the CLA attended a workshop run by Defra in February 2008 where the effects of the biophysical criteria on England were discussed. We were shown that if only one of the biophysical criteria listed in the Commission’s consultation paper were to be applied to England then the LFA area could increase by 100 percent. Similarly if a combination of these factors were to be applied then England would have an extra 7,476,600 ha of LFA land which would cover almost the whole of England’s landmass including vast areas of arable land in the East of England which would be considered ‘agriculturally productive’. Interestingly if the same criteria were applied to the devolved administrations of Scotland and Wales the area of LFA largely remains unchanged.

3.3Whilst the Commission has suggested that a second step could be adopted by Member States to delimit LFA areas based on production criteria, the CLA has severe concerns about the effectiveness of this approach. Farm productivity can be affected by a number of external factors including market effects, climatic factors in an individual year (likely to be further affected by climate change), production costs, to name but a few. These external influences on agricultural businesses in the LFA’s could remove the transparency of the second step or cause productive areas of land to be classified as LFA’s. The CLA is extremely concerned about the development of the delimiting criteria based on agricultural productivity.

3.4In addition member states have varying levels of information relating to the biophysical criteria suggested by the Commission. For example England has extensive data relating to the biophysical criteria which has been collected and analysed for decades. However other member states including both new and existing members of the EU do not have such data and the costs involved with collating it could be considerably higher than the payments to be made under the LFA support system.

Question 3:Are the common biophysical criteria set out by the Commission in its consultation paper appropriate and effective in identifying disadvantaged areas? Are there any omissions, whether in the form of further biophysical indicators or other indicators?

4.1No. The biophysical criteria largely focus on the areas of Europe that have a continental climate of cold winters and warm dry summers rather than for example the UK’s cool wet maritime climate. The ‘one size fits all’ approach will mean countries with different handicaps will either find their areas of LFA significantly increasing or perhaps more worryingly severely decreasing with support lost to those areas that need it most.

4.2The CLA believe that it would be possible and highly desirable to develop criteria which relate to the second part of Article 50, 3(a) that would focus on the positive side of the concept of LFAs namely the extensive farming systems which are a vital part of the management of these semi-natural habitats and landscapes, and thus to the environmental and landscape characteristics we wish to maintain. Thus if we were to start from the landscape character and specifically the fact that they arise because of grazing management systems then we may have another way of arriving at an appropriate definition of Less Favoured Area.

4.3 The CLA knows there would be potential problems with this approach, particularly that it leads towards linking LFA definition, and hence LFA payments, to particular farming systems, if not farming products, and might be thought as leading to a recoupling of supports to agricultural outputs. We have two responses to this.

4.4First we would expect the definition to be based on landscape character or a land use designation (e.g. permanent grass, or grazing area) which are or could be practiced there. In these ways there is no direct relation to specific grazing animal species or outputs.

4.5 Second, it is not of our choosing that the areas have unfortunately been negatively labelled in terms of agricultural production potential. Less favoured means less suitable for agricultural production, and land ‘suffering’ from permanent natural handicap means handicapped for agricultural production. The confusion is that these areas are tremendously favoured in landscape terms, and if appropriately managed by reasonably remunerative agriculture, for biodiversity and for resource protection too.

4.6 It is deeply unfortunate that for years now the EU has chosen to focus on what this land is not very good for (agricultural production) rather than on what it is admirably suited for – cultural landscape. If this is accepted as a much more positive and rational way of thinking about this land then we should not be scared to define it in terms of the environmental high value rather than the agricultural poor value.

Question 4: What degree of harmonisation of eligibility conditions (for determining access to LFA payments), if any, is needed.

5.1At present a high proportion of LFA payments are based on socio-economic criteria particularly concentrating on stopping rural depopulation in some areas, however these payments are becoming increasingly ineffective as has been seen with the loss of traditional crofters in Scotland and the loss of hefted flocks in the Yorkshire Dales. Payments across Europe range from €25-150/ha and whilst payment rates should be flexible based on the market value of what is being produced, farmers in neighbouring areas can be receiving vastly different payments for the delivery of the same product and a degree of standardisation is needed.

5.2The Commission wishes LFA payments to ‘have a stronger focus on land management that should contribute, through continued use of agricultural land, to maintaining the countryside and to maintaining and promoting sustainable farming systems’ with the LFA measure specifically designed to ‘…deliver public goods, such as valuable landscapes, biodiversity, soil conservation and fire prevention in areas where farming is difficult’.

5.3From 2010/11 LFA payments in England will no longer be based on socio-economic payments but instead will reward farmers for the delivery of environmental goods under the Uplands Entry Level Stewardship Scheme. In order to claim these payments farmers will need to complete a basic environmental audit of their holding and agree to manage the land under government prescriptions for five years and will receive payments based on income foregone which are comparable to those payments previously received as a socio-economic payment but will require a lot more effort. Interestingly the payments are loosely linked to headage since farmers must agree to a minimum (although not a maximum) stocking level in order to deliver the various environmental goods.