Thank you for inviting me to open Cereals 2014. It’s a huge pleasure to be here at an event that really is at the heart of the industry.
Some of you will have heard the announcement yesterday about greening. I know how important it is that you know where you stand on this and many of you wanted me to make a quick decision. It would have been easy to make a snap decision, which would have been quick but wrong. It’s more important to make the right decision than the easy one.
These reforms of the CAP are not as I would have wished. From the beginning, I wanted to continue on the trajectory set in train by Macsharry and then Fischler. Although the reforms are disappointing, throughout the negotiations we did succeed in stopping a number of damaging and regressive proposals. All along I have been very clear on my priorities for the new CAP: we want to keep it simple and we don’t want to make the mistakes of the last Government. Implementation of the last reform was far too complicated, causing huge difficulties for the Rural Payments Agency (RPA) and farmers. It resulted in us having to pay over £600m in disallowance, or fines to you and me.
The RPA we have now is unrecognisable from the agency that this government inherited and I am hugely proud of that. Last year they had their best ever Single Payment Scheme performance – they got £1.48 billion of payments out on day 1, the first of December, and 97% out by the end of January – that’s £1.61 billion, which made up the payments to more than 100,650 English farmers. They exceeded the benchmark set by the EU five months early. We have worked really hard to get there and the RPA is completely transformed.
It would be tragic to put this success at risk.
However, in implementing greening and the Ecological Focus Area requirements, we are faced with a real conundrum. I don’t want to damage the success of the RPA. I want to keep things simple. But I don’t want to pay people to take land out of production.
The previous Government made policy on the basis that there is a plentiful supply of cheap, safe food beyond our shores. I completely disagree. Any of you who have heard me speak before will have heard me talk about my priorities for Defra: growing the rural economy, improving the environment and protecting the country from animal and plant disease. Nowhere do these priorities come more into their own than implementing the CAP.
When growing the rural economy, we should concentrate on our own growing population, the increasing demand for quality protein foods abroad and therefore a rapidly expanding market for British produce. These are all fantastic opportunities for British farmers and producers. Against that backdrop, it is unthinkable to take 5% of good land out of production. We’ve estimated that every 1.5% of arable land that is taken out of production is the equivalent of around £30 million in lost profitability.
That is not a loss we should be willing to accept.
We fought hard during CAP negotiations, and I have fought hard since then to make the new system as simple as possible for English farmers. We won’t be bringing in a certification scheme for greening and we have simplified cross-compliance. On capping of basic payments, we are required to reduce payments to the largest farms but have set these reductions at the minimum level allowed by the EU regulations. But there are some areas where we didn’t get what we wanted. On Greening, we did not win on crop diversification and the Ecological Focus Area requirements have come with too great an administrative burden.
Both of these new Greening rules were brought in to try and tackle problems that happen on the continent. But what started as the Common Agricultural Policy is morphing into a Common Environmental Policy, a concept that is completely unworkable. Crop diversification might be a good idea in some countries where there is a problem with monocultures across huge holdings, but we don’t have the same landscape here as they do elsewhere in Europe. But applying uniform rules to the unique structure of the English countryside is a real challenge. The success of our agri-environment schemes demonstrate what can be achieved when you make these environmental decisions at a national level.
The European Regulations provide a range of options which Member States can choose to offer their farmers for the purpose of meeting the 5% Ecological Focus Area requirement. The more Ecological Focus Area options we offer, the more complex and difficult it will be to deliver and control these options in accordance with the EU rules. Whilst I would like to give our farmers the widest choice of Ecological Focus Area options, I have judged that the complexity of introducing all of the necessary controls to manage them in accordance with the EU Regulations would place a high risk on the Rural Payment Agency that could jeopardise our ability to make all CAP basic payments to farmers on time.
Including hedges in our Ecological Focus Area offer will help us reduce the land taken out of production, but it will also make the process of administering the payments much more complex. Under the EU rules, we are faced with a difficult logistical exercise to check and verify everything on a map.
We will do whatever we can to get payments to you on time. But given the nature and complexity of such mapping exercises, we want to ensure that farmers understand now that a consequence of our decision around hedges is an increased risk of payments being made later than usual. We have worked long and hard to square the circle, but it’s impossible to do that and keep everyone happy. We will all have to compromise.
If you do not have to include Ecological Focus Area on your holding, then your payment date should not be affected by this decision on hedges. If you include the simpler options like fallow land, catch and cover crops, buffer strips, or nitrogen fixing crops in your Ecological Focus Areas, your payment should be made in reasonable time. For many of you, using nitrogen fixing crops will be a very attractive option. Planting peas or beans to meet your Ecological Focus Area requirement would simultaneously count as one of your crops for the crop diversification rules.
I totally sympathise with those of you that don’t want to take land out of production and want to include hedges within your Ecological Focus Area; I want to include hedges as a landscape feature. We have looked carefully at the challenges this presents and I think it is possible, but with some compromises on the high delivery expectations RPA’s excellent improvement has created. But if we are going to make this work, I will need you to work with us. If you want to include hedges in your Ecological Focus Area, we’ll need to work with you to get the mapping of hedges right, you will need to accept that the verification process could take longer and there is a risk that you may get your payment later.
I know some of you will be thinking “well if they can do hedges, why can’t they do ponds” or stone walls or other features. Many of you will already be mapping those for your agri-environment schemes. But the fact is, the extent of mapping for existing ELS and HLS agreements does not reach the level of detail that is required for Ecological Focus Area under the EU rules. And if we start trying to go to that level of detail to include ponds and walls and ditches in this scheme year then we could put the whole payment system at risk.
I remember when we made the switch from historic to area based payments. It was good to move away from coupled payments, but it was a hugely complex process and the way it was done caused a lot of upset and misery. I have not forgotten that and I know you won’t have either; I want to learn from those mistakes.
What I am doing is making sure that the system the RPA brings in is flexible enough, and robust enough, to include additional options in the future. I am determined to make sure that we use this situation to our advantage. I want to get the RPA in the best possible shape to bring in extra features in the coming years, so English farmers can get the most out of their land. Ideally, we would like to allow as many landscape features as possible to count towards Ecological Focus Area, bringing in additional options in subsequent years. Personally I would like to include ponds and stone walls from 2016. But we need the Commission to confirm that this can be done by agreeing to introduce further flexibility into the rules. So I will be speaking to Commissioner Ciolos about this, and trust the NFU, CLA and others will help me make the case.
I understand that many of you will be concerned about the possibility that late payments might have on existing financial commitments. The banks have been immensely supportive for the industry during the difficult time of bad weather. We held a very useful summit together to tackle the problems caused by this year’s flooding. The banks were very supportive and I am hoping for a similarly helpful attitude as we settle into the new CAP and my officials have already been in touch with the major banks. Let me be clear, we will do everything we can to make payments as early as possible in the payment window. But the complexity surrounding some of the new CAP rules, particularly Ecological Focus Areas, mean we have to be prudent and think about contingency arrangements. That’s why we’re warning farmers now that if they chose to use hedges, we may ask them to submit their claims earlier and that they may receive their payment later.
This is the best balance between safeguarding the efficient performance the RPA and making sure we bring in the Ecological Focus Areas in a way that won’t put English farmers at a disadvantage.
We know that this is unsatisfactory. I have already written to Commissioner Ciolos about the serious problems of the crop diversification rule and many of you here have given me evidence of the difficulties this will cause you. I have also written to him specifically about other aspects of greening, requesting flexibility about the rules governing the implementation of Ecological Focus Areas. I will say exactly the same thing when I go out and speak to him shortly, because a lot of these rules are simply not practical for the landscape of the UK and the way we farm.
If we are going to make a success of it, it will need to be a team effort. I will continue to fight our corner with the Commission, and will work with you to make this work. I’m confident that together we can arrive at a better solution for implementing this disappointing reform in a way that doesn’t disadvantage our farmers.