Written evidence submitted by NFU Cymru (AGR 13)

 

NFU Cymru very much welcomes the opportunity to make a written submission to the House of Commons’ Welsh Affairs Committee enquiry into Agriculture in Wales Post Brexit, we are pleased to offer the Committee the following evidence

 

           Introduction and background

 

  1. The decision to leave the European Union presents us with a unique opportunity to set out a clear vision for the future of Welsh agriculture. It also provides us with the chance to shape and develop policies that will enable us to realise our ambition of a productive, progressive and profitable industry that will deliver jobs, growth and investment for Wales. 

 

  1. Welsh farming businesses are the backbone to the Welsh rural economy, and the axis around which rural communities turn. The raw ingredients produced on Welsh farms are the cornerstone to the multibillion pound food and drink industry, employing nearly a quarter of a million people. We are a significant part of a UK food and drink industry worth £108bn to the economy.  As well as supporting the economy, agriculture also makes a unique contribution to the environmental and cultural well-being of Wales.

 

  1. Farmers manage over 80% of the land area of Wales, providing much of the backdrop for our tourism and recreation sector worth an estimated £2.5bn annually.  Post Brexit we want all our farmers to play their part in producing food to world leading standards of animal health and welfare, whilst at the same time maintaining and enhancing our environment and ensuring we are continually improving our carbon footprint per unit of production.

 

  1. We must recognise that the strategic importance of the sector is likely to increase significantly going forward.  The challenges to our global food production system are, by now, well documented.  A growing world population; increasing demand for high quality diets; greater competition for land, water and energy and the increasing impact of climate change which will see Wales become an area of the globe favoured for production in future with an increasingly important role in securing food supplies.

 

  1. NFU Cymru believes that Brexit provides an opportunity to transform Welsh agriculture, allowing us to develop our own vision for the sector, to seek out new opportunities and markets, and to develop an agricultural policy that better fits Wales’ needs.  Outside the European Union there are also opportunities to look again at issues such as regulation and public procurement, which we will be urging government to seize.

 

  1. Following the Brexit decision, NFU Cymru undertook the biggest member consultation exercise in its history.  This has included a series of regional roadshows, commodity board meetings, NFU Cymru Council meetings and a consultation document sent directly to every NFU Cymru member in Wales.  

 

The implications of leaving the Common Agricultural Policy and future funding

 

  1. Around 80% of Welsh farmers’ income comes from the Common Agricultural Policy. Leaving the CAP has the potential to have a profound impact on the sector, particularly if future levels of support are reduced or there is disparity in terms of the level of support available to Wales’ farmers, compared to the rest of the UK home nations or the residual EU.

 

  1. From the outset it has therefore been NFU Cymru’s view that Wales’ farmers need to be accorded parity of treatment with farmers in the other UK home nations and the residual EU when it comes to future support for agriculture. 

 

  1. Average net farm income is forecast to be just £14,500 for the 2016-2017 accounting period.  Given the current volatility of the market place, it is perhaps unsurprising that a significant percentage of Wales’ farms would not be viable without European funding.

 

  1. It is unclear how farm support might operate in future, however as things currently stand Wales’ receipts from the CAP are significantly above what would be Wales’ ‘Barnettised’ share of UK receipts from the EU. Whilst the size of the Welsh Block Grant is predicated on our population being about 5.7% of the size of England’s, in terms of EU funds which come to the UK, because they are allocated amongst the home nations according to need, Wales does far better and accesses around 12% of the EU funds that flow to the UK.

 

  1. If EU funds lost to Wales upon Brexit were replaced by the UK Treasury according to a population based Barnett calculation, then compared to the current mechanism for dividing up EU funds amongst the home nations, it is likely that Wales would be looking at an allocation reduction of 40%

 

  1. NFU Cymru therefore believes that securing agreement from the UK Treasury to allocate funds to Wales, to replace those lost on EU departure should be by analogy to the existing formula for dividing up EU funds amongst the home nations, rather than by population share.   It is our view that securing such an agreement with the Treasury must be a priority for Wales’ politicians

 

  1. The UK Treasury also needs to be mindful of the dependence of Welsh agriculture on support payments, and work swiftly to provide reassurance for funding to support agriculture in Wales, beyond 2020.

 

  1. In order to avoid distorting the UK’s internal market, NFU Cymru would like the governments of the UK home nations agreeing by mutual consent a common overarching agricultural framework that will determine the level of support available in each of the home nations.

 

  1. Once this funding is transferred to Wales, NFU Cymru asks that it is protected for the purposes of agricultural support and rural development.

 

  1. Post Brexit we would suggest that we should not confine our thinking to Pillar 1 and Pillar 2.  Departing the EU does in fact present us with an excellent opportunity to think differently about how future agricultural support might be delivered, and to move away from the CAP with its many shortcomings to a system that is specifically designed for the needs of Wales. We propose a single flexible framework with a series of themes targeted at a number of key elements that will directly support farm businesses to become more productive, progressive and profitable whilst also maintaining and enhancing the quality of our environment. 

 

  1. The fact that we look set to retain most of the body of EU legislation when we leave the EU, means that there is no reason why we could not, as an interim measure use the current CAP as a framework model for support to Welsh farming.  This would offer both continuity and stability and give us the necessary breathing space to devise a domestic agricultural support policy that suits our needs, sometime after our EU departure in 2019.

 

Trade

 

  1. Over the course of the last few weeks and months, it has become clear that political considerations over issues such as free movement of people, and continued submission to the jurisprudence of the Court of Justice of the European Union will inform the UK government’s Brexit negotiating stance. 

 

  1. NFU Cymru’s primary concern remains that our access to European markets should not be fettered by tariffs or non-tariff barriers, and from the perspective of Welsh agriculture it is essential that the UK Government secures the right deals in its negotiations with the EU27, rather than pursue Brexit at any cost.

 

  1. The EU’s single market is by far our largest, most proximate export destination with around a third of our lamb crop ending up on the European Market, and around 90% of Welsh food and   drink exports going in to the single market.   For our members, continued access to the European single market, unfettered by tariff and non-tariff barriers is essential.

 

  1. Owing to our dependency on export markets, NFU Cymru is very anxious to ensure that the UK avoids the sort of precipitous ‘cliff edge’ Brexit in Spring 2019 which will follow if the UK Government fails to secure a free-trade agreement with the residual EU and  would be incredibly damaging to Wales’ export dependent agriculture.

 

  1. It is essential that ahead of the likely ‘Brexit day’ in Spring 2019 that the UK has secured a free trade-agreement with the EU which includes agricultural produce.  From NFU Cymru’s point of view it is essential that such trade agreement comes into force on ‘Brexit’ day so as to give us a seamless transition from single market participation to free-trade agreement.

 

  1. Elections taking place in the UK, France and Germany later this year will eat in to the commencement of the two year Article 50 negotiating window. In addition, at the end of the negotiating period, any concluded agreement will require ratification by the EU27 and the European Parliament.  It has been suggested that this period of ratification will take as long as six months. 

 

  1. The challenge of concluding trade agreements within the two years allowed for by Article 50 would of itself present a considerable test, but the fact that other factors are set to significantly impinge on the length of the available negotiating period makes the task all the more difficult.

 

  1. In the event of the UK failing to secure a free-trade agreement with the EU, which   includes trade in agricultural produce, NFU Cymru believes that the Prime Minister and her Cabinet colleagues should be prepared to keep an open mind on the use of transitional arrangements as an interim measure if it becomes apparent that a concluded trade agreement encompassing agriculture cannot be secured within the two-year negotiating window so as to avoid a Brexit cliff-edge

 

  1. It would be devastating for Welsh agriculture were we forced to operate on World Trade Organisation tariffs which have effective rates as high as 46% for chilled lamb carcasses and 65% for fresh boneless beef.

 

  1. In his appearance before the House of Commons’ Exiting the European Union Committee on 15th March,  the Secretary of State for Exiting the European Union, David Davis MP acknowledged that in the absence of a trade deal, UK farmers will face tariffs of between 30 and 40% on their exports

 

  1. Whilst there has been much talk of tariff barriers, non-tariff barriers can also have very harmful impacts if they are allowed to impede trade flows.  As producers of what are often very perishable products, Wales’ farmers cannot afford to see their produce held up at international borders by red-tape and bureaucracy.  We very much need the free and frictionless trade that the Prime Minister spoke of earlier this year, and this must include tariff as well as non-tariff barriers.

 

  1. European markets are relatively mature, access to new markets is therefore seen as increasingly important in future. Any future trading arrangements with any country, in or out of the EU, must be balanced, with the same conditions applying to imports as to exports.

 

  1. Whilst we recognise the value and importance of non-EU export destinations, for the foreseeable future, EU export destinations are likely to remain our most significant owing to both their proximity and value. Although Brexit will give the UK the freedom to conclude its own trade agreements with countries outside of the EU27, from NFU Cymru’s perspective, the UK Government’s first priority must be to secure a trade agreement with the EU27, it being our largest and most proximate export destination.   

 

  1. Agriculture is a strategic industry which is both economically and culturally important to Wales.   We do not want to see agriculture used as a bargaining chip when it comes to trade negotiations with third countries, where for example it might be traded off in return for access to markets in services for example.

 

  1. Similarly, if the UK were to enter into trade agreements with the countries such as New Zealand and Brazil, then there could be a temptation on the part of the UK government to unilaterally lower tariffs for food imports.  Such a move would have a devastating impact on Wales’ livestock industry, and the UK government must resist the temptation to embark on such a course of action.

 

  1. We must seek to limit our exposure to imports produced to lower standards (for example, lower animal welfare standards, goods produced with chemicals prohibited domestically etc.). This is not a straightforward matter as WTO rules prohibit discriminating against imports on the basis of their production methods.

 

  1. We can help ourselves by strengthening our brand and promoting the qualities and values of Welsh and British production through assurance schemes, and NFU Cymru believes more needs to be done both publically and privately in this area. But there are limits to what can be done and this can only be a partial solution.

 

  1. Whilst much attention has focussed on trade with the EU and the rest of the world after Brexit, there are of course significant opportunities presented by Brexit in terms domestic utilisation of food.   Whilst public procurement of domestically produced food has in the past been hampered by European rules, following Brexit we believe there is a real opportunity to re-visit this whole issue and ensure that there is far greater use of home produced food in public procurement contracts by public bodies including the NHS, schools, local authorities, the prison service and the MoD.

 

Regulation and The Great Repeal Bill             

 

  1. The nature and extent of the regulatory landscape emerged as quite a distinct theme during the course of our recent member consultation. Poor regulation is often cited as a reason for lack of farm business confidence, whilst the costs of compliance, the time given over to complying, and perhaps moreover demonstrating compliance, add significantly to farmers’ workload.     

 

  1. Whilst trading partner expectations will inevitably shape the post-Brexit regulatory landscape, the expectation amongst our members is that there will be some rolling back of regulatory requirements. The ‘cover’ that Europe has provided for domestic regulators seeking to pursue ever higher regulatory standards will have fallen away and our members will be looking for objective justification of any new regulatory requirements, as to whether they are truly necessary.

 

  1. NFU Cymru’s members also accept that it is unrealistic to think that all EU legislation will cease to apply at the point at which we leave the EU. We are therefore under no illusions as to the scale of the task ahead, but our members are clear that this does not mean that Government should not be ambitious in its task, and we believe that Brexit offers considerable opportunity to reduce the regulatory burden under which our farmers currently operate. NFU Cymru is committed to working with Government and Regulators to develop better approaches to deliver the outcomes society seeks.

 

  1. The white paper which pre-figures the Great Repeal Bill set out in a little more detail what it is intended that the Great Repeal Bill achieve, including converting and preserving EU legislation into UK statute where practicable and relevant in order to give on-going effect to it.

 

  1. NFU Cymru recognises the fact failing to make provision for the on-going effect of the acquis would leave enormous legislative lacunae.  Having such voids in our legislative framework would be very prejudicial to the UK being able to secure and maintain trade deals with the residual EU and much of the rest of the world.  Preserving the acquis should therefore offer some certainty and continuity, and should presumably place the UK in a stronger position in terms of concluding trade negotiations, and for this reason we understand the need to preserve the bulk of the acquis.

 

  1. Whilst we understand the reasons for converting and preserving the on-going effect of the bulk of EU legislation, NFU Cymru very much hopes that in due course we will be able to review and get rid of any which is unnecessary.

 

  1. If, as is assumed, Great Repeal Bill takes a ‘snapshot’ of EU legislation  (including Court of Justice of the European Union case law) that is effective at the moment of our departure from the EU, this legislation will be rendered static, and will slowly start to date.

 

  1. Should post-Brexit trading arrangements require that the UK and Wales be observant of much EU law, then this presents a potential challenge.  Presumably the solution to this problem would require the acquis (now enshrined in domestic law) to be updated continually so as to reflect changes and developments in EU law.  This would though give rise to a significant and ultimately open ended task for Government

 

  1. NFU Cymru accepts the need for the Great Repeal Bill owing to the unique exigency created by Brexit, the need for stability and continuity and moreover the need to be in the best possible position to secure trade agreements. 

 

  1. NFU Cymru is aware that reviewing each and every piece of EU derived legislation and deciding whether if it is desirable to preserve it, remove it or refine it represents a very significant task, but we would urge government not to shy away from doing so.

 

  1. In her appearance before the National Assembly for Wales’ Climate Change, Environment and Rural Affairs Committee on 14th September 2016, the Welsh Government Cabinet Secretary Lesley Griffiths estimated that there were approximately 5000 pieces of EU legislation within her portfolio alone. 

 

  1. Government must seek to reduce unnecessary regulation and bureaucracy wherever possible.   Much of what might be possible will depend on trading partner expectations as well as domestic political priorities, but we urge Government to be ambitious in seeking to roll-back on regulation.

 

  1. The extent to which the Great Repeal Bill will impinge on the devolution settlements and the legislative and executive competence of the National Assembly for Wales and Welsh Government would benefit from some further clarification. NFU Cymru would however make the point that any amending, enlarging or diminishing of the scope of devolved competence should be subject to the consent of the National Assembly for Wales as part of a relationship between London and Cardiff that is founded on mutual trust and respect.

 

Science and Technology

 

  1. One of the principle challenges facing farmers is the need to increase productivity and outputs whilst optimising the use of inputs in order to produce safe, high quality food in an environmentally sustainable manner.

 

  1. Over the last few decades, the EU has enjoyed exclusive competence around the authorisation of plant protection products and biotechnology.  It is unclear whether this competence will lie at a UK or Wales level after Brexit.  Wherever the decisions are taken, our members want to see the objective assessment of the potential benefits that accrue from science and innovation placed at the heart of future policy making.  

 

  1. The manufactured controversy surrounding the re-authorisation of glyphosate, left many farmers questioning the ability of the European institutions to act objectively and resist the politicisation of the decision making process. 

 

  1. Our departure from the European Union presents an opportunity to repudiate this sort of politicisation of the decision making process in relation to plant protection products and biotechnology, and to put science back at the heart of the decision making process.

 

  1. We believe that the UK government has a duty to maintain the world class expertise we have built up in the fields of plant and animal science, post Brexit. As part of the Brexit negotiations we are anxious that a UK outside of the EU seeks to negotiate on-going participation on EU research programmes.

 

Labour and other issues

 

  1. The Welsh food and drink supply chain requires access to a flexible, skilled workforce. The number of non-UK born workers needed across the UK food chain for it to remain competitive is significant, official figures have proven hard to come by.

 

  1. Across the UK it is estimated that meat processing employs around 75,000 people, of whom around 63% are nationals of the EU27.   It has proven difficult, if not impossible for employers to recruit their workforce locally, despite their best efforts.

 

  1. NFU Cymru would suggest that the Government should not become too pre-occupied with making a distinction between migrants who are skilled and those who are not when it comes to the issuing of work permits.  It should instead be informed by the approach that if a job needs filling, then it needs filling irrespective of where it sits in the jobs market.

 

  1. There are a number of issues that make it difficult to recruit sufficient domestic labour; flexibility of location, hours and tolerance of harsher working environments are prominent reasons. But even amongst the EU labour force there is evidence of a growing difficulty in sourcing the labour force farm business requires - this means the prospect of sourcing labour from beyond the EU also has to be considered.

 

  1. Businesses indicate there is a very urgent need to focus on the short term labour supply – sterling’s devaluation has made the UK labour market less competitive within the Single Market. There is a real danger that production will shift abroad unless the industry can access the supply of labour it needs and with investment plans also on hold.

 

  1. The UK Government must ensure that it talks with all sectors of the UK economy in order to establish what their labour requirements are  UK Government must also ensure that there is communication between its own departments and the Home Office so that the likely labour needs of various sectors of the UK economy are understood across the government.

 

  1. Whilst Brexit does of course present some significant challenges, as a Union we would stress that it also presents some considerable opportunities including opportunities to design and develop a bespoke agricultural policy, to strike trade deals with third countries, to overhaul legislation and to look again at public procurement.

 

  1. NFU Cymru is grateful to the committee for the opportunity to be able to provide written evidence on the implications of Brexit for agriculture and food.

 

April 2017