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Agriculture: Dairy Farms

House of Lords written question – answered on 2nd November 2011.

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Photo of Baroness Byford Baroness Byford Conservative

To ask Her Majesty's Government whether they have undertaken a cost assessment of the impact of the proposals regarding (a) nitrate-vulnerable zones, and (b) the water framework directive, on British dairy farmers; and, if so, what are the results.

Photo of Lord Taylor of Holbeach Lord Taylor of Holbeach The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs

The implementation of the nitrates directive is a devolved matter, with the impact assessments carried out separately within each Administration. The last impact assessment accompanying the nitrates directive review for England was undertaken and published on the Defra website in 2007.

This 2007 impact assessment considered the impact of the proposed amendments to the implementation of the nitrates directive in England. It estimated that the damage cost of water pollution from agriculture in England and Wales was in the region of £445 million to £872 million per year, of which around £196 million to £497 million was accounted for by the impact of agriculture on river and wetland ecosystems and natural habitats. The assessment included a 2004 Ofwat estimate that the cost to the water industry to reduce high nitrate levels caused by diffuse pollution in drinking water supplies would be £288 million (capital expenditure) and £6 million per annum (operating expenditure) for the 2005-10 period.

The assessment identified that the main private sector group that would have been affected by revisions to the designations and action programme measures was farmers and, in particular, livestock farmers. These costs reveal that under each action programme option and designation coverage scenario, the dairy sector and arable sector were most likely to be the most significantly affected. Low-end cost estimates showed the dairy sector bearing almost two-thirds of the action programme costs, whilst high-end cost estimates showed both the arable and dairy sector bearing a third to almost half of the action programme cost. The cost to the dairy sector was estimated between £32 million and £42 million through the life of the action programme. The impact assessment included estimates of the potential savings arising if the Government sought a dairy derogation from the EU. For each scenario, the costs to the dairy sector were approximately half where the derogation was made compared to the situation where there was no derogation. The derogation was subsequently granted.

The implementation of the water framework directive (WFD) is also a devolved matter. Impact assessments are also carried out separately within each Administration.

In England, no separate cost assessment of the impact of WFD on dairy farmers has been undertaken. The national WFD impact assessment in 2007 estimated overall potential costs of implementation for agriculture and rural land management of £142.1 million per annum, at 2007 prices over a 43-year period. However, the process of determining what specific environmental improvement and protection measures are adopted involves an assessment of costs and benefits which may conclude that costs are disproportionate. Where this is the case, measures would not be implemented.

The focus in the first river basin management plans, covering the period 2009-15, is on encouraging voluntary change in farming behaviour via the uptake of best practice advice and raising awareness of Codes of Practice through targeted information campaigns. From the impact assessments of the river basin management plans, it is estimated that the cost to the whole of the agriculture and rural land management sector during the first cycle of river basin management is £209,000 (based on 2008 prices).

The Environment Agency is developing economic tools for the purpose of assessing costs and benefits of environmental improvement measures that will be able to provide information for the dairy industry in the future. The tools will be used in planning measures which will be subject to consultation and published in the next river basin management plans.

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