by: James Blitz
Britain’s decision to leave the EU has profound implications for many parts of the UK economy, but few areas will be as heavily affected as agriculture.
For years, British farmers have been big beneficiaries of EU subsidies, receiving £2.9bn of EU money in 2014-15. The UK’s impending withdrawal from the Common Agricultural Policy is therefore causing some anguish in parts of the farming community.
Last week, Philip Hammond, the chancellor, tried to mitigate these concerns. He announced that the Treasury would guarantee the £6bn paid annually by Brussels to farmers, academics and the poorer regions of Britain between now and 2020. As the FT reported at the time, Mr Hammond’s move is of limited significance because it is a short-term palliative. He has made no commitments on subsidising these sectors beyond the end of this decade.
Even so, some commentators believe the announcement is politically significant because it suggests that the Conservatives might be minded to keep the policy of heavily subsidising farming in the long run. This dismays those who want a different approach and who believe the UK’s withdrawal from the CAP creates an opportunity to recast the country’s approach to farming and trade.
Shanker Singham, a leading trade lawyer now at the Legatum Institute, is one person with concerns. He believes that, post Brexit, the UK could close off trading opportunities with non-EU states if it continues the same production-subsidy distorting policies of the CAP.
Mr Singham argues that one of Britain’s main goals after Brexit must be to access new non-EU markets for UK exports, notably in services. He thinks Britain’s ability to do this will be significantly enhanced if it is willing to open the UK to agricultural imports from outside the EU. “Britain can completely revitalise its relationship with the Commonwealth by giving its members access to the UK market, something that the EU’s agricultural protectionism has prevented for many years,” he says.
Mr Singham is clear that the UK should not phase out subsidies altogether. Governments will always have to make direct transfers of cash to some farmers to help deal with specific environmental challenges, he says. But some commentators believe Britain should scale back such subsidies as much as possible because they have distorted the UK’s agricultural sector.
As columnist Ian Birrell writes in this piece, 80 per cent of the cash paid in farm subsidies is scooped up by the richest 20 per cent of claimants. He says these big agricultural producers are “the worst offenders” when it comes to turning the countryside into dreary tracts of land cleared for industrialised farming.
How the Conservatives navigate this issue will be something to watch closely. Sections of the party are fiercely supportive of the farmers’ lobby. But many free marketeers — and even a few Remainers — regard Brexit as a golden opportunity to dump the heavy baggage of agricultural production subsidies once and for all.