Brexit Briefing: Agriculture anguish

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.

Category: 

Comments

I would like to think the government is guaranteeing farm payments until 2020 in order to give itself time to come up with a carefully thought out policy for agriculture. Before the CAP policy came into effect large parts of British Agriculture were subsidised with a policy that allowed cheap imports from abroad. Whilst it would not be possible to go back to the policies of the 1960s it should be possible to come up with a policy that is better suited to UKrequirements in its broadest sense.

We do need to be careful that we don't throw the baby out with the bathwater. A lot of the environmental damage that was done to soil, air and water can be attributed to the postwar period and EU policies have done a lot to redress that. The much castigated area payments that farmers receive from Europe are subject to cross compliance requirements. Farmers can lose part or all of those payments if they breach the requirements. There has also been a move toward more of the payments being linked to environmental benefit on farmland. We don't want to see recent achievements being lost.

The NFU also has a point in suggesting food security is taken into account. It is going to be a major challenge to feed an increasing world population with less land and resources in the future. Is it reasonable or wise to expect most of our food to be produced abroad? Apart from security concerns we could inadvertently be exporting environmental problems as well as increasing pressure on soils that are less suited to intensive food production than our own. 

The countryside is not only farming's factory floor but a major part of the environment we all live in. It is no surprise that there are a large number of interest groups who will want to have a say on any future agricultural policy so the govenrment is not being over generous with the time it is allowing to come up with a policy that is unlikely to make everyone happy. 

Food security is a hugely overused, emotional phrase that translates to subsidies.  Global agriculture has more than kept up with population growth and increasing moving standards.  Dumping subsidies will focus farmers in productive/profitable use of land and hopefully will force a sensible debate on GMO which is currently dominated by unscientific emotional blackmail.

Brexit is a mistake but if it must happen at least stop paying farmers to farm and richer homeowners to keep 50 acres and claim payments.

 

These subsidies might be better spent elsewhere.  Risk and security have been eliminated by Brexit, unclothed as an elaborate hoax perpetrated by elites and their expert lackeys.

I'd like to see the money spent on statues of the Queen and Winston Churchill.  Can we have a vote on it?

 

 

I think the real question is why subsidies are needed? Are we paying a fair price for the food that buy or are put another way: are the supermarkets, who enjoy a near monopoly in the sales of sales squeezing the price that they pay for food and passing these lower prices to the consumer, while making very good profits themselves?

We are constantly told that dairy farmers can hardly make ends meet. We are also told that intense farming is harming our environment by removing the nutrients from the earth and killing off our bees throw pesticides. So shouldn't we better rebalance everything by looking at supermarket monopoly practice and therefore paying more for our food?

After all whether we subsidise farmers or pay more from our food at the check out, the money has to come from the consumer one way or another.

Supermarkets aren't making much profit - it's only a few per cent margin on the produce.

If it costs £1 to produce some vegetables in Kenya and ship them to the UK, but it costs £3 to produce them in the UK (if we stop subsidies and eastern European immigrants), then we have three options.

(a) block imports, charge consumers the extra £2 (and hope they pay rather than eat something else)

(b) pay the farmer £2 in subsidy, and then sell the product to the consumer at the same price as the Kenyan import

(c) don't grow the produce in the UK in the first place, and import it from Kenya.

Which would you choose?

Saying that supermarkets make a low margin on produce is like saying that oil companies do not make money at the pumps. For supermarkets produce, such as milk, are loss leaders to get people in through the doors because they make money by selling volume, which leads to waste. The average family wastes GBP60 per month or the equivalent of one meal per day. Furthermore, the supermarkets make much better margins on pre-prepared meals and impulse purchases such as batteries and magazines.

Frankly, I think that putting aside the monetary values that you assign at a third (how could Kenya produce and ship vegetables if the UK farmers are likely using the most efficient farming techniques and do not suffer from the additional shipping cost?), I believe that people should be paying more for their food generally and paying what it costs to produce in the UK.

The main reason is less economic than strategic and that is food security.

If food production is concentrated where it is more economically produced, there is a risk of vast quantities of crops being lost due to arbitrarily changing weather patterns.

I have read a comment saying that food production today exceeds world demand and elsewhere that what stops this food from reaching starving nations is that no one is willing to pay for the shipping and distribution. However, I have read other studies that within 10 years, the world population with expand to such a level that the best estimate of food production will not be enough.

I also understand that GM crop will increase production intensity without side-effects, but even if this is so, it causes another issue of food security in that the seed has to be bought each year from the seed companies and that over time, yields fall and more fertilisers and pesticides are required, which lead to other environmental issues. There are cases in India, where subsidence farmers have taken loans to buy seed, which they repay after harvest, but yields have dropped year by year needing more and more artificial fertilisers and then one year of bad harvest has wiped them out. In the past, they have yielded a steady if lesser crop volume and even in a bad year, they have survived by planting their own seed.

So in short: a for the reason given above

 Sainsbury's profit margin from 2014 accounts, 2.98%.

2015 profit margin, loss of -0.007%.

I don't think supermarkets make too much profit

Add new comment