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Brexit - An agricultural outlook

View profile for Alex Keenan
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What will a British Agricultural Policy look like? Amongst the many questions that surround our departure from Europe, this must be one of the most pressing.  What, if anything, will replace the Common Agricultural Policy and how will this ‘British Agricultural Policy’ work?

The Tenant Farmers Association were first out of the gate when it came to suggesting a possible answer, publishing a draft policy for discussion in April.  Although their proposal includes suggestions for maintaining direct payments and increasing rural development funding, it also incorporates restated versions of some of their already familiar policy innovations. These include incentivising landlords to offer longer term tenancies via changes to the inheritance tax regime, making Red Tractor mark standards compulsory and giving the Groceries Code Adjudicator ‘OFSTED like powers’. The TFA’s suggestions would redeploy a lot of the existing direct payments by hectare into new agri environmental and farm business development schemes together with, presumably, some money being allocated towards providing the Groceries Code Adjudicator with these wider and deeper powers.

One difficulty the TFA will face however is that they envisage levels of government funding for the British Agricultural Policy at least matching the money we currently get back from Europe.

In our more pessimistic view however, any British Agricultural Policy is likely to feature a significant reduction in overall payments to farmers and the rural sector. Farmers should not be expecting more public funding post Brexit. It was in large part their money that was being promised to the NHS and everyone else by the Leave campaign, and CAP payments make up the majority of the money we currently get back from the EU.

The TFA are looking to update their proposals very shortly, and we await these with interest.

The NFU have been more conservative in their stated objectives. Their opening statements attempt to hold the line against the reduction in support that many fear is inevitable, asking for “the retention of comparable levels of direct support payments”.

Of course this will not be the first time we have had a British Agricultural Policy, and many in farming are still capable of growing nostalgic for the statement of purpose in the Agriculture Act 1947, which spoke of promoting

“a stable and efficient agricultural industry capable of producing such part of the nation’s food and other agricultural produce as in the national interest it is desirable to produce in the United Kingdom, and of producing it at minimum prices consistently with proper remuneration and living conditions for farmers and workers in agriculture and an adequate return on capital invested in the industry.”

However attractive this might sound to farmers today, policy objectives have moved on in the last 70 years, carried along in part by the evolution of the CAP.

It is too early to speculate as to the government’s detailed position, but we can get some ideas from what they said they wanted out of the periodic CAP reform negotiations. Various governments and, perhaps more pertinently DEFRA, have made clear over the years that they want a reduction in direct payments, which in the context of the CAP would be made up for by an increase in the funding of Pillar 2 - which covers rural development and the provision of ‘public goods’.

Broadly speaking, if Britain had gotten its way over the years in the CAP negotiations we’d have a lower level of agricultural subsidies, more specifically directed towards the delivery of public goods in the rural environment. We’d effectively be paying farmers to deliver environmental benefits and ensure higher standards of animal welfare - an area where the government has repeatedly said “Markets tend not to reward farmers properly for their activities that deliver environmental or societal benefits”.

So we’re probably looking at a smaller subsidy scheme, aimed more squarely at environmental and rural development objectives. But how much smaller?

The elephant in the room (or should that be the sheep?) is New Zealand. Their total abolition of farm subsidies in the 1980s did not result in the industry collapse that might be predicted. In fact, they are an agricultural powerhouse. The corollary however is that they now export over 70% of their produce, with the obvious consequences for food security and perhaps less obviously an inflationary effect on domestic food prices, to which the British electorate would probably object.

We probably won’t see such an approach taken here, but we also probably won’t see a subsidy scheme like the US or Turkish systems which are based on minimum prices or subsidised input costs - although the dairy sector in particular might well be lobbying strongly for some kind of ‘floor price’ for milk being put on a statutory footing. Such minimum pricing might come in by the back door if the TFAs suggestions are taken up and the Grocery Code Adjudicator is given more power to regulate contracts between farms and the supermarkets.

We still have the CAP itself for another two years and a lot can change in that time. There is also the possibility that a ‘soft landing’ for farmers might be negotiated by retaining a facsimile of the existing CAP and the current set of agri environment schemes until they would have expired or come up for review had we remained in the EU. There is a strong moral case for this in respect of the Countryside Stewardship schemes currently in place at least, given that the up front investment in establishing these will already have been made, and it would surely be unfair for such long term arrangements to be unilaterally revoked.

Unfortunately, the only thing we really know is that the British Agricultural Policy, however it turns out, is now ours for the writing.

(This article has been revised following further discussions with the Tenant Farmers Association, and we are grateful for their continued assistance)