5 January 2001

Unions unite to fight for strong £ compensation

By Robert Harris

FARMING unions are joining forces in a bid to secure over £220m of agrimonetary compensation to offset the effects of the strong £ on UK farm businesses.

farmers weekly has learned that the unions are preparing to lobby government for the cash. Their main lever will be the dire state of farming incomes, which, according to MAFFs own estimates, fell a further 27% in 2000, to just £1.7bn.

That completes a £4.36bn fall from the 1996 high, and incomes are now at the lowest level since the 1930s.

The main reason for the crash is the strength of sterling relative to the k, which has undermined product prices and k-based subsidies.

But EU legislation allows for this, by providing compensation payments. Several fresh compensation packages have recently been triggered. These are thought to be worth about £220m, or 13% of the total income generated from farming during the past year; about £1000 for each full-time person employed in the industry.

Beef, dairy and sheep farmers stand to gain most, though there is some arable compensation, too.

"It has always been our opinion that the UK government should pay agrimonetary compensation in full," said NFU deputy director general Ian Gardiner. "This is a common position among the UK farm unions, and we will launch a campaign," he confirmed.

"We have seen a big drop in farm incomes and a huge reduction in farm workers. Recent weather-related problems reinforce an already cast-iron case."

But national governments have to apply for the money, and only have until April to do so. Much of the Brussels cash also has to be match-funded, but the UK government will have to pay much more under terms agreed during the budget rebate negotiated at Fontainebleau in the early 1990s.

Nevertheless, Mr Gardiner believes lobbying will pay off. "We got a fair bit of money from the Treasury last time round. And arable farmers have since received about £37m."

Even if all the agrimoney were paid twice over, farm incomes would still be the lowest in real terms for years, said NFU chief economist Siôn Roberts. "Although the k is now rising, we have to remember from what level it is coming from."

At midday, Wednesday, the k was worth 63.3p, about 2.5p more than its average during 2000, suggesting that the beleaguered currency may be fighting back.

A sustained recovery would make imports more expensive, exports more competitive, increase support prices and boost direct payments. "For every 1% change in the k:£ exchange rate, the value of farm outputs rises about 0.5%," said Mr Roberts.

"The k has already moved a long way – about 9% off its autumn low," he added. "No one can say for definite whether this will be a permanent recovery, but the fundamentals are in place."

Rather than an economic slow-down, some believe the US economy now appears to be heading for all-out recession. "Latest figures show the flow of capital out of Europe has slowed. That will almost certainly continue."

How long for depends on the extent of the US downturn. "If it is deep, we could see a significant recovery of the k," said Mr Roberts. &#42