Analysis: What’s driving future of farm support post Brexit

There is still a long way to go before the shape and form of any new domestic farm support policy is known, but there are some early pointers. 

Here we take stock of where things currently stand.

See also: Subsidies must be earned after Brexit, Gove tells farmers

With the EU referendum over a year behind us, with Brexit negotiations under way in Brussels and with a new secretary of state at Defra, farmers might have hoped for a clearer idea by now of what a future British agricultural policy will look like.

Unfortunately, that is not the case. But the recent speech by Defra secretary Michael Gove at the WWF in London did give some further, more concrete indications of the direction of travel.

He said he valued the contribution farmers made towards feeding the nation and the fact they produced food to high standards. “It is my job to support them to grow, produce and sell more,” he said.

He also repeated the government pledge to continue with the £3bn support funding for farming until 2022, with the promise of “generous” continued support thereafter.

And he added, “support for farmers in areas like the Lake District, upland Wales or the Scottish borders is critical to keeping our countryside healthy”.

But there was no detail as to how that money would be made available – just a series of hints that most, if not all of it, will come with environmental strings attached.

Green Gove

Michael Gove

Michael Gove © Tim Scrivener

Declaring himself an “environmentalist first”, Mr Gove said the current CAP system, based on direct payments, had failed miserably in as much as it was “not designed to put the environment first”.

The Defra secretary also complained the CAP rewarded people based on the amount of land they owned, including those who are often already very wealthy.

He, therefore, advocated support for woodland creation and tree planting, praising trees for their intrinsic beauty, as well as their functions as a carbon sink, a way to manage flood risk and a habitat for precious species.

Any future farm support should also be directed at improving animal welfare, he said.

Pick ‘n’ Mix approach to farm support

Defra may be keeping tight-lipped on the shape of any future rural support policy, but there is no shortage of models to choose from, with most farming and countryside groups publishing their own visions in recent months.

NFU logo

NFU

Three constituent parts make up the NFU’s proposition for a future domestic farm policy.

  • Productivity: Measures to improve efficiency might include targeted public investment, support for R&D, incentives for the adoption of new technology, provision for training and tax breaks on equipment and infrastructure investments.
  • Environment: A broad environmental scheme could help farmers deliver for environmental protection, landscape management and priority habitats. Payment would depend on the value placed on public goods. Schemes could be regionally implemented and farmer led.
  • Volatility: Support, including direct payments for some farm businesses, should be provided to help farmers deal with adverse weather, pests and disease, price volatility and weakness in the supply chain. Measures could include insurance schemes and/or loan schemes.

The relative amounts of money allocated to the three areas, and the precise policy options implemented, will depend on the economic climate post Brexit, says the NFU.

If the government secures a good trade deal, then more emphasis could be placed on environmental measures and productivity improvements. If the economy is more hostile, then more should be ploughed into volatility measures, such as direct aid.

New policies should only be introduced gradually, with the exact timeframe depending on things such as market access, the supply of migrant labour and levels of farm support in Europe after the next CAP reform. Current levels of funding should be maintained throughout this transition period.

Farmers Weekly view

Provides flexibility in both emphasis and timing to respond to different economic scenarios.

Country Land and Business Association

The Land Management Contract (LMC) is the latest policy idea from the CLA, based on the principle of paying farmers and landowners for managing their land to provide public goods and services.

Farmers would choose from a range of measures, which might include increasing carbon storage, reducing flood risk, providing public access, improving soil structure and/or water quality, and habitat creation.

Contracts would be for a fixed period of time and would state exactly what the farmer should deliver. Payment would be based on the value of the activity, but must be high enough to ensure farmers take part.

The CLA says existing CAP arrangements should stay in place for five years, while the LMC is developed, and only then phased out gradually.

The LMC should be just one part of a wider economic strategy, including measures to help improve the profitability and productivity of farming and to ensure rural economic prosperity.

Farmers Weekly view

A clear contract for defined outcomes is likely to appeal to the Treasury, but the schemes could become overly complex.

NFU Scotland logo

NFU Scotland

NFU Scotland’s alternative farm policy is set out in its document “CHANGE” – currently doing the rounds north of the border. It has three themes:

  • A fairer supply chain – with government and industry working to ensure equitable margins and to manage price volatility.
  • A supported transition – striking a balance between financial stability, productivity improvements and environmental benefits.
  • “Developing our people” –  new policies should move farm businesses away from “farming for compliance” to “farming for the market”.

More than any other union, NFU Scotland is pressing for the retention of direct income support, which it says is vital for many businesses.

“Direct support would be based on eligible payment hectares focusing on agricultural activity,” it says.

“For more disadvantaged areas, these payments would be enhanced by top-ups based on existing fragility markers.”

NFUS also calls for coupled support for vulnerable sectors, and says “direct support would be complemented by a suite of productivity and environmental options which would offer real, practical choices to every farm and croft”.

Farmers Weekly view

Emphasis on direct payments, coupled to production, could lead to trade distortions.

Farmers Union of Wales logo

 

Farmers’ Union of Wales

Influenced by Wales’s specific requirements, the FUW has spelled out a number of policy principles which it believes are fundamental to any future domestic agricultural policy:

  • On finance, it demands the proportion of CAP spending Wales currently enjoys (about £300m or 10%) is retained, and ring-fenced for farming. A change to the Barnett Formula, which bases the budget on size of population, would see this funding halved and is strongly opposed.
  • On policy instruments, the FUW accepts a UK framework may be necessary to minimise unfair competition and market distortion, but this must be drawn up in partnership with farmers and the devolved governments.
  • There should be flexibility for Wales to tailor that framework to its own needs.
  • There should be a 10-year transition to any new support policy.
  • Money should be directed at active, family farms only.
  • Environmental requirements should be proportionate and realistic, and should not expose farmers to unfair competition.

Farmers Weekly view

The case for maintaining the current share of budget seems well justified.

Tenant Farmers Association logo

Tenant Farmers’ Association

The TFA’s post-Brexit policy ideal is based on a three-pronged approach, including:

A Farm Business Development Scheme to provide annual grants to active farmers for things such as investment in fixed equipment and cost reduction initiatives, protecting against volatility, encouraging diversification and environmental improvement.

  • A new agri-environment scheme, with a menu of costed options farmers can choose from, including specific options for hill and upland farmers with livestock.
  • A package of “near market initiatives” to support British food, including R&D, technology transfer and food promotion.

The TFA says there should be a UK framework agreed with all of the devolved administrations to ensure fair competition and free trade between the four parts of the UK.

It also wants greater powers for the Groceries Code Adjudicator to tackle malpractice within the groceries supply chain, and a requirement for public procurement bodies to “buy British”. (Most other organisations share these two objectives.)

Various fiscal measures are also suggested to encourage landlords to extend the length of their tenancies.

Farmers Weekly view

Recognises the importance of a UK framework, to ensure fair trade between the regions.

Sustain – an alternative to CAP

Representing a broad church of non-governmental organisations (NGOs) including Compassion in World Farming, the RSPB and the Soil Association, Sustain wants to see a new three-part alternative to the CAP:

  • A Land Management Support (LMS) scheme offering payment for specific outcomes such as nature conservation, flood management, soil improvement, animal welfare and greenhouse gas reduction. It also wants to limit payments to larger farmers and support new entrants.
  • Sustainable businesses and rural development support, with grants and loans to help set up marketing hubs, co-ops and microprocessing units.
  • Free advice and training to help farmers innovate, meet climate change goals, diversify and convert to organic.

Like most other groups, Sustain wants to extend the Grocery Code Adjudicator’s powers to ensure fair trading practices, and require schools and hospitals to buy more local and sustainable food.

Farmers Weekly view

Too much emphasis on environment could jeopardise food production.

What would happen if subsidies were abandoned altogether?

A number of consumer voices have suggested the UK follows the New Zealand example and abandon subsidies overnight.

But an analysis by AHDB says the two situations are completely different and cannot be compared. For a start, the NZ economy was in deep crisis in the early 1980s, with a collapsing currency, double-digit inflation and soaring government debt.

It really had no choice but to reign in its system of market distorting price supports and heavily subsidised inputs.

NZ farmers paid a high price, with many unable to service debt. Reports suggest about 5% went bankrupt over the next five years, while land values slumped by 52%.

There is no doubt there was considerable short-term pain, though this was eased by a 20% devaluation of the NZ$ which boosted export competitiveness.

In a predominantly livestock-producing country, New Zealand farmers were also able to cut back heavily on fertiliser and machinery use, while the climate enabled them to leave livestock outdoors all winter.

These circumstances are very different to those affecting the UK right now, says the AHDB report.

While NZ exports more than 90% of its meat and dairy produce, the UK is a net importer. “A devaluation of sterling would likely lead to vast inflation,” the report warns. “This could potentially spark a rise in interest rates and a domestic consumption crisis.”

Animal welfare concerns also prevent overwintering of livestock.

Brexit timeline

So far

23 June 2016

“Leave” vote in EU referendum

2017

17 January

Lancaster House speech – Theresa May spells out Brexit priorities

29 March

Article 50 triggered – the UK will leave the EU

9 June

General election – Conservatives lose parliamentary majority

19 June

Negotiations with EU Commission begin

21 June

Queen’s speech announces there will be an Agriculture Bill in the next parliament

13 July

Great Repeal Bill laid before parliament, preparing for the transfer of EU law into UK law upon Brexit

Possible timeline to come

Autumn 2017

Government’s 25-year Environment Plan published, setting out policy objectives 

Summer 2018

Agriculture bill published, setting out powers to change parts of the CAP and identifying longer-term objectives

Early 2019

Great Repeal Bill signed into UK law, ready for Brexit on 29 March 2019

Early 2019

Agriculture Bill completes passage through parliament, confirming details of post-Brexit agriculture policy

29 March 2019

UK leaves EU, Great Repeal Act kicks in, Agriculture Act starts to take effect, transition period begins

May 2022

More radical reform kicks in and budget reductions begin following general election

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