DAVID RICHARDSON
DAVID RICHARDSON
With very little help
from the Chancellor
and the chances of
assistance from the
market appearing
negligible, British
producers are once
again casting their
eyes across the
Atlantic in envy
IT had been my intention to review the Budget in an attempt to assess how far the Chancellor went towards complying with the Curry Commissions recommendations. To seek and hopefully find consolation in Gordon Browns package to offset our industrys current debility.
Unfortunately, I cannot do that. Farming was hardly mentioned in the Budget. All the headlines went to health, obviously a vitally important aspect of British life. But is food less vital?
So, unless the Chancellor was hiding his intention to come up with the £500m Mr Curry said was necessary to assist agriculture recover from its malaise, we must assume he regards food as a minor matter. If that is what he believes, he is wrong, as any doctor or dietician would tell him.
Meanwhile, as one commentator put it after the Budget: "Farming still waits in a critical condition on a trolley in a Treasury corridor." And if it does not receive attention soon, large chunks of it will not survive, sacrificed on the altar of the Chancellors indifference.
There is little more to say on Mr Browns tax and spend Budget with regard to agriculture. You have to make profits to save tax, while higher National Insurance contributions affect everyone and cancel out any modest savings.
Altogether, the Budget is probably negative to neutral for most farmers and that is not enough to persuade or enable them to keep battling indefinitely against impossible odds.
But before I leave the Budget, and more especially its author, I wonder why he enjoys such a reputation with the rest of the economy and internationally. Britains trade deficit has never been so high. Whats more, as the National Statistics Office said in its Mar 11 report the latest estimate of trend suggests the UK trade deficit is widening.
The same publication showed the negative balance of trade, excluding oil, during 2001 was almost £38bn. Oil reduced the overall deficit to just over £19bn, of which almost half was accounted for by food and drink. Domestic agriculture, popular culture now says, accounts for a tiny proportion of the economy, representing only 1% of GDP. It was, of course, 2% before ex-farm prices halved.
But by allowing farm commodity production to run down at an accelerating rate, the government is provoking the importation of processed, added-value foods at enhanced prices. I am not an economist and I do not doubt there are some from that profession who could explain that logic to me, but I remain unconvinced.
Which means we can only fall back on the market. What chance of salvation from that direction? Not much, I fear. Milk is on the skids and has slipped back below the cost of production. Pigs are sliding again after a brief spell above the line and all the practical evidence suggests that feed wheat and barley are set to plumb new lows come harvest time.
But the Economics Intelligence Unit (EIU) thinks it knows better. In a statement issued a couple of weeks ago, the unit forecast that grain prices world-wide would recover strongly this year and go through the roof next year.
Its "strong recovery" this year was elsewhere defined as a rise of 6.4%, so dont hold your breath. But in 2003, the report says, prices should increase by a further 19.4%, which would be nice if it happened.
The basis for this optimism that it claims should include most soft commodities is the units belief that the world economy is booming and that this will create increased demand, forcing up prices. But we will soon be half way through 2002 and the trend so far has been the opposite to what the EIU says.
I would love them to be right and my gut instinct to be wrong, but I fear that, like a lot of economic theories, it may not work out in practice.
Meanwhile, they have other worries in the US. For while Congress wants to increase farm subsidies above the $19bn cap imposed by the WTO, trade departments within the US government are still demanding trade barriers be lowered.
The plan, which insiders say will go through, is to provide for bigger support payments based on present production levels guaranteed through what is called counter cyclical aid to US farmers. That would provide direct payments if market prices fell below an agreed level. In other words, it is a close relative of the old deficiency payments system Britain operated before we joined the Common Market.
But if market prices dropped very sharply, as they have in recent years, the US would find itself paying substantially above $20bn, as it has in recent years, thereby exceeding the WTO cap.
USDA officials are once again burning midnight oil dreaming up new names for aid that will not attract criticism by the WTO.
Commentators admit this might make it more difficult for US attacks on trade distorting measures in other countries to stick, but at least the US government is trying to help its farmers. I wish we could say the same.