FW Opinion: Defra’s market-led plans show direction of travel

George Eustice is probably still wondering what hit him.

He barely had time to settle himself into the big corner office in Smith Square before the coronavirus crisis was upon him.

Thrust into the full media limelight as shops began to run low on food, any initial roadmap of how he wanted to spend his first months in the top job has been hastily scrapped.

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The long-awaited consultation on dairy contract reform, for example, was meant to have been published last month, having first been expected in 2018, but has again been kicked into the long grass.

Instead, he has been taking his turn at the Downing Street podium as part of the revolving cast of ministers at the daily coronavirus press conference.

Back at the office, there has been policy making on the hoof that has helped supermarkets continue to keep shelves full and public concern abated.

The actions that he has taken, and not taken, are giving us an insight into what the current government approach may mean for farmers.

The bedrock of this is a classic Tory belief in the ability of the free market to balance supply and demand and solve problems, with government only intervening to keep the playing field level, rather than supporting the players.

This can be seen with the recent oversupply of milk caused by closure of most of the foodservice sector.

Competition law

The policy lever reached for first was a relaxation of competition law that, in theory, could help rebalance markets, but not to rush back to intervention buying where the state becomes the customer.

And, even though intervention purchasing and private storage aid for some commodities are now available, those are EU measures, not UK government ones.

Defra was also for some time insistent that farmers should use the Coronavirus Business Interruption Loan Scheme (CBILS), rather than receive bespoke support.

The problem there is that many would not pass the viability checks – even though the scheme requires these to be based on the pre-crisis fundamentals of a business.

This is the crux of the issue. Why, a free marketeer might ask, is it the job of government to prop up businesses that didn’t even have the faith of their banks before coronavirus happened?

Furthermore, it can be argued that CBILS, with a maximum loan duration of six years, is very costly for farmers who normally borrow over much longer periods.

Unions have also been quick to point out that coronavirus has pushed food security up the political agenda, and farms need to be helped now in order to maintain UK production after this is over.

Milk promotion campaign

In response, and after much foot dragging, Defra have announced that farmers in England who have seen income drop by 25% or more will be eligible for grants of up to £10,000 to compensate them for up to 70% of lost income.

The department, along with the AHDB and Dairy UK have also this week announced a jointly-funded £1m milk promotion campaign.

Farming unions have been quick to welcome the concession that the Secretary of State and his team won from the Treasury amid the many competing demands from other beleagured sectors of the economy, but it is concerning for affected farmers outside of England that it was not possible to achieve a UK-wide plan of action.

However, despite this sticking plaster the direction of travel remains clear. Direct payments are being phased out. Environmental payments will not fully compensate for the Basic Payments Scheme income forgone.

The era of EU-levels of interventionism is over.

While paying tribute to farmers as essential workers, the government is prepared to allow more of them to fail.

And farmers who may expect Mr Eustice, a former farmer himself, to deliver more on their behalf need to remember which way power flows in cabinet – from the top down.