29 May 1998


ECONOMIC instruments, often taxes, seem an attractive way to encourage potential polluters, such as farmers, to be more responsible with crop inputs. In practice history suggests most fail to achieve environmental benefits, and risk being unfair.

So says Michael Payne, environmental consultant to the NFU. "Several European countries have tried taxing nitrogen fertiliser use. Only Sweden still does so," he notes.

After much pre-Budget debate it was a great relief that the chancellors latest announcements omitted all reference to such measures, says Mr Payne.

But any notion that they have gone away would be gravely misplaced. "All the vibes we are getting suggest they are still a real possibility. The idea of pesticide and fertiliser taxes may be very appealing to the Treasury because the public wont notice them."

NFU objections remain as stated in its response to the governments proposals on economic instruments for water pollution back in January, he explains.

"Basically we think input taxes are wrong because most producers, as price takers rather than price setters, wont be able to pass them on. They hit the responsible user as much as the careless operator and so do not follow the polluter pays principle."

The level of any tax is also a problem, he maintains. "At a low level it would be most economic for farmers to continue to use the inputs. This would achieve little environmental benefit. If the tax was set high enough to make it uneconomic to continue with current levels of inputs, the industry would be badly damaged."

If the government is determined to proceed, the NFU is willing to collaborate with the authorities on determining the best route ahead, stresses Mr Payne.

But with the European Commission already examining fiscal ways to promote more environmentally-friendly farming, it would be premature to go ahead with a UK-only scheme, he argues. "It would be prudent to wait to see what they introduce or we could be chopping and changing or at worst suffer a double whammy."

Irrespective of the levels of input tax (and many figures are being banded about), the NFU has three main concerns.

It is hard to see how the idea sits comfortably beside farm minister Jack Cunninghams avowed aim, expressed at the Oxford Farming Conference, of seeing a successful, competitive and sustainable UK agriculture, says Mr Payne.

"There are dangers that taxes could encourage more rather than less polluting forms of farming," he adds. "It would be counter-productive to tax all pesticides by the same amount. If it has to be done it would make more sense to reflect their environmental profiles." But that would inevitably lead to a very complex if not unworkable scheme, he suggests. "It could be an administrative nightmare."

The NFU is also worried that taxes would bear most heavily on producers least able to afford them. A cereal grower on poor, thin land with low yield potential would find the burden much harder to carry than a producer on fertile valley soil, Mr Payne points out.

"The whole subject is very complex in the way it affects different sectors and in the way it can be manipulated to gain the desired benefits. The government now has a breathing space in which to undertake further consultations. We believe these are very necessary to avoid rough justice."

Current vibes from government suggest an input tax is still an attractive source of additional income, which the public

would not notice, says the

NFUs Michael Payne.

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