Sunday, July 11, 2010

Insurance back on the agenda

European farm commissioner Dacian Ciolos is considering plans for a publicly-funded insurance scheme for farmers' incomes. His view is that it is needed to give a minimum income to farmers after the disapperance of most market support mechanisms.

An alternative view would be that either these farmers would be better off exiting the industry or they should be funded by income support schemes for the least well off, although admittedly these vary substantially as they are a member state matter.

Economists tend to favour insurance schemes and consider that not enough has been done to promote them in the debate in the UK about cost and responsibility sharing in animal health. The difficulty in practice is that the pool is not big enough or lucrative enough to interest insurance companies.

You are then back to state subsidies, albeit delivered by a possibly more efficient policy instrument. EU farmers' group Copa-Cogeca states that average incomes in agriculture were about 50 per cent less than those in other sectors, with two-thirds of farmers' income coming from direct payments from the CAP.

An original objective of the CAP was to narrow the gap between urban and rural incomes and this has never been achieved as far as farmers are concerned. This suggests that for some people farming is simply not a viable activity, at least as a full-time occupation. If one considers that one needs people to remain in remoter areas, a subsidy should be paid specifically for that.

What one really wants is a more diverse rural economy and in the UK, and I suspect elesewhere, the absence of rural broadbrand or a service that is slow (as on the Isles of Scilly) is a real constraint.

A friend runs an agriculturally related consultancy business in a rural area. Recently her provider said that it could no longer offer a broadband service. There are mechanisms to complain, but it will all take too long. She is going to have to move. Action on infrastructure of this kind would help rural areas more than additional payments to farmers.

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