Has leaving the CAP been good for English farm policy?

The Economist thinks that getting rid of the Common Agricultural Policy has led to a more effective farm policy in England so it is one example of a Brexit dividend (Wales and Scotland are different cases).

The journal comes from a stance that favours market oriented policies so the views expressed in an editorial and article are no great surprise.  In broad terms I agree with them.   This doesn't mean that Brexit was a good idea viewed in the round, but the CAP remains a dysfunctional policy in many respects.

First, I think that blanket subsidies for farmers related to the size of farm discourage innovation.  They could well be used for personal consumption rather than investment in the enterprise.   Scotland continues to give direct subsidies as part of a generous package for farmers (but they have elections in May).  Wales offers such support to a lesser extent.

Funds should be linked to specific policy targets and in particular genuine public goods such as the environmental benefits specified in current policy.

Given the sector's poor productivity record and the need to take advantage of digital technology, money should be made available for capital investment and training.  New capital grants have recently been announced, but the funding does not match the scale of the problem and is likely to run out quickly.

The conflict in the Middle East has given farm organisations the chance to bang the food security drum to justify a restoration of direct support, but food security is a merit good rather than a public good.  Our imported food comes from a wide range of countries.

As The Economist points out, diversification has been important for the viability of farm businesses.  A family moved from Wales to the better land of Warwickshire in the 1930s.  The land is still farmed and the farm manager was short listed for farm manager of the year a few years back

However, their main now comes from a very successful removals and storage business (I am a satisfied customer of both aspects of their operation).   Business is so good they have a coffee shop on site.

Watching the latest series of This Farming Life on BBC2 it is also evident that many farms rely on the off farm income of at least one partner.  (One farming relative has married a university lecturer).

Farming involves hard physical work, good business sense and long hours, but this doesn't justify distorting subsidies.

CAP will be tricky subject if Iceland joins EU

The news that Iceland is to hold a referendum on joining the EU in August reminds us that, apart from fisheries, agriculture is likely to be one of the most difficult topics in any negotiations.   Iceland has a producer subsidy equivalent three times the OECD average and farmers on average receive nearly half their income from the state.

It is a small and shrinking sector, but is cherished and has some interesting innovations such as using geothermal power to grow tomatoes.   Cucumbers and herbs are also produced in this way all year round.

The sheep sector is unsurprisingly the largest and there is some dairy production.

CAP budget stays stable but different winners and losers

Professor Alan Matthews writes:'The likely size of the CAP budget in the next programming period 2028-2034 has been highly contentious since the publication of the Commission’s MFF proposal last July. Among agricultural stakeholders, the AGRI Committee in the Parliament, and the AGRIFISH Council, the amount available for the CAP under its two Pillars in the current programming period was compared with the size of the minimum ring-fenced amount for CAP income support in the proposal and found wanting.

The Commission, on the other hand, has insisted on the potential for a larger CAP budget depending on the choices made by Member States. In my latest post Professor Matthews concludes that the Commission is broadly right. 

Assuming the Commission MFF proposal is agreed (a big if!), the CAP budget will be broadly similar to the current CAP in current prices and possibly bigger. However, its distribution between Member States will be different. For some Member States, especially Denmark, Austria and Ireland, it will not be possible to maintain their current CAP receipts, but other Member States already have a larger CAP budget than in the current period assuming they fully use their 'Mercosur' concession.

Full analysis here: https://capreform.eu/the-likely-size-of-the-cap-budget-in-the-next-mff-reprise/