Where do we go from here?

Britain, or more specifically England and the devolved administrations, now need to think about what sort of domestic agricultural policy they want to have outside the European Union. I do not think that the decision to leave will be good for agriculture and the food industry more generally, but we now need to move on. Talk of a second referendum is in my view a distraction.

Of course, at this stage, we do not know what shape Britain's future relationship with the European Union will be. However, as a working hypothesis, I am assuming that we will have a domestic agricultural policy and that, hopefully, there will be no tariff barriers against British agricultural exports such as sheepmeat.

It is an opportunity to re-think what the objectives of a domestic agricultural policy should be, and which policy instruments could best achieve those objectives. However, there are many other items on the Government's agenda and agriculture is not likely to be their top priority, just as it was very much a secondary issue in the campaign outside farming areas.

Path dependency theory would suggest that the most likely outcome in terms of subsidies is a scaled down version of the single farm payment. I say scaled down because there are already considerable pressures on public expenditure and the economy is likely to grow more slowly than it would otherwise have done in the short to medium term following Brexit.

In an ideal world, farming as an economic activity would not be subsidised. However, we are faced with volatile prices and for many farms the subsidy payments make the difference between running at a profit and a loss. There are food security and environmental arguments for not reducing the total area farmed.

One could return to deficiency payments which made up the difference between the market price and a target or guaranteed price. However, the expenditure involved is unpredictable which means that they do not find favour with the Treasury as a policy instrument.

There are a series of difficult questions to be faced. For example, do we want to concentrate subsidies more on marginal upland farms which make an important contribution to landscape? The counter argument is that efficient arable farms would be disadvantaged in terms of competitors elsewhere in Europe if they did not receive similar subsidies.

There are also difficult questions about how the horticultural sector is to secure the unskilled or semi-skilled labour it needs for planting and harvesting? Could we and should we revive a version of the Seasonal Agricultural Workers Scheme (SAWS)?

What we certainly need is a debate about what sort of domestic agricultural policy we could and should have in terms of both objectives and policy instruments.

Deficiency payments unlikely to return

Writing in The Spectator Matthew Parris cites as one of his six arguments for Remain that 'The EU good has been good for farmers and good for the countryside.' It's quite unusual to see agriculture mentioned in the general debate.

He then goes on to say 'Leaving the EU, the UK would probably have to revert to pre-membership system of "deficiency payments" to support farming. It was a costly, ill-controlled nightmare which the Treasury hated.' That's one good reason why it won't come back.

Deficiency payments do at least take some account of market prices. The problem is that the guaranteed price, with farmers paid the gap between that and the market price, was often set too high as a result of lobbying.

Path dependency theory suggests that what we are most likely to get is a scaled down version of the basic payment (formerly single farm payment). In the event of a Brexit, what we really need is a debate about what the objectives of a domestic agricultural policy should be and which policy instruments could best achieve them. However, we are unlikely to get it. Expediency and rushed decision-making is likely to prevail.