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.

What would Brexit mean for British farms?

My last contribution to the referendum debate: Brexit and British farms

It has already been condemned by one commentator as a piece of agit prop, but we think that our report represented an honest appraisal of the evidence and that it is difficult to see clear gains for British agriculture from Brexit.

If there is a Brexit decision, hopefully we will have a thorough debate about the objectives of a domestic agricultural policy and the policy instruments that can best achieve them, but the pressure of events will probably dictate otherwise.

Consequences of Brexit for UK agriculture

This article summarises a contribution I made to a recent edition of EuroChoices on the consequences of Brexit for UK agriculture, along with summaries of contributions by Alan Matthews and Alan Swinbank: Brexit uncertainties

The need for a Common Sustainable Food Policy

An authoritative and informative survey of the CAP by Alison Bailey, Tim Lang and Victoria Shoen concludes with a call for change and the formulation of a Common Sustainable Food Policy: Common Food Policy

Whatever else the referendum debate has done, it has stimulated some excellent work on the future direction of policy.

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.

Is CAP beneficial for UK?

Alan Greer of the University of the West of England has written a particularly good contribution to the referendum debate in relation to agriculture for the Royal Society of Edinburgh: Agriculture, Food and Rural Policy. He covers a lot of ground in a relatively short space.

He notes that there is at least consensus about what the key issues are. Much of the debate reflects disagreement about whether or not the CAP is beneficial to the UK.

Looking at the views of the farmers, he says that the evidence is contradictory. However, the Farmers Weekly poll he refers to was based on self-selection rather than a sample. Supporters of Brexit are more likely to respond. I would place more reliance on the NFU poll.

Single market is key for agriculture

The importance of the single market to agriculture was emphasised by Martin Haworth, deputy director-general of the NFU, in a presentation earlier today at a conference in London organised by the UK in a Changing Europe programme. Subsidies to farmers were not the most important issue. 65 to 70 per cent of agricultural exports from the UK went to Europe and there was no other alternative. He also noted that the EU had over fifty trade agreements with third countries.

The uncertainty inherent in the Article 50 process was of itself damaging and the CBI had estimated that it could lead to a fall in GDP of 0.75 per cent to 1.5 per cent.

UK agriculture required 20,000 - 25,000 seasonal workers and there were another 35,000 full-time EU workers in agriculture. Analysis by Oxford University of the effects of a point system showed that 96 per cent of the workers would not get through.

Governments of other EU member states showed more sympathy with agriculture. Britain was a more urban society than most of the rest of Europe. He noted, 'I get much more access, interest and sympathy in Brussels.'

Farming formed part of a food chain and virtually the whole chain was in favour of staying in the EU. Food manufacturers would have to consider relocating in the event of Brexit. The catering industry was highly dependent on migrant labour.

He had not heard a credible argument on agriculture that suggested we would be better off leaving.

Responding to questions he said that the Ciolos reform had not offered a strategic vision of agriculture, but was a tactical attempt to green the CAP to attract more support. The division between Pillar 1 and Pillar 2 had been blurred.

Britain in the EU had been sullen and budget obsessed and had never punched with the weight we should have done.

Natalie Bennett, leader of the Green Party, said that going around the country food issues had been raised relatively rarely. However, she occasionally heard the demand 'We must take control of our fish' which created the vision of a fish swimming round with a passport tucked under its fin. We now had a reasonably sustainable fisheries policy that took account of the biological capacity of the ocean. The fact that we had been able to reform the CFP raised hopes for the reform of the CAP.

What is very clear is that fishers want to get out of the EU, in contrast to the more divided views of farmers: Fishermen and the EU

As for the referendum debate, it had degenerated into a Tory leadership contest masquerading as a EU referendum debate.

Big data could be the next big thing

'Big data' could foster the next wave of agricultural innovation, but there are some impediments that arise from the nature of the industry. Developing low cost measurement capabilities is key: Innovation

What is the Common Agricultural Policy?

CAP expert Robert Ackrill (there aren't many of us) explains in a very useful review: What is the CAP?

No bonfire of controls

Here are some extracts from a presentation I made at a conference at the British Academy on 'The EU and the UK: the Wrong Kind of Regulation?

Farmers find the most negative aspect of the European Union to be what they perceive as the excessive burden of regulation. There is particular complaint about the ‘gold plating’ of EU regulations in the UK, adding to what is required by the EU, although when farmers and their representatives are asked to come up with examples they can usually produce very few and some of those are trivial.

There is no doubt that regulations impose transaction costs on farmers, taking them away from the activity of farming. My brother-in-law is a sheep farmer and I have seen the paperwork associated with the movement of his animals. However, regulations are there for a reason and those farmers who anticipate a bonfire of controls if there was a Brexit would probably be disappointed. There are four main drivers of the regulation of agriculture and food:

• The protection of human health
• The protection of animal health and welfare
• The protection of the environment
• The protection of the consumer

It is worth noting that the UK has been in the forefront of pushing the EU’s smart regulation agenda which emphasises:

The need to take impact assessments for significant proposals

The desirability of seeking alternatives to legislation

The need to evaluate current legislation, so-called fitness checks

The importance of consulting on proposed regulations

Another defining characteristic of UK policy has been that risk management should be based on robust science and evidence. This has led it at times to question risk management decision as being unduly risk averse leading to disproportionate legislation, for example in relation to plant protection about which I will say more later.

Farmers receive substantial subsidies from the EU. The payment of these subsidies by the Rural Payments Agency is often badly delayed with consequences for farmers’ cash flow. This is partly the responsibility of the agency, but it also reflects the complexity of the regulations and the difficulty of applying them. Simplification of CAP rules has been objective of the EU for some time, but progress has been slow. In part, this reflects the fact that the regulations are the result of an often messy compromise between different interests.

The EU has effectively prevented the commercial use of genetically modified crops. However, whether this represents the right or wrong kind of regulation depends on where you stand on this controversial issue. Regulatory issues are not just questions of burden reduction but also of political judgment.

As far as food regulation is concerned, the emphasis has been on free movement and food safety. It has been argued that the regulations are safe and comfortable and not that useful. In particular, there has been a relative neglect of nutritional issues which are important in relation to obesity. However, that in turn reflects defects in the scope of the Common Agricultural Policy. Good policy instruments in the form of regulations rely on well thought out and comprehensive policy objectives.

David Baldock of the IEEP, also on the panel, and I agreed that the main areas in which regulations might be relaxed after Brexit were GM crops, the Nitrates Directive and some aspects of the Water Framework Directive.

Food culture and Brexit

The March meeting of the Food Ethics Council Business Forum considered the consequences of Britain remaining in or leaving the EU for food and agriculture and have now produced a concise report on the meeting: Business Forum

An interesting point is how the UK's food culture has strengthened since the country joined the EU. How much this is to do with the EU and how much due to other factors such as more sophisticated and informed consumers is a moot point, although the report argues that European food culture has had a beneficial effect which might be lost after Brexit.

In addition, Dan Crossley gives his reflections on various events on the subject (one of which I participated in) organized by the Food Ethics Council: Enough time to decide?

More on Brexit and agriculture

My latest contribution to the Brexit and agriculture debate, this time for the Global Plant Council: Global Plant Council

We need to stay in the CAP but we must continue to work for reform

I was one of the speakers at an event on the impact of Brexit on food at the House of Commons last night. It was organized by the Food Foundation, Food Research Collaboration and the Food Ethics Council. The other speakers were Tim Lang of City University and Fiona Smith from Warwick who covered the complex international trade dimension which she described as a 'quagmire'.

Tim Lang claimed that the issue of how food and drink would be affected has been 'largely ignored' in the debate so far. His report suggests there will be 'volatility, disruption and uncertainty' in a post-Brexit trade world. 'The UK should wake up to the significance of our and the EU’s food role in this changed world,” said Lang. 'The public isn’t yet interested, seeing it as a matter of farming. This is dangerously wrong.'

I argued that Pillar 1 subsidies would be vulnerable after Brexit, Pillar 2 subsidies less so. Kerry McCarthy, the shadow cabinet member for Defra, asked why this was the case. I responded that Pillar 2 subsidies would be defended by a coalition of environmental and conservationist lobbies along with farmers, whilst Pillar 1 subsidies would be defended by farmers alone. Pillar 2 subsidies would also receive more support from academics as they were seen as providing public goods.

There was agreement among the panel that the emphasis needed to be on sustainability and that the CAP needed to address public health issues. There was increased public concern about these issues, but it would take at least ten years to make progress. If the UK remained in the EU, the Government needed to take a more systematic and engaged approach to CAP reform.

Kerry McCarthy made a good point when she referred to the Janus-faced nature of the CAP, on the one hand encouraging niche, high valued added, quality production and on the other hand intensive forms of commodity farming.

As President Obama pointed out, we live in an interconnected world and that is why we need a policy like the CAP, for all its imperfections.

Brexit and agriculture

My latest contribution to the debate can be found here: Brexit

Brexit fears hit farmland prices

English farms have seen the steepest fall in their value since the financial crisis, as investors worry about what might happen to farm subsidies after Brexit. Values fell 3 per cent in the quarter to March according to an index constructed by estate agent Frank Knight. This is the largest quarterly fall since the end of 2008. Average values have risen nearly 180 per cent in the last decade.

Knight Frank think that farmland values will fall 8 per cent this year on the assumption that commodity prices remain low and there is not a collapse of sterling.

Farmers Weekly has noticed a 24 per cent drop in the acreage of land advertised in its pages in the three months since January compared with the same period last year. The average price of an acre of English farmland has dropped below £8,000.

NFU release Brexit report

The National Farmers Union have released the report they commissioned from Wageningen University on the possible implications of Brexit for EU agriculture: The report explores three alternative scenarios of what might happen after Brexit.

The NFU Council will decide in mid-April whether to take a position on the referendum. Most farmers probably favour remaining in membership, but a sizeable minority want to leave.

Feedback meetings on the report being held by the NFU around the country are attracting big audiences. This is in line with my experience of addressing meetings in Yorkshire on our Yorkshire Agricultural Society report on Brexit. These attracted audiences of 200 and 160. I will be addressing a meeting in Cumbria on May 5th.

The results of each scenario show that the biggest driver of UK farm income change is the level of public support payments available. The positive price impacts on farm incomes seen through both the FTA and WTO default scenarios would be offset by reductions in direct support. A reduction of direct support, or a complete elimination of it, would exacerbate the negative impact effects seen under the UK Trade Liberalisation scenario.

The cattle and sheep sectors are particularly dependent on direct support payments, but so too are mixed farms and field crops. Consequently, the combination of a more liberal trade policy and a reduction or elimination of direct support would make many British farms less viable.

The report can be linked to from here: Report

Is the CAP fit for purpose?

50 NGOs have urged the European Commission to carry out a fitness check of the CAP: Fit for purpose?

They say that it needs to be assessed in terms of its effectiveness, efficiency, coherence with other EU policies and the advantages of an EU wide policy compared with national policies.

The EU referendum and the CAP

My latest contribution in terms of a briefing paper for the Birmingham Food Council: Referendum

An imperfect storm

A new book edited by Johann Swinnen entitled The Political Economy of the 2014-20 Common Agricultural Policy judges it to be an 'imperfect storm' compared with the 'perfect storm' of the Fischler reforms dealt with in an earlier book. The book has chapters written by leading experts on the CAP such as Alan Matthews, Tim Josling and Alan Swinbank.

The authors generally found the outcome of the 2013 decision to be disappointing. The policy changes were relatively minor and not always coherent. The term 'reform' is probably inappropriate.

In terms of explanation, the reform proposals presented by Commissioner Ciolos were not very ambitious to begin with, reflecting his inexperience and that of his cabinet. Another factor was the role of the European Parliament with COMAGRI able to control much of the decision-making with farm interests having more influence than environmental organisations. A final element was that the increase in global food prices pushed food security up the agenda.

The new CAP provides an unprecedented amount of flexibility for member states. However, flexibility may have been a rational choice by decision-makers to reach an agreement. It may become a permanent part of the CAP, reflecting the need to come to political decisions in an increasingly heterogeneous EU.

Alan Matthews suggests in his chapter that the reformist camp, always a minority among member states, seems to have lost much of its momentum and cohesion during the 2013 negotiations. The UK in particular was preoccupied with other issues.

Brexit a diversion from sustainability

The referendum on the UK’s European Union membership will have “momentous significance” for the country’s food system, according to a new briefing paper published by the Food Research Collaboration (FRC). The report – called Food, the UK and the EU: Brexit or Bremain? – argues the country must “wake up to the enormity of unravelling 43 years of co-negotiated food legislation”.

According to the authors – Professor Tim Lang, of City University London, and Dr Victoria Schoen, of the FRC – both consumers and businesses will be affected by a vote to leave the EU. This is a deviation from what the authors describe as the real task of getting the UK food system, from production to consumption, to be more sustainable. If the country decided to leave, food imports are predicted to become more expensive, prices would increase and there could be major disruptions to the finely tuned just-in-time supply chains on which the UK food system now depends.

With such prices increases for imported goods, it is suggested there could be consequences for the consumption of foods that the UK relies on EU nations to produce. For example, nearly 40 per cent of the UK’s total food supply of fruit and vegetables comes from the EU, and nearly 55 per cent of its supply of pigmeat.

The authors express concern about the health implications of Brexit, as diet now accounts for 10.8 per cent of the nation’s total disease burden (compared with 10.7 per cent for tobacco). According to the report, the UK is about 60 per cent food self-sufficient so should be wary of instant independence from the EU.

The authors also warn of a potential “food service and food factory crisis” if EU labour currently working in those industries lost their freedom of movement to be in the UK – figures show EU employees make up more than a quarter of the food manufacturing workforce (26.9%) and a tenth of workers in food and beverage services (11.3%). This compares with 6.1 per cent across the UK economy as a whole.

The paper can be accessed here: Brexit or Bremain