What would British withdrawal from the EU imply for British farm policy?

Farmers are uncertain what impact a British exit from the European Union would have on their businesses. This is not surprising as so far there has been little systematic exploration of these issues, says the Farmer-Scientist Network which has been set up by the Yorkshire Agricultural Society.

The Farmer-Scientist Network is based at the Great Yorkshire Showground, and has assembled a working party of CAP experts from economics, law and political science chaired by Professor Wyn Grant of Warwick University. North Yorkshire farmer, Bill Cowling, who is best known as the Honorary Show Director of the Great Yorkshire Show, is a working party member and is helping to identify the issues that concern farmers in particular.

He comments: “The impact of a possible withdrawal from the EU cannot be under estimated. The Yorkshire Agricultural Society was established to drive forward developments in farming, and it is anticipated that this Network will encourage a more informed debate in the event of a referendum.”

The Network has raised the point that Britain would be outside the Common Agricultural Policy (CAP) and would have to devise its own agricultural policy. The shape of that policy would, however, be influenced by the form that the relationship with the EU took after exit and obligations under the international trade regime as Britain would remain a member of the World Trade Organisation.

Over the next few months the working party will examine:

• Financial support for farmers post exit
• The tariff regime that would be followed outside the EU
• What would happen to environmental regulations
• The availability of migrant labour

Farmers and the EU

Yesterday I spent a very interesting day in Yorkshire talking with a cross-section of farmers. As always, it was good to hear of the ingenuity that farmers deploy in diversification such as an upland sheep farmer who was producing honey using the summer heather crop, a bit hit with consumers. Another interesting point to come out of the discussion was that many farmers, perhaps egged on by banks, had gone for increasing the area of their farms and had not thought enough about how they could improve productivity on existing land, e.g., by grassland improvement which could yield gains of 50 to 100 per cent.

Many different topics came up, the availability of plant protection products being a particular concern, but among other things we discussed Britain's membership of the EU. There was concern about EU regulations, particularly from the poultry sector, in terms of whether they prevented British farmers from enjoying a level playing field in terms of competition.

When I said 'many' farmers could not survive without the single farm payment, I was corrected by the word 'all'. If this is the case, it is worrying in terms of the viability of British farming. But I accept that the availability of the SFP is built into business models and can make the difference between profit and loss. An arable farmer did emphasise that most farmers would prefer to earn a living from the market if they could get a fair price and this led us into a discussion of the economic power of the supermarkets.

It is quite likely that we will have a referendum on Britain's continued membership of the EU: Labour would be disadvantaged at the next general election if it was unable to offer this. It is also quite likely that the vote would be to withdraw. In terms of the single market, a lot would then depend on whether a satisfactory association agreement could be concluded with the EU. European countries have an incentive to do so given the exports they make to the UK, but the devil would be in the detail.

But what would happen to farm subsidies? It would be an opportunity to think again about what the objectives of such subsidies should be, and also to reduce them. One of the problems with EU policy has been that the objectives in the Treaty of Rome were contradictory, had no preference ordering (although one appeared in practice) and were never changed in treaty revisions (too much of a hot potato).

What could be done is to pay farmers a tapering percentage of their historic SFP, say 90 per cent in the year after exit and 80 per cent in the second year while there was a serious conversation about what sorts of subsidies were needed, for what purpose and how they could be reduced over time. Indeed, farmers could be offered a buy out of their subsidies through a bond scheme.

Thinking about the unthinkable

Fifty years ago saw the start of the Cuban missile crisis. It was a frightening time if you were fifteen years old, as I was, and whatever else one says about Jack Kennedy, one has to admire the way he managed the crisis and resisted the calls of the hawks for early military action. Now it's all old history and it was announced today that two of the Cold War missile sites have been given listed status.

Nuclear war strategy was referred to then as 'thinking about the unthinkable'. Perhaps we also now need to start thinking about another kind of unthinkable, Britain leaving the European Union and what sort of domestic agricultural policy might replace the CAP. Whatever one thinks of British membership of the EU, few would mourn leaving the CAP, but British farmers would be worried about what would take its place. No doubt some contingency thinking is already being undertaken.

My hunch is that if there was a straight yes-no choice, the majority of British voters (although perhaps not in Scotland) would vote to leave. There is some evidence to support this. Peter Kellner of YouGov has written an interesting contribution on underlying attitudes for the LSE European Politics blog: Kellner

In essence the message is that there are three attitude clusters in the electorate in terms of attitudes to the outside world and only one of those could be largely relied on to vote in favour. Kellner thinks that fear would shape a lot of decisions. Of course, that could be fear of the consequences of staying in or fear of the consequences of leaving. Much would depend on the campaign.

Of course, we may never get to a yes-no vote. Dave Cameron does not like the EU, but he does not want to withdraw. His favoured scenario is to 'renegotiate' after the next election when the Conservatives might have an overall majority. He would then put the renegotiated deal to the electorate. Harold Wilson took the stance of 'no entry on Tory terms' before the 1975 referendum and got a few goodies out of the EU, but essentially we stayed in on the terms agreed by Ted Heath. Dave would probably get some concessions out of the EU, but they would fall short of what Eurosceptics wanted.

Hence some Eurosceptics are calling for a yes-no referendum at the time of the next election. Conservatives are worried about a UKIP victory in the 2014 European Parliament elections, a more than likely scenario, and then losing votes to them in the following general election.

How this will all play out depends on a wide range of different factors affecting Conservative Party politics. If Labour wins, there is a different scenario (although if they were dependent on Lib Dem support, there would be another one again). Ed Miliband always jumps on any bandwagon that comes along, although usually what he does is call for a public inquiry rather than a referendum. There wouldn't be any judges left to staff the courts if all his requests were granted. However, Miliband could promise some sort of referendum, although its timing and nature would probably be left vague.

Anyway, the point is that Britain leaving the EU is a sufficiently serious possibility to start thinking what we would do then and that is what I plan to do over the next few months, starting with the nature of agricultural policy betweeen the end of the Second World War and our accession to the EU.