Brexit and Wales

A vibrant and innovative food movement is growing in Wales and there could be new opportunities post Brexit. But is England holding Wales back? Brexit and Wales

The report argues that Brexit poses particular risks for Wales’s export-dependent farmers and food producers. It also gives Wales an opportunity to make a step-change into a new approach to food and farming. Wales has a forward-looking government with sustainability high on the agenda, and a diverse geography. The size of the country gives it an advantage: small enough for individuals and projects to make a difference, big enough for economies of scale, and diverse in its landscapes and culture.

It has several innovative pieces of legislation that could support a transition to fairer and more environmentally sustainable farming and food production, if political authority and public support can be mobilised to link them together.

Agriculture in Wales after Brexit

The Commons Select Committee on Welsh Affairs has produced a report on Welsh agriculture after Brexit: Report

The report emphasises the contribution of agriculture to community life in Wales and the health of the Welsh language.

The report notes, 'UK-wide common frameworks could be established in a number of different ways, but it is still not clear where they will apply, what they will look like, how they will work, or how any disputes would be resolved. It is imperative that these frameworks are agreed mutually between the UK and devolved governments and ensure the unique issues that face each of the administrations are given due consideration. We believe that these frameworks will need to be supported by robust and transparent intergovernmental mechanisms.'

The Welsh Government's own proposals for phasing out the basic payment had not been well received by farmers. There is a case for retaining some form of basic payment in less favoured areas to support remote hill farms.

Wales needs a 'farming plus' policy

Wales must develop a 'farming plus' policy post Brexit to ensure a sustainable agriculture argues Professor Terry Marsden: Post Brexit Farming Model

He concludes, 'Developing a reinvigorated and branded quality agri-food strategy, based on a more diverse set of farming practices, thus becomes a critical element of the post-Brexit approach in Wales.'

Goblygiadau Brexit i amaethyddiaeth Cymru

Yesterday I gave evidence to a Welsh Assembly committee on the implications of Brexit for Welsh agriculture. The paper I prepared for them is reproduced below. The standard of the questioning was high and a central theme was whether Wales would be able to develop a sufficiently differentiated agricultural policy that took account of its special needs and concerns.

Scenarios for the future relationship

Considerable uncertainty attaches to the nature of the relationship between the UK and the European Union after Brexit, and the form of that relationship will have considerable implications for agriculture. A worst case scenario would see tariffs imposed on exports of Welsh sheep meat to France, depressing the domestic price. It is quite possible that there will be a transitional period in which our relationship with the EU would be governed by WTO rules. However, the most likely outcome is a deal in which the UK has access to the single market but has make to concessions in terms of a contribution to the budget and relatively few limits on the access of EU labour, e.g., confining access to those with employment offers or providing for some kind of ‘emergency brake’.

Structural characteristics of Welsh agriculture

Clearly the sheep sector is of crucial importance to Wales which accounts for over a quarter of the total UK population. Cattle are also important with a greater share of the UK total than the share of the land mass. Milk is particularly important in Carmarthenshire. However, the horticulture sector is small so that migrant labour issues are of less significance in Wales.

It is important to bear in mind the importance of farming to the rural economy, particularly in the remoter parts of Wales where a traditional Welsh culture remains strong. The physical geography and climate in these areas is often challenging. Many people who are not farmers depend on the continued success of the farm sector for employment, e.g., agricultural contractors, tree surgeons, mechanics, veterinary practitioners etc.

Farm support

The Basic Payment in its present form and at its current level is to continue until 2020. For many far, businesses, this represents the difference between making a profit and running at a loss. What will happen after 2020 is uncertain, but there is a growing consensus among policy analysts that any future general support should be focused on marginal farms in upland areas where the need is greatest. Large-scale arable farms in East Anglia should be able to be competitive without the large subsidies that they receive at the present.

There is a case for some continuation of general support given that farmers remaining in the EU will continue to receive CAP payments and there will not be a competitive level playing field. Some attention also needs to paid to price volatility in terms of its impact on levels of production and hence on food security. Vulnerabilities to climate change could increase global price volatility.

Conservation and agri-environmental schemes will continue to be significant. There is a broader basis of political support for them. However, they are relatively short term, for example over periods of five years. All farms only have a limited area that can be taken out of production, or subject to special treatment; and still allow the farm to be a viable producer of food. Conservation and environmental protection will only be successful if the industry feels secure financially.

One sheep farmer I talked with noted, ‘if the family farms are not maintained then they will not be there in the future and then who is going to look after the environment?’ This farming family has been active in creating habitat areas with some grant help and noted ‘This was all possible because over the years we have had a fairly reliable income source which has allowed us to improve the farm.'

One issue with such schemes is that of ‘additionality’, whether payments lead farmers to behave differently from what they would have done in the absence of the scheme. Whether this is the case is very difficult to assess conclusively.

Mechanisms of support

Payments that are based on head of stock produce quantity rather than quality which is not the best outcome either for the industry or the environment and they may not be compatible with WTO rules. Whether it would be possible to devise a policy instrument that rewarded quality without placing too great an administrative burden on administrators and farmers is an interesting question.

Farmers in Wales have sought to move up market and add value by producing more speciality products that can command a higher return from the market. Anything that can be done to encourage and support these efforts would represent a good strategy. However, the buying power of the supermarket chains remains a challenge.

Regulations

The EU has devised a wide range of regulations that apply to agriculture. These are embodied in numerous EU directives such as the Nitrates Directive and the Water Framework Directive. These have been transposed into law by the introduction of primary legislation or by the introduction of statutory instruments under the European Communities Act 1972.

As well as environmental legislation, there are extensive measures relating to animal health and welfare reinforced by the recognition of animals as sentient beings in the Lisbon Treaty. There are 18 EU laws setting standards on the way farm animals are produced and reared, transported and slaughtered. There are 12 laws covering wildlife.

Existing regulations should remain in place after Brexit while they are reviewed in terms of their objectives and whether they are efficient means of achieving those objectives, in particular whether they place disproportionate compliance burdens on farmers.

Conclusions

How far Wales can pursue a differentiated policy after Brexit that is sensitive to Welsh needs and priorities depends in large part on funding arrangements. (The Barnett formula came up in discussion.

Complex picture on cutting payments to big farms

A common complaint about the CAP is that too high proportion of the subsidies go to already prosperous farmers. The counter argument is that these farmers are the most efficient and the most internationally competitive. It all comes down to what you think the CAP is for and there has always been confusion about the objectives and their relative preference ordering.

From this year all member states are obliged to apply a 5 per cent degressivity tax on payments over €150,000. Let us suppose that you are an East Anglian grain baron receiving €1m in subsidies. This means that you would appear to lose €42,500 of your subsidy, but then the 30 per cent greening subsidy is exempt, so the actual sum comes in at under €30,000 (obviously the amount received in pounds is sensitive to the pound-euro exchange rate). The amount lost would be significant but not devastating.

However, any member state or region can impose their own cap. This option has been chosen by all the devolved regions in the UK, but on a different basis in each case: It's your choice

Northern Ireland has imposed an absolute cap at €150,000. There are not many farms in Northern Ireland who would receive more than this. Wales has come up with a particularly complicated system, but again there are not that many farms in Wales who would qualify for relatively large payments. Scotland, where there are some large farms, has set the cap higher. Indeed, their €600,000 starting point is the highest notified by any EU country or region.

It's not difficult to work out the politics of this. Farmers in Northern Ireland who are Democratic Unionist or Sinn Fein supporters are unlikely to be affected. In Wales, the more Welsh-speaking parts of the country are unlikely to be hit (although other aspects of Welsh Assembly Government policy have been a source of complaint). In Scotland, the Scottish Nationalists do not want to upset any constituency, but the relatively small number of farmers likely to be affected are not significant in electoral terms.

A disappointing interview

I realise that opposition politicians have to say all things to all persons and jump on any bandgwagon that's going on, but I must say that I found an interview with Nick Herbert, the shadow Defra secretary, in Farmers Weekly a bit disappointing.

It remains to be seen whether the MP for Arundel and South Downs will be Defra secretary in Dave Cameron's government, or even whether Defra will remain in his present form. However, if his thinking is typical of that in the shadow cabinet on agriculture and food matters, it's a bit worrying. It looks as if we could be lurching back towards productionism.

Perhaps that is not entirely surprising as there has always been quite a close informal relationship between large-scale farmers and the Conservative Party. Unlike smaller farmers (who often vote for the Lib Dems or the Nationalists or even Labour), they are overwhelmingly Conservative voters. Many of them hold office in local Conservative associations.

Herbert thus goes for a badger cull, even though the scientific evidence is contradictory and culling can actually spread Bovine TB by disturbing social groups of badgers. It is also unlikely to win the Conservatives friends among the well-organised badger lobby. I would not rule out culling in any circumstances, and it will be interesting to see whether the proposed policy experiment in Wales goes ahead and, if it does, what its effects are. Herbert is chair of the all-party group on badger TB and one would have hoped that he could have been a bit more cautious before trying to score a few partisan points over Hilary Benn, whatever the latter's shortcomings.

What really concerns me is the following set of statements: 'We need to re-address the balance of food production. Total self-sufficiency isn't the right objective, but we do need increased production on the foods we can grow and rear domestically. We are a trading nation with important export markets and, while I'm not a protectionist, it's madness to import food we could be producing ... We should be maximising food production in a sustainable manner.'

Let's try and deconstruct these statements:
1. Addressing the balance of food production. This is part of the current fashion for re-balancing the economy, but I am far from sure that governments should set targets for the share of the economy undertaken by particular sectors.
2. Autarchy is impossible (good), but we should maximise domestic production. How? At a cost to the taxpayer or to the environment?
3. It's madness to import food we could be producing. Supposing that food is cheaper and of an equivalent quality or offers a better price/quality mix. The only way to keep that food out of the UK market is through protectionism which is what the CAP does at the moment.
4. How does one maximise food production in a sustainable manner? Of course, there are policies like Integrated Pest Management that need to be pursued, but there is something of a contradiction in this statement.

On the CAP, Herbert says, 'I would rather make decisions here. There's too much nonsense coming out of Europe and we need to minimise here.' Of course, the Conservatives are Eurosceptic, but I have never heard them advocating withdrawal from the CAP (unlike the CFP).

To be fair, there is a possibility of greater co-responsibility in the post-2013 CAP. Member states might be able to vary the level of subsidy provided. The problem with that approach is that it undermines the internal market which is one of the major achievements of the EU. Herbert's own answer is to have greater scrutiny of regulations in the Commons. There's nothing wrong in that, but I don't think it's the answer.

More thinking needs to be done between now and the election.