01 August 2017

What is the most important question to be asked in deciding on the shape of UK Agriculture Policy (UKAP) after Brexit?

Should payments be made?

To some, the question is whether any payments at all should be made to farmers. For the foreseeable future, the answer seems to be that they should, and not only to avoid the potential problems associated with a "cliff edge" change of policy, but because there are good reasons for continuing with some form of rural payment.

Who should be paid?

If you read or listened to press commentary surrounding Michael Gove’s speech at the WWF on Friday 21st July you might think the relevant question is who gets paid. It is true that Mr Gove criticised the Common Agricultural Policy (CAP) for benefitting the "already wealthy" and linking reward to "size of landholding".

Although he ignored the concept of cross-compliance and the "active farmer" test as preconditions to receipt of payment, it is also true that many who own large areas also choose to farm themselves and so are seen to receive significant annual payments. It is also true that there is one aspect of the CAP which is concerned with who receives the payment. Upland farmers enjoy a special status related in large part to the desired preservation of rural communities in these sparsely populated areas.

Why should payments be made?

However, the CAP is not, and UKAP is unlikely to be, primarily directed at offsetting income differentials between competing farmers and landowners. The real question is why payments should be made; that is the wider policy issue which is being debated at the moment, and identifying the recipients, or at least controlling the amount received by some, is a secondary question at best.

Any payment which rewards the way that land is treated benefits the people who own that land, whether through direct payments based on area support or through increased rent levels as a result of increased income to tenant farmers. On that basis, the same "already wealthy" landowners will benefit from the increased payments for environmental benefits as those who benefit from the CAP at present. In both cases that payment will to some extent be "earned", through the carrying out of capital operations and possibly the reduction of farming activity.

Environmental benefits

Many farmers and landowners will applaud the prospect that UKAP will reward environmental benefit. They recognise that public money needs to be paid for things which benefit the public, and that the preservation of our environment is a public benefit in the widest sense.

They also recognise that some environmental benefits, such as improvement of soil fertility and structure, can have a direct but longer term benefit for them as farmers. What they don’t agree with is an argument based on economic theory that because food is subject to market forces and can produce profits, its production falls outside the scope of government intervention. Indeed, the generally unreported aspect of Michael Gove’s speech at the WWF is that he explicitly recognised that the production of food is a very good reason for supporting UK agriculture. He did not go so far as to say that farmers and landowners after Brexit would receive payments because they produce food, but he certainly did not close the door on it.

Food production

Perhaps the clue to understanding where we are going with UKAP is that the reference to food production, in the middle of a speech focussing on the rewarding of environmental benefit, was explicitly to "high quality" food production.

Mr Gove may have laudable aspirations but he also operates in the pragmatic world of politics. In order to conclude deals with trading partners after Brexit, the lowering of trade barriers to permit the import of food from abroad may be a valuable bargaining chip. In that context, a high level of support to UK farmers for food production is a problem.

Canada solves that problem, in its trade deals with the United States, by avoiding direct support and instead channelling support to farmers through schemes for offsetting the effects of natural disasters and extreme volatility in markets. We can expect that UKAP will have some aspects which cover these risks, but what place will food production have within UKAP as a reason for payment?

We can speculate that a policy could emerge which, insofar as it rewards "high quality" food production as well as environmental benefits, tries to direct support to businesses rather than landowners, and seeks to distinguish between those which show innovation, producing distinctive food which sells in a world market as well as a local one, and those who do not.

Those innovators would be farmers who earn their payments because they actively seek to improve their businesses as well as observing basic (as we in the UK consider them) rules of animal welfare and land stewardship. That support could be one-off, it could be limited, and it could even reward some landowners who own many acres. But the impetus behind those payments, the reason why those payments would be made, would be the encouragement of competitiveness in UK farming.

Key contact

Emma Folkes

Emma Folkes Partner

  • Head of Rural Property
  • Estates and Land
  • Food and Farming

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