Papers
Britain and Europe

The future of farming

29 January 2018

UK agriculture after Brexit

Authors
Charlie Cadywould
Author
Image credit: EddieCloud / Shutterstock.com

For the best part of half a century, UK agricultural policy has been controlled primarily from Brussels, and British governments have long expressed a desire to reform the system of farming subsidies that accounts for almost 40 percent of the total EU budget but lacked the power to do so. Now, with Brexit looming, ministers and parliament must prepare once again to ‘take back control’ and be held accountable for an issue that has been largely absent from the domestic debate for so long.

The likelihood of the Conservatives presiding over a ‘botched Brexit’ increases with every day that passes without significant progress in the negotiations. Significant political turmoil would ensue should the UK crash out of the EU without securing a meaningful deal and replicating much of the EU’s current spending in the UK. Those in the agriculture sector, and rural communities more generally that overwhelmingly voted for Brexit, would feel the pinch and the sense of disappointment more than most. In that scenario, progressives would face an immediate challenge to present a credible alternative plan for post-Brexit rural Britain, with new opportunities to win back trust in these traditionally Conservative-leaning constituencies.

While this report focuses on agricultural policy, it is recognised that farming is the distinct, but not dominant, economic activity of rural areas, and that agricultural policy will have to be just one part of the offer to rural communities. Alongside the ideas in this paper, progressives should begin thinking creatively about rural policy more generally, including ways to improve rural public transport and infrastructure, as well as easing the transition out of agriculture for those whose activity is no longer economically viable.

This report sets out how competing visions of Brexit may impact the British agriculture sector in the coming years, explaining for a progressive audience the challenges and opportunities that will come about from the repatriation of agricultural policy levers. At the end, it offers a set of radical, progressive alternatives for future policy.

Key points:

  • Despite decades of Conservative dominance and cultural disconnect with the Labour party, Brexit offers opportunities for progressives to win back trust in rural Britain
  • Domestic farming provides significant benefits beyond its raw contribution to GDP. A significant contraction of the sector after Brexit would have knock-on effects for the environment, rural communities, and other parts of the economy
  • Retaining strong access to the single market, which would require continuing to apply the same basic farming and food standards as the EU and the same rules for imports (e.g. continuing to prohibit chlorine-washed chicken), would be the least damaging for the agriculture sector
    • This would require a closer continuing relationship with the EU even than the ‘Norway option’, which does not cover agriculture
  • A no-deal, deregulatory, ‘Global Britain’ Brexit could be disastrous for the sector and cause a significant contraction in farming activity
  • While a ‘protectionist Brexit’ could help to increase domestic demand for British produce, it would result in higher food prices, inefficiencies and poor value for public money
  • Within the framework of a continued close trading relationship with the EU, there could be opportunities to reform the system of agricultural subsidies
    • While the subsidy regime has improved over time, it is seen by many as an inefficient, unfair use of resources that, combined with tax reliefs, artificially inflates land values and fails to protect the environment

The report sets out three ‘hybrid approaches’ that could retain strong access to the single market for British farmers and food exporters, while at the same time reforming subsidies. These are included not as complete solutions, but to stimulate a ‘first principles’ debate around the purpose of agricultural subsidies. Such reforms could be implemented alongside other measures to improve the productivity of the sector, such as funding for R&D and access to finance for capital investment.

Hybrid approaches:

  • Supercharged environmentalism – routing all subsidies for farmers through incentives for responsible practices such as undertaking environmental measures (e.g. organic practices), providing other public goods (e.g. managing areas of natural beauty), and responsible business practices (e.g. paying a living wage)
  • Sales-linked subsidies – providing subsidies to farmers based on revenues from agriculture, thus linking payments to the market and escaping the inefficiencies of area-based payments and ‘coupled’ subsidies linked to production
  • The ‘buy-British’ voucher – replacing all area-based payments to British farmers with a voucher for every household to buy British produce

As with all the options set out in the report, this last option carries various potential drawbacks, uncertainties (including its legality under the World Trade Organisation ‘national treatment’ principle), and practical difficulties to navigate. However, it also has a lot going for it, with the potential to meet the most desirable criteria for reform and to achieve various policy objectives.

It would give certainty of demand for the sector as a whole, but would do so without shielding individual farmers from competition through guaranteed payments. It therefore guarantees the continuation of an important sector of the economy without compromising on productivity, market efficiency or value for public money, and without artificially inflating land values, or raising food prices.

It also represents a first step towards the progressive goal of ensuring that every family can afford basic necessities, without the efficiency losses of many other redistributive policies. If the voucher replaced current spending on direct payments (but the level of payments for environmental schemes and rural development was maintained), it would amount to roughly £200 per household, or just over 7 per cent of a typical family’s annual shop. Depending on how such a voucher is designed, it would also have the potential to help deliver certain public health goals, such as by limiting the voucher to unprocessed fresh produce.

Authors