Subsidies…dare we predict the future?

If you type in the phrase ‘farm subsidies’ into any search engine news feed you will find multiple references to the super rich receiving hundreds of thousands of pounds in subsidy for simply owning land. Under our current format of payments, driven by the Common Agricultural Policy, landowners receive payments for being just that, landowners. The Basic Payment is worth approximately £180 per hectare (£72 per acre) per year to a landowner and this is often supplemented by further environmental ‘subsidies’, the amount of which depends on the specific scheme (although there are a greater number of conditions and activities required to receive these). This is up to £539 per hectare per year in the case of AB8 of CS – flower rich margins). The news headlines seem to tell us that ‘farm subsidies must go’ and ‘subsidies are unsustainable’. Environmental groups declare that subsidies should remain but they should be overwhelmingly environmental in focus, with payments available for undertaking habitat restoration and other conservation work. However, if subsidies were to go, would we shoot ourselves in the foot and open the door to higher food prices or the transformation of the British farming industry into something completely different and an over reliance (even more-so than at present) on food imports? Is the status quo actually our best available option?

Since the introduction of the Single Farm Payment (predecessor of the Basic Payment) in 2005 most of the controversy relating to it has revolved around the basis of its inequality as an area based system which rewards those who hold the most land in the first place. This bone of contention is the source of the stories such as the Saudi billionaire Khalid Abdullah al Saud receiving £400,000 a year in subsidy for his farmland. There is no getting away from the fact that this black and white way of seeing the world is a consequence of area payments. Add in the fact that SFP/BP entitlements can be, and are, traded as a commodity and you begin to see a system that is riddled with problems. The large scale subsidies for large scale farms also encourages investment to sit in the laps of the more powerful landowners and could be said to increase inequality when it comes to investment and innovation. Of course, the argument goes that small farms are provided with a safety net, in case of need, and that subsidy also ensures that food prices remain low, with farmers spending their subsidy funds to boost the rural economy. The key questions we should ask ourselves are: are we prepared to pay more for our food? Would we favour cheap overseas food imports over domestic produce? What do we expect from farmers and landowners and are we prepared to pay them for providing extra services?

It has been a particularly busy few weeks and so I have only just managed to get around to reading the Green Alliance’s New Markets for Land and Nature report in detail. Supported by the National Trust, the Green Alliance propose a way of implementing payments for ecosystem services that puts the ‘seller’ at the forefront of the process, rather than ‘the buyer’, who currently seems to be the key actor. The report suggests that new National Infrastructure Schemes (NIS) should be implemented, allowing farmers and landowners to take ecosystem services, such as flooding mitigation, to the marketplace in the same way that they market their crops and livestock. Adrian Colston wrote a good summary of the report last month – available here. What this is getting at is an attempt to encourage subsidies to be phased out in favour of a more rounded approach to marketing all the assets of a piece of land. Innovation is the word of the day when it comes to agriculture and so, through this report, the Green Alliance is encouraging farmers and landowners to be ‘environmentally innovative’, to take another look at their assets and see how they can best use of them. The recent State of Nature report showed that there is still a huge amount of work to be done when it comes to improving farmland biodiversity and that a new approach might be required. Payments for Ecosystem Services (PES) through the NIS could be one such approach.

However, I believe that there is little point at the moment even attempting to predict the situation in which we might be in a few years time when it comes to subsidies. Brexit has thrown everything into the frame for consideration and until we hear some concrete ideas from Defra and May’s cabinet, we don’t really know where we are heading. It is wise for farm businesses to wean themselves off subsidy reliance in the first place. There are many ways of going about this. However, some farm businesses have (quite understandably) shifted their business over time in relation to the available subsidies (including pillar 2 environmental payments). It is those businesses that are perhaps going to have the highest ladder to climb over the next few years. It might still be that subsidies of one form or another remain. I feel it unlikely that we move wholeheartedly towards a New Zealand style model of minimal support. However, who knows in reality? Do we dare predict the future when the situation is so uncertain?

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5 thoughts on “Subsidies…dare we predict the future?

  1. A complex subject for a non-farmer like myself, I would appreciate more blogs of this type, Ben. If only to help the rest of us, get a handle on what it is that makes farming tick, and to investigate just how subsidies do provide good/bad environmental practice in some cases. In my opinion, this subject deserves plenty of airtime right now as a “one size fits all” policy will never work. As in wildlife conservation practice and for example, farmland bird communities, a “holistic” approach is surely the best approach in attempting to understand all the problems facing them. Members of our rural communities and farming enterprises should do likewise, consider the competition and where necessary, stand up and be counted, have their voices heard and set about getting their much-deserved food, farming and wildlife policy. I fear I might have rambled on a bit too much, so will leave things at that.

  2. Ben. Agree too early but definitely a move to rethink who receives subsidy.
    Many of the lowland farmers I question say they can farm without them. Thus point that subsidy money uphill as a social fund to keep remote marginal areas ‘alive’ and still farming but paying extra support to widen their output of public goods.
    Don’t mix the word ‘subsidy’ with agri enviro ‘support’ payment! The former props up the bottom line, the latter pays for costs forgone in undertaking environment works.
    Let’s get over the impasse of looking at creating new markets but also explore the social science in nudging farmers/ land managers towards farming for new markets.
    Best

    • Rob, Thanks for explaining the differences between ‘subsidy’ and agri enviro ‘support’ payment. I feel you could certainly make a case for farmers receiving flexible subsidy payments when times are tough, such as when low commodity prices and global crop failures dominate the market. Whereas I’d like most farmers to receive some form of agri-environment payment for as long as feasible on the basis that on-farm biodiversity indicators, tracked and monitored over time. Yes, this is a general overview as someone learning from the sector as I go.

    • Thanks for this Rob. I certainly take on board that labelling stewardship payments as ‘subsidy’ is slightly beyond the reality of the situation. Many ‘lowland’ farmers are (and should be) in a situation whereby they are able to make a living without subsidy. A social fund is an interesting idea although I question how upland farmers would feel about it. It would have to be rolled out sensitively. I believe that some form of subsidy will be required but these should be targeted and that cross compliance should perhaps go further in its expectations. ‘Nudge’ tactics would certainly be welcome in a post Brexit policy. Payments are a typically useful way of encouraging ‘good’ behaviour.

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