How crucial are direct payments for farmers?

In a recent policy document the NFU has suggested that continuing direct payments (at least in the short-term) in a new British Agricultural Policy will be crucial to help farm businesses deal with volatility. Before I read the report I must admit that I had become convinced that withdrawing as much support as possible is the way forward, moving towards a system that is mostly market driven albeit with the government paying for work that benefits the environment (I am not the biggest fan of market driven environmental measures such as biodiversity offsetting). In an ideal world I still believe this is preferable. However, the amount of time it would take to get to this stage is an important thing to consider. Further, with subsidy (effectively implemented) the taxpayer has more of a stake in British farming and has more influence over the way land is managed and in driving overall rural productivity.

Having reflected and read the ideas presented by the NFU I accept that such significant change must be done in a way that is gradual and that enables farmers to adapt. The three pillars of the report should be in the minds of all policy makers: ‘productivity’, ‘volatility’ and ‘environment’. No matter the conclusions they come to, it’s important that they at least take these in to account. Not all businesses are as productive as they could be, and I count my own family’s farm amongst these. However, when it comes to capital investment often the funds required are immense, increasing the long-term burden on what are often small businesses and when it’s down to improving productivity of labour or machinery, or indeed reducing environmental footprint, again there are often problems of insufficient training or hidden costs. We need to find a way around this.

Driven by various global conditions, food prices are extremely volatile, as we have experienced in recent years, and this won’t miraculously stop as a result of leaving the European Union. The benefit of direct payments is that farmers are given a certain amount of security, giving them, in theory at least, the confidence to invest in their businesses for the long-term. If they are overly concerned about short-term cashflow, planning ahead becomes that much more difficult. The report suggests that grant uptake for capital projects has been low in recent years, and this should be an option for the future, but farmers need to know how to work through the processes and we need to reduce complexity as much as possible on this front. Consultants cost a lot of money (my goodness our own farm has been through many in the past) but the right business advice or training can do great things for a farm business.

Giving farmers confidence to invest in the long-term is absolutely vital if the agricultural sector as a whole is to move forwards in a way that enables us to be competitive in our own areas. It’s important not to forget that a thriving farming sector is in the interests of everyone – think about rural tourism, environmental management and rural community vitality. For me at least, keeping a thriving farming sector, and a diverse one at that, is really important. In the long-term farmers should be as little reliant on the state as is possible, but as the report suggests dozens of countries around the world support their farmers in various ways, and our farmers (those who rely on commodity sales at any rate) will be competing in this framework. Struggling farmers will impact on all sorts of other lines of work in the rural economy. Further, as has already been suggested, by the taxpayer having a stake in the farmed environment we can get real benefits and influence its direction (so long as we agree with the policies of the government of the day!).

What must change is the correlation between landownership and amount of payment gained. Here I agree with Dieter Helm, chairman of the Natural Capital Committee, who has suggested that paying farmers simply on the basis of the amount of land they have leads to inflated land and input costs. There are of course other payments available, but it is the direct subsidy pillar 1 payment that most people think of. Instead, state payments could be provided for services that offer public goods, improving the general state of the environment, water quality and flood protection etc. These payments would be available for all, no matter the amount of land owned. Entitlement would be given to active farmers who undertake definable and tangible projects that benefit the taxpayer.

As the months roll on there will be many other ideas presented as to how a future domestic agricultural policy should look, but from the point of view of someone who is looking to invest in a future in farming, it all looks very uncertain at present. I’ll continue to listen to what others are saying and work around whatever is thrown at us. There is no other option.



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