Opportunity to think again

by Warwick Lightfoot
Director of research and head of economics policy exchange



BREXIT has changed everything in British politics. There is a new Prime Minister and a new government that is setting out a different agenda. Brexit provides an opportunity to think again about what we do. Many areas of policy, since 1973 when the UK entered the EEC, have been decided in Brussels. This applied to farming. The Common Agricultural Policy (CAP) was the first policy that the EEC developed in the early 1960s. From the start it was a clumsy compromise between needs of French and German farms. It was, and remains, expensive for the taxpayer and for the consumer. As well as using public money to subsidise farms the CAP protected European farmers from competition through international trade. This was done by establishing a high wall of tariffs on food and agricultural goods. Whatever the objective policy makers may have, starting from scratch policy makers would not construct a farm policy like that of the EU’s CAP. It is expensive for the taxpayer, costly for the consumer and distorts international trade. As with so much policy in the EU a single policy does not fit the varying circumstances of farming communities across the UK, never mind the EU as a whole. One of the big problems of the CAP is that the lion’s share of the help to farms goes to the largest farmers and agricultural businesses. Depending on how the figures are presented between 60 and 80 per cent of the money that gets to a farm goes to the top 10 per cent of farming households and businesses. This is reflected in the payments made to high profile individuals. The late Duke of Westminster has received some £779,000, the Earl of Plymouth £669,000, and the Duke of Devonshire £260,000. There are other examples of international billionaires reported in the Sunday Times to be receiving much greater sums. Whereas the average payment to a farmer is about £24,400 and the average payment to a hill farmer are around £14,700. There is a need to support farms and rural communities. The traditional smaller diary and mixed farms in Devon and Cornwall offer good examples to the kind of farms that should be helped. Along with the less favourable areas ‐ the hill farms ‐ on Dartmoor and Exmoor These are similar to the kind of traditional farms in Wales. There are good environmental and landscape management reasons to support these farms. The challenge is to ensure that policy makers shape the support in a way that is consistent with the direction of travel in international trade rules. A long standing criticism of the EU has been its stance on trade, and its high common external tariff for manufactured and agricultural good. These have been a hindrance to liberalisation of international trade over the last forty years. Out of the Single Market, the Customs Union and its rules the UK will be able to negotiate genuine free trade agreements. Not just with countries like Australia and New Zealand but the South Pacific economies of Latin America. The heart of the problem of the CAP and trade is that the EU gives much greater support to farm incomes compared to other countries. The provider support estimate, is the ratio of gross farm receipts given to agriculture by consumers and tax payers. In the EU it is 19 per cent. Although it has come down it is still much higher than 2 per cent in Australia and 10 per cent in US. Out of the EU the UK needs to improve the transparency and quality of science advice. We need to catch up with international research on genetics and the use of GM and we must ensure that the regulation of pesticides conforms to the best contemporary science available.

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