10 May 2018

Small and medium-sized farmers will be most affected by any reduction in subsidy.

The Government’s consultation paper on the future of farming closed on 9 May.

I gathered the feedback of a large number of clients ranging from small private farmers to large landholding institutions and producer organisations across England and consolidated their views into the Taylor Vinters response to the consultation.

We strongly believe that the Government’s proposals for future agricultural policy in England are flawed and could herald an uncertain future for farmers.

We outlined our concerns in an article published on our website and asked our clients in the food and agriculture sectors to share their views on the consultation paper.

Below is a summary of their responses:

CAP reduction

  1. If the total subsidy is reduced it must remain at a level which allows competition with the EU and other economic areas that receive a subsidy.
  2. There must be certainty around the timescales for the reduction and any changes should be phased to allow time for farmers to budget accordingly.
  3. The reduction should be implemented across the industry as a whole – for example a reduction of 10% to everyone, rather than targeting a specific group via a cap. A cap on the amount of subsidy will lead to a proliferation of alternative business structures to work around the cap.
  4. The current subsidy payment provides the profit margin of many farmers. If it is taken away, it is likely that many small or medium-sized farmers will go out of business. This will lead to the sale of many farms to large-scale conglomerates who are arguably worse for the environment and could have a devastating effect on the rural economies. Every job in agriculture sustains a further seven jobs in the wider economy.
  5. The current subsidy system is effectively a tax on all to support lower food prices. If the subsidy is removed, profit will have to be generated elsewhere to sustain farming, which is most likely to come from higher food prices.

Efficiency

  1. Although it is accepted that levels of efficiency vary among farmers, there is not enough slack in the system for all farmers survive if the subsidy payments are removed completely or restricted only to environmental activities.
  2. The natural environment exists in many different and challenging forms which can constrain farmers from achieving greater efficiencies.
  3. Farmers have little control over the price of their products as these are set by traders in global commodities, by supermarkets, and buyers at auction markets.

Environment

  1. Although there is a need for environmental support for wildlife habitats, putting too much emphasis on this land neglects other critically important uses such as food production. This could lead to asset bubbles for farms and parts of the UK where environmental credentials are high, but where there is little extra benefit.
  2. High quality food is more expensive to produce. If the subsidy system is skewed towards the environment, quality will suffer and there will be a shift towards intensive production.

Technology

  1. Many farmers already use their subsidy payment to invest in new technology.
  2. Technology comes with a high price tag, so it will be very difficult for farmers to make future investments without certainty of cash flow and payments and without surplus income.

Support and implementation

  1. Farmers have no confidence in the RPA’s ability to deliver and deal with a workable new system for a new subsidy.
  2. Many of our respondents cited that they will not enter into new environmental schemes given the difficulties in receiving payment under the current schemes.
  3. Without careful management of any change in support, there is concern that farmers will have to produce according to EU regulations whilst having to compete with lower cost producers from the rest of the world.
  4. Direct support to small and medium-sized farms must continue in some form – ideally at the current level for at least another 10 years otherwise food production levels may be negatively affected.

Producer Organisations

Brexit and the suggested new regime will also have a profound effect on Producer Organisations. Respondents in the fresh produce sector raised the following specific comments in addition to those points raised above which apply equally to them.

  1. The UK does not eat the recommended intake of fresh fruit and vegetables. There is an opportunity as part of a wider scheme for UK producers to supply more fruit and vegetables to the UK market. This should be borne in mind when considering where the fresh produce industry fits into any new regime.
  2. Brexit has brought into focus the UK’s reliance on imports for fresh fruit and vegetables.
  3. Access to seasonal labour is an important issue – as fresh fruit and vegetable are dependent on this. Schemes which apply to those countries outside the EU could be applied now to those within it.
  4. Producers in other countries will continue to receive funding from the EU fruit and vegetable regime. The UK’s producers will need support to compete in this uneven playing field.
  5. Investment in automation will continue to be an important feature to the fresh produce sector.

Conclusion

In summary, the UK’s farmers operate in incredibly challenging conditions but despite this, are among the most efficient in the world, producing food to the highest standards.

The consultation paper suggests that reducing the subsidy payment can both improve the environment and increase farming efficiency. Our respondents do not agree that those twin aims can be achieved as described.

Ultimately, it will be the small and medium-sized farmers that will be most affected by any reduction in subsidy, which could result in detrimental consequences for farmers, the environment and food production in the UK.