Thursday, December 14, 2017

Conservationists estimate cost of new agri-envirionmental policy

A new report Assessing the costs of environmental land management in the UK commissioned by The Wildlife Trusts, RSPB and the National Trust, shows how much Government might need to pay farmers and land managers for their role in looking after our natural heritage.

The report estimates that meeting existing government commitments to improving natural assets such as water quality, soil health and biodiversity will cost £2.3 billion per year. But meeting existing commitments will not be sufficient to halt the decline of the UK’s wildlife and reverse this trend.

£2.3 billion is five times more than is currently spent through agri-environment schemes – the source of most current environmental land management funding. This figure does not include wider financing required in the farming sector, for example for research and development or providing advice to farmers.

The total includes £876m for protecting and improving priority habitats, which include woodlands, marshes, bogs and fens; £402m for hedges and stone walls; and £78m for flood plains.

Ellie Brodie, Senior Policy Manager, of The Wildlife Trusts said: 'Farmers can sell the food they grow through the market. But they can’t sell a whole range of services that society needs them to provide, whether it’s reducing the risk of floods downstream, creating habitat for bees or improving the health of our soils. The Wildlife Trusts believe that farmers should be paid for this as it benefits us all. A healthy, wildlife-rich natural world is valuable in its own right and is also at the core of people’s well-being and prosperity. We must be prepared to pay for these benefits.'

Christopher Price, head of policy at the Country Land and Business Association said that government agri-environmental schemes were over bureaucratic and fragmented and drew attention to the CLBA's vision of a land management contract.

The associated policy briefing can be found here: Policy briefing

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Friday, December 01, 2017

Hard Irish border would be difficult for food trade

A hard border between Northern Ireland and the Irish Republic would create particular problems for the agriculture and food sectors.

Food and live animals account for the largest share of trade with Ireland. Northern Ireland is reliant on the republic for more than 60 per cent of its food and live animal exports. Agri-foods are particularly important to Northern Ireland and the sector is 'one of the few economic bright spots' according to the CBI.

Aiden Gough of InterTradeIsland told the Financial Times that 'The food industry is absolutely predominant in the cross-border trade in the island. The vast majority of trade is supply chain and goods cross the border multiple times before coming final products.'

A quarter of Northern Ireland milk and more than one-third of its lamb are processed at plants across the border. Baileys liqueur is produced in Ireland and sent north for bottling before returning to the republic for export.

Shaun Murphy at KPMG says that agriculture is 'the sector that is most at risk' because 'integrated cross-border supply chains are complex and costly to unravel'.

Given that the UK Government is not prepared to countenance Northern Ireland staying in the customs union or internal market, it is apparently prepared to consider continued regulatory convergence between the north and south of Ireland to prevent border problems.

However, that solution is unacceptable to the DUP whom the Government depends on for its majority. It would in effect create a border in the Irish Sea. It might also attract objections from other member states who could portray it as giving an unfair advantage to Northern Ireland.

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Tuesday, November 28, 2017

Glyphosate gets a reprieve

The controversial herbicide glyphosate which is used by Monsanto in its Roundup products has been given a reprieve. It has been the subject of a battle between agrochemical and farming interests and environmentalists. However, the EU has given it a five year licence after Germany changed its position.

German environment minister the SDP's Barbara Hendricks has been against renewal of the licence while Christian Schmidt, the conservative agriculture minister has been in favour. Schmidt decided to change the vote from abstain to in favour, Hendricks accusing him of acting behind her back.

Up to now the Christian Democrats have been constrained by their 'Jamaica' coalition negotiations with the Greens, who are against the herbicide, but these have now broken down.

After Germany changed its vote, and following some tweaking to the wording of the licence, Bulgaria, Romania and Poland followed suit and switched their vote from abstain, allowing the EU committee for plants, animals, feed and food to give its approval for another five years by qualified majority vote.

Despite their apparent victory, farming organisations are concerned that renewal was only for five years rather than the 15 years they think was justified.

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Thursday, November 23, 2017

NFU 'disappointed' with Budget

The NFU is 'disappointed' with the Budget which it saw as offering little to help farmers to prepare for life outside the EU or to help rural communities more generally: Budget response

The NFU should not be that surprised at the urban focus of the budget. The more general question that arises is whether tax reliefs are a better policy instrument than direct support payments.

If we gave farmers more tax allowances, it would not alter their behaviour in any way in accordance with policy objectives, but it would give them an additional financial cushion against the effects of Brexit.

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Monday, November 20, 2017

Big Blue goes for green farm policy

Liberal Conservative think tank Big Blue has produced the latest analysis of the future of agricultural support in Britain, A Greener, More Pleasant Land. It's certainly in tune with the emerging conventional wisdom. Read the full report here: Green and pleasant

It sets out a vision for a new market-based commissioning scheme for rural payments after Brexit, which would replace the EU’s Common Agriculture Policy (CAP) and fund ecosystem services, such as woodland creation, restoration of peatlands and removing invasive plant species. Under the scheme, ‘suppliers’ would bid to supply ecosystem services to paying ‘beneficiaries’ in specific catchments via online market-places. Suppliers would include farmers, landowners, and land managers.

Beneficiaries would include the general public (represented by central, devolved, and local government), private interests (such as water companies, other land managers, and insurers), and other groups (such as conservation NGOs, civil society groups, land trusts, philanthropists, local communities via town and village halls, or crowd funders). Contracts for supplying ecosystem services would pay quarterly based on results, potentially with incentives to encourage performance.

It calls for ensuring that as current CAP subsidies are phased out, public funding for market-based commissioning scheme and means tested livelihood support is phased in pound for pound.  It advocates the creation of a single rural payments budget from central government that identifies exactly and merges existing government budgets for production and land management support (under CAP), natural flood management, and payments for ecosystem services. Merging these current expenditures into a single rural payments budget would result in at least £3.1 billion being made available per year. It appears that prices for ecosystem services would be derived through an online market place designed by users for users. Striking a price may not be as straightforward as the paper assumes.

Three forms of income for farmers

The elimination of all production subsidies in agriculture would ensure instead that farmers have three forms of income available to them. The first from the new market-based commissioning scheme for rural payments, the second from a form of means-tested livelihood support, and the third from agricultural produce or other monetisable services sold at market prices without production subsidies. These sources of income are not mutually exclusive.

In my view means-tested livelihood support is a matter for the benefits system and not for specific policies directed at farmers. It seems that these are meant for small farmers, but there is a case for keeping area based payments in some form in marginal upland areas.

 

All things bright and beautiful

It is claimed that market-based commissioning of rural payments combined with a properly enforced system of environmental regulations, targeted livelihood support (particularly for smaller farmers), and consumer demand for high-quality UK produce will together drive higher environmental standards across the UK.

Senior Associate Fellow Ben Caldecott, who co-wrote the report, says: 'Commissioning ecosystem services efficiently and effectively using the dynamism of market-based approaches will bring significant public benefits, including a more sustainable farming industry, enhanced natural beauty and landscapes, greater biodiversity, increased carbon sequestration, improved natural flood defences, better water quality, better mental and physical health, and better air quality.'

Commenting, Zac Goldsmith MP, member of the Environment Audit Committee, said: 'The biggest opportunity by far [on leaving the EU] is the ability we now have to redesign the way we subsidise rural activity via whatever regime replaces the Common Agriculture Policy, something environmentalists have long dreamed of being able to do. Instead of simply paying people for owning land, no matter what they do to it, we can finally tailor that support to reward good stewardship of the land to boost biodiversity, minimise floods, improve water quality and access, and deliver food security.' Of course, it could be argued that one of the things that the current system does is support food security.

The usual targets

Press commentary on the report has inevitably brought up the £1.6m in subsidies going to Sir James Dyson. In a sense he is fair game, but he has been investing money in his farms and losing money on them.

No one wants to retain blanket area based subsidies in their present form, but we have little practical experience of pricing ecosystem services (there is one public-private scheme covering forests and peat bogs). As it is, area based subsidies represent the difference between profit and loss for most farms, so one has to be careful how one replaces them if one doesn't want to see a forced restructuring of the industry which might hit food production and would certainly disadvantage smaller farmers.

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Friday, November 17, 2017

Who will pick fruit and vegetables after Brexit?

I return to this issue in a contribution to the LSE Brexit blog: The migrant labour dilemma

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Thursday, November 09, 2017

The pros and cons of land management contracts

Talking to farmers recently, it is clear that quite a few of them see merit in the idea of land management contracts put forward by the CLA. This 'would be a legal agreement between the farmer and the government for provision of goods and services that the market doesn't pay for but provide valuable benefits to society.' Examples include safeguarding and increasing carbon storage; mitigating or reducing flood risk; creating better connectivity of habitats and species; maintaining the distinctiveness of historic landscapes and heritage; managing soil structures to maintain productive capacity of land for future generations.'

The motivations of the CLA are clear. President Ross Murray states, 'The best retort to accusations that the acreage payment merely rewards the wealthy is to promote a compelling and revolutionary new system based on contract where the farmer or manager is rewarded for public service'.

Policy instruments that are envisaged are:

  • Multi-channel advice to increase adoption of new technology and practices
  • Business skills development and encouraging collaboration
  • Capital grants, loans and tax incentives for investment in infrastructure, equipment and buildings, farmer led research and collaboration
  • Support for new entrants and succession and retirement planning support [this is an under developed area of policy]
  • Promoting UK food in domestic and international markets
  • Resilience funds and compensation for unforeseen events [some might think that was the role of insurance]

There would not be a standard contract. 'Farmers will choose what sort of land management activities are right for them and their rural business ... The importance of specific outcomes will vary across the country ... The land management contract will be locally adaptive'.

This is reasonable enough, but it does raise the question of the transaction costs of negotiating contracts with individual farm businesses with variable payments reflecting the public benefits delivered. The CLA calls for 'simplicity of administration' and 'keeping bureaucracy to a minimum'.

However, public money is involved and accountability is necessary. It is admitted that 'new and existing evidence from mapping' is involved which invariably involves a checking process. Proposed outcomes need to be realistic and there needs to be some means of checking that they have been achieved.

This is an ingenious idea and a good one in principle, but how would it work out in practice?

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