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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Friday, November 03, 2017

Post Brexit model could mean major disruption for farmers

Chatham House (the Royal Institute of International Affairs) has produced a new paper on the implications of Brexit for UK, EU and global agricultural reform: Chatham House

The briefing paper looks at four broad agricultural policy options for the UK after leaving the EU. It considers how these four models might perform in the context of future EU agricultural policy decisions and wider global trends and challenges.

The paper argues that for the UK, only a market-oriented model – aligned and integrated with a more effective commitment to the environment and climate change mitigation – would enable the country to benefit from free trade while keeping the government’s promise to improve the environment for the next generation. Applying such a model in the UK could lower prices for consumers, lift the economy’s productivity and allow for substantial budget savings to support the environment and public finances.

It would mean significant disruption for agricultural producers, and the political challenge of market reform should not be underestimated, but, the paper concludes, implementing a sustainable, market-oriented agricultural policy is a genuine opportunity for UK global leadership outside the EU in the next decade.

It is admitted that, 'A move to a genuinely market-oriented model would result in imports displacing UK products, and the removal of all forms of subsidies would cause some farming operations to fold. While the resulting lower prices would benefit consumers, importing businesses and the economy overall, it would also mean unviable agricultural businesses closing, being taken over or having to reinvent themselves. The livestock sector in particular is vulnerable in this regard, with rural communities, especially upland areas, likely to suffer the most commercially.'

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Friday, October 27, 2017

Does Gove speaked with forked tongue?

Defra secretary Michael Gove has become something of an unlikely hero with green activists. Some of this reputation has been achieved by grabbing low hanging fruit such as stopping the sale of ivory antiques or banning the use of plastic microbeads in personal care products.

However, this week he delighted greens by condemning farmers who 'drench' their fields with chemicals and damage soil fertility. In my experience most farmers don't over apply chemicals as it would be a waste of money. Never mind, the Soil Association said they had been 'bowled over' by his comments.

So are farmers unhappy with him? No, because he has giving them assurances behind the scenes. Moreover, he has matched his words with actions. He ensured that the UK voted in favour of retaining glyphosate in the EU and has ordered the biggest cull of badgers ever.

Mr Gove is an ambitious man and he is trying to win support in as many areas of political life as he can.

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Thursday, October 26, 2017

Future of key pesticide in doubt

The future of glyphosate, a key ingredient in pesticides, is in doubt in the EU. Arable farmers say they cannot do without it if they are to farm successfully, but environmental lobbies such as Pestcides Action Network Europe (PAN) have been working hard on the issue: Weedkiller decision

A standard ten year renewal no longer seems achievable, but it may be possible to get agreement on a three year phasing out period. However, Angela Merkel's need to involve the Greens in a German coalition government is a complicating factor. In any event, its future seems in doubt and the search for alternatives will need to begin. The scientific evidence is contested, but the politics are leading the way with President Macron favouring its withdrawal.

PAN's statement can be found here: Policy recommendations

The perspective of the National Farmers Union can be found here: Questions and answers

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Tuesday, October 17, 2017

New SAWS scheme not ruled out

The Government has now responded to the House of Commons Defra committee report on the agricultural labour market: Response

It argues that the sector faces a 'challenging situation' rather than a crisis. However, it does not rule out a new version of the SAWS scheme and says that such a scheme could be introduced within months of it being needed.

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