Sunday, October 28, 2007

Productionists bang the food security drum

It has been evident for some time that those who would want to see a switch away from a greater emphasis on environmental issues in relation to agriculture and a restoration of a productionist orientation have seen food security as one of their best cards.

In part this is because food supplies are getting tighter. Supply has been affected by growing demand for biofuels and other non-food crops. Demand is being stimulated by a growing and more prosperous world population.

So could 'the UK run short of food in the future' as is argued by regular Farmers Weekly contributor Hugh Brown (who combines farming with working full time for Capital Radio). This shows a not unsurprising lack of faith in the price mechanism for a farmer.

If the supply-demand balance alters, prices will go up and this will encourage more production. Of course, the land supply is not infinite, but there is plenty of land in the world, not least in the Global South, that is not being farmed as efficiently as it could be (without having an adverse environmental impact). Of course, climate change is a big uncertainty, but this shows why it should be a priority in decisions about farm policy.

Brown concentrates a lot on his fire at Defra, and it is certainly a department that has had its problems. From a farming perspective, of course, it no longer acts as the voice of the farmer in the way that MAFF did, but that was one of the reasons for setting up Defra with a new mission.

Brown argues, 'If we do start to go short of food and need to start planning seriously about how we feed the nation, it would be somewhat of a contradiction to have the same department both try to encourage the growing of food, while the other part of the department is trying to nail down environmental regulation, potentially curtailing food production.'

His solution is to give the food part of Defra its own department, presumably a Ministry of Food Security, so that 'it might be able to work more effectively in planning ahead.' The shadow of Stalinist five year plans dies hard in some areas of farming. That is not to say that we shouldn't continue to fund work that is concerned with diseases and pests that affect plants and livestock and hence undermine production.

However, given the challenge of climate change, not to mention various pollution issues, farming needs to be guided by an effective environmental policy, but also one that provides farmers with incentives for maximising environmental benefits.

Wednesday, October 17, 2007

Fischer Boel rebuffs twitchers

EU agriculture commissioner Mariann Fischer Boel has rebuffed claims by the Royal Society for the Protection of Birds (RSPB) that the time has come for a new CAP. The suggestion is made in a report launched by the RSPB and its associated global organisation Birdlife International: New challenges, new CAP

RSPB head of agriculture Gareth Morgan had the temerity to suggest that the CAP needs a far greater environmental element to retain its current budget: 'That means scrapping subsidies and, instead, rewarding farmers for measures to help tackle climate change, reverse widlife declines and improve water quality.'

But Fischer Boel was having none of it. She insisted that much of what the organisations were asking for was already being delivered by the CAP: 'You say you want a new CAP ... today's CAP has a huge number of "new" elements compared with a few years ago.' Of course there are significant new elements, but whether that amounts to a new policy is another matter altogether.

Fischer Boel went on to explain that the forthcoming 'health check' would provide scope for further refinement. But refinement is just what it is. As contributors to the CAP HealthCheck blog have pointed out, an opportunity is being missed to do some fundamental thinking about the objectives of the CAP and how they can be delivered. See: Health Check

Sunday, October 14, 2007

Capital gains tax hit on farmers is not good news

Why should anyone who wants to see a more modern agriculture in Britain be concerned about the fact that the measures announced by the Chancellor in the pre-Budget report impose a greater tax burden on farmers?

Because it may discourage farmers from selling up. That is an important mechanism for restructuring farms to permit greater efficiency. It also allows new capital and younger managers with new ideas to come into the industry. Even if average age statistics can be misleading, there are still many farmers who started farming when maximising production with the help of subsidies was the favoured policy.

Farmers have been hit particularly hard by the Chancellor's scrapping of indexation allowances. This reduces taxable gains on assets held long term. It has had the effect of making tax free the first 105 per cent of gains on farmland held since at least 1982, leaving only gains above that amount subject to capital gains tax.

Farm prices have been buoyed by a number of factors. The availability of substantial subsidies has been one factor, but farms within easy reach of London have often been purchased for lifestyle and/or sporting reasons. The recent hike in crop prices also makes arable farms a more attractive investment.

Some farmers who have been thinking of selling up may now try and do so before April, but that may entail some discounting as purchasers will be well aware of the tax penalties attached to a delayed sale.

Wednesday, October 10, 2007

The environmental impact of ending set aside

Idling land resources through set aside never made a lot of economic sense and was largely a way of dealing with over production encouraged by the old style CAP. However, many environmentalists felt that set aside encouraged biodiversity.

This was particularly the case for the Royal Society for the Protection of Birds (RSPB) which with over a million members, largely urban gardeners whose bird identification skills are sketchy, is a very influential conservationist group in the UK. Defra policy is strongly influenced by the RSPB which has framed the agenda in terms of, for example, using farmland bird populations as an indicator of environmental stress, although they may not the best measure.

The RSPB view, as expressed by head of conservation Sue Armstrong Brown, is that 'One of the strengths of set-aside was simply that there was lots of it. It made the whole countryside more varied and wildlife loves variety.' The NFU, in contrast, argues that it is a blunt policy instrument and that only a small part of set aside ever had great environmental value.

Defra secretary Hilary Benn has stepped in to warn farmers to look after habitats and bird numbers after set aside has gone, or face new regulations to compel them to do so. He announced an immediate programme of environmental monitoring of farmland.

In fact, as Don Curry has pointed out, this is an English policy manifestation of a mich wider debate. As commodity prices have risen, global tensions between the use of land for food, fuel and the creation of environmental benefits have increased. There are no easy answers, but a debate is needed.

Monday, October 01, 2007

Capping SFPS is on the agenda again

Leaks from Brussels suggest that capping Single Farm Payments is on the agenda for the forthcoming Health Check. This was mooted at the time of the last reform and defeated by opposition from Britain and Germany who would have lost out the most.

The last set of proposals envisaged an overall ceiling, but this time reductions would be tapered to make them more palatable. There would be a 10 per cent reduction on payments about €100,000, 25 per cent off payments above €200,000 and 45 per cent off payments above €300,000. As an additional incentive, money saved by the 'capping' would stay in a member state and be added on to its national envelope for targeted receipts.

There would also be a lower limit on payments to save the transaction costs of payments to owners of horse paddocks or hobby farms. These tend to gum up the payments system and are not supporting anything that resembles a commercial farming activity.

Reducing payments to large-scale farmers, some of them members of Europe's royal and aristocratic families, would seem to be a no brainer. In a sense, however, it is penalising the more economically efficient farmers who are often better suited to compete in an international market. That being so, perhaps they should not have subsidies at all, but then no farmer should be receiving non-specific subsidies (other than a pay off in the form of a bond).

There is also a difficult technical problem. How does one define what constitutes a farm? Ownership of large estates could be subdivided among different companies. Lawyers have always been adept at spotting new loopholes in the CAP and they could be the real beneficiaries of these proposals. However, I doubt whether they would go through in the form suggested.