Since the publication of the Government consultation paper ‘Health and Harmony: the future for food, farming and the environment in a Green Brexit’, there has been growing concern that there is insufficient emphasis on food production. The Chairman of the Parliamentary Environment, Food and Rural Affairs Select Committee, Neil Parish MP, described it as ‘woefully lacking on anything to do with proper food production’. The phrase ‘the payment of public money for the provision of public goods’ or some variation occurs repeatedly throughout the paper.
It is clear that direct payments will be phased out during a transition period but this will have a dramatic impact on British farming. The average farm business in England in 2015/6 made a loss of £27,044, offset by income from agri-environment schemes of £5,359, from farm diversification of £9,020 and from the Basic Payment of £21,145. There will inevitably be significant restructuring of the industry with the least efficient farmers going out of business. The concern is that overall production will fall so that we rely even more on imported food at a time when trade relations with other countries are uncertain.
It has been suggested that food production should be considered a public good but this is mistaken. The definition of public good is one for which there is no market and this clearly cannot apply to food production. However, food security might be considered a public good, the avoidance of a risky reliance on food imported from countries with which we may not have trade deals or which may have entirely different standards of production and welfare.
Self-sufficiency is not a helpful concept, not least because we cannot grow in this country much of the food that we consume, but we should at least produce as much as we can of products for which our climate is suitable. If we produce a surplus, this can be exported to offset the importation of that produce we cannot supply.
In a climate where direct subsidies for farming are politically unacceptable, the objective must be to improve productivity to the point where British farming is profitable without subsidy. Productivity growth has been disappointing for many years, at least in part due to the degradation of soils. It will take time for significant improvements to be found but there are ways in which the Government can support farming to reach that goal.
Payment for participation in agri-environment schemes is based on profit forgone. If a farmer replaces a hectare of wheat with one of cover crop, providing habitat for wildlife, for example, then the payment he receives must be based on the loss of the sale of the grain. It is compensation in that the farmer should be no worse or better off. This is fundamental in European law but the original concept comes from WTO rules. However, when transposing the principle into EU regulation, the Commission took a stringent approach; when the UK reverts back to the WTO rules, there may be scope for rather more generous payments. For example, an element of incentivisation is allowed to encourage farmers to participate.
Most farmers take their worst land out of production to grow cover crops, in wet areas or next to woodland for example. This means that the actual loss may be less than the grant, increasing the total income from the farming enterprise. If payments can be increased under WTO rules, then there is further support for farmers to enhance the environment.
Defra is anxious to include within its new environmental land management scheme measures to improve the health of soil, water and air. There is an evident benefit to improve soil health and fertility which will lead to improved productivity. So, for example there might be grants for farmers to widen the crop rotation to include restorative crops such as legumes, payment to be based on increases in organic matter content and soil structure. This could be a major step to improving farm productivity at the same time supporting farmers in their quest for profitability.
Perhaps the most important element of a new agricultural policy is the introduction of a major campaign to encourage innovation and the exploitation of new technology. The Government must ensure adequate funding for research and development but the key is then to get the benefits adopted at a farm level. There must be a well financed grant scheme to incentivise farmers to innovate, together with an effective extension scheme, funded by but not run by Government, to advise farmers how new technology can improve productivity. This may be by means of artificial intelligence or robotics, such as driverless tractors or drones, or by means of biotechnology. There is huge scope to reduce dependence on fertilisers and pesticides with the consequent benefits to the environment. It was a great disappointment that the European Court of Justice recently ruled that gene editing must comply with the strict genetic modification rules. Whilst in theory the UK will not be bound by that judgement when we leave the EU, trade considerations make it unlikely that we will be able to forge ahead with biotechnology innovation.
The phasing out of direct payments to farmers through the transition period will cause hardship as incomes fall. However, the process will lead to restructuring and greater efficiency, a significant incentive to improve farm productivity. The Government must facilitate change by helping farmers to improve efficiency to the point where they can be profitable without subsidy. The three examples above describe how farming can be supported through that process.