Jeremy's Blog 26th August 2022: Subsidy and Stasis

This article by Jeremy Moody first appeared in the CAAV e-Briefing of 25th August 2022

There are some significant misperceptions about agricultural subsidies.

An English landowner and farmer, explaining why he had now “re-wilded” a substantial area of very low yielding land, said it was a response to the coming withdrawal of subsidy for his crops. The mystery is that he has not had a subsidy for even general arable cropping since 2004; even the quirks of the Single Payment over set-aside and fruit, vegetables and potatoes ended over a dozen years ago. While taking the Single and then the Basic Payment, he has been the only person subsidising his cropping. That is a personal choice but such personal choices have held back the commercial evolution of the sector and its readiness for the new challenges.

Scotland’s LFASS does consciously assist the production of beef in LFAs at below its cost of production, partly to ensure volume for abattoirs. However, production has still fallen and may fall further with the proposed climate change conditionality of Scottish payments.

At the recent UK Agricultural Partnership discussion of food security, Professor Tim Benton of Chatham House argued for increased UK production of fruit and vegetables. But the economics need to be right for this to rely on anything other than magic. When I argued that the current balance of working capital, risk and reward joined other market pressures (not only labour) to drive continued reductions in this sector, his response was to suggest shifting subsidies from combineable crops to it. That fails to consider the differences in character and magnitude between the operation of the two types of enterprise and so:

• the scale of what would be required at a per acre level to make a difference
• the consequences as farmers channelled such money on into the supply chain of land, and inputs including machinery and labour while continuing to face supermarkets

if the goal is import substitution for a nation wanting cheap, year-round production. How much margin would farmers retain, warranting risk and investment?

The tenanted sector is a barometer of the impact of the Single and Basic Payments. The CAAV’s annual Agricultural Land Occupation Surveys have shown that, since the initial allocation of entitlements settled down for 2007, in each year:

• overall activity in the let sector has run at between 30 and 40 per cent of 1999 levels
• the number of new FBTs granted has been around 25 per cent of the 1999 figure.

They have produced stasis.

Abroad, we see the interaction with social security. While some 30 per cent of BPS claimants are over 65 in the UK and Ireland, it is half that in France whose agriculture-specific pension cannot be combined with BPS. When Bulgaria changed its social security system, it lost 35 per cent of its subsidy claimants.

In England, the slow emergence of the new schemes has seen an upsurge in Countryside Stewardship but the first significant sense of real change may come when most find their December BPS payment is 40 per cent of what it was two years ago. As the phasing out of Basic Payment continues (is in prospect in Wales and will become most conditional in Scotland), we shall see from 2024 if English de-linking is understood any more than de-coupling was in 2005.