Memorandum submitted by the Family Farmers'
Association
IMPLEMENTATION OF CAP REFORM IN THE UK
1. The Committee of the Family Farmers'
Association looks at this sort of question from a long-term point
of view. We are interested in the whole future of the countryside,
believing that much of the character of Britain still depends
on the existence of family farms. We do not wish to see farming
become an industrial type of activity, where only very large units,
be they arable or livestock, produce food for the nation. It is
believed by many that food imported cheaply from other parts of
the world, where labour and land are cheap and regulations minimal,
is liable to spell the end of family farming; also to produce
a great deterioration in the appearance and general health of
the countryside. We consider the likely effects of CAP reform
in this light.
2. One of the main comments of the committee
was that, in fact, the international balance of production and
consumption would have more effect on the future of farming than
the CAP has. Some countries, such as Brazil, are apparently set
to increase their production enormously. Some NFU members believe
that the increasingly affluent Eastern countries will happily
absorb this production and it will not come this way. Some people
feel that if beef production, for instance, becomes uneconomic
after subsidies are decoupled, and less is produced, prices will
rise. Others believe that the void will be filled by imports and
there will be no consequential rise in prices.
3. Imports apart, it seems highly likely
that cycles will develop in the absence of the stabilising effect
of subsidies. Lower profitability of any product will reduce production.
This reduced supply will raise prices. Greater production will
follow which will, in turn, reduce prices, leading to restriction
of supply and higher prices again. Such a cycle has bedevilled
the pig industry for as long as anyone can remember. The grave
disadvantage of cycles is that the period of low returns always
eliminates smaller producers who have not been able to build up
reserves. In the particular case of pigs the cycle phenomenon
has led to the elimination of vast numbers of pig farmers and
extreme concentration into very large units.
Such a situation seems only too probable in
dairying, and likely in most types of farming.
4. Another basic issue raised was the extent
to which agricultural land will be used to produce fuel and power.
Biomass to convert to electricity could use up an enormous amount
of land if subsidised sufficiently to make it economic. Likewise
a variety of crops can be converted to liquid fuel given the right
incentive. Will we see subsidies for food crops replaced by subsidies
for fuel crops? Another way of meeting Kyoto obligations would
be to import the raw materials for manufacturing fuel and power.
Can we afford this in addition to importing a large proportion
of our food if it becomes uneconomic to produce it here?
5. More specifically to CAP Reform: The
argument rages as to whether the single farm payments should be
on a historic or an area basis, though this may possibly be settled
before your committee reports. It does not seem necessary to rehearse
all the arguments in detail, but a few comments must be made.
In general, the case for area payments seems very much stronger.
It will be manifestly simpler to administer and is more logical.
Payment can hardly be called "decoupled" if it is based
entirely on the level of production—even if that production
is historic. Those who caused allegedly excess production in the
past would be rewarded for ever more. Those who exercised restraint
and sought to fill actual markets, rather than "chase subsidies",
would lose.
6. There has not been much discussion of
the proposition that historic payments would be tradable. This
seems a totally illogical, almost abhorrent, idea. Surely there
must be a reason or purpose for granting a subsidy? There can
be no logic whatever in giving it to a person who has simply bought
the right to it, even if he has also acquired some land to connect
it to. The only remaining reason for paying a subsidy, if it is
not to encourage food production, is to care for the land. Also,
perhaps, to keep communities in the countryside. The simple and
logical system must be to pay the subsidy to whoever is caring
for the land now. Actively farming new entrants must be more deserving
than elderly farmers who were drawing subsidies ten years previously!
7. Another argument against the historic
method is that the more historic it becomes, the less happy people
will be to pay it. One cannot imagine that in 2010 taxpayers will
be happy to give large sums of money to a landowner because he
produced intensively ten years previously. Still less if he never
even farmed but has recently bought the entitlement and some land
of some sort to attach it to. It has been suggested that if this
course is chosen it is unlikely to last any longer than the reform
of 2000, which was supposed to be the basis for many years to
come.
8. Whichever method of calculation is used,
we would, as usual, recommend that the payment should be tiered
or tapered. The original intention was to give a band of small
to-medium sized farmers exemption from deductions from their payments.
This was quietly dropped from Mark II, with no explanation. Presumably
because neither the government nor the NFU wished to give encouragement
to smaller farmers. Our wish has always been that as subsidies
reach a certain level, higher sums should have a progressive percentage
reduction. For example, this might start at 5% on a payment over
£20,000 and increase to the extent that a person who, according
to the rule, was due £1 million should receive only half
a million. In fact that could well be considered a ceiling. Large
farmers should not object to such a plan, as it should ward off
public objection to subsidies for non production.
9. Given the area system of payments should
be adopted, there will be a problem of genuine hardship cases.
The ones we would be concerned for would be smallish farmers who
have worked hard and, of necessity, farmed fairly intensively
to make a living. There would be a proportion who became non-viable
with only area payments. The simplest solution would be to guarantee
payment of not less than, say, 90% of previous subsidies, up to
a certain limit. This was done for hill farmers when the Hill
Farming Allowance was instituted. It could be time limited, and
once the problem businesses were identified, serious efforts could
be made to find solutions for them. What the solutions might be
would depend on how the agricultural scene develops post decoupling.
10. A peculiar suggestion has been made
about area payments. That is that payments for arable land should
be much higher than for grassland. That would be manifestly unfair.
If it is in fact the case that arable payments have always been
higher than livestock ones, worked out in relation to area farmed,
that does not make it any more fair! Arable farms tend to be larger,
which will perpetuate the tendency for arable farmers to be richer
than those who, on the whole, work harder caring for livestock
year round. Some adjustment would be needed for hill and mountain
land, but there does not seem any logical reason why well stocked
lowland livestock farms, including dairy farms, should not receive
the same payment per hectare as any arable farm.
11. As for the question of our competition
with other European Union Member States, one can only assume that
they will be better at adapting—or ignoring—the new
rules and that this will be to our disadvantage. It has been a
fact of life for decades that we have the lowest milk price in
Europe. Many statistics show the profitability advantage—be
it increase or absolute—to continental farmers and no doubt
this will continue. What proportion of their advantage is due
to more government backing and what proportion to better business
acumen on the part of the farmers is difficult to tell.
12. What all farmers long for is to feel
that the government values them. General opinion is that the fewer
farmers there are the happier the government is. This theory is
based on the government's regularly advocating "restructuring".
This is proceeding apace, to the consternation of many, but apparently
the government sees no harm in the large numbers of farmers exiting
the industry. (Figures are quoted regularly, it does not seem
necessary to repeat them.)
13. It would require an in depth study,
for which we do not have the resources, to determine how many
of Sir Don Curry's proposals have been implemented, or are in
the process of implementation, and whether they have had any good
effect. It seems that some are in operation, but it is probably
too soon to judge if they are helpful. Although it is said that
incomes have improved recently, that is only in certain sectors.
The fact has not reduced the serious exodus from farming.
The Family Farmers' Association
December 2003
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