Brexit is a life or death matter for Britain's farmers
A new report warns that UK agriculture would collapse outside the EU, but it assumes that any post-Brexit government would let it happen
By Ambrose Evans-Pritchard
Welsh Hill farms would be devastated unless the UK government made up CAP payments Photo: National Trust Images/Joe Cornish
Land prices will crash. British agriculture will face a traumatic shock, and 90pc of the country’s farmers will be ruined.
There will be a wave of debt foreclosures by banks, akin to the America Dustbowl and the Grapes of Wrath. A fresh seed of discord will be sown between England, Scotland, and Wales, imperilling the United Kingdom.
This is what is likely to happen if Britain votes to leave the EU next year, according to a confidential 70-page report issued to clients by the specialist consultants Agra Europe.
It is not a propaganda document. It is a detailed text, carefully researched, written for industry insiders. It is not to be dismissed lightly.
British farmers currently receive 60pc of their income from EU subsidies and environmental subsidies. They would lose most of this at a stroke unless the British government guaranteed compensating support of one kind or another, and so far it has clarified nothing.
Yet like all Brexit and counter-Brexit assertions, the Devil is in the assumption. Agra Europe takes it as a given that David Cameron or any other British prime minister will do little to prevent such a bloodbath running its course if the British people vote to withdraw from Europe, and say goodbye to the Common Agricultural Policy (CAP).
“What is certain is that no UK government would subsidise agriculture on the scale operated under the CAP,” it states.
This is conjecture. Few Brexit advocates – including ardent free-traders – suggest that subsidies should be slashed. They accept that agriculture is strategic, even iconic, and that society has a special duty of care to farmers. Let us call it ‘une certaine idée de l’Anglettere’, to borrow from Charles de Gaulle.
“Our view is that no farmer in the UK should left out of pocket as a result of Brexit. Preserving our farms and countryside is a very high priority,” says Ian Milne from Global Britain.
“Farmers and fishermen should receive exactly what they received before, for at least five years. We should recruit the excellent agricultural colleges of Cirencester, Reading, and Manchester, and those in Scotland, to invent a new model of subsidies. We paid £12.3bn into the EU budget in 2014, which we would no longer have to pay, so there would be more than enough money.”
Agra Europe’s report is worth reading. It is part of the “political discovery” that forces us to confront the hard realities the Brexit. We are all weary of rhetoric at this point.
Direct CAP payments to Britain will average £2.88bn a year from 2014-2020. This is a trivial sum for those who live and breath the world of global finance, almost a rounding error for Apple, Exxon, or JP Morgan.
In 2013, these subsidies were worth €200 a hectare (£58 an acre) and made up 35-50pc of total gross income. “Only the super-efficient, top 10pc could survive without them,” it said.
Most farmers have thin margins, if they have any at all. DEFRA figures for 2013-2014 show that a fifth of cereal and grazing livestock farms failed to make a profit, and this was before the latest leg down in global commodity prices. Average cereal farms earn around £100,000, and £55,000 of this comes from the EU single farm payment.
The European Commission estimates that land prices would fall 30pc across the EU if CAP subsidies were abolished. “For farmers who have taken out debt against the value of their land, a loss of value could be fatal. 18pc of farms have current liabilities that exceed current assets,” says the Agra Europe report.
For clues on Britain’s post-Brexit strategy, Agra Europe relies on the Fresh Start Policy document published by the Coalition in 2013. This Tory-drafted text is infused with the anti-subsidy doctrines of Adam Smith and David Ricardo, and seems to suggest – implausibly - that Britain could mimic the success of New Zealand and Australia in establishing agrarian free markets.
The Government would cut green payments to the rich agro-industrial farms of the lowlands and concentrate subsides on Welsh hill farms, the Highlands, or areas of special fauna and natural beauty. Tariffs would be slashed, throwing open UK markets to cheap food imports from the Antipodes, North America, Brazil, and Argentina.
“The consequences would likely be that land prices would fall, banks would foreclose on loans based on high land prices, and bankruptcies would be widespread. The numbers of small and medium-sized family farms would further decline and agriculture would become even more industrialised. Only large units with low marginal costs would be able to survive on a fluctuating and uncertain world market. UK food self-sufficiency would fall,” it says.
The damage would not be spread evenly. Per capita reliance on EU farm subsidies is three times higher in Scotland and Wales, and four times higher in Northern Ireland.
Just 12pc of English land qualifies for the EU’s Less Favoured Area subsidies, compared 78pc in Wales and 84pc in Scotland. Brexit is plainly an agrarian minefield.
Less known to the layman is that Britain’s food-processing industry is surprisingly big, and 60pc of its exports go to the EU. These could face a tariff of 48pc on average processed dairy products (assuming UK falls back on Most Favoured Nation status), 22pc for animal and livestock, 21.6pc for sugars and confectionary, 18pc for cereals, 14pc for beverages, and 11pc for tea, coffee, and cocoa.
The UK hosts the headquarters of 17 of the world’s 100 biggest food and beverage conglomerates, more than Germany, France, Switzerland and the Netherlands put together. Some would be tempted to leave, chiefly for dual taxation reasons.
Needless to say, we are talking about tail risks, not forecastable facts. Nobody knows what trade deals would be agreed once the dust settled and whether there would in fact be any such tariffs given the reliance of EU exporters on Britain’s market.
Nor do we know whether an already crippled EU could survive the further trauma of British withdrawal, given the damage already done to the European Project by the failed experiment of monetary union.
Richard North, author of the Death of British Agriculture, said it is an “absurd assumption” that a post-Brexit government would slash farm subsidies, given the reliance of the UK food industry on agricultural feedstock as a raw material.
He notes that Owen Patterson, the former Secretary of State for Environment, Food and Rural Affairs, depends on dairy farmers for miles around to feed his enormous yogurt plant in Shropshire.
His operations would be paralysed under any scenario described by Agra Europe, yet Mr Patterson is a leading champion of Brexit.
Mr North said the more likely outcome is that Britain would go in the opposite direction, increasing rural subsidies along the lines of Norway, Switzerland and Iceland.
This means moving away from production payments to a multi-pronged strategy that combines farming with rural tourism and conservation, intended to safeguard village life and stop the relentless depopulation of the land. “It costs more, but you get more bang for the buck,” he said.
The National Union of Farmers have so far refused to take sides on Brexit, deeming it impossible to make any useful judgment until the Prime Minister has revealed his EU negotiating demands and clarified what future policy will be.
If the 55,000 members of the NFU cannot yet reach an informed conclusion on what is in their own vital self-interest, the rest of us can scarcely do so.
“What is certain is that no UK government would subsidise agriculture on the scale operated under the CAP,” it states.
This is conjecture. Few Brexit advocates – including ardent free-traders – suggest that subsidies should be slashed. They accept that agriculture is strategic, even iconic, and that society has a special duty of care to farmers. Let us call it ‘une certaine idée de l’Anglettere’, to borrow from Charles de Gaulle.
“Our view is that no farmer in the UK should left out of pocket as a result of Brexit. Preserving our farms and countryside is a very high priority,” says Ian Milne from Global Britain.
“Farmers and fishermen should receive exactly what they received before, for at least five years. We should recruit the excellent agricultural colleges of Cirencester, Reading, and Manchester, and those in Scotland, to invent a new model of subsidies. We paid £12.3bn into the EU budget in 2014, which we would no longer have to pay, so there would be more than enough money.”
Agra Europe’s report is worth reading. It is part of the “political discovery” that forces us to confront the hard realities the Brexit. We are all weary of rhetoric at this point.
Direct CAP payments to Britain will average £2.88bn a year from 2014-2020. This is a trivial sum for those who live and breath the world of global finance, almost a rounding error for Apple, Exxon, or JP Morgan.
In 2013, these subsidies were worth €200 a hectare (£58 an acre) and made up 35-50pc of total gross income. “Only the super-efficient, top 10pc could survive without them,” it said.
Most farmers have thin margins, if they have any at all. DEFRA figures for 2013-2014 show that a fifth of cereal and grazing livestock farms failed to make a profit, and this was before the latest leg down in global commodity prices. Average cereal farms earn around £100,000, and £55,000 of this comes from the EU single farm payment.
The European Commission estimates that land prices would fall 30pc across the EU if CAP subsidies were abolished. “For farmers who have taken out debt against the value of their land, a loss of value could be fatal. 18pc of farms have current liabilities that exceed current assets,” says the Agra Europe report.
For clues on Britain’s post-Brexit strategy, Agra Europe relies on the Fresh Start Policy document published by the Coalition in 2013. This Tory-drafted text is infused with the anti-subsidy doctrines of Adam Smith and David Ricardo, and seems to suggest – implausibly - that Britain could mimic the success of New Zealand and Australia in establishing agrarian free markets.
The Government would cut green payments to the rich agro-industrial farms of the lowlands and concentrate subsides on Welsh hill farms, the Highlands, or areas of special fauna and natural beauty. Tariffs would be slashed, throwing open UK markets to cheap food imports from the Antipodes, North America, Brazil, and Argentina.
“The consequences would likely be that land prices would fall, banks would foreclose on loans based on high land prices, and bankruptcies would be widespread. The numbers of small and medium-sized family farms would further decline and agriculture would become even more industrialised. Only large units with low marginal costs would be able to survive on a fluctuating and uncertain world market. UK food self-sufficiency would fall,” it says.
The damage would not be spread evenly. Per capita reliance on EU farm subsidies is three times higher in Scotland and Wales, and four times higher in Northern Ireland.
Just 12pc of English land qualifies for the EU’s Less Favoured Area subsidies, compared 78pc in Wales and 84pc in Scotland. Brexit is plainly an agrarian minefield.
Less known to the layman is that Britain’s food-processing industry is surprisingly big, and 60pc of its exports go to the EU. These could face a tariff of 48pc on average processed dairy products (assuming UK falls back on Most Favoured Nation status), 22pc for animal and livestock, 21.6pc for sugars and confectionary, 18pc for cereals, 14pc for beverages, and 11pc for tea, coffee, and cocoa.
The UK hosts the headquarters of 17 of the world’s 100 biggest food and beverage conglomerates, more than Germany, France, Switzerland and the Netherlands put together. Some would be tempted to leave, chiefly for dual taxation reasons.
Needless to say, we are talking about tail risks, not forecastable facts. Nobody knows what trade deals would be agreed once the dust settled and whether there would in fact be any such tariffs given the reliance of EU exporters on Britain’s market.
Nor do we know whether an already crippled EU could survive the further trauma of British withdrawal, given the damage already done to the European Project by the failed experiment of monetary union.
Richard North, author of the Death of British Agriculture, said it is an “absurd assumption” that a post-Brexit government would slash farm subsidies, given the reliance of the UK food industry on agricultural feedstock as a raw material.
He notes that Owen Patterson, the former Secretary of State for Environment, Food and Rural Affairs, depends on dairy farmers for miles around to feed his enormous yogurt plant in Shropshire.
His operations would be paralysed under any scenario described by Agra Europe, yet Mr Patterson is a leading champion of Brexit.
Mr North said the more likely outcome is that Britain would go in the opposite direction, increasing rural subsidies along the lines of Norway, Switzerland and Iceland.
This means moving away from production payments to a multi-pronged strategy that combines farming with rural tourism and conservation, intended to safeguard village life and stop the relentless depopulation of the land. “It costs more, but you get more bang for the buck,” he said.
The National Union of Farmers have so far refused to take sides on Brexit, deeming it impossible to make any useful judgment until the Prime Minister has revealed his EU negotiating demands and clarified what future policy will be.
If the 55,000 members of the NFU cannot yet reach an informed conclusion on what is in their own vital self-interest, the rest of us can scarcely do so.
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