Gove’s green guarantee: reforming the Common Agricultural Policy

On the Andrew Marr Show last weekend, the new Environment Secretary, the Rt Hon Michael Gove MP, offered some succinct and unambiguous answers on the outline of agricultural subsidies post-Brexit. Of particular note, he confirmed that wealthy landowners could expect to receive less money in the form of subsidies after the current Parliament.

The Common Agricultural Policy and its problems

At present, the regulatory and funding systems which govern the British countryside are dominated by the EU’s Common Agricultural Policy (CAP). This regime sees the UK receive over £3 billion per annum, which is allocated to farmers and landowners alike. Underpinning the CAP are two ‘pillars’, which dictate as to where public money is directed. Pillar I funding consists of measures such as income support (money awarded per hectare of land owned), and receives three quarters of the total CAP budget. Pillar II funding, which is paid out through each EU member state’s Rural Development Programme, is supposed to encourage environmentally sustainable farming practices in return for cash payments.

Unfortunately, this system has a number of perverse unintentional environmental implications. Firstly, the strict requirements for Pillar I payments mean that farmers have a fiscal incentive to avoid agri-environment practices. One instance of this playing out in reality is reports of some farmers felling trees under the justification that it will increase the amount of land on which they can farm, and thus claim subsidies for.

Secondly, by subsidising inefficient farming operations, the CAP has allowed agriculture to take place in areas it otherwise would not. Hill farming, for instance, is rarely economic, as the market price received for produce cultivated on hillsides would not cover the costs of production – it is only thanks to subsidies that the practice persists. Without subsidies, therefore, this land would go unfarmed, potentially allowing more afforestation in the uplands, and increased biodiversity as a result.

The future of agricultural subsidies after Brexit

With woodland coverage in the UK having shrunk to just 13% of the total land area, society is missing out on a wide range of benefits that trees offer. A report from the Forestry Commission cites how trees purify the air, serve as natural flood defences, and are even associated with improving mental health amongst individuals. It is for exactly these reasons that Bright Blue launched its campaign earlier this year for the Government to improve tree planting incentives for farmers after Brexit.

But what other funding priorities should the new post-Brexit agricultural policy have? The National Trust has called for taxpayer money to be paid out to farmers only where clear public benefits are delivered. They have also pointed out the fact that there are certain aspects to agriculture which degrade the natural environment, such as through the excessive use of harmful fertilisers, and which currently are actively rewarded by the CAP. Thus, a more targeted system of granting funds to farmers would allow the Government to remove or reduce payments from those who engage in such detrimental practices.

Echoing this perspective is Professor Dieter Helm of the University of Oxford, who argues that the problem is not that farmers receive public money per se, but rather the ends to which it supports. Further, he argues that farmers should be regulated to maintain the land to a certain level in a way that avoids harming the wider environment and that public funds should be earmarked to directly purchase public goods from farmers.

The consequences of Brexit on the agricultural community will be pronounced, perhaps more so than for any other sector of the economy. Many farmers are anxious that the end to subsidy payments could imperil their businesses and livelihoods. Yet such fears may be premature and unwarranted. In 1973, New Zealand’s farmers faced a comparable situation when Britain – one of its then major trading partners for foodstuffs like lamb and dairy – joined the European Economic Community and thereby adopted its external tariffs.

New Zealand responded by removing all of its agricultural subsidies in 1984 for food production and fertiliser use. These subsidies had been blamed for environmental degradation, low productivity, and inducing a lack of innovation within the sector. Once withdrawn, some smaller farmers who lacked the requisite economies of scale went out of business. But many others successfully embraced innovations in science and technology as the means to realise increasing yields, and began to utilise the differing types of land more effectively and more efficiently. Accordingly, New Zealand’s agricultural sector enjoyed average real terms growth of 4% for the next 15 years and has since established itself as a key component of the global food supply network.

In terms of the environment, the results have been mixed. With the lucrative subsidies scrapped, farmers found it less affordable to purchase artificial fertilisers and pesticides, and their use declined accordingly. Moreover, rates of afforestation increased, and the total number of hectares of land dedicated to pasture fell. However, critics of New Zealand’s approach have cited concerns about how the rate of conversion of indigenous grassland to exotic pasture increased in the South Island by 67% between the period 1990-2001 and 2001-2008. In addition, by excessively focusing on its comparative advantage in livestock production – a highly greenhouse gas-intensive activity – New Zealand has become the largest emitter of livestock emissions per capita.

Conclusion

In leaving the EU, and by extension the constraints of the CAP, Britain has presented itself with an historic opportunity to review the relationship between the Government and the agricultural sector. The substantial sums of money which are currently sent to subsidise inefficient, and at times environmentally injurious, farming operations can be redirected to finance projects and farming practices that improve the environment.

During the debates which took place in the run up to the 23rd June 2016, there were only cursory mentions of the implications of Brexit for the environment, with the Remain side highlighting the potential loss of environmental regulation, and the Leave side promoting the opportunity to relinquish the EU’s unwieldly CAP. We now have a Government re-committed to “being the first generation to leave the environment in a better condition” than it inherited. Certainly, Gove’s comments this weekend indicate his desire to use Brexit and the UK’s departure from the CAP to further that ambition.

Eamonn Ives is a researcher at Bright Blue