Gove’s Brexit revolution sows seeds for farming gloom

Andy Lebrecht is a former Director-General for Food and Farming at Defra and UK Deputy Permanent Representative to the EU.

The government’s new Agriculture Bill has been hailed by Michael Gove as a “green Brexit”, a “historic moment” and “brighter future for farming”. The Bill in fact provides few new powers that are not already available under the EU’s Common Agricultural Policy (CAP). But there is one major shift in policy (for England) and two significant omissions, which together raise questions about the future of farming following Brexit.

Gove announced that, over a seven-year transition, direct payments to farmers would be replaced in their entirety by payments for “public goods”, such as better air and water quality, improved soil health, higher animal welfare standards, public access to the countryside and measures to reduce flooding. There would also be payments to promote productivity improvements and investment in research and development.

This shift in farm support to focus on environmental efforts has, in theory, much to commend it and past UK governments have been successful at moving the CAP in this direction. However, a policy that makes sense when implemented by all players in a market can be highly distortionary when implemented by just one player.

Direct payments make a much bigger contribution to farm profitability than payments for public goods. So – even if overall funding levels were maintained – replacing direct payments entirely by payments for public goods in England alone would tip the level playing field and put English farmers at a competitive disadvantage to their continental, and perhaps Scottish and Welsh, rivals. The sheer scale of direct payments, some £2 billion per year in England, ensures the level of distortion will be significant.

Gove’s statement however said nothing about the level of funding for this new policy from 2022 onwards. Given the current and forecast state of the public finances, and the growing demands for resources from other parts of the public sector, can farmers be confident that Defra will be given sufficient priority to make the policy a success? It seems unlikely.

The other notable absence from Gove’s statement was any information about future trade agreements. These could have a major impact on the prospects of farming in the UK. Extensive sheep and beef farmers in particular are concerned to know whether their businesses will face intensified competition from countries such as the US, Brazil and New Zealand.

Those countries are amongst many who will be keen to increase their exports of agricultural products to the UK thanks to reduced tariffs and perhaps lower standards, such as allowing the use of hormones to stimulate beef production. If the UK Government accedes to their demands, the prospects for many hill farmers, in Scotland, Wales and Northern Ireland as well as England, will be dire.

Nor should only farmers be concerned about this anything-but-bright future. Those who care about the rural environment should too. If farming is struggling to compete with generously supported EU producers, and without protection from the more efficient livestock producers of the Americas and elsewhere, its response will be to restructure, cut costs and corners and, in the hills, perhaps stop farming altogether. The prospect of a “green Brexit” emerging from a depressed agricultural sector seems speculative at best.

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Edited by Luke Lythgoe