UK agriculture and its dependence on Europe.

European Dimension Matthew Griffin BLSE Year 3

UK agriculture and its dependence on Europe

Europe’s Common Agricultural Policy (CAP) was established in 1962 driven by a strategic need for food security in Europe. The CAP created a deliberate economic signal to increase domestic food production. It was founded on the basis of ‘open-ended price support’, that is, if output doubled so did revenue (Institute of Economic Affairs 2000). Furthermore, it included protection for domestic markets through import taxes and export subsidies (DEFRA- Shifting support from the 1st to the 2nd Pillar of the CAP). As production responded, increasing surpluses necessitated heavier expenditure, which led to friction with other suppliers to the world market who were not reliant on subsidy.

The CAP was so successful that by the late 1980’s surpluses such as the widely reported grain mountains and milk lakes were being produced. Various systems designed to limit this over-production were introduced such as set-aside, milk quotas and reduced price support, but they have failed to limit production and the intensification of farming. To compensate for reduced price support subsidies now largely include direct payments to farm businesses, based on the cropped area or number of animals. This has further encouraged large farms and intensive systems with increasing numbers of animals, resulting in further loss of space for wildlife and overgrazing and also in larger farms being paid more.

Increased production and intensification have brought with them far-reaching consequences for the natural environment. For example, our three most precious natural resources, soil, water and air are heavily degraded. Between 1995-1998, 2.3 million tonnes of topsoil were lost due to erosion (Pretty, 2000) 8.1% of the national emissions of greenhouse gases between 1995 and 1997 came from agriculture (Gee D, Hine R, OECD 2001) and water companies spend £120 million every year removing pesticides from watercourses (Gee D, Hine R, OECD 2001). Semi-natural habitats have been lost at an unprecedented rate to agriculture: 20% of all ancient woodland loss since the 1930s, and 98% of wildflower meadows and 190,000km of hedgerows since 1950.

Similarly some of our best loved wildlife has declined: for example, corn bunting down 83%, willow tit down 69% and skylark down 53% in the last 30 years

Agri-environment schemes were established in the UK in the late 1980’s to encourage farmers to manage their land in more environmentally friendly ways. However, these schemes have involved fewer than 10% of farms to date, and the limited resources available, restricts the benefit the schemes can deliver. All schemes are also heavily over-subscribed. Further limits to the performance of agri-environment schemes stem from the ways that they are designed, promoted and delivered as ...

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A Look to the Future

European and UK Government policy is now changing to reflect that farming is about more than food production and to acknowledge that it also plays a vital role in shaping our countryside and is an important part of rural life. The Rural Development Regulation (RDR), which resulted from the EU’s Agenda 2000 agreement on the future of the CAP, has resulted in EU member states producing Rural Development Plans (RDPs). These RDPs involve various incentive schemes designed to help farmers, foresters and rural businesses develop. They include vocational training and rural enterprise initiatives, as well as measures to conserve and improve the environment, known as agri-environment schemes. However, the RDR expenditure covering all of the above only accounts for 10% of the EU total CAP budget of about 40 billion Euro (£24 billion) (DEFRA- Shifting support from the 1st to the 2nd Pillar of the CAP). The Department for the Environment, Food and Rural Affairs (DEFRA) accepts the need for a shift in support for farmers from production subsidy (1st pillar) towards stewardship and provision of public benefits and other measures through the RDR (2nd pillar). Agenda 2000 permits member states to voluntarily divert direct payments from the 1st to the 2nd pillar, a process known as modulation, however whilst agreement is for up to 20 % the UK Government’s plans are for only 4.5% by 2006.

There is now increasing EU advocacy for compulsory modulation, which would be advantageous for Britain to support to ensure a level playing field between EU states.

Speciality, local and organic sectors have grown rapidly in recent years and in 2000 65% of households made an organic purchase, up from 37% two years before. However with only 3% of UK farmland managed organically and with only 1% fully certified to date, imports account for 75 % of the market (DEFRA- Shifting support from the 1st to the 2nd Pillar of the CAP). Although the numbers of organic farmers increased following the launch of the Organic Aid Scheme in 1995, the amount of land in the UK is well below that found in other European countries partly because the UK is the only country in Europe that does not support its organic farmers post-conversion. Furthermore organic farmers receive less CAP support than conventional farmers because they tend to grow more ineligible crops and lower livestock densities in organic systems mean lower headage payments.

In January 2002, the Policy Commission on the Future of Farming and Food published its report. It set out a visionary set of solutions for reform of the agriculture and food chain in England and included strong advocacy for a move away from production subsidies to payment for provision of public benefits in the longer term with increased modulation as the key mechanism for increasing funds to the RDR in the short-medium term. The report urged the Scottish and Welsh departments to follow similar strategies. While the vision was well received by a wide range of stakeholders, including Government, certain bodies including the NFU in all countries and the Scottish Executive remain sceptical about modulation as set out in the report.

A Look at Funding

If we want our farmers to produce a countryside that we can be proud of, we must be prepared to pay for it. These non-market benefits such as wildlife and landscape then become marketable benefits to the wider rural community as businesses prosper across the board from countryside contractors to the tourist industry.

However there are some short and medium term funding opportunities that should be taken before final shift of support payments from the 1st to the 2nd pillar of the CAP is fully achieved.

Modulation should be increased to at least 10% and ideally to the 20% permitted under Agenda 2000. This will significantly increase the funds available for agri-environment schemes. In order to support small farms, modulation beyond the existing 4.5% target should not be applied at a flat rate but should be targeted at large farm businesses which receive the greatest share of CAP subsidies and will be best equipped to withstand cuts in such subsidies.
In the medium term, more EU funding must be negotiated for UK Agriculture. The UK’s RDR allocation is disproportionately lower than other EU member states due to the comparatively low historic spend on rural development in the UK. The UK government should seize the opportunity presented by the 2003 mid term review to negotiate for a larger proportion of the budget and to apply for re-allocation of any under spend by other EU states to the UK.

Conclusions

Clearly there are many issues such as arable and livestock proportions, the type of agricultural intensification (essentially arable or intensive livestock production), differing landscapes, number of small farmers and country’s identity that will affect the method of chosen agricultural reform delivery. Added to this there are a number of existing differences such as agri-environment schemes with Tir Gofal in Wales, the Rural Stewardship Scheme in Scotland and Countryside Stewardship in England. All will develop in different ways but the rationale for and the basis of reform across the UK as well as the rest of Europe must be the same. I feel the reform will help prepare the European Union for enlargement to the East and pave the way for forthcoming negotiations in the World Trade Organisation leading to greater liberalisation of agricultural trade. They will also reduce EU farming's dependence on market price support, opening up the industry to greater competitiveness and helping to deflect the pressure for tighter controls over production. The environment will benefit from reduced reliance on market price support. British farming will best flourish and make its contribution to society under a CAP which encourages farmers to produce in response to the demands of the market within the context of fair conditions of competition and taking account of legitimate concerns about the environment. A more liberalised CAP will also help the industry to become more competitive and prepare for the challenges which further trade liberalisation and EU enlargement will pose in the early years of the next decade.

Bibliography

Institute of Economic Affairs 2000. ‘The CAP: whence it came, where it should go’.

Brett C, DEFRA- Shifting support from the 1st to the 2nd Pillar of the CAP, a background policy paper. July 2001

Pretty J, Soil Survey and Land Research Centre (SSLRC), 2000,'Agriculturally accelerated soil erosion by water', Report to Countryside Agency

Gee D, Hine R, OECD (2001) Environmental Indicators for Agriculture Vol 3, Methods & results (quoted in Countryside Agency The State of the Countryside 2001, pp24)

Mason C F, Morison J I L, Raven H, Rayment M and van der Bijl G. 2000. An Assessment of the External Costs of UK Agriculture. Agricultural Systems