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The Impact of ‘No Deal’ on Rural Communities
26 Jul, 2019

One of the most difficult parts of the 2016 referendum to explain is the higher than average support for Leave amongst the farming community, a more classic case of turkeys voting for Christmas would be harder to find, as without the annual Basic Payment, the subsidy which is paid direct to farmers as part of the EU Common Agricultural Policy, many farms would be non-viable and would have to shut or diversify out of farming to continue to exist. It is beyond doubt that in the long term UK farming has benefited from membership of the EU, yes there have been blips such as the introduction of milk quotas in 1984 but on the whole the industry has seen greater stability and prosperity. So why are farmers on average so Eurosceptic?

One of our supporters, Andrew Charlton, a farmer from central Lincolnshire offers his thoughts.

In my view the opinion of leave supporting farmers is identical to leave supporters in wider society in that the choice is driven by a desire for personal freedom driven by that teeth grating phrase ‘I want my country back’. The only flaw in that set of arguments is that the EU is not vastly concerned with personal freedom; I see it as a trade grouping as well as a cultural and scientific organisation.

What has fermented a great deal of farmers loathing is an organisation called the Rural Payments Agency, the UK organisation which has the responsibility for paying out subsidies and grants not just to farmers but to communities accessing EU grants. The RPA does not have a great track record in getting payments made accurately or on time and I guess if you put a group of farmers in a room it would not be long before a long list of war stories were dragged out over mapping errors, lost records and so on.

The RPA is a UK government agency, and its past errors are a matter of record as well as significant fines from the EU for under performance. It is not a laughing matter, nor dismissible by claiming this is just farmers moaning again; on my own farm I applied for, and withdrew, a scheme to enhance environmental features in 2018 because I was really concerned I wouldn’t get paid for doing the work. I know I’m not alone and there is a consequent loss of environmental benefit across the whole country.

Farmers also bemoan the fact that payments are historically lower in the UK than across most of the rest of the EU- by and large that is factual and is down to the fact that the UK applies the maximum claw back it can to the farming subsidy pot, known in the parlance as modulation and has historically been tardy in applying extra schemes such as the small premium to the Basic Payment for farmers under 40 who are starting new businesses and have extra demands for investment often without a return for several years.

It’s not difficult to see the negatives in all this - but what has been missed is that this is due to chronic and consistent failure by successive UK governments to get on board with the EU and implement delivery of schemes in the UK effectively. I was a civil servant back in the early 2000’s and a colleague of mine described the administration of EU schemes as follows: ‘after several years of doing nothing, and at the point we have to hand the money back to the EU, we open the windows in the top floor of our building and shout out “would anybody like any free money” before we shovel it out the window’.

It’s a mess for sure, and the reaction in 2016 only served to make things worse, and now farmers are going to have to brace for the likelihood of No Deal. On subsidies alone no one in the industry expects the current levels of BPS (about £210/Ha) to be maintained. The current advice to anyone undertaking budgeting is to assume a 50% drop in subsidy. The only problem with that is economics- according to latest statistics from the Farm Business Survey, the government’s own   measure of farm productivity the profit achieved by growing cereals in England is £8/Ha (much better than minus £71/Ha the year before), effectively the subsidy is the margin for the farmer.

However it gets worse than that - No Deal will mean that exporting food will be an extremely difficult if not impossible activity, WTO tariffs of €95/Tonne (Wheat) and €93/Tonne (Barley) will make UK grown crop uncompetitive in EU markets. We have become very effective exporters of grain out of Immingham, Hull and Kings Lynn to countries like Ireland, Denmark, Spain and Poland and will have to find new means of domestic consumption for these tonnages- and that’s for grain which was planted last October, being harvested now.

There will be some winners- it is highly likely that pig meat production could be runner for a few years at least, this is because the UK government’s decision to unilaterally increase welfare standards in the 1990’s led to an increase in production costs which supermarkets could get around by importing cheaper Danish, Dutch and other EU product, the consequence of which was about half the UK industry closed (yet another example of our inability of working in tune with the EU).   

The greatest damage by far will affect the sheep industry where the UK produces more than it requires for domestic consumption and consequently a strong export market has built up based on the quality of the product. I saw a presentation recently from researchers at Bangor University who estimate that about 10,000 farms in North Wales will have to shut as there will be no market for the lamb.

I have eurosceptic non-farming friends who accuse me of being a doom-mongerer, telling me it’s easy- we just follow the New Zealand system. Whilst it is true New Zealand abandoned fairly meagre subsidies in the 1970’s and this led to some farm bankruptcies the country has 2 huge advantages which their farming industry has been masterful at exploiting. The first is probably the best climate and soils in the world meaning livestock do not need to be housed in the winter as grass grows year round for example, and the second is their proximity to the immensely valuable food markets in Japan where natural geography has thrown together a huge population with poor quality soils.

The consequence for UK farming is that a very significant degree of agility will be needed by UK farmers, more young people with entrepreneurial ideas and more and better technology will be a minimum requirement, but before that many, many businesses will close.