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Is British agriculture so incapable of standing on its own two feet that it needs to be treated like a lame duck; and if it is lame, does it need a pair of crutches or a surgical operation. 

Body (1982)

The Common Agricultural Policy

Agriculture  in many developed countries is financially supported by  national governments, although the levels of assistance vary depending on the type of farming and the policy of each government. A common system of support, the Common Agricultural Policy (CAP) was devised by the six original members of the European Union (EU) to support their farming industries and communities and to facilitate trade between member states. British agricultural policy has been integrated with the EU  (then EEC) since Britain joined the community in 1973.

Pause for thought................. Can large amounts of taxpayers money be justifiably allocated to an industry that employs 1.7% of the population and contributes less than 9% to Britain's Gross Domestic Product (including merchants, wholesalers, manufacturers and food processors)?  

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 Fifty years of production policies in Europe 

Adapted from The Living Land: Jules N Pretty (1998)

The principal goal of agricultural policy throughout Europe in the 20^th Century has been increased productivity. Financial support from the state, and later the European Community and then the European Union, has been tied to output and markets for produce that have been guaranteed (see Agriculture in Post war Britain). Intensification was actively sought. The 1952 Agriculture (Ploughing Grants) Act set two rates for ploughing up grassland, the higher rate of £30/ha (£430/ha, today's equivalent) for removal of at least 12 year old, grassland. Rates of uptake were the greatest in the eastern and south-western counties where grassland was rapidly converted to cereal production (Bowler, 1979). The 1957 Farm Improvement Grant further favoured the development of capital intensive cereal and dairy farming, since land drainage and hedgerow removal qualified for subsidy as well as buildings and machinery. These grants and subsidies continued through the 1960's, with new provisions to encourage the amalgamation of small farms into larger units and the early retirement of farmers. It was not until after Britain entered the European Union that many of these direct grants and subsidies were discontinued, i.e. those for fertilizer and lime in 1974. Nonetheless, the Common Agricultural Policy (CAP) continued to support agricultural prices, protect markets and provide for export subsidies. 

Historically, agricultural support favoured production

The policy climate began to change in the 1980's. Food commodities were beginning to accumulate at an alarming rate in the EU, producing the first food mountains. It was becoming increasingly apparent that something must be wrong with an agricultural support system that produces too much food and which, therefore necessitates great expenditure on storage and subsidising exports to other parts of the world.  In 1988, set-aside was introduced  to control over production.  At first it was a voluntary measure, however as part of the MacSharry reforms of the CAP it became compulsory in 1992.

CLICK HERE  for description and development of set-aside.

By the early 1990's, these surpluses were absorbing 20% of the CAP budget, just in storage costs, a further 28% was expended on export subsidies. By 1997, the total CAP budget had grown to 41 billion ECU's (European Currency Units), of which about half was for direct payments to farmers (EC 1995). In the UK the total expenditure under the CAP and on national grants was £3.03 billion during 1995 and 1996, the equivalent of £52 per citizen in the UK.

In the UK these direct payments (subsidies) are not necessarily supporting those farmers they are aimed at with the largest farmers capturing the greatest payments.  In England, seven farms received area aid payments in excess of £500 000 in the mid 1990's. The largest 651 arable farmers (1.3% of total) received 15% of all support, whereas the smallest 30 000 farmers (58% of total) received 33.3% of all support. No farmer in Wales received more than £100 000. 

Pause for thought... List 2 other mechanisms which could  possibly be used to allocate support to farmers which would provide a distribution of monies more in line with the aims of the EU.

The Way forward for Policy.

In Mid 2001 the old Ministry of Agriculture Fisheries and Food was merged with parts of other Government Departments to become the Department for Environment, Food and Rural Affairs.  Documents relating to the objectives of this merger and the strategic developments in this area can be found on the DEFRA website

Examples of several of the key documents related to  agriculture have been published by DEFRA and can be found by following the links below:

Policy Commission on the Future of Farming and Food

Lessons learned from the FMD outbreak

Sustainable Food and Farming: Working together

Reports on genetic modification

The new Single Payment Scheme

Pause for thought: What do you consider the impact of the replacement of MAFF with a new overarching Ministry (DEFRA) has been in the farming community. Do you think the removal of "farming" from the Ministry title is significant?

Agri- environment payments

Are the rewards worth it to the farmer?

The annual cost of the CAP was about €40bn in 2000, of which about €10.8bn goes on market price support, €25.5bn on direct payments and €4.2bn on rural development and agri-environment schemes. In addition to budget costs, CAP imposes a cost on EU consumers through higher food costs. This varies according to movements in world prices, but in 2000 was estimated by the Organisation for Economic Development (OECD) at around €48bn. The UK receives some 9 per cent of available CAP funds (some £3bn in 2000-2001), but we are a significant net contributor to the policy.

The Agenda 2000 agreement which was agreed at the Berlin Council in March 1999, brought cereal, milk and beef prices closer to world levels, and agreed the Rural Development Regulation (RDR) which underpins what has become known as the second pillar of the CAP. The RDR essentially required Member States to draw up seven year (2000 - 2006) Rural Development Plans which draw on measures in the RDR to provide rural development and agri-environment support to address identified needs. Click here for information about the current England Rural Development Programme (2007-2013). Agenda 2000 also agreed horizontal provisions which allow Member States to divert up to 20% of compensatory direct payments to fund agri-environment schemes, afforestation of agricultural land, Less-Favoured Area support and early retirement schemes under the RDR. In the UK we are diverting 4.5% of direct payments.  This process is called modulation.

The mid-term review of CAP and the introduction of the new Single Payment Scheme is having a major impact on the support for farming and is likely to seriously influence the way some people farm in the future.

Pause for thought......should agriculture be supported at all? What is the difference between a family farm and a family owned shop that has to compete with the supermarkets?

CAP Reform - Mid-Term Review 2003

In June 2003, the mid-term review of the CAP saw major changes to the CAP reform agreement. The changes will allow farmers to be free to produce to market and consumer demands as subsidies will be de-coupled from production, DEFRA estimates this could allow farm incomes to rise by up to 5%. The CAP has also been simplified through the introduction of a single payment scheme which will replace around ten of the previous schemes used in the UK. The de-coupling of subsidies with production will also have an environmental benefit, as subsidies will be linked to compliance with environmental standards along with food safety and animal health and welfare standards. The main changes are detailed below. 

Simplification - Single Payment Scheme (SPS)

The introduction of the SPS replaces eleven of the existing direct payment schemes. These are:

The SPS will take effect in England from the earliest date permitted under the agreement of 1st January 2005. Payments will vary upon location and England will be divided into three regions, with each region receiving a different flat rate. Farmers applying to the scheme in 2005 will receive an entitlement for each hectare of eligible land. The three regions will be divided into:

Payments will also be based on the historic direct payments receipts for 2000-2002, with special provisions to help farmers who took up land during this period and up to 31st May 2003. Payments will be staged over a period of eight years to 0% of the historic element by 2012 (see table below).

Schedule of Single Farm Payments

Source: Adapted from Department of Environment, Food and Rural Affairs (2004)

Modulation

The CAP reform agreement has for the first time set a compulsory EU-wide modulation rate of 3% of direct payments in 2005, increasing to 5% from 2007 onwards. The UK has agreed a levy of an additional national modulation rate. This higher modulation rate will be used to fund agri-environmental spending, as part of the Governments Strategy on Sustainable Farming and Food, in particular, the new Environmental Stewardship Scheme. 

The modulation rates for England

Source: DEFRA

Cross Compliance

Cross compliance is a series of standards that farmers need to meet in order to receive full payment of their subsidies. There are two main elements:

1) Statutory Management Requirements (SMR),

2) Maintenance of land in Good Agricultural and Environmental Condition (GAEC).

Farmers are already required to comply with the SMRs which cover the environment, public, food safety, animal welfare and animal & plant health. The GAEC measures will be defined by each member state and will include the protection of soil, habitats and landscape features. Inspection of a number of sample farms on a yearly systematic basis will ensure that the standards are being met. 

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