Britain’s farmers will need help after Brexit

Britain’s decision to leave the EU poses challenges for many sectors of the economy. Few are likely to feel the heat in the next few years quite as much as the country’s farmers. For decades, the British farming community has been the recipient of generous subsidies under the EU’s Common Agricultural Policy (CAP). Last year CAP payments to the UK totalled about £3bn, making up 55 per cent of farmers’ incomes. Once the UK leaves the bloc, these payments will come to an end, potentially endangering businesses across the country.

Theresa May’s new government is aware of the challenge this poses. Earlier this month, Philip Hammond, the chancellor, announced that the Treasury would replace any shortfall in EU funding to farmers that might arise between now and the end of the decade as Britain redefines its relationship with the EU. However, Mr Hammond is providing no more than a short term stopgap. Farmers remain highly uncertain about their prospects after 2020 and Mrs May and her ministers need to address how British farming support can be reconfigured in a post-CAP age.

Some free market thinkers believe Britain’s departure from the CAP is a golden opportunity to scale back — and even end — agricultural subsidies altogether. They believe the CAP has been hugely distortive because farmers are granted funds according to how much they produce. British farming businesses have therefore been unwilling to innovate, leaving agricultural productivity in the UK lagging well behind that of the US, for example.

Proponents of deep cuts in subsidy also believe they are a sine qua non if Britain is to forge new trade deals with non-EU states. The EU is so heavily committed to agricultural protectionism — imposing tariff barriers on outsiders while subsidising its own farmers — that its ability to sign trade agreements with developing nations has long been restricted. If the UK adopts a different approach, opening up its markets to food exports from, say, Commonwealth nations, it could gain significant new access for UK companies looking to sell services.

(From: The Financial Times August 21, 2016)