Impact of Brexit on the Agricultural Bill

The agricultural sector plays a vital role in the UK’s economy, contributing £109 billion in 2015 (Defra, 2017). The farming industry forms the core of the agricultural sector and acts as the base of the domestic food-supply chain, therefore it is imperative that the UK’s farming industry is protected by Governmental law given the potential uncertainties that come with Britain’s imminent withdrawal from the E.U.

If the UK Government’s negotiations with the E.U continue down their current path, the result is likely to deliver a hard Brexit which would mean leaving both the single market and customs union (Chatham House, 2018). This type of Brexit risks compromising the ability of UK farms to act as a profitable business that supports the local and wider communities. To negate the potential impact of Brexit, a primary concern of the UK Government should surely be to ensure that sufficient levels of income support for farmers are maintained after the Common Agricultural Policy (CAP) is phased out.  Achieving the best possible access to Europe’s markets following the UK’s expected departure from the Customs Union, alongside gaining increased access to rest of the world’s markets, will be crucial to enable British farms to be competitive on an international scale. In addition, efforts must be made to secure farmers’ access to the supplies of migrant and seasonal labour, given that 85% of seasonal workers currently arrive from Bulgaria and Romania (Travis, 2018).

However, we believe that despite the uncertainties that currently exist regarding the UK’s departure from the European Union, in the short term at least, Brexit provides numerous opportunities to create a more efficient and self-reliant agricultural model, which better encompasses environmental welfare. In particular, amended funding systems for farming businesses can be made more universally available. Conceivably, UK independence could act to incentivise increased production and place higher emphasis on providing improved environmental services.  

We enter these negotiations to discuss three major objectives (outlined below) which we believe are integral to the future success of the agriculture industry and which are entirely practical in terms of their implementation.

1. Key Negotiation Objections:

-          A continuation of direct payments with additional money funded into ‘pillar two’ type subsidies.

-          Increased support for farmers as they implement appropriate environmental practices.

-          The introduction of a more rigorous productivity programme with investment targeted into the adoption of new farming technologies.

Red Lines:

-          Current funds made available as direct payments must not decrease for a 7-year period following Brexit with a view to possible extension. 

We believe it is essential that current levels of direct payments under CAP are maintained by the Government after Brexit. With the disruption Brexit will inevitably cause in the short-term, direct payments will be more important than ever to manage volatility. In 2014/15, 19% of UK farms made annual losses, with around 50% of farms failing to make in excess of £20,000 per year (Defra, 2016). It is clearly unrealistic to assume the abrupt change to a market-orientated system, whereby all investment received is based upon paying farm for ‘public goods’, would not result in many farming operations ceasing to operate. The problems caused by providing a lack of direct subsidies was made clear in New Zealand where it resulted in farmers focusing solely on profitability, leaving little opportunity to account for the environmental costs (Diamond, 2017).  We also strongly disagree with the introduction of any insurance type models, as they do little to combat climate change or risk of disease to animals, but instead do more to encourage greater risk taking (Chatham House, 2018). We would welcome the idea of farms being rewarded for the environmental services they provide as this will undoubtedly promote sustainable farming; However, any payments based on the output of ‘public goods’ should not be introduced if the effect of such action would necessarily compromise existing subsidies. The NFU does, however, recognise that direct payments, in their current form, are not distributed fairly amongst farmers and do not fully incentivise farms to optimise output in conjunction with making environmental welfare a priority. We therefore propose higher proportions of funds should be made available to ‘pillar 2’ type payments instead of ‘pillar 1’, which currently comprises of 75% of available funds (Helm, 2016). Not only should this increase agricultural competitiveness, it will place a higher emphasis on providing environmental services whilst helping smaller rural farms to be better supported.

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Creating a farming industry with environmental welfare at its core is a necessity for a healthy agricultural sector going forward. If environmental concerns are put aside, the long-term effects will result in the degradation of farm land and a decrease in production. As mentioned previously, we would like the UK Government to increase its funding of phase two type payments but also place more rigorous environmental qualifying standards to receive the payment. There have been criticisms that the environmental obligations CAP imposed to receive its payments did not go far enough (Environmental Agency, 2018); Brexit provides the opportunity for the UK to encompass a broader scope of issues such as flood management, air quality, health and wellbeing as well as landscape benefits, climate change mitigation, soil management, water resources and biodiversity (Environmental Audit Committee, 2016. Although the Government’s plan to move to a funding system whereby farms are paid for the environmental services (public goods) could be beneficial, it cannot be a replacement to direct payments. If bassline subsidies (‘pillar 1’) are abolished, the UK countryside could become polarised into areas that are ‘biodiversity winners’ with particular farms being forced to implement industrial farming practices which have no environmental benefit, simply to stay afloat financially. Particular attention must be given to the preservation of E.U. laws regarding animal welfare standards, pesticides regulation and food labelling requirements, so that farms continue to produce safe, affordable food whilst maintaining high environmental and animal welfare standards (Burns, 2018).

The agricultural market has been quoted to be 61% sufficient by (House of Lords 2018)., with a trade deficit of £23 billion. Clearly the UK farming industry needs become more self – sufficient, especially so, given the food supply chain faces much uncertainty post Brexit. Measures to support more productive and resilient farms will involve the Government providing specific investment targeted at research and development (R&D) for farmers. Not only do farmers require funding to invest in modern farming technologies and equipment, but also the access to the provision of training and market knowledge, so that these investments are used to maximise productivity gains. In particular, investment should be concentrated on the use of digital technologies, advancements in crop and livestock genetics/breading techniques and integrated crop management systems with environmental welfare being a top priority (Ncl.ac.uk, 2018). There should also be an emphasis on ensuring all farmers are involved in research programmes so that they are easily adopted. Given issues facing an ageing farming population (average age of 59) (Helm, 2016), young farmers entering the industry should be granted a separate individual subsidy so that they can have instant access to the latest farming technologies enabling new talent to become instantly competitive.

-          Defra, Agriculture in the United Kingdom 2016, May 2017

-          Chatham House. (2018). The Implications of Brexit for UK, EU and Global Agricultural Reform in the Next Decade. [online] Available at: https://www.chathamhouse.org/publication/implications-brexit-uk-eu-and-global-agricultural-reform-next-decade [Accessed 13 Nov. 2018].

-          Travis, A. (2018). Decline in EU workers hits UK agriculture, Lords inquiry told. [online] the Guardian. Available at: https://www.theguardian.com/environment/2017/jan/18/decline-eu-workers-hitting-uk-agriculture-lords-inquiry-told [Accessed 13 Nov. 2018].

-          DEFRA, (2016) (Welsh Assembly) and RERAD (Scottish Government), 2016. Agriculture in the United Kingdom 2015 Crown Copyright

-          Diamond., E. (2017). Brexit: Hope for our Agriculture. Report for Friends of the Earth.https://www.ole.bris.ac.uk/bbcswebdav/pid-3568375-dt-content-rid 10082324_2/courses/GEOGM1409_2018/Brexit%20-%20Hope%20for%20our%20agriculture.pdf [Accessed 29st October, 2018].

-          Helm, D. (2016) British Agricultural Policy after Brexit. Natural Capital Network Paper 5. Retrieved from: http://www.dieterhelm.co.uk/natural-capital/environment/agricultural-policyafter- brexit

-          Environmental Agency, (2018). Response to Defra consultation – Health and Harmony: the future for food, farming and the environment in a Green Brexit. [online] Available at: https://www.ole.bris.ac.uk/bbcswebdav/pid-3568375-dt-content-rid-10082346_2/courses/GEOGM1409_2018/Environment%20Agency%20-%20Response%20to%20Defra%20Health%20and%20Harmony%20Consultation.pdf [Accessed 9 Nov. 2018].

-          Environmental Audit Committee, 2016. The Future of the Natural Environment after the EU Referendum para. 107.  http://www.parliament.uk/business/committees/committees-a-z/commons-select/environmentalaudit-committee/publications/

-          Burns, C., Gravey, V., and Jordan, A., (2018). UK Environmental Policy Post-Brexit: A Risk Analysis, a report for Friends of the Earth, Brexit and Environment, March, 2018.

-          House of Lords (2018). Brexit: agriculture. [online] Available at: https://publications.parliament.uk/pa/ld201617/ldselect/ldeucom/169/169.pdf [Accessed 13 Nov. 2018].

-          Ncl.ac.uk. (2018). Brexit: how might UK agriculture survive or thrive? Some early indications.. [online] Available at: https://www.ncl.ac.uk/media/wwwnclacuk/centreforruraleconomy/files/brexit-how-might-agriculture-thrive-or-survive.pdf [Accessed 13 Nov. 2018].