Opinion: The future of the CAP – specific proposals by Liberal Democrats

This is the second of three articles, based on interviews with Lib Dem MEPs Phil Bennion and George Lyon, covering the future of the Common Agricultural Policy (CAP). This article addresses the specific changes they want made to current EU plans for reform.

When I spoke to him, Phil Bennion explained to me that, while Lib Dem MEPs are broadly supportive of the Commissioner’s plans for reform (the key idea being to start spending 30% of ‘pillar one’ payments on environmental elements), they have serious concerns with the detail.

An example he gave was the proposal for farmers to have to turn 7% of their land into ecological focus areas. Phil warned that this would mean that a lot of farmers would have to return to set-aside to meet the 7% requirement.

Phil Bennion MEP at the European Parliament

Phil also told me that, while set-aside has “fringe ecological benefits”, it is also “far less efficient than delivering biodiversity-rich ecosystems directly on very small areas of land.”

His main fear was that the result would be the EU would be “reducing a lot of production for a very small environmental output.”

He warned that the, as the demand for food would not fall, the consequences would be that “that demand will have to be produced elsewhere and will have a counter-productive environmental impact elsewhere… it will actually have an overall negative effect on the global environment.”

As a result Liberal Democrats are favouring a 2% figure as what the EU “could probably get away with… without having too much negative impact.”

The Commissioner is also proposing three crops grown on every holding. But Phil explains that this would be “completely impractical”. He gave me an example of a farmer on the outskirts of Birmingham who has a small area of arable land, hemmed in by three motorways, on one holding number.

“He’d have to grow three different crops on that in every year which means a convoy, with police escorts, to get his machinery there in any case, once a year for the harvest, but they’d have to do that three times… [the requirement] makes large chunks of land actually uneconomic to farm.”

Instead, Phil and George are advocating that there should be what Phil describes as “a list of seven or eight or ten green measures that [farmers] pick three of – because it would give individual farmers in individual areas flexibility to choose greening measures which suited their particular situation.”

Another proposal that George and Phil take issue with is for a €300,000 cap on the subsidies that any farm can receive.

Phil told me that a flat cap “creates another set of perverse incentives – you create an incentive for farms not to get any bigger.”

And George Lyon’s opinion was quite clear as well. “As liberals we believe that if we move the public subsidy to one where you reward the delivery of public goods then I’m not clear why you would want to cap the payments as long as the famer’s delivering.”

The alternative they advocate is to increase the tapered taxation of the subsidies instead. Phil Bennion says “that could be done very simply because we’ve already agreed that it can be taxed.”

George Lyon MEP

When I asked George Lyon how confident he was that the changes they are pushing for would be made he said “I think we’ve got a reasonable chance.”

“I’m working closely with the Socialists and our EPP colleagues and I’m quietly confident we can get them to sign up to some of the things that we want to see changed… we’ve got allies within the governments as well – quite a few of the governments who have liberal parties in the coalition are actually interested in the kind of things we’re suggesting. So I think we’ve got a chance to build quite strong support among the countries and within the parliament itself.”

The third and final article next week will cover the arguments as to why a CAP is needed at all.

* George Potter is a councillor in Guildford

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7 Comments

  • Abolish it – job done. Or leave it to member states to decide on what Farming policy they should have. If any.

  • Alex Sabine 18th May '12 - 5:01pm

    Indeed, Dan.

    When New Zealand’s Labour government took the momentous decision in 1984 to abolish all 30 farm subsidies and export incentives there was a painful adjustment process. Farm incomes plunged by 40%; land and stock prices slumped.

    The government predicted a 10 percent failure rate, but in the event only 1 percent of farms (about 800 commercial farmers) went of business. Sheep farmers, the most heavily subsidised group, unsurprisingly were the hardest hit by the elimination of subsidies. Those farmers who were heavily in debt at the start of the reform period were hit hard by rising interest rates, and a transition programme was negotiated to help write off some of these debts.

    Within six years of the subsidy flow being turned off, recovery and renewal was underway. Land values, commodity prices and farm profitability had stabilised and started to rise by 1990. Productivity began to grow, farming’s share of GDP actually rose as did the rural population, and family farms survived and went on to thrive.

    Since subsidy removal the agricultural sector has grown faster than the rest of the economy. Annual productivity gains before reform were about 1%. Since 1986 they have averaged 5-6% – higher than any other sector in the country’s economy.

    Agricultural produce now accounts for nearly 60% of all New Zealand’s exports, not just to favoured Commonwealth markets like the UK but to a global market. Farmers have learned to diversify. During the subsidy era New Zealand had 72 million sheep – 18 for every human. The number is now roughly half that level, but more efficient methods mean it still produces the same amount of meat, and meanwhile freed-up land was turned over to dairy farming and to growing grapes for the country’s ever more successful wine industry. Rural tourism has boomed.

    This powerful article from BBC reporter John Pickford conveys the cultural shift that has occurred in New Zealand agriculture: http://news.bbc.co.uk/1/hi/programmes/from_our_own_correspondent/3747430.stm. It turns out that there is life – indeed, a better life – after subsidies. As Pickford says, young farmers in NZ “just could not conceptualise what having subsidies might mean… They could talk fluently about the impact of international currency movements on their markets. But subsidies? They did not know and they did not want to know.” Strikingly, having been weaned off subsidy, farmers themselves didn’t want them back, and advice farmers in other countries to “get off the subsidy gravy train as fast as you possibly can”.

    The Rodale Institute, a non-profit US institute dedicated to organic farming research, looks at the New Zealand example in depth here: http://newfarm.rodaleinstitute.org/features/0303/newzealand_subsidies.shtml

    An interesting Q&A with the agricultural eeconomist Daniel Sumner explores these issues, and in particular the follies of US farm subsidies, in considerable detail here: http://www.freakonomics.com/2008/07/24/the-illogic-of-farm-subsidies-and-other-agricultural-truths/

    Finally, for those who imagine that the US is a bigger offender than the EU when it comes to farm subsidies, at least in quantitative terms that isn’t borne out by the OECD figures. These show that agricultural support as a percentage of the value of gross farm receipts is 20% in the EU – higher than the OECD average – versus 7% in the US. In New Zealand it is 0.5%, with the residual assistance taking the form of funding for agricultural research.

  • Alex Sabine 18th May '12 - 5:02pm

    Apologies, I forgot to unbold the text after “all 30 farm subsidies” in my second sentence… Didn’t mean to shout!

  • I think there is still a need for Government support for agriculture, but only when there are specific crises, drought, foot and mouth etc. Currently farmers get too much support in the good years and not enough in the bad years. The subsidies end up largely in the supermarkets’ profits anyway.

  • I see you claim removal of subsidies in New Zealand was a success. From the vantage point of the UK, The cost of New Zealand lamb has moved from a cheap meat to a dear one over the time scale you state, from pre-1990. I’d suggest that if the shop price had not gone up a lot, then your farmers would be gone. UK sheep farmers have also benefited from rises in shop prices which reflect world rises in all sorts of agricultural products. There may be a case that subsidies are no longer necessary, but I dont see any case that removing subsidies automatically makes people more profitable.

    Set aside was removed because there were world crops shortages rather than huge unwanted surpluses in the EU. Set aside was to stop people growing crops which no one wanted. Everyone thought it was insane at the time. Last I heard there are no longer surpluses so the logic for maintaining it no longer exists.

    Requiring people to grow three crops? Is that aimed at forcing small farmers out of the system? Perhaps it is directed at the leisure sector, where a farm may do nothing other than graze horses, which I presume would just count as one crop. I dont understand what the farming justification for this would be but it is contrary to modern concepts on efficient farming. Perhaps someone does not like subsidisng the leisure industry, but what about those sheep farmers?

    Where I live in Sussex the farm land is downright marginal. Land is already essentially abandoned with its owners just collecting the subsidy and maybe renting it out to horses just to keep it tidy. Maybe that isnt what subsidy was intended to be for, but it is not a profitable small scale industry. We remain interested to see what will happen to the neighbouring 75 acre farm which has been for sale for 1.5 years and not really farmed since the previous farmer died about 2005. Before that, they just grazed sheep.

  • Jonathan Price 7th Jun '12 - 10:01am

    This is one of the many aspects of EU law and policy that can benefit from a de minimis exception. In this case all farms of less than, say 20 hectares, would be exempt from the policy, thus removing in one stroke lots of the problems associated with it.

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