Issue of support is complex

Commissioner Phil Hogan has hinted the next CAP will be greener
Commissioner Phil Hogan has hinted the next CAP will be greener
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The Conservatives have said in their manifesto that if they are returned to government they will maintain the same level of support for agriculture for the term of the next parliament. Assuming the next parliament runs until 2022, that would mean funding would be guaranteed for two years beyond the present commitment to maintain CAP support measures until 2020.

There is however a big gap between saying funding will be there and the issue of how that will be spent. There is also no indication of any allowance for inflation. Prudent advice remains that farmers need to prepare for an era when there will be less government support. That will drive efficiency the industry is capable of delivering.

Farmers have always responded to market signals and support changes and will do so again. Freed from the constraints of CAP regulations farmers should be able to become more efficient. That is the side of the bargain the government must deliver. If farmers instead end up outside the CAP with the same regulations, or an excessive zeal in applying new regulations, Brexit will have been for nothing.

Based on benchmarking figures there is a lot of potential for a more efficient industry. The challenge for those at the bottom will be to drive towards the middle, while those already there will need to drive upwards for greater efficiency and profitability. The loss of the safety net of direct payments makes this inevitable, and there will be those who will decide change is not for them. This is the natural process of the big getting bigger that has been a feature of agriculture for years, and the end of the CAP will accelerate it. When we finally know the support structures for the UK, they will come with a caveat that the funding should be seen as a transition from the CAP. Every penny going to agriculture will be seen by some in government as a loss to the headline grabbers of health and education.

When change of this magnitude is coming it is inevitable that people will look back to what they are losing. However whatever policies are decided will not be about a comparison of what we will have then against what we have now. Instead they will be a comparison between the UK policy and the post-2020 CAP. On that basis the change might well be less than people believe likely. A tough decision is looming for the EU-27 on the size and shape of the new CAP. The loss of the UK as a member state means a big hole in the budget. They will have to decide whether the paymaster countries are going to fill that gap, or trim back their plans to reflect a budget reduced by up to 15 per cent.

Even for the EU-27 it is beginning to look as though direct payments might have had their day, much as some countries want them to continue. We know there have been over 300,000 responses from the public on the future of the CAP. A campaign by environmental groups means these are largely pressing for a greener CAP. The farm commissioner, Phil Hogan, has already hinted this is coming, and that the emphasis will be more on the environment than sustaining farm incomes. That is an approach also likely in the UK. The commission is also talking in terms of more risk management tools and financial instruments, which would mean farmers taking production and investment risks with some support and insurance. Similar ideas have been mooted in the UK, although probably without loans via the European Investment Bank. That again blurs the differences between UK and EU-27 farm support.

In the EU there is already a big drive to boost food exports. This is about real markets, secured without subsidies, and this will be another similarity between how Brussels and London see the future. The pressure will be on to open new markets and for the UK government to quickly secure new trade deals. That is a big challenge, and one of the problems will be that the EU is already well established.

UK exports are now on the basis of agreements at an EU level. After Brexit the EU-27 will stop being our ally in these markets, becoming instead one of our biggest competitors with deep pockets for promotional activities and the ability to offer in return for trade a market of 500 million, against 60 million people in the UK.