A few days ago the think tank Policy Exchange produced a report (HERE) about the future of farming calling for a phasing out of subsidies by 2025. Policy Exchange is a centre right free market think tank and like a lot of economists on the leave side, they are keen to see consumer prices fall. Now the NFU has responded (HERE) cautioning against exposing the farming sector to very low world prices. On the Today programme on Friday morning an NFU representative was asking the government for clarity on future policy and for an assurance that we will get a transitional period after March 2019 and do not default to huge WTO tariffs with our largest trading partner. This she said would be disastrous.
The government has a big problem on future agricultural policy. There are three parts to the problem. The consumer wants high quality food at low prices and importing more at world prices would achieve that. The farmers want guaranteed prices so they are not exposed to the vagaries of the weather and other factors affecting the supply of food from this country and abroad. The treasury wants to reduce or at least not increase the subsidies paid to farmers and which make up a huge part of their income. Trying to balance these things while ensuring a reliable food supply and satisfying the environment lobby will not be easy.
If the CAP is simply continued no one will be happy. Change must come otherwise Brexit would have been a complete waste of time. Reducing import tariffs would satisfy the Treasury and the consumer because prices would fall. But farmers may go out of business and the nation would then lose valuable exports as well as becoming more reliant on foreign suppliers. This could be avoided by raising subsidies but the Treasury and taxpayer would be unhappy.
British farmers could compete if standards were lowered but the consumer and environmentalists would be unhappy. To keep high standards probably means continued subsidies if we are to retain our own agriculture industry.
There are so many variables. The tariff schedules and quotas we set at the WTO, the food quality standards we define, the trade agreements we sign, particularly with the USA, and the amount of taxpayer support the government is prepared to offer will all play a part as well as the political advantage of providing lower food prices to the consumer. Things will change. The price, quality, range and type of food we consume will be different after Brexit and there will be winners and losers. Managing change is always difficult and while change is happening we may find that no one feels they are the winner.
It is not difficult to see a situation where farmers, consumers and taxpayers are all losers.
