January 9, 2016

Brexit & The Importance of CAP Payments to British Farming and the Countryside

Filed under: Agriculture, Brexit, CAP, Uncategorized — drderrick @ 1:29 pm

The upcoming referendum on UK membership of the European Union will be one of the most important decisions in a generation for British farmers. Passionate views are held on both sides of the argument, and many claims – both for and against – will be made. One thing we do know is that if the UK votes to leave the EU (Brexit) the European Common Agricultural Policy (CAP) will no longer apply to British farmers. Undoubtedly there would be benefits of leaving the CAP, but there would also be some potentially important losses as well. Chief amongst those losses would be the loss of the £3 billion CAP budget. Broadly speaking, from this £3 billion some £450 million is used to fund the agri-environment schemes, and the balance – £2.5 billion – supports farmers through the SFP It may well be that the HM Treasury will maintain the payments to farmers from the overall budgetary savings of Brexit, but they may not. Without clear unequivocal assurances from HM Treasury that the payments will be maintained, there is a risk that Brexit will mean the end of the Single Farm Payment (SFP).

What would British farming look like if the SFP ended? This is a complex question, and it is not possible to foretell exactly what would happen. The prosperity of British farming is influenced by many more factors than the SFP, and farm businesses will respond to the changes in the market that the end of the SFP would cause. Nonetheless, we can get a fairly good idea of the scale of the risk of losing the SFP by examining the latest Farm Business Accounts (FBS) for England alongside other official statistics published by Defra.

The FBS breaks farm business income down into four key areas: income from farming, income from diversification, income from agri-environmental schemes, and income from the SFP.

For All Types of farms, the latest accounts (2014/15) show:

FARMING income: £2100, down 69% yoy
DIVERSIFICATION income: £9300, up 11% yoy
AGRI-ENVIRONMENT income: £5900, up 13% yoy
SFP income: £22,400, down 2% yoy
TOTAL FARM BUSINESS INCOME: £39,800, down 8% yoy

But these are aggregate figures for all farms of all types, and there is a wide range of size and business performance amongst the 103,000 farm businesses in England. Fortunately, the FBS also provides accounts for the different farm sizes and performance groups, as well as for the different types of farm, which allows us to examine more closely the consequences of different changes.

Assuming income from farming and from diversification remain unchanged, and that the agri-environment schemes remain fully funded by HM Treasury, by removing the SFP from the farm accounts we begin to get a picture of what would be at risk if the SFP ended.
Over 50,000 farms – over half of all farms in England – would be at risk of closing because their total farm business income would be negative. Unless income from farming and/or diversification improve significantly, all the lowest performing farms, except in horticulture, would be at risk, as would the medium performing farms in general cropping, mixed farming, and both lowland and upland grazing livestock. Overall, the end of the SFP would also mean farmland prices would fall significantly and seriously impair farm balance sheets.
• The farms at risk currently employ over 80,000 farm workers.
• The farms at risk currently manage some 7 million hectares of land – about 45% of all farmed land. To give this some perspective, currently around 50,000 hectares of farmland are marketed each year in England. While we have assumed that the agri-environment schemes are continued, it is unclear what would happen to all the environmentally-focussed land management regulations currently imposed through the SFP.
• The farms at risk currently produce over £10 billion – over 40% – of all domestically produced food. Some of this production will be replaced by higher performing farms, and some by imports, but it is a significant proportion of the domestic food supply

This analysis is not meant to suggest what will happen if the UK leaves the EU, but to provide an impression of the scale of the challenges that losing the SFP could cause. Some or all of the SFP may be maintained by HM Treasury after a Brexit, and there will be many other factors affecting what actually happens. But it certainly appears to lend support to the vital importance of the question posed by Meurig Raymond, President of the NFU, at this year’s Oxford Farming Conference: ‘How are we going to convince the treasury to support British farming?’


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