British Farmers Can Have a Bright Future

15/08/2016 12:54

Brexit will undoubtedly have a profound effect on UK farmers. Currently the UK is a member of the EU's Common Agricultural Policy (CAP), which dominates British agriculture. UK farmers now receive close to £3billion from the CAP, which constitutes up to 55% of farmers' incomes. There is, therefore, no chance of these being immediately dropped following Brexit without causing significant damage to the UK agricultural sector. Instead, the UK Government will need to prepare a long-term strategy to wean British farmers off these subsidiaries - through their gradual replacement with investment grants. The former strategy should consist of two main objectives: to increase overseas demand for British produce and to increase competitiveness through greater productivity and lower costs.

One of the major priorities for Dr Liam Fox, the new Secretary of State for International Trade, should be a significant push for British food exports. Whilst we are still a member of the EU, the UK will be unable to sign new trade deals and in the meantime Dr Fox should focus on increasing demand for British agricultural produce around the world. This will not be difficult. Several British farmers already produce high quality goods which are exported around the world, without the benefit of major trade deals. Improving British labelling and establishing a British Certificate of Regional Authenticity will help more UK farmers produce prestige goods which can then be marketed around the globe. A new junior minister responsible for increasing agricultural exports would be another easy way to boost the UK's agricultural sector.

Currently many UK farmers are held to ransom by domestic supermarkets and their demand for low prices. Basic economic theory tells us the best way to increase prices for specific goods is to increase demand. There are already calls for the government to implement public food procurement policies to favour British produce, alongside an investigation into the power of supermarket chains. Whilst there may be some merit to these, it is highly unlikely the UK Government will have time to examine and implement these complex policies any time soon. Increasing foreign demand for our UK produce is a much better solution. It will present British farmers with another option: If they find the prices offered for their produce by UK supermarkets to be too low, they can choose to sell their produce abroad. In the modern age of refrigeration and containerism, it is entirely feasible for UK farmers to export their produce to the other side of the globe.

It may seem an obvious point, but the best place to export food is to places where there are more people - ie to places where there are literally more mouths to feed. Europe is a continent in demographic and economic decline, so it makes little sense for UK farmers to try and increase their share of this already crowded market. Instead they should be helped in their efforts to export goods to growing markets in Asia and America. Establishing greater demand for UK produce is a far more sustainable solution to the issues facing British farmers. Subsidiaries and high tariffs may provide some comfort for UK farmers in the short term, but in the long run they will make the UK agricultural sector uncompetitive and inefficient. British farmers need only look across the English Channel to see the mess which unbridled protectionism has lead to.

In the long run protectionism damages the industries it was designed to safeguard, whilst also costing the country as a whole. It is certainly unfair to expect ordinary UK citizens to pay higher taxes to subsidies UK farmers in perpetuity, whilst also facing higher food prices as a result of tariffs on foreign produce. Instead, the UK Government should seek to gradually reduce direct subsidiaries - which currently make up over 2/3rds of total agricultural subsidiaries - and slowly replace them with investment grants focused on improving productivity. Removing many complicated CAP regulations will also provide a significant boost to UK farmers, reducing the amount of time they have to dedicate to unnecessary paperwork.

Overall there is much the UK Government needs to do to ensure the long term success of British agriculture. In the short term it needs to establish a British Certificate of Regional Authenticity and to encourage demand for high-quality British agricultural produce abroad. It needs to prepare a long term strategy to increase the productivity of British farms through the gradual replacement of direct subsidiaries with investment grants. This will make UK farms more competitive, enabling the reduction of agricultural tariffs through trade deals with the world's growing economies. This may seem tough, but it will be worth it.