UK Environment Secretary Michael Gove yesterday set out proposals to replace EU farming subsidies post Brexit involving a drastic overhaul of the incentives on which the regime is based.
Instead of paying landowners according to the amount of land they have, which is what the EU’s Common Agricultural Policy boils down to, the new system would reward farmers who try to enhance their environment by planting woods, creating wildflower meadows and providing habitats for wildlife.
The shift would happen sometime after 2024, with subsidies set to remain at the current EU level – £3 billion ($4 billion; €3.4 billion) a year – up to a date that Gove said would be subject to consultation. He hopes the UK will leave the CAP in 2019, when Brexit formally happens, with a “transitional period” in the following years.
The speech elicited some warm responses, such as that of Patrick Begg, rural enterprise director of the National Trust. “Gove’s commitment today is another step in the right direction for the future of our countryside,” he said. “These changes will help to shape a sustainable future for farming, while giving birds, bees and butterflies the environment they need not only to survive, but to thrive.”
In his address, Gove decried the CAP has “unjust” and “fundamentally flawed by design”, with the largest landowners receiving the most public money. Farm subsidies “must be earned,” he said, arguing that it was time for “a new deal.”
The short straw
Observers reacted by demanding more clarity on what this new deal is going to be. “Assurance that the current scheme will be lengthened will allow farming businesses to start planning for the future. However, as to precise details, the speech poses more questions than answers,” noted Tim Jones, head of rural division at real estate agent Carter Jonas.
Such doubts were echoed by Fergus Ewing, Gove’s counterpart in Scotland, who said the minister’s proposals “leave far too many questions unanswered for any comfort to be taken.”
Some went further. Jeneiv Shah, a deputy portfolio manager at Sarasin & Partners, told Agri Investor that the main implication of the reform for private investors would likely be a fall in land values prompted by a decline in net income. Recurrent, stable subsidies would be replaced by rewards farmers have to pay for, he observed.
The extent of the decline would be contingent on how much farmers’ spend climbs relative to income, Shah said, though he observed that such effects would be muted while the current system remains in place. He suggested the weak pound, attracting overseas investors, would also help support land values in the short term.
But he was not optimistic about the changes’ broader impact on the rural economy. A proportion of farmers who don’t own land, he suspected, will cease to be tenants, as reduced incomes make it hard to pay rents. That could very well result in further consolidation, he said – a development at odds with Gove’s intended outcome.
In the long term, he said, the new regime would help achieve a more sustainable agriculture in the UK, both environmentally and economically. In the interim, however, Liberal Democrats leader Vince Cable said farmers were not immune to “a lot of turbulence and distress.”