Abolishing subsidies to farmers would result in lower food prices and higher levels of food production, a study claimed this week.
The Institute for Economic Affairs (IEA) said that the Common Agricultural Policy of the European Union was supporting less efficient farm business and disincentivising farmers to invest in their business.
The study, authored by Sean Rickard, claimed that the EU‘s current 55 billion euro CAP budget will increase to 63 billion euros by 2020 and that this 8 billion euros increase was coming “at a time when we can least afford it”.
As well as recommending that direct income payments for farmers should be phased out, a move he claims will save 40bn euros a year, he called for agricultural technology to be deregulated.
Prof Philip Booth, editorial director of the Institute of Economic Affairs, said: “British families are suffering hugely from increases in food prices; it is appalling that EU policies are making this situation worse.
“It is time the government took action on this issue and called on Europe to radically change course. It should abolish direct farm payments and encourage the adoption of technology to dramatically raise agricultural productivity. Calls by NGOs for more government control of food production would be totally counter-productive.”
And Mr Rickard said: “At a time when EU member states are desperately seeking ways to reduce public expenditure it is inexplicable that the cost of the CAP and in particular, perennial income payments to farm businesses, are not being questioned by member states.
“Yet the evidence is compelling: CAP expenditure is wasteful. Not only does it raise the cost of food to EU households but also it makes little contribution to visual amenities, biodiversity and sustainability.”
The IEA study claims that farm subsidies do not necessarily help bio-diversity and that their abolition would lead to a less than corresponding fall in farm incomes. It argues that “to a large extent” subsidies become capitalised in land values, and so thus increase costs to farmers.
Between 1992 and 2009 – the period since the introduction of direct payments under the CAP – the value of agricultural land and buildings in the UK rose 400 per cent compared with a 38 per cent increase in prices generally.
“This suggests that one of the effects of removing direct payments would be a decline in land prices, rents and associated production costs,” it said. .
Global food production is currently facing the prospect of failing to keep pace with demand and the EU farming industry’s ability to respond positively is often adversely affected by environmental lobbying from groups such as the WWF. This holds back the growth of food production and thereby pushes up prices.
The IEA said the CAP itself reduced incentives to research and adopt new technologies that will increase productivity.