'˜Target public money at innovative farms', say peers

Income support for EU farmers should be protected because the conditions for agriculture are more challenging than in many other major producing countries, but public money should not be used “to simply prop up inefficient farmers”, according to a report by the House of Lords’ EU Energy and Environment Sub-Committee.

Given that the farming industry is expected to provide public goods, there is a case for one-off financial aid in certain circumstances - such as to negate the impact of the Russian trade ban - however policy should “display much more explicit links” between expected outcomes and the use of public funds, the report states.

All farming sectors are suffering from a lasting downturn and the Government needs to take a lead in equipping UK farmers with the knowledge and expertise to calculate and manage their costs, the report adds.

A downturn blamed on a global oversupply of produce, driven largely by the withdrawal from markets by Russia and China, has seen the average milk price fall by more than a third, pig meat by 30 per cent and feed wheat by almost 40 per cent in the last two years, figures from the National Farmers’ Union (NFU) show.

Baroness Scott of Needham Market, the committee’s chairman, said: “Farmers across the EU do a vital job in ensuring the safe supply of food, managing the land and contributing to the wider rural economy. They do so in the face of risks including price volatility and unpredictable political decisions.

“Evidence we received suggested it is time for the Common Agricultural Policy to be reformed to more fully recognise the holistic service farmers provide for society by directing funding towards the provision of public goods, including environmental management, food security and stewardship of the land.

“We believe that income support for farmers in the UK and in the wider EU should continue as the conditions for agriculture are more challenging than in many other major producing countries. Nevertheless, public money should not be used to simply prop up inefficient farmers.

“Direct Payments still have a role to play and we do not propose a move to a US-style insurance-based approach. However, there is a real risk with the pronounced focus on blanket income support, as opposed to more targeted subsidies, that innovation is stifled and new farmers are discouraged from entering the industry.”

The Baroness added: “Last year we saw catastrophic flooding in parts of the UK which caused real hardship for farmers in the affected areas. One-off support packages can help farmers through such episodes beyond their control, but a long-term policy should focus on building the sector’s resilience to withstand a wide range of risks including low prices. Our inquiry found that better business skills are key to competitive farm businesses.”

Peers recommend the Government encourages tenant farmers who face barriers to diversifying their businesses, that it promotes the use of appropriate “financial instruments” to help farmers manage volatility, and that it works with the private sector to develop new financial tools that could be accessed through the EU’s Common Agricultural Policy (CAP).

They are recommend the European Commission considers restructuring the CAP around the provision of public goods by potentially removing the distinction between direct payments and rural development funding.

The NFU welcomed the findings. The union’s president Meurig Raymond said: “It is clear that over the past 24 months, with prices where they are, many farmers would struggle to continue in business. The NFU believes that the decoupled direct payments received by farmers by way of the Basic Payment Scheme (BPS) should remain at the core of the CAP and that the primary purpose should remain primarily an economic one.

“The direct payments provide a degree of income stability which enables farmers to maintain productive capacity despite volatile agricultural markets and climatic shocks. They provide some compensation for farmers in the EU who meet higher production standards. They provide a security against which farmers can invest and leverage additional private investment from banks and they allow farmers to deliver a range of wider public benefits that flow from the management of agricultural land. These are in addition to the basic public good of a secure supply of safe, high quality food.”