Gets better and better all this.
Don't let the article headlines fool you mate. Coming out of the EU Common Agricultural Policy is a good thing. The headlines are slightly misleading. And you need to look behind the subsidy payments and see who is actually benefitting from them. It isn't always the actual farmer.
Firstly you need to look at the word income in the headline. If you consider a business's income, you normally relate it to sales, but that isn't the case here. For instance the current annual GVA (essentially farm sales income less VAT and not including subsidies) for UK farming is around £10bn. Including EU subsidies that would be £13.5bn. So subsidies are around 25% of that. The income figures they are referring to in the article is the TIFF, or total income from farming, also referenced on the Government website as return on capital for entrepreneurs. In other words Profit. TIFF for UK farms in 2019 is forecast to be £5.6bn, so £3.5bn in subsidies is just under two thirds. Now for the small holder, who will likely be set up as a sole trader or partnership, they will need to take their own personal income out of this. But the larger farms will be limited companies or even trusts, and all salaries will have already been accounted for. So all the profit is available for dividends for the fat cats then.
You then need to look at who actually receives the subsidies. You would think it would be the farmers, and for the most part you would be right. But many of our small farms are tenanted and invariably these subsidies wind up in the landlords coffers via their rents. Subsidies are paid by the hectare so the bigger the farm the bigger the subsidy. The average subsidy for our farmers is around £28k, but many small holders only receive around £10k, with the really big earners getting close on £500k. Large amounts of these total subsidies relate to land that isn't even farmed. Hard to believe I know. It dates back to the nineties when many of our farms were paid "not to farm" their lands in a bid to try and control the level of farm goods being produced. I believe at one stage 1600 farms were on the scheme. The EU discontinued this in 2008 but I'm reliably informed that it is not well policed and many farmers still take subsidies without farming the land. Tens of thousands of acres of perfectly good farmland are believed to be unworked at present whilst the landowners happily live off the subsidies, which is shocking.
A recent survey has shown that around 40% of farmers have said they would make a loss if the subsidies stopped, the vast majority of these being small holdings. Most of the larger ones are already making big profits, even without the subsidies. The farms claiming subsidies of £20k or less will only have a reduction of 5% in 2021. The biggest reduction of 25% will only apply to those getting subsidies of over £150k, and most of these are already making big profits anyway and don't rely on these subsidies. In fact 80% of the UK subsidies goes to the largest 20% of land owners. Of the biggest claimants, 20% are billionaires and multi millionaires listed in the Times UK rich list and it's pretty much the same all over Europe. The CAP has become an annual handout to Europe's elite, and is not fit for purpose.
It is also widely accepted that these subsidies have led to an inflated valuation of agricultural land, with a correlated knock on effect on tenants rents. Prices peaked in 2016, and have been slowly reducing annually since then in the knowledge that when we leave the EU these subsidies will be reviewed and, for many, stopped. Reduced land values (and consequently land rents) are bad for the fat cats, but good for the vast majority of UK farmers, many of who are young tenants, possibly looking to buy their first pieces of land.
There is no doubt that Brexit will bring many challenges to our farming community, mostly surrounding potential tariffs in the event of a no deal, and also the potential for cheaper poorer quality imports, but fingers crossed that neither of these actually happen. But coming out of the EU Common Agricultural Policy has to be seen as a benefit for everybody linked to farming other than the ones that can afford it.
The new bill is not that bad on the whole. I'd rather that there were no planned reductions in subsidies at all for the smaller farms, but hopefully the majority will be able to absorb the 5% somehow. But 80% of the subsidies go to large business's that don't need it. Subsidies will now become an incentive/reward for farmers to do more for the environment and to farm in a more organic and environmentally manner. It will also reduce land prices which will have a knock on effect on tenants rents. They're good things aren't they?.
Also look at the savings that can be made. For the £3.5bn the UK receives from CAP, it is estimated that we contribute between £5bn and £6bn annually into the EU CAP coffers. So the UK will have the opportunity to spend that £5/6bn on the countryside, in theory at least. From 2021 the £3.5bn annual subsidy bill will start coming down, so more and more money will be available to spend on things like the environment, on protecting against storm damage, on providing grants to get new farmers to come into the business and start farming the multitude of farmland that is currently sitting there untouched. Once the current landowners stop getting their annual "interest" payments, they'll be pretty keen to either start farming it themselves or sell/lease the land to somebody who wants to. If not all of the £5/6bn is spent on the countryside, then it will go towards the extras being spent on health, schools, policing and infrastructure.
The NFU are looking after their own, as you would expect them to do. But this bill is being painted as another example of this Tory government right wing policies and another reason why Brexit is bad for the country. But that's wrong on both counts. The Tory fat cats are the big losers here (not that it will effect them in any way) and we are definitely better off out of the CAP rather than in it.
www.businessinsider.nl
