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Eustice: Defra on Right Path for Growers

Former Defra secretary of state George Eustice has stated that there is a consensus among all major parties that area payments, "which are subsidies for land ownership, have no place in the future, and that the general thrust of the Government’s plan, although everyone has articulated their differences on it, is indeed the right one".

He said during a Parliamentary agriculture debate: "It is also important for us to understand why the Government decided to get rid of direct payments—payments for the ownership of land, which is what the basic payment scheme and, before it, the single payment scheme essentially were. This dates back to fairly recent history in the mid-2000s. In 2005, there were negotiations on reform of the common agricultural policy, and as part of the so-called Fischler reforms, there was a great deal of talk about decoupling farm subsidies from production.

"Economists throughout the European Union, and here in our own Treasury, were obsessed with the need to get rid of what they called production subsidies, which they regarded as being market-distorting, but they only ever intended the payments for the ownership of land to be temporary. Indeed, when this was discussed by the European Union in the early 2000s, it was mooted that the direct payments, or area payments, would be phased out by about 2020.

"However, what we really did by introducing direct payments was to replace one subsidy—for production, which was market-distorting—with another, which was equally distorting. There is a fair amount of evidence that within the first two to three years of the introduction of direct payments for the ownership or tenure of land, about half the entire BPS budget disappeared in inflated land rents, which meant that those who owned land were able to charge higher rents to those who needed to rent land in order to farm. That is a classic example of what happens when we introduce a market-distorting subsidy, which is what the BPS payment was.

"It is sometimes said that the BPS payment is an income support payment—that it helps to support farm incomes, and that it has a value almost as a social security payment—but I think that is absolute nonsense, and I did look at the issue carefully during my time at DEFRA. The truth is that 50% of the BPS budget goes to about 10% of the wealthiest landowners in the country. If we were seeking some sort of income support mechanism to help farmers who could not afford to carry on, and we wanted to keep them in the landscape that they were in for social reasons, we would means-test that benefit. We would not have a system whereby the vast majority of the budget went to the wealthiest landowners while some of those trying to make a living in marginal landscapes received nothing, or next to nothing.

"It is often said, too, that the BPS helps to support food security. Again, that is absolute nonsense. By its very definition, the introduction of a subsidy for land ownership was, as it was described at the time, a decoupled payment. It was explicitly delinked from any food production. Look at the way the BPS payment worked in the last 10 years or so of its life. Look at the big sectors in the UK that produce most of the agricultural output. Look at horticulture, the top-fruit industry and companies such as G’s, which produces a big proportion of this country’s salads. Look at the pig and poultry sectors. None of those sectors gained anything whatsoever from the BPS payments, even though they were the backbone of food production in this country.

"There would probably have been thousands of people across the country who were able to claim BPS payments just because they had more than 5 hectares of land, even though in many cases they were messing around with a few ponies and not producing any food at all. When I was in DEFRA, I discovered a rather extraordinary statistic: 30% to 40% of sheep farmers never received BPS payments. The reason is that the landowner kept the BPS payment and got the sheep farmers to act on a grazing licence, making them ineligible to claim the payment. The sheep farmers producing the food got nothing, because the landowners who were renting out the land captured the BPS payment. For all those reasons, it made sense to get rid of area subsidies.

"Some people have said that, in a year when a lot of weather events have brought into sharp focus the risks associated with agriculture, maybe we need something like the BPS to help mitigate the risk. Again, that makes no sense whatsoever, because the sectors that really shoulder the risk are those involved in veg production and top-fruit production, and the BPS payment is a drop in the ocean in their accounts; it is not a significant part of their business model. In my constituency, I have some of the biggest brassica growers—growers of cauliflowers—in the country. They have had a horrendous year, but the few tens of thousands of pounds that they get from the BPS payment is neither here nor there in the scheme of things.

"There is a final reason why the SI is absolutely right: this House has already taken the decision to delink the legacy payments from the need to own land, and we now have a fixed reference period, which is what the delinked payments between now and 2028 will be based on. It makes no sense to delay the trajectory of winding down those payments, given that some farmers might have exited agriculture altogether, and others might have come into agriculture as new entrants and will not be eligible for the BPS payment. Having delinked payments from the need to own or have tenure of land, we must now stick to the programme and move forward."


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