Spending the money three times

The whole system of farm payments is up in the air. To be brutally frank, this isn’t surprising. On a general, first world level, governments have blown so much money on the pandemic they are scrabbling behind the sofa for loose change. I would be surprised if, in five years’ time, any country hasn’t cut its agricultural support, or moved the money from one heading to another so it can burnish green credentials whilst still claiming to support farming.

But here in the UK we’re perhaps further down the road than many others. The problem comes when you assess the money spent in agricultural support. Originally, when you delve back into the past, the initial purpose was to ensure that UK (and EU farmers) were able to compete against foreign producers who didn’t have the same costs, many of them imposed by EU and UK regulation. It has long been accepted that consumers are not willing to pay for the higher standards that those who lobby for them claim that consumers want. So if we want an agriculture in the UK (and the EU) farmers had to be compensated for the extra costs the state imposed.

As an aside I’ve been somewhat amused to hear civil servants and ministers say that farmers cannot be subsidised ‘just to obey the law.’ Funny really, the whole CAP was based on doing just that.

The problem came when all agricultural support was paid through one scheme, ‘single farm payment,’ or ‘basic payment scheme’. When the money went out in scores of different schemes it largely passed under the radar. But when it was paid out through one scheme, there was one damned big heap of money sitting there. Every lobby group, every other government department, cast eyes on that pile and tried to work out how they could get some.

One way was ‘Rural development’. After all it was the ‘second pillar of the CAP’ and the idea was that some money destined to go to farmers would be used to support the infrastructure that would help their businesses. In one case a particularly smart local authority got rural development money to pay for a bus shelter.

Then there was environmental spending. The idea now is to support farmers through environmental payments. In itself it isn’t a bad idea. The problem comes when government takes money from the SFP/BPS pot and puts it into the environmental pot. Remember, the regulations, the extra costs, imposed on the industry are still here, and frankly are not going to be removed. But doing the work necessary to get the environmental payments is not cost free either. So the farmer who moves across to environmental payments now has to pay the costs entailed in the schemes, and if there is a ‘profit’ the farmer still has to pay the cost of the extra regulation out of that. By definition there isn’t as much to put towards these regulations as there was.

Finally it’s been suggested that farmers might have to hire advisers. This is understandable. The House of Commons Committee of Public Accounts has produced its Environmental Land Management Scheme report this month. One comment was, “We are concerned that ELM [Environmental Land Management Schemes] will be too complex and bureaucratic, and will not cater for the full range of farm types and circumstances.”
So you have a scheme that is too complicated and bureaucratic and farmers will have to hire advisers to negotiate a way through it. Even if the money is paid for by the scheme, not by the individual farmer, the money is still being paid out of the same pot.

So now we are in a position where the scheme will pay expensive advisors to advise farmers what environmental schemes they should enter, but which they can no longer afford to join because they cannot make a living once they’re in them.

My advice to any farmer is to look at each scheme as if it were another crop. You have to ask yourself can you afford to grow it? What are the margins?

Now I’ve looked at the schemes and will apply for one on hedgerows, because, in reality, I’m doing that anyway. It is the only option of all the schemes that I can enter without it costing me more to earn the money (in a combination of new costs and lost production) than I’ll earn. It’s the only option that will not lead to me cutting production. As you’re the ones who eat that production, look forward to buying more from abroad.

Here’s the graph of world wheat prices for the last two decades. Still looking for cheap food?

Amusingly enough the government and the bureaucracy are also saying that farmers will have to become more efficient.

Let us look at the figures a moment Beef and Pork are both cheaper, allowing for inflation, than they were in the 1960s. The consumer can pay less, in cash terms, for milk than they did in the 1990s.We’ve had sixty years of driving prices down. Perhaps we should suggest that MPs and Civil Servants should prove their efficiency by going back to their 1995 salaries?

♥♥♥♥

There again, what do I know? Speak to the real experts

From Amazon in paperback or on Kindle

And from everybody else as an ebook

https://books2read.com/u/mggzxz

As a reviewer commented, “

I love Jim’s autobiographical musings. They make me feel that I am following him and Sal, his dog and manager, around the farm as he encounters the vicissitudes of everyday life. I feel I’m wandering around after him, with his great narrative style.

This book, along with the others in this series, are an absolute treat and gives us the opportunity to explore life in someone else’s head.”

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20 thoughts on “Spending the money three times

  1. rootsandroutes2012 January 11, 2022 at 4:42 am Reply

    ‘My advice to any farmer is to look at each scheme as if it were another crop. You have to ask yourself can you afford to grow it? What are the margins?’ Thank you, Jim. This is so simple, and should be so obvious, that I can’t imagine why it had never occurred to me.

    • jwebster2 January 11, 2022 at 6:30 am Reply

      A lot of farmers (probably a large majority) will have some sort of environmental project tucked away that is ‘a bit of a hobby.’ or a personal interest. They get no funding for it, it never occurs to them to apply for funding. It appears on no records and gets no publicity
      The problem can be when they see the schemes as a chance a chance to ‘expand the hobby’ but forget that it all has to be paid for 😦

  2. Doug January 11, 2022 at 6:21 am Reply

    I wrote a lengthy comment that Wordpess swallowed. Essentially that the public and many politicians simply don’t understand macroeconomics with a sovereign currency. Money doesn’t run out and can be used for whatever you want. A country is not a corner shop and doesn’t have a credit card. Productive investment is neither inflationary or detrimental to currency value.

    And to all those who believed that the UK government would substitute for CAP, all I can say is that having a trusting nature is laudable, but one always has to account for the nature of those making promises.

    • jwebster2 January 11, 2022 at 6:34 am Reply

      In this country we have 200 years of watching governments abandon farming when cheap imports are possible and then panicking and throwing money at it when you have a war or similar
      Actually what people forget is that the Second World war didn’t ‘finish’ but strategically morphed into the ‘Cold War’ where there were still hostile submarines patrolling out waters. This ended in the 1990s and it’s interesting that that decade was the threshold. After that prices in the EU and UK started to fall behind

      • Doug January 11, 2022 at 6:45 am

        Are you in any way surprised? Much cheaper to import than to grow it here. Farming is just the same as manufacturing in that respect. Commodity farming for retail is simply too expensive in the UK, it’s only niche products that can command a sufficient premium that can be affordably farmed here. Even Brexit supporting economists like Minford admitted as much. Consumers can look forward to either lower standards or higher prices. As the latter is probably much too politically unpalatable, we will see standards drop, as UK farmers are forced to compete, or more likely, just sell up.

      • jwebster2 January 11, 2022 at 9:33 am

        We’ve got the Athenian Dilemma. We rely on imported food, can no longer afford a fleet to enforce our will on the world and now have to grovel to the major powers who supply our grain.
        At least we’ve never yet given an American President divine honours 😦

  3. Eddy Winko January 11, 2022 at 7:40 am Reply

    We may look back on the erosion of funding for farming in the same way we look at the decimation of the coal industry, not very good at the time but now look at us, beacons of the green energy industry!

    • jwebster2 January 11, 2022 at 9:34 am Reply

      People have made the comparison, and it is valid. But the difference is that people shifted from coal to gas. They’re going to abandon eating for what? All we’re doing is exporting environmental degradation.

      • Eddy Winko January 11, 2022 at 10:43 am

        That was my point, it was a great lost opportunity 🙂 You would think that a self sufficient country would be a goal of any government considering how Covid was dealt with and the3 shortages that it exposed.

      • jwebster2 January 11, 2022 at 2:43 pm

        I suspect winning the next election takes precedence

    • Doug January 11, 2022 at 10:51 am Reply

      That’s a very good summary Jim. I suspect that the clash between the reality of the position and the historical narrative is going to be a horrible shock to many if it becomes even more explicit.

      • jwebster2 January 11, 2022 at 2:45 pm

        I may well blog about it 🙂

  4. Stevie Turner January 11, 2022 at 2:29 pm Reply

    MPs never forget to vote themselves a pay rise.. They have trouble living on around £80,000 per year.

    • jwebster2 January 11, 2022 at 2:46 pm Reply

      poor lambs, slumming it like that

      • Stevie Turner January 11, 2022 at 2:47 pm

        I know … it’s dreadful.

      • jwebster2 January 11, 2022 at 2:59 pm

        I wonder if we ought to help them out with vouchers for the foodbank?

      • Stevie Turner January 11, 2022 at 3:02 pm

        Perhaps they’re having trouble finding exorbitant fees in order to send tribes of progeny to private schools in order for them to carry on when Daddy or Mummy leaves off.

      • jwebster2 January 11, 2022 at 3:14 pm

        Well somebody’s got to inherit the legal practice and the three houses

      • Stevie Turner January 11, 2022 at 3:34 pm

        Indeed. And who’s going to pay for Araminta’s horse-riding lessons?

      • jwebster2 January 11, 2022 at 3:35 pm

        The temptation to make an off colour comment is almost overwhelming 🙂

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