Westcountry farmers are anxiously awaiting the outcome of the UK’s Brexit negotiations, despite reassurances from the chancellor Philip Hammond that the Treasury will guarantee the £6bn currently handed over by the Brussels, the bulk of it going to agricultural communities and poorer regions.
The Common Agricultural Policy accounts for nearly 40% of EU spending with British farmers receiving £2.9bn of the budget in 2014-15.
Solicitor Andrew Lugger – a partner in Plymouth-based law firm Curtis Whiteford Crocker where he specialises in commercial property and agricultural work – says uncertainty has caused great concern in the farming community: “Nationally, they are very concerned about the money they get in subsidies in the form of the Single Farm Payments (now the Basic Payment Scheme), they want to know if there will still be subsidies from the British Government and will they be at the same rate? It’s never going to be more, but if they get less money, it will have a knock-on effect.”
The Common Agricultural Policy, or CAP, was established nearly 60 years ago to boost agricultural productivity across Europe, currently sustaining around 12 million farmers. About 55% of farming income in the UK comes from CAP support.
One outcome of the uncertainly caused by Brexit that Mr. Lugger has observed in the farming community is a reluctance to borrow money. This is despite the Bank of England – while cutting the base rate last month (August) – providing a £100bn boost to encourage banks to make more money available to its customers in the form of loans. He states: “Farmers are not prepared to borrow money at the moment, they rely on the subsidies for their income and look at loans for things like capital improvements. Banks have a large budget to lend, but the farmers are not prepared to take it up”.
“On one hand they see the economic side of Europe as an emotive issue. Many of them are conservative with a big and a little ‘c’. They despised the regulations foisted upon the agricultural sector over the last 30 years, but they want the subsidies. They want to kick Europe into touch because they are sick and tired of all the nonsense”. “It’s only health and safety law which has its roots in the Victorian era. All the other farming directives, all the regulations, have come from Brussels. You can understand farmers being aggrieved. And if it’s not Europe, it’s big business – like the supermarkets – telling them what to do. I’m sure people are unaware of it, but a change in subsidies would affect the consumer,” says Andrew Lugger.
“If the subsidy disappeared, the cost of food will go up. We need to protect supply and that needs to be at the forefront of the political agenda”.
The CAP originally set out to support farmers and growers by propping up market prices – leading to the bizarre 1980s phenomenon of butter mountains and wine lakes. The response from the EU was to introduce quotas on everything. Single Farm Payments, which followed, rewarded farmers for particular land use, later supplemented by incentives for environmental measures. The current Basic Payment Scheme is similar to the former Single Payment Scheme. The claimant must hold entitlements and match them on a given date each year with eligible land.
Mr. Lugger is concerned about the possible ramifications of the reluctance of farmers to take up loans. “In any other commercial sector, businesses would take the money up. The manufacturing or service industry can’t remain static. In farming, business comes to an abrupt end if subsidies go. Agricultural managers at major banks are telling me they have the budget for loans – the money is out there and interest rates are low. But the farmers don’t want to borrow.”
“It’s the uncertainty. Who knows what is around the corner?”
Where does this leave the farming industry? Andrew Lugger has noticed the impact on family farms. There’s been a cultural change in the farming community and children aren’t always prepared to take on the business. He adds: “I act for a lot of farmers giving tax advice and on estate planning. There are some reliefs available if you’re passing the farm on and we try to keep it in the family.” “But a major problem is that the culture has changed. There’s nothing you can do to influence children once they’ve made their mind up and some of them simply don’t want to take a farm on.”