Farmers face ‘cuts agenda’ as Brexit unravels EU farm subsidies

British farmers stand to lose more than half of their income under a bad Brexit deal. [Amanda Slater/Flickr]

Brexit raises big questions about the viability of agriculture on both sides of the Channel, as the sector currently relies on the EU for around half of its income. UK farm profits may fall dramatically as the sector adjusts but EU farmers will also feel the squeeze as the bloc searches for budget savings.

Untangling the UK from the EU’s monolithic Common Agricultural Policy (CAP), worth 40% of the bloc’s budget, is seen by some as a big opportunity for the UK to redesign a farming system independent of subsidies, but the change will cause economic upheaval in Britain and across the EU.

Britain’s Minister for Environment, Food and Rural Affairs (DEFRA) Michael Gove has said Britain will continue to pay for “public goods” in agriculture after Brexit. “That’s an easy thing to say,” shadow DEFRA Minister David Drew told EURACTIV.com, “but it’s complicated because this whole brief is EU-related.”

So far, Drew said, there has been little discussion on the issue, but British MPs are expecting the government to present its legislative proposals for post-Brexit farming in February.

An impact assessment presented this week by the UK’s Agriculture and Horticulture Development Board (AHDB) found that UK farm profits could rise from an average of €42,500 to €45,700 under a best-case Brexit scenario. This assumes that Britain will remain inside the EU single market and maintain farm subsidies at current levels while rising import costs increase demand for home-grown food.

But London has ruled out membership of the single market and Drew sees the maintenance of the current model of farm subsidies as highly unlikely.

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“It’s a cuts agenda,” he said. “It will be interesting to see what the British government comes up with as an alternative to the CAP’s area-based direct payments, but we know they will be dumped in one way or another.”

“There are a lot of reasons to do things differently

The shadow minister criticised the EU’s area-based subsidies as having failed to support small farmers or innovation while being too generous to those who don’t need the money.

“There’s no way we should be paying people for pony paddocks and there’s no way we should be paying people like James Dyson millions each year for playing the tax system with land,” Drew said. “There are a lot of reasons to do things differently.”

But AHDB warned of the risk for British farmers of moving too far away from the EU model. According to the think tank, a bad Brexit deal would see average annual farm profits slashed to just €16,700. Cutting farm subsidies, leaving the single market and liberalising trade with other partners would leave farmers defenceless against tougher competition from big agricultural exporters such as Brazil and New Zealand.

And the impact of Brexit on agriculture does not stop at the UK border. The reduced value of the pound and the threat of import tariffs in the event of a no-deal scenario are already posing serious challenges to EU sectors that rely on the UK as an export market, while a depleted EU budget will mean less generous farm support in the future.

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Doubt over future CAP funding

“It will be interesting to see when David Davis starts talking about the black hole in the EU budget,” said Drew. “Brexit will deprive the EU of 10-12% of its total resources so it will have to make savings somewhere. Expect cuts in EU and the UK.”

The European Commission appears to agree. Budget Commissioner Günther Oettinger said in June that it was time to “look at shifting expenditures and cuts” in response to Brexit. And a June Commission paper tentatively singled out direct payments to farmers as an area for future savings.

“One option to explore is the introduction of a degree of national co-financing for direct payments in order to sustain the overall levels of current support,” the paper said. An option that will not go down well in the EU’s agricultural heartland of France.

The current CAP expires in 2020 but talks over its future have been slowed by the rocky Brexit process. For the centre-right European People’s Party, the EU should avoid making major changes to its agricultural policy until the issue of the UK’s exit bill and the EU’s post-2020 budget have been settled. The problem is that both of these issues also depend on the Brexit negotiations.

For the centre-right European People’s Party, the EU should avoid making major changes to its agricultural policy until the issue of the UK’s exit bill and the EU’s post-2020 budget have been settled.

The problem is that both of these issues also depend on the Brexit negotiations, creating a chicken-and-egg dilemma that the EU will be at pains to resolve any time soon.

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