future agricultural policy options for britain (scotland?) · steven thomson:...

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Future agricultural policy options for Britain (Scotland?) Future agricultural policy options for Britain (Scotland?) Steven Thomson Senior Agricultural Economist Land Economy, Environment & Society Research Group, SRUC Rural Futures: Adaptation to Challenges faced by Scotland’s and Ireland’s Rural Communities Norton House Hotel, Edinburgh 12/13 March 2018

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Page 1: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

Future agricultural policyoptions for Britain (Scotland?)Future agricultural policyoptions for Britain (Scotland?)

Steven ThomsonSenior Agricultural Economist

Land Economy, Environment & Society Research Group, SRUC

Rural Futures: Adaptation to Challenges faced byScotland’s and Ireland’s Rural Communities

Norton House Hotel, Edinburgh12/13 March 2018

Page 2: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

22-£300,000

-£200,000

-£100,000

£0

£100,000

£200,000

£300,000

Farm Business Income

Data source: RESAS Farm Business Survey (2016 accounting year)

2016

Importance of CAP to Scottish Agriculture

-£300,000

-£200,000

-£100,000

£0

£100,000

£200,000

£300,000

Farm Business Income less CAP Farm Business Income

Data source: RESAS Farm Business Survey (2016 accounting year)

-£300,000

-£200,000

-£100,000

£0

£100,000

£200,000

£300,000

Farm Business Income less CAP CAP Support Farm Business Income

Data source: RESAS Farm Business Survey (2016 accounting year)

35% loss making with CAP support79% loss making without CAP support

How to innovate, reinvestand take drawings??

2016

Page 3: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

33

The Brexit puzzle

• A real challenge foragriculture:

– Policy support mechanisms

– Regulations and standards

– WTO and Trade

– Agricultural Budget

• Membership of WTO andfuture trade deals may needharmonized principlesacross UK

Page 4: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

44

Brexit timeline of issues

Page 5: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

55

What has been achieved?

“The European Council reiterates thatnothing is agreed until everything is agreed”

-Final EU-UK Relationship-UK’s global trade position

Fundamental to futureUK agricultural policydevelopment

Page 6: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

66

Remember – this is a negotiation

Page 7: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

77

This is a negotiation

“existing models…do not deliver

the ambition weneed or impose

unsustainableconstraints on

our democracy”

“I fully understand andrespect Theresa May’s

political objective: todemonstrate, at any

price, that Brexit couldbe a success and is theright choice. But sorry,it is not our objective.”

Page 8: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

88

Why does this matter?

• Significant consequences if we get itwrong!

Ch

ange

inn

etp

rofi

t(%

)

(a) With direct farm support (b) Without direct farm support

-£60,000

-£40,000

-£20,000

£0

£20,000

£40,000

£60,000

£80,000

LFA Beef DairyLFA Cattle &

Sheep Crops

FT+WTO+LT+

-£100,000

-£80,000

-£60,000

-£40,000

-£20,000

£0

£20,000

£40,000

£60,000

LFA Beef DairyLFA Cattle &

Sheep Crops

FT-WTO-LT-

Page 9: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

99

Why does this matter?- the viability conundrum

Data: Scottish Farm Business Survey (Various Years)

Page 10: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

1010

Apart from EU negotiations…..

A lot of Parliamentarywork in 2018 toestablish post-BrexitUK Mechanisms

Continuity Bills

Page 11: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

1111

Regulatory Bonfire??

• “not…a competitive race to the bottom…but.…a global race to the top…this will requireeffective, and supportive, regulation”

• Do the public want to significantly reduce regulatorycontrols that are part of the functioningagricultural framework?

• Comply with regulations if we want to trade

• Limited scope for immediate changes?• Lighter touch?• Review inspection regime?

Page 12: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

1212

Repatriation of Agricultural Policy“the framework”

European Union(Withdrawal) Bill

• “replicate the currentframeworks provided byEU rules”

• “identify where commonframeworks need to beretained in the future”

Page 13: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

1313

Future Support – the CommonFramework?

• “We will achieve this by ensuring thatpublic money is spent on public goods,such as restoring peat bog andmeasures which sequester carbon fromthe atmosphere; protecting dry stonewalls and other iconic aspects of ourheritage; and reducing disease throughnew initiatives that better monitor animalhealth and welfare.”

Frameworks will be established where they are necessary in orderto enable a well-functioning internal market across the UnitedKingdom, compliance with international obligations andprotection of our common resources.

Page 14: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

1414

Transition Period

• In CAP until 31st Dec2020?

• BPS & Greening until???

• Rural Development Brexitcommitments?

• LFASS (de facto Pillar1?)

• Guaranteed agricultural budget till 2022 andexpects BPS transition till 2025

Page 15: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

1515

Defra proposals

• Policy driven by “public money for public goods”=payment for outcomes• Transition period and support - Degressivity and capping to fund

pilot environmental programmes and help farmer transition(innovate / withdraw) [Ombudsman Regulation]

– New environmental land management schemes / enhancednatural capital [what about areas already with rich NC?]

– Animal Welfare [why targeted – what about those already at highstandards?]

– Plant and Animal Health [safeguarding future ]

– Smarter Regulation

– Managing risk and volatility [ but challenging in practice]

– Trade policy [challenge if approach is to lower consumer prices –they are already low….high standards to be maintained ]

– Skilled workforce [ but how to deliver is the challenge]

Page 16: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

1616

Scottish Agricultural Strategy

• 4 Agricultural Champions

– 6 Key priorities closely aligned

• Cabinet Secretary for the Rural Economy andConnectivity, Fergus Ewing – food should be at theheart of agricultural policy & supporter of hillfarming's role in rural communities

“I have always felt from day one that farmers produce food whichis key, but they are also the custodians of the countryside and ifwe don’t support what they do then we must be prepared toaccept that the countryside will not look as it does and thattourism would be hugely damaged as a consequence”Scottish Farmer 3rd Feb 2018

Page 17: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

1717

Future Agricultural Policy – some thoughts

• We need common framework setting out the rules farmers inUK are working to– avoids internal competitive advantage

• UK’s WTO schedule of commitments will be key– what future for coupled support / or area based payments?

• Choice to pursue cheaper food trade in the long run– how can we ensure transition for those unable to compete / with no

production choice?

• How flexible will WTOs income forgone / additional costcriteria be followed for environmental support?– can be challenging to deliver support beyond capital items in

extensive areas?

• A lot of discussion on “enhanced / improvements”– future support must also recognise maintenance of existing high

levels of achievement (animal health and welfare / biodiversity, etc)

Page 18: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

1818

Future Agricultural Policy – some thoughts

• What is the natural capital / climate-change baseline weare operating under?– How will outcomes be paid / assessed / monitored?

– Why would other land managers be excluded –activity clause?

• How will food production be safeguarded?– Supply chain is vital in recompensing farmers for local food produced to

high standards?

– Consumer education on real cost of food?

• What will happen to GAEC cross compliance measures /greening?– Review and keep those delivering? Do we need to comply with EU?

• How do we support small scale farmers and crofters?– Redistributive model for Pillar I type support if it is continued

• Pillar II schemes can have very high transaction costs for smallfarmers / and ‘points’ based systems are often out of reach– Should we adopt a small farmer applications for PII-type schemes – with

very easy / quick / light-touch application?

• How do we retain activity in remote / extensive farming systems?

Page 19: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

1919

What should SRUC and Teagasc be doing?

Supporting change in uncertain times(government / agencies / stakeholders and farmers) and

demonstrating / evolving best practice

Page 20: Future agricultural policy options for Britain (Scotland?) · Steven Thomson: steven.thomson@sruc.ac.uk Much of my Brexit work is funded by the Work Package 2.4: Rural Industries

2020

Contact

Steven Thomson: [email protected]

Much of my Brexit work is funded by the Work Package2.4: Rural Industries and SEFARI Gateway of the Scottish

Government’s 2016-2021 Strategic Research Portfolio