New Brexit Blog

I have set up a new blog site solely dedicated to Brexit, Farming and the Rural Economy.

You can see it here, and in particular a page of links to useful information which I hope to keep updated with relevant publications and other sources of Brexit information as they appear.

I hope you will find it a useful resource.  Please send in any suggestions for material you think is needed, or other suggestions for its development.

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CAP: Agric Fundamentalists v Enviro Fundamentalists – some inconvenient points

Decision week for Defra Secretary Owen Paterson.  He is due to announce the ‘modulation’ rate for England by the end of the week.  Will it be 9% as the NFU wants, or 15% as the RSPB demands?  Modulation is EU-speak for the amount of farming support that is diverted (modulated) into more general rural development and environmental schemes.  So the more money that is modulated, the less the direct farm payments through the Basic Farm Payment which will soon replace the Single Farm Payment.  The BBC provides some of the background here.

Last weekend saw a crescendo of lobbying on the issue, with the RSPB taking out full page national newspaper advertisements and the NFU writing to all MPs.  Some of the mood of the debate is caught in Mark Avery’s Sunday blog: all households will have to pay £400 to support farmers; this is nothing more than a payment for owning land and farming it (whither tenant farmers?).  On the other hand the NFU whinges that German farmers are only subject to modulation rates of 4.5%, French farmers 3% and the proposed Scottish rate is 9.5%.  This will hurt competitiveness, says the NFU, and disadvantage English farmers.

The environment lobby makes much of the ‘value’ that we get for CAP payments.  The more money that goes to Pillar II (EU-speak for the budget that pays for environmental and social goodies), the better. But farmers prefer Pillar I (EU-speak for the budget that pays for direct farm support payments) because that relates directly to the land they farm and how they farm it – and this can be defended strongly on grounds of food security (will you starve or me?).

But of course we are dealing with public policy here, and the reality is more complex that the advocates of Pillar I and II would like us to accept.  The new direct farm payments come with more environmental strings attached – crop diversification and ecological focus areas for example.  And more of the money is moved uphill – where it is desperately needed because much of upland farming is economically marginal at best – at the (moderate) expense of lowland areas.  Whatever Pillar II funding we are left with, will be far more focussed than previously – a better deal on the 35% of rural land which will benefit compared with the previous 70%?  Perhaps so if you are in the lucky areas; perhaps not otherwise – although tougher conditions on the Pillar I funding may make up the difference in some lowland areas.

The RSPB and others have set out their case for the ‘value’ we receive in return for our £400 per household.  This is a compelling and attractive case, immediately attractive to anybody who pays tax.  Given the propensity of Avery and others to dismiss the CAP payments as a mere subsidy on land ownership and farming, I have been pondering what we do get for the money we spend on farm support.

This is an incredibly complex question once you factor in food security and social justice.  To take some dairy figures, our consumption of milk products works out as follows:

Taking our daily consumption of fresh milk, butter, yogurt, cream, dairy desserts we on average consume about 4 litres of raw milk a week.  That’s a little over 200 litres a year.  With an average dairy cow now producing 7,327 litres a year, that means each cow is supporting 36 people.  This typical cow requires 0.5 ha  of land a year, and lives in an average herd of 125 cows.  So the average herd is providing dairy produce for 4,500 people.  At a direct CAP Single Farm payment cost of just over £200/ha, this equates to a cost per consumer supported with dairy products of just under £3.00/year (1).  Doesn’t seem much, but let’s cut the CAP farming support payments altogether.   What happens next?

There is little doubt that the main buyers of milk from farmers have an excellent idea of the costs of production – including the effects of farming subsidies – and set their prices accordingly.   Ergo – exit CAP, enter higher payments from the main buyers.  Despite the hyperbole to the contrary, the main farm produce buyers have no interest in the financial failure of their principal suppliers.  So prices are adjusted accordingly to make it worthwhile – but only just so for better than average producers – to continue to supply milk.  In compensation retail prices increase – for everybody.

So if you are hard up, milk has just gone up and you won’t save much tax if you weren’t paying any or much tax anyway.  But if you are better off milk, yogurt, cheese etc has also gone up, but the CAP isn’t costing you so much through your tax bill.  That’s to say that another element of redistribute taxation has been lost.

Meanwhile at lower rates of modulation fewer farmers are encouraged (forced?) to look at the financial effiency of their operation.  At the recent LEAF conference, Martin Wilksinson (HSBC Head of Agriculture) made the point that many farmers could more than make up their CAP losses with improved technical and financial effiency.  This is one of the real challenges to the farming industry: to move more farmers to the standards of the best.  England was the first region in the UK to move to Single Farm Payments based on the same average payment, away from a payment based on historic payments.  Wales and Scotland have been slower to move in this direction, and there seems a compelling case for England being better prepared for this round of CAP reform as a result.  One fear for the environmental lobby might be the real danger that some of the best lowland farmers may move away from CAP support altogether, joining those sections of the farming industry which have never had it anyway (eg pigs and poultry).

Meanwhile farmers need to promote the value we get from Pillar I payments by stressing any benefits they provide to the rest of the country as consumers and taxpayers.  For example, how many people is your farm feeding?  And at what cost in public support?  Will Santa be coming early for the farming lobby or the environment lobby?

-oOo-

Footnote 1: These calculations were surprisingly hard to source.  The DairyCo website provides daily consumption figures, and the average herd size and milk yield are available from Defra statistics.  DairyCo also provides a diagram showing how the UK’s milk supply is utilised.  My approach was to take the daily consumption of the dairy products listed (a list which is not complete) and work out how much raw milk is needed for each product, eg about 20 litres for 1 kg of butter; 10 litres for 1 kg of cheese.  This ignores some of the complexities of dairy processing, for example milk from which cream has been separated may reappear as another milk product and so on.  Some arithmetic followed based around stocking rates (0.5 ha/cow), total production/consumption figures and lowland Single Farm Payment Rates per hectare in the last year or two.  In short, lots of assumptions; lots of scope for error – but if anybody can highlight any errors or better still existing sources of information like this I would be delighted to know.

 

Farming for Food Plus ~ Food+ Farming

Projects are now trying to bring the management and appreciation of nature’s services – ecosystem services – to life.  Here is a case study I prepared for a seminar, part of one of these projects.  Please share your views in the comments section, or via twitter to me, @charlescowap

The fictional case study below has been designed to enable us to discuss three key questions in the context of Ecosystem Services (ESS):

  1. What ESS does and could this farm offer?  If you are uncertain about what counts as an ESS, there’s a diagram below which should help.
  2. How can they be measured and managed?
  3. What practical issues does the study illustrate as far as the future development of ESS in a farming context is concerned?

Case Study

Red Earth Farm is a mixed tenure farm of total 500 hectares.  Of this 400 ha is rented under the Agricultural Holdings Act 1986, and the remainder is owned (but subject to a mortgage with the Agricultural Mortgage Corporation).  The main farmhouse and two workers’ cottages are located on the rented land along with the farm buildings.  The owned land consists exclusively of bare land with no dwellings or buildings.  The land abuts the west bank of the River Severn to the north of Tewkesbury (both the tenanted and owned land).

The landlord has invested nothing in the farm since the present tenant, Ivor Gripe took on the tenancy in 1978.  Ivor himself however in his early years invested heavily in field drainage, water supplies, a new dairy unit for 150 cows and a 1,000 tonne grain store.  Sadly all this is now showing its age.  Ivor has had several warnings about the adequacy of the grain store for the Assured Combinable Crops Scheme, the dairy inspector has issued a list of required works which must be undertaken over the next year and the Environment Agency is concerned that silage effluent, slurry and dairy washings may be getting into the river system (albeit on a relatively small scale).

This will require major investment; the absentee landlord has once again affirmed that he has no intention of helping with any of it and, at the age of 67 years Ivor is pondering the economic sense of further investment on which he will recoup little or no return.  His son and daughter could, in principle, be eligible for succession to the tenancy but given the economic straits experienced by farmers in recent years it looks increasingly likely that they will seek their fortunes elsewhere (Alison is a veterinary surgeon and Andrew a chartered accountant).  Ivor has always reinvested every penny in the farm, which of course is also the family home.

All of the land is registered under the IACS scheme (Integrated Administration and Control Scheme) for SFP (Single Farm Payment) purposes, and Ivor has also entered an Entry Level Stewardship Scheme (ELS).  This mainly covers hedgerow management, ponds, protection of a small archaeological site, grassland management for farmland birds.

-oOo-

The following summary of ESS is taken from the TEEB (The Economics of Ecology and Biodiversity) Synthesis Report published in 2010.  The full report can be seen on the TEEB Website (link here):

TEEB Summary of Ecosystem Services
TEEB Summary of Ecosystem Services

 

Please do take this opportunity to share your views.  For chartered surveyors and others with a professional CPD obligation, time spent working on this could even count as self-directed CPD – evidenced by your considered opinion in the comments below!

 

The Top Environmental Business Opportunities

Water, Food, Carbon and Environmental Resilience are the top four business opportunities in the latest report from the Ecosystems Markets Taskforce.

Water offers opportunities for its management, and for exports of water expertise and technology.  Rural businesses can be significant users of water themselves, and could be in the front line for not only flood management but also new approaches to water storage and distribution.  The rewetting of peat is one example of how extensive areas of rural land could play a valuable and remunerative part in water storage, flow management and flood protection.

Carbon will come into play through offsetting schemes for new development – including zero carbon housing – and the growing obligations on industrial producers of carbon to reduce or mitigate their carbon outputs.  The Woodland Carbon Code is already an example of this, and we should see the arrival of a Peatland Carbon Code, as peat is the largest natural repository of atmospheric carbon.

There will also be important global markets in our knowledge and expertise in measurement and management of these markets.

The Taskforce report also sets out the business case for the importance of nature to business:

  1. Business depends on nature: no nature – no business;
  2. The natural world is under pressure with stress on energy resources, and grave threats from dramatic weather events and climate change.  Placing a proper value on these assets will enable us to recognise them more appropriately and manage them more effectively.
  3. Public policy making is putting a higher value on nature.  This will open new opportunities for business.
  4. Businesses which plan for this will be the winners.

The Ecosystems Markets Taskforce comprises 10 eminent business leaders, chaired by Ian Cheshire, Chief Executive of Kingfisher plc.

The interim report issued on 6 November 2012 also offers the following interesting facts and comments on the relationship between business and nature:

  • Food demand will rise 70% by 2050; water demand by 55%
  • Energy demand is expected to have risen by 35% between 2009 and 2035
  • Global population rises by 8 billion by 2030, with 3 billion new middle class consumers
  • About 30% of UK Ecosystem Services are currently assessed as declining
  • We may be losing the potential to create one major drug every two years due to the decline in genetic diversity
  • One cup of coffee takes 150 litres of water to produce
  • About 70% of ’embedded water’ in the UK is imported in manufactured goods, food etc
  • Sustainability related global business opportunities could be worth six trillion US dollars by 2050 (2008 prices)
  • If the chemical industry had to pay for all its environmental impacts, the cost would be 43% of its earnings.
  • South West Water’s Upstream Thinking project estimates a 65:1 benefit:cost ration over 30 years for measures to improve land management practice for water supplies, at a cost of 60 pence per customer by 2015.

A full final report is due next year.  Meawhile the interim report can be seen on the defra website here.

Also see my previous post on top business opportunities in ecosystem services, here.

The publication of this report is very timely with regard to my own report’s launch at the Royal Institution of Chartered Surveyors on Thursday 15 November.  A few places are still available for the launch, so please do follow this link for more details of the RICS Thinkpiece: New Challenges in International Professional Practice: from market value to natural value.  This is a public event, subject to prior booking.  Arrival is from 5.30 pm for a 6.00 pm start.  Presentation of the new publication will be followed by a discussion with a panel of distinguished experts in this field, and there will be a short drinks reception afterwards before dispersing at 8.00 pm.  And a bonus point for chartered surveyors is that this will not only introduce you to a wide range of new points for professional practice, it also qualifies as free Continuing Professional Development.

How Coca Cola won WW2 while the world starved: The Taste of War by Lizzie Collingham

Lizzie Collingham has written the first comprehensive survey of the role of food in WW2.  While 19.5 million died military deaths, 20 million died of starvation or hunger-related diseases.

Collingham makes it clear that food was a decisive factor in the motives for, and outcomes of, WW2.  Germany had faced starvation in WW1.  Hitler eyed the British Empire and the fertile land to his east with envy.  Jews and East Europeans were condemned as ‘useless eaters’ under agronomist Herbert Backe’s cold-blooded plans to occupy Eastern Europe in order to feed first, the Wehrmacht and second, the German homeland.  Thus it was that Germany exported its hunger to Russia and Eastern Europe.

Great Britain also faced the prospect of severe food shortages, but Collingham makes the case that the full extent of these has been overstated in comparison with the shortages elsewhere in the world.  Nevertheless, Britain also managed to export its own hunger, in particular to India and parts of Africa.

Japan did little if anything to provide nutrition for its Army, and expected soldiers to forage for themselves once they were on active service, by taking over enemy supply dumps or using local supplies.  At first they were successful, christening the supplies they captured ‘Churchill’s rations’.  But in the longer run the Japanese soldiers and civilians suffered severe privations as supplies failed; one example has a soldier ravening cannibalistically over the sight of his colleague’s rump.

Stalin’s Russia made the feeding of the towns and Red Army a priority, even when this meant that the peasants on the collective farms had to go without.  In a fascinatingly different perspective on the success of the Russian collectives however, Collingham makes the point that they were at least able to provide food for the towns.  This was in contract with the small scale farms of Germany, which reverted to self-sufficiency.  Very little surplus was offered up for the wider population, in contrast with the more developed, mechanised, larger scale farms of other countries.

The USA was by far and away the best-fed combatant nation in WW2, but even in America there were problems.  Food was held back from the needier UK to ensure that Americans did not go short; wage and food price inflation tended to exclude groups like black people from the largesse of the booming US wartime economy and Food Aid programmes which had started to tackle disadvantage in the late 1930’s were dropped in the most disadvantaged states as the cost of administration was transferred from federal to state governments.  This underlined the fact that they had in reality been farm support programmes all along.  US troops based in Australia literally sucked the life out of their Australian neighbours in some towns, using up local water and fresh food supplies at the expense of the local population.

Collingham paints a terrifying, but clearly well-researched, picture of the role that food shortages can play in driving a nation to War.

The technical advances must however also be recognised.  The acceptance of nutrition science, the general improvement in nutritional standards in Britain, the acceptance of free school milk schemes by 1941 in Britain until their abolition by Margaret Thatcher in 1971 (pp396-7), recognition of food as a morale-booster, developments in food preservation and logistics and the creation of Army Catering Corps in Britain and Australia, can all be credited to this period.

Rationing also showed interesting variations from country to country.  Americans had the biggest most varied rations, and their Army quickly realised the importance of fresh food in maintaining the health and morale of soldiers.  Germany prioritised soldiers, industrial workers, civilians and useless eaters, differentiating for each group.  Britain originally made no distinction between different groups, other than in favour of servicemen on active service.  However the realisation that industrial workers were being left too short of vital nutrition led to the introductory of compulsory works canteens wherever more than 250 staff were employed in 1943.  This was paralleled by the Rural Pie Scheme for farmworkers.  Lyons Corner Houses opened more bakeries to prepare the pies for distribution by the Womens Voluntary Service to farmworkers (P364).

The first traces of two other developments can also be found.  The tension between human grain and meat consumption can be seen in attitudes towards the American diet, where a great emphasis was placed on ensuring a plentiful grain-fed meat supply.  The mobilisation of vast armies in America and India also faced army caterers with considerable challenges in catering for a variety of different tastes, leading to the popularity of bland recipes which would appeal to the greatest majority without causing offence to minority interests.

This book is a timely reminder of the importance, not only of the resources to provide a plentiful and reliable food supply, but of the  consequences of excessive competition for other basic resources of energy and water, and of the utter horror of living in a world reduced to total war over these supplies.

And Coca Cola?  Wherever the American Army went, so did Coca Cola.  Experts from the company were attached to the Army as Technical Observers with the task of establishing new bottling plants to serve the US Army wherever it served.  The company was exempt from sugar rationing in order to ensure supplies to the forces.  So Coca Cola established a worldwide network while securing its association with the land of prosperity and plenty of the American liberators.

Collingham, Lizzie (2011) The Taste of War, World War Two and the Battle for Food,  London: Allen Lane/Penguin