EU Referendum: Impact on UK agriculture policy
Most farming organisations are taking a 'remain' or neutral position ahead of the EU Referendum on the grounds that there is too much uncertainty around a potential UK approach to farming outside the EU and its Common Agricultural Policy. However, others are starting to set out what a new approach to UK agriculture, outside the EU, might look like.
Farming unions across the UK have passed council resolutions advocating a ‘remain’ position for the EU referendum. This is on the basis that the uncertainties associated with a UK exit are just too great in terms of the levels of future support for UK agriculture and the basis of future UK trade with the EU.
However, their members are more evenly split.
A Farmers Weekly survey in April 2016 found that 58% of farmers planned to vote exit and only 31% were planning to vote remain.[1] This is in contrast to CBI reports that almost 80% of UK businesses want to remain in the EU.[2]
This briefing provides an update to the agriculture chapter in House of Commons Library briefing EU referendum: Impact of an EU exit in key UK policy areas (February 2016) to reflect the more detailed analysis and stakeholder positions which are now in the public domain.
It concentrates on the potential implications for UK agriculture policy of the EU referendum vote mainly in terms of the EU’s Common Agricultural Policy. Broader issues of trade models and tariffs are covered in the trade section of the February paper.
EU Common Agricultural Policy support – a major element of UK farming
Almost 40% of the EU’s budget is related to agriculture and rural development through the EU Common Agricultural Policy (CAP).
The CAP provides an EU framework of regulation for direct payments to farmers, market support measures and rural development. In the UK, EU farm subsidies currently make up around 50-60% of farm income.[3]
Whatever the outcome of the referendum, there are major implications for the UK’s food and farming industry because of the CAP.
Prime Minister David Cameron has committed to ensuring that an agricultural support system is “properly maintained” in the event of a UK exit.[4] However, the UK Government has provided no ‘Plan B’ for agriculture for exit.
Defra Secretary of State Liz Truss supports a ‘remain’ position on the basis that EU exit is a “leap in the dark” for farmers.[5] The farming minister, George Eustice has set out how a fresh approach to farm support and policy could look outside the EU.[6] UKIP has done the same.[7] Both of these positions in support of a UK exit suggest maintaining some level of subsidies. Meanwhile, Shadow Environment Secretary, Kerry McCarthy has welcomed the backing of EU membership by the farming unions.[8]
Although there is no UK vision for an agricultural sector operating outside CAP, successive UK governments have consistently sought to reduce the overall CAP budget, levels of direct subsidies and ensure that direct subsidies are linked to the delivery of wider public goods such as environmental protection to give value for money to the tax payer.[9]
The key EU referendum issues for the agricultural sector
If the UK stays in the EU the key issues for the agricultural sector are around:
- the shape of the next CAP reform (2020-2027) for which preparations are already under way
- decisions on a range of pesticide approvals that are currently being reviewed.
- the outcome of the CAP simplification process being led by the EU Agriculture Commissioner Phil Hogan.
The key issues influencing the debate around EU exit are around:
- future levels of payment support
- future levels of rural development funding
- overall national farm policy and regulation
- future trade models
- seasonal labour availability
- the potential for greater deregulation and innovation outside CAP
- From a general rural perspective, there is also the issue that the CAP includes Rural Development Programmes for each Member State which fund the broader rural economy e.g. rural broadband, agri-environment schemes and tourism.
Latest agricultural sector analysis
A range of agricultural analysis produced within the last year illustrates the range of uncertainties associated with a UK exit in terms of implications for agriculture.
Wageningen University for the National Farmers Union (April 2016)
- Analysis, produced by LEI at Wageningen University (The Netherlands) for the NFU, Implications of a UK exit from the EU for Birtish Agriculture (April 2016), looks at 3 different trade scenarios with 3 different levels of direct payment support (status quo, 50% reduction and no support). It concludes that, in the main the biggest driver of UK farm income changes is the level of public support payments available. The loss of these support payments offset positive price impacts in all of the scenarios. It also highlights that livestock farms are particularly heavily dependent on direct income payments.
- The NFU has also produced a report to influence policy makers and indicate the questions that farmers need answering on Brexit. See UK Farming’s Relationship with the EU – NFU report, 29 September 2015.
- The CLA’s Leave or Remain: The decisions that politicians must make to support the rural economy report suggests that the £3.87bn EU CAP spend in the UK in 2013 resulted in a £10bn contribution to the EU economy, including more than 350,000 jobs and £3.5bn in tax revenue.[10]
- Agra Europe, an EU agriculture and food publication, has prepared a detailed analysis of the impact that the likely farm policies on EU exit and their impacts. ‘Preparing for Brexit: What UK withdrawal from the EU would mean for the agri-food industry’.
- This highlights how an EU exit would be “traumatic” for the farming industry with large cuts in farm incomes, bankruptcies, falling land prices and elimination of small and medium sized farms as well as increased barrier to exports and lost markets.[11]
[1] 58% leave, 31%remain, 11% undecided, Farmers Weekly, 29 April 2016
[2] CBI, Two futures: What the EU referendum means for the UK’s prosperity, April 2016, p.2
[3] Defra, Total Income from Farming 2014 - 2nd estimate United Kingdom, 26 November 2015 shows that subsidies made up around 54% of UK Total Farm Income in 2014 and HM Government, Review of the Balance of Competencies between the United Kingdom and the European Union: Agriculture, Summer 2014 paras 2.34 –2.38 indicted that in 2012 this figure had been as much as 68%.
[4] CLA, PM David Cameron responds to CLA EU referendum concerns, 14 April 2016
[5] DEFRA Press Release, Environment Minister addresses the NFU Conference, 23 February 2016
[6] Eustice outlines £2bn plan for farming as Defra Ministers stand divided on Brexit, Farmers Guardian, 25 February 2016
[7] Leaving the EU ‘too risky’ warn farm leaders, Farmers’ Weekly, 5 March 2016
[8] Labour Party Press Release, Labour welcomes the NFU’s decision to back British EU Membership – McCarthy, 18 April 2016
[9] See for example, House of Commons EU Scrutiny Committee Seventh Report of Session 2007–08, 9 January 2008 and overall explanation of the Health Check in National Assembly for Wales Members’ Research Service, EU Common Agricultural Policy 2008: CAP Health Check, February 2008
[10] CLA, Leave or remain: The decisions that politicians must make to support the rural economy, March 2016
[11] Analysis: The CAP and its role in the UK’s Brexit debate, Agra Europe, 14 October 2015