I get mail

From a large and decrepit building in SW1:

Re your CapX story, and speaking as a landowner and landlord,

I agree!!!

Concerning this:

All of which makes our post-Brexit farming subsidy system obvious enough. We can lower the cost of becoming a farmer by lowering that input cost of land. All we need to do is stop sending money to the people who currently own that land. Sounds like a bit of a plan, really. And given that this is pretty much all that we currently actually do to “subsidise” farming, doing away with this malpractice means that we’ll just stop subsidising the entire sector completely.

Britain’s future farm subsidy system should be not to have one. Precisely because of the new evidence on land prices, even thinking about that outcome lowers the price of farmland – and why on earth would we want that to be expensive in the first place? As long as we’re not landlords, of course.

10 comments on “I get mail

  1. Yes and no. Agricultural subsidies are a subsidy of land (and their rents) for sure. And the removal of subsidies will drop rents to virtually zero in many cases, in some actually zero, I’m sure there would be some landowners in some areas letting people farm their land for free just to keep it tidy.

    However this doesn’t actually affect the cost of production. At the moment farmer gets (roughly speaking) £80/acre subsidy. Most of this will result in a higher rent to his landlord. So remove the £80, rents drop by £80 also. Tenant is in exactly the same position. His costs are no lower than before than before.

    The removal of subsidies will take money away from landowners but it won’t help farmers one jot.

    (Note I’m defining farmer as ‘person who grows crops and keep animals’, and landowner as ‘person who legally owns the land’. Sometimes these are two people (landlord and tenant), sometimes they are one (owner-occupier))

  2. Jim – perfect then… Farmer is in exactly the same position and the government is not spending as much money… i think that’s a win-win…

    when can we do this?

  3. Its going to be done fairly soon according to Gove, by 2022 I think. But he has also said that the same amount of money will be poured into environmental payments, and so called ‘public goods’ ie paying farmers for public access, allowing their land to flood in preference to urban areas, reducing fertiliser and chemical leaching into rivers, that sort of thing.

    Its a moot point as to who such payments would accrue – current payments are cash sums, fixed per acre, without strings, so its easy for a landlord to know exactly how much the tenant is getting and demand a rent to match. Under an environmental scheme, each farm will be different, depending on what options the farmer chooses. So the landlord is going to have far less information to go on, plus many of the schemes require there to be some farming going on (keeping of animals to graze grasslands, arable crops to be grown in order to grow them with less fertilisers and chemicals), so the landlord would face the choice of having a tenant paying some rent (but not all he gets in environmental payments) or having to start farming the land himself in order to get the payments himself. Which would require a hefty capital investment in machinery, labour etc.

    I suspect environmental payments will affect rents, but not to the degree the current subsidy system does.

  4. The main argument for the removal of farming subsidies is that New Zealand did it, and shortly afterwards the farming sector grew massively. Now there are few, if any, farmers who advocate for a return of subsidies. Indeed the main argument that we are currently having is whether being able to irrigate land for free, using water flowing from rivers on the land, is a subsidy and so whether farmers should pay for it.

    And say what you want about New Zealand farmers’ predilection for fornicating with wooly animals; but one thing that they know how to do is produce farmed goods that the world wants and is willing to pay top dollar for!

  5. What, the Conservatives will willingly depart from an age-old policy of inflating land values? Where will this end?

  6. “The main argument for the removal of farming subsidies is that New Zealand did it, and shortly afterwards the farming sector grew massively. ”

    And while removing subsidies may or may not be a good idea, using the example of New Zealand as an argument as to why it’ll all work out wonderfully for farmers is bollocks on stilts. You cannot compare a small country that is a large primary agricultural producer with a very large modern industrialised Western economy where farming is a tiny % of the economy.

    When NZ abolished subsidies it resulted in a massive drop in the value of the NZ dollar which largely compensated via higher output prices for the loss of subsidy. Yes there was a big rationalisation of the industry as over borrowed businesses failed, but the rise in prices meant that there was a profit still to be made, by someone, if not necessarily those in situ at the time of the subsidy removal. The climate of NZ also meant that in fact they had a cost advantage over all their competitors anyway, there was no real need for subsidy in the first place

    That is not the case in the UK. Farming is a marginal industry in a lot of the UK, it is not a net exporter of agricultural products, import penetration is high. Were subsidies to be removed there would be no appreciable impact on the value of sterling, so costs and output prices would remain exactly as today. Just because NZ removed subsidies and prospered does not mean UK farming will do likewise – the UK coal industry was heavily subsidised, and when the subsidies went, the industry went, because it was not competitive with the foreign competition.

    Some of UK farming is competitive at world prices, mainly parts of the arable sector based on the rich soils of the Fens and East Anglia. The dairy sector will do OK, partly because raw milk cannot be easily imported, and the UK has climate well suited to growing grass (or other fodder crops) that are needed to keep dairy cattle.

    However the remainder of the livestock sector would be very vulnerable to foreign imports, as would a lot of the marginal arable land. In the absence of any subsidy at all, large swathes of the UK farmland would revert to scrub, as it would not be viable to farm it purely on world prices for the output.

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