Let us assume that the UK will exit the EU and that the post-Brexit settlement will allow the UK to repurpose the resources that currently go into the Common Agricultural Policy (CAP; give or take £3B a year). Let us also put to one side the details of how agricultural policy will be distributed amongst the devolved administrations, and the complexities of trade in agricultural products the other side of Brexit.
One possibility is that all the money that currently goes into supporting rural economies through the CAP is redirected to the NHS, education and other spending priorities. This is surely unlikely given the dire consequences for many farming businesses (though partial redirection is much more possible). Let us suppose that a substantial fraction of current spending through CAP is retained in the rural sector, indeed the working assumption of most people interested in the future of British farming and the countryside.
There are at least three framings of how we should continue to support the countryside. The first seeks to keep direct transfers to farmers and landowners as in the pillar one of the CAP, often with some restructuring to benefit economically challenged parts of the industry. The main arguments put forward to support this option are the negative economic consequences to farmers of subsidy withdrawal and the need to maintain a certain degree of UK food self-sufficiency in face of possible food security threats.
My view is that the first argument is strong and the second weaker. Existential food security risks for a country as rich as the UK only occur in times of conflict when agricultural policy is transformed onto a war footing. If we thought this should influence current policy should we not care as much about indigenous fertilizer, agrochemical and seed industries? Global food security is a more pressing issue and we can ask what should be the role of UK agriculture in addressing food scarcity. Emerging problems will be heralded by higher food prices and through the workings of the market UK agriculture will respond by producing more food. We want this response to be efficient in its strict economic sense but also environmentally efficient with increased production not undermining ecosystem services or the ability of the land to produce food in the future. This points to two market failures that might attract policy attention: encouraging the human and other capital components to increase economic efficiency, and intervening to reduce agriculture’s negative environmental externalities. It might also be argued that a more economically efficient response would occur in the absence of inevitably distorting subsidies.
The second framing sees Brexit as allowing substantial funds to move from pillar one to pillar two and in particular to environmental protection. The most extreme form of this narrative sees the majority of UK farming as being carried out in ways that are “unnatural” and actively detrimental to the environment. All subsidies should be removed, except for organic and other forms of non-conventional agriculture. It argues that public money should be used for public good and that the environment is the public good per excellence that requires particular investment.
This narrative reflects a long frustration about how agricultural policy has affected the environment. The CAP today does make some contributions to environmental protection, in particular though agro-environmental schemes funded under pillar two, but the benefits of the “greening” of pillar one are much more problematic. We can surely get better bangs for our environmental buck. But I think these arguments too often ignore the positives from conventional agriculture and its role in keeping food prices low enough that the absolute number of people throughout the world who go to bed hungry has been falling over the last 30 years. It can also merge into calls for reorganising society and the economy in completely new way: there may be good arguments for this but it needs to be argued on its own merits, and at least at present it is not supported by a political majority.
Finally, there is a third narrative that like the last asserts public money should be spent on public good, but is less proscriptive about what the public good is. For sure it will include environmental public goods, but it might also include outcomes such as strong rural economies supporting viable communities in the countryside. Thus it advocates a move away from direct cash transfers, but allows a broader specification of what exactly we want from our public investment in the countryside.
Of course, one response to this narrative is to say it will be a cop out – any repurposing of CAP funds could be justified post factor as supporting a public good. But exactly what is a public good cannot be purely determined mathematically. Identification of public goods is inescapably a political economic decision that in a democracy needs to be discussed by society in the political sphere. Economic theory can keep us honest in not conflating public and private goods, and modern environmental economic thinking such as natural capital accounting is hugely valuable in prioritising investment and suggesting how it can be delivered, but the political process has to balance the interests of different stakeholders.
The agricultural sector does of course worry that a switch of public funds to the delivery of public goods will hurt farmer incomes. There is a short-term and a long-term issue. Any change to rural support must surely be phased in, no one wants farmers to face a cliff edge. In the long-term farmers and landowners will be asked to do something different, and there will be both businesses that benefit and suffer. The provision of the skills and knowledge, the human capital, for the industry to produce these public goods is in of itself a public good and should, I believe, be a priority for investment.
Many farmers and landowners today provide far more public goods than they should from a strictly rationale economic standpoint. They do it for numerous reasons, including that it is the “right thing”. Restructuring CAP allows a greater emphasis to be placed on payments for public good delivery and for a much more geographically granular specification of public goods. It should be a priority for the research community to deliver better means of measuring public goods so that entrepreneurial genius of farmers and landowners to increase public goods productivity can be unleashed. Innovation in economics is also allowing us to value non-market stocks and flows and suggesting institutions that can maximise returns from the way public goods are commissioned.
There is also a raw political argument for the third narrative. There are many groups in society that care about the countryside, and I think emerging consensuses that direct cash transfers are hard to justify for a single sector, that vibrant rural communities require policy action, and that we need to do more to protect the natural capital that is our countryside. But we argue too much amongst ourselves and if all these sectors united behind a single banner of public money for public goods, and stressed the huge value of the public goods farmers and landowners produce, it would represent a constituency hard for politicians to ignore. For sure there will be arguments down the line of what constitutes a public good and how resources should be distributed amongst its different categories. But these are the right things to debate in a democracy. I worry without such a consensus, and bearing in mind the political pressures to show a Brexit dividend for other hard-pressed spending areas, there may be much less money for either agriculture or the environment.
Charles Godfray directs the Oxford Martin School Programme on the Future of Food at Oxford University, and writes in a personal capacity.