Be careful what you wish for.

Be careful what you wish for.

To create an incentive for achieving results can be very positive. Rewarding certain achievements in the workplace with a bonus can be very good for both sides. Farmers are the perfect example of this. Many years ago, farmers were paid by governments to drain wetlands and to remove hedges to improve the productivity of farms at a time when food security was a concern. Times changed, as did priorities. Protecting the environment and preserving our countryside became as important as producing food, and so the subsidies shifted to a range of schemes, starting with Environmentally Sensitive Areas and Countryside Stewardship and moving through Entry Level Scheme and Higher Level Scheme. As these schemes reach their conclusion, and we move to a new, as yet unnamed scheme with the catchy working title of NELMS, policymakers must remember the law of unintended consequences.

The result of prioritising food production during the 1960’s and 1970’s meant that the Common Market or EEC vastly over produced crops which were subsidised because farmers learned to produce the crops that they were incentivised to produce, sometimes at the expense of the environment. This created cheaper food for the consumer, resulting in a huge reduction in the percentage of household income spent on food. Consumers became used to food being cheaper than the actual cost of production combined with land ownership. The result of this is that food is too cheap because we are now unable to break away from the system of subsidising farmers. If we did so, as New Zealand did in the 1980’s, many businesses would not survive, and end users would eventually see a rise in food prices. The decoupling of subsidies from production towards more environmental payments 10 years ago made a step away from this system, but land still attracts a significant “single farm payment” which distorts the market for produce and for rental and purchase of land.

Step in the new subsidies; many are for ‘renewable energy”. Farmers are well placed to access these ‘grants’ because many farmers require power which can come from green energy, most have land on which to build solar panels or wind turbines or to grow biomass crops, and they have the ability to borrow money against their assets to finance the build cost. With short payback times, there are now over 70 biogas plants in the UK, and several straw burning plants to accompany the many thousands of individual efforts all combining in the government’s vain attempt to keep it’s promise of 15% renewable energy by 2020.

Back into the mix come those unintended consequences though. The increase in biogas plants has hiked land rents up in many areas, impacting on vegetable and potato sectors. The increased burning of straw will inevitably lead to higher straw prices, challenging livestock farmers margins, whilst at the same time reducing the organic matter which is ploughed into the soil on arable farms, reducing their productivity and soil health. Governments will always impact on the role that farms play in society. Sometimes they are less aware of the consequences of their actions until it is too late.