From “The Economist” Sept. 1st - 2018


BRITAIN



The future of the countryside



A New Furrow


USK ALLEY


Brexit will force a change in farming that could change the face of rural Britain



IT HAS been a testing year for Britain's 150,000 or so farmers. A summer heatwave scorched the broccoli and cauliflower crops. Before that, freezing conditions held up sowing, and scythed through the lambing season. On Pant-y-Beiliau farm, in Wales's Usk Valley, the Trumper family was anticipating a bumper year from their flock of a thousand ewes. In the end they lost about 5% of their newborns to the knackermen. But the extremes of weather are something that Maurice Trumper, born on his farm in the 1920s, has learned to live with. Brexit is different.


In most sectors of the economy, the government is doing its best to maintain continuity after Britain leaves the European Union next March. But in agriculture, it promises big changes. Michael Gove, the secretary for the environment, food and rural affairs, has pledged a shake-up regardless of whatever deal the government eventually reaches with Brussels.


Under the eu's Common Agricultural Policy (cap), British farmers receive subsidies worth about £3.1bn ($4bn) a year. After Brexit those payments will end. The Treasury has promised to pay farmers the equivalent of the cap subsidies until the end of the parliament, due in 2022. After that, the payments will be phased out and replaced by a new system that the government is drawing up. Its design will determine the future of British farming, and theface of the c untryside.


Agriculture makes up only about 0.5% of Britain's economy. But it employs almost half a million people, or 1.5% of the working population, a figure which rises to 4.1% in Wales and 5-7% in Northern Ireland. It supports other industries, contributing most of the raw materials for the food and drink business, for instance. And perhaps no industry has a greater physical impact on the country. Nearly three-quarters of British land is used for farming.


Under the cap, most subsidies are given out according to the acreage of a farm, in what are known as direct payments. The rest are allocated for the work that farmers do to look after the environment. British farmers have long argued that the system is unjust and inefficient, rewarding rich landowners for the size of their holdings and failing properly to recognize farmers' stewardship of the landscape. In 2016 the top 10% of recipients in England received 47% of cap payments, while the bottom 20% got just 2%.


So the government is seizing the opportunity that Brexit presents to flip the formula. In future, subsidies will be awarded for delivering "public goods". The most important of these, Mr Gove says, is "environmental protection and enhancement", such as planting woods, restoring peat bogs or maintaining hedgerows. Mr Gove has won plaudits from environmentalists for his apparent devotion to their cause; he calls himself a "romantic" about the countryside. He has promised to flesh but his ideas in an agriculture bill later this year.


Although the cap is unpopular, fiddling with the system provokes nervousness. The subsidies make up 61% of farm income in England; in Wales and Northern Ireland the figure is over 80%. Small, upland livestock farms tend to be particularly reliant on the subsidies. Mr Trumper says that his 500-acre farm receives about £36,000 a year in cap payments: "We are totally dependent on that to survive."


The government has modelled the consequences of removing direct payments from lowland sheep and cattle farms. The results are bracing. In 2015-17 19% of such farms made a loss even with the subsidy; without it, the figure would have risen to 53%. Across all farms, 16% made a loss; without direct payments the figure would have been 42%. Ministers have yet to reveal the details of the system that will replace direct payments. But it seems that farmers will face a choice: either seek government payments for creating public goods, or focus on efficiency in order to survive without subsidies. One government adviser says farmers will have five years or so to shape up. Those that don't "will come a cropper and go bankrupt."


Some farmers are excited by the prospect of being paid for their maintenance of the countryside. Yet small farms may not have the wherewithal to compete for the payments that Mr Gove has in mind. Many voted for Brexit as a protest against the bureaucracy involved in applying for eu subsidies. The replacement system may be no less cumbersome. Nor is it clear that there is much more scope for diversification. Two-thirds of farmers have already gone into other lines of business, such as solar energy and bed-and-breakfast, a quarter make more money from this than farming.


What of improving efficiency? The country has some highly efficient, large farms, such as the cereal farms in East An-glia. Seven per cent of England's farms produce 55% of its agricultural output. But there is a long tail of smaller, less productive ones. Almost half the country's farms are less than 20 hectares. Sheep and cattle farms, which make up nearly a third of the total, are the least profitable. Proponents of change argue that in places like Wales, farms will have to merge, or at least co-operate more closely to lower their costs.


Mr Gove has also talked up the potential of technology. On small farms, like that of Gary Ryan in Monmouthshire, gizmos like Moocall, a sensor stuck on a cow's tail to alert a farmer before calving, improve efficiency. Government aides point to the Netherlands, a country of only 17m people that is nevertheless the world's second-largest agricultural exporter, thanks to heavy investment in technology such as drones and high-tech greenhouses. In Britain, there is plenty of potential for improvement: the top quarter of farms are twice as productive as the bottom quarter. The country lags behind others countries in agricultural productivity (see chart).


Yet British farmers have little time to get up to speed. Tom Hind of the Agriculture and Horticulture Development Board, an industry body, says that productivity growth has been so sluggish that "this is like turning around a supertanker." He argues that Britain is good at agri-science, but not at applying it to farming-though there are growing attempts to do this, sometimes with European help.


Back in the USK valley, farmers wait to learn their fate. Agricultural policy has been devolved to the governments of Scotland, Wales and Northern Ireland, which might choose to continue directly propping up farms if they do not like the look of Mr Gove's new system. As one Welsh official says, the local coal and steel industries were virtually wiped out in the 1980s. In some areas farming, "a social anchor to communities", is all they have left. ■