Security for British Farmers

Press, Volume XCIV, Issue 28154, 18 December 1956, Page 14

Security for British Farmers

The British Government announced recently its proposals for providing the more effective long-term guarantees sought By British farmers and for helping the industry to meet its investment needs. Several months of negotiations have been complicated by a tug of war between the Government’s duty and commitments to assist home agriculture and its desire to reduce the taxpayers’ liability for subsidies. The price supports, such as the cereal deficiency payments and the fat-stock guarantees, are estimated this year at £ 152,000,000, and the production grants, such as the fertiliser and lime subsidies, drainage grants, and the grassland ploughing grants, amount to £67,000,000, which, with administration overheads, make a round total of £225,000,000 which the taxpayer will meet. The results of the negotiations are more satisfactory to the farmer than to the taxpayer. At present, guaranteed prices (based chiefly on production costs) are fixed at each year’s price review. The new system will not replace the annual price reviews, which neither side, when it came to the point, was willing to drop. But the power of the annual review to make changes in the level of guarantees will now be limited in two ways. First, it is proposed that the guaranteed price for any individual commodity shall not be reduced by more than 4 per cent, in any year, and that for livestock and livestock products the reduction shall be limited to 9 per cent, over a period of three years Second, it is proposed that the total value of the guarantees and production grants shall not be reduced by more than 2j per cent, in any year,

after making allowances for cost changes.

Farmers would be able to plan ahead in the knowledge that there wil] be no sudden drop in the prices of what they produce. As one London newspaper has put it, “ fear “of an unpredictable chute has “ been replaced by confidence in a “ fixed ladder down which prices, “if they fall, can go only one “ moderate step at a time ”. The taxpayers, therefore, can expect no substantial relief from the burden of subsidies; and the new proposals offer no insurance against a greatly increased subsidy bill should world prices fall. Subsidies constitute a large part of the industry’s profit; the cost of agricultural support last year was 16 per cent, of sales. But many hoped that .the Government would be able to reduce the dependence of agriculture on subsidies from the public purse. The Government’s proposals have been attacked on the ground that they weaken central control over the pattern of agricultural production, because the ability to provide any substantial price incentive—or disincentive—for a given line of production has virtually disappeared. The “ Economist ” cites milk as an example .of the undesirable effects of such rigidity. The maximum possible cut in the milk price between now and 1965-66 would be about 3£d a gallon—from the present 3s 2|d to 2s lid. “ Yet ”, the “ Economist ” observes, “ the “ country is swimming in surplus “ milk The “ confidence ” given to farmers, the “ Economist ” says, “ is confidence that if they produce “ types of food which the market “ turns out not to want, taxpayers “ will go on paying remunerative “ prices for them ”. The new proposals for assistance in capital development have been better received. Privileges already given to hill farms and farms in livestock areas and for drainage and water supplies are to be extended, doubling the cost of the existing scheme. As details are still being worked out. it is not yet certain what works will qualify for grants and under what conditions. Generally, the Government proposes making a grant of one-third towards the cost of new fixed equipment and land improvements. While the capital grants scheme is designed to raise farming efficiency, some critics have complained that its looseness may well result in extravagant grants to prosperous farmers, most of whom do not lack for investment capital. However, the proposed new grants are not large in relation to the subsidy bill. They are expected to push up the rate of investment in fixed equipment by some 30 per cent, and to cost about £50,000,000 in 10 years. Its reliance on very heavy subsidies iS still the real cause for concern about the state of British agriculture. Far from reducing this dependence, the new proposals seem all too likely to increase it