British Farm Subsidies

Press, Volume XCVII, Issue 28543, 24 March 1958, Page 10

British Farm Subsidies

Although the reduction of £l9 million in the guaranteed prices for British farmers in the next financial year is unlikely to have any significant effect on prices for New Zealand produce, it encourages hopes that agricultural policy in Britain may bev modified in the future to the advantage of overseas producers. The reduction amounts to less than 2 per cent, of total farm supports, now running at a rate of £1257 million a year; but it is near the maximum the Government is permitted to make under its agreements with the farmers. The reductions may help to check the over-production of milk, eggs, and pigmeat, which has had undesirable consequences both for Britain and the Commonwealth. The reduction, too, will assist the Government in its drive for economies in State spending. Agricultural supports account for nearly 10 per cent, of all Government civil supply expenditure. A cut of £l9 million will be welcome to the new Chancellor, Mr Heathcoat Amory, as he prepares his Budget.

But the cut is most welcome as a sign of a change in British agricultural policy. The practice in the war and post-war years of increasing agricultural production "by artificial means regardless of cost has been difficult to alter in the changed economic conditions. There have, however, been modifications in the last few years, and of these the most significant step was taken last year when the Government introduced long-term guarantees to farmers. Firm assurances were given that the guarantees would be reduced only gradually, by no more than 2i per cent, in total in any year, or up to 4 per cent, for a single commodity. But the clear implication was that a reduction in

) supports was planned; and this 5 has been confirmed as the t Government’s policy. The > changes will be gradual; rapid changes might disrupt farming 1 severely. Special aid is • necessary for British farming, . partly for social and strategic • reasons and partly because of • the balance of payments; but ; Commonwealth and European producers believe, with some reason, that the subsidies are too high. The total amounts to nearly the total net income of British farmers and thus provides nearly all the aggregate profits, though many farms are, : of course, profitable on their own account. Evidence that a : progressive reduction in sub- : sidies has begun will not be ' welcome in Britain; but farmers j cannot expect to be guaranteed i fully and for ever against financial risk and farming uncertainties. Good farming will

continue to be encouraged; but farmers will have to compete, sooner or later, with European and Commonwealth producers. The reduction, which will assist in the fight against inflation, may seem to be contradicted by the reduction in the bank rate, announced simultaneously. The 7 per cent, bank rate, however, was set six months ago more because of external factors than internal. Its tentative reduction by 1 per cent, is evidence that foreign confidence in sterling has been restored rather than that the internal economy is secure—though it is certainly stronger than it was in September. The credit squeeze has, to some extent, held wage and cost inflation; and the balance of payments position is sounder. Six per cent, is still high and disinflationary in effect and the modest reduction is no evidence that the Government is relaxing its fight against inflation. If reserves continue to increase, more significant reductions may be expected.