The issue of public goods is a complicated and controversial area. The following is an opinion piece written by Griffin Carpenter of the New Economics Foundation.

Why subsidise farming? It may seem like an obvious question, but the way public support for agriculture has changed over time, shows that it’s not a given. With farm subsidies set for an overhaul in agricultural policy after Brexit, the upcoming Agriculture Bill provides an opportunity for the UK to decide what subsidies our Government should be supporting.

For most of the post-war period, the explicit objective of farming subsidies in the UK had been to encourage the production of food. Modern agricultural policy developed in the aftermath of World War II, with food rationing continuing until 1954. With the introduction of the Common Agricultural Policy (CAP) in 1962, to which the UK became party in 1972, farming subsidies had the effect of increasing revenues from food production – generating too much food, it turns out. With food production supported via subsidies regardless of consumer demand or prices, supply surpluses built up in the form of notorious mountains of butter and lakes of wine.

This system of support clearly wasn’t sustainable – financially, environmentally or politically. In order to stop incentivising overproduction, a long series of reforms throughout the 1990s and 2000s saw farming subsidies decoupled from production and instead linked to the amount of land (hectares) held. However, the main objective of this new system (which was no longer the maximum production of food) was never particularly clear. Are area-based farm subsidies a means of protecting the landscape, or of helping to keep farms viable? They seem to be sometimes a bit of both, but often a lot of neither.

In the most recent CAP reforms, a larger share of farm subsidies has gone towards ‘agri-environment’ schemes. These subsidies target specific environmental outcomes and reward on-farm improvements like planting hedgerows. Although the bulk of payments are still area-based, this is about to change, with Environment Secretary Michael Gove stating that post-Brexit farm subsidies in the UK will be based on the principle of ‘public money for public goods’.

While clarifying definitions may be pedantic, it’s worth pausing here for a closer look at the meaning of ‘public goods’. In economics, the term ‘public goods’ is technically defined as something that is difficult to prevent others from using (‘non-excludable’), and where one person’s use does not diminish the amount available for others (‘non-rivalrous’). This definition of public goods is specific and unhelpful. I’d suggest that, in the context of agricultural subsidies and indeed most other government programmes, the term ‘public goods’ or ‘the public good’ simply refers to non-commercial benefits (‘positive externalities’) that are determined through democratic processes to be in the public interest.

For better or for worse, this conception of public goods leaves a lot to be determined, and different stakeholders have been offering their own conceptions of important public goods, including public health, farm viability and employment (through minimum payments), and farm diversity (through support for small farms). An amendment to the new UK Agriculture Bill aims to support County Farms (owned by local authorities, and often rented out below market rates) for their role in protecting smallholdings and supporting new entrants into agriculture – another stated public good of agriculture.

One of the more contentious definitions is for food itself to be considered a public good, as nutrition is a necessary part of life. Beside the fact that many unsubsidised industries could make similar claims (e.g. clothing, utilities), subsidising food production for its own sake risks heading back to the bad old days of supply glut.

The case for food production as a public good has actually weakened over time as the increasing trade and specialisation in food products means that the link between supporting food production in one country, and the food that is actually consumed in that country, has broken down. Likewise arguments for food security or self-sufficiency in a country crumble under scrutiny. Rather than simply producing more food from a country’s own specialised products, food security should mean strengthened and diverse trade links to build a more resilient food system. Food self-sufficiency, if it were a legitimate goal, would necessitate support for agrochemicals, processing facilities and all the other equally critical points of the food supply chain.

Certainly, there are benefits from food production, countless in fact. But the relevant question is whether these necessarily increase with food output, or if they can be separated. More often than not the non-market benefits from farming do not increase with a greater quantity of production, but many of the non-market costs, especially environmental costs, do. We need to be more targeted about what we want from farming.

The debate over what constitutes acceptable public goods is clearly far from over. At this point, it’s important that the widest possible range of stakeholders are engaging with the Agriculture Bill to ensure that the future of British farming reflects the outcomes they would like to see.

More than almost any other sector, agriculture is financed by public support and is therefore shaped by the purpose and structure of this support. With farms, especially in England, becoming increasingly concentrated, and reductions in agricultural greenhouse gas emissions lagging behind other sectors, the winding road of farm subsidies – from food production to the provision of public goods – must point in a different direction.

 

Photo: Neil Howard

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