At the recent Oxford Real Farming Conference a spat broke out between farmers and rewilding advocate George Monbiot as reported in the Farmers Guardian.
"Tenant farmer Rebecca Hosking, who runs the organic Village Farm in south Devon, said while she would be ‘proud’ to farm without subsidy, she needed it to cover her farm rent cheque.
Ms Hosting reported comments, while I am sure not supported by herself, shows how the Farmers Guardian seems blissfully unaware, or is it convenient for them to obfuscate the truth, that most of a farmers rent is the farming subsidies they received as well as the indirect subsidies they do not. So farming subsidies makes tenant farmers no better off at all.
This is shown easily when looking to rent land (or buy land as it is capitalised into vastly inflated land prices). Agricultural land is offered for rent at two prices. One price where the subsidy is claimed by the landowner and another collected by the tenant. The difference is exactly what the subsidy is minus a tiny amount to cover the hassle of doing the paperwork etc. and some smoothing issues.
“Agricultural subsidies tend to be capitalised into the purchase and the rental price of agricultural land. Because of higher incomes farmers are prepared to bid more to rent in or purchase extra land. But given that the overall supply of land is fixed, farmers will bid against each other up to the point where the entire increase in profitability is dissipated by the higher cost of land. Thus, it is landowners who are the main beneficiaries of farm support policies."
The last time I looked to rent land it was £130 per acre per year with the single farm payment and about £65 without. When you take into account the other farm subsidies and price support we can see the real rent would be about £30 per acre and every penny of subsidy (minus the hassle of claiming it) is just added onto the rent. This was for good quality farmland.
A wider analysis (Source Savills) shows us that:
Single Farm Payment is typically worth approximately £210 per hectare (£85 per acre), per annum. Environmental subsidies, where eligible, can add £30 per hectare (£12 per acre) for the Entry Level Scheme and up to £300 per hectare (£121 per acre) typically for the Higher Level Scheme.
As land gets close or below the margin so the real rent approaches zero and subsidies account for all the rent.
You must of course take out the rent covering farm buildings and other improvements.
So a marginal hill farmer's rent is made up nearly entirely of subsidy, especially if they receive the enhanced Higher level stewardship(minus any work needed for compliance).
If no subsidies existed then sub marginal farms would not be economic and thus the land could be rewilded at no cost, saving taxpayers a fortune and we could put the land to good use protecting biodiversity and performing 'ecosystem services' such as acting as a carbon sink and holding onto water to stop other farms, towns and cities flooding further down stream.
The economic picture is further complicated by other tax breaks to the landowner and cultural factors which keep uneconomic land in functionally useless production.
The real picture is of course much more complicated in that there would be a rich mosaic of areas uneconomic to farm (poor farming areas) rewilding and the better fields still farmed and those tenant farmers would be no worse off.
All of the various subsidies are in fact non-means tested state benefits to landowners who receive this without work. So we are subsidising the mere ownership of land and not farming and to a large part those people who endeavour to create good quality food and protect wildlife on the land they rent.
There are of course a small minority of landowners who endeavour to protect wildlife on their land out of moral duty but our system does not support them to the extent it should and the cost to the taxpayer of ELS and HLS agri-environment scheme are so high as they must first essentially pay the landowner for compensation for the other subsidies on offer as well as profits forgone.
If we had a Land Value tax, on the rental value of the land, replacing income tax and vat then this would solve this problem much more effectively and just about all the other problems we face(see my many other posts or read this comprehensive site on the issue
http://www.sharetherents.org/ ). The monopoly of land and any subside to landowners would be removed and farmers could get on with the business of farming unencumbered by this economic minefield & and any agri-environment subsidy would end up helping the environment and not some idle landlord.
A further problem with Agri-Environment schemes ELS & HLS is that they are a double edge sword and can create as many problems as they solve. To understand this you have to see how the economics of land use work out. Agri- environment schemes actually are capitalised into land values and rents and as such make land acquisition much more expensive (probably about 20 times more for marginal land being acquired as nature reserves, so wildlife charities cannot afford to buy much land) . Also Agri-environment schemes shift the margin of production and actually cause land that would be uneconomic to be farmed to remain in production at a higher intensity, destroying wildlife.
Of course it is a very complex picture but it would be far better to use legal instruments and financial penalties to control land use than subsidies. That is why I think the solution to wildlife protection and flooding is to remove subsidies, give greater powers of instructing land use obligations on landowners by Government agencies. As we peel this land economic onion once again the best policy is to shift taxes onto land value taxes and externalities taxation with the objective of getting land of poor economic use and in the case of flood prevention for buffering water flow peaks to go into less intensive use or be rewilded. All of this achieved through fluvial geomorphological modelling and economic pressure.
