from the Report of the Policy Commission on the Future of Farming and Food, January 2002

SUMMARY OF RECOMMENDATIONS (pps 109-112)

As a Commission, we start from the position that the situation in England's farming and food industry today is unsustainable, in every sense of that term. It is serving nobody well.

Taxpayers are handing over huge subsidies every year for a policy which is destroying economic value. Consumers are paying more for their food than world prices. The environment is being degraded. Farming incomes are on the floor.

We believe the real reason why the present situation is so dysfunctional is that farming has become detached from the rest of the economy and the environment. The trauma of last year should be a watershed. The key objective for public policy should be to reconnect our farming and food industry: to reconnect farming with its market and the rest of the food chain; to reconnect the food chain with the countryside; and to reconnect consumers with what they eat and how it is produced.

Our vision is for a farming and food sector that is profitable and sustainable, that can and does compete internationally, that is a good steward of the environment and provides healthy food to people in England and around the world.

Despite the gloom overall at the moment there are some good things already happening. We have seen many examples of exciting good practice in our trips around the country. Some producers are connecting with the market; joining forces with retailers and suppliers to cut costs for all; making a selling point out of high standards and an attractive countryside.

The Government's role is to provide the policy framework, and to remove the distortions that are currently preventing these sorts of initiatives from flourishing and growing. at includes creating a market for the environmental public goods that farming can supply.

Beyond that, we believe it is up to the food and farming industry to spot and seize its opportunities.
...
The recommendations of this report, which must be seen as a package, are addressed to both industry and Government on how we can move forward.

PROFIT
FMD has passed but farming is still in crisis. Incomes rose last year but they are still near rock-bottom and the long-term trend is downwards. The public image of farming in England is bad. e industry is not attracting new entrants or investors.

Some of the trends which have driven the present crisis are inescapable. Trade liberalisation is not going to go away. Consumers are becoming ever more choosy. To the extent that price becomes less important to some, with rising real incomes, convenience looks like taking over as the key factor in buying decisions. On present form that would tend to mean more prepared food. It will mean more eating out, where it is harder to make provenance count. None of this is, on the face of it, good news for high-cost domestic commodity producers.

A strategy that tried to turn these basic trends round would be doomed. However, for those that can work with change and can shape and anticipate it, there is a good future ahead.

The first question we set ourselves is how we can make farming and food production profitable again, by reconnecting it with the rest of the food chain and with consumers.

The right answer to making farming profitable is not to cling on to production subsidies, whatever they may do for incomes in the short term. Subsidies are part of the problem, not the solution. They divide producers from their market, distort price signals, and mask inefficiency.

We therefore want to see the current EU regime of price supports and production subsidies dismantled as quickly as possible. Public money has to be refocused on real social and environmental public benefits.

We urge the Government to press for substantial reform of the ... as soon as possible, establishing a clear timetable for reform and encouraging and supporting the farming and food industry to adapt to change. The guiding principle must be that public
money should be used to pay for public goods that the public wants and needs:

• remaining price supports and associated production controls must go;
• direct payments should be phased out as quickly as possible
• they should be decoupled from production and be subject to base environmental conditions for as long as they do exist;
• resources should progressively transfer to the socalled Pillar II of the ... to pay for rural development and environmental protection schemes;
• the UK's share of the Pillar II budget should increase at the same time, and rules on eligibility and administration should be made more flexible.

As the industry moves towards an unsupported world we have considered what strategies producers can employ, and what public policy can do to help them - accepting that in practice market disciplines are likely to be the best spur and guide to opportunities. This report's analysis is that the available strategies are likely to boil down to some combination of three
things: driving out unnecessary cost; adding value; or diversifying the business.

But we first deal with the effect that the exchange rate has had on the food industry's performance, particularly in farming and particularly in the last five years. There are a lot of other things wrong in farming but this issue cannot be ignored. Whether or not the UK should join the single currency is outside our brief. But there are measures that can be taken now to help.

We recommend that the Government should give farmers the option of receiving their direct support payments, for as long as these last, in euro.

We support the Department for Environment, Food and Rural Affairs in its current work with the industry on risk management tools that could reduce the exposure of farming to currency movements. We think that work should be extended through the convening of a group involving farming representatives, the Treasury and the main UK banks. at group should be established within the next three months and be given another three months to explore the Government aided venture capital initiatives. The English Collaborative Board should be involved in scrutinising these applications.

(the recommendations continue on from page 112 to page 141)