Thomas Coughlan examines the perks and pitfalls of taking an agricultural subsidies approach to fixing our waterways
The secret is out — and don’t we just hate it when the secret gets out. Foreigners are poking around the 100% Pure brand and finding it wanting. It’s not the first time; British TV Presenter Stephen Sackur gave it a good dent back in 2011, but with a new government riding in on a wave of discontent over the state of our rivers, it’s likely we will see some change to how our agricultural resources are managed over the course of the next Parliament. With the governing parties strongly divided on the issue, it’s unclear which direction the government will move.
At the end of last year, Sir Tim Smit, a prominent British ecologist added his voice to the chorus of criticism the agricultural sector has faced in recent years. At The Country Land and Business Association’s Rural Business Conference in London he described the country as being like a “beautiful person with cancer”.
Some New Zealanders have picked up the cry. New Zealand Fish and Game Council and Greenpeace, echoed Smit’s call for a rethink of how we manage our countryside.
They should proceed with caution. Though using New Zealand as a cautionary tale, Smit’s criticism is less relevant to us than it initially appears. As has often been the case in the history of Anglo-Kiwi relations, Smit’s criticism has more to do with British domestic politics than anything happening in New Zealand.
As a member of the European Union, landowners in rural Britain benefit from the Common Agricultural Policy or CAP, a massive program of subsidies that encourages farmers to grow (or not grow) certain crops and rear certain animals. Most people haven’t heard of it, which is rather alarming, given that the subsidies account for a whopping 40 percent of the EU’s €145 billion (NZD $245 billion) budget.
Key government figures, notably the Environment Secretary and arch-Brexiteer, Michael Gove, have been advocating for the full or partial removal of the subsidies, arguing that it would help to make British farming more competitive and efficient, as well as save the government billions of pounds.
Our farms are competitive now, but perhaps at the cost of their own future.
New Zealand is often cited as an example of what Gove would eventually like to achieve: a competitive, profitable agricultural sector, unshackled from depressive government subsidies. They’re correct in some ways. Since David Lange’s Fourth Labour Government removed farm subsidies in 1984, New Zealand’s farms have indeed become more efficient and competitive.
To give Smit his due, one of the most harmful side effects of Labour’s deregulation was the intensification of farming and deterioration of the environment that ensued. CAP-style subsidies do have the side-effect of discouraging the style of intensive dairy farming that is destroying our rivers. Our farms are competitive now, but perhaps at the cost of their own future.
So why not support it? After all, if Winston has nixed the unpopular water tax, perhaps subsidies are the way to go: if we can’t charge farmers for polluting, perhaps we could pay them to keep the rivers clean? The resumption of subsidies would be a huge transfer of wealth into the rural and regional economy — just the sort of thing this government needs and just the sort of things its New Zealand First ministers could strongly get behind.
The problem is that subsidies like CAP have a distortionary effect and tend to confer further privileges on the already well-off. CAP is itself a good example: its leading benefactors are large landholders, often members of the British aristocracy, whose lands net them generous subsidies paid for by working people.
Research done by Greenpeace has found that 20 of the top 100 beneficiaries of CAP are billionaires. Beneficiaries include: Sir James Dyson, the Earl of Rosebery, the Duke of Buccleuch and Earl Bathurst, the Duke of Westminster, the Duke of Northumberland, the Duke of Westminster, the Earl of Iveagh and even the Queen. Notice any similarities?
If the new Government is serious about tackling inequality in home ownership and cooling the housing market, particularly in areas like the Southern Lakes, where the issue of land value has again reared its ugly head, it should probably start by ruling out paying landowners for the privilege of owning valuable property.
Perhaps the Government will put something else on the table? Protectionist tariffs are probably not an option, threatening, as they do, our free trade agreements. Could we imagine some form of minimum dairy price of the kind that existed, in various forms, from the time of the First Labour Government?
If the new Government is serious about tackling inequality in home ownership and cooling the housing market ... it should probably start by ruling out paying landowners for the privilege of owning valuable property.
Again, however, this is a massive transfer of wealth and subsidy to rural New Zealand. James Belich, in his book Paradise Reforged recalls that it was common, when the price of milk was low, to sell all of a farm’s milk for the minimum price, only to buy their own milk back (for use around the farm and in the kitchen) at the reduced, consumer price, effectively pocketing the difference as handout from the taxpayer.
Other subsidies, based on the amount of land or sheep farmed are also distortionary and encourage farmers to bring into cultivation hilly, forested or otherwise unsuitable land that should really be left uncultivated.
Gove himself might have found a middle-ground. He has proposed ditching all subsides apart from a payment for environmental improvements like planting trees, windbreaks, and preserving wetlands. The obvious problem here is not just the immense cost, but how to maintain diversity in the agricultural sector.
The subsidy has to be attractive, but not too attractive, and it would have the unattractive side effect of making land that received a subsidy expensive. Yet we need to at least try to achieve some of this effect: some land does need to be transitioned away from high-intensity farming; some might even need to be reforested.
This might lead us back to the kiboshed water tax and the split within the governing parties of how to manage the rural economy. New Zealand First is in favour of carrots, while Labour and the Greens prefer sticks.
The hard truth is: to preserve our waterways and prevent further degradation of farmland, the number of cows we farm must be reduced. Unpalatable disincentives might be the only option. To quote Roger Douglas, the architect our free-market agricultural sector: “There’s got to be a better way…”