How will agriculture fare with this Government? We look at the new line-up for Defra, plans to reduce the deficit, initial cuts and other policies.
With its 'feet under the table', the Coalition Government is starting to tackle its number one priority – the UK's massive budget deficit. This is affecting all areas of government policy, including agriculture. There are also the new administration's initiatives that are separate to any spending cuts. This will give the industry plenty to ponder over the coming months.
The Defra Team
The most interesting aspect of the new team is that, for the first time in a long while, the ministers have direct farming experience. Whether this proves to be positive or not remains to be seen.
The Defra secretary of state is Caroline Spelman. Mrs Spelman is MP for Meriden, which covers an area of the green belt between Coventry and Birmingham. Before entering Parliament in 1997, she had fifteen years within the agricultural sector, including a stint working for the National Farmers' Union (NFU) as sugar beet commodity secretary from 1981 to 1984. Mrs Spelman is also fluent in French and German – useful in future CAP negotiations.
The new minister of state for food and farming will be familiar to many in agriculture. Jim Paice has been MP for South East Cambridgeshire since 1987 and also has a strong background in the industry. He has twice been the Opposition spokesperson for Agriculture and Rural Affairs and previously had a successful career in farm management. He will be responsible for food and farming including animal health, responsibility and cost sharing, the Single Payment Scheme and the Rural Development Programme for England (RDPE). The Defra team is completed by Richard Benyon and Lord Henley who have been appointed as parliamentary under secretaries of state in the Commons and Lords respectively. This completes an all-Tory line up in Defra, with no Lib-Dem ministerial representation.
Deficit Reduction Plans
The new Government's first (emergency) Budget was a combination of overall tax rises and spending cuts to reduce its budget deficit. In terms of cutting the deficit, 77% will be through spending cuts. The remainder will come through tax rises. Government spending, apart from in protected areas such as overseas development and health, will see a 25% real-term drop over the next four years.
It is not clear whether this will apply equally across all departments, or if some will face deeper cuts than others. More detail will be provided in the Spending Review due to be announced on 20 October. Whatever the final figure, it is clear that Defra will face significant cuts. These will also filter down to its associated agencies and quangos, with some effects already being seen.
Initial Cuts
The Spending Review will be looking at longer-term savings. But Defra has already made reductions for the current 2010/11 year. These equate to 5.5% of the department's budget, or Ł162m. Areas to be cut include new recruitment, temporary staff and consultants, IT spending, Regional Development Agency (RDA) funding, and the usual catch-all of efficiency savings.
As part of the review process, Defra has already started on a 'bonfire of the quangos' it sponsors. The Commission for Rural Communities, the Royal Commission on Environmental Pollution, the Inland Waterways Advisory Council and the Commons Commissioners are all to be abolished. Funding for the Sustainable Development Commission is to end. Also to go are the Agricultural Wages Board (AWB), the 15 Agricultural Wages Committees, the 16 Agricultural Dwelling House Advisory Committees and the Committee on Agricultural Valuation.
Few in the farming industry probably had much idea as to what these bodies actually did, so it is unlikely that they will be greatly mourned. The one exception is the AWB, which did have direct relevance to agriculture. The future of the AWB has been debated for some years. It seems the question of whether it had outlived its usefulness or not has eventually been rendered moot by budgetary pressures.
Although not a Defra responsibility, it was announced that the RDAs will be abolished. It remains to be seen how this affects the distribution of RDPE grants.
What's Next?
The cuts outlined above are likely to be only the start. Defra is presenting a set of spending scenarios to the Treasury: a range of cuts between 25% and 40% are being proposed (with some reports of cuts of up to 50% also being modelled).
According to the department it 'has around 90 arm's length bodies'. The phrasing suggests that Defra is not exactly sure of the number itself. This would appear to offer plenty of scope for further spending reductions. The biggest savings will come from the biggest agencies, with staff numbers at both Natural England and the Environment Agency likely to fall. There are also cuts to be made within Defra itself.
One 'arm's length body' that many farmers would like to see abolished is the Rural Payments Agency (RPA). A review has just been published looking at the performance of the agency (www.defra.gov.uk/foodfarm/farmmanage/singlepay/documents/rpa-exec-summary-190710.pdf). Not surprisingly, the comments are scathing. However, what the report did not recommend was that the agency be scrapped. To quote: "...there is no reason to believe that a scrapping of RPA with a complete new start would produce a fitfor- purpose organisation any faster or at any lower cost to the public purse."
Importantly, UK spending cuts will not directly affect the Single Payment (SP). This is prescribed by the EU under the CAP, and it is not within the UK Government's power to alter payments. But this may be a relatively short-term reprieve.
The current EU support structure is due for another reform, to be implemented for the 2013 SP year. With money tight across Europe, the budget for the next seven-year period to 2020 may well decrease.
What is under greater threat in the short-term are the rural development programmes run by the various UK administrations. These pay for agri-environmental schemes like the entry level stewardship (ELS) and higher level stewardship, along with grants for things like diversification. Funding for rural development comes from a number of sources (including modulation), but part of it is direct from the Treasury. The level of this is under review.
Those who are considering making an application to these programmes may be advised to do it sooner rather than later.
Policies
Within this austere environment, Defra is still trying to carry on with the business of government. It has published a Structural Reform Plan that sets out three departmental priorities.
- Support and develop British farming and encourage sustainable food production.
- Help to enhance the environment and biodiversity and improve the quality of life.
- Support a strong and sustainable green economy, resilient to climate change.
See ww2.defra.gov.uk/about/ourpriorities/ for more details.
In addition, a new task force has been set up to look into ways of reducing the regulatory burden placed on farmers and moving to a 'risk-based system'. The Task Force on Farming Regulation will be chaired by Richard Macdonald. Mr Macdonald was the NFU's director general from July 1996 until December 2009.
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