The CAP doesn’t fit – why the EU’s farm subsidies are ripe for reform – The Property Chronicle
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The CAP doesn’t fit – why the EU’s farm subsidies are ripe for reform

The Farmer

With the support of the Atlas Network, CapX is publishing a new series of essays on the theme of Illiberalism in Europe, looking at the different threats to liberal economies and societies across the continent, from populism to protectionism and corruption.

Richard Findlay is a farmer in the North York Moors National Park between York and Newcastle. As the Financial Times reported last year, Mr Findlay garners a profit of around £12,000 a year by grazing some seven hundred sheep. But even that £12,000 is quite a lot if one looks closer. Indeed, if it weren’t for subsidies delivered by the EU’s Common Agricultural Policy (CAP), Mr Findlay would be facing a loss of £32,000. Simply put, this farm would not exist if it were not for Brussels.

But Mr Findlay is far from the only farmer keeping his business alive through subsidies – the same thing is happening all over Europe. In the UK, 61% of the average farm’s profit comes from the EU’s direct payment scheme. On farms specialising in livestock farming, more than 90% of what is called ‘profit’ comes from subsidies.

The Common Agricultural Policy has been one of the most controversial parts of the EU’s work for decades – and it has certainly been a bugbear for many Brexiteers, who have long argued that it symbolises everything wrong with the way the bloc works.

When it was established in 1962 the original purpose of CAP was to secure that there was enough food for Europeans on a continent that was still wrought from war – or, in more technical terms, to achieve “food sovereignty”. And yet, as Europe became a continent of peace and trade with the world increased, the arguments for food sovereignty began to look a bit thin. Nonetheless, CAP was going nowhere. Not only did it stay in place, it actually expanded. By the 1980s, CAP accounted for over two-thirds of the entire EU budget.

While the share of the overall budget has since gone down – to 38% under the current six-year budget – it is still the largest financial program of the union. In addition, despite having decreased in relative terms, CAP payments still increased in absolute numbers until 2013.

At 38% of the budget, European taxpayers send more than €58bn to farmers each year – a shocking amount if one considers that farmers only make up 3% of the EU’s total population and are responsible for no more than 6% of its GDP.

Indeed, while the original goal of CAP was to enable farmers to feed Europe after decades of conflict, now it’s Europe that is feeding farmers through its massive subsidies. Their businesses often only survive because they are effectively bailed out – unlike big financial institutions, these are not one-off bailouts, but day in, day out.

If all of this sounds like protectionism and an illiberal economic policy it’s because that’s exactly what it is. That much was also clear from the strongly expressed opposition to a recent free trade agreement with Latin American countries from French President Emmanuel Macron and his colleagues from Ireland, Belgium, and Poland – all countries where farmers are profiting much from CAP. Politicians across Europe are fond of telling us that farmers need “protection” from the scourge of cheap imports, as if consumers’ interest in cheaper food were of no consequence at all.

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