Welfare for the Rich: how large landowners & corporations get lion’s-share of UK’s Common Agricultural Policy (CAP) annual windfall

Written in 2010, by James Armstrong, Dorchster
Contact: james36armstrong@hotmail.com

reC.A.P., – TO  CAP IT OR SCRAP IT?
 
 
The Common Agricultural Policy costs U.K. taxpayers some £3.8bn per annum.
It does not benefit ‘small’ farmers nor agricultural workers 
It is a serious threat to democracy and welfare. It should be scrapped .  The least we can do is to cap  the expenditure at a means tested amount equivalent to claimants receiving  £12,344 per annum  – the minimum wage.
 
For an every-day example by which to judge the purchasing power of £1billion we can use the cost of the 12 new detached houses with garages built by a team of self builders in St Minver Cornwall and completed in 2008.  for a cost of  some £80,000 each.
£1million would buy twelve and a half such houses and £1 billion some 12,500 so £3.8billion would fund  the building of 47,500 new houses.  
 T his gives a measure of the annual cost of CAP. Payments to   UK taxpayers in money expended and benefit forgone. .
 
The origin of CAP. (Ritson and Harvey)
The European Union was to be a means of political unification and a guarantee for peace following the resolution of the world war.
(during the  in negotiations leading to the Treaty of Rome 1958) the attitude of  the French government and the French farm lobby  were of crucial significance in the establishment of the C.A,P.   just as Germany played a   leading role in directing the industrial policy.
 
The Treaty of Rome set the agenda for  the C.A,.P..
The Treaty  talks of,
“a fair standard of living for the agricultural  community  in particular  increasing the  earnings of persons engaged in agriculture.” 
 
The background to UK agriculture
The C.A.P. effectively transferred  money from industrial workers  (mostly  Germans )  via taxes  to fund C.A,P. payments to farmers (mostly French) . When Britain joined in 1973 owing to the nature of landownership in UK , CAP payments in large tranches were received by the very  small constituency which is the British Landowning group- some
One  per cent of the population.  The historical tendency in UK has been for farms to amalgamate by  enclosure, by  engrossment and by industiralisation  of farming techniques.by emparkment etc.
 
The Underlying principle of CAP
It was established when CAP came into being that producers  should receive a price determined by market forces   but that these market forces should be controlled so that prices fluctuated only between pre-determined upper and lower limits.  So that farmers were protected from excessively low and consumers from excessively high prices. The most basic CAP support scheme is for cereals .   All others a re a variation of this.
 
 
The second major component of the cereals regime is the import controls since world prices are often lower than EU prices.  I t would be worthwhile in the absence of controls to import, so imports are controlled by licence  and import duty must be paid.
 
 
AGRICULTURAL PRODUCTS PRICES IN E.C. AS % OF WORLD PRICES (=100%)
                         E.C.,1994%      highest%
Common wheat         155             155
Maize                         140             211
Barley                         214            218
Rice                            209             209
White sugar                106             137
Milk                            241             259
Beef / veal                   208             208
Pig meat                      130             134
Poultry                         118             161
Sheep meat                  156             243
 
Who receives CAP payments?
The client group is heterogeneous including landowners, food manufacturers, agribusinesses , pheasant breeders,  racing stables , farmers, pony paddock owners, donkey sanctuaries, racehorse trainers’ gallops, wildlife trusts, fishing clubs ,etc
 
 
 
 
 
THE ECONOMIC AND SOCIAL EFFECT OF C.A.P.
The Benefits and cost of CAP versus free trade (Ritson & Harvey p 165)
 
                          Billion ECU ( U.K. ) 1994
                                                                            Interpretation ?
Producers gain                 3.82          (CAP payments received by ‘farmers’
Users cost                         4.31          (cheaper food prices foregone by consumers)
Taxpayers cost                 2.51          ( UK contribution to EU to fund CAP payments )
Net Welfare cost              3.01           ( CAP on balance is a cost not a benefit)
Bridge Trade Effect        -3.31           ( an allowance for the distortion of free trade)
                                      
Analysis
 
In the  following analysis The figures are taken and processed from the information available on the web site
www.cap-payments.defra. gov.uk
 
 

Reducing the annual CAP payouts
For comparison ,the statutory  minimum wage    at £5.93per hour yields £12,334 p a for a 40 hour 52 week year
Using this as a guide  between ‘low’ and ‘high’ C.A.P-income receivers the following analysis emerges for the year 2009 .
At present (2009) 197,346 claimants receive  a total of   £3,426,076,230 costs push this up to £3.8bn) 
The high  claimants
65,991 receive   greater than   £12,334, – in total  £2,993,905,590 average £45,468
If they were ineligible ( cut off point at £12,334, ) the savings would be £2,993,905,590
If they received the  minimum wage equivalent, they would receive  £813,932,994, saving £2,179,972,596  (some £2.2bn)
The low  claimants
At present (2009) 131,427 receive  less than  £12,334,  in total  £434,158,342 , average  £3,303
 
CAP reserved for those now claiming £12,334 or less 
If all now receiving  less CAP than the minimum wage were upgraded to the min wage
And those claiming above this sum were ineligible the cost would be £1,621,020,618
And the savings £1,805,055,612
 
CAP as a fixed payment to all qualifying claimants . large and small.
If the statutory payment was  the minimum wage equivalent
For 197,346 receiving  £12,334 the cost would be £2,434,065,564,saving £992,010,666
 
THE MACRO ECONOMIC EFFECTS OF C.A.P. ON LAND VALUES
Ritson and Harvey write,
“The Producers’ gain is a measure of the economic rent earned by factors engaged in agriculture over and above that which could be earned in the  absence of the policy intervention.
In the case where all the factors and inputs except land are available to agriculture in perfect elasticity of supply (that is the prices and returns of these factors and inputs do not change whatever the  agricultural output  and use levels) theory suggests that all of the policy benefits will accumulate to rents and agricultural values of land .
So the figure is a measure of the annual gain to landowners .
In practice the assumption of perfect elasticity of supply is extreme. Some fraction  of the gain would be expected to accrue to owners of other factors specifically associated with the industry including those upstream of the farm gate”
R and H seem to mean that CAP payments cause land values to rise. 
 A marked increase in the price of agricultural land has been noticeable  since the introduction of CAP, resulting from feeding in £billion  CAP grants each year over thirty three years. .  
 
 
 
 
 
WHO RECEIVES C.A.P.PAYMENTS ?
.
 
annual payments go to –
     Lord Carrington          £149,000
     Lord Linlithgow          £ 144,000
      Lord Rothermere        £29,000
 to-    M.P.s  ,    Richard Drax ,M.P.,  £417,846
To dukes….to earls…. To Prince Charles £581,000
To their  trade association , NFU, £70,000
 
HM Queen received  £1,183,508 over the last two years for privately owning the Sandrigham estate.
Two thousand get more than the Prime Minister’s annual salary,
The regime is not designed to  benefit struggling ‘small’ farmers since the majority of funds go to large agricultural holdings.  Large plc corporations receive £multimillion payments 
It has nothing to do with food security – Owners of one million pony paddock acres  qualify for some £30million.  Preserving the countryside and the wildlife  is the business of Defra and  the RSPB-not CAP –  (yet that Charity with a £15million membership fund gets an additional £1million from CAP annually).
 
Thousands of  claimants are already landowning millionaires
.
WHO PAYS – HOW MUCH- WHO GETS WHAT- WHY?
CAP  is not funded  by EU but out of UK taxes and costs the British taxpayer £3.8 to £4billion in 2009.
This is an increase of  23 per cent over 2008  and in 2010 will increase again, and in 2011
Some 80% of UK citizens live in urban settings. Some 99% of UK citizens own no bulk land and do not qualify for CAP payments.  
From their taxes, moistly income tax, these non qualifiers  fund CAP.
and this is largely unknown to them.
CAP is not rational.
CAP does not fulfil the rationale of the Treaty of Rome,  In UK  the number employed in agriculture has fallen by 1million  and agricultural workers are amongst the lowest paid in the land.  Those farmers on the lowest incomes receive the least benefit from CAP and the increase in incomes of large corporate  farms threatens their existence from buy outs.
The increase in land values proves a barrier to  new entrants to farming.
 
In the past CAP has caused overproduction and waste of food.
Food prices within the EU are  higher than world prices. CAP related EU  Tariffs are a barrier to  exports from third world countries.
EU exports of foodstuffs at subsidised prices threaten the livelihoods of third world producers.   
 
 
CAP  IS ANTI DEMOCRATIC
Access to the orginators of CAP policy is severely restricted and they are not democratically accountable.
 
CAP budget is set by the  Directorate  General for the  EU Budget
Agriculture policy by the   Agricultural  D.G.
The Council for Europe is the major legislative  body of the EU.
 
CAP IS ANTI- WELFARE
The CAP is a regressive tax paid mostly out of income tax to reward the wealthy and privileged . CAP has  increased the price of food.
 
CAP HAS INCREASED LAND COSTS FOR NEW HOUSES   
 
ABOLISHING / SEVERELY REDUCING THE COST AND EFFECTS OF CAP
Britain is a valued member of the EU.   The workings of CAP as shown above are not rational, not democratic and have a negative welfare effect.  It is necessary as a minimum measure , to severely reduce the burden and the effects of C.A.P. for UK citizens .
This can be achieved by the co-operation of the E.U. or unilaterally by UK if necessary by reducing pro rata the UK contribution to EU or reconsideration of our role within EU.
 
 
References :
 
The Common Agricultural Policy, 2nd Ed .  Edited by  Ritson and Harvey 
www.cap-payments.defra.gov.uk
 
James Armstrong  August 2010 .

asury in a written correspondence; puzzling however how the figure quoted of £10.3 billion was ommitted from the Annual Abstract of Statistics by the ONS). After explaining the origins of CAP and how the new system of Single-Farm Payments (reformed from the previous system of production-subsidies) still rewards the largest landowners, this time quite unashamedly in accordance of land-area, he went onto a discussion around the subject of comparing this situation with the original objective of what CAP actually stands for – which was to “reward agricultural-workers”

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