Landed Interests

By JACK DONALDSON

DURING the negotiations for entry to the Common Market it was inevitable that planning for the future of the British agricul- tural industry should remain in abeyance. The negotiations, necessitating a study of European agriculture, marketing and future policies, were invaluable to an objective analysis of the con- ditions in which support to the home industry could be successfully undertaken. The Minister's statement of May 22, the first policy statement since the failure of the negotiations, was therefore based on the developments of several years and marked the opening of a new phase.

The peace-time problem of agriculture in the industrialised centres of the world has for long been the same—that of overproduction in rela- tion to effective demand. In England, before the war, however, the low purchasing power of the people and the lack of control over imports con- tributed to a neglect of the home agriculture which resulted in impoverished conditions and greatly retarded efficiency. The situation was -therefore seen as an inability to compete with overseas production.

After the war, government was faced with the necessity to implement promises of support to agriculture, but at the same time to maintain the traditional policy of cheap food. Initially it was imperative so to increase efficiency within the industry that support could be given without sacrifice to the interests of the consumer. British farmers must learn to produce at a cost which compared well with the rest of the world.

When the Tory Government came to power they were pledged to dismantle controls and dis- credit planning. They introduced the system of deficiency payments to replace the guaranteed prices of the Ministry of Food. This worked well for a time, although changing circumstances showed up some unplanned liabilities which have lately swollen to embarrassing proportions. For the rest they tried from year to year not merely to give fair prices, but so to distribute subsidies directly or indirectly as to increase efficiency and give support where it was most needed.

Too Many Farmers The first effects of a drive to increase efficiency must necessarily he to increase production, and this was in any case initially desirable. When serious overproduction first occurred it served to underline the chronic internal problem of the British industry and attention focused on this rather than on the overproduction itself. Milk, bacon and eggs—commodities largely pro- duced on small farms unsuitable for corn or beef production, and with too much reliance on imported feeding stuffs—ran into surpluses ana, because of the terms of support, were under- written by a bigger and bigger share of the sub- sidy paid to the industry. The way to restore the balance was obvious, and the only one available. Some part of the agreed subsidy was knocked off these products and, in consequence of the work- ing of the 1947 Act, added to corn and meat.

Clearly, however, a crisis had been reached of greater proportions than that of the necessity to adjust the balance of the subsidies. This was how the situation appeared: in England today there are a small number of highly proficient farmers mainly producing corn on a large scale, while the majority of the farmers produce— with unequal skill and at too high a cost—milk, bacon and eggs. The problem was one of the viability of the small farms and had to be measured as much in social as in agricultural terms. The issue was whether a large mass of British farmers should be driven off the land (with the adjustment of acreage and social dis- integration this would involve) by prices below those at which they could profitably produce, or be State-aided to a position from which they could produce at lower costs.

This was a turning-point in British agriculture, because there is a very strong case for saying that neither these farmers nor their production are really required. Recently Mr. Colin Clark, one of the leading advocates of this view, tried to show that 150,000 men could produce on 48.1 million acres all the food that Britain needs from the home industry. If his argument was not entirely convincing, it is still true that the simplest way to control production would be by fixing price levels at which only the most efficient units could operate at a profit.

But, if it was a turning-point, there was never much doubt what path would be pursued, and the Government, with the agreement of the Opposition and at least with the acquiescence of the nation, reduced the subsidy on milk, bacon and eggs, but introduced new direct grants to offset the hardship to the small man.

The first result was to increase the production these measures had been designed to check. The immediate reaction of the farmer to a moderate (but not a catastrophic) fall is to produce not less but more. The man with twenty cows, estimating that he will now need twenty-five to yield the same income, sets about acquiring the extra five and so on throughout the range of his activities The situation was aggravated because the division in types of production on large farms and small operates in a one-way direction. The small farms are not suitable for corn or beef production, but the large-scale man can produce milk, bacon and eggs and, under the stimulus of lower prices, those who were doing so achieved a considerable expansion.

Learning from Milk

But if the recent history of the milk industry may be fairly taken as a guide, there is some evidence that the long-term effect of a fall in prices is to halt the rise in production. Growth in production requires constant injection of capital and it does seem that over the course of years the less well-equipped fall out. while the techniques of those who remain reach a limit beyond which they cannot for the moment he pushed. Milk producers have declined by 4,000 a year since 1950 and this is no longer being offset by rising production from the bigger sur- viving units. The ability of the geneticists, breeders and engineers seems to have reached the limits of its present momentum. Indeed, dairy farmers may have a genuine case that some part of the subsidy at present going to corn and beef should be returned to them, for in the past year milk has been paid for without recourse to subsidy, even if this has meant raising the price to the consiimer.

The milk industry is individual in being con- trolled by the oldest and most powerful of the Boards. Advertising has increased demand and milk does not suffer competition from overseas anything like as much as other foods. These factors cannot completely offset, however, the evidence that production has been controlled largely by the use of the price mechanism. This has been done partly by ousting the small man un- able to compete with the large low-cost producer.

It is clear now that the crisis of modern agri- culture is the threat of overproduction in all the developed countries of the Western world, and that in England almost every government measure has tended to encourage this. The in- evitable trend of the future must be towards fewer and larger units of production, and where these cannot be achieved in terms of acreage they must be in terms of 'intensive highly- capitalised enterprises. Direct government grants can ensure that the process is gradual and httmane, but they should not be used to per- petuate high-cost production.

It is unfortunate then that the Farm Improve- ment Scheme, intended above all to improve the competitiveness of the small, medium-sized and undercapitalised farms, was conceived in terms of aid only for schemes that would satisfy the 'prudent- landlord,' i.e. the average rather than the exceptional tenant. This Prudent Landlord is an unimaginative gentleman. Always ready and eager, even in times of glut, to add to the number and modernisation of cowsheds, he has set his face against capital grants for the modern intensive broiler, hen and pig houses, although these represent one of the most extraordinary advances in labour-saving techniques and have inestimable value in making his smaller acreages viable. A more sensible patrbn, such as the State, should use what means come to hand to rationalise the production of the small man, and could devise controls for any general over- production that resulted from too sudden an increase in efficiency by studying the history of the milk industry.

Again, outmoded forms of subsidy origin- ally intended, to increase efficiency through an increase in production, should be withdrawn. The most obvious of these is the plough-up subsidy. Introduced to induce the farmer to plough old, worn-out turf, it has,for many years run absolutely counter to the developing policy; and, since recently a circular turn in techniques has taught the all-grassland farmer that it is uneconomic constantly to resort to the plough, it merely serves to line the pockets of the already most-favoured group—the cereal growers who need no incentive to break up rotational grasses in the natural sequence of the arable cycle.

An Orderly Market But, if the necessity to hold the balance within the industry in a situation where production must be controlled is a chronic problem, Mr. Soames, on the failure of the Common Market negotiations, was faced with an acute one.

Concurrently with the rationalisation of the milk industry the impact of what has come to be called the 'open end' of the system of de- ficiency payments logically but unexpectedly added to his difficulties. If market prices are made up to a standard price on an unrestricted quantity of any particular product, in times of glut the price is maintained and the total amount of the deficiency payment unlimited. It is almost true to say that the final £100 million of support to agriculture which has been added to the bill during the last three or four years has been the unwanted and unnecessary result Of the 'open-ended' guarantees on meat and corn. The breakdown of the subsidy estimated for this year is as follows: of a total of £360 million, £120 million was for direct farming grants, £210 million went to cereals and meat and only £30 million to all other commodities.

Mr. Soames announced his intention to close the 'open end' by the use of the 'standard quantity' which he has successfully employed to control the payments for other commodities, i.e. the subsidy is limited to a fixed amount and all excess production finds its own inevitably lower market level. But in these conditions' it is necessary to ensure that the market is not so glutted–with supplies from overseas that the discrepancy between the market price and the guaranteed price again causes the subsidy bill to soar. There are really two 'open ends' to close.

Speaking to the House of Commons on May 22, the Minister said : 'The fact that we are the only big cymmercial free importer of food in the world has meant that time' and again our market has been undermined for reasons over which our agricultural industry has no control whatsoever. I believe that the incentive to improve the marketing of home produce. which must be an important feature of our system, has been seriously weakened by the knowledge that no matter what is done for home production it could be thwarted or brought to nought by the importation of supplies from abroad at low prices.'

In these circumstances, he announced his intention to stabilise the market not merely by the use of the standard quantity at home but by controlling imports or import prices. In working out a proper balance he will start broadly from the present level of supplies and he is conducting talks with overseas suppliers with a view to negotiating agreements. He believes that in the long run it is also in their interest to secure more orderly marketing arrangements.

'They cannot expect in times of surplus to have both limitless access ih terms of quantity and at the same time be sure of getting reason- able prices.'

Production by Contract For the moment import control will be con- fined to cereals and meat, but its introduction marks a new policy and it could clearly be ex- tended to other commodities should the need arise. The detailed' arrangements have not yet been announced and their negotiation must be fraught with .difficulties, but in modern world conditions this double-ended control of the market must be accepted by all those concerned.

Above all it should be welcomed at home. ff the British farmer cannot see that in the long run it is to his advantage, it will go to show that the one thing he cannot learn about food is which side his bread is buttered. He is en- titled to expect that his virtual monopoly of the liquid milk and shell egg markets will be safe- guarded, and that he will get his fair share of any expansion in demand for other commodities. NEDC is looking to agriculture to increase output by 3.4 per cent a year and to release 20,000 workers a year for employment in other industries. Both these targets are well within capacity and this area should be preserved from encroachment by foreign interests. For the rest he must accept restriction on his own produc- tion in return for control of import§ For the future there are hopeful factors. The British farmer today is as efficient as any in the world and the industry compares favour- ably with the other industries of this country. A considerable agility has been developed in turning from one line to another, checking pro- duction here and promoting it there. An ability has grown up to forecast trends in advance of the movements of the cumbersome government machinery and, in spite of its dependence on seasons, the agricultural cycle contrives to respond faster than heretofore. There is, too, an increasing initiative within the industry to manage 'its own affairs. An enormous growth has taken place in co-operative and trading groups, and there is ground for encouragement in the importance now being given to the for- ward contract. This conception of producing only contracted quantities, which first appeared in the broiler industry. is spreading to other branches of farming. It could lead to the best kind of voluntary limitation of supply to a de- mand assessed by the selling organisations.

Plan for a Plan

So much for the present situation. The old Tory objection to planning is dead, suffocated by the deVeloping situation. Today it is necessary to inquire what Mr. Soames's successor may do. The Labour Party promise a policy document. and, although this has not yet appeared, we may judge from Mr. George Brown's speech last week that they intend to carry on and develop present policy with some characteristic additions.

On the two most controversial points, the management of the food market and the level of agricultural support, there is virtual agree- ment. While Mr. Soames is already embarked on a policy of control of both home and overseas supplies of meat and cereals, the Labour Party plan to extend the principle over the whole field of agricultural marketing. There is agreement, too. as to the extent of the Exchequer contribu- tion to agricultural prosperity. 'Reasonable' pros- perity in this context is traditionally agreed to mean a level at which workers earn 20 to 25 per cent less than in industry, and entrepreneurs are content with a margin of 20 to 30 per cent below that of their industrial colleagues. There is a strong national feeling that agricultural incomes are properly less than those of the urban population, and. if it cannot be justifiably argued that this is the natural penalty for a fairer life, it will remain so long as the need is to limit rather than encourage production.

Mr. Brown announced two new points in Labour Party policy, both to be welcomed. Specific encouragement to leave the land will be given to farmers on ,uneconomic holdings and the farms thus vacated acquired by the State. This land would be put to better agricultural use, where possible being amalgamated in neigh- bouring holdings to create more efficient units. Secondly, Mr. Brown announced the intention to 'present to the United Nations new proposals aimed at channelling .food surpluses to the deficit areas.' As far as can be seen this is the only alternative to restricting production, and, to the ordinary observer, the humane as well as the ex- pedient solution to undernourishment in the face of superfluity. There is at the moment a three- year pilot scheme running on an extremely limited scale and in its early stages, but which nevertheless gives hope that some progress may be made It is on a multilateral basis and is de- signed quite properly to meet the requirements of the recipients rather than to relieve Western surpluses, but, if it is successful, an extension would tend to do both.

Otherwise, differences between Mr. Soames and any possible successor must almost certainly be confined to technical rather than policy issues. The Labour Party will use the medium of com- modity commissions and boards where the Tory Party prefers where possible the good offices of the trade, but the general approach to the problems is the same.

It is a pity that the whole issue cannot be lifted out of the realm of party politics. The agricultural vote means little to either party, since it is of importance only in fourteen con- stituencies and even there is not likely to be used effectively in the next election if the_swing from the Tory Party exceeds 5 per cent. The task of supporting the home agriculture in circumstances of overproduction teems with administrative problems and unpredictable con- tradictions will certainly confuse the future. Here, if anywhere, there is a case for a coalition of the best brains in economics, science, agri- culture and the legislative and administrative spheres to devise' means to achieve ends so gen- erally agreed upon.