Of course British farmers would be better off outside the EU


We find this a slightly puzzling question to ask: whether British farmers would be better off inside or outside the EU? Because the answer is entirely obvious:

Would British farmers be better off in or out of the EU? Environment department ministers are at odds over whether a Brexit would be good for farmers, who receive roughly £2.5-3bn a year in EU subsidies

The answer is obvious not because it's the EU, nor because of free trade or anything else like that. It's obvious because of the form the subsidies take.

Currently farm subsidies are pretty much entirely an area based payment. Have one acre, get x, have 1,000 acres, get 1,000x. Not entirely but close enough, that's the system.

What does David Ricardo tell us about a rise in rent? It gets very quickly capitalised into the value of the land itself. And of course an annual payment, unconnected with anything very much other than the area of land owned is equal to a rise in rent. So, all that the current subsidy scheme does is push up the price of farming land. Which is lovely for those who already own it and wish to sell. But of course it just increases the capital requirements for those who wish to enter the field, or who wish to expand their operations. The end result is more capital, or more borrowings and thus interest, and at very best the farmers are back where they started before the subsidy scheme was set up.

All the current subsidy process does is raise the cost of the major input into farming, the land itself. It's a ludicrous system of subsidy. And farmers and everyone else would be better off if the system simply did not exist.

That leaving would enable us to abolish that system, although of course the usual political cravenness in the face of the farmers means that we probably wouldn't, which would be a good idea.

This is not to take a view on Brexit specifically: it's only that the current system of farming subsidies is simply ludicrous and anything at all that would allow is to get out of it would be both useful and sensible.