Economic Theory

A post-Brexit alternative to the Common Fisheries Policy

For the first time in 40 years, the UK will shortly have control of fishing policy. We can, at last, leave the Common Fisheries Policy (CFP) behind, to the benefit of the fishing industry and the UK as a whole.

The essential problem with sea fisheries is that there are often no well-defined property rights. Many fisheries are huge ‘commons’ that can, in principle, be exploited and ultimately destroyed by trawler owners. As William Forster Lloyd pointed out in a pamphlet back in 1833, when a resource is open to all you get a ‘tragedy of the commons’ and over-use of the resource.

He was referring to animal grazing, but what applies to the land can also apply to the sea. When a trawler takes fish from the sea, the owner considers only the value of the fish it catches and the cost of going to sea. He does not consider the reduction in fish (including breeding stock) available to other boats. Over-fishing is the consequence. The EU’s response to this has been the ham-fisted, centralising and – in essence – socialist CFP.

For much of human history, the management of sea fishing grounds did not generally matter. The demand for fish was small relative to the resources available and limitations in technology made ‘over-fishing’ difficult, at least in open waters. However, this is certainly not the case now. Most fisheries are over-exploited. We need to learn from those that are not.

The solution is to establish property rights in sea fisheries. This is precisely how we deal with the problem of scarcity and conservation when it comes to the land. As Thomas Aquinas understood, when it comes to the land, private property encourages us to work hard and efficiently (because we are the beneficiaries of our efforts). It also encourages peaceful co-operation because we understand who is responsible for what and where our rights begin and end. We also have an incentive to nurture the land when it is privately owned because we are the long-term beneficiaries of its sustainability.

Few would seriously question private property when it comes to the land. Few would suggest that farms should be nationalised or returned to an unregulated commons where anybody can graze their animals without restriction. It would be understood that this would lead to chaos, inefficiency and environmental catastrophe (rain forest destruction in many countries is a living example of the problems caused by lack of well-defined and well-enforced property rights).

Given that private property rights work much better than the alternatives on land and government-controlled fisheries do not have a good record either, one would think that the development of private property rights in sea fisheries would be a no-brainer. Indeed, for economists it is.

However, there are practical problems. Apple orchards and grain fields remain stationary and cattle can be fenced in, but fish are more difficult to pin down. So the development of property rights is not quite as simple as on land. It is not a case of selling off fishing rights in 300 square miles of the North Sea to one trawler owner and in 500 square miles to another.

The system that tends to work quite well is that which has been used in Iceland. What happens in such systems is that a given percentage of the total allowable catch in a particular fishing ground is allocated to the different trawler owners as a quota. This right needs to be a right in perpetuity (like a freehold rather than a short-term let), though in Iceland the legal position is slightly vague. The quota can then be traded. Each year, a total allowable catch is set. In practice, the total allowable catch is set by the government in Iceland. However, it need not be and, indeed, it would be better if it were not. Because each trawler owner’s right stretches into perpetuity, trawler owners have an incentive to agree to set the catch in a given year in such a way that sustainability is maximised. Fewer fish caught this year (up to a point), means more fish available to breed and more fish in the future and so the value of the quota increases.

In the EU, there is a continual battle between the Commission, scientists and trawler owners, all of whom have different interests, and the EU tends to come up with solutions to allocating fishing rights that satisfy nobody. In Iceland, there tends to be broad harmony between all concerned. Indeed, the evidence suggests that the job of setting the annual quota could easily enough be given to the trawler owners in the same way that farmers decide how many cattle to graze on each hectare of land. The trawler owners have a property right that gives them a long-term interest in sustainability.

There is no second-best solution worth considering. Andrea Leadsom should immediately start thinking about the practical details of how to implement the above system in the UK. Those practical details relate to issues such as how to define the fishing grounds; how the quotas for different types of fish interact with each other; whether the behaviour of particular types of fish mean that a different approach should be taken in some circumstances; how to monitor the catches; and so on.

Perhaps the biggest practical issue is how to allocate the initial rights that can then be bought and sold on the open market. This was somewhat controversial in Iceland. In the UK, it would have to be decided whether to treat foreign trawler owners who currently fish in what will become British waters the same way as British trawler owners, whether to give the rights away to current trawler owners or sell them to the highest bidder, and so on.

But the principles by which the UK’s fishing policy should operate can be fixed soon. Britain can then demonstrate to the EU how the establishment of property rights in fishing grounds is the only way to promote sustainability and a prosperous industry.

This article was first published on Conservative Home.

Academic and Research Director, IEA

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

3 thoughts on “A post-Brexit alternative to the Common Fisheries Policy”

  1. Posted 28/08/2016 at 02:39 | Permalink

    Actual rents, rather than Grandfathered rights to use and exploit scarce resources rent free, are the optimal mechanism for efficient allocation . Only if everyone pays rent for exclusive rights to use common resources can the market fully internalise opportunity costs. That cannot happen when the owner of a scarce resource is also the user. They can afford to be inefficient.

    A good example is the dysfunctional UK housing market, which clearly shows that giving away Grandfathered rights is a disaster that harms our economy and the cause of excessive inequality.

    There are many different rent collecting mechanisms to chose from. The main point is, fishermen should pay rent to the State for the right to catch fish, the scarcity value from which, should belong to us all as an equal share.

    Ms Leadsom should be very wary of advice from those that by default conflate “private ownership” with market efficiency. Where goods and services are elastic in supply, that simple view of the World is invariably correct. However, imagine in the 1970s we had given away the right to exploit North Sea oil, royalty free? It would be the same mistake with our fish stocks.

  2. Posted 28/09/2016 at 11:14 | Permalink

    The small scale fisheries in UK are a topic which would be usefully reformed. This sector employs considerable numbers of fishermen and ancillary workers in the post harvest sector, has spin off benefits in heritage and tourism. The under 10 meter vessels could be allocated a larger share of quota and with greater policing and management could lead to thriving and sustainable fisheries in many coastal regions of UK.

  3. Posted 14/04/2017 at 16:47 | Permalink

    Full of glaring ommissions and more a historic review than a serious policy package for the uk post brexit.

    There is no limit to introduce itqs under the cfp.Denmark amd estonia have them. A former communist, commissioner damanaki wanted them for all fisheries, but uk and othes stopped her.

    The uk industry fought against a discards ban. It is not today being implemented properly. The use of cctv has declined under the new rules. The uk government has stalled on enforcement. The British government tried to back out of the discards ban during negotiations.

    The uk fleet is doing financially very well. The ROI is amazing.

    The uk has a feudal quota ownership regime. There is nothing to stop the uk introducing a genuine free market for quotas tomorrow. Nothing, except they don’t want to.

    I expect more serious analysis from the iea

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