IEA releases new paper on farming policy
A new paper from the Institute of Economic Affairs demonstrates the extent to which pressure groups have been able to lobby the EU to increase regulation in the areas of food standards, animal welfare and the environment which have created deadweight costs and which are misaligned with consumer preferences.
The paper charts the increase in compliance costs within existing Common Agricultural Policy regulations and then demonstrates that, in the worst case scenario, the potential costs of further environmental restrictions would have added costs of up to £7.5 billion had the UK remained within the EU.
Common Agricultural Policy:
- The CAP is not only the EU’s most expensive policy, but also its most complex and interventionist. Its remit covers a multitude of areas, from biodiversity to food safety to environmental protection, all of which have led to a huge regulatory burden on the food industry.
- Since the 1990s, the growth of regulation and subsidies has gone hand-in-hand as subsidies have been increasingly tied to environmental requirements imposed on farmers. This leads to costs for consumers and taxpayers alike
- One cause of the growth in regulation is the use of the precautionary principle. This is poorly defined. However, in general, it applications means that the benefit of the doubt is given to the protection against any possible harm at the expense of consumer, business or economic interests. The result has been a drift towards overregulation and a jettisoning of rational principles of managing and taking into account risk.
- As relatively few people have direct experience of farming, professional, well-resourced non-farming interest groups have been successful in campaigning against things such as genetically modified crops (GMOs).
The threat from increased regulation
- Official figures shows that compliance with existing agricultural regulations is costing nearly £600 million every year in England alone. Even worse, these figures fail to take into account the longer-term costs arising from the impact the regulations have on competitiveness and food affordability, meaning the real cost is much higher.
- The concern is not only the long-term opportunity costs of regulations, but also the danger that the use of the precautionary principle has unnecessarily widened the burden and long-term deadweight costs of regulation.
- The current EU review process could result in the removal from sale of many more pesticides commonly used in the UK, leading to significant yield losses and reductions in economic margins.
- Without the use of crop protection products such as pesticides, overall yields would fall by a half.
If all food were grown organically:
- Wheat yields would halve, leading to a price rise of nearly 70%
- Potato yields would fall by 44% leading to a price increase of nearly 200%
- Bean yields would fall by a quarter, leading to a price rise of over 50%
Commenting on the report, Mark Littlewood, Director General at the Institute of Economic Affairs, said:
“EU member states face staggering food price rises unless the march of increased regulation is halted. The UK is fortunate that it now has the opportunity to repatriate control of its farming regulations. It’s crucial that decisions stem from good scientific evidence, and pay attention to consumers’ interests and the potential crippling costs that overregulation can have in pushing up food prices and the cost of living.”
Notes to Editors:
For media enquiries, please contact Stephanie Lis, Director of Communications Director on 020 7799 8909 or 07766 221 268.
To read the full paper, Ploughing the Wrong Furrow – the costs of agricultural exceptionalism and the precautionary principle, click here.
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.
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