Last summer The Times newspaper published an article about farming subsidies received by farmers in the UK from EU funding sources. The article indicated that the average UK farm made around £2,100 from farming and over £28,300 from agricultural subsidies. The article also claimed that cereal crop farmers made a loss of around £9,500. This begs the question: are subsidies worth more to UK farmers than the revenue they generate from their farming activities?
What is classed as a subsidy?
The figure of £28,300 quoted in The Times included any profit after costs from the Single Payment Scheme and from agri-environment payments made by the Government and the EU. However, defra does not class these payments as subsidies as they are meant to be compensation to farmers for carrying out environmental works such as woodland planting, rather than farming.
Are farming subsidies how farmers make their money?
Farm income is generally made up of four key areas: the Single Payment Scheme, agriculture, agri-environment, and diversification. The Single Payment is an EU payment distributed by the UK Government. Agriculture covers income generated through crops and livestock. Agri-environment is generally land management which benefits the environment, woodland planting being a common example. Farmers taking part in such a scheme can expect to receive compensation from the Government for lost income from land that has been put to environmental use rather than commercial. Finally, diversification covers activities that farmers may undertake to generate additional income. This may include a tourism scheme or renting out land or buildings.
English farms generally do make more in farming subsidies than from agriculture.
Figures change depending on the size of the farm and from year to year. The figures for 2013/14 show that agriculture, for the average farm, generated profits of £6,600, which the following year reduced to £2,100. For the year 2015/16 small farms made a loss of £6,600 while large farms made £22,300.
The level of profit made by farms will, of course, depend upon their size as well as what they produce. Cereal producers, for example, have high labour and machinery costs, both of which affect profitability greatly. Based upon the types of farms listed by Defra, poultry farms have the largest business profit over the same time period mentioned above, making £126,800. About half of that profit, £79,300 came from agriculture and just £8,500 from farming subsidies.
Farm subsidies vary depending on the farm’s size but on the whole, farms receive the same payment per hectare. On average, subsidies for small farms make up 78% of profits, on medium concerns, about 61% and on the largest farms, around 46%. There is a broadly similar story in Wales, Scotland and Northern Ireland.
Where does the money come from?
Farming subsidies for farmers across the EU come from the Common Agricultural Policy. Made via the Single Payment Scheme and the improvement schemes designed to improve the environment, quality of life within rural communities and to boost forestry and agricultural competitiveness.
All EU funding is paid in euros, and the strength of the pound against the euro in the payment period of 2014/15 meant that the farming subsidies, in real terms, were less valuable.
Farming throughout the UK is a difficult industry in challenging times. It has to balance the production of food, whether that is from cereal crops or from livestock, with environmental considerations for the protection of the land and wildlife habitats. Farming subsidies enable farms to set aside land for environmental purposes. Without them, this would prove to be difficult, if not impossible.
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