Abolishing the Corn Laws again - the case against 'food security'

It's not every day that you read an article saying that it was a mistake to repeal the Corn Laws:

The situation created by the British vote to leave the European Union is momentous for UK food. It is on a par with the Repeal of the Corn Laws of 1846 when Britain decided its Empire could feed it, not its own farmers.

The point about the Corn Laws was that they existed for the sole reason of keeping grain prices high so as to sustain marginal British agriculture. With the expected effect of making food prices higher:

The high price caused the cost of food to increase and consequently depressed the domestic market for manufactured goods because people spent the bulk of their earnings on food rather than commodities. The Corn Laws also caused great distress among the working classes in the towns. These people were unable to grow their own food and had to pay the high prices in order to stay alive.

By opening British farmers up to competition, the repeal of the Corn Laws resulted in cheaper grain and, therefore, cheaper bread (and beer). We forget, however, that the main justification for the corn laws wasn't landowner self-interest but the belief (at the end of a long war and a series of poor harvests) that what we'd now call food security was more important than open trade. At the heart of the food security concept is the idea of self-sufficiency.

My concern is that the security of food might get lost in the debacle. The UK must not let that happen. Food stocks are low in a just-in-time economy, an estimated three to five days’ worth. The UK doesn’t feed itself. It has dropped to 61% self-sufficiency, Defra reported last month.

Now leaving aside how the UK being self-sufficient in food is compatible with membership of the EU, let's ask instead what the consequence of self-sufficiency might be - here Professor Lang's article is helpful. The consequence - a policy aim in the professor's world - will be more expensive food:

Part of the challenge now is the UK’s love of cheap food. This was the legacy of the Repeal of the Corn Laws which sought cheap food for workers. Cheapness as efficiency is still central to the neoliberal project today, as Michael Gove stated in the referendum campaign. But in food, cheapness encourages waste and makes us fat. Good diets are too expensive for the poor.

Again, we'll ignore that Professor Lang also tells us in his article that Brexit will make food more expensive, and ask instead whether there is any practical basis for deliberately making food more expensive (for there surely isn't any moral basis). We'll note the negative impact on the economy from people spending more of their income on food - a huge and unnecessary opportunity cost. The main - probably the only - case is a health one:

The researchers found that healthier diet patterns—for example, diets rich in fruits, vegetables, fish, and nuts—cost significantly more than unhealthy diets (for example, those rich in processed foods, meats, and refined grains). On average, a day’s worth of the most healthy diet patterns cost about $1.50 more per day than the least healthy ones.

The problem here is that we have to accept the premise - Diet X is healthier than Diet Y - and to agree that there is a reason for government to intervene in food pricing (for example by making grain more expensive). And to understand just how much more expensive. Plus of course, we have to agree with the researchers that the price differential is so substantial remembering that these are extreme measures - the 'most unhealthy' diet set against the 'most healthy' diet.

So instead we get food policy planning that uses the idea of 'food security', on the assumption that there is a genuine threat to the supply of food meaning that, in the worst case, we get food riots. Indeed, Professor Lang thinks these are on the way because of Brexit:

But given that the WTO rules are “the lowest common denominator” and the Codex Alimentarius is determined in meetings that are “dominated by big business and lobbies [making] the EU look like the most democratic organisation in the world”, this is far from ideal. The result would be food riots, says professor Lang.

The agricultural sector is very keen (especially the bit that actually owns the land) to get this idea of food security high up on the agenda when food is discussed. It is the biggest justification for the continuance of agricultural subsidy post-Brexit and for the sorts of high-tariff models loved by the EU, USA and Japan. We should be resisting such a model (subsidy plus tariffs) since - as we can see from the corn laws experience - the result is more expensive food acting as a drag on the economy to the benefit of a tiny proportion of the UK's population. Smaller even than you think:

Each year we’re seeing a further concentration of benefits in the hands of fewer,
larger landowners, who seem to use their subsidy cheques to buy up more land and more subsidy ­entitlements,” Jack Thurston, the co-founder of farmsubsidy.org, told the Scotsman. “Most people think farm subsidies are there to help the small guy but we’re seeing it’s quite the reverse. The bigger you are, the better your land, the more public aid you get,” he said.

So we've a system of support (as, unintentionally, Professor Lang shows) not far removed from those 19th century corn laws. We know also that the main impact of subsidy comes in raising land values meaning that those agricultural subsidies and supports are doing little or nothing to maintain food security but represent a straight transfer of money from the taxpayer to the owners of agricultural land.

We should explore whether there is a model that works rather than promising to stay in the warm bath of subsidy after we've left the EU. Perhaps starting by asking how New Zealanders can grow onions that sell in a Kentish farm shop for the same price as locally grown onions. And why those Kiwis can produce lamb, ship it to the UK, sell it for less than British producers and make a profit:

New Zealand is the largest dairy and sheep meat exporter in the world, and a major global supplier of beef, wool, kiwifruit, apples and seafood. New Zealand-grown produce feeds over 40 million people, with 7,500 animal products and 3,800 dairy products going to 100 countries every month.

All of this without any subsidy:

New Zealand agriculture is profitable without subsidies, and that means more people staying in the business. Alone among developed countries of the world, New Zealand has virtually the same percentage of its population employed in agriculture today as it did 30 years ago, and the same number of people living in rural areas as it did in 1920. Although the transition to an unsubsidized farm economy wasn’t easy, memories of the adjustment period are fading fast and today there are few critics to be found of the country’s bold move.

So ask yourself a question. Do you want the sort of protectionist, subsidy-hungry food security that sucks up over £10 billion each and every year. Or an agricultural sector that contributes to a growing and successful economy? For me food security isn't about self-sufficiency but is about diversity and choice - we're more at risk if we've only one supplier of grain than if we've 50 suppliers. Yet the advocates of policy based on food security still argue that protectionism, trade barriers and expensive food (plus rich landowners) is the way to provide that security. The argument we thought we'd won back in 1846 when those Corn Laws were scrapped is still here today and we have to make the case for open trade in food all over again.

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Tim Farron and the illusory wool boom...

Like Tim Farron, I represent a lot of sheep (although these are now going for economic reasons to be replaced with beef cattle and horses) so I'm always struck by his strange and limited connection to economic reality:

Tim Farron, South Lakes MP and chair of the all-party parliamentary hill farming group, said: "We need to do all we can to support our farming industry, particularly in the uplands where life can be a real struggle. This support and funding could make a massive difference to upland farmers throughout Cumbria and help show the next generation that there is a real future in a career in farming."

OK there's some votes in this for Tim but is he really saying that there is a 'career' in upland farming when - a breath earlier - we read this:

An upland farmer earns, on average, only £6,000 a year, which has led to a number of people leaving the industry.

Six grand-a-year! That's half the minimum wage and Tim Farron thinks that this is some sort of sustainable industry? There's more - despite a (rather illusory) 'boom', here's the economics of upland sheep farming explained:

Will Rawling, chairman of Herdwick Sheep Breeders' Association, said he was getting about 50p a fleece. It costs him 70p to have each animal sheared; bundling and transport fees take the total cost per sheep up to about £1.50, three times what he gets back. 

To be fair the article also says most farmers are "breaking even" but it does seem that, not only isn't there a boom, but farming sheep on the fells isn't a viable business. If Tim Farron had said this and continued with 'but we need to find ways to continue the job, done by hill farmers at the moment, of caring for the fells', I would be with him. But he didn't, he simply called, like the good liberal, for price fixing.

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Subsidising union officials - time for Bradford Council to stop

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New stats show cutting back on trade union facility time will save £400,000-a-year of taxpayers’ money.

This is at the Department for Communities and Local Government. We know that Bradford spends £500,000 of local taxpayers hard earned cash on full time union officials yet bleat and mithers about "the cuts".

Time to take that cut and stop paying the wages of full-time union activists.

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Should we end the subsidy of newspapers?

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OK I hear you - what subsidy? There is no subsidy of newspapers and nor should their be.  Except that some people believe that newspapers (and books, and children's shoes and jaffa cakes) are subsidised:

Dwarfing this is an estimated £4bn p/a subsidy on the direct consumption of petrol, gas and coal through a reduction in VAT from 20% to 5%.

Yes I know, this author - drawing on a piece of egregious research from some folk called Oxford Energy Associates - is talking about domestic fuel. But I guess that is no different from the zero rating of food, publishing and children's clothing?

The truth is that this argument - used again and again by green sorts to excuse the actual subsidy of renewable energy - is a load of old cobblers. A subsidy is where I give you money to reduce your costs not where I reduce your (and lots of other businesses') rate of taxation.  Unless, of course, that rate of tax is set to be negative when it is a subsidy.

We do not subsidise fossil fuels not even a little bit. We give producers tax breaks on exploration and development just as we give pharmaceuticals businesses tax breaks on R&D and manufacturers tax breaks on investing in new plant. And these aren't subsidies either. Neither is a hypothetical (and doubtful) estimate of the externalities related to carbon dioxide emissions. These may well be such externalities but their existence is not a subsidy.

If we're to have a debate about whether energy should be subsidised (it shouldn't be) let's have that debate about the actual subsidies rather than some make-believe ones dreamt up by people with a direct vested interest in the continuing subsidy of renewable energy and the promotion of a particular policy response to climate change.

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Very rich hobby farmer wants poor people to pay more for food

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We've known for a while that our future king is, how do we put this? Ah, yes - rather too much of a hippie for his own (and our) good. All the talking to plants, alternative medicine, organic farming and old-fashioned architecture is rather sweet. But when he talks about food and the food industry he displays the arrogance of being, not merely a hippie, but a very wealthy hippie.

Charles said the drive to make food cheaper for consumers and to earn companies bigger profits was sucking real value out of the food production system – value that was critical to its sustainability.

Now Charles might not be living in a recession but the rest of us are and telling us that food should be more expensive is really quite objectionable. Especially when it's wrapped up in all those trendy, middle-class green movement words like "resilience" and "sustainability". Worse still, our king-to-be has discovered nannying fussbucketry and the blaming of obesity on the food industry rather than on people choosing to eat too much.

What is most striking (and this is very typical of this sort of wealthy man greenery - Transition Towns being a fine example) is that Charles is chiefly interested in the producer - those farmers - rather than the consumer.

"It has also led to a very destructive effect on farming. We are losing farmers fast. Young people do not want to go into such an unrewarding profession.

"In the UK, I have been warning of this for some time and recently set up apprenticeship schemes to try to alleviate the problem, but the fact remains that at the moment the average age of British farmers is 58, and rising."

The cause of that decline isn't that we've stopped consuming farming product (especially if you take Charles' obesity point as true). The decline is because - despite the subsidies and price fixing - many of our farms are uneconomic. And whilst it's tough on the romantic notion of farming (the sort Charles plays at with his tailored tweeds and hand-crafted shepherd's stick) most of us would rather have the cheap food.

And the farming won't go away - it will intensify. Which means fewer input costs to produce the same amount of fine food. If we wibble on about soil and local systems, we are completely missing the point and worse, we'll be making food more expensive and poor people poorer.

So next time you hear this wealthy - very wealthy - hobby farmer calling for higher food prices, just remember who benefits. It isn't you and me - we're going to pay more for our food and drink. Instead it's Charles and his castle-dwelling German farmer friends who'll suck up the higher prices and syphon off the new subsidies. And maybe a few ageing, overworked hill farmers might stay on a year or two longer than they should.

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Quote of the day....

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On the threats to leave from big energy companies:

The departure of rent seeking tax farming parasites is rarely a bad thing for the people whose taxes are being farmed.

Absolutely.

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Dear Mr Dromey, making houses more expensive doesn't solve your housing crisis.

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The utter lunacy of Labour's emerging housing policies become more apparent with each passing day. We have seen how Labour MPs are backing policies that charge landlords up to £800 per property just for the happy privilege of being allowed to rent those properties. Apparently this deals with the tiny minority of "rogue" landlords. And now we see Jack Dromey, uber-stalinist Labour housing spokesman advocating huge imposts on housing development:

Mr Dromey attacked the government for allowing section 106 agreements, which require developers to include affordable housing in developments, to be waived where schemes are unviable.

Now, dear reader, not the stupidity here. If the scheme is unviable because of the s106 agreement it doesn't really matter how much you shout and scream about fairness or the "residualisation of social housing" those houses won't be built. And we either need the houses - whatever their tenure - or we don't need the houses. If it's the former then we have to adjust the externalities (such as contributions to or provision of "affordable" housing) so as to make the scheme viable.

And while we're on the subject of nonsense here's Mervyn Jones from Yorkshire Housing banging the drum for wealthy housing associations like his to get more government subsidy:

...Mervyn Jones, chief executive of Yorkshire Housing, warned that revenue models that raise rents to increase capacity of associations ‘in the end always cost more to the public purse and of course help us reach our capacity quicker.’

Two quick points: the extra cost is only because three-quarters of Mervyn's tenants are on housing benefit. And the subsidy is the subsidy - it may fall better for the housing association if it is from higher rents but it is not higher.

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So the solution to a dysfunctional housing market is to make it more dysfucntional?

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It seems that the housing sector has been captured by people whose grasp of economics and understanding of markets is diminishingly small. The Labour Party - under the direction of that old Stalinist, Jack Dromey, has had an enquiry. And the solution is:

A cross party inquiry led by a Labour peer is today calling for £5 billion of quantitative easing cash to be used to build homes across England, and for a £3 billion increase in funding for social housing.

Other ‘emergency measures’ demanded in the Housing Voice report include making the housing minister a cabinet position, and deferring the merging of housing benefit payments into universal credit.

In the medium and longer term the group wants to see the affordable housing budget raised to £4.75 billion a year, and for a national commission on affordable housing to be set up to report before the 2015 general election.

These people are serious about this you know. They really do want to print £8 billion and give it to housing developers. To build social housing - that's subsidised housing to you and me. Because there's a housing crisis don't you know?

Well yes there is a housing crisis but not the one you're thinking of. The crisis is that the social housing 'sector' isn't able to develop as much as it used to develop because the government isn't bunging in enough subsidy. This enquiry and its 'solutions' seems to be good old-fashioned grant-farming. Give us lots of subsidy and we'll build lots of houses in places where people don't want to live. Meaning that we won't have to answer the big question of how we get more houses in the places where people do want to live and where there's work for those people that mean they can afford those houses.

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Oh dear, those bohemian luvvies...all that smoking, tut, tut!

The New Puritans are frothing again - this time at government backing for films that 'promote smoking':

Health experts have accused the government of spending more on subsidising American films that contain smoking scenes than on anti-tobacco campaigns.

Researchers at Imperial College London calculated that between 2003 and 2009, £338m of tax credits in Britain went to US-produced films with imagery "promoting" tobacco use.

You just have to laugh. There is no choice really - the sight of lefty indulgence eating itself is too joyful for words.

"We think film subsidy programmes should be harmonised with public health goals by making films with tobacco imagery ineligible for public subsidies," Millett said. "This wouldn't cost anything to implement so in the current financial climate it should be an attractive policy option."

You couldn't make it up!

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Why we should question the value of bilateral aid

I’ve always believed in the value of international aid, that it is right that wealthy nations should assist less wealthy countries. I absolutely believe that, most of the time, governments are better placed to provide emergency assistance than private individuals or private organisations.

However, the problem with bilateral aid – where country X gives money to country Y – is that it becomes quickly a tool of realpolitik rather than a genuine act of philanthropy. Even where, as is the case with the UK, the use of aid as, in effect, an exporter subsidy is no longer allowed we can see how decisions relating to aid become wrapped up in other considerations – votes on international bodies, support for military action, clamping down on migration, and even investment decisions in the home nation.

The idea that Government is a benign, innocent compared to non-governmental bodies or international bodies is a complete misperception. And this self-interest extends to the people employed – the hundreds of people administering our huge aid contribution to nuclear armed India will be working tirelessly to try and prevent that subvention being cut.

Finally bilateral aid has to go via the government – there is no alternative as it is a sovereign transfer. And this means that, however well meant the decision to support a struggling place might be, the corrupt government there will take its cut of the aid before it arrives with those it is intended to assist.

Sadly, we do not apply ourselves enough to these considerations, to making the aid we give effective. Instead – much like the “I buy fair trade” argument – we shout around about how big the budget is rather than about the real outcomes of the work funded by that budget. I really don’t care whether the UK spends 0.5% or 0.7% of GDP on aid – what I care is that the money actually does some good.

Taking this view doesn’t make me some kind of moral leper, someone who doesn’t care about the development of Africa or the suffering of the world’s poor. Indeed, those who advocate increased aid budgets but support the subsidising of western agriculture should look to their own contradictions – the Common Agricultural Policy does more damage to Africa than our aid programmes do good. And much the same can be said for other market distorting actions of the developed world – the structure of financial regulation (making it ever more difficult for developing countries to build a financial sector – even massive countries like India), the subsidising of basic industries, the dumping of production surpluses in the name of “aid” and much else besides.

If we really cared about helping Africa transform we would start removing these barriers, we would concentrate on opening up our home markets to the products of poorer countries, we would incentivise moving production upstream (processing and packaging the coffee in Ethiopia rather than Banbury maybe) and we would concentrate our aid on disaster relief, educating women and disease prevention.

Instead we choose to wave and shout about how good we are and how much money we spend. I find this sad.

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Joseph Rowntree Trust argues for a subsidised housing market with mortgage controls - self-interest or stupidity?

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According to a report from dear old JRF, there is an urgent need for 'reform' to prevent another bout of boom and bust in the housing market. This seems to be the gist of their proposals:

Credit controls, such as maximum loan-to-value mortgage ratios, should be considered, the report argues. The taskforce acknowledges this could restrict access to mortgages but says reducing volatility is ‘in the wider public good.’

So we ration mortgages in order to prevent house prices rising and instead shove people into a tenure that isn't what they prefer:

The report says more social rented housing with secure tenure is required as it is the most suitable option for households which seek long-term security but cannot access the mortgage market.

And to do this we need more government spending:

The report says this can only be delivered if there is sufficient subsidy.

Finally, to cap it all we further hobble the mortgage market by removing any downside to borrowing (remember dear reader that this was one of the problems with the US sub-prime market and look where that got us):

The report also argues for a better safety net for borrowers, including making sure borrowers have more information and tools to assess mortgage affordability and a partnership insurance model which would provide cover for mortgage capital and interest payments in the event of loss of income through redundancy, sickness or accidents.

So there you have it - government-approved mortgages, subsidised house-building in the wrong tenure and a 'safety-net' that will act to raise the cost of borrowing. All underlined by a steady increase in government spending on housing. And these people think that will "stabilise" the market?

Do remember, of course, that Joseph Rowntree own thousands of houses for rent and are a significant developer in that sector. So maybe this is just self-interest!

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Tim Farron or "Some so-called liberals really don't get it do they?"

Tim Farron, who I believe holds some elevated position in the Liberal Democrat Party and represents South Lakeland at Westminster is prattling on about needed "fair trade" for upland farmers.

I see farmers who struggle to keep going and just to pass on the farm to their children. It really is high time we give farmers a fair deal. I am doing all I can to make sure that their concerns are heard. We need a strong supermarket regulator as soon as possible and we need to provide fair trade for British farmers.

Let's be clear, Mr Farron is right when he says farmers struggle, work daft hours in all weathers and are often living below the poverty line. And that often the price they get for their produce barely represents the cost of production. But his solution - regulating prices - is wrong.

Let's begin with subsidy. The Common Agricultural Policy dishes out 55 billion Euros in farm subsidy. So why then Tim are your upland farmers below the poverty line?

Each year we’re seeing a further concentration of benefits in the hands of fewer,
larger landowners, who seem to use their subsidy cheques to buy up more land and more subsidy ­entitlements,” Jack Thurston, the co-founder of farmsubsidy.org, told the Scotsman. “Most people think farm subsidies are there to help the small guy but we’re seeing it’s quite the reverse. The bigger you are, the better your land, the more public aid you get,” he said.

So there you have it, Tim. Billions in subsidy to farmers is being scooped up by landowners leaving tenant farmers and upland farmers with less income. And you want to blame supermarkets? Are you so in love with the EU that you can’t see how its corrupt subsidy system is the problem and that more regulation, more price controls will serve only to distort the system even further?

Let’s look at what happened in New Zealand where there was a similar situation with plenty of upland sheep and cattle farmers a long way from the market. And there was a distorting subsidy system. In the 1980s the Government scrapped the subsidy. And all the farms closed? No.

New Zealand agriculture is profitable without subsidies, and that means more people staying in the business. Alone among developed countries of the world, New Zealand has virtually the same percentage of its population employed in agriculture today as it did 30 years ago, and the same number of people living in rural areas as it did in 1920.

Indeed if you read on Tim, you’ll find that sheep farmers – you know the chaps who come to your surgeries – were hardly affected at all by the changes:

Sheep farmers, who as a group were the most heavily subsidized, were (not surprisingly) hardest hit by the elimination of subsidies. Those farmers who were heavily in debt at the start of the reform period were hit hard by rising interest rates, and a transition program was negotiated to ease their situation. Farm-related sectors like packing and processing, equipment and chemical supply, and off-farm transport also suffered, but this was regarded as evidence of their previous inefficiency. Overall the ‘transition period’ lasted about six years, with land values, commodity prices, and farm profitability indices stabilizing or rising steadily by 1990.

If you were a real liberal, Tim – one who believed in free markets allowed to operate freely – you’d be campaigning for us to scrap agricultural subsidy so as to allow farming to thrive. Instead, like a good social democrat sucking at the taxpayers teat, you call for more regulation, more price controls and more taxpayers money directed to special interest groups.

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How the BBC licence fee amounts to subsidising middle class hobbies

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I return to this matter of the free rider. But this time, I am stretching the thinking a little to look at the extent to which certain groups receive far more value from the BBC licence fee than others. It has seemed to me for some while that, despite its efficiency as a tax (it is after all a near universal poll tax), the license fee presents some issues of equity.

At the heart of this is use – whether or not we get value from the license fee depends on the extent to which we make use of the BBC’s services. As I noted before with cinema popcorn and service stations, there is an implicit cross subsidy within the BBC's business model. And, as with those situations the cross subsidy is intended to ensure that some ‘free’ goods are provided. In the BBC’s case, these free goods are what is termed ‘public service’ and provision for ‘minorities’ (or rather a selected group of minorities – we have an Asian radio station but no station for gypsies, for example). And the biggest minority benefit goes to elite arts and culture.

This all seems perfectly fine until you appreciate that my friends who slump before assorted soaps, televised sport and reality TV are forced to subsidise grand opera, symphony orchestras and ‘up themselves’ late night arts discussions (and frankly such folk are more likely to be annoyed by this than they are irritated by Jonathan Ross’s package). Because of the ‘public service’ requirement (and limiting broadcast restrictions), my friends are contributing to religious programming, to earnest current affairs analyses and the development of a vast internet empire. I suspect that, given a choice, these friends would choose not to cough up for any of this stuff.

Which brings us to the free rider problem. Bluntly, middle class arty-farty types like me are getting a brilliant deal from the BBC – vast subsidies for our narrow, minority interests are achieved by transferring cash from people forced to pay for the license fee who would never pay for subsidising a ballet company. And these people will make some observations about these subsidies – like the fact that their chosen preferences either are too plebby for subsidy (not a lot of public subsidy for the Northern club circuit, I notice) or else are more than capable for paying their own way without support – the BBC aren’t subsidising rugby league, country and western or snooker.

So those of us who enjoy minority music, who want to watch a bunch of smug people pontificate about books we’ll never read or who want to watch god being bothered get this on the cheap because people who don’t want that stuff are paying the same price. And the BBC gets a further economic benefit from all this as those benefiting from this cross-subsidy (which is, generally speaking, from poor to rich) provide an articulate, media-savvy, well-connected lobby aimed at persuading the government to maintain the current poll tax. Plus, of course, reminding the poor saps being ripped off just how important the poll tax is to maintaining these vital cultural institutions.

As a result we have an ‘elite’ arts and cultural sector that is de facto nationalised (this is especially the case with music) – so dependent on continued subsidy that its leaders simply cannot envisage a sustainable model based on the idea that people pay an economic price to watch or listen. The very business model that makes London theatre profitable and allows for the continued extension of aging rock stars’ careers wouldn't work for Philip Glass or Newsnight Review.

I do not think the licence fee should be scrapped rather that a gradual reduction of its significance to the BBC is needed. The BBC’s business model should seek to monetise all those aspects of provision that are not clearly and definably a public service. Over time the license fee should whither to a small amount directed to clearly described and limited purposes – everything else should be paid for by the user, through advertising, using sponsorship or through other charges. I can think of no rational or moral case for carrying on with taking poor people’s money to subsidise rich folk’s hobbies – however much I may like those hobbies.



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