CAP to cut or cap?

[james armstrong]

C.A.P., - TO  CAP IT
OR SCRAP IT?

 

 

The Common Agricultural Policy costs U.K.
taxpayers some £3.8bn per annum.

It does not benefit ‘small’ farmers nor agricultural
workers  

It is a serious threat to democracy and welfare. It should
be scrapped .  The least we can do is to
cap  the expenditure at a means tested
amount equivalent to claimants receiving 
£12,344 per annum  - the minimum
wage.

 

For an every-day example by which to judge the purchasing
power of £1billion we can use the cost of the 12 new detached houses with
garages built by a team of self builders in St Minver Cornwall and completed in
2008.  for a cost of  some £80,000 each.

£1million would buy twelve and a half such houses and £1
billion some 12,500 so £3.8billion would fund 
the building of 47,500 new houses.  


 T his gives a measure
of the annual cost of CAP. Payments to  UK
taxpayers in money expended and benefit forgone. .

 

The origin of CAP. (Ritson and Harvey)

The European Union was to be a means of political
unification and a guarantee for peace following the resolution of the world
war. 

(during the  in
negotiations leading to the Treaty of Rome 1958) the attitude of  the French government and the French farm
lobby  were of crucial significance in
the establishment of the C.A,P.   just as
Germany played a
  leading role in directing the
industrial policy. 

 

The Treaty of Rome set the agenda for  the C.A,.P..

The Treaty  talks of,

“a fair standard of living for the agricultural  community 
in particular  increasing the  earnings of persons engaged in agriculture.”  

 

The background to UK
agriculture

The C.A.P. effectively transferred  money from industrial workers  (mostly 
Germans )  via taxes  to fund C.A,P. payments to farmers (mostly
French) . When Britain
joined in 1973 owing to the nature of landownership in UK
, CAP payments in large tranches were received by the very  small constituency which is the British
Landowning group- some 

One  per cent of the
population.  The historical tendency in UK
has been for farms to amalgamate by  enclosure,
by  engrossment and by industiralisation  of farming techniques.by emparkment etc. 

 

The Underlying principle of CAP 

It was established when CAP came into being that producers  should receive a price determined by market
forces   but that these market forces should
be controlled so that prices fluctuated only between pre-determined upper and
lower limits.  So that farmers were
protected from excessively low and consumers from excessively high prices. The most
basic CAP support scheme is for cereals .  
All others a re a variation of this. 

 

 

The second major component of the cereals regime is the
import controls since world prices are often lower than EU prices.  I t would be worthwhile in the absence of
controls to import, so imports are controlled by licence  and import duty must be paid. 

 

 

AGRICULTURAL PRODUCTS PRICES IN E.C. AS % OF WORLD PRICES
(=100%)

                        
E.C.,1994%      highest% 

Common wheat        
155             155

Maize                        
140             211

Barley                         214            218

Rice                            209             209

White sugar                106             137

Milk                            241             259

Beef / veal                  
208             208

Pig meat                      130             134

Poultry                         118             161

Sheep meat                  156             243

 

Who receives CAP payments?

The client group is heterogeneous including landowners, food
manufacturers, agribusinesses , pheasant breeders,  racing stables , farmers, pony paddock
owners, donkey sanctuaries, racehorse trainers’ gallops, wildlife trusts,
fishing clubs ,etc

 

 

 

 

 

THE ECONOMIC AND SOCIAL EFFECT OF C.A.P.

The Benefits and cost of CAP versus free trade (Ritson &
Harvey p 165)

 

                         
Billion ECU (U.K.)
1994

                                                                           
Interpretation ?

Producers gain                 3.82          (CAP payments received by ‘farmers’

Users cost                         4.31          (cheaper food prices foregone by
consumers)

Taxpayers cost                 2.51          (UK
contribution to EU to fund CAP payments ) 

Net Welfare cost             
3.01           ( CAP on balance is
a cost not a benefit)

Bridge Trade Effect       
-3.31           ( an allowance for
the distortion of free trade)

                                      

Analysis

 

In the  following analysis The figures are taken and processed from the
information available on the web site

www.cap-payments.defra. gov.uk 

 

 

.  

Reducing the annual CAP payouts 

For comparison ,the statutory  minimum wage    at £5.93per hour yields £12,334 p a for a
40 hour 52 week year 

Using this as a guide  between ‘low’ and ‘high’ C.A.P-income receivers
the following analysis emerges for the year 2009 .

At present (2009) 197,346 claimants receive  a total of  
£3,426,076,230 costs push this up to £3.8bn) 

The high  claimants


65,991 receive  
greater than   £12,334, - in
total  £2,993,905,590 average £45,468

If they were ineligible ( cut off point at £12,334, ) the
savings would be £2,993,905,590

If they received the 
minimum wage equivalent, they would receive  £813,932,994, saving £2,179,972,596  (some £2.2bn)

The low  claimants 

At present (2009) 131,427 receive  less than 
£12,334,  in total  £434,158,342 , average  £3,303

 

CAP reserved for those now claiming £12,334 or less  

If all now receiving 
less CAP than the minimum wage were upgraded to the min wage

And those claiming above this sum were ineligible the cost
would be £1,621,020,618

And the savings £1,805,055,612

 

CAP as a fixed payment to all qualifying claimants .
large and small.

If the statutory payment was  the minimum wage equivalent 

For 197,346 receiving 
£12,334 the cost would be £2,434,065,564,saving £992,010,666

 

THE MACRO ECONOMIC EFFECTS OF C.A.P. ON LAND VALUES

Ritson and Harvey write, 

“The Producers’ gain is a measure of the economic rent
earned by factors engaged in agriculture over and above that which could be
earned in the  absence of the policy
intervention.

In the case where all the factors and inputs except land are
available to agriculture in perfect elasticity of supply (that is the prices
and returns of these factors and inputs do not change whatever the  agricultural output  and use levels) theory suggests that all of the
policy benefits will accumulate to rents and agricultural values of land .

So the figure is a measure of the annual gain to landowners
.

In practice the assumption of perfect elasticity of supply
is extreme. Some fraction  of the gain
would be expected to accrue to owners of other factors specifically associated with
the industry including those upstream of the farm gate”

R and H seem to mean that CAP payments cause land values to
rise.  

 A marked increase in
the price of agricultural land has been noticeable  since the introduction of CAP, resulting from
feeding in £billion  CAP grants each year
over thirty three years. .   

 

 

 

 

 

WHO RECEIVES C.A.P.PAYMENTS ?

.

 

annual payments go to –

     Lord
Carrington          £149,000

     Lord
Linlithgow          £ 144,000

      Lord
Rothermere        £29,000

 to-    M.P.s 
,    Richard Drax ,M.P.,  £417,846

To dukes….to earls…. To Prince Charles £581,000

To their  trade
association , NFU, £70,000

 

HM Queen received 
£1,183,508 over the last two years for privately owning the Sandrigham
estate.

Two thousand get more than the Prime Minister’s annual
salary,

The regime is not designed to  benefit struggling ‘small’ farmers since the
majority of funds go to large agricultural holdings.  Large plc corporations receive £multimillion
payments  

It has nothing to do with food security – Owners of one
million pony paddock acres  qualify for
some £30million.  Preserving the
countryside and the wildlife  is the
business of Defra and  the RSPB-not CAP
-  (yet that Charity with a £15million
membership fund gets an additional £1million from CAP annually).

 

Thousands of 
claimants are already landowning millionaires

.

WHO PAYS – HOW MUCH- WHO GETS WHAT- WHY?

CAP  is not funded  by EU but out of UK
taxes and costs the British taxpayer £3.8 to £4billion in 2009. 

This is an increase of 
23 per cent over 2008  and in 2010
will increase again, and in 2011

Some 80% of UK
citizens live in urban settings. Some 99% of UK
citizens own no bulk land and do not qualify for CAP payments.   

>From their taxes, moistly income tax, these non qualifiers  fund CAP.

and this is largely unknown to them.

CAP is not rational.

CAP does not fulfil the rationale of the Treaty of
Rome,  In UK  the number employed in agriculture has fallen
by 1million  and agricultural workers are
amongst the lowest paid in the land.  Those
farmers on the lowest incomes receive the least benefit from CAP and the
increase in incomes of large corporate 
farms threatens their existence from buy outs. 

The increase in land values proves a barrier to  new entrants to farming.

 

In the past CAP has caused overproduction and waste of food.

Food prices within the EU are  higher than world prices. CAP related EU  Tariffs are a barrier to  exports from third world countries.

EU exports of foodstuffs at subsidised prices threaten the
livelihoods of third world producers.    

 

 

CAP  IS ANTI
DEMOCRATIC

Access to the orginators of CAP policy is severely
restricted and they are not democratically accountable. 

 

CAP budget is set by the 
Directorate  General for the  EU Budget

Agriculture policy by the  
Agricultural  D.G.

The Council for Europe is the major
legislative  body of the EU.

 

CAP IS ANTI- WELFARE 

The CAP is a regressive tax paid mostly out of income tax to
reward the wealthy and privileged . CAP has 
increased the price of food.

 

CAP HAS INCREASED LAND COSTS FOR NEW HOUSES   

 

ABOLISHING / SEVERELY REDUCING THE COST AND EFFECTS OF CAP 

Britain
is a valued member of the EU.   The
workings of CAP as shown above are not rational, not democratic and have a
negative welfare effect.  It is necessary
as a minimum measure , to severely reduce the burden and the effects of C.A.P.
for UK citizens
.

This can be achieved by the co-operation of the E.U. or
unilaterally by UK
if necessary by reducing pro rata the UK
contribution to EU or reconsideration of our role within EU.

 

 

References :

 

The Common Agricultural Policy, 2nd Ed .  Edited by 
Ritson and Harvey  

www.cap-payments.defra.gov.uk

 

James Armstrong 
August 2010 . 		 	   		  
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