UK farming and subsidies: a kiwi comparison (part one)

The early 1980s saw New Zealand move through a tough economic period with continual decline in its currency: down 55% in decade to 1984. A snap election in 1984 led to a change that stabilised the economy. A new labour government rolled into power and introduced significant austerity measures with budget cuts to a number of industries, and agriculture received a big hit – the loss of subsidies.

New Zealand Reserve Bank bulletin from 1986 suggested that 10% of all farmers were in a critical financial state. High inflation rates, debt across the agricultural sector and the aligning of rural lending interest rates with market rates were crippling for farmers. What’s more, the ‘artificially’ inflated land prices, believed to be linked to subsidies, declined immediately. A situation in which the UK farming community may well find itself in the years to come.

The Agriculture and Horticulture Development Board (AHDB) noted that bankruptcies throughout New Zealand (although these are not all farming related) jumped from around 900 per year in 1984 to almost 2,500 in 1992.

However, New Zealand agriculture recovered. Farmers took the initiative. They responded to the cuts through cost reduction, diversifying land use, seeking diversification for non-farm income and developing new farming products. The 1984 changes became the catalyst for increased innovation and productivity.

Some farmers may now think the removal of subsidies is a blessing in disguise. Following several difficult years, they lead the world in exporting agricultural produce and value-added products. New Zealand produces enough food to feed approximately 40 million people versus a population size of around 4.8 million and, unlike the UK, it exports 90% of farm outputs.

What will our own farmers say in 20 to 30 years’ time? Will UK farmers look back and say, “I believe leaving the EU was a very good decision”?

This is a question I’ll discuss next week.

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Laurie Hill