By Richard Wright
 

Back when he was canvassing support for the EU in the Brexit referendum, the farm commissioner, Phil Hogan, said it boiled down to a simple choice for UK farmers – opt for the certainty of CAP funding or 'take a punt on the generosity of the British Treasury'.

Many farmers opted to take the 'punt', but as things develop in London and Brussels, there might not be a lot of scope for Treasury generosity towards agriculture.

We know now that the Defra Secretary, Michael Gove, wants to deliver a green Brexit. What we have no idea about is what he will do about farm support.

This is guaranteed for the term of this parliament, but given that the government's majority only exists because of the DUP in Ulster, that is a far from cast iron guarantee. A big problem is that to buy a deal with Brussels on access to the single market, without actually being in it through a customs union, the government is prepared to spend more and more money.

An initial £18bn has risen closer to £40bn and in a negotiation where it holds most of the cards, Brussels will push for even more. This seems bizarre on two counts.

Firstly, it means we are paying a lot to buy something we already have as members of the EU. The other is that we are paying to buy access to the single market, despite the UK being a nett importer of everything from cars to food.

When it comes to food, the UK is a big nett importer from the EU 27. Those set to lose out if there is no deal are Ireland, France and the Netherlands. Despite the losses they are facing, it is the UK that is being forced to pay to 'buy' a deal.

Calculations show that without a deal, food destined for the UK will end up being sold in the EU-27 and that will inevitably drive down prices. The debate about the UK divorce bill is, however, the stuff of high politics and far beyond agriculture.

What is certain is that far from there being £350m a week going spare because we are out of the EU, the Treasury is under pressure to meet the divorce bill and the decision to take the brakes off public spending. As Phil Hogan suggested back in 2016, this is going to leave farmers at the back of a long queue hoping for Treasury support.

Ironically, some of that funding from the divorce bill will indirectly take pressure off the CAP budget in the EU 27. There seems to be less concern in Brussels now that there will be a hole in the CAP budget after 2020 and Brexit. That contrasts with the position here, where future support for farming is very much an unknown.

A key question is whether the government views food production as a priority. Importing more from third countries would help it secure wider trade deals and at the same time drive down prices on supermarket shelves. That is ultimately how many consumers will measure the success of Brexit.

While the UK is wondering where it will sell its food and drink after Brexit, the EU is flat out capturing markets. It has just announced a big increase in funding to promote food and agricultural products overseas and within the EU.

This is going up from $142m to almost $180m in 2018 and a focus in that campaign will be lamb, which the commission says has been losing out to other meats with consumers. This is ironic, since lamb is probably the UK product most vulnerable to loss of access to the EU 27. So, the industry will see the market developed in 2018, only to potentially lose access after Brexit in 2019.

As EU members the UK now gains from that promotional pot, but what will happen after Brexit is another question for the Treasury. The EU funding is not split on a country basis, but all U28 members gain.

Funding on this scale is a big investment and it is paying off for the EU which is enjoying record growth in food exports. After Brexit it will be our biggest competitor.

The Treasury will have to dig deep to come up with funding to fill the hole left by EU departure – assuming it is serious about the UK remaining a major food export player.