Food Policy Matters - By David Read

Jun 9th 2017

We recently held the first of a programme of small “consultation dinners” with foodservice leaders, chaired by Helen Browning, chief executive of the Soil Association, who is assembling a commission to advise the government on the future of UK food policy once we leave the EU. If this sounds dull to you that might not be surprising. But you would be wrong.

The UK hasn’t really had a food policy since 1973. When we entered Europe we became a part of the EU’s Common Agricultural Policy (CAP), and we have been subsidising our farmers to an average level of more than 50% of farm incomes ever since. But that important piece of legislation called “the side of the Brexit bus” and its promise to divert the £350m a week to our NHS conveniently forgot to mention a huge slice of it passes straight back to our farmers in the form of farm subsidy, and rural investment schemes.

But this is just one part of a complex set of changes as we leave the EU. We discussed these at our dinner, and one of the most critical conclusions we reached is our quiet backwater of the agrifood sector needs to engage more fully in the policy of UK food if it is to have the kind of supply chain it wants and needs in the future. So, here’s why. 

 

Cost

The most recent CGA Prestige Foodservice Price Index shows food and drink inflation for caterers is now running at 6%. The good news is it should begin to ease over the remainder of the year. Last summer’s Brexit driven correction of 15% to 20% against major currencies will gradually wash out of the inflation numbers as the new import prices become the norm. 

But the cost of labour in agriculture and food manufacturing may rise if immigration restrictions are not pragmatically implemented, leading to higher prices for the 54% of our food that’s grown in the UK. We also import 27% of what we eat today from the EU, which of course is on a tariff free basis. Hopefully this status will survive, but our withdrawal from the single market gives us no guarantee. 

We are net contributors to CAP, so we will “save” about £2bn a year by not being in the EU. Apart from farmers there are very few that want the retention of a subsidy system on the basis that it doesn’t incentivise efficiency and innovation, so we lag competitors like the US for example. But equally, revolutionary subsidy changes could destabilise supply, remove production and drive price upwards. There’s much rhetoric about super-low prices from opening up of other supply markets through new trade deals, but tariffs and fluctuating exchange rates bring risk with them too.

 

Security of supply

There is a further risk the government will be keen to flex its trading muscles, withdraw subsidies and allow UK farming to “find its own level”. One can certainly argue that removal of subsidy will help Britain to forge new trade deals with non-EU states. The EU is so heavily committed to agricultural protectionism that its ability to sign trade agreements with developing nations is restricted. If the UK adopts a different approach, opening up its markets to food exports from, say, Commonwealth nations, it could gain significant new access for UK businesses.

We should be cautious though, as it’s in our interest to maintain a strong farming industry at home – no government can afford to play fast and loose with food security. After all, most developed countries, whether inside the EU or not, maintain at least some public funding for farming communities. Perhaps the time is right for Britain to replace CAP with a smarter and more innovative system. We could for example, put more emphasis on paying farmers to tackle specific environmental problems, or to boost training and skills in the workplace, or to invest in research and development projects that boost innovation and productivity.

 

Soil and the rural environment 

Finally, let’s not forget the countryside is a national asset that we need farmers to invest in and protect. If we allow farming to wither on the vine we not only destroy jobs, and food security, but we put the countryside itself at risk. Of critical importance is the health of our soils after decades of intensive chemical laden farming. Some are now suggesting that at the current rate of decline we may have less than 100 harvests left as a nation.

The food and drink sector is the UK’s largest manufacturing sector. But because of the fragmented nature of the catering sector we are simply not at the table right now. In December last year, 25 chief executives of large restaurant businesses wrote an open letter to Theresa May imploring her to help on a wide range of issues from business rates/living wage to availability of EU labour. Yet the huge issues threatening our supply chains did not even get a mention. As a sector foodservice needs to become much more involved in protecting the supply chains that will be essential to survival in the challenging years ahead. 

David Read is chairman of Prestige Purchasing