A top Treasury official has said he is concerned that maintaining some direct payments after Brexit could mean farmers stop ‘bothering about managing risk’.
Brendan Bayley, senior policy analyst at the Treasury, made the remarks during a Westminster Food and Nutrition Forum event in London yesterday.
He was responding to a presentation given by NFU Brexit director Nick von Westenholz, who explained the union believed direct payments would need to continue in some form in order to help farmers manage volatility.
Mr Bayley said: “I am worrying slightly about incentives in that sort of context. Is it about direct payments helping people to manage risk, or is there a risk direct payments mean people do not need to bother about managing risk and not focus on it.
“That would be my concern.”
Though Mr von Westenholz acknowledged direct payments were a ‘crude and basic’ tool, he insisted they were better than any of the alternatives on offer.
“We would hope there would be opportunities of finding much more targeted and clever ways of allowing farmers to manage their volatility”, he said.
“But at the moment, direct payments do a half decent job of that. There are things such as insurance schemes, but none of these would be ready as a complete replacement.
“We need to be careful about removing current mechanisms for helping farmers deal with risk in a way which will undermine the viability of businesses in the short-term.”
Neil Wilson, head of agriculture at HSBC bank, agreed with the NFU position, saying he would be ‘concerned’ about the loss of direct payments.
Asked by Farmers Guardian whether it could have an impact on the bank’s ability to lend, he said less than half of his farming customers were borrowing at present, but it could become an issue.
“Those businesses who have borrowed to grow and do different things, I am less worried about”, he added.
“At the other end of the non-borrower scale, there is a problem because a lot of those businesses are not as efficient and there will be a significant impact on them.
“I am not lending them any or much money at the moment, so as a bank is there any leverage? Probably not.
“When they come to me and say ‘I have lost this bit of payment, I want to go and invest and do something else’, that is the challenge which will come along to us.”