The wrong moment to make policy on the hoof

In 1967, when I joined The Economist wet from university, I was given a suitably small industry to cover. In a matter of weeks, however, this quiet training ground was in the grip of a raging foot-and-mouth epidemic, and roaring up the news agenda. Just as today, the Government was frantically relearning the physical and political importance of agriculture, and quack policy remedies were rife.

In 1967, when I joined The Economist wet from university, I was given a suitably small industry to cover. In a matter of weeks, however, this quiet training ground was in the grip of a raging foot-and-mouth epidemic, and roaring up the news agenda. Just as today, the Government was frantically relearning the physical and political importance of agriculture, and quack policy remedies were rife.

The paradox of farming is that while it earns less than 1 per cent of our national income, it occupies, manages and cares for about 75 per cent of the land area of the United Kingdom. Include forestry, and you are up to 85 per cent. Urging people not to "go to the countryside" may have done something to keep them away from livestock but sheer scale makes it difficult to achieve completely. The countryside is not some small and remote colony. That is one reason why agriculture matters, and can demand support, to a degree denied (sometimes to their furious resentment) to other industries.

But there is of course another reason. Virtually all agricultural land is devoted to growing or rearing food. Most of this, as the graph shows, is grazing land, with cereals accounting for almost all the rest. Non-food crops, such as oilseeds, flax and hemp, are grown on only about 5 per cent of our arable land. Farming is the first £8bn link in the £57bn supply chain of the food industry. In household shopping bills, food may feature much less prominently than it once did - only 17 per cent of spending, the same as on leisure or transport - but it bulks much larger in our concerns.

Of course, those concerns change. Wartime convoys and postwar rationing drove policy towards the production of more "food from our own resources". In the 1970s, Britain's farm support regime was replaced by a still more production-driven system, the Common Agricultural Policy. Only gradually did anxieties about security of supply give way to concerns about cost, as the CAP held prices above world levels. Still more recent has been the growth of concern about food safety and quality. A tangle of these anxieties has, however irrelevantly, exploded into public debate with the onset of foot-and-mouth.

Memories of the 1967 epidemic should make us a little wary of efforts to pin the blame on recent changes in farming. Yes, it is a pity that regulatory costs should have driven many small abattoirs out of business. But even if they still existed, farmers would still be transporting, batching and trading animals right around the country: ministers are right to say that foot-and-mouth spreads faster through markets than slaughter-houses. Let's not forget, either, why the abattoir regulations were tightened up (it is at least worth noticing that complaints about the burden of inspection costs here are running hand in hand with a demand for the closure of German abattoirs careless about the removal of bovine spinal cords.) And - so far as cattle are concerned, at least - the post-BSE passport scheme has made it easier to trace animals at risk than it was in 1967.

A major target for blame is intensive farming. But it is doubtful that it is the culprit on this occasion. After all, as the President of the National Farmers' Union pointed out on Friday, grazing sheep is about as non-intensive (or extensive) a business as one can imagine. As for the pig industry, moves back to more natural, outdoor rearing have arguably increased their exposure to air-borne diseases such as foot- and-mouth. Foot-and-mouth is far more prevalent in third-world "natural" farming than in the "industrialised" agriculture of the developed world. And paradoxically, the foot-and- mouth plague seems to be driving the public towards food that often is factory-farmed, notably chicken.

What about the supermarkets, back in the Prime Minister's doghouse, accused of having an armlock on their farm suppliers? That may be popular with farmers but quite what it has to do with foot-and-mouth is unclear.

Meanwhile, the big food retailers can fairly point out that they have only recently been done over by the experts, that is to say the Competition Commission, which concluded that they were not making excess profits.

There is another paradox here. Ironically, it is the very competitiveness of the retail sector that leads supermarkets to put pressure on costs (i.e. on their hard-pressed farm suppliers). "Codes of conduct" may check some muscle-flexing by big buyers but they will not alter the basic equations. The Prime Minister can hardly blame the supermarkets for the impact the strong pound had on the competitiveness of British farmers; he should talk to his neighbour about that. Nor are retailers to blame for the extra wedge of disease control costs between farm gate and supermarket shelf.

So where supermarkets and farmers might want to join forces is in asking Government to make up its mind. Does it want cheap food, whose price is driven down by competition and trade liberalisation? Or does it - suddenly - want something else?

The Government's rural White Paper was published only a few months ago. And that seemed clear enough. Agricultural production must "adapt to a competitive world market". The long-desired reform of the Common Agricultural Policy will reduce the annual food bills for a family of four "by around £65 a year". The Government would encourage farmers to diversify into non-food crops. It would pay them to look after the countryside, support a little organic farming and local tourism. But when it came to mainstream food production, the message was clear: Britain's farmers must compete with the cheapest the world can offer, or make their living in other ways.

This message had already been expressed in the Government "action plan" for agriculture, launched by - yes - the Prime Minister only a year ago. Although the liberalisation of farm trade has long been an objective of agricultural policy, these initiatives were, of course, launched as a "new direction", so one must assume the message was delivered with due deliberation. So what now?

It's not easy to tell but let's try. The Prime Minister was, to be fair, only echoing public anxieties about the quality of our food - quality of the product, of the processes, of husbandry and animal welfare. So what would a quality-based strategy look like? Showering the struggling farm sector with a whole new raft of quality-based regulations would drive more out of business, unless matched by subsidies and buttressed by import tariffs. It is a fair bet that the Government would be readier to impose the regulations than provide subsidies or tariffs, which would have knock-on effects on all Britain's trade.

The other option is to help quality food to command a premium price, by heightening consumer awareness and hoping demand will follow. British agriculture has been struggling to repair the damage that it inflicted on its brand through the spread of BSE, and trying to re-establish a quality position understood and valued by the customer. That will be a long, slow but not impossible job, in which Government does still have an important role: doing more to help inform the consumer, and encouraging the supermarkets to play their part.

This outbreak will be expensive, both to the Treasury and to farming's reputation. The 1967 epidemic cost, in today's money, £1.6bn. There will certainly be new lessons to be learnt about disease control. The fact that foot-and-mouth is endemic in many parts of the world makes clear our vulnerability to imports, legal or illegal. But the first thing to do is to get the outbreak under control, and work out how it arrived. Even a pre-election Government should be able to stop, learn and think before seizing scapegoats, or trying to reinvent an industry.

Sarah Hogg is chairman of Frontier Economics