Leading Article: Farmers need fewer subsidies and more competition

BRITAIN'S FARMERS are in crisis. As profits dive and debts mount, tens of thousands of jobs could be lost in rural areas. World agricultural prices are falling; farmers are being squeezed by increased competition. Three or four years ago prices were at an all-time high. Now loans made on the basis of those conditions are prompting despair. This is the background to the Government's announcement of extra money for farmers.

The Government can pursue general policies that will take the immediate pressure off agriculture. Some of them are already in place; the Bank of England's decision to lower interest rates will lower the value of sterling and make it easier for farmers to find export markets. There is no reason why the Office of Fair Trading cannot investigate the fact that food prices in the shops are not falling in line with prices at the farm gate. If supermarkets are making excess profits out of agricultural distress, then they can be tackled in the manner of any company making windfall gains. The ban on selling British beef on the Continent, which has eaten into profits, seems set to be lifted: our Government, too, should at least redeem all its blunders, such as the absurd ban on beef on the bone.

In the longer term, the Government can continue to pursue reform of the Common Agricultural Policy, which has outlived its usefulness, granting perverse incentives for farmers to grow crops that Europe does not want. Every year Europe's taxpayers pay out pounds 30bn to buy up produce and support prices. Britain, to the Government's credit, is pushing hard to reform this system; but this may cost more money in transition payments before the subsidy supertanker can be turned around.

The potential for allowing Britain's farmers, often more efficient than their Continental counterparts, to compete is more exciting than simply giving them more money. Even the National Farmers Union has recognised that there is no future in simply asking for more money. The Cap already provides a huge subsidy. Regional policy redistributes money to those areas, especially in Scotland and Wales, that are most heavily dependent on farming for their income; the Scottish Parliament and Welsh Assembly will probably accelerate such policies.

The Agriculture Minister's extra money, therefore, seems to be misguided generosity. If Rover or British Steel do not deserve industrial support, why should agriculture be different? Nick Brown's comparison between farmers and deprived families in inner-city areas makes no sense. There is a world of difference between self-employed farmers getting into debt, but still sitting on the assets of their land, and families living on benefits, with nothing to call their own and nothing to sell in the bad times.

As tariffs on trade fall, farmers will have to stand up to increasing, not decreasing, competition. Equipping them with more government aid is not the way to encourage this. It may be argued that it is a social good, worth paying for, to preserve our countryside the way it is now - fields, hedgerows, barns and all. But this seems more like a suburban fantasy of a rural Britain that never existed.

The money announced yesterday was really a very small amount when compared to the taxpayer's total largesse. We must hope that this is a signal that the Government is recognising the need for competition and diversification above subsidy. The market for organic foods or new products such as British wine may not be large enough to replace the income lost in the present crisis - but encouraging such enterprise is the only way to preserve farming in the long run.

Caught in the net of the Cap, which forces them to act against their long-term interests, farmers should beware of the "help" being offered. Governments should learn the lessons of the past. Subsidise in haste; repent at leisure.