On May 8^th the government will end its consultation period on a new agricultural policy for England. Revealingly, its policy document – called ‘Health and Harmony: The future for food, farming and the environment in a Green Brexit’– has more to say about the environment than either food or farming. The Department for Environment, Food and Rural Affairs (DEFRA) wishes to end the direct subsidies that farmers have received under European Union policies, and environmental schemes are at the heart of its proposals.  The policy seems likely to go through, with firm support from environmental groups.

But this is curious in two ways. Policy for the environmental consequences of agriculture is very important.  As we read this week, “In the past 50 years in Britain, through the intensification of agriculture, we have destroyed well over half of our biodiversity, and the populations of birds, butterflies and wild flowers that once gave the landscape such animation and thrilling life have been utterly devastated”.

The measures will be beneficial and they flow on from those of the EU’s Common Agricultural Policy (CAP), 87 per cent of which in England now goes to agri-environment schemes. However, they mainly concern indirect effects of agriculture. DEFRA has little to say about its immediate impacts on the soil itself and through emissions of methane and other greenhouse gases. The report’s 64 pages make no mention of the damage done to soils by modern industrial agriculture as such.

Soil scientists now understand the varied roles that soil microbes play in these areas and more: nutrient cycling; carbon, nitrogen and phosphorus utilisation; carbon sequestration; methane mitigation; soil fertility; and plant nutrient density. Carbon sequestration means a healthy soil will counter climate change since it absorbs carbon dioxide. This has stimulated a farming method called regenerative agriculture, which rebuilds organic matter and restores biodiversity in the soil, ‘resulting in both carbon drawdown and improving the water cycle.’ But DEFRA says nothing about that.

Meanwhile, the vital minerals found in food grown on British soil have reduced sharply. In 2006, it was reported that since 1940 the amount of iron in the average rumpsteak, for example, had dropped by 55 per cent and magnesium by 7 per cent. Cheddar cheese provided 9 per cent less calcium, 38 per cent less magnesium and 47 per cent less iron.

The second curious aspect is that the government largely ignores the complicated economics of food and agriculture, at the heart of most agricultural policies since the 1930s.  In the eight chapters defining new policies in DEFRA’s paper, more than three times as much space is devoted to environmental issues (including animal health) as the economic ones which affect farmers’ and farmworkers’ own livelihoods. Originally, policies were introduced to reduce price volatility and ensure that farmers had secure incomes, enabling citizens to have more reliable supplies of food. Global concern with food security was reinforced by the big spike in cereal prices in 1972-74. But by now, few politicians see agriculture as of much consequence since it accounts for only 0.7 per cent of UK gross domestic product and 466,000 jobs, or 1.5 per cent of UK employment in 2016 (of which 302,000 in England). The countryside seems to matter more for its visitor attractions.

However, the state of agricultural prices and farmers’ incomes is worrying. English farms are highly capitalised, but in the last three years they made annual profits of just £37,000 on average. Of that, 30 per cent came from non-agricultural activities and an astonishing 61 per cent from direct payments under the CAP: from agriculture itself, the average farm lost £700 per year. Even in nominal terms, total income from farming is less than half of what it was in 1995. Meanwhile, farmers’ median age is 59 and one-third are over 65, with only 3 per cent under 35. But to survive the end of EU direct payments, DEFRA offers only a pious hope, not a policy: “Removal of Direct Payments may be offset in a number of ways, including farm efficiency improvements and diversification, although this will vary by type and location of farm.”

Average income (£) from agriculture for cereal farmers, 2003-04 to 2016-17

Source: DEFRA, ‘The Future Farming and Environment Evidence Compendium’, p. 26.

Nevertheless, farming people are widely rumoured to have voted to leave the EU, although the actual evidence is mixed and it appears likely that they voted around 50:50. Farmers’ votes to leave would mirror the paradoxical finding that it was the regions most dependent on European markets that voted most keenly for Brexit. One explanation might be that farmers do not like depending on subsidies and the subsidies are associated with the EU, therefore they rejected the EU. The National Farmers Union itself recommended a vote to remain.

Higher farm prices and incomes are now needed for the sake of farmworkers as well as farmers. This is a global problem. Domestic agricultural prices largely reflect international prices, which have been the most volatile in their long history of volatility over the last 15 years. At the end of that, real prices are no higher than in the mid-1960s, according to the main global reference, the Food and Agriculture Organisation’s Food Price Index.

UN FAO Food Price Index, 1961-2018

Source: U.N. Food and Agriculture Organisation

The FPI is based on prices of foodstuffs as they cross international frontiers. However, because of corporate concentration, especially in retailing, the share of those prices received ‘at the farm gate’ is substantially less than it was. Farmers are price takers, squeezed by powerful businesses on either side of their activity. Not only do they receive less of the traded price for their outputs than in the past, but the real prices of essential inputs for industrial farming, such as fuel, agro-chemicals and fertilisers have gone up sharply (tropical farmers who supply coffee, cotton and cocoa to world markets have fared even worse).

Percentage changes in certain real average commodity prices 1984-86 to 2015-17

Sources:  Author’s calculations, using data from the World Bank

This even affects US farmers. In the most recent year only one out of nine major US crops – rice – covered its production costs, and then with no profits. Cotton, barley, oats and sorghum did not even cover their costs during the price boom ten years ago. The university which published these figures called the current situation ‘normalcy’, but other American academics disagreed. As one of them reported, in 2016 the US Centers for Disease Control found “that the occupational group farming, fishing, and forestry had the highest suicide rate of any occupational group” at 84.5 suicides per 100,000 persons.

Ratio of gross revenue at harvest to all costs, USA, 2003-2016

Source: University of Illinois at Urbana-Champaign, March 21st, 2018, citing the U.S. Department of Agriculture

Something similar is happening in the Indian Punjab – heart of the Green Revolution, which is reputed to have made many Punjabi farmers wealthy in the 1970s and 1980s.  By now, the controversy there is over the number of farmers and farm labourers who are taking their own lives. University studies show this to have been 542 over 2013-16, twice the official figure. Major causes of suicide are reported to be bankruptcy, debts and ‘farming-related issues.’

Nevertheless, the wider backlash against neoliberalism has not touched the sanctity of market mechanisms in agriculture, even though the markets that serve it fulfil their purpose of balancing supply and demand through the price system only fitfully. There is official pressure to develop large corporate units, like those in Californian dairying, still based on modern industrial inputs and equipment.  Price volatility is to be accommodated by ‘hedging’ on futures and derivatives markets as well as commercial risk insurance, without any public interventions.

But in Britain, the urgency of the situation is seen in a chronically weak balance of payments, part of which is a deficit in food trade.  In 1984, before the CAP reforms began, the UK had risen to 78 per cent self-sufficiency in all food and 95 per cent in ‘indigenous’ foods, based on international prices. Ten years ago this had fallen back to 60 per cent and 74 per cent respectively and it has stabilised at around that level. However, when valued at ‘farmgate’ prices – those actually received by farmers – Britain in 2007 produced only half of the food it consumed.

Origins of food consumed in the UK by value: 2007

Source: DEFRA

The new agricultural policies, in England at any rate, are likely to worsen the precarious position of many farmers (even under the CAP, agriculture has been a devolved power in the UK). The CAP’s import duties and ‘intervention’ prices above market levels brought an end to the UK’s ‘Cheap Food’ era, which started with the repeal of the Corn Laws in 1846.  The CAP replaced a previous policy which was designed for British needs as a food-importing country. This supported farm incomes with ‘deficiency payments’ to farmers when their costs for a crop were above the import price.

In addition, marketing boards – despite their name – took distribution and pricing essentially out of market hands, with prices negotiated year by year between all sides of the business.  They started with the Milk Marketing Board in 1933, when market concentration had enabled dairies to force down the prices they paid to farmers – just as in recent years. The MMB ensured the production, distribution and availability of good-quality milk and dairy products at stable prices for over 60 years. These measures were allied with practical, free technical advice to farmers from a government agency.

The economic principles of those interventions were sound, even though they accompanied the shift to industrial farming methods. However, because of the World Trade Organisation’s rules we cannot now go back to a system like that. The UK will be ill-placed to secure any changes in those rules, as just one among 164 member countries.

DEFRA’s current proposals portend a serious crisis in English agriculture, which will be entirely of the country’s own making.  If our farmers cannot afford to continue in business, who will feed the rest of us?

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The annual Lord Mayor’s Show on November 11^th will instal Charles Bowman as Lord Mayor of London. He officially represents the Worshipful Company of Grocers and he will find a lot on his plate as he starts his 12 months in office.

In everyday life Alderman Bowman is a topline accountant at the multinational firm PWC, and his job as Lord Mayor will be tricky as Britain negotiates its way out of the European Union (EU) – and the City of London finds out if it can sustain its longstanding ambition of turning London into the world’s economic hub.  This goes back to the Bank of England’s lobbying of the Macmillan government in the 1950s to let dollar-denominated (‘eurodollar’) loans be issued in Britain.

One consequence of the globalisation of the City is that international lobbying organisations, or trade associations, are an established part of its ecology.  It hosts several of them, and a large umbrella organisation, the Transatlantic Coalition on Financial Regulation – based at the former Futures and Options Association in Botolph Street – persuaded the EU to push to include finance in the planned TTIP trade agreement with the US.

Meanwhile the City of London Corporation (CLC) has taken on more of the work done by the public sector in promoting financial business.  The Lord Mayor is described first and foremost as ‘an international ambassador’ for the sector, with a status which the CLC claims to be ‘on a par with that of a cabinet minister.’

This article will examine the central role played by the CLC in the curious business of official support for these private-sector lobbying activities – and how it is threatened by Brexit.

The CLC’s task amounts to coordinating many lobbying activities of the bankers and brokers, on behalf of Her Majesty’s Government.  The coordination is active, wide-ranging and well-organised.  After half a century of evolution, it took on its present form linked with the Corporation’s Guildhall under the pre-2010 Labour governments.

The public face of the set-up is TheCityUK, a membership organisation which calls itself ‘the representative body for the UK-based financial and related professional services industry.’ Operating from Finsbury Square, it arranges briefings and round tables with political figures from Britain and abroad, publishes reports on topics ranging from Islamic finance to a ‘general election manifesto’ last May, and will hold a national conference in Manchester on November 28^th.

TheCityUK boasts that it is ‘where senior government ministers, policymakers and key stakeholders from the UK, Europe and the rest of the world come to engage with and address the wider [financial] industry.’  Its 19-member Board is chaired by John McFarlane, Chairman of Barclays Bank, but also includes senior representatives of the CLC and the Greater London Authority.

TheCityUK descends in a direct line from the Committee on Invisible Exports, which the Wilson government set up under the Bank of England’s auspices in 1968.  It took its present form in June 2010 in a joint initiative of Chancellor of the Exchequer Alistair Darling and Sir Winfried Bischoff, a senior banker at Schroders and Citigroup.

In the shadows, the same initiative also created a little publicised but arguably more important sister body, the International Regulatory Strategy Group.  The IRSG’s mandate is explicitly to lobby for ‘an international regulatory framework that will facilitate open, competitive capital markets’, and it reports jointly to the public-sector CLC and the ostensibly private-sector TheCityUK.  It insists on the fact that it is ‘practitioner-led.’

It is tempting to see the IRSG as the engine room of the whole set-up.  Its policy is directed by TheCityUK’s Head of Policy in London, and its facilities by the CLC’s European Regional Manager in London and, critically, the head of the Corporation’s own lobbying office in Brussels.

The ambiguous ‘public or private?’ nature of this operation is seen in the fact that the IRSG’s Board is chaired by Mark Hoban, a Treasury minister in David Cameron’s government who now has an impressive array of City jobs in his bag.  He also sits on TheCityUK’s Board.  The compliment is returned with the presence of Miles Celic, TheCityUK’s Chief Executive, as one of two IRSG co-chairs – the other being Daniel Nussbaum, ​CLC Director of Economic Development.

The IRSG is characterised by international representativeness and a strong ideological thrust.  It works on technical issues such as capital markets, ‘coherence’ between regulatory regimes, corporate taxation and EU proposals for a financial transaction tax (which it opposes, even though the UK’s Stamp Duty on stock market trades is one of the oldest FTTs in existence).

Recently there has been an inevitable focus on Brexit.  In September 2017 the IRSG published a report, ‘A New Basis for Access,’ simultaneously in French, German, Italian, Polish and Spanish as well as English.

TheCityUK and the IRSG have similar structures, with a Board running operations and a large advisory Council directing strategy.  But there are differences.  The IRSG’s Council explicitly ‘seeks to reflect the international, cross-sectoral nature of the City of London’ and at Board level, the IRSG is rigorously international.  Besides the three who chair it, only four of the Board’s 17 members represent British organisations – accountants Deloitte, the London Stock Exchange, Prudential Insurance and Standard Chartered Bank.  Six are from the US, including Citi and JPMorgan banks and Moody’s rating agency, and three from other European countries.  Finally – remarkably – there is the Canadian media conglomerate, Thomson Reuters.

Thus, the strategy of the IRSG, which comes under the wing of what is essentially a jumped up local council, is determined largely by banks and financial firms from other countries.  There are witnesses to this multinational lobbying effort in the form of observers from the British government itself.  They represent the Treasury, the Foreign Office, the Department for Exiting the EU, the BIS Department, the Bank of England and three financial regulatory authorities.

Think about this for a moment.  Whitehall works hand-in-glove with British and foreign private ‘practitioners’ as they work out their research and lobbying plans on new financial regulations, in a body that was set up by a Labour government in the wake of a calamitous failure of the financial system.

It actually fits well with the CLC’s own electoral mandate, in which a small number of residents is overwhelmed by the ‘business vote’ of the City’s commercial residents, such as banks, insurance firms and financial exchanges. Abolished in the rest of the UK in 1969, the number of business votes in the City was greatly increased by the Blair government in 2002.

Under these arcane rules, the likes of Goldman Sachs, the Bank of China and Deutsche Bank have corporate votes in the City’s elections.  Institutionally, the Corporation actually does represent international finance, and not a specifically British interest at all.  For foreign banks and insurance companies to be determinant on the IRSG Council and Board truly reflects the Guildhall’s own ‘democratic’ mandate.

Of the IRSG Council’s 50 members, 21 represent non-UK organisations, 14 of them from the US.  However, only one is from Asia: the Japanese bank, Nomura.  There used to be more.  So is the global role steadfastly built up by the City’s patriarchs already receding?  This is not the only sign, and it may be that, without or without the Brexit vote, the high tide of that role already passed three or four years ago.

Thus, since 2015 officials of the Bank of China and Bank of Tokyo-Mitsubishi UFJ – Japan’s largest bank – have left the IRSG Council, without any Asian bodies replacing them.  And the City’s central role in financial lobbying over TTIP was prised apart when, in June 2016, a new alliance on financial regulations under TTIP was formed: the Transatlantic Financial Regulatory Coherence Coalition.  This one is based less narrowly on banking, capital markets and derivatives trading, and its office is at the European Banking Federation in Brussels.

Even before Brexit, these could be straws in the wind for a wider retreat from the City’s 60-year dream of a dominant global role.  In reality, most of TheCityUK’s and IRSG’s actual work has always been lobbying on regulations in the EU, where their influence is anyway bound to diminish with the loss of membership.  It is still unclear whether the City can even remain Europe’s largest financial centre.  As I finished writing this, a neighbour knocked on my door.  In conversation he told me he is currently helping a major US bank with plans to transfer some of its activities from London to Ireland, against the risk of a ‘hard’ Brexit.

With the UK moving outside what is now the core of the global system – the United States, the European Union and China – it is hard to see how the implicit goal of making global financial regulations converge in a network centred on London can be achieved.  But many opponents of Brexit might heave a big sigh of relief if one consequence is to cut global finance down from the high perch it occupies in British life.

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