United Kingdom-The Dairy Quota.
UNITED KINGDOM-THE DAIRY QUOTA.
IT will be exactly 25 years ago tomorrow that milk quotas were imposed across the European Economic Community, as it then was. No single political act has had a greater influence in shaping the way farming in the Westcountry has developed over the intervening years.
At the time, the sense of shock was profound. It had been obvious for several years that something would have to be done to curb the EEC’s burgeoning surpluses of butter and skimmed milk, but the expectation was always that, when it came to the crunch, the farm ministers’ courage would fail them and some sort of fudge would be the result. But in the spring of 1984, there was no fudge.
Agreement was reached on March 2, and one month to the day later, quotas came into force. In the dairying heartlands of the South West, it came as a hammer blow, all the more so, because of the appallingly bad and unfair deal that the then Minister, Michael Jopling – a Conservative – had secured for Britain.
At the time, we were 85 per cent self-sufficient – the only EEC country producing less milk than we consumed. Yet it was the UK that took the biggest cut – of 6.5 per cent, compared with the EEC average of 3.5 per cent. Ireland, by contrast, which was producing almost twice as much milk as she consumed, was treated as a special case and actually enjoyed a small increase.
The pill was even more bitter in the South West. The Government decided to achieve the necessary cut-back and allow for special cases by basing quotas on 1983 production, minus 9 per cent. But many dairy farmers in the South West had experienced a terrible year in 1983, which had featured the wettest spring since 1878 followed by the second driest summer since 1921. For many spring-calving herds it meant a cut of almost a fifth on what they would expect to produce in a normal year.
Resentment was deep and widespread. At the time, I was the county secretary for the NFU in Somerset – Britain’s most productive dairy county, as we liked to claim, to the irritation of our neighbours in Devon. We had thousands of posters printed warning that "Quotas Kill Cows" and took to the streets of Taunton and Bristol with tractors and cows. But it was almost a ritual protest. We knew that there was no chance of the decision being reversed and, in any case, there was a substantial minority of dairy farmers – with whom I tended to side – which held that, compared with the alternative of deep price cuts, quotas were actually the lesser of two evils.
The key argument in favour of quotas at the time was that they would drive fewer farmers out of dairying than the alternative of price cuts. This does not appear to have been borne out by events. In 1984, there were just under 40,000 dairy farmers in England and Wales. At the last count, in February this year, only 12,000 remained, of whom 2,767 are in the four South West counties, which is roughly the same number as Somerset on its own could boast, 25 years ago.
Have numbers fallen less steeply than would have been the case under a policy of price-cutting? Initially, probably yes. But as the capital value of milk quotas began to develop, so the system came to provide an incentive to quit dairying, either into a well-pensioned retirement, or to make a heftily subsidised entry into somebody else’s sector. In beef, cereals and, especially sheep, production was seriously inflated by the influx of non-producing quota holders, using income from quota leasing to subsidise their new enterprises. The distortions created by milk quotas thus stretched far beyond the boundaries of dairying itself.
What has been the cost of quotas? Well, I remember Bill Madders, when he was chairman of the NFU’s Milk Committee, telling the Cornwall AGM in Newquay that the amount of money that had been spent on buying and leasing quota in (I think) 1997, was the equivalent of over 3p on every litre of milk produced. That was when quota values were sky high. Taken over the long term, perhaps a more reasonable figure might by 2p per litre. Spread that over 25 years, and it comes to £7 billion, and that takes no account of all the millions of pounds that have gone into the pockets of lawyers and land agents for quota disputes, end of tenancy settlements, SLOM compensation and goodness knows what else. I find it impossible to believe that all that money could not have been more productively spent.
But – and this is the acid test – has the price of milk been 2p per litre higher over the lifetime of quotas than would otherwise have been the case? Possibly. We would certainly have seen much deeper price cuts in the 1980s and 1990s if output had not been capped, and any recovery after that would have been on the back of considerable hardship. Would the UK’s relatively efficient milk producers have gained market share in this scenario, as the advocates of price cuts in 1984 had argued? Almost certainly.
However, far and away the most damning indictment of the quota system has been the barrier it has placed in the way of able young people coming into dairy farming from outside. In the shameful absence of any new-entrant scheme, the quota system has starved the industry of new blood. I very much doubt if we would be seeing the current exodus from dairying, with production lower than at any time since the early 1970s, if the industry contained a higher proportion of people milking cows from choice and aptitude, rather than as a result of an accident of birth. That it does not is down to quotas.
You can argue over whether dairying in the South West would be more or less profitable, with or without quotas. Some farmers have done very well out of the system. But that dairy farming would be a more efficient, productive and, above all, happier industry if quotas had never been invented is, I believe, indisputable.
Anthony Gibson is a freelance writer and may be contacted at anthony.gbsn@googlemail.com
