Brexit will lead to cheaper food if right policies adopted, says OBR official

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British households are on course to enjoy cheaper food after Brexit if the UK returns to the system of farming subsidies adopted before joining the European Union, a top official from the Office for Budget Responsibility has claimed.

Sir Stephen Nickell said breaking away from the EU’s common agricultural policy (CAP) and returning to subsidies where the UK “traded at world market prices in agricultural products” and compensated farmers to ensure they didn’t “all go bankrupt” could also reduce Britain’s borrowing bill.

Asked to describe the possible “positive” aspects of Brexit on the public  finances, the former Bank of England rate-setter said returning to the system “might lead to a situation where we needed to give less money to farmers than under the current arrangements, which would improve the public finances, and people would like it better because food would be cheaper.”

The CAP has evolved since its introduction in the 1960s.

It began by operating a system of intervention, buying and storing products when the price fell below a certain level, resulting in excessive storage of surpluses.

Payments are now partly based on acreage, with extra subsidies available for implementing environmental measures. Critics argue that the policy restricts competition through import tariffs which inflate food prices.

Sir Stephen, who retires from the Government’s fiscal watchdog at the end of this year, stressed that the scenario was “a tiny part of a big story”.

He also told the Treasury select committee that forming “different trading arrangements from the ones that the EU has with places like China, India and so on” would take an “awful long time”.

Britain relies heavily on EU trade. The EU is the UK’s biggest import and export market, exporting £18bn worth of food and drink in 2015, of which £10.7bn was to the bloc, according to the Department for Food, Environment and Rural Affairs.

Last year the UK imported over £38.5bn worth of food and drink, with £27bn from the EU.

Robert Chote, chairman of the OBR, suggested last week that the impact of leaving the EU was unlikely to be known for decades.

He told MPs that one possibility was a world “in which you end up with a much more liberal trade regime, which promotes greater productivity, growth, and real incomes improve”.

However, he said that “even if one was an optimist about getting to a very liberal trade regime at the end of this, you might not expect that to have been cemented into place over the five-year horizon that we are looking at.”

[Source:-REUTERS]

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