Why does Michael Gove want to treat farmers and water companies differently?
Michael Gove was in pugnacious form in his address to last week’s annual Water UK City Conference. Pulling no punches, his subjects included water company abuse of monopoly power, the use of offshore companies and complex financial engineering, and the privileging of shareholders at the expense of the UK’s billpayers, taxpayers and the environment. It would be no surprise if, in the aftermath, a number of bruised industry executives were tempted to beat a retreat to their Cayman Island offices so criticised by Gove.
His line was tough, clear and uncompromising. Continued failure would lead to tougher regulation. “Should companies continue to drag their feet, I have already said I am prepared to consider changes to the regulatory framework to ensure that consumers receive the service they deserve – and the natural world is better protected.”
Contrast this with Gove’s speech the previous week to the annual conference of another major sector, agriculture, in which he spoke of his admiration for farmers as “the very first friends of the earth”, described himself as a farming “romantic”. He spoke of the need for reform to the “unwieldy” and “counter-productive” rules farmers are subject to under the Common Agricultural Policy.
These warm words have been backed up in Defra’s subsequent agriculture command paper, which will set the framework for post-Brexit agriculture policy. The command paper has this to say in praise of farmers: “They protect the beauty of our countryside, the majesty of our forests and the richness of our wildlife.” In consequence, the new system will have “regulatory simplification at its heart”, to deliver on the government’s commitment to “lessen the burden” of farm inspections.
This contrast in tone is striking. Critical, verging on condemnatory, towards water companies; supportive, verging on collaborative, towards farmers.
Different treatment for farmers and water companies
Farming is dependent on water. But a lot of food production is not especially good for water. Agriculture is the major source of diffuse pollution of the UK’s surface and groundwaters. Nitrates, phosphates and pesticides are a major threat to the long term health of aquatic ecosystems. The persistent and increasing chemical and biological contamination of our waterways is damaging, costly, and poorly addressed by the existing regulatory regime.
While Michael Gove has stressed – more than any other Defra secretary of state of recent times – that environmental harm from farming is unacceptable and must be reduced, there are clear risks that the promised “regulatory simplification” could compromise his ability to realise his vision for greener farming. Worse, it could cancel out many of the environmental benefits his reform of farm payments will deliver.
In particular, the promise to abolish cross compliance standards (a set of requirements relating to, among other things, protection of soil and water resources) during the Brexit transition period opens up the prospect that environmentally damaging agricultural practices could be tolerated. One study for WWF calculated that 20-30 per cent of farmers are not compliant with water protection standards. How much worse would the situation be if these standards no longer applied?
So, in summary, the water sector is being threatened with stronger regulation to reduce the harm it causes to water resources, while farmers – who are responsible for a far greater share of water pollution – will benefit from the relaxation of some environmental standards, and less scrutiny of farm management practices, in exchange for public payments for ‘environmental public goods’.
Do we need more or less regulation?
Should the water sector be more tightly regulated? Perhaps. The charge sheet levelled by Michael Gove suggests the current system isn’t working. But a looser regulatory approach could actually help water companies go further in some areas to protect the environment. For example, a less rigid emphasis on outcome targets could make it easier to invest in catchment management programmes that support more sustainable farming practices, but whose outcomes are less certain or predictable than ‘hard’ engineering.
Should farmers benefit from simpler regulation and fewer interventions? Perhaps. There is plenty of evidence that the current system of inspections results in farmers being penalised for minor infractions or in ways that feel arbitrary. But abolishing cross compliance, at the same time as reducing farm inspections, would make it harder, not easier, to improve the environmental performance of the sector.
Regulation is not the cause of, nor the panacea to, the problems correctly identified by Gove in the water and agriculture sectors. While regulation is not a zero sum game, in which the removal of regulation from one sector should be matched with a corresponding increase in another, there is a strong case for a fairer distribution of duties and responsibilities between the two.
There is another way
The bigger point here is that farmers and water companies have a shared interest in the effective stewardship of water resources. This is particularly true of highly productive agriculture in places such as East Anglia, where our work has demonstrated the potential for farmers and water companies to gain financially from long term farm management agreements to reduce the groundwater concentration of nitrates. And, while there are many terrific examples of working partnerships between farmers and water companies, we are barely scratching the surface in terms of what could be achieved.
Building more of these partnerships will be as much about a change in mindset as changing regulation. Michael Gove has already transformed perceptions, speaking freely of a commitment to excellence and world-leading standards, and being clear how high his expectations are of water companies, farmers and others. He has many levers to pull to put these principles into practice, from the implementation of the 25 year plan for the environment, to the final design of his new farm payment system and the upcoming five year review of water company business plans. If he can facilitate more collaborative and innovative farming businesses, working in partnership with more flexible and environmentally-focused water companies, then the legacy of his time in Defra will be extraordinary indeed.