A RADICAL new approach to agricultural insurance could provide an alternative to the Single Payment Scheme (SPS) in the UK.
That was the message from George Eustice, Parliamentary Under Secretary for Farming, Food and Marine Environment.
Mr Eustice said the UK could learn from Canada and the USA which have their own successful national agricultural insurance schemes, which are paid for both by farmers and the Government.
“The USA has a flagship agri-insurance scheme,” he said. “If a farmer’s income drops significantly below a certain level, due to crop failure for example, they can call on the insurance fund to top their income up.”
Farmers pay in to the system, explained Mr Eustice, and the American government helps support it by paying some of the administration costs and helping the insurance scheme pay for the gap in farm income.
He said: “Canada also has a similar system, known as agri-stability, whereby if the farmer’s income drops below 70 per cent of their average income for the previous five years, they are eligible for the insurance.
“The Canadian Government has a bigger financial input, contributing between 60 and 80 per cent of the insurance cost, with the industry paying the rest.
“The NFU has previously asked us to consider such a scheme and in 2009 Defra commissioned Prof Berkeley-Hill to look at its potential in the UK.
“He concluded if done correctly a national agri-insurance scheme could provide an alternative exit strategy to the SPS we currently have.
“Prof Berkeley-Hill also said it could be on way of reducing the long-term cost of the CAP.”
However, he also highlighted several big drawbacks to this kind of insurance system.
“Both Canada and the USA do not have a SPS, so the insurance scheme which NFU has previously advocated would have to be in place of a SPS, rather than an addition to it.”
He also said the cost of such schemes, which cost more than the UK currently pays to administer CAP, were also a drawback.