THE CONTROL OF SUBSIDY EXPENDITURE: AGRICULTRUE

Publication Date01 Feb 1963
AuthorGeroge Houston
DOIhttp://doi.org/10.1111/j.1467-9485.1963.tb00914.x
THE
CONTROL
OF
SUBSIDY EXPENDITURE:
AGRICULTURE
GEORGE
HOUSTON
AGRICULTURAL
subsidies provide the outstanding British example of an
open-ended scheme of public support for an industry of private
businesses. This study is concerned with expenditure which has
a
direct
effect on farm prices and costs and discusses the nature and effective-
ness of the methods used to control exchequer liability and
lo
ensure
that public money spent has the effect intended.'
I
The cost of exchequer support to agriculture is normally classified
under two headings,
(a)
the implementation
of
price guarantees and
(b)
farming grants and subsidies (see Table
I).
Payments made under
heading
(a)
provide support to prices received by farmers; payments
under
(b)
are often intended to reduce costs.
The nature of the measures varies with the product, service or
enterprise involved. Price guarantees are normally intended to secure
a minimum unit return to farmers producing a commodity of
a
certain
quality. For some products (e.g. milk), the guarantee system is asso-
ciated with fixed price schedules, applicable to virtually all farm sales,
but other commodities, such as cereals and fatstock, have deficiency
payment schemes which are designed to bring the average unit returns
of producers as
a
whole up to an agreed level, while leaving room for
wide variation in the prices received by individual farmers, even for
identical products.* In some instances payments are made to farmers
directly; in other cases statutory marketing boards are involved in the
guarantee scheme.
Public expenditure
on
agricultural research, education and advisory
services affects farming efficiency in the
long
run but is excluded from this
study. Administrative questions, such
as
safeguards against fraud and delegation
of
financial powers are also ignored.
*
Under a deficiency payment scheme the government announces
a
certain
'
standard
'
price for
a
farm commodity.
If
the average price actually received
for
this commodity in the market turns out
to
be lower than the standard
price, then every producer receives
a
payment equivalent to the difference
between these prices multiplied by the quantity he has sold
or,
in some
cases. produced in the relevant period. Seasonal scales are associated with
certain commodities.
61

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