Distributional aspects of the UK costs of the common agricultural policy

Abstract

Although the various costs of the Common Agricultural Policy (CAP) of the European Union have been well documented, little attention has been directed at distributional considerations. This paper focuses on the way in which some of these costs are distributed amongst food consumers and taxpayers in the United Kingdom. Average cost figures hide large differences in the burden of agricultural support between individuals. Moreover, recent reform measures, entailing a move from artificially high market prices to the use of direct income payments, represent a shift in the cost of support from the consumer to the taxpayer, with concomitant distributional implications. Results suggest that transferring the entire consumer cost component to taxpayers would lead to a decrease of around 1% in the income of those in the top income quintile, and an increase of almost 2.5 per cent in the income of those in the bottom quintile. However, the impact on overall income inequality in the UK would be trivial.