A milk quota (or more accurately dairy produce quota) is one of the measures the British government uses to intervene in agriculture. Their purpose is to bring rising milk production under control. Milk quotas are attached to land holdings, and they represent a cap on the amount of milk that a farmer can sell every year without paying a levy. Milk quotas are assets; they can be bought and sold, or acquired or lost by other means, and there is a market for them.
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Milk quotas were first introduced on 2 April 1984 under the Dairy Produce Quota Regulations 1984, which reflected the then European Economic Community (now the European Community)'s Common Agricultural Policy.[Notes 1] Originally they were to run until 1989, but they have been extended several times, and now will endure until at least 31 March 2015.[1][2]
Each member of the European Economic Community was allowed to produce dairy products up to a cap, which was based on each state's 1981 production, plus 1%.[3] The cap was designated the "reference quantity". A levy to the EEC was due on production in excess of the reference quantity. This levy was then to be recovered from the farmers or dairies involved. Until 2002, recovery of the levy was down to the Intervention Board for England and Wales. It is now recovered by the Rural Payments Agency on behalf of DEFRA (the Department of Environment, Food and Rural Affairs).[4]
The Dairy Produce (Quotas) Regulations 1994, which came into effect from 1 April 1994, substantially revised the old structure. Until 31 March 1994, the MAFF ("Ministry of Agriculture, Fisheries and Food", a British government department that has since been replaced by DEFRA) was responsible for milk quotas. On the MAFF's behalf, Milk Marketing Boards kept a register of quotas that detailed which farmers or dairies held what quotas. The Milk Marketing Boards were dissolved on 31 October 1994 (in England, Wales and Scotland) and 28 February 1995 (in Northern Ireland).
The current regulations governing milk quotas are the Dairy Produce (Quotas) Regulations 2005, as amended, and the Dairy Produce (Quotas) (Wales) Regulations 2005, as amended.
There are or have historically been five kinds of milk quota:[5]
The EEC did not originally mean for milk quotas to attract a value. Contrary to their intent, milk quotas have become a valuable asset, although prices have fallen of late. Milk quotas may be purchased outright or leased.[1][6]
Although the quotas are normally attached to land, and transferred with it provided the transfer is not a tenancy of less than ten months, they can now be traded separately.[Notes 2] The legality of such a transfer was questioned by the Courts, particularly in Carson v Cornwall County Council [1993] 1 EGLR 21, [1993] 03 EG 119, but since 1994 has been accepted, at least in a limited way, in for example Harris v Barclays Bank Plc [1997] 2 EGLR 15, [1997] 45 EG 145, CA.[7]
Milk quotas can also be transferred without payment, where the tenant of a holding under the Agricultural Holdings Act 1986 ceases to use that land for dairy farming purposes for five years and transfers that quota to other land that he holds for dairy farming purposes, provided there is no quota protection clause in the tenancy. In the absence of such a clause, a tenant under either the Agricultural Holdings Act 1986 or the Agricultural Tenancies Act 1995 also seems, in principle, to be free to sell the quota attaching to the land he rents on the open market. This has been called quota "massage" or even quota "theft", though Williams (2011) calls this last term "inelegant and inappropriate", such a transfer being apparently lawful.[8]
Disputes about milk quota are generally referred to arbitration.