Basic payment scheme & grant funding
UK agriculture has been greatly supported by the European Union’s subsidy system – the Common Agricultural Policy (CAP).
Although the UK left the EU on 31st January, UK farmers will still benefit from the Basic Payment Scheme in 2020. At the end of the current transition period, 31st Dec 2020, UK agriculture will no longer be supported along the lines of CAP and will be subject to UK agricultural policy. This will mean a shift away from direct payments (such as the BPS) towards a system of “public funding for public goods” via a new Environmental Land Management Scheme
Although the way ahead is still rather vague, some clarity has now provided by the Agriculture Bill. This was first published in September 2019 and re-issued with some additions in January 2020. This currently states that farmers will receive full BPS style payments in 2020, although the scheme may contain some simplifications. In 2021 all English farmers (agriculture is a devolved issue) will see their direct payments being reduced in line with the formula as published by Defra. In the following 6 years, the payments will be reduced to zero. Therefore, there will be no BPS style direct payments made to English farmers in 2028 and beyond.
Prior to his departure from No.11 Mr Javid did state that the overall agricultural budget will remain the same until the end of this Parliament. Funding syphoned from direct payments will be diverted to payments for the delivery of public goods under the new Environmental Land Management Scheme, which may well also include significant funding for new woodland creation.
Defra analysis, released in tandem with the Agriculture Bill, showed that the BPS currently contributes 98% of farm profits in the North East. Therefore, it is reasonable to expect that the transition to the new England agricultural policy will result in a significant restructuring of the farming industry in the North East region. An obvious early casualty will be agricultural rent levels, which may result in landowners seeking alternative land uses.
The Agriculture Bill contains little reference to the socio-economic schemes that are currently funded via the Rural Development Plan element of CAP. There is a Government commitment to honour those schemes as per their contract. Socio-economic funding should be provided via the Shared Prosperity Fund, but details are currently unknown.
Our specialist team understands the workings of the support system, and is up to date with the latest developments regarding the UK and the EU. The changing support system must be taken into account when discussing any farm business restructuring or new farming agreements.
If you would like any further information or to discuss any rural related matter, please contact Tom Wills, head of the agriculture & estates department at Sintons.