Tag Archive: agricultural bill
For the first time in my life, the UK is not a member of the European Union. As a result, on 15th January 2020 the Government published the second iteration of the Agricultural Bill. In summary the Agricultural Bill sets out a framework of new Agricultural Policies and transition measures for England, Wales and Northern Ireland. The Bill is a crucial cornerstone of the Governments’ future farming and land management policy.
Practically, what does this mean for farmers and land owners?
The Bill clearly sets out that direct subsidy payments (BPS) will be phased out between 2021 to 2027. This means that the current application window to the Basic Payment Scheme will be the last under the current subsidy scheme as we know it. In 2021 reductions in payments will begin. Although there is nothing specifically set out in The Bill, a DEFRA policy statement released in September 2019 clearly sets out the payment bandings and percentage reductions, these operating in a similar way to Income Tax with the reductions only applying to the claim amount within that band. It is likely that further reduction percentages will increase over the transition period until the final payments are made in 2027 scheme year.
Unfortunately, as we know many farming businesses, since the early 90’s, have based their business models on the receipt of IACS, SPS and more recently BPS. To put this into some sort of perspective, according to the FARM BUSINESS SERVICE DATA 2018-2019 the average English cereal farmer relies on BPS income for 58% of their Profit. Within the same survey a less favoured area, grazing livestock farmer relies on 186% of its profit from BPS income, this is a startling figure and would mean the average LFA livestock farmer would be making a significant loss when the BPS payment is phased out in 2027.
The Bill also sets out that it could be possible to roll up a number of future BPS payments and these could be taken as a lump sum. It is clear that the Governments’ intention with this is to assist farmers to either retire, diversify, improve efficiencies or to make it easier for new entrants into the industry.
De-linking is a significant change, payments will be continued to be made to current recipients of BPS, however in the future it is understood that these recipients would no longer have to be actively farming. As I understand it this, coupled with the ability to “roll up” BPS payments, is to accelerate change within the industry and to help free up land and farms that could help existing farmers or new entrants into the industry.
What is the focus of the Bill?
It is understood that there will be new financial assistance powers which will enable payments to be made to farmers for a range of public goods. These payments will be made for such items as providing habitats for wildlife, reducing flood risk, preventing climate change, improving public access and protecting iconic features. In England the Government is in the process of developing the Environmental Land Management Scheme (ELMS), this will be part of the delivery mechanism, working towards the provision of public goods. This scheme is being piloted in a number of areas at the moment and is hoped to be rolled out in 2024, half way through the Agricultural Transition period. If farmers were thinking that this was going to replace the direct subsidy scheme I would suggest that this is not going to be the case at all. The ELMS scheme will be very targeted in what it delivers and I’m assuming will be no-where near the level of financial rewards that current CSS/HLS/BPS schemes deliver to regional farming businesses.
In short the profitability of farming businesses are going to be reduced over the next 7 years. It is important for farmers to understand the impact of what is on the horizon, we have time ahead of us to improve the performance of farming businesses and decrease their reliance on subsidy and in preparation for this we are holding a series of regional talks over the coming months to discuss the Agricultural Bill in more detail and its potential effects on family farming succession.
We are hosting a series of regional seminars which will include discussion on the Agricultural Bill which will run between 24th February and 4th March, for more details visit www.georgefwhite.co.uk/planning-for-change or call your regional office.
Simon Britton, Partner – Head of Farm at George F. White 07866 721146 / email@example.com
Great Yorkshire Show is over for another year, and as expected, it did not disappoint! Thank you to everybody that took the time to see us on our stand and around the showground, as well as those that attended our annual drinks reception and debate.
Our annual Great Yorkshire Show debate has become popular with farmers up and down the country, something that we are extremely proud of as we continue to encourage farmers and farming businesses to share their experiences and views with their peers, advising and supporting each other through a period of uncertainty.
It was always inevitable that the way agriculture in the UK is currently subsidised would undergo some kind of reform regardless of whether direct support is phased out over the next five, ten or twenty years. Without doubt, the agricultural industry is about to see the biggest policy revolution in a generation and we must adapt and face the challenges head on. Elliot Taylor, who leads the Farm Business Consultancy team in County Durham at George F. White discusses why.
“Currently, 62.3% of Farm Business Income or profit in Yorkshire and Humber is from subsidies (2017/18 Farm Business Survey) and we anticipate that these direct payments are going to reduce significantly from 2021 according to the proposed Agricultural Bill. Rather than dwell on this, farmers must to work together, discuss and share best practice and review their business performance as soon as possible to ensure they can continue to be successful.
On Wednesday, Simon Britton, Partner and Head of Farm Business Consultancy at George F. White, hosted a discussion panel at the Great Yorkshire Show. The purpose was to encourage farmers to share their experiences and offer their thoughts on how to prepare for the changes Brexit will inevitably have on the industry; whilst deliberating the current and future opportunities available for safeguarding their future in relation to farming without subsidy, and the impact it may have on land values and rent.
Managing Partner Robyn Peat, Partner and Rural Practice Surveyor Tim Michie and myself were joined by Fred Ryle and Kevin Craggs, both arable and livestock farmers, and Mark Exelby, a mixed organic farmer, making up the discussion panel. We discussed in depth the future of the agricultural industry from our differing perspectives and experience as well as answering some excellent questions from the audience.
One panel member suggested that we would not actually see UK agriculture without some kind of subsidy support in the future. He also believed that we should leave the European Union on 31st October with no deal and enter a 12-month period of adjustment. He also said a pro farming government was vital to help introduce a fair replacement to direct support. Discussion also focused on the proposed Environmental Land Management Scheme (ELMs) and the aim of paying public money for public goods.
The panel agreed that the public must continue to support British farmers, utilising home-grown produce rather than relying so heavily on imported goods. The panel also agreed that farmers must receive a fair price for their produce and not have to compete within imported products, in particular, red meat from areas such as South America that may not have the same high standards of animal welfare as we have in the UK.
Despite some different opinions on the fate of UK agriculture, it was unanimously agreed, that farmers must have a sound understanding of their business and focus on the management practises that will help make them top performers in their sector. The panel also expressed that we must be prepared to support each other during uncertain times and use education to promote the high standards of British farming in our schools.
This week’s announcement of a possible delay to Michael Gove’s plan to abolish subsidy payments, due to the continued uncertainty over the UK’s exit from the EU, is just another example of why farmers must start now to get their businesses ready for change. The first step to take is to understand how reliant your business is on direct support payments whilst exploring the opportunities to become more efficient and profitable. We can see from the previously mentioned statistics that the majority of farms are hugely reliant on subsides but we at George F. White believe that with careful business planning and adopting the right strategy the impact the removal of agricultural support payments will have can be reduced.”
Again, thank you to all that visited us over the three days at Great Yorkshire Show, we will look forward to seeing you again soon!
We have all now had an opportunity to read and process Michael Gove’s proposal for the future of agricultural support payments, public money for public goods… James Thompson, Graduate Surveyor at George F. White, discusses what it all actually means and the decisions that farmers must make to maintain profitability.
Firstly, what are public goods?
By definition, a public good is a ‘non-excludable and non-competitive’ good. A common example, used outside of agriculture, is street lighting. Having street lighting is not competitive nor is it excludable to a single consumer; when I consume that good, it doesn’t stop anyone else from consuming it at the same time.
DEFRA will be looking to fund the public goods under the following categories:
- Enhancing the environment
- Farming in remote areas and rural resilience
- Public access to countryside
- Improving the productivity and competitiveness of farming
- Animal and plant health and animal welfare
The proposed Agricultural Bill, which will shape the UK’s future Agricultural Policy, indicates that, the current Basic Payment Scheme (BPS) will be phased out and replaced by the above funding streams. It is therefore imperative that, individual businesses establish how exposed they are to the loss of the farm subsidies. As an example, according to The Farm Business Survey, the average farming business in the North East makes £71/ac profit. This is includes £97/ac support from BPS and Ag Environmental Schemes. Farming business need to build business resilience over the transition period, reducing their reliance on support payments and understanding how best to access “public money for public goods”.
Exploring the options
Based on the five categories of funding for public goods, there is a decision to me made; a focus on delivering actual public goods (categories one to three) or in improving efficiency and competitiveness of agri-products (categories three and four).
Firstly, let’s focus delivering actual public goods. We state that these are ‘actual’ public goods as they are truly non excludable or competitive; we all enjoy the British countryside, whether that be breathing in the fresh air or enjoying family walks and activities in the outdoors.
It is likely that the replacement of current environmental schemes could be highly geared towards protecting soil, improving water quality or even the management of carbon; this could result in more productive land being withdrawn from food production enterprises. It is also entirely possible that funding for open access to the countryside (unavailable in previous environmental schemes) could be reinstated into the new Environmental Land Management schemes (ELM’s) and could be lucrative.
Secondly, you may choose to focus on improving efficiency and competitiveness, for example, improving animal health and welfare or reducing nitrogen and chemical use. In addition to this, with an aim to increase competitiveness of farm businesses, the government has already committed £30 million to the Countryside Productivity Small Grants scheme with emphasis to increase opportunities that high tech and precision farming equipment can deliver. We expect the next round of this scheme to be launched next spring and it is suggested a number of new options will be available to farmers.
There are crucial decisions to be made, but that will be entirely dependent on your business health and its financial exposure to current support payment, resulting in the magnitude of change required to provide a resilient future income to you and your family. That being said, and having conducted research on this topic, many farm businesses in the North East and Yorkshire believe that the best way to safeguard against a decrease in subsidy payments is to improve business efficiency, learn from top performing farms and explore new income streams including diversification.
I will leave you with a question to ponder: Having defined and discussed public goods – does food security constitute as a public good? Consequently, should food production be supported by government funding?
If you would like to understand in more detail how exposed your farming business is to the ceasing of direct subsidy’s payments, then contact your local Farm Consultanct:
The much anticipated Agricultural Bill, resulting from the government’s Health and Harmony consultation carried out earlier this year, was published on 12th September initiating the biggest shake-up of farming in a generation. The government’s ambition for a ‘green Brexit’ has now been outlined where farmers will be rewarded for the public good they provide. Michael Gove has said “the Agricultural bill will allow us to reward farmers who protect our environment, leaving the countryside in a cleaner, greener and healthier state for future generations.” We now understand the focus will be on enriching wildlife habitats, flood prevention, improving air quality, protecting soils and planning trees. Farmers will be encouraged to sign Environmental Land Management Contracts replacing direct aid and be paid to protect and preserve the natural environment helping mitigate the effects of climate change; a move praised by many environmental groups. Farmers will also be encouraged to become more resilient, more productive and more competitive and will have access to funds to help boost productivity.
A new innovative relationship between government and land managers is proposed by DEFRA but many see the Bill falling short on addressing key subjects such as the future of food production, food security and the hugely important subject of a successful post Brexit UK trade deal. Ministers have also refused as yet to specify how much public money will be allocated for supporting these initiatives and the Agricultural Bill unfortunately lacks detail on how this will be achieved in practice.
The things we do know – the present funding mechanism will remain for the life of this parliament; and current agri-environment agreements have been given assurances, but many farmers are naturally worried about the future reductions in support payments beyond 2022. The Bill explains how the current system of direct payments will be dismantled, reducing each year over a seven year period with the final Basic Payment being received in 2027. Furthermore the Bill describes how the de-linking of payments from the requirements to farm land will help those wishing to retire or indeed invest in their businesses and still be in receipt of payments; one-off lump sums could be also offered to farmers in place of future direct annual payments.
It is hoped by many that this Bill provides the first steps towards a better future for farming and the environment, but it is clear that the transitional period from 2022 to 2027 is likely to have a negative financial impact on farm profitability. Without doubt there will be winners and losers from the new agricultural policy, the reason why planning for change in good time is essential. Assessing the options for the future is crucially important; the earlier you start planning the better the outcome will be. Regular preparation of budgets, benchmarking businesses annually and comparing key performance indicators at every opportunity is what all business should be doing. Assessing and fully utilising the key assets of the business including its people will be extremely important. Exploring potential new income streams, investigating possible diversification opportunities and understanding the impact new policies will have will be vital for business success. Of course further detail will emerge in the coming weeks and months but now is the time to start planning so farmers can prepare for change and become as resilient as possible.