Tag Archive: Countryside Stewardship Scheme

Proposed ELMS Scheme will not bridge the gap

The proposed Environmental Land Management scheme (ELM) will not bridge the gap left by the withdrawal of the Basic Payment Scheme (BPS) and farmers are sleepwalking into disaster, advisers have warned.

Simon Britton, Head of Farm Business Consultancy at George F. White, said the three-tier system recently outlined by Defra was reminiscent of the environmental stewardship triad introduced in 2005, of base-level BPS, entry-level stewardship (ELS) and higher-level stewardship (HLS). However, he believes even the higher echelons of ELM will not be a substitute for the direct payment. On a whole-farm basis, currently ELS works out at about £30/ha, with HLS ranging from £74-£124/ha, based on George F. White’s clients.

Based on these figures, the bottom tier of ELM could be about £12-£49/ha, which would not be a replacement for the £222/ha that lowland farms were broadly getting for BPS.

“ELM is not going to be a magic silver bullet,” says Simon. “Time, money and effort will need to be spent on works in order to get this money. You’ve got to be eligible for it and want to go into it and it doesn’t even start until 2025, so we’ll already be well through the transition period.”

See the tables below showing Defra’s proposed percentage reductions for BPS during the transition period and George F. White’s analysis of what the accumulative effect will be on farm businesses.

 

Transition Payments
BPS Income Bands Proposed percentage reduction in 2021
Up to £30,000 5%
£30,000 to £50,000 10%
£50,000 to £100,000 20%
£150,000+ 25%

 

Profit and Loss
Year Payment (£) Payment (£) Payment (£)
2020 30,000 70,000 160,000
2021 28,500 62,500 134,000
2022 22,800 50,000 107,200
2023 15,960 35,000 75,040
2024 11,172 24,500 52,528
2025 6,703 14,700 31,517
2026 4,022 8,820 18,910
2027 2,011 4,410 9,455
2028 0 0 0
Total value of BPS payments at current rate with no reduction 2021-2027 210,000 490,000 1,120,000
Projected BPS income 2021-2027 after assumed reductions 91,168 199,930 428,650
Difference between income at current rate and income at reduced rate -118,832 -290,070 -691,350
Table shows confirmed percentage decrease by payment rate for 2021 and then a George F. White prediction of gradual decrease to 2027. The percentage decrease is based on a tiered reduction system, similar to how income tax is applied. These figures do not include any potential agri-environment income.

The agricultural subsidy transition period is due to end in 2028, with BPS being phased out from 2021. Reduction percentages for 2021 have been announced and range from 5% for BPS claims up to £30,000, to 25% for claims of £150,000 plus.

Our table predicts how much farmers could expect to receive if the payments declined gradually for the following seven years, and the overall loss compared with receiving the full payment. This does not take into account any additional payments through the phasing in of ELM income. On this basis, a £30,000 claimant will see an accumulative reduction in support income of £118,832 over the transition period, while a £160,000 claimant will record a difference of £691,350.

Many agricultural businesses are heavily reliant on BPS support, and the latest Defra farm business survey shows that even with a five-figure annual subsidy payment an overall loss was recorded. “It doesn’t matter how you skin the cat on the way down, the accumulation is significant,” he said. “All farmers are going to need to be businessmen to get through the next 10 years.”

The average age of farmers means they have spent the majority of their working life building a business based on subsidy support.

“There is a massive amount of business planning work to come, which will include restructuring and succession. Farmers are sleepwalking into this and if we don’t manage this, this is going to be a big problem.”

If you would like to discuss the above in more detail please contact:

Simon Britton
01677 458202 / 07866 721146

The Future is GREEN

It is common knowledge that commercial forestry can be key to broadening and diversifying landowning portfolios, primarily due to the tax-free income, 100% relief from Inheritance tax and partially tax-free gains. The future of forestry and forest products is strengthening due to technical advances, political backing and increasing renewable energy demand. The environmental benefits provided by woodlands include its habitat provision, carbon sequestration and flood risk alleviation. Socially, the recreational and health benefits associated with time spent in woodland add further strength to its branches in being a key player in its provision of public good.

In addition to the above, forestry has promise as an investment. Forestry investment provides a long-term capital return, with annual returns of 13.9%. The first income is available after approximately 15 years on the most productive sites. A driver of the return is the increasing timber prices which according to Forest Research (2017) have been showing a positive trend since 2003.

Table 1 – Graph produced by Forest Research depicting increasing timber prices.

Future trade and demand for forestry products is also on a steady increase, as softwood availability in Great Britain shows a declining trend until 2050. This decline in availability could lead to a further increase in the UK importing forest products, however the value of the pound in Europe leads to the UK being seen as a less attractive market which could dampen interest. Because of the declining availability, the manufacture of wood products in the UK has been steadily increasing. Timber exports have shown growth in recent years and were worth £1.9 billion in 2017.

The Committee on Climate Change (CCC) report the agricultural area of production could decrease by 30% by 2050 and it is thought that the agricultural area will be diversified to more woodland. The governments current ambition for afforestation to reach net-zero emission by 2050 is to increase tree planting to 20,000 hectares a year.

The government incentivises woodland planting to landowners and farmers through the Countryside Stewardship Scheme (CSS), and there will be a new Environmental Land Management Scheme in the future.

Countryside stewardship grants are available in Mid-Tier applications for woodland creation, management plan grants and woodland tree health grants. These grants are available all year round, and the Woodland Creation Scheme provides a grant of up to £6,800 per ha for capital items covering both planting and protection.

In addition to the above the Woodland Carbon Fund targets large scale woodland creation. The site must be over 10 hectares in size and must achieve multi-functional targets with open space, improved public access to woodland, and improved landscape scale opportunities. Funding includes the trees, guards, fencing and gates, forest roads, and recreational infrastructure. In year 5 one of capital payments of £1,000 per hectare is available for successful establishment.

As mentioned previously, a common incentive to plant or purchase woodland is the tax benefits. Commercial forestry Business Property Relief comes into play after two years of ownership. In addition, no capital gains tax is applicable, and sales of timber are not subject to income tax where the woodland is ran commercially.

Risks

The risks associated with woodland investment are soil quality, exposure, wind damage, natural predation, pests and diseases. Therefore, forest expertise and management goes hand in hand with successful and profitable forestry.

The real opportunists in forestry as I see it in the future are upland landowners or farmers that can take advantage of strategic planting on marginal land. These farmers can increase productive output per acre and provide a broadened income stream in times when agricultural markets may be weakening.

The positive implications of forestry investments are diverse and exceed the traditional objectives which typically drive investment. However, in all investments there are risks, and with a living investment some of these risks are related to the natural environment. The outputs of a living investment in forestry can be limited or reduced due to wind damage, fire damage and pest damage from squirrels and deer species. There are also the unknown future effects such as climate change and the spread of disease which could have devastating effect.

As an industry we are already seeing policy focusing on environmental benefits and how these transpire in to “public good.” It would seem that forestry is a multifaceted land use with significant potential in the future.

If you would like to discuss the opportunites relating to commercial forestry please contact a member of our Farm team within your regional office:

Countryside Stewardship Scheme: Simplified Options

DEFRA has announced that the Countryside Stewardship Scheme is being simplified to make it easier for farmers and land managers to apply. Alan Falshaw (Agricultural Consultant) looks into the detail of what is involved in the new proposals.

Countryside Stewardship Scheme



Four New Offers

• Online Arable Offer
• Lowland Grazing Offer
• Upland Offer and
• Mixed Farming Offer



Other Changes

• Shorter application forms
• Streamlined evidence checks
• Non-competitive application process

All farmers who meet the eligibility requirements will get an agreement. This is a step change from the competitive process of previous applications. The options available for the four strands above have all come from the Countryside Stewardship Scheme and are more focused on the particular offer. The number of options available for each offer ranges from eleven to fourteen.


In addition, the popular Hedgerow and Boundary Grant has increased from £5,000 to £10,000 (maximum) per individual. £10 million pounds has been allocated to this grant alone.


As usual, the devil will be in the detail but farmers and land managers should view this as a further opportunity to access funding from the RPA whilst delivering positive environmental benefits.


For more information on Grants and Funding please contact your local consultant:

Northumberland and Borders: David Hume
Durham: Alan Falshaw
Yorkshire: Sally Horrocks

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