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.
|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%|
|Profit and Loss|
|Year||Payment (£)||Payment (£)||Payment (£)|
|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:
01677 458202 / 07866 721146