Today, Michael Gove revealed the government’s proposal for the future of agricultural support payments; whilst further detail is eagerly awaited it is clear a number of changes lie ahead.
The Agriculture Bill sets out how farmers and land managers will, in future, be paid for ‘public goods’, such as better air and water quality, improved soil health, higher animal welfare standards, public access to the countryside and measures to reduce flooding.
Mr Gove made it clear that he wants a ‘smooth and gradual’ transition to allow farmers to adapt to the new payment regime and therefore is suggesting a seven-year transition period, effectively starting in 2021; he confirmed that the 2019 payments will be based on the current system, but would be simplified if possible. He also indicated that the 2020 payments would be on a similar basis, allowing farmers to utilise the next two years to appraise their businesses and make sure they make use of the certainty the next two years offer. This may include, through examination of each enterprise and its performance, a review of debt and financial arrangements, and also a review of the business structure and planning for future generations. We have already begun this exercise with some of our clients and are finding that if you remove direct payments and rely on business performance some work is needed to ensure maximum performance can be obtained.
It is clear that the government will move away from the current area based direct payments as these are seen to simply pay farmers for owning or occupying land. Figures suggest that the top 10% of recipients currently receive almost 50% of total payments, while the bottom 20% receive just 2%. There will then be an agricultural transition period in England between 2021 and 2027 as direct payments are gradually phased out, being replaced in part by the new payment options.
Mr Gove stated that, “In its place, a new Environmental Land Management system will start from next year. The government will work together with farmers to design, develop and trial the new approach. Under the new system, farmers and land managers who provide the greatest environmental benefits will secure the largest rewards, laying the foundations for a Green Brexit”.
The direction of travel is clearly set out by Mr Gove, and it is clear he wants more for his money, linking future payments to deliverable objectives for the animal health, environment, water, soil or air. It looks as though in order to deliver this he will look to make money available for investment in productivity and increasing efficiency of production. The also appears to be possible funding for research and development. Farmers will need to look at what is available and then plan for the future; it is clear that the way in which farmer run their business is set for possibly the biggest shake up for generations. The way in which we farm looks set to change significantly and those farmers who are willing to adapt may be able to take advantage of the opportunities which lie ahead. We may find that some farmers adapt businesses to pursue future payments, whilst others look to gain investment money to increase their production. Either way in order to decide what is the best option for you, accurate assessments will need to be made, budgeting the many options available to you will be key; this will also need to be balanced with the labour available and the financial constraints of the business.
The is a suggestion that the government will look to delink payments from land occupation in order to allow for those wishing to retire and exit the industry and also make way for new entrants. Succession planning will be a key part of future business planning and this period may offer an opportunity to make the transition to future generations. For those on tenanted farms, it will be important to balance business objectives with the constraints of the tenancy in operation. Our Land agents will be working hard to ensure that both objectives can be achieved seamlessly and allow for farmers to progress and make best use of the opportunities available.