DEFRA has released a series of documents detailing their aims for transitioning agricultural funding and policy, this is set to be the biggest shake up of agricultural policy in England since 1947. Including yet more acronyms, proposed consultations, and a great deal of unknowns, the documents released have yet to put a payment figure on anything, but they do confirm that a big period of change is coming, and farm funding as we know it is about to change beyond recognition, all starting from 2021.

2021 – 2024

The recent spending review confirmed that £2.4 billion will continue to be available to DEFRA to spend on agricultural policy until 2024. However, what has been made clear in these transition statements, is that direct payments to farmers are set to decline from 2021, this in turn will release some of that budget to plough into other parts of the new proposals. By 2024, BPS payments are set to reduce by at least 50% to all claimants. This is the intended reduction schedule:

BPS Reductions until 2024
Payment Band	2021	2022	2023	2024
Up to £30,000	5%	20%	35%	50%
£30,000 – £50,000	10%	25%	40%	55%
£50,000 – £150,000	20%	35%	50%	65%
£150,000 +	25%	40%	55%	70%

 

This will be applied on a pro-rata basis like income tax bands, therefore a payment of £40,000 in 2020, will be reduced as follows: the first £30,000 will be reduced by 5% therefore £1,500, then the remaining £10,000 will be reduced by 10%, therefore £1,000. Total payment reduction = £2,500 in 2021.

Payments would become de-linked (no longer linked to land acreage in your control) from 2024, which consequently ends the current cross compliance mechanism.

Countryside Stewardship & Grants

Currently DEFRA have said applications for CS will be possible up until 2023, and there will be an option to transition existing CS agreements to ELMS without penalty.

All existing grant schemes will continue to be honoured.

Individual funding for Hedgerow & Boundary grants and Water Capital Grants is going to increase to £20,000, more information about this is expected in Feb/March 2021.

A Farm Resilience Scheme is expected to open in June 2021, more information expected March 2021. A Farm Investment Fund for equipment and technology is expected to open for applications in December 2021, with more information expected in April 2021. In 2022, the following grants are expected, an Innovation, Research and Development scheme, Slurry Investment Scheme and New Entrant Support Scheme.

Exit Scheme

George Eustice has spoken several times recently about allowing farmers the option to take their remaining BPS payment as a “lump sum” to enable them to “retire with dignity”.  This will be consulted on next year, when we assume we will know the tax position on this payment, but it is expected to be rolled out for applications in 2022, so farmers who choose this option can at least receive a notable sum of their remaining payments.

Cross Border Claimants

Alike COVID, it appears each devolved nation will be able to paddle their own canoe going forward, with each part of the UK managed their own system. Cross border claims will cease to exist, meaning each claim has to stand up and comply on their own merits, and cannot rely on land the other side of the border. As such if you have less than 5ha in one country, you will no longer be able to make a claim on that land.

2024 to 2028

So, what will follow the BPS phase out? The policy as a whole is called the Environmental Land Management Scheme (ELMS) following a phased introduction, it will be rolled out fully from later in 2024 until 2028, it will consist of the following components:

• Sustainable Farming Incentive (SFI) (formerly Tier 1) – This is the “blanket option” for all farmers the chance to be paid for “public goods” and paid for providing management above the required regulations. Features of this are likely to include at the least:
• Soil Health
• Nutrient Management
• Integrated Pest Management

DEFRA have indicated that agreement lengths could be annual for basic SFI contracts or be periods of years where more commitment can be offered. The SFI is likely to offer a structure of options, with a basic level but higher rates of pay where there is higher commitment. We are still awaiting confirmation on any proposed payments.

• Local Nature Recovery (formerly Tier 2) – This will involve more significant work on species, habitats and land use change to be geared at the location in question.
• Landscape Recovery – this is for landscape and eco-system recovery which will be aimed at a larger scale, so might be more of a collaborative option, perhaps over areas of 2-3,000 hectares.

The SFI will be piloted in 2021, with hopefully 1,000 farms involved in the pilot, details for this are expected early in the new year. There will then be second phase of pilots to develop the Local Nature Recovery element of ELMS.

In conclusion, change is coming, exactly how and what form that change will take is still unclear, however, direct payments are set to decline and from 2022 that decline will be a lot more noticeable. Focusing on the positives, grants are set to continue, announcements promised in the New Year should provide further information on what is set to become available. Farmers who are in the process of thinking about retirement should consider the advantages potentially associated with the lump sum payment which will be offered from 2022. Lastly, it could be a very promising time to be a new entrant, as it appears that DEFRA is very in favour of encouraging new entrants into the industry.

If you would like to discuss this further, or consider what the future could hold for your business, please contact Ellie Watkins for a confidential discussion on 07495 006808 or ellie@agriadvisor.co.uk