The New Agriculture Bill – forecasts are for a ‘green Brexit’

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Following the first reading of the Agriculture Bill on the 12th September 2018 into Parliament, post-Brexit reform is expected to see payments for public goods take centre stage as the Common Agricultural Policy is to be replaced by a new agricultural policy.

The New Agriculture Bill – forecasts are for a ‘green Brexit’

The new Agriculture Bill was debated by MPs in the Houses of Commons on 10th October 2018 and the proposal will show a complete reform of the current system, outlining direct payments to be phased out over the period of 2021 to 2027, in favour of payments for ‘public goods’. However, the bill does give ministers the powers to extend this period of phasing out direct payments, if this becomes necessary.

A ‘green’ post-Brexit agricultural policy will enable farmers and landowners to claim payments that concentrate on preserving the environment and mitigating climate change effects, i.e. public money for public goods. Improved air and water quality, improved soil structure, higher animal welfare standards, public access to the countryside, measures to reduce flooding and preserving historic landscape are all prioritised within this new bill and are consequently enabling the government to meet their 25 year Environment Plan through the creation of these Environmental Land Management Contracts.

Food production specifically is not mentioned within the Agriculture Bill itself, however is mentioned within the policy statement released alongside the bill. This is through productivity, infrastructure and equipment investment as well as pioneering and collaborating on farming techniques that aim to improve resource sustainability. The NFU are currently lobbying for more focus on food production within the bill itself, with concerns over population growth and the UK competing on a global scale.

Strengthening of the supply chain and increased transparency are also included in the bill proposal through improved data collection for benchmarking performance and managing risk. As well as government published statutory codes of practice to improve fairness in the supply chain.

As outlined in the Agriculture Bill, direct payments are to be made in the same way for 2019 and 2020 and are to be ‘delinked’ from the requirement to farm the land: most likely ‘delinked’ during the transition period from 2021- 2027. Farmers may be able to claim under the scheme in a similar way to the current system or could be paid a lump sum, which could be used to meet individual business objectives such as investment, improving productivity or diversification. Payments are likely to be based on previous claims, but farmers will see a staggered percentage reduction under the new bill.

Over this transition period from 2021 to 2027, money siphoned off from the BPS payments will be redirected into new public good schemes, such as ELMS.

The government have confirmed they will honour the full term of existing agri-environment schemes and are planning in the short term to make improvements to simplify Countryside Stewardship. Additionally, pilot schemes under the new bill would come in place in 2019 to around 2025, with around 5000 in the first year predicted to be put in place for farmers. This would mean they will be involved in trials and development of the scheme during the transition period.

So if passed through Parliament, what will this mean for farmers and landowners?

Come 2021, the new Agriculture Bill outlines the transition of the phasing out of direct payments through progressive reductions based on the direct payment bracket. These progressive percentage reductions could free up to £150 million of public funding.

The table below shows the published Defra data for the proposed progressive reductions to direct payments in 2021.

Direct Payment Band Proposed Percentage Reduction
Up to £30,000 5%
£30,000 - £50,000 10%
£50,000 - £150,000 20%
£150,000+ 25%

What this would mean short term?

In 2021, this would mean all farmers would see a reduction to their direct payment. Farmers receiving £150,000 or more are proposed to see the largest deductions to their farm income almost immediately.

For example, a farmer who receives £160,000 annually in direct payments, would face a reduction of 5% on £30,000, 10% on £20,000, 20% on £100,000 and a 25% reduction on £10,000. This would amount to £26,000 reduction in this case.

This could be the difference between a viable farm income compared to a business that may not be able to achieve a profit or reinvest at the level they need to be able to.

However, even for farmers receiving smaller payments, a farmer or landowner receiving £25,000 would see an immediate reduction of £1,250 in the first year from 2021-2022.

What does this mean in the mid-long term?

Over the transition period, the proposed progressive reductions are to be fixed for 2021. However, come the end of this parliament whether that be in 2022 or even earlier than that, there is no guarantee to the cash total the sector is to receive, as this was a commitment made in the Conservative Manifesto. A change in parliament could therefore mean a change in the pot of money available to the sector.

With no direct guarantees to the level of public money available to subsidise the agriculture sector, no one can forecast the potential reductions to the direct payments, either the extent nor time frame. In addition to this, the NFU Brexit team have warned that the agricultural industry may have to tender against other industries for public money, causing deeper concern that farmers will have to become increasingly self-reliant and market driven.

A real positive included the bill is the powers the government can take to intervene in the case of extreme market conditions to stabilise a sector that will mainly be self-reliant. But no direct cause or even action is outlined within the bill itself, just that the case would need to be extreme to merit intervention and the intention of ministers to utilise the tool.

Therefore, all farmers are advised to be prepared for a future without direct payment subsidies. Exploration of schemes that are currently still in place as Pillar 2 schemes and the new management schemes and diversification options can help farmers to reduce risk to their business. Sectors like upland farming, which as highlighted by the bill, will be well placed to benefit from new environmental management schemes.

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