In this blog Mike Cluley gives a very brief summary of the main points of the new Agricultural Bill that is passing through parliament so that consideration can be given as to what businesses should expect and the things that they should consider with the likely changes to future farm payments. Agricultural policy in the UK is about to go through arguably the biggest changes since the McSharry Reforms of the early 1990’s and there will be unavoidable impacts on most farming businesses as a result.
WHAT IS GONG TO HAPPEN TO BPS?
The new Agricultural Bill is currently going through the various stages of parliament and whilst there will be tweaks, given the large parliamentary majority, the main themes are likely to progress into the final Act. It is expected that the Bill will be passed into law in June / July 2020 and whilst the Bill does not give the detailed rules for the future schemes, it does essentially reserve various powers for the Government to do the things they want. The most informative information we have recently had is the “Farming for the Future – Policy Progress and Update” document which puts the “flesh on the bones” of where the Government is going with the new schemes. It is a very worthwhile (and not too long) read for anyone who wants to understand what is around the corner. If you would prefer not to read the Update then the prominent points going forward are:
2021 BPS – More or less the same as BPS 2020 although some simplifications (eg. possible removal of Crop Diversification etc). Cuts will be made to payments from 2021 onwards. The proposed cuts for 2021 will be on a progressive basis and are 5% on payments under £30k; 10% between £30k – £50k; 20% between £50k – £150k; and 25% on £150k and more.
2022 BPS – Potentially the first year of “de-linking” payments from the need to farm the land (see below). This essentially means that the level of payments will be probably based on a historic reference year(s) and will not be dependent on the amount of land or entitlements you hold as of the claim date. Further cuts will be made to payments.
2023 – 2027 – Gradual phasing out of BPS using the “de-linked” payment.
2028 – No more BPS payments
One key change to the current system is that the Bill permits “de-linking” of payments from land from 2022 (although it is not guaranteed to happen from this date). It is assumed that in order to calculate the amount of “de-linked” money payable then there will have to be some sort of “reference” year(s). As yet we don’t know when this may be or indeed have been. It could be a single year, it could be an average of a number of years (eg similar to the Single Payment Scheme reference years of 2001-03). Obviously the RPA will need to be sure of its data (which is not necessarily straightforward given the IT issues with the BPS system) and presumably there will need to be the ability to consider any changes that may have resulted in a claimant having a “non-standard” claim amount in a reference year. There may also be the option of a claimant being able to take up the option of taking a lump sum payment of the de-linked payment rather than an annual payment up until 2027. These are the finer details we still await.
FUTURE FUNDING OPPORTUNITIES
The new Environmental Land Management Scheme (ELMS) is due to start from late 2024 (with Countryside Stewardship schemes still available until then) in order to deliver the government’s aim of “Public Money for Public Goods”. The ELMS is likely to be formed in three “Tiers” as follows:
- Tier 1 – Basic options to adopt good practices and deliver management options – likely to be along similar as the current streamlined Countryside Stewardship Offers
- Tier 2 – Options based on locally targetted issues and likely to require collaboration between land owners
- Tier 3 – Large scale land use change projects to help sequest carbon, mitigate against flooding etc.
It is increasingly looking likely that most of the more simple option payments will be on a “cost foregone” basis and will therefore not necessarily be able to replace the eroding BPS income. Other payments under the ELMS may be more complex through “payment by results” or through reverse auctions. There is, however, likely to be a greater focus on farm productivity and resource management with capital grants. Further details on the scheme will come forward following the pilot schemes that are about to start or are currently in place.
CHANGE IS COMING…..
What is clear is that the era of direct payments is rapidly coming to an end after nearly 30 years (IACS, SPS and BPS) and businesses need to start acting now to consider how they will manage this change and loss of direct income.
For further information or assistance with planning for the future please do get in contact with one of the team.