The path to sustainable farming

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As our departure from the EU draws near, policy changes will be coming into affect for the agricultural industry. Read our latest article to ensure your business is heading in the right direction... 

“We recognise that there is currently great reliance on the area-based subsidy payments, so we will change things gradually throughout the transition period. This will be an evolution from the old system to the new, not an overnight revolution” – George Eustace, Secretary of State for the Environment, Food and Rural Affairs.

As the UK leaves the EU on the 1st January 2021 the agricultural transition period will begin. Direct Payments will be phased out between 2021 and 2027.

Three levels of support aimed at paying for sustainable farming practices, creating habitats and making large scale change, will be the replacements.

The UK policies will be more flexible, rather than fixed for a 7-year period as they have been under EU regulations.

Aims

By 2028 the government aim to see:

  • A renewed agricultural sector, producing healthy food for consumption at home and abroad, where farms can be profitable and economically sustainable without subsidy.
  • Farming and the countryside contributing significant to environmental goals including addressing climate change.

What does that mean for Farmers?

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This is a fundamental change for farmers. The aims make it clear that all farms are run profitably and sustainably. Income will need to be generated to replace the Direct Payment.

As this graph from The Andersons Centre shows without the Direct Support Total Income from Farming would be decimated and in some periods of recent history would have made the sector loss making.

It is vital therefore that every farming business explores how best they should replace this income.

Timings

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Phase out Direct Payments and existing Agri-environment schemes in a gradual, smooth, and orderly way (The last direct payment will be 2027)

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  • Direct Payments will reduce by around 15% in both 2022 and 2023.
  • In 2022 Core Elements of Environmental Land Management will start.
  • During 2022 and 2023 more funding will be made available within the legacy Countryside Stewardship Scheme, with simplified administration.
  • A slurry investment scheme will be set up in 2022 as part of the 25-year Environment Plan
  • Standalone plans to support tree planting, peatland restoration and nature recovery

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  • Full roll out of the three components of the Environmental Land Management Scheme
  • By the end of 2024 it is anticipated that legacy Basic Payment Scheme will have reduced by 50%
  • Direct Payments will be de-linked, cross compliance will stop being the basis for regulation and enforcement.

Improving Farm Prosperity

The UK Government are looking to target interventions into the following areas to help farms prepare:

  • Productivity Improvement Grants
  • Support for new entrants
  • Raising standards
  • Training

Leaving the Sector

To allow farmers to leave the sector, a lump sum exit scheme would allow some farmers to receive a one-off payment in place f direct payments. Certain conditions will need to be met. This is expected to be launched in 2022.

How can RWB help you?

With many years’ experience in the sector and excellent support network of other professionals we are best placed to support our agricultural clients. The need to plan for these changes, should be at the forefront of any thinking, this will need to be both Practically and Financial. Ensuring that your financial data is up to date and relevant will make those decisions easier to make.

Contact our Director, Gary Brockway, who specialises in agriculture directly on 0115 964 8874 or email him at garyb@rwbca.co.uk to find out how we can help you across all areas of your business.

The views provided in this article are for general information purposes only. Nothing in this article represents advice of any nature whatsoever. Accordingly, RWB CA Limited does not accept any liability or responsibility for the information contained in this article or any decision or other action that may be taken in reliance upon the information contained within it. RWB CA Limited accepts no responsibility for any errors of fact or opinion and assumes no obligation to provide you with any changes to its assumptions.  

Tags: Financial planning Tax advice Tax planning VAT Tax HMRC Employee Farms Agriculture Employment Government Brexit EU European Union Farming Sustainable

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