The moment the EU referendum result was announced, British farmers knew their future outside the Common Agricultural Policy (CAP) would be very different. Now that time is limited for area-based payments to farmers, Bidwells is working with farm businesses to prepare for a future with less government support.
In the immediate wake of the Brexit referendum, chancellor Philip Hammond was quick to announce that current financial support for farming would be funded by the UK Treasury for two further years. This meant that the Basic Payment Scheme (BPS), the principal method by which EU member states support their farming sectors, would remain unchanged until 2019. This was welcome news, even if it did not afford farmers much time to plan for the future.
This method of paying farming subsidy has been the subject of much criticism but also much confusion. It is not paid, as much of the media has reported, to farmers on the basis of how much land they own, but on how much land they occupy, whether or not they, in fact, own the land on which they claim. And despite the fact that, to claim this payment, farmers must abide by a series of complex rules regarding environmental protection and good practice, it has become increasingly fashionable for politicians to declare that such subsidies “reward unsustainable practices” or benefit only the wealthiest landowners.
Government policy advisers have also claimed, erroneously, that area-based payments to farmers have inflated the market value of agricultural land, despite evidence that the value of such subsidies has declined in the last decade, while land values continued to rise.
In January, DEFRA secretary Michael Gove has revealed his plans for the future of farming. He built on Philip Hammond’s earlier promise of continuity, by announcing that farm support would continue “at the same levels” until 2024 but described a five-year transition phase to a new farming policy once the UK had left the EU.
“During these years, we propose to first reduce the largest BPS payments in England. We could do this through a straight cap at a maximum level or through a sliding scale of reductions to the largest payments first."
"£3bn [direct support for farmers] should be an investment for the future, not a continuation of the 1970s and 80s", he added, despite the fact that the current, area-based payment system was introduced in 2005, replacing a much more complex system of farm subsidies based on market intervention and production quotas.
The government is to reveal detailed proposals in the coming weeks, on which there will be a public consultation. This will feed into the Agriculture Bill which will be debated later this year.
Mr Gove went on to confirm the perception that future support for farmers and landowners would be more closely linked to environmental work. For some time, critics of the current subsidy system have argued that support for farming should be where farmers deliver “for the public good”. The traditional interpretation of this, certainly by the National Farmers Union, was that the public good that farmers delivered was affordable food produced, safely and sustainably.
There is still little flesh on the bones of exactly what this term means, but it is clear that DEFRA is becoming more confident in terms of general themes.
Announcing these plans, Mr Gove said:
“Public money should reward those who look after the soil and think hard about farming in a way which is respectful.... those making sure land is available for habitats".
It is anticipated that increased public access could also be a significant element of what is conceived as “public good”.
Most people in the farming and rural economies recognise that there is a case for subsidising food production, which has its roots in ensuring a safe and secure supply of foodstuffs and maintaining rural jobs, employment and livelihoods. The challenge for UK farming businesses will be to transition from a subsidy system that has worked well since its implementation, particularly in difficult farming years when the value of the subsidy has been 100% of profits made.
In urban communities, where most of the population live and work, the case for supporting farming and rural communities is less obvious and, in many cases considered an irrelevance to day to day life. At a time when the NHS is crying out for funding and the MoD is needing to react to potential new threats in the face of uncertain support from the EU or US, it seems unlikely that finding £3bn for the farming community will be top of the priority list. It has never been more important for farming businesses to make their case and, at the same time, make plans for their continued survival.
Few people doubt that Brexit presents an enormous opportunity to define a UK food and farming policy that delivers safe, affordable food and protects the countryside and biodiversity. The difficult, practical elements of the transition will be faced by real farming businesses.
Already, Bidwells is working with farming clients to ensure these businesses can be flexible and fleet-of-foot enough to manage in a post-BPS world. This means looking hard at farming structures, finding ways to take cost or complexity out of farm businesses, or explore ways of working together with other farmers to reduce reliance on annual payments. Mr Gove’s words at least provide a horizon for the industry to work towards, but the next six years will pass all too quickly.