Farm chief slams post-Brexit subsidy regime

The post-Brexit farming subsidy scheme in England has failed to improve on the old EU system and large landowners are still benefiting disproportionately, according to the president of the National Farmers Union. In an interview with the Financial Times, Minette Batters, who is due to step down as president of the NFU in February, slammed post-Brexit agricultural policy, which has been overseen by seven different environment secretaries since the UK voted to leave the EU in 2016. 

One of the biggest criticisms of the EU subsidy scheme run as part of the Common Agricultural Policy was that it unfairly benefited large landowners. Brexit was seen as an opportunity for the payment system to be overhauled. But the replacements in England, the Environmental Land Management schemes (ELMs), have been slow to be implemented and criticised for placing too much emphasis on the environment at the expense of food production. “The focus at the moment is on growing a crop for the environment and not producing food . . . I think that’s going to be really hard with the cost of living crisis,” said Batters, adding that consumers cared more than ever about food security.   [Not sure about the evidence for that claim].

She went on to criticise the government for failing to build a more equitable system. “Large landowners effectively living off the state is not going to wash going forward,” said Batters.  While the new scheme differs from the EU system in that funding is awarded in exchange for environmental actions — “public money for public goods” — the system is still area based. Access to land is a pre-requisite to access the scheme and the more land a farmer has the more funds they will be able to secure. 

The phaseout of the EU Basic Payment Scheme has left many farmers who were reliant on the subsidies with lower payments than they had previously. Meanwhile, take up of the flagship payment under ELMs — the Sustainable Farming Incentive — has been low, with only a fraction of the 82,000 farmers who are eligible having signed up.

New government may row back on farm subsidies

The Truss government is reviewing farm policy and may delay the phase out of the domestic version of the CAP Basic Payment due in 2027.

The NFU has been banging the food security drum, but the Government seems to be more concerned about breaches in the blue wall after two rural constituencies were lost to the Liberal Democrats in by-elections.

The Treasury has always been opposed to the extent of farm subsidies, both because of their cost and the weak relationship with desired policy outcomes.   Delaying their phasing out would cost money, but with the Treasury under new management, fiscal prudence has been effectively abandoned by what is a new Government.

The Government is also reviewing plans to make environmental payments for 'public goods' under the ELMS scheme.  The roll out of this has been slow, but farmers taking part in the pilot were angered by a press report that it could be scrapped.

Conservation groups had already made clear their anger at the threat to environmental rules in the investment zones announced in last Friday's 'mini' budget.  The National Trust commented that scrapping environmental payments would 'squander one of the biggest Brexit opportunities for nature.'

Farmers are also concerned that a reversion to payments based on land area rather than public goods would be more vulnerable to being reversed under a future government.

No final decisions have been taken, but kites are being flown.

New form of help for farmers

The Government is trying to devise a system of temporary subsidy payments for farmers to meet the gap between the phasing out of the Basic Payment and the arrival of the new Environmental Land Management Scheme.   That is going to be piloted in 2021 and rolled out nationally in 2024.

An interim system of payments called the Sustainable Farming Incentive is to be made available from 2022.  This will include help to improve productivity as well as to farm sustainably.

Defra research shows that subsidies make up 61 per cent of profit for the average English farm.   Some of the biggest sums go to large scale farmers.  Sir James Dyson revealed in an interview over the weekend that he receives £2.9m in Basic Payment subsidies for his farms.

Farmers are concerned that multiple schemes may be administratively complex leading to delays in payments as has happened with Countryside Stewardship.

Defra sets out its stall

Defra has provided more details on how direct payments will be phased out in England and how the future Environmental Land Management Scheme will function, although arrangements after 2021 remain unclear: Plans for future greener farming

ELMS will have a three tier entry scheme. As far as the basic payment is concerned, farmers making a claim of more than £150,000 will be subject to a 25 per cent reduction in 2021, while those making a claim of up to £30,000 will be subject to just a five per cent reduction.

I welcome proposals on productivity and research and development. From 2021, new government grants will help farmers to invest in equipment and technology which will help them to increase their productivity and deliver environmental benefits. From 2022, Defra will support research and development projects to help our farming industry benefit from innovation, enabling farmers to produce food more efficiently and sustainably with lower emissions.

As far as smaller investments are concerned, 'Grants will be available for equipment, technology, and small infrastructure investments that will make an immediate difference to farm performance, including investments that help farmers use less inputs, reduce emissions, and cut waste, which will also benefit the environment.' These will be for specific, pre-determined items - in other words the devil is in the detail.

As far as larger investments (sum not specified) are concerned, 'These grants will be for higher-value or more complex investments, with the potential to bring transformational improvements to business performance. Eligible investments could allow for more efficient use of labour, provide opportunities to switch to alternative or more efficient production methods, reduce environmental impact or create opportunities for new business models and alternative ways of selling produce directly to customers.' These will be for priority outcomes, including the use of automation and robotics.

Level funding for farmers

HM Treasury has stated that level funding for farmers in the form of direct payments will be made available in 2020: Support confirmed

Level funding does mean a decline in real terms because of inflation, currently running (CPI) at fractionally over 3 per cent. The basket of goods used by farmers as inputs may differ from the CPI rate and indeed from one farm to another.

The NFU welcomed the statement, but remains concerned about future trade policy and imports: NFU response

Quite what form the new ELMS payments will take remains to be seen. I have heard that at least three versions have been discussed within Defra. The key is to develop a scheme that provides genuine incentives for farmers to engage in environmentally friendly behaviour whilst giving a fair deal for taxpayers.

I am still not convinced that sufficient attention is being paid to climate change, although that was a major deficiency of the CAP where attempts to introduce a climate change pillar were (in my view) defeated by the agri-industry lobby.

Warning about government's new farm policy

The National Audit Office has issued a report on the government's new farming policy. Gareth Davies, the head of the NAO comments, 'Defra is moving forward with a policy which is a radical departure from the CAP farm payment regime we have known for forty years. Because it is such a big change, from acreage-based direct payments to an environmental stewardship scheme, we have looked at Defra’s approach to implementing its policy at an early stage.'

'We urge Defra to give itself time and space to fully test and evaluate the policy, and for comprehensive planning, to avoid any unintended consequences for the farming community, our environment or ability to feed ourselves.'

The report notes that 'The government’s new farming policy will be a significant change for farmers in England and the Department for Environment, Food & Rural Affairs (Defra) has a lot to do to prepare for its implementation at a time when its resources are already under immense pressure from its preparations for EU Exit. The National Audit Office warns that government must approach its roll-out carefully to ensure farmers can prepare in the way they need to.'

'The UK farming industry provides over half of the food the UK eats, employs 474,000 people and comprises 217,000 farms. While a member of the EU, the UK takes part in the Common Agricultural Policy (CAP). Under CAP, farmers in England received €2.4 billion in subsidies in 2017. To prepare for exiting the EU, Defra is developing the Future Farming and Countryside Programme (the Programme) to implement a new agricultural policy and regulatory arrangements to replace CAP.'

'The key part of this new programme is the Environmental Land Management System (ELMS). Defra hopes to have 82,500 farmers enrolled on ELMS by 2028. Under CAP, most payments to farmers are based on the amount of land they farm. These direct payments will be gradually phased out over a seven-year period starting in 2021. Under ELMS, farmers will be encouraged to enter into a contract with the government to produce environmental land management plans, and be paid for the environmental outcomes they deliver, often working in collaboration with other farmers. The policy represents a major shift away from traditional farming towards a system that pays public money primarily for delivering environmental benefits.'

'Farmers will have little time to prepare for participation in a three year national pilot of ELMS, which will run from 2021 to 2024, because Defra is not planning to set out the environmental outcomes it will pay for or how much it will pay until April 2020. This is less than a year before the start of the pilot and when their payments will start to be reduced. Defra has consulted with farmers as it designs the Programme, but it has not provided the necessary guidance to enable farmers to plan how to adapt their businesses or how to work collaboratively with other farmers.'

'Defra has recently scaled back its ambitions for the level of take-up of ELMS during the first year of the three-year national pilot, from 5,000 farmers to 1,250, but is seeking to increase participation as the pilot progresses. It is not clear whether this lower number in the first year of the pilot will provide sufficiently robust evidence across the range of farm types and locations to inform further development of the Programme. This means that Defra only has two years to test how well ELMS will work at scale.'

'Defra currently has no plans to test its assumptions about the level of take-up of the new system. If take-up is low, Defra will need to find alternative ways to achieve environmental benefits. Farmers that do not participate may leave farming or replace direct payment income by adopting more intensive farming methods that could damage the environment.'

'The success of the Programme depends on government assumptions about how the farming community will respond to the new policy. Direct payments from the EU currently account for an average of 61% of farms’ net profit. Without these, 42% of farms would have made a loss between March 2014 and February 2017. The Department expects the withdrawal of direct payments to be offset by improved business approaches, new entrants to the sector taking over farms that have ceased to be viable, and productivity gains across the sector. However, there is limited evidence that many farms are equipped to increase their productivity.'

'Defra is starting to specify its digital requirements for the Programme before key decisions have been made about how the new policy will work in practice, increasing the risk that it will need to make significant technology changes late in the Programme. For example, Defra has not yet decided which environmental outcomes will be rewarded or how much farmers will be paid.'

'The NAO recommends that Defra gets a plan in place with realistic timescales, that has sufficient flexibility to allow changes to be made as more is learned about how farmers react to the new farming policy. It should extend participation in its pilots to a wider range of farmers and land managers to test their willingness and ability to participate in ELMS, and determine the level of ELMS take-up it needs to justify investment in its design and development.'