The policy shift towards farming subsidy being paid for the delivery of ‘public goods’ under a new system of ‘environmental land management contracts’, which had been anticipated but not formally announced until the publication of the Agriculture Bill this week, will be of great concern for those farming under Westminster’s jurisdiction.
Richard Cartwright, a partner and member of Saffery Champness’ Landed Estates Group, comments:
“This is a seismic shift in the basis of how subsidy will be paid and there will be little comfort for farmers to be drawn from 2019 payments being made on the same basis as now, direct payments for 2020 “in much the same way as now” – whatever that means – and then a “smooth and gradual transition” post-Brexit between 2021 and 2027. It should be noted that the government has said that all farmers will see some reduction to their payments from the start of the transition.
“Farming is generational, its very nature requires long-term planning and, every year, business profitability is subject to uncertainty because of external factors. The future basic payment system will now be structured so that those providing the greatest public benefits will receive the greatest rewards. Whatever Brexit may yet bring in terms of trade and markets, imports (of chemicals and fertilizer for example) and impact on exchange rates remain unknown.
“Facing these challenges, farming businesses should undertake a thorough analysis of business budgets and forecasts, including essential capital expenditure, profitability, borrowing requirements and take due account of the ‘worst case scenario’, ie no subsidy. It would certainly appear harder in the future to farm just for food and farms with other profitable business streams will be at an advantage. Scale will be important so that, despite losing out initially, bigger landholdings will benefit from higher levels of support for their greater contribution towards the environmental footprint.”