The seven-year transition period phasing out direct payments from 2021, as outlined in the government’s Agriculture Bill that was reintroduced to Parliament last week, will cause major and unavoidable change to the farming sector and challenge many farming businesses.
David Chismon, a partner and a member of Saffery Champness’ Landed Estates and Rural Business Group, comments:
“The phasing out of direct payments is a watershed and may prompt a number of actions for farmers. At one end of the spectrum it will force some to leave farming completely, particularly those whose businesses are marginal and have relied on Basic Payment to survive. Some will stay but will have to adapt their business model in order to work within the new system. And there will be others who can afford to invest, will pick up the pieces, and can grow and expand their farming businesses, delivering the public interest benefits – greening, environmental measures, public access – whilst also farming for food.
“Food security is crucial moving forward and the government has included measures on this in the Bill. Half of the food we eat in the UK is grown/produced in the UK, and we need to protect the integrity of that supply. Post-Brexit also we must be sure that future trading arrangements do not allow food imports of a standard that undermine that demanded of UK producers for their home market.
“On the tax front, succession planning will take on a new complexion once the new rules are in place, and we may see future changes to inheritance tax and associated reliefs that have, in many respects, given agriculture an edge. Depending on the numbers choosing to leave farming this may also impact on land price and availability.
“In short, we think a shake-up is unavoidable since the subsidy system has always masked poor profitability. It is important, however, that government support continues that allows the sector to enhance productivity, to be competitive, to develop new ideas and systems so that the future is not just a case of keeping step but of taking the lead. In this respect, the anticipated review and reform of Entrepreneurs’ Relief to be announced in the Chancellor’s March budget is unlikely in our view to be a step in the right direction.”