Outlook 2021: Farm policy and funding

Farm support will dominate the agenda in 2021, with payments linked to environmental improvements.

Two government policies in particular will shape the future for farming – the Environment Bill and Part 2 of Defra’s National Food Strategy.

See also: Defra unveils roadmap to ELM scheme

Basic Payment Scheme

Since Anderson’s Outlook 2021 was written, Basic Payment Scheme (BPS) reduction rates for English claimants have been announced through to 2024. However, more information is needed on delinking of the BPS from land and lump sum payments, according to Andersons consultant Caroline Ingamells.

Delinking breaks the link between receiving support and occupying land. Once support is delinked a farmer could double the size of their holding or stop farming completely and would still get the same future stream of income, although tapering off to 2027.

It gives the claiming business a right to the support in future based on what the claimant received in a reference year.

The lump sum concept rolls up the future stream of BPS income from delinked payments into one single payment, but it is entirely separate from delinking. More information is expected in a consultation early next year.

Many details remain to be decided on the replacement of BPS with the Environmental Land Management (ELM) scheme.

ELM and other funding

Defra is working with farmers to design, develop and trial the new approach, based on a three-tier model ranging from a broad and shallow offer for all farms, likely to be similar to Entry Level Stewardship, through to the top tier where a more collaborative approach is likely to be needed from groups of landowners.

Productivity improvements will be encouraged from next year through a grant scheme similar to Countryside Productivity, while a Future Farming Resilience scheme will offer business advice.

There will also be schemes for farmers to deliver animal welfare enhancements beyond the regulatory baseline.

However, other rural development funding – for example, for diversification – is likely to be through a new Shared Prosperity Fund which is not exclusive to farming.

The landmark Environment Bill, expected to become law in 2021, will enshrine environmental principles in UK law for the first time, also introducing measures to improve air and water quality and to restore habitats.

The government has pledged that 30% of the UK’s land will be protected by 2030, requiring a further 400,000ha to be designated.

Part 2 of Defra’s National Food Strategy is also due in 2021, probably including sweeping recommendations on how systems should evolve to meet the needs of society, affecting the whole food chain.

Scotland

Covid-19 is likely to have a long-term effect on demand for many premium commodities produced on Scottish farms, say Alex Caraffi and Ben Kellagher of Andersons.  

The additional impact of the US import tax on Scottish whisky means cropping large areas of spring barley needs careful thought.

While 95% of the BPS loan scheme was paid in September 2020, it is difficult to know how payment periods will work in future.

Convergence monies paid in 2020 provided a boost to upland and hill businesses – we wait to see whether a similar payment is made in 2021.

The next Scottish parliamentary elections in May 2021 may inform how those convergence fund payments will proceed.

The Scottish National Party has recently shown strong support for the rural vote. Whether it can maintain that support throughout a new parliament remains to be seen.

Agriculture seems unlikely to be a high priority, so it is doubtful that support will increase.

Scotland’s Agriculture Bill passed in autumn 2020, adding a sunset clause closing current schemes in 2024, with a transition period piloting new approaches from 2021 to 2024.

Secondary legislation will bring forward pilot schemes and the continuation of the BPS and Less Favoured Area Support Scheme (LFASS) for 2021.

Businesses should consider how they may fare when support schemes change in 2025, by consolidating profits or investing to make them stronger.

Wales

The extension of BPS into 2021 and possibly into 2022 and 2023, has given some sense of security.

However, very little detail is available on the replacement scheme, although a minimum transition of five years is generally favoured, say Andersons consultants Kerry Jerman and David Thomas.

Much depends on the level of funding to Wales once EU funding ends.

Despite uncertainty at the impact of Brexit, there are many opportunities to benefit from funds in the extended Rural Development Programme.

Farming Connect runs to August 2022, offering up to 80% funding for one-to-one business and technical advice, training courses, and to help young farmers into joint ventures with those ready to step back.

Further rounds of existing schemes also allow farmers to fund investments in field and farm infrastructure as well as capital items to improve stock management.

However, it is important to assess carefully what any investment will do for the farm. For smaller investments, consider how long an item is expected to last and depreciate the cost over that span, also think about whether it will save or create additional labour requirements.

With infrastructure items, budget the cost savings and/or additional output to ensure the return on capital invested is worth the investment and whether it simplifies or complicates the system.