In November 2020 the long awaited Agriculture Act 2020 finally gained royal assent after what seems to have been a long and winding road.
The NFU has described it as a ‘landmark moment for Post–Brexit farming’, and it sets a new direction of travel for the agricultural sector in the UK.
So how will the new Act change things?
One of the key parts of the legislation is the way those in and supporting farming will access financial assistance in the future and that financial assistance available will be linked with improving climate change and the environment and in farming sustainably.
Unlike the Subsidy Payment from the EU, this financial assistance is designed to flex and change through time. Bite-size alerts with further updates will be released over the coming year.
Over the next seven years, the European subsidy basic payment scheme will be phased out with direct payments over the next four years being reduced by 50%. This phasing system has been introduced to give those that rely on the payment time to plan for a future without it. However, it is possible to start planning for this now.
As part of the Act, the UK Government is introducing schemes which will provide subsidy payments to farmers, such as the Environmental Land Management (ELM) scheme. It is important to remember however that these are not b a replacement of the basic payment scheme. The ELM Scheme has been founded on the principle of ‘public goods for public money’, the aim is to help deliver the Government’s ambitious 25 year environment plan and to help meet the target of net zero emissions by 2050, whilst also supporting the rural economy.
Farmers and farm managers will see subsidies made for delivering public goods that do not necessarily have an obvious market value such as;
- clean air,
- clean and plentiful water,
- plans for thriving wildlife,
- protection from environmental hazards,
- engagement with the environment and
- reduction of, and adaption to climate change.
It is also expected that penalties for any breach are likely to be smaller and more proportionate than those that have seen with the outgoing European legislation, and of course, there will be no oversight by the EU (which has always been in the minds of DEFRA inspectors).
The ELM scheme will be fully rolled out by 2024 although various trials are already taking place. The aim is to see all farmers in a position where they can access sustainable farming incentives but for the larger landholdings and Estates, there will be some big-ticket items available for landscape recovery.
What can be done to prepare?
Planning and preparation will be key and now a good time to have conversations about the future of farms and estates. A number of organisations are already inviting farmers to join together to provide data that will ultimately help to inform the policy and regulation which will affect the sector over the next seven years. Farmers are being encouraged to consult and collaborate as part of the co-design of this policy and key to this will be talking with family and neighbours to consider how the business structures can be more efficient, improve climate change and adapt to reduce carbon emissions and ultimately access financial support as a result.
Food Production and Sustainability
The Agriculture Act does not specifically reference food production as something that will receive subsidy. The Government will be continually monitoring our food standards and sustainability with three yearly reviews. However, whilst this is considered a positive move there is still some discord that there is no mention of imposing UK food standards on imported food.
However, for the first time for many decades, there is now a requirement for the Government to regularly review our national food production against consumption: food security is back on the map, and indicates a revived concern about its ability to feed the nation from production within UK borders.
Contract terms will play an ever-increasing part
There is much discussion about the need to recognise food for wellbeing and not just as an economic commodity and to some extent the COVID-19 pandemic has reinforced the importance of the food supply chain: that basic need to ensure that we as a nation are fed. But ultimately the Act itself places reliance on these supply chains and lays the foundation for this by writing provision to ensure fair contract terms can be struck within these supply chains. To make the most of this farmers will need to look longer and harder at technology to see how investment in this can increase productivity and reduce overheads, as well as looking at and considering contract terms carefully to make sure they reflect legislation – and work for your business.
Is this time to exit?
For those farmers that are not interested in or don’t have the appetite to engage in the new schemes, for a variety of reasons, it is recognised that they may ultimately choose to exit the sector. There are proposals to roll up basic payment scheme entitlement payments into one exit payment although HMRC is still considering the tax implications for this. Again this offers a good opportunity to sit down and consider with family and advisers the future of the farm and farming business to ensure all assistance available is fully explored.
Finally, we see the Act bring changes to the agricultural tenancies, paving the way for further overdue tenancy reform, encouraging landowners to provide longer-term farm business tenancies and agricultural tenants to feel secure in discussing diversification options with their landowner – without the risk of losing security. This is going to prove important in making the natural capital investment and bringing about the environmental changes governmental policy requires. None of this can be successfully achieved on standard two or three year tenancy agreements or where tenants are unable to change and improve their farming methods due to outdated tenancy provisions.
To round up
The long awaited Act together with the coronavirus pandemic and Brexit has resulted in a turbulent and uncertain time for the sector. However, profound change is happening and this is a perfect opportunity for all involved in the agricultural sector to take stock, reflect, discuss and plan for the future. Unlocking the support payments available will be key to future plans and whilst the details are not yet available planning and preparation, finding opportunities to collaborate with new initiatives and share in the financial support available will be crucial to the survival and future in the new post-Brexit world.
From inspirational SHMA Talks to informative webinars, we have lots of educational and entertaining content for life and business visit SHMA® ON DEMAND.