What does the future hold for farm subsidies

Written by Saffery Chapness, Rural Business 19 July 2017

Following the vote to leave the EU and the triggering of Article 50 of the Treaty of Lisbon, there has been much speculation regarding the future of financial support for UK farmers.

What do we know?

A two-year timescale has been quoted for exiting the EU, although it could take significantly longer – a prospect which perhaps seems more likely given the outcome of the 2017 general election. What will certainly take longer are the complex negotiations that will ensue around developing a new trading relationship between the UK and the EU, including applicable tariffs, barriers to entry, and movement of people.

UK farmers will remain subject to the EU’s Common Agricultural Policy (CAP) until exit is completed, and this will include receipt of direct payments under Pillar 1 (Basic Payment Scheme), and also Pillar 2 (European Agricultural Fund for Rural Development).

In addition to receiving their EU funded Basic Payment, UK farmers remain eligible to apply for EU funded grants under Pillar 2, up until the point at which the UK leaves the EU. In August 2016, Phillip Hammond confirmed that the current level of direct payment funding would be guaranteed through to 2020, the date on which the current CAP would end.

The Chancellor also announced that all structural, investment and agri-environment scheme projects signed before the UK’s 2016 Autumn Statement would be fully funded by the UK government, even where the project continued beyond the UK’s EU departure.

That was promptly followed by a further announcement from Mr Hammond at the Conservative party conference in October 2016, that the government would guarantee funding for all CAP Pillar 2 schemes entered up until the point at which the UK leaves the EU, providing further certainty for those applying for multi-year EU funding.

Farmers making successful applications for the Countryside Stewardship (usually lasting five years), Countryside Productivity and LEADER schemes, will be assured funding for the length of the contract, even after Brexit, as long as the schemes meet UK priority and value for money criteria.

The Conservative manifesto pledged to extend its commitment to guarantee the current level of financial support for farmers, from 2020 until 2022, whilst it worked with farmers, food producers, environmental experts and the devolved administrations to devise a new system.

Beyond the CAP

DEFRA will consult with UK farmers on post-Brexit policy and has suggested that a future support system will move toward more targeted measures that more effectively encourage productivity, protect the environment and mitigate volatility.

DEFRA secretary Andrea Leadsom has pledged to scrap the European ‘three crop rule’ as part of a drive to reduce the bureaucracy faced by farmers.

The NFU is developing its own proposal around these themes to put to the government, following discussion with relevant stakeholders.

More targeted payments are expected as follows

  • Productivity and competitiveness Capital grants, training and advice, knowledge transfer and tax breaks to encourage investment and diversification.
  • Environmental measures Focus on sustainability, government funded and outcome-based agrienvironment schemes and private funding, eg water companies paying farmers to look after watercourses.
  • Volatility mitigation Crop insurance, futures contracts and income guarantees, in addition to some direct payments.

Source: Saffery Chapness, Rural Business, July 2017 - http://www.saffery.com/news-and-events/publications/rural-business-july-2017 

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