Preparing for a new world in agriculture

12 June 2018

Following the conclusion of the “Health and Harmony” consultation the government will, amongst other minor issues on its agenda, “introduce an Agriculture Bill that breaks from the CAP, providing the United Kingdom with the ability to set out a domestic policy that will stand the test of time.”

Whilst there are no clear indications what might be in such an Act at this stage, it is never too early to start planning for the medium term. One can reasonably conclude, for example that:

  • The current level of subsidy will be continued for the life of this parliament (Health & Harmony para 8)
  • There will be a transition period of undisclosed length to convert the current CAP based subsidy system to something new (Health & Harmony para 9)
  • The new system is unlikely to be based on the current principles of agricultural occupation and will be more geared towards public benefit
  • “Public benefit” will certainly include maintaining or improving current quality standards for air, water, soil and animal welfare
  • The shift in the basis of subsidy payment will mean that every farm in the country will need to rethink their medium term business plans to adapt and survive under the new rules.

It is almost certainly too early to make irrevocable decisions- (if there were another General Election in the next few months everything would be back in the melting pot), but that risk aside, the Government have given some pointers as to which way they might move.

  • Health and Harmony itself sets out an agenda, albeit that it is just a consultation paper.
  • Changes in the 2018 BPS compliance rules and the introduction of new and simplified Stewardship schemes point towards a lighter level of regulation and a greater emphasis on environmental schemes.
  • The short lived farm capital grants scheme may suggest a new era of simplified grants directed at specific types of capital expenditure.

With its long production cycles, traditional family ownership and huge levels of capital investment, the agricultural industry is a bit like the proverbial oil tanker. Changing direction is likely to be a slow process, but, continuing the metaphor, we have heard the shipping forecast and need to start plotting at least some provisional new courses. Each farm will be different, but things which could be considered now are:

  • Identifying areas of the farm which could be put into Stewardship schemes without disproportionately reducing overall production
  • Considering longer term capital plans such as reservoirs, forestry, arable reversion, new livestock handling or chemical wash-down areas which might be favourably funded
  • Thinking about machinery requirements if cultivated acreages are to be reduced. Should major replacements be deferred until better information is to hand?
  • Co-operation with neighbours might be a way forward for some. If the new world is one of lower inputs and less intensive cultivation, might machinery or labour sharing cut costs? Could joint venture environmental schemes unlock grants which individual farms could not access?
  • It is always worth thinking about succession at the earliest opportunity. There may be support for new entrants and a new regime might give opportunities for one generation to stand aside while the successors are given favoured status.

The phrase “nothing is settled until everything is settled” applies to the new agricultural regime as much as it does to the wider Brexit negotiations, but equally it is never too early to start thinking about how one might like the farm to look in a medium term future without flat rate payments. The writing has been on the wall for some time now, and forewarned is forearmed.

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For further information please get in touch with Sarah Dodds, Partner and head of Agriculture and Rural Business, or send us an online enquiry.

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