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The UK’s ‘Green Brexit’: a bold step towards an environmentally-led farm policy

Plan represents the logical culmination of UK-backed EU initiatives to transfer funding from CAP Pillar 1 to Pillar 2

The UK government’s new farming plan for England represents a bold experiment in re-shaping agricultural policy.

Income subsidies of the type which have supported all European farmers since the reforms of the mid-1990s are to be replaced by aids which will heavily incentivise the delivery of public goods.

“After nearly 50 years of being tied to burdensome and outdated EU rules, we have an opportunity to deliver a Green Brexit,” commented Defra Secretary of State, Michael Gove.

In a sense, the plan – to be set out in the Agriculture Bill which will be presented to the UK Parliament later today (September 12) – represents the logical culmination of the various UK-backed EU initiatives to transfer funding from the CAP’s Pillar One to Pillar Two.

By 2028, the transfer to Pillar Two will in effect be 100% for farmers in England. (Scotland, Wales and Northern Ireland are all setting up their own agricultural support policies post-Brexit).

The phase-out of direct income supports has long been flagged as a key longer-term ambition by Gove. But even after the publication of the Bill, there remains an absence of clarity about the scale and speed of the transition.

Defra’s initial plans make no reference to how the reductions will be phased over the seven years, although the initial reduction in aids in Year 1 (2021) will be modulated to impact larger farmers more extensively than smaller-sized holdings.

There is to be a 5% reduction in payments for those with aid entitlements of up to £30,000, 10% for those in the bracket £30,000 - £50,000, 20% for those receiving £50,000 - £150,000, and 25% for those receiving £150,000 or more. This, Defra says, will free up £150 million in Year 1 for environmental and public goods payments.

 

“De-linking” revives 30-year-old proposal

For agricultural economists, the most interesting element of the UK plan is likely to be the plan to “delink” the remaining direct payments from a requirement to farm the land.  Almost 30 years after the idea of a “bond” payment was first floated by former OECD Director of Trade and Agriculture Stefan Tangermann, the idea appears to have embraced at last by a European government.

“These payments, which may be calculated according to money received in previous years, can be used by farmers to invest in their business, diversify their activities or else retire from farming and give way for new people to enter,” says a note accompanying the Agriculture Bill, underlining a significant break with the ‘cross-compliance’ philosophy which continues to underpin EU direct payments.

As well as creating a fine new piece of jargon for the agricultural policy lexicon, Defra also hopes that “delinking” will “help new entrants get into the sector and give farmers flexibility to plan for the future.”

Environmental Land Management

The key policy elements within the proposed new Environmental Land Management scheme offer little that is not already available as either a mandatory or optional programme under the CAP’s Pillar Two. 

Improving air and water quality and soil health, providing habitats for wildlife, and preventing climate change are well-established elements within the second Pillar of the CAP, although the strong focus on “improving public access to our countryside” gives a specifically British flavour to the policy framework.

What will be interesting to observe is farmers’ responses to these policy shifts.

Given that direct payments currently make up such a large segment of most farmers’ overall incomes, will farmers embrace the concepts of ‘environmental land management’ with enthusiasm, given that from the mid-2020s onwards these will be the only remaining sources of state funding? Or will some farmers see the end of greening and cross-compliance as a ‘liberation’ and aim to maximise their returns from the market, turning their backs on now-optional land management requirements? The evolution of global commodity markets over the coming decade may ultimately provide answers to that question.

In the more immediate short-term, Defra is confirming that little will change in the way direct payments are paid and administered until the end of 2020. This is in line with the expectation that the UK will continue to make contributions to the EU budget, and hence the CAP, during the so-called ‘implementation period’ between March 2019 and December 2020.

But even in the case of a so-called ‘no deal Brexit’, which would hence also imply no implementation period, the sheer practicalities of having to redesign a brand new agricultural support scheme means that CAP-like subsidies would almost certainly persist in any case for the coming two years.

 

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