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ELMS – the agricultural subsidy of the future. Will it be a success?

ELMS – the agricultural subsidy of the future. Will it be a success?

Thursday, 09 July 2020

For more than forty years, the EU’s Common Agricultural Policy (CAP) has dictated how we farm our land. Brexit and our departure from the EU and the CAP provide us with a unique opportunity to redesign agricultural policies to meet our environmental ambitions, while supporting our farming sector. By moving to a new system based on ‘public money for public goods’, we will put our farmers in the best possible position to meet the objectives of protecting the environment and producing food.

The UK Government published a 25 Year Environmental Plan back in January 2018 with the sole intention of being the first generation to leave the environment in a better state than we found it. DEFRA’s (Department for Environment, Food & Rural Affairs) belief is to deliver this via Environmental Land Management (ELM) schemes and productivity grants to enhance our natural capital and boost sustainable food production.

Farmers and landowners, as the stewards of our landscape, have lacked incentive with significant red tape and the number of ‘hoops’ to jump through for the current Countryside Stewardship Schemes (CSS), but DEFRA wants to make sure uptake of the new ELM schemes is much greater.

In the recent policy discussion document, a learning point for DEFRA is just that: ‘We need high levels of uptake in ELM.’ The aim of the ELM scheme is for up to 88,000 farmers to be involved by 2028, whereas the National Audit Office has stated that 55,000 is a more reasonable target, yet this is still more than three times the participants in the Countryside Stewardship Schemes.

Hence, I ask: Will it be a success? We hope so, but unlikely to the extent that DEFRA believes.

Effort must be put in from both sides for success; both from DEFRA and the farmers and landowners.

Opinions on environmental schemes will have to change, as many consider the additional red tape an unnecessary hassle they would rather do without. There’s a distinct lack of confidence in the current system, largely due to a poor track record on payment timelines, contributing to its low uptake. However, the phasing out of the Basic Payment Scheme (BPS) subsidies from 2021 to 2027 may force the adoption of this new ELMS approach to reflect the need for farming businesses to be sustainable and profitable.

DEFRA, on the other hand, must be able to balance expectation by providing local prioritisation yet not being overly prescriptive with how farmers and landowners are able to deliver environmental outcomes. Yes, they must ensure compliance with the standards and regulation by tackling instances of non-compliance, but it’s hoped that by developing the ELMS alongside farmers and landowners, the scheme will drive a greater approval and therefore uptake.

The ELM Policy Discussion Document has recently re-opened after being paused due to COVID-19. DEFRA is running interactive online seminars throughout July up until 31 July 2020. If you wish to learn more and be involved, the link below provides the necessary information:

https://consult.defra.gov.uk/elm/elmpolicyconsultation/

Three-tiered system – public money for public good

The extent of the payments under the new ELM scheme and how the payments are to be calculated is yet to be finalised, with different options being published:

  • Tier 1: Payments may be based on an ‘income foregone, and costs incurred’ model, so farmers will be paid for the actions they carry out, as is the case with the Countryside Stewardship Schemes, rather than the environmental outcome.
  • Tier 2: DEFRA is exploring whether payments could initially be based on actions, but with top-up payments for the delivery of additional results.
  • Tier 3: Over the long term, it may look at moving entirely towards results-based payments, with amounts negotiated on an individual basis.

Before the ELMS is fully introduced in 2024, the Government aims to grow the number of participants of the CSS as a stepping-stone towards a future ELMS agreement. As such, CSS is expected to remain open until 2023. DEFRA has repeated its assurances that farmers entering CSS from 2021 will be able to end it early, without penalty, if they are subsequently offered an ELMS agreement.

Risks and opportunities

As we move away from BPS land-based payments to a public money for public goods system there will be winners and losers. As highlighted in my previous blog, farming businesses must evaluate themselves and consider significant forward planning to assess what the future may look like.

The future holds opportunity and risk:

  • Opportunity to optimise farming operations and streamline costs to protect and insulate farming businesses from direct support and change opinions on adopting existing environmental schemes.

  • Risk of losing 10-20% of your business turnover without consideration of how you will replace it or how you survive without it.

Be proactive not reactive. Remember your business has been given time by the Government with the phased transition period to reposition itself for the future; unlike New Zealand in 1984, where subsidies disappeared overnight.

Our advisors at Larking Gowen are always available to help provide business advice to help your business for the future.

For more information please get in touch with your usual Larking Gowen contact. You can find contact details on the Our People section of the Larking Gowen website. Alternatively, call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Laurie Hill

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