Agricultural Subsidies – Delinked Payments and Lump Sum Exit Scheme

In late November of last year, Parliament enacted the Agriculture Act 2020 in response to Brexit which set out the United Kingdom’s Agricultural Transition Plan away from the EU and its ties with the Common Agricultural Policy.

From 2021, payments made to farmers under the Basic Payment Scheme (BPS) will be gradually phased out through minor percentage reductions over the course of a seven-year period, reducing the burden on both farmers and Government. As a substitute, farmers are now required to meet targets specified under a new Environmental Land Management scheme known as ‘ELMs’ as part of the UK’s goal for achieving net zero emissions by 2050.

These ELMs will provide farmers with financial assistance for delivering ‘public goods’ by implementing ethical farming practices in connection with, protecting the Environment, better land and water management, forest and woodland regeneration as well as improving plant and livestock health. Upon completing and upholding these objectives, farmers will be given financial assistance by way of Grants, Loans or Guarantees.

For farmers who remain dependent on BPS payments (including greening and young farmer payments), The Department for Environment, Food and Rural Affairs (DEFRA) are proposing to ‘delink’ payments starting from 2021 with a focus on replacing all BPS payments with delinked payments to applicants by 2024.

As a result, recipients of direct payments are no longer required to work the land or meet cross compliance requirements in order to receive these forms of subsidies. Such an approach will lessen the burden on farmers, provide for greater flexibility to business operations and create an easier transition process over to the new ELM schemes.

DEFRA will also consider offering a lump sum exit scheme in lieu of relevant payments on the condition that the recipient leaves the Agricultural Sector. This method of payment will entitle the eligible BPS recipient to take a single lump sum payment which equates to the approximate total amount of the remaining delinked payment during the transition period up to 2027 (or a maximum of £100,000.00). In proposing these conditions, DEFRA believes that by providing this added security to older farmers wanting to leave the industry, it will offer an easier course into the agricultural sector for farmers who are keen to start up or expand their business and make use of the ELM schemes by working neglected land.

Currently, both proposed lump sum and delinking payments are subject to a consultation period which was launched on the 19th of May 2021 and is expected to run until early August of this year allowing people to share their thoughts. The scheme details will be confirmed later this year.

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