Phased withdrawal of direct subsidies - What we know so far!
For the average English farm business 61 per cent of their profit is currently due to the direct payment subsides which they (hopefully!) receive each December. Grazing livestock farms are particularly reliant on their Basic Payment Scheme income, it accounts for nearly all their profit (91-94 per cent).
The new Agriculture Bill outlines that farm subsidies in England will be phased out over seven years from 2021 until 2027, with those receiving the highest payments to see the biggest reductions in the initial years. However, we understand that direct payments in 2019 and 2020 will be made on much the same basis as now.
Direct payments will be replaced with a new system of “public money for public goods”, largely based on rewarding farmers who undertake environmental measures. However, there are no guarantees that money made available under the new system will match the total amount currently paid to farmers as direct payments.
The proposed reduction in direct payment for the first year of transition (2021) is as follows:
Direct Payment Band (p.a) Reduction Percentage (%)
Up to £30,000 5%
£30,000 - £50,000 10%
£50,000 - £150,000 20%
Over £150,000 25%
By withdrawing the payments it hopes that businesses will adapt and take action to boost their productivity. Meaning that in 2027 we have a more resilient and successful agricultural industry which is less reliant on Government support.
There is a wide range of approaches which businesses could take to boost productivity and profits, depending upon their circumstances, assets and location. Perhaps there are opportunities to secure new income streams through diversification or to utilise equipment provided through various Rural Grant Scheme's that aims to increase efficiency and productivity.
Contact us today for information on Rural Grants available to your rural business.