Brexit next steps: Farm funding in 2020

Sarah Coe

Farm policy is in the news. The Government has introduced a major new Agriculture Bill to the House of Commons. This Bill is the most significant new legislation on how farmers are supported since the 1940s. But these changes are not due to start until 2021. So, what is happening to farm payments this year as we leave the EU?

This Insight looks at the legislation and policy on 2020 farm payments. More information on the Agriculture Bill’s longer-term proposals will be published before the Bill’s Second Reading on 3 February.

How is farming currently supported?

UK farmers currently receive about £3.5 billion annually in farm support under the EU’s Common Agricultural Policy (CAP).

More than 80% of this support is paid as direct payments under ‘pillar 1’. These are based broadly on the amount of land farmed. The majority of the rest is paid to support rural development and agri-environmental schemes. These come under CAP ‘pillar 2’.

The Library has published an analysis of funding by constituency. The table below shows how much CAP funding has allocated to each UK nation each year since 2010. It also shows how much is allocated firstly to pillar 1 for direct payments and secondly to pillar 2 for wider rural and environmental schemes.

This Table shows the total Cap payments by country and UK CAP payments by pillar in Euros million for the EU financial years 2014, 2015, 2016, 2017 and using provisional figures for 2018.

What changes are planned for the future?

The UK leaves the CAP when it leaves the EU. The Government has guaranteed the same level of overall farm support budget for each year of this Parliament.

The Agriculture Bill sets out measures principally for England. It provides the basis for how farms will be supported from 2021 onwards. This will involve phasing out direct payments over a seven-year transition period.

The Agriculture Bill will provide new payments to farmers for providing ‘public goods’ such as payments for environmental or animal welfare improvements.

Agriculture is a devolved issue. The devolved administrations have also been developing their future support plans. Legislation has been introduced in Scotland to maintain current approaches until at least 2024. The Welsh Government aims to introduce legislation in Wales by the end of 2021. Northern Ireland has also held a consultation on future approaches to enable payments to continue pending the return of Assembly Government.

What about this year?

Nearly £3 billion of funding has been provided to cover farm payments for 2020. Total funding for direct payments will match the amount that was available for 2019.

The funding is spread across two financial years (2020-21 and 2021-22). The allocations for Defra and each nation of the UK are:

£1,843 million for the Department for the Environment, Food and Rural Affairs;
£473 million for the Scottish Government;
£243 million for the Welsh Government; and
£294 million for the Northern Ireland administration.

Legislation for 2020 direct farm payments

Most EU regulations relating to direct payments cease to apply on the day the UK leaves the EU. This was agreed by the UK and EU in the UK-EU Withdrawal Agreement. Agriculture Bill powers are not yet in place and do not relate to 2020. This means there is a legislative gap in the powers for Ministers to make farm payments in 2020.

The Direct Payments to Farmers (Legislative Continuity) Bill was introduced on 9 January. It completed its Commons scrutiny on 28 January. This Bill does two main things. Firstly, it incorporates the EU Direct Payments Regulation into domestic law. This gives Ministers the legal power to fund farm payments in 2020 and to adjust the Regulation. Secondly, it will enable an increase in the total maximum amount of direct payments.

Increasing the total amount payable facilitates implementation of the Bew Review recommendations without having a negative impact on funding for Northern Ireland and England. The Review looked at the way in which UK CAP funds are distributed among the UK nations. The Bew Review recommended an increase in farm funding allocations for Scotland and Wales. If the overall budget was not increased this would have had a negative impact on the amount which could be paid to England and Northern Ireland. The Library briefing on the Direct Payments to Farmers (Legislative Continuity) Bill contains further details.

What do farmers think about future farm support?

Farming representatives have welcomed the Direct Payments to Farmers (Legislative Continuity) Bill and the Government’s commitment to nearly £3 billion of funding in 2020. as they increase certainty for farmers waiting for details of future trade deals and agricultural payments. Food standards in future trade deals remain a key issue for farmers.

The (National Farmers Union) NFU’s President Minette Batters has called for food production to be at the heart of a future agriculture policy to “ensure farmers continue to deliver sustainable food while maintaining our high environmental and animal welfare standards”.

Farmers also want longer-term funding certainty. The NFU has called for a multi-annual budgetary framework that provides allows farmers “to plan and invest for the future”. The Agriculture Bill requires the Government to publish a seven year plan for how it intends to use the Bill’s powers to make new types of farm payments from 2021.

What do the political parties want?

Before publication of the Direct Payments to Farmers Bill, the SNP had called for primary legislation to reapply and amend the relevant CAP regulation across the UK to enable payments to continue.

The Labour Manifesto pledged to maintain agricultural and rural structural funds, repurposed to support environmental land management and sustainable food production.

The Liberal Democrats said public goods and “effective land management” would be supported by reducing payments to larger farmers.