Farmers fear a 'funding abyss' as EU subsidies are phased out

Nick Deane, Norfolk branch chairman of the National Farmers' Union (NFU). Picture: Chris Hill.

Nick Deane, Norfolk branch chairman of the National Farmers' Union (NFU), has raised concerns over farm funding as subsidies are withdrawn after Brexit - Credit: Chris Hill

Struggling farms are threatened with a "funding abyss" between the post-Brexit withdrawal of subsidies and the government's replacement environmental payment scheme, said Norfolk's farming leader.

Defra's long-awaited agricultural transition plan, published this week, outlines a seven-year phase-out of the current EU system of "direct payment" subsidies based on the amount of land farmed, to be replaced with a new Environmental Land Management Scheme (ELMS) which will instead reward farmers for work to improve landscapes and ecosystems.

But while the document gives a clear timetable of how the current subsidies will be phased out between 2021 and 2028, farmers say it lacks detail on exactly how the replacement scheme will work.

Ministers have confirmed that the budget for agriculture will stay the same during each year of this parliament, and insist that the money saved from subsidy withdrawals will be redistributed through other grants and payments schemes.

But with subsidy reductions starting next year, and the flagship ELMS scheme not scheduled to be rolled out in full until 2024 with "some core elements" introduced in 2022, there are concerns over how farmers will bridge the immediate funding gap.

Nick Deane, Norfolk branch chairman of the National Farmers' Union (NFU), said the changes are coming at a critical time when farm businesses are already battling the effects extreme weather, Covid-19 and Brexit uncertainties.


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"There are some great ambitions there, some challenges for our industry, and some ambitious targets," he said. "The difficulty I have is that these changes start as of January 1 and we have no framework within which to work.

"We have to recognise that the support system, for better or for worse, forms a significant part of farmers' income, and if that is going to be taken away from them the consequence is that farming businesses will become insolvent. They said the budget is ring-fenced, and that is great news, but they haven't said in any detail how they are going to deliver it back into agriculture.

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"So, there is going to be a funding cliff edge, an abyss that has got to be crossed in the next two or three years.

"Defra's record on timeliness of delivery is not the best. So even if we take their existing target, which has already been revised once, they are talking about elements of ELMS coming in two or three years time, so we are going to have two years where, depending on which threshold you are in, you could be losing between 20pc and 40pc of your payments (in 2022). If 50-60pc of your income is from the support system, and you are going to lose 30pc of that, what is going to happen in the meantime?"

Defra says in 2021, as direct payments begin to reduce, the money saved will be "made available through schemes, grants and other types of support for farmers to manage land and their businesses more sustainably". More detail is expected early next year on the specific land management actions that ELMS will pay for and how payment rates will be set.

In 2022 and 2023 it plans to start rolling out "some core elements" of ELMS while making more funding available within the legacy Countryside Stewardship scheme, and launching standalone programmes to support tree planting, peatland restoration and nature recovery which will be consolidated into ELMS after 2024.

There will also be a new "industry-led innovation, research and development scheme".

Environment secretary George Eustice said: "This will be an evolution from the old system to the new, not an overnight revolution. As the legacy payments are wound down, the money released will be made available for a broad range of new schemes."

HOW WILL THE SUBSIDY REDUCTIONS BE MADE?

In 2021, farmers paid less than £30,000 will see their direct payments reduced by 5pc, with the reduction rising to 10pc for the £30,000-£50,000 band, to 20pc for the £50,000 to £150,000 and to 25pc for payments over £150,000.

In each of the next three years, each payment band will be reduced by another 15pc, meaning all payments will be at least halved by 2024 - with the highest payments cut by 70pc. By 2028, direct payments will end completely. 

The money will be redirected into the three tiers of ELMS: Sustainable farming incentive, local nature recovery and landscape recovery.

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