Farmers must treat the latest changes to farming subsidies cautiously and prepare fully, warns a leading firm of land agents and rural chartered surveyors.

Laura Carrick, rural chartered surveyor at Vickers & Barrass in County Durham, says farmers need to start to prepare for post-Brexit changes and the move away from the EU-wide payment system, in the light of the National Audit Office's early review of the farming programme*.

Under the programme, farmers who are compensated for the amount of land they farm, will instead be rewarded for delivering environmental benefits.

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Current land-based payments to farmers will be phased out over a seven-year period starting from 2021. They will be succeeded by public funding for public goods at the core of which, will be the Environmental Land Management System (ELMS).

Under the new system, farmers and land managers can enter into a contractual agreement with the government to produce environmental land management plans providing outcomes, for which they will be paid.

However, Defra has not yet determined the level of payments, which will be made under the new scheme. Laura Carrick echoes concerns that the move could herald a significant change for farmers in England, who received more than £2bn in 2017 to payments linked to size of land farmed.

The NAO reveals that almost half (42%) of farmers would have filed losses between 2014/15 and 2016/17 if they had not received direct financial aid.

This highlights the critical and urgent need for an alternative support package post CAP, which will enable farmers to continue to manage viable businesses, she says.

"Analysis of the programme shows Defra wants to change the dynamic between the government, farmers and landowners, with the ambition to deliver a better environment and prosperous agriculture sector.

"It's not yet known specifically what outcomes Defra intends to reward and, at this stage, the picture of how the system will work in practice is incomplete. Consequently, farmers have very little time to prepare for their business for the introduction of ELMS.

"The uncertainty in relation to the future level of payments needs to be addressed in order to provide assurances to the farming community that entering the schemes is in their financial best interest."

If there is a low uptake to the scheme, those farmers who don't choose to enter the schemes can choose to farm more intensively to make a profit with the possibility of creating unfavourable environmental outcomes: "Consequently, it is essential that Defra ensures that these schemes are attractive," says Laura Carrick.

Predictability is key for farming businesses which operate on multi-year planning cycles. Understanding this is critical as the sector has been affected by Defra's previous difficulties in introducing change successfully.

Laura Carrick says: "The scale of the change Defra is now taking on is much greater. So, following previous difficulties adjusting to a new system in the implementation of the Basic Payment Scheme, it's not surprising that there's concern among local farming community at the ability to implement the scheme effectively."

It's important to consider international market volatility: "Subsidy currently provides a buffer to protect farmers from price fluctuations on the open market and without this aid managing cash flow during uncertain market conditions could put businesses under significant pressure."

Productivity gaps can be seen across all sectors of farming, but these vary in size and may be partially linked to factors such as farm location and soil quality, which cannot be addressed by improved farm management.

Defra does not consider in its accompanying evidence whether there are types or locations of farms that may require additional support to achieve productivity improvements

Laura Carrick adds that some parts of the region and types of farms will be able to adjust more easily as they are currently less reliant on subsidy.

"There should be specific consideration in relation to marginal areas, which are historically heavily subsidy reliant, to ensure that local farms are supported and stay viable, providing important land management services.

"It would be helpful if Defra gave itself more time for evaluation of the policy to avoid any unintended consequences for farmers and future impact on farming." More at http://www.vickersandbarrass.co.uk/

*https://www.nao.org.uk/wp-content/uploads/2019/06/Early-review-of-the-new-farming-programme.pdf