Jeremy's Blog 19th May 2023: A Change of Farming Era for England
This article by Jeremy Moody first appeared in the CAAV e-Briefing of 18th May 2023
The bells striking for midnight on Monday marked the end of an era for farming in England. For 31 years, May 15th has been a key date in the farming calendar for a succession of area-based payment regimes, since the MacSharry reforms were implemented for 1993. The frantic scramble then to have the required mapping done in time foreshadowed later crises, as applications were prepared and made each year, despite IT, Foot and Mouth and pandemic. Each regime has had its pains, acronyms, rules and bureaucracies.
All that is in the rear view mirror for English farmers who should now focus on the business of farming that earns their keep from what they sell. In effect, May 15th, no longer St Subsidy Day, largely returns to be just one more date alongside the other 30 days of May. This August’s payments will see English farmers having had over half the Basic Payment due between 2021 and 2027. Not only will payments now fall fast, releasing money for the new schemes now developing, but they will effectively be a run-off pension, with no present link to farming or land. The system’s end, due for 2028, has happened. Entitlements have evaporated. Land and farming decisions are now clean of these issues.
Looking back, the last 40 years of CAP regimes can be seen as a story of budgetary controls wrestling with policy principles settled by political haggling in the rug market of Brussels. On the ground, farming the subsidy became routine amid administrative intricacy under the lash of inspection and penalties. Making rules and process work typically required doggedness and ingenuity with land occupation arrangements developed to achieve flexibility – a tale of many valuers’ professional lives.
The UK had joined the EEC in which support was provided through intervention prices for key products, the great majority of EEC spending. As politics meant prices were inevitably set high, production increased and surpluses were bought into intervention stores as butter and beef mountains and then sold cheaply to Russia or given away, while farmers’ support flowed into farmers’ costs. As an open-ended system, it became financially unsustainable and controls were introduced to limit spending.
The first financial control over production came with milk quotas in 1984. Based on earlier production history, this was traumatic for many with the same issues and appeals for those expanding and new entrants that were seen in later schemes. Opening up a whole new area of activity, valuers developed flexibility through sale and leasing markets, initially through the rules for quota to move with land use, that were not properly recognised by the EU for several years. Voluntary set-aside followed.
Then, ahead of the Uruguay world trade negotiations Commissioner Ray MacSharry drove through the wholesale conversion of arable and meat support into Arable Area Aid (with accompanying set-aside) and Livestock Premium Rights with stocking limits and extensification payments. Occupying land became key to payments, set-aside yellow was added to the palette of countryside colours and UK farming productivity improvement began to slip behind others. Land occupation was managed to assist with set-aside and extensification, creating values.
While that regime was tweaked by Agenda 2000, Commissioner Franz Fischler used its simple Mid Term Review to push through the more dramatic change to the Single Payment regime in the face of many EU member states. This consolidated past payments into the Single Payment decoupled from production choices, simply requiring Good Agricultural and Environmental Condition, setting a position for the WTO talks and an intended starting point for later reform. France and Germany thought they had blocked him by fixing the CAP Budget; he told them how he was going to spend it.
With the evidently closer link of payments to land occupation and so arrangements and values, the CAAV was engaged closely with DEFRA from the first Commission papers in June 2002. When the draft legislation was issued in January 2003 for implementation in 2004, the land sales market froze within a week and control of land occupation became a critical issue. The CAAV and lawyers had to hammer out land occupation structures that kept land markets alive. The complexities here prompted the CAAV to establish its Spring Briefings for members, ahead of May 15th.
Agreed in June 2003 (ahead of new members states joining), implementation slipped to 2005. DEFRA then made a radical change to its implementation in England, switching to a “dynamic hybrid” (designed for Germany) that would reach common payment values by 2012 – but without preparing for its operation set the stage for chaos. The 1998 devolution of agricultural policy saw Wales and Scotland stay with the original historic basis of allocation and Northern Ireland have a mixed system – with interesting issues for cross border farms.
For England, balancing land control in 2005 with farmers’ past claims resulted in the contrasting approaches of landlords holding possession to get the new entitlements and granting seven year tenancies to maximise the benefit of claims history. Retiring farmers stacked their history on small areas for it to work out while others took larger areas to benefit as the area payment element rose over time. Meanwhile, England’s administration become notorious enough to be a whole chapter in The Blunders of our Governments with few farmers paid until long into 2006 and fewer paid accurately, taking years to be resolved and leading more farmers to want advice and support from valuers. The Commons EFRA Committee called ineffectively for the Permanent Secretary’s dismissal.
The initial complications of fruit veg and potato authorisations (in practice, requiring land swaps) and then set-aside entitlements were abolished. The Health Check passed up the opportunity for further real reform. The RPA’s administration slowly settled down as the next prolonged round of CAP negotiations heaved into view from 2011, after delays becoming the Basic Payment in 2015. Milk quotas, valueless in the UK for several years, were abandoned.
While embellished by Greening, adding complexity and little benefit, and with the seriously mis-described “active farmer” test, the Basic Payment saw reform stall with a lack of further vision and the EU’s labyrinthine processes. The serious mapping issues of the new regime were such a threat to making applications (and so any chance of payment) that I met Commissioner Phil Hogan in Dublin in March 2015 to seek a month’s extension – which was granted.
England, having reached standard area payment values, carried forward and rebadged its entitlements; other parts of UK had to make a new allocation and move to standard payment values. Scotland’s system was bogged down in complexity so that payments were supplemented by a system of loans. Again with hard work, the RPA’s systems finally stabilised while changes including the Omnibus Regulation eased some issues.
Leaving the EU has, of necessity, required each part of UK to take possession of its own agricultural policy. All parts have rewritten legacy legislation, for more simplicity and proportionality, ahead of embarking on larger, typically environmentally influenced reforms. England, long very critical of the CAP, has moved fastest but Wales is now legislating for the replacement of Basic Payment by the land management options of the Sustainable Farming Scheme, Scotland is to legislate this winter to make payments heavily conditional on climate change and biodiversity commitments and Northern Ireland, having set out its policy goals, awaits an Executive to act.
So, at the start of this week, England stepped over the threshold into its new world. The new schemes, with their different logic of ‘something for something’, are options to be considered on their merits with the help they may offer before more is required by rising regulatory standards. They are not a rebranding of Basic Payment.
Outside the EU, DEFRA’s policy making evolves in response to lessons, more principles-based than prescriptive and so requiring new attitudes by both officials and farmers, but with new and demanding targets.
With those strong expectations of environmental improvement, commercial farmers need to look to their businesses, efficiency and find where a financial margin can be found, won and held. We have to look at the costs that have been fed by area support and the structures that would have changed but for its subsidy. As ever, necessity can be expected to drive much invention as dynamic markets help adjustment.
The story also comes back to land. Activity in the let sector has been much reduced since explicit area payments created an incentive for claimants to continue to occupy land. CAAV Land Occupation Surveys have shown that in each year since the Single Payment began to settle down for 2007:
- activity in the let sector has been between 30 and 40 per cent of that in 1999 – down to 28% for 2022
- the number of new FBTs at 25 per cent of that in 1999 – down to 19% for 2022.
That points to the potential role for the let sector to help manage this change as the logjam of this stasis breaks, giving the opportunities we need for proficient farmers to have the use of the land they need and ease the withdrawal of those owner-occupiers and tenants unsuited to the new environment.
Valuers have a major role in helping this to be well managed. There will be much work to do.