Jeremy's Blog 8th December 2023: Farming Agreements Beyond Basic Payment

This article by Jeremy Moody first appeared in the CAAV e-Briefing of 7th December 2023

The area-based Basic Payment Scheme ends this month for England. The RPA has just made the overwhelming majority of the second balancing payments for 2023, so that English farmers have now had almost two thirds of the direct payments possible under the Agricultural Transition. The statutory instrument revoking the Scheme and ending cross compliance has been published together with another one setting 60 day time limits for appeals under the old Scheme. The personal delinked payments to be made from 2024 will erode away quickly.

With a new Act in Wales, a programme in Northern Ireland and a Bill in the Scottish Parliament, the other parts of the United Kingdom will soon be making their own moves away from the legacy Basic Payment Scheme.

The end of direct payments linked to land and farming should concentrate minds on the business issues for farms – effectively, DEFRA’s policy goal in seeking a farming sector with greater productivity. With no scheme incentives as to what is grown how and where, it is for each business to look at its own situation and determine its way forward. The range of performance between good and bad farm businesses shows that there is much potential for business improvement. As well as decisions about enterprise choice and delivery, farm structures will change. Some will withdraw and others will seek opportunities. These processes and the advice needed call on the skills of the profession.

The new schemes and the talk of private finance should be seen as options to be considered on their merits, not as an automatic or default replacement. The world has moved on with these options typically requiring cost and change. They will help where they give a margin or support farm objectives. That may include offering assistance now for changes, whether for soils, slurry management or other purposes, that may be required by law in future.

Farming agreements are likely to need review for the changed background, requiring professional support. The CAAV updated its model FBT agreements for England in the summer, since any letting this September was for a delinked world. We are now reviewing the English grazing licence for 2024 to update it and recognise those aspects where English law will operate in place of cross compliance. The purpose remains an agreement where the licensor has the positive husbandry of the land with the licensee having access only for grazing or mowing. If the grazier is to do more husbandry, then a tenancy could be considered.

We are also looking at contract farming agreements, with both the wide variety of arrangements found in practice and the CAAV templates. This is not just about the end of Basic Payment but might also consider how new schemes might be handled in each case:

• many agreements have included Basic Payment income in the payment arrangements, others not. The delinked payment now has no relation to any area of land or farming – does it now drop out of some or all agreements?
• with new SFI options for particular farming practices, the agreement might list the options taken up not only for management purposes but also to consider whether the payments are to be taken into account. That might also apply to Countryside Stewardship agreement requirements, especially where the contractor is retained to deliver some actions.

The answers are likely to vary between cases, calling for early and individual consideration. As ever but now in a world of larger risk, a critical test is how losses might be recognised and handled under the agreement.

The changes underway drive a need for farmers to have good objective, practical professional support in business review with fresh care to be taken with agreements, whether tenancies, licences or contracts, so that they are effective in their purpose and create value for both parties.