Coping with Basic Payments

Subsidy support is crucial to UK agriculture. It made up £3.25bn of income last year, a staggering two-thirds of the £4.8bn of total income contributed to the UK economy from farming. Without it, the majority of businesses would not survive. So the value of, and cost of compliance with, the new CAP Basic Payment when it arrives next year is important to understand.

With a reduced European CAP budget, monies being siphoned off at EU level into a Crisis Reserve, effective increase in modulation in this country and reallocation of monies in favour of uplands, the annual payment is likely to be some £20 per hectare less (see table) in England next year compared with last year (disregarding any change in exchange rate). In addition farmers will be obliged to comply with greening measures which will have the effect of making compulsory activities that previously were voluntary under Entry Level Stewardship and compensated through ELS payments.

For smaller arable businesses there will be the additional costs associated with having to grow two or three different crops.

So what can farmers do to make the best of the new regime?
• Avoid penalties. Make sure you comply with things that are simple to do but often overlooked, such as completing your Soil Protection Review, not ploughing within 2m of the centre of a hedge, and reinstating public rights of way promptly after cultivation.
• Think carefully about your Ecological Focus Area (EFA) obligations, to make sure these cause the minimum compromise to your farming activities and the minimum financial implication.
• Consider your cropping programme very carefully. For example, winter wheat and spring wheat are different crops, but could be stored in the same bay in the grain store, minimising storage hassle.
• Review carefully how any environmental stewardship obligations you have will interrelate with EFA, and whether you should reduce or cease altogether your HLS/ELS commitments. In extreme cases, some farms might even consider not claiming the ‘greening’ payment in order not to have to -comply with greening, and some high-producing intensive farms might even consider not claiming Basic Payment in order not to have to comply with cross-compliance or greening measures.

Cropping programmes as well as farming strategy will merit extremely careful thought over the next two months, given that this autumn’s plantings will determine the make-up of the all-important first claim under the Basic Payment in spring 2015.

George Chichester is a partner with Strutt & Parker in Newbury.

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