Following our recent ‘Life after BPS’ (Basic Payment Scheme) conference which was held at Capesthorne Hall in Cheshire, we spoke to one of our associate partners, Ian McKenzie, to examine the post-BPS landscape and explore his views on the options available to farmers for the future.
“BPS was an important subsidy for many farmers in England for several years, but the payment is now being phased out after the UK voted to leave the EU. A typical 100-ha farm has already lost 35 per cent of its BPS income since payments started decreasing in 2020, and a 500-ha farm has lost 44 per cent. With payments set to reduce further, farmers need to take the initiative and find new ways to fund their enterprises.
“A direct replacement for BPS has not emerged. Instead, there is a patchwork of grants and other strategies that can help farmers with their bottom line. In the main, the bulk of government grants out there tend to be awarded to farms that prioritise environmental benefits. One example is the Countryside Stewardship (CS) scheme which provides financial incentives for farmers to conserve and restore wildlife habitats, create new woodland, improve flood risk management, and more and the Sustainable Farming Incentive (SFI) pays out per hectare to farmers that undertake sustainable soil management plans.
“While these are useful new sources of income, government grants are not the only way to monetise environmental credentials. A private market is also emerging for sequestered carbon in soil on farms that companies can purchase to offset their emissions, with similar markets already available for woodland and peatland. However, not every farm has the capability to make changes like this to the extent that their farm becomes profitable.
“We expect to see more contract farming soon, this is where the farmer essentially hires in labour and machinery but still plays a role in farm management. This is different from simply letting a farm out to a tenant. A farmer can sell his working capital as machinery is provided by the contractor and it also removes the burden of finding and maintaining employment. Indeed, tenant farmers can also enter into contract agreements. There are also benefits from a tax point of view, as HMRC views the farmer as ‘active’ which means tax relief can be applied for. With farming being an increasingly ageing occupation, contract farming could be a smart solution for many looking to save money in the long term.
It is important to stress that every farm is different and that no ‘one-size-fits-all’ solution exists, so farmers need to do their research before committing to anything. Farmers need to assess where they want to be in two, five, and a decade, and what would be the best ways for them to get there. The issue for farmers is that legislation and grant schemes have been rapidly changing of late and it can be difficult for many, especially those who have farmed for a long time, to get their heads around the various options. There are likely to be a handful of farms that struggle to adapt as BPS winds down, but the sooner farms create a clear plan for their futures, the easier it will be to navigate.
We would encourage any farm owner or tenant looking to create the right plan for them to contact the rural property management team at Fisher German, who can take them through the various options and work with them to find the best solution.
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