Nearly two and a half years since its introduction, the Agriculture Bill has now passed into law. Bidwells’ Ian Ashbridge looks at what it means now, and in the future, for British farmers and contractors
On November 11, the 2020 Agriculture Bill entered the Statute Book and, as it did so, set the direction of travel for British farming for perhaps a generation.
Unlike previous Agriculture Acts, its focus was not on farm output and production, reform of land tenure or occupation. Instead, it enshrines environmental policy as the driving force behind agriculture and food production. It also marks the severing of links to a shared European approach to agricultural policy.
We have always viewed the Agriculture Act as “enabling legislation”. Its purpose is to provide a legal basis for the government to introduce further pieces of regulation, which will address different and very specific issues.
What will change as a consequence of this Act?
The Basic Payment Scheme will run in 2021 and for the next seven years. The Act gives the government the power to make payments under this scheme after Britain has left the EU and, importantly, to simplify it. The government has already announced the removal of the Crop Diversification Rule and Ecological Focus Area rules in England for 2021 and this simplification is indeed welcome. Furthermore, we now know there will be no Financial Discipline levied.
The Act appears to confirm the transition period for phasing out direct payments, and that this will begin in 2021 and run for seven years; the last year of any direct payment should therefore be 2027.
However, the Act also makes provision for the Secretary of State to extend this period if necessary. And furthermore, the Act is silent on exactly how payments will decline during this period. This is a detail farm businesses will await anxiously, as it will clearly help business planning. It is reasonable to conclude this has been deliberately omitted in order to give the government maximum flexibility in delivering the Environmental Land Management Scheme, which has been expected to commence from 2024/25 but is widely anticipated to be delayed.
Also absent from the Act (although it was never in the early versions of the Bill, only in a supporting policy document) is explicit confirmation of initial reductions to direct payments in 2021. This policy document indicated reductions in bands, similar to the way income tax is levied.
| Direct Payment Band | Percentage Reduction |
| Up to £30,000 | 5% |
| £30,000 to £50,000 | 10% |
| £50,000 to £150,000 | 20% |
| £150,000 or more | 25% |
For simplicity, we have assumed a sliding scale as the most straightforward model the government could introduce. Coupled with the initial reductions, this would have the following effect on a farm of 500 acres receiving a BPS cheque of £46,500 in 2020.
| Payment Band | Payment Reduction | 2021 Payment reduction |
| Up to £30,000 | 5% | £1,500 |
| £30,001 to £50,000 | 10% | £1,650 |
| £50,001 to £150,000 | 20% | £0 |
| Over £150,000 | 25% | 0 |
| Total Reduction 2021 | 7% | £3,150 |
| Year | Payment (£) |
|
| 2020 | £46,500 | |
| 2021 | £43,350 | |
| 2022 | £37,157 | |
| 2023 | £30,964 | |
| 2024 | £24,771 | |
| 2025 | £18,579 | |
| 2026 | £12,386 | |
| 2027 | £6,193 | |
| 2028 | £0 | |
All of the above can be summarised as “what the government will no longer pay farmers”. [1]
Therefore, we should now turn to what the government will pay for, from 2021.
Financial Assistance Powers
Chapter One sets out the Secretary of State’s power to “give financial assistance”. In essence, this is the government articulating what it will pay farmers for in the future. The ten purposes for such financial assistance closely mirror the “six pillars” of the Environmental Land Management Scheme which have been under discussion for two years now. They are, in effect, the “public goods” for which the government may offer farmers public money.
These include:
- Managing land or water in a way that protects or improves the environment
- Managing land or water in a way that mitigates or adapts to climate change
- Supporting public access to and enjoyment of the countryside, farmland or woodland, and better understanding of the environment
- Managing land or water in a way that maintains, restores or enhances cultural or national heritage
- Managing land or water in a way that prevents reduces or protects from environmental hazards
- Protecting or improving the health and welfare of livestock
- Conserving native livestock, native equines or genetic resources relating to any such animal
- Conserving plants are grown or used in carrying on an agricultural, horticultural or forestry activity, their wild relatives or genetic resources relating to any such plant
- Protecting or improving the quality of soil
So what does the Act include that wasn’t in the Bill before?
It was a central criticism of this Bill that it made almost no mention of commercial agriculture or the role of food production.
The Act now states that any financial assistance scheme (see above) is required to consider the need to encourage food production and, particularly, environmentally sustainable production. Although the text requires the Secretary of State to “have regard to” food production, this has been widely welcomed as a big step forward from the earliest draft.
Furthermore, the Act allows the SoS to give financial assistance for some specific purposes linked to food production:
- Starting, or
- Improving the productivity of an agricultural, horticultural or forestry activity
It also allows for financial assistance for supporting “ancillary activities”.
The real value lies in the definitions for these terms. Interpretation of these suggests that the Act opens up financial assistance to contractors as well as farmers because the definitions widen to include those who “carry on an agricultural, horticultural or forestry activity”.
A definition of “improving productivity” helps further. This means:
- Improving the quality of agricultural products and
- Improving the efficiency of the activity
This has led to speculation that schemes similar to the recent (large and small) Countryside Productivity scheme might be introduced in the next couple of years, but perhaps be more comprehensive.
Accountability for Financial Assistance
In giving financial assistance, the SoS must prepare a “multi-annual financial assistance plan”, essentially setting out how funds are to be distributed. This plan must be laid before parliament. Furthermore, the SoS must report annually on the assistance given. The first plan must be from January 2021.
This appears to be a measure in recognition of the delays and difficulties experienced by farmers in receiving BPS and Stewardship funds.
De-linking payments
Much of the discussion in the farming press has presented this measure as a fait accompli[3]; but the text of the Act records that this remains only a possibility. The idea may have been introduced as a means of incentivising some BPS claimants to relinquish occupation of their holdings but keep receiving BPS payments until their demise, or possibly even to take these payments as a lump sum.
Whether and how easily this could be achieved raises questions still unanswered. For instance, without the requirement to occupy land and observe cross-compliance, it is difficult to see how accountability for public money could be assured. In addition, the feasibility of these ideas needs to be considered in the context of a post-COVID economy and deficit.
Fair Dealing in the Supply Chain
The Act allows the government to introduce (fairly speedily) regulations to promote “fair dealing” in supply chains and this would mean placing meaningful obligations on purchasers and how they behave towards suppliers, to promote fair contracts. In the past the only body capable of acting in this area was the Groceries Code Adjudicator.
Land Occupation
It is interesting that the Act includes some significant changes to both the 1986 Agricultural Holdings Act and the 1995 Agricultural Tenancies Act.
Succession procedures for AHA tenancies are simplified, removing the restriction on “commercial unit” occupation for incoming successors. The suitability test on successors is also amended to require them to be persons of “likely capacity” to farm the holding responsibly, with experience, training, physical health and financial standing all still included but subordinate to this main requirement.
Free Trade Agreements & UK Production Standards
As national media witnessed, significant efforts were made by the NFU and others to secure a binding requirement for any trade deals struck after Brexit to ensure imported foodstuffs met UK animal welfare and assurance standards. The provision in the Act is something of a compromise. A free-trade agreement that “includes measures applicable to trace in agricultural products” cannot be placed before parliament for approval until the SoS has first presented a report, setting out to what extent the proposals are consistent with UK standards on animal welfare, the environment, or plant/animal/public health.
Essentially, parliament gets to take a view on individual trade arrangements and determine on a case-by-case basis whether they are acceptable.
However, these do not apply to trade negotiations completed in 2020, or where the deal is with the EU or a member state, or where the agreement is with a country that has an existing agreement with the EU. It is far from everything the farming industry hoped for.
Bringing it all together
It may be said that this Act does attempt to address some enduring problems with the way food and farming have operated for decades.
Lack of accountability in the performance of schemes on making payments to farmers meant that there were few real consequences for failures; although the businesses affected were often forced to resort to borrowing to make ends meet.
The long-observed lack of fairness and transparency in the way some food chain actors – notably supermarkets – deal with producers and other suppliers is now tackled.
In other ways, its consequences will take time to assess. Area-based payments do reward those with the largest areas of land. There was never any requirement on how BPS funds were spent (could they have been required to be invested in the business, for instance?). Yet they constituted a contract between farmers and government for basic environmental protection – surely, public goods.
The Act is now law. Yet, as we have observed, much of the detail has yet to become law. But the direction of travel is unmistakable.