Farm Support Guaranteed

Support to UK farmers has been guaranteed at current levels until 2020.  In a statement given by Chancellor Philip Hammond on the 13^th August (see https://www.gov.uk/government/news/chancellor-philip-hammond-guarantees-eu-funding-beyond-date-uk-leaves-the-eu ) it was also announced that all structural and investment fund projects, including agri-environment schemes, signed before the Autumn Statement will be fully funded, even when these projects continue beyond the UK’s departure from the EU.  There will also be money made available to scientists and researchers to replace any funding lost as a result of Brexit.

It now seems clear that all those with an existing agri-environment scheme agreement will be fully paid until the end of its lifetime – there was a chance, albeit quite tiny, that Brexit could have been used to trigger the ‘exceptional circumstances’ clause in agreements to bring them to an end.  However, the announcement does not end the uncertainty around new agreements, and particularly those being applied for this autumn.  The Autumn Statement is likely to be in November.  CSS agreements formally commence on the 1^st January – although it might be argued that they are ‘agreed’ before that date.  It seems that we will need to await further announcements from DEFRA on this point.  It is also not clear what the Treasury announcement means for future LEP and LEADER funding over the next couple of years.  Again, further detail is required.

Even the guarantee on direct payment (BPS) funding is perhaps not quite as clear as it looks at first glance.  More detail of the Treasury’s position is provided in a letter from David Gauke, Chief Secretary to the Treasury, to David Davis Minister ‘for Brexit’ (see https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/545767/CST_letter_to_SoS_for_DExEU_August_2016.PDF).  Some questions arise out of this;

• in David Gauke’s letter the precise wording is ‘[the agricultural sector] will receive the same level of funding that it would have received under Pillar 1 of CAP until end of the Multiannual Financial Framework (MFF) in 2020‘.  However, the 2020 MFF actually pays the 2019 Basic Payment.  Even the Treasury statement only talks about ‘until 2020’.  It has been widely reported that BPS-equivalent funding is guaranteed up to, and including, the 2020 year.  However, is it actually only guaranteed until the 2019 calendar year?
• the quote above refers to the ‘same level of funding’.  But what does this actually mean?  The MFF is set in Euros – will this still be converted into Sterling amounts on a yearly basis, or will the Treasury pick a fixed €/£ conversion rate for the whole period through to 2020, so they have budget certainty.  If it is the latter, what will be the rate?  The difference between last year’s €1 = 73p and today’s €1 = 86p is obviously considerable. 
• How will be money be paid out?  The announcement only guarantees funding, not the system.  The Treasury letter states that ‘These funds will be allocated using the principles of CAP Pillar 1, and we will of course consider the opportunities post exit for making any short-term improvements to the way the system operates once we cease to be bound by EU rules‘.  This gives room for changes to the BPS post-Brexit.  Although we would guess the BPS will be rolled-over largely unchanged, this in not guaranteed.  In addition, the devolved administrations may want to make greater changes than DEFRA in England.

Although the announcement will give the industry a degree of certainty over future support, there a still a number of questions to be answered.  In some ways, this might be viewed as an exercise in ‘kicking the can down the road’ – putting off decisions for a few years.  The Government may have decided that it has plenty to do between now and 2020 without having to devise a new agricultural policy.