skip to Main Content

Brexit update: impact of transition agreement on English farmers

More is gradually becoming clear about the Brexit transition agreement which will come into force next year provided that an exit agreement is reached. The headline agreement is that between 29 March 2019 and 31 December 2020 Britain will remain in the single market and customs union, and in return will permit free movement of EU nationals and continue paying into the EU budget.

Looking at one specific element where details are clear, the transition agreement for fishing provides some certainty, although it is highly controversial, with EU vessels to be allowed access to UK fisheries and the British government to be ‘consulted’ (but not given a veto over the quotas) to which the industry will be subject.

Agricultural transition

However, the picture for UK farming is far less clear from the beginning of the transition period. The overall government farming budget is set until the end of the current parliament in 2022, and Defra plans to administer payments in 2019 in roughly the same way as now with some simplifications. But the government has made no commitment to the level of funding available to support farming beyond 2022, and has indicated that changes and reductions to some Direct Payments will commence once ‘free of the CAP’.

The consultation currently underway anticipates that an ‘agricultural transition’ will take place in England from 2020, reducing Direct Payments year on year and replacing them with a system of ‘public money for public goods’. Following the consultation, a White Paper is expected to be published giving more detail of the length of the ‘agricultural transition’, the way in which Direct Payments will be reduced, and the new ‘public goods’ system (discussed further below).

Regional differences?

The government has recently conceded that the UK’s devolution settlement allows regional autonomy on farming policy. This opens the possibility of increasingly significant differences in how farms are subsidised in England, Scotland, Wales and Northern Ireland developing after the UK’s departure from the EU.

The four UK farming unions have called for collaboration between the farming ministers in all four regions in order to avoid harmful conflict and competition between the regions. However significant cooperation between governments who are highly divided in political terms is unlikely to be forthcoming.

The Scottish government has already made the most of their limited autonomy under the CAP to incentivise food production via livestock headage payments and young farmer schemes designed to attract new entrants. It seems highly likely that, during the transition period, this approach will be extended, potentially encompassing headage payments, guaranteed agricultural commodity prices and other forms of subsidy.

Meanwhile in Wales and Northern Ireland, the regional assemblies will also be able to reflect the nature of farming in their regions, and specific priorities, in the subsidies provided. Michael Gove, the Environment Secretary recently defended their right to do this, based on their different geography and farming challenges, whilst specifically ruling out any internal barriers within the UK livestock and food markets.

English concerns

The direction of travel is less clear for English farmers. The NFU has looked at the recent policy direction in Westminster and has said it is deeply concerned. The Environment Secretary has pledged a “green Brexit”, with payments to farmers driven by “public goods” such as the environment, animal welfare standards and public access to the countryside. It is, at best, unclear what his vision is for food production by farmers in England under his department’s jurisdiction. The NFU President has argued that any new system should recognise the production of safe and traceable food as a ‘public good’ alongside others, such as environmental stewardship, and has expressed concern that this is not the time for the government to make radical changes to the current system which support farmers in providing a healthy and affordable supply of food.

When it comes to food, the EU is breaking all records in export markets, driven in part by allocating an annual budget for food promotion of around €180 million. After 2019, the UK will be going head-to-head with the EU in the same international markets, and experts in farming policy are becoming concerned that the Treasury does not recognise the importance of allocating a substantial budget to promote UK food exports at a time when British farmers will face increased competition. They are also increasingly concerned that, without coordination between the regions, English farmers may face unexpected competition much closer to home.

FEATURING: Daniel Sladen
Daniel is a corporate and business tax specialist in the Truro office with extensive experience of complex tax structuring and risk management. He relocated to… read more
FEATURING: Brian Harvey
As head of PKF Francis Clark’s agricultural sector group, Brian manages a dedicated team of agricultural accountants and tax advisers. He hails from a Cornish… read more
Back To Top