The Agriculture Bill was enacted on 11th November 2020 after 2 years of negotiations and is now known as the Agriculture Act 2020. It is the first domestic legislation on Agriculture in over 70 years!
DEFRA have called this “an exciting time for English farming”. Whilst this statement is true, it is also a very uncertain time. The agricultural transition period began on 1st January 2021 during which Direct Payments will gradually reduce. The phasing out of Direct Payments, the current scheme for subsidising farmers, will be done by percentage reduction of the amount which the farmer currently receives.
Farmers are, understandably, concerned as to the effect this will have and whether there will be a funding shortfall in the coming years. DEFRA have “committed to maintaining the current annual budget in every year of this Parliament” and have said they will redirect the funds back to agriculture through other schemes. There are still many details to be set out, but these are uncertain times for farmers who often rely on the support of the Direct Payments to turn a profit.
Now is the time for farmers to review their business plans, review their finances and look at succession planning. Farmers need to get themselves into the best possible position for the future given the reduced payments which they are expecting to receive in the coming years.
Land is usually one of the largest assets of any farming business. Given interest rates are historically low, now is a key time for farmers to look at their finances. Could you remortgage your land to reduce your current repayments or even look to mortgage additional land and/or increase your current overdraft limits? The additional funds could even be used to diversify to reduce reliance on the Direct Payments rather than being a ‘buffer’ during the upcoming uncertainty.
DEFRA have announced that from 2022, they “plan to offer an exit support scheme to help farmers who want to retire” as well as supporting new entrants. Now is the ideal time for farmers to ensure that they are looking at their succession planning. Have you spoken with the next generation and taken on board their ideas for reducing costs or the future of farming or the business? What about your farming structure, does your Partnership Agreement need to be reviewed to allow for better succession planning?
Spire’s Agricultural Team are able to assist with reviewing key aspects of your farming business. If you are interested in undertaking a comprehensive review of your farming business, please contact us.