The CLA has responded to Defra’s consultation on the proposal to offer an industry exit scheme in 2022 and to delink Basic Payment Scheme (BPS) payments from 2024. See here for the full CLA consultation response.
The exit scheme, in particular, has attracted significant levels of attention, with successful applicants receiving their remaining BPS payments in one lump sum. The scheme will be open to applications in 2022 only, and may appeal to those that are considering their future in the industry, as recipients will be required to cease farming. Those considering the scheme should start to think about how they might execute an industry exit in a timely manner, as matters such as selling stock and machinery, determining alternative land tenure arrangements and closing business trading accounts will take some time.
Defra is analysing the consultation responses following the submission deadline on 11 August and will publish response summaries, along with the scheme rules, in late October 2021.
In order to facilitate restructuring in the farming industry and to create opportunities for new entrants, Defra is planning to offer a lump sum exit scheme. This scheme will allow eligible BPS recipients to receive a lump sum payment in place of the remaining payments that they would have been entitled to receive during the transition period up to 2027, on the condition that they leave the sector. The consultation put forward a number of proposed scheme rules and eligibility requirements. Recipients would be required to either sell, gift or rent out their farmland. Defra has proposed to cap the lump sum payment at £100,000, which equates to an eligible farm size of 450 acres, and means that around 87% of BPS recipients would be eligible to apply for the scheme.
CLA key points on the exit scheme:
- Those holding leased entitlements should not be eligible to apply for the exit payment without the express permission from the owner of the entitlements
- Those that are left to continue running a farming partnership once the lump sum has been received and the senior partner/s have left the business, should not be prevented from accessing future support such as the Sustainable Farming Incentive, or Countryside Stewardship
- Recipients of the scheme should not be prevented from accessing future funding schemes under E.L.M that are not linked to farming activities, such woodland creation and management
- Those that are looking to participate in the scheme will require a significant period of time, at least two years, to make the necessary plans once the scheme rules are published in October
- The lump sum reference period should be based on 1 year as close to the time of change as possible, to minimise the impact on businesses that have restructured.
- The £100,000 payment cap is acceptable, but there should be a mechanism for exceptional circumstances up to £200,00
Delinked payments will mean that recipients of the annual Basic Payment Scheme will continue to receive annual payments on a declining profile, but will no longer need to complete an annual application or continue to farm the land. Cross-compliance will end, but a new regulatory approach is currently in development under a review of regulation and enforcement. Delinked payments, will allow Defra to simplify the administration for both recipients and government.
CLA key points on delinked payments:
- There should be a 1 year reference period as close to the point of introduction as possible, so either 2022 or 2023, to minimise the impact on businesses that have recently restructured.
- Where leased entitlements return to the owner between the point of delinking and the final payment in 2027, the remaining delinked payments should be transferred to the owner of the entitlements.