A proposal in Defra’s future farming policy consultation to decouple payments from land eligibility and cross compliance for the next few years is the kind of radical thinking the industry needs, says TFA chief executive George Dunn.
Consensus is a rare phenomenon in discussions around Brexit, however there is a confluence of opinion that whatever happens over the next few years, as a cohort, UK farm businesses need to change.
Tucked away in the Government’s health and harmony consultation there is a mechanism which, if used intelligently, could provide a significant catalyst to the sort of change required.
The consultation document floats the idea of making direct payments to farmers through the agricultural transition period, irrespective of the area farmed.
It goes further, suggesting there would be no requirement for the recipient to remain a farmer and the need for any land eligibility rules or cross compliance could be removed.
The payments would be based on what the applicant received in a reference period and recipients would be unrestricted in terms of how they would use the money.
This is indeed a radical idea but it is far from new. Agricultural economists as far back as the 1960s have advocated the use of fully decoupled compensation payments to facilitate reform in farm policies.
The idea had particular resonance in 1991 in a report commissioned by the Land-Use and Food Policy Inter-Group of the European Parliament authored by the renowned economist Stefan Tangermann.
Prof Tangermann proposed that rights to future compensation payments could be vested in a bond which could either be retained by the recipient of the bond or traded in financial markets for a capital sum.
This idea was taken no further then, but for such a time as this could have significant advantages.
A decoupled payment issued in the form of a bond, tradeable for a capital sum, could allow the recipient to use the capital receipt to assist with on-farm investment to help drive productivity and profitability, investment into on-farm diversified activity or investment off farm.
For tenant farmers, particularly those on older secure tenancies, a bond could also unlock the possibility of a housing solution for future retirement or, coupled with a payment for a tenancy surrender from a landlord, form part of a more immediate move into retirement.