How much will the Basic Payment Scheme (BPS) reduce?
The Basic Payment Scheme received by farmers and landowners as a grant each year is set to start reducing this year progressively to 2028. The loss of income will cause a dent in the finances of many farms and planning is needed now to cope with the drop in cash flow.
At present, BPS payments are made from mid-December and as that time approaches farmers are facing less income this winter. Farmers and landowners are going to be receiving less money as the grant is gradually reduced each year, as shown below.
Table 1: Percentage reduction in scheme payments
(Source: DEFRA, 2020)
|Up to £30,000||5%||20%||35%||50%|
|More than £150,000||25%||40%||55%||70%|
For example, a farmer with 125 hectares (ha) eligible for BPS was entitled to a payment of approximately £29,152 for the 2020 claim year (1ha = £233 subsidies). However, taking into account Table 1, in 2021 the same farmer would be entitled to 5% less (£27,694) as they’re in the first payment band; then 20% less in 2022 (£23,322) etc, until subsidies reach zero by 2028. There is a handy calculator on the .gov.uk website to calculate what will be lost each year.
Preparing for the effects on your cashflow
It has never been more important for farmers to plan their finances to ensure this loss of income can be successfully managed. The use of Digital accounting can put you in control to both predict and manage the fluctuations in cash availability and support applications for finance. If you don’t have these tools and numbers at your fingertips then get in touch for a free Demo to see how much more in control you can be.
Environmental Land Management (ELM)
Now is the time for farmers to also investigate other income streams such as schemes under ELM. Whilst there is frustration that the introduction of these new schemes may not be fully operational until 2024 some details are available regarding eligibility.
There are 3 new schemes that will reward environmental land management:
- Sustainable Farming Incentive
- Local Nature Recovery
- Landscape Recovery
If you need help in assessing the impact of these changes to the Basic Payment Scheme or other issues contact our specialist agricultural team.