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15 January 2020
The UK will leave the EU’s Common Agricultural Policy (CAP) when it leaves the EU.
UK agriculture receives around £3.2 billion per year in support via the CAP and direct payments make up about 88% of total UK payments. For most farmers in Wales, CAP direct payments make up the majority of their income. In 2014-15, direct payments accounted for an average of 81% of net Welsh farm profit for all Welsh farm types.
The future of agricultural support has been the subject of much debate with questions raised around the level of payment, the design of future schemes and the associated legislative mechanisms required to continue payments.
The Direct Payments to Farmers (Legislative Continuity) Bill was introduced into the UK Parliament on 9 January. The Bill allows direct income support to farmers in the UK to continue after exit day, for the 2020 claim year.
What are CAP direct payments?
Direct payments currently fall under ‘Pillar 1’ of the CAP. Payments are broadly based on the amount of land farmed. The following direct payment schemes operate in the UK:
- the Basic Payment Scheme (BPS), which is the main scheme of direct payments to farmers that offers a basic layer of income support;
- the greening payment, which is a top-up payment for agricultural practices beneficial for the climate and the environment; and
- the young farmer scheme, which is a top-up payment for young farmers.
To qualify for direct payments, farmers must meet certain standards on environmental management, animal welfare and traceability – this is known as ‘cross-compliance’.
Direct payments typically amount to a total of €260 – €300 million per year in Wales (since 2014). Currently Pillar 1 funding comes directly from the EU, where it is agreed in budget funding cycles. The current cycle is 2014-2020.
Will direct payments continue post-Brexit?
On 30 December the new UK Government announced that funding for direct payments to farmers for 2020 would continue at the same level as 2019. The UK Government has guaranteed the annual farm budget for each year of this Parliament. The Welsh Government is responsible for distributing this money in Wales.
Although the Welsh Government is consulting on plans to move away from the CAP-style system of support, the Minister for Environment, Energy and Rural Affairs, Lesley Griffiths, has confirmed that direct payments to farmers will continue in 2021, to provide some certainty post-Brexit.
How will there be legal continuity of direct payments?
The CAP’s legal basis can be found in one of the EU’s main treaties, the Treaty on the Functioning of the European Union (TFEU), and the Basic Payment Scheme is contained in an EU Directive, Regulation (EU) 1307/2013.
However, as the current funding cycle comes to an end in 2020, the UK and EU agreed that EU direct payment rules will not apply to the UK after the exit day in the Withdrawal Agreement. This avoids the UK being included in the next EU budget cycle.
The Withdrawal Agreement comes into force after the UK leaves the EU at 11pm on 31 January. This means that the UK needs to pass legislation before this to continue making direct payments to farmers in 2020.
Direct Payments Bill and the Legislative Consent Memorandum
The main purpose of the Bill is to provide a legal basis to make direct payments to farmers in the UK in 2020. As well as providing the legal mechanism for the UK and devolved governments to make payments, the Bill also:
- Contains powers for the UK and Welsh governments to make further regulations to modify retained EU law, including to correct deficiencies so that it works in UK law or to replicate developments in EU law during 2020. These powers expire after 31 December 2020. Any such regulations made by UK Ministers which apply to Wales will require further consent from the Welsh Government.
- Enables the UK Government to increase the total amounts / financial ceilings for direct payments, to provide a greater share of farm support to Wales, as recommended by the Bew Review. As a result of the review an additional €6.12 million per year is committed for Wales for the next two years.
- Applies the EU’s state aid exemption to the UK’s 2020 direct payments, if they are equivalent to the EU’s scheme.
As agriculture is devolved to Wales, primary legislation on a UK-wide basis can be made by the UK Government but it must have the consent of the devolved legislatures in Wales, Scotland and Northern Ireland. The Welsh Government laid its Legislative Consent Memorandum (LCM) (PDF, 135KB) on 14 January which sets out its position.
The Welsh Government believes that taking powers under the UK Bill provides a “practical and pragmatic solution” which is “smoother, quicker and clearer for farmers and other stakeholders”. The LCM sets out specific clauses which require the consent of the Assembly and concludes that:
Given the urgency of the issue resulting from the absence of legal powers needed to continue making Direct Payments to Welsh farmers in the 2020 scheme year, it would be appropriate to deal with these provisions in this UK Bill.
In a written statement, the Minister added that the Bill brings “much needed stability to farmers”.
The Assembly will debate and vote on the LCM on Wednesday 22 January.
The UK Agriculture Bill
So what about the anticipated UK Agriculture Bill? The (amended) UK Agriculture Bill, which fell at the end of the last Parliament, included provisions for continuing direct payments to farmers post-Brexit in Wales beyond 2020.
It also included powers to phase out direct payments over a seven year transition. The UK Agriculture Bill is expected to be re-introduced in January. However there is a legislative gap in the short-term which the Direct Payments Bill aims to fill by providing powers for Ministers to make payments to farmers in 2020.
The Assembly’s Climate Change, Environment and Rural Affairs (CCERA) Committee considered the LCM to the UK Agriculture Bill at the end of 2018. Although the Committee acknowledged the UK Agriculture Bill would be an appropriate vehicle to provide immediate continuity of financial support, it felt that an Assembly Bill would be more appropriate for the wider and longer-term provisions within the Bill. A Welsh agriculture Bill is expected in the next Assembly.