Ahead of the 15 May closing date for the 2023 single application, a question often asked by farmers is how long payments will last, and what value basic payment scheme (BPS) entitlements will have going forward.Whatever happens, it is clear that direct payments, while still vital for many farm incomes, are being eroded by inflation.
Ahead of the 15 May closing date for the 2023 single application, a question often asked by farmers is how long payments will last, and what value basic payment scheme (BPS) entitlements will have going forward.
Whatever happens, it is clear that direct payments, while still vital for many farm incomes, are being eroded by inflation.
The main measure of UK inflation is the consumer prices index (CPI), which has started out 2023 at over 10%. While this is an historic high, and we did actually see inflation dip below zero briefly in 2015, it has still averaged just under 4% over the last 12 years.
Back in 2010 NI farmers received £296m in direct payments and less favoured area support. That compares to slightly over £300m of BPS money due this year.
Allowing for inflation, £296m in 2010 is the equivalent of around £485m in spending power today.
That creates a problem for DAERA, who has traditionally relied on BPS to encourage compliance with rules.
Inflation
Without some form of inflationary rise, these payments are becoming less relevant, especially on productive farms.
The current plan is that 17% will come off all payments in 2024 to fund new schemes to encourage more efficient beef production.
Beyond that, we can also expect money to be diverted to agri-environment schemes, leaving a new area based sustainability payment as a “basic safety net” for farmers.
But if this payment is too low, some might decide to forego the money, and along with that, new associated rules that replace cross compliance.
The sustainability payment is to be activated by the same system of entitlements that operates at present.
The exact value of these entitlements going forward is highly uncertain, but with reports suggesting that they can be bought at around 1.25 times their value, it is probably still a pretty sound investment to make.
And with DAERA intending to allow all land to be eligible for payments in 2024 outside of hard features (an additional 40,000 ha of land), there could be higher demand for entitlements in future years. Entitlement trading closes on 2 May 2023.
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