Residential property
22 Jun 2021 News

Paying farmers to retire: political havering or right on the money?

Last month the UK Government announced plans to reform farm subsidies; amongst the headline proposals were conditions around greener farming practices and one-off payments for older farmers to give up their farm. The scheme as proposed would see farmers receive a one-off payment of up to £100k for surrendering their land or tenancy. They would be able to continue to stay in their house and in some cases retain up to 5% of their land. The proposals are ‘England only’ at this stage, but may show a possible future we should be considering.

Alongside the anticipated green benefits of increasing the number of new entrants to farming, the Government hopes that the policy will enable new entrant farmers to get their foot in the door of the industry and give an exit strategy to older farmers without succession planning.  The latter a key issue for the sector with a study in 2020 by the NFU and University of Exeter concluding that over a quarter of farmers had no succession plan in place.  On the other end of the spectrum, many younger farmers report struggling to fully commit to farms where there is not enough work to sustain them or being unable to find a tenancy to enable them to expand their farming operation.

The UK Government proposal on the face of it, looks like a possible silver bullet to problems facing those in or trying to get into the industry. However, some have cautioned that the plans do not fully address the complexities of farming business set ups or the capital problems facing new entrants and that it ignores that fact that many older farmers are doing good work around embracing “greener farming”.

Indeed whilst perhaps attractive to tenant farmers, the English proposals do not appear in their current form to provide great incentive to owner occupiers when it comes to giving up land. Would a farmer who accepts a payment to leave, gift the land to a willing applicant? Or will that willing applicant be expected to pay market rate? Or is it a top up if you sell? Land sought for planting for forestry is also a hot topic at the moment, not surprising given the steps being taken around carbon capture and the journey to net-zero.  This in turn has sent sale prices rocketing upwards and anecdotally it’s understood that it’s a price bubble that is unlikely to burst anytime soon.

As yet, we await to see what Holyrood will propose for the future of grant payments here in Scotland. However, there is little doubt from the manifesto published by the Government during the election the Scottish scheme will also have “green strings” and succession at its core.  

The Scottish Land Commission in conjunction with the James Hutton Institute has done much work in recent years around how best to increase access to farmland for new entrants while ensuring good use of the land with a number of key themes and concepts rearing their head time and time again.

Mentoring and time – scope for Share Farming?

Many of those who will be encouraged to retire under any such scheme will have farmed the land for decades. They know the land and its quirks inside out but more importantly they have a wealth of experience that could benefit the next generation. Alongside this, many of these older farmers may struggle to fully retire. Machinery, livestock, etc, are all crucial to the success of developing and growing the business but they all cost money. For those totally new to the industry where existing connections with other farms are absent, this is more difficult.  A  scheme which allowed for the surrender of land on a transitional basis would therefore bring benefits to both the retiring farmer and new entrant alike, allowing the older generation to wind down on a phased basis while ensuring new entrants felt they had support and brains to pick as they navigate the early stages of farming. Mentoring is not an unusual concept in farming in Scotland and can already be seen to some degree through Share Farming agreements and internationally including in French Incubator Farm projects which give new entrants, land, equipment and mentoring for a limited time to see if they can make a success of things or decide farming is not for them.

Existing farming families and arrangements

The proposals in England, however suggest that the older generation of existing farming families will have to vacate the business completely and the farm meet a number of green criteria to continue receiving grants. This on the face of it negates the time and transition element of matters. Transitioning to greener farming does not happen overnight, and while the exit of the older generation from the existing farming partnership may be what is needed to move further towards green farming, it has to be understood that many farms will have transitional and staged succession plans in place. These staged succession plans are there for the good of the business and the land and any scheme therefore cannot take a one size fits all approach that cuts farms off because their succession and transition plans are a year or two behind.

The whole rural scene is full of uncertainties at present, Brexit and Carbon are only the most obvious. Whether Scotland looks to adopt a similar scheme to that proposed in England  or come up with something different to help the next generation into farming it will be key that any dialogue puts the themes of education, transition and funding at the top of the agenda and not that of a cold sharp exit.  

If you have any queries please do not hesitate to get in touch with Mike - mike.blair@gillespiemacandrew.co.uk

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