Chancellor confirms direct payment funding level

Monday, 6 January 2020

On Monday 30th December, Chancellor Sajid Javid confirmed that the level of funding for direct payments to farmers will remain the same for 2020 as the 2019 payment, with supplementary funding for Pillar 2 until 2023 at the latest. . The most recent announcements  confirms the government’s election pledge to maintain 2020 payments at the current rate, however, the government have again reiterated their funding pledge that the current annual budget available to farmers will remain the same for every year of this parliament. Beyond 2020, direct payments are set to reduce in year 1 and the implementation of the new Environmental Land Management Scheme will begin to take shape. More clarity around this will be forthcoming as the Agricultural Bill returns to parliament.

A total of £2.852 billion of support has been allocated for the 2020 payment window, and will be split across two financial years to provide flexibility to the various administrations. The budget has also been allocated between the devolved administrations (see below). The vast majority of this money will be used to match the current level of direct payments (Pillar 1). Remaining EU funding under CAP Pillar 2 will be continued until it is used up, or 2023, whichever is earliest. The UK government will supplement the Pillar 2 budget to ensure the same level of funding continues, providing some certainty to producers/farmers who may have been thinking about entering into pillar 2 payment mechanisms.

Based on 2017 EU pillar 1 funding to the UK, the direct payment equivalent for 2020 works out at an exchange rate of around €1 = £0.89, the same as the 2019 exchange rate for direct payments.

The exact payment rate per hectare will be decided later in the year by Defra and the devolved administrations.

Each part of the UK will set its own level of Direct Payments for 2020 under existing EU rules which enable up to 15% of the Direct Payments budget to be used for rural development