Farmers who receive up to £30,000 will see their payment reduced by 5%, with further reductions for payments falling in bands above that amount (see table below).

For example, for a claim worth £40,000, a 5% reduction would be applied to the first £30,000 and a 10% reduction would be applied to the next £10,000.

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The reduction percentages will be increased over time until the final payments are made for the 2027 scheme year, said Defra on Tuesday 25 February.

Money saved by reductions in direct payments will be reinvested directly into the farming and land management sector, it added.

ELM scheme pilots

In 2021, this will include piloting the government’s forthcoming Environmental Land Management (ELM) scheme, which will pay farmers who undertake environmental work.

Defra said the money would also be used to help “continue and improve our tree health offer ensuring that the nation’s trees are increasingly resilient and healthy”.

It wants to increase the number of farmers coming into Countryside Stewardship, which it sees as a stepping stone into the ELM scheme.

Grants will be made available so that foresters, growers and farmers can invest in their businesses, allowing them to add value to their products and help mitigate climate change.

‘Delink’ direct payments

Defra said it plans to “delink” direct payments – maybe as early as 2022 – as they are being phased out, so recipients no longer have to farm to receive them.

It said it would also look to offer farmers a one-off optional lump sum to replace ongoing direct payments during the phase-out period.

Farmers may choose to use this lump sum to invest in their business to boost their productivity and profitability. Others may choose to use the money to diversify their activities, it said.

“Some farmers may decide to stop farming altogether and use the payment to contribute to their retirement or move to another sector,” added Defra.

“This should facilitate restructuring, creating opportunities for existing businesses to expand and new entrants to join the industry.”

Basic Payment reductions

Direct payment band Reduction percentage
Up to £30,000 5%
£30,000 – £50,000 10%
£50,000 – £150,000 20%
£150,000 or more 25%