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What will ending the Basic Payment Scheme mean for Gloucestershire?

Updated: Nov 29, 2021

Written by Chris Short, Bryonny Goodwin-Hawkins and Theo Lenormand

Things are changing in the countryside. Now the UK has left the EU, future aagricultural policy will be different. This year, the Basic Payment Scheme (BPS) for farmers began to be phased out in a seven-year transition. Why is this happening, what does this mean for farmers in Gloucestershire, and what impact might we see on our countryside?

In recent years, ‘public money for public goods’ has become the key policy goal driving changes to farming support. The BPS has had few fans in this respect since payments were simply attached to land area and only required a minimum level of management in return. But how the BPS will be replaced is still unclear. Farm businesses could be facing a loss – and no business likes to see a hole in the finances without a real vision for what comes next.

To calculate the financial implications for Gloucestershire, the Local Nature Partnership [1] and GREAT project [2] collaborated with the Countryside and Community Research Institute. [3] The research team sourced publicly available Defra data from 2020 and added our own data science wizardry.

We estimate that approximately £40 million comes into the county each year through BPS. This represents 0.25% of the county economy, and is equivalent to about 4% of the County Council’s annual expenditure. To put these figures in perspective, building Gloucester Services [4] cost close to £40 million – once. Over the full phase-out period, BPS losses in Gloucestershire will total £180 million.

Payments are not evenly spread across the county. Cotswold District claims half (£20 million), with about £6 million heading to each of the Forest of Dean, Stroud and Tewkesbury. This means that the regional impact of BPS reductions will not be even, either. Cotswold District clearly faces the heaviest impacts. Because the district has larger farms, and more arable and mixed farming in higher payment bands, reductions in BPS will also be quicker. Our calculations indicate that Cotswold District has already seen a 16.5% BPS reduction in 2021, compared to under 10% elsewhere in the county.

Defra’s data shows that, from 1985 to 2016, the number of farm holdings in Gloucestershire has already dropped by almost half. Dairy farms have fallen by some 75%. Arable has remained stable. The only category to have grown is holdings over 100 hectares – that’s around a square mile plus. History here suggests that wound-up farm businesses tend to be absorbed by larger holdings. Though the trend will likely continue, larger holdings are now set to see the biggest losses in BPS income. Arable farms are also more likely to face losses since they tend to be more reliant on subsidy payments.

Agri-environment schemes (AES) – which pay farmers to manage land in an environmentally friendly way – are important and promising, but can’t fill the gap. In 2019, agri-environment agreements brought £9 million into the county, again concentrated in the Cotswolds. Existing Environmental Stewardship [5] agreements look set to continue until 2024, and the Countryside Stewardship [6] scheme is being temporarily expanded. For farmers new to AES, stewardship agreements could offer some help towards filling BPS losses. There are fewer options for farmers who have already signed up. Either way, AES offers no simple pound-for-pound replacement. As rural business advisors Strutt & Parker also note [7] , the costs of carrying out environmental management work reduce the net value of AES compared to BPS.

An interim Sustainable Farming Incentive [8] for current BPS recipients will start early rollout in 2022. This is part of Defra’s roadmap towards a flagship Environmental Land Management scheme (ELMs), due in 2024. But there is still much uncertainty around how ELMs will operate and the incomes achievable – and a comfortable window for working out policy detail is a long and anxious wait for business.

It’s easy to assume that withdrawing farming support will weed out unprofitable businesses. But telling a struggling business that they’re simply “no good” doesn’t help anyone. When a farm goes under, more than the business is lost. Farming in Gloucestershire is embedded in our wider regional economy, from land agents and business support to diversification and product value chains. Gloucestershire’s tourism industry also depends on well-managed landscapes and a high-quality local food and drink offer. The many potential knock-on effects for the county’s rural fabric are hard to model. Because we may not see the full results of BPS withdrawal for some time, running a reactive strategy could prove too late.

Of course, swapping BPS for a same-sized replacement isn’t anyone’s idea of good policy. Sustainable farming futures won’t be built on the same old subsidy models. But real routes forward won’t be found in wonky balance sheets and fuzzy policy statements, either. Here in Gloucestershire, we need to think proactively about mitigating the adverse impacts of BPS withdrawal on our farming community, our business ecosystem, and for our cherished countryside.

Gloucestershire's Great project and the Gloucestershire Food Revolution are working to mitigate the environmental and economic impacts of these changes, and seize the opportunities they create, in part by implementing some of the recommendations of the National Food Strategy (see previous LNP blog post). Biodiversity Net Gain and Carbon trading, through Gloucestershire's emergent Nature and Climate Fund (see previous LNP blog post) represent alternative sources of income for farmers wishing to diversify their portfolios to include non-food related products and outcomes. But what role does the LEP, Local Planning Authorities and the County Council have to play in this? Clearly these changes overlap a number of priority areas for these institutions, and work is underway within the LNP and elsewhere to explore responses to these changes for the benefit of the people, wildlife and economy of our county.

BPS in Glos pres v2_pres_update_LNP
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