The main policy instruments described below relate to measures implemented in the United Kingdom within the framework of the Common Agricultural Policy2 that continued until 2021, and domestic measures decided at national level. Agricultural policy in the United Kingdom is devolved to the UK nations: the governments of England, Northern Ireland, Scotland and Wales. As a result, different elective schemes apply in these jurisdictions, as described below.
The CAP funded 80% of support to agricultural producers in the United Kingdom. In addition to output support delivered through markets, the largest envelopes under the CAP fund per-hectare payments decoupled from production (Figure 28.4). The Basic Payment Scheme (BPS) accounts for 66% of direct payments, the payment for greening (agricultural practices beneficial for the climate and the environment) accounts for 30%, and the so-called young farmer scheme accounts for 2%. Only Wales offers the elective decoupled redistributive payment for first hectares of farmland (EC, 2016[6]). Together, these absorb 99% of direct payments under the European Agricultural Guarantee Fund (EAGF). Output-linked Voluntary Coupled Support is limited to three schemes that support the Scottish suckler cow and upland sheep sectors (EC, 2019[7]).
Measures funded by the CAP’s European Agricultural Fund for Rural Development (EAFRD) are co-financed by the national budget and require a minimum five to seven years commitment. From a budgetary standpoint, the top three elective measures under EAFRD support in the United Kingdom are: (1) agri-environment and climate measures, (2) agricultural investments, and (3) payments to areas with natural constraints. Organic farming is also supported, although with smaller budgets.
In addition to the CAP, national measures promote on-farm investments through capital grants, credit concessions and guarantees. National measures also reduce the costs of farm inputs. Public revenues foregone under the rebate on excise duties for agricultural diesel (so-called red diesel) represent the third-largest element of support after the BPS and greening. At the same time, Exchequer-sourced output payments support environmentally friendly production.
National measures are prominent in funding sector-wide general services, as three-quarters of the spending comes from the national budget. These mainly support research and development to underpin the UK’s knowledge and innovation system. The national budget also funds inspection and control services. CAP funding supports knowledge, advisory and extension services which ensure on-farm innovation uptake and capacity building, farm and business development, and marketing and promotion of farm products and producer groups.
Until 31 December 2020, the United Kingdom was part of the EU Single market, with its trade governed by the overarching settings of EU trade as foreseen in the Withdrawal Agreement (HM Government, 2019[8]).