The past year has seen clear signals that significant changes are coming on the use of EU payment entitlements. They have been tied to acres for the past two decades and have been a big influence on the land market, encouraging many farmers to hold on to land rather than sell. That includes many farmers at retirement age.

Changes to entitlement rules will, in turn, have some effect on long-term land leasing. The long-term leasing scheme has had a major effect on the land market over the past seven years, again encouraging landowners to hold on to their land rather than sell. For many farmers, it is a very effective retirement strategy.

Last year, discussions on the new CAP, which will begin to operate next year, saw the first real debate about who is or isn’t an active farmer and therefore eligible to claim payments from entitlements.

The Minister for Agriculture has now signalled his intention to restrict the ability of “armchair” farmers to claim payment on entitlements under the new CAP. Farmers claiming payments will have to show, if asked by the Department of Agriculture, that they are actively farming. The request could be made as part of a routine farm inspection, for example.

So, from next year, the estimated 10,500 armchair farmers will have to either resume farming, sell or lease out their entitlements, with or without land – or risk penalties on payments.

To encourage these farmers to sell their entitlements to active farmers, the Department will waive the current 20% clawback applied on entitlement sales without land, for the years 2023 and 2024.

The 20% clawback is expected to resume operating in 2025.

Further, the minister has announced a new 10% clawback to be applied where 80% or more of a farmer’s entitlements are leased out for less than five years. This is to encourage a farmer who doesn’t want to sell to lease out the farm and entitlements to an active farmer under the long-term leasing scheme.

Meanwhile, in the new CAP, from next year, we will see some payment money unhitched from entitlements. It is expected that the new eco schemes, which will be funded by a 25% cut on all farmers’ payments, will be paid out on all acres farmed by an applicant, even those without entitlements. This could be viewed as a first small step in dismantling entitlements.

farmer Uncertainty

The new CAP will change how direct payment will be claimed by a farmer. There is a degree of uncertainty now as to how this will pan out at individual farm level. This uncertainty was one possible reason why the amount of farmland put up for sale fell last year. The uncertainty will continue for much of 2022.

The new CAP and its new annual payment scheme – Basic Income Support for Sustainability (BISS) – will commence next year and that will fall in the middle of some long-term land leases.

Many leases specify that the active farmer claims the EU payment and pays the value to the landowner. However, payment levels will change under the new BISS scheme.

To maximise the annual payment, farmers will have to take up eco schemes. However, it is unclear if active farmers will be willing to bear the cost of participating in an eco scheme if the payment is given to the landowner.

In addition, all entitlements will be subject to the 10% cut of Complementary Redistributive Income Support for Sustainability (CRISS) – and the money may not come back on to the leased outfarm. So who will suffer that cut?

This is likely to lead to renegotiation of the terms of some leases next year.