The specific purpose of this paper is to estimate the extent to which decoupled payments under the Single Payments Scheme (SPS) are being used (either explicitly or implicitly) in England to support the continuation of activities that were previously supported by area and headage payments. In the absence of a farm survey, the methodology consists of using information on farm accounts collected through England’s Farm Business Survey (FBS), to estimate a multi-output cost function differentiated by farm size and farm type. This cost function, calibrated to match regional prices in England, is used to estimate the level of cross-subsidisation in the first full year after implementation of the SPS (2005/06). Results indicate that cross-subsidisation was occurring, which might infer that many farmers across England are coupling their payments. Whilst, these results are for the first year, and in that sense may reflect a transitional situation, they are nevertheless important because they provide empirical evidence to inform the discussion concerning the impact and future development of the SPS.


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