The RPA has confirmed 93.4% of eligible applicants received their 2018 Basic Payment by the end of December. According to the Agency, payments worth £1.57 billion were made to 78,787 applicants; the best performance since the BPS started in 2015. Payments continue to be made, those who have not received a payment in December have been written to and will be kept up-to-date. It is possible to keep track of a claim’s progress by going on to a claimant’s Rural Payments account, scroll down to Basic Payment Scheme Applications and click on ‘View a Previous BPS Claim’. The status moves from ‘Claim Validation’ to ‘Final Checking’ and finally ‘Preparing for Payment’. The RPA has said it is on track to complete payments ‘significantly ahead’ of the payment window deadline which is the end of June. Those who have not received their payment by the end of March will receive a bridging loan worth 75% of the estimated total value.
2019 Mapping
Some may have already noticed ‘Messages’ appearing on Rural Payments accounts notifying them of mapping changes. The RPA is currently undertaking its annual Proactive Land Change Detection (PLCD). This should be completed before the 2019 BPS application window opens. Although this may bring back bad memories for many, it is hoped that there should be far less alterations this year. Many will recall 2017 when there were about 1.2 million changes. However, the system hadn’t been updated for 3 years, the RPA now undertakes this annually, last year about 98,000 land parcels were altered and it is hoped this will reduce again this year. In addition, the digitisers have been instructed not to split or merge parcels unless requested, although it remains to be seen if this instruction is adhered to.
On 15th January, the Government suffered a historic defeat (by 230 votes) in its first bid to get Parliament to accept the Withdrawal Agreement and accompanying Political Declaration. As a result, the sense of chaos and uncertainty in Westminster has accelerated. Whilst it is clear that the Parliament does not want this deal (in its current form), what is not clear is what sort of deal there would be a majority for. The EU is clear that the ball is now in the UK’s court and the Prime Minister, assuming she wins today’s confidence vote, needs to set-out a plan by Monday. Following last month’s article, below is an update of the potential options available in the coming weeks and months. It is likely that a combination of these will be required.
Cross-party dialogue: this is the most obvious first-step that the Government needs to take and the noises from Downing St. suggest that it has already started to do this. However, such an approach does not have much chance of succeeding if additional options to the PM’s deal are not considered.
Indicative votes: have been suggested by several MPs as a means to break the deadlock as the votes would be non-binding. It would help to gauge what there could be a majority for in the House of Commons. The scale of the Government’s defeat on the Withdrawal Deal shows that another vote on the current deal has no chance of succeeding unless it can be changed fundamentally.
Renegotiate with the EU: on numerous occasions during the Brexit process Westminster has been operating in a silo and has not sufficiently considered the EU’s perspective in the negotiations. Whilst some form of Brexit might eventually emerge as a favoured arrangement within the House of Commons, it has no chance of succeeding without agreement by the EU. What is clear is that the EU will not back-down on the backstop and the UK Government’s strategy of trying to isolate Ireland has back-fired at every juncture. It is therefore clear that if the UK wants to dilute the backstop, which is detested by many in Westminster, a lighter form of Brexit will be required. Below are some of the possibilities available;
Norway Plus / Common Market 2.0 – both of these options are broadly similar and essentially amount to the UK being within the European Economic Area (EEA) similar to Norway. But, in addition, the arrangement would include agricultural products and the UK being part of a Customs Union. As mentioned previously, this option has gained traction but the big drawback is that Freedom of Movement would have to be accepted, and as this was a major reason for the Leave vote in the first place. It is unlikely to be favoured by many in the Labour party. Added to this, the UK would not have voting rights, would probably have to pay into the EU budget, and could not strike its own trade deals. Therefore, it continues to be very difficult to see this arrangement being successful without some form of emergency brake on immigration as a minimum, even then it presents grave difficulties.
Customs Union with the EU: this is the favoured option by the Labour party as it would go some way towards addressing the Northern Ireland border but would potentially curtail free movement. However, on its own, it would not prevent border checks on the island of Ireland as sanitary and phytosanitary (SPS) checks would still be required. Unless the UK could agree some form of regulatory equivalence agreement with the EU, of the kind that has never been reached before, then Brussels will continue to insist on a backstop. It would also mean an independent UK trade policy for goods would be largely redundant.
Free-Trade Agreement with the EU: an accord similar to the CETA agreement with Canada is championed by many Brexiteers as the panacea to the current impasse and they claim that it will also address the Irish border problem. A cursory assessment of the EU’s Official Controls Regulations (2017/625) would show that this is simply not the case, as SPS border controls would still be required on the island of Ireland. Such controls would of course be unacceptable to the DUP and the famed technological solutions are years away (and some doubt whether they are feasible at all).
Second Referendum: this is still the favoured option amongst many Remain MPs, however, as with all other options, there is not a majority in Parliament for this and the Labour leadership is lukewarm to say the least. Even if a majority of MPs decided on a second Referendum, the path ahead would be fraught with difficulties. Firstly, what question(s) would need to appear on the ballot box to reflect the now diverse range of opinions in the UK (from No Deal to No Brexit). Secondly, it could lead to social instability as there would be heated opposition in some quarters and would at least entail another six months of uncertainty. Some would argue that another Referendum, if framed correctly, could at least lead to a definitive answer (e.g. if Leave won, then the issue is dead for a generation). However, all indications suggest that it would be another close vote, and if anything has been learned in the last few years is that the British public do not want more of the same, no matter what the outcome is.
No Deal: continues to be the default option and with 72 days until Brexit, its likelihood increases by the day, particularly if the House of Commons does not pass a cast-iron guarantee that No Deal will not happen. As outlined in previous issues, a No Deal has the potential to severely damage UK farming, especially as it may well eventually encompass a liberal trade policy with respect to imports. On 16th January, the NFU has emphasised its view that a No Deal would be catastrophic for UK farming and most business associations agree with this view. From an Irish perspective, a No Deal also presents a major dilemma. If it does not introduce some forms of regulatory checks on produce coming in from the UK (including from Northern Ireland) in the event of a No Deal, then this may be viewed unfavourably by customers elsewhere in the EU and non-EU, who may in-turn place some additional controls on Irish produce. Such a development would have damaging ramifications for the Irish economy, whilst the re-introduction of a hard border would have severe social consequences. In such a situation, it is therefore likely that the Irish Government would first seek to introduce temporary measures along the border (citing safety concerns), similar to what was done during the foot-and-mouth crisis in 2001. It could potentially keep these for weeks if not months in the hope that a more sustainable Brexit outcome could be achieved. However, even such a temporary move is also likely to entail problems.
Extension to Article 50: all of the options set-out above contain unpalatable elements. With the time relentlessly ticking towards the 29th of March and numerous Bills and secondary legislation still required to be passed by the Commons, the prospect of an extension to Article 50 grows by the day. Rumours circulating in Brussels suggest that preparations are being made for a formal request by the UK for an extension and while a period of 3-months is doable (i.e. till early July) a longer period would present legal problems for the European Parliament if the UK is still a Member State and has no MEPs. Therefore, if an extension is to be accepted by the EU and its Member States, it will need to be coupled with a clear plan from the UK as to what form of Brexit or plan of action it could agree on which could be countenanced by the EU.
Overall, it now appears that an extension to Article 50 will be required and another attempt will be made by the Government to get some form of Withdrawal Agreement passed by the Commons. It would appear prudent to do this after indicative voting to discern what sort of a deal would garner a majority, bearing in mind what would also be acceptable to the EU. If the Government fails at the second attempt to pass a deal, much will then depend on Labour. If it attempts another confidence motion and loses, will it call for a second Referendum?
Many questions remain. All the while, agri-food businesses have to try and cope with all of the uncertainty which does not show signs of dissipating just yet.
The Department for Business, Energy and Industrial Strategy (BEIS) has launched a consultation on proposals for future low-carbon small-scale electricity generation. The scheme, called the Smart Export Guarantee (SEG) is intended to act as a replacement for the FiT export tariff. It was announced in December that the current FiT flat rate export tariff will close to new applications from 31st March 2019 (see December’s article https://abcbooks.co.uk/fits-closure/ ).
The consultation follows a ‘call for evidence’ from the Government back in July 2018, asking for information to identify the role small-scale low-carbon generation can play in maximising the advantages for the UK in the ‘global shift to clean growth’. Responses highlighted routes to market for exported electricity are limited and also have a bias towards larger generators. The consultation proposes introducing a mandatory supplier-led route to market. Through the SEG, government would legislate for suppliers to remunerate small-scale low-carbon generators for the electricity they export to the grid. The scheme would be open to all technologies currently eligible under the FiT scheme up to 5MW. The consultation document can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/769601/The_future_for_small-scale_low-carbon_generation_SEG.pdf. Responses need to be submitted by 5th March 2019.
Fergus Ewing, has announced two initiatives which aim to provide ‘stability and simplicity’ for the forestry sector during Brexit. The Scottish Rural Economy Secretary has already stated that the Scottish Government will aim to avoid major new initiatives and changes to existing schemes, during a ‘transition’ period, proposed to be until 2024. He has confirmed this will include the continuation of the Forestry Grant Scheme, but two new initiatives will look into ‘streamlining and simplifying’ the scheme. Firstly there will be a review into simplifying the application process, undertaken by the new CAP Simplification Taskforce. This will look into the process of claiming forestry Annual Recurrent Payments via the Single Application Form (SAF). In addition, the Forestry Commission Scotland Customer Reps Group, will be tasked with trying to find ways to encourage uptake of the scheme from small-scale landowners.
The Scottish Government has announced LFASS support will continue in 2020 but at a much reduced rate. Our article back in June (https://abcbooks.co.uk/lfass/) reported that it would be retained in 2019 at a rate of 80%, but for 2020, it would only be possible to pay 20% of the current LFASS rate if the switch to an Area of Natural Constraint (ANC) scheme has not been made. The European Commission recently announced a change to the Regulation, which allows the rate to be 40%. The Scottish Government has accepted this as a minimum. However, the Rural Economy Secretary, Fergus Ewing has met with Farm Commissioner Phil Hogan, and has submitted proposed amendments which will give more flexibility in setting the rates. He has also said, that work is already being undertaken to look at ways of bridging the funding gap if there are no amendments to the proposed rates.
Scotland has published a payment schedule for when CAP payments will be made to farmers and crofters in 2019 for schemes claimed for in 2018.
CAP Payments 2019 – Scottish Government
Scheme
Payments Commence
95% of Payments made by
BPS & Greening
March 2019
End of June 2019
Young Farmer
March 2019
End of June 2019
Coupled Support – Beef & Lamb
April 2019
End of June 2019
LFASS
April 2019
End of June 2019
Rural Priorities
May 2019
End of Sept 2019
AECS
May 2019
End of Sept 2019
Forestry Grant Scheme
May 2019
End of Sept 2019
Beef Efficiency Scheme
July 2019
End of Oct 2019
The aim is to give farmers and crofters some certainty as to when payments will be made, although the payment windows are pretty wide at 3-5 months and it may therefore be prudent to budget to receive the payment towards the end of the period. In terms of the BPS Payment and Greening, many will have taken up the National Loan offer and this will therefore effectively be just a balance payment.
Defra announced back in November that it would be launching a consultation on agricultural tenancy reform in January 2019. Due to the Brexit shenanigans, this may be delayed, but it remains on the table for early 2019. Some of the proposals, if agreed, would see some big changes, these include:
The right of Agricultural Holdings Act (AHA) tenants to assign their tenancies to another person for a fixed term of 25 years, at an open market rent
The right of AHA tenants to apply to arbitration to alter the terms of their Tenancy at any point
The removal of the Commercial Unit test used to determine succession eligibility for AHAs and the introduction of a business competency test
Ring fencing the financial charge Landlords’ make for the provision of new buildings and equipment, so it does not form part of the rent calculations
For long-term FBTs, there is a proposal to make dealing with breaches of condition or non-payment of rent easier.
We will report further once the consultation is launched and we have more detail on the proposals.
The Government has confirmed that the current Feed-in Tariff regime for renewable electricity will close for new applications as from the 31st March 2019. More details can be found at – https://www.gov.uk/government/consultations/feed-in-tariffs-scheme.
Just before Christmas, Defra issued a flurry of documents on environmental issues. First came a Resources and Waste Strategy for England (https://www.gov.uk/government/publications/resources-and-waste-strategy-for-england). This aims to make businesses and manufacturers pay the full cost of recycling or disposing of their packaging waste. Next there was the publication of an Implementation Plan for the National Pollinator Strategy (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/766200/nps-implementation-plan-2018-2021.pdf). This is an update of a programme first launched in 2014 and, as the name suggests, aims to improve the health of pollinating insects – particularly bees. Lastly, the Government has published draft clauses on environmental principles and governance which will be included in a new Environment Bill in 2019 (see https://www.gov.uk/government/news/new-environment-protections-set-out-in-flagship-bill–2?utm_source=eb052fd5-4072-4cbf-b5af-c184a373c987&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate). One of the key elements of the clauses is the introduction of a new Office for Environmental Protection (OEP) to uphold environmental legislation in the UK after EU exit.
Changes to the Scottish Land and Buildings Transaction Tax (LBTT) which will affect agricultural land were announced in the Scottish Budget held on 12th December. The changes which will be brought into force on 25th January 2019 will see amendments to the rates for non-residential properties and an increase to the Additional Dwelling Supplement.
For non-residential properties (including farmland) the rates for larger transactions have been increased from 4.5% to 5%. The new rates are:
LBTT rates from 25th January 2019 for Non-residential Properties
Purchase Price
Percentage
Up to £150,000
0%
£150,001 to £250,000
1%
More than £250,000
5%
The Additional Dwelling Supplement applies on Residential property. It was introduced in April 2016 and applied to the LBTT on the purchase of additional dwellings by individuals and also non-natural persons, i.e. companies. Originally the rate was set at an additional 3% this has now been increased to 4%.
There will also be increasing divergence in Income Tax rates between Scotland and the rest of the UK in 2019. Earlier this year, Scotland decided to implement different taxation bands with the introduction of a new starter rate (19%), 1% below the Basic Rate, and an increase in the Top Rate to 46%. The Scottish Budget included an announcement that the threshold at which the Higher Rate becomes payable in Scotland will remain at £43,430. In the rest of the UK, the Chancellor, Philip Hammond, has announced that the threshold (including the Personal Allowance), will rise to £50,000 from next April.
