Category: Policy & Business

Metaldehyde Ban

Defra has announced a ban on the outdoor use of Metaldehyde across Great Britain as from Spring 2020.  The pesticide which is used to control slugs in a range of crops will still be available for use in permanent greenhouses.  The decision follows advice from the UK Expert Committee on Pesticides (ECP) and the Health and Safety Executive (HSE) that the product poses ‘unacceptable risk to birds and mammals’.

The outdoor use of Metaldehyde will be phased out over 18 months, it will be available for sale (for outdoor use) for a further 6 months and then allowed to be used for another 12 months.  In announcing the ban, Michael Gove said he had recognised the work the Metaldehyde Stewardship Group had undertaken to encourage responsible use by growers and gardeners, but the advice he had received was clear that the risks to wildlife are ‘simply too great’.

Brexit: More Tumult and Uncertainty

Brexit Options

To say the least, it has been a tumultuous month for Theresa May.  Despite reaching an accord on the Withdrawal Agreement and a Political Declaration on the Future Relationship with the EU in November, the Prime Minister’s plan has been faltering in recent weeks and culminated an eleventh-hour postponement of the meaningful vote on the proposed deal in Parliament on the 11th December.  Since then, she has overcome a confidence vote by Conservative MPs, but her position has weakened as a result. Following last week’s rebuttal at the European Council when the PM sought to obtain legal guarantees that the Irish backstop would only be temporary, there are serious doubts as to whether her proposed deal will be ratified by Parliament, even if the vote is delayed until mid-January.  In the House of Commons, there are now several schools of thought as to the end-point that the Government should seek in its relations with the EU.  These are summarised briefly below;

  1. No Deal –  the UK-EU relationship would be based on WTO Most-Favoured Nation (MFN) conditions.  As highlighted previously, this would mean tariffs on UK exports to the EU and would cause significant damage to agri-food trade both as a result of new trade barriers and the potential for the UK to unilaterally reduce tariffs on imports.  Some MPs are advocating a variant of this called a ‘managed No Deal’ where limited agreements with the EU are reached in areas concerning aviation for example.  This option is likely to lead to a significant economic shock both for agri-food and the economy generally.  It would also lead to a hard border in Ireland which would add a volatile political element to the economic uncertainty that would ensue.  Whilst a motion put forward by Dominic Grieve last month and approved by Parliament limits the chances of a No Deal, with time running out and current legislation still putting the UK on the course for No Deal as a default, the prospect of crashing out on WTO terms cannot be completely ruled out. 
  2. Canada ‘plus, plus, plus’ – leading advocates of this option include David Davis and Boris Johnson.  Whilst it would permit tariff-free trade in goods, non-tariff barriers would be a major issue particularly on the island of Ireland.  Therefore, without a backstop in place, the EU-27 will simply not agree to this.  Proponents of this arrangement have devoted scant attention to addressing Irish border concerns and the proposals they have put forward recently, which are closely linked with technology, have not addressed issues such as sanitary and phytosanitary measures which EU official controls law states requires controls at the border.
  3. The Withdrawal Agreement (with modifications) – this is what Downing Street is still aiming for but as alluded to above, the EU is lukewarm towards any modifications.  Whilst the EU-27 will countenance some ‘clarifications’ to the Political Declaration and backstop-related provisions of the Withdrawal Agreement (WA) in a separate document, it will not agree to re-opening the WA legal text itself.  Whilst this option would mean that the UK would lose its influence (vote) on EU regulations and as a result become a rule-taker, it would permit an open-border on the island of Ireland and would permit tariff-free goods trade between the UK and the rest of the EU.  As reported last month, it would involve some regulatory checks on GB-to-continental EU trade and would permit the UK to end free-movement, one of the key driving forces behind the Leave vote.  However, it is clear that the ‘indefinite’ nature of the Irish backstop is the major hurdle which many MPs object to.  That said, for the EU side, the backstop is seen as a vital insurance mechanism to apply ‘unless and until’ a better solution can be found to maintain frictionless trade on the island of Ireland.
  4. Labour Renegotiation – Labour has mentioned its ‘six-tests’ on numerous occasions which it would use to assess the Government’s deal, but these look to have been set-up from the start to reject any proposed deal that the PM put forward.  Labour appear to be proposing a Customs Union-type arrangement with the UK with a high degree of regulatory alignment (around Single Market matters) which it would see as obviating the need for a hard border on the island of Ireland.  However, Labour would seek a say on future trade deals that would be struck under this UK-EU Customs Union and it is also keen to curb free movement.  Once again, the EU is likely to have serious misgivings about these requests, particularly the latter as it would contravene its red line on the ‘indivisibility of the four freedoms’ (of the Single Market).  It is also likely that it would still insist on a backstop as an insurance arrangement.  Of course, for the UK itself, being locked into a (goods) Customs Union with the EU will limit its ability to strike free-trade agreements elsewhere as trade deals in Services tend to be very limited in scope.
  5. Norway ‘plus’ – as reported last month, this option has gained traction amongst some MPs and it is thought that some in Cabinet (e.g. Amber Rudd) would be in favour of it if Theresa May’s deal were to fail.  This arrangement would entail Norway’s EEA/EFTA model.  The ‘plus’ would involve agri-food and potentially a Customs Union (or ‘Single Customs Territory’) with the EU until alternative customs arrangements could be found to ensure that no hard border emerges in Ireland.  Of course, the big drawback with this option is that free movement would have to be accepted.  So, without some form of emergency brake being applied in the UK for a period of years, it will remain a challenge to get a majority in the House of Commons for this option.
  6. Remain in the EU – advocates of this option are calling for a second Referendum (‘People’s Vote’) and would involve withdrawing the Article 50 letter and remaining in the EU, subject to the Referendum ratifying that approach.  However, this option also has challenges.  Not least is what some perceive as the democratic deficit which would ensue if the 2016 result is overturned. Furthermore, there are also issues around what the question should be on the ballot paper.  Will it consist of some form of preference vote on three options (Deal, No Deal and Remain) as suggested by its lead advocate Justine Greening?  It would also likely lead to Brexiteers calling for a ‘best of three’ if Remain were to win. Of course, if a Leave option were to win, it would close the issue for a generation and society could at least move on and address other issues which badly require attention (housing, NHS, social care etc. etc.). 

It is clear that whatever course of action eventually gets chosen, difficult challenges will have to be overcome.  For more than two years, our Brexit articles have argued that judgement needed to be suspended until it was clear what a deal would entail, both in terms of Withdrawal but also in respect of the Future Relationship.  Whilst the current deal partially answers this question, insofar as it is clear what the backstop would involve, it is neither the UK’s nor the EU’s preferred option.  Parliament urgently needs to get its act together and work in the national interest to firstly coalesce on which option it would approve.  This will involve a deal of some description as there is simply not the will within Parliament for a No Deal. Options 2-5 above involve compromises and all arguably go against the ‘will of the people’ as expressed in 2016 in some form (e.g. continued acceptance of free movement, rule-taker, splitting the UK into two customs territories etc.).  However, with the result as close as it was in 2016, some form of compromise was always going to be needed.

Brexit – Key Dates in Coming Months

With all of the uncertainty at present, the following dates are worth bearing in mind as the Brexit drama unfolds;

  • Week commencing 14th January – the Government will bring the Withdrawal Agreement and Political Declaration before Parliament for a ‘meaningful vote’.
  • 21st January – deadline for the UK Government to have made a decision on whether to proceed with the PM’s deal.  If the Government has not presented the deal before then, powers for MP’s to influence Ministers’ next steps will kick-in.  Alternatively, if the Government is defeated on its meaningful vote deal, it would have 21 days to report back on what it believes the next steps should be based on the provisions of the 2018 EU Withdrawal Act.  If the Commons passes the deal, then the Government would put forward the EU (Withdrawal Agreement) Bill.
  • 11th March – according to some, this is the latest available date for the European Parliament’s vote on the Brexit deal, which is required before formal EU ratification.  The potential for an alternative special plenary session to vote on the Withdrawal Agreement cannot be ruled out either.
  • 21st – 22nd March – next European Council meeting and set to be the UK’s final Summit as a Member State.  It is at this point that a ratified UK-EU Withdrawal Agreement would be rubber-stamped.  Failing that, this would be the juncture that the UK could request a suspension, extension to, or revocation of, the Article 50 process.  The UK could also choose to delay its Article 50 notification at any time before 29th March.
  • Before 29th March – UK Parliament will have to pass the European Union (Withdrawal Agreement) Bill by this point, assuming that Parliament has approved it beforehand.
  • 29th March (‘Brexit Day’) – UK formally exits the European Union based on the current Article 50 timeline (at 11pm).  If a deal has not been ratified (by both UK and the EU) by this point, a No Deal would be the default as things stand.
  • After 30th March – assuming that the UK has an agreed Withdrawal Deal from the EU, fully-fledged talks on the UK’s Future Relationship with the EU could begin.  Until the UK has withdrawn, such formal talks are not permitted under EU law.
  • 18th April – last session of outgoing European Parliament.
  • 23rd – 26th May – European Parliament elections to take place across EU Member States.  If the UK decided to suspend/extend Article 50 in March, there are questions around what would happen to its representation at the European Parliament.
  • 2nd July – inaugural plenary session of the new European Parliament.  If Article 50 was delayed, and the European Parliament still had to vote on the Withdrawal Agreement, it would be after this point that a new vote could take place.

Thereafter, the next key dates to note are July 2020, by which point it is expected that a decision will be taken on whether the Irish backstop would apply, if the current Withdrawal Agreement were to be ratified. Alternatively, a decision could also be taken at this point to extend the Transition (Implementation) period which is due to end in December 2020.  For those who think that talk of Brexit would end on the 29th of March, there will be some disappointment as the process is set to continue on for many more years to come.

Farm Inspection and Regulation Review

Defra has published the final report from the independent Farm Inspection and Regulation Review.  The review, chaired by Dame Glenys Stacey, recommends a more ‘supportive, flexible and incentives-led approach’.  It recognises that mandatory rules have their place but are often ‘not the best approach’ and the current system is far too inflexible.  The review suggests that a more supportive and collaborative approach suits many situations and regulation should work ‘alongside the sector’ and only ‘flex its muscles’ when required.  The review makes a number of recommendations to achieve this:

  • The creation of a new independent Regulator as soon as possible to be responsible for detailed standard-setting and delivery
  • The regulatory system should bring about a culture change, so that instead of there just being a set of binding rules, the regulations also maximise opportunities to enhance the environment as well as reducing the risks of harm to it
  • The new regulator would offer practical advice, guidance and help to incentivise good practice, this could include Environmental Land Management scheme incentives
  • Decide whether it should be public policy to prevent those that consistently break the rules from applying for public funds, before the harms are dealt with
  • Consider whether, during the agricultural transition period, there should be specific financial incentives for those who need to sort out inadequate slurry storage
  • Ensure, where possible, that the regulatory requirements to support internal trade are not too constricting
  • Require the Regulator to report periodically on whether the government is meeting its stated priorities, also to develop measures so that farmers and the Regulator can track progress and areas of concern
  • Current arrangements for registering land parcels should be simplified as soon as possible and allow for the creation of a ‘single land-keepers’ register’ which will be held by the new Regulator
  • Simplify and standardise animal registration.  CPH numbers should be retained for disease control measures.  All poultry should be registered and a decision made as to whether South American camelids and horses should also be registered
  • During the transition to a new Regulator, the Government must ensure it retains enough field staff to be able to deliver its future remit and also to protect the country’s ability to detect and respond effectively to exotic animal diseases and improve TB controls.

The full report runs to 131 pages and can be found at https://www.gov.uk/government/publications/farm-inspection-and-regulation-review/farm-inspection-and-regulation-review-summary-and-recommendations.  The government will respond to the review in the New Year.

Farm Profits Down in 2018

UK farming profitability fell 15% in 2018 compared to the year before.  The forecast of Total Income from Farming (TIFF) from Defra puts the likely returns at £4,850m – a £861m reduction (at current prices) from the record £5,711m seen for 2017.  Whilst output was affected by the weather during the year – the cold, wet spring followed by the summer drought, the main cause of the fall in profits was higher costs.

TIFF is the total profit from all UK farming businesses for the calendar year.  It shows the return to all entrepreneurs for their management, labour and capital invested.  The first estimates of TIFF are usually published in the spring following the year in question.  However, Defra is required to provide the EU Commission with a forecast of farm incomes, so it has decided to publish this for the first time this year.  It does mean the announcement comes before all the information is available and thus the figure may be subject to some revision.  A more detailed ‘estimate’ for 2018 TIFF will be produced in May 2019 and then a final figure in November.

Interestingly, Andersons also produce an estimate of TIFF each autumn.  This is included in our Outlook publication (see here).  Our estimate (prepared completely independently) also has a TIFF for 2018 of £4,850m. 

Agriculture Bill

The Agriculture Bill passed the Committee stage in the House of Commons on the 20th November.  The next step in now the Report stage (date still to be announced).  The legislation also still has to pass through the House of Lords.  We will report on any amendments to the original legislation once the Bill has progressed through both Houses.  It is not clear when this will be.  The original plan was for the legislation to be completed early in the New Year, and at least before the Brexit day of March 29th.  It is possible that the Parliamentary timetable will not now allow this.  The Ag Bill is probably considered one of the less urgent pieces of legislation, so may get shunted down the list.  At some point in 2019 it is expected that Defra will issue a consultation on changes to the farm tenancy regime.  No radical changes are expected – more ‘tweaks’ to the present system to make it better fitted to a post-Brexit farming industry.     

ELMS Update

There is nothing concrete to report on the new Environmental Land Management Scheme (ELMS) as yet.  Our September article provided an overview of this, the replacement for the BPS in England.  However, Defra is undertaking significant work on the design of the new programme.  It has 13 separate ‘workstreams’ underway on different elements and external tenders have been issued for other projects.  The main point is that there is likely to be opportunities during 2019 (and beyond) for the farming sector to feed into this process and influence the design of the scheme.  The industry needs to take advantage of these to make sure that a practical and workable scheme results.

Farming Rules for Water

In last years’ December Bulletin we wrote about the new Farming Rules for Water which were to be introduced from April 2018.  Heading into 2019, this is an area that English farmers may need to focus more attention on.  So far, the Environment Agency has adopted a softly-softly approach to enforcement relying largely on advice and persuasion.  However, as the first anniversary of the regulations approach, the Agency is likely to adopt a stricter policy.  It is reported that, out of 50 farms surveyed in the South West, only one was fully compliant with the regulations.

Trade Update – TRQs Split and EU-Japan FTA

UK-EU Proposed TRQs Split

One of the (many) issues that the UK and EU need to agree on is the split of Tariff-Rate Quotas (TRQs).  These allow a set quantity agricultural goods into the Single Market with  a lower-than-usual tariff applying to them.  With the UK splitting from the EU, these quantities need to be apportioned between the two parties.  This is necessary whatever form Brexit takes – even under a ‘no-deal’ scenario there will be a requirement for the UK to have an agreed schedule of TRQs lodged with the WTO.

On 7th December, the Permanent Representatives Committee (COREPER) of the European Council approved the split of the current EU import TRQs between the UK and the EU.  Both the European Parliament and the Council needs to approve this ‘apportionment’ before the Regulation enters into force by publication in the Official Journal.  However, it is also important to emphasise that it is not just a matter for the European Union (EU-27) and the UK to approve these TRQ splits, as the eventual adoption of these new TRQs will be contingent on agreement amongst other WTO members, some have whom have already opposed the UK-EU’s suggested approach.

The tables below provide a summary of the proposed splits for selected TRQs. For each TRQ, the share has been calculated based on the imports over a “recent representative 3-year period”.  It should be noted that, for a given commodity (e.g. poultry meat), there are additional TRQs which have not been shown as there are over 160 TRQs which have been split in a similar manner.

In terms of meat, the New Zealand sheepmeat TRQ (228Kt) has been evenly split between the UK and the EU and this is reflective of historical trade patterns.  Interestingly, 80% of Australia’s sheep meat TRQ (19Kt) would be allocated to the UK.  The UK’s shares of poultry and selected pigmeat import TRQs are also relatively high and reflects the fact that UK is not self-sufficient in these areas.  The British share of beef TRQs varies quite significantly but historical trading patterns with the likes of Australia remain evident as is the case with dairy products.

Table A: Proposed UK-EU27 TRQ Splits – Selected Meat and Dairy Products

Source: COREPRER analysed by The Andersons Centre

For cereals the UK’s proposed TRQ share is relatively low for most of the commodities shown, the notable exception is malting barley.  The UK’s proposed share of sugar and wine imports is also substantial. Arguably, this could present difficulties for the UK sugar beet sector in the future, particularly if the UK seeks to boost trade facilitation arrangements with non-EU countries such as Brazil and Indonesia.

Table B: Proposed UK-EU27 TRQ Splits – Selected Cereals and Other Products

Source: COREPRER analysed by The Andersons Centre

However, attention will now move towards WTO members to ascertain the extent to which the proposals will be acceptable.  One anticipates that some countries will object as they will perceive that they are losing the ‘option value’ of sending products into either the UK or the EU-27 in the future.  It is therefore likely that they will seek expanded TRQs to compensate for this perceived loss.  Whilst the appetite amongst the EU-27 to do this might be lukewarm, the UK may adopt a different view, particularly if it helps to reach Free-Trade Agreements with these countries at a later date.

EU-Japan Free Trade Agreement

On 12th December, the European Parliament ratified the EU-Japan Free Trade Agreement which is the largest ever negotiated by the European Union.  As reported in the July edition, the EU claims that this agreement could lead to an increase in agri-food exports to Japan of around €1 billion with dairy exports projected to double and more than 90% of Japanese duties on imports of European food products to reduce by 90% on Day 1 of application (which is expected to occur in February 2019).  The Free Trade Agreement brings together the two major players in the global economy representing about one-third of global GDP and over 600 million people.

Of course, the extent to which the UK might benefit from this deal is highly questionable in the context of Brexit.  However, the UK is keen to pursue a Free-Trade deal with Japan in its own right and has mooted the possibility of joining the Trans-Pacific Partnership (TPP) which is a trade agreement covering 11 countries including Japan, China, Australia and Malaysia.  Although trade deals with such countries are a positive development, given the geographic distances involved, they are unlikely to compensate for a significant loss in trade which could occur with the EU in the event of a hard Brexit. 

RPA Update

The RPA has sent ‘An Update’ to its customers.  This provides information, not only on the BPS, but also the Countryside Stewardship (CS) and Environmental Stewardship (ES) which the Agency took administrative control over at the beginning of October.  The Update can be found at – https://www.gov.uk/government/publications/rural-payments-agency-update-winter-2018.  The key points in the update include:

BPS 2018

2018 payments and receipts for previous queries are being made during December.  If the payment is not what claimants are expecting they should wait until they receive their Claim Statement before querying a payment.  If claimants still do not agree with the amount they have been paid they need to fill out a BPS Payment Query Form. If a payment query form has been completed for a previous year, there is no need to send another for that year.  Although if a previous year’s incorrect payment is having a ‘knock-on’ effect to future years it would be sensible to include this information in the query form. 

BPS payments are making good progress and the RPA says it is on track to pay 90% of claimants by the end of the month.  But as always there are a few that take longer to pay, these typically include; businesses which have had an inspection, either remote or in person, cross border claims, those with common land and more complex claims.  Where a payment will not be made by the end of December the RPA will contact claimants by the end of the month to let them know.  Claimants are reminded they can track their claim by logging on to their account on Rural Payments.  Scroll down to ‘Basic Payment Applications’, click on ‘Apply for BPS’ and the status box progresses from Claim Validation, to Final Checking, through to Preparing for Payment.

BPS 2019

The scheme will run the same as for 2018.  There have been no changes to Greening, or any of the other rules.  The scheme Guidance will be published at the same time that applications open in the spring.  It is likely that the timings for 2019 applications will be broadly similar to last year.  The online facility to transfer land and entitlements should be available from late January or early February.  Actual applications should be possible through Rural Payments from early March.

Claimants who applied online last year will be informed via email when the application window opens.  Those that applied on paper will receive a paper application, this will be sent to agents if they hold the correct ‘BPS submit’ permission.

In addition, there are no changes to the Cross Compliance rules for 2019, which commence on 1st January.  The RPA has put a ‘Guide to cross compliance in England 2019’ on Gov.UK.  This can be accessed here.

Countryside Stewardship (CS)

A further round of applications to the CS will be available in the New Year.  The application dates have not yet been announced, but it seems likely that this will be in February of March.  We will keep readers informed when there is a formal announcement.  We do know that more will be available online this year.  Applicants will be able to;

  • request a Mid-Tier application pack
  • apply for all four Wildlife Offers (just Arable was available online last year)
  • print maps – Options, Farm Environment Record (FER) and Environmental Information Map (EIM) for applications to the Wildlife Offers
  • apply for CS Hedgerows and Boundaries
  • apply for CS Woodland Management Plan
  • complete CS annual revenue claims and capital claims for existing agreement holders.

Countryside Productivity

Although not included in the RPA’s ‘Update’, another scheme to prepare for is the Countryside Productivity Small Grants Scheme.  Another round of this is expected ‘early in the New Year’.  Although scheme details have not yet been announced, they is likely to be very similar to those under the previous round which was launched in February 2018. 

Glastir & Sustainable Production Grant

Cabinet Secretary for Energy, Planning and Rural Affairs, Lesley Griffiths, has announced an £80m funding package to extend Glastir and also fund further investments through the Sustainable Production Grant.  Funding of £62.9m has been allocated so that all existing Glastir Advanced, including any underlying Glastir Entry, Glastir Commons and Glastir Organic agreements will be extended until 2021.  There will also be another round of the Glastir Small Grants scheme.

A further £16m will be made available through the Sustainable Production Grant.  This will be to invest in equipment to protect water quality from agricultural pollution and improve nutrient management, in preparedness for the introduction of the new water regulations (see earlier article).  The Farm Business Grant will also continue and future rounds will be announced.

The aim is to give land managers some certainty and maintain the ongoing environmental management until the new Land Management Programme is available, together with improving farm productivity to support farmers through the transition post Brexit.