Category: Policy & Business

Scottish Rural Economy Secretary, Fergus Ewing, has announced that the first tranche of 2018 BPS loan payments are underway and should reach bank accounts over the coming days.  Mr Ewing has urged those that have yet to respond to their loan offer letter to do so as soon as possible.  Furthermore, those that have yet to receive an offer will do so as soon, as all eligibility checks have been carried out on their claim.  This should be no later than 31st October.  Once accepted, the loan payment should be received shortly afterwards.

Under the loan scheme, farmers and crofters receive up to 90% of their estimated 2018 BPS payment (including Greening) via a nationally-funded scheme.  Balance payments will be paid in spring 2019, once the Scottish IT system has fully validated all claims and can obtain EU funds.  The National scheme has been in place for the last couple of years as the payment system has not been able to validate claims in time for payments to be made in a timely manner.

The Welsh Government has confirmed that the deadline for applications to the Farm Business Grant has been extended until 26th October 2018 (from 5th October).  In the announcement, Lesley Griffiths said she had taken the decision because, due to lack of clarity on future funding from the UK Government, this may be the last application round and she wanted to give farmers as much time as possible to apply.

The scheme provides support of up to 40% towards the cost of specific capital items which have been identified to improve the economic and environmental performance of agricultural holdings.  There are about 80 items which farmers can choose from which relate to one of the following themes:

• Animal health, performance and genetics
• Crop management
• ICT
• Energy efficiency, and
• Resource efficiency

Grants of between £3,000 and £12,000 are available.

A new Minister has joined the Defra team.  David Rutley, MP for Macclesfield, joins as a Parliamentary Under Secretary.  He will have responsibility for Brexit preparations, the food chain (including leading on the Food and Drink Industrial Strategy), animal welfare, forestry and climate change adaptation.  Before becoming an MP in 2010, Mr Rutley held executive positions in Asda, PepsiCo, Halifax Insurance and Barclays.

Fergus Ewing, Rural Economy Secretary for Scotland, has announced plans to establish a Task Force to produce measures which will simplify Scottish farm support payments from 2022 onward.  The Task Force will be led internally by Scottish Government staff but will also include external stakeholders and other contributors, in particular young farmers.  The announcement was made during a statement to the Scottish Parliament on the CAP, in which Mr Ewing renewed his requests to the UK Government to repay Scottish farmers the money the UK received from the EU under CAP convergence rules.  The Scottish Government has long argued that Scottish farmers are due £160m under these measures.

Feeding into future policy will be the recently-published report from the National Council of Rural Advisors (NCRA).  Titled ‘ A New Blueprint for Scotland’s Rural Economy’, it sets out a series of recommendations to the Scottish Government.  Its remit is far wider than just farm policy, as it aims to boost the whole rural economy.  As such, it does not set out any detailed proscriptions for agricultural support, but its themes may be included in future schemes – particularly those replacing the current SRDP.  The headline recommendation is that rural policy needs ‘mainstreaming’ – i.e. rural areas should not be sidelined with their own separate strategy, but instead should be seen as key contributors to the overall objectives of Scotland.  It is recognised that this will take a change of mindset and that an interim Rural Economic Framework (REF) should be implemented which will set out a new approach to rural development support.  The full report can be found at – https://beta.gov.scot/publications/new-blueprint-scotlands-rural-economy-recommendations-scottish-ministers/ .

Defra has announced the latest Financial Discipline Mechanism (FDM) reimbursement rate is 1.310%.  Any farmer with a 2017 BPS claim worth more than €2,000 will receive a reimbursement at the above rate from the 2016 FDM fund.  Payments will commence from early October.  The reimbursement is calculated by removing the first €2,000 from the 2017 BPS claim, less any further reductions (not including cross-compliance penalties) then multiplying by 1.310%.  The resulting amount is then reduced for any cross-compliance penalties received.

Each year the European Commission takes a percentage off the BPS budget to create a ‘crisis reserve’, known as Financial Discipline.  If this is not all used then it makes reimbursements to eligible farmers in the following year.  We are still waiting for confirmation of this year’s rate (see article on BPS conversion), it has provisionally been set at 1.42%.

BPS payments for 2018 will be converted at a rate of €1 = £0.89281.  This is 0.2% lower than last year’s rate of €1 = 89.47p.  The table below shows all the rates since the BPS was introduced in 2015.

This does not quite allow the final calculation of 2018 payment rates.  Entitlement values change on a yearly basis depending on the number claimed.  Also, the final rate of Financial Discipline needs to be set at EU level.  This has been provisionally announced at 1.42%, but could alter slightly.  None of these factors are likely to change payments a great deal.  Therefore, the estimated rates set out in Key Farm Facts for 2018 are likely to be fairly close to the amounts actually paid. 

The Government has announced that the date of the Budget will be brought forward so that it does not clash with the final negotiations on Brexit.  Chancellor Philip Hammond will set out his financial plans on the 29th October.

The latest release from the RICS/RAU Rural Land Market Survey shows land prices still edging up, although this appears to be masking a polarised market.  Anecdotal evidence suggests that high quality, well equipped land in a good location is still sought after, whereas land of lessor quality is selling at much lower prices or remaining unsold and therefore not included in the headline figures.  According the opinion-based measure in the Survey, land prices edged-up 1.5% in the first half of 2018 compared to the second half of 2017, to a value of £7,542 per hectare.

The outlook remains cautious; the supply of land has remained stable, however demand is expected to soften further as buyers wait for some clarity in the industry as uncertainties surrounding Brexit continue.  Contributors’ future price expectations are more pessimistic compared to the previous report, with a net balance of -23% expecting prices to decline over the coming year, compared to -13% previously.  The chart below shows the two measurements of average farm land values in England and Wales.  The opinion based measure, is a hypothetical estimate by surveyors of bareland prices excluding the residential component.  The transaction based measure, includes land sales with a residential element, as long this is estimated to be less than 50% of the total sale.

The survey also reports on rents which have remained pretty stable over the first half of the year, with full Agricultural Holdings Act rents seeing a marginal decline for both pasture and arable rents.  FBT rents showed a small increase for arable land whereas pastureland rents remained the same.  The table below summaries the weighted averages.

Events of the last month seem to have made the prospect of a No-Deal Brexit more likely.  As outlined previously, the consequences of this for UK agriculture would be severe.

Firstly, the Prime Minister Teresa May appeared at a summit of EU leaders in Salzburg to argue the case for the UK’s proposal for a Future Relationship – the so-called ‘Chequers Plan’.  The reaction of the European leaders could be described as ‘lukewarm’ at best.  It appears that the proposals would require significant amendments to be acceptable to the EU; amendments that would be hard to sell to the Mrs May’s own Party.

The UK Government continues to publish its Technical Notes on No-deal Planning (see last month’s article for more detail).  Part of the reasoning behind this appears to be to make a convincing case to Europe the EU has a ‘Plan B’ and could and would walk away from a bad deal.  Unfortunately, at present, the EU does not seem to be buying it.  It believes it has a strong negotiating hand, can stick to its agreed positions, and does not need to compromise. 

Secondly, the Labour Party conference saw an announcement that the Party would be almost certain to vote against any deal that Teresa May negotiates if it is based on the Chequers blueprint.  This seems a naked political calculation, as the hope is that the Parliamentary rejection of a Brexit deal will lead to a General Election which the Labour Party is obviously hopeful of winning.  With a group of fundamentalist Conservative Brexiteers also likely to vote against any deal, then the Parliamentary arithmetic is looking shaky for the Prime Minister.

The Labour Party also opened the possibility that it would back a second referendum to break the deadlock in Parliament if necessary.  The momentum for a ‘peoples’ vote’ seems to be growing.  Quite how this could be accomplished with the clock ticking down to 11pm on the 29th March 2019 is not clear. 

As we approach the final few days of September, the average £/€ exchange rate for the month is looking very similar to that of last year.  Most readers will be aware of the significance of this as the average £/€ exchange rate during September sets the BPS conversion rate for that year.  The conversion rate for the 2017 BPS was €1 = 89.47p.  We should know the rate by close of play on Friday 28th, as the last day of September falls on a Sunday and the average is done of the rates prevailing on working days.