Category: Policy & Business

Cuadrilla Gets Fracking Greenlight

Cuadrilla Bowland Ltd has been given the go ahead to begin fracking.  The Energy and Clean Growth Minister, Claire Perry, has granted Hydraulic Fracturing consent for the shale gas operator, to drill shale rock at its Preston New Road site in Lancashire, subject to certain ‘financial health’ conditions being met.

Brexit Update

In what is becoming a familiar trend, the Brexit process is becoming increasingly turbulent with civil war in the Conservative party and the stakes being raised in negotiations with Brussels over the prospect of a ‘No Deal’ Brexit.

The publication of the Chequers White Paper changed the dynamic with Brussels insofar as there was finally a detailed paper on the table which the EU could negotiate on.  However, the sands have shifted in Westminster yet again following last week’s Commons debate on the Customs Bill.  Four key amendments were tabled by Conservative Brexiteers which are seen by some as an attempt to undermine the Chequers White Paper:

  1. Customs Duties’ Collection – bans the UK Government from implementing its plan to collect EU customs duties after Brexit unless the EU agrees to collect tariffs on behalf of the UK. The EU has already made it clear that it would oppose such an arrangement, something which is already conceded by the UK Government in its White Paper.
  2. New Customs Union with the EU – prevents the UK from entering into a post-Brexit customs union with the EU, without introducing a specific new piece of (primary) legislation.
  3. VAT regime – requires the UK to operate a separate regime to the EU.
  4. Northern Ireland – makes it illegal to have a customs border within the UK, thus seeking to rule out a hard border on the Irish Sea between NI and GB.  The Prime Minister has already made this commitment, as the UK Government’s opposition to the EU’s proposed backstop is well known. Notably, this amendment did not preclude a regulatory border as Northern Ireland already operates within a separate epidemiological area to the rest of the UK.

Of the four amendments, those relating to customs duties and VAT are the most problematic.  On customs, Downing Street is maintaining that the approach is consistent with its White Paper because it envisages that money from tariffs will flow both ways.  However, the White Paper has not provided much detail on how this would work aside from a vague reference to using a formula to govern flows of money based on trade patterns between the UK and the EU-27.

The situation regarding VAT is potentially more serious as it withdraws the UK from the EU’s VAT administrative system.  This could mean that authorities would have to impose a hard border to check if the proper tax has been applied to goods crossing the border.  This will be most problematic on the island of Ireland where there is a 500 kilometre land border.  If the UK chose not to impose a hard border, it would be exposed to massive fraud (smuggling) and tax evasion.  One possible way to negate this is for the Government to seek agreement from the EU to UK participation in its VAT information sharing arrangements, which would need new parliamentary legislation and would add further complexity, particularly because the EU would likely insist on ECJ oversight.

Although the four amendments complicate an already fraught position for the UK, the reality is that the Chequers White Paper is more of an opening gambit in the negotiations with Brussels.  What is crucial for the UK now is to increase the pace of the negotiations with Brussels and to pay attention to the sequencing which it has already agreed.  This requires the UK and the EU to firstly agree a Withdrawal Agreement, a legally binding treaty, which will include a backstop on Ireland.  This will also be accompanied by a Political Declaration setting out the future direction of the UK-EU relationship.  The details underpinning the future relationship would then be negotiated and agreed during the transition period.  Undoubtedly, the UK-EU negotiations are going to require further compromises.  If the terms of the negotiated deal go against existing domestic UK legislation, then the British Government will simply have to change the legislation.  So, in other words, the four amendments and key elements of the Chequers White Paper could be overturned at a later juncture if required.

That said, as the stakes get higher in the negotiations, the chances of a No Deal (whilst still less likely than a negotiated settlement) increase.  It is prudent that agri-food businesses start seriously planning for the prospect of No Deal.  At the business level, steps to consider include:

  • Contingency stocks – there is increasing evidence that businesses are starting to build contingency stocks to smooth over extra delays which could result from border checks being re-imposed.
  • Training – boost efforts to train-up staff on customs and official controls issues and procedures which must be followed if the UK is trading with the EU as a third country under WTO trading conditions.  Some of this knowledge is likely to be useful anyway once the eventual UK-EU trading relationship is finalised and will be applicable for businesses seeking to expand markets beyond the EU.
  • Licensing – ensure that UK businesses have undertaken the steps necessary to ensure that they can continue to export to the EU-27.  This could include providing proof of previous trade with EU Member States.
  • Mitigating tariffs – most businesses by now should know what the default EU Common External Tariffs are for the products they supply into the EU.  What is perhaps less well-known are the Tariff Rate Quota (TRQ) options potentially available to mitigate the impact of tariffs.  It should be noted that the TRQs available to the UK are limited and British businesses would be competing with other countries for access.
  • Managing cash flow – if UK businesses need to start lodging securities (e.g. licensing securities) with EU-27 authorities as well as potentially paying VAT on cross-border consignments, then cash flow will have to be carefully managed, particularly if goods are delayed in transit and payments by customers get delayed.

For policy-makers, actions to consider to help businesses would include:

  • Recruiting additional customs and border control staff – the UK Government has already started this process but faces competition from the likes of the Netherlands and Ireland which are increasing their recruiting efforts significantly.  In addition to customs staff, the need for veterinary staff is evident.  Incentives to encourage veterinarians working in small animal veterinary practices to assist with implementing official controls should be considered, even if they work on a part-time basis.  As in parts of the US, programmes to part-subsidise tuition fees for veterinary students if they commit to a period (e.g. 5 years) of working on border controls or associated duties in meat plants should also be examined.
  • UK-EU TRQs – given that the close historic trading links between the UK and the EU, a case should be made to the WTO to introduce new UK-EU TRQs that would reflect the historical trading patterns between both parties in the event of a No Deal.  Whilst this would not eliminate friction, it would go a long way in addressing tariff-related issues that could arise whilst simultaneously protecting farming livelihoods.  Admittedly, there may be some opposition within the WTO on this, but it is worth pursuing given the potentially exceptional circumstances of a No Deal Brexit.
  • Official controls and associated checks – given that UK and EU standards would essentially be the same on Day 1 of Brexit, there are grounds for UK exports having a lower frequency of physical checks for products of animal origin (e.g. 1% for sheep meat) than the EU’s default rates (20% for sheep meat).  Currently, New Zealand enjoys a 1% physical check rate given its closeness to EU standards, so there is a precedent.  This would work in both directions UK-EU and EU-UK as long as standards didn’t diverge and would help to lower the regulatory burden considerably.  This arrangement could also include reciprocal recognition of existing UK (and EU) licenses and authorisations so that existing trading patterns could continue and upheaval is lowered as much as possible.
  • EU-27 employees – grant all existing EU-27 citizens and residents in the UK something akin to settled status.  This will require clear and rapid communication to them, to their employers and their landlords to clarify their rights and obligations.  This would at least give businesses some degree of certainty that existing employees could continue to work in the UK whilst giving workers and their families the peace of mind they require to continue to be productive.

It is worth emphasising that the likelihood of a No Deal scenario is still relatively low and that an extension of the Article 50 process (of around 3-4 months) is deemed by experts in Brussels and elsewhere as being more probable if a negotiated deal was not reached in the time available.  However, as an industry which has been through many crises in the past, it is always prudent to prepare for the worst case scenario whilst striving for the best outcome possible.

EU/Japan Economic Partnership

On 18th July, the EU-Japan Economic Partnership Agreement was signed in Tokyo, thus finalising negotiations on a major new free-trade deal for Europe.  The EU Commission is claiming that this is another major success and pointedly mentions that it is a powerful signal that cooperation, not protectionism, is the way to tackle global challenges.  The deal still needs to be ratified by EU legislatures over the coming months.  Key points include:

  • Bilateral trade – offers substantial opportunities to further expand EU’s exports to Japan, estimated at €86 billion per annum (€58 billion for goods and €28 billion for services).
  • Customs duties – the deal seeks to remove €1 billion worth of duties which affect both European exporters and consumers.
  • Agri-food trade – the EU claims that its exports of processed agri-food to Japan could increase by more than half (circa €1 billion increase), with dairy exports potentially doubling.  The agreement will see Japan eliminating duties on more than 90% of EU agricultural exports from day one.  Current Japanese tariffs on EU food and drink products are 38-40% for cheese and 38.5% for beef.  For products that are too sensitive for Japan to remove duties completely, duty-fee quotas or reduce duties for EU produce will be increased.
  • Geographical Indications (GIs) – the EU wants Japan to recognise 205 GIs, so that only products with this status will be allowed to be sold in Japan under the corresponding name.  This list includes Scottish Farmed Salmon, West Country farmhouse Cheddar cheese, White Stilton cheese / Blue Stilton cheese and Scotch Whisky.
  • Food standards – the EU will continue to have the right to apply the precautionary principle and will apply its own standards to all goods and services sold in Europe.  For example, any food, clothing, or cars coming from Japan to the EU must respect all EU rules.  The deal also permits the EU to set higher standards for product or food safety, and higher levels of protection for labour or the environment, if it so wishes. T his, once again, emphasises the EU’s determination to continue to uphold its standards when trading internationally and is a signal to the likes of the US that the EU will not accept lower standards with respect to agri-food.

Whilst all of this sounds positive, from a UK perspective the big question concerns Brexit and whether the UK agri-food industry will see any benefit.  Central will be the eventual agreement which the UK strikes with the EU on its future relationship. The fact that some UK GIs are included in the list can be seen as a positive and, provided that the UK and the EU can agree a transition that gives the UK equivalent rights as present, implies that it would continue to benefit from such trade deals – at least during the interim.

What happens thereafter is highly questionable.  Japan has been unusually vocal in urging the UK to minimise any trade disruption arising from Brexit.

An overview of the EU-Japan Economic Partnership is available via: http://ec.europa.eu/trade/policy/in-focus/eu-japan-economic-partnership-agreement/

A chapter-by-chapter breakdown of the deal is available via: http://trade.ec.europa.eu/doclib/press/index.cfm?id=1684   Please note that the Trade in Goods chapter alone is over 500 pages long, and makes for pretty heavy reading!

Brexit: Future Relationship White Paper

Following on from last week’s negotiating proposals supposedly agreed by the Cabinet at Chequers, the UK Government published, on 12th July, its long-awaited White Paper setting out its detailed vision on the future UK-EU relationship.  The 98-page document has received a cautious welcome by the EU-27 who are mindful of the deep divisions within the British Government.

In the White Paper, the UK Government is essentially seeking an ‘association agreement’ with the EU of unprecedented scale and depth so that the UK can achieve a ‘principled and practical Brexit’ which respects the referendum result and simultaneously acknowledges the deep trading relationship between the two parties.  The key points from an agri-food perspective are set out below;

  • Frictionless trade for goods: at the border between the UK and the EU.  This encompasses the establishment of a free trade area for goods as a means to protect the deeply integrated supply chains and ‘just-in-time’ processes developed over the past 40-plus years.
  • Common Rulebook for goods including agri-food: would seek to avoid customs and regulatory checks at the border but would only cover ‘those rules necessary to provide for frictionless trade at the border’.  The White Paper identifies three broad categories of rules relevant to agri-food and fisheries:
    1. Sanitary and Phytosanitary (SPS) rules – would be included in the common rulebook.  Linked with this, the UK would ‘make an upfront choice to commit by treaty to ongoing harmonisation with the relevant EU rules, with all those rules legislated for by Parliament or the devolved legislatures.’
    2. Rules relating to wider food policy – this would include marketing rules that determine how agri-food products can be described and labelled.  As these do not need to be checked at the border they would not be included in the common rulebook.  Geographical Indicators (GIs) (e.g Stilton cheese and Melton Mowbray Pork Pies) would also be included in this category and the UK will be establishing its own GI scheme after Brexit in accordance with WTO rules.  As part of this, the UK would open its GI scheme to both UK and non-UK applicants.
    3. Agricultural and Fisheries Policies – as previously communicated, the UK will leave both the CAP and the Common Fisheries Policies, thus enabling it to pursue domestic policies which best serve the UK’s interests.  Thus, these rules would not be included in the common rulebook. For fisheries, the UK is proposing annual negotiations with the EU on access to its waters.  Some EU Member States will have significant concerns about this.
  • Facilitated Customs Arrangement (FCA): would seek to ‘remove the need for customs checks and controls between the UK and the EU as if they were a combined customs territory’.  The Government claims that it would enable the UK to control its own tariffs for trade with the rest of the world.  For businesses this would mean;
    • where a good reaches the UK border, and the destination can be robustly demonstrated by a trusted trader, it will pay the UK tariff if it is destined for the UK, and the EU tariff if it is destined for the EU.  This is most likely to be relevant to finished goods; and
    • where a good reaches the UK border and the destination cannot be robustly demonstrated at the point of import, it will pay the higher of the UK or EU tariff.  Where the good’s destination is later identified to be a lower tariff jurisdiction, it would be eligible for a repayment from the UK Government equal to the difference between the two tariffs. This is most likely to be relevant to intermediate goods.

The UK Government claims that up to 96% of UK goods trade would be able to pay the correct or no tariff upfront, with the remainder most likely to use the repayment mechanism.  This is in effect combining the Customs Partnership and ‘Max-Fac’ proposals in the last year’s paper, both of which were rejected by the EU.  There was an acknowledgement by the UK that this system would become operational in stages as both sides completed the necessary preparations.  Given where the infrastructure is currently at, this process could take several years.  The UK Government has already stated that it envisages the UK remaining part of the EU Customs Union for a year after the end of the Transition Period.  This may well get extended.  It is unclear what ability the UK will have to strike Free-Trade Agreements (FTAs) with other countries whilst it remains within the Customs Union.

  • Rules of Origin: agreement not to impose tariffs, quotas or routine requirements for Rules of Origin on any UK-EU trade in goods.  This would allow EU content to count as local content in UK exports to its FTA partners for Rules of Origin purposes, and UK content to count as local content in EU exports to its FTA partners.  ‘Diagonal cumulation’ would allow UK, EU and FTA partner content to be considered interchangeable in trilateral trade.
  • Trade with non-EU countries: the UK’s claims that the FCA will enable it to strike Free Trade Agreements with non-EU countries as the UK will have its own schedule with the WTO.
  • Participation in EU agencies: UK would seek continued participation in agencies which facilitate goods being placed on the EU market but conceded that it would not have voting rights.
  • State Aid: the UK would continue to apply the EU’s State Aid rules via a common rulebook. Although elsewhere in the document, the Government is seeking to reserve its right to make its own arrangements regarding tax. As highlighted in a recent article, there were questions about whether there would be limits on the UK implementing agricultural policy tools such as tax deposit schemes (e.g. similar to the Australian Farm Management Deposit Scheme) which do not comply with EU State Aid rules. This is an area that will require clarification, potentially via the Agriculture Bill due later in the year. 
  • Maintain high standards in environment, employment and consumer protection rules: includes ‘non-regression provisions’ to ensure that current high standards are maintained by the UK.
  • Northern Ireland/Ireland: taken together, the UK Government believes that its proposals (including the points set out above) would see the UK and the EU meet their commitments to Northern Ireland and Ireland through the overall future relationship.  It claims that this would preserve the constitutional and economic integrity of the UK, honour the letter and the spirit of the Belfast (‘Good Friday’) Agreement and ensure that the ‘backstop’ solution of the Withdrawal Agreement will not have to be used (i.e. Northern Ireland remaining in the Single Market).  The Irish Government in particular has responded positively to this as it is also seeking to resolve the frictionless border riddle via the overall UK-EU relationship.  However, the UK Government’s proposals are arguably narrower than what was envisaged in the December Joint Report which contained commitments on protecting the all-island economy and North-South cooperation. The latest UK proposals are very much focused on goods trade only (i.e. services are omitted). 
  • New Joint Institutional Arrangements: these are required to manage the future relationship in key areas such as the common rulebook, including a clear process to update relevant rules in a manner that respects the UK’s sovereignty and provides Parliamentary scrutiny.  This will include regular dialogues at leader (PM) and Ministerial levels.  There would be a Joint Committee to discuss and interpret regulations as well to resolve disputes which may arise.  At times, such disputes could be resolved via a binding independent arbitration.  These bodies would have oversight by the European Courts of Justice (ECJ) as the interpreter of EU rules, but only the UK courts (whilst giving regard to EU case law) could give judgements on rules which apply to the UK.  Here, the UK is effectively conceding that in areas where it commits to adhering to the common rulebook, the ECJ would (indirectly) hold sway. 
  • End to Free Movement: however, the UK proposes introducing new frameworks which would enable ‘UK and EU citizens to continue to travel to each other’s countries and businesses and professionals to provide services’.  In agri-food, the provision of services associated with the supply of input equipment for example, is an important consideration and whilst the UK proposals imply that such arrangements could continue along much the same lines as present, questions remain about the extent to which this will be the case. 
  • Mutual recognition of professional qualifications: including for those working in the veterinary and agri-food sectors.  The extent to which this includes low or unskilled workers remains to be seen and is unlikely to be clarified until the Migration Advisory Committee (MAC) publishes its report in September

The white paper is available via: https://www.gov.uk/government/publications/the-future-relationship-between-the-united-kingdom-and-the-european-union

Whilst there has been a polite initial response from the EU, the proposals are likely to raise several objections from their side including:

  • Indivisibility of the Single Market:  the EU will fundamentally object to the UK wanting to remain in the Single Market for goods, without accepting the EU’s rules on freedom of capital, services and movement.  This separation, combined with the potential for divergence in areas not covered by the common rulebook, could give the UK competitive advantages in years to come and could undermine the rationale for EU membership by others.  This could potentially include the protection currently afforded by GI designations to EU-27 brands (e.g. Parmesan cheese) sold to the UK if the UK decided not to continue with existing GI legal protections.
  • Trade with non-EU countries: whilst the proposals focused heavily on tariff-free access between the UK and the EU, the UK wants to reserve its right to do free trade deals with other countries, potentially including agri-food products.  Whilst the UK’s participation in a common rulebook for agri-food trade would limit the scope for cheap imports, there is still a possibility that such trade could significantly displace EU exports to the UK, if third countries met the standards required.  This would have an onward impact on domestic prices in the EU-27.  The EU is expected to push-back strongly on this to curtail any potential displacement.
  • Complexity and cost: the UK’s proposals amount to an elaborate set of mechanisms to replicate its current access to the EU across a wide variety of areas.  To some, it is akin to the arrangements between the EU and Switzerland which Brussels is keen to rationalise.  Therefore, the EU is likely to have serious reservations about the creation of new frameworks adding yet more complexity to what is already and intricate tapestry.  There is little detail in the White Paper as to how much all of this will cost, but one can anticipate that the EU will expect the UK to bear a substantial proportion of any funding involved.

Whilst many questions remain unresolved, the UK Government’s White Paper provides a credible starting point for the substantive negotiations with the EU to take place.  These need to be urgently accelerated as there is a huge amount of ground to cover between now and the autumn.  For the agri-food sector, the commitment to ‘ongoing harmonisation’ via a common rulebook for agri-food trade should provide some welcome reassurance for the industry generally, particularly those which are heavily dependent on EU export markets.  Furthermore, given President Trump’s claim that the UK proposals would likely ‘kill’ the prospect of the US-UK trade deal, this may also be seen as a positive by those concerned with the potential for cheaper imports to undermine UK farming.  That said, a lot of uncertainty remains especially given the principle that ‘nothing is agreed until everything is agreed’.

Farm Regulation Review

The regulation and inspection of farms in England could see a big shake-up if the recommendations of a review currently underway are accepted by Government.   This could include a new over-arching regulator and the licencing of farms to operate.

The Farm Inspection and Regulation Review was launched in March and is being led by Dame Glenys Stacey.  It is due to present its findings by the end of the year, but has recently published an interim report.  In terms of the current arrangements, Dame Glenys seems unimpressed.  The report finds that the rules and standards faced by agriculture are complex and confusing; deriving from a vast number of pieces of legislation.  The inspection regime was not found to be excessive compared to other industries.  However, most farm visits are not ‘inspections’ as would be widely understood – they are often for a single purpose rather than a ‘holistic’ overview of the entire farming operation.  Much of the inspection landscape is skewed by the enforcement of CAP schemes.  Of course, with Brexit, there is an opportunity to start afresh in terms of regulating agriculture.  A new regime is proposed by the report with the following features;

  • there should be a single Regulator for the farming industry (OfAg?).  This would have its own skilled field force to inspect and regulate.  Some inspections could be contracted-out to third parties (i.e. making more use of existing farm-assurance arrangements)
  • standards should be simplified and it should be made plain to farming what is required of it.  The industry should play a part in setting these standards so that it has ‘ownership’
  • a range of approaches is needed – with a mix of ‘carrot’ and ‘stick’, and an ability to have a proportionate sanction for non-compliance (at present, there is often little middle ground between doing nothing and bringing a criminal prosecution)
  • the use of registration or licencing of farms (or activities) should be expanded.  This allows the regulator to both know where activities are being carried-out, and gives them a sanction in the form of the withdrawal of the licence
  • farms should be assessed periodically (the implication is that some farms may actually be inspected more often than at the moment – indeed, the document states “enforcement should be ramped-up”).  However, the inspection/assessment should be ‘supportive and holistic’ trying to drive improvements rather than ‘catch farmers out’
  • a farm rating system should be considered.  It is stated that “ratings could drive improvements and offer market value to the farmer”
  • as ever, the use of technology is heralded as a way of making the process more efficient.

The full interim report can be found at – https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/724785/farm-inspection-review-interim-report.pdf

 

Environmental Stewardship Payment Update

We have written previously about the delay in payments to ES agreement holders.  The expectation was that all 2017 payments would have been completed by the end of June, but this has not been the case.  New payment targets will mean that some will still be waiting until October, or even beyond.  Natural England has said it aims to have made advanced payments to 95% of 2017 ES claimants by 15th August and 98% of final payments by 15th October 2018; nearly a year and a half after they submitted their claim.  The payment schedule is meant to be 75% of the value by December in the claim year and the remaining 25% by the end of June in the year following.  Payments under these agreements are calculated on income foregone and therefore by their very nature, this will mean that agreement holders are waiting for money that they will have already spent on capital items or environmental management practices that they have had to follow as part of the requirements of their scheme agreement.

 

 

Hot Weather Stewardship Derogations

England

Natural England has received a number of requests for derogations due to the hot and dry weather, particularly to cut hay earlier than agreements allow due to early ripening.  In situations where agreement holders are unable to meet the requirements of their agreement they can request a Derogation under Environmental Stewardship or a Minor and Temporary Adjustment (MTA) under Countryside Stewardship.  Application forms are available on the Gov.UK website, but Natural England must give a derogation or MTA before agreement holders can make changes to their agreement.

Wales

Meanwhile in Wales, RPW has given a blanket derogation to allow the immediate cutting of hay meadows under Glastir options 22, 122, 124, 126, 130 and 166.  There is no need to contact RPW in these circumstances; just ensure farm records are kept up-to-date.  The derogation allows contract holders to cut only – as long as all other requirements are adhered to their Glastir payment will not be affected.  Where the delivery of other Glastir options is being affected by the weather, contract holders must contact RPW either in writing or through their RPW Online account, detailing why they are unable to carry out the requirements of the option.  Requests for these derogations will be considered on a case-by-case basis.  Where a derogation is granted, contract holders will not be paid for that option in 2018, but they will not receive penalties.

Welsh Post Brexit Consultation

The Welsh Government has joined those from Scotland and England in publishing its ideas for supporting agriculture after the UK leaves the European Union.  Following the recent trend for flowery titles, the consultation is called ‘Brexit and Our Land: Securing the Future of Welsh Farming’.  It runs until the 30th October and can be found at – https://beta.gov.wales/sites/default/files/consultations/2018-07/brexit-and-our-land-consultation-document_0.pdf

The proposals are based on the five core principles set out by the Welsh Government back in March.  All current CAP schemes would be replaced by a Land Management Programme which would have two main elements;

  • Economic Resilience Scheme – to promote the efficient production of food and timber
  • Public Goods Scheme – as the name suggests, to pay land managers to deliver public benefits where there is no market mechanism

Turning to the first of these, the Economic Resilience Scheme would not just be for primary producers but would aim to make a difference right along the food (or timber) supply chain.  Although there is only a broad outline at present, funding under this heading looks to be in the form of one-off, or time-limited payments such as grants, loans and guarantees – i.e. there would be no long-term ‘income support’.  Five areas have been highlighted for intervention;

  • increasing market potential – this aims to grow and improve the market for Welsh produce with higher demand/prices flowing down into improved farmgate prices.  It will involve the promotion of the Welsh food ‘brand’ at home and abroad.  There will also be measures to improve the efficiency of the supply chain and greater collaboration
  • improving productivity – will cover ‘on-farm’ improvements such as infrastructure grants, tackling animal health and disease, the application of new technology and data, and farm skills
  • diversification – both capital grants for projects, and support and advice
  • risk management – improving business skills, greater collaboration for better resilience and potentially government initiatives to deal with market volatility
  • knowledge exchange, skills and innovation – which could include a farmer CPD scheme

The Public Goods Scheme is highlighted as offering a ‘new income stream’ for farmers and land managers.  It is specifically highlighted that payment rates need to be higher than the ‘income foregone’ model seen under current CAP agri-environment schemes.  Land managers will be paid on the outcomes they can deliver for society in the following areas;

  • decarbonisation and climate change
  • habitats and ecosystems
  • flood risk reduction
  • air and water quality
  • soil conservation
  • heritage and conservation

Again, there is little more than broad principles, with the scheme still being designed.  However, multi-year contracts look likely, with some sort of premium if groups of land managers work together to deliver ‘scale’ in agreements.

Alongside the support schemes ‘regulatory simplification’ is also promised.  A ‘step change in the advice offer’ is also highlighted to give farmers support as they make important decisions about the direction of their businesses in the post-Brexit landscape.  This looks set to build on the current Farming Connect programme.

In terms of getting to the new system, a transition much like that in England is proposed.  The 2019 year will see the BPS operate as it does currently.  Then, from 2020, direct support will gradually be phased-out with the new arrangements being fully in place by 2025.  There is no detail as yet on how the phasing will be undertaken – but the capping of large payments is mentioned as an option.

Overall, the approach of the Welsh Government looks rather closer to Defra’s plans than those in Scotland.  The difference in the Welsh plans compared to England, however, is more of a balance in supporting an efficient food production sector as well as paying for public goods. 

Global Demand for Food

Global demand for food is set to slow down over the next 10 years.  This is the forecast from the Organisation for Economic Co-operation and Development (OECD) and the UN’s Food & Agriculture Organization (FAO) as published in their Agricultural Outlook 2018-2027.  The slow-down is expected for most types of food, but in particular cereals and meat.  The first time the two organisations produced a similar report, was in 2008 when there was a global food crisis, since then low stocks have been replenished whilst rising incomes in developing markets had boosted demand; this is now expected to increase at a slower rate.

At the launch of the report in Paris on 3rd July, the head of the OECD said ‘for most commodities demand growth will average only a little bit more than growth in world population, for the foreseeable future’, stressing that the current problem is not one of food shortage but of ensuring that food is accessible to the poor.  The FAO chief explained that growth in demand for meat was expected to slow down in China.  One of the main challenges according to the report is improving the sustainability of food production and it emphasises we should use this window of opportunity, whilst stocks of food are strong, to improve way food is produced and marketed.  The OECD Secretary-General also expressed concern over escalating trade tensions, stating international economic cooperation was the ‘only hope, to meet the challenges facing the global trading system today’.

Rented Sector

The Government is seeking views on overcoming the barriers to Landlords offering longer tenancies in the private rented housing sector.  The consultation also invites comments on the proposal for a three-year tenancy with a six month break clause.  Deadline for responses is 26th August.  The full consultation can be found at https://www.gov.uk/government/consultations/overcoming-the-barriers-to-longer-tenancies-in-the-private-rented-sector