Category: Policy & Business

National Parks Review

DEFRA has launched a review in England’s National Parks and Areas of Outstanding Natural Beauty (AONBs).  The review was one of the commitments in the 25 Year Environment Plan (see January article).  It will be led by Julian Glover, who is the associate editor at the London Evening Standard, and will report in 2019.  The full terms of reference can be found at – https://www.gov.uk/government/publications/designated-landscapes-national-parks-and-aonbs-2018-review/terms-of-reference.  England’s 10 National Parks and 34 AONBs cover a quarter of England’s land and attract more than 260 million visitors a year.  The review will specifically not be looking to reduce either the protection or the size of the current designations.  Instead, it will look at the scope for expanding the network of National Parks and AONBs and looking at how they can be made to work better for the public.  Although the terms of the review states it will look at ‘… how those who live and work in [National parks and AONBs] can be better supported, and their role in growing the rural economy’, there is a fear that the review will prioritise the environment over economic activity and communities, and lead to more restrictions on rural businesses. 

Organic Farming

UK Area

The area of organic land increased marginally in the UK in 2017.  The total area being managed under organic conditions (i.e. fully organic plus in-conversion) stood at 517,000 hectares.  This is 1.9% up on 2016.  Organic land makes up 2.9% of the total farmland in the UK.  Despite the recent increase, the area of organic land is still 30% below its peak in 2008.  Unsurprisingly, almost two-thirds of the organic area (64%) is permanent pasture, with temporary grass making up another 18%.  Cereals are grown on 7% of organic land.

The number of organic producers also increased slightly between 2016 and 2017; up 2% to 6,600.  The number of organic cattle declined by 7.4% over the 12 months, the organic sheep flock grew by 5.5% and the number of organic pigs rose by a massive 87% (albeit from a low base).  The full statistical release can be found at – https://www.gov.uk/government/statistics/organic-farming-statistics-2017

EU Rules

The EU has agreed an overhaul of the organic rules, and these will come into force from the 1st Jan 2021.  The new rules are claimed to be simpler, with a greater degree of harmonisation as derogations and exemptions are phased-out.  The idea is also to ensure consumer trust by making sure that organic production systems meet the public’s expectations.  There will be stronger checks built into the system as well.  The result of this is that some of the exemptions that have been useful (and cost-saving) for producers may no longer be available in the future raising the cost and complexity of organic production.  All organic produce being imported into the EU and marketed as organic will have to meet the new rules.  For this reason (and lack of resources to produce any different rules) UK producers are likely to have to comply with these new standards for the foreseeable future, despite Brexit.

 

Brexit and Customs

There has been much recent debate about the UK Government’s proposals on its future customs relationship with the EU.  This has centred on two key options put forward in August 2017 – a Customs Partnership and a Customs Arrangement (known as maximum facilitation (‘Max Fac’).  Both of these concepts, have been rejected, in their previous form, by the EU.  A third customs option also appears to have emerged, but it too is facing opposition from the EU.

Despite this, the Prime Minister recently established two Cabinet sub-groups to further examine each option put forward in August.  One group which includes Michael Gove (DEFRA Secretary), Liam Fox (International Trade) and David Lidington (Cabinet Office Minister) are considering the Customs Partnership.  Meanwhile, Greg Clark (Business Secretary), David Davis (DEXEU Secretary) and Karen Bradley (Northern Ireland Secretary) are examining Max Fac.  These options are generating intense debate within the Conservative party with the Brexiteers favouring Max Fac whilst the Europhiles are leaning towards the Customs Partnership. Both options are briefly summarised below;

  • Customs Partnership: involves the UK collecting tariffs on the EU’s behalf for goods transiting through the UK intended for use in countries within the EU Customs Union.  The UK would also apply its own tariffs for goods intended for use in the UK market.  At the border, importers would pay whichever tariff was highest and could subsequently reclaim the difference based on any proportion of the consignment was used in the lower tariff territory.  It is claimed that this approach would obviate the need for customs processes between the UK and the EU, including between Northern Ireland and Ireland.  Such a system would require an elaborate tracking system to check whether goods were being tariffed appropriately and a ‘robust enforcement mechanism’.  The EU has dismissed it as ‘magical thinking’.  Furthermore, whilst a customs border might be obviated there would still need to be border controls to check product standards (especially in the food sector) unless the UK continued to align all of its regulations with the EU. 
  • Max Fac: this would involves creating a border between the UK and the EU, but seeks to make this border ‘as frictionless as possible’ through the application of technology and recognition of ‘trusted traders’ amongst other mechanisms.  It would also allow smaller traders on the Irish border to trade as they currently do with no new restrictions.  This option has been criticised by many in industry, particularly in Northern Ireland, where some believe that it would create a ‘smugglers’ charter’ and would undermine the integrity of existing food safety systems.  It is also not clear that the technology exists, or that the Government could implemented it quickly enough, to make this option work (see below).

HMRC Weighs Into the Debate

The HMRC estimates that Max Fac would cost businesses between £17-20 billion per year to implement, primarily due to the increased costs associated with customs declarations.  This equates to about twice the UK’s annual net contribution to the EU budget.  Brexiteers such as John Redwood have rubbished these estimates claiming that they are highly speculative and claim that trade is already taking place with non-EU countries with costs nowhere near this amount.  Nevertheless, all credible analysis indicates that dealing with customs, even under a free-trade agreement, does create additional costs.

Jon Thompson (Head of HMRC) also said that the Customs Partnership would have a negligible cost to business over time – a view which will play into the hands of the PM who is said to favour a Customs Partnership-type model.  Mr. Thompson also stated that neither model would be ready to implement by 2021 and suggested that a lead-in time of between three to five years would be required to establish the systems needed, once it became clear what these would consist of.

A Third Customs Option?

In recent days, a third option appears to have emerged which, it was hoped, would help to overcome the deadlock in the Brexit negotiations.  This proposal, which some think of as a Hybrid Customs Partnership plan, was tabled by the UK this week in Brussels.  It is understood that it would also represent a backstop which would align the UK as a whole, not just Northern Ireland, with the rules of the Single Market and Customs Union for a time-limited period only (but longer than the ‘transition period’ already agreed).  This time-limited period would then give the UK the scope it needed to develop the systems required for its Customs Partnership model.

This too appears to have been rejected by the EU, although there are signs, that it has not been completely ruled-out.  The Brussels view is that the backstop envisaged in Paragraph 49 for the December Joint Report would apply to Northern Ireland only, given the wording in Paragraph 46 which states that the “commitments and principles outlined in this Joint Report will not pre-determine the outcome of wider discussions on the future relationship between the European Union and the United Kingdom, and are, as necessary, specific to the unique circumstances on the island of Ireland.”  The UK on the other hand has taken a broader view, claiming that the wording of Paragraph 49 states that “the United Kingdom will maintain full alignment…”, not Northern Ireland. Therefore, the backstop could apply to the UK as a whole.

It is understandable that the UK has taken this more expansive view and there are attractions to this perspective for several EU Member States, particularly Ireland whose 2016 trade with the UK is valued at €66 billion. This includes €32 billion in goods, of which nearly €9 billion is in agri-food, and €34 billion in services. Other countries, such as the Netherlands and Denmark, which rely heavily on trade with the UK, particularly for agricultural products are also believed to see the attractions of this proposal.  That said, EU Member States are reluctant to break ranks on this issue, as it is seen as another attempt by the UK at cherry-picking.

This impasse looks set to drag on to the European Council in June, but as Michel Barnier has reminded us on many occasions, time really is ticking, and there are now just a few months left to get all of this agreed.  A time-limited, interim arrangement beyond the current transition period is the only realistic way to achieve this whilst facilitating a ‘smooth and orderly Brexit’ which the PM called for back in January 2017.  Whatever form the eventual relationship takes, no matter what its name is, it is crucial that the time is taken to get it right.  For agriculture, this is especially critical.  In this regard, the five-year ‘agricultural transition’ envisaged in DEFRA’s recent consultation might be a prudent model to apply elsewhere as well.

Brexit Opinion in Northern Ireland

A survey recently published by Queen’s University Belfast suggests a significant shift in opinion on Brexit in Northern Ireland.  The study conducted during February and March, surveyed 1,000 people and found that 69% of those sampled would now vote to Remain in the EU; this is much higher than the 56% Remain vote in the June 2016 referendum.  Increasing awareness of the problems Brexit will cause concerning the Irish border is likely to be the key reason for the shift.  Such findings are likely to get the attention of the DUP, which of course holds the balance of power in Westminster.  Some believe that the DUP has been softening the tone on its Brexit stance in recent weeks. This could signify a move towards a softer form of Brexit, more akin to a customs union-type of arrangement.  It must be emphasised that whilst there appears to be a shift in Northern Ireland, its population is under 3% of the UK total, and there is not much evidence of a shift in views on Brexit elsewhere in the UK.

EU Free-Trade Deals

Australia and New Zealand Talks

On 22nd May, EU ministers gave the go-ahead to commence talks with Australia and New Zealand (NZ) on a free trade deal. The move is the latest in a series of initiatives to strike bilateral deals with major economies coming on the back of deals with Canada (CETA), Japan and Mexico as well as negotiations with Mercosur (including Brazil and Argentina).

Bilateral trade between the EU and Australia is estimated at €45.5 billion per year, whilst EU-NZ trade is estimated at €8 billion.  Agricultural trade forms an important component of this, particularly in terms of EU imports and both Australia and NZ will be keen to expand this further.  However, the EU’s has already stated that its focus will be on reducing existing barriers to trade whilst taking account of its agricultural sensitivities.  It is therefore clear that the EU does not envisage full liberalisation in agricultural trade but may contemplate increased access via tariff rate quotas (TRQ) for sensitive agricultural products, with long tariff dismantling periods, similar to the CETA deal.

Any increase in market access for Australia and NZ will exert pressure on EU producers particularly in dairy, beef and sheep meat where both countries hold strong competitive advantages.  However, it must be borne in mind that NZ already has a TRQ of around 228,000 tonnes for sheep meat exports to the EU and it has struggled to fill this in recent years, partly due to strong demand in China.

Mercosur Negotiations Progress

Meanwhile, sources in Brussels suggest that a trade agreement with Mercosur is on course to be signed next month and would include provision for a 99,000 tonne increase in beef imports, via TRQs, into the EU.  The move comes as Mercosur has agreed to a phasing-out of its tariffs on European cars and it is also rumoured that France might be getting imminent access to China for its beef, thus lifting some opposition to the deal.   Again, it is likely that any increases in market access will be phased in over a long period, with EU Commissioner Phil Hogan claiming that any agreement would ‘take 10 years to implement’.

Given the flurry of recent progress on trade deals, it appears that Brexit has jolted the EU into action. However, it looks like a case of being too little, too late, and one wonders what the impact might have been had some of this progress taken place years ago.  From a UK perspective, given that it is now in the EU departure lounge, it will be seeking to replicate similar trade deals as soon as possible. The fear amongst farmers is that it adopts a more aggressive ‘meat for motors’ approach and exposes agriculture to cheaper competitors in a much shorter timeframe.

Countryside Stewardship Update

2018 Offers

There are still some agreements which should have been in place by 1st January 2018 that have not even been sent to claimants.  Our article of 10th May reported that the deadline for claims has already been extended by a month until 15th June to allow those affected to have chance to check and approve agreements and submit their claim for this year.  It now seems likely that some claimants will not receive their offer in time even for the new extended claim deadline.  Natural England has said it will be writing to those in early June who have not received their offer by the end of May to explain how they should submit their claim by 15th June deadline.

2017 Payments

The news is no better surrounding payments on exiting agreements.  Many have not yet received their advance payments whilst balance payments should also be being made.  It appears that the Proactive Land Change Detection (PLCD) mapping update has made the CS validation process more difficult this year, resulting in the delays.  Natural England has not given a timescale of when it expects to have completed payments.

2019 Application Packs

A reminder that to make a 2019 CS application for a Mid-Tier or a Wildlife Offer, application packs must be requested by 31st May.  The Mid-Tier application request form can be found at https://www.gov.uk/government/publications/countryside-stewardship-mid-tier-including-water-quality-capital-items-manual  and the Wildlife Offer application request form can be found at https://www.gov.uk/government/collections/wildlife-offers-countryside-stewardship.  It appears there is also a delay in getting these packs out to claimants as well.  So the sooner a request is made the more time claimants will have to complete it before the earlier submission deadline this year of 31st July.

 

Clean Air Strategy and Farming

New rules are being proposed by the Government which could have a big impact on the farming sector.  These are part of a ‘Clean Air Strategy’ aimed at reducing air pollution which, it is claimed, is the fourth biggest threat to public health after cancer, heart disease and obesity.

The strategy focuses on five main airborne pollutants – fine particulate matter (PM2.5); ammonia (NH3); nitrogen oxides (NOX); sulphur dioxide (SO2) and non-methane volatile organic compounds (NMVOCs).  All of these can produce toxic effects in humans resulting in both short and long-term health issues.  They also have an effect on the wider environment.  Ammonia emissions are the main focus for farming (with farming accounting for 88% of such emissions in 2016).  Although ammonia is not especially harmful in itself, it reacts in the air to form fine particulate matter which is a problem.  There are also issues around acidification and excess nitrogen in the environment.

The Government is planning to produce a ‘Code of Good Agricultural Practice on Ammonia Emissions’ (it is not clear what legal force, if any, the Code will have).  The consultation also highlights that the new Domestic Agricultural Policy will support farmers to make investments in farm infrastructure and equipment to reduce emissions (i.e. grants).  Any new Land Management scheme will also incentivise practices that limit the release of ammonia.  The detail of these measures will have to wait until such schemes are designed.  However, DEFRA is also proposing three elements of regulation on farming;

  1. Setting limits of the amount of Nitrogen that may be applied to farmland.  The consultation states that ‘a group of independent specialist will make recommendations by November 2019 on the maximum limits that should be applied for (organic and inorganic) fertiliser’.  Oddly, although the document makes reference to RB209, there is no reference to existing NVZ regulations which, of course, already proscribe nitrogen limits for almost 60% of England.
  2. Environmental Permitting Regulations (EPR) would be extended to large dairy farms by 2025.  These rules are perhaps better know by their previous name – Integrated Pollution Prevention and Control (IPPC).  To get a permit (effectively a licence to operate) facilities must demonstrate they are using ‘best available techniques’ to control pollution.  Facilities are inspected by the Environment Agency.  Although not specifically stated, there is an inference that a ‘large’ dairy farm would be over 150 cows.
  3. Some ‘specific rules’ are also proposed (to be introduced for 2022 unless stated otherwise);
  • all urea must be spread with urease inhibitors (by 2020)
  • new design standards for agricultural buildings will be introduced
  • solid manure and digestate must be incorporated within 12 hours
  • all slurries and liquid digesates must be spread by low-emission systems – either trailing shoe/hose or injected (by 2027)
  • all slurry stores and manure heaps must be covered (by 2027)

In terms of exhaust emissions, the Government had already set out measures last summer on measures to limit pollutants from road vehicles.  This consultation goes further by looking at other vehicles and stationary engines.  Part of this is a review, ahead of the Budget 2018, of the non-road diesel fuel duty rebate (e.g. ‘red diesel’).  Rebated diesel comprises 15% of all diesel use in the UK.  The consultation suggests its low-cost inhibits the take-up of low-emissions technologies.  It is pointed-out that 75% of the use is in non-farming situations (marine, rail, construction, generation, airports etc.), but the future of agricultural red diesel may well be drawn into a general review.  

One last issue that is likely to be important for those living in rural areas are potential restrictions on the use of solid fuel systems.  The burning of solid fuels in homes (open fires, ‘woodburning’ stoves, biomass boilers etc.) contributes 38% of particulate matter in the air.  From 2022 there will be restrictions on the sale of solid fuel stoves that do not meet minimum efficiency standards.  There may also be restrictions on the sale of unseasoned logs and other fuels deemed to be polluting.

Air quality is a devolved issue, so the consultation and proposals only relate to England.  However, other UK administrations are likely to be looking at the topic as well in the future.  The consultation can be found at – https://consult.defra.gov.uk/environmental-quality/clean-air-strategy-consultation/.  The deadline for responses is 14th August.  Results from the consultation will feed into a final UK Clean Air Strategy and detailed National Air Pollution Control Programme to be published by March 2019.

Conduct of Agents

The Scottish Land Commission has recently published a report into the conduct of ‘agents’ in the landlord and tenant process.  In this context, an agent is not just a land agent but also includes solicitors and others acting as intermediaries.   The report found that, in general, parties were satisfied with the work of agents.  However, where there were problems, these tended to be within four main areas;

  • Poor communication and inadequate recording of the outcome of meetings
  • Unnecessarily aggressive, condescending and insensitive behaviour on the part of the agent
  • Lack of transparency, openness and honesty on the part of the agent
  • Lack of consideration of the impact of a single negotiation or transaction on the longer-term landlord tenant relationship

 

The full report can be found at – https://landcommission.gov.scot/tenant-farming/reviews-and-reports/

RPA Performance

Anyone who has struggled to submit their 2018 BPS forms over the past few weeks will not need reminding of the shortfalls of the Rural Payments Agency.  However, the performance of the Agency has been criticised once again in a report from the Environment, Food and Rural Affairs (EFRA) Select Committee of Parliament.

The Committee found that it was ‘unacceptable’ that over 3,000 claimants were still waiting for their 2017 payments by March 2018.  The report went on to highlight ‘poor communications and complaints handling’, errors from mapping updates, and incorrect payments.  Concern was raised over the RPA’s ability to take on the administration of Countryside Stewardship schemes from this autumn.  The report makes a number of recommendations for improvements to the service offered;

  • a more ‘stretching’ payment target for 2018 of 98% of payments made by the end of March
  • developing a system to allow farmers to make mapping changes directly onto the online mapping system
  • set out a strategy for improving communication and complaints handling.  This should include changing the helpline so claimants have a single point of contact with the RPA (i.e. a dedicated Case Worker)
  • publish an ambitious set of key performance indicators for delivering the Countryside Stewardship scheme
  • be fully involved in ant Brexit discussions to ensure that ‘operational practicalities are properly reflected in policy development’.  The Committee states that ‘the RPA’s history of failing to deliver workable payment systems does not fill us with confidence that it has either the capacity or expertise to deliver a seamless Brexit transition’

 

The full report can be accessed via; https://www.parliament.uk/business/committees/committees-a-z/commons-select/environment-food-and-rural-affairs-committee/inquiries/parliament-2017/work-of-the-rural-payments-agency-17-19/

Welsh Young Entrants Scheme

The Welsh Government has launched a new £6m initiative to encourage young people into farming.  The Young People into Agriculture (YPiA) scheme will be available to those under 40, who have started up as head of a holding in the 12 months prior to 1st April 2018, or intend to set up before 1st September 2018.  The support will be in the form of a capital grant worth £40,000, payable in three equal tranches in January 2019, July 2019 and January 2020.  Expressions of Interest will be accepted from 10th May to 12th June.  The top 150 candidates will then be asked to submit a full application including a business plan with key performance indicators.  A formal offer of grant should be made in September.  It is intended that this scheme will be a one-off.  The implication being that new schemes will operate under the Welsh domestic farm policy from 2020.