Category: Policy & Business

Brexit Committee Sets Out 15 Key Tests

On 4th April, the Commons Select Committee for Exiting the European Union (Brexit Committee) published its report on the future UK-EU relationship.  It contains 15 criteria (key tests) by which it will judge any future deal agreed between the UK and EU negotiators.  The key tests which are of relevance to agriculture include;

  • Maintaining an open border between the Republic of Ireland and Northern Ireland: with no physical infrastructure or any related checks and controls as agreed in the Phase 1 Withdrawal Agreement. Data from the Irish Central Statistics Office (CSO) for 2017 reveal that agri-food trade accounted for 45% of all cross-border goods trade on the island of Ireland in 2017, and is therefore the primary concern when it comes to solving the border issue. 
  • No tariffs on goods trade between the UK and the EU 27: this could potentially be achieved via a comprehensive free-trade agreement (FTA) between the UK and the EU, but will need to be more in-depth than the EU-Canada (CETA) FTA agreed last year.  However, this will not address non-tariff barrier issues.
  • No additional border or rules of origin checks on goods trade: these would delay the delivery of perishable or time-sensitive deliveries or impede the operation of cross-border supply chains. At present, the UK’s stated desire of being outside the Single Market and the Customs Union makes it virtually impossible to meet this test and will require a blurring of the UK’s so-called red lines.  As a minimum, the UK would need to participate in a Customs Union with the EU (which includes agricultural goods).  It would also require a robust regulatory equivalence agreement; the likes of which the EU has never agreed with any other third country, to avoid non-tariff barriers such as border or rules of origin checks. 
  • No additional costs to businesses that trade in goods or services: most businesses are resigned to the fact that there will be some increase in administration and other costs even with a very soft Brexit.  This test therefore appears very difficult to meet.
  • Any new UK-EU immigration arrangements must not impede the movement of workers: covers those providing services across borders and the recognition of their qualifications and their right to practise. Given the labour difficulties in some agricultural sectors, continued access to labour from the EU will be vital.  This is particularly important in areas such as veterinary services in abattoirs but will also be important for drivers of HGVs transiting to and from the EU.
  • UK to maintain convergence with EU regulations necessary to maximise access to European markets: the report noted that Norway has to accept all EEA relevant EU legislation (estimated to account for 30% of all EU legislation that currently applies to the UK).  A similar level of compliance would be needed if the UK is to meet this test and, potentially, more considering that agriculture does not come under the current EEA arrangements.

The report also stated that should the negotiations on a deep and special partnership between the UK and the EU not prove successful, then EFTA/EEA membership should remain an alternative and would have the advantage of continuity of access for UK services. However, as mentioned previously, it must be emphasised that such an EFTA/EEA arrangement would not automatically cover agriculture and would, therefore, be insufficient to avoid a hard border on the island of Ireland. 

It must also be highlighted that the Brexit Committee is deeply divided over this report and those objecting to its conclusions include the high-profile Jacob Rees-Mogg who has claimed that the report seeks to “thwart Brexit by stealth”.

Finally, the report mentions the EU’s Association Agreements with Ukraine, Georgia and Moldova which cover most of the Internal Market rules and also provide for selective participation in many of the EU’s agencies and programmes whilst not including free movement of people.  However, it acknowledged that binding arbitration is provided for dispute resolution and referrals to the Court of Justice of the EU are limited to interpretations of EU law.  The Committee also noted the recent EU Parliament’s support of the Association Agreement option. It appears that the Association Agreement option is gaining traction as it offers greater flexibility than other ‘off-the-shelf’ models frequently cited.  Ultimately, the future UK-EU relationship will need to have its own distinct model, particularly considering the commitments of both parties with respect to the Irish border.  It is now time for the UK and the EU negotiators to put some ‘meat on the bones’ of a future relationship deal. Only then can any future deal be fairly judged. 

The report is accessible via: https://publications.parliament.uk/pa/cm201719/cmselect/cmexeu/935/935.pdf

Hedge Layer Guidance

The RPA has published new guidance on how to check and change hedge information, this can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/696039/How_to_check_and_change_your_hedge_information.pdf.  The guidance is important where hedges will form part of an application or claim under the Basic Payment Scheme or Countryside Stewardship Scheme (not Environmental Stewardship).

As previously reported, there is a new ‘Hedge Layer’ on applicants’ Rural Payments accounts, which maps out the hedges in each land parcel.  This can be viewed in the ‘Land Viewer’.  Also, where hedges have been used to satisfy EFA requirements previously, these have been pre-populated in the Land-Use screen.  In both cases, there appear to be a lot of inaccuracies and the new guidance shows claimants when and how to correct this information.

If claimants disagree with the hedge information on their digital maps or a hedge is not shown, they only need to correct this if they will be using the hedge for:

  • BPS EFA requirements
  • a Countryside Stewardship Scheme application, or
  • submitting a claim for an existing Countryside Stewardship Agreement

To correct hedge information an RLE1 form and sketch map needs to be submitted.  Complete the form at Part D.  Fill in columns D1, D4 and D5.  The code (at D4) should be H and the Effective date of change (at D5) should be 01/01/2018 or later.   Annotate a sketch map showing the length and location of hedges as on the ground.  It is possible to take a ‘screen shot’ of the Hedges information from the Land Viewer to mark on the correct hedges.  If the gap between hedges is less than 20m, the hedge should be shown as a continual length.

Where hedge information has been incorrectly pre-populated in the Land Use section this can be updated. If this disagrees with the digital maps an RLE1 will need to be submitted as above.  Where there are multiple hedge entries in the Land Use for one land parcel it is possible to delete the individual entries, add up all the lengths and insert one entry.

Note, the RPA is saying that the RLE1 does not form part of the BPS or CS application and therefore claimants should make sure in the first instance their application is submitted on time, is accurate and reflects what is on the ground.  RLE1s and sketch maps can then be completed and returned to the RPA by 6th July.  But, in practice it is often easier to complete sketch maps at the time of making an application.

 

Countrywide Farmers Goes into Administration

Countrywide Farmers, which went into administration at the beginning of March, has made its first redundancies.  32 out of over 700 employees have been made redundant so far to reduce costs in order to keep the business trading to realise stock and encourage interest from potential buyers for its stores.  The rural and agricultural retailer is mainly farmer-owned and has 48 retail sites across England and Wales.  The company’s Liquefied Petroleum Gas (LPG) business was sold on 1st March 2018.  Mole Valley is interested in buying the retail business and looked like providing a lifeline, but the Competition and Markets Authority (CMA) is concerned that there would be insufficient competition in the South and South West of the country and has launched an investigation.  Countrywide sold its crop protection and cereal business to agronomists Hutchinsons and its grain marketing operation to Openfield back in 2014 to concentrate on the retail side of the business.

Wage Increases

Agricultural employers are reminded that minimum wage rates increase as from 1st April.  In England the Agricultural Wages Board was abolished and minimum agricultural wages are now the same as for all other employees.  The table below shows the new rates of the National Minimum Wage (NMW) and National Living Wage (NLW).  In all the other regions of the UK, farming wages are still negotiated by Agricultural Wages Boards.

The Scottish Wages Board has aligned its rates with the NLW since its introduction.  This means all qualifying workers (see Wages Order for details – http://www.gov.scot/Publications/2018/03/6565) should be paid £7.83 per hour and £11.75 for overtime.  The Welsh Wages Order for 2018 has not yet been published – in 2017 it was delayed by some months.  Employers should pay the NLW pending any announcement.

England wage rates from April 2018
Age

Current Rate (£/hour)

Previous Rate (£/hour)
National Living Wage (25+)

7.83

7.50
NMW (21-24)

7.38

7.05
NMW (18-20)

5.90

5.60
NMW (16-17)

4.20

4.05
Apprentice NMW

3.70

3.50

On the topic of employment costs, those businesses affected should also note that contributions under auto-enrolment Workplace Pensions will rise to 2% (from the current 1%) from 6th April.  Employees contributions will go up from 1% to 3%.

 

 

 

 

CAP Reform

The process of agreeing the next reform of the Common Agricultural Policy continues within the EU.  Although no longer directly relevant to UK farmers (barring a huge U-turn in policy), it is still important in respect of the support farmers in our closest competitors are likely to receive.  As we have previously written, the current proposals foresee the continuation of direct payments in the form of the BPS, albeit with some simplification of the rules around Greening and Cross-compliance.  The big unknown is the budget, with Brexit leaving a large hole.  EU Member States (minus the UK) discussed the proposals in March.  The Bulgarian Presidency was hoping to get a broad agreement (Council Conclusions) on the overall shape of reform.  However, this proved impossible due to two main stumbling blocks – the continued use of coupled support within the CAP, and the harmonisation of BPS payment rates across all Member States.

Bayer – Monsanto Approval

Bayer has made a significant step closer towards finalising its acquisition of Monsanto after gaining EU approval.  The $66 billion deal is conditional on a number of divestments which BASF is expected to purchase.  The aim is still to have the takeover completed during the second half of 2018.  With EU approval gained, the US Department of Justice is the most significant approval left to be obtained.

EU Agrees Brexit Guidlines

EU leaders agreed the negotiating guidelines for the next stage of talks in a matter of seconds at their summit on the 23rd March.  These set out Europe’s position for the ‘future relationship’ talks that will set how the UK and EU trade with each other after the transition period.  The EU is looking for comprehensive free-trade agreement on goods with a minimum level of standards.  This would be combined with cooperation on security matters.  The mandate is vague on the extent to which services might be included in any agreement.

The guidelines reiterate that ‘nothing is agreed until everything is agreed’, highlighting that the progress in negotiations achieved so far would count for little if outstanding issues (such as the Irish border) cannot be resolved.  EU leaders will discuss progress at their June summit (28th and 29th June).

Basic Payment Scheme

2017 BPS Payment Update

Bridging Payments are due to start being made on 4th April and will arrive in bank accounts from 6th.  Readers will recall that all those who have not received a 2017 BPS payment in England by the end of March 2018 will receive an interim payment.  The amount will be 75% of the estimated full payment.  However, if land and entitlements are incorrect at the time the calculation is made the payment might not be the amount expected.  The RPA has been sending out emails (or letters if an email is not registered) to all those affected from the 26th March.  However full payments are still being made, so it may be possible to receive a bridging payment letter but be paid in full, before the end of March.

2018 Guidance

The RPA is already on Version 3 of the Basic Payment Scheme rules for 2018.  The latest version can be found on Gov. UK at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/693100/BPS_2018_scheme_rules_v3.0.pdf

The new version amends the entitlement usage examples on pages 30 and 31.  Already amended in Version 2 was a diagram on Page 44 and the Section starting on Page 57, where a duplicated paragraph and diagram on Pages 57 and 58 have been amended with the correct ones.

New Hedge Layer

It appears that the new Hedge Layer has a lot of inaccuracies.  The RPA is due to be sending out some updated guidance on how to deal with these issues.  Only hedges that are being used for EFAs need to be mapped correctly.  Currently where an EFA hedge is not mapped correctly the only way to correct this is for an RLE1 and map to be submitted to update the data, if this situation changes we will inform readers.  The RPA is being pressed to alter the rules.   In some cases hedges, have been pre-populated in the Land Use section (in addition to being on the Land Viewer).  This is largely where they have been used for EFA in previous years (although there are some inconsistencies).  Where an EFA hedge is incorrectly pre-populated in the Land Use section it is possible to change the length.  Also note you do not have to have an individual line for each component part of the hedge, it is possible to add all the lengths together and input as one length.  But if the length does not agree with the digital maps on the Land Viewer, an RLE1 and map must be submitted.

Welsh Future Farm Policy

Lesley Griffiths, Cabinet Secretary for Energy, Planning and Rural Affairs has announced five ‘core principles’ to underpin future agricultural policy in Wales:

  • Keeping land managers on the land – seen as pivotal to maintaining communities and the rural economy
  • Food production – remains ‘vital’; future policy gives the chance to advance an already thriving food and drink industry.  The Cabinet Secretary has said there is no need to choose between food production and public goods.  Targeted to support will be available for sustainable and economic production to help Welsh farmers compete in a global market place.
  • Delivering public goods for all the people of Wales – the Welsh landscapes is key to the Welsh brand, vital for food and tourism
  • Land managers must have access to support – farmers must be able to continue to make a living from the land, but there will be no ‘automatic payment’ and they will be asked to do ‘different things’ in return for support.  This seems to suggest that direct payments will be removed.  This is the first clear indication that Wales might follow the lead of DEFRA in this respect. 
  • The delivery of support will need to be changed – it is recognised that current support, provided by the Basic Payment Scheme, needs to be changed to ensure the agricultural sector can be ‘prosperous and resilient’ post Brexit.

The Welsh Assembly will now hold ‘intensive stakeholder’ meetings to deliver these principles, with initial proposals for reform being ready before the summer recess.  With England having already launched a consultation on its proposals, it would appear that Wales is a little behind the curve, but to the Welsh Government’s defence it is probably waiting to see what ‘powers’ it has over future farm policy following any Brexit devolution settlement.  The announcement states that the ‘case for devolution is stronger than ever’ and that the composition of the farming sector in Wales is different to other areas of the UK, particularly England.  Scotland appears to be even further behind, as there has been no announcements or consultations yet on the shape of future support.  Again, it has been said the Scottish Government is also is waiting to find out the extent of its powers on farm policy.  However, some believe the administration is happy to remain vague on future policy, as whatever plans are proposed, they are likely to ‘upset’ somebody.

Farm Management Practices

Farmers are gradually adopting a more professional attitude to running their businesses.  This is the finding of a set of statistics recently released by DEFRA on ‘Business Management Practices on Farms’.

The Farm Business Survey for 2016/17 (2016 harvest) included a number of additional questions on how owners run their farm businesses.  A similar exercise was undertaken in 2011/12.  The recent survey found that a third of farms prepared budgets, cash-flows, gross-margins or in-depth profit-and-loss accounts.  This was up from a quarter five years earlier.  In the most recent survey, 25% of businesses said they prepared a formal business plan, up from 19% in 2011/12.  By far the most common type of business planning found (59%) was ‘an informal business plan’, although little detail is provided on what this might encompass.  Business planning practices are more likely in businesses that are in the arable sector, are larger businesses, be higher performing and have younger proprietors.

A certain degree of complacency is evident in the sector however.  In response to the question ‘why are you not undertaking (more) business management practices?’ almost half (45%) of those surveyed replied that all the practices required were already being carried out.

Almost a third of farms (32%) in the survey used paid-for advice – up from 26% five years ago.  The survey also asked questions about risk-management practices on farm.  The full statistics can be found at – https://www.gov.uk/government/statistics/farm-business-management-practices