Category: Policy & Business

Domestic Agricultural Policy in 2020?

The UK could be operating its own Domestic Agricultural Policy as early as the 2020 year.  This is one of the implications of the draft Brexit ‘transition deal’ agreed by the UK and EU on the 19th March.

In terms of the agreement, this largely follows the pattern set in the negotiations so far – progress is made largely by the UK eventually agreeing to almost all the terms that the EU proposes at the outset.  The transition period (or ‘implementation period’ as the UK Government likes to refer to it as), will last for 21 months until 31st December 2020 – as the EU wanted.  During this period the UK will have no say in setting the rules of the EU, but will have to abide by them – including any new legislation.  Any EU citizen moving to the UK during this period will have the same rights as those who came previously – i.e. free movement will still apply.  Whilst the UK will be able to negotiate and sign trade deals with other countries during the transition, they will not be able to come into force until it has ended.

The thorny problem of the Irish border has been kicked down the road once again.  The final deal in this area is still to be agreed.  However, the draft text retains the EU’s ‘backstop’ requirement that Northern Ireland remains in the Customs Union if no acceptable alternative arrangement can be agreed.

In terms of farm support, there appears to be a specific opt-out from the normal requirement that the UK follows all EU rules and regulations during the transition.  Article 130, Part 1, para 2, states that ‘[the BPS] shall not apply in the United Kingdom for claim year 2020’.  This is in line with what we wrote last month when the ‘Command Paper’ on future agricultural policy was written.  The paper implied that a Domestic Agricultural Policy (DAP) might start as early as 2020.  The EU were presumably happy to agree to this exemption from the standard transition rules as it makes the financing easier; the 2020 BPS is paid from the 2021 EU budget which is the first year of the new 7-year EU budget period.  It is probably simpler just to not have the UK involved.  Interestingly, the opt-out only appears to refer to the BPS.  Therefore, it seems possible that other parts of the CAP such as market support and even Rural Development could still apply in 2020.    

 

Scottish BPS 2018 Applications

The 2018 Single Application Form (SAF) window opens on 15th March in Scotland.  All guidance can be found on Rural Payments and Services at https://www.ruralpayments.org/publicsite/futures/topics/apply-for-funding/single-application-form/  The SAF needs to be completed to claim payments for any of the following schemes:

  • Basic Payment Scheme – Including Greening and the Young Farmer Payment
  • Scottish Suckler Beef Support Scheme
  • Scottish Upland Sheep Support Scheme
  • Less Favoured Area Support Scheme (LFASS)
  • Agri-environment Climate Scheme
  • Forestry Grant Scheme
  • Beef Efficiency Scheme
  • Rural Development Contracts

Claims can be made online or via a paper application.  Online is obviously the preferred method, but if applying on paper, copies can be collected from local area offices.  It is possible to download blank Base Forms and Data Sheets, but downloaded Base Forms will not be accepted.  Only Base Forms given out by the area offices will be accepted.  Downloaded and computer generated Data Sheets may be accepted in certain formats; see scheme guidance.

The deadline for claims without penalties is the usual May 15th this year.

2018 BPS Application Window

The 2018 BPS application window in England is now open.

Guidance

All the scheme guidance, forms and continuation booklets can be found on the dedicated BPS 2018 page on Gov.UK at https://www.gov.uk/guidance/bps-2018?dm_i=4G3E,75XJ,330Y6P,RWC4,1  this includes:

  • Basic Payment Scheme : rules for 2018
  • BPS Key dates 2018
  • BPS Land use codes
  • Greening workbook for 2018
  • Winter varieties of Brassica crops
  • Young and New Farmer form
  • Guide to Cross Compliance 2018
  • RLE1 form and guidance
  • Digital mapping updates – explained
  • Continuation booklets for Parts C, D & E

There is also guidance on how to make an online claim, including a checklist and troubleshooting questions.

Help on how to make a paper application is also available.  Paper forms are due to be sent out about a week later and therefore should be with claimants by the end of March.  They will only be sent to those who applied on paper in 2017 and do not have an agent ‘registered’ to them on the Rural Payments System.  To ‘switch’ from paper to online, contact the RPA helpline on 03000 200 301.

Drop-in Centres

Drop-in centres will once again be available at six sites: Carlisle, Exeter, Newcastle, Reading, Workington and York.  They will be open from 8.30am to 5pm Monday to Friday (excluding bank holidays) from 1st May until 15th May.  Currently there are no plans to open weekends or late nights.

Hedge Layer

As previously reported there is a new Hedge Layer.  This can be found in each individual land parcel information in the View Land section.  In each individual land parcel map there is now a ‘hedges’ tab next to the ‘map’ and ‘photo’ tabs.  If the hedges tab is clicked, the hedges are marked in a blue/grey colour.  Below the parcel land cover information are details on each hedgerow for the field.  If you click on this, the corresponding hedge is highlighted in purple.  Similarly if you click on the hedge on the map, the corresponding hedge information is highlighted in the list.  The details contain the length of the hedge and whether it is eligible for EFA or not.  To change the hedge information an RLE1 and map will need to submitted.

The measuring tool is also back for 2018 and is available on the View Land screen (same as the Hedge Layer) as it was in 2016.

Amending a Land Cover

If you wish to change a Land Cover (i.e. Permanent Grassland, Arable, Permanent Crops or non-agricultural) it maybe possible to use a new telephone route.  This could be beneficial where there has been an incorrect PLCD mapping update.  This route is only possible where there is just one land cover in the field parcel and all of it needs changing to a different one.  If this is the case it should be possible to contact the RPA on 03000 200 301 and request the change, for all other amendments (i.e. more than one land cover, split field) where a map will be required, an RLE1 will need to be submitted.

Nitrogen Fixing Crops

The online system automatically assumes that NFC will be used for EFA.  If PPPs have been applied to NFC and they are not being used to meet EFA requirements this will have to be amended.  This is a similar process to when fallow is only being used to satisfy Crop Diversification requirements and not being used for EFAs.  In both cases claimants need to go to ‘Applications’, ‘Make changes to your application’ and click on ‘Use less EFA than available’.

Active Farmer

Although the Active Farmer rules no longer apply and the negative list and readmission routes are no longer relevant in England, the decision was made too late to change the Rural Payments Online system.  This means that all applicants will still need to complete the Active Farmer declaration, but whatever their situation, everybody ‘ticks’ the option ‘No – I qualify as an Active Farmer.

 

 

Farm Profits Rise

Profitability across almost all farm types in England rose in the past year.  DEFRA has released its provisional forecasts for Farm Business Income (FBI) for the 2017-18 year.  This runs to Feb/March 2018 and includes the 2017 harvest and Basic Payment.  Although titled ‘income’ what the series shows is profit at the farm level.   The current  figures are initial estimates, derived from information collected in February 2018 and will be updated in October, but the overall trends are clear.

FBI can be thought of as average profit for farms in a particular sector.  The fall in the value of the Pound has once again supported the increase in FBI.  Not only did it make domestic commodities more competitive, leading to price rises for most, it also meant the 2017 Basic Payment was in the region of 6% better than in 2016 for all sectors.

The largest increase is expected in the dairy sector, where an increase in the milk price and production is expected to see average incomes nearly double compared to 2016-17, to £99,000.  The average farmgate milk price, in the UK, was about 27% higher in the period March 2017 to January 2018, compared to the previous year.  Input costs are also expected to be higher.  These are driven by higher feed costs, due to an increase in consumption and stronger cereal prices.  Higher machinery running costs and straw values are also expected to have increased input costs.

The other farm type which is expected to show a significant improvement, is cereals.  Better prices and yields for cereals and oilseed rape and an increase in the Basic Payment means average cereals farm income is expected to rise by 48% to £64,000; the highest value since 2012-13.  Input cost increases have largely been only at the level of inflation, although machinery depreciation and fuel costs are expected to have seen higher increases.

Specialist pig and poultry producers are both expected to see a modest 5% increase compared to year earlier levels to £61,000 and £57,000 respectively.  On specialist pig farms, output is expected to increase due to an increase in the price for finished pigs, culls and weaners.  However, as the Farm Business Survey has a large proportion of contract rearers in its sample, the full extent of the increase in the pig price (about 17% higher) is not fully reflected in these results.  Output is also expected to be reduced due to the change in livestock valuation to reflect the weakening of pig prices towards the end of 2017 and beginning of 2018.  Input costs, particularly feed, which makes up a substantial amount of costs are expected to have risen due to the increased value of feed wheat and barley, although soya was cheaper.

Even so, as the chart below illustrates, not all sectors saw an increase.  Both grazing livestock categories have seen small declines and from low baselines.  Lowland grazing livestock farms are forecast to be similar to last year as firmer cattle and sheep prices are offset by higher input costs, mainly feed.  Average income on LFA grazing livestock farms is expected to decline by about 8% to £25,000.  The average price of breeding ewes and hoggs is expected to be similar or even lower than the previous year, which together with higher input costs is expected to offset any increase in cattle output and Basic Payment.  Environmental payments are also expected to be lower in 2017/18, which on LFA farms is usually a significant revenue source.

The chart below splits returns into four ‘profit centres’ for the previous four years.  This split of data is not yet available for 2017/18.

LEADER Funding U-Turn

After being assured by DEFRA that additional funding would be available, LEADER Local Action Groups (LAGs) have now been told that this might not be the case.  Those LAGs which are close to committing all of their original allocation have now been told by DEFRA ‘we cannot guarantee at this stage whether or when it will be possible to accommodate any further requests for funding’.  DEFRA has also told LAGs to signpost potential applicants to available funding through the Growth Programme or the Countryside Productivity Scheme.  The Chairs of LAGs have sent their complaints to DEFRA, highlighting the negative impact (again) this will have on the Government’s reputation for managing rural grant schemes and asking for the £5m, which should be available due to exchange rate change since the initial allocation, to be made available for LEADER projects now.  One thought is that the funding has been diverted to the new Countryside Productivity Small Grant Scheme.

February Brexit Roundup

Transition Period Positions

Both sides have used the past moth to set out their positions on what a transition period might look like.  The UK Government prefers to use the term ‘implementation period’.  In summary, the Eu is suggesting the terms of the deal are as follows;

  • would run until 31st December 2020
  • UK would remain in the Single Market and Customs Union (thus preventing any immediate disruption to trade flows)
  • the UK abides by all current Single Market rules and accepts any new rules implemented
  • the UK should not sign any trade deals with 3rd countries during this period (although it appears it would be able to commence talks)
  • the UK would have no role in setting EU rules during the transition
  • the ‘four freedoms’ of the Single Market would continue to apply, including the free movement of labour.  It seems that those that move to the UK during this period would have the right of continuing residence after the transition ends.

Perhaps not surprisingly, the UK Government seems loath to accept all this in full.  Specifically, it wishes to continue to have a say in setting new EU laws (or at least having the right to object to them), and limiting the right to stay of those who enter the UK during the period.  The aim is to get agreement on the transition by the end of March (although this may slip into April).  The UK Government seems to have little leverage as the EU’s Chief Negotiator, Michel Barnier, has pointed out that a transition should not be taken for granted.  It could be derailed by disagreements over the ‘Phase 1’ withdrawal text – see below.

The effect of all this on farm policy is not clear.  Being part of the EU acquis seems to imply the CAP would continue to operate in the UK during the transition (i.e. BPS 2020).  However, the DEFRA consultation on future policy (see separate article) seems to suggest the UK might look to make a special exemption for farm support.  This might be acceptable to the EU, as the 2020 BPS is actually paid out of the 2021 EU budget, which falls under the next financial framework.

Legal Text and Ireland

As this article was being written, the EU was preparing to publish the full draft text of the Withdrawal Treaty – the legal implementation of December’s political agreement on the ‘divorce’ elements of Brexit.  The document runs to 168 articles covering about 120 pages.  It seems that the EU is going to take a tough line in the agreement – perhaps getting tired of what it sees as the UK’s vague and/or unrealistic expectations of what the Brexit process involves.  This will be particularly evident on Ireland.

It is rumoured that the text will state that the island of Ireland must remain a ‘single regulatory space’.  This effectively means that Northern Ireland would be in a Customs Union with the EU and have to follow Single Market regulations.   If the UK chose not to adopt either of these then the logical extension is that there would be a ‘border’ in the Irish Sea.  This, creates a whole set of problems, both political and economic.

Corbyn Goes Cherry-Picking

The Labour leader, Jeremy Corbyn has subtly shifted the Party’s position on Brexit with a commitment to enter into a Customs Union with the EU.  This puts clear water between the Government and the opposition on how ‘hard’ Brexit should be.  However, Mr Corbyn stated that he would only sign-up to a union that gave the UK a say in future trade deals that the EU strikes.  This is likely to be regarded as having-your-cake-and-eating-it by the EU, and would be resisted.  In practical terms, therefore, the distance between the position of the leadership of the two main UK parties on Brexit is still not large. 

 

Gove Speech and Inspection Review

Michael Gove made a keynote speech at the NFU Conference on the 20th February.  Being the consummate politician, Mr Gove played to his audience and said lots of positive things about farming.  The speech itself was entitled ‘A Brighter Future for Farming’.  However, there was little in the way of ‘meat’ in policy terms.  It appears this was being held back for the publication of the consultation on the future of farming and food a few days later. 

One concrete announcement was a review of the farm inspection regime in England.  This will aim to improve regulation and reduce duplication in the way farms are audited.  The cynical might think that we have been here before, with a number of such reviews over the years (e.g. the Macdonald Red Tape Review), but that the compliance burden does not seem to ever reduce.  The review will be led by Dame Glenys Stacey, who has held a number of regulatory positions in the public sector as well as being the former CEO of Defra’s Animal Health Agency.

The full text of Mr Gove’s speech can be seen at – https://www.gov.uk/government/speeches/a-brighter-future-for-farming

Future Farm Policy

DEFRA launched its much-anticipated consultation on the future for food, farming and the environment on 27th of February.  It is entitled ‘Health and Harmony’ – which sounds rather more like a spa than a future roadmap for the sector.  The consultation seeks views on the Government’s proposals for future domestic farm policy once the UK has left the EU.

The deadline for responses is the 8th May.  The consultation has a number of open-ended questions, or asks respondents to list their priorities in certain areas.  Many in the industry have already commented the paper lacks detail and fails to set out a clear plan.  In the Governments’ defence, the exercise is meant to be a consultation ahead of the Agriculture Bill (due later in the year).  There may well have been equal criticism if the paper had set out a set of decisions that had already been made.

Timing

The Government anticipates that it will agree a transition period after Brexit (the Government’s preferred term for this is ‘implementation period’).  It is envisaged that this will last for about two years after we formally leave the EU in March 2019 – the EU is looking at a slightly shorter period ending on 31st December 2020.  Once the UK is able to move away from the CAP, the Government has said there will be an ‘agricultural transition’ period in England, this will begin as soon as possible – subject to negotiations with the EU.  It has already been announced that the 2019 BPS in England will be paid on the same basis as it is now.  It seemed likely that, whilst the UK was in the implementation period, the CAP would apply – thus the BPS would continue for 2020.  The implication of the consultation (although not explicitly stated) is the UK will try to extricate itself from the CAP during this period.  Thus, the new ‘agricultural transition’ period could be implemented as soon as 2020.  During this period, which will last a ‘number of years’ (the length being part of the consultation), direct payments will be phased out and replaced with a system of ‘public money for public goods’.  It appears that major changes in support will not happen until this transition period – i.e. if the UK remains in the CAP for 2020 (or even 2021), everything would be delayed.

Direct Payments & Capping

Perhaps of most interest to farmers will be the proposals for Direct Payments, and especially capping.  In the first year of the agricultural transition two options for capping are outlined;

  • reductions beginning at £25,000 of Direct Payments with a 5% deduction.  10% between £30,000 and £40,000 and rising in steps thereafter.  Amounts over £200,000 would face a 75% deduction.  This system is claimed to affect 19,000 farmers.
  • a straight cap at £100,000, affecting an estimated 2,100 claimants

Both these options are stated to free-up £150m in the first year to go towards funding new pilot environmental schemes.  The consultation also gives the option for respondents to suggest other capping systems as an alternative to these two.  Further reductions would be brought-in in later years of the ‘agricultural transition’ until payments were completely phased-out.  The consultation suggests this could be done in gradual steps, or with a further ‘step-change’ after a period of years (3 is suggested).

Interestingly, the paper suggests that the conditions for receiving Direct Payments could be radically altered.  One option is just to retain the current requirement of being paid on eligible area (albeit with simplified Cross-compliance and Greening).  However, an alternative suggested is to break the link with land area.  Farmers would be paid just based on their historical support – they would not even have to continue farming.  This turns the payment to a sort of ‘bond’.  Some might use it as a retirement income for example.  It would also solve the problem of claimants splitting businesses to avoid capping.  New control measures would be needed to replace cross-compliance as some (new) farmers would be outside of the support system.

Environmental Schemes

In the short-term the Countryside Stewardship would continue to operate.  Further streamlined options are promised for 2019, including simplified woodland grants.  The CSS is planned to end in 2020.  Although the timing is not entirely clear, this might suggest that 2019 would be the final chance for applications for a 1st January 2020 start date. 

Some will have a sense of deja vu as the new scheme is being referred to as the New Environmental Land Management Scheme (NELMS).  Pilots will be run from 2020 with the new scheme scheduled for a 2022 start.  This suggests there may be a ‘gap’ in scheme availability.  It will have the familiar features of past schemes such as annual payments and capital grants.  However, it is promised to be simpler, and have room for ‘innovative approaches’ (e.g. results-based schemes).  There will be a continued focus on collaboration and landscape-scale approaches.  The scheme will pay for ‘public goods’ in the areas of soils, water, air, biodiversity, climate change, natural beauty and heritage.

Other Policies

A number of other policy areas are outlined as being ‘public goods’ (which presumably mean they could attract public money in future).  These include animal health & welfare, plant & tree health, productivity support, resilience, traditional farming systems and landscapes (e.g. hill areas), and public access.

Not all the ‘asks’ of the industry look like being accepted however.  Volatility is covered in the consultation but the implication seems to be there will be no government subsidy for risk management instruments.  Likewise, ‘fairness in the supply chain’ is covered, but there seems little appetite for more Government legislation.

A new ‘regulatory culture’ is outlined, linking with the Inspections review being carried out by Dame Glenys Stacey (see earlier article).

Devolution

The consultation touches on the split of competencies between devolved Governments and UK-wide authorities.  There is little detail on what this might look like in practice.  There appears to be a presumption that powers will be devolved wherever possible – and certainly in areas where these already sit in Cardiff, Edinburgh and Belfast.  This suggests that different farm support arrangements will be likely in the four parts of the UK.  However, the paper sets out that ‘common frameworks’ are needed in areas that affect the internal UK market and trade.  If the scope of this is drawn widely enough then there could still be the ‘power grab’ that the devolved administrations have been warning against.

The full consultation can be found at – https://www.gov.uk/government/consultations/the-future-for-food-farming-and-the-environment

 

BPS Applications 2018

It seems likely that the Rural Payments system will open for online applications from the 13th March 2018.  This is somewhat earlier than the ‘late March’ date previously indicated.  As outlined in previous articles, it is currently possible to start to build a claim up by inputting field data, but it is not yet possible to print a summary of the claim or make the actual submission. 

Scottish Active Farmer Rule

We wrote last month that DEFRA had dropped the Active Farmer rule in England following a change in the legislation at European level.  The Scottish Government has now announced that it is also changing its rules for 2018.  However, it is partial change rather than a complete removal.  There will no longer be a Negative List of claimants (i.e. airports, water companies, golf courses etc.) that are ineligible for the BPS.  These entities can therefore now claim the BPS.  However, the second active farmer test, covering minimum activity levels on ‘naturally kept land’ has not been altered.  More details can be found at – https://www.ruralpayments.org/publicsite/futures/news-events/news-release—positive-change-to-cap-regulations/