- The NFU of England and Wales will be looking for a new leader come February. The current President, Meurig Raymond, has indicated that he will not seek re-election when his current two-year term ends next year. He has stated that, with Brexit negotiations likely to run on for some years, and his desire not to continue in office beyond 2020, he is stepping down now to allow someone else to take up the post who can provide continuity. Mr Raymond was voted as the successor to Peter Kendal as President in 2014, and was re-elected in 2016.
- One of the country’s biggest farming operations is to cease day-to-day farming. Farmcare, which used to be Co-op Farms before it was sold to the Welcome Trust in 2014, will no longer be involved in ‘operational farming’. The company occupies around 13,000 hectares (32,000 acres) at 11 locations across Britain from Aberdeen to Kent. From September 2018, the farming of the land will be undertaken through joint-venture arrangements. The Farmcare fruit business will be sold-off as a going concern.
- Scotland’s Tenant Farming Commissioner is inviting Landlords and Tenants to take part in a survey to find out their views and experiences of the conduct of agents acting on their behalf on agricultural matters. The Tenant Farming Commissioner must complete the review and make recommendations to Ministers by March 2018 as part of his commitments under the Land Reform (Scotland) Act 2016. Research Resource, a social and economic research agency based in Glasgow has been commissioned by the Scottish Land Commission to undertake telephone interviews.
- The latest figures on wild bird populations show no overall increase in numbers. In particular, the farmland bird index is disappointingly flat – despite all the efforts of the industry in terms of environmental management over the last few years. The bird numbers are important as the Government tends to use them as a ‘proxy’ for the health of the environment and biodiversity more generally. Farmland bird numbers have declined by over half since the early 1970s. Even over the last five years, the survey has recorded a 9% reduction. The figures can be found at – https://www.gov.uk/government/statistics/wild-bird-populations-in-the-uk
Category: Policy & Business
UK Industrial Strategy: Food & Farming
New residential Government has launched an industrial strategy for the UK economy. The White Paper entitled ‘Industrial Strategy – Building a Britain for the Future’ sets out a long-term plan to boost the productivity and earning power of the people in the UK. The 255 page report focuses on ‘5 foundations of productivity’;
- Ideas – the worlds most innovative economy
- People – good jobs and greater earning power for all
- Infrastructure – a major upgrade to the UK’s infrastructure
- Business Environment – the best place to start and grow a business
- Places – prosperous communities across the UK
The report includes a number of references to agriculture stating ‘we will put the UK at the forefront of the global move to high-efficiency agriculture’. It includes a new ‘ Transforming food production – from farm to fork’ programme which aims to put the UK at the forefront of advanced sustainable agriculture. The White Paper also reports that over the coming years, the CAP will be replaced with incentives to grow the markets for ‘innovative technologies and techniques’.
The report which was launched on 27th November appears to be full of nice ideals and lofty ambitions but a bit short on actual plans. And a lot of the policies that are in it seem to be stuff that has already been announced. The full paper can be found at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/662508/industrial-strategy-white-paper.pdf
Scottish Residential Tenancies
New residential tenancy legislation in Scotland comes into force as from 1st December. The introduction of the Private Housing (Tenancies) (Scotland) Act 2016 will mean any existing Short Assured and Assured tenancies will continue, but new tenancies granted in the private rented sector from the beginning of December will be Private Residential Tenancies. The new Tenancy will;
- be an open-ended tenancy, which means a landlord will no longer be able to ask a tenant to leave simply because the fixed term has ended
- provide more predictable rents and protection for tenants against excessive rent increases
- include the ability to introduce local rent caps for rent pressure areas
- provide comprehensive grounds for repossession that will allow landlords to regain possession in 18 specified circumstances
More information can be found at https://beta.gov.scot/policies/private-renting/private-tenancy-reform/ including guides for Landlords and Tenants and a model Agreement.
English Grants
Countryside Productivity Grants Extended
New grant funding is available for farmers in England to improve productivity and add value to farm produce. An extra £40m is being committed to the Countryside Productivity Scheme (CPS). As reported on in August, this was already open for forestry and water management projects, but is now being extended further.
Grants of 40% are available, with the minimum grant level being £35,000 and the maximum £1m under the productivity strand. Examples of the type of productivity investments that will be funded under the CPS are;
- robotic equipment and systems to aid production including robotic milkers and robotic harvesters
- equipment to increase the use of renewable energy produced on farm (but not equipment for the generation of energy). Includes heat distribution systems and battery storage for renewables
- LED lighting for crop production
- slurry and digestate management equipment
Funding for processing to add value is available for most farm produce including milk, eggs, meat grain, fruit and vegetables. Applicants for these grants have to submit an Expression of Interest before being selected for a full application. The deadline to submit EOI is 29th June 2018. Under the Productivity strand, there is a single-stage application process with a deadline of 3rd December 2018. For more details see – https://www.gov.uk/guidance/countryside-productivity-scheme
Growth Programme
The deadline for applications to the Growth Programme under the RDPA has been extended until 31st May 2018. The deadline for submitting Expressions of Interest was previously going to be 31st January 2018. The Growth Programme provides funding for projects in England which create jobs and help grow the rural economy. The funding is delivered through Local Enterprise Partnerships (LEPS) who have developed local strategies and priorities. There are 39 LEPs in England. Funding is available in three areas; Business Development, Food Processing and Rural Tourism Infrastructure. More information can be found on the Government website at https://www.gov.uk/government/publications/rdpe-growth-programme
Base Rate Rise
The Bank of England raised the UK Base Rate to 0.5% on the 2nd November. Some younger readers may not have experienced a rise in interest rates in their working lifetime – the last occasion that Base Rates rose was on the 5th July 2007, going from 5.5% to 5.75%. Rates were slashed down to 0.5% after the Financial Crisis of 2008-09, and dropped once more to 0.25% after the EU Referendum. The Bank of England has now reversed the latter cut, as it wants to keep control of inflation. The UK economy has proved quite robust with high employment and reasonable growth, giving the Bank an opportunity to raise rates with less concern over hurting the economy. The Governor of the Bank of England, Mark Carney, has stated that he expects there to be two more rate rises in the next three years, bringing the Base Rate up to 1%. Whilst these increases will have an effect on the borrowing costs of those not on a fixed-rate deal, it should be remembered that lending rates remain at historically low levels, and look set to remain so for the time being.
Budget 2017
The 2017 Budget, delivered by the Chancellor Philip Hammond on the 22nd November, was dominated by deteriorating economic forecasts. The independent Office for Budget Responsibility (OBR) has reduced its estimate of UK growth for 2017 to 1.5%. In March the OBR believed growth this year would be 2%. Forecasts for the coming years have also been downgraded; to 1.4% for 2018, 1.3% for 2019, and 1.5% and 1.6% for 2020 and 2021 respectively. Worryingly for the long-term health of the economy, a large part of the reduction is due to lower productivity growth – a chronic problem for the UK economy. Another factor weighing on the economy is uncertainty over Brexit – which is reducing business investment.
With the economic outlook gloomy, and a continued desire to reduce the budget deficit, Mr Hammond’s room for manoeuvre was limited. He did, however, make a number of specific policy announcements;
- Stamp Duty Land Tax (SDLT) will be abolished for first-time buyers on the first £300,000 for properties worth up to £500,000. This change does not apply to Scotland which has a separate land tax.
- On house building, the Government will make an extra £15.3 billion of new financial support available over the next five years, bringing total support for housing to at least £44 billion over this period to meet a target of 300,000 new homes per year. Note that much of this is in the form of loans and guarantees rather than straight Government spending. There will also be measures to prevent ‘land banking’ by developers and possible changes to the planning laws to promote development.
- Under Income Tax, the Personal Allowance will increase to £11,850 and the Higher Rate Threshold to £46,350, in line with inflation. The Government has reaffirmed its commitment to raising the PA to £12,500 and the HRT to £50,000 by 2020. The lifetime allowance for pensions will rise to £1,030,000 for 2018-19.
- The National Living Wage, for those over 25, will rise to £7.83 per hour (currently £7.50) from April 2018 – an increase of 4.4%
- National Minimum Wage rates will also increase from April 2018; from £7.05 to £7.38 for 21 to 24 year olds, £5.60 to £5.90 for 18 to 20 year olds, £4.05 to £4.20 for 16 and 17 year olds and the apprentice rate rises from £3.50 to £3.70.
- Despite much pre-Budget speculation, the threshold for VAT will remain at £85,000.
- Duties on alcohol (except high-strength ciders) and fuel are frozen.
- Business Rate rises will now be calculated using the CPI inflation measure rather than RPI – likely to make increases around 1% lower on average
- A report on the use of Inheritance Tax Reliefs has been published. This can be found at – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/660027/Behavioural_evidence_around_Inheritance_Tax_and_reliefs.pdf. It makes no policy recommendations, but simply highlights how existing reliefs such as APR influence behaviour.
- The Government has set aside an additional £3bn of funding for Brexit preparation including the possibility of a ‘no deal’ Brexit. This is to cover the cost of setting up new systems for immigration, customs etc.
New Environmental Body
Michael Gove, Environmental Secretary, has announced plans to consult on a new independent body for environmental standards. The new body will advise Government as well as having the powers to challenge and hold the Government to account after we leave the European Union. Currently environmental decisions in the UK are overseen by the European Commission. These are based on a number of ‘Environmental Principles’ such as polluter pays and sustainable development. The consultation will also look into the content of a new policy statement to ensure these environmental principles underpin future policy making in the UK. The consultation on the ‘scope and powers’ of the independent body will be launched early next year.
Brexit Roundup – Progress (Or Lack Of)
Little has seemingly shifted in the Brexit talks this month. The next big event will be the Summit of EU Heads of State on the 14th and 15th of December. After failing to get agreement to move onto the Trade element of the talks in October, the UK Government will be hopeful of breaking the impasse next month. It is rumoured that the UK might make an offer on the ‘divorce payment’ ahead of the meeting to push the talks forward. A figure of £40bn has been mooted, although this still falls short of what the EU is likely to be looking for. We have previously outlined how money was proving to be the biggest obstacle within the ‘Exit issues’ preventing the next stage of the negotiations starting. Just to show how difficult and complex the process is, the last few days have seen the issue of the Irish border move to centre-stage in terms of being a deal-breaker.
Thursday the 9th November 2017 marked the mid-point between the Referendum on the UK’s membership of the EU, and the date of exit. It can be safely stated that half of the work in preparing for Brexit has not yet been completed.
Meanwhile, the UK Government has confirmed the precise time of leaving (should all go to plan) will be 11pm on Friday 29th March 2019 (midnight Brussels time).
Greening Penalties
Whilst we await further announcements on the operation of ‘greening’ under the Basic Payment Scheme, it may be worthwhile looking at the penalties that apply if BPS claimants fail to ‘green’.
The penalty regime is set out in the EU legislation and, to be honest, is not that easy to interpret (and less easy to summarise simply). This is our attempt;
- the penalties for the crop diversification and EFA elements are calculated and applied separately (then summed at the end of the process)
- the crop diversification test is applied in two parts; firstly to see if the main crop is not more than 75% of the arable area, secondly to see if the two largest crops are not more than 95% of the arable area
- penalties for each element are calculated based on a figure equivalent to 50% of the arable land area. This means that penalties are seemingly not applied to the greening element on permanent pasture land or permanent crops.
- the penalty is based on a calculation referred to as the ‘ratio of difference’ – this basically means how much of a shortfall there is, divided by the actual requirement
- the range the ‘ratio of difference’ can be from 0 to 1 for each element (diversification/EFA). Therefore for each part of greening the range of penalties is from 0% up to 15% of the BPS (1 x 50% land area x 30% greening payment)
- thus, when penalties are added together, if they are at the maximum for both crop diversification and EFA, the full 30% greening payment will be lost
- the legislation sets out various ‘administrative penalties’. These are waived for 2015 and 2016, but for 2017 have the effect of taking the maximum penalty to 120% of the greening payment, and 125% for 2018 onwards
An example may help illustrate this complicated system. Consider a farm of 100 arable hectares. In 2015 it has Crop A of 80 Ha, Crop B of 18 Ha and Crop C of 2 Ha. The farm has 3.5 Ha of EFA.
Crop Diversification:
Stage One: Test of whether main crop is less than 75% of arable area:
Required percentage of ‘other’ crops = 25%. Percentage that Crop A goes above 75% threshold = 5%. ‘Ratio of Difference’ = 5%/25% = 0.2
Stage Two: Test of whether two main crops together are less than 95% of arable area:
Required percentage of ‘other’ crops = 5%. Percentage that Crop A + B go above 95% threshold = 3%. ‘Ratio of Difference’ = 3%/5% = 0.6
Total crop diversification ratio of difference = 0.2 + 0.6 = 0.8 (Note that this figure is capped at a maximum of ‘1’)
Crop Diversification Penalties = 0.8 x 50 Ha (half of arable area) = loss of greening payment on 40 Ha
Ecological Focus Areas:
Required area of EFA = 5% or 5 Ha in this case. Shortfall in area of EFA present = 1.5 Ha. ‘Ratio of Difference’ = 1.5/5 = 0.3
EFA Penalties = 0.3 x 50 Ha (half of arable area) = loss of greening payment on 15 Ha
Total penalties = loss of greening payments on 55 Ha (40 + 15 Ha) – i.e. 55% of the total greening payment is lost in this case.
It can therefore be seen that there is a sliding scale of penalties under each heading. If a claimant just missed his EFA requirement by a few square metres due to a mapping error for example, the penalty will be quite small. If they simply ignore it completely and have no EFA, then the penalty will be 15% of their total BPS (assuming it is an all arable unit – permanent pasture seemingly being exempt from greening penalties).
This does open up the possibility of some claimants opting out of a specific element of greening if the benefits outweigh the costs. For example a claimant may not want to do crop diversification. They could plant 100% of their arable land to a single crop. Assuming a BPSpayment of, say, £200 per Ha, 15% of this would be lost resulting in a reduction of £30 per Ha. Some farmers may be prepared to accept this.
However, a clause in the penalty regime states that if you are non-compliant with either element of greening for three years, penalties will be applied to the entire arable area. Thus the maximum penalty for ignoring an element rises from 15% to 30%.
One final quirk might be in the way the claims process actually works. The form in 2015 could include wording along the following lines “I have read and understood the greening requirements of the BPS and hereby confirm that this application complies with those requirements“. Therefore simply submitting a form could bind the claimant into greening. If they were then found to have never had any intention of abiding by the rules could this be ruled an intentional over-declaration? (with the severe penalties that brings). Therefore, the greening penalties would be for inadvertent slip-ups and miscalculations, whilst harsher penalties might apply for intentional non-compliance (although telling the difference would be tricky). No doubt this will become clear in due course.
BPS Payments 2017
Payment levels under the 2017 BPS in England have been announced by the Rural Payments Agency. The headline figure is that the amount farmers will receive will increase by 7% compared to last year.
As most readers know by now, the calculation of entitlement values is undertaken from scratch each year and the rate can vary depending on how many entitlements are claimed in each region. The fact that rates are slightly higher than our estimates suggests that fewer entitlements were claimed this year and the funds from them have been ‘recycled’ into the remaining entitlements. The table below shows the published rates, our estimates and the actual payment that farmers will receive. This is based on the 2017 conversion rate of €1 = £0.8947 (£0.85228 in 2016).
The net payments shown for 2017 are after Financial Discipline at 1.388419% (slightly higher than last year when it was 1.354%). The rate for this year is compared to the payment for the last two years. The final result is that payments in Lowland England are £15.07 per hectare more than last year and £48.91 more than in 2015. SDA and Moorland payments are up by £14.54 and £6.81 per hectare respectively on last year.
| BPS ENTITLEMENT VALUES 2017 | |||||||
|
Gross Payments – € per Ha |
Net BPS/SPS Payments – £ per Ha |
||||||
|
2017 Standard |
2017 Greening |
2017 Total |
Our 2017 Est. |
2015 |
2015 |
2016 |
|
| Lowland |
180.46 |
77.69 |
258.15 |
254.8 |
£178.85 |
£212.69 |
£227.76 |
| SDA Non-Moor. |
178.90 |
76.92 |
255.82 |
252.9 |
£177.57 |
£211.16 |
£225.70 |
| Moorland |
49.63 |
21.32 |
70.95 |
66.8 |
£46.92 |
£55.79 |
£62.60 |
| Source: RPA *converted at €=£0.8947, 1.388419% Financial Discipline | |||||||
