Category: Policy & Business

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.

A number of schemes in Wales are currently open or require Agreement Holders’ attention:

• Glastir Organic – New agreement holders in 2017 must submit their Organic Business Plans via RPW Online by 31^st December 2017.
• Glastir Advanced – All 2016 and 2017 capital works must be completed by 31^st December 2017.  Claims have to be made via RPW Online by 28^th February 2018.  RPW will be sending reminders to those affected.
• Glastir Small Grants – The next round of Expressions of Interest (EoI) concentrate on the Carbon theme.  This opened on 1^st November 2017 and will close midnight on 13^th December 2017.
• Co-operative Forest Planning Scheme – the window for EoIs opened on 23^rd October and will close on 30^th April 2018
• Co-operation and Supply Chain Development – The 5^th round opened for EOIs on 6th November and will close on 20^th December 2017.
• Farm Business Grant – This grant will re-open for applications on 2^nd January 2018.  See article of 1st November for more details.

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.

The deadline for applications to the growth Programme under the RDPA has been extended until 31^st May 2018.  The deadline for submitting Expressions of Interest was previously going to be 31^st 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

Scottish BPS loan payments have began ahead of schedule.  Scottish Rural Economy Secretary, Fergus Ewing, has confirmed that about 12,300 farmers and crofters should have received 90% of their anticipated 2017 BPS payment by 1^st November.  This payment is earlier than expected; it was due in the first week of November.  The payments are being made via a National Scheme as Scotland’s IT system is (still) not in a position to have fully validated applications to make payments from EU funds until much later into the BPS payment window, which runs from 1^st December 2017 to 30^th June 2018.  Those who have not yet applied for a payment under the National Scheme can still do so as soon as they receive a ‘loan offer letter’.

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 Bank of England raised the UK Base Rate to 0.5% on the 2^nd 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 5^th 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.  Most forecasters believe there will be two more rate rises in the next couple of 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.  

The Farm Business Grant will re-open for applications on the 2^nd January 2018.  The deadline for completed forms is the 2^nd March.  The scheme provides 40% grants for investment in particular items of equipment and machinery.  The minimum grant is £3,000 and the maximum £12,000.  The first rounds of the scheme were under-subscribed with all eligible applications being funded.