Category: Policy & Business

The Scottish Environment Secretary, Roseanna Cunningham, has announced the next round of applicationsfor the Agri-Environment Climate Scheme (AECS) will open at the start of 2018.  In January there will be a round dedicated to agri-environment, diffuse pollution and organic conversion and maintenance schemes.  There will be a further window for projects designed to improve public access, this is expected to open in March 2018.  All successful applications will be funded for the full 5 year term.

Rural Secretary, Fergus Ewing, announced at the Rural Highland Show the establishment of a National Council of Rural Advisers.  This will look into the potential implications for Scotland’s rural sector to the UK leaving the EU.  The National Council will make recommendations on future policy and support by early 2018.  The Council is made up of key experts, including the ‘agriculture champions’ announced back in January.  Lorne Crerar and Alison Milne are to be co-Chairs of the Council. More details can be found at – https://news.gov.scot/news/the-rural-economys-future.

A number of reports released this month highlight the issues with labour in the fruit and vegetable sectors.  These are both short-term, with the UK becoming a less desirable place to work due to the weakness of the Pound and a perceived anti-migrant sentiment in the UK, and longer-term with the availability of labour post-Brexit unclear.

The first report was produced for the soft-fruit industry body British Summer Fruits, by Andersons Midlands.  The headline finding was that without access to EU labour, strawberries and raspberries will be between 30% and 50% more expensive after Brexit.  Currently around 29,000 seasonal labourers pick soft fruits in the UK but this would be expected to rise to 31,000 by 2020 with the forecast growth in the sector.  Britain’s soft fruit industry is worth £1.2 billion a year and has grown by 131% in the last ten years.  British Summer Fruits is calling for a Seasonal Agriculture Permit Scheme after Brexit which would allow European workers toenter the UK on fixed-term contracts.

A further survey undertaken by the BBC has found that fruit and vegetable growers in the UK are having difficulty recruiting migrant labour this year and would like to see a return to the Seasonal Agricultural Workers Scheme (SAWS).  The BBC surveyed members of the British Leafy Salad Association and British Summer Fruits, which represent 90% of growers across these sectors.  Three quarters of growers responded, of those, 78% said recruitment had been more difficult than last year.  One-in-five growers said they had fewer workers than required.

In total, about 80,000 seasonal workers a year are involved in picking and processing fruit and vegetables in Britain.  Over the years the nationalities of these workers have changed, with the majority currently coming from Romania and Bulgaria.  Recruitment had already been getting more difficult in recent years, but this has been exacerbated by the weak Pound and the uncertainty over Brexit.  Worryingly, of those surveyed, 71% said they would consider reducing their production if there were restrictions on seasonal workers in the future.

Finally, an NFU survey has found that the numbers of seasonal workers coming to work on British farms have dropped 17% in the months leading up to May, compared to the same time last year.  The NFU blames ‘a lack of clarity regarding the UK’s future relationship with the EU and a weakened Sterling’.

Whilst the industry is fairly clear that part of the answer is to bring back the Seasonal Agricultural Workers Scheme (SAWS), in a recent Select Committee inquiry into seasonal labour shortages, the Government said that net migrant figures showed there was no shortfall and that a SAWS was not needed.

As part of the preparations ahead of Brexit an ‘Agriculture Bill’ will be put before Parliament.  This is ensure ‘an effective system is in place to support UK farmers and protect the natural environment after the UK leaves the EU and the Common Agricultural Policy’.  The plan was announced in the Queen’s Speech on the 21^st July which set out the Government’s legislative programme.  Unlike normal Parliamentary sessions which run for a year, the current one is scheduled to last two years – mainly due to the need to deal with Brexit.

Eight of the 27 Bills announced were on topics related to Brexit.  As well agriculture, there will be the over-arching Repeal Bill to convert EU law into UK law.  Interestingly, it no longer seems to be referred to as the ‘Great’ Repeal Bill.  Other areas covered are a UK customs regime (including VAT), a Bill to allow the UK to make trade deals, powers on immigration, fisheries, nuclear safety and the power to impose economic sanctions.

What the Agriculture Bill will cover is not entire clear.  It is perhaps unlikely to set out the actual policy for the post-Brexit era.  Instead, it will put in place a legal framework to allow any policy to be implemented.  But it may well provide some steer on the direction of future support and provide clarity in areas such as the level of devolution in farm policy.  It could also be used to enshrine the Conservatives manifesto commitment to keep farm support spending at current levels until the end of the current Parliament (planned to be 2022).  It is unlikely that the Bill will been seen early in the session – it could well be later in 2018 before it is introduced.  The industry will therefore have an extended period in which to lobby for the right legal framework.

Away from Brexit, the Bills announced were fairly low key.  Among the measures outlined were legislation on automated vehicles, the extension of HS2 to Crewe, and a ban on landlords and their agents charging letting fees to tenants.  Many of the Conservative manifesto commitments have been side-lined due to the election result.  There are no legislative proposals to scrap universal free school meals, means-test the winter fuel allowance, end the ‘triple lock’ on pensions, reform the funding for social care, expand grammar schools, impose an price cap on energy bills, end fixed-term parliaments or allow a free-vote on fox hunting. 

The giant online retailer, Amazon, has made a major move into the grocery sector.  It announced on the 16^th June that it would pay $13.7bn to buy Whole Foods, a high-end US supermarket.  In itself, this might not look very seismic; Amazon has less than half a percent of the American grocery market and Whole Foods just over one percent.  Whole Foods is also fairly niche, with only 450 stores, including a handful in the UK.  But, what might be important is what it might say about the future.  According to research, in 2016 43% of all online retail sales in the US went through Amazon.  It is completely dominant in some online categories such as books and consumer electronics.  What keeps supermarket executives awake at night is the thought that it might be able to replicate this dominance in the food sector.  Until now, Amazon has only nibbled at the edges of the grocery market, but the purchase of Whole Foods looks like a significant strategic step – including the running of physical stores for the first time.  It will not be easy for Amazon; margins in the supermarket sector are low and the goods are far more tricky to deliver than a book.  However, with its mastery of logistics, reputation for service and existing customer loyalty it would be brave to bet against Amazon becoming a force in grocery retailing.  Once it has worked out its offer in America the UK market would be a logical next-step.

A report has outlined that the Scottish Government’s CAP IT system is still not working properly.  Audit Scotland states that significant issue remain, and that the programme has not delivered value for money or planned benefits for applicants.  It goes on to outline that the Scottish Government will need to incur further costs to fix the system and fines for late payments of up to £60m are possible.  The report can be found at – http://www.audit-scotland.gov.uk/news/it-project-for-rural-payments-ends-but-significant-issues-remain

The talks between the UK and the EU to set the terms of Brexit finally began on the 19^th June.  Nearly three months after Article 50 was triggered by the UK government the two sides have finally met in Brussels to thrash out the terms.  Whilst the EU side has had plenty of time to prepare its position the UK is in some disarray.  After the inconclusive General Election it is not even clear what type of Brexit the UK now favours.  Whilst the position for a ‘hard’ or ‘clean’ Brexit set out back in January by Teresa May remains the default position, there are many voices in the UK calling for a change of direction.  This might entail remaining in the Single market, the Customs Union or even, at the wildest end of speculation, back-tracking on Brexit altogether.

The EU approach to the negotiations has been likened to a bomb disposal unit; methodical, calm, but very much on edge because they are dealing with something so unstable.  All the EU preparation had been predicated on the UK looking for a ‘hard’ Brexit.  if this is now changing it makes the negotiations even more complex.  As previously written, the first part of the talks will focus on ‘divorce’ issues – citizens’ rights, the Brexit bill and the status of Ireland.  Only if progress is being made on this will talks on the future (trading) relationship begin.  The EU’s Chief negotiator, Michel Barnier, has stated that it is likely to be early 2018 before this stage is reached.  Despite the UK Government’s desire to negotiate behind closed doors, the EU side has stated it is going to be ‘open’ in terms of releasing documents and minutes.  It should therefore be possible to gauge fairly easily how well the talks are going (or not).

It now looks likely that pesticides will be banned on Greening EFA areas for the 2018 year onwards.  As we wrote earlier in the month (/arable/greening-uncertainty/), a vote by the European Parliament Agriculture Committee had raised the possibility that the plans would be scrapped or watered-down.  However, a vote by the full Parliament has accepted the proposals and they now seem likely to progress to the rule book.  Those planning their cropping for 2018 should now assume that it will not be possible to use plant protection products (PPP) on EFA land next year.  This is, of course, particularly relevant to Nitrogen Fixing Crops (NFC) where many farmers have used their bean or pea areas to meet EFA Greening.  It is unlikely that producers will want to grow these crops without using PPP.  The precise rules are not yet known, especially on issues around the period when a ban might apply – e.g. from planting to harvest, or a defined ‘cropping period’?  But it would be dangerous to assume there would be any ‘loopholes’ that could allow PPP to be used.  Aside from NFC, this is also an issue for the management of fallow land being counted towards EFA.  Up until now it has been possible to spray this land during the fallow period to, for example, control weeds such as blackgrass.  This will no longer be possible.

EU Farm Commissioner, Phil Hogan, has suggested a ‘two stage’ approach to try and break the deadlock over organic reform.  Talks collapsed at the endof May after Member States rejected a revised mandate at the Special Committee on Agriculture (SCA).  The key sticking points surround the rules under which organic food products would lose certification when non-authorised substances are found, and greenhouses using demarcated beds.  The EU Farm Commissioner put forward the idea of ‘parking’ these two issues until a later stage to try and push through the rest of the reforms before the Maltese Presidency finishes at the end of June.  But views remain very divided, the Danish Minister has even called for the Commission to withdraw the proposals altogether.

Over the coming days the Presidency, Special Committee on Agriculture and the Commission will hold a series of talks with a view to producing a revised compromise text for 21^st June.  A further SCA meeting has been ‘pencilled-in’ for June 26^th, but this will be dependent on the readiness of the delegates to want to broker a deal.  The final trilateral is tentatively scheduled for 28^th June.

The EU Commission initially published proposals for a new regulation governing the production and sale of organic food in the EU back in 2014 but progress has been very slow.  The key points of the proposal are:

• end all derogations; certified producers will be required to use 100% organic inputs and agricultural ingredients for food prcessing
• end ‘parallel’ production, the whole holding will be required to be 100% organic
• require 100% of feed for cattle & sheep and 60% for pigs and poultry to come from the farm or ‘region’
• automatic decertification if low levels of contamination from non-authorised substances is found

Teresa May’s gamble to call a snap General Election has mis-fired badly.  Instead of strengthening her position ahead of the Brexit talks, she is left heading a minority Government with her personal authority badly, if not fatally, damaged.   The final results saw the Conservatives lose 13 seats to finish with 318 MPs, eight short of the 326 necessary for a majority.  A deal has been agreed with the Democratic Unionist Party (DUP) of Ulster for its 10 MPs to provide support and Mrs May to remain as Prime Minister.  With Sinn Fein maintaining its long-standing position of not taking up its Westminster seats (currently numbering seven) the position for the Government is slightly eased, but every by-Election becomes critical.

It is an Election where it could be said all of the main parties lost.  For the Conservatives, starting with a 20-point lead in the opinion polls and then ending up with a weaker position highlights a fairly disastrous campaign.  For Labour, although much has been made of its increase in support, losing by less-than-expected is still losing.  The Liberal Democrats failed to rebuild their vote after the slump of 2015 (despite positioning themselves as the anti-Brexit party).  The Scottish Nationalists went backwards with seemingly little appetite for ‘IndyRef2’, and UKIP basically disappeared. 

All this adds even more uncertainty to the UK political situation.  The Pound weakened on the result and is currently at around 88-89p to the Euro.  The further fall in Sterling will provide an even greater short-term boost to farming.  The Queens Speech, scheduled for the 19^th June, has been delayed to allow the Government’s programme to be re-worked.  The policies included in the Speech will, it is presumed, have to be acceptable to the DUP. There may also be less ambition due to the lack of full majority and less of a stamp of Mrs May’s favoured policies.   The new-found power of the DUP worries many.  Not only have they a very conservative set of social policies, but if they gain a favoured position in Government it may upset the politics of Northern Ireland.  The UK Government has tried to play the role of honest broker between Unionists and Nationalists, which now looks much harder to achieve.  In agricultural terms, the DUP derive a lot of support from rural areas so may take an interest in driving a pro-farming agenda.  Despite not wanting a hard border between Northern and Southern Ireland the party was strongly pro-Brexit, so may not be pushing Government towards a softer line.  The DUP may be looking for increased funding for the Province – not least to plug the gap created by the £400m-plus ‘cash-for-ash’  scandal that led to the downfall of the power-sharing agreement in the first place.

Effect on Brexit

The impact of the election on Brexit is currently hard to gauge.  There is a school of thought that a weaker position and a stronger opposition may force Mrs May to adopt a less tough stance on Brexit.  Whilst remaining part of the Single Market does not seem likely (Labour also promised to leave), there is renewed discussion of the UK staying in a Customs Union.  Brexit negotiations were due to start in Brussels in the week commencing 19^th June.  This now looks to be in doubt.  With the clock ticking towards the March 2019 leaving date any delay reduces the chance of a good deal (or any deal) for the UK.  It might be thought that the European side would be quietly chuckling at the disarray in the opposition team.  In fact, it is reported that they simply want an organised, realistic and competent set of people to start talking to. 

New Face at DEFRA

One result of the election was a very minor reshuffle of the Conservative team.  This saw Michael Gove replace Andrea Leadsom as DEFRA Minister.  The departure of Mrs Leadsom, who becomes Leader of the House of Commons is unlikely to be mourned by many in the farming sector – her rare utterances on agriculture consisted mainly of platitudes and sound-bites.   Mr Gove may not be to everyone’s taste, but he is said to posses a sharp intellect and brings a higher profile to the DEFRA job.  As a Department, and industry, hugely affected by Brexit, some strong leadership and bright ideas would not go amiss.