Category: Policy & Business

Natural England is inviting applications for its second round of the Countryside Stewardship Hedgerows & Boundaries Grant.  In 2016 there were nearly 800 successful applicants.  Farmers can apply for a grant worth up to £5,000 towards the restoration of farmland boundaries.  There are set rates for each works such as hedge-laying, coppicing, gapping up etc.  The scheme is competitive; priority is given to smaller holdings as well as for the restoration of hedges and stone walls, as opposed to stone-faced or earth banks.  Those holdings that have previously taken part in Environmental Stewardship or the Woodland Grant Scheme will score more highly, as do applications applying for more than £1,000 in grant.

The scheme is not available on fields which already form part of a Mid or Higher Tier CSS agreement, HLS or UELS on 31^st July 2017 or already have a 2016 Hedgerow and Boundary Grant in place.  Land parcels subject to an ELS agreement are eligible as long as all other criteria can be met on the land.  Applications close on 28^th April 2017 and can be made using a paper form, or by using the new online application process which is expected to be available through the Rural Payments Service from early March 2017.  Further guidance and paper application forms can be found at https://www.gov.uk/government/news/natural-england-backs-hedges-and-boundaries-for-wildlife-and-people

Farm profits in Scotland are estimated to have risen 14% last year.  This finding comes from the Scottish Government’s first estimates of Total Income From Farming (TIFF) for 2016.  TIFF, the aggregate return for the farming industry, is estimated to have increased by £96 million compared with year earlier levels and follows two years of decline.  The Euro:Pound exchange rate has played a large part.  The weakening of thePound after the EU referendum led to an improvement in output prices, particularly for beef, lamb and cereals.  In addition the exchange rate to convert the Basic Payment from Euros to Sterling was 17% better than in 2015, leading to support payments increasing by £53 million in 2016.

Overall income from livestock is estimated to have increased slightly.  The beef industry has remained pretty steady over the last couple of years, the second half of 2016 seeing prices pick up.  Sheep farmers have seen a more positive increase of 13% due to improved prices and more numbers.  Income from pig and poultry farmers is also estimated to have risen in 2016 after both falling in 2015.  By contrast income from milk is estimated to fallen by a further £50m in 2016, down to £328m, after seeing a drop of £76m in 2015.  Cereals income has also fallen for two years on the trot, down 12% in 2015 and a further 8% in 2016.  Income from potatoes is estimated to have risen by 23% to £209m, due to improved ware prices and volume.

On the costs side, feed and fertiliser are estimated to have fallen in 2016; with fuel remaining steady, and labour increasing slightly compared with 2015 levels.  This resulted in total costs falling marginally.

TIFF is based on a calendar year and therefore these ‘first estimates’ for 2016 are pretty soon after the year-end. Accordingly, the figures therefore contain a large number of forecasts; final estimates for 2016 will not actually be published until 2019.  Even so the figures should give a good indication of the direction of income, both in Scotland and in the UK more generally.  The full statistical release which also contains final estimates for 2014 and second estimates for 2015 can be found at http://www.gov.scot/Resource/0051/00513593.pdf

The RPA has announced after more than six years at the helm, Chief Executive, Mark Grimshaw has decided to stand down.  Paul Caldwell has been announced as the Interim Chief Executive of the RPA.  Paul has been with the Rural Payments Agency since 2001.  He was made Operations Director in 2010 and in late 2016 he was appointed BPS Operational Delivery Director.  Previously he was manager at the British Cattle Movement Service (BCMS).

The Scottish Government has launched the latest round of the Agri-Environment Climate Scheme (AECS).  Applicants have until 31st March to apply for funding aimed at promoting low carbon farming and protecting the environment.  More than 60 options are available through the scheme to help improve water quality, protect land and support organic farming.  The scheme is competitive and applicants are scored against set criteria.  Support under the AECS is also ‘geographically targeted’ meaning claimants need to check which options are available in their area via spatial targeting maps.  Note also, the options available can alter slightly from year to year.  Applications are made online via Rural Payments and Services.  Further information and full scheme guidance can be found at: https://www.ruralpayments.org/publicsite/futures/topics/all-schemes/agri-environment-climate-scheme/

There looks set to be further consolidation in the UK food supply chain with the news that Tesco has agreed to buy Booker Group.  Booker is a major food wholesaler offering a ‘cash-and-carry’ service to small retailers and the food service sector.  It also owns the Londis, Premier, Budgens and Family Shopper retail brands (although the actual stores are own and operated independently).  Tesco is paying £3.7bn in the deal.  it is not yet clear whether it will be subject to Competition Authority investigation.

The RPA has announced 93% of farmers in England have now received their 2016 BPS money, this is just over 80,000 claimants.  This was the RPA’s target for the end of March.  We are aware of a number of inaccurate payments including some still outstanding from 2015 so claimants are encouraged to check their payments carefully.

Farmers and other rural businesses are now able to apply for grants under the Growth Programme of the RDPE.  The DEFRA Secretary, Andrea Leadsom, announced at the Oxford Farming Conference that £120m would be available under this scheme.

The application process has been streamlined somewhat from the previous rounds.  In the past, the RPA issued ‘calls for projects’ for each of the individual Local Enterprise Partnerships (LEPs) that set the priorities for funding.  It was often difficult to know if a scheme was open in a particular area, and what grants might fund.  Now, it looks much more like a ‘national’ scheme.  New Handbooks have been published setting out the overall rules of the scheme.  They also provide details of local priorities – there remain regional differences with some LEP areas not taking part in all aspects of the scheme.  The programme will remain open for Expressions of Interest until 31^st January 2018.

Grants are available in three areas – business development, food processing and rural tourism infrastructure.  There is a separate Handbook for each.  Grants of up to 40% of eligible costs are possible.  An Expression of Interest form and Guidance on how to complete this are also available online.  For more details see – https://www.gov.uk/government/publications/rdpe-growth-programme

Article 50 Ruling

The Government has lost its appeal in the Article 50 case.  Eleven Supreme Court Judges ruled by a margin of 8 to 3 that Parliamentary consent is required before the clause can be triggered.  This backs the earlier High Court decision (see November article) and means the Government must rethink its plans to use the Royal Prerogative to kick-start the Brexit process.

The Supreme Court did not rule on the form that Parliament’s consent needs to take.  The Government duly presented a very short Bill (of only two lines) a couple of days after the Court’s ruling.  The full(!) Bill can be found at –  http://www.publications.parliament.uk/pa/bills/cbill/2016-2017/0132/17132.pdf.  The timetable is for this to pass through the House of Commons by the 8^th February and the House of Lords soon after.  This would still allow the clause to be invoked by the end of March as planned.  However, MPs will almost certainly try to attach amendments to the Bill, either to try and specify the type of Brexit that is acceptable, or simply to ensure that Parliament has a say in the negotiation process.  The SNP has stated that it will table 50 amendments.  With a Conservative majority in the Commons, and Labour pledged not to obstruct any legislation, then the passage of the Bill could still be relatively swift.  There is a suggestion that the process may become bogged-down in the Lords however.

The fact that the Government believes it can stick to its Article 50 timetable, despite the Supreme Court’s decision, rather begs the question why the original ruling was appealed at all and why the Government didn’t put a simple Bill before Parliament to start with.  The impression of making policy up as it goes along was reinforced the day after the Court ruling.  Theresa May told Parliament that the Government would be publishing a full White Paper setting out a Brexit plan.  This is despite David Davies stating the day before that it was not necessary.

The Supreme Court also ruled on the role of devolved nations in the Article 50 process.  It found that the administrations at Holyrood, Cardiff and Belfast do not have to approve the triggering of Article 50 – it is solely a matter for the UK Parliament.

Welsh Brexit White Paper

On the subject of devolved administrations, the Welsh Government has published plans for what it wants to see from Brexit.  A White Paper called ‘Securing Wales’; Future’ was published on the 23^rd January (see https://beta.gov.wales/brexit ).  Along the same lines as the paper from the Scottish Government in December, this sets out the priorities for Wales in the Brexit negotiations.  They include;

• ‘full and unfettered’ access to the Single Market – access for Welsh foodstuffs is specifically mentioned as being key
• continuing to allow migration – by linking freedom of movement to employment
• any EU funding to Wales must be replicated by UK funds
• no reversal of powers already devolved to Wales and Brexit should be used as an opportunity for a debate about the future constitutional arrangements of the UK
• legislation to protect the environment and works rights should not be weakened as a result of Brexit
• in light of the timings for Brexit, the UK should consider transitional arrangements

The date of the spring Budget has been set for Wednesday 8^th March.  Following the Chancellor’s announcement in the Autumn Statement, this will be the last ever spring Budget with the main ‘fiscal event’ moving to an autumn date.

The UK will not seek to remain within the EU Single Market after Brexit.  This was the clear message delivered by Theresa May in a speech, setting out for the first time, the UK’s negotiating position.  Mrs May stated that staying in the Single Market would mean ‘not leaving the EU at all’ as theUK would still be subject to rulings of the European Court of Justice and would have to accept free movement of labour (aka EU migration).  Therefore, in the range of Brexit options, the Government is clearly aiming for the ‘harder’ end of the spectrum.  This could have significant consequences for agriculture.

Within the speech, twelve objectives for the negotiations were outlined;

1. Provide certainty wherever possible – although Mrs May stated there would not be a ‘blow-by-blow’ account of negotiations.
2. Have control over setting laws – it could be argued that the ability to decide laws in Westminster, Edinburgh, Cardiff and Belfast is the whole essence of Brexit.  However, the Great Repeal Act is going to mostly transpose existing EU rules into UK law with them only being amended over time (perhaps an extended period).  Therefore, the imprint of the EU will remain in UK law for many years.
3. Strengthen the United Kingdom – there was a clear move to try and bind all the parts of the UK into the Brexit process and head-off the prospect of a second Scottish Independence referendum.  Perhaps as an olive-branch Mrs May stated that ‘no decisions currently taken by the devolved administrations will be removed from them’.  This would suggest agricultural policy will continue to be set at the devolved level.  However, leaving the Single Market clearly goes against the declared wishes of the Scottish Government.   
4. Keep a Common Travel Area with Ireland – the CTA predates the EU and it is seen as vital for the peace process in Northern Ireland that there is not a hard border between the North and the Republic of Ireland.
5. Control migration – the Government has interpreted the Brexit vote as being, to a large extent, about immigration.  Certainly, Mrs May seems prepared to trade-off some economic pain in order to ‘control’ the number of people coming to the UK from Europe – hence leaving the Single Market and abandoning free movement of goods along with people.  There were warm words in the speech about immigration filling skills shortages and that the UK would continue to be open to ‘international talent’.  There was little on the problems that would be faced by sectors such as agriculture, hospitality, caring etc. if EU migration is halted.
6. Guarantee rights of EU citizens living in Britain & rights of British nationals in other Member States – the UK government is looking to do this as soon as possible to provide reassurance to the individuals involved.  Whilst some in the EU would favour agreeing this now, others are not keen.
7. Protect workers’ rights – this appears to be a move to reassure those at home and abroad that there will not be a ‘race to the bottom’ on labour standards with the UK becoming an offshore sweatshop for the EU. 
8. Construct a solid trade deal with the EU – the clear long-term aim is to have a comprehensive Free-Trade Agreement (FTA) with the EU (the so-called Canadian model).  This would provide access to the Single Market, but would not be membership of the Single Market (with all that entails).  The possibility of paying something into the EU Budget for Single Market access was raised, but it was made clear this would not be at the level of current contributions. 
9. Create trade deals with other countries – this would rule out the UK entering into a Customs Union with the EU as it would have to adopt the EU’s Common External Tariff.  However, Mrs May stated that she wanted a bespoke ‘customs agreement’ to smooth trade between the UK and the EU.  The ability of the UK to set its own tariffs needs to be watched carefully by the UK farming sector.  We could see cuts on agricultural tariffs imposed, either as part of a ‘cheap food’ policy, or within deals with other countries such as the US, Australia or Brazil.  This could see a big drop in UK prices.
10. Be a leader in science and innovation – this is a proposal to continue to collaborate with European partners on major science, research and technology initiatives.  It is also likely to link back into the migration issue with continued access to the UK for foreign students and researchers.
11. Continue to cooperate on crime, terrorism, and foreign and defence policy – the UK’s well-regarded intelligence and armed services may be a positive aspect for the rest of the EU within the negotiations.
12. Ensure a phased implementation process – Mrs May outlined she is keen to avoid a ‘cliff edge’ upon Brexit.  However, nor does she want an ‘unlimited transitional status’.  The aim is to have the future status between the UK and EU clarified within the two-year article 50 process.  There could then be a ‘phased process of implementation’.  All this is rather vague, but potentially could mean continued Single Market or Customs Union membership for a period after Brexit, with perhaps the Customs Union option being more likely.

Where this all leaves agricultural trade is not clear. Firstly, setting out a series of objectives is a long way from securing a deal.  The ‘wish list’ above still has to meet the hard realities of the negotiating process.  Even if a Free Trade Agreement is the final outcome, some FTAs partially or wholly exclude agricultural products.  And, even if farm goods are included in an eventual FTA, then tradeis unlikely to be as ‘frictionless’ as it is under the current membership of the Single Market – with increased trade costs leading to lower prices.  Then there is the question of how we get there from here.  The terms of any transitional arrangement are also key. 

The speech made positive noises about the UK continue being a ‘reliable partner, willing ally and close friend’ to the EU.  Mrs May stated that ‘we do not want to undermine the Single Market, and we do not want to undermine the European Union. We want the EU to be a success’.  However, there was also a threat within the speech for those in Europe who wish to see the UK punished.  The Government would walk away from a bad deal.  There was an implied threat that, denied access to the Single Market, the UK would look to become a low-tax, low regulation economy on the doorstep of Europe.

One final point contained within the speech was that any deal concluded between the UK and the EU would be put before both Houses of Parliament before it comes into force.