Category: Policy & Business

Trade Policy Blueprint

The UK Trade and Business Commission, a body consisting of business and political leaders from opposition parties as well as international trade experts, recently launched its blueprint for future trade policy.  It is designed to address key barriers to trade and help grow of the UK economy.  The blueprint was launched at the Trade Unlocked conference in Birmingham.  This event was attended by over 650 businesses, industry leaders and several Labour MPs, including the Shadow International Trade and Foreign Secretaries.  As such, the conference provided an interesting insight to the potential direction of a future Labour Government.  The Commission’s recommendations, if enacted, would have significant implications for agricultural trade.  They include;

  • ‘Beneficial’ alignment with EU Standards and Regulations:  whilst staying outside the EU Single Market and Customs Union, the Commission suggests that there is ‘everything to be gained’ by the UK aligning with EU Standards and Regulations, where it is beneficial to do so.  The Commission also suggests that where it is sensible to diverge, the UK should use its freedom to do so, whilst acknowledging that costs would arise in such instances.  It argues that this would give greater predictability regarding the UK’s regulatory system,  helping investment.  It is also seen as key to achieving a UK-EU Sanitary and Phytosanitary (SPS) and veterinary agreement  – something that a future Labour Government is particularly keen on.  In addition to SPS, other areas where the Commission calls for alignment include;
    • Food safety: the UK should maintain and uphold the key principles of EU food safety standards, including the General Food Law (EC 178/2002) and EU regulation (EC 852/2004) on the hygiene of food stuffs.
    • Chemical contaminants and residue monitoring: continue to align with EU maximum residue limits (MRLs) for pesticides and align veterinary drugs’ regulations with the EU.
    • Foodborne disease surveillance and outbreak response: the UK should actively participate in the various EU surveillance networks and systems including the Rapid Alert System for Food and Feed (RASFF) and have close collaboration with the EU across a range of other disease-related areas.
    • Safeguard against lower quality imports: the UK Government should ensure that imported food products meet minimum regulatory standards that apply to domestically produced food, including on environmental requirements and animal welfare.
    • Organic food equivalence: maintain regulatory alignment between the UK and EU for organic food standards to facilitate continued equivalence beyond December 2023.
  • Establish a new regulatory forum for trade cooperation with the EU: this UK-EU Regulatory Council would be styled on the US-Canadian Regulatory Cooperation Council and would aim to reduce non-tariff trade barriers and build on the commitments made in the Windsor Framework.  It would be established ahead of the 2026 review of the UK-EU Trade and Cooperation Agreement. This is a sensible approach and the US-Canada relationship provides a useful template for how the future UK-EU trading relationship should be managed.
  • Establish a new UK Board of Trade: this would be an independent body acting for the Department for Trade and Business in much the same way as the Office for Budgetary Responsibility (OBR) acts for the Treasury. As such, it would impartially assess the UK’s trading performance and help to drive improvements across Government.  It would also provide impact assessments of new and existing trade deals and assess areas of divergence between the UK’s and other trading blocs’ regulations that will benefit the UK economy.  Its board would include representatives from major UK business organisations, SMEs, trade unions, devolved Governments, and senior experts in trade and regulation. One would imagine that if such a body were established that it would supplant many of the functions of the Trade and Agriculture Commission.
  • Visa system reform: to address labour shortages, including in agriculture.  This would include a comprehensive review of the Seasonal Worker Visa Scheme to determine areas for improvement and give greater long-term certainty to businesses.  It also calls for the reform of short-term and business visa rules to enable corporations to bring in highly-skilled personnel for short-term projects and to extend the maximum permissible stays under business visas to enable UK businesses to pursue longer-term projects.  It also calls for a bilateral and reciprocal Youth Mobility Visa Scheme with the EU allowing young people (aged 18-35) to travel and work in both UK and the EU for up to five years.  In addition, it calls for the UK to develop targeted skills development programmes to address labour shortages in specific sectors.  Many in the agri-food sector are likely to be sceptical about this latter recommendation as numerous organisations have tried to recruit and train indigenous workers, with minimal success. 

Overall, given the make-up of the UK Trade and Business Commission, and statements by Shadow Ministers at the UK Trade Unlocked conference, it is evident that a future Labour Government will seek a much closer relationship with the EU.  Whilst the EU will be open to such an approach, it has other priorities given what is happening in Eastern Europe.  Its appetite for any renegotiation of the Brexit deal is minimal.  This is recognised in Labour circles; hence the focus of the UK aligning with EU regulations.  The EU will also push back strongly on any attempts to dilute what it sees as the indivisibility of the Four Freedoms of the EU Single Market.  Without free movement of people and leaving open the possibility for UK regulations to diverge in the future, the EU will not offer the UK frictionless trade.  That said, significant improvements are possible and should be pursued. 

The full report is accessible via: https://www.tradeandbusiness.uk/blueprint

Image source: Best for Britain

Base Rates

The Bank of England increased UK Base Rates for the 13th time in a row at its June meeting.  The rise was not a surprise, but its size was.  Markets were generally expecting a 0.25% increase, but the Bank decided to raise rates by 0.5% to 5% – a level not seen since 2008.  The size of the increase was in response to the inflation data which came out a day earlier.  This showed that inflation was not yet coming under control – the headline CPI rate at 8.7% for May was unchanged compared to April.  Perhaps more worryingly for the Bank of England was that the rate of ‘Core’ CPI (excluding energy and food prices which are closely linked to commodity prices) increased in May.  It was 7.1% compared to 6.8% in April.  This indicates the recent interest rate rises are not yet achieving a slowdown in demand in the economy.  With more people now on fixed rate borrowing deals, higher base rates appear to be a less effective, or at least slower, policy mechanism than has been the case historically.  Money markets are now pricing-in a rise in rates to 6% by the end of 2023.   They may then be slow to reduce through 2024.

Agricultural Reform: Scotland

More detail has been released covering what Scottish farmers will have to do to receive support in 2025.  An updated ‘Agricultural Reform Route Map’ was announced by Rural Affairs, Secretary Mairi Gougeon, at the Royal Highland Show.  It is an update of the previous document released in February (see https://abcbooks.co.uk/scottish-support-details/) – but supposedly rewritten to make it shorter, more practical and clearer.  The latest version can be found at – https://www.ruralpayments.org/topics/agricultural-reform-programme/arp-route-map/ .

None of the fundamental timings set out previously have altered – the BPS (and other support) will be unchanged for 2024 before altering in 2025.  The key points to emerge from the new document relate to what will be required from 2025 onwards.

To receive the BPS in 2025, farmers will have to meet new ‘Essential Standards’ – this is part the ‘conditionality’ that requires farmers to do certain actions to gain support.  The Essential Standards will include;

  • Greening – with the rules unchanged from currently
  • Cross-compliance – as per the current rules, but with new protection for wetlands and peatlands added-in
  • Whole-Farm Plans (WTP) – at this point the document becomes a little vague.  It states that – ‘the foundations of the Whole Farm Plan will go live in 2025. The Foundations are ‘productivity baselines’: soil testing, animal health and welfare declaration, carbon audits, biodiversity audits, and the support for effective business planning’.  It is not clear what elements of the WFP will be required in 2025 and to what extent.  The Scottish Government plans to work with the industry to refine the requirements.  Full details of the conditionality rules are set to be published in the first quarter of 2024.

The Preparing for Sustainable Farming (PSF) scheme is currently funding ‘baselining’ with grants for soil sampling, carbon auditing, and animal health & welfare.  The PSF will end by March 2025 when these elements will be subsumed into the Whole-Farm Plan process.

The other new announcement in the document relates to conditionality on the Scottish Suckler Beef Support Scheme (SSBSS).  From 2025, payments will be linked to calving intervals.  Again, details of the requirements are still awaited.  Thereafter, the Government has stated that the SSBSS will continue for 2026 but may be delivered differently.  In terms of the Scottish Upland Sheep Support Scheme (SUSSS), the Roadmap states that it is ‘expected to continue in 2025 and 2026 but may be delivered using a different model from the current one’.  It seems to suggest that there will be no conditionality on SUSSS payments in 2025, or that would have been announced now.  Longer term, it is stated that ‘consideration is still being given to how Voluntary Coupled Support will be delivered from 2027’.

As set out in February, much larger changes will occur in 2026 – not least as the BPS will go to be replaced by a ‘Base’ payment and then ‘Enhanced Support’.

Capital Grants: Upcoming Schemes

A number of capital grants in England have been flagged-up as opening in the next few months.  Farmers, and their advisors, may wish to prepare for these – especially in terms of starting the process of applying for Planning and any other permits.  Details are below.

Calf Housing Grant

This is a new scheme that will offer 40% grants to build new or refurbish existing calf housing.  It will be available to both the beef and dairy sectors.  The grant aims to improve the health and welfare of calves (up to 6 months old) by providing a good ambient environment and facilitating social contact through pair or group housing.  The grant will be competitive so only the best schemes will be funded.  More details are expected shortly.

Farming Transformation Fund (FTF)

This is the ‘large scale’ capital grant scheme.  The next round to be launched under it is expected to cover Robotics and Automation.

Slurry Infrastructure Scheme

Technically, this will be another ‘theme’ under the FTF.  Another round for Slurry Infrastructure is expected sometime this autumn.  As in the first round, the grant rate is expected to be 50%.  It is not yet known whether there will be any changes to scheme rules.  This is likely to be the scheme where the most up-front preparation in terms of Planning, permits and quotes is required.

Roof-Top Solar

At the Farm-to-Fork summit (see https://abcbooks.co.uk/food-summit/) one of the pledges was to boost ‘barn-top’ solar.  Grant support for this will be included in Defra’s schemes (although it is not yet clear which one it will fall into, or whether a separate scheme will be launched).  There will also be changes to the Permitted Development Rights (PDR) regime which may be of help if Planning issues are preventing the installation of solar (although this, generally, tends not to be a big issues with barn-top arrays).  The consultation on Planning changes will only commence in the autumn, however, so any improvements will be some way further off.  

Private Nature Funding

It has been announced that there will be a further round of the Natural Environment Investment Readiness Fund (NEIRF) later this year.  This scheme helps groups develop nature recovery schemes to a point where they can attract private finance.  The next round is to be specifically targeted at groups of farmers.  The announcement was made by Defra secretary Therese Coffey at a ‘Nature For Finance’ event on 19th June brought together farmers, land managers, investors and conservation experts.  The Government has a target that £500m for nature should come from private investment by 2027 and this should reach £1bn by 2030.  Whilst there has been a lot of discussion of this source of funding, the number of deals done and amounts being generated still appear to be small.  For more details see – https://www.gov.uk/government/news/support-for-farmers-to-access-investment-to-drive-nature-recovery .

SFI 2023: Details

Further details of the Standards available under the Sustainable Farming Incentive (SFI) in 2023 have been released by Defra.  These will be available from August onwards.

These are largely the same as set out in the previous announcement in January (see https://abcbooks.co.uk/environmental-land-management/).  However, there have been some changes;

  • the Soil and Moorland Standards have altered compared to the 2022 version.  In line with the new approach of the SFI, instead of multiple actions being grouped into Levels (Introductory, Intermediate etc.) the actions themselves are just offered.  Defra states that this allows farmers to adopt a more flexible pick-and-mix approach.  This does mean that three actions included in the 2022 Soils Standard (add organic matter, single species winter cover and minimise bare ground) will no longer be available as they only have benefit when grouped with other actions
  • there is a new Buffer Strips Standard.  However, this has been created by moving two previously-announced options out of the Wildlife Standards for Arable and Grassland
  • The management Payment of £20 per Ha on up to the first 50 hectares entered into the SFI will now be paid on all Standards.  Previously the Moorland Standard was going to be excluded as no land management actions are required
  • The rates for Low-Input Grassland have been equalised between the SDA and non-SDA (lowland) farms.

A brief summary of the options are given in the table below.

Applications for the SFI closed as of 21st June.  This is allow the computer systems to be changed to process the new 2023 Standards.  Defra states that ‘applications for SFI 2023 will start to be accepted through a controlled rollout beginning in August’.  This is somewhat vague – both on what a ‘controlled rollout’ might look like, and when in August it might commence.   At present, the SFI is still being limited to farmers who were eligible for the BPS in 2022 or 2023.  In future, it is expected to be rolled-out to other land managers. 

Those that have already applied for the SFI 2022, but yet to accept an agreement, will be offered the choice of continuing with their application or starting again under the 2023 rules.   For farmers already with a 2022 SFI agreement, things are, again, a little vague.  Defra states ‘we will be in touch with all farmers signed up to the original scheme . . . to explain how they can access the payments, benefits and improvements in the 2023 offer’.   This seems to suggest they may be able to change their existing Soil and Moorland Standards for the new versions.  SFI 2022 agreement holders will get their Management Payments backdated to the 1st January 2023 or when their agreements started – whichever is the later.

The SFI 2023 guidance has been consolidated into a single Manual – this will be a relief for those that struggle to navigate multiple webpages.  It runs to 156 pages and can be found via – https://www.gov.uk/government/publications/sfi-handbook-for-the-sfi-2023-offer 

Levy Rate Increase

The AHDB is proposing to increase levy rates from April 2024.  The Levy Board states that, with no increases in rates for a decade, its real-terms income has declined by 40%.  There are no details yet on how large the increases might be – the AHDB is consulting with farmers and processors.  Any increase in rates will be put to Defra to approve.

Rural Policy

The Government has released a Policy Paper, setting out a series of initiatives designed to boost the economic performance of rural areas.  The ‘Unleashing Rural Opportunity’ document can be found at – https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1161242/Unleashing_rural_opportunity.pdf.  Some of the policy details what the Government is already doing.  However, a number of new schemes were included;

  • a new £7m fund will look at how satellite, wireless, and fixed-line broadband van be integrated to improve rural connectivity
  • extra funding for the new National Rural Crime Unit and an increase in fines for fly-tipping and littering
  • a commitment to improve bus services in rural areas and also more funding for village halls and a strategy for rural libraries
  • improving electric infrastructure in rural areas so that it can cope with the increased demands of EV charging and the pivot to electrical heating
  • a network of ‘Rural Housing Enablers’ to be put in place to boost affordable housing.  They will identify possible sites for development and act as brokers between developers and communities
  • consulting on a new grant scheme for small abattoirs
  • a consultation on changes to the Planning rules to make the conversion of farm buildings to residential easier and also the adaption of buildings to improve productivity (as set out the the Number 10 ‘Farm-to-Fork’ meeting).

Farm Equipment Grants

Defra has announced funding allocation under the latest round of the Farm Equipment and Technology Fund (FETF).  This is the ‘small-scale’ grants scheme whereby farmers apply for 40% funding on a defined list of pieces of equipment.  The FETF 2023 was made up of two themes.  The grant offers currently going out to farmers cover the ‘Productivity and Slurry’ theme.  This closed on the 4th April 2023.  The other theme, Animal Health and Welfare, closes on the 15th June.  Farmers who receive a Grant Funding Agreement (GFA) have to accept these via the dedicated FETF acceptance portal if they wish to go ahead.  They then have a limited period of time to buy and install the items and submit a claim for payment.  The deadline for this will be set out in the GFA, but it is thought to be November for most applicants.  Defra received 3,000 applications under the Productivity and Slurry theme.  Due to the high level of demand it increased funding from £17m to £31m.  Further rounds of the FETF are expected, but it could be 2024 before it reopens.

Upland Grants

Defra has announced payments for 4 Upland Stewardship options will be increased.  The uplift will mean the rates are now equal for both upland and lowland farms where they are carrying out the same actions.  The new, increased payments will be back dated to take affect from 1st January 2023.  The table below shows the 4 options together with the old and new rates;

The evening-up of payments for both upland and lowland farms results in an increase for one option for lowland farms – WD4: Management of Lowland Wood Pasture and Parkland, with the payment being increased to £212 to match that of WD10: Management of Upland Wood Pasture and Parkland.

The improved rates are part of a package of measures to ‘improve and extend’ the offers available to Upland farmers.  Defra has said from 2024 there will be further improvements to Countryside Stewardship (CS) to make it more accessible, broader and rewarding for Upland farmers and has been working with farmers and stakeholders.  This includes a further update to the following 7 existing CS offers;

  • GS9 – Management of wet grassland for breeding waders 
  • GS12 – Creation of wet grassland for wintering waders and wildfowl 
  • GS13 – Management of grassland for target features 
  • GS14 – Creation of grassland for target features 
  • GS15 – Haymaking supplement 
  • GS16 – Rush infestation control supplement 
  • SP8 – Native breeds at risk supplement 

No details are available yet but feedback has suggested reviewing dates associated with some actions, providing clarification on how the options should be carried out and reviewing payment rates.  Defra has said further details will be available this summer together with an announcement on the rest of the 2024 offer.  In addition, Defra is also trying to improve its engagement with Upland farmers and has produced The Payments for Upland Farmers leaflet (this can be found via https://defrafarming.blog.gov.uk/wp-content/uploads/sites/246/2023/05/Defra-SFI-Upland-Leaflet.pdf) This 15 page leaflet summarises what schemes and the options available within them are available for the sector.  It is said to be the first in a series of sector-specific leaflets.