Category: Policy & Business

As the SFI 2023 has been open for a couple months now we thought it might be useful to share some things we have learnt so far:

• Ensure maps are correct on Rural Payments – before you begin an application it is important that the business’s digital maps are correct.  At the bare minimum, ensure the parcels that will be included in the application are up todate, but it is probably a good time to check that all land parcels are correct.  For any parcels that need updating for mergers, splitting, boundary changes, ineligible features, land cover changes, new land etc., an RLE1 will need to be submitted.  Further information can be found at https://www.gov.uk/government/publications/tell-the-rural-payments-agency-about-land-changes-and-entitlement-transfers/rle1-guidance-2023.  This can be  submitted online, but applicants will have to wait until the RPA has updated the changes before they continue with their SFI application.  It is possible to add an already registered parcel via the RPA’s ‘add land by email service’ see https://www.gov.uk/guidance/rural-payments-applications-add-a-land-parcel-by-email
• Ensure Land Cover is correct on Rural Payments – before you begin an application, for each land parcel you want to use for an SFI action, check that the land cover shown on your digital maps is compatible with the land use code declared in the BPS 2023 application (again it may be prudent to check all land parcels).  When you view each land parcel on your digital maps in the Rural Payments service, you’ll see that it has one or more registered land covers.  The land cover identifies what broad category the land is.  There are three agricultural land covers;
  • arable land
  • permanent grassland
  • permanent crops

There are also a number of non-agricultural land covers, such as woodland or farm buildings, the land use codes must be compatible with these – i.e. if the land cover is permanent grassland the land use cannot be an arable code or temporary grassland.

• Ensure there are no undeclared or overdeclared parcels – for each land parcel you want to use for an SFI action, in ‘Land Use’ on Rural Payments ensure there are no undeclared or over-declared parcels.  These may be due to splitting fields at BPS time last year – the RPA has now used the submitted RLE1, measured the parcels and the areas are different to those estimated on the BPS application.  This can leave an undeclared area.

All of the above actions will cause an ‘error warning’ if not completed.  We have also noticed there have been problems when trying to submit an SFI agreement when there is another application waiting to be processed i.e. if a CS capital grant is in the process, the system doesn’t seem to cope.  We would hope this will be sorted by RPA shortly, but it is something to be aware of if you have an ‘error’ message when you come to validate your application on completion – if you cannot find any other errors it could be because you have another application waiting to be offered.

Once an application has been submitted, we have found, at the moment, the turnaround time by RPA is quick; about 10 days and the agreement, if accepted, will start on the first day of the month following.

As with all new schemes there will be a lot of questions at the start, until everyone gets more familiar with the rules.  Furthermore unlike most of the previous schemes, the rules are less ‘rigid’.  For most of the actions the handbook simply says ‘It’s up to you how you complete this action, as long as you do it in a way that can reasonably be expected to achieve this action’s aim’.  Further help is available in the ‘How to do’ guidance for each action.  These are voluntary and can be found via https://www.gov.uk/government/collections/sustainable-farming-incentive-guidance

The RPA has answered some of the most commonly asked questions and this Q and A can be found at https://ruralpayments.blog.gov.uk/2023/11/17/the-sustainable-farming-incentive-commonly-asked-questions-answered/

One of the most common questions we receive is are you able to subsequently add land to an agreement?  The answer to this is ‘yes’ and it can be done via two ways:

• It will be possible to upgrade your SFI agreement to add more SFI actions and land.  This will be done via an ‘upgrade request’ towards the end of the first and second years of your 3-year SFI agreement.  There will be strict deadlines on submitting an upgrade request and, if approved, on accepting it.  With an upgrade the length of the agreement will not extend.
• It is possible to have more than one agreement.  Applicants can submit as many applications as they want and subsequently have a number of agreements running in conjunction.  These agreements could cover separate land parcels or,it is possible to add a compatible action to a land parcel in an existing agreement.  Although you cannot apply for NUM1 or IPM1 in multiple agreements.

By mid-November, Rural Payments reported there were 1,000 live agreements with a further 300 offers with customers; perhaps a little lower than they anticipated, but it feels like there is a lot of interest in the scheme now and momentum is growing.  Similar to when the system was new under the BPS, there are likely to be some ‘teething’ problems and it will also take time for clients and advisors to get to grips with the new system.  However, for many, it is possible to build a good agreement which complements the existing farming operations and can help to offset some of the ‘lost’ BPS payments.

The Welsh Government has published its Winter Update.  This gives an overview of the various agricultural policy changes that are happening, most of which we have covered in previous articles.  These include the Sustainable Farming Scheme, the Agricultural (Wales) Act, Agricultural Pollution Regulations and Livestock ID and Movement rules.  The document can be found via – https://www.gov.wales/sites/default/files/publications/2023-11/agriculture-winter-update-2023.pdf

The Welsh Government has also released dates of when it will be accepting applications to the various schemes from now through 2024.  These are in the table below.  Note that. for Small Grants Environment, there are different themes; Carbon, Water, Landscape & Pollinators and Hedgerow Creation.  The Welsh Government has not confirmed which theme will open in each of the three windows announced.

Readers may recall that we are expecting a major announcement on Environmental Land Management (ELM).  This will cover additional SFI Standards for 2024, as well as details of the ‘new’ Countryside Stewardship (CS) scheme which is to be introduced next year.  This announcement was meant to be made ‘in the autumn’.  With December now approaching, the timetable has obviously slipped.  Having a new Minister in charge at Defra (see other article) is likely to have delayed things as the schemes will need to be signed-off.  However, we expect a statement to be issued before Christmas.

Graham Wilkinson will take over as the new Chief Executive of the AHDB in the New Year.  He replaces Tim Rycroft.  Mr Wilkinson is currently global vice president of agriculture at Arla.

The latest Farm Business Income figures released by Defra show a mixed picture for farm profitability.  The data relates the 2022/23 year – covering harvest 2022 and the 2022 BPS payment.  They are an update of the estimates released in the spring (see https://abcbooks.co.uk/farm-business-income-9/).  Although titled ‘income’ what the series shows is average profit at the farm level for a typical farm in each sector.  A summary of the results is included in the table below.

They key sectors of Cereals and Dairy both experienced an increase in profits – even on the high levels seen in the previous 2021/22 year.  Whilst costs were higher, sale prices for both grains and milk more than offset this.

General Cropping farm profits were pulled-down by lower outputs from potatoes and sugar beet.  Readers will remember the drought in the summer of 2022 which reduced yields of these two crops.

The grazing livestock sector, both in the lowlands and uplands, recorded lower profits.  Although sales prices for beef and lamb were reasonable, it was higher costs that really caught up with these type of businesses last year.

The Pigs figures are a little odd – showing a massive jump in profits when most businesses were struggling with high costs and only slowly increasing prices.  However, delving a little deeper into the data, a large amount of the increase in profit comes from a big jump in diversification income.  It is difficult to believe that pig farms really all started alternative enterprises in 2022/23.  What seems more likely is that there is a slightly different population of farmers being sampled.  Promar took over the Farm Business Survey for the 2022/23 year.  It has always been difficult to recruit certain categories of farmer to the survey, including pigs, due to the relatively small number of them.  It may well be that data from different businesses have been collected.

Looking to the current, 2023/24 year, first Defra estimates will be published in the spring.  These are likely to show sharp falls in the profits from Cereals and Dairy farms as output prices have fallen considerably.  General Cropping farms could well record a rise with better potato returns and high beet prices.  Grazing Livestock may well also show a small recovery, as a result of the high beef prices this year and also firm lamb markets.

More data is available at – https://www.gov.uk/government/statistics/farm-business-income .

The Chancellor, Jeremy Hunt, gave the Autumn Statement on the 22nd November.  The main points are;

• the Office of Budget Responsibility (OBR) released its latest economic forecasts alongside the Autumn Statement.  This shows the economy has been more resilient this year than initally forecast.  Economic growth in 2023 is now predicted to be 0.6% instead of a contraction of 0.2%
• this unexpected growth, coupled with high inflation bringing more people into top tax bands, has led to bigger-than-expected tax receipts.  This gave the Chancellor some room for tax cuts (see below).  However, the strength of the economy also means inflation will be more persistent.  The forecast is that CPI will increase 7.5% in 2023, with prices rising by 3.6% in 2024 and 1.8% in 2025
• the OBR has cut its forecasts for future UK growth.  The OBR now believes the economy will expand by 0.7% in 2024 (previously 1.8% was predicted).  For 2025, growth is put at 1.4% (previously 2.5%).   Worryingly, the OBR has revised down its estimate of the ‘medium-term potential growth rate of the economy’ to 1.6%, from its previous level of 1.8%
• as previously set out in last November’s Budget, Personal Allowances and Higher Rate Thresholds for Income Tax will be frozen until 2028.  This increases tax income because, as wages rise, the tax-free element does not rise in tandem
• although billed as a tax-cutting Statement, the measures announced, plus those already in the pipeline, will see tax as a share of the economy rise every year for the next five years to a post-war high of 37.7% of GDP
• probably the most important announcement for farming, especially those sectors employing large amounts of labour, is the increase in the National Living Wage.  This will rise by 9.8% to £11.44 per hour in April.  It will also be extended to 21 and 22 year olds who currently receive a lower rate.  The Living Wage rate has almost doubled since 2010
• there were cuts to National Insurance rates.  NI paid by employees will fall from 12% to 10% as from the 6th January 2024.  For the self-employed, the rate of Class 4 NI between £12,570 and £50,270 will be cut by 1% to 8%.  Class 2 NI is to be abolished.  Both the self-employed NI changes start on the 6th April 2024
• ‘full expensing’, whereby companies can claim 100% first-year capital allowance against Corporation Tax on capital investment, is to be made permanent.   The standard 100% Annual Investment Allowance (AIA) for sole traders, partnerships etc. will remain at £1m
• the discount on Business Rates for small retail, hospitality, and leisure businesses is to be extended for a further year
• £110m was pledged to a Local Nutrient Mitigation Fund for schemes to deliver nutrient neutrality and unlock housebuilding
• there were other measures to boost development.  These include a ‘fast-track’ Planning system where Local Authourities will be able to recover the full cost of dealing with applications, in return for faster responses.  There were also policies to boost renewables and the electricty transmission network, including a payment of up to £10,000 to those living near new transmission lines
• There were no changes to Inheritance or Capital Gains Tax, despite changes to the former being widely trailed before the Autumn Statement
• The previous Budget saw the launch of a consultation on the taxation of the ecosystems market.  The Autumn Statement indicated that an update on this would be provided in ‘the Spring’.

The Government has issued a ‘call for evidence’ on poor practices in the tenant farming sector.  This is a result of the Rock Review of the sector (see https://abcbooks.co.uk/rock-review-of-tenancies/).  Defra are seeking information on the extent and nature of poor practices, especially in the relationships between Tenants, Landlords and their Agents.  It asks whether existing dispute mechanisms are effective at dealing with bad practice and whether new arrangements are needed.  Specifically, it requests views on whether a new Code of Practice is required and if there is a role for a new Tenant Farming Commissioner to provide oversight.  The consultation can be found at – https://consult.defra.gov.uk/farm-tenancy-policy-team/da7bd616/.  The deadline for submissions is 8th February 2024.

 

Round 2 of the Slurry Infrastructure Grant (SIG) is now open in England.  This round of the scheme has £74m of funding – more than double the amount (£34m) that was eventually granted under the 1st round.  A third round has been promised in 2024 – likely to have similar funding to the current one.  There is no guarantee of the scheme continuing beyond that, as the agricultural budget has not been set beyond 2024.  Those that need to invest in slurry storage may wish to apply whilst funding is certain.  It does, however, seem likely that some support will be on offer for 2025 onwards, given the focus on water quality.  

Our article of 17th October gave a summary of the scheme including the rule changes from Round 1 (see https://abcbooks.co.uk/slurry-infrastructure-grant-2/).  Initially, those interested must apply via the Online Checker.  This will be available until 17th January 2024 and can be found via https://www.gov.uk/government/publications/slurry-infrastructure-grant-round-2-applicant-guidance/how-to-apply-for-a-slurry-infrastructure-grant-round-2

Once the Online Checker has closed, those shortlisted will be informed by the RPA.  They will receive a ‘slurry store location and design check form’.  This will need to be completed by 30th September 2024.  It will then be checked by the Environment Agency (EA) and if necessary RPA or EA may discuss changes to ensure the final project protects the environment, meets regulations and meets the needs of the applicant.  The full application including planning permission needs to be submitted by 27th June 2025 at the latest.

Defra and the Forestry Commission have announced improvements to the forestry grants available under the England Woodland Creation Offer (EWCO) and the Countryside Stewardship (CS).  Maintenance Payments will now be made for 15 years; previously these were only made for 10 years.  In addition, farmers carrying out capital works under the EWCO will now have three years to complete them.  Increasing this timeframe from two years means land owners will have two whole planting seasons to deliver the scheme, irrespective of when the agreement commences.  This gives more flexibility to plan work, secure trees and materials, and respond to weather conditions if they prevent planting from going ahead as planned.  More information on the EWCO can be found at https://www.gov.uk/guidance/england-woodland-creation-offer

 

Steve Barclay has been appointed Secretary of State for the Environment, Food and Rural Affairs.  This comes as Thérèse Coffey resigned during the Cabinet reshuffle on 13th November 2023.  Mr Barclay was previously Secretary of State for Health & Social Care between 25th October 2022 and 13th November 2023, having held the same post between 5th July 2022 and 6th September 2022.  He represents the Fenland constituency of North East Cambridgeshire and, unlike many Defra Secretaries, has shown a previous interest in farming and rural issues.  The junior Ministers in the Department, including Farming Minister Mark Spencer, remain largely unchanged.  However, Trudy Harrison has left her postion as Parliamentary Under Secretary of State.  She has been repalced by Robbie Moore, MP for Keighley and Ilkley.