Category: Policy & Business

The RPA has started to contact those that are due a Recovery Payment following the extreme wet weather last winter including Storm Babet in the autumn and Storm Henk in January 2024.  The Environment Agency and Met Office data has been used as follows, to identify which farm businesses will receive the recovery payment.

• Data from the Environment Agency was used to track high river levels during Storm Babet and Storm Henk and satellite imagery was used to confirm the land where the river flooding impacts were most severe.
• Rainfall data from the Met Office identified Local Authority areas in England where at least half of the area experienced exceptional rainfall of more than 70% above the 30-year average rainfall from the period October 2023 to March 2024.  Eligible land parcels were then identified in these areas.  However payment is only made for a ‘set proportion of total eligible farm area to take account of uncertainties in the precise extent of localised rainfall impacts across the country’.

RPA has then applied the following payment bands to areas identified for each affected business:

• 1 – 25 ha –  £2,895
• 25.01 – 50 ha –  £4,875
• 50.01 – 75 ha –  £8,125
• 75.01 – 100 ha –  £11,375
• 100.01 – 125 ha –  £14,625
• 125.01 – 150 ha –  £17,875
• 150.01 – 175 ha – £21,125
• 175.01 ha and above £25,000

Around 13,000 farm businesses will receive this one-off payment as a contribution towards the uninsured costs incurred from returning their land to its pre-flooding condition.  There is no need for farmers to submit an application or claim form.  The RPA will contact those who are eligible, usually via an email.  This will include a list of field numbers that have been deemed to be affected and notification of the payment due which will be made within 28 days of the email unless farmers notify RPA of any changes.

The Welsh Rural Affairs Minister, Huw Irranca-Davies, has announced application windows for further SFS Preparatory Phase schemes.   In addition to the schemes announced at the end of July (see https://abcbooks.co.uk/future-support-wales/) the following schemes will also be available with some already open;

• Growing for the Environment – open from 4th November to 13th December 2024 for funding towards a range of spring and summer crops, such as mixed leys, protein crops and unsprayed cereals.
• Agricultural Diversification and Horticulture Scheme – open from 4th November 2024 to 17th January 2025, provides support for livestock enterprises that are not traditional in Wales e.g. sheep or goat milking enterprise or growing of novel or alternative crops.
• Small Grants – Environment – due to open 13th January 2025 to 21st February 2025, although no announcement has been given as to which theme this will be out of Carbon, Water or Landscape and Pollinators
• Small Grants – Efficiency – due to open from 3rd March to 11th April, supports capital investments in equipment and technology that have been pre-identified.

In addition to these new announcements a reminder that the Woodland Restoration Scheme has just opened and will close on 28th February and also the Habitat Wales Scheme 2025 will be available on the SAF from 3rd March next year.  Details of all the schemes can be found via https://www.gov.wales/rural-grants-payments

From 12th November, an Expression of Interest is no longer required before applying for the SFI 2024 expanded offer.  Applications can now be made through the Rural Payments Service without having to wait to be ‘invited’.

Not mentioned by the Chancellor in her Budget speech, but buried in the accompanying documents, was news on the UK Shared Prosperity Fund (UKSPF).  This includes the Rural England Prosperity Fund (REPF).  The UKSFP replaced money that previously came from the EU for regional and structural funding.  The REPF filled the gap left by EU Rural Development funds.  It has been announced that the UKSFP will continue for a further 12 months from April 2025.  However, funding will be cut from the current £1.5bn p.a. to £900m.  The European schemes usually included capital grants for farm diversification projects.  In theory, the UKSPF and especially the REPF, could support this too.  However, this funding has been given to Local Authorities to distribute.  This has seen a patchwork of initatives spring up.  Some Authorities have opened grant schemes to which businesses can apply.  Others seem to have used the money to fund programmes (e.g. training) or even support their own pet projects.  Some appear to have done very little at all with their allocations.  Therefore, although the announcment of continued funding is welcome, with the reduction in the budget, and the complex delivery arrangements, it is unlikely to make much difference at farm level.   

Victoria Atkins has been appointed Shadow Defra Secretary by new Conservative leader Kemi Badenoch.  Ms Atkins was previously Health Secretary but should have a decent grasp of agricultural matters as she is married to Paul Kenward, Chief Executive of British Sugar.  She was elected as the Member of Parliament for Louth and Horncastle in May 2015.  Prior to her election, Victoria Atkins was a criminal barrister specialising in prosecuting serious organised crime.  Robbie Moore has been (re)appointed to Shadow Farms Minister.  He is MP for Keighley and Ilkley.

Following the Budget, Defra has released further information on its farming support schemes for 2025.  Details can be found in a Defra Blog post – https://defrafarming.blog.gov.uk/2024/10/30/budget-2024-maintaining-momentum/.

Delinked Payments

Following the Budget, Defra has announced the deductions to delinked (BPS) payments in England for 2025.  Readers will recall we have been waiting to find out the reductions for the years 2025-2027.  It appears the cuts will be far deeper than we, and many others, forecast.  Defra has said, for 2025, it plans to apply a 76% reduction to the first £30,000 of a payment; we had previously estimated 65%.  Importantly though, for amounts above £30,000, there will be no payment at all – the deduction will be 100%.  This means that all English farms will receive no more than £7,200 in direct payments next year.   I.e a BPS delinked Reference Amount of £40,000 will be cut to £7,200 in 2025, reducing from £19,500 this year.  This will come as big shock to many, especially on the back of a poor harvest and two difficult autumns.

ELM

Defra has confirmed that SFI, Countryside Stewardship (Higher Tier) and Landscape Recovery schemes will continue.

The SFI 2024 expanded offer is open, although still requires an Expression of Interest to be submitted first and an ‘invitation’ from RPA to make an application.  There is no indication when the scheme will be freely open.

There will be more information regarding Countryside Stewardship Higher Tier in December (previous announcements has said it would be available ‘in the autumn’).  Farmers with expiring HLS or Higher Tier agri-environment agreements this year will be offered an extension to their existing agreement, supposedly to allow them time to move into new agreements in an ‘orderly way’.   The long-awaited process for those in legacy HLS agreements and those farming on Commons to transfer into new schemes, which was supposed to have been available from September has been pushed back until next year now – Defra states ‘Next year, we will make it much easier for farmers in legacy HLS agreements and those farming on Commons to transfer into new schemes smoothly, as and when they wish’.  This transfer process which was promised at the outset of ELM, appears to keep getting pused back.  Furthermore there is no real announcement on the third element of ELM, Landscape Recovery, the previous Government had committed to annual rounds, but there has been no application available this year as yet.  The latest announcement says ‘we will share more about future rounds of Landscape Recovery in due course’. 

Other Support

Defra has confirmed it will honour the £60 million which was made available under the Farming Recovery Fund to support those affected by Storm Henk and other severe weather last winter.  It has said the RPA will contact eligible farmers directly.  It has also stated ‘We will simplify and rationalise our grants offer to prioritise the initiatives that deliver the most critical support for food security and environmental goals in England. We will confirm the plans for our grant rounds in due course’.  It is unclear what this is actually referring to, whether this is the capital grants under the Farming Investment Fund, which have not opened as ‘expected’ this year.

Rachel Reeves unveiled the first Budget of the new Labour administration on the 30th October.  As expected, it included large tax increases to fix the fiscal ‘black hole’ the Chancellor says she has inherited.  A number of the announcements have direct implications for farming.

The Office of Budget Responsibility (OBR) has updated its economic forecasts for the years ahead.  These show fairly anaemic growth for the medium term, and inflation not reverting to its target level of 2% until 2029.  Of course, one of the guiding principles for this Government is to boost economic growth.  This is not a short-term process however, and even sucessful policies will take years to show an effect.

Headline points from the speech include;

• As widely trailed, the rules on Agricultural Property Relief (APR) for Inheritance Tax (IHT) are to be amended, along with Business Property Relief.    100% relief will still be available for the first £1 million of combined agricultural and business assets.  On combined assets above £1m, IHT will be payable at 50% of the normal rate (50% of 40% = 20% effective tax rate).  The IHT threshold is to remain fixed at £325,000 until 2030.  At a land price of £10,000 per acre the new rules will hit farms abover circa 100 acres – hardly large farms.  The change is to be introduced from April 2026.  The rules on Potentially Exempt Transfers (PET) are unchanged meaning assets can be given away tax free if the donor survives 7 years.  There will be transitionary arrangements on this where deaths occur between now and April 2026.  The ability to pay IHT over 10 years remains.  From April 2025 land entered into environmental schemes will be eligible for APR
• The rates of Capital Gains Tax are to increase.  The standard rate will rise from 10% to 18% whilst the higher rate lifts from 20% to 24%.  This aligns the rates with those for residential property
• The biggest tax increase comes in the form of a rise in Employers National Insurance (NI) contributions.  The rate will go up by 1.2% from 13.8% to 15%.  The threshold at which payments start is also to be lowered from £9,100 to £5,000.  A very thin silver lining for employers is that the Employers Allowance will rise from £5,000 to £10,500.  The changes to NI are predicted to raise £25bn
• Minimum wage rates are to rise from April next year.  The National Living Wage for those 21 and above will go up 6.7% from £11.44 per hour to £12.21.  The 18-20 year old rate goes up from £8.60 to 10.00, whilst the Apprentice rate jumps from £6.40 to £7.55.  The combined effect of the NI and Minimum Wage increases will have a significant effect on those that employ a lot of labour at low wage rates – for example the fresh produce sector
• The thresholds for Income Tax and NI will remain fixed until 2027/28 as previously announced.  This is effectively a stealth tax as ‘fiscal drag’ gradually brings more people into higher tax bands as inflation takes effect.  Thresholds have been unchanged since 2022.  In a slightly surprising move the Chancellor stated that thresholds will start to be increased in line with inflation again for 2028/29
• Fuel duty will remain unchanged.  Alcohol duty will largely rise in line with inflation although the rate for draft beer is to be cut
• A reform of the Business Rates system is promised within the lifetime of this Parliament.

A key question for agriculture was what the funding for farm support is going to be.  Defra’s Departmental spending allocation is as follows;

The Budget document states that ‘The Government is facing significant funding pressures on flood defences and farm schemes of almost £600 million in 2024-25.  While the Government is meeting those commitments this year, it is necessary to review these plans from 2025-26 to ensure they are affordable‘.  It is not obvious what this means.  The publication goes on to state that ‘[The settlement is] providing £5 billion over 2024-25 and 2025-26 to support the transition towards a more productive and environmentally sustainable agricultural sector in England‘.  This, coupled with the announcement from Defra (see article on BPS in 2025), indicates that the current farm budget in England of £2.4bn per year has been maintained.  The amount for 2025/26 is going to be increased as a one-off to £2.6bn as £200m of underspend from previous years is going to be rolled forward.  This neatly arrives at the £5bn for two years.  In 2025/26 £1.8bn will be allocated to ELM.

A continuation of the current budget (in nominal terms) is not unexpected.  But should be remembered that there has been significant inflation since the £2.4bn for England figure was set in 2020.  Using the OBR’s forecasts going forwards, prices will be 30% higher in 2026 than they were in 2020 – thus this is effectively a circa 30% funding cut.  Furthermore, farm spending was never uprated for inflation when we were part of the EU.  The £2.4bn figure has been almost the same since 2007.  Agriculture is being asked to do more for less.  The settlement is far lower than the £4bn for England the NFU (with Andersons help) calculated as being required to meet Government policies.

Looking beyond 2025/26 (the 2025 ‘subsidy year’) the Comprehensive Spending Review will set Defra’s budget for future years – likely 2026 to 2028.  If public finances remain under strain, there is no guarantee about future funding even remaining at current levels.

The EU Deforestation Regulation (EUDR) implementation has been delayed by one year.  The delay was announced in mid-October following the Council of the European Union’s decision to extend the timeline.  Initially set to be enforced from December 2024, the regulation will now be applicable from December 2025 for large businesses and from June 2026 for micro- and small enterprises.  Last month, we reported how the enforcement of the EUDR was causing growing concern for the UK agri-food industry, especially around access to soya, and this delay will give businesses more time to adapt to the new requirements.

The EUDR aims to prevent products associated with deforestation from entering the EU market, targeting key commodities such as soy, palm oil, and wood but the regulations also apply for commodities such as beef and sheepmeat.  For agricultural businesses, this regulation demands thorough scrutiny and traceability measures to verify that products are not sourced from recently deforested land.  The delay provides additional breathing space for companies to implement systems to demonstrate compliance.  As reported last month, there was concern within the UK agri-food industry that other countries were more proactive in creating Government-backed systems that are EUDR-compliant and that the same level of preparation has not taken place within the UK.  Therefore, whilst the delay has bought some more time, the challenge remains for the UK agri-food industry and policy-makers to meet EUDR requirements in just over a year.

The EU’s Entry/Exit System (EES), originally set for 2023, has been delayed until 2025, following an EU Commission announcement on 10th October.  The EES will digitally record entry and exit data for non-EU nationals, including UK citizens.  This delay provides UK exporters and port operators extra time to adapt to logistical challenges and potential costs arising from increased border checks which could have resulted in substantial delays at key trading routes such as Dover-Calais.  This announcement has been welcomed by industry as it became evident in recent months that authorities in France, the Netherlands and Germany were not ready to implement EES.

The EU Commission mentioned that it will provide further detail of its delayed plans ‘in the coming weeks’.  It is anticipated that travellers will now undergo EES registration probably during the summer of 2025.  This timeline would then be aligned with the need to register for the EU’s ETIAS visa waiver scheme, which the EU says will be introduced ‘in the first half of 2025’.  ETIAS will require visitors from 60 visa-free countries, including the UK, to obtain a new electronic travel authorisation to enter 30 European countries.  The fee for ETIAS will be €7 for those aged 18 to 70 and it will be valid for three years.

The EES is another example of the increasing regulatory burden which is going to be placed on businesses trading between the UK and the EU which will add further costs to trade.  It is crucial that both UK and EU authorities have the correct systems in place to ensure that any delays associated with the implementation of these requirements are minimised.  Otherwise, the competitive position of UK exports to the EU will be eroded further as a substantial proportion of agri-food trade with the EU is via driver-accompanied Roll-on Roll-off (RoRo) shipments.

The Government has confirmed the Seasonal Worker visa route will be maintained for 2025.  This means 43,000 per year will be available for the horticultural sector with a further 2,000 allocated to poultry.  (The horticulture figure is a slight reduction on the 45,000 previously available).  The extension of the scheme had been announced under the previous Conservative Government, see our article of 10th May (https://abcbooks.co.uk/seasonal-workers-scheme-extended/) but the present Labour Government had not confirmed that this would be carried forward until now.  While this announcement will be welcomed, the scheme only addresses seasonal labour issues and there is still a fundamental shortage of permanent labour in the farming and food sectors which remains a significant barrier to growth in the industry.