Category: Policy & Business

Defra has seen relatively few change in its Ministers, despite all the political turmoil in Westminster.  In the wave of Ministerial resignations that led to Boris Johnson’s exit, only the junior Ministers Rebecca Pow and Jo Churchill quit their Defra posts.  The Johnson loyalist, George Eustice, remains as Secretary of State and Victoria Prentis continues with the farming portfolio.  Rebecca Pow has been replaced by Steve Double, MP for St Austell and Newquay.  It does not appear that Jo Churchill’s position has been filled.  Of course, once the Conservative leadership election has taken place, and a new Prime Minister installed, they are likely to want to appoint their own team.  There is then likely to be a further change in the Defra Ministerial team.  It would be surprising if this led to a change in policy direction though – the key elements of the Agricultural Transition in England look set to continue.      

At the end of last month, the Committee on Climate Change (CCC) presented its latest Progress Report to Parliament.  The overall summary would be ‘must-try harder’.  The report states that, although there is a clear policy ambition, a strategy and measures to actually deliver the goals in the timeframe outlined is lacking.  In terms of farming, the CCC describes progress in cutting GHG as ‘glacial’.  The Committee goes on to add that ‘agriculture and land use have the weakest policies, despite being vital to delivering net zero and the Government’s other goals on food security and biodiversity’.   The full report can be found at – https://www.theccc.org.uk/publication/2022-progress-report-to-parliament/#key-messages

A decline in the value of Sterling, especially against the Dollar, has gone somewhat un-noticed over the past few months.  This is partly as the Dollar has always enjoyed ‘safe haven’ status which means its value tends to rise in times of political and economic uncertainty.  The Pound has come under particular pressure as traders believe the UK economy will be more affected by inflation and cost-of-living pressures than others.  The fevered political situation in Westminster has not helped but the Pound has strengthened slightly since Boris Johnson announced his resignation.

As we have pointed out before, a weak Sterling is generally good for most parts of UK agriculture.  It makes our exports more competitive on world markets, and makes imported food more expensive here (although this is not so good for consumers and a further source of inflation).

The Welsh Government has outlined proposals for the new Sustainable Farming Scheme, which will replace the Basic Payment Scheme and will be the main source of future support for farmers in Wales.  The Scheme will have actions under five themes or ‘characteristics’ to support farmers in a variety of ways to help them deliver a wide range of  outcomes alongside sustainable food production.  The five characteristics are;

• Resilient and productive
• Reduce, reuse and recycle inputs, nutrients and waste
• Reduce on farm emissions and maximise carbon sequestration
• Protect and enhance the farm ecosystem
• Benefit people, animals and places

The sustainable production of food and the actions to deliver environmental outcomes are seen as complementary and not competing agendas.

The Proposals

The new Sustainable Farming Scheme (SFS) will have three layers; Universal, Optional and Collaborative – each containing a set of ‘actions’.  All Universal Actions have to be carried out by farmers who join the Scheme.  A ‘baseline payment’ will be made to farmers for undertaking the ‘Universal Actions’.  There will also be additional payments for those farmers who choose to undertake extra ‘Optional’ and ‘Collaborative Actions’.

Universal Actions – the aim is for these to be practices that most farmers will be able to undertake and that can be integrated into the current farming practice.  Farmers will be expected to perform the Universal Actions to receive their baseline payment, these will include;

• • Managing and enhancing (semi-natural) habitats across at least 10% of the farm, or creating new habitat features where existing habitat does not exist
  • Having at least 10% tree cover on farm (in addition to the above) managed in line with UK Forestry Standard
  • Managing new and existing hedgerows in line with the hedgerow management cycle
  • Having a multi-species cover crop on all uncropped land over winter
  • Restoring, managing or creating ponds or scrapes (temporary ponds)
  • Ensuring biosecurity measures are in place to reduce the risk of spreading diseases and ensure farm boundaries are secure
  • Completing an annual benchmarking self-assessment against a minimum of the sector and industry KPIs to improve business performance
  • Carry out soil testing (N, P, K, Carbon and pH) at Scheme entry and in time for contract renewal including, biological measures (e.g. worm counting) and physical assessments (e.g. Visual Evaluation of Soil Structure)
  • Completing an IPM assessment; collecting and record data on Plant Protection Products use
  • Working closely with their vet through the Animal Health Improvement Cycle (AHIC) and reporting on farm antibiotic use
  • Maintaining and enhancing the historic environment, beauty and heritage where identified on holdings
  • Completing a level of learning, including Health and Safety.

The majority of compulsory elements of nutrient and livestock management are already completed by farm assured businesses so there will not be too much change in that respect.  But for some it will be a lot of additional work and they will need support to comply.  The need for 10% of land in woodland plus 10% of land in semi-natural production will be quite onerous for some.

• Optional Actions – farmers will be able to choose which actions they undertake, these will be targeted towards specific land or landscape feature issues; these will include
  • Restore damaged peatlands through ditch blocking or re-establish vegetation
  • Grow crops to reduce the amount of bought-in feed
  • Establish new horticultural enterprises within existing farm businesses
  • Support for innovation projects which trial new techniques and technologies
  • Support for isolating incoming stock for 6 days and having a 3m wide fence and hedge farm boundary
  • Actions which impact a farm’s nutrient use and soil condition e.g. nitrogen fixing plants, crops with varied rooting profiles, min or no till
  • Use a graze-and-rest approach for 5 months of the year
  • Establish/maintain a mixed sward of grasses, legumes and herbs
  • Support for managing/creating woodland more than the 10% minimum coverage and for increasing the width of hedgerows on boundaries to 3m
  • Managing or enhancing habitats above the 10% minimum

The above is not an exhaustive list.  In the proposals, it is made clear that these are only proposals and that some of the actions may be changed based on feedback received through the second phase of co-design and additional features may also be included in the future.

• Collaborative Actions – these will be carried out in a coordinated way by multiple land managers at a landscape, catchment or national scale where they can deliver more than the sum of the individual parts; including
  • Support for working with other farmers across catchments to improve water quality
  • Support for innovation projects to help farmers work together to sell more directly to the consumer to add value
  • Support for projects to restore and manage peatland shared by multiple farmers
  • Collaborative support for producers who work together to promote genetic health from native breeds and come together to use native breeds to develop and maintain natural habitats and increase diversity.
  • Creating interconnected habitats across landscapes
  • Supporting projects which enhance the historic environment and designated landscape across multiple farms

Each farm business will need to complete a Sustainability Review before entering the scheme this is likely to include basic farm and land information  – the proposals say this will be similar to the Single Application Form, a Carbon Assessment and Habitat Baseline Review – the hope is for farmers to be able to use tools already available to minimise the burden and that this can be completed on-line.  Contracts will be up to five years in length.  No indication of payment rates have been given yet, these will be be informed by Government modelling and economic analysis which is still underway.

Under the proposals, there will be an advisory service together with farmer-to-farmer knowledge sharing to help producers carry out the actions.  This will be provided through a new Farming Connect programme, including a ‘redesigned’ advisory service.  Farming Connect will also include a Continuing Professional Development (CPD) Programme.

Timetable

Between now and 2024 the Welsh Government will support farmers through a ‘Prepare and Pilot’ phase.  As part of the ‘preparing farmers’, the Welsh Government would like to receive views and thoughts on the scheme and has launched the second phase of co-design so that farmers can give their feedback – see our article of 2oth June https://abcbooks.co.uk/sustainable-farming-scheme-wales/   Piloting will also take place over this period.  Furthermore it has been confirmed that there will be a transition period so that the SFS will not be introduced overnight.  The Welsh Government has confirmed, the proposals include a transition period commencing on 1st April 2025 and ending on 31st March 2029, this will mean that there is no ‘cliff edge’ in funding if farmers choose not to participate in the new SFS, with a ‘stability payment’ available during these years.

The Government is currently engaging with the sector during the next phase of co-design and a decision on the final scheme will not be made until further consultation on the detailed proposals and the economic analysis has been presented in 2023.  Full details can be found at – https://gov.wales/sustainable-farming-scheme-outline-proposals-2025

The Scottish Government has issued a Land Reform consultation with a particular focus on the management and sale of land estates.  This is ahead of proposed legislation next year.

The definition of a ‘large land holding’ is suggested as anything over 3,000 hectares (7,400 acres), but this is subject to the consultation.  Inhabited islands below the threshold may also be included in the scope of the legislation.  There are three main proposals for such holdings;

• Updating the Land Rights and Responsibilities (LRRS) statement produced by the Scottish Government and then making compliance with its protocols mandatory rather than voluntary for large landowners
• A Land Management Plan would have to be drawn up.  This would set how the estate proposes to – implement the LRRS in practice; demonstrate how the land will be managed sustainably (including meeting the Government’s net zero and nature recovery goals); engage with the local community; increase the transparency of its plans and operations; and align its activities with Government policy
• The introduction of a ‘public interest’ test where large estates are sold (or where land is being traded to create a large estate).  This would include a prior-notification before sale.

There is a new form of tenancy proposed in the Consultation – a ‘Land Use Tenancy’.  This would cover land being let for a wider range of uses than just farming.  Little detail on this is provided.  The consultation also addresses issues of land registration and transparency over who owns Scottish land.  This would mean that public money would not be paid to farms where the ownership was not registered.  There are also questions in the Consultation on issues of taxation.

This Consultation continues the Scottish Government’s narrative of recent years of ‘small farms good, large estates bad’.  This simplistic approach seems more rooted in ideology than reality as, clearly, there will be good and bad land management practices across all sizes of land holding. 

The Consultation can be found at – https://consult.gov.scot/agriculture-and-rural-economy/land-reform-net-zero-scotland/.   The deadline for responses is 25th September.

New legislation is expected to be introduced shortly to allow the continuation of old Higher Level Stewardship (HLS) and Countryside Stewardship (CS) agreements on more favourable terms.  Many HLS agreements have continued, being rolled-over from year-to-year, since the original 10-year terms ended.  As these agreements were signed under EU rules these continue to apply – having stricter penalty regimes and the potential that penalties will be applied right back to the start of the agreement.  There was also no ability to amend the agreements.  New legislation, the Rural Development (Amendment) (England) Regulations 2022 SI 765 which takes effect from 28th July, will bring these agreements under UK rules.  This will change the penalty regime (and re-set the ‘clock’ to year one).  There should also be the possibility to extend agreements by at least 3-years rather than just one, and amendments to existing agreements may be allowed.  It is not known whether the opportunity will be taken to review payment rates.

The changes could also apply to any older CS agreements coming to an end.  Those agreed before 2021 are also subject to EU rules.  Where they are ending, an extension may be offered under new, UK, rules rather than a whole new application being required.  With slow progress in launching the replacement Local Nature Recovery (LNR) scheme under ELMs, Defra is increasingly seeing the extension of existing agreements as a favoured way to keep land in environmental management and a ‘bridge’ to the new programmes whilst minimising administration.    

Farm profits in England rose 17% in real terms between 2020 and 2021.  This is in line with the figures seen for the whole of the UK we reported on in May, which recorded a 14% increase.  The series is Total Income from Farming (TIFF) which is the aggregate profit from all farming businesses for the calendar year; it shows the return to all entrepreneurs for their management, labour and capital invested.  The rise in English TIFF from £3.6bn to £4.2bn was largely down to higher yields of crops and better sales values for both livestock and crops.  This was partially offset by higher input costs.  The outlook for 2022 profitability is difficult to forecast.  The rise in input costs has been well-documented.  Some sectors such as arable and dairy have been more than compensated by higher sale prices.  Other parts of agriculture such as pigs, poultry and horticulture have not been so fortunate.   

The initial stage of the Sustainable Farming Incentive (SFI) launched on 30th June.  There is no deadline date for applications, those interested can apply when it suits them best.  Payment is expected to be three months after application – this implies agreements will be offered relatively quickly and a lot faster than CS offers.  The aim is then to have quarterly payments, with no need to make a claim for payment.  To make the process as ‘straightforward and quick as possible’ applications will be online via new functionality on farmers’ RPA accounts.  This will allow checks to be carried out automatically and enable applications to be processed must faster.  However, this functionality may not be available to everyone during July; those that do not have the SFI functionality available during this initial period should get in touch with the RPA who will be able to support them through the application process.

It is important that applicant’s details are all up to date on the Rural Payments service.  Check digital maps are correct, as this will affect land parcels you can select to include in the application.  The online application should show the area eligible for SFI for each land parcel.

SFI & CS Interaction

Where a land parcel is entered into another scheme it may be eligible for SFI, but this is much more limited than expected.  We had been led (like many others) to believe that the initial Soil Standards could be put on CS agreement land as there is no overlap.  However, it seems that this is not the case and there are only a limited number of CS options that are also eligible for SFI.  Tables 1 and 2 in the following guidance show which options can be used on the same area https://www.gov.uk/guidance/how-an-sfi-standards-agreement-interacts-with-other-funding-schemes.  It therefore becomes somewhat either/or whether to go for SFI or CS Wildlife package, for example.  However, if part of a land parcel is used for a CS revenue option not listed in tables 1 and 2, and cannot be entered into the Soils Standards, it is possible to enter the rest of the land parcel into either of the Soils Standards.  For example, if part of a land parcel is used for a CS grass buffer strip, it will be possible to enter the rest of the area into either of the Soils Standards.

This may seem to many quite complicated!  But to help, if the applicant has an existing CS agreement, the RPA automatically removes the area of ineligible CS revenue options from the affected land parcels in the SFI application.  This includes any area currently used for ineligible rotational CS revenue options.  This will mean those who are not in CS, will need to weigh-up whether to go for just an SFI or a CS agreement or a mixture of both.

The UK launched Free Trade Agreement (FTA) negotiations with the Gulf Cooperation Council (GCC) on 22nd June.  This is seen as a lucrative market for British producers.  The GCC is made up of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE.  It is home to more than 57 million people, with a large (and expanding tourism industry).  It is the the richest region in the Middle East, with a high standard of living and with the lack of farmland imports approximately 90% of the food it consumes.  Tariffs on UK agri-food products to the region are already set relatively low but negotiators should seek to remove tarriffs where they exist.  The region is a large consumer of sheep meat, currently the main suppliers are Australia and New Zealand, but the removal of the 5% tariff on frozen lamb would support UK lamb exports to the region, which have already grown by 652% between 2018 and 2019.

Defra has confirmed the Sustainable Farming Incentive (SFI) will open for applications from 30th June.  This is the first part of the Environmental Land Management (ELM) programme to be put into practice.  Initially, just three Standards; Arable and Horticultural Soils, Improved Grassland Soils, and Moorland will be available.  Our articles of the of the 31st March and 27th May give further information.