Category: Policy & Business

The Agri-Environment Climate Scheme (AECS) will open in Scotland for another round from 30th January.  A summary of application dates and scheme changes are outlined below.  Full scheme details are available via https://www.ruralpayments.org/topics/all-schemes/agri-environment-climate-scheme/

• Slurry Storage – applications for Slurry Storage must be made by 24th March 2023.  Under this round, slurry storage will now be available nationally, with the exception of areas designated as Nitrate Vulnerable Zones.  Those businesses that currently house livestock on slurry-based systems with less than 6 months storage capacity are eligible to apply.  Contracts will be issued by the end of April 2023; all work must be completed and claimed for by 29th February 2024.  It will not be possible to defer the works to another year. The Scottish Government has announced that this year’s £5m Agriculture Transformation Fund will be made available to support slurry storage through the AECS, allowing funding to be available to all areas other than Nitrate Vulnerable Zones.
•  Organic Conversion or Maintenance – applications must be made by 7th June 2023.  From this year the area caps have been removed, this will also apply to those with existing contracts.  The Scottish Government has announced the forthcoming round of AECS will target and support its ambition to double the amount of land under organic management by 2026.  
• Agri-environment – applications must be made by 7th June 2023.  However, due to ‘budgetary pressures’ some options have either been capped or suspended for this round meaning the following agri-environment capital items will not be available:

• • Restoring Drystone or Flagstone Dykes
  • Pond Creation and Restoration for Wildlife
  • Muirburn and Heather Cutting
  • Primary Treatment of Bracken – Mechanised or Chemical
  • Follow up Treatment of Bracken – Mechanised or Chemical

In addition the Creation of Hedgerows option will be restricted to just 500 linear metres per application for 2023 and the following items/options remain suspended for the 2023 round.

• • Creation of Species Rich Grassland
  • Heather Restoration
  • Heather Restoration – Follow – up Molinia control

• Improving Public Access (IPA) – this element will not be available this year

 

Countryside Stewardship (CS) agreements starting on or after 1st January 2023 are now eligible for the new revised higher capital payment rates.  Readers will recall we wrote about amendments to CS Capital Grants earlier this month (see https://abcbooks.co.uk/countryside-stewardship-capital-grants-update/).  This included a review of the payment rates, but the new rates were only to apply to applications made from 5th January 2023.  This seemed to harshly discriminate against those whose CS Agreements commenced on 1st January 2023.  Defra has said it has ‘listened’ to feedback from farmers and landowners and has amended the date from when the new rates apply from 5th to 1st January 2023.  This means those whose agreements started from 1st January 2023 will receive the new capital rates (increases but no reductions) these include:

• CS Higher Tier and Mid Tier with capital grants
• CS Capital-only agreements
• SFI Pilot capital grants

For applications received from 1st January they will receive the new rates, including any reductions.

CS and SFI Pilot agreements starting in 2022 or earlier will receive the rates within their agreement.  It is possible for these applicants to withdraw individual capital works from CS agreements or even whole agreements and re-apply, but only where capital works have not commenced and materials have not already been ordered.  New applications would also require any endorsements, such as Catchment Sensitive Officer approval to be renewed.

Another point which has been mentioned is the £20,000 per group ceiling in CS Capital Standalone agreements.  This has remained unchanged even though rates have increased and in the case of new hedges, doubled.  Defra has said this is under ‘consideration’ along with how the new rates interact with Farming in Protected Landscapes (FiPL) agreements as these use CS payment rates.  An announcement on these is expected shortly.

 

The latest agricultural rents data once again shows a mixed picture.  Following a rise in the overall average rent in 2020, the All Farms rent in 2021 has come back down to 2019 levels.  Some sectors have experienced a rise in ‘full’ Agricultural Holdings Act (AHA) rents whilst at the same time seeing a fall in FBT rents; for other sectors it is vice versa.  The table below shows a summary of the last three years.  Defra’s Farm Rents publication uses data from the Farm Business Survey.  Due to the time taken to collect the data, it is somewhat historic.  The figures just published are for the 2021/22 year, March to February, (shown as ‘2021’ in the table below).  The full statistical notice can be found at https://www.gov.uk/government/statistics/farm-rents/farm-rents-england-2020

Cereals farms on AHA Tenancies recorded an 8% decline (although this is following a 10% increase in 2020) whilst FBT Cereal rents declined marginally.  Although only a small decrease this year, this is the third year in a row that Cereal FBT rents have fallen; they do however, remain 24% higher than AHA rents.  Full AHA rents for General Cropping have seen a further decline in 2021 and after a ‘sizable’ increase in the 2020 FBT rent, these agreements have also seen a rental reduction in 2021; although not quite back to 2019 levels.  Rents for Dairy land are strong, particularly FBT rents but have remained fairly stable over the last three years.  LFA Grazing  rents show a steady increase for both AHA and FBT agreements and this is the same for Lowland AHA Grazing farms.  FBT Lowland Grazing rents continue to fluctuate, falling by 19% in 2021 following a 30% increase in 2020.  The livestock sector has seen better prices recently, but is also, in the main, more dependent on the BPS and as this declines, will see margins squeezed.

As written previously, data on rents can fluctuate annually and one year’s information should not really be taken in isolation.  In general, rents have been on an upward trend, but looking to the future it would be expected that, as the BPS is phased-out, then overall rents will fall.  

The Government has announced a new business energy scheme to replace the existing one when it ends.  The current Energy Bill Relief Scheme (EBRS) is scheduled to finish on 31st March (see our article of 25th September https://abcbooks.co.uk/energy-price-cap/).   The new Energy Bills Discount Scheme (EBDS) will be available for all non-domestic consumers in Great Britain and Northern Ireland and will run from 1st April to 31st March 2024 – i.e. a further year.  However, the current EBRS is worth £18bn, whereas the new EBDS will have a cap set at £5.5bn – based on estimated volumes.  The Government says it has always been clear that the current levels of support were ‘time-limited’ and intended as a ‘bridge’ to allow businesses to adapt.  It refers to wholesale gas prices having fallen to levels seen just before the invasion of Ukraine and having halved since the current scheme was announced.  It states the new scheme ‘strikes a balance’ between limiting taxpayers’ exposure to volatile markets and supporting businesses over the next 12 months.

In terms of what support will be available, under the EBDS, non-domestic users will receive a unit discount of up to £6.97 per MWh to their gas bill and a unit discount of up to £19.61 per MWh to their electricity bill for the period April 2023 to March 2024, above a threshold of £107 per MWh for gas and £302 per MWh of electricity.

As under the previous scheme, customers should not have to do anything, the support should automatically be applied to bills by the energy supplier.  The discount will be available to those;

• on existing fixed price contracts that were agreed on or after 1st December 2021
• signing new fixed price contracts
• on deemed / out of contract or standard variable tariffs
• on flexible purchase or similar contracts
• on contracts paying energy costs above a price threshold
• on variable ‘Day Ahead Index’ (DAI) tariffs (Northern Ireland scheme only)

There is further support for those in energy and trade intensive industries (ETIIs).  These are mainly manufacturing industries and it does not include agriculture.  However, many associated sectors in the food chain are covered such as the processing & preserving of meat, operation of dairies & cheese making, and manufacturing of beer, wine & cider.  The full list can be found via https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1128021/230104_ETII_List_for_gov.uk.pdf .   This discount will apply to 70% of energy volumes and will be subject to a maximum discount of £40 per MWh for gas and £89.10 per MWh for electricity with a threshold of £99 and £185 per MWh for gas and electricity respectively.  Businesses may need to register to be eligible for this additional support; details on how to apply will be released in due course.

The Chancellor, Jeremy Hunt has announced that the Spring Budget will be delivered on 15 March 2023.  In a further Treasury announcement, it has been confirmed that the requirement for all self-employed individuals and landlords to submit their Income Tax self-assessment forms through Making Tax Digital (MTD) portal will be delayed two more years until April 2026.  MTD for Self-Assessment returns was due to take effect from April 2024 and would have required those with income over £10,000 to report earnings quarterly through the MTD for ITSA system.  However, it will now only be phased-in from April 2026.  Businesses, self-employed individuals and landlords with income over £50,000 will be required to comply from that date.  Then, from April 2027, those with income over £30,000 will be included.  Many farms are already in the MTD system as a result of VAT requirements.  However, there will be some relief that the move to quarterly reporting and calculation of Income Tax has been delayed.  This relief will also be felt by other self-employed people in farming and rural businesses.  

Woodlands

The 2nd Round of the Woodland Restoration Scheme (WRS) opened for Expressions of Interest on 16th December and will close on 2nd February 2023.  The WRS provides capital works for restocking, fencing and associated operations on sites where there is Larch and up to 50% non-Larch species.  Further information can be found via https://www.gov.wales/woodland-restoration-scheme-round-2-rules-booklet-html.

The next window for applications to the Woodland Creation grants opens from 13th February to 24th March 2023.  This is for the Small Grants – Woodland Creation scheme, which covers small areas of tree planting under 2 hectares and also for the Woodland Creation Grant, covering larger schemes in excess of 2 hectares.  For further information go to https://www.gov.wales/small-grants-woodland-creation  and https://www.gov.wales/woodland-creation-grants-booklet .

Winter Update

The Welsh Government has also published its Winter Update, which can be found online at https://www.gov.wales/sites/default/files/publications/2022-11/agriculture-winter-update-2022.pdf.  This is a 36 page document updating land managers on a variety of rural topics including scheme opening dates (see table below), the Sustainable Farming Scheme, agricultural minimum wage, EIDCymru, Farming Connect, animal health and welfare and more.

Farming Connect Boot Camp

The Farming Connect Boot Camp is a fully-funded residential course designed to give new entrants into agriculture the skills to be able to develop efficient businesses.  The first session is on 18th and 19th January with the second session running from 8th -10th February 2023.  More information can be found at https://businesswales.gov.wales/farmingconnect/business/business-bootcamp

After a brief closure, applications for Countryside Stewardship Capital Grants have re-opened, with some changes to try and provide further flexibility to applicants and an update to payment rates.  The full guidance can be found at https://www.gov.uk/government/publications/capital-grants-2023-countryside-stewardship/applicants-guide-capital-grants-2023. The main changes include;

• Agreements increased to 3-years – all agreements starting on or after 5th January 2023 will have 3-years (previously 2-years) to complete the agreed works
• New CS Higher Tier Capital Grants – to be used in the most environmentally significant sites and woodlands without the need for a CS Higher Tier agreement.  20 capital items are available under this new tier.  For further information go to https://www.gov.uk/government/publications/higher-tier-capital-grants-2023-countryside-stewardship/applicants-guide-higher-tier-capital-grants-2023
• New Natural Flood Management theme – this offers 3 capital items and increases the maximum limit for a single application to £80,000, with a limit of £20,000 for each group;
  • Boundaries, trees and orchards
  • Water quality
  • Air quality
  • Natural flood management (new for 2023) – equipment to disrupt tramlines and leaky wooden dams
• Updated payment rates – the majority of capital grants have been increased for agreements commencing from 5th January 2023 i.e. Hedgerow planting (BN11) is now £22.97 per m (previously £11.60 per m) and Hedgerow laying is £13.52 per m (£9.40 per m).  There are, however, a few which have declined and some have remained the same.  Defra say, on average, the rates have increased by 48%. The new rates can be found at https://www.gov.uk/government/publications/capital-payment-rates-from-january-2023-countryside-stewardship
• Land in an SSSI now eligible – previously not eligible, but land located in an SSSI is now eligible for capital works if the land is already in and existing CS or ES agreement
• Proportionate reductions on late claims – reductions will be scaled back depending on how late a claim is.  Currently if a claim is one day late, 100% reduction is applied.
• Catchment Sensitive Farming (CSF) – capital items which require support from CSF are now available in High, Medium or Low Priority Areas for Water and Air quality
• Public Access and Educational Visits – the eligibility of some items has been expanded to encourage public access and enhanced educational visits to woodland.

A reminder that applications to CS Capital Grants and CS Higher Tier Capital Grants can be made all year round.

 

Defra has announced an update to the Countryside Stewardship (CS) payment rates and the introduction of the Sustainable Farming Incentive (SFI) Management Payment.  Both are following feedback from farmers and in recognition that prices have increased and that Defra needs to ensure the schemes are viable to attract all businesses.

Sustainable Farming Incentive Management Payment

The SFI Management Payment will be £20 per hectare for up to 50 hectares of land entered into the scheme per annum i.e. agreement holders will receive up to a maximum of £1,000 per year via this payment.  The payment has been introduced following feedback from those already in the scheme who have said the current payments do not fully account for the administration costs of entering and implementing an agreement.  Defra acknowledges the new Management Payment will benefit small farms in particular, but it notes these are currently half as likely as the average farm to be in an environmental land management scheme.  It has been fairly well documented that uptake of the SFI has been poor and that payments are considered to be too low.  An increase in uptake is required if Defra is to meet its environmental targets.

The SFI Management Payment will apply to new agreements and also those already participating.  It will not apply to those in the SFI Pilot who already receive £5,000 per year for taking part in ‘learning activities’.  Defra states that this Pilot payment will be reviewed for the 3rd year, but it is unclear what this actually means.  The Management Payment will only be available for agreements that include changing land management activities, meaning planning or preparation activities such as the current Moorland Standard are not eligible.  More information on the SFI Management Payment is expected before the end of the month.

SFI – Additional Standards

Defra is expected to announce further SFI Standards for 2023 shortly.  At the Oxford Farming Conference in early January the Farming Minister, Mark Spencer, stated that a further six Standards will be available.  Details are expected in the coming weeks, but our understanding is that the following topics will be covered;

• Arable and Horticultural Land Standard (as distinct from the current Soils Standard)
• Improved Grassland Land Standard
• Low Input Grassland
• Hedgerow
• Integrated Pest Management (IPM)
• Nutrient Management

Countryside Stewardship Payment Rates

Our previous article reports on the updates to schemes rules and payment rates for CS Capital Grants (see https://abcbooks.co.uk/countryside-stew…al-grants-update/).  CS revenue rates have also been updated and will be introduced for all new and existing Mid Tier and Higher Tier agreements as from 1st January 2023.  The majority of payment rates have increased, none have been reduced, with about 20 remaining unchanged.  The new rates can be found at https://www.gov.uk/government/publications/revenue-payment-rates-from-january-2023-countryside-stewardship.  Defra has said it will continue to review payment rates, in addition, later this year it will publish how it will ‘routinely review’ rates from 2024.

The legally binding environmental targets, as required under the 2021 Environment Act, have finally been published.  We wrote in the November Bulletin that Defra had missed the statutory deadline of 31st October as set out in the Act.  A Ministerial Statement to the House of Lords on the 16th December set out thirteen targets in a number of areas.  The targets are largely the same as was set out in earlier Defra consultations, so contain few surprises.  Details can be found at www.gov.uk/government/news/new-legally-binding-environment-targets-set-out .

The targets are;

Biodiversity and Woodland

• To halt the decline in species abundance by 2030
• To ensure that species abundance in 2042 is greater than in 2022, and at least 10% greater than 2030
• Improve the Red List Index for England for species extinction risk by 2042, compared to 2022 levels
• To restore or create in excess of 500,000 hectares of a range of wildlife-rich habitat outside protected sites by 2042, compared to 2022 levels
• 70% of the designated features in the Marine Protected Areas network to be in favourable condition by 2042, with the remainder in recovering condition
• Increase total tree and woodland cover from 14.5% of land area now to 16.5% by 2050 (the original target in the consultation had been 17.5%)

Water Quality and Availability

• Abandoned metal mines target: Halve the length of rivers polluted by harmful metals from abandoned mines by 2038, against a baseline of around 1,500 km
• Agriculture target: Reduce nitrogen (N), phosphorus (P) and sediment pollution from agriculture into the water environment by at least 40% by 2038, compared to a 2018 baseline
• Wastewater target: Reduce phosphorus loadings from treated wastewater by 80% by 2038 against a 2020 baseline
• Water Demand Target: Reduce the use of public water supply in England per head of population by 20% from the 2019/20 baseline reporting year figures, by 2037/38

Waste & Air Quality

• Reduce residual waste (excluding major mineral wastes) kg per capita by 50% by 2042 from 2019 levels
• For air quality, an Annual Mean Concentration Target for PM2.5 levels in England to be 10 µg m-3 or below by 2040
• A Population Exposure Reduction Target for a reduction in PM2.5 population exposure of 35% compared to 2018 to be achieved by 2040.

Although not all are directly relevant to agriculture, it can clearly be seen that some of these targets will affect farming.  Now these legal targets are in place the Government has a duty to enact policies to achieve them.  The roadmap for how this is to be done will be the Environmental Improvement Plan (EIP).  This is due to be published in January and will be updated every five years.  It is the successor to the 25-Year Environment Plan.

Defra has published the cross-compliance rules for 2023.  There are no changes to the existing rules.  Full details can be found at – www.gov.uk/government/publications/cross-compliance-2023/cross-compliance-2023.  This should be the last year of cross-compliance in its current form.  In 2024 the residual BPS payments in England are to be ‘de-linked’ – with the link between payments and land being removed.  At this point the cross-compliance system no longer works.  A replacement system for ensuring farming standards is likely to be drawn up during 2023.