Leaked reports suggest that Defra is looking to amend its plans for Environmental Land Management (ELM). This comes following the review of policy instigated by the previous Defra Secretary, Ranil Jayawardena. The results were communicated in confidence to stakeholders under the Future Farming and Countryside Programme, but details have been widely shared.
The largest change is that the Local Nature Recovery (LNR) scheme will not go ahead and, instead, the existing Countryside Stewardship scheme will be retained and amended to meet future policy requirements. There may also be changes to some of the planned Standards included under the Sustainable Farming Incentive (SFI).
As when the review of Defra policy was originally announced, there has been a chorus of protest at the (alleged) plans. This often comes from environmental groups who are quick to see any change in policy as evidence as ‘backsliding’ on the environment. It can also be pointed-out that having something to criticise raises the profile of such lobbying groups. From a farming perspective, this change, if true, probably makes little difference. The direction of policy travel in England is clear – no more direct payments and payments for public goods instead. What a scheme is called is rather immaterial. The name Local Nature Recovery was set to be dropped anyway as the word ‘recovery’ was seen as pejorative – suggesting that land managers had broken the environment and it needed to recover. There is an argument that, if a scheme is working reasonably well (as CS generally is), then it is better to amend what is there than start with a blank sheet of paper.
A formal announcement on any changes is expected by the end of the year.
The latest Budget was delivered by the fourth Chancellor of 2022, Jeremy Hunt, on the 17th November. It was designed to put the Government’s finances on a sounder footing and reassure financial markets after the disastrous ‘Mini-Budget’ of Liz Truss’s premiership. There is a mix of tax increases and spending cuts. The main points are;
The Office of Budget Responsibility (OBR) predicts that the UK is already in recession. This is defined as two quarters of economic contraction. The initial estimate of growth in Q3 was -0.2% and the OBR is assuming that growth will also be negative in the current, fourth, quarter of 2022. The forecast for 2023 is that the economy will shrink by 1.4%. It will return to growth of 1.3%, 2.6%, and 2.7% in 2024, 2025 and 2026 respectively. The OBR estimates that inflation will be 9.1% in 2022 and will still be at 7.4% in 2024
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
Top 45% Additional Rate of Income Tax will be paid on earnings over £125,140, instead of £150,000
National Insurance and Inheritance Tax thresholds are also frozen until April 2028
The National Living Wage for those over 23 will increase from £9.50 to £10.42 an hour from 1st April 2023 (a 9.7% increase)
Pensions and Benefits will be increased by September’s inflation rate – 10.1%
The annual exemption for Capital Gains Tax is to be cut from the current £12,300 to £6,000 from April 2023. It will then fall to £3,000 the following year
The Household Energy Price Capwill be extended for a further year after April 2023 but at a higher level (average bills capped at £3,000 a year instead of £2,500). There will be specific help for those on low incomes. No further details were provided on support for non-domestic energy users after the end of March – a review is meant to report on future proposals by the end of the year
Electric vehicles will be subject to Road Tax from April 2025
The budget for infrastructure has largely been protected with the Sizewell C nuclear power plant, HS2, Northern Powerhouse rail and East-West rail projects all going ahead
Most Departmental spending has been frozen in nominal terms for two years – meaning significant real-terms decreases with inflation at 10%. Exceptions to the spending squeeze are the armed forces and the NHS.
The Scottish Government will enact legislation to allow it to impose ‘conditionality’ on support payments. The proposed Agriculture Bill, currently the subject of consultation, would provide these powers. However, with the Bill coming before the Parliament until late 2023, it is unlikely to be in place for the 2025 year. The Scottish Government has previously stated that ‘50% of farm payments should be subject to conditionality by 2025’. Interim legislation will be passed to amend the Agriculture (Retained EU Law and Data) (Scotland) Act 2020 to allow this to happen. This seems to make it all-but-certain that the new Scottish policy will not be introduced until the 2026 year. The current regime of BPS (and LFASS), albeit with some modifications, will be retained through to 2025.
Scottish farmers can now claim for their soil analyses. This is part of the National Test Programme: Preparing for Sustainable Farming (PSF). Claims for carbon audits opened in July and now farmers can also claim the cost of undertaking soil sampling.
The Bank of England increased the UK base rate by 0.75% on the 3rd November – the largest single rise since 1989. This brings the rate up to 3% – the highest level since late-2008. The rise is designed to combat high inflation which is now above 10%. The Bank is also forecasting a long recession in the UK economy with a prediction that it will shrink for eight quarters in a row – starting in Q3 2022, going right through 2023 and into 2024. This would be the longest recession in at least a Century. Interest rates are rising in many major economies in response to inflation. The US Federal Reserve Rate, the most important in global financial terms, was also increased by 0.75% to 4% on the 2nd November.
The Government has failed to set environmental targets in the areas of air quality, water quality, biodiversity and waste reduction. Under the Environment Act 2021, legally binding targets were meant to be in place by the 31st October 2022. Defra consulted on the issue earlier in the year, but the Department has said that the volume of responses to the consultation has meant it has taken longer than planned to enact the necessary secondary legislation. No timetable for implementing the targets has been set out. The targets, when in place, will drive policy which, in turn, will directly impact on farming over the longer-term. More details can be found at – https://questions-statements.parliament.uk/written-statements/detail/2022-10-28/hcws347.
The latest round of the Countryside Stewardship Facilitation Fund opened for applications on 7th November. The Fund supports facilitators to bring together groups of farmers, foresters and other land managers. Bodies such as farming and nature groups, charities, and farm advisors provide advice, share knowledge and help design schemes. Farmers and land managers in the area then have complimentary CS agreements, with activities taking place across a much larger area than would be the case with a single farm. Under the latest round, £2.5m will be available; applications need to be submitted by 25th January 2023.
Following the appointment of Therese Coffey as Defra Secretary of State (see https://abcbooks.co.uk/new-minister/), there hasn’t been too much change with the other Ministers in the Department. Rebecca Pow has been reinstated as Parliamentary Under Secretary as from 28th October, following her resignation in July under the Johnson administration. The Rt Hon Lord Benyon has been promoted to Minister of State at Defra on 30th October after previously being Parliamentary Under Secretary at the Department. The other Junior Ministers retain their positions from under Liz Truss; Mark Spencer remains Minister of State (Minister of Food – but which also covers farming) and Trudy Harrison Parliamentary Under Secretary (Minister for Environment).
The third Defra Secretary of State since the start of September is now in place. Ranil Jayawardena’s tenure lasted 1 month and 19 days, and has been replaced by Therese Coffey in Rishi Sunak’s new Government. Ms Coffey was elected as MP for the Suffolk Coastal in 2010. She spent time in Defra from July 2016 to September 2019 as a junior Minister for State for Environment and Rural Opportunity. She should therefore have a grasp of the issues and how Defra operates. In more recent times she has been in the Cabinet as Secretary of State for Work and Pensions and then (briefly, under Liz Truss) Secretary of State for Health and Deputy Prime Minister.
At the time of writing, the junior Ministerial positions in Defra had not been confirmed. Another familiar face returns to the cabinet as Michael Gove becomes Secretary of State for Levelling Up, Housing and Communities.
Jeremy Hunt continues as Chancellor. It is still the case that an announcement of an ‘Economic Plan’ will be made on Monday 31st October. However, there are rumours this it could be delayed to give more time to work through the details. We will report on the outcome on the Bulletin website.
The letting of houses in Wales will see significant changes from the 1st December. The provisions of the Renting Homes (Wales) Act 2016 (“the 2016 Act”) will come into force on this date and all Assured Tenancies in Wales will convert into Occupation Contracts. This includes any Assured Agricultural Occupancies (AAOs) which exist in Wales.
Under the Act, which has experienced several delays, two new forms of Occupation Contract for letting residential property in Wales will be introduced: a Secure Contract and a Standard Contract; the latter will replace the Assured Shorthold Tenancy (AST). Secure Contracts are for Community Landlords. The legislation is retrospective, meaning it will apply to existing tenancies as well as new Agreements; existing ASTs will need to be converted to Standard Contracts. The new Contracts will also be ‘Model Contracts’ meaning that, when setting up a new Tenancy, the contract will need to contain certain clauses and conditions set by the Welsh Government. Model Contracts are available from the Welsh Government website.
One significant change surrounds bringing an Occupation Contract to an end. Where the contract-holder has breached the Occupation Contract, the minimum notice period that must be given is one month (shorter where it relates to a breach of the anti-social behaviour or the serious rent arrears). However, where a ‘no fault’ notice is issued (similar to the s21 notice under an AST), the minimum notice period that must be given is six months. Furthermore, a Landlord will not be able to give such a notice until at least 6 months after the contract starts. In practice, this means that there will be a twelve-month minimum term for periodic Standard Contracts under the new Act. It will be possible to have a Landlord’s break clause but these will only be able to be incorporated into a fixed term Occupation Contract if the contract has a fixed term of 2 years or more and the Landlord will not be able to exercise a break clause within the first 18 months of occupation.
