Category: Policy & Business

Local Nature Recovery & Landscape Recovery

Outlined by George Eustice at the virtual Oxford Farming Conference, Defra has released two policy papers giving more information on the Local Nature Recovery (LNR) and the Landscape Recovery (LR) schemes.  These are the other two components of ELM, the first being the Sustainable Farming Incentive (SFI) scheme.  The are due to be fully in place by late 2024.

Local Nature Recovery (LNR)

Defra has described LNR as the ‘improved and more ambitious successor to the Countryside Stewardship scheme in England’.  It will pay for locally-targeted actions to ‘make space for nature alongside food production’.  This can be contrasted with the SFI, which is more about incorporating environmental improvements within farming.  The aim is to take the best bits of CS to create a scheme with ‘wider appeal that can deliver more and better outcomes, in a less bureaucratic and more supportive way’.

LNR will provide a range of options (much like Countryside Stewardship), so that farmers can choose those that fit their own circumstances.   This will include options which have been successful under CS but also new ones as well.  Initially the options will cover the following themes:

  • managing feeding, shelter and breeding areas for wildlife on arable farms
  • managing, restoring and creating grassland habitats such as species-rich grassland on farms and in the wider countryside
  • managing, restoring and creating wetland habitats such as ponds, lakes, reedbeds and fens
  • managing, restoring and creating lowland heathland
  • managing, restoring and creating coastal habitats such as sand dunes, salt marsh and shingle
  • managing and restoring areas of upland and lowland peat and moorland on farms and in the wider countryside
  • targeted measures to support the recovery and reintroduction of particular wildlife species, such as creating and managing nesting and feeding habitat, and to tackle non-native invasive species
  • managing and creating trees and woodlands, including agroforestry, traditional orchards and tree planting on areas of farms – noting that the England Woodland Creation Offer will be the main scheme for woodland creation until 2025
  • nature-based solutions for water – such as creating and managing in-field vegetation, buffer strips and swales to reduce and filter runoff and contribute to natural flood management
  • restoring rivers, flood plains, streams and riparian habitats

More details on the full list of options are expected later this year, alongside more details on scheme rules and the proposed payment rates.  The LNR will be open to farmers, foresters and other land managers.  Agreements will cover multiple years, with the length dependent on the activities being undertaken.  It will be possible to add more options or land to agreements over time and work continues to try and ensure the scheme is accessible to tenant farmers and also those farming common land.  It will be possible for farmers to enter into both LNR and SFI, provided the actions are compatible and they are not getting paid for the same thing twice.  The aim is that, from 2024, both the LNR (and SFI) will be accessible through a single digital service that shows all the options available.

There will be encouragement for farmers to work together under the LNR as trials have shown these can provide some of the best outcomes.  There is likely to be a similar ‘facilitation fund’ as was seen under the CS.  Similarly, through tests and trials, it has been found that land management plans (LMPs) are a good way to assess the potential to deliver environmental benefits on farms and work will continue through 2022 on how best to use LMPs as part of SFI and LNR.  The priorities of the LNR scheme will be locally-targeted which will be influenced by the Local Nature Recovery Strategies to be introduced under the Environment Act.

Quite a topical issue is private finance arrangements and Defra has said it would like farmers to be able to enter into private arrangements such as carbon trading, providing Biodiversity Net Gain and nutrient trading alongside the government schemes.  It is working with stakeholders to consider how to make this work so that farmers are ‘better off when seeking private finance’.  Clear rules will be set on this later in the year.

In terms of timescale, piloting and testing is planned to take place in 2022 with up to 500 participants, focusing on specific areas which are new or different, more details on this and how farmers can get involved is expected shortly.  Then in 2023 an ‘early version’ will be available to a limited number of participants, followed by full roll out by the end of 2024.

Landscape Recovery

This scheme is for landowners and managers who want to take a more ‘radical and large-scale approach’ to producing environmental and climate goods on their land.  The scheme will initially focus on biodiversity, water quality and net zero.  Agreements are expected to be long term, 20-years plus, with safeguards, such as Conservation Covenants in place to protect them in the future.  There will be no set list of options with payment rates, instead Defra will work with project managers to negotiate bespoke agreements.  These will need to deliver good value for money, significant outcomes, and attract private finance to support the project.

At least two rounds of pilots will run over the next two years.  The application for the first round of up to 15 LR projects will open shortly and will focus on two themes;

  • recovering and restoring England’s threatened native species – projects under this theme are expected to recover priority habitats, habitat quality and species abundance
  • restoring England’s streams and rivers: improving water quality, biodiversity and adapting to climate change – these projects could restore water bodies, rivers, and floodplains to a more natural state, reduce nutrient pollution, benefit aquatic species, and improve flood mitigation and resilience to climate change

The second round of pilots will open in 2023.

LR will be open to any individual or group who can deliver a large scale project on between 500-5,000 hectares of land.  Land already in an existing agri-environment is eligible, but obviously payment will not be made for the same thing twice.  Work is being carried out looking into ending exiting HLS and CS agreements early, without penalty, to go into LR.  Applications will be assessed against set criteria, full details of which will be available shortly when the full guidance is published.

There will be a two stage application approach.  The initial application window will be open for 16 weeks.  Those projects that achieve the highest score in the initial round will receive development funding from Defra.  This will support more detailed planning over around a two-year period.  At the end of this, successful projects will proceed to the implementation phase i.e. when work on the ground actually commences.  At this point, there is a strong presumption that the schemes will only be part-funded by Defra.  Such large-scale projects are assumed to be attractive to private-sector funders which will supplement payments coming from Defra.

This is an ambitious scheme, the pilot projects alone are expected to create at least 20,000 hectares of wilder landscapes, habitats, rewetted peat and afforestation at a landscape scale, delivering on the commitments made in the Prime Minister’s 10 Point Plan.

These two schemes will not be for the majority of farmers, the SFI will be the component for most who continue to farm commercially.  But when fully up and running, the LNR and LR combined are expected to use 60% of the agricultural budget taken forward from CAP.  The SFI will receive 30% and the other productivity schemes the remaining 10%.

Countryside Stewardship Payment Rates

The Countryside Stewardship revenue payment rates have been revised.  Most (over 100) have been increased, although a few (less than 10) have been reduced.  All the new rates can be found at https://www.gov.uk/government/publications/countryside-stewardship-revenue-payment-rates-from-1-january-2022/countryside-stewardship-payment-rates-for-revenue-options-from-1-january-2022

If you have a revenue agreement, or an application for a revenue agreement starting on or before 1st January 2022 then where the new rate has:

  • increased; the new (higher) rate will be paid
  • decreased; the existing (higher) rate shown on the signed agreement will be paid
  • not changed, the existing rate shown on the signed agreement will be paid.

For new agreements starting from 1 January 2023 all of the new revenue rates will apply and full details of the changes will be included in the relevant Countryside Stewardship scheme manuals when the scheme opens in February 2022.  There are no plans to change payment rates for capital options for 2022.

Farmers Opinion on Welsh Support Sought

The Welsh Government is looking for farmers to take part in the co-design process of the new Sustainable Farming Scheme (SFS).  The first stage of co-design saw around 2,000 people take part.  The next phase will take place in the summer of 2022 and is looking for farmers to provide ‘opinions on the practicality of proposed actions underpinning the SFS and the wider scheme structure and processes’.  Details of the SFS are due to be published in the first half of 2022 alongside the Welsh Agriculture Bill.  Once the co-design process has been undertaken the final SFS will be announced in 2023.  More details of how to sign-up can be found at – https://gov.wales/register-have-your-say-wales-future-farming-scheme .

Peat Consultation

A consultation has been launched on the banning of the sale of peat for horticulture in England and Wales.  The consultation can be found at – https://consult.defra.gov.uk/soils-and-peatlands/endingtheretailsaleofpeatinhorticulture/.

Delinking and Lump Sum Payments

Defra’s response to the Delinking and Lump Sume Payment consultation has been delayed further.  Initially it was due to report on it in October, but said it hoped to report by the end of the year.  It has now announced ‘Publication of our report on the consultation has been delayed so we can fully consider the comments made by respondents. We received 654 responses. We expect to publish the report in early 2022’.  As said previously, if the Lump Sum exit scheme is to be availble in 2022, this gives very little time time for respective applicants and their advisors to interpret the rules.

Chief Brexit Negotiator Resigns

On 18th December, Lord Frost, the UK Government’s Chief Brexit Negotiator, and co-architect of both the Trade and Cooperation Agreement (TCA) with the EU and the Northern Ireland (NI) Protocol, resigned with immediate effect.  In his resignation letter, he cited issues with the Government’s direction of travel on Covid policy and higher taxation as key reasons for his departure. However, many suspect that frustrations with how negotiations with the EU are progressing on the NI Protocol were also influential.  In recent weeks, some progress had been reported on medicines and the UK’s stance on the European Court of Justice had softened but negotiations will continue into 2022 with agri-food, particularly Sanitary and Phytosanitary (SPS) regulation continuing to be a key stumbling block.

Whilst some see Lord Frost’s resignation as a blow to the Prime Minister, others believe that the possibility of a deal on the NI Protocol in early 2022 has increased.  Particularly with the Foreign Secretary, Liz Truss, now taking on the responsibility of overseeing negotiations with the EU.  Ms Truss is popular with Conservative party grassroots and is viewed as more of a pragmatist than Lord Frost.  Her experience as Defra Secretary (2014-2016) and International Trade Secretary (2019-2021) should also be helpful in addressing remaining SPS and customs issues.  She will be deputised by Chris Heaton-Harris MP who has become Minister of State for Europe who will support the Foreign Secretary on EU Exit and NI Protocol issues.

Interest Rates

The Bank of England raised UK Base Rates from 0.1% to 0.25% on the 16th December.  This is in response to rapidly rising inflation with the year-on-year increase in prices accelerating from 3.1% in September to 5.1% in November (CPI measure).  Even with the threat of the Omicron variant to economic activity, many economic forecasters are predicting further base rate increases in 2022 as inflation pressure continues.  Rates of 1% by the end of the year loom possible.

 

UK:Australia Trade Agreement Signed

The UK-Australia Free Trade Agreement (FTA) was signed virtually on 17th December.  It is the first FTA that the UK has negotiated from scratch since its departure from the EU.  It means that all chapters of the agreement have now been agreed by both parties following the agreement-in-principle in June (click here for previous article).  From an agri-food standpoint, much of what was agreed in principle is now contained within the detailed agreement and will now be laid before Parliament for scrutiny.

The key points relating to agri-food are;

  • Tariffs:
    • UK Imports: there will be an immediate elimination of 99% of tariffs on goods imported from Australia to the UK upon entry into force (potentially sometime in 2022).  Pork, poultry and eggs are not included so the UK Global Tariff will continue to apply. However, restrictions will remain for other sensitive agricultural products as specified below.
    • UK Exports: almost all tariffs on UK goods will be eliminated upon entry into force. Tariffs on whisky, confectionary and biscuits will be phased out over 5 years. 
  • Tariff Rate Quotas (TRQs): the duty-free TRQs remain largely the same as previously outlined in the agreement-in-principle. These are summarised in the Table below.

  • More detail has been provided on what is included within each TRQ:
    • Beef (TRQ 1): the products (commodity codes) which are applicable include fresh/chilled beef (0201); frozen beef (0202); and a range of other chilled and frozen beef offal, preserved beef, beef-based meat mixtures and selected blood preparations.
    • Sheep meat (TRQ 2): products applicable include chilled lamb carcases/half-carcases (020410); chilled sheep carcases (020421); other sheep meat cuts with bone-in or boneless (020422; 020423); frozen sheep meat; edible flours/meals of sheep meat offal; and blood preparations.
    • Milk, Cream, Yoghurt and Whey (TRQ 3): applicable products are milk/cream whether concentrated or unconcentrated (0401; 0402); buttermilk and yoghurt (0403); and whey (0404 (excluding 0404.10.48)).
    • Butter (TRQ 4): all products under the 0405 HS code.
    • Cheese and Curd (TRQ 5): all products under the 0406 HS code.
    • Wheat (TRQ 6): this 80Kt TRQ applies to all types of common wheat but excludes seed (HS code 1001.99).  Wheat seed will have its £79 per tonne duty removed in 4 equal instalments and after Year 4, the duty will be removed. 
    • Barley (TRQ 7): this 7Kt TRQ applies to malting and other (feed) barley (HS code 1003.90), but excludes seed. Barley seed will also have its £77 per tonne duty removed in 4 equal instalment and will be duty free after Year 4.
    • Long-grained Rice (TRQ 8): a 1Kt TRQ applying to selected commodity codes.
    • Broken Rice (TRQ 9): an 11.5Kt TRQ applying to broken rice of all varieties (HS code 1006.40).
    • Sugar (TRQ 10): the TRQ is 80Kt (Year 1) rising to 220Kt (Year 8). It includes cane sugar, white sugar and other sugar (HS codes 1701.13; 1701.14; 1701.91; 1701.99). Beet sugar (1701.12) is excluded.
  • Sanitary and Phytosanitary (SPS) Measures: both parties emphasise their commitments to a science and risk-based approach to implementing SPS measures.  However, there is no mention of any changes to import standards.  Such changes, if they were to be introduced, would be set-out separately in future either by the UK or Australian Governments.  Therefore, this area will need to continue to be monitored closely. 
  • Rules of Origin: there is some more flexibility for UK exporters in terms of percentage of processed food ingredients that must be of UK origin, with a greater focus on the production process as opposed to the list of ingredients. This means that biscuits made from imported flour will qualify for tariff-free access to Australia under the FTA. It is also notable that whiskey from the Republic of Ireland used as inputs into Northern Irish whiskey will qualify for preferential access to the Australian market.  Effectively, NI whiskey will enjoy the same tariffs as Scotch whisky. 

Overall, the UK-Australia FTA is significant as it is the first trade agreement negotiated independently by the UK in nearly 50 years.  The UK farming sector, particularly grazing livestock and sugar beet will be more exposed to competitive pressure from Australian imports in the long-term.  However, it is worth emphasising that Australia is currently heavily focused on the Asia-Pacific region and that having generous quota access with eventual full liberalisation does not necessarily mean that Australian imports will reach these levels.  That said, from an Australian perspective, the UK market is an important diversification opportunity, particularly given its recent tensions with China. 

From a UK farming standpoint, the Australian FTA of course sets an important precedent, that other deals are likely to follow.  We’ve already seen this with the NZ agreement-in-principle.  The UK has also relented on its efforts to base beef and sheepmeat import TRQs on carcase weight equivalent.  The HS codes included show that the TRQs will be based on product-specific weight.  This is unsurprising as both Australia and NZ have been digging their heels in on this.  They also have leverage with the UK in terms of its application to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).

The deal will now go before both the UK and Australian Houses of Parliament for further scrutiny and ratification.  Once domestic ratification has been completed, both parties will notify each other.  The agreement could enter into force as soon as 30 days after both parties have completed ratification.  Some anticipate that entry into force could occur as soon as the middle of 2022, others think the process might take longer.  More detail is available via: https://www.gov.uk/government/collections/uk-australia-free-trade-agreement

UK Border Operating Model and Ireland

On 15th December, the Government announced that there will be delays to the implementation of the UK Border Operating Model as regards imports from the island of Ireland.  This is due to ongoing negotiations around the Northern Ireland Protocol which will continue into 2022 and associated legal complexities around maintaining unfettered access for NI traders to the GB market.  This means that exporters from the Republic of Ireland – an EU Member State – will continue to be able to export to Britain as they do now.  Meanwhile, exporters from other EU countries will have to complete a range of additional Customs and Sanitary & Phytosanitary (SPS) documentation (e.g. full import declarations) from 1st January.  The UK Border Operating Model will be updated accordingly shortly.

The Chief Brexit Negotiator, Lord Frost, claimed that the move was partly made as a “pragmatic act of good will” but that the continuation of such arrangements would be predicated by the quid-pro-quo that the EU shows in terms of allowing goods to circulate freely within the UK (including Northern Ireland, which although part of the UK, applies the EU Customs Code and other regulatory requirements).