Category: Policy & Business

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).

FIF: Farm Productivity

We rote last month about the Farming Investment Fund (FIF).  The larger grant element of this, the Farming Transformation Fund (FTF) opened at the time for grants for water management.  The deadline for expressions of interest for this is the 12th January.  Defra has now published the manual for the second theme of the FTF – Improving Farm Productivity.  This can be found at – https://www.gov.uk/guidance/about-the-improving-farm-productivity-grant .  The focus for the first round of productivity funding is robotic or autonomous equipment and systems to aid crop and livestock production and the installation of slurry acidification equipment.  The scheme manual sets out what type of equipment may be eligible.  The window to express an interest in this grant is due to open in mid-January.  The manual has been published now to give potential applications time to consider their proposals.