Category: Policy & Business

The Agricultural and Horticultural Development Board (AHDB) is asking the farming industry to comment on its plans for the future.  The levy board has published a new 5-year strategy (see https://ahdb.org.uk/strategy) and is asking ley-payers to comment on the proposals by the end of January.

The AHDB will focus on two main areas.  The first is assisting levy-payers on-farm.  This will be through using data and analysis to help them make better decisions, investing in R & D and promoting knowledge exchange to get best-practice out onto farms (including on environmental practices).  The aim is to have 70% of levy-payers using the AHDB’s services by 2026.  The second focus area is promoting produce – both in new markets abroad but also domestically.

The organisation has made a commitment to change in a number of areas;

• Levy-payers will be given more say in setting the priorities for the AHDB.  There will be more transparency in the governance of the AHDB with greater levy-payer involvement.
• Levy rates will be set at a level that funds the agreed activities, rather than being effectively ‘fixed’ and then the AHDB deciding how to spend the funds available.  There will be a review of how the levies work in the potato and horticulture sectors
• There will be a focus on cutting costs and delivering value for money.
• The levy in each sector will be subject to a ballot every five years where the future of the levy will be decided.  The AHDB is in discussions with Defra on how the vote should operate.  

The RPA has announced that it paid 95% of English farmers their 2020 BPS on the first day of the payment window.  This equates to £1.671bn (up some 40% on the amount paid on the first day in 2019).  The Agency has also started paying Countryside Stewardship (CS) and Environmental Stewardship (ES) revenue payments for 2020.  A reminder that there will only be one payment under these agri-environment schemes this year rather than split payments as in the past.

Defra has announced £3.9m of funding to boost tree planting.  £2.5m will go on five pilot projects to boost establishment outside traditional woodland plantings.  This could involve plantings in urban areas, agro-forestry, hedgerow trees etc.  The other £1.4m will go to the Environment Agency to fund ‘woodlands for water’ – projects to plant trees next to watercourses to improve water quality and limit flooding.

Parliament’s Environmental, Food and Rural Affairs (EFRA) Select Committee has launched an inquiry into ELM and the Agricultural Transition.  This follows the publication of the Government’s ‘Path to Sustainable Farming’ document.  Ahead of the national ELM Pilots in 2021, the Committee will ‘scrutinise the Pilots’ design’ and question how the Government will ensure ‘sufficient support to farmers’ will be available throughout the Transition Period.  To this end, the Committee is calling for evidence on the following questions:

• Is the Government’s timeframe for the national Pilot, full roll-out of ELM and phasing out direct payments by 2027 feasible?
• Will the Sustainable Farming Incentive (SFI) be a viable support measure for farmers before the full roll-out of ELM?  Is further support required during the Transition Period?
• How effectively has Defra engaged with land managers and other stakeholders on the design of ELM, including on the transitional arrangements?
• How can ELM be made an attractive business choice for farmers and land managers while effectively delivering its policy goals?
• How can the Government ensure that ELM agreements achieve their intended environmental outcomes, reduce bureaucratic burdens on farmers and deliver value for money?
• What lessons should be learned from the successes and failures of previous schemes paying for environmental outcomes?

Details on how to submit evidence can be found via https://committees.parliament.uk/work/886/environmental-land-management-and-the-agricultural-transition/.  The initial deadline for evidence is 29th January 2021.

Defra finally released more details on future farm support in England on the 30th November.  Although earlier billed as a consultation, the ‘Path to Sustainable Farming’ document is actually simply a policy statement, with more consultations promised later.  As such, it provides rather less detail on some areas of the Agricultural Transition than we might have hoped.  The 60-page document can be found at; https://www.gov.uk/government/publications/agricultural-transition-plan-2021-to-2024

BPS Phase-Out

Most English farmers will be primarily concerned with how far and how fast the BPS is to be cut.  Only the reductions for the first four years have been announced.  This is due to the budget after 2024 not being known as the ‘Funding Guarantee’ runs out after that.  The table below sets out the figures that are known, and also our predictions for the final years (based on a simple arithmetic progression).  These figures will be included in our BPS calculator which will be updated shortly.

Note that the figures shown are the deductions rather than the percentage being paid.  Also, a reminder that the bands work like Income Tax, so all BPS claimants get the lower deductions on their first £30,000 of claim.

The headline point is that at least half of the BPS will be removed by 2024.  These deductions are larger than we had thought likely for the early years of the Transition.  We had thought that, without ELM launched, Defra would not have a huge need to generate funding.   However, it seems that other policy measures (see below) will require significant funding.

A reminder that from 2021, under simplifying the BPS, ‘Greening’ ends, the requirement to use all entitlements at least once in every two years has also been removed and cross border claims will no longer be treated as one ‘holding’.  Those with land in more than one region of the UK will now make separate claims.

Delinking, Lump Sum & Cross Compliance

Delinking will not now happen until 2024 (it was originally intended for 2022).  This is the breaking of the link between the payment of direct support and the requirement to occupy land.  Presumably, with the link in place, the system of entitlements will continue to operate from 2021 to 2023.

Cross-compliance will also remain in place until payments are de-linked.  The consultation states ‘When we delink Direct Payments, we will stop using cross-compliance as the basis for deregulation . . . ).

Despite the delay in delinking, Defra is still looking to offer lump-sum payments in 2022 as an exit scheme.  There will be a consultation on both lump-sum payments and delinking in early 2021.

ELM

The document devotes 19 pages to ELM and provides a little more detail than what we knew already.  The three tier architecture is confirmed with amended tier names;

• Sustainable Farming Incentive: this is broad (and shallow) offer that should be accessible to all farms.  It is likely to have a menu of options and be managed online.  It could look similar to the previous Entry-Level Stewardship.  
• Local Nature Recovery:  this will require more intensive management from farmers. It is likely that a whole-farm plan will have to be drawn up (possibly by accredited advisors).  The focus will be on rewarding farmers for positive management such as biodiversity, flood management, carbon storage, landscape heritage etc.  This will be the ‘core’ of ELM over the long-term.
• Landscape Recovery:  this aims to get groups of landowners to work together to deliver widespread change.  The focus will be on large-scale woodland planting, peatland restoration and coastal habitats (e.g. salt marshes).

The Sustainable Farming Incentive (SFI) will open in 2022 – probably with only some elements.  It will focus on soils, IPM, and nutrient management.  What is learnt in 2022 and 2023 will inform the full launch in 2024 when further elements are added (including boundaries and tree management).  Initially it will only be available to those in receipt of BPS, including those already with a Countryside Stewardship agreement.  As it is piloted and then scaled up between 2021 and 2024, the aim is to expand the range of options on offer and explore making it available to a wider group of participants which could include smaller farms, horticulture and pig/poultry farms that do not currently receive Direct Payments.

The national pilot for ELM will be testing elements for both the first and second tiers but probably with a greater emphasis on the second – Local Nature Recovery (LNR).  Further details on this, and the ability to register an Expression of Interest in taking part in Pilots, should be available ‘early next year‘.   Applications to take part in the SFI pilot will be by June 2021 with agreements starting in October 2021.  The pilots for the LNR are due to commence in mid-2022.  In total, the Pilots are expected to involve 5,500 farmers.

The naming of the second tier as ‘Local Nature Recovery’ clearly points to the importance being given to Local Nature Recovery Strategies that are to be introduced under the Environment Act.  These need to be closely watched over the coming years.

The third tier, Landscape Recovery will be tested with 10 large-scale projects due to commence in 2022.  Invitations to take part in this will be made later in 2021.

Whilst all this piloting is going on the Countryside Stewardship CS) scheme will remain open to new applications.  The last application window will be in 2023 for a 1st January 2024 start date.  The scheme will be ‘simplified for 2021’.  Existing HLS and CS agreements that are coming to an end can be rolled-over until ELM begins.

Other Support

Various other new schemes are set out in the document;

Farming Investment Fund:  (from 2021 to 2026)  This is the ‘son of Countryside Productivity’.  This is due to open in ‘autumn 2021’.  Like the CPS there will be two tiers;

• Farming Equipment and Technology Find: a fixed rate of grant for specified items with application online
• Farming Transformation Fund: for high-value items.  A two-stage process with an EOI then full application

Farm Resilience Scheme: (from 2021 to 2024)   A pilot scheme is already running offering advice to farmers on how to cope with the changes ahead.  This will be built on.  The pilot ends in March and details of the new advice and support scheme will be published after that.

Farming In Protected Landscapes: (from 2021 to 2024)  This is effectively a scheme for upland areas.  It covers National Parks but also Areas of Outstanding Natural Beauty (AONBs).  There will be both farm-level projects including environmental payments and business support, and projects at community scale.  More details are promised in early 2021.

Slurry Investment Scheme: (from 2022 to 2025)  Grants will be available to help farmers invest in stores that must have at least 6-months of capacity and an impermeable cover.  Rates of grant are not yet set.

New Entrants Scheme: (from 2022 to 2024)  The scheme is still being designed, but it looks like funding is more likely to be for things such as matching services rather than direct grants to new entrants themselves.

Skills and Training: (from 2022 onwards)   Firstly, this will see an Institute for Agriculture and Horticulture set up that will be the professional body for farming.  Also, a set of standardised Key Performance Indicators for each sector will be produced, in conjunction with the AHDB to facilitate benchmarking.  In addition, there will be funding for Research and Development in agriculture under an Innovation and Research programme.

Animal Welfare: (from 2022 onwards)  Details of this funding stream are still being worked on.   However, the ‘Animal Health and Welfare Pathway’ will be designed during the course of 2021.  It will offer support for disease eradication programmes, capital grants to farmers for measures to increase animal welfare above the statutory baseline, and a new payment-by-results scheme (to be piloted in 2023)

Tree Health Scheme: (piloted from 2021, fully launched in 2024)  This will build on the Tree health grants under CS.

All in all, there is quite a lost to digest from the document.  We will be providing further information as it becomes available.  

 

 

 

 

The Chancellor, Rishi Sunak, delivered the Comprehensive Spending Review (CSR) on the 25th November.  Originally, this was meant to set out the budgets for Government departments for the next three years.  However, the economic uncertainty generated by the Covid-19 outbreak has seen the budgeting period reduced to just one year.

The general economic news is grim.  The economy is set to shrink by 11.3% this year (2020-21) – this is the largest fall for 300 years.  A recovery is then forecast with 5.5% growth in 2021-22 and 6.6% the following year.  Unemployment is forecast to increase from 1.62 million (4.4%) currently to 2.6 (7.5%) million by the middle of 2021.  It will then decline.  In terms of public finances the UK is forecast to borrow £394bn this year – a peacetime record.  For some context, the maximum borrowed in the wake of the Financial Crisis was around £150bn, and the average in recent years has been below £50bn.  Whilst this money has been raised at low interest rates, the books will have to be balanced at some point – indicating future tax rises.  The Chancellor gave no real indication in the CSR what these might look like – putting-off such decisions until the planned Spring Budget, by which time the Covid situation may be more stable.

Below is a list of some specific points from the CSR with relevance to farm businesses and rural areas more generally.  (However, as the CSR runs to 122 pages we may have missed one or two relevant issues);

• Defra’s ‘settlement’ will ‘ensure total farm support in England of £2.4 billion in 2021-22 to meet the government’s commitment to maintain the current annual budget to farmers in every year of this Parliament’.
• Under the Barnett formula, this should mean that farm support funding has also been maintained at current levels in Scotland, Wales and Northern Ireland.  However, a row has broken out with the devolved administrations claiming that their funding has actually been cut.  It is claimed that the Treasury has used a ‘flawed methodology’ that bases the payments on a single year when some funds went unspent.  Also, inter-Pillar transfers have not been properly accounted for and amounts have been ‘netted-off’.  In total Farm Ministers in Wales, Scotland and Northern Ireland believe that they will lose almost £400m of funding between 2021 and 2025.
• Defra’s capital budget will increase by £0.6 billion in cash terms next year, taking the total to £5.8 billion.  There will be additional investment in flood prevention and science capability.
• The CSR outlines a lot of new infrastructure spending.  This will affect many landowners in specific locations where new roads etc. are being planned.  There is a new National Infrastructure Strategy (NIS) – see https://www.gov.uk/government/publications/national-infrastructure-strategy.  Also, there will be a New Infrastructure Bank to catalyse private investment in infrastructure projects across the UK
• There will be a £4bn ‘Levelling-up Fund’ in England for local infrastructure (e.g. town bypasses).  Amounts for Scotland Wales and NI through the Barnett formula.
• Digital infrastructure will also receive extra funding including Shared Rural Network for 4G coverage, and better rural Broadband connections
• More details of the Shared Prosperity Fund were announced which is set to replace EU funding (including Rural Development funding).  This will be £1.5bn per year but looks unlikely to be available until 2022; pilots will take place in the meantime.  More details are promised in the spring but it is headlined as supporting ‘ex-industrial areas, deprived towns and rural and coastal communities’.  The focus seems to be more on training than on business grants.  Given this, and the focus on other areas aside from rural ones, the level of ‘diversification grants’ looks set to be much lower than it was under Rural Development programmes.
• The National Living Wage (NLW) will rise by 2.2% from £8.72 to £8.91 per hour from April 2021.  It will also now apply to those 23 and above.  Other Minimum Wage rates will also increase.
• Income Tax Personal Allowance and Higher Rate Thresholds for 2021-22 will be increased in line with the September CPI figure.  This figure will also be used for setting National Insurance thresholds
• The Business Rate multiplier will be frozen for 2021-22.

The Prime Minister has set out a ten-point plan for a ‘green industrial revolution’ which aims to create and support up to 250,000 British jobs.  The Green Plan, which is intended to set the UK on the road to net zero emissions by 2050, whilst levelling-up the economy and creating jobs, covers clean energy, transport, nature and innovative technologies.  A summary of the 10 points is set out below:

• Offshore wind: Producing enough offshore wind to power every home and supporting up to 60,000 jobs.
• Hydrogen: Working with industry aiming to generate 5GW of low carbon hydrogen production capacity by 2030 for industry, transport, power and homes, and aiming to develop the first town heated entirely by hydrogen by the end of the decade.
• Nuclear: Advancing nuclear as a clean energy source, across large scale nuclear and developing the next generation of small and advanced reactors, which could support 10,000 jobs.
• Electric vehicles: Backing car manufacturers to accelerate the transition to electric vehicles, and transforming our national infrastructure to better support electric vehicles.  This includes the headline point of banning the sale of petrol and diesel-only cars by 2030.
• Public transport, cycling and walking: Making cycling and walking more attractive ways to travel and investing in zero-emission public transport of the future.
• Jet zero and greener maritime: Supporting difficult-to-decarbonise industries to become greener through research projects for zero-emission planes and ships.
• Homes and public buildings: Making our homes, schools and hospitals greener, warmer and more energy efficient, whilst creating 50,000 jobs by 2030, and a target to install 600,000 heat pumps every year by 2028.
• Carbon capture: Becoming a world-leader in technology to capture and store harmful emissions away from the atmosphere, with a target to remove 10m tonnes of carbon dioxide by 2030.
• Nature: Protecting and restoring our natural environment, planting 30,000 hectares of trees every year, whilst creating and retaining thousands of jobs.
• Innovation and finance: Developing the cutting-edge technologies needed to reach these new energy ambitions and make the City of London the global centre of green finance.

Whilst full of ambition, critics point out that the plan is being backed with only £4bn of new money which will be insufficient to achieve many of its aims.  This contrasts with £27bn being earmarked for new roadbuilding schemes.  The full announcement can be found via https://www.gov.uk/government/news/pm-outlines-his-ten-point-plan-for-a-green-industrial-revolution-for-250000-jobs

As previously written, the Defra consultation on the detailed workings of the Agricultural Transition was expected ‘in November’.  Indeed, Theresa Villiers, the Defra Farming Minister, wrote in the Farmers Guardian in mid-November that the consultation would be out ‘later in the month’.  However, at the time of writing (26th November) nothing had appeared.  It seems highly likely that this will be released early next week.  it may now be more of an ‘announcement’ covering aspects of the Agricultural Transition and ELM, with some of the consultation aspects dropped.  We encourage readers to keep an eye on our website where we will publish details and analysis of the proposals if and when they appear.