Category: Policy & Business

The UK farming industry has come together to call on the Government to protect the agricultural sector under any future Free-Trade Agreement (FTA) with Australia.  Nineteen bodies have produced a ‘Statement on the UK’s Free Trade Agreement Negotiations’ which was published on the 17th May (see https://www.nationalsheep.org.uk/workspace/news-pdfs/ukfr-statement-on-ftas-170521.pdf).

The publication comes amid reports that negotiations between the UK and Australia on a comprehensive FTA are in a ‘sprint’ to be completed.  It is perceived that access to UK food markets may be offered to ease the passage of a deal.  The farming sector is asking that tariffs and tariff-rate quotas be retained – especially in the sensitive sectors of beef, dairy, sheep and sugar.  There is also a call that any FTA must uphold the UK’s standards on the environment, labour, food safety and animal welfare.

Any deal with Australia would be the first entirely new FTA agreed by the UK as an independent trading nation.  It is not merely the terms of this specific deal that are of concern – what is agreed will set the ‘benchmark’ for other future deals.  For example if Australia received complete tariff-free access then New Zealand would expect the same.  These two deals would then, in turn, set expectations in countries such as the US, India, Brazil etc.

The long-awaited Defra consultation on Lump Sum payments and Delinking of the BPS has finally been published.  The consultation seeks views on who should be eligible for the Lump Sum payments and how these and Delinked payments should be calculated.

Lump Sum Payments

These will be offered to those who wish to exit the industry.  Defra’s intention is that there will be a one-off application window in 2022 with no scope to apply after that.  Proposed conditions and eligibility rules include:

• Only those who claim the BPS will be eligible, it is an exit scheme and therefore there will be no age restrictions.  To prevent recent entrants from leaving with a lump sum, Defra is proposing that applicants must have made their first Direct Payment (BPS) claim in 2015 or earlier.
• The BPS applicant would have to give up their land in England.
  • An owner/occupier would have to sell and/or rent out their land, or transfer by gift.  The proposal is if an owner/occupier decides to rent out their land this must be via an FBT and for a minimum of five years.
  • A Tenant must surrender their tenancy, this can be a Farm Business Tenancy (FBT) or An Agricultural Holdings Act (AHA) tenancy.  AHA tenants will also be eligible if they pass on their tenancy under a succession.
  • Those receiving a Lump Sum would be able to retain occupation of their residential and commercial property and up to 5% or 5ha (whichever is the smaller) of their land.
• All English BPS entitlements held by the applicant would be cancelled, including any that have been leased-in from another farmer.  Those that have been leased-out would be cancelled at the end of the lease.  This could present a problem where a Landlord has leased or Transferred entitlements to a Tenant with an obligation to return to the Landlord – will the Landlord accept the Surrender if he will be left with land without any entitlements? 
• It will be an all-or-nothing scheme – it will not be possible for applicants to keep some entitlements and take a partial Lump Sum payment.
• If a Lump Sum payment is received, the farm business cannot claim any further direct payments (BPS).  This includes any Directors of a Limited Company and all Partners of a Partnership.  If any recipient enters into a new land management agreements (or adds land to an existing agreement) such as Countryside Stewardship or ELM, during the Agricultural Transition, the Lump Sum payment will have to be repaid.
• The tax treatment of Lump Sum (and Delinked) payments is currently being discussed with HMRC and guidance is expected shortly.  This will be crucial to how attractive the ‘offer’ is to many farmers – i.e. will the payment be taxed as capital or income.

With regard to the actual payments, Defra expects to be able to fund all the eligible applications it receives and therefore it will not be a competitive scheme.  There will be no rules on what the lump sum can be spent on.  The amount a claimant will receive will be;

Lump sum Reference Amount   X   2.35

A 2.35 multiplier means the payment will be approximately equivalent to the amount a farmer could have received in Direct Payments for 2022 to 2027 under the phasing out of the BPS.  The Reference Amount will be the average value (if more than one year is used) of BPS received (for English entitlements) before any penalties or progressive reductions have been applied in a Reference Period.   Defra is asking for views on the Reference Period, but is proposing a three-year average based on 2018, 2019 and 2020 BPS years.

There is a proposed payment cap of £100,000, meaning a maximum Reference Amount (average BPS claim) of about £42,500 would not be affected by the cap.  There will be measures put in place to deal with changes to farm businesses since the start of the reference period (‘mergers and scissions’) and also to prevent artificial changes to businesses to claim payment.

Full rules for the Lump Sum scheme are promised by the end of October this year.  This is to allow time for farmers to consider the merits of the scheme (and potentially Tenants to negotiate with Landlords) before applications are invited in ‘early 2022’.

Defra has clearly said exiting farmers will have to give up their entitlements.  It has also stated that it intends to end the New and Young Farmers National Reserve scheme (offering free entitlements) from 2022, meaning from next year we could already see land which will not have any entitlements over it.  On the face of it, it looks like new entrants will be losing out, which seems strange as part of the reason for the Lump Sum encourage new and young entrants by freeing-up land.  Defra has said the proposal will create ‘more lasting opportunities for new entrants to access land’ and in the press release it has said it is working on a scheme with industry leaders, local councils, land owners and new entrants on a New Entrants Scheme.  This will be available in 2022 with details expected to be published later this year.

Delinked Payments

These are expected to be introduced in 2024 and will mean businesses can reduce the area they farm or even cease farming and they will still receive payments for the rest of the Transition Period.  Delinking will not be optional.  Delinked payments will be made to those who were receiving a BPS payment in a Reference Period (see below) and in 2023 (if the Reference Period is earlier than this).   Defra has said Tenants who received BPS during the Reference Period, and still farm at the end of it should be eligible to receive the delinked payment. Again, this throws up questions about Tenancies which end during the Agricultural Transition; it seems to suggest that the Tenant will receive the Delinked payment and the Landlord will not have a payment to ‘give’ to a new Tenant.

The actual payments will be calculated for each year from 2024 to 2027 based on the BPS payments made to the applicant in the Reference Period less the progressive reductions for each year.  Defra is asking for views on the Reference Period.  It is proposing the average of 2018 to 2020 (the same as the Lump Sum) for ease, but acknowledges a longer period, which includes 2021 and 2022 would take account of more business changes.

Defra acknowledges that Delinking payments means there will no longer be an annual BPS claim, meaning it loses data on land use.  Having no link between payments and land also means  cross-compliance will no longer operate.  These points are not part of this consultation, indicating there will be another consultation later.

The consultation is open from 19th May until 11th August.  The  full consultation document can be found at https://consult.defra.gov.uk/agricultural-policy/lump-sum-and-delinked-payments-england/supporting_documents/lumpsumexitschemedelinkedpaymentsconsultation.pdf.  Responses can be made online via https://consult.defra.gov.uk/agricultural-policy/lump-sum-and-delinked-payments-england/

Whilst the detailed scheme rules for the Lump Sum will not be known until October, those potentially wanting to take advantage of it should be having discussions with the relevant parties (bankers, advisors, landlords, etc.) sooner rather than later.  

The Welsh Government has announced the Expression of Interest windows are open from 18th May to 25th June for the following schemes:

• Farm Business Grant – Yard coverings
• Glastir Woodland Restoration – Capital grants for restocking and fencing
• Glastir Small Grants, Landscape and Pollinators – Support for the maintenance of traditional landscape features and for providing habitat ‘linkage’ for pollinating insects.

Following the vote from the horticultural and potato sectors to end their statutory levies, the Agricultural and Horticultural Development Board (AHDB) is restructuring.  It is looking to make around 140 staff redundant around 30% of its total.  Whilst the majority will be in the two sectors concerned, the organisation is also looking to make wider efficiency savings.

The Queen’s Speech on the 11th May set out the Government’s legislative agenda for the forthcoming Parliamentary session.   A number of the proposed Bills could have an impact on farming and rural areas.

Probably the most directly relevant is the Environment Bill.  We have written about this previously (see https://abcbooks.co.uk/environment-bill-progress/ for a summary).  The legislation’s passage through Parliament has been repeatedly delayed since it was first introduced in January 2020.  It is hoped that it will be passed before the end of this year.

Other plans include three bills on Animal Welfare that will include provisions to ban the live export of animals for slaughter or fattening.  A Planning Bill is due which will enact many of the ideas outlined in the White Paper of last year (see https://abcbooks.co.uk/planning-reform-proposed/) including the ‘zoning’ of sites for development and an overall drive to increase the number of homes built.

More generally, legislation in such areas as Infrastructure and Telecoms is promised as part of the overall ‘levelling up’ agenda.

 

 

 

Another chapter in the Brexit process has come to a close with the ratification of the Trade and Cooperation Agreement (TCA) by the European Parliament.  On the 28th April 660 MEPs voted in favour of the deal whilst 5 were against it and 32 abstained.  The TCA thus fully entered into force on the 1st May – although, for all practical purposes, it had been operating since January.  Now the agreement is formally in place, the governance structure can be implemented.  At the top is the EU/UK Joint Partnership Council – this will oversee the implementation of the TCA and provides a forum for resolving problems.  Beneath the Council are various committees that will look t specific topics – e.g. rules of origin, aviation, fisheries etc.  All this gives a clue that the ratification of the Treaty does not mean that Brexit is ‘done’.  There will be significant ongoing work on managing the agreement.  In addition, there are proposals to expand the scope of the TCA, notably in the area of Financial Services, which 

 

The troubled AHDB has got a new Chief Executive.  Tim Rycroft will join the Levy Board on 31st August, replacing Jane King who left her post at the end of March.  Ken Boyns, the AHDB’s chief finance and operations officer has been acting CEO.  Mr Rycroft joins from the Food and Drink Federation.  He, along with the AHDB Chairman Nicholas Saphir, will need to pilot the organisation through a period of turmoil following the votes of both the horticulture and potato sectors to end the statutory levy.

The RPA has announced expiring Countryside Stewardship (CS) agreement holders may be offered a new 5 year Agreement, instead of one year extensions.  So called ‘Mirror Agreements’ will be available for Mid and Higher Tier agreements which are due to expire on 31st December 2021.  This will include agreements which originally started in 2016 and were extended for one year in 2021 and those that started in 2017 and are due to expire at the end of this year.  Those considered eligible will be invited to apply for a new agreement which will ‘mirror’ the current one and start on 1st January 2022.  The new Mirror agreements will be offered under domestic CS regulations and subject to the CS 2022 manual.  One year extensions of CS agreements will no longer be offered.

Countryside Stewardship Mid-Tier Agreements due to expire on 31st December 2021 will be assessed by RPA.  Natural England will assess Higher-Tier Agreements based on environmental outcomes to decide whether to offer 5 year Mirror Agreements.  It will not be possible to add, remove or replace options in a Mirror Agreement.  Effectively they will be the same as the original Agreement.  Expiring Woodland-only agreements will not be eligible and holdings which have an unmanaged SSSI or SM will not be offered a Mirror Agreement.  If the agreement is not suitable for a Mirror Agreement, or holders wish to change their options they will be able to apply under the CS scheme this year.

Importantly, Mirror Agreements can still be terminated early at the end of a calendar year without penalty if an ELM Agreement has been accepted.  Further information can be found at: https://www.gov.uk/guidance/countryside-stewardship-mirror-agreements?utm_medium=email&utm_campaign=govuk-notifications&utm_source=63305f63-6553-4a46-b757-50c4ea809add&utm_content=daily 

 

 

The UK Government has set challenging new targets for the reduction of greenhouse gases (GHG).  This is likely to have implications for agriculture as one of the economic sectors that is seen as part of the problem, and the solution, when it comes to battling climate change.

In line with the recommendations of the Committee on Climate Change (CCC) the UK’s share of international aviation and shipping are now included in the figures (up to now they have been excluded).  The UK had a previous commitment to reduce emissions by 68% compared to 1990 figures by 2030.  The target has now been extended to a 78% cut by 2035.  The eventual aim is for the UK to be ‘net zero’ by 2050.  The commitment comes ahead of the UN climate talks, COP26, which will be hosted in Glasgow this November.

It is quite easy for Governments to announce targets.  What is more difficult is producing a set of coherent and sustainable policies to make it happen.  This will be especially difficult in the area of climate change.  The reductions achieved so far (a 44% drop between 1990 and 2019) have generally been the relatively ‘easy’ things – decarbonising power production and a shift from manufacturing to services.  As emissions fall, achieving the marginal extra percentage drop becomes ever-harder.  It also starts to affect the lifestyles and livelihoods of the population (i.e. voters) so is more difficult to sustain politically.  

The RPA has given some updated information on Countryside Stewardship (CS) inspections, especially for agreements which commenced from 1st January 2021.  CS (and Environmental Stewardship (ES)) agreements which started prior to this date must still meet EU rules and regulations for inspections.  But for CS agreements starting on or after 1st January 2021 UK domestic rules apply and in its quest to try and increase the uptake of CS, the RPA has changed ‘Inspection’ to ‘Environmental Outcome Site Visit’, as it says it wants to focus on the environmental outcomes of the agreement.  It is well documented that the threat of ‘inspections’ is one of the key reasons why farmers do not enter agri-environmental schemes.  In 2021 there will be two approaches to the the ‘Environmental Outcome Site Visit’,

• Whole Agreement – as it infers, it will look at all the options in the agreement and an assessment will be made against the environmental outcomes found
• Campaign – this will just look at certain options which have been chosen for the year (see below).  These may change each year.

For 2021, the following ‘Campaign Options’ have been chosen;

• Buffer Strips
  • SW1 – 4-6m buffer strips
  • SW4 – 12-24m watercourse buffer strips
• Grassland Options
  • GS1 – Take field corners out of management
  • GS2 – Permanent Grassland with very low inputs (outside SDAs)
  • GS7 – Restorations towards species-rich grassland
  • GS17 – Lenient grazing supplement
• Boundary Options
  • BE3 – Management of hedgerows

If a Campaign Environmental Outcome Site Visit finds a breach this may trigger a ‘Whole Agreement’ visit.