Category: Policy & Business

Further Furlough Extension

The Chancellor, Rishi Sunak, has announced a further extension to the Furlough scheme.  The programme (officially titled the Coronavirus Job Retention Scheme) had already been extended to run until the 2nd December to cover the second ‘lockdown’ in England.  It will now operate until the end of March 2021.  It covers the whole of the UK.  The Government will pay 80% of employees wages (up from 55%) with employers having to fund just NI and pension contributions.  Those that were on the payroll on the 23rd September, but have subsequently been made redundant because the original Furlough scheme was due to end, can be re-employed and placed on the scheme.  With the extension of Furlough, the Job Retention Bonus will no longer be paid.  The next Self-Employed Income Support Scheme (SEISS) grant which covers the period November to January will be increased to 80% (from 55%) – up to a maximum of £7,500.  Another SEISS grant to cover the period Feb to April 2021 is promised.  There will also be the ability to top-up Bounce Back Loans and there will be cash grants of £3,000 per month for businesses in the hospitality sector.

Food Standards

A Government U-turn looks set to provide more protection for UK agriculture under future trade deals.  But the fight to ensure all food imports adhere to UK production standards is still ongoing.

As reported last month, the House of Commons removed the amendments to the Agriculture Bill proposed in the House of Lords, that would have enshrined protection of UK food standards in law.  The Bill subsequently returned to the Lords.  It was expected, as their amendments had been rejected once, that the current version would be accepted by the Lords.  This was not the case and the Lords put forward a (similar) amendment (16B), which sought to ensure ‘equivalence of standards’ for imported agri-food products under any future trade deals.   However, this was also been rejected by the House of Commons; this time by 331 to 272.  In this vote six Conservative MPs voted against their Government and a further 24 abstained, notably Prime Minister, Boris Johnson, and Chancellor of the Exchequer, Rishi Sunak.

In the meantime, MPs have voted in favour of a separate amendment which had been announced by Liz Truss, International Trade Secretary.  This means the newly formed Trade & Agricultural Commission would be put on a statutory footing, with its reports on future trade deals put before Parliament.  Previously, the Commission was only to operate for a limited period and would just advise Government.  

The new proposal doesn’t exactly incorporate the Lords’ amendment, but the Government is probably hoping it’s enough of a concession that they stop trying to amend the Agriculture Bill.  But many fear this doesn’t go far enough; MPs would still not have the right to vote on such deals.  Intense lobbying of MPs to try and get them to support the Lord’s amendment continues.  Amendment 16B could ‘ping-pong’ back and forth between the House of Lords and the Commons for some time yet.

BPS 2020 Payments Rise

English farmers will see a slight increase in their BPS payment rates this year.  This is largely because there will be no Financial Discipline deduction from 2020 payments.  This was previously used to fund the EU crisis fund.  2020 lowland payments will be just over 1% higher than last year.

The calculation of entitlement values is undertaken from scratch each year and the rate can vary depending on how many entitlements are claimed in each region.  However, this year the Standard payments in Euros are exactly the same as last year, with the Greening amount up just a few pence, meaning there has been little change in the number of entitlements claimed.

BPS payments for England are still set in Euros, for 2020 the exchange rate has been locked at the  2019 level; €1=0.89092.  The table below shows the published rates in Euros, our estimates and the actual payment that farmers will receive in Sterling and a comparison with last year.

 

English Agricultural Policy

We have been reporting on English future agricultural support as it has been announced.  We appreciate this has been rather piecemeal and have therefore prepared a two-page summary so readers do not have to go back through a year’s worth of Bulletins.  The summary can be found under the ‘Bulletins’ tab at the top of the page, titled Agricultural Policy Summary.  We expect this to be a ‘living’ document i.e it will be unpdated when the consultation comes out (expected November).

Brexit Update

Despite most of the month being dominated by discord, it appears that the Brexit talks are at last getting down to the real detail.  After the October European Council, the EU instructed its Chief Negotiator to ‘continue’ with the Brexit negotiations.  However, the UK’s desire was for an ‘intensification’.  As a result, it temporarily withdrew its invitation to Michel Barnier to come to London for further talks with his counterpart David Frost.  Whilst this increased the chances of a No Deal, in tense talks such as this, there always comes a point where a big ‘fall-out’ occurs.  Arguably, it is not until this happens, that the real negotiations start.

Landing Zone Visible

There are signs that substantive negotiations are now underway.  The ‘landing zone’ between the UK’s and the EU’s position is also getting clearer.  However, there are still some difficult trade-offs around the Level Playing Field and Fisheries which have hampered progress throughout 2020.  Whilst the EU, and particularly coastal Member States such as France, are talking tough on Fisheries in a bid to get access to the UK’s waters as close as possible to the status-quo, it is clear that the EU will have to concede on this issue.  It is also apparent that the EU is standing firm on its requirements around the Level Playing Field, particularly with respect to State Aid.  Arguably here, the UK’s intent to break international law as outlined in its Internal Market Bill, has made the EU more insistent on ensuring that the UK will not be able to have good access to the EU Single Market on the one hand, and be able to undercut it on the other.  That said, there are signs of movement from the EU side on this as well.  The focus is now on key principles that both sides should adhere to, ensuring that the UK has a strong independent regulator which can uphold what is agreed during the Brexit negotiations.

Despite these signs of progress, the time available is very short.  The EU side now believes that it will be into November before an agreement might be reached, leaving very little time for the ratification process.  Given the importance of issues such as Fisheries in some regions, this could result in some difficulties in getting the vote through the European Parliament.  With the Transition Period ending on 31st December, it is last minute glitches such as this, which could also result in a No Deal situation on 1st January.

Business Preparation

All the while, agri-food businesses are left scratching their heads as to what precisely will be expected from them when trading with the EU from January.  In recent weeks, Defra has held a number of webinars which have sought to shed light on the process.  This includes information on Defra’s Export Health Certification (EHC) online facility which allows exporters to apply for, manage and keep up to date on the progress of their EHC applications.  What is clear is that irrespective of whether there is a Deal or not, change is coming and businesses must prepare for this, even if time is limited.  In recent weeks, Andersons has been involved in examining the key regulatory processes the British businesses will need to adhere to when exporting to the EU.  These are outlined, in general terms, below as specific steps can vary depending on the products/species involved.

Regulatory Steps on Agri-Food Exports from GB to France Post-Transition

Sources: Customs Clearance Consortium / Andersons

On 8th October, the UK Government published its updated Border Operating Model, following the initial publication in July.  Much of what was previously announced remains in place (see July article).  This version focused on additional inland border infrastructure to be constructed to manage delays at the border as well as details of a new Kent Access Permit which HGV drivers will need before being able to travel onwards to Dover for instance.

Whilst additional information is emerging in some areas on what is required post-Transition, there is very little detail on how trade with Northern Ireland will be managed.  This is being discussed at the Joint Committee between the UK and the EU.  Further information is expected soon.  However, this is becoming increasingly urgent as the Protocol, and associated checks on GB to NI trade will need to be operational from January.  Based on information to hand at the time of writing, below is an overview of documentation that will be needed for trade with NI whether transiting directly or via the Republic of Ireland.  For those that trade with Northern Ireland, it is worth checking the Trader Support Service to see what support that might be available in addressing the regulatory requirements.

Overview of Documentation Needed for NI Agri-Food Trade Post-Transition

Sources: Customs Clearance Consortium / Andersons

Whether formally or informally, it is clear that an implementation period of at least six months is needed so that businesses can put in place the measures required to manage trade between the UK and the EU.  With such limited time available, even if a Deal is agreed, there will be plenty of follow-up negotiations needed on numerous technical points arising from Brexit which simply cannot be addressed in the time available.  In this respect, Brexit has become more of a process than a one-time event.  So, Brexit-related wrangling will continue for some time yet!

 

Covid Support Changes

The Chancellor, Rishi Sunak has been forced to amend his plans for Covid-19 employment support.  As local lockdowns proliferate across the UK, and the whole of Wales goes into a ‘firebreak’, there were increasing concerns that the existing measures were not going to prevent a big rise in joblessness.  The main change is to the Jobs Support Scheme (JSS) announced just last month (see last month’s article).  Originally, employers where to have paid 33% of the cost of any time not worked by staff put on short hours.  Staff would have to work a minimum of a third of their normal hours.  It became clear that it was still going to be more cost-effective for many employers to lay staff off, rather than contribute to short-time working.  Therefore, the Government has announced that employers contributions will fall to 5% and the minimum hours worked will only be 20% of normal.  The JSS starts on the 1st November when the Furlough scheme ends.

In addition the Chancellor announced that the rate of grant under the Self Employed Income Support Scheme will be increased from 20% of average monthly profits to 40%.  The maximum grant is now £3,750.   Finally, there will be cash grants for businesses in the leisure and hospitality sector of up to £2,100 per month.  These will be targeted at businesses that have not been forced to close (as there is separate support for these) but have seen trade affected by tighter restrictions (e.g. areas in ‘tier 2’ in England).

 

NI BPS Payments

Most farmers in Northern Ireland have received their 2020 BPS payments.  Payments began on the 16th October and it has  been announced that 97% of claimants have now had their money.  This amounts to £275m.

Environment Bill Progress

The Environment Bill has restarted its journey through the Parliamentary process, after being dormant since mid-March.  The legislation is scheduled to pass through the Committee stage in the Commons before Christmas.  The aim would be for the Bill to become law in the early part of 2021.  There are a number of proposals in the legislation that will have an effect on agriculture.  One is the setting-up of the Office of Environmental Protection (OEP) which will hold the Government to account on environmental matters.  It also sets out the broad principles of environmental protection such a ‘polluter pays’  and hazard versus risk-based regulatory approaches which could have relevance in pesticides regulation and fertiliser use.  The draft legislation also enacts a concept of biodiversity net gain where any development must result in a net increase of 10% in biodiversity.  This offers potential opportunities for landowners in ‘selling biodiversity’ by creating habitats to offset losses elsewhere.  Another part of the Bill, Conservation Covenants, will provide a firmer legal footing for agreements to provide such environmental services.  As there has been such a hiatus in the progress of the Bill, the Government may be looking to make amendments to the original legislation as policy development has moved-on in the last 6 months.

CAP Reform

EU Agricultural Ministers have struck a ‘general approach’ on the three-way CAP Reform regulations.  The agreement was reached in the early hours of 21st October, paving the way for trilogue negotiations to kick start with the European Parliament and EU Commission.  One of the key elements will see ‘eco-schemes’, such as precision farming, agro-forestry and organic farming becoming mandatory, with 20% of direct payment funding ring fenced for these activities.  Both Lithuania and Latvia had grievances over the 20%, saying it was too high and would lead to a reduction in Basic Payments for their farmers who were already below the EU average.  Lithuania voted against the package whilst Latvia together with Bulgaria and Romania abstained.  Provisions for capping payments and degressivity remain, with Member States able to cap the basic payment at €100,000 and reduce payments from €60,000.  Coupled support will still be possible similar to the current percentages (13% +2%) of the national budget.

The EU Farm Chief, Janusz Wojciechowski backed the compromise text stating ‘it provides a good starting point in the trilogue discussions and legal certainty for farmers from next year’.  The majority of delegations praised the ‘Herculean’ effort of the German Federal Minister Julia Klockner and her team, whilst others said they would support the text in the ‘spirit of compromise’.  In contrast, environmental groups do not believe the plans go any where near far enough on the environment.  Although no longer directly relevant to UK farmers CAP reform is still important in respect of what support our closest competitors are receiving.  This reform is not especially radical.  Direct payments, in the form of the BPS will still be core of farm support across the EU, with some Rural Development type funding in addition.  The biggest change under the new CAP is that it aims to be less prescriptive – rather than a single EU-wide regime for support, each country will draw up Strategic Plans setting out how it aims to achieve its goals.   

Agriculture Bill Update

The House of Commons has removed the amendments to the Agriculture Bill proposed in the House of Lords that would have enshrined protection of UK food standards in law.   The Commons voted 332 to 279 to reject the Lords amendment that would have required food imports to meet domestic production standards.  Other amendments on incorporating climate change requirements into policy and restricting the use of pesticides in certain locations were also rejected.  The Bill now returns to the Lords.  As their amendments have been rejected once, it seems likely that the current version will be accepted by the Lords.  It will then return to the Commons for a final reading.  It still seems likely that the Act will receive Royal Assent by the turn of year.