Category: Policy & Business

SAWS Extension

The Seasonal Agricultural Workers Scheme (SAWS) will be extended to 30,000 places for 2021.  The Government has announced that the Pilot scheme, which ran with 2,500 places in 2019, and 10,000 in 2020 will be extended, and expanded, for the coming year.  Whilst the fruit and veg sector has welcomed the news, the numbers still fall short of the estimated 80,000 seasonal workers required.  With the end of the Brexit Transition Period and free-movement of EU labour, there are still fears of a labour shortage.  The Pick for Britain scheme which had modest success in attracting UK labour into the sector will run again in the spring and summer.

Cross Compliance

The 2021 rules for cross-compliance have been published in both England and Wales.  In both cases the requirements are pretty-much identical to those for 2020.  The main change is how the rules and inspected and enforced – with Brexit there is now more flexibility on how the inspection regime operates.  The English guidance can be found at – https://www.gov.uk/guidance/cross-compliance-2021.  The Welsh version at – https://gov.wales/cross-compliance-2021

Brexit Update

Last month, we reported that time was almost up in the Brexit negotiations and last weekend, it looked as if a make-or-break decision on the future of the talks would be made on 12th December.  As is nearly always the case with EU negotiations, and Brexit especially, the talking has continued beyond the latest deadline.  A few days’ back it was suggested that about 97% of the draft legal text had been agreed.  More recently, there have been signs of progress on addressing two of the three outstanding issues – the Level Playing Field (LPF) and Governance.  However, Fisheries remains unresolved.

On the LPF and Governance, the outline of the Deal is taking shape.  EU Commission President Ursula von der Leyen claimed that the architecture of the LPF is based on two pillars: State Aid and standards.  On State Aid, it appears that the common principles around robust domestic governance, and the right to autonomously remedy situations of unfair competition / distortions in trade have now been established.  In terms of standards, the EU Commission President also claimed that a mechanism of non-regression on labour, social and environmental standards has been agreed although there some issues remain around future-proofing such arrangements.

Sources close to the talks suggest that the negotiators’ energies are currently focused on resolving the remaining LPF/Governance impasses.  Thereafter, the final hard bargaining will take place on fish.  This looks set to come down to a pure numbers game in terms of quota access which both sides are able to live with.  The EU appears to be linking access to fisheries with access to its Single Market which gives an indication of how hard it intends to bargain.  There are also rumours that a five-year review mechanism will be included in the trade deal which will take stock of how the fisheries quota share and access arrangements are working on the one hand and whether the playing field has remained level.  A formal review of how any agreement is functioning would seem prudent.

Overall, it appears that the talks are inching towards a Deal, but hurdles remain which could still scupper the negotiations.  The European Parliament is unhappy that it will not have the necessary time to scrutinise the agreement before voting on it.  Although the EU would technically be able to ‘provisionally apply’ the Deal before MEPs get to vote, this is not desirable.  All EU institutions would much prefer an EU Parliamentary vote on 28th December.  To have any chance of meeting this timeline, an agreed text would be needed a few days in advance of Christmas.

If a Deal is not agreed until after Christmas, a short No Deal (interregnum) period in January becomes a distinct possibility.  Some claim that even if both sides agree to provisionally apply such a Deal, a range of procedural measures would still be required.  However, in such circumstances, one would surely think that some sort of brief standstill period could be agreed whilst the required measures are put in place?

From an agri-food perspective, there is a big element of wait-and-see in terms of what Deal might be agreed.  However, irrespective of a Deal/No Deal, major changes are afoot.  Whilst arrangements such as those recently agreed under the NI Protocol (see accompanying article), might provide for a limited grace period, preparations for friction on UK-EU trade in early 2021 need to continue with urgency.  Customs agents need to be booked.  There are reports that some do not want to become involved in agri-food because it is too complicated given all of the additional Sanitary and Phytosanitary regulations which can result in difficulties in getting consignments through Customs.  For agri-food companies trading with the EU, training and upskilling in Customs and other regulatory formalities will also be necessary.  This is especially the case for exporters to the EU, as it appears that regulations will apply to a greater extent from January in comparison with importing from the EU into the UK.

Welsh Farm Support

The Welsh Government has set out plans to replace the BPS with its Sustainable Farming Scheme (SFS).  However, those eager for scheme details still have to wait.

The Agriculture (Wales) White Paper was published on the 16th December; it sets out the intentions for primary legislation and provides the basis of the Agriculture (Wales) Bill.  It describes the Welsh Government’s ambition to reform the way in which agriculture (including farm woodland management) is supported by Government and the policy direction for the next 10 to 15 years, and therefore has a broad scope including;

  • future support for agriculture
  • regulatory reform (including a new enforcement regime to replace cross-compliance)
  • future support for industry and the supply chain
  • forestry and woodland management
  • improving animal health and welfare
  • improving monitoring through the effective use of data and remote technology

The Agriculture (Wales) Bill is planned to be put before the Senedd in summer 2022.  It will provide the framework for future policy with secondary legislation providing the detail.  Included will be the provisions to establish Sustainable Land Management (SLM) as the ‘overarching principle’ for future agricultural policy, including future support.  The proposal is to replace the BPS and Glastir with a single direct support scheme – the Sustainable Farming Scheme (SFS).  The scheme will provide support and advice for farm businesses.  There will be separate support for the wider industry and supply chain beyond the farm gate.

The SFP aims to address climate change, public health and environmental issues associated with agriculture alongside the production of sustainable food.  Although, the White Paper does not offer a time line for this transition, but the Welsh Government has requested a ‘sunset’ clause, so legacy CAP schemes will end in 2024.  No scheme details have been included or an indication of payment rates, but the aim is to make payments by ‘rewarding’ farmers for the delivery of outcomes rather than compensation for the costs of inputs.  A Farm Sustainability Review will be required for each farm to determine the delivery of outcomes.

The full White Paper can be found at Agriculture (Wales) White Paper (gov.wales) a consultation period on the White paper will run until 25th March 2021.

 

Northern Ireland Protocol Agreement

On 7th December the UK and EU announced that they agreed ‘in principle’ how the Northern Ireland (NI) Protocol would be implemented.  This is a significant achievement given the problems in other UK/EU talks, and has been widely welcomed, especially by business groups.  However, there is unease in some quarters on the how the new procedures will work in practice.

The arrangements will enter into force irrespective of whether the UK and the EU reach an agreement on their future trading relationship, although if such an agreement were reached, it would make the operation of the NI Protocol much easier.  Key aspects include;

  • No checks on goods being transported from NI to GB: this issue caused problems throughout 2020 as the EU was insisting that Exit (Export) Summary Declarations were required for Safety and Security purposes.  This requirement has been obviated through the use of commercial data (e.g. from shipping manifests), which is already collected, to meet safety and security obligations. This is a pragmatic solution to the issue.
  • Trusted Trader scheme: is to be introduced for supermarkets and other suppliers.  This ‘UK Trader Scheme’ is primarily directed at businesses whose products will be sold to NI consumers and who can prove that such products will not leak into the Republic of Ireland (EU Single Market) and thus be potentially liable to tariffs (under a No Deal).  Traders who believe that their products being sold to NI are not ‘at risk’ of entering the EU Single Market can register for authorisation via’ https://www.gov.uk/guidance/apply-for-authorisation-for-the-uk-trader-scheme-if-you-bring-goods-into-northern-ireland-from-1-january-2021
  • Reimbursement scheme: for traders who are not part of the UK Trader Scheme or who cannot guarantee that their goods will remain in the UK customs territory (including NI) can join this scheme to have any tariffs paid upon entry into NI reimbursed if such goods are eligible to be traded freely in the UK.  This will require proof that such goods have remained in the UK customs territory. 
  • Grace periods for traders to adjust to new arrangements: these vary from 3 months to 12 months and are predicated on UK regulatory standards remaining aligned with the EU’s for the periods in question. A range of issues are covered including;
    • Export Health Certification: will not be required on retail shipments of plant and animal products for three months, provided the organisations involved register as a Trusted Trader.
    • Requirements for some meat products to be frozen: on trade between GB and NI for products such as mince and sausages it will not be mandatory for supermarkets (and trusted traders) for the first six-months. Thereafter, fresh/chilled products will have to be sourced locally from NI or from the EU (particularly the Republic of Ireland).  However, this requirement could be obviated as part of a wider trade deal between the UK and the EU.
    • Veterinary products: will have a 12-month adjustment period to ensure that there will not be a shortage of critical supplies.
  • EU presence in NI: although the EU will not formally have an office in NI, which again caused controversy, its officials will be present to oversee the implementation of the Protocol and the EU will have access to relevant databases to monitor trade flows.
  • State Aid: GB-based firms will not be subject to the EU’s State Aid rules where there is no ‘genuine and direct link’ to Northern Ireland and no foreseeable impact on NI-EU trade.  Further detail will be needed as to what this means in practice but the clarification addresses a key UK concern over its sovereignty in terms of State Aid regulation.
  • Agricultural Support: will continue to be exempted from State Aid, subject to ceilings agreed under the Protocol. The agreement in principle provides that approximately “£380 million of agricultural support” can be provided to NI farming and be exempt from State Aid rules.  Up to £25 million of support not used in one year can be rolled forward to the next year and an additional £7 million will be made available for crisis support when required. Current spending on agricultural support (including rural development elements) in NI is around £330 million annually.  This arrangement provides further flexibility for NI to support its agricultural industry when it sets its own agricultural policy independently of the EU CAP. 

Whilst these temporary arrangements will ease the flow of goods from GB to NI initially, longer-term, there will be a significant increase in bureaucracy as Export Health Certificates (EHC) will be required for animal and plant products and Customs (import) declarations will be required for all goods.  Furthermore, products will also be subject to a wide range of regulatory checks.  Documentary and identity checks will be required for all plant and animal products subject to Sanitary and Phytosanitary (SPS) regulations.  A significant proportion of these products (15% for red meat; 30% for dairy and poultry products for human consumption) will need to be physically checked at a Border Control Post.  Added bureaucracy will lead to increased food costs in Northern Ireland.  However, it must also be acknowledged that the UK plans to introduce a Movement Assistance Scheme to help traders with ‘reasonable costs’ incurred on EHC and official controls on goods moving from GB to NI.  This is in addition to the Trader Support Service launched in August to assist with Customs-related issues.

At least, this grace period, will help to put the necessary infrastructure and systems in place to manage the long-term implementation of the Protocol.  Such an application (adjustment/grace) period on any UK-EU trade deal is also needed to give traders and regulatory authorities the time to implement the new arrangements.  Further detail on the UK Government’s Command Paper on the NI Protocol and supplementary information is available via: https://www.gov.uk/government/publications/the-northern-ireland-protocol

Welsh 2020 BPS Payments

The Welsh Government has announced it paid over 94.6% of Welsh farm businesses either their full BPS or the BPS Support Payment (estimated 90%) during the first week of the 2020 payment window.  This equates to over £219.3m being paid to more than 14,900 claimants.  The Minister for Environment, Energy and Rural Affairs thanked Rural Payment Wales for paying an ‘impressive’ number of claims in ‘challenging circumstances’.  Wales has a good track record in paying claimants early in the payment window.  This year the number of payments made in the first week has exceeded those made last year (93.5%)

Farm Profits Fall

Farm profits slumped by over 20% in 2020 according to Defra.  The Department has just released its first forecast of Total Income from Farming (TIFF) for the year and it shows the twin effects of reduced crop plantings and Covid-19.

The forecast put TIFF for 2020 at £4,151m compared to £5,278m in 2019.  We had been predicting a 10% drop, so the level of decrease comes as a bit of a surprise.  However, these first Defra forecast have a history of quite large revisions, to the figure could get back closer to our level (£4,700m) when the ‘first estimate’ is published in May.  Defra itself states that the forecast this year is more uncertain that usual due to the problems in gathering data during the pandemic.     

The main driver of the fall is a decline in crop output – in monetary terms down 13% compared to 2019.  Livestock output is forecast to actually rise slightly, even with the disruption caused by Covid in the spring.

Looking to 2021, trying to forecast aggregate UK farm profitability is probably as hard as it has ever been – simply because of the uncertainty of Brexit.  Should a UK/EU deal be reached (even a minimal one) then profits could recover back towards the £5bn level as shown on the chart.  If there is No Deal, then profits could slump towards £3bn – a level not seen for over a decade.

 

Organic Standards

UK organic producers will continue to be able to sell their produce in the EU following a vote by the EU Commission.  This extends the recognition of the UK’s organic standards and six organic certification bodies until the end of 2021.  Without this approval, UK produce would not have been able to be sold in the EU as ‘organic’ after 31st December.  This market is reportedly worth over £200m per year.  It would have also affected GB produce sold in Northern Ireland which is remaining in the Single Market.   Whilst this is a short-term reprieve, it does not provide long-term certainty for UK organic exporters.  

AHDB Consultation

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.  

95% BPS Payments Made

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.