Category: Policy & Business

The Single Application Form (SAF) 2020 claim window opened in Scotland on 15th March.  The closing date is the usual 15th May, a Friday this year.  Further guidance can be found at: https://www.ruralpayments.org/publicsite/futures/topics/apply-for-funding/single-application-form/

In contrast to England, the Scottish Government has also confirmed due to the ongoing wet weather, the Crop Diversification rules (the two and three crop rule) will not be enforced in Scotland for the 2020 scheme year.  Online guidance has been updated, but due to the late decision, the online SAF application has not been updated for this derogation.  This means a non-compliance notification may still be given, but applicants can ignore this if related to Crop Diversification (CD).  Note, this is only for CD and not Environmental Focus Areas (EFAs).

2020 Applications

The 2020 BPS online application window opened on 12th March in England.  The deadline, to avoid receiving penalties is the usual 15th May, which falls on a Friday this year.  The claim window for Countryside Stewardship and Environmental Stewardship revenue claims is also open and closes on 15th May.

All guidance, latest news and forms can be found at https://www.gov.uk/government/collections/bps-2020.  The claims process and rules are, in the main, the same as last year.  Minor changes include,

• simplifying the paperwork required for the Young Farmer Payment so that the Basic Payment Scheme Young and New Farmer application form and the Accountant or Solicitor certificate only has to be sent to the RPA in the first year as long as there have been no changes to the structure of the business in future years.
• plans to make simplifications to the penalties for over-claims.  To this end guidance is expected to be updated shortly
• there will be no reduction to claimants’ 2020 BPS payments for the Financial Discipline Mechanism (FDM) (this was 1.4327% in 2019).  This funded a ‘crisis reserve’ for the CAP.  Many will also be familiar with the FDM refund usually received in September, this reimbursement will be made again this year if the funds deducted from last year’s claim are not required.
• all payments will be made in Sterling. We had been awaiting this announcement, this means there will be no option to receive payment in Euros.  However, paper forms and the online application system have not been updated for this.  Therefore on paper application forms disregard Question B1 and if applying online do not amend the ‘payment declaration’ to request Euros.
• with regards to the actual payment rate, the RPA had already confirmed the level of funding available for BPS in 2020 would be the same as for 2019 but it has now announced it intends (our italics) to set the exchange rate at €1 = 0.89092 to convert entitlements which are denominated in Euros into Sterling.  This is the same rate as last year so farmers will see no material difference in their BPS payments.  Although with no Financial Discipline, payments may be a little higher?  Whilst not yet confirmed, there seems a strong chance that the 2020 payment will also set the ‘start point’ for payments during the Agricultural Transition.

2019 Payments

The RPA has announced almost 99% of eligible farmers had been paid their 2019 Basic Payment by the end of February; a total of £1.76 billion.  With regards to agri-environment schemes, 77% of eligible farmers had received their full Environmental Stewardship payment, worth a total of £133m and 37% of eligible Countryside Stewardship agreement holders had also received their payment by 29th February.  All payments should be received by the end of the payment window, 30th June 2020.

The Bank of England made an ’emergency’ Base rate cut of 0.5% on the 11th March.  This brings interest rates down to a historic low of 0.25%.  The move is a response to the Covid-19 outbreak and its possible effect on the economy.  The Bank also stated that it would free up extra lending in the economy.  The move follows a cut in US Base Rates by the Federal Reserve, also by 0.5%, earlier in the month.  The European Central Bank is expected to follow suit.

In his first Budget, less than four weeks after being given the Chancellor’s job, the Rishi Sunak announced an increase in spending, in large part to offset the economic effects of the Covid-19 outbreak.

Apart from the anti-virus fiscal boost the Budget was rather short on eye-catching policy initiatives.  Although there was a lot of extra spending (and consequently extra borrowing) most of it went on the usual areas of the NHS, schools, housing, police etc.  There is also to be an extra £175bn over the next five years for infrastructure.  This includes a doubling of spending on flood defences to £5.2bn over six years.  All this could have big effects on landowners, but only in the locality where the projects are occurring. 

Another Budget is planned in the autumn and the Chancellor may be saving some other initiatives until then – once he has got his feet-under-the desk more and the effects of Covid 19.  The farming sector may just be pleased the rumoured changes in the agricultural red diesel rebate and Inheritance Tax did not come to anything.

Some of the main points are;

• To offset the slowdown caused by Covid-19, there is to be additional Business Rates relief for businesses is the retail, hospitality and leisure sector – this may have some benefits for diversified farm businesses.  There is to be review of the whole Business Rates system.
• Many small businesses do not pay business rates due to the existing Small Business Rate Relief (SBRR).  There will be a fund of £2.2 billion for Local Authorities in England to pay a Small Business Grant of £3,000.
• The rules on Statutory Sick Pay (SSP) will be amended so that workers can claim it from the first day of being off sick.  Employers with less than 250 staff will be able to claim back the full cost of SSP from the Government.
• There will be extra ‘Time to Pay‘ measures introduced by HMRC.  Also a Business Interruption Loan Scheme.
• Extra spending will be made available to the NHS to cope with Covid-19.  Overall, the ‘virus’ measures in the budget amount to £12bn of extra spending.  Other measures add around £18bn.  This equates to a total ‘fiscal boost’ of 1.3% of the economy – very large numbers.
• The National Insurance threshold will increase from £8,632 to £9,500 from April.  The Employment Allowance will rise from £3,000 to £4,000 per business.
• The planned decrease in Corporation Tax to 17% will not now happen and it will remain at 19%.
• The lifetime limit on Entrepreneurs’ Relief will be reduced from £10 million to £1 million from the 11th March 2020.
• The Structures and Buildings Allowance (SBA) is to be increased from 2% to 3%.
• Fuel duty is frozen once again.  As is the duty on beer, wine and spirits.  Although agriculture retains its red diesel exemption, it will be removed for other sectors such as construction.
• There will be funding of £640m for a ‘Nature for Climate Fund‘.  This will aim to see tree planting increase by 600% over current rates.  It will also fund peatland restoration.  There are no details on how such schemes will work at present.
• Investment in Research and Development will be boosted.  This includes investing £1.4bn over 10 years at the animal health science facility at Weybridge.
• The was no further detail on the Shared Prosperity Fund, but more detail on this replacement for EU Rural Development funding is expected with the publication of the Comprehensive Spending Review in July.
• The Government has promised a Statement on the Planning system, with a White Paper to follow in the spring.  The desire seems to be to speed up the Planning process to drive growth.

The Budget statement also, as usual, provided the latest economic forecasts from the Office of Budget Responsibility (OBR).  The UK economy grew by 1.4% in 2019.  Economic growth in 2020 is now forecast to be 1.1% – downgraded from the 1.4% estimated in spring 2019.  The forecast for 2021 is growth at 1.8%.  It should be noted that these forecasts were undertaken before the effects of Covid-19 became clear, so are subject to (downwards) revision. 

Defra has published the results from the Farm Practices Survey held in October 2019.  The survey included questions on farm business advice, precision farming technology, computer and smartphone usage, farm business planning, disposal of plastics and animal welfare.

Some key findings include; the majority (63%) of farms find it very easy or quite easy to seek and gain advice on running their farm business, with farmers most likely to seek advice on productivity, the environment and regulation.  However, almost a fifth of farmers (18%) surveyed, said that advice was not needed for their business in the last twelve months.  The farming press and media were found to be the most popular source of information for productivity, the environment and regulation.  Friends, family and colleagues were the next port of call for productivity advice, with industry bodies or local farming groups such as the NFU or AHDB being the second favourite for advice on the environment and regulations.

When it came to the questions answered on precision farming, interestingly the most common practice was regular weighing of livestock, carried out by 42% of farmers, estimated breeding values came in second at 30% with soil mapping and yield mapping at 29% and 17% respectively.   The most frequent answer on the reason why farms used precision farming techniques were to increase productivity or performance at 78%, followed by improving accuracy at 59% and reducing input costs at 55%.  Impact on the environment was the least likely reason to employ precision farming techniques at 38%.

Nearly a third of farms (31%) have developed non-farming income such as tourism or letting buildings and over a quarter stated that they plan to widen the variety of crops or enterprises over the next three years.  This follows from the 2018 survey which found that a third of farms intended to introduce a significant change over the next 12 months.  This may be due to the phasing out of BPS payments, farmers will be seeking to bring in further income from different practices.

A third of farms said that the most significant reasons preventing farms recycling plastic on their farm was due to lack of infrastructure and uncertainty of who can collect the waste. Nearly three quarters of respondents were concerned about plastic pollution on farm.  The most common type of plastic found to be used on-farm was packaging, with 80% of farms indicating this.

Providing the best care possible for animals was the most frequent answer when asked what motivates farmers to maintain high animal welfare standards (95% of livestock farms surveyed).  Of farms with livestock, 62% stated that they had already done all they can or were happy with the current level of animal welfare provided on their farm.  Following this, 41% of farms with livestock stated that it was financial reasons that were the greatest barrier to improving animal welfare further.

The full survey can be found at https://www.gov.uk/government/statistics/farm-practices-survey-october-2019-general

Minette Batters has been re-elected as President of the National Farmers Union; Stuart Roberts and Tom Bradshaw will serve as Deputy and Vice President respectively.  Mr Roberts was promoted from Vice President to Deputy President with Guy Smith leaving the role after six years in post.  Ms Batters paid tribute to Mr Smith for his service as both Deputy and Vice President representing NFU’’s members.  The elections took place following the NFU’s annual conference on 26th February.

The shape of the new Environmental Land Management (ELM) scheme that will be the main funding stream for English farmers is becoming clearer.  The scheme contains strong echoes of the previous Environmental Stewardship (ES) scheme with an entry level, broad-and-shallow tier and then higher level options.  The plans are set out in a ‘Policy Discussion Document’ published by Defra (see https://www.gov.uk/government/publications/the-future-for-food-farming-and-the-environment-policy-statement-2020 ).

Underpinning the scheme is the idea that land managers will only be paid for ‘public goods’.  Six key categories of public goods have been set out;

• clean air – reduced ammonia and particulates
• clean and plentiful water – reduced nitrogen and phosphate run-off, less sediment in watercourses, better quality ground and surface water
• plants and wildlife – habitats, species, protected sites etc.
• hazard protection – flooding coastal erosion, droughts
• beauty, heritage and engagement – landscapes, public access, education, health, cultural heritage
• climate change – reduced GHG emissions, carbon capture, resilience to climate change

Many of the objectives are familiar from previous agri-environment schemes, but new (or more highly prioritised) elements such as climate change, air quality and hazard protection come more to the fore. 

As the market does not adequately reward for the delivery of environmental public goods, the aim is ELM will be an effective way for government to utilise public funding to deliver them.  The key objective of ELM is to ‘deliver environmental benefits, paying farmers, foresters and other land managers for interventions and actions that improve and enhance our environment, or for maintaining current land management practices that secure environmental public goods’.  As direct payments are phased out, the ELM should provide an opportunity for farmers (and foresters) to receive another income stream by providing these public goods.  Our previous article, on Farming for the Future: policy and progress update, sets out other funding which may be available to the sector in the future.

The current plan is for ELMS to be based on a three-tier model;

• Tier 1 –  broad (and shallow), focusing on actions that are deliverable on most farms so that it is accessible and attractive to all farmers, if they wish to participate. This might include; nutrient management, pest management, livestock management by targeting breeding to reduce ammonia emissions, managing soils such as minimum tillage, soil organic matter content, putting in place flower/species rich field margins/corners, cover crops and water storage.  It is likely to have standards all farmers must meet and a menu of options to deliver additional benefits.  It is expected to be managed 0nline.    
• Tier 2 – this will incentivise land managers in the delivery of locally targeted environmental outcomes.  It is likely to encourage an reward collaboration between land managers and require more intensive/complex management from farmers.  Examples might include; tree/shrub/hedge planting or maintenance, habitat creation/restoration, natural flood management, species management, rights of way, heritage asset management and education infrastructure.  It is likely that successful delivery of the outcomes supported through this tier may require specialist knowledge and support.  This is expected to be the ‘core’ of ELM over the long-term.
• Tier 3 – this aims to deliver land use change ‘at a landscape scale’.  It would deliver a range of environmental outcomes across landscapes while making a ‘substantial contribution to specific government commitments, notably around nature recovery and net zero emissions’ by creating and restoring carbon rich habitats, delivering biodiversity, water quality and flood mitigation.  Projects might include, forest and woodland creation/restoration/ improvement, restoration of peatlands and the creation/restoration of coastal habitats.  It is possible that individuals or groups will be invited to deliver specific projects and as such there could be a role for a facilitator/co-ordinator to develop a group application.

Tests and Trials commenced in 2018 and will continue until 2028, they have and will continue to help design the scheme with stakeholders.  Pilots will start in late 2021 continuing through to 2024, with the intention that the scheme be fully up and running in late 2024.  The plan is to involve a wide range of farmers, foresters and land managers across all regions of England including all farm types in the pilots.  The pilots will be funded using some of the money freed up by the reductions to the BPS.  Until the new scheme is fully rolled out, the current Countryside Stewardship scheme will remain open until 2024, although it is expected to be simplified and the number of agreements offered each year will be dependent on the development of the new ELM.  It may also be possible to extend HLS agreements which are due to end between 2020 and 2024.

Other points to note about ELM are;

• agreement lengths are likely to be flexible, long enough to secure the outcomes but short enough to ensure participation.  Tier 3 may look at conservation covenants to ensure the land use change has long term protection
• applications will be possible year-round, rather than by a yearly deadline
• there will be annual management payments as well as grants for capital works
• payment rates are yet to be set.  But, unlike previous EU schemes they will not be limited to ‘income foregone’.  However the discussion document does say for Tier 1 it may be most appropriate to base payment rates on income foregone and costs incurred, although it also states to ensure sufficient uptake it may need to adjust prices over time to ensure the desired level of uptake.  Tier 2 payments could include an element of results-based payments or even auctions.  Payments for Tier 3 are likely to be be determined on an individual basis through negotiated agreements, with high upfront costs to support initial land conversion followed by maintenance payments.  Payment by reverse auctions may be an option to incentivise land managers to collaborate to put in in an application.

The discussion document sets out Defra’s initial thinking for the ELM scheme design, it includes 17 questions which Defra is inviting views on.  It will also be holding a number of regional workshops with land managers and stakeholders over the next three months, the responses will help to inform detailed scheme design for both the pilots and the national scheme.  It is anticipated that a full consultation on the detailed scheme design will published at a later date.  Responses to the questions need to be received by 5th May and can be completed at https://consult.defra.gov.uk/elm/elmpolicyconsultation/

 

Basic Payment Scheme

The 2020 BPS application window in England is expected to open online on 12th March, with those who still wish to make a paper claim receiving their application forms shortly after this date.  The Land Use screen is already available for those who wish to check the information is correct ahead of their application, although it is perhaps worth noting the PLCD mapping update work is expected to continue until around 10th March.  The 2020 Land Use codes are available on the Gov.UK website at: https://www.gov.uk/guidance/rural-payments-land-use-codes-2020?utm_source=09585430-cf3e-4460-9848-792520123f64&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

In Wales, the Single Application Form (SAF) 2020 will be available from 2nd March, guidance and information will be available online.  A reminder that RPWales must be notified of the transfer and lease of entitlements by 30th April, for them to be used for a 2020 claim.

HLS One Year Extensions

Those in England who have accepted a one year extension to their HLS agreements need to be aware of the implications of ‘double funding’ and EFAs.  Double funding is not allowed, which means it is not possible to be paid for the same activity twice, i.e under the BPS and under an agri-environment scheme.   This affects 19 agri-environment options, where the management is the same as that required for Ecological Focus Areas (EFAs).  However, all original HLS (and the underpinning ELS) agreements have been exempt from these rules, meaning that for the best part of 10 years agreement holders have not had to worry about this.  But from 1st January 2019 new rules were introduced, this means where an HLS agreement is due to end in 2020 (and this can be any date in 2020) and a one year extension is accepted, the ban on double funding will apply to the extended agreement.  In addition this applies to those whose agreements expired in 2019 and they have agreed a second year extension.  This means, claimants will need to look at the location of their EFAs to ensure they do not overlap with the 19 affected agri-environment options.  It is possible to have EFAs in the same parcel as the agri-environment options, but they must not overlap.  Hedges are not one of the affected options.  Information on the 19 options can be found at https://www.gov.uk/guidance/higher-level-stewardship-hls-2020-agreement-extension

Defra has published a policy statement outlining its plans for farm support in England.  This is to accompany the Agriculture Bill as it enters the Committee stage in Parliament and comes ahead of George Eustice’s appearance at the NFU Conference on 26th February.  In general, there is nothing particularly revelatory in it – most of the policy initiatives in it have already been announced or been widely-trailed.  However, it provides an overview of the direction of farm policy for the next decade and there are some additional points of interest.  A summary is given below.  The full document can be found at – https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/868041/future-farming-policy-update1.pdf

Direct Payments

Probably the topic of most interest to the sector, although it is buried away at the back of the Policy Statement.  In summary, the plans for the ‘Agricultural Transition’ as set out in the original Statement of September 2018 remain unchanged.  Direct payments will be phased-out starting in the 2021 year, with 2027 being the last year any will be made.  The phasing process is still unknown with only the first year’s deductions being set out.  Again, these are unchanged from what has been announced previously;

% Reduction in Direct Payments in 2021
Payment Bands	% Reduction
Up to £30,000	5%
£30,000 to £50,000	10%
£50,000 to £150,000	20%
£150,000 or above	25%

A few new points emerge from the document;

• deductions in future years will depend on the funding required for other elements of the Government’s plans.  Although not specifically stated, it appears that the first ‘multi-annual financial assistance plan’ as required by the Agriculture Bill (see last Bulletin), due by the end of 2020, might well include the future deductions.  Defra states it will work with the industry in setting the pace of the phase-out.
• delinking of payments from land will occur during the Transition.  However, this will not happen until 2022 at the earliest.  Once this is done, there will be no link between land occupation and payments, and entitlements will disappear – there will just be a right to support for the business or individual claiming in a reference period.  There will be no requirement for that business to carry on farming.  A consultation is promised on the mechanics of delinking including, crucially, what reference period is to be used.
• when delinking occurs, there will be no link between land and subsidy, so the cross-compliance regime will end at this point.  Defra plans to bring in an alternative regulatory regime.
• the option to allow the delinked payments to be capitalised into a one-off lump sum is still being looked at.  This will be included in the future consultation.
• for the 2020 year, the BPS penalty regime will be reformed so that small errors do not lead to large fines.  The Financial Discipline mechanism will also be removed.

Other Support

As Direct Payments are phased-out, various new schemes will be introduced.  The Statement acknowledges that having multiple schemes can be confusing, but set against this is the fact that individual programmes can be used to target specific issues.  The main replacement for the BPS in England will be Environmental Land Management (ELM).  A separate consultation and Policy Document on ELM (see https://consult.defra.gov.uk/elm/elmpolicyconsultation/) has also been published.  More details on the current plans for ELM is contained in the following article.

The following is a summary of the other policies set out in the Statement;

• following criticism of the lack of focus on anything to do with food production in earlier Policy Statements, food gets a mention on the very first page.  But there is nothing new beyond what is contained in the Agriculture Bill.
• advice to farmers is covered.  This appears firstly in the context of ELM and having the right advice to put together a scheme.  But there is also a Future Farming Resilience Funding project which will be running pilot schemes in 2020 looking at the best ways to provide support for farmers through the early years of the Agricultural Transition.
• there will be a change in farm regulation – although not immediately.  The plan is to take up the recommendations contained in Dame Glenys Stacey’s ‘Farming Inspection and Regulation Review’ (FIRR) of 2018 (see Dec 2018 Bulletin).  This would see a move away from cross-compliance to a more proportionate, transparent and flexible regulation regime.  A consultation on the next steps will be undertaken later in the year.
• with Brexit, EU Rural Development rules and funding no longer apply.  The replacement for past EU funding is to be the ‘UK Shared Prosperity Fund’.  The Statement has no details how this will operate, other than a vague promise that rural areas will not be forgotten.  Funding under this heading could replace previous programmes such as LEADER, the Growth Fund etc. in areas such as diversification and food processing.  It does not seem that grants will be available any time soon however.  
• there is a strong focus on animal welfare and health in the Statement.  Firstly there is a promise to maintain and enhance the current high regulatory baseline.  Any increase in legal standards would take into account the effect of this on international competitiveness.  There would be support to get the market (consumers) to pay more for high-welfare products – for example, by clarifying labelling terms and standards.  Lastly, there may be public money for animal welfare in certain circumstances.  There is little detail yet on what these initiatives might look like in practice
• the Government commits to investing in tree health, with a new set of grants available in 2024 with pilots being undertaken in the next two years.
• there is a wide package of productivity support promised.   There will be capital grants that look very much like the current Countryside Productivity Scheme – both the small and large grants elements look set to continue, with new rounds opening in 2021.  There will be support for initiatives in Research and Development, particularly projects that get research out onto farm.  The skills and knowledge of the farming sector will also be a focus, with plans for a professional body for agriculture and more benchmarking of performance.

Just from this brief summary, it is hopefully clear that Defra has got big plans now that it is free to set English farm policy.  Although it will not all happen overnight, there is still a large shopping list of initiatives.  There will be a question of whether Defra (and the wider Government) has the capacity to deliver them all, and deliver them well.