Category: Policy & Business

Scottish Farmers and crofters will be able to obtain funds to help tackle climate change on their holdings.  Under the Agricultural Transformation Programme £40 is being made available through a combination of grants and loans to carry out actions which will reduce greenhouse gas emissions and support sustainable farming and land use.  The details of the scheme are still being developed, but it is expected to include support for:

• farm pilot schemes to reduce greenhouse gas emissions
• more tree planting
• promoting the benefits of good grassland management for livestock producers
• investment in renewable energy
• organic farming

The programme is expected to be available later in the year. NFU Scotland has shown its support for this initiative, but says to really deliver on ‘environmental and climate goals’ more funds are required and that farmers and crofters must be ‘incentivised’ to take up measures focusing on soils, input costs and emission reduction.

According to NFU Scotland, there should be minimal change in farm support policies until 2024.  In a document published on the 3rd March, entitled ‘Stability – The Platform for Change’, the Union very much backs the Scottish Government’s plans as set out in the ‘Stability and Simplicity’ consultation of June 2018.  Similar to the Scottish Government, its proposals include simplifying and improving the existing schemes from 2021, with more significant change being introduced from 2024.  In the short term this would mean:

• Maintaining the BPS largely unaltered until 2024.  Changes during this period would be limited to improvements to farm mapping requirements, the farm inspection regime and also the penalty process.  The proposals call for the scrapping of the current Crop Diversification and Permanent Grassland requirements, with a review of the Ecological Focus Area rules.
• Retaining the Less Favoured Areas Support Scheme (LFASS) in its current form until 2024, including maintaining the £65m budget, but re-based on 2019 data.
• Maintaining both the coupled support schemes; the Scottish Suckler Beef Support Scheme (SSBSS) and the Scottish Upland Sheep Support Scheme (SUSSS).
• According to the Union, the Beef Efficiency Scheme (BES) must be replaced with an effective Beef Improvement Programme that enables ‘pragmatic actions to deliver productivity and environmental outcomes’. That approach must be adopted for other sectors.
• It is also calling for the Agri-Environment Climate Scheme (AECS) to be re-modeled, so that it is non-prescriptive, based on rewarding outcomes rather than only covering income foregone or additional costs.

The document also calls for funding at the level provided for under both pillars of the CAP to be maintained.

NFU Scotland is proposing the money allocated under the Bew Review should be used to fund the Scottish Government’s proposed pilots from 2021.  It is calling for future support that ‘underpins activity, productivity and environmental delivery’ and says it will use its earlier policy document ‘Step to Change: A New Agricultural Policy for Scotland’ to initiate negotiation with the Scottish Government on what future policy should look like.  The full document can be found at: https://www.nfus.org.uk/userfiles/images/Policy/Stability.pdf

Defra has released its latest Farm Rent data for England.  The data is collected via the Farm Business Survey (FBS) and is rather historic as the Survey takes some time to undertake.  The latest figures are for the 2018/19 year (roughly Feb to Feb).  They are shown as ‘2018’ in the table below.  Land let under a full Agricultural Holdings Act (AHA) Tenancy saw a marginal increase in average rents.  General Cropping values saw a strong uplift, following a decline in the previous year.  Dairy farms also saw a pretty large increase, whilst Cereals farms saw only a marginal rise.  AHA Cattle & Sheep rents have seen very little movement; LFA rents remained the same in 2018 as the previous year following quite a considerable drop in 2017.  Lowland livestock farms, after a large jump in the rental value in 2017, have seen a marginal decline in 2018.

FBT rents have seen an increase in all sectors compared to 2017 apart from General Cropping. General Cropping rents remain the highest for both AHA tenancies and FBTs; these will include a large number of short-term potato and vegetable growers.

The average rent paid under Seasonal Agreements (likely to be largely grass lettings) in 2018 was £156 per Ha compared to £152 per Ha in 2017.  Full results can be found at https://www.gov.uk/government/statistics/farm-rents?utm_source=dae76c2b-6ed7-4b34-9305-7475c6ed871b&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

The results from this survey show the amounts actually being paid by farm businesses in England.  This will include some lettings that are not at full market value – for example, lettings within families.  Therefore, the figures may not correspond to some of the ‘headline’ rates often quoted.  These usually relate to situations where new land is being let, or there is a review.  The historic nature of the survey means that current trends are not always picked up.

Nicholas Saphir has been appointed as the new Chair of the AHDB.  Mr Saphir will take over from Sir Peter Kendall with effect from 1st April 2020 for a term of three years.  Mr Kendall will have completed his 2nd term in office at the end of March.  Nicholas Saphir has a strong background in agriculture and horticulture having built a public company farming, processing and trading fruit and vegetables in the UK, Europe, South Africa and South America.  He has also been involved in the growth of the Organic Milk Producers’ Cooperative (OMSCo) over the last 18 months.  Mr Saphir has experience of chairing industry and government bodies in the food and farming sector including being chairman of the Central Council for Agriculture and Horticultural Cooperation, founder chairman of Food from Britain, President of the Fresh Produce Consortium and chairman of the Agricultural Forum.

Ministers and mobile phone network operators have signed an agreement worth £1bn which aims to end poor mobile coverage in the countryside.  The Shared Rural Network (SRN) is a deal between EE, O2, Three and Vodafone, overseen by a jointly owned company called Digital Mobile Spectrum Ltd.  It will invest in a network of new and existing phone masts to deliver strong 4G coverage across the country in rural areas irrespective of what network provider people use.  The biggest improvements will be seen in rural parts of Scotland, Northern Ireland and Wales.  The deal will see 4G coverage to 95% of the UK by 2025.  The four networks have pledged £532m between them, with a further £500m been made available from Government.  The commitments will be enforced by Ofcom.

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.