Category: Policy & Business

The new Agriculture Bill contains some amendments to the tenancy legislation in England and Wales (see previous article https://abcbooks.co.uk/agriculture-bill-2020/).  This follows the joint consultation held by both Defra and the Welsh Government back in April 2019, seeking views on reforms to the law (see article https://abcbooks.co.uk/agricultural-tenancy-reform/).  The proposals contained in the draft Bill are relatively minor changes.  Other proposals included in the earlier consultation, including the more contentious ones including Tenants being able to assign their Tenancy to a third party when they wish to retire and extending the ‘family members’ eligible of succession rights, will be considered further.  The current changes include:

 

• removing the ‘Commercial Unit Test’ under the succession provisions of AHA tenancies, which currently prevents those already occupying a commercial farm from succeeding to an AHA tenancy.  There will also be an update to the ‘Suitability Test’ to more of a ‘business competence test’
• amendments to the 1986 Agricultural Holdings Act (AHA) to allow a third party to be appointed to resolve a rent dispute at any time up until the rent review date.  At present, this has to be made at the time of a s.12 notice, 12 months beforehand
• amendments to the 1986 Agricultural Holdings Act (AHA) to allow a third party to be appointed to resolve a rent dispute at any time up until the rent review date.  At present, this has to be made at the time of a s.12 notice, 12 months beforehand
• amendments to both the 1986 Act and the Agricultural Tenancies Act 1995 (the FBT legislation) to include both the President of the CAAV and the Chair of the ALA to make appointments of arbitrators.  Currently this is just restricted to the President of the RICS
• amendments to the 1986 Act to allow for regulations to be made to enable a Tenant to refer to dispute resolution requests for variation of terms or Landlord’s consent
• removing barriers which currently dis-incentivise Landlords from investing in their AHA holdings.  This will see changes to the 1986 Act so that if the Tenant has agreed to make payments to the Landlord for improvements that are wholly or partly financed by the Landlord, such payments will be disregarded from rent considerations, similarly any benefit from the improvement to the Tenant will also be disregarded
• updating the retirement provisions for Council farm Tenants.  This will see the retirement age of 65 in a Case A Notice to Quit being replaced with ‘the tenant’s pensionable age’ using the ages included in the Pensions Act 1995
• amendment to the 1986 Act, so that applications for succession on retirement can be made at any age.  Currently the Tenant must be at least 65 years old.

The Agriculture Bill was set before Parliament on the 16th January.  This will set the framework for agricultural policy in England for the foreseeable future.

The legislation is largely the same as in the original Agriculture Bill published in September 2018 – which ‘fell’ with the end of the previous Parliament prior to the General Election.  Generally, it gives Ministers broad powers to undertake certain activities, without necessarily setting out in any detail how those powers might be used.  For example, in terms of direct payments, it states that the ‘Agricultural Transition’ will commence in 2021 and last for seven years.  It provides powers to ‘delink’ direct payments from the requirement to occupy land, and to capitalise future payments into a lump sum.  However, the Bill gives no details on if, when or how this all might be done.  A Policy Statement, similar to that which was published alongside the original Bill, was expected this time too.  It might have provided more information on matters of detail.  However, it has not yet appeared – it is reported that it may be published when the Bill enters the Committee stage in Parliament.

One point that can be taken from the Bill is the Agricultural Transition will happen, and looks certain to begin in 2021 – the NFU had been calling for a year’s delay.  Therefore the BPS will start being reduced from next year.  Some people have mistakenly taken the announcement on the guarantee of funding for the next five years (see other article) as a guarantee of BPS funding for that period.  This is not the case; it is merely the total ‘pot’ of money available to the farming sector.  Over time, much of this will be paid in other ways – for example ELM.

The new Bill does contain some changes from its predecessor.  Many of the alterations are to address criticisms of the original legislation – not least the minimal mention of food production.  The most notable are;

• in the areas that Government may ‘give financial assistance’ to in future (e.g. under ELM) there is now a specific mention of soil quality and preserving the genetic resources of livestock (native breeds).  Upland farming also gets a more prominent mention (although largely in the explanatory notes).
• under the new legislation, any financial assistance scheme ‘must have regard to the need to encourage the production of food in England and its production in an environmentally sensitive way’.
• multi-annual ‘financial assistance plans’ will have to be drawn up.  This will set out what support the Government intends to operate under its financial assistance powers.  The first plan will run for seven years from 2021, and then each plan will be for a five year period.
• every five years the Government must produce a statistical analysis of the food security of the UK.  This is not just self-sufficiency, but will look at issues such as global food supply, resilience of the supply chain, consumer spending etc.
• there is a new section of the Bill (Part 4) that might be thought of as dealing with miscellaneous issues.  These include the power to change fertiliser regulations, setting rules for animal ID, amending the red meat levy (mainly to address the issue of Welsh lambs being slaughtered in England) and changes to agricultural tenancies legislation.  The changes to the tenancies legislation are relatively minor, but are covered in the following article.

With a large Government majority, it is expected that the Bill will pass into law relatively easily, although minor elements may be amended during the Parliamentary process.  It is likely to be the Parliamentary timetable that is more of an issue, with many pieces of legislation having to be dealt with.  Theresa Villiers, speaking at the Oxford Farming Conference, suggested that the legislation would be passed by ‘late spring’.  Whilst this may slip, the Bill looks set to become law in plenty of time for the Agricultural Transition to begin in 2021.

A full copy of the Bill can be found at – https://services.parliament.uk/Bills/2019-20/agriculture/documents.html

We have had a few inquiries as to whether the three crop rule will be relaxed because of the wet weather.  It does not appear that there will be a ‘blanket’ relaxation of the rules.  RPA has released guidance, titled ‘Claiming BPS 2020 and greening payments in extreme weather’ (see https://www.gov.uk/guidance/claiming-bps-2020-and-greening-payments-in-extreme-weather).  In the main, it simply reiterates the different ways claimants can meet their crop diversification requirement.

It may be possible in ‘abnormal’ or ‘unforeseeable circumstances’ that force majeure may be claimed, but RPA has said it will not consider a force majeure request until later in spring 2020 (once spring planting conditions have become clearer).  However if you think you may need to claim force majeure you should collect evidence to support a possible claim in the future, including:

• rain fall data to show the rain was exceptional on your farm during the drilling period
• seed invoices & delivery notes or letters from suppliers if not able to supply seed
• soil type
• original cropping plans, drilling dates if applicable
• dated and referenced photographs showing field conditions.

In the main though, claimants will be expected to meet the crop diversification rules (see below) but are reminded uncropped land can be managed as fallow which is counted as a separate crop.  Similarly, spring and winter varieties count as different crops irrespective of their sowing date.  In addition, failed crops can count as the crop originally established or be managed to count as fallow land.  However, if it is no longer possible to identify what crop was in the field, supporting evidence such as seed invoices, spray records or photographs, will be required.

The crop diversification rules have two bands:

• where the arable land covers between 10 and 30 hectares, at least two different crops are required, with the main crop not more than 75% of the arable area
• where the arable land is greater than 30 hectares, at least three different crops are required.  The main crop cannot cover more than 75% and the two main crops together not more than 95%

Claimants are exempt from crop diversification if:

• more than 75% of their entire holding is used in a combination of permanent or temporary grass, or
• more than 75% of their arable area is used for temporary grass, left fallow or planted with leguminous crops, or
• more than 50% of their entire holding was not claimed by them in the previous year and all the land is growing a different crop from the year before.

Further to our article in December (see https://abcbooks.co.uk/lfass-payments-3/) the first tranche of LFASS loan payments have now started.  The Scottish Government has confirmed more than 7,500 hill farmers and crofters will receive up to 95% of their estimated payment in this first run.  A further 2,500 eligible farmers and crofters are able to make use of this loan mechanism if they have chosen to take up the offer.  Further payment runs will take place over the next few weeks.  The loan is for the 2019 payment, which is 80% of the 2018 rates due to EU rules.  The amount received will automatically be deducted from the LFASS payment when claims have been fully processed and a balance payment will be made; this should be from April 2020.

For those English farmers who need to transfer land and/or entitlements in preparation for this year’s BPS claim, the RPA has confirmed the online functionality to allow this will be switched back on from 31st January.  It is possible to make transfers via a RLE1 paper form whilst the system is closed, but where possible we would recommend using the online system.  In order for entitlements to be used for a 2020 BPS claim they must be transferred to the correct business by midnight on 15th May 2020.

The first Budget of the new Government will be on the 11th March.  The Chancellor, Sajid Javid has pledged to use the announcement to follow through with the promises made in the Election campaign.  This is likely to include the announcement of significant investment in infrastructure, especially in the north of England.

The Agriculture Bill will return to Parliament before the end of January, with a view to it becoming law by the ‘end of the spring’.  This announcement was made by the Defra Secretary, Theresa Villiers, at the Oxford Farming Conference (OFC) at the start of the month.

From the comments made by the Minister, it appears that the contents of the Bill will remain very similar to the previous one that ‘fell’ with the end of the last Parliament.  There is a new commitment within the legislation to undertake a regular review of food security.  This seems to have developed from some of the No-Deal planning that Defra did prior to Brexit, and is perhaps a response to how little mention of food there was in the original Bill.

An updated Policy Statement is also going to be released alongside the draft legislation.  Whether this will provide any more detail around the Agricultural Transition, phase-out of BPS, or introduction of ELM and other new support remains to be seen.  One point that Mrs Villiers was clear on in her speech, was that the Agricultural Transition would commence in 2021.  There have been calls for a postponement for a year due to the delay in Brexit, but this does not seem to be on Defra’s agenda at the moment. 

 

 

The Scottish Rural College (SRUC) and Adas are to form a new joint venture aimed at the agricultural sector.   Running alongside the existing services offered by the two organisations, the ‘UK National Agricultural Knowledge Service’ will pool research knowledge from Scotland and England.

Farm profitability increased by 16% in 2019 compared to the year before, according to Defra forecasts.  The Department has released its early estimate of aggregate industry profit, Total Income from Farming (TIFF) for the year just gone.  The main reason for the change is higher output from the cropping sector (up 11%).  Livestock output increased by 1%.

This forecast is produced by Defra to meet EU requirements.  It is stated that it is based on incomplete data in some areas and there is a history of quite large revisions.  A more accurate figure will be produced in May 2020.

The rise, from £4,644m in 2018 to £5,380m in 2019 at current prices equates to a 14% rise in real terms.  Our estimate was for a more restrained increase of 6% in real terms.

The Government has announced that the 2020 BPS will be fully-funded at 2019 levels.  In addition, it has also reiterated its Election promise to ‘match the current budget available to farmers in every year of this Parliament’.  The current Parliament is due to end in 2024.

The Chancellor, Sajid Javid, has announced that a total of £2.852 billion would be made available (see https://www.gov.uk/government/news/farmers-3-billion-support-confirmed-in-time-for-2020).  Most of this will be used to fund direct payments (the BPS) for the 2020 scheme year, but some will also be used to co-fund Rural Development (RD) schemes.

As set out in our article in November (see https://abcbooks.co.uk/bps-2020/), the UK takes over funding of the 2020 BPS because it is paid out of the 2021 EU budget – under the Brexit Withdrawal Agreement, all EU programmes are due to revert to UK control as from the 2021 budget year.

Actual BPS payments made in the 2019 year are currently unknown.  However, a total of £2.750bn was paid out in 2018; 2019 will be very similar as both the exchange rate and financial discipline were close to the previous year’s figure.  Therefore, the amount pledged for 2020 looks about right, given that some money will go to RD schemes (it’s not that we don’t trust Government announcements – but it’s always best to check . . .).   As also set out in the November article, there is a quirk in the system that still has to be resolved.  Not surprisingly, in a post-Brexit world, the funding announcement was made in Pounds.  But all BPS entitlements are denominated in Euros.  How individual farmers’ payments are to be calculated has not yet been announced.  Based on this announcement, out best-guess is that the conversion rate has effectively been locked at the 2019 level (€1 = £0.89092).  What happens with financial discipline (a 1.4327% deduction in 2019 is unclear).

The announcement on funding after 2020 gives scope for a variety of interpretations.  The Chancellor stated that ‘We will guarantee the current annual budget to farmers in every year of the Parliament’ (our bold).  Does this just mean the current level of direct payment funding (circa £2.75bn)?  Or does it also include agri-environment and hill farming funding (another £0.51bn in 2018)?  It could be argued that these latter payments are not limited to ‘farmers’, so do not fall within the funding guarantee.  Then, there are grant scheme payments under the Rural Development programme – in England, LEADER, Growth Programme, Countryside Productivity etc., and the equivalent programmes in the devolved regions.  It is surprisingly difficult to track the spending under these, but in 2018 it was in the region of £0.18bn.  Is this funding included as well? – we would guess not as they go wider than just ‘farming’.

European funding for regional social and economic development (including rural areas) is due to be replaced from 2021 with the ‘UK Shared Prosperity Fund’ (UKSPF).  There is little detail on this at present, but we would suspect that the funding for capital grants under the various Rural Development Programmes will end up within this.  How much then comes back to rural areas is an open question.  With the Conservative’s electoral gains in English Northern and Midlands towns, there may be a political imperative to put most of the funds into these areas. 

The total funding for BPS 2020 has been divided up among the four devolved regions.  As the respective administrations have freedom over spending, this money could be used for other things – legally it is not ring-fenced for the BPS.  In practice, it seems highly unlikely that this would occur.  The Welsh Government has already stated that it will be using its allocation for 2020 to simply continue with 2019 spending levels.  This includes the 15% ‘Pillar Transfer’ from the BPS to Rural Development which has been in the scheme since its inception.

To summarise, anyone budgeting for 2020 BPS payments is now pretty safe to just roll-forward 2019 payment rates.