Category: Policy & Business

A new report has recently been published making recommendations on how food, farming and the countryside need to change to meet the challenges of the future.  The report ‘Our Future in the Land’ was commissioned be the RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce).  It was set up in November 2017 under the chairmanship of Sir Ian Cheshire and has taken evidence from a range of sources.  Among the 15 recommendations made are that there should be a ten-year transition plan to a sustainable, ‘agroecological’ farming by 2030, increased innovation to unleash a fourth agricultural revolution, greater advice for farmers, and more emphasis on cooperation and collaboration.  The full report can be found at – https://www.thersa.org/discover/publications-and-articles/reports/future-land

Defra has a new leader in the form of Theresa Villiers.  Following his appointment as Prime Minister on the 24th July, Boris Johnson was quick to radically reshape the Cabinet.  This included moving Michael Gove to the Cabinet Office (his formal title being Chancellor of the Duchy of Lancaster) where he will oversee much of the planning for Brexit – including preparations for a ‘No Deal’.

Ms Villiers is somewhat of an unknown quantity when it comes to farming and rural matters.  She has been MP for the solidly urban seat of Chipping Barnet in London since 2005 (with a slim majority of 353 in the 2017 election).  She grew up in London and had a career as a barrister and lecturer before going into politics.  Ms Villiers has previously served as the Transport Minister and was then Northern Ireland secretary from 2012 to 2016 under David Cameron – a position in which she was not regarded as a great success.

Like almost all of Mr Johnson’s Cabinet, Theresa Villiers is a committed Brexiteer.  She has argued that the UK should be prepared to leave the EU without a deal if the Northern Irish backstop cannot be renegotiated.  She would be happy to see trade conducted on WTO terms.  Ms Villiers has been a strong advocate of animal welfare, but supports the badger cull to control bTB.  She has backed fracking in the past, and supports HS2.

For the majority of farmers, the most important question will be Theresa Villiers views on future farm policy, and particularly farm support.  Will she continue the process set out by Mr Gove (‘public money for public goods’), or strike out in a new direction?  It is worth remembering that the Agriculture Bill is still stuck in Parliament, so could be amended.  And, more importantly, the Bill only provides Defra with the powers to implement a new farm policy – it does not ‘hard wire’ into legislation what that policy will be.  The future direction of support – BPS phase-out to 2028, ELMs etc. – was only contained in a ‘Policy Paper’ which could be changed almost at will. 

Whilst Mr Gove was not everyone’s cup-of-tea it made a refreshing change to have a heavyweight – both in political and intellectual terms – at the head of Defra.   Theresa Villiers becomes the sixth Defra Secretary since 2010 – the rapid turnover of Ministers does not seem to be a receipe for informed and sensible policy-making. 

George Eustice also makes a return to Defra after resigning in February over the issue of Brexit.  He is Minister of State alongside the retained Therese Coffey.  Lord Gardiner of Kimble and David Rutley also remain on the Defra Ministerial team.

Ursula von der Leyen has been appointed as the new President of the EU Commission – one of the most powerful jobs in Europe.  She will replace the outgoing head, Claude Juncker, on 1st November.  Although that is (theoretically) the day after Brexit, as President-elect, Ms von der Leyen will have a big influence on any withdrawal negotiations during the autumn.  She has already stated that she would support a further extension of the UK’s withdrawal date “should more time be required for a good reason”.  Whilst the Commission is only the EU’s ‘Civil Service’, it has a far more powerful role than that title might suggest.  It proposes and drafts all EU legislation, enforces EU rules across Member States, and negotiates treaties (such as that with the UK).   Ms von der Leyen gained the role after a tortuous process that involved a delicate compromise between Member States and the European Parliament.  She is currently German Defence Minister and a close ally of Angela Merkel.

The Welsh farming industry has another chance to comment on post-Brexit support policy.  As we wrote last month, a further consultation has been launched on the design of the Sustainable Farming Scheme.  The consultation, ‘Sustainable Farming and Our Land’, will run until 30th October 2019.

Details of the scheme are obviously still being worked-out; as well as the consultation, a process of ‘co-design’ with farmers, foresters, advisors and academics is scheduled to start in the autumn.  However, some key features are likely to be included in whatever emerges.

A ‘Sustainable Farming Payment’ will effectively replace the BPS and Glastir.  This will be an annual payment to land managers that rewards ‘sustainable farming practices’.  This will be based on four principles;

• it provides a meaningful and stable income stream.  There will be multi-year contracts with fixed payment rates which will help offset market volatility.  Payment rates will not be constrained by the ‘income foregone’ calculation, and there is an indication that the scheme will be set up so that the SFP can be a significant income stream into farm businesses.
• it rewards outcomes in a fair way.  It is clear that the support will not simply be available ‘as of right’ like the BPS.  Farmers (and foresters) will be required to deliver ‘outcomes that are not rewarded by the market’.  As there is a market for food production, this will not be specifically supported under the scheme.  However, the provision of public goods will be rewarded.  Note the focus on ‘outcomes’ – it may not be enough to simply follow defined practices, it may be necessary to show that these are actually having the desired effect.
• it pays for both new and existing sustainable practices.  Criticism of past agri-environment schemes was that they paid land managers for changing from harmful practices, but did not reward those already ‘doing the right thing’.  The SFP looks to change this.
• it can be flexibly applied to every type of farm.  If the SFP is to be a realistic replacement to the BPS there is an acknowledgement that all farms must have a realistic chance of getting into the scheme and it not be restricted to certain geographies or farm types.

In addition to the annual payments under the SFP, there will also be significant business support.  This will focus on advice, capital investment and skills development.

In terms of advice, it is envisaged that entry to the scheme will be conditional on a Farm Sustainability Review that produces a Farm Sustainability Plan.  The farmer would put this together with an accredited advisor and it would set out what the farm could do to receive annual payments under the SFP and what business support would be useful.  Business support would come in three mains forms: business capacity and skills, capital investment to enhance sustainability, and knowledge transfer and specialist skills.

The capital investment strand could work in a similar way to the current Farm Business Grant.  Business capacity, skills and knowledge transfer will build on best practice from existing advisory services – for example the Farming Connect advisory service and Glastir contract managers.

The transition to the new support arrangements has not been set out due to the continued uncertainty over Brexit timing and future funding levels.  Likewise, detailed scheme eligibility and payment levels will not be decided on until later.

The consultation can be found at – https://gov.wales/revised-proposals-supporting-welsh-farmers-after-brexit

The productivity of English lowland beef and sheep farms dropped by 21% between 1990/91 and 2017/18.  Livestock farms in the LFA showed a 9% decline and mixed farms (which will include a high proportion of grazing livestock) recorded a 4% drop.  Other sectors fared better.  Cereals farms’ productivity increased by 25%, general cropping by 32%, and dairy by 27% over the 27 year period.

These figures come from new statistics released by Defra, which calculate Total Factor Productivity (TFP) for individual farm sectors.  TFP is a key measure of the performance of agriculture.  It represents how efficiently farm businesses turn inputs into outputs.  It looks at physical quantities of both, so swings in market prices should not influence the figures.  For many years Defra has produced a TFP figure for the whole industry (see -https://www.gov.uk/government/collections/productivity-of-the-agricultural-industry).  The same methodology has now been applied to individual sectors, based on Farm Business Survey data.  Defra highlight that this new analysis are experimental statistics and will be subject to further refinement.  Data for specialist pigs, specialist poultry and horticulture farms have not been presented due to concerns around small sample sizes.  The full statistics are available at https://www.gov.uk/government/statistics/total-factor-productivity-for-england-by-farm-type.  These provide more detail on what lies behind the headline figures.

It is obviously concerning that beef and sheep, one of the main sectors of English farming, has actually got worse over the last 27 years.  On closer examination of the figures, a lot of the decline in productivity occurred in the first few years of the period.  However, ‘flat-lining’ productivity for the last two decades is still pretty poor.  It is perhaps no coincidence that the beef and sheep sectors have been those that have, proportional to output, received the greatest level of subsidy in the recent past. 

Other sectors may feel slightly more pleased with their performance.  However, even the best, general cropping, at a 32% improvement, only works out at an annual increase of 1.2% – hardly stellar efficiency gains when compared with other parts of the economy.  Also, looking deeper, much of the apparent increase in productivity has come from a decline in labour use, rather than using inputs or land more efficiently.  The ‘productivity challenge’ is one of the biggest issues facing UK farming in its post-Brexit future.     

Defra has appointed a new Chief Scientific Adviser (CSA), Professor Gideon Henderson.  Professor Henderson has been head of Earth Sciences at the University of Oxford and replaces Sir Ian Boyd, who is leaving Defra after seven years in the post.

The second application window for the Countryside Productivity Small Grants (CPSG) has finally opened.  Initially, we expected the second round in autumn 2018, then it was pushed back to ‘early 2019’, after which we were informed it would be mid-May following the BPS application window.  Defra realises the delayed application window is not ideal timing, being during harvest, and has therefore extended the window to eight weeks, closing at midday on 3rd September 2019.

The CPSG provides funding for farmers towards specific items of equipment to improve the productivity of their farm.  Claimants can choose from a list of items  (26 new ones have been added for Round 2) that have been chosen to improve either:

• technical effiency
• animal health and welfare
• resource efficiency, or
• nutrient management

Grants of 40% (up to 50% in Cornwall and the Isles of Scilly) of the standard cost of the item are available.  Applications must between £3,000 and £12,000.  Those who applied in Round 1 can apply in this Round as long as the value of both applications does not exceed the maximum of £12,000 and this grant also meets the minimum threshold of £3,000 i.e. the grant in Round 1 must have been £9,000 or below.

Once again, applications are made via a specific online portal.  Those submitting the application must have either ‘make legal changes’ or ‘full permissions’ for the applicant’s business on the Rural Payments service.

Once the closing date has passed, the RPA expects Grant Funding Agreements (GFAs) should be emailed out towards the end of September.  The grant funded equipment must be purchased and claims submitted within 150 days of the agreement.  During the last round, there were problems with supplies of some of the equipment.  Although equipment must not be ordered or purchased before the GFA is received, claimants are urged to order items quickly after an Agreement has been offered.  More information can be found on the Defra website at https://www.gov.uk/guidance/countryside-productivity-scheme#small-grants

Gifts could become exempt from Inheritance Tax (IHT) after five years, rather than the current seven, if the recommendations of the Office of Tax Simplification (OTS) are accepted by Government.  This is one of the suggested changes in a report into the operation of the IHT which was published in July.  It is stated that the current seven years during which a lifetime gift may become subject to Inheritance Tax is too long as Executors can struggle to find records.  At the same time, it is also recommended that the tapering provision of potentially exempt transfers is abolished.  Other suggestions from the OTS include a simplification of the gift exemptions and better coordination of the rules between IHT and Capital Gains Tax.  For agriculture, the report states that HMRC should review their current approach around the eligibility of farmhouses for Agricultural Property Relief (APR) in sensitive cases, such as where a famer needs to leave the farmhouse for medical treatment or go into care.  Also, the HMRC should be clearer in their guidance as to when a valuation of a business or farm is required.  The background to the report outlines how niche IHT is – only 5% of all deaths in the UK result in any tax being paid.  Of the total value of estates in 2015/16, only 14% of the value fell to be taxed, with 64% being exempted by the nil rate band.  APR and BPR only exempted a further 1% and 2% of the value of estates respectively.  Although it is important to farming, the relative unimportance of APR in fiscal terms may provide some comfort to those who fear its abolition.  The full review can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/814181/Final_Inheritance_Tax_2_report_-_web_copy.pdf

Defra has finally published the Terms of Reference of an independent review into the food sector.  As we reported back in January, the review will be led by Defra non-executive director and food entrepreneur, Henry Dimbleby.   This is the third time that Defra has announced the same review, with the process starting back in the summer of 2018 and then re-announced at the Oxford Farming Conference.  Something now appears to be happening however, with ToR appearing and a ‘call-for-evidence’ to be launched in the summer.  The review will look at the entire food chain, from field to fork.  There will be a particular focus on how food can influence health and well-being.  The review will publish its findings in summer 2020.  The results of the review will then feed into an integrated National Food Strategy for England.  This will be an overarching strategy for government and aims to be produced six months after Mr Dimbleby’s report is delivered.  The terms of reference can be seen at – https://www.gov.uk/government/publications/developing-a-national-food-strategy-independent-review-2019