Tag: DEFRA

Government Review of Pig Contracts

A UK wide consultation into the structure of contracts in the pig industry has been launched by Defra.  Following the extremely challenging eighteen months for the sector, Defra is looking to gather views on how supply arrangements currently function.  Furthermore, it is looking to address whether the functionality of the pig supply chain can be improved.  It is hoped that any interventions as a result of the review will enable businesses to improve risk management practices.

The consultation closes on 7th October 2022, with those involved in the sector able to give their views here – https://consult.defra.gov.uk/supply-chain-fairness/contractual-practice-in-the-uk-pig-sector/

AHDB Consultation

Defra has launched a new consultation on changes to the Agriculture and Horticulture Development Board (AHDB).  The consultation, launched on 17th November, seeks views on proposals for reform of the legislation that establishes the levy board.  It is in response to the request for views on AHDB conducted in 2018.  The proposals also reflect the outcome of the ballots on potatoes and horticulture, from earlier this year.

There are four proposals being consulted on;

  1. The Future of the Potato and Horticulture levies – This proposal reflects the outcome of the ballots in these two sectors.  The proposal requests consultation on removing potato and horticulture levy mechanisms from the AHDB Order.  Further, the consultation requests views on how to manage and fund future Emergency Authorisations (EAs and EAMUs).
  2. A Regular Vote for Levy Payer – This looks at establishing a five-year voting cycle on the work that levy funds will be spent on in each sector.  The first of such votes is set to take place in Spring 2022.  This proposal also requests views on whether the 5% threshold for calling a ballot should be retained.
  3. Extending the Scope of AHDB – Views are being sought on whether the AHDB order should be amended to allow work to be conducted in non-levy paying sectors, i.e. poultry, on a voluntary or commercial basis, where requested by industry.  This may also allow the potato and  horticulture sectors to ‘opt back in’ in certain circumstances.  
  4. Change in Headroom for Levy Rates in the English Sheep Sector – A proposed 25% increase in the maximum allowable levy rate for the English sheep sector. This is to allow more flexibility in delivering additional services as required

Responses to the consultation are sought before midnight on 10th January 2022.  Further details on the consultation are available here.

Defra’s Brexit Preparations

The National Audit Office (NAO) reports that Defra has been making good progress in its preparations for leaving the EU.  However, enormous challenges remain and it believes that it is no longer possible for Defra to deliver everything it originally intended for in a ‘No-Deal’ exit.  That said, Defra is working on contingencies to have what it believes are sufficient arrangements should a No-Deal scenario arise.

As readers will be aware, Defra is one of the Government Departments most affected by Brexit and the NAO reports that it is responsible for 55 of the 319 EU-related work streams across Government.  This covers agriculture, the agri-food industry, chemicals, fisheries and the environment.  The NAO report focuses on overall implementation of Defra’s EU Exit portfolio as well as work streams covering environmental regulations for chemicals, the import and exports of animals and animal products and control of English fishing waters.  Areas where significant progress has been made, despite the demanding timescale, include;

  • securing HM Treasury approval for £320 million spending in 2018-19
  • started to build new IT systems
  • recruitment of over 1,300 new staff by March 2018
  • strengthened its project management capability
  • published consultation documents on agriculture and fisheries (note Agriculture Bill was published on 12th September – see accompanying article).

Despite this notable progress, major challenges remain, particularly as the political environment is constantly changing, making it difficult to develop a robust plan and stick to intended timelines.  The main challenges include;

  1. No-Deal Scenario Planning for Agri-Food – as alluded to above, Defra will not have time to implement all the changes necessary by 29th March. Examples of areas where Defra will fall short are;
    • Export health certification for products of animal origin – estimated to be valued at £7.6 billion, Defra needs to negotiate and agree replacement export health certificates with 154 countries, necessitating the introduction of approximately 1,400 versions of the current EU export health certificates. As a mitigating measure, Defra is focusing on 15 countries which account for 90% of all exports. It accepts that under a No-Deal scenario, UK firms exporting to the other 139 countries may be unable to do so for a period after a no-deal Brexit.
    • Shortages of qualified veterinarians – with the prospect of having to issue health certificates to EU countries for the first time in many years, it is clear that there are not enough vets.  Estimates of the increase in certification required as a result of the UK trading with the EU as a third country range from 300% to 800%.  With veterinary shortages, there will be delays to consignments crossing the border. The NAO reports that Defra plans to launch an emergency recruitment campaign for vets in October to meet minimum requirements and plans to use non-veterinarians to check records and processes that do not require veterinary judgement. Whilst these steps are sensible and should be pursued without delay, with less than 200 days before ‘Brexit Day’ it remains a tall order to have new veterinary and non-veterinary sufficiently trained and up-to-speed to deal with the increased bureaucracy. 
    • Control and enforcement of fishing waters – whilst not of direct relevance to the agri-food sector, it highlights the fact that there is a significant shortage of patrolling vessels for border control. This echoes sentiments elsewhere and indicates concern regarding the potential for smuggling, particularly if there are major bottlenecks at Border Inspection Posts (BIPs). 
  2. Chemicals Regulations and Exports – the UK exports of chemicals to the EU are valued at £17 billion.  Whilst the UK is seeking continued participation on the European Chemicals Agency, this is subject to negotiations. Without this access, exports to the EU would cease as existing registrations would no longer be recognised by the EU and re-registration in another EU Member State is a lengthy process and cannot commence until the UK last left the EU.  This has the potential to affect sales of agri-chemicals from UK plants to other EU markets (e.g. Ireland) and could also give rise to issues concerning the import of chemicals from the EU.  However, based on the UK Government’s no-deal planning publications in August (see previous article), it is anticipated that the UK would continue to recognise existing EU certifications and registrations (at the UK’s ‘discretion’). 
  3. Parliamentary Time – there is a high risk that Defra will not be able to introduce all of the required legislation to transpose EU law into the UK statute by March 2019.  The NAO reports that Defra has “three new bills and 93 Statutory Instruments to convert EU law into UK law and is now having to prioritise.”
  4. Supporting Businesses to in Brexit Preparations – the Government has been unwilling, until recently, to allow Departments to discuss preparation for a No-Deal scenario with stakeholders.  This finding will be unsurprising to most readers as many business organisations have long been expressing concern at the lack of information available on how they can prepare for Brexit. Last month’s Technical Notices on no-deal planning are a start but substantial uncertainty remains and very little time to implement contingency plans.

Overall, the NAO report demonstrates that Defra is rising to the Brexit challenge.  But the scale of a No-Deal scenario is so substantial, that the Department’s best efforts will fall short in several key areas.  Another major issue for businesses which the NAO did not cover, is the potential deterioration on product value and the reputational damage to British Agri-Food Plc that will arise from not being able to adhere to just-in-time supply chain delivery requirements.  In sectors where profit margins are frequently less than 5%, any deterioration in product value will have the potential to cause severe damage.

Finally, one needs to be mindful that many of the issues pointed out above are related to a No-Deal scenario.  According to Michel Barnier this week, if both sides are realistic a Withdrawal Agreement could be reached in 6-8 weeks.  That said, in today’s political environment, realism appears to be in short supply and businesses must prepare for all scenarios, including No-Deal.

Future Farm Policy

DEFRA launched its much-anticipated consultation on the future for food, farming and the environment on 27th of February.  It is entitled ‘Health and Harmony’ – which sounds rather more like a spa than a future roadmap for the sector.  The consultation seeks views on the Government’s proposals for future domestic farm policy once the UK has left the EU.

The deadline for responses is the 8th May.  The consultation has a number of open-ended questions, or asks respondents to list their priorities in certain areas.  Many in the industry have already commented the paper lacks detail and fails to set out a clear plan.  In the Governments’ defence, the exercise is meant to be a consultation ahead of the Agriculture Bill (due later in the year).  There may well have been equal criticism if the paper had set out a set of decisions that had already been made.

Timing

The Government anticipates that it will agree a transition period after Brexit (the Government’s preferred term for this is ‘implementation period’).  It is envisaged that this will last for about two years after we formally leave the EU in March 2019 – the EU is looking at a slightly shorter period ending on 31st December 2020.  Once the UK is able to move away from the CAP, the Government has said there will be an ‘agricultural transition’ period in England, this will begin as soon as possible – subject to negotiations with the EU.  It has already been announced that the 2019 BPS in England will be paid on the same basis as it is now.  It seemed likely that, whilst the UK was in the implementation period, the CAP would apply – thus the BPS would continue for 2020.  The implication of the consultation (although not explicitly stated) is the UK will try to extricate itself from the CAP during this period.  Thus, the new ‘agricultural transition’ period could be implemented as soon as 2020.  During this period, which will last a ‘number of years’ (the length being part of the consultation), direct payments will be phased out and replaced with a system of ‘public money for public goods’.  It appears that major changes in support will not happen until this transition period – i.e. if the UK remains in the CAP for 2020 (or even 2021), everything would be delayed.

Direct Payments & Capping

Perhaps of most interest to farmers will be the proposals for Direct Payments, and especially capping.  In the first year of the agricultural transition two options for capping are outlined;

  • reductions beginning at £25,000 of Direct Payments with a 5% deduction.  10% between £30,000 and £40,000 and rising in steps thereafter.  Amounts over £200,000 would face a 75% deduction.  This system is claimed to affect 19,000 farmers.
  • a straight cap at £100,000, affecting an estimated 2,100 claimants

Both these options are stated to free-up £150m in the first year to go towards funding new pilot environmental schemes.  The consultation also gives the option for respondents to suggest other capping systems as an alternative to these two.  Further reductions would be brought-in in later years of the ‘agricultural transition’ until payments were completely phased-out.  The consultation suggests this could be done in gradual steps, or with a further ‘step-change’ after a period of years (3 is suggested).

Interestingly, the paper suggests that the conditions for receiving Direct Payments could be radically altered.  One option is just to retain the current requirement of being paid on eligible area (albeit with simplified Cross-compliance and Greening).  However, an alternative suggested is to break the link with land area.  Farmers would be paid just based on their historical support – they would not even have to continue farming.  This turns the payment to a sort of ‘bond’.  Some might use it as a retirement income for example.  It would also solve the problem of claimants splitting businesses to avoid capping.  New control measures would be needed to replace cross-compliance as some (new) farmers would be outside of the support system.

Environmental Schemes

In the short-term the Countryside Stewardship would continue to operate.  Further streamlined options are promised for 2019, including simplified woodland grants.  The CSS is planned to end in 2020.  Although the timing is not entirely clear, this might suggest that 2019 would be the final chance for applications for a 1st January 2020 start date. 

Some will have a sense of deja vu as the new scheme is being referred to as the New Environmental Land Management Scheme (NELMS).  Pilots will be run from 2020 with the new scheme scheduled for a 2022 start.  This suggests there may be a ‘gap’ in scheme availability.  It will have the familiar features of past schemes such as annual payments and capital grants.  However, it is promised to be simpler, and have room for ‘innovative approaches’ (e.g. results-based schemes).  There will be a continued focus on collaboration and landscape-scale approaches.  The scheme will pay for ‘public goods’ in the areas of soils, water, air, biodiversity, climate change, natural beauty and heritage.

Other Policies

A number of other policy areas are outlined as being ‘public goods’ (which presumably mean they could attract public money in future).  These include animal health & welfare, plant & tree health, productivity support, resilience, traditional farming systems and landscapes (e.g. hill areas), and public access.

Not all the ‘asks’ of the industry look like being accepted however.  Volatility is covered in the consultation but the implication seems to be there will be no government subsidy for risk management instruments.  Likewise, ‘fairness in the supply chain’ is covered, but there seems little appetite for more Government legislation.

A new ‘regulatory culture’ is outlined, linking with the Inspections review being carried out by Dame Glenys Stacey (see earlier article).

Devolution

The consultation touches on the split of competencies between devolved Governments and UK-wide authorities.  There is little detail on what this might look like in practice.  There appears to be a presumption that powers will be devolved wherever possible – and certainly in areas where these already sit in Cardiff, Edinburgh and Belfast.  This suggests that different farm support arrangements will be likely in the four parts of the UK.  However, the paper sets out that ‘common frameworks’ are needed in areas that affect the internal UK market and trade.  If the scope of this is drawn widely enough then there could still be the ‘power grab’ that the devolved administrations have been warning against.

The full consultation can be found at – https://www.gov.uk/government/consultations/the-future-for-food-farming-and-the-environment