UK: Agricultural Bulletin - Summer 2011

A Briefing For Farmers And Land Agents
Last Updated: 8 July 2011
Article by Smith & Williamson

Red tape review

A summary of the recommendations made by the farming regulation taskforce to reduce bureaucracy in the farming sector.

One of the first policies the new Defra team announced after the Coalition Government came into power in May 2010 was to set up a taskforce to identify ways to reduce the regulatory burden on the farming industry. Chaired by Richard Macdonald, the taskforce has now delivered its report which contains 215 specific recommendations. The overall message from the farming regulation taskforce is that the industry should be trusted more, but it has to warrant such trust. The phrase that is used is 'earned recognition'.

In terms of changing the culture of regulation, the report has six overall recommendations.

  1. Question whether there is actually a problem and if regulation is the best way to solve it.
  2. Foster better partnerships between the industry and Government, allowing for more voluntary industry-led initiatives, and ensuring industry advice is heeded.
  3. Ensure inspection and enforcement is targeted and fair (cracking down on major breaches but issuing warnings for minor wrongdoings).
  4. Make the process of compliance easier, through reviewing paperwork requirements (including greater use of information sharing within Government and electronic data capture).
  5. Understand farmers and their motivations better so that behaviour can be influenced without regulation (or to make regulation more effective).
  6. Be more proactive at an EU level to ensure any new regulation is minimised and implementable.

Following these broad recommendations, a large number of specific problem areas have been addressed and summarised in this article. The full report can be found at www.defra.gov.uk/publications/2011/05/17/pb13527farmingreg-report

SPS and cross-compliance

  • Efforts should be made to avoid remapping, and a single map should cover both the single payment scheme (SPS) and the agri-environment scheme.
  • In terms of claiming for the SPS, the review recommends:
    • the minimum claim size should be raised from 1ha to 5ha
    • i n EU negotiations, Defra should press for the abolition of entitlements and fight against the imposition of payment capping
    • crop codes should be abolished
    • the automatic rotation of entitlements to protect against confiscation ought to be possible
    • earlier applications (from January) should be allowed.
  • The 'obvious error' provisions should revert to those in place prior to the rules being tightened in 2010.
  • Cross-compliance is an area where the reform of the inspection regime would have a significant effect. Other points raised include simplifying the cross-compliance guidance, and removing the requirement to have a soil protection review under GAEC1.

Animal movement regime

  • A thorough overhaul of the county parish holding (CPH) number system, allowing all premises within ten miles to be covered under one CPH number. No recording of animal movements between land under the single CPH would be required.
  • Removal of sole occupancy agreements and cattle tracing system links.
  • The development of a central computerised database to record all animal movements (cattle, sheep and pigs).
  • The same standstill rules to apply to all species and to be relaxed to allow farm-to-farm transfers and transfers to isolation facilities without triggering a standstill.
  • More flexibility on enforcing the animal ID rules, especially for lowlevel or minor breaches.

Environment

  • The report devotes a number of pages to the nitrates regime. Overall, the review recommends that nitrates should be managed through the Water Framework Directive in a joined-up, catchment-level approach. In the shorter term, the nitrate vulnerable zone rules should be amended as such to make them simpler to comply with:
    • no requirement for a nutrient management plan
    • exemption to recording requirements for low-intensity and organic farmers
    • NMax calculation only required when there is a major change in farming system
    • grassland livestock manure (250kgN/ha) derogation to be applied for on SPS form.
  • Streamline the integrated pollution prevention and control process.
  • Adopt a lighter touch in the regulation of waste from farms.

Inspections

  • Duplications between inspections should be reduced. Specifically, participating in farm assurance schemes should count towards the 'earned recognition', resulting in fewer statutory inspections.
  • The number of inspections should be reduced, and a more targeted approach used.
  • Inspectors should have a proper understanding of the sector and be more sympathetic to the farming calendar.

Business issues

  • The planning regime should be amended. This would see a relaxation of the permitted development rules that govern the erection of farm buildings. There should also be more clarity on the planning requirements for polytunnels.
  • In terms of labour issues, there should be a replacement for the Seasonal Agricultural Workers Scheme. The gangmasters legislation should be retained, but its implementation simplified.
  • Despite health and safety legislation's reputation for being a major irritant of modern life, the review makes no specific recommendations in this area, other than to urge the farming sector to improve its current (very poor) record.
  • Make some changes to the tenancy legislation in terms of arbitration and model clauses.

The Natural Choice

Envisioning the future of the environment

We discuss some of the policies outlined in the Government's new environmental white paper and how these may impact the agricultural sector.

A new Government white paper on the environment, The Natural Choice, was published by Defra on 7 June. A white paper is a 'vision statement' for a longterm strategy in a particular policy area. This is the first such document on the environment for 20 years and is meant to guide policy through to 2060. It is published against the background of the National Ecosystem Assessment, which outlined strong economic arguments for having a healthy environment.

One of the main messages contained in the white paper is that farmers and land managers will have a key role to play in reconciling the tension between improving the environment and increasing agricultural production. Those policies with a direct relevance to farming and rural areas are summarised here.

  • Creating new income-generating opportunities for farmers through the provision of 'ecosystem services'. Government would help markets develop that would see the beneficiaries of natural systems pay those that maintain them. An example given is where water companies would contract with farmers to manage upland catchments to filter water to reduce downstream treatment costs.
  • In a similar vein to the above, 'biodiversity offsetting' would become part of the planning system. Where development degrades the environment, land managers would be paid to recreate equivalent habitats elsewhere.
  • Various changes to environmental stewardship (ES) are proposed. A Natural England study has found that there would be considerable environmental benefits if ES schemes could be co-ordinated on a 'landscapescale'. A pilot scheme is likely to be introduced to see how farmers can be encouraged to work together in developing such schemes.
  • Additional flexibility may be built into ES schemes so that they focus more on what environmental outcomes are achieved rather than a prescriptive list of management options.
  • The environmental advice available to farmers and landowners will be reviewed with a view to making it more streamlined. This might involve bringing together advice on ES, catchment sensitive farming (CSF) and even cross-compliance issues.
  • The CSF initiative will continue through 2011/12, and additional options will be added to the entry level stewardship (ELS) for the protection of water.
  • There will be reform of the water abstraction regime. The implication is that (summer) abstraction rights will be limited and farmers will be encouraged to invest in reservoirs and other infrastructure.
  • Twelve new nature improvement areas will be set up, supported by £7.5m of funding. These are designed to allow landowners, local government and conservation bodies to work together to improve designated landscapes. The planning system could be used to protect these areas.
  • Natural capital will be included in the UK accounts with a Natural Capital Committee reporting to the Chancellor.

The white paper is not legislation, so it remains to be seen if and when these measures are enacted. The full document can be found at www.defra.gov.uk/environment/natural/whitepaper

Animal welfare on the agenda

Farmers, vets and animal welfare experts will be included in a new animal health and welfare board to be set up in England by the end of the year.

In December 2010 the responsibility and cost sharing (RCS) advisory group submitted its proposals to ministers; the main recommendation was for the introduction of an English partnership board which should include external members from the livestock industry. The RCS advisory group was set up in July 2009 to advise on how best to develop the body charged with overseeing responsibility and cost sharing within animal health policy.

It appears ministers have taken on the advice, as Defra has announced farmers, vets and animal welfare experts will be included in a new animal health and welfare board to be set up in England.

Defra has said there will be around twelve members, five of whom will be senior Defra officials, including the chief veterinary officer. The other seven to eight will have experience in veterinary or animal welfare or in keeping farmed animals. Included in these external members will be the chair of the board.

The new board will be the main source of advice to Defra ministers, with the overall aim to reduce the risk and cost of animal disease and to improve the welfare of kept animals. The board will be responsible for:

  • setting the strategic policy priorities and how they should be funded
  • determining whether any charging mechanisms should be introduced
  • assessing the risk of, and managing, animal diseases, together with developing contingency plans for dealing with disease outbreaks
  • determining surveillance and research priorities.

The board will become part of Defra, rather than a non-departmental or arms length body, and is expected to be in place by the second half of 2011. Defra is currently advertising for external members. Each external member will be assigned to a group of stakeholders and will be responsible for ensuring their views are heard during the board's decision making processes.

CAP reform update

We review the latest developments in the CAP reform process and reveal the views of the European Parliament on budget considerations.

Revised reform timetable slipping?

Most readers will be aware that the current Common Agricultural Policy (CAP) legislation is written for a period that runs to the end of 2012, which would indicate the new reforms should commence from 1 January 2013. This will not be the case. The current timetable is for the new reforms to commence on 1 January 2014, with the existing scheme rolling over for one more year. Although, even this date may not be achievable as there is evidence of the revised timetable already slipping. Latest indications from the Commission suggest the detailed CAP reform proposals may not be out until November this year. Previously this had been scheduled for early October. Furthermore, a senior Defra official who is involved in the CAP reform negotiations has conceded that there is now a reasonable probability it will be 2015 before any reformed SPS will begin.

Reform news

One further development seems to be a subtle shift in the terms of the 'greening element'. Previously this had been described as an 'environmental top-up', indicating that claimants could get the basic payment even if they opted-out of the environmental measures. This now seems to be changing, with the view that farmers will have to undertake some of the options such as crop rotation, fallow and permanent pasture in order to qualify for any direct payment.

The budget

As outlined in the last edition of the Agricultural bulletin, the big issue behind the forthcoming CAP reform will be the amount of money available from the overall EU budget settlement; often referred to as the Multi-annual Financial Framework. The first proposals from the EU Commission on this issue are expected to be published as this issue of the Agricultural bulletin goes to press.

Leading up to the publication of these proposals, the European Parliament (EP) has come out with its views. An influential EP committee has called for the budget to increase by 5% over 2013 levels. Within the overall total, the amount going to the CAP should be at least maintained at current levels. The EU should raise more of its funds directly through measures such as carbon or financial transaction taxes, rather than rely solely on contributions from member states. It also says all rebates and correction mechanisms should be scrapped. A body such as the EP is always likely to propose ambitious and integrationist measures such as these. Whether the official plans will be as bold as this against a background of austerity across the EU remains to be seen.

A mixed bag

CFE's progress towards voluntary set aside targets to date

Defra's publication of the Survey of Land Managed Under the CFE reveals that although some of the targets regarding set-aside are being met by voluntary measures, others are still falling short of the mark.

The Campaign for the Farmed Environment (CFE) was formally launched in November 2009 with the aim of retaining the environmental benefits from set-aside by voluntary measures. The CFE has a number of targets to meet by 2012 (see below). The implied threat being that if these targets are not met, some sort of compulsory set-aside replacement will be enforced on the industry. New data is showing mixed progress; although some of its targets are being achieved, the initiative is falling short in other areas.

Information on a number of the targets has come with the Defra publication of the second ongoing monitoring survey, the Survey of Land Managed Under the CFE. Progress is being measured against a baseline of the 2008/09 cropping year.

The table below summarises progress against the main targets. This is not always easy to monitor as some targets are measured against data from sources other than the Defra survey. (There are a couple of targets covering training of advisers and the choices of voluntary environmental options that are not included below.)

The CFE has pledged to meet its targets by 2012, therefore the next monitoring survey in February 2012 will be the final test. However, it is thought the CFE may be given a little more time to deliver, pending the outcome of CAP reform, especially as one of the 'greening measures' proposed at an EU level is a requirement for a proportion of fallow or environmental land.

Use it or lose it

Planning your capital expenditure on plant and machinery for the next 12 months

Careful planning should be undertaken in order to maximise your annual investment allowance prior to the forthcoming reduction next April.

Changes to capital allowances for plant and machinery acquired on or after 1 April 2012 (for companies) and on or after 6 April 2012 (for unincorporated businesses) make it important that you consider the timing of any planned expenditure. Delaying purchases until on or after 1 or 6 April 2012 will mean a significant reduction in the annual investment allowance (AIA); potentially resulting in 100% up-front tax relief being lost. Claiming on the balance not covered by AIA at rates applicable to the general, special or short-life asset pools will spread the claim for tax relief over longer periods, and adversely affect your cash flow. The AIA available depends on the date of expenditure.

Using an example of a 30 June 2012 year end, the table below shows the effect of delaying expenditure until after 1 April 2012 or 6 April 2012 on the maximum amount of AIA claimable for that year. Advice can be sought on the relevant amounts which can be claimed for your specific accounting year, but, whatever your year end, it will still be advantageous to advance expenditure where possible. Additionally, a purchase early in the season may allow you to take advantage of lower interest rates that might be on offer, or to negotiate discounts.

Care should be taken with HP contracts, or with purchases close to the April deadlines, as anti-avoidance rules may mean the purchase is regarded for tax purposes as arising after the relevant dates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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