On 11 November 2020 the Agriculture Bill passed into UK law as the Agriculture Act 2020. The Act paves the way for fundamental change to the agricultural industry following the UK’s exit from the European Union.
The changes include a boost to the industry in replacing the direct support scheme with a system of public money for “public goods”. We expect that from next year, farmers will have a seven year transition period to adapt to the new system which intends to reward farmers and land managers for contributing to better air and water quality, thriving wildlife, soil health and measures reducing flooding and the effects of climate change. However the Act deals with much more than payment structures.
What is happening to direct payments?
At present, the direct payment scheme continues to be in operation in England. It is anticipated that 2021 will see the beginning of a seven-year phasing out period for direct payments with the largest reductions first being applied to the highest payment bands. At the end of the transition period direct payments as we now know them will cease to exist. Recipients of direct payments may be able to elect to take a one-off lump sum payment. This is projected to have a particular impact on farm rents especially where rent review clauses do not consider the availability of entitlements.
Farmers and landowners will still be able to enter into new Countryside Stewardship schemes in the first few years of the transition period and productivity grants will also be offered next year.
The Environmental Land Management scheme (ELMS) is the Government’s new agricultural policy centred on the principle of public money for “public goods”. DEFRA are currently running tests and trials before full roll-out of the scheme in late 2024.
Further details on the plans over the transition period are expected to be published by DEFRA later this month.
Under the Act, the Secretary of State is now empowered to provide financial assistance in England for a range of purposes including (but not limited to) environmental protection, public access to the countryside and measures aimed at safeguarding livestock and plants. The Secretary of State also has powers to give financial assistance to support the productivity of the agricultural, horticultural and forestry sector.
In framing any financial assistance, the Secretary of State must have regard to the need to encourage the production of food by producers in England and also its production by them in an environmentally sustainable way.
The Secretary of State’s plans for providing this financial assistance will be contained in a “multi-annual financial assistance plan” which aims to help achieve a degree of certainty to the industry during the transition period. The first plan is to be for seven years and is to run from 1 January 2021.
Additionally, a report is also required to be published each year and placed before parliament by the Secretary of State which sets out the financial assistance provided. This ensures that parliament now has the ability to comment on the successfulness of any future scheme.
Food and Agricultural Markets
The act imposes a duty on the Secretary of State to report to parliament on UK food security at least once every three years. This is after concerns were raised during the bill’s drafting phases regarding the standards of future agricultural and food imports.
The first report is to be published at the end of next year and will include an analysis of the impacts of food supply during the coronavirus pandemic, as well as the global availability of food, food safety and consumer confidence.
The act also includes a requirement for a report to be presented to parliament which focuses on the impact of future trade deals on the food and farming sector.
Whilst the Government’s emphasis has primarily focused on providing farming businesses exposure to market conditions, it has recognised that there may be circumstances in which it is relevant to intervene. As such the Act provides powers to allow the Secretary of State to declare periods of exceptional market conditions. At these times financial assistance can be given to support farmers.
The Secretary of State is also empowered to make regulations setting and amending marketing standards for agricultural products and imposing obligations on business purchasers. This should ensure a level playing field in the market and aims to protect producers and consumers from unfair terms.
Following on from the Government’s consultation in England in 2019 the Act has also made some specific changes to existing agricultural tenancy legislation. Some of the main changes are:-
- Rent review provisions under the Agricultural Holdings Act 1986 (“AHA”) have been amended to replace a demand for arbitration with a notice of determination. This can then be followed by either third-party determination or arbitration. This brings AHA tenancies in line with Farm Business Tenancies in that parties now have the choice of referring the rent review to an expert or arbitrator appointed by the Royal Institution of Chartered Surveyors, Central Association of Agricultural Valuers or Agricultural Law Association. This broadens the scope of available parties to determine rent reviews.
- The Secretary of State now has the power to create regulations enabling an AHA tenant to refer a refusal of consent to arbitration or an expert. No such regulations have been forthcoming as yet but they are expected to cover controls on erecting or altering buildings, changing use and sub-letting among others.
- The minimum age for service of a retirement notice under an AHA tenancy has been removed. A tenant can now serve a retirement notice at any time giving them more freedom to decide when they retire.
- The commercial unit test in succession cases has been removed to remove the prohibition on succession to occupiers of another commercial unit of land.
- The Secretary of State has also been given powers to amend the suitability test in succession cases which could pave the way for a more modern test for assessing a potential successor’s ability to farm the holding.
Provisions have been included in the act allowing the Secretary of State to establish a new body to better collect and manage information relating to the identification, movement and health of animals in the agricultural industry.
There are also further provisions included to ensure the UK has powers in the future to regulate the fertiliser and organics industry in order to allow UK producers the ability to continue to trade globally.
The Agricultural Act 2020 is undoubtedly a landmark piece of legislation for the agricultural sector and one which sets out positive proposals for the future. Although largely an enabling act in its form and substance, it is clear that the powers and arrangements the act now confers are ones which will form the basis of fundamental change to the agricultural sector in the years to come.
For any information on the Agriculture Act and how it might affect your business please contact Denise Wilkinson or Gareth Williams.