The government reiterated its commitment to the principle but said including the clause in the Bill would jeopardise potential future trade deals. This is because its legality in relation to World Trade Organisation rules is dubious. Ironically the latest round of future relationship negotiations with the EU ended with the parties criticising each other’s inflexibility, in particular because the UK is unwilling to agree to level playing field obligations relating to regulations and standards. The apparent contradiction here perhaps highlights how difficult it is to bring environmental or social considerations into systems which have historically focused on the final product and its price.

Support for businesses and individuals impacted by Covid-19 continues to expand, with new tools launched to support the dairy market and support for small private sector landlords in Scotland. For our thoughts on how Covid-19 will shape the future of the rural sector a recording of our recent webinar has been released.

FOOD & FARMING

Agriculture Bill: Debate focuses on how we protect food standards
On 13 May 2020, the Agriculture Bill passed through the House of Commons for its third reading and made history by becoming first Bill ever to be formally voted upon through an electronic voting system. Legislating for high animal welfare and environmental standards on future agricultural imports was the focus of the debate. There was unanimous support from all sides for this principle, but the question was whether it should be legislated for within the domestic Agricultural Bill itself, to avoid the government weakening its commitment in due course. The vote was ultimately unsuccessful.

The challenge is that banning imports of certain food products because of the way in which they are produced, risks non-compliance with World Trade Organisation (WTO) rules because it ignores the WTO principle of trade without discrimination (the Most Favoured Nation Clause). With standards that relate to the safety of the product itself (for example, pesticide residues), international rules for imposing trade restrictions are well established. However when the standards relate to the production method (for example animal welfare and environmental protection) and seemingly have no discernible effect on the final physical product, there is less clarity. Such standards could be considered a non-legitimate barrier to trade and may be deemed as a cover for protectionism.

Inserting such a legislative commitment in the Agriculture Bill could bind the government’s hands in an area where more creative solutions may be required. UK consumers rightly expect as a given high levels of animal welfare, environmental delivery and food quality, and so it should not be legitimate for UK food businesses to deliberately or inadvertently exploit this through a sourcing policy based on price alone. Government has shifted responsibility for food production onto supply chains, but now needs to get busy making sure the free-trading platform it wants to create through trade deals protects the environment and meets the expectations of consumers and farmers in both this country and abroad. Focussing on improving the supply chain provisions in the Agriculture Bill is key. For more information see our Briefing Note.

Agricultural productivity increases
UK agriculture has long been criticised for having low productivity growth, however the latest figures show that in 2019 Total Factor Productivity (TFP) is estimated to have increased by 4.0% to its highest recorded level. This was driven by a 3.8% increase in the volume of all outputs but most notably a 7.8% volume increase in all crop outputs. Output of livestock and livestock products increased by 1.6% and 1.8% respectively but the volume of inputs decreased marginally by 0.2%, predominantly driven by a 10% decrease in the use of plant protection products. TFP has fluctuated since 2000 but shows a steady overall improvement averaging 0.7% per year based on the 2000-2019 period.

Total Income From Farming figures show a larger improvement, rising by £398 million (8%) to £5.3 billion. Agriculture’s contribution to the UK economy also increased by £633 million (6%) to a total of £10.4 billion. Its higher performance was driven by increased crop production, particularly cereals. According to TFP figures, the volume of crop output increased by 24.1% owing to favourable weather conditions, though low commodity prices did dampen the potential increase in income.

Organic veg box sales grow
Sales of organic veg boxes in London have increased by 23% in one month. The organic box schemes form part of the network of Better Food Traders and supply households with a weekly delivery of organic fruit and veg. The schemes now accommodate an additional 1,000 households. Data collected by the Food Foundation from 101 similar schemes across the UK shows a similar picture with the number of weekly veg boxes sold doubling between February and mid-April. Those running the schemes have had to adapt quickly to introduce additional health and safety measures and the demand with more staff and larger premises. The key question is the extent to which new buying behaviours persist after lockdown.

Covid-19

Supporting the dairy sector
The government has announced a support package for dairy farmers affected by disruption to milk demand and supply chains caused by Covid-19. Eligible farmers who have lost more than 25% of their income over April and May will be able to claim aid of up to £10,000 to cover up to 70% of their lost income. No cap has been set on the number of farmers who can receive the support, or on the total funding available. However our analysis shows that only farmers who were supplying processors which service the food service sector, and subsequently had a significant volume of their milk sold on the spot market, will have experienced the magnitude of income loss required to qualify. A similar scheme is also available in Wales. NFU President Minette Batters said “we appreciate the hard work Defra has put in to secure this much-needed financial support for many dairy farming families”. NFU dairy board chairman Michael Oakes argued that “measures are needed in order to stabilise the industry’s viability for the medium and long term”. Competition laws have already been temporarily relaxed to allow processors to collaborate and minimise wasted milk and capacity. This could include sharing labour and facilities, cooperating to temporarily reduce production or identifying where there is hidden capacity in the supply chain for processing milk into other dairy products.

As discussed in the last issue of Landscope, the RPA has opened intervention storage for skimmed milk powder (SMP) and butter to support prices. It has also opened Private Storage Aid (PSA) schemes for dairy and meat (sheepmeat, goatmeat, beef, cheese, butter and SMP). This mechanism makes a payment towards the cost of processors storing qualifying products for up to 180 days, so supports prices by removing product from the market, but without the state taking on the risk of ownership. Applications opened on 7 May, and the PSA offered to store 4,490 tonnes of cheese and was used up immediately.

To boost consumption of dairy products the government is backing a £1 million marketing campaign. The 12 week campaign will be funded by a combination of £500,000 from the UK governments, £300,000 from Dairy UK members and £200,000 from the AHDB. It will focus on encouraging tea, coffee and milky drink occasions in the home as they offer the largest volume opportunity to boost liquid milk consumption. The campaign will appear across social media, digital and television platforms. If you would like to discuss dairy support please contact Adrian Matthews.

Savills Webinar: The Rural Sector and the Impact of Covid-19
On Thursday 14 May we held a webinar to discuss how the global lockdown is affecting the sector from supply chains to commodity prices, rent collection and asset values. Crucially the webinar considered what outcomes to expect in the future and how Covid-19 could alter the future direction for the rural sector. Hosted by Andrew Harle, Head of Rural, the speakers were Rupert Clark (Head of Estate Management), Andrew Wraith (Head of Food & Farming) and Alex Lawson (Head of National Farms & Estates). To watch the webinar, please click here.

Business Interruption insurance – Test case
To assist policy holders the Financial Conduct Authority (FCA) intends to obtain court declarations to resolve the contractual uncertainty in selected Business Interruption insurance policies. This is due to continuing and widespread concern about the basis on which some insurers are making decisions in relation to claims. The result of the test case will be legally binding on the insurers that are parties to the test case and will provide persuasive guidance for the interpretation of similar policy wordings and claims. As it builds its case the FCA is inviting policyholders to feed in their concerns.

Restarting the housing market
People who wish to move house in England may now do so providing they follow new guidance published by the government. Precautions should still be prioritised and those with coronavirus are required to delay their move. Arrangements should also be made to accommodate the vulnerable and those shielding. When marketing properties initial viewings should be done virtually when possible. This also means that letting activity can resume, but the government has been clear that tenants’ safety should be letting agents’ and landlords’ first priority. Where possible surveys and safety checks should be done during the void period. New guidance has been provided for circumstances where it is necessary for surveyors and tradespeople to visit or work in people’s homes.

England: Residential safety checks
The government has also reiterated that landlords should make every effort to abide by gas and electrical safety requirements, but acknowledges this may be more difficult due to restrictions associated with the coronavirus outbreak, for example where a tenant has coronavirus symptoms, is self-isolating or shielding. Under such circumstances, provided the landlord can demonstrate they have taken reasonable steps to comply, they would not be in breach. The Health and Safety Executive has published some useful guidance which outlines the action to take in a range of scenarios such as when the tenant is socially distancing (but not self-isolating) and denies the gas safety engineer access.

POLICY

Supporting Welsh farmers after Brexit
Responses to the Sustainable Farming and our Land consultation in Wales have been summarised and published. 3,322 responses were received, with 2,816 of those coming from three distinct campaigns; the National Farmers’ Union Cymru, the Royal Society for the Protection of Birds, and Ramblers Cymru. Unsurprisingly a wide range of suggestions were brought forward, with some feeling the proposals lacked explicit reference to specific outcomes such as soil health and promotion of the Welsh language, while others felt the framework was too prescriptive and needed flexibility to ensure engagement. Doubts were also cast on the amount of support offered to food production and security and the ultimate impact on farmers’ profitability. For many, the scheme should reward both the ‘creation’ and the ‘maintenance’ of sustainable land management activity and prioritise farmers’ financial stability.

UK and US start negotiations
The first round of Free Trade Agreement negotiations between the UK and US governments began on 5 May. International Trade Secretary Liz Truss and the US Trade Representative Robert Lighthizer launched negotiations via a video conference call. This first round will involve around 100 negotiators on each side, covering around 30 different negotiating groups. Each country is the other’s largest source of foreign direct investment, with over £700 billion invested in each other’s economies and total two-way trade between the two countries already worth £230 billion. Progress will be keenly watched as agricultural exports are a key opportunity for Washington and the outcome is of great significance to the rural sector as demonstrated by the recent Agriculture Bill debate. There have been reports that the Department for International Trade is preparing to offer a “big concession package” that would cut tariffs on some agricultural imports to help secure the trade deal with Washington. George Eustice and Michael Gove are said to oppose this approach.

In addition to commencing negotiations with the US and ongoing talks with the EU, the UK has initiated trade negotiations with Japan. The agreement will be modelled on existing free trade agreements between the EU and Japan, though with some scope for changes. Analysis indicates that the UK economy could  benefit from a £1.5 billion boost,  as a UK-Japan trade deal could  increase trade flows between  both countries by £15.2 billion. An agreement could also pave the way for UK entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Negotiating objectives for Australia and New Zealand will be published shortly, with the aim of having 80% of total UK external trade covered by free trade agreements by 2022.  

Britain does not understand
Michel Barnier, the European Commission’s Chief Negotiator has said the latest round of Brexit negotiations have been disappointing once again. Though he praised the “two very professional teams” and is determined to “build an ambitious partnership”, he expressed concern about how little time is left to strike an agreement. He said the British side did not comprehend the conditions to access the single market, saying they were seeking a Canada-style agreement but with far more. He added that there is a real lack of understanding of the consequences of the decision to leave the single market and that this is hindering progress. On the other hand, the UK’s Chief Negotiator David Frost has criticised the EU’s “ideological approach” and said it must change its approach before the next round of talks begins on 1 June.

The EU is seeking a Free Trade Agreement (FTA) without customs duties and quotas for all goods, this level of market access would be unique amongst its trade agreements. There have been recent suggestions that the UK may give up on zero tariffs and quotas in order to avoid having to commit to level playing field conditions for environmental, social and labour standards. Mr Barnier said the EU will not bargain away its European values for the benefit of the UK economy and that without a clear and effective level playing field, there will not be an FTA.

There is a certain irony that the focus of the recent Agricultural Bill debate and a major concern in the trade negotiations with the US is effectively about ensuring UK producers are not undercut by cheaper imports produced to lower standards, whilst in the negotiations with the EU the positions are reversed, and the major point of disagreement concerns the UK’s unwillingness to commit to a level playing field for the standards against which imports are manufactured.

UK streamlines trade tariffs
The government has published details of the UK Global Tariff which will apply to imports once we leave the Transition Period on 1 January 2020. Under the system 60% of trade will enter the UK tariff free on WTO terms. Free trade negotiations are likely to increase this percentage further. To support the industry, tariffs on agricultural products such as lamb, beef, and poultry are being maintained at current rates. However these tariffs will not be charged on all imports because some products will be able to enter the market at reduced tariff rates under Tariff Rate Quotas (TRQ) as they do today. Across the arable, livestock and horticulture sectors tariffs are either held at current levels or rounded down to the nearest 2%, which is a simplification applied across the board. The one exception is that the Variable Import Duty mechanism which currently applies to grains such as wheat and maize is being removed, in practice this measure is rarely used. A flat rate tariff of £79 per tonne remains on low quality wheat.

ENVIRONMENT & NATURAL CAPITAL

Resistance to ash dieback
Certain environments help to block the spread and supress the severity of ash dieback according to a new study published in the Journal of Ecology. Diverse landscapes of hedgerows and several types of tree have proved to be more resistant. The disease remained mild “on trees in open canopies (hedges, isolated trees) or on trees in forest with a mixture of tree species” according to Dr Benoit Marcais, director of research at the French National Institute for Agriculture Food and Environment. Areas with higher concentrations of ash, such as ash woodland, were far more severely affected. The findings seem to suggest that the pathogen will not entirely erase ash trees from European landscapes.

How to make a resilient recovery
The Committee on Climate Change (CCC) has provided six key principles to rebuild the nation in a sustainable manner following the Covid-19 crisis:

• Use climate investments to support economic recovery and jobs

• Lead a shift towards positive, long-term behaviours

• Tackle the wider ‘resilience deficit’ on climate change

• Embed fairness as a core principle

• Ensure the recovery does not lock-in greenhouse gas emissions or increased risk

• Strengthen incentives to reduce emissions when considering tax changes.

The CCC outlined these actions in letters to the Prime Minister and First Ministers in Scotland, Wales and Northern Ireland. The letter says there are “clear economic, social, and environmental benefits” to be had from the immediate expansion of measures such as investing in resilient infrastructure, upgrading homes and tree planting.

PROPERTY & DEVELOPMENT

Scotland: Aid for private sector landlords
In Scotland, a £5 million fund has opened which offers interest-free loans to landlords whose tenants are having difficulty paying rent due to the Covid-19 crisis. The Private Rent Sector Landlord Covid-19 Loan Scheme will offer eligible landlords up to 100% of lost rental income for a single property. It will support private-sector landlords who are not classified as businesses and have five or less properties to rent. Landlords facing difficulties with repayments on a mortgage for a rental property are expected to seek a mortgage repayment holiday from their lender before they apply for a loan.

OTHER RURAL NEWS

And finally…
Wish you weren’t here
Most European nations are still in the grip of lockdown procedures implemented to slow the spread of coronavirus. Sweden took a different path. Citizens of the Scandinavian nation have been able to frequent bars and shops as long as they at least try to stay distant from one another. In that spirit of social distancing, the Huddinge municipality on the outskirts of Stockholm has shortlisted the area’s “least popular days out”. The local environmental department has promoted the three least-visited “attractions” from the Huddinge Nature Guide. It includes the entrance to the nuclear power station, the roadkill by the Glado Windmill and a “long and bumpy” 10km walk that “few people (bother) to walk the whole distance”.