Budget 2014: Rural points

Nothing very obvious grabs the rural headlines in today’s budget other than the extension of CGT rollover relief to the new Basic Farm Payments.  This measure is backdated to 20 December 2013, the date the new payment entitlements were introduced.

The single most significant measure for most rural businesses will be the increase and extension of the Annual Investment Allowance.  Currently £250,000 a year this was due to revert to its former rate of £25,000 after December.  In a very welcome extension it is to be increased to £500,000 almost immediately (from April), and to be extended to 31 December 2015.  Complications which arise from straddling account year ends aside, this is most welcome for any farmer with serious investment plans in the next year or two.  The government reckons this will ‘cost’ £85 million in 2014-15 rising to £1,270 million in 2016/17.  However there will be a benefit to government from 2017-18 of £445 million over two years as annual writing down allowances are proportionately reduced.

The property world will also be interested in the extension of the special taxes which now apply to dwellings owned by ‘non-natural persons’ – generally meaning valuable London property held by companies, latterly to avoid SDLT on sales and transfers.  The threshold for 15% SDLT is reduced to £500,000 from £2 million immediately – although there are savings for those unfortunates who have exchanged contracts but not yet completed.  The threshold for ‘ATED’ – Annual Tax on Enveloped Dwellings – will also start to fall from 2015, to £1 million in the first year incurring an annual ATED charge of £7,000 and the following year to £500,000, leading to an annual ATED charge of £3,500.

Environmentalists will want to study the changes to the Carbon Price Floor.  The Carbon Price Support rate has been reduced to £18/tonne through to 2020.  It had been planned to raise it to £30 per tonne in 2009 prices by then.  However the EU Energy Trading Scheme has not worked well, and continuation at the current floor rate was seen as a threat to the competitiveness of the electricity generating industry.  This should take some pressure off electricity bills in the next few years (although marginally so in most cases).

Other more detailed points which may be relevant in the rural economy and to property include: Continue reading “Budget 2014: Rural points”

Sustainable Agriculture: show me the money #LPE13

The annual LEAF (Linking Environment and Farming) President’s Event takes place today, 5 November, at the headquarters of HSBC in Canary Wharf, East London. The theme of the event is Sustainable Agriculture: Show me the money, and I am speaking on the Valuation of Ecosystem Services. Here are my slides:

The key message is summed up on Slides 10, 11 and 12. We have the potential to embark upon a new paradigm in rural land management but will we step up to the task of the ecosystem entrepreneur?

Biodiversity offsetting, peat, conservation covenants and newts on the move

Defra, the UK Department for Environment, Food and Rural Affairs has issued a consultation paper (Green Paper) on biodiversity offsetting and development.  This paper represents a major government commitment to the introduction of biodiversity offsetting as a means to mitigate the environmental impact of development.  Government plans to have definite proposals ready by the end of this year.  Comments are invited by 7 November.

How is it likely to work?  There are already trials underway and Defra has developed a simple ‘metric’ to determine the ‘biodiversity units’ lost to development, and therefore how many units must be offset by positive environmental work elsewhere.  The Green Paper gives a simple example of how this works for a supermarket development on a site which is part derelict, part arable land and part woodland.

A number of questions flow from this: must replacement be like for like, or can one sort of habitat be substituted for another?  Hedgerows in the pilot schemes must be replaced by hedgerows for example, on a ratio of up to 3 new for one lost.

Is this a developer’s charter?  Continue reading “Biodiversity offsetting, peat, conservation covenants and newts on the move”

Spending Review 2013: Looking for agriculture, environment or rural? Don’t bother

Chancellor Osborne today set out his Spending Round for 2015-16.  Widely mislabelled as a Comprehensive Spending Review, the review only relates to one year – the year in which the next General Election will take place.  It doesn’t offer much hope for the countryside, but there could be some interesting implications for rural property and land in general.

The headlines include:

  • Osborne had to achieve £11.5 Bn overall in cuts
  • The overall emphasis is on growth and public service reforms, with an emphasis on localism, efficiency and fairness
  • A big requirement is to keep mortgage rates low – probably good news for property and housing markets (and a wider-scale disaster if they are allowed to rise)
  • £50 Bn capital spending infrastructure in 2015, covering roads, railways, broadband and flood defences (but see more below).  More on this will follow on Thursday, but likely candidates include improvements to the A14, HS2 and the Mersey Gateway Bridge
  • Schools and tax inspectors will benefit from increased funding
  • Ed Balls for Labour says we should be spending £10 Bn on infrastructure now, while the Institute for Fiscal Studies says we are stuck with austerity until 2018

Important points for the countryside include:

  • Defra subject to further cuts of £37 million by 2013, with its overall budget going down from £2.2 Bn in 2011-12, to 1.9 Bn in 2013-14, £1.7 Bn in 2014-15 and £1.6 Bn in 2015-16 (a year on year cut of 9.6% from 2014 to 2016)
  • Defra has recently been likened to a fourth emergency service for its role in flooding, animal and plant disease (think Foot and Mouth Disease and Ash Dieback), food scandals (how we miss those horseburgers) and Bovine TB.  Flood defence spending is to be maintained in CASH terms, but of course the REAL terms story will be different
  • Defra’s settlement includes £40 million for South West Water in 2015-16 to defray south western water users’ bills
  • Meanwhile Defra has to achieve £54 million in efficiency savings in 2015-16.  This will be achieved by reduced EU fines for non-compliance and greater efficiency in its Arms Length Bodies (Rural Payments Agency, Environment Agency, Natural England) for example by sharing back office functions
  • Meanwhile Defra is to prioritise spending on ‘economically high value areas’ (geographic? Subject?).  This could be one to watch
  • Energy and Climate Change comes with a new emphasis on renewables and a commitment of £430 million for Renewable Heat Incentive, proposed new tariffs and a higher budget cap for RHI payments
  • Food Standards Agency to see a cut in funding from £94 million to £86 million from 2014-15 to 2015-16
  • Funding for science is to be maintained and enhanced, £4.6 Bn in 2015-16

For property and land, big news will come on Thursday with the announcement of Infrastructure Plans.  For the moment we know:

  • £100 Bn infrastructure spending planned for the next Parliament.  This is for transport, science, schools, housing, broadband and flood defences although it looks as if parts of large scale broadband investment may become a voucher scheme for small businesses
  • This should equate to £300 Bn infrastructure spending to the end of this decade
  • £9.5 Bn to be spent on the transport network in 2015-16
  • This will also cover 180 new Free Schools, 20 Studio Schools and 20 University Technical Colleges and Business Centres in all the major trading centres in China

On a smaller scale, Defra and DECC (Department of Energy and Climate Change) have both been targetted with spending £3 million each in the government’s Small Business Research Initiative in 2013-14.  This scheme runs across government and all departments are expected to make better use of it.  It should allow innovative companies to solve specific public sector needs in new innovative ways, so perhaps an opportunity or two here.

Search diligently through the key details document, HM Treasury, Spending Round 2013 for the words environment, climate, rural, agriculture and farming and you won’t find much.  Climate change comes up in terms of fairness – we are committing £969 million to supporting low carbon growth and adaptation in developing countries.  Other than that you’ll only find climate and environment in the appropriate department’s names (Defra and DECC), and you won’t find farming, agriculture or ‘rural’ at all.  Well done on rural proofing this one government!

So what should the land manager, farmer or rural business consultant take away from all this?

  • Of far greater significance for farming as a whole will be the CAP reforms, now possibly in the final inches towards an agreement today
  • With voluntary modulation looking like 15% in England, this could add up to 20% cuts in Single Payments for English farmers
  • And after Cameron’s little regarded EU Budget deal, it looks like 22% less funding for rural development as well
  • Meanwhile Thursday’s Infrastructure Announcement is the one to watch – will there be a new road, fibre-optic cable or railway coming to a field near you?  And will it be an opportunity or a threat to your business?

Pilot UK Peatland Code

Follow this link for details of an event in London on 10 June to learn about the new Peatland Carbon Code, to meet the team responsible for writing it and to provide your initial thoughts and feedback in preparation for a pilot project to start in September this year.  Or go to this link to book a place directly.

For details of the event: http://www.iucn-uk-peatlandprogramme.org/initiatives/PeatlandCode

And to book a place: http://peatlandcode.eventbrite.co.uk/#

Look forward to seeing you there.

 

 

PEATLAND RESTORATION AND INVESTMENT IN THE SOUTH WEST

The Natural Environment Research Council has funded practical research work in the South West to develop a scheme for the practical restoration of peatland for water management, the reduction of atmospheric carbon and biodiversity habitat management.  This work has been led from Leeds and Birmingham City Universities, and supported with additional funding from South West Water (SWW).  A prospectus is planned to be one of the major outputs from the project, providing advice to landowners, farmers and land managers as to how a scheme could work, what factors need to be considered in deciding on site suitability, and how land managers can decide if participation is right for them.  The prospectus should also be helpful to potential investors in deciding if they wish to invest in the carbon and biodiversity aspects of the scheme.

The prospectus is now being prepared and the purpose of this synopsis is to invite feedback and comments on its overall structure, and the matters which it is proposed it will cover.  All comments are welcome.  Please send them to Charles Cowap, Project Team, at cdcowap@gmail.com.  Charles Cowap and Dr David Smith (SWW) are happy to discuss any questions arising from this work: Charles Cowap 07947 706505; Dr David Smith: 07824 460274 (dmsmith@southwestwater.co.uk).  There will be further opportunities to comment on the full prospectus in due course.

Introduction

  • What this document is about
  • How it is structured
  • How it aims to help you to consider if PES (Payments for Ecosystem Services) is for you including some important factors to consider in deciding to sign up for PES
  • Status of document in contractual terms
  • Desirability of seeking independent advice

The proposed PES scheme

  • What we are offering for SWW (South West Water) and other investors to ‘buy’: peatland management for water supply and quality, with an option to bundle carbon and biodiversity management/development for corporate CSR (Corporate Social Responsibility) purposes
  • Potential interest for other investors in carbon and biodiversity benefits
  • Background to ESS (Ecosystem Services) and PES more generally, including links to the development of a UK Peatland Carbon Code
  • The relationship of this prospectus to the important and growing role of ESS and PES thinking in government policy and land management more generally

Basis (es) of offer

  •  The ‘offer’ to landowners and managers interested in selling their ESS
  •  The offer to companies and other potential investors in biodiversity and carbon in the south-west

Factors and issues for sellers and buyers to consider in deciding whether to join PES programme

  • Contractual aspects: length of agreement, review terms, break clauses, succession, other key terms and what they mean
  • Land tenure arrangements
  • Effects on other interested parties, eg tenants, landlords, graziers, commoners, rights of turbary, manorial rights, owners of sporting and mineral rights, implications for succession and inheritance,
  • Practical farming considerations
    • Series of sub-headings
    • Animal welfare and health considerations
    • Relationship with statutory schemes and designations (ESA, HLS, ELS, GAEC obligations etc)
    • Public liability and insurance questions/CROW Access Land
    • Other business considerations, eg relationship to diversification opportunities
    • Maintenance obligations and concerns
    • Taxation: VAT, Income Tax, Inheritance and Capital Gains Tax, Stamp Duty Land Tax [Corporation Tax]
    • Ongoing obligations [may be covered by contractual aspects or cross-linked]
    • Impact on capital values
    • Security/risk judgements

Decision Tree

Two decisions trees, one for site selection; the other to help land managers to work through the options.

Site suitability, eg

  • Peatland – known mapped damage – further investigation by survey team – detailed mapping – determine if damage restorable – evaluate impact on farming activity – evaluate drainage/wetness implications for surrounding farmland

 

  •  Identify all interests in site: tenure, other rights, designations, schemes
  • Liaise with other interests and stakeholders
  • Identify new management requirements
  • Consider compatibility with existing management and schemes, and potential to gain funding from conservation related initiatives through providing more sustainable habitat
  • Identify any needs for adapted management or farming policy
  • Consider scope to release other resources for alternate uses
  • For non-compatibility, evaluate ‘better’ option: in or out of PES and review for alternatives
  • Assess financial benefits and costs

A suggested approach to financial aspects

Costs saved

  •   Eg some livestock purchases
Extra costs, eg

  •   Time for access to more difficult ground
  •   Vet and med bills
  •   Insurance
  •   Feed
  •   Machinery costs if contracting to be offered

 

Extra Revenue, eg

  •   PES Income
  •   Contracting opportunities for SWW
Lost Revenue

  •   Eg some livestock LWG or sales
Balance positive: financially worthwhile

– Consider capital and tax implications

Balance positive: not financially worthwhile

Conclusion: pulling it all together

Next steps and who to contact for further information

Please forward comments on this draft to:

Charles Cowap, MRICS FAAV

NERC Project Team

cdcowap@gmail.com

For further information or to discuss any points on this synopsis, please contact either Charles Cowap as above (or phone 07947 706505), or Dr David Smith, SWW, 07824 460274 (dmsmith@southwestwater.co.uk)

[Reproduced in full from a document circulated on 5 March 2013 to stakeholder representatives]

Development of a Peatland Ecosystem Services Scheme on the South West Mires and Moors

Slides presented by Dr David Smith and Charles Cowap at an evening meeting of the Agricultural Law Association, kindly hosted by Michelmores LLP at their Exeter Office on 26 February 2013.

Dr David Smith first reviewed work in recent years on the benefits of peatland restoration work in the south west, for water management, carbon capture and habitat and biodiversity management.

David then went on to explain why South West Water is interested in securing clean supplies of water from upland areas

Finally Charles Cowap presented the work he has been doing with South West Water in a project funded by the Natural Environment Research Council with Leeds and Birmingham City Universities.

Questions and discussions continued in a lively fashion for some time after the presentations, both formally and informally over refreshments kindly provided by Michelmores.