Supplementary written evidence from the
Department for Environment, Food and Rural Affairs
Thank you for your letter of 23 November asking
for some follow up information from the oral evidence session
on 17 November. This information is set out below.
If the Minister would be willing to comment on
the results of the testing of the eight bio-physical criteria
that the European Commission has proposed be used to identify
areas of natural handicap/constraint
The review of Areas of Natural Handicap, or
ANH—previously known as Less Favoured Areas, or LFA—has
been underway for some time, following a European Court of Auditors
report from 2003 which was critical of the differences in how
Member States applied the area designations. In the most recent
attempt at reform, the Commission proposed eight biophysical criteria
and asked all Member States to simulate what areas of land would
be designated as ANH under those criteria. The eight criteria
cover aspects of soil, climate and slope.
The UK has played a full part in this testing,
and in February 2010, submitted our initial mapping results to
the Commission. I enclose a copy of the UK's submission to the
Commission. My officials then met the Commission in April to discuss
the results. The initial mapping results showed that the Commission's
approach broadly captured the areas of land we would regard as
naturally handicapped. However, the Commission's proposed criteria
did not capture those areas which are constrained because of the
UK's maritime climate. In England this is particularly noticeable
in the South West, where land currently classed as Severely Disadvantaged
Area (SDA) did not come into the ANH defined by the simulation.
There are also areas in the Welsh borders which are not being
captured by the Commission's approach, while some additional land
is being captured, particularly in the North East. Similar issues
around climate and temperature as in the South West arose in Wales
and Scotland; while for Northern Ireland, the results broadly
reflected the areas considered as naturally handicapped.
The UK's submission therefore identified a number
of proposals for amendments, or additions to, the Commission's
criteria, to better reflect handicapped land in the UK. The Commission
have in general been supportive of the UK's proposed amendments,
and have indicated some flexibility in their mapping methodology,
which would allow us to better capture naturally handicapped land
within the UK. However, discussions are still ongoing on the best
way to ensure that the UK's maritime climate is taken into account.
We understand that other Member States have also raised a number
of issues with the Commission, which are also being considered.
It is important to note that the exercise is
only a simulation, and not a revision of the current Less Favoured
Areas. The current results do not therefore have any practical
impact, and the designation used for policy purposes including
Uplands Entry Level Stewardship remains the domestic Severely
Disadvantaged Area classification. We will remain fully engaged
at EU level as it becomes clearer how the Commission intend to
take forward any formal redesignation, as well as how any new
designation may be used under the Common Agricultural Policy post-2013.
The rationale for precluding amending the statutory
objectives of National Parks as an option within the Consultation
on the Governance arrangements for the National Parks and the
Broads
The remit for the current consultation on the
governance arrangements for the National Parks and the Broads
was focussed on the generic issues of their future governance
rather than substantive issues like amendments to the statutory
purposes, although it is possible that responses to the consultation
may call for such changes. The Commission for Rural Communities'
recommendation that National Park Authorities should give equal
priority to fostering economic and social well-being alongside
their existing statutory purposes of conservation and access,
will be considered as part of the review of uplands policy which
will conclude in February 2011 and will take into account any
responses to the governance consultation on this point.
The progress of "Home on the Farm",
specifically including: what the scheme entails; whether any change
or amendment to the Planning Policy Guidance will be made; what
the flexibility is for `Home on the Farm' dwellings to be used
by non farm-workers and by retired farm-workers; and whether any
budget has been allocated for the promotion or extension of "Home
on the Farm"
On 18 October Andrew Stunell, Parliamentary
Under Secretary of State at the Department of Communities and
Local Government, announced the "Home on the Farm" scheme
which encourages farmers and local councils to work together to
secure the conversion of redundant and underused farm buildings
to deliver affordable homes for local people. Affordable homes
provided through "Home on the Farm" will be for households
in the local community, which could include non-farm workers or
retired farm-workers.
Planning authorities in rural areas with high
demand for homes, may want to consider amending their local planning
polices to support the change of use of farm buildings to affordable
homes where these are considered inappropriate for employment
use, or take the need for affordable homes into account in assessing
individual applications.
The Coalition Agreement says we will publish
and present to Parliament a simple and consolidated national planning
framework covering all forms of development. We will make an announcement
on how we propose to take forward the national planning framework
and the implications for specific areas of planning policy. This
will include planning for housing policy.
There is no specific funding allocated to promote
"Home on the Farm", either in terms of grants or for
publicity (as the latter will fall within the Department's normal
business). Local authorities may wish to offer incentives to farmers
to carry out conversions to provide affordable homes for local
people.
The split between rural and urban interests in
the LEPs that were announced in October; how Defra will in future
be ensuring that LEPs have an equitable balance of urban and rural
interests; and also on the accessibility of the Regional Growth
Fund to uplands enterprises
In addition to the question above, you also
requested more detailed information on LEPS. On 29 June 2010,
the Secretaries of State for Business, Innovation and Skills and
for Communities and Local Government invited business and civic
leaders to come forward with proposals for joint partnerships
which would be based around a functional economic geography and
which would provide the strategic vision for economic growth within
that area. It was for local areas to decide whether they wanted
to form a LEP, there was no prescription from Government.
24 LEPs were announced at the end of October.
Some of these cover predominantly rural areas (including uplands
areas), while others are naturally urban-centric based on established
partnerships around cities. Others still, have urban areas with
rural hinterlands with close economic relationships with the urban
centres. I enclose a map showing the extent of these 24 LEPs.
Regarding the areas not currently covered by a LEP, these 24 were
only the first tranche of LEPs to be announced. Some 60 expressions
of interest to form LEPs were initially received but not all of
these fully met the criteria. Suggestions for improvement have
been fed back to any prospective partnership and they have been
invited to resubmit their proposal once any issues have been addressed.
If the revised proposal meets the Government's expectations then
they will become a LEP. Thus areas of the country, including rural
areas, not currently part of a LEP could potentially be part of
one in the future.
LEPs are developing their own strategy for growth
depending on local needs. They will determine their own priorities,
including whether they pursue rural and/or uplands interests.
However, the White Paper Local Growth: Realising Every Place's
Potential published in October, which provides the policy
context for LEPs, quite clearly flags the importance of recognising
the "characteristics of the rural economy and its contribution
to national growth."
With regard to the specific enquiry about accessibility
of the Regional Growth Fund (RGF) to upland enterprises, an organisation
or an area is not necessarily disadvantaged by not being in a
LEP as RGF bids are not restricted to LEPs. Bids can also be made
by private bodies, public-private partnerships (not exclusively
LEPs) and by social enterprises. The advantage that a LEP might
bring is a more strategic view of the needs of the local economy
and an overarching body to bring together packages of smaller
bids. Where there is no LEP, areas or organisations may need to
think instead about how they can work collaboratively and innovatively
with neighbouring places, other organisations and private sector
partners.
You may wish to be aware of some other background
to the RGF. The fund's objectives are to stimulate enterprise
for the transition to sustainable private sector-led growth and
to support areas and communities currently dependent on the public
sector. The RGF is £1.4 billion over three years and has
a threshold of £1 million for bids—this can be either
for individual projects or strategic packages of projects, or
strategic investment programmes. The fund is therefore available
to a wide range of bids in a wide range of areas, and allows for
bids for smaller projects, particularly through the "Programme"
option which is designed for small proposals which will together
work toward a strategy for economic growth. The fund has been
open to bids since 28 October 2010. In addition to the core economic
criteria for bids, bidders are encouraged to demonstrate, where
possible, how their proposal will contribute to green economic
growth. Defra contributes to the funding of the RGF and will be
working with other government departments to allocate funding
from early next year. Bids will go before an independent panel
chaired by Lord Heseltine and will be finally approved by a ministerial
group on which my Rt Hon. friend Caroline Spelman will sit on.
The differences between the agriculture tenanted
sector in England and in the rest of the EU, specifically, the
rights of tenants and landowners to receive EU CAP subsidy
Land tenure arrangements vary significantly
across the EU and there is not a clear distinction between England
and all other Member States. However, some aspects, such as the
management framework for common land, are distinctive to England
and Wales as is the informality of some of our seasonal lets eg
grazing licences. This can give rise to issues in applying standard
regulatory requirements under the various CAP schemes. For example,
the Single Payment Scheme Handbook, section E (http://www.rpa.gov.uk/rpa/index.nsf/15f3e119d8abcb5480256ef20049b53a/d363bddf0e993cba802576e300436523/$FILE/ATTUW7IN/SPS%20Handbook%202010%20V2.0%20WEB%20Mar.pdf)
explains how the requirement to have "land at your disposal"
is met for those who hold a tenancy under the Agricultural Holdings
Act 1986 or Agricultural Tenancies Act 1995 but requires individual
consideration in respect of more informal arrangements. As discussed
at the hearing, there are also specific requirements for agri-environment
agreement holders—including where they are tenant farmers—that
are set out in the scheme handbooks.
In addition, the Minister promised to write
to the Committee to clarify the change made by the previous Government
in relation to the rules regarding succession to a tenancy.
Following a recommendation of the Tenancy Reform
Industry Group, the previous Government amended the Agricultural
Holdings Act 1986 to make changes to the "livelihood test"
for succession to a tenancy. Previously a potential successor
to a tenancy had to have earned his livelihood from agricultural
work on the holding from five out of the last seven years in order
to meet the "livelihood test". This discouraged farm
tenants from diversification as it could jeopardise a successor's
chances of succeeding to a tenancy if he was carrying out non-agricultural
work. However, the amendment made by the Regulatory Reform (Agricultural
Tenancies) (England and Wales) Order 2006 provides that income
from diversified and off-farm activities can be taken into account
in the "livelihood test", where the landlord has given
consent for the diversification.
We understand there have been concerns raised
in the Tenancy Reform Industry Group by the NFU and TFA that some
landlords are unwilling to renew consents which were given before
the legislation was passed. Following a small survey by the Central
Association of Agricultural Valuers, TRIG concluded that there
was not the evidence to suggest that this was a problem, but it
has been agreed that the matter should be kept under review.
The Tenant Farmers' Association's proposals in
their Vision for Agriculture to modify the taxation system to
encourage longer-term tenancies
The Tenant Farmers Association's proposals to
modify taxation in their Vision for Agricultural largely reflect
recommendations made in the Report of the Tenancy Reform Industry
Group (TRIG) at the end of 2003.
These are:
- An amendment to the definition of agricultural
property relief for the purposes of inheritance tax, so that a
landlord does not lose or jeopardise his entitlement to agricultural
property relief if he agrees to a tenant diversifying out of agriculture.
— Deferment of Capital Gains Tax on improvements
to let agricultural holdings.
— For the purposes of assessing Stamp Duty
Land Tax, all farm business tenancies that are let for terms in
excess of 10 years to be deemed to be 10 year tenancies.
— A review of the schedular system for
income tax and corporation tax to remove obstacles to letting
and diversification (ie the arrangements whereby losses under
one Schedule cannot be offset against profits under another Schedule).
— A review of the VAT position so that
where the purpose of the letting is for agricultural use and the
dwelling is ancillary to that, the whole be liable for VAT, with
VAT due on the whole rent and reclaimable on all relevant costs.
— The current period of ownership of seven
years for landlords to benefit from Agricultural Property Relief
to be aligned with the period of ownership for an owner occupier,
that is two years.
However, in its Vision for Agriculture, the
TFA suggests that it might be time for a more radical reform of
Inheritance Tax. For example, it questions whether landlords should
automatically be entitled to 100% relief if they choose to let
land only on short term let and also suggests that agricultural
property relief should only be for those landlords who let their
holdings for 10 years or more without a landlord's break clause.
The TFA also argues that a landlord who has
decided to let land on a long term basis should be able to treat
the income as earned income from which he could off-set costs
and losses from his wider business interests.
When the TRIG proposals were originally put
forward in 2003 the Treasury made clear that it would need to
see concrete evidence before it would contemplate any changes
to fiscal arrangements. I have indicated to the Tenancy Reform
Industry Group that I am willing to consider any evidence that
it can put forward that taxation issues are a barrier to diversification
or longer term tenancies, but ultimately this is a matter for
the Chancellor.
An update for the Committee on the research Defra
has commissioned into water markets (Q224) and the knowledge barriers
that this work has identified
There are a number of Projects underway in this
area
— Barriers and opportunities for use of
Payments for Ecosystem Services (PES): URS/Scott Wilson are undertaking
this short study commissioned by Defra to review the barriers
and opportunities for use of PES in a domestic context. The study
is due to be completed in March 2011.
— Strategic Partnership between Defra,
the Association of River Trusts and three water companies to test
measures for tackling diffuse pollution from agriculture and assess
what role there is for innovative approaches like paid ecosystem
services to meet the aims of the Water Framework Directive: also
to report March 2011.
— UK Water Industry Research/Water Research
Council—water industry led project—part Defra funded,
Report summer 2011 overview of the catchment management initiatives
being undertaken by water companies during AMP5 Asset Management
Programme which runs from 2010-15; a summary of the environmental
drivers for action and the measures being implemented; an analysis
of the views of the financial, environmental and public health
regulators; and, a summary of learning points from catchment management
initiatives to date. An evaluation framework for measuring the
effectiveness and quantifying the benefits of catchment management
initiatives.
— Several projects funded through the Defra
Farming and Food Science Sustainable Water Management Programme
are investigating ways of minimising impacts of UK agriculture
on water quality. This includes the Demonstration Test Catchments
project—which has been established on three river catchments
to test measures to reduce diffuse water pollution and to understand
the scale of changes needed to achieve improvements in water quality.
— The National Ecosystem Assessment (NEA)
is already demonstrating the importance of the uplands for a variety
of ecosystem services, water provision and purification being
just two. This analysis will be completed in the Spring of 2011.
Whether Ofwat's system of reviewing water prices
could be reformed to allow more investment in upstream measures
We are currently considering whether there are
practical and unnecessary barriers to economically justifiable
investment in upstream measures as part of the current review
of Ofwat, and in developing policy for the Natural Environment
White Paper and Water White Paper. Ultimately though, it will
be for Ofwat as the independent economic regulator to decide how
to run its price review process.
December 2010
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