New father time

At the year’s end Will Mooney, Carter Jonas partner and head of its commercial agency and professional services in the eastern region, is looking forward, very far forward.

Whether your view of Old Father Time is that he hands his watch over to New Baby Time on Hogmanay or you’re of the feeling that, much like the Grim Reaper, the old fellow is a fixed feature who watches over us year-in year-out as the sands of our lives slip through the hourglass, is a matter of cultural education or superstitious belief.

What the Oxford Martin Commission for Future Generations wants us to do is exorcise our habit of short termism and think about the consequences of our actions. When I say us, what I mean are policy makers who are urged in the Commission’s report “Now for the Long Term” which calls for radical thinking in policy and business.

The Oxford Martin School (http://www.oxfordmartin.ox.ac.uk) is an “interdisciplinary research community of over 300 scholars working to address the most pressing global challenges and opportunities of the 21st Century”.

The Commission’s latest report has ideas about transforming the way governments and corporates go about their business. But the ideas are not founded on wishy-washy sentimentalism. How could it be? The international brains of the commission are chaired by the former director general of the World Trade Organisation, Pascal Lamy who only left that post in September.

The report identifies megatrends - demographics, social mobility and technology to name but three - that are shaping the 21st Century. A century which, the founder of the School Dr James Martin, says could be our best or our worst ever.

These megatrends are, by default, drivers of change and our institutions need to update themselves or become obsolete.

Business and financial systems come in for criticism for short termism. The sector is urged in the report to re-wire itself for long term investment as opposed to slavishly following quarterly reporting cycles.

Interestingly, on the day Pascal Lamy was fulfilling his media commitments about the launch of the Commission’s report, news broke of the departure from Invesco Perpetual of one of the biggest stars of fund management. Neil Woodford said his decision to leave his role managing a £24.6 billion fund and co-managing another of £6.4 billion was based on where he sees long term opportunities in his industry.

Monsieur Lamy pointed out to one interviewer that the news media seemed to be frightened by the long term too. In a time of rolling 24-hour news schedules to fill, it’s no wonder many journalists and producers look to the brevity and immediacy of Twitter and other social media platforms for news and views to source or reinforce a story or even report social media activity as news in itself. There’s a lot of air time to fill and our attention span appears to be ever-shortening.

Pascal Lamy pointed to a couple of examples where business and policy makers had come together to think about the long term with staggering success achieved in a relatively short space of time. Namely, anticipation of Y2K technology meltdown in the year 2000 and also in setting minds to tackling HIV-AIDS in the late 1980s and 1990s.

It seems fitting to quote Marx here: Groucho Marx. “Why should I care about future generations – what have they ever done for me?” But it seems that the Oxford Martin Commission’s view is that in thinking about future generations, we could actually do ourselves a favour right now.

Will Mooney MRICS
Partner
Commercial, Cambridge

Government modulation - hot topic of debate

Until 2005, I thought modulation was a musical expression referring to a change in pitch or tone, but as is so often the case in the context of “EU diplomatic speak” this word popped up with quite another meaning when the CAP was last reformed in 2005. Its new meaning is basically a “tax” to be taken off one payment and added to another and in recent weeks this has become a hot topic of debate.

Under the forthcoming CAP reforms which are due to take effect in 2015, the government is proposing to modulate or effectively tax the payments due to be received by farmers by 15%. Farmers and farm leaders are not impressed and are urging government to reduce modulation to a much lower rate of 9%.

The reason for the argument is that the funds received from the EU to support farmers and the wider rural economy come under two funding streams or “pillars”; pillar one providing direct payments to farmers and pillar two providing wider rural economy payments.

Historically the UK has always had low pillar 2 funds compared to the rest of the EU, which at least in part stems back to the budget rebate negotiated by Margaret Thatcher in 1984. As a result when subsequent governments have wanted to increase funding for the wider rural economy they have effectively “taxed” or “modulated” the pillar 1 pot to supplement the pillar 2 pot.

Most recently one of the primary drivers for such modulation was to fund the environmental stewardship schemes which have been introduced widely throughout England and it is understood that around 70% of the farmland in England now falls within one scheme or another. However, in addition to the environmental schemes, pillar 2 funds have been used to fund a whole raft of measures in the wider rural economy varying from “knowledge transfer” schemes to helping fund small start up businesses.

My experience with the latter schemes in particular is that although they do have some merit, by the time it has taken the relevant authorities to develop the rules and implement the schemes, it often means it takes many years for the modulated funds to reach their ultimate destination. In these economically difficult times, such delays could be very damaging and therefore, although I would support the continued funding of the existing environmental schemes, I would suggest that increasing the money being fed in to pillar 2 funds at the expense of direct payments to farmers would be a bad idea.

To put it simply, paying funds direct to farmers and landowners will be a much quicker and more effective way of getting financial support out of the EU in to the our rural economy than would be the case if we invented a whole raft of new schemes with their associated rules and bureaucracy to reallocate the same funds, on occasions to exactly the same people, but often several years later than would otherwise have been the case.

It is appreciated conservation organisations in particular will disagree with this but it also has to be appreciated that like farmers they receive significant funds from the CAP in one form or another. It is understandable that they would like to see more funds directed to conservation but equally, many such organisations will have experienced the cash flow problems that occur when new schemes are introduced with the resultant delay in receipt of funds. Thus, in my view supporting a continuation of the existing environmental schemes as suggested by farm leaders rather than an expansion of pillar 2 funding as suggested by government is the most sensible approach in these uncertain economic conditions.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

The Rural Payments Agency

The Rural Payments Agency (RPA) has reported that it has successfully paid Single Payments to 95,600 farmers in England on the first day of the payment window being 2nd December this year. This is the best the RPA has ever achieved since the Single Payment Scheme was introduced in 2005 and it is a far cry from the chaos and delays which were experienced by many farmers in the early years of the scheme.

Indeed the payments made on 2nd December exceed the RPA’s own payment targets, which is good news for farmers, many of whom in the livestock sector in particular are still reliant on these subsidies in order to make a profit.

However, there is a concern that with the forthcoming reform of the CAP which will come in to force in 2015 that the RPA does not take its eye off the ball. It is imperative the RPA makes sure that as far as possible the progress that has been made in recent years is not squandered when the new scheme is introduced.

There is hope that the new scheme will be easier to administer because the government has sensibly decided to roll over the existing “entitlements” in to the new scheme. This will mean farmers will not have to go through a fresh registration process under the new scheme but there will no doubt be many other complications which may have the potential to cause problems.

The entitlements are important because in order to claim the area based support payments under the Single Payment Scheme and the new successor scheme, farmers need to match the number of entitlements they hold with an equivalent area of qualifying farmland. Therefore, as a result of the decision to roll over existing entitlements in to the new scheme, the value of entitlements has appreciated from around £200/entitlement to around £300/entitlement because there is now certainty that they will be around until 2020 which is when the CAP will next come under review.

Accordingly, those farmers with spare entitlements may consider selling them sooner rather than later because under the new scheme it is understood that any entitlements which are not claimed in 2015 will be confiscated without compensation. These entitlements will be put in to the National Reserve for distribution to other claimants, the rules for which are as yet unknown.

Further, any claimants with less than 5 hectares of land will no longer be allowed to claim in the new scheme which means they may wish to offload their entitlements now even though this would preclude them from making a claim in 2014.

So, it seems just as the RPA have got to grips with the existing Single Payment Scheme after 9 years of trying, there is a danger things could go awry as a new scheme is introduced in 2015. However, I hope the roll over of entitlements will make this process much more manageable than it was in 2005 although that does not mean to say the RPA or farmers should be complacent. The new scheme will present both opportunities for some and dangers for others and farmers will need to keep abreast of developments as the detail of the new scheme rules start to emerge over the coming months.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Carter Jonas' Energy Index

The Energy Index 2013 has just been published by Carter Jonas’ research team and I think this will make interesting reading to farmers, landowners and anyone with a general interest in the subject of onshore renewable energy technology.

The report gives a brief over view of the five principal technologies which are anaerobic digestion, biomass heating, solar photovoltaics, hydroelectric power and wind and then analyses how they perform against a variety of measures. These include efficiency, cost of installation, annual operating costs, development timeframe, planning risk and the financial support mechanism of each technology type.

The key objective of the index is to rank the various technologies against the various measures to help landowners and farmers through the difficult decision making process as to which technology may be the most suitable for them to pursue. Clearly the physical characteristics of every site are different and these will often be the most significant factors guiding a landowner as to what opportunities may be available but I would suggest this index will be of interest to anyone who is at the start of this thought process.

The energy sector is clearly high on the political agenda and at the time of writing we await an anticipated announcement in Chancellor’s autumn statement on potential changes to the manner in which green levies are to be raised in order to fund renewable energy developments. Clearly if these changes result in significant cuts in the subsidies which are paid to encourage certain types of renewable developments this could have a significant impact on the viability of certain technologies.

Having said that, the renewable energy sector and its costs of development and pricing structure are already changing; there are a number changes to the financial support mechanism which are in the pipeline and forthcoming government announcements may result in further changes. It is uncertainties such as this which last week saw the shock announcement that RWE Innogy has decided to cancel the proposed development of the so called “Atlantic Array” which was planned to be a 240 turbine wind farm located off the North Devon Coast.

In light of this volatility it is Carter Jonas’ intention to update their Index on an annual basis although will be worth keeping in close contact with their energy team to ensure you keep abreast of changes as they happen because waiting a year for an update in this fast moving industry will be too late.

Anyone interested in receiving a copy of the index should contact James Stephen on james.stephen@carterjonas.co.uk or they can download a copy from the Carter Jonas website: www.carterjonas.co.uk

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk