The Committee divided: - Ayes: 7 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 7 / Noes: 10 - Question accordingly negatived.
The Chair
I remind the Committee that with this we are considering new clause 10—Annual assessment of funding for purposes—
“(1) The Secretary of State must report on funding for each purpose listed in section 1.
(2) A report under subsection (1) must be made for each financial year and must be laid before both Houses of Parliament no later than 31 October in the financial year following the financial year to which the report relates.
(3) The first report shall be made by 31 October 2019 and shall relate to funding in the 2018-19 financial year.
(4) A report under this section must record, on the basis of best data available—
(a) the total sum of funding allocated to each purpose in section 1,
(b) the source of any element of funding under subparagraph (a) which comes from public funds, and
(c) the sums from each source under subparagraph (b).
(5) The Secretary of State must include in each report under this section—
(a) a statement of their opinion on whether any sum recorded under subsection (4) is sufficient to meet their policy objectives in relation to each purpose; and
(b) a statement of the Secretary of State’s intentions if, in their opinion, a sum recorded under subsection (4) was not sufficient to meet their policy objectives in relation to a purpose.
(6) For the purposes of this section, ‘funding’ includes any payment, grant, loan or guarantee.”
This new clause would require the Secretary of State to report annually on the funding allocated to each of the purposes of the Bill, on its sufficiency to meet policy objectives and on the Secretary of State’s intentions if in their opinion funding for any purpose was not sufficient.
The Minister for Agriculture, Fisheries and Food (George Eustice)
I turn my attention now to Opposition new clause 10. I recognise that there is a very big issue behind the new clause—funding. We completely understand that. We need to ensure that we have the funding in place to support the purposes we outline in clause 1 in particular. We are absolutely clear about the importance of that. That is why we made a manifesto commitment, which we will honour, to keep the cash totals we spend on agriculture policy the same for the duration of this Parliament—we hope until 2022.
There is also provision in the Bill for a long, seven-year transition. Although we have given no concrete undertaking about the exact quantum of funding after 2022, it is implicit in the Bill and in the nature of the transition that there will be ongoing funding thereafter. We also made a manifesto commitment to introduce new schemes to replace the current common agricultural policy, and that is what the Bill is all about. On 16 October, the Government announced that they will review the intra-UK allocation for domestic support, which will go some way to giving consideration to how we allocate funds within the UK and set the ground rules for allocations after 2022.
At the moment, we spend around £3 billion a year on the CAP. In the scheme of things, compared with the spending of many other Departments, that is a relatively modest sum, particularly if we refocus those resources to delivering public goods—improving the quality of our soils and water, enhancing the beauty of our landscapes, and supporting key Government objectives, such as promoting biodiversity and wildlife on farmland and reducing our climate change emissions to mitigate the impact of climate change.
However, new clause 10 is less about the size of the budget—no doubt we will discuss that later—than about annual reporting on the budget. There are two reasons why it is unnecessary. The first is technical. The new clause would create a legal requirement to list the total funding for each of the purposes outlined in clause 1. As I made clear on Tuesday, the difficulty with that is that many of the interventions we seek will cross multiple purposes. We may have schemes that enhance animal welfare but also the environment, or that enhance the environment but also mitigate the impacts of climate change. It would be difficult to separate those things out and report on the basis of individual purposes.
Strangely enough, it would be far easier to report even more granularly—to report how much money we spent on integrated pest management schemes, catchment-sensitive farming schemes or schemes to enhance farmland birds or pollinators, for instance. We would probably be able to extract that information from individual agreements and aggregate it for reporting purposes far more readily than we would be able to pigeonhole expenditure within the purposes outlined in clause 1.
The second reason—the hon. Member for Stroud may have forgotten this, but he was in the House at the time—is that the last Labour Government introduced the Government Resources and Accounts Act 2000, under which the Department for Environment, Food and Rural Affairs already has a statutory duty to present an annual report and accounts to Parliament, detailing all our expenditure. These days that includes quite a comprehensive list, as well as reporting of the Department’s priorities and how it is delivering, for example, on its business plan.
Mr Robert Goodwill (Scarborough and Whitby) (Con)
Is it not also the case that hon. Members who might have an interest in such things may table parliamentary questions and need not wait for the publication of an annual report?
George Eustice
That is absolutely the case, as my right hon. Friend points out. We have scrutiny by the National Audit Office, the Environmental Audit Committee and the Environment, Food and Rural Affairs Committee, for example, and I always enjoy the many parliamentary questions I receive on every piece of detail about DEFRA’s spending priorities.
A statutory requirement to do annual reporting on DEFRA is in place already. However, this is an important point, so at a later stage of the Bill—perhaps on Report—I might be willing to explain to the House in a bit more detail what information we would envisage publishing as part of our requirements under the Government Resources and Accounts Act. In a world in which we want transparency about how we spend money in this area and what it is delivering, it may well be possible for us to decide to adopt a convention on the particular format of these annual accounts. I am more than happy to return to the House on Report to say a little more about that. On that basis, I hope the hon. Gentleman will not press new clause 10.
Dr David Drew (Stroud) (Lab/Co-op)
That is all very interesting, and I largely concur with what the Minister says. The academic Steven Lukes, in his wonderful little book “Power”, always draws a distinction between the “power to” and “power over”. The problem with Government and that piece of legislation in 2000 is that it was all about how Government decide to report and to defray their financial considerations. To me, this is “power to”; it is a more consultative arrangement—there is a need to have a reporting mechanism whereby the Government say what they intend to spend.
That is nothing new, and it is exactly what happens every year under the CAP, which has a mechanism whereby the Council of Ministers signs off the budget, which is then reported to not only Parliament but all the farming organisations. The reality of that is that the farmers are either well pleased or start burning their tyres. That is where we are with agricultural politics, which is big on the continent, if not so big here, because our farmer organisations tend to work through the system. That, however, is the point: they are asking for a system to be put in place.
Farmers are very worried that if such a mechanism is not in place, a future Government of whatever colour or persuasion could, in effect, just say, “Well, there isn’t enough money, so we’re making large cuts, including to all these wonderful schemes that we’ve talked about.” The Minister is very lucid about how all these different organisations could be brought in, but it will not make a jot of difference if there is not any money to run the schemes.
In a sense, the new clause would protect any organisation or any person who clearly wants to obtain funding through the system available. It would give them some security, and all people are asking for is security and certainty. Although we shall not have a vote on the new clause at this stage, I hope that the Minister will reflect on it. It will come back in the Lords, but it is always nice if we can do things in the Commons.
There needs to be some mechanism to say not what the money is but how it will be defrayed. That is important under the CAP, where we had not just pillar 1 but pillar 2. For some of us in rural areas, that pillar 2 money was very important. There is security in knowing in what ways we can go on to make future plans. Otherwise we are subject to the whim of the Government. As has been pointed out before, an urban-centred Government might decide they did not want to farm the country, but wanted to use it for all sorts of other things. I would not want that, and neither, I am sure, would anyone on the Committee. However, it is the danger.
At least there could be a requirement to go on the record and state what was to be spent and how it was intended to keep the different provisions going. We shall not press the matter to a vote at this stage, but we shall keep the right to return to the matter for a vote at an appropriate time.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Simon Hoare (North Dorset) (Con)
I think there are two things that taxpayers would presume to be inherent to this, and which they would require. First, the hon. Member for Stroud alluded to the need for transparency and to know that moneys being provided by the Exchequer through DEFRA to support any public good or food production scheme are being spent wisely. There must be public confidence in this, and I go back to a point I made in Tuesday’s debates: in the increasingly urbanised country we live in, which is less interested in rural life, it is imperative that the public know that, just as we insist on transparency, fairness and rectitude in, for example, the welfare system or other things.
The balance that I detect, certainly from my right hon. Friend the Member for Scarborough and Whitby and my hon. Friend the Member for Ludlow, and which I echo, is that while we must have these powers to allow public confidence to set in, be fostered and flourish, we must also have proportionality and discretion. It would be frankly bonkers to trot somebody off to the magistrates court, the Crown court or indeed the High Court over somebody’s daughter riding a pony on a bit of set-aside, as my right hon. Friend the Member for Scarborough and Whitby has said, or other such small things.
We need within the Bill—I think it is referred to in other subsections of the clause—the discretion to say, “Right, we have overpaid you for that, or you haven’t done this in-year, so we will roll over,” and so on, which provides the transparency and accountability.
However, we must remember that a lot of our farms and farmers are small businesses, where people do not have time and space to go off and instruct a solicitor, get their defence ready and take those two or three days off to go to court—only to find that the court hearing has been adjourned because the judge is not available or the chief usher has a heavy head cold. In many of our smaller courts, which are also constrained in terms of manpower, there is a huge delay in the delivery of justice.
I hope my hon. Friend the Minister will reflect on what I appreciate are often competing demands, namely for transparency and discretion. The heavy hand can often fall on, “Let’s go really big on the criminal stuff,” and we have a pretty crowded statute book at the moment. I think that is why lawyers are able to charge so much money, because there is a hell of a lot of reading involved even in making a case for a minor or small point.
Let us not overcrowd the statute book with statute law and criminal offences if we do not need to. We should ensure that the robustness is there, as in those other clauses, but I urge my hon. Friend the Minister—not today, but either in the other place or on Report—to reflect on the considered and informed remarks of my right hon. Friend the Member for Scarborough and Whitby and my hon. Friend the Member for Ludlow, and on my small and amateurish contribution.
George Eustice
I confess that when the Bill was drafted that particular bit about creating offences jumped out at me too, and I discussed it at some length with our legal advisers and officials. I can confirm that we seek only to replicate powers that already exist.
The Common Agricultural Policy (Control and Enforcement, Cross-Compliance, Scrutiny of Transactions and Appeals) Regulations 2014 already provide for offences, and there has always been the ability to provide for criminal offences under EU regulation and the enforcement regulations, which are in secondary legislation.
The idea was always that those offences could include such things as intentional obstruction, the deliberate failure to give required assistance or information or knowingly to provide false or misleading information. I reassure the Committee that, during the time we have had those powers, the RPA has never brought criminal sanctions. It has never needed to, because other interventions have been sufficient.
A number of important points have been made, and I listened carefully to those raised by my right hon. Friend the Member for Scarborough and Whitby and my hon. Friends the Members for Ludlow and for North Dorset. The hon. Member for Ipswich also raised the legitimate point that there is already alternative legislation to deal with fraud. I am grateful to the shadow Minister, the hon. Member for Stroud, for not pushing the amendment to a Division today.
Given the representations from my hon. Friends behind me and from others, I am certainly willing further to discuss this issue with Government colleagues, and perhaps to come back to Parliament on Report to give it further consideration. We are clearly going into a changing world and a changing situation, and it might not be necessary to bring across all the sanctions available to us under the CAP scheme. It might be that the many other provisions—including being able to disqualify people from entering schemes in the future, penalties, an ability to recover or withhold moneys and so on—alongside existing criminal powers, are sufficient. We will undertake to look at that.
Ben Lake (Ceredigion) (PC)
On that point, will the Minister clarify, either today or on Report, the status of the power to create offences granted to Welsh Ministers under paragraph 3(2)(h) of schedule 3? Does that also mean amending criminal offences and creating new ones?
George Eustice
The power to create new offences is in the Welsh schedule. It is a decision for the Welsh Government whether they wish to change that as the Bill progresses. That is clearly a decision for them, and I will not give any indication about what they might do.
Chris Davies (Brecon and Radnorshire) (Con)
I find it quite strange to be in great sympathy with the hon. Member for Stroud, but, after that direct answer from the Minister, which I thank him for, I urge him to have another look at the clause. We look forward to discussing it on Report. We have concerns.
George Eustice
I very much look forward to discussing the issue further on Report. As I said, in considering the mood and sentiment of the Committee, I undertake further to discuss the issue with Government colleagues and to report back to the House on Report. I hope that, on that basis, the hon. Member for Stroud will agree to withdraw his amendment and keep his powder dry for another day.
Dr Drew
I certainly agree. A report by the House of Lords Delegated Powers and Regulatory Reform Committee identified some concerning inconsistency between clause 16, which contains an extended treatment in respect of monetary penalties, and clause 3, which does not. However, so long as the Minister looks at that, I will withdraw the amendment without further ado. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3 ordered to stand part of the Bill.
Clause 4 ordered to stand part of the Bill.
George Eustice
I oppose this probing amendment for reasons that I shall set out. The shadow Minister made the good point that people want certainty. In the Bill, we have tried to give a clear direction of travel—that is to say, we believe that the end state should be a system in which we reward farmers based on the delivery of public goods, be that animal welfare or higher environmental outcomes, and in which we tackle the causes of low profitability in farming by improving transparency and fairness in the supply chain and making grant support available to farmers to invest in the future.
The difficulty I have with this amendment is that it would largely undermine the purpose of a transition, if the idea is that we would increase direct payments during the transition. If there were a particular problem that meant that a future Government decided they had to pause the transition, it would be open to them under clause 5(2) to extend the transition period. Provided that they brought those regulations in during the transition period, they could extend it for as many years as they liked, and if a future Government so decided, they would have the ability to say that they would not pursue what we have outlined, which is a phasing down of direct payments. It would be open to a future Government, if they deemed it the right thing, to pause that process, extend the transition and slow or halt the rate of decline. That option and that power are already in the Bill.
The issue I have with saying that a future Government could also increase direct payments during that time is that that would effectively undermine the direction of travel we have set out. It would mean that there was less money—potentially no money—to do the pilots we talked about earlier for the new environmental land management scheme that we want to roll out. It would mean that there could be less money, or no money, to make available to support new entrants to the industry or to help farm enterprises to invest for the future.
Of course, in addition to having the power already to pause and slow the taper on the single farm payment and to extend the transition period, later parts of the Bill, which we will come to at a future date, also contain intervention powers. Those are powers, in a severe market disruption, for the Secretary of State to declare exceptional circumstances in the market and intervene directly at that point to provide income support or market stabilisation measures. I believe the Bill strikes the right balance and sets a clear direction of travel, and my objection to this amendment is that it would largely undermine the purpose of the transition period.
If people want certainty, they need the certainty of a seven-year transition, but also an understanding that in all normal circumstances it is the Government’s intention to reach an end state at the end of those seven years. If we introduced the uncertainty that it might all be changed and that we might pay even more via direct payments, people frankly would not know where they stood, and I think that would send a mixed message. I hope that, on that basis, the hon. Member for Stroud will withdraw amendment 102 and not press amendment 104.
Dr Drew
I am happy to do so. Again, these amendments are just teasing out how the process will work in practice. It will be a difficult process; we are, in effect, asking people to change their business orientation completely in a relatively short time. They will have to learn to do very different things. That is why it is important to know, if those things do not work out, what the Government’s response will be. I think the Minister has said what the Government’s intention is. Only time will tell whether it works in practice. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 5 ordered to stand part of the Bill.
Clause 6
Power to modify legislation governing the basic payment scheme
Dr Drew
I should say in passing that there was a Henry VIII power in clause 5 that we allowed to slip through. It is one of the powers that no doubt the House of Lords will have great joy in pointing out to the Government, when and if the Bill gets there.
We are now considering clause 6 and two straightforward amendments, looking at the powers to modify from one system to another. The question is what the clause really adds to the Bill, given that clause 7 tells us that it will phase out direct payments and de-linked payments. One wonders why this power is in there at all and what the Government are doing by keeping the clause there. We would question why clause 6(2) and clause 7(8) are there and whether they are necessary. As the Minister has just said, either we have the strength of our convictions and we are going towards the greening of the farm, food and environmental system, or we will always be thinking that we could go back to a basic payment arrangement if all else fails.
Will the Minister explain what the clause does? The reality is that, if it remains, in extremis there is nothing to stop the Government going away from a greening payments system altogether and looking at other arrangements, as the explanatory notes highlight. Although we question whether the clause adds anything, if it was used inappropriately it could be quite dangerous.
George Eustice
I am grateful for the opportunity to address why there is a need for this subsection of clause 6. The greening provisions in the CAP, by the admission of the European Commission and the EU auditors, have achieved next to nothing in environmental outcomes.
The genesis of the subsection was the fact that in the last CAP reform voices in the European Parliament pressed for a move away from pillar 1 direct payments and for greater emphasis to be placed on pillar 2 agri-environmental schemes, while the Council of Ministers and member states resisted that and clung to the idea of direct payments. The outcome was a classic EU fudge, which attempted to put greening conditions on to the direct payments in a way that has not been effective.
We have ended up with rather ludicrous rules, such as there being one window in which land must be made fallow for the purposes of the ecological focus area rule and a separate window for the purposes of the three-crop rule. There is all sorts of confusion because people have fallow land and they have to work out whether it is fallow for the purposes of the EFA rule or for the purposes of the three-crop rule.
There are also lots of unintended consequences of the three-crop rule and problems with different species being treated as the same. I remember having a long argument with our officials some years ago about whether a cabbage and a cauliflower were the same or a different species, whether a winter cauliflower was different from a summer cauliflower, and whether spring wheat was different from winter wheat. Our contention is that introducing rules of that sort to the direct payment scheme has ultimately failed, as even the EU admits.
The inclusion of these powers gives us the ability to switch off the greening provisions. As things stand, 30% of the single farm payment is linked to the greening conditions. One of the National Farmers Union’s concerns is that we have a secret plan to remove the greening conditions and take 30% of the single farm payment at the same time. I reassure the NFU that that will not happen, because the way the wiring of the scheme’s funding works means that if we remove the greening requirements, the payments linked to them automatically go back into what is called the national ceiling—the budget allocation—and are reflected in the remainder of the basic payment scheme payments. This will not affect farmers’ payments, but it will enable us to remove a lot of the unnecessary administration and checking around the greening requirements, which have achieved very little.
Jenny Chapman
That is a good point. If there is any purpose to our being in Committee two days a week for however many weeks is necessary, it is that we want to improve the Bill.
The process we have followed, including our taking evidence, has enabled us to make suggestions, many of which—although not all—came from third-sector organisations, interest groups or the National Farmers Union, for example. We have really gained from their expertise. The Bill will clearly be amended—it will not be the same as it is now by the end of the process—and I genuinely think that we have benefited from that input. Input is welcome, and it ought to be available to the Government if they intend to make substantive changes to any other measures as well.
The only other thing I say to that is that we will come later to amendments that address consultation and how we might better involve other organisations in shaping our future policy. It is important to note that, by using these affirmative or negative procedures, we cut out from the process not only expertise from organisations but most MPs as well. Let us not forget that Members do not just stick their hand up and get on one of those Committees. There are filters that sometimes enable and sometimes prevent Members from exercising the privilege of taking part in the consideration of measures.
There are many reasons to be concerned about the extensive use of regulations to amend the very legislation in which those regulations are contained. I have deep reservations about the overuse of the negative procedure. I hope that the Minister will confirm that his amendments, which are grouped with my amendment 76, have been tabled to address some of those concerns. Although they will not address my concerns about the use of regulations, he might at least assure me that he intends to use the affirmative procedure, rather than the negative.
George Eustice
I will also speak to a large clutch of Government amendment—amendments 2 to 5, 7, 8 and 12 to 14—in this group. To reassure Committee members, most of them are identical, so I can deal with them quite quickly.
I begin by addressing the points raised by the hon. Member for Darlington regarding her amendment 76. The amendments we have tabled will not achieve exactly what she is trying to achieve with her amendment. However, they will achieve something important, which is to establish that the affirmative procedure will be used if consequential amendments need to be made to primary legislation. I will explain that in more detail later. It is a technical point, but having been on certain Committees, she is clearly familiar with it.
The Chair
With this it will be convenient to discuss the following:
Government new clause 2—Power to reduce the direct payments ceilings for England in 2020 by up to 15%.
Government new clause 3—Power to provide for the continuation of the basic payment scheme beyond 2020.
George Eustice
I will speak to new clauses 2 and 3, which are largely technical amendments. New clause 2 relates to the ability to have an inter-pillar transfer. It allows us to modify retained EU regulations to provide for a smooth transition from the current direct payments scheme to our future arrangement, in line with our stated plans. We have said that we plan to allocate the money paid in direct payments for 2020 in England in much the same way as we do now. We have also committed to uphold the current level of agricultural funding under pillar 2 until 2020, as part of the transition to new domestic arrangements.
The new clause will allow the UK Government to maintain the direct payments budget in England in line with preceding years. It is modelled on existing powers to reduce the direct payments budget, which allows member states to make a reduction of up to 15% in each year up to 2019. Up to and including 2019, we have chosen to redirect 12% of the overall pillar 1 budget to rural development schemes in England. The direct payments regulation does not allow for a similar reduction in the direct payments budget for 2020, but the new clause will correct that and allow us to make that reduction. Without the new clause, the direct payments budget would increase in 2020, which would not be in line with our stated commitment and would go against our aims for a smooth transition.
Regulations made under new clause 2 will be subject to the affirmative resolution procedure. They will affect a large number of recipients and entail a significant spending decision, so we feel it is right that they receive full parliamentary scrutiny. However, our intention is ultimately to maintain the status quo in terms of the current arrangements for inter-pillar transfer.
New clause 3, which is also a technical amendment, will ensure that we are ready for all eventualities. It has been tabled with due concern for providing a smooth transition for farmers from direct payments to the future scheme. As I said, it is our intention to de-link direct payments at some point during the transition period, but first we will stop making payments under the basic payment scheme. In other words, the basic payment scheme will not operate after we have begun making de-linked payments.
Clause 7 provides the powers to de-link payments, either at the start of the transition period in 2021 or part of the way through the transition period. However, the CAP regulations, as retained, do not allow us to make basic payment scheme direct payments beyond 2020. Financial amounts are specified in the annexes only up to and including 2020; to continue making basic payments after that, it is necessary to provide a means to determine a financial amount beyond 2020. New clause 3 does not change our intentions for de-linking, but it gives us the powers that we need to set a national ceiling to enable payments to take place.
The hon. Member for Darlington will be pleased to know that regulations made under new clause 3 will be subject to the affirmative resolution procedure. The regulations may specify the method of calculation for a ceiling, rather than an actual financial amount. We have chosen that approach because the regulations will have an effect on a large number of farmers. I beg to move the two new clauses in the name of the Government.
Dr Drew
We all make slight errors from time to time.
I have some questions for the Minister. I agree that the new clauses look like technical amendments, but I do not quite understand how new clause 2 relates to the Government’s policy document “Health and Harmony”, which sets out very different percentages for the gradual reduction of the basic payment. I presume that the new clause supersedes that document—or does it?
The policy document gives very clear figures for the direct payment bands: a 5% reduction for up to £30,000, a 10% reduction between £30,000 and £50,000, a 20% reduction between £50,000 and £150,000, and a 25% reduction for more than £150,000. That clearly implies that larger holdings would have more than 15%, so I do not understand how that relates to the figure of “up to 15%” in new clause 2. Does the new clause supersede the policy document? If not, what is the status of the policy document? Perhaps the Minister might like to start by answering that point.
George Eustice
May I intervene to point out the policy context? The UK Government took a decision in 2014, under the powers available to us under EU law, to modulate up to 12%—in other words, to take 12% out of the pillar 1 budget, reducing farmers’ overall BPS payment, and move it into the pillar 2 budget to support agro-environment schemes or the rural development programme. All we seek to achieve with this power is the roll-over of the legal underpinning that supported that modulation rate. Our proposed taper on the basic payment scheme will be on the existing payment; it is a taper on the payment after 12% has been modulated to pillar 2.
Dr Drew
I think I understand that, but I will clearly have to read it back quite carefully, because I am not sure that I totally understand it. I will see if I can get this right: we have taken 12.5% out, which might well have been the pillar 2 moneys, and we are now looking at a scheme, for what remains, that moves from the basic payment, through a de-linked mechanism, to some environmental payments. Is that largely right?
George Eustice
That is broadly right. Farmers currently receive a BPS payment, which is an allocation from the pillar 1 budget minus the 12% that was moved across in 2014. We reviewed that decision in 2016 and said that we would keep it the same until 2019. All we want is continuity for 2020, and this gives us the legal underpinning that we need to maintain the modulation decision taken in 2014. Any future taper and phasing down of the single farm payment, as outlined here, will be based on the BPS payment that farmers have become accustomed to receiving since 2014.
Dr Drew
I will read this interchange back very carefully to see whether it has been about what I think or whether I have misunderstood. This matters because, at the end of the day, farmers need to plan ahead, and 2021 is not that far in the future. Some farmers will lose a considerable amount of money, which they will have to replenish by moving into the new scheme, which we do not quite have yet.
George Eustice
This debate links to a discussion we had earlier about setting a clear direction during the transition period. I understand that the purpose behind the amendment is to try to tease out a bit more what we have in mind when it comes to the de-linking of payments.
We believe that many farmers—sometimes they are in upland areas, sometimes they are on tenancies; often they are in their 70s, sometimes they are even older—who probably should face the decision to retire should have support in doing so, but it is not always easy for them. Sometimes they will have some residual debt or an overdraft and always be hoping that next year might be the good year that will put them in a better position.
If we want to have a vibrant, profitable farming industry in the future, we think it is right to support new entrants and put in place the right schemes that will help some farmers retire with dignity. We will de-link the payment from the need to farm the land and for it to be connected to the land. There is provision in a separate part of the Bill for us to bundle up several years of payments into one lump sum. Through those measures, that 70-something farmer who probably should retire, or would retire if he felt he was financially able to, may take a lump sum as a voluntary exit package to sort out some of his liabilities, pay off his creditors and take that decision to retire with dignity. In doing that, we will create an opportunity for new entrants who are coming in while, equally, helping to safeguard good retirements for those farmers for whom it is right to step back. That is one of the thoughts behind de-linking.
Also, in the final stages of the transition period it might be the right thing to de-link everyone’s payments from needing to be linked to the land. Through that, people can have complete freedom over what they do with that money, whether they invest it in new equipment, choose to retire or put it into some crisis reserve to give them a buffer. We want to free them up to do that as we prepare for the move to a new system.
Mr Goodwill
On the point the Minister raised regarding the farmer who might want to retire and take three years’ payments, one question we tried to explore during the evidence sessions was what would happen to the new entrant coming on to that farm, who perhaps for the first two years on that farm would not receive any support, which might make it difficult for him to establish that business.
George Eustice
I understand my right hon. Friend’s point, but of course we must view all this in the context of a seven-year transition period, at the end of which it is our objective and our vision that there will be no basic payment scheme as it is known today. What we would envisage happening in those scenarios is that we would free up land for new entrants to come in, who would get used to working in a different way from the start.
It would be quite possible, for instance, to prioritise the roll-out of a new scheme to those new entrants coming on to land that had been exited and was no longer eligible for the BPS payment. I would also envisage that some of those new entrants coming on to that land would also be likely to qualify for the productivity support. We have to see all this in the context of the fact that we do not want a single farm payment to be carrying on forever. We have set a clear pathway to move to a different approach over a seven-year transition period.
Martin Whitfield (East Lothian) (Lab)
Is not the situation that the Government envisaged one where, by using this de-linking, some farmers may release themselves from land that they see as being less profitable in the future, take advantage of the de-linking, retain land that is more profitable and then continue to claim for that—in other words, make a profit by reducing their business to shape it for what will make money for them again in the future?
George Eustice
Broadly speaking, although, as I said, one of our key thoughts behind the concept of de-linking is that it will be a tool to assist people with retirement. Because we do not want multiple systems—a new system emerging, a legacy system and a de-linked system—we have drafted this in such a way that, once someone takes the decision to de-link, it will apply to everyone and we will not have that problem. It will be a bold policy to help to support structural change and give farmers the freedom to invest that money as they deem right.
Government amendment 91 is another technical amendment that simply reflects the way the current direct payment regulations operate. There has been no change to our policy of trying to de-link payments, but the current direct payment regulation only contains financial provisions known as “ceilings” until the end of the 2020 scheme year. Introducing de-linking in 2021 means that ceilings under the direct payments will not be set for 2021. The existing basic payments will therefore automatically end in 2020 and we will not need to terminate such payments. The amendment reflects that. Other than that, the intent is exactly the same as originally drafted, but the amendment makes it clear, crucially, that de-linked payments cannot be made alongside the direct payments under the basic payment scheme, in line with clause 7(3)(b).
This is a technical amendment simply to deal with a similar point to the one I addressed with respect to one of the new clauses, which is that the ceilings expire and we might want to be able to make those de-linked payments based on a direct payment and not necessarily on the old BPS payment. Again, this is a technical issue that has its genesis in the way that EU payment ceilings and budgets are wired. I hope I have given the Committee a good explanation of what we seek to achieve through the amendment.
Dr Drew
I do not think farmers need agronomists; they need lawyers to go through some of this and work out whether they are entitled to various payments. It is a wee bit complicated, but maybe it will all be clearer when it comes out in the wash. As I have said to the Minister, I have always supported a retirement scheme for farmers. For too long, too many people have tried to stay farming when it is really not good for them or for their holdings. I welcome the fact that there is now a mechanism by which they can leave the land, by managing to take the payments over time.
Chris Davies
There are many farmers in Herefordshire and Shropshire who will own land 30, 40 or 50 miles into Wales, so does Minister foresee any difficulty with decoupling in cross-border schemes if both devolved areas end up with different schemes?
George Eustice
We have had a comprehensive debate, and I want to pick up on some of the points that were made.
The Opposition’s amendment 107 is about making provisions for determining the status of those persons who have received de-linked payments where the agricultural transition period has been extended. That links to the point that I addressed earlier. We are setting a clear course here, and if a decision is made under clause 7 to de-link all payments, as far as we are concerned there will be no turning back at that point. It will be possible, under subsection (1)(a), to continue with the basic payment scheme and make a decision to extend, but if at a later stage of the transition period a decision is taken to de-link all payments, from our point of view it is not possible at that point to turn back, nor would we want to do so. If at that point we decided that we still wanted an old-style subsidy system, the right thing to do would be to pass new primary legislation because that would be a major departure from what we envisage in the Bill.
I was asked about de-linking and about what will happen at the end and whether we will put conditions on what people can spend the payment on. During the transition, we envisage there being a progressive, year-on-year phasing down of the BPS payment. Alongside that, we will roll out new grants for such things as productivity, and we will roll out the new environmental land management scheme.
There is already a huge amount of bureaucracy, inspection and tedious form filling behind the BPS payment. If in year three, four or five the BPS payment is considerably smaller than it is now, farmers will rightly say, “Isn’t this a sledgehammer to crack a nut? Our BPS payment is much smaller, yet we still have this extraordinary inspection regime, we still have to employ agents to fill out all the forms, and we still have to have someone from the Rural Payments Agency come to walk our fields and inspect everything.” At that point, people will rightly ask whether the enforcement architecture surrounding the BPS payment fits the size of the payment, given that it is necessarily being phased out.
That is why our view is that if we de-link the payment we will not attempt to put conditions on that, because it will be a diminishing sum of money anyway towards the latter part of transition. We have not decided when to de-link. That might come later; it could be at the beginning—that is provided for. We would consult on that, but my expectation is that for a period we would phase down the existing BPS payment. A point would then come when, frankly, having all the architecture that we have now to enforce it would cease to be justifiable, and simply de-linking to get the system closed down would be the right thing to do.
The answer to the Landworkers Alliance, the members of which generally complain to me that they are ineligible for the BPS payment at the moment anyway, is that in so far as some of them might be eligible, if they took a de-linked payment they would be able to spend it on anything they wanted, as would any other farm.
A slightly separate provision—although it is linked, and they overlap in some respects—is clause 7(7), which creates a parallel power for us effectively to do what I described earlier: make a rolled-up payment of several years to a farmer who might be deciding to leave the land. We may exercise that whether or not we had de-linked. It will be open to us to run a scheme basically to make an exit payment to farmers, with several years rolled up in one, even if we are proceeding on the basis of clause 7(1)(a)—that is the phase-down. It will also be open to us to do it under subsection (1)(b), but if we were using subsection (1)(b) towards the end of the process to free everyone from the need to have their payment linked to the land, it might be less attractive at that point as an exit package.
Dr Drew
I have some fairly basic questions. Who makes the decision, and is it capped? Lots of farmers might say, “Great—we’ll take the money now. We’ve always wanted to retire.” The average age is somewhere between 60 and 65. Is the figure capped or could, effectively, thousands of farmers decide that now is the time to go?
George Eustice
Any regulations will be under the affirmative resolution procedure. We will work with industry and others on the precise scheme designs. We will not do it in a hurry. We think there is a great logic to de-linking payments towards the end of the scheme. We also think that having a scheme that supports retirement with dignity and voluntary exit is useful. That is why we have provided for that to be done under subsection 7(7).
Dr Drew
I think the Minister has answered the hon. Member for Ludlow well, but the trouble is that that is just the theory. My tenant may suddenly get tens of thousands of pounds. If he has left the farm in a very poor state, he may leave the holding. That is a potential legal minefield, which the Government need to look at. The general view is that rents will decrease after the area payments scheme goes. I was at a farm on Friday, however, and the farmer I spoke to was very clear that once the area payments scheme goes, the landowner will want to put the rents up because they will believe that they are losing out and the tenant could pay more. There are some complications here.
George Eustice
I would almost say the opposite. If the market is such that a number of people choose to retire and there is no longer the inflationary pressure of a BPS payment driving up rents, rents might decline in some areas. That is not necessarily a bad thing. If rents go down, it is not great for landlords, but it creates opportunities for new entrants to come in with lower overheads and produce food for the country. There is a problem with the BPS scheme, which has inflated rents and made it difficult for entrepreneurs to get on to the land and make a sensible living.
Amendment 108, which was also tabled by the shadow Minister, puts explicit timescales on payments. I understand the frustration of many hon. Members who have had farmers coming to them in recent years and complaining that they have been unable to get the payment. We address the issue in a number of ways. First, under retained EU law, the existing timescales already set out in EU law would come across. I know that farmers will generally take the view that unless they are paid in December their BPS payment is late. In fact, the payment window opens at the beginning of December and closes in June, so there is quite a wide payment window under EU law. That will come across through retained EU law, but we have made some improvements in recent years in terms of getting money to farmers as quickly as possible. Last year more than 90% got to farmers by the end of December.
Mr Goodwill
Of course, in the past when payments have been delayed, fines have been payable to the European Commission. Under the new scheme, presumably there would be nobody to pay a fine to.
George Eustice
That is absolutely correct, but the scrutiny of Parliament will demand action. I was going to say that one of the strong features of the Bill is the fact that it gives the Government the power to act to sort out the dysfunctional EU auditing processes that create late payments.
Clause 9 gives us powers to sort out what is called the horizontal regulation. That is the regulation that sets out all the conditions on payment and the plethora of audit requirements, which often duplicate one another and are unnecessary. The primary cause of the problem we had last year in the BPS system was that under EU law we were forced to remap 2 million fields in one go, to try to get their area accurate to four decimal places. If we had not done, that we would have had a fine from the European Commission of more than £100 million, so we had to attempt the exercise. However, it inevitably caused problems on some farms. Many hon. Members will have had farmers reporting to them that fields had disappeared, or, in some cases, their neighbour’s fields had ended up on their holding. That is what happens when we try to remap 2 million fields. We would not have had to do that, had we had the powers to strike down those requirements.
Secondly, the issues we have at the moment with the countryside stewardship scheme are largely due to the fact that the EU, under horizontal regulation, introduced a new requirement that every single agreement must commence on the same date; so whereas we used to spread the burden of administration across the year, with people able to start in any month, everyone had to start in January. That meant a huge pile of application forms coming in at the same time. Our agencies had to employ lots of temps to try to process the work; and we all know what happens if there is a surge of temporary agency workers to process work. There were inevitably errors and problems. Again, we could remove those rather ludicrous requirements that the European Union imposes on us—in that case under clause 11.
I hope that I have been able to provide some further information about how we would intend to use the clause 7 powers, both to de-link and to make lump sum payments available. I hope I have also reassured hon. Members that the answer to the problem of late payments lies in clauses 9 and 11, not in an amendment to clause 7.
George Eustice
I must apologise for missing my hon. Friend’s important point, which links to a number of others that have been made about how we treat cross-border applications. In effect, what we will be doing is putting in place administrative agreements with Wales and the other devolved Administrations to ensure that where we have cross-border farms—we have similar arrangements in place now—we will have an agreement about how to approach these things to make sense of them and to ensure that things are done in a joined-up way.
Dr Drew
Whatever is happening with England and Wales, we have Scotland and Northern Ireland. This is going to be quite a complicated issue. There will be farmers in Northern Ireland who farm on both sides of the border; they will have whatever the common agricultural policy is and whatever the Northern Ireland policy is within the framework of the United Kingdom policy. That will greatly determine what they intend to farm, how they intend to farm and whether they wish to stay in farming.
George Eustice
I will try to be as brief as possible. Amendment 77 repeats the earlier debate on clause 6, which also proposes a negative resolution. For the same reasons, we believe that a negative resolution is appropriate in this case, because it deals with technical issues and the switching off of certain requirements that currently sit in the scheme to try to improve it, simplify it and remove some of the frustrations that we have at the moment. That should be seen in the context that this is a time-limited scheme anyway, which will expire at the end of the transition.
I note what the hon. Member for Darlington says about the term “simplifying” or “improving”; I know the Lords Committee that looked at this also raised that point. We have not quoted the Agricultural Act 1947 today, but I know many hon. Members like it, so let us look at section 1, which talks about the importance of
“a stable and efficient agricultural industry capable of producing such part of the nation’s food and other agricultural produce”,
as it is deemed “desirable to produce”. Now, if I had drafted a clause along those lines and put it in, everyone would have said, “What does ‘desirable’ mean? What does ‘stable’ mean? What does ‘efficient’ mean?” The truth is that we can have false precision on these things. It is clear what we mean by “simplifying” and “improving”.
We should also view this in the context of subsection (2)(a), which is simply the power to switch off certain provisions altogether. It is very clear in the context of subsection (2) that our preference will be to switch off things altogether where they serve no purpose or we think we can do without them, but where we think they serve some purpose we can simplify and improve them. That is understood.
I should also say that we have to understand that at the moment, the best that Parliament will get on things such as this is an explanatory memorandum, explaining the latest thing that the EU has done to us. Most of these sorts of decisions are made by EU delegated acts. There is literally no democratic input at all on some of those requirements, and often things get made up on the hoof by EU auditors working for the Commission, who create all sorts of new processes that have not been discussed or agreed at any level within the European Union.
This is an approach that I believe is right. To explain the types of things that we want to deal with here, I have to deal as Farming Minister with something called RPA appeals. Every month I get a bundle of cases in my box that are farmers who maybe missed a deadline because something got lost in the post or there was a problem with their application form. The system is hideous; I have spent hundreds and hundreds of hours wrestling with lawyers in our Department to try to find a way of doing what is just and fair and finding in favour of farmers, only to find, all too often, with deep frustration, that EU law does indeed require me to find against them. The system we have in the so-called horizontal regulation is manifestly unjust and unfair, and we must resolve to improve it.
I turn now to the hon. Lady’s amendment 78. She explained her approach in great detail, but let me just say that she rather undermined her own argument by pointing out that DEFRA, without any statutory requirement necessarily to do so, is quite capable of churning out a great many consultations. I can tell her that, more often than not, the conversation I have with our officials is, “Do we really need a consultation on something as small as this?” and the answer is invariably, “Yes, because that is what Cabinet Office guidelines require.”
I do not believe that we need a statutory requirement to have a consultation on this. The only area where we have a statutory requirement for a consultation in the DEFRA field is on issues of food safety, where there is a written statutory requirement always to consult, but that does not stop us consulting. We consult on everything, and if it would give the hon. Lady some reassurance, I can give her an assurance, here on the Floor of the Committee, that we would consult on the changes that we intended to make under clause 9.
I would envisage our having a single strike at improving the system and probably not changing it much beyond that. It is inevitable that we would issue a consultation on all the changes that we would seek to make, and we would try as far as possible to do everything in that one go. It might be the case that there was something we missed and at a later date we might want to do a less formal type of consultation, but I take the opportunity here in this Committee to give the hon. Lady an assurance that we would consult on that first major batch of changes that we would seek to make, but we do not need to be forced to do so by a statutory requirement—as I said, we are quite capable of doing that anyway. I hope on that basis that the hon. Lady will withdraw amendment 77 and we can prepare to adjourn.
Jenny Chapman
I have listened carefully to what the Minister has said on amendment 78 and I accept, I think, what he is trying to say. I think he has tried to assure the Committee that there will be some kind of process put in place, so I will ponder that. I might return to that, but what he said was very helpful. In the interest of consistency, I feel I need to press amendment 77.
Question put, That the amendment be made.