Rules for Direct Payments to Farmers (Amendment) Regulations 2020
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Lord Gardiner of Kimble
That the Grand Committee do consider the Rules for Direct Payments to Farmers (Amendment) Regulations 2020.
Relevant document: 5th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Gardiner of Kimble) (Con)
My Lords, I declare my farming interests as set out in the register. I hope that it will be helpful to your Lordships if I speak to both the Rules for Direct Payments to Farmers (Amendment) Regulations 2020 and the Financing, Management and Monitoring of Direct Payments to Farmers (Amendment) Regulations 2020, given the close connection between the two instruments. These instruments amend retained EU law governing the direct payment schemes for farmers for the 2020 scheme year. This EU law was brought into domestic law on exit day by the Direct Payments to Farmers (Legislative Continuity) Act 2020, which, as noble Lords will remember, we have debated.
These statutory instruments address operability issues in retained EU law so that it can continue to function effectively in the United Kingdom for the 2020 scheme. The instruments make purely technical amendments to fix inoperabilities, and I should emphasise that they do not make policy changes. They use the affirmative procedure and I would like to explain why this was necessary. They could not have been made any sooner as they could be made only after the parent Act received Royal Assent, which was just before exit day. The instruments needed to be in force on exit day, at the same time as the relevant direct payments legislation was brought into UK law. This has ensured a seamless transition from EU law to UK law. It has meant that the Government and the devolved Administrations can continue to operate effectively the 2020 scheme, which began on 1 January, therefore avoiding any disruption to farmers. Significantly, these instruments ensure that the UK Government can meet their commitments to funding in the agriculture sector. The Government have announced nearly £3 billion in funding for direct payments to UK farmers for the 2020 scheme year.
The Rules for Direct Payments to Farmers (Amendment) Regulations 2020 make operability amendments to the retained EU Regulation 1307/2013, which is the main direct payments regulation establishing the high-level framework required to make direct payments to farmers. It also amends two delegated and implementing Acts under this regulation which together set the detailed scheme rules for direct payments. Finally, it makes minor operability amendments to an existing statutory instrument related to direct payments in England. It is worth making it clear that the direct payments legislation being amended by this regulation was brought into UK law only for the 2020 scheme year, not for prior years, so this instrument makes amendments only in relation to 2020 direct payments.
The Financing, Management and Monitoring of Direct Payments to Farmers (Amendment) Regulations 2020 make amendments to the retained EU Regulation 1306/2013. This is the main “horizontal” regulation that sets the overarching framework for how the CAP is administered, including direct payments. It also amends four delegated and implementing Acts under the main regulation, which together set the detailed rules necessary to finance, manage and monitor the delivery of the CAP schemes. Finally, it makes minor operability amendments to an existing statutory instrument in relation to direct payments in England.
It is important to recognise that the EU legislation being amended by this regulation was brought into UK law only in so far as it relates to 2020 direct payments and not to other parts of the CAP. Therefore, this statutory instrument amends only the parts of the legislation which relate to the 2020 direct payments. The list of regulations amended by these instruments can be found in paragraphs 2.2 and 2.3 and Annexe 1 to the accompanying Explanatory Memorandum.
The amendments include replacing EU terms with domestic equivalents. For example, references to “Member States” have in most cases been replaced with the term “relevant authority”. The SIs define a relevant authority as meaning the Secretary of State, Scottish Ministers, Welsh Ministers and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland. The instruments in most cases confer powers to make legislation which once sat with the European Commission on either the Secretary of State or the relevant authority.
The amendments also include removing provisions which are not applicable in the UK, such as references to the payment for cotton and administrative processes which lose their purpose outside the EU context; for example, the requirement to send information to the Commission.
More specifically, the Rules for Direct Payments to Farmers (Amendment) Regulations 2020 remove the power to fix spending ceilings for individual direct payment schemes. In a domestic context, it is unnecessary to set such individual ceilings in legislation, particularly given that the schemes are administered at the devolved level.
The Financing, Management and Monitoring of Direct Payments to Farmers (Amendment) Regulations 2020 remove from retained EU law the EU’s processes for managing its budget and remove or amend the EU’s auditing and accounting rules.
Except for the amendments made to the domestic statutory instruments, which apply only in England, these SIs cover all four parts of the United Kingdom. We have worked closely with the devolved Administrations to produce the instruments and they have given their consent to them.
In summary, the instruments allow the retained EU law to function effectively so that the Government and devolved Administrations can continue to operate the 2020 direct payment schemes for farmers. I beg to move.
Baroness Byford (Con)
My Lords, I thank the Minister for introducing the regulations. I thank him, too, for the Government’s commitment to give £2.852 billion to ensure that the programme continues. I should declare a family interest in farming in Suffolk, where we are recipients of basic farm payments and stewardship funding.
The instruments speak for themselves. I have no queries with them; the legislation as it stands is fine. However, is the Minister confident that the payments will be made at the right time and in the full amount? I refer not just to the basic payments but to payments on the stewardship side, which has not had a good record in recent times. I understand from farming colleagues around the country that they are still waiting for some of those payments to be made. Perhaps the Minister can tell us how many are outstanding and when they will be paid. My worry is that the Government will find that fewer people enter those schemes because they fear that they will not be paid at the right time. That would be a great shame because we are trying to encourage a greater number of environmental projects within food production.
Given the flexibility within the instruments, might the Government rethink their stance on the three-year crop rule in the light of recent circumstances? I have in mind particularly the flooding that we have had. At the moment, we are supposed to rotate crops within a three-year period, but given the flooding—which remains a key issue in Lincolnshire, Yorkshire and other areas where crops are still standing in the fields, with little chance of farmers getting them out or being able to plant spring crops—is there flexibility within the system to make any allowances for that?
I have a direct question for the Minister on flooding. I know that emergency payments are allowed, and that some may have already been paid of which I am not aware. Within these rules, may some flooding assistance be given to the farmers who are in such dire straits at the moment?
I noticed in particular Regulation 7(10). I think the exchange rates are undecided at this time. Can the Minister tell us whether the exchange rates will be honoured in the same way between the four devolved Administrations? Clearly, it would surely be wrong to have one system in England and another in Wales and in Scotland. Will he comment on that?
On Regulation 7(6), I see that the Government of Wales have paid an amount to small farmers, and in Scotland beef and sheep farmers have been given assistance. Where will that balance take us? Are there plans to assist farmers in England, who are not represented in that way?
Lastly, I turn to payments. The Minister has a farming background and I am sure he realises that we need to ensure that payments given to farmers this year, let alone next year, are equal across the four devolved Administrations; otherwise, we will have unfair trading circumstances, which I know the Minister would not want to encourage.
Having made those few comments, I return to where I started: I welcome these regulations, and it is important that they are passed by the House. I have no difficulty with what is in them, but they raise other questions, which I have been able to ask this afternoon. I thank the Minister for introducing them.
Lord Gardiner of Kimble
My Lords, I thank all noble Lords for this contributing to this debate, because it reflects what we are all most concerned about: the importance of food production, the people who enable the consumption of food at home and abroad, and their simply excellent produce.
I remind your Lordships that we are the Department for Environment, Food and Rural Affairs, so I intend, in declaring my farming interests, to champion food production and farmers. The noble Baroness, Lady Bakewell, was absolutely right to refer to young farmers. Those of us who farm do not want to be the last generation of farmers. We need to ensure that the next generation produces food for us and enhances our environment, with 70% of our land farmed in the farmers’ custodianship.
I will seek at a brisk gallop to answer a number of questions. My noble friends Lady Byford and Lady McIntosh asked about payments on time. The Rural Payments Agency has worked hard to improve payment performance, as I think has been acknowledged. For farmers, by 20 January the RPA had issued in England £1.69 billion of BPS payments, about £101 million for environmental stewardship and just under £8 million for countryside stewardship. As is recognised in the department, the RPA is now focusing on paying remaining claims as soon as possible. I am well aware of the importance of prompt payments, an issue which the ministerial team places great importance on for future confidence.
The noble Lord, Lord Jones, referred to the intricacy of the instruments. I always go to the Explanatory Memorandum—I find looking at the statutory instrument alone very confusing. Indeed, sometimes, the Explanatory Memorandum needs some explaining too.
However, it is important to record that the Government’s funding for direct payments, announced on 30 December, matches the total funding for direct payments available for 2019. The Government have committed a total of £2.852 billion to UK farmers—£1.843 billion for England, £523 million for Scotland, £243 million for Wales and £294 million for Northern Ireland. This is in addition to the £216.6 million of funding awarded since the spending round to support the farming sector in Scotland and Wales, following the Bew review on farm funding allocations.
The noble Lords, Lord Grantchester and Lord Jones, and the noble Baroness, Lady Bakewell, mentioned the Bew review. This money will be ring-fenced, to be spent on farmers in Scotland and Wales. We intend to lay a further statutory instrument that will amend the 2020 UK direct payments financial ceiling to take account of this funding announcement as far as it relates to the 2020 scheme. We will lay this further SI well ahead of payments being made.
Your Lordships may wonder why this will be dealt with in a separate SI. This is because the SI will be made using a power to amend ceilings which has been transferred from the Commission to the Secretary of State by one of the SIs we are debating today. The SI to amend the UK ceilings will be made with the consent of the devolved Administrations. It will be subject to the affirmative procedure so we will have a further opportunity to reflect on that.
On the issue of exchange rates—again raised by my noble friend Lady Byford, the noble Baroness, Lady Bakewell, and the noble Lord, Lord Grantchester, among others—the level of funding available for the 2020 direct payments will be the same as for 2019 for each part of the UK. The funding is based on the same financial ceilings and exchange rate used for the 2019 direct payments.
The exchange rates to be used to calculate the 2020 BPS payments will be confirmed and set in the statutory instrument we intend to lay in the coming months. The exchange rates were not set in the SIs we have been debating today as at the time, the Government and devolved Administrations had yet to confirm the rates they wished to use for the 2020 scheme. The further SI will be made with the consent of the devolved Administrations and will reflect the decisions made in each part of the UK. This will be the same SI as that used to amend the 2020 financial ceilings.
On devolved Administration funding agreements, raised by my noble friend Lady McIntosh, the Government have committed to engage with the devolved Administrations to develop a fair approach to future funding allocations. This will sit alongside the work to develop an agricultural support framework.
In referring to wet weather and the three-crop rule, I perhaps should declare my own circumstances. I would not like to compare notes with some of your Lordships on the percentage of winter wheat that was drilled, but it has been extremely depressing, so I understand the predicament of farmers across all the nations.
The farming recovery fund provides money to help farmers whose agricultural land has been significantly affected by flooding. The money will go towards the costs of restoring their land as quickly as possible. On 6 January this fund was extended to areas in south Yorkshire and the east Midlands affected by flooding. We are also exploring how best to provide flexibility and support to those farmers affected by the prolonged period of wet weather, so that we can continue to comply with the CAP rules.
The retained EU law governing the 2020 direct payment schemes, as made operable by these two SIs, allows some flexibility from the normal scheme rules. This includes allowing us to waive payment reductions and penalties where a farmer has been unable to meet scheme rules due to exceptional wet weather. In January we published updated guidance for farmers in England to help them safeguard their greening payments. We will continue to keep the weather conditions under review, to assess whether a derogation from the three-crop rule is needed. I will go back to the department with your Lordships’ helpful views on this matter.
The noble Lord, Lord Jones, referred to horizontal regulation—my goodness, I needed a tutorial in that too. These EU regulations set the overarching framework for the administration of the common agricultural policy. That includes the direct payment scheme, which is why I pointed out that it is part of this overarching framework. The law incorporated into the UK now only relates to the direct payment elements.
Questions were also asked about the ELMS. As the direct payments are going to be tapered over this seven-year transition period, it is important that we work collaboratively with the farming community, so these schemes are a codesign. I come from a farming background and I know that they will not work as we intend unless they have the ownership and active, positive collaboration of the farming community. The scheme will be developed through a series of tests, trials and pilots. We plan to launch the national pilot in late 2021. This will provide an opportunity to test and refine the scheme design prior to its full rollout in late 2024. These tests and trials will be taking place across a range of topographies and farmers, so we can see how this works for various types of farm. On 25 February, we published a policy discussion document which provides further information on our current thinking on the ELM scheme.
The noble Baroness, Lady Bakewell, asked about young farmers’ payments. We intend to continue operating the young farmers’ scheme in England while we continue to operate the basic payment scheme. As I said in my introduction, the future of land custodianship rests with the next generation. We need to do all we can to ensure that the enhancement of the environment and food production are a complementary and rewarding part of the farming calendar.
The noble Lord, Lord Grantchester, asked about penalties to be applied in respect of being in the EU in January. Farmers must comply with the scheme rules for the whole calendar year. If a farmer breached them in January, the RPA or devolved Administration would be able to take any necessary enforcement action, in the same way it normally would. This action would include applying reductions or penalties when the payments are calculated later in the year. As the 2020 schemes will be funded by the Exchequer, they will not be subject to disallowance. Disallowance is a fine imposed on member states where the Commission considers they have paid out EU moneys without fully complying with EU rules. Another important part of what the noble Lord, Lord Grantchester, referred to is that the 2020 schemes will be subject to the usual rigorous domestic financing and audit systems. For example, in England, payments made under these schemes will continue to be reported and audited in accordance with the Government Resources and Accounts Act 2000. Equivalent provisions apply in the devolved Administrations.
The noble Lord, Lord Grantchester, referred to the agricultural transition plan, and I have spoken of it before. We will continue to offer land management schemes throughout the transition. On 11 February, a new round of Countryside Stewardship opened for applications, with the agreements starting in 2021. We believe that Countryside Stewardship provides a stepping-stone to the new environmental land management scheme. During the transition, we will also offer schemes to boost industry productivity and improve animal and plant health and animal welfare. I am looking forward to discussing that during consideration of the Agriculture Bill.
The noble Lord, Lord Grantchester, also asked about inter-pillar transfer. The Government will confirm the overall level of direct payments for England shortly. A further statutory instrument will be made to amend the 2020 direct payment financial ceilings to reflect the decisions of each Administration, as this is a devolved matter. This will be done with the consent of the devolved Administrations. This further statutory instrument will, as I said, adjust the financial ceilings to take account of the Bew review’s findings. I seek to ensure that our statutory instruments are not unnecessarily numerous. I will do what I can to try to combine these arrangements.
Baroness Byford
My Lords, I am very grateful for my noble friend’s responses to the various questions raised. I am not surprised, but I am really pleased to hear him champion the need to produce food above all else. He kindly referred to the recovery funds following flooding and such things. My understanding is that, in the past, some of those payments have not been made until after the recovery happened. I do not know whether there has been a change of thought on that, because they need those payments most when flooding happens, not when they have recovered, if the Minister follows my line of thought. If he cannot answer today, I am quite happy for him to write to me, because this is crucial. As he knows so well, there is immense pressure on the health and well-being of many of our farmers. For some of them this is nearly the tipping point. It would be very helpful if he could clarify that.
Lord Gardiner of Kimble
My Lords, I obviously cannot make any commitments today, given the changing situation and floods in parts of the country that were not part of the further announcements. However, the unprecedented flooding in many agricultural parts of the country has obviously affected many towns and villages, as well as farmland. I will write to my noble friend, put a copy in the Library and send it to all noble Lords who have spoken in the debate. Providing an up-to-date version of what we plan to do on farm recovery would be the most helpful way to deal with that.