Direct Payments Ceilings Regulations 2020
(Limited Text - Ministerial Extracts only)
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Lord Gardiner of Kimble
That the draft Regulations laid before the House on 9 June be approved.
Relevant document: 18th 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 it would be helpful to your Lordships if I speak to both the Direct Payments Ceilings Regulations 2020 and the Direct Payments to Farmers (Amendment) Regulations 2020, given the close connection between the two instruments.
These instruments amend retained EU law governing the 2020 direct payment schemes for farmers. That EU law became domestic law on exit day under the Direct Payments to Farmers (Legislative Continuity) Act 2020. The Direct Payments Ceilings Regulations 2020 are needed to amend the financial ceilings for 2020 direct payments. The Direct Payments to Farmers (Amendment) Regulations 2020 are needed to confirm the exchange rates to be used for the payments. These instruments also make other minor operability amendments to the retained EU law. These will ensure that the law can function effectively in the United Kingdom for the rest of the 2020 scheme year. These instruments maintain the status quo of the 2019 scheme. The Chancellor of the Exchequer announced on 30 December that funding for direct payments for 2020 would match the total funding for direct payments available in 2019. These instruments are consistent with that announcement.
The Direct Payments to Farmers (Amendment) Regulations 2020 are subject to the “made affirmative” resolution procedure. That procedure was specified in the 2020 Act because, under that Act, the EU law became domestic law on exit day and, therefore, operability amendments were also needed by exit day. This avoided a significant legislative gap in the direct payments schemes for claim year 2020.
The two instruments before your Lordships today cover all four parts of the United Kingdom. We have worked closely with the devolved Administrations, and they have given their consent to the instruments.
The Direct Payments Ceilings Regulations 2020 amend the UK national ceiling and net ceiling for claim year 2020. These financial ceilings are in the retained EU regulation 1307/2013 and are used to calculate payments to farmers. The amendments to the ceilings made by this instrument take account of previous policy decisions made by the Government and devolved Administrations. This includes the transfer of funds from direct payments to rural development. Each part of the UK has decided to transfer the same percentage of its share of the ceilings as it did in previous years. This maintains continuity for farmers. The amendments also take into account the findings of the Bew review concerning the allocation of farm support funding in the UK. I have previously commended the noble Lord, Lord Bew, for his review, and I do so again today.
In line with the recommendations of the Bew review, the Government agreed that Scottish farmers would receive an additional €60.43 million and Welsh farmers an additional €6.11 million over the two-year period 2020 to 2022. The Welsh Government have decided to use the additional funds allocated to them for 2020-21 for their 2020 direct payments schemes. The UK national ceiling and net ceiling for the claim year 2020 have been increased by €3.055 million to account for this. The Scottish Government have decided not to use any of the money allocated to them following the Bew review for their 2020 direct payments schemes, but this money remains ring-fenced for farmers in Scotland.
The net ceiling has also been amended to take account of the decisions made by the Government and devolved Administrations on the level of reductions to be applied to large payments. Each part of the UK has maintained the same approach as for previous years. I want to emphasise and make clear that the existing reductions are not part of the phasing out of direct payments in England, which will not begin until 2021.
The amendments made by this instrument mean that the UK national ceiling for claim year 2020 is €3.055 million higher than it was for claim year 2019. The UK net ceiling for claim year 2020 is €3 million higher than it was for 2019. These increases result from the additional funds for Wales arising from the Bew review.
The Direct Payments to Farmers (Amendment) Regulations 2020 amend six pieces of legislation, as described in sections 6.3 and 6.4 of the Explanatory Memorandum. The amendments confirm the euro-to-sterling exchange rate for payments under the 2020 scheme. The rate is the same as was used for the 2019 scheme, where 1 euro is worth just over 89 pence. This reflects the decisions made by the Government and the devolved Administrations about the exchange rate they wish to use. It provides farmers with certainty.
The other operability amendments made by this instrument are minor. The need for these instruments was identified after EU exit. These amendments include removal of some redundant cross-references, such as to articles which are not part of retained EU law. Other amendments include removal of references to the Commission’s budgetary management system of financial discipline, as this does not form part of retained EU law. Some amendments address other outstanding minor operability issues, such as removing references to the “Commission”.
These two instruments are important, as they provide certainty and continuity for UK farmers. I beg to move.
Lord Grantchester (Lab)
I thank the Minister for his introduction to the regulations before the House today. I also thank him, the noble Baroness, Lady Bloomfield, and the department’s officials for having a short meeting with me and the noble Baroness, Lady Bakewell, to discuss these regulations. I remind the House of my being in receipt of payments, as recorded in the register.
I confirm that the regulations are necessary and hope that they are the last regulations and amendments needed under the Direct Payments to Farmers (Legislative Continuity) Act 2020. The regulations have UK-wide relevance. While one SI states that it was made with the consent of the devolved Administrations, the other merely states that it will be made UK-wide with consent. I am sure that there have been discussions with the devolved Administrations, but I stress to the Minister that this dialogue must be meaningful and two-way. I say that in light of the poor sharing of data and dialogue, not only between the Administrations but within the regions and between the city mayors of England, concerning health information on Covid-19 cases. Both SIs are peppered with references to the devolved Administrations and the individual policy choices made by them, and I echo the remarks of the noble Lord, Lord Bourne, in that respect.
The Direct Payments Ceilings Regulations 2020 make many amendments and adjustments that previously, while the UK was a member of the EU, would have been made by the European Commission. One of the adjustments takes account of the reallocations of payments between Pillar 1 direct payments and Pillar 2 rural development. I thank the Minister for confirming that these adjustments and many others are following the custom and practice of prior years and in this case are making redistributions of 12% in England, 9.5% in Scotland and 15% in Wales, with no transfers occurring in Northern Ireland. I recognise the importance of this to many regions, as noted by my noble friend Lord Liddle in his remarks.
I also take this opportunity to commend the noble Lord, Lord Bew, for his review of the distribution of EU funds between the Administrations of the UK, which has now awarded a further €60 million to Scotland and €6 million to Wales for the period 2020 to 2022. I understand that Scotland and Wales have yet to decide how these funds will be distributed. Will the Minister let us know in due course the decisions taken, if that is deemed appropriate?
I have several questions around paragraph 7.7 of the Explanatory Memorandum, where the level of deductions applied across the Administrations to payments under the basic payment scheme is addressed. That they reflect levels similar to prior years is recognised and appreciated, and that they differ in gradations, sizes and top-slicing ceilings between Administrations is further recognised. Can the Minister confirm that these differences do not amount to meaningful competitive distortions between the Administrations of the UK as a whole? How will this operate on a holding or holdings farmed across borders or in more than one Administration? Like the noble Baroness, Lady McIntosh, I would like to know how the transitional arrangements due to start next year will play out against these various clawbacks in terms of continuity of payments between the two systems.
The 100% reduction above a certain amount appears brutal and begs the question of how many applicants these top-payment amounts would be paid to. Bearing in mind the exchange rate and, for example, a top amount of €300,000, my back-of-an-envelope calculation does not suggest that a large percentage of funds would be going to a lot of big estates. The reduction of only €3.9 million in a total of €3 billion would seem to suggest that.
This is the status quo. It is important to reflect that to receive payment you have to qualify as an active farmer, and it seems to suggest that payments are going to farmers to encourage good agricultural practice, and landlord and tenant legislation at present reflects this. Next week, the Agriculture Bill goes into Committee. There seem to be government proposals that suggest a change in the criteria for payment away from the status quo—the active farmer. Will the Minister confirm that payments now and in future are aimed at rewarding farmers producing food for the nation for the public goods they provide by farming in a sustainable manner? Can the Minister provide the split of the total UK reduction of €3.9 million between the Administrations?
Finally, I return to the Direct Payments to Farmers (Amendment) Regulations 2020, merely to ask the Minister to confirm that this instrument’s many corrections to operability issues, to enable retained EU law to operate without ambiguity, mean that there is no likelihood of any more amending instruments to come, and that there are no changes in policy reflected in the amendments.
I hasten to add that one change is brought to our attention in the Explanatory Memorandum regarding the exchange rate used for the 2020 claim year. My understanding is that it will remain the same as in 2019—in other words, no change—but that to take a prior year’s rate is a change. In this situation, I am advised that the Government are being helpful in making this decision.
With that, I confirm our approval of the instruments before the House today.
Lord Gardiner of Kimble
My Lords, in many respects, the debate went beyond the instruments, but it was an interesting and important prelude. Let me say immediately that if, in the time I am allocated, there are any points that I have not addressed, I will write more fully.
Let us deal with devolution, about which a number of points were raised by the noble Lord, Lord Grantchester, the noble Baroness, Lady Ritchie, and my noble friend Lord Bourne of Aberystwyth. The first thing to say is that we have worked very closely with the devolved Administrations. As noble Lords will know, there are schedules relating to Wales and Northern Ireland, at their request, which we will deal with in due course.
We plan to have an agricultural support framework agreed and in place by the end of the year. This is currently planned to cover marketing standards, crisis measures, public intervention, private storage aid, data collection and cross-border farms. The aim is to have effective co-ordination and dialogue between the Administrations on how changes to legislation in one part of the UK could affect others. As I said, these statutory instruments cover all four parts of the United Kingdom, and I emphasise again that they are made with their consent.
My noble friend Lady McIntosh and the noble Baronesses, Lady Bakewell of Hardington Mandeville and Lady Northover, raised exchange rates. As we all know, exchange rates fluctuate on a daily basis. The rate we have set, which is not significantly different from today’s rate, maintains continuity with the 2019 scheme. The feeling across the piece was that it would be better to set the rate now rather than wait for a September rate, as has been done before, so that there could be certainty for the farmer as to what the rate would be. I am afraid I have no crystal ball to tell me what the exchange rate might be in September. All I can say is that we decided to keep continuity with the arrangement for the 2019 scheme, which I think is a better way forward.
I turn to the point of the noble Lord, Lord Mann, and other noble Lords. The Government are determined that farming in the UK should not see a reduction in government support at this time. That is why this Government have pledged to guarantee the current annual budget in every year of this Parliament. We recognise that farmers and land managers need certainty over future funding arrangements, and we have committed to a seven-year transition, starting in 2021.
It is already interesting to see the different strands that are coming out around that. I always think that, if the Government are in the middle, perhaps we might have it right: the noble Lord, Lord Liddle, mentioned the pace of change and said that the agricultural transition should be quicker, and my noble friend Lady McIntosh suggested that we should have a longer transition. The reason we have set this transition is that we do not want any cliff edge; we want farmers to continue to do the very important work that they do, at this time of change.
For me, there is no issue around whether you are a large farmer or a small farmer, and the noble Lord, Lord Mann, was right in what he said. All farmers play a very important role in the management of the environment and the production of food. We have all sorts and sizes of landholdings and tenure, and they are all part of the very important arrangements that we have to support the landscape, agriculture and food production.
On another point, which I think the noble Baroness, Lady Ritchie of Downpatrick, raised, if we look at the Agriculture Bill, we can see the Secretary of State’s powers to give financial assistance. Clause 1(4) says:
“In framing any financial assistance scheme, the Secretary of State must have regard to the need to encourage the production of food by producers in England and its production by them in an environmentally sustainable way.”
We want sustainable agriculture. With particular regard to Cumbria, I say to the noble Lord, Lord Liddle, that the new arrangements will be very appealing to hill farmers—farmers who have been looking after the landscape throughout generations. The ELM schemes will be an important part of the recognition that we, as a nation, should give to land managers for the really crucial role—with over 70% of our landmass farmed—that they will play in the mitigation of climate change, adaptation and so forth.
This concept of public money for public goods is important—again, the noble Lord, Lord Mann, referred to this—because it portrays to the British taxpayer what the British farmer will actually do to improve the environment. At the same time, we need farmers to have stability and certainty, along with a smooth transition to a replacement system. So, as I said, we will not be switching off direct payments overnight.
In connection with the ELM schemes, I should say to my noble friend Lady McIntosh that we did have to pause the response to the discussion document and supporting engagement. But as of 24 June, we have reopened this discussion and look forward to receiving feedback from stakeholders. We are doing those tests and trials across the land, with farms of different topography and size, precisely so that we have a range of schemes that will be successful for farmers; and so that farmers will feel that it is their own system, too. I also say to my noble friend that as part of that prelude, applications for the new countryside stewardship scheme are open. We continue to encourage farmers and landowners to apply, as we believe that this is the best way to start preparing for ELM. The ELM national pilot is due to commence in late 2021 and run until 2024, when the full ELM scheme is due to launch.
I also say to the noble Lord, Lord Liddle, that upland farmers play a vital role. As the Minister responsible for national parks and areas of outstanding natural beauty, and from my frequent visits to those glorious parts of the country, nothing could be clearer to me than that benign and pastoral farming is a key element of that. They will therefore be very well placed.
I think it was the noble Baroness, Lady Northover, and the noble Lord, Lord Grantchester, who raised the issue of cross-border farms. Where a farmer has land in more than one part of the United Kingdom, all their land must be included on a single basic payment scheme application. Guidance is provided to such farmers to explain how the scheme rules apply to them. The existing payment reductions for large farmers are worked out based on the proportion of the entitlement that the farmers have used in each part of the United Kingdom.
I turn to the matter of some divergence appearing in interpillar issues. For certainty, this Government, the Scottish Government and the Welsh Government—as I have said before, the Northern Ireland Government have decided not to make a transfer—have decided to take the same approach as was taken for the years 2014 to 2019. They will maintain the status quo precisely to ensure certainty and continuity. The claim for 2020 is around £386.4 million, to be transferred for rural development measures and important schemes in England, such as the Countryside Stewardship scheme and so forth.
The noble Lord, Lord Chidgey, mentioned maintaining the ecology of our rivers. That is hugely important. Clean water will clearly be covered by the financial assistance that is available for new schemes. There were some references to the Commission’s budgetary management system regarding financial discipline, and these have been admitted because they do not form part of retained EU law.
The noble Lord, Lord Addington, raised a clearly important point about errors and omissions. I have heard of many farmers who have had difficult conversations and discussions about this. We are determined that our successor to the CAP will not be so bureaucratic and that it will trust the farmer, although it will obviously have enforcement measures as well to ensure value for money. I say to my noble friend Lord Holmes of Richmond and the noble Lord, Lord Addington, that this will clearly be a very important feature when looking at how best to simplify matters.
Many other points were raised, but I understand that I have gone beyond my time and I apologise to noble Lords. We will be discussing food security. It is a very important part of our work and will be the subject of discussion next week. There is much more that I could say but, in view of the time, I will write to noble Lords on all the outstanding points.