Agriculture and Horticulture Development Board (Amendment) Order 2022
(2 years, 6 months ago)
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Lord Benyon
That the Grand Committee do consider the Agriculture and Horticulture Development Board (Amendment) Order 2022.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)
My Lords, I declare my farming interests as set out in the register.
This instrument delivers changes for a reformed and more accountable Agriculture and Horticulture Development Board that will play an important role in supporting farmers through a time of significant transition. While it marks an end to the AHDB’s levy work in horticulture and potatoes, it also marks an important new beginning for how the AHDB engages with and delivers for other sectors, including cereals, oilseeds, beef, sheep, pork and dairy. It respects the outcome of the ballots in the horticulture and potato sectors to end the AHDB statutory levy in their sectors; it is clear from the ballots and industry feedback that the statutory levy mechanism does not meet the very diverse needs of horticulture and potato businesses and that a different approach is needed going forward.
However, we must recognise that, while the overall result of the horticulture ballot supports an end to the statutory levy—with 61% voting against it continuing—there are a diverse range of views, with some subsectors such as soft fruit, tree fruit and mushrooms voting to keep a levy. I recognise the concerns of those subsectors at losing levy investment in important research and crop protection activities that the AHDB has traditionally funded and delivered. Therefore, while this instrument respects the ballot by repealing the statutory levy provisions, it also ensures that the horticulture and potato sectors can remain in scope of the AHDB order. This means that any parts of the industry that want to continue to work with the AHDB can do so on a voluntary levy or commercial basis in future. This will also enable the AHDB to continue to deliver legacy research and plant protection services to these sectors during a transition period.
I can also assure noble Lords that the Government continue to engage proactively with the horticulture industry to develop alternative industry-led funding models, such as syndicate funding for specific crop research and voluntary levies, that will better suit the diverse needs of the sector going forward.
I also highlight that this instrument marks the beginning of a new direction for the AHDB—an AHDB that is more accountable to levy payers in other sectors, including beef, sheep, pork, dairy, cereals and oilseeds. It delivers a new duty on the AHDB giving levy payers a regular vote on sector priorities. This will ensure that levy payers have more influence over the AHDB’s sector programmes, how much levy will be raised and what it is spent on in future.
The AHDB has been working hard to deliver this already through its “Shape the Future” campaign, where levy payers have recently voted on the priorities they want to see the AHDB deliver over the coming months and years. This could be such things as the work the AHDB does to open new export markets, its consumer marketing campaigns to promote UK produce and defend the industry’s reputation, or the market intelligence it delivers to inform farmers’ decisions. This is a momentous step forward for the organisation and marks a turning point in putting levy payers right at the heart of everything it does.
I also draw your Lordships’ attention to a technical drafting point. As a consequence of removing the horticulture levy provisions, this instrument will broaden the definition of the horticulture industry in the AHDB order. The definition will now include the growing of a wider range of horticulture products by way of business. This will deliver more flexibility in future, as it will enable more businesses in the horticulture sector to work with the AHDB on a voluntary levy or commercial basis if they wish to.
To support this flexibility, this instrument also includes provisions to clarify that the AHDB can charge to cover the costs of any services it may deliver in future to any agriculture or horticulture business in scope of the AHDB order. It also ensures that, where a sector is paying a levy, any additional charges can only be made for the cost of services not already covered by the levy.
In conclusion, these legislative changes sit alongside significant governance and cultural changes which the AHDB has already put in place to deliver a more inclusive, democratic organisation that is in a stronger position to meet the needs of farmers. I hope I have assured noble Lords on the need for this instrument, which establishes a reformed AHDB that will help farmers improve their productivity, reduce carbon emissions, engage in environmental land management and access new markets at home and internationally. I beg to move.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I thank the Minister for his introduction and for his time—and that of his officials—in providing a briefing for this afternoon’s statutory instruments. It is important that those engaged in both the horticulture and potato industries know when the levy that they pay is to be removed, in order that they can plan. I assume that the consultation carried out has provided some indication of timetables.
The levy was first implemented in 2008 under powers in the NERC Act. In January and February, the potato growers triggered a call for a ballot. Only 5% of the membership is required to call a ballot, which seems a very low threshold. In the horticultural sector, there was a 69% turnout and, as the Minister has said, of those who voted, 61% voted to abandon the levy. In the potato sector, there was a 64% turnout, with 66% voting no to continuing with the levy—overwhelming figures. As a result, the Government have abandoned the levy for future years.
However, there is still the issue of how the money accumulated in the past and in future will be spent. A five-yearly vote on how the money is spent seems a long gap between decisions on spending priorities. Are the results of the vote on spending plans monitored against sector planned priorities? Paragraph 7.6 of the Explanatory Memorandum indicates that levy payers have a say in how the levy is spent. Can the Minister say whether this happens in practice?
With the abolition of the levy, there is a fear that the research and development work of the AHDB will be restricted. However, as the Minister has said, there is an opportunity for the AHDB to charge for services provided. I could not find any reference in the EM or in the statutory instrument itself to the scale of the charges. Paragraph 12.2 of the Explanatory Memorandum states:
“The impact on the public sector is the loss of levy funding for AHDB horticulture and potato services.”
Does this mean that the AHDB will be financially unviable for these sectors, or will the charges they can impose cover the loss of the levy?
There are 10 other sectors covered by this SI within the overarching definition of the horticulture industry—from protected vegetables grown in glasshouses and indoors to trees and saplings in tree and forest nurseries. It is important that research and development continue to provide protection for all categories, especially as many diseases are airborne and difficult to control.
The current levy produces an income of £5.6 million from the potato industry and £5.7 million from horticulture. This is a large sum to be replaced by charges, which appear to be ad hoc but I hope have some rational basis. All other sectors, including pork, beef, dairy and sheep, produce an income of £70 million. At this time of uncertainty in both the EU and other trading markets, it is vital that R&D capacity is not weakened across any sector. There is ongoing consultation with sheep producers on the levy. I look forward to the results of this consultation.
I am encouraged that the Government are listening to industry growers in abolishing the levy for potatoes and horticulture, but I am concerned about the effect on R&D. I look forward to the Minister’s reassurance but generally welcome this SI as a step forward.
Baroness Jones of Whitchurch (Lab)
I thank the Minister for his introduction and for the helpful briefing beforehand. I should declare an interest through my involvement at the Rothamsted agricultural institute. The Minister will be pleased to hear that we will not oppose this SI. The issue seems to be straightforward, particularly given the democratic ballots that have taken place in the horticulture and potato sectors. However, the fact that these changes have been felt to be necessary raises some wider questions, which I hope the Minister will feel able to address.
First, can the Minister explain when Defra and the AHDB became aware that there was such disillusionment among those sectors under the previous levy regime, and why was no action taken to change the levy system at that time? It seems rather extreme, if I may say so, that the two sectors had to organise themselves to demand a ballot when, had there been ongoing consultations, there might have been a bit more sensitivity to their disillusionment. I would be grateful if the Minister could say a little more about what happened in the run-up to the two groups organising a ballot.
Can the Minister also say something more about the underlying concerns that the sectors had about the levy? Was it just about the cost, or did they feel that they were not getting value for money in a broader sense from the payments that were being made? For example, was there a problem with the quality of the research and advice that they were getting for their money? If so, are we confident that that is now being addressed? And, if that is the case, why were those concerns not addressed at the time that we first became aware of them?
Secondly, as the Minister has explained, arrangements are now being made for the other sectors covered by the levy to have regular ballots, which is to be welcomed. Is he confident that those new consultations will prevent the other sectors from triggering unilateral ballots, now that they have seen the success of the potato and horticultural action? Is he confident that those arrangements are now settled and that people are now happy with the new proposals?
In addition, the Explanatory Memorandum makes it clear that the devolved nations also considered a
“proposal to extend the scope of the Order to other agricultural industries on a UK-wide basis”.
Can the Minister explain what is happening with the devolved nations? Are they all doing the same thing at the same time now—in other words, will the AHDB equivalents in the devolved nations all have these regular ballots? Is that what the proposal is? And how does that fit with the proposals before us today?
Thirdly, and most importantly—this echoes the point made by the noble Baroness, Lady Bakewell—what will be the impact of the loss of the levy on the work of the AHDB? Is there a danger that vital research capacity will be lost, which might have a wider impact on future disease control and climate mitigation techniques, for example, as well as investment in better techniques for cultivation in the future? Are there wider implications that the Government should have a concern about rather than just greater productivity? Are we sure that that ongoing research will still be addressed when the levy is no longer here?
Paragraph 7.2 of the Explanatory Memorandum also makes mention of delivering
“legacy research and plant protection services”
on a transitional basis. That is great, but what will happen when that research comes to an end? Presumably, it was felt to be necessary in the past, so what will be the future of that research and plant protection services? Are we confident that it will still be covered? Otherwise, given the UK’s ambitions for the agriculture sector, we might find that we are losing out if we do not have the research base in the future.
Fourthly and lastly, the EM makes it clear that, as the Minister said, sectors can continue to work with the AHDB on a voluntary or a commercial basis if they wish to. Can the Minister say something more about how that cost basis will be different to the old levy structure? Is there a danger that only the larger producers will pay the levy in the future? In other words, are we in danger of having a two-tier system where the big producers have the money to invest with the AHDB but the smaller producers do not and therefore fall further behind, when we would want to make sure that smaller producers have the research capacity as well? I am just a bit worried about how that cost basis will work.
Lord Benyon (Con)
My Lords, I am grateful for the views expressed on the order. I believe we all recognise the importance of respecting the outcome of the democratic ballots to end levies in the horticulture and potato sectors and the need for the AHDB to be more accountable to levy payers in future. I will try to respond as best I can to the questions that have been put on such an informed basis—I am grateful for them.
On the point made by the noble Baronesses, Lady Bakewell and Lady Jones, I recognise the concerns at the loss of £14 million of annual levy funding for the future of horticulture research and about retaining skills and research capabilities in these sectors. However, I can assure the noble Baronesses that we are working proactively with representatives from across the horticulture and potato sectors to agree new industry-led funding models for research and crop protection activities that can meet the needs of this diverse sector more effectively than the statutory levy has done in the past. Discussions with industry on these options are ongoing, with the aim of agreeing new industry-led funding models over the coming months.
It is clear that the current one-size-fits-all levy was not meeting the diverse research and support needs of these two sectors. Therefore, it is more appropriate in future for subsectors or groups of growers to come together to formulate plans for the delivery and funding of priority research activities tailored to their specific business needs. This could be through a voluntary levy or a statutory subsector levy if industry supports that approach. As a next step, we will engage in discussions with industry-led groups and trade bodies to explore in more detail the design of industry-led funding options.
I understand the point that the noble Baroness made about five years between seeking the opinions of sectors as to whether they want to continue with the levy. However, a body with 471 employees and a turnover of many millions of pounds needs a period of stability to produce research, to do the work it does on innovation and then to take it forward with the sectors concerned so that they can then make an informed decision about whether this suits them. We considered the views very carefully but concluded that we do not currently have the details necessary to make legislative amendments to deliver a subsector levy. For example, there are detailed questions that need exploring, such as who would pay the levy, how it would be applied and calculated and whether there should be any exemptions. We are engaging in discussions with industry to explore industry-led funding options, including syndicate grower-led funding for specific research projects and the potential for a voluntary levy to fund a co-ordinated approach to crop protection activities. We also remain open to exploring new subsectors of statutory levies if there is widespread support for this from the businesses that would be eligible to pay for it.
A point was made about the consultation response saying that the public funding will not pay for research or other actions that were funded through levy investment. The inferred question was: does that mean that horticultural and potato research bodies or businesses cannot apply for funding from Defra’s future farming schemes? Research organisations and businesses in these sectors can continue to apply for existing future farming schemes in England, all of which have a policy focus, such as the farming innovation programme, for which they definitely are eligible. These schemes are subject to open competition, with applications judged on their merits. It is important that industry provides leadership in formulating new industry-led funding models that will enable cross-industry collaboration for the delivery of priority research development and other activities to support their businesses in future.
If I got her point right, I think the noble Baroness also asked what would happen if it cost the AHDB more than estimated to wind up its horticulture and potato operations and would another year of levy be charged. The AHDB has built a small contingency into the wind-up budget to cover any such eventuality, and it is tightly managing the wind-down process to ensure that it is completed within budget. We are clear that the statutory levies on the horticulture and potato sectors are ending from April 2022, and the AHDB will not seek any additional levy after 2021-22, even if additional costs or liabilities arise out of that wind-up process.
The noble Baroness, Lady Jones, asked about issues relating to Scotland and the devolved Administrations. I shall just give some background to this. The organisation employs around 470 staff. The noble Baroness made a very good point about governance, and it is governed by a main board, with several sector councils representing each of the levy-paying sectors. In response to industry feedback, the AHDB has been delivering organisational change to modernise its governance, reduce central costs and bureaucracy and increase levy payer engagement to deliver improved value for money to levy payers. That is very much part of the process that she asked about.
The AHDB embarked on a major change programme to ensure that it is an effective and efficient organisation, fit to meet evolving levy payer needs in future. However, before those changes were fully delivered, a number of dissatisfied levy payers in this sector, as I have already described, utilised the provisions in the order to trigger a ballot. As has been said, a ballot can be triggered if requests are received from at least 5% of levy payers in the sector over a rolling three-month period. The horticulture ballot closed on 10 February 2021; 69% of horticulture levy payers turned out to vote, as has been said, and 61% of those voted no to the levy continuing.
To respond to the outcome of the ballots and implement reforms resulting from the earlier request for views, the UK Government and devolved Administrations ran a public consultation between November 2021 and January 2022 to deliver an end to the horticulture and potato levies and improve the accountability of the AHDB to other levy-paying sectors in future. This SI now implements those changes. A joint UK Government and devolved Governments public consultation delivered that answer. Some 1,196 levy payers voted, which, as the noble Baroness said, is a fairly decisive number.
A question asked was why we were not implementing proposals to expand the scope of the AHDB to other agricultural sectors. Having considered the range of views on this proposal, and some of the difficulties between respondents from different countries, we have decided not to deliver this legislative change now. However, as a next step, we will take forward discussions between the UK and devolved Governments to explore in more detail the benefits and safeguards needed to provide a broader scope for the AHDB to work in practice, with a view to implementing the legislative change in future, subject to the outcome of these further discussions.
It was asked whether there will be any further Defra funding to help fill the gap left behind by the levy. It is not appropriate for public funding to replace levy-funded activity, but we are keen to work with industry leaders on their proposals for new models to fund collaborative research and development and other activities to support their businesses in future, whether through a voluntary levy, commercial arrangements or a new statutory levy where there is widespread support for that. However, research organisations and businesses in these sectors can continue to apply for existing future farming schemes, as I have already said, including the farm innovation programme and the farm investment fund, for which they are eligible. These schemes are subject to open competition.
The noble Baroness, Lady Jones, asked what will happen to the horticulture and potato research and knowledge generated from levy funds since 2008, and whether it will still be accessible. AHDB horticulture and potato work will be archived and made accessible online via the AHDB website to levy payers by the end of March 2022, to ensure that the industry can continue to benefit longer-term from its investment. She is entirely right to raise this, as all data and research must be available.
We live in a fast-moving time for agriculture. We need to introduce new innovation and measures to support different sectors, and I hope that this will provide a meaningful future for this very important organisation. I hope I have addressed the concerns raised by noble Lords and that they will approve this instrument for a reformed and accountable AHDB that will deliver value for money, supporting farmers for years to come—
Baroness Jones of Whitchurch (Lab)
I do not want to make heavy weather of this, but it seems a bit odd to me that we are effectively cancelling—or running down via a transition—the research that has been taking place without a new model to replace it. The noble Lord has explained that discussions are going on, but in my limited experience an awful lot of agricultural research has to be ongoing—you cannot just stop it and expect to pick it up two years later. They may not be researching potato blight, but things such as that happen in field trials season by season, rather than stopping and starting again. We are where we are, and I do not suppose that anything will change, but it seems odd that we have stopped one scheme without having the follow-up replacement oven-ready to be there in future.
Lord Benyon (Con)
The noble Baroness will be a much greater expert than me on scientific research and support for agriculture, but she will also know that this is across a very wide spectrum of provision—all kinds of academic organisations, government-linked bodies and organisations funded through industry. We want all different sectors to be able to access the research they need to build on the very long datasets which have been built up over the years; 2008 to 2022 is a microscopic moment in time in terms of the development of understanding and knowledge about crops and animals and how to make them more productive and how to make our systems reflect the desire for good animal welfare and environmental standards.
I am sure the noble Baroness will continue to keep the Government’s feet to the fire on this. I will be very keen to share with her and others all the different avenues we are going down to make sure that there is adequate support for these sectors in future. I cannot be more specific than that, but we live in a broad-spectrum world of innovation and we must not be narrow in our approach but accept that the answers may exist in the minds of people yet to enter into academia and research —and also those abroad. We will take her point into account and I will keep noble Lords informed. If there are no more points, I beg to move.