Agriculture (Financial Assistance) (Amendment) Regulations 2023
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Lord Benyon
That the Grand Committee do consider the Agriculture (Financial Assistance) (Amendment) Regulations 2023.
Relevant document: 31st Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)
My Lords, in moving the regulations I declare my farming interests as set out in the register.
This is the third year of the seven-year agricultural transition period. The new financial assistance schemes under the Agriculture Act are an important part of this transition as farmers move away from direct payments. They will help to ensure that sustainable food production and the delivery of improved environmental outcomes go hand in hand. Indeed, we are investing in the very foundations of food security—healthy soils, clean water and abundant pollinators—to support a prosperous long-term future for the sector.
We are due to meet at a later date to debate the statutory instrument that sets the reductions to farmers’ 2023 direct payments. I want to be clear to anyone who is minded to support the fatal Motion tabled by the Liberal Democrats about exactly what they would be voting for. First, that vote would be against small farms. We are replacing unfair and ineffective area-based payments with targeted payments. Some 50% of the direct payments budget went to the largest 10% of recipients, so by seeking to stop the agricultural transition the movers of this Motion are voting for that unfairness to continue. Secondly, that vote would be against food security. Support for that Motion would be a vote for the EU’s area-based subsidies to continue, and they did very little for farming, food production or the environment. The link between food production and the common agricultural policy was substantially severed in 2005.
If the fatal Motion on the other regulation is successful, the effect would be insufficient funding to deliver current plans. Specifically, we would have to cancel all the agreements or plans under Countryside Stewardship 2023, the sustainable farming incentive, landscape recovery, farming in protected landscapes, support for producer organisations, the future farming resilience fund, the livestock information programme, the animal health and welfare pathway, and the Institute for Agriculture and Horticulture. This would mean immediately stopping work on projects to restore nearly 400 miles of river and to protect and provide habitat for 263 species—such as water vole, otter, pine marten, lapwing, great crested newt, European eel and marsh fritillary—across 40,000 hectares. We must therefore continue our move away from direct payments and the legacy of the EU’s bureaucratic common agricultural policy, which did little for farming, food production or the environment. I hope that, with that little taster of the debate in a week or two, I have persuaded noble Lords who were minded to table that Motion to rethink.
The regulations that we are debating today provide the legal framework for Defra and its delivery bodies to enforce and monitor the financial assistance schemes and to publish data about grant payments. This instrument makes technical amendments to those regulations to support the continuing transition to new schemes. Through this instrument, the definitions of three financial assistance schemes from the 2021 regulations have been removed. This change does not impact the schemes, which have already been launched, or their funding. It is so that the Government can be more flexible in adapting schemes to suit farmers’ needs. For example, the Government will be launching the animal health and welfare grants through the farming investment fund, which were previously defined as separate schemes.
The data publication requirements are amended so that the Secretary of State may exempt financial assistance schemes awarded to improve the health or welfare of livestock or plants if full publication would hinder the scheme’s purpose. For example, identifying a land manager who has received grants related to diseases in livestock could be damaging to their business and deter them reporting future cases. Similarly, the Government will continue to exempt the tree health pilot and animal health and welfare review from the full publishing requirement to protect the interests of affected parties. The Government have continued to name these schemes in this instrument to provide certainty to existing beneficiaries. However, as with all exempted schemes, the aggregated data for these payments will be published.
The Government are making sure that the taxpayer still knows where the funding is going. This instrument amends the data publication requirements so that, where the Secretary of State is required to publish the aggregate of financial assistance paid under a scheme, they must also publish the number of agreement holders who received financial assistance under that scheme.
These amendments will allow the financial assistance schemes to run more efficiently and effectively for farmers and help to achieve their intended benefits under the Agriculture Act while still making sure that there is accountability to the public. Therefore, this instrument is an essential step in ensuring that farmers can help build and maintain resilient businesses by spending public money in a way that helps us to secure the public good. I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, I am grateful to my noble friend the Minister for setting out the detail of and background to the regulations before us today. I simply want to probe him on a couple of points, if I may, including on how these regulations will apply, especially to English farmers, and particularly tenant farmers.
The guidance was published in March 2022, and the path to sustainable farming was set out earlier. Has the guidance been updated since 2022? I do not see that in the Explanatory Memorandum, paragraph 11. If they are just technical changes, that may not be so important.
Why was no impact assessment done? As my noble friend said, this is year three of the seven-year transition and where the finances will start to bite quite dramatically. I state at the outset that English farmers will feel unfairly treated. My understanding is that the direct payments will continue in Scotland, so those farms in North Yorkshire, Durham, Cumbria and Northumberland will look across the Scottish border and see a slightly more familiar scheme to that which they have now and which is being taken away from them. Is that something that concerns my noble friend the Minister?
My real concern is the transition from basic farm payments to ELMS. My noble friend concentrated very heavily on the advantages to the environment. I press him on how this will impact on hill farmers, upland farmers and small farmers everywhere, in particular those who produce grazing stock such as spring lambs and, indeed, fatstock cattle.
In a Financial Times article on 5 March, it is calculated that a drop in farm business income—a measure of net profit—of almost two-thirds is expected in this financial year. That amounts to a drop in profit of £16,300. When I was an MP next door—as indeed was my noble friend—I worked very closely with the graziers. I would hazard a guess that that £16,000 per grazier was their total income. The question is this: what alternative money will they seek? They tend to have the rights in perpetuity but they tend to be tenant farmers elsewhere. If they do not get direct farm payments because the landowner, where they farm elsewhere, is taking it then obviously they will not be getting any compensation.
My noble friend the Minister will be familiar with the work of Julia Aglionby, a Professor of Practice at the University of Cumbria’s Centre for National Parks and Protected Areas. Her projection is that income will recover to £22,900 in two years before slumping back to £16,700; this would place it at just above a third of its 2021-22 level. I understand that of particular concern to the president of the NFU is the fact that at the heart of this squeeze on government payments is the decision to calculate payments on the basis of income foregone plus costs, meaning paying for green improvements at rates aimed at recompensing farmers for the resulting fall in agricultural income.
According to the president of the NFU, Minette Batters, for some farms that took part at the pilot stage, the work was simply not cost effective. As my noble friend the Minister will be aware, upland farms are particularly affected because they tend to produce less food than lowland sites, meaning that they are considered to have foregone less income and are paid lower rates. As I understand it, most farmers will receive £151 a hectare for managing grassland with minimal fertiliser, but those doing the same work in so-called severely disadvantaged areas or upland farms will be paid only £98. That is a severe drop in income and this is only the third year of seven.
Can my noble friend the Minister address those points? How are these farmers meant to survive? What are the department’s projections for the fourth, fifth, sixth and seventh years? Where the farmers in the uplands are tenant farmers, as many of them will be—I appreciate the fact that, in North Yorkshire, where I served as an MP, and in County Durham, where I grew up in the Pennines, probably 50% of the farming community is made up of tenant farmers—what hope do they possibly have of farming in future if they are not eligible for food production grants going forward? I realise that they will get money for stonewalling, which is a tradition that we want to keep, but they are hardly contributing to food security or sourcing more food—as the Prime Minister would like them to do—for our schools, hospitals and local garrisons. What future does my noble friend see, even in this coming year, for upland farmers and, separately, for tenant farmers?
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I thank the Minister for his introduction to this SI. While this is my first outing shadowing him, I am sure it will not be my last—unless this goes horribly wrong—and I look forward to our interactions in the months ahead. I also thank his officials for indulging my newbie questions in the briefing.
In recent weeks, our newspapers have been filled with tales of food shortages, excessive levels of food inflation and the associated food poverty. There has even been a national debate about our domestic turnips. No longer is the impact on our farmers and rural communities reserved to news stories on “Farming Today”. We live in a period of global uncertainty and economic challenge; this is no less the case for our domestic agricultural economy than for any other sector. Labour shortages, new bureaucracy and the ongoing impact of the war in Ukraine on grain and energy supplies are having a direct and daily impact on our domestic food supplies, as well as on the natural environment.
It is therefore vital that, in our post-Brexit world, we get the regulatory and payment structures fit for purpose to ensure security of food supply, and that we do everything that we can to support our farming businesses and communities. They are invaluable to our long-term sustainability and security, and we all rely on them. That is why the Labour Party will not be opposing this SI. However, I have some questions for the Minister relating to the implementation of the regulations.
The financial assistance amendment places more burden on Defra civil servants in terms of monitoring and the likely ongoing adaptation of some of the financial assistance schemes already launched. Can the Minister confirm that Defra has the resources to apply these changes in a timely manner over the next 12 months, given the additional strains which would be placed on his department by the Retained EU Law (Revocation and Reform) Bill, should it pass into statute? I promise that I do not seek to rerun the arguments which were heard in Committee on the REUL Bill last week; rather, I seek reassurance from the Minister that this has been considered and that appropriate resources are in place.
Following on from the debate in the other place on this statutory instrument, I hope the Minister can assist the Committee in answering some specifics which his colleague, the Farming Minister, failed to address. My colleague Daniel Zeichner sought clarification on Regulation 5(c); can the Minister confirm which schemes do not require a request for payment but will instead require an annual declaration to the Secretary of State? How many cases do we believe will fall into that category each year?
I also seek clarity on points raised by the right honourable Kit Malthouse in the other place in Committee. Referring to paragraph 7.6 of the Explanatory Memorandum, he asked:
“Does that mean that, without parliamentary consent, the Minister can start or close a new scheme or quietly”—[Official Report, Commons, Delegated Legislation Committee, 28/2/23; col. 8.]
abandon a funding mechanism that is no longer viable? As my noble friend Lord Grantchester highlighted, given the significant discretion that now rests with the Secretary of State, can the Minister confirm that, when schemes are launched, amended or closed, the department will be required to consult their beneficiaries before the terms are revised? If so, to what timetable will the department work?
I know that the Minister has vast experience of this area, which I do not claim to have, and is committed to making these regulations work for our farmers. I look forward to working with him in the months ahead to deliver the best possible deal for our rural communities.
Lord Benyon (Con)
I thank noble Lords for their valuable contributions. I start by welcoming the noble Baroness, Lady Anderson, to her position; I built up huge respect for her when we were on Select Committees together and am delighted that she will be holding me to account—I should be careful what I say; I am a bit nervous because I know what an effective parliamentarian she is. It is great to see her in her place.
I shall tackle as many of the points raised as I can. In response to my noble friend Lady McIntosh, this is a devolved issue, so this instrument, like all our agricultural policy, is for English farms only. We are working really hard to make sure that the vast majority of the schemes that we take forward are available to tenants. We have changed the rules so that tenants can access schemes without the consent of landlords in the vast majority of cases, particularly in the sustainable farming incentive. We are working through the Rock review, which is a brilliant piece of work, and want to see as many of its recommendations implemented as we can, as quickly as possible.
My noble friend asked about the need to update the 2022 guidance. There is no need to because we are not changing the policy. There is no need for an impact assessment for the same reason. She asked about area payments in relation to Scotland and England. I cannot comment on what Scotland is doing because we are still not entirely certain. However, I can say with every fibre of my being that the need to move away from area payments is long overdue. When I arrived at Defra in 2010, the Farming Minister was Sir Jim Paice. He was absolutely clear, and I agreed with him, that we need to prepare the farming community to move away from the completely unacceptable system whereby the largest farmers get most of the money. The CAP system and area-based payments were not friendly to small farmers. Under our schemes, small farmers will be able to be more fleet of foot and adapt.
Upland farmers will have access to 130 of the standards that we are seeking to implement. I will talk more about that in future. I worked with Julia Aglionby; her input in trying to make our schemes fit graziers who have access to areas of uplands in particular has been invaluable. I gather Ms Aglionby is publishing her assessment of what this means. We will examine that and respond to it.
Baroness McIntosh of Pickering (Con)
I feel I may have confused my noble friend. I did not mention area payments. I said that there is envy of what the Scots are being paid. My concern is that the way that the calculation has been done—income forgone plus costs—is leading to this perverse situation of a fall in incomes.
Lord Benyon (Con)
I will seek to address those points as I go through my remarks. We want to make sure that the £2.4 billion is spent more fairly. That means a greater incentive for smaller farmers to receive more of the pie because they have been hard done by under the common agricultural policy. I will come on to talk about this as I address other points.
The noble Lord, Lord Grantchester, raised some important points. I make no apologies for the fact that we have amended the schemes. He quite rightly asked about consultation. The schemes are indicative. We want to make sure that, as we work through not only our tests and trials but the implementation of these schemes, we are listening to farmers. This has probably been the largest consultative process that I have experienced in my time in Defra. The food, farming and countryside team has attended agricultural shows, done webinars, visited clusters of farmers, attended the vast majority of farmers’ social gatherings that can possibly be imagined and responded to concerns raised. We will continue to do that through our standard routine engagement with organisations such as the NFU, the TFA, the CLA and others and also directly with farmers. I have been able to put farmers who have raised particular points with me straight through to the director concerned and she has been able to answer their questions, so the answer to the noble Lord’s question about continued consultation is absolutely yes.
Agreement holders will have to be notified. On the noble Lord’s point about changes in farm tenure and ownership, these will be considerably simpler under the schemes. There should be no deterrent effect to being able to transfer the schemes if, for example, a partner in a farming partnership arrangement changes and there should be no bureaucratic barrier more than a notification, if required, in those schemes. There are issues relating to the time left of a farm business tenancy, for example. If it is less than three years, I think, it can be rolled over but it needs to be notified.
We are measuring the impact on the environment of the uptake of these schemes. We will also be measuring the impact on the environment of farmers and land managers accessing private sector green finance, and making sure that we are working to strategies through our Countryside Stewardship, which now has more than 30,000 farmers in the scheme. We have raised the payments by 40% and have increased the amount of support for farmers to go into those schemes. We want to make sure that local nature recovery strategies are doing what Professor Sir John Lawton did in his ground-breaking paper, Making Space for Nature: seeking to connect environments where possible.
The noble Baroness, Lady Bakewell, talked about the exemptions. It is important that we get this right. Whether it is a perception or not, perceptions are reality in this case. If there is a perception about making public the fact that you are taking part in an animal health and welfare grant scheme or you might have tree diseases on your land, and that will be a barrier to farmers taking part in the schemes, then I think we are right to seek that exemption.
As the noble Baroness points out, there have been cases where certain animal rights organisations have targeted farmers. On the question of African swine fever, it is a notifiable disease, so somebody not notifying the Government would be breaking the law, but that is an absolute nightmare prospect. In all our border security measures, biosecurity and everything that we seek to do, the risk of that sort of disease coming into our farming community is at the forefront of our minds. We are tracking what happens and where it is spreading across Europe and making sure that, with people coming to this country, in this globalised world in which we live, we seek to minimise the chance of that disease happening here.
The noble Baroness, Lady Anderson, raised the issue of food shortages. The principal cause of the headline-grabbing shortages was strange climatic conditions in southern Spain and Morocco, from where we receive most of our tomatoes at this time of year. It is a warning to us, but also to retailers, that we can expect strange climatic conditions. Our supply chains, which are resilient and were proved to be so during the pandemic, need to be prepared for such risks so that we can continue to see the food that we want to see on our shelves.
The noble Baroness’s question on resources is a good one. We in Defra are putting enormous resources into this; I can assure her that other issues we are seeking to deal with at the same time will not have an impact on the importance of rolling out these schemes, explaining them to farmers, getting as many as possible to sign up to them and making sure that we are supporting our farmers to produce food. We want them to produce food sustainably but we also have hungry mouths to feed. Food security remains an absolute priority for my department and the Government.
I will tackle other points as they have arisen and hope that I will cover all the questions. One point raised was on how we are helping farmers who will become unprofitable as a result of direct payment reductions. There are a number of ways in which farmers can be profitable without direct payments, including farm efficiency improvements, diversification and receiving money under new schemes. The actions taken will depend on the particular farm. The future farming resilience fund provides farmers with free advice from an independent provider to help them work out what to do for their business, including how best to improve business practices.
The impact on farmers of the phasing out of direct payments is obviously at the forefront of our minds. There is evidence showing that the scope—
The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)
My Lords, I fear the bells ring for us. We shall adjourn for 10 minutes then reconvene and return to the Minister’s remarks.
Lord Benyon (Con)
I am grateful to resume this, and I will get through these points as quickly as possible.
Let me clarify something about the exemption, which the noble Baroness, Lady Bakewell, rightly raised. The exemption is limited to only a few potential schemes that are established for reasons of plant or animal health or welfare and are in a similar position to those already exempted by Parliament in the 2021 regulations. Schemes developed under the other Section 1 purposes will continue to be published in full., including Defra’s core environmental land management or productivity schemes,
The proposed power to exempt a scheme or part of a scheme from full publication will be available only where it satisfies two conditions: first, if a scheme is established to protect or improve the health or welfare of livestock or to protect or improve the health of plants; and, secondly, if the Secretary of State is satisfied that publication is likely to hinder the extent to which the scheme achieves that purpose. As I have said already, we feel that these two areas fulfil those two tests. Ahead of any use of the power, we will provide our rationale on new exemptions to the EFRA Committee in the other place. We will also publish aggregate data on each exempt scheme.
Going back to the point about the impact on farmers of the phasing out of direct payments, there is evidence showing that the scope for productivity improvement would enable a large majority of farms to be profitable. In 2019, the Government published a farming evidence compendium that set out the impacts of removing direct payments, including analysis by sector, location and land tenure, and provided analysis on how farm businesses across all sectors can offset the impact of the scheme. In October 2021, the Government published further evidence in Agriculture in the UK Evidence Pack. We will continue to do this. Of course, under the Agriculture Act, we are required to publish details of our food security every three years. Our belief on our food security is that we will remain self-sufficient to roughly the same degree that we have been in recent years. Of course, fast balls, such as avian influenza and the war in Ukraine, come but, broadly speaking, we hope to be able to continue with roughly the same level of food security and, if possible, to increase it.
On upland farmers, farmers will be paid for more than 130 actions—not standards—in all the schemes that are applicable to them. I really hope that we can get across to them the message that they are valued, that they have a future and that we can work with them.
As I have said, we believe that our schemes will have no overall impact on the food security of our country. Investing in the natural environment will help us reduce future risks related to climate heating and the loss of biodiversity. We are designing our schemes to achieve win-wins for food and the environment where we can. I sometimes get questioned in this place by people who believe that food production and the environment are mutually exclusive. I know that everyone here is intelligent enough to know that that is not the case, that you can farm productively on much of our land and that we can restore the catastrophic loss of species that we have undergone in recent years to where they were. We can end that decline by 2030 and see the number of species and commitment to nature realistically delivered by our amazing farmers using these schemes and their own ingenuity.
If we do not continue to reduce direct payments as planned, we will not be able to offer any of the new schemes across the environment, productivity and resilience. Not only would we be unable to accelerate the rollout of the environmental land management schemes, as we are already doing with the sustainable farming incentive, we would have to cancel our plans for any new agreements in SFI and Countryside Stewardship. We would be unable to offer anything in the majority of the rest of our schemes, including landscape recovery and animal health and welfare. We might even have to cancel some of the more than 30,000 existing Countryside Stewardship agreements already in place.
There was an average increase of 10% in revenue payment for the Countryside Stewardship scheme, and our ongoing activity, such as managing habitats, saw an average of 48% for capital rates. Under the Agriculture Act, we have offered 7,870 Countryside Stewardship mid-tier or higher-tier revenue agreements and 1,508 capital agreements. This is farmers taking up schemes and doing good work on their farms—precisely the sort of thing that the public want to see in terms of public goods being delivered.
For our other agri-environment agreements, environmental stewardship, Country Stewardship under retained EU law and under the Countryside Stewardship regulations passed last year, we have 35,000 live revenue agreements. In the first year of the sustainable farming incentive, with the opening offer, we have more than 2,300 live agreements. The Government are accelerating the rollout, with six additional standards being added this year.
On the question about bureaucracy, the noble Lord has probably been and I have been the victims of bureaucracy which seemed wrapped in a mystery about why it needed to be so detailed. Applying for the SFI takes a matter of minutes, and they are probably the most valuable minutes that a farmer can spend in a year. It takes between 20 and 40 minutes for an average farmer to apply for many of the schemes.
The statutory instrument will help the industry move beyond the bureaucracy of the EU’s common agricultural policy so that the Government can better reward farmers for delivering climate and environmental benefits. I hope I have addressed the issues raised by noble Lords and that they will approve this instrument. I commend these draft regulations to the Committee.