Direct Payments to Farmers (Reductions) (England) Regulations 2023
(1 year, 8 months ago)
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20:49 - Division on Baroness Bakewell of Hardington Mandeville’s amendment - Ayes: 47 / Noes: 144 - Division on Baroness Bakewell of Hardington Mandeville’s amendment disagreed.
Lord Benyon
That the draft Regulations laid before the House on 31 January be approved.
The Minister 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 is a fundamental part of the vital reforms we are making over the agricultural transition period in England. These reforms support the prosperous long-term future of the sector to produce high-quality, nutritious food, and protect and enhance the environment for future generations. The Government committed to maintain the same budget for farming, totalling £2.4 billion per year, but to move it away from the EU’s common agricultural policy, which did so little for food production or the environment, and towards investing in the foundations of food security: healthy soils, abundant pollinators, and clean and plentiful water.
This instrument applies progressive reductions to direct payments made to farmers in England for the 2023 scheme year. It puts into law the reductions which the Government first announced in their agricultural transition plan in November 2020. The reductions are being applied in a fair way, with higher reductions for amounts in higher payment bands. Therefore, this is a process that favours smaller farmers over larger ones. The reductions are calculated to be replaced pound by pound with investment in our new and existing schemes. This is the third year of the seven-year agricultural transition period, during which direct payments are gradually being phased out as we invest in targeted schemes.
The Labour Party has put a regret amendment before the House, and my concern is that this will send a confusing message to farmers. We are seeing farmers feel less confident about the agricultural transition due to previous political uncertainty, but we have made great progress since then, with the provision of more details about our improved countryside stewardship and sustainable farming incentive offers.
According to the Farmer Tracker Opinion for England, which was published last October, farmers on 81% of holdings said that Defra paying for environmental outcomes would be very or moderately important to their business in future, so this opinion supports the need to continue our agricultural transition.
I turn now to the fatal amendment from the Liberal Democrats. The Government remain convinced that direct payments are not the right way to support farmers and improve the environment. Let me set out clearly what the fatal amendment means and what the Liberal Democrats are asking the House to vote on this evening. First, if the House supports this amendment, it will be voting against the interests of small farming businesses. In England, historically, half the direct payments money went to the largest 10% of recipients. I cannot believe that anyone in this House would want that to continue. Meanwhile, our new schemes benefit small farms with a new management payment under the sustainable farming incentive of £20 a hectare for the first 50 hectares. This means that farmers can receive up to £1,000 extra to cover costs, so that is one way in which we are weighting this budget to smaller farmers. There is no minimum amount of land that can be entered into the scheme.
Secondly, support for this amendment would be a vote against maintaining our food security. The EU’s area-based subsidies were substantially de-linked from food production in 2005. Indeed, they have inhibited productivity improvements. Meanwhile, our schemes invest in the very foundations of food security: from productivity to innovation, soil fertility and beyond. We set out our plan for this very clearly in the Government’s food strategy, and I have yet to see a clear plan from other parties.
Thirdly, supporting this amendment would be against the public’s demand for a better environment. Many in this House want, for example, to see our rivers restored. If the amendment was successful, many measures which directly restore water quality in our rivers would have to be shelved. We would be incentivising farmers to remove herbal leys and habitat-rich pastures that they may have planted alongside watercourses, and that would clearly be a crazy move to have to make because of how the amendment is worded.
Voting for this is not voting just to maintain the status quo; it is voting to stop any direct payments being released for new schemes. This would mean that we would have to stop landscape recovery projects, which are restoring more than 400 miles of river. We would have to stop the slurry infrastructure grant, which helps farmers to utilise their nutrients, which are such a valuable input but, when misused, can cause real pollution. We would need to cancel the existing 30,000 Countryside Stewardship schemes, which saw a 94% increase in uptake since 2020. Last but by no means least, support for the amendment would be a vote to keep farmers locked into a bureaucratic system that has worn them down with endless tedious red tape.
If certain Members of this House—the Liberal Democrats in particular—are serious about addressing urgent matters, such as the decline in our rivers or the crisis of species decline, what on earth is their game? That is the point: it is not a game; it is a desperately serious matter which should not be part of some cheap political campaign. We should be united in the ambition to support and incentivise our farmers to drive real change.
The basic payment system burdened our farmers with complex rules about the maximum width of a gateway or whether a cabbage and cauliflower were the same for the purpose of the three-crop rule. We have already scrapped those draconian rules and the related penalties to work with farmers rather than against them.
Let us be clear. This can be dressed up however noble Lords want, but the British people and our farmers will see straight through this. This amendment would keep rewarding people just on the basis of the land they manage, not what happens to that land, and it cruelly cuts the legs out from those who are doing the right thing. Those who support it do not support the many farmers who are embracing change, investing in their productivity, or building their resilience for the long term from the shocks from drought or pest outbreaks. They do not support the farmer who is putting a buffer of wildflowers alongside the river to protect it from run-off and retain vital nutrients on their farm and being rewarded for any revenue forgone.
I have a healthy respect for the noble Baroness, Lady Bakewell: she is a formidable parliamentarian and a valued member of the Secondary Legislation Scrutiny Committee, and I know that this is probably not of her doing but has probably been pushed by someone at the other end of the building. I hope that she has the decency not to push this to a vote. In my two years in this House, I have seen that this is a place that takes its responsibilities seriously. We know that change is worrying for farmers. On top of this world of change are the effects of international events that have seen spikes in input costs. Let us not play this game: let us leave that to others and show that we want to get on with delivering for farming, our countryside and the millions who mind about it.
We will continue to accelerate the rollout of the sustainable farming incentive, with six additional standards being added this year. We will make it more attractive by introducing a new management payment of up to £1,000 per year, and this will help to drive uptake in the scheme among all farms, but particularly smaller ones. We will continue to simplify Countryside Stewardship, under which there are now more than 30,000 agreements across England, continue our planned increase to payment rates to help farmers who are already enhancing the environment to keep up with rising input costs, continue to offer grants for equipment to increase productivity, boost environmental sustainability and improve animal health and welfare.
Under round 1, the Government have already paid out £31.5 million, supporting more than 3,000 farmers with their investment plan, and a further round of the fund opened last month. We will continue to provide free business advice to help farmers to adapt and build their businesses. These are just some of the ways in which the funding being released from direct payments is being used. Other examples include the slurry infrastructure grant, which helps farmers to invest in better storage, the new entrants’ pilot, which will help to bring new talent into farming and land-based businesses, and the tree health pilot, which helps farmers to tackle tree pests. All these would be at risk if this fatal amendment passed tonight. This instrument is essential so that we can free up funds to continue to support farmers to build and maintain resilient businesses while delivering improved environmental outcomes and supporting sustainable food production. I beg to move.
Amendment to the Motion
Baroness Bakewell of Hardington Mandeville
Leave out all the words after “that” and insert “that this House declines to approve the Direct Payments to Farmers (Reductions) (England) Regulations 2023 as they would reduce the direct payments made to farmers for the 2023 year of the Basic Payments Scheme; considers that the implementation of this reduction in payments, combined with rising input and energy costs to produce food, risks the livelihoods of British farmers as they transition their businesses to producing food and public goods like environmental protection; and calls on His Majesty’s Government to accelerate urgently the roll-out of the Environmental Land Management scheme”.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I thank the Minister for his introduction. Needless to say, I have a different view and feel that he somewhat overstates his case. The statutory instrument reduces the money that farmers get from the CAP through the basic farm payments by at least a further 35%. After Brexit, the then Minister assured the House that as the Government phased out BPS payments on a sliding scale, the environmental land management scheme would replace payments, but on a different basis. The Minister gave assurances that the total sum of money—£2.4 billion, as mentioned—that had been allocated under the CAP would be maintained and reallocated under ELMS during the seven-year transition period.
The Minister at the time believed that, and I believed him. What has actually happened in somewhat different. The money may well be there, but it has not been allocated in a way that farmers can easily access. The Direct Payments to Farmers (Reduction) (England) Regulations 2022, which came into force on 15 April 2022, made the following reductions in direct payments: to those farmers receiving £30,000 or less, 20%; to those receiving more than £30,000 but less than £50,000, 25%; to those receiving between £50,000 and more than £150,000, 35%.
That is what the SI said. I believe it should have read, “those between £50,000 and no more than £150,000”, as the next category is those above £150,000—40%, on top of the previous year’s reductions. The SI we are debating today would make additional reductions as follows: for £30,000 or less, 35%; above £30,000 and no more than £50,000, 40%; above £50,000 and no more than £150,000, 50%; and above £150,000, 55%.
We can see immediately that the cumulative effect is very harsh indeed. Now, this would not matter if farmers were able to replace this lost income through ELMS. There are some excellent ELMS strands which have been rolled out, as the Minister has listed, but many are still in the pilot stage. Others have yet to see the light of day in a form which farmers can easily assimilate and assess how this would fit in with their business plans and models.
Farmers are struggling. They have seen significant cuts to their basic payment already: at least 5% in December 2021 and at least 20% in December 2022. Meanwhile, input costs have increased significantly. Energy bills are sky high, and the costs of fertilisers and animal feeds are also significantly up. Farmers are struggling to recruit people to pick produce, leaving food rotting in the fields, despite Ministers encouraging our population to move to areas where this type of work is available. The avian flu crisis is leading to egg shortages. The weather in Spain has led to major shortages of produce in supermarkets. This latter is clear evidence of climate change and an excellent example of why the UK needs to transition faster.
While farmers are struggling with all these factors, the Government are cutting energy support for them from this April by about 85%. The energy bills support scheme is being replaced by the energy bills discount scheme. Under the support scheme, farmers, like all other businesses, benefited from an absolute cap on the cost of electricity and gas per kilowatt hour. Under the new discount scheme, which starts on 1 April, businesses will get a discount: a small proportion of the bill covered. This means that farmers are likely to see energy support drop by 85%. So not only are farmers losing BPS this year, they are seeing this help cut—all during a food shortage crisis.
Farms are no longer to be classed as energy-intensive businesses, robbing them of more support. Minette Batters, president of the NFU, wrote to the Chancellor ahead of the Budget, asking him to prioritise food production. This request was ignored. Ms Batters said
“the NFU was clear that greater support is needed for the thousands of farm businesses which are trying, but struggling, to keep our nation fed amidst soaring production costs. It’s therefore extremely frustrating that the Energy and Trade Intensive Industries scheme was not extended to include energy intensive sectors such as horticulture and poultry”.
Farmers are being undermined by the new trade deals that allow food to be imported from Australia and New Zealand which, despite ministerial reassurances, is not produced to animal welfare and environmental standards currently existing in the UK. If this SI is agreed and another 35% reduction in farmers’ basic payments goes through, food production is likely to drop even more as farmers make decisions now about what to plant and produce next year. We are seeing the increased cost of both fertiliser and energy leading to tomato plantings in the UK dropping off dramatically.
Farmers should be able to replace the money lost through access to new and better environmental land management schemes. We on these Benches support ELMS. However, the Government have not handled the transition at all well. It has been somewhat botched. There was even a threat back in September, under the premiership of Liz Truss, that ELMS would be dropped altogether.
Cambridgeshire farmer Martin Lines, the chairman of the Nature Friendly Farming Network, which promotes sustainable farming, said that any delay to the ELMS would deny farmers crucial support to adapt to a changing climate. He said:
“If the government is stalling ELMS, it is failing any duty of leadership in maintaining momentum and building resilience”.
No wonder farmers are not rushing to take up those ELMS already launched.
We are six years after the Brexit vote, and two years after the start of the reduction in basic payments. On 5 January this year at the Oxford Farming Conference, Minister Spencer announced more money for farmers and landowners through both the countryside stewardship and the sustainable farming incentive schemes. As the Minister has already said, this change means that farmers could receive up to a further £1,000 per year for taking nature-friendly farming action through the sustainable farming incentive—SFI. This new management payment will be made for the first 50 hectares of farm, at £20 per hectare, in an SFI agreement, to cover the administrative costs of participation and to attract smaller businesses—many of which are tenant farmers—that are currently underrepresented in the scheme.
The Deputy Speaker (Baroness Morris of Bolton) (Con)
My Lords, I inform the House that if this amendment is agreed to, I will be unable to call the amendment in the name of the noble Baroness, Lady Hayman of Ullock, by reason of pre-emption.
Baroness Hayman of Ullock (Lab)
My Lords, I first declare my interest, as set out in the register, as president of the Rare Breeds Survival Trust. The statutory instrument on direct payments that we are considering today is very short, and should be straightforward, but I have tabled an amendment, as we have some reservations about how the agricultural transition is being managed. This was done with no intention to confuse farmers.
Farm businesses have been facing increased volatility, uncertainty and instability and have been expressing concerns about the phase-out of direct payments against a backdrop of huge cost inflation. The noble Baroness, Lady Bakewell of Hardington Mandeville, talked about the huge extra costs being faced. According to the NFU, agricultural inputs have risen by almost 50% since 2019. It says that fertilisers are up by 169%, energy by 79% and animal feed by 57%.
During a time of fresh food shortages, it is worrying that the production of salad ingredients such as tomatoes and cucumbers is expected to fall to the lowest levels since records began back in 1985. Is Defra talking to supermarkets about the need to support British farmers? The NFU survey of livestock producers found that 40% of beef farmers and 36% of sheep farmers are planning to reduce, with input costs given overwhelmingly as the main reason.
Following the survey results, and with the SI reducing payments to farmers by between 35% and 55%, I was perturbed by paragraph 12 of the Explanatory Notes, headlined Impact, which states:
“There is no or no significant impact on business, charities or voluntary bodies”.
How can there not be an impact? I also draw attention to paragraph 7.6 of the Explanatory Memorandum, which indicates that the Government intend this to be last year of the current direct payment scheme in England. It is being replaced by the delinked payment. Will that process require a further SI, or will what is in front of us today be sufficient to make that transition?
I would also appreciate clarification of the claims in paragraph 7.2, which states that direct payments are untargeted, can inflate land rent prices and can stand in the way of new entrants to the farming industry. These are quite sweeping assertions. What is the evidence base for this and what impact has the reduction in basic payments so far had on land prices and new entrants?
As the Minister knows, we have always supported the introduction of new ELM schemes and we clearly want to see them succeed, but between 2018 and 2022, Defra struggled to provide farmers with sufficient information. This unsurprisingly led to concerns, particularly against the backdrop of changes to our trading relationship with Europe, the Covid-19 pandemic, the impact of the war in Ukraine and the cost-of-living crisis.
There has been a huge number of differing pressures and uncertainty. It is no surprise that farmers are concerned and worried about all the changes that are happening. But it was very welcome that in January this year, Defra finally published the details of the three ELM schemes and provided much needed clarity to the farming sector. As we have heard, this includes a sustainable farming incentive, an expanded countryside stewardship scheme and a further round of the landscape recovery pilots.
It is important for the different options to be attractive to farmers, enabling them to produce food while helping to protect and enhance our natural environment. We have heard that this year, Defra has increased countryside stewardship payment rates and removed the caps, so that farmers can access more capital to invest in farm infrastructure, improve air and water quality and restore habitats. This is very welcome, but we believe that Defra could go further in offering support. One way could be to increase access to the higher tier options, including for hill farmers. Currently, only about 300 to 500 farmers a year benefit from this, but it has the potential to provide a flexible, effective and more attractive offer to many more farmers. Is this something the department would perhaps consider? Defra has stated that it will manage the budget in a flexible and transparent way but has not made firm allocations to each scheme. When is that information likely to be available?
We know that the successful rollout of ELMS is critical to meeting our domestic and international commitments to tackle the nature and climate crisis we face. Following COP 15, we now have international commitments to pursue more nature-friendly farming. So, while we have concerns about the lack of long-term certainty about the future that farmers are struggling with, and we still need to know details of how all this will work in practice, we do not support the amendment in the name of the noble Baroness, Lady Bakewell of Hardington Mandeville.
Analysis by the Green Alliance has demonstrated that a two-year delay to the phase-out of direct payments would halve the contribution of ELMS to the fifth carbon budget, leaving a substantial gap in the UK’s net zero plans. The analysis also found that retaining the previous EU scheme for an extra two years would mean that at least £1.2 billion—that is £770 million in 2023—would continue to be spent on the wealthiest farms in England: in other words, those already receiving more than £100,000 each in public subsidy in exchange for carrying out no public goods whatsoever.
Unfortunately, the Government have dithered for a number of years over the future of ELMS, which has been significantly delayed from the original start date of 2020. There was also uncertainty when Liz Truss even looked at axing it. So, January’s announcement was very helpful, but everything has been moving far too slowly, both for farmers and for our environment. Many farmers are also concerned about a gap in funding as they work out which schemes they are eligible to apply for.
My colleague in the other place, Daniel Zeichner MP, said:
“Unfortunately, it’s hard to imagine the money that’s been lost in direct payments will now be replaced through environmental schemes. Farmers are losing thousands and thousands. Labour is committed to making these schemes work and unfortunately it appears there is no such commitment from this government”.
I know that the Minister is personally very committed.
The extra £1,000 that has been mentioned is not exactly a huge sum for struggling farmers, but this SI is part of the next stage in the transition to the “public money for public goods” approach to agricultural support. We strongly support that transition, and we want it to work. We need to move to a more environmentally friendly and nature-positive food production system, but we remain concerned that the complexity of the schemes currently proposed may hamper take-up. The noble Baroness mentioned the slow uptake of the scheme so far. In terms of food supply and environmental gain, that is something we simply cannot afford. We support the Government’s aims, but they just need to get on now with delivering what both our farmers and the environment so badly need.
The Earl of Caithness (Con)
My Lords, this has been an interesting discussion so far. Both noble Baronesses talked about farmers in general, as if all farmers are struggling. That is not the case. A number of farmers in this country are doing very well at the moment because of the nature of the land. There are roughly 45 million acres of farmable land in the UK. Of that, 15 million acres constitute very good land, and its farmers are able to adapt and grow high-value crops at good yields. There are about 15 million acres of moderate land, and they are a serious problem; my noble friend and Defra are tackling it, and ELMS will undoubtedly help. There are 15 million acres of hill land, which again present a very difficult problem. The challenge facing my noble friend and Defra is sorting out the two less productive areas. The way they are going with ELMS is absolutely the right direction.
The noble Baroness, Lady Bakewell of Hardington Mandeville, who up until today has been a great supporter of the farmers, said that the high cost of fertiliser is causing farmers a lot of problems. She is right in one way, but quite wrong in another. It is entirely due to the high cost of fertiliser that more and more farmers are putting in leys and cover crops, and hill farmers are looking, probably for the first time, at soil quality—the most important thing for farmers and for us. So the situation is not all bad.
I share some of the concerns that have been raised. One reason that there has not been greater take-up—although, as my noble friend rightly said, the Countryside Stewardship scheme has just about doubled in the past three years—is that it is quite natural for farmers to think there is a better scheme coming in the next couple of months. That is causing a lot of farmers to sit back and wait to the last possible moment. I hope that my noble friend the Minister will make as clear as possible to farmers what the situation is. If farmers know what the schemes are and what the payments are going to be, they will make a decision. They have to be moved from the position where they think that a better scheme will come in a few weeks’ time.
Baroness Boycott (CB)
My Lords, I too support the ELM scheme, and, broadly, I support everything that the noble Baroness, Lady Hayman of Ullock, said. I understand what the noble Baroness, Lady Bakewell, said, but I do not believe for a second that we should effectively cancel the ELM scheme at this moment.
I think it is important to put another point of view, to do with the food price situation. The noble Earl, Lord Caithness, talked about when we were progressing the then Agriculture Bill and we debated the ELM scheme. It was decided that sustainable food growing would not be classed as something that could get any sort of payment. It was thought that if you grow food, you have a means of making money; that is fundamentally correct but, at that time, the reckoning was that about 8p in every pound got to the farmer; the rest disappeared into supermarket profit, packaging, production, processing and all the different things up the chain. New figures that have come through in the last year—compounded by issues that the noble Baroness, Lady Hayman, set out to do with the war in Ukraine and energy costs—reveal that UK farmers receive less than 1% of the retail price for goods that go through our main supermarkets.
That is not a percentage on the production cost but a percentage of the total price; it is pathetic and tiny. For example—I am referring to the research—for a wrapped, sliced loaf of bread, a cereal farmer will spend 9.03p yet will receive a negligible profit of 0.09p on something sold as a unit for £l.14. If they sold it as a loaf of “real bread” through an independent bakery they would make 0.5p profit; that is not much but it is something. For four beefburgers, the processor gains 10 times the profit of the beef farmer. A carrot grower spending about 14p per bag and selling to the supermarket will get virtually no money in return.
This leaves them with nothing to fund the transition. We all know that we need to have this transition. The agri-food sector currently makes up a third of UK greenhouse gas emissions, while agriculture accounts for 10% or possibly more. Farming drives 70% of terrestrial biodiversity loss. Intensive livestock farming poses a serious threat to climate change—we have debated many times in this House what industrial chicken farming does—and 85% of our land is used to graze livestock or produce crops to feed animals rather than feed us.
Everyone in this House agrees that we have to reform the farming sector, but if we are to reform it through the ELM system, people will need some reason to put in the herbal leys and they need to make some decent money out of food. This is driven by our commercial and rubbish food system dominated by supermarkets, which are driving farmers—especially small farmers—completely out of business.
So I have three small ideas: accelerate ELMS—madly so, putting more money in—introduce a land use framework that supports farm diversity, and support the transition to agroecological farming. Farming can be nature-friendly; it does not need to be industrial. We are pushing big farmers in the middle of England towards being more industrial rather than thinking, “I will grow some hedgerows”.
The Government should set up new, legally binding sector-based supply chain with codes of practice and use data to help farmers deliver more public goods and get supermarkets to help by giving farmers a much fairer deal. Given what we know about the two big supermarkets that recently distributed £1 billion to their shareholders, we could do something; we could have some higher prices paid to the farmers.
Given all that we have learned from recent shortages in fruit and vegetables, the UK must have a coherent and ambitious horticulture strategy to improve our nutritional food security. We are already importing large amounts of fruit and veg from climate and water-stressed countries. As it worsens, this threatens our own food security. As many people have said, we need to support our small and family farmers; but we need also to support our big farmers so that they see a proper advantage in transitioning out of industrial farming methods that cause so much damage.
Lord Taylor of Holbeach (Con)
I ought perhaps to draw the attention of the House to my interests as in the register. I am also president of the Institute of Agricultural Management and I have the good fortune to be involved in a horticultural and farming business. I consider it good fortune because that business has grown. As my noble friend Lord Caithness would say, we are in some of the most fertile parts of England, and we have flexibility available to us that is not available to everybody involved in farming.
It is inevitable that we will talk about farming in general as we talk about this SI. The noble Baroness, Lady Boycott, spoke particularly about the strains that face farmers—the difficulties that they have in marketing their produce—but we can all agree that we want to take the industry forward. We want to see the agricultural and horticultural industries going forward.
There may be a certain amount of frustration in the criticism of this SI. Change is, of course, difficult. Nobody likes change, least of all farmers, but we are blessed in this House in that I always feel that we generally have a consensus on this issue. I am slightly distressed to suddenly find that we are talking about a “fatal Motion” and a “regret Motion”. We have in my noble friend the Minister someone who was a colleague of mine in Defra some 11 years ago and whom we can rely on to make sure that the interests that we express here this evening are expressed within government.
I know that change is a difficult matter, but what are we trying to achieve? We are trying to achieve a diversity in farming that has not existed before. We are trying to induce a situation where farmers realise that what is environmentally beneficial to this country is also part and parcel of the way that the state, the Government, funds farming and gives farmers a chance. This SI is a step on the way. It is only the beginning of a continuing process, but we should support it at this stage. This change will be to the benefit of the country and to the benefit of the industry of which I consider myself through my family connections to be a part, and I consider it to be to the benefit of the world in which the majority of our fellow citizens want to live.
I am sorry that the noble Baroness, Lady Bakewell, has proposed this amendment. I cannot agree with her. I think it is looking backwards when we need to be looking forwards. I know that we and the Labour Party are both anxious to make sure that we have a policy for agriculture and horticulture which builds on where we are and what we want to achieve; it is something that I think we share.
The Duke of Wellington (CB)
My Lords, I declare my farming interest as detailed in the register.
Last week, the environment committee of your Lordships’ House—of which I am a member, as are some other Peers present—heard a very interesting presentation from one of our witnesses. She was a lady farming in the Yorkshire Dales, I think. It was a small family farm, and she was farming with her son. She explained that, in the past, they had received £12,000 per annum in farming support under the basic payment scheme. However, they were now due to receive £5,000, under the new schemes. I tell this story only because it is a very realistic assessment of what is happening to small family farms in the uplands, which are trying to farm in an environmentally sensitive way but not really being supported by the support system to which we are moving.
Like others, of course I support the idea that there should in future be payments that help the environment. In fact, I believe that most farmers already want to farm in a way that is friendly to the environment. Nevertheless, I understand that public money should be directed towards environmentally friendly systems of farming.
We all know that our Minister, who is so widely respected in this House, is not the author of the details of this transition. I do not think he was the Minister when we were debating two or three years ago the then Agriculture Bill. Many Members of this House at the time warned about the effect of phasing out the basic payments before the development of the ELM schemes and how it would affect particularly family farms in the uplands. That is indeed what is happening.
It is an uncomfortable truth for a Member of the United Kingdom Government that the Scottish Government are treating their farmers rather better than the English farmers are being treated by the centrally directed schemes here. In Scotland, they have decided to retain the basic payments until such time as the new environmental schemes properly kick in. We have been told many times in this House and in Grand Committee that there will be alternative ways in which farmers can apply for public money. We all accept that and nobody is disputing the principle. What worries me, and should be of concern to the Minister, is that there is a serious funding gap between the diminution of the basic payments and the access to and development of the new environmental schemes.
Although I of course support the direction in which the Government are taking farming, I do not rate the announcement by the Minister in January of £1,000 for helping all farms to receive advice. I am sure the Minister is aware, even though I have heard him suggest otherwise, that the complexity of the various schemes on offer quite often requires rather expensive advice. I have even been told that the expense of the advice is likely to be as great as the payments that people might possibly receive under some new schemes. It is complex—I think the Minister probably realises that—but I do not think the offer of £1,000 is really very significant or indeed very generous.
The Lord Bishop of St Edmundsbury and Ipswich
My Lords, I shall follow the comments that we have just heard. I declare a new interest as the president-elect of the Suffolk Agricultural Association, where we see the issues that have just been described in the uplands similarly in small family farms in Suffolk.
By and large, the farmers that I speak to want to embrace the ELM scheme and many of them are doing so. What those who are embracing it are saying to me about those who are not yet doing so is that somehow the scheme needs to be made more attractive, the incentives need to be increased—particularly for the smaller family farmers—and the process simplified in some way so that they can gain access to the scheme. I understand that His Majesty’s Government are seeking to achieve 80% take-up of ELMS by 2030. I ask the Minister where we are with that at the moment and what he sees as the possibilities of accelerating and incentivising the take-up by those who, as we heard earlier, might need hand-holding in that process.
Lord Grantchester (Lab)
My Lords, I declare my farming interests as set out in the register, being a farmer in receipt of payments. I shall speak from a grass-roots perspective and perhaps be a little more critical.
On 26 January this year, the Minister in the other place introduced the Government’s agricultural transition plan with the words:
“We will learn from the past”.—[Official Report, Commons, 26/1/23; col. 1191.]
I regret that the Conservatives are slow to do so. The errors of the common agricultural policy will not absolve them of their mistakes, repeatedly made. That is not to say that I am not in favour of the new approach towards payments for environmental benefits; it is the poor way in which they are being introduced that I regret.
I regret that Conservatives still insist on basing environmental payments on the income-foregone model, long discredited since the start of Pillar 2 payments many years ago. I had thought that, under the new post-EU system, farmers were to be rewarded for the value of the benefits for the public good of enhancing the environment. Under the cross-compliance features of the CAP it made some sort of sense, but it makes no sense where schemes replace elements of agricultural production and payments go nowhere near the value of cropping, hence the poor uptake in many of the schemes under Countryside Stewardship.
I regret that the Conservative Government paid little attention during the passage of the Agriculture Act to calls that payments need to be worth while under new ELM schemes and that it would be foolish to reduce payments aggressively during the transition before there were meaningful ELM alternatives that could be understood and planned for in future farm business plans. This approach is not a way to build confidence. Conservatives tend to like to reduce, restrict and restrain rather than to undertake positive provisions for growing the market and providing inclusive initiatives.
Against the background of climate change, energy price rises and the war in Ukraine, food security and the lack of certain products on supermarket shelves have highlighted the reduction of support to, and confidence of, farmers. The disastrous trade deal with Australia and New Zealand, agreed by the discredited Liz Truss as Trade Secretary, is not welcomed.
The CAP was an agricultural policy, not an environmental one. Payments were made only to farmers. NGOs and environmental charities were envious that they did not qualify. The Government will say that the same budget of £2.5 billion is still being maintained, but it no longer goes only to farmers. No wonder the NGOs are enthusiastic in their praise. While the money is cut from BPS payments to farmers, can the Minister give the figure for the amount returned to farmers—as distinct from NGOs—from environmental land schemes? Is he able to break down that amount between farm types to clarify the effect of reductions to the uplands, perhaps the most stressed and vulnerable agricultural sector?
I will use another word beginning with R: could the Minister “refrain” from saying it is up to farmers to apply for the new schemes that were introduced in late January? The Minister’s department set itself the ambition of attracting all 80,000 farmers under the BPS to be involved in environmental land management schemes. The department would also need to include tenants, now able to take part under the Rock reforms. That would show the Government’s full commitment to have the countryside in a better state as we drive our ambition to achieve net zero by 2050. As a baseline, can the Minister say how many farmers—not NGOs—participated in schemes last year?
I urge the Minister to learn from the past and develop schemes that are simple and effective. Farmers do not want 100 pages of bureaucracy. Could communication be improved and directed at each qualifying farm in a determination to be inclusive and encouraging, as part of the 30 by 30 commitment? The ambition must be to include all the farms, with their farmers, in schemes at the end of the transition period that began in the Agriculture Act 2020.
Getting the wider 30% of land well-managed for biodiversity by 2030 is a huge challenge. I draw attention here to the fact that all farmers would want to be included, respond positively to challenges and can bring huge benefits across all types of land, in addition to those already protected under designated protections.
Paragraph 7.6 of the Explanatory Memorandum states that the Government intend the 2023 claim year to be the
“last year of the … Direct Payment scheme”.
In the new system for 2024, will the Government repeat the mistakes they committed previously, with a lack of timely detail, a lack of funding and the same philosophy of reduce, restrict and restrain? Perhaps the Minister can be encouraging this evening
Baroness Bennett of Manor Castle (GP)
My Lords, I find myself in the entirely familiar position of agreeing with everything said by the noble Baroness, Lady Boycott, particularly her reflections on the stranglehold that supermarkets have over farmers’ lives in this country. However, I find myself in the unusual position of disagreeing with both the Liberal Democrats’ fatal amendment and the regret amendment from the Labour Benches. At base, that is because, if we were not to take the steps that this SI delivers, the shift away would see £770 million—as calculated by the RSPB—taken away from helping farmers to take action on climate change, reduce water pollution, plant trees and restore nature.
It is worth noting that, under the Environmental Improvement Plan, 90% of the funding for tree planting —to meet the target of 16.5% of England being covered by trees by 2050—depends on ELMS funding. Some 80% of progress on nitrogen, phosphorus and sediment pollution from agriculture depends on ELMS funding. Of course, that is not to say that there are not huge problems with where we are, as the right reverend Prelate, the noble Duke, the Duke of Wellington, and others pointed out. The Carbon Brief website has a useful interactive table that lists the 270 activities that farmers can undertake to earn payments, particularly from SFI and CS schemes; 39 of those 270 are still at the planning stage, yet the base payments are being cut away.
The Minister will be surprised to hear that I will pass a small bouquet in his direction: the Soil Association has just acknowledged that payments for organic farming are rising by an average of 25% via the Countryside Stewardship scheme, which is a recognition of the benefits of organic production. But, picking up the points about small farms, it is worth noting—perhaps the Minister can write to me about this—that in Wales they are looking to reduce the size of farms eligible for farm payments to three hectares, or, alternatively, to farming businesses that rely on 550 hours of labour per year. Will the Government look at helping those smaller producers, particularly in horticulture, and perhaps small-scale livestock producers, to do that?
But—I suspect the Minister knew there was a “but” coming—my reason for regretting the Labour regret amendment is, as the Minister identified, the fact that farmers and land managers in the UK now need certainty about the future for long-term plans. If you are going to plant trees or herbal leys, you need to know what is happening not just this year or next year but in the long term. Given where we are in the electoral cycle, the Labour regret amendment will deliver to farmers a degree of uncertainty about where they might be in two or three years, in terms of the schemes that the current Conservative Government introduced—
Baroness Hayman of Ullock (Lab)
I honestly do not think that my regret amendment does that at all. We are trying to point out that the transition has not been straightforward and is not working properly for either the environment or farmers, and that the Government need to urgently re-evaluate their approach to the ongoing transition in order to get this to work for everybody.
Baroness Bennett of Manor Castle (GP)
I thank the noble Baroness for the reassurance. I hope that farmers around the country will hear and feel that there is a degree of certainty, because that is what they need, as I said.
I will now get to the part where I criticise the Government. With these kinds of policies, we need a method of policy-making by consensus. In other countries, particularly those with proportional representation electoral systems, there is decision-making that is arrived at by consensus. It would have been better if this had been constructed in a more stable and secure way, in consultation with all parts of our political system, to deliver the certainty that farmers need. As has been said from all sides of your Lordships’ House, that is not the position that farmers are in today.
Lord Roborough (Con)
My Lords, I declare my interest as a farmer and landowner. Despite my position as a loser of financial support under the Government’s current policies, I am against these amendments.
Small farmers in this country, particularly upland farmers, are dependent on predictable government support to plan their businesses and to enable investment to achieve positive environmental outcomes. Many of those farmers are on a financial knife-edge, and these amendments would throw the plans for those embracing change into turmoil. I am familiar with the finances of typical upland farmers in my home county of Devon and their reliance on consistent and predictable government support. Changing that government support now is not helpful.
Lord Lucas (Con)
My Lords, I have two short questions for my noble friend the Minister. First, will he really support what my noble friend Lord Caithness said and up the hand-holding? When I decided, 50 years ago, not to go into farming but to go into the City, I chose the less intellectually challenging option. Secondly, does he share my astonishment at how paper-thin the Liberal Democrats’ commitment to the environment is?
Lord Benyon (Con)
My Lords, I thank everybody for their valuable contributions to the debate. It has been a great opportunity to highlight the important work the Government are doing to invest properly in our farming sector.
Sometimes people refer to farmers as being very conservative with a small “c”. I speak as one, and sometimes we are backwards in coming forwards; but when we get the idea of policy taking us in a certain direction, no group of people in the country can be more dynamic and better embrace change, innovation and all the other factors. Farmers are embracing change. I have seen some remarkable experiences around the country, and no doubt other noble Lords have too.
It is important that we press ahead with our planned reforms. Direct payments have held farmers back and are fundamentally unjust. Continuing to apply reductions to direct payments means that we can fund our other schemes, which deliver better policy outcomes and which we are designing with farmers so that they work on the ground. Our new schemes are designed to support farmers to be profitable and resilient.
We have recently updated the payment rates for Countryside Stewardship to reflect cost increases. There was an average increase of 10% for revenue payment rates for ongoing activity, and an average increase of 48% for capital payment rates. By continuing to invest in our new schemes, we will be providing support to farmers to help them reduce costly inputs and increase productivity.
The noble Baroness, Lady Hayman, asked whether we were talking to the supermarkets—or it may have been the noble Baroness, Lady Boycott, or both. I assure her that we are, on an almost weekly basis. Particularly through the UK Agriculture Market Monitoring Group, we work very closely to make sure that all the supply chain difficulties experienced through Covid and then as a result of the Ukraine war, as well as other lumps in the road such as avian influenza, are dealt with, and we work with them. The point that the noble Baroness, Lady Boycott, made struck home to me. As you drive past my local supermarket, you see photographs of farmers with chickens under their arms, in an idyllic scene. It is very much part of their marketing operation. We want to make sure that this is reflected in the farm gate prices offered and that we have a food supply chain system that reflects the work that has gone into producing that, as well as our need for good food security and the reasonable intention of the retailer to make a margin, but not one that is at the expense of anyone else.
We have a new entrants scheme to encourage new, young and diverse people into the farming industry—but also recognise that, for some people, this transition is not for them. A dignified exit scheme is up and running and allowing people to move on. But I hope that the scheme will bring in a new, younger generation, so that the average farmer is not me, a 62 year-old white man—it is a younger person, bringing new ideas into farming.
We will lay another statutory instrument to deal with payments later this year. I think that that answers another point that was made.
The noble Baroness, Lady Bakewell, talked about Martin Lines of the Nature Friendly Farming Network. I am his greatest fan. He is helping farmers alongside the scheme that we are paying for and alongside the Prince’s Farm Resilience Programme and other organisations. On his farm, he is farming 11% less land, which he has put into environmental schemes, but he is producing more food off the rest; that is an example of where this can be of such benefit.
The noble Baroness, Lady Rock, produced a very good report, which we are working through. We are making sure that these schemes are accessible for the tenants and in the main do not require landlords’ consent—but also making sure that they are freely available to every part of the farming industry. Tenure is, of course, much in our minds.
The noble Baroness, Lady Boycott, talked about accelerating the process of instigating ELMS. We think that we have this about right. We have worked on this on an iterative basis, so we have changed schemes where we have had to, and we have increased payments—such as when the Ukraine war happened and there were spikes in prices. We are working with the Groceries Code Adjudicator to make sure that there is a fair deal for farmers.
On the noble Baroness’s point about the land-use framework, I was always opposed to it. To go back a decade, I thought that it was a sort of Soviet-style, tractor-plan piece of top-down centralisation. I now have the zeal of the convert. The House of Lords report on this is really important; it is driving Defra forward. We will produce a land-use framework, which absolutely is needed, if we are to square the circle of all the different requirements that we need from our land to make sure that that happens.
I thought that the noble Duke, the Duke of Wellington, was uncharacteristically gloomy in his assessment. Farmers in Scotland have no idea what their Government are going to do; they are living in a fog. At least the fog of the transition is starting to clear south of the border, and we are showing farmers here the direction that we are taking and they are embracing it. In Scotland, it is an absolute mess. We are helping farmers here, whereas Scotland is continuing to pay an unfair area payment, whereby 55% of the money goes to the largest 10% of the farmers.
On complexity, I shall just say that, as a former land agent, I do not want this to be something that lines the pockets of land agents. I want it to be as easy as possible. The average time that it takes to sign up to the sustainable farming incentive is between 20 and 40 minutes. It is not something that requires a land agent to do it for you—although perhaps the noble Duke does require a land agent to do it. I am talking about the average farmer. Countryside Stewardship is more complicated, but we are simplifying it and linking it to the sustainable farming incentive, so you do not need different maps. Of course, there are over 200 different options under stewardship.
The right reverend Prelate talked about take-up. The new standards in SFI go live in July and I hope that we will then see farmers embracing it. The free advice we are giving to farmers shows them how they can access it. The noble Lord, Lord Grantchester, talked about Countryside Stewardship as if no one was going into it. We have seen a 96% increase in it and I totally reject his rejection of revenue forgone as a concept: it is vital that farmers see that if they are asked to do something different, if they are asked to reduce the stocking rate, they are rewarded for doing that. Also, we are not just assisting the large landowners, big NGOs, the National Trust and others; this is going into farmers’ pockets.
The noble Baroness, Lady Bennett of Manor Castle, talked about the minimum area. Five hectares is what we are talking about here. I am open to all sorts of ideas for new designations, but horticulture, which was unable to access the basic payment scheme, is able to access a great many areas of these schemes. On the point of my noble friend Lord Lucas, hand-holding sounds a bit patronising, but it is vital to support farmers in this, and that is why we are offering free advice. We will continue to do this. There is not a farmer in this country who could not, if they wanted to, have met a member of the Defra team, at shows, at marts or other agricultural events. They could have gone on a webinar or an event with the NFU or another organisation—we really have tried to do this.
There are roughly 500 actions, grants and advice offers that farmers can access right now to support their profitability, to help them to grow food and to protect the environment. I hope that that person the noble Baroness, Lady Boycott, talked about will be able to access it and see that her level of profitability can be sustained. I urge everyone to take a look at the offer available and the improvements we have made, directly responding to farmer feedback. It can take as little as 20 minutes, as I said, to sign up to the sustainable farming incentive.
We have a comprehensive offer for the uplands, which we have developed in partnership with upland farmers. They have formed the landscape that underpins tourism in these areas and so much more, and we want to see them sustained, we want to see these landscapes farmed and we want to support them in doing so. We include in an expanded offer increased payment rates for Countryside Stewardship. We have significantly increased payments for upland options, such as low-input grassland, which has increased from £16 to £98 a hectare. The SFI has tailored options for the uplands, including the moorland standard, and this goes alongside other options that are applicable to upland farmers. All the standards we are introducing in 2023 are open to upland farmers if they have relevant land and features. Our offer for the uplands also includes the opportunity to apply for landscape recovery funding, farming in protected landscapes grants, animal health and welfare advice and grants, as well as grants to help boost productivity. Most of this offer is already available.
The “income forgone plus costs” approach to sustainable farming incentive payments delivers the largest profit margins on the least productive land. Upland farms, which have typically lower income than the median, are well placed to benefit. This is because the majority of actions for which upland farmers will be able to apply have a single payment rate, which is costed at a national level based on the median farm eligible for the action. Our historic agri-environment schemes use this approach and are popular in the uplands: around three-quarters of commercial upland farmers are already in agri-environment schemes.
To finish, I want to add that in January we updated the offers for schemes. Our Countryside Stewardship increased by 10% on average; the amounts we are offering in our grants in Countryside Stewardship have increased by 46%; our sustainable farming incentive management rate has increased; and the Countryside Stewardship higher tier is getting more farmers involved. We are reflecting the pressures that farmers are feeling because of costs.
We have introduced more flexible rules to allow farmers in legacy higher level stewardship to extend these agreements or to apply for Countryside Stewardship. That flexibility did not exist before. They can also choose to have a Countryside Stewardship agreement alongside their higher level stewardship agreement. Our schemes have been designed to complement each other. Farmers can enter the sustainable farming incentive alongside their Countryside Stewardship agreement, provided that the actions they are taking are compatible and they are not being paid twice for the same actions.
Baroness Bakewell of Hardington Mandeville (LD)
I thank all noble Lords who have taken part in this debate, and I am grateful to the Minister for his response. It is undoubtedly true that the reduction in the BPS was well trailed and consulted on and appeared reasonable. As other noble Lords have said, change is always difficult, but as others have also said, it could have been handled better.
What was not anticipated by farmers was the extremely slow rollout of ELMS. The initial pilots should have been held before the beginning of the reduction of the BPS. Had this been done earlier, there could have been a faster and more efficient rollout of ELMS across the farming community. The noble Earl, Lord Caithness, referred to the uncertainty farmers are currently feeling.
Most farmers are keen to take part and improve their land quality, contribute to net zero, improve biodiversity and restore habitats. However, they need to make a living at the same time. The Minister has extolled the virtue of the SFI, which last year spent only 0.44% of the overall budget on that scheme.
The noble Lord, Lord Grantchester, referred to the many debates we had during the progress of the Agriculture Act, and to the long-term nature of farming. We made those points over and again, but they were not listened to. Energy price hikes and fertiliser shortages have not helped. Changing to a different method of fertiliser takes time, and the shortage of fodder for animals has also had an impact. All this has had a cumulative effect on farm profitability.
Like the noble Baroness, Lady Hayman of Ullock, and the noble Duke, the Duke of Wellington, we fully support the ethos and rollout of ELMS. The noble Baroness, Lady Boycott, made some very important points on the reward that farmers get for their produce, saying that it is so small and unsustainable. She promotes escalating ELMS, and we fully support her in this. What we are asking for is a pause in the reduction of the BPS. ELMS is vital and needs to speed up to catch up with the gap that the BPS has created.
Some 70% of land in the country is managed by either agriculture, horticulture or open countryside. The land needs and deserves to be managed in a sustainable way. We must ensure farmers are still here to achieve this. Some 44,000 farmers have left farming in the last four years; that is an undeniable fact. I do not believe that the whole House is on a very different page; we just do not agree on the way this should go forward. I understand and appreciate that others do not support this amendment. Nevertheless, I would like to test the opinion of the House.
Baroness Hayman of Ullock
At end insert “but that this House regrets that the Direct Payments to Farmers (Reductions) (England) Regulations 2023 introduce significant reductions to the basic payments provided to many farmers at a time when input costs are high, supplies of certain produce are scarce, and His Majesty’s Government have not fully implemented the Environmental Land Management schemes which will replace the Basic Payment Scheme; notes that the latest release of the Farmer Opinion Tracker for England highlighted falling confidence among farmers in His Majesty’s Government’s agricultural policy; further notes that this is the last year that His Majesty’s Government intends to lay these regulations, with payments for 2024 and beyond to be delinked payments administered through alternative means; and calls on His Majesty’s Government to re-evaluate urgently their approach to the ongoing agricultural transition, in order to better support and increase the confidence of domestic producers”.