Agriculture (Delinked Payments) (Reductions) (England) Regulations 2024
(7 months ago)
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Lord Douglas-Miller
That the Grand Committee do consider the Agriculture (Delinked Payments) (Reductions) (England) Regulations 2024.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Douglas-Miller) (Con)
My Lords, I declare my interests as set out in the register.
This instrument continues the important agricultural reforms we are making in England. Through these reforms, we are investing in the long-term prosperity of the sector and the future of our precious environment—things which I know many in this House care deeply about. The instrument applies progressive reductions to delinked payments for 2024. Delinked payments were introduced on 1 January 2024 in place of payments to farmers under the basic payment scheme in England. We are phasing out untargeted subsidy payments, as they have held the industry back and done little to improve food production or the environment. We are doing this gradually, over our seven-year agricultural transition period in England. That period began in 2021, so we are now in the fourth year of the transition.
The Government first announced the reductions in this instrument in the agricultural transition plan, published in November 2020. We are applying the reductions to delinked payments in a fair way. Higher percentage reductions are applied to amounts in higher payment bands. We plan to make delinked payments in two instalments each year, which will help farmers with their cash flow.
By continuing gradually to reduce these subsidy payments as planned, we are freeing up money so that farmers can access a wide range of environmental land management schemes and grants to suit all farm types. At this year’s National Farmers’ Union conference, the Prime Minister reiterated our commitment to maintain total farm support at an average of £2.4 billion per year across this Parliament. Therefore, the money that is no longer being spent on untargeted subsidies is not lost to farmers; instead, it is being put to better use. It is being redirected to the sustainable farming incentive and other farming support, which help boost agricultural productivity and resilience, increase food security and deliver for the environment. Our new schemes are investing in the foundations of food security and profitable farm businesses—from healthy soils to clean water.
Earlier this year we updated payment rates in our environmental land management schemes, the average uplift being 10%. Some payment rates went up by significantly more: for example, species-rich grassland has risen from £182 to £646 per hectare.
This summer, we will launch up to 50 new actions, which will allow farmers to access scheme funding for things such as precision farming and agroforestry for the first time. The new actions give farmers even more choice about what they can do, especially those on moorlands and grasslands.
Nearly half of all farmers are now in one of our environmental land management schemes. So far, there have been around 22,000 applications for the sustainable farming incentive under our 2023 offer, and more than 21,000 agreement offers have been issued. There are now over 35,000 live Countryside Stewardship agreements—more than double the number since 2020.
The sustainable farming incentive can help to reduce costs and waste on farms, to make them more resilient and to improve food production by, for example, funding farmers to plant companion crops to help manage pests and nutrients, to assess and improve the health of their soil, and to grow cover crops to protect the soil between the main crops. We are designing our schemes so that they work for smaller farms. We have doubled the management payment for the sustainable farming incentive, which is now worth up to £2,000 for the first year of an agreement. This will help to attract even more smaller farms into the scheme.
Smaller farmers potentially have access to more income than they did before. Under the basic payment scheme, half the money went to 10% of the largest farms. Under the sustainable farming incentive, payments are based on the actions that farmers take, rather than simply the amount of land they have. This means that SFI agreements can produce more income than the basic payment for a typical farm.
Farmers taking part in the sustainable farming incentive are typically more than making up their lost basic payments so far. The value per hectare of applications so far is £148. This, alongside delinked payments for small farms this year—equivalent to £117 per hectare—adds up to more than the value of the basic payment scheme per hectare before the start of the agricultural transition. That is £233 per hectare under the basic payment scheme, versus a total of £263 under delinked payments and the sustainable farming incentive.
This year, we will make it even easier for farmers to access the funding by allowing them to apply for actions previously in Countryside Stewardship mid-tier and the sustainable farming incentive through one application process. In February, we announced the largest-ever grant offer for the agricultural sector, totalling £427 million. This includes a doubling of the investment in productivity and innovation in farming to £220 million this year. This provides support for farmers to invest in automation and robotics, as well as solar installations to build on-farm energy security. It also includes £116 million for slurry infrastructure grants and £91 million for grants to improve the health and welfare of our farmed animals.
We are providing a range of other support for farmers and land managers. This includes a third round of our landscape recovery scheme later this year. The farming resilience fund continues to provide free business support to help farmers plan and adapt their businesses. To date, more than 20,000 farmers have received this support.
In conclusion, the Government continue to back our farmers. We are investing in our new schemes and grants, which are helping farms and food production become more resilient. They also deliver better outcomes for animals, plants and the environment. We must press ahead with these reforms as planned. As ever, I am happy to take any questions. I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, I thank my noble friend for setting out the regulations, which, as he explained, follow on from the earlier regulations to delink payments. I congratulate Defra on the second Farm to Fork summit, which seemed to be well received last week, particularly the inaugural publication of a food security index and the commitment to introduce a five-year seasonal workers scheme, which will be extremely well received by fruit and vegetable farmers across the country.
On farms and food security, the summit recognises the unprecedented challenges all farmers have faced this year. This has been the wettest 18-month period—not just a 12-month or six-month period—since 1836. Also, unprecedented imports have led to competition on very unfavourable terms. For example, given that battery-cage production of poultry has been banned in this country—I do not disagree with that—it is unfair that our farmers face unprecedented levels of imports of battery cage-produced eggs and poultry from EU and third countries.
I would like to press my noble friend to explain how he expects small farms, which he mentioned specifically, to benefit from the provisions of these regulations. We in North Yorkshire are fairly unique in that 48% of our farms are tenanted; that is possibly replicated in County Durham, Cumbria, Northumbria and other parts of the north, and perhaps in the south-west. How does my noble friend expect tenant farmers to benefit, not just under the provisions in the regulations before us but under other provisions that have been announced this year?
I would argue that tenant farms are the backbone of the country. I mentioned the wet weather that we have had, which has had an impact not just on crop production. The AHDB’s figures find that the planting of oilseed rape is down 28% this year, while the planting of wheat is down by 15% and winter barley by 22%, but my noble friend will also be only too aware that livestock farmers have endured an incredibly difficult lambing period. Many have been unable to turn their stock out and have had to rely on feeding livestock, particularly sheep, at a much earlier stage in the year than they would have done otherwise. Cattle have been stuck in sheds with feed running low. I understand that this year straw will be like gold dust.
We all know that, because of the war in Ukraine and other factors, energy and other input prices remain volatile. This is an extremely difficult time, with farmers facing high input costs and very challenging sales prices. Against that backdrop, can my noble friend imagine anything else that the Government can do to extend help to tenant farmers? How does he imagine that small farms, family farms and tenant farms in particular will benefit from the provisions before us today?
Baroness Young of Old Scone (Lab)
My Lords, I welcome the Government’s commitment to keeping up the pace of reform, because it is immutable that we will not be able to tackle net zero or species decline without changing farming considerably and adopting nature-friendly farming practices. It is also difficult to imagine how we can maintain food security without altering farming practices, because climate change and environmental degradation are probably two of the bigger risks to food security.
The basic payment system was always a bit half-baked, if I can use that expression, in that it gave substantial sums of money to large farms and rather less of a share to smaller ones. Many of these smaller farms are the ones that are taking major steps to re-engineer their agricultural practices and businesses in order to maintain future economic sustainability and deliver both for the environment and on carbon. It was quite a worry when various newspapers started banging on about the fact that farmers should not have to lose basic payments at this stage because they were facing the pressures that the noble Baroness, Lady McIntosh, just outlined—in particular, the lousy weather this year and last.
However, there are other ways of supporting farmers through that. I do not think that we should allow those things to break our stride on the reduction and delinking of payments. The farming resilience fund that the Minister referred to is the sort of proposition that I would dearly like to see in a unified advice system across the board for farmers—one that takes account of advice not just on transition but on all sorts of things that we are expecting, asking and incentivising farmers to do. I am very old so I remember ADAS. Bring back ADAS and modernise it to deliver for the future because at the moment farmers are sometimes bamboozled by the range of advice that they get.
In terms of the immediate financial pressures on farmers as a result of the climate and weather, there needs to be a stand-alone fund that does not get bound up with the delinked payments issue. I hope that we will see the Government’s backbone in continuing to implement delinking as fast as possible until we get to the point where ELMS is indeed the name of the game and there is no other.
Lord Teverson (LD)
My Lords, perhaps I can ask simple question. I very much welcome the fact of the transition from basic payments to SFI. Let us be quite clear: there has been a heck of a lot of uncertainty during that process, which now hopefully is more concrete, so that everybody knows the direction. I welcome the number of farmers who are now involved in SFI. Coming back to the question about the environment and the objective of bringing back nature into the countryside, how does Defra intend to assess whether these various SFI programmes have been successful, so that they can be modified in future to make sure that they achieve the goals that we all want them to achieve? That is what I would like to understand as we move into the future. Given the flexibility that SFI gives in terms of various individual incentives within it, how do we assess that, how do we manage it, how do we calculate it and how do we change it into the future to make sure that effectiveness is still there?
Earl Russell (LD)
My Lords, on these Benches we have real concerns and questions in relation to these regulations. This instrument was debated in the Chamber of the other place. The Explanatory Memorandum states:
“This instrument sets the percentage reductions which will be applied to delinked payments in England for 2024. Delinked payments were introduced on 1 January 2024 in place of Direct Payments to farmers under the Basic Payment Scheme … in England … As part of moving away from the Common Agricultural Policy, the Government has been gradually phasing out Direct Payments in England. It is doing this over an agricultural transition period (2021 to 2027), as provided for in its Agriculture Act 2020”.
We support the overall approach, so we will not be opposing the SI, but we have concerns about the process of transition of farm payment mechanisms in general, the resultant department underspend to date and the impacts that these are having on farmers, their economic welfare and, in many cases, their very economic survival.
The debate today so far has largely mirrored that which happened in the other place, most people being supportive of the long-term transition and policy objectives, but equally being deeply concerned about the implementation of that transition. These changes need to be assessed against the broader implementation of the whole package of measures. The truth be told, our farmers are really struggling to survive financially.
As has been said, we have had one of the wettest winters since 1836. In many cases, winter and spring crops have not been planted and livestock farmers have also suffered. The NFU farming confidence survey, published just a few weeks ago, showed that mid-term confidence is at its lowest since records began in 2010. Because of a lack of confidence, production intentions are plummeting within all farm sectors. That cannot be good for farmers or our food security. Also, the relentless wet weather has caused farmers real hardship: 82% of respondents to the NFU survey said that their business had suffered, which cannot be good either. We are increasingly seeing the impacts of climate change and I ask the Government and the Minister to be more flexible and responsive to the impacts of climate-related events on our farmers. The Government must recognise the role that farmers play in flood prevention and adequately reward them for the important work that they do in mitigating floods and protecting us from further flooding.
We have this £200 million underspend in Defra and are now four years into a seven-year transition under the SFI. The NFU survey also found that profitability had fallen for 65% of respondents. We have this big period of transition, weather events and real economic hardship for our farmers, so questions must be asked about the impact of these regulations against this overall background.
The Explanatory Memorandum states that
“compared to applying no reductions at all, the 2024 reductions set in this instrument will release around £970 million to £1,010 million”.
These are huge amounts of money, and we are worried about the impact of this change. The Government must be in possession of an overall impact assessment of the transition to ELMS to date, but this information has not been published. I ask them to be more open and flexible with the information they provide.
The Minister in the other place said of the overall budget that it is the same cake and that budgets are not being reduced. Against this, some of the slices have not been eaten because there were underspends, the department is undertaking new and more complex sets of measures around supporting farmers to undertake environmental stewardship, with a greater number of schemes being developed overall, and new organisations are now eligible for payments. Added to this, we have had the rise in inflation, which means that the budgets were not as large as set out.
All of this is adding increased financial impact; farmers are being asked to do more and there are more schemes, so the money is being subdivided to a greater extent. Given that no impact assessment is included with this SI, how does the Minister expect us to make adequate judgments about the money being provided and the decisions that lie behind that? What is the factual basis for the figures the Government have put forward? How confident are they that they have the right figures, that they are set at the right rates and that they are capable of achieving the policy objectives?
Finally, what is Defra doing to improve the situation for our farmers? What assessment has it made of the overall support that farmers need and how best it should be provided at speed and at scale? What other problems has it had to date with the implementation of the present system? What is being done to support small farmers and tenant farmers, in particular to make applications? The Minister proudly stated that half of farmers have made applications; by that same logic, half have not engaged with these schemes as yet, so how can we do more to bring them into these schemes and make them work more effectively?
Baroness Hayman of Ullock (Lab)
My Lords, we do not oppose this SI, as we did not oppose the agricultural transition plan, but we think that the implementation of ELMS and the agricultural transition away from the BPS need to work much better and the Government need to look at how they can provide better support for farmers while this transition takes place. The noble Baroness, Lady McIntosh of Pickering, asked specific questions about small farms and tenancies; they are having particular challenges, so it would be good to hear from the Minister on that.
We have heard a lot today about how climate change continues to threaten farmers’ livelihoods. I am sure the Minister is aware that the NFU has suggested delaying ELMS while certain things are sorted out. While we have some sympathy because of the struggles farmers have had recently, delaying the implementation of ELMS and the phase-out of basic payments is not the solution.
Policy-driven agricultural practices have been one of the single biggest drivers of wildlife loss in the UK over the past 50 years. We are concerned that, if you start delaying the ELMS rollout, all you will do is create more uncertainty at a time when farmers desperately need certainty. They need to be able to plan—and to plan to farm in a way that provides food but also benefits nature. As my noble friend said, we will not reach net zero or be able to tackle species decline and biodiversity loss without the widespread adoption of nature-friendly farming practices. We have also heard that the biggest long-term risk to our food security comes from climate change and environmental degradation. That is why it is important that we get these schemes to work effectively for farming.
My understanding is that there is almost a £1 billion funding gap for agriculture to meet existing nature-recovery and net-zero targets. I do not expect the Minister to pull £1 billion out of his back pocket, but it demonstrates that this is a huge problem that needs addressing. Instead of doing what the NFU has suggested and pausing ELMS, have the Government thought about using the emergency financial measures available to them in Section 21 of the Agriculture Act? There are powers to add an additional emergency fund on top of SFI for farms that are suffering the greatest climate damage. Have the Government looked at that as a way of supporting farmers? Given the terrible weather we have had, including flooding, would that be an option?
I want to look at some of the farmers’ concerns, because the NFU is clearly not happy with the way things are at the moment. The noble Earl, Lord Russell, talked about many of the concerns in the NFU’s latest annual farming survey, which gives a good overview. It shows the lowest level of confidence in at least 14 years, and extreme weather and the phasing out of subsidies are cited as the primary drivers. Tom Bradshaw, the new president of the NFU, said his concern was that,
“if members don’t have confidence, then we as a country can’t deliver food security”.
That is a real worry.
One factor in that is the weather, about which we have heard a lot, but what was quite striking about the survey was that mid-term confidence had been hit harder than short-term confidence. That is striking because it shows that farmers are losing trust in the Government’s ability to support them through this transition period and during the challenges of climate change. Will the Minister comment on that? How are the Government working to bring back farmers’ trust? It is very important.
On the weather, analysis by the non-profit Energy and Climate Intelligence Unit forecast that crops could be down by nearly one-fifth as a result of the wet weather, and that it was likely that prices for bread, beer and biscuits, for example, would rise. Has Defra made any forecast of the impact of continued bad weather on inflation and on harvests, for example?
The NFU is concerned that the combination of the BPS being down by 50% and all these extra pressures will mean that farmers are more likely to borrow. Borrowing is more expensive, and the NFU is concerned that, as Tom Bradshaw, put it, we are facing
“the perfect storm of events”.
This is about looking at the bigger picture of how the Government will support farmers. What steps are they taking, or proposing to take, to support farmers with those extra costs?
We know that red diesel has been a particular problem, but I am not expecting the Minister to answer the difficult questions around red diesel today. I have spoken before about the benefit that family co-operatives can bring when costs are high. Have the Government looked at that, particularly around investing in new machinery, which can help to mitigate some of the difficulties that farmers are facing?
Finally, we completely agree that we need a fairer system of payments based on the principle of public support for public goods, which ELMS is bringing in, but the Government need to grasp that more must be done to make the system work much more effectively than it does at present for farmers and the environment.
Lord Douglas-Miller (Con)
I thank all noble Lords who have contributed to this debate and I welcome the strong level of support across the House, largely, for these measures.
I start by addressing one or two of the issues raised by the noble Baroness, Lady Hayman. She touches on a common theme that comes up when I am out and about. I was at the Chelsea Flower Show this morning and there were a few farmers there—not many, but a few. The issues are about what is going on and where the money is going. The same amount of money is available today as there was yesterday and will be tomorrow. It is £2.4 billion each year over the course of the Parliament, so there is not less money available.
To anyone who has been in receipt of the basic payment scheme as—full disclosure—I have been for probably 40 years, it is a pretty blunt instrument. You get your cheque. There is a little bit of cross-compliance. I received mine in Scotland. It came in two tranches: one at the year end and one about six months after the year end. For anybody who feels that transitioning away from the BPS is somehow bad for cash flow or bad because there is less money in the pot, they have misunderstood what is going on .
The issue of confidence is critical. For sixty-something years—I cannot remember the exact number—if you have been a farmer, you have been used to one system. You farm, you get your BPS payment. If you were interested in other stuff, you could get into an agri-environment scheme, but they were pretty challenging to get into and pretty expensive to join; they really only suited the larger landholdings.
This is a significant shift away from that, but I get that any shift is challenging. Looking at my own farm arrangements, I find myself wondering how we are going to make all this work. Instead of just getting the money, you have to think about what you are going to do. It is public money for public good, so it is a proper shift in mindset. When you get that big shift, it does knock confidence. I am acutely aware of that. It means that people have to think totally differently about their farming operation.
If I am absolutely blunt, that is exactly what ELMS is designed to do and should do. The way that we have been farming has not been overly helpful to productivity or to innovation and—as I think all of us in this Room would collectively agree—it has been deeply unhelpful for the environment. To me, this change is absolutely welcome and necessary but I know that it causes a bit of stress and strain. That is one reason why it has been spread out over a seven-year period.
Farmers are amazing; they are incredibly resilient, but they are also incredibly resilient to listening. It is not as if this has come as a shock to anyone. We have been advertising it on the front page for a number of years now but, of course, this year is the year when it starts to really bite. If you have not been paying attention, you are going to feel some financial pain. We cannot hold everybody’s hand in this space. A huge amount of effort and energy has gone into consultations and into all the prototypes for the SFI modules. A huge amount of consultation has been done with the industry. Defra teams and Ministers have gone to agricultural shows; they have gone around the block telling everybody, “You have to pay attention; there is change coming”. But, as with all things in life, sometimes you start to pay attention only when it starts to hurt the wallet.
I know that there is a degree of concern and a degree of change but, as I think everybody recognises, this transition is long overdue. We really need to get on with it, so I am grateful for the overwhelming support. This is something that we should plug on with.
I will try to answer a few specific questions now. I was asked about financial support for farmers in the event of a crisis or financial emergency. In the event of an exceptional market disruption, the Government have powers to act to support farmers by making a declaration under Section 20 of the Agriculture Act 2020. These powers are intended to deal with unforeseen short-term shocks to agricultural markets where there is an adverse effect on the price achievable for one or more agricultural products. We have seen some pretty big shocks over the past few years, some caused by the weather and some caused by world events. The Government continue to keep this measure as a backdrop. I know that we look at it and think about it, but we have not got round to using it yet. I hope that it is a rainy day one that never has to come out.
Quite a lot of questions were asked about the rationale for delinking. I hope that I covered a lot of this in my opening comments but, broadly speaking, it is vital that we continue gradually to move away from untargeted subsidies as planned because these payments have inhibited productivity improvements and are, I believe, fundamentally unjust. The scheme that we have now delivers a much better outcome and will deliver a much better outcome in the long term.
The noble Earl, Lord Russell, and my noble friend Lady McIntosh asked whether this is the right time to go through a reduction in the BPS, given the weather and other activities. The Government recognise that many farmers are facing challenging conditions—not least the extreme wet weather, which was referenced several times during the debate and has affected enormous parts of the country—but cancelling the planned reductions to delinked payments is not an effective way of addressing these challenges or setting businesses up for a successful future. The longer we hang on to this, the longer we hold everybody back. These payments are untargeted, so increasing them does not direct support to those who most need them. In fact, you do not have to be a farmer to be in receipt of delinked payments now; if you have retired from farming, you will still get what you were due. Perpetuating that is not a helpful way of addressing either today’s issues or the issues that will undoubtedly come in future.
The noble Baroness, Lady Hayman, and my noble friend Lady McIntosh asked a couple of questions about tenant farmers and small farms. This is a challenging area but, on the basis that the basic payment scheme paid you for the chunk of land that you owned, the smaller the chunk of land, the less money you get. This transition allows you to earn more money on a smaller farm, by picking up the delinked payments and engaging with the SFI options. Again, I appreciate that this is challenging because you have to think about what you are doing and you will probably have to make some adjustments to your farming model but, as I have said, this has been signalled to the farming community—small farmers, tenant farmers and large farmers—for a long time. It will take a little time for it to bed in. The money is available; you just have to work out how to go and get it. The money is there. Noble Lords look as though they do not believe me, but it is. The options and choices are there. You have to go out and engage with that.
The noble Earl, Lord Russell, asked what had been done about an impact assessment. One has not been prepared for this instrument because it is not a regulatory provision. However, the Government have already published evidence providing in-depth assessments of the impact of removing direct payments. This includes the 2018 and 2019 farming evidence compendiums, our 2018 assessment of the impact of removing direct payments, and the 2021 and 2022 Agriculture in the United Kingdom evidence packs. If the noble Earl wants more information on that that I can supply, I would again be delighted to do so.
Earl Russell (LD)
No evidence has been published on the implementation of the transition to date. There was no evidence in this pack on the impact of these changes. From my point of view, it made it quite hard to assess the changes.
Lord Douglas-Miller (Con)
It is pretty early days in this transition, so I am not anticipating that we would have that evidence. We do a lot of consultation directly with farmers and with the industry through organisations such as the NFU, and we have developed a new food index to look at how that might be impacting food security, so quite a lot of measures are evolving and coming through. I would suggest that it is a little early to try to measure impacts at this stage.
I think the noble Lord, Lord Teverson was keen to understand what consultation we are doing with industry and how we are working with it. Have I got that right?
Lord Teverson (LD)
I thank the Minister for asking. What I am really trying to say is that we have here a unique instrument that can use various elements of the SFI to get the sort of environmental improvement goals we all want. How are we assessing them so, that over time, we make sure that this state aid, in effect, that we are giving to farmers is used effectively to achieve what we want to achieve? How does that assessment work—not now, but as we start to move through the implementation?
Lord Douglas-Miller (Con)
I thank the noble Lord for that helpful clarification. There is a lot in that, and if I may I will write to him with the details rather than go through them all now.
Unless anybody has anything further they would like to ask, I think I have covered most of the questions. I believe—and the Government are right behind this too—that this instrument is essential for our agricultural reforms. We must press ahead as planned so that we can fund our schemes that support farmers to be resilient and sustainable over the long term.
Management of Hedgerows (England) Regulations 2024
(7 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Douglas-Miller
That the Grand Committee do consider the Management of Hedgerows (England) Regulations 2024.
Relevant document: 23rd Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Douglas-Miller) (Con)
My Lords, I declare my interests as set out in the register.
I am sure that many noble Lords will agree that hedgerows are precious features of our landscape, enriching our environment and wildlife. Many of our wild birds depend on them, including red-listed birds such as the linnet and the yellowhammer. Hedgerows also help food production by supporting pollinators, providing windbreaks and shelter, and protecting the soil. I am therefore pleased to bring before this Committee this statutory instrument, which proposes further to protect our hedgerows. The instrument establishes by legislation a common approach to managing hedgerows on agricultural land in England. It builds on the existing legal protections for some hedgerows, which will remain in place.
In proposing this legislation, we have listened to the views of many who cherish our hedgerows, including many farmers. I thank those who responded to our consultation on protecting hedgerows; their insights have enriched our understanding. We received almost 9,000 responses, which we have considered carefully. The responses showed how much hedgerows are valued. There was strong consensus from environmental and farming stakeholders alike that hedgerows should be protected in domestic law in a similar way to the previous hedgerow management rules provided by cross-compliance.
That is what this statutory instrument does. It aims to provide a familiar baseline for hedgerow management. We want to make sure that everyone knows what is expected and is supported to follow good practice. As a safeguard, we are also making sure that there are clear, proportionate consequences for the small minority who might choose to ignore it.
I know that these rules are simply a reasonable minimum which most farmers have been practising for many years. Farmers are the guardians of our hedgerows, protecting, planting and maintaining them for generations. I thank them for their continued efforts to help wildlife thrive on their farms, alongside food production. We trust them to continue to do the right thing. In fact, many are already going further than required by these regulations. We have seen strong uptake of options to manage and further improve hedgerows under our agri-environment schemes. I am delighted to report that there are already more than 20,000 agreements or applications in place, contributing to the management of over 60,000 miles of hedgerow in England. We look forward to working in partnership with many more farmers to manage and improve their hedgerows in future.
The purpose of these regulations is to protect hedgerows in order to support biodiversity, benefit the environment and enrich the landscape. They will make sure that all farmers are treated fairly by upholding common rules for managing hedgerows, and they will provide clarity on what is expected. The regulations govern the management of “important” hedgerows on agricultural land. Broadly, this means hedgerows which have a continuous length of at least 20 metres or which, if shorter, meet another hedgerow at each end. They do not apply to hedgerows within or forming the boundary of a dwelling house. Because the regulations apply to all important hedgerows growing on agricultural land, they will bring into scope some people who were not subject to cross-compliance, such as those who chose not to claim any direct payments or who have farms under five hectares in size.
There are two main requirements under these regulations. First, cutting or trimming hedges will be prohibited between 1 March and 31 August inclusive. This is to protect hedge-nesting birds and their habitats during the breeding season. There are some exceptions to this rule to give farmers and others flexibility where needed. The second requirement is to establish and maintain a two-metre-wide buffer strip alongside the hedgerow. This will protect the hedgerow and its root system from the effects of cultivation and the application of fertilisers or pesticides. Subject to certain exemptions, these activities will not be allowed within the buffer strip. The requirement for a buffer strip will not apply to fields which are two hectares or smaller.
We recognise that people may need time to establish their buffer strips where they do not already have them in place. We therefore propose that, in cases where a field has no buffer strip and is in crop production on 1 July 2024, the requirements will not come into force until that crop has been harvested. In all cases, the exemptions are needed to accommodate the practicalities of farming, or for health and safety-related reasons. They are largely the same as under cross-compliance. They are in place to ensure that we have the right balance between hedgerow protections and effective farming.
The regulations will be enforced on behalf of the Secretary of State by the Rural Payments Agency. Although the rules themselves will be familiar to many farmers, there will be a different approach to enforcement, with the emphasis being on being fair and proportionate. The Rural Payments Agency will take a primarily advice-led approach to enforcement. This has been shown to be the best approach for bringing farmers into compliance in other regulatory areas. However, the Rural Payments Agency will also be able to use a range of civil sanctions and criminal proceedings for the worst-case scenarios. Such action will be proportionate to the damage caused.
Subject to parliamentary approval, detailed information on how the regulations will operate will be provided once the statutory instrument has been made. The Rural Payments Agency will also hold a public consultation on its proposed enforcement policy. I know that it is committed to taking a modern, pragmatic and proportionate approach, with advice and guidance at the forefront.
Although these regulations govern the management of hedgerows on agricultural land, we recognise the value of hedgerows in other locations. Officials are therefore working separately with stakeholders to consider how to support the sustainable management and protection of hedgerows more widely in future.
In conclusion, this statutory instrument will afford fuller protection to one of our countryside’s greatest assets, the hedgerow. That will, I hope, be widely welcomed. I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, I have only one small question for my noble friend the Minister, as we do not have too many hedgerows in north Yorkshire; we mostly have stone walls, which we could have a separate debate on another time.
I am intrigued by the Government’s response to questions posed by the Secondary Legislation Scrutiny Committee in its report. It transpires that the Government are now bringing within the remit of cross-compliance farms of less than five hectares but larger than two hectares. For what reason are we going down that path? Obviously, these are quite small farms. The fields that we used to claim on when we owned a couple of fields would have fallen into this category, I think. I no longer have such an interest, but I wonder why we have gone down the path of including farms of between two and five hectares. Does my noble friend the Minister not agree that this seems like a lot of administration for such small farms?
Baroness Young of Old Scone (Lab)
I have been having sleepless nights about this, noble Lords may be pleased to hear. I was always a great fan of cross-compliance. It was quite a low-key instrument; nevertheless, it could be deployed. Of course, hedges are vital for wildlife and for carbon. They provide linear routes through our landscapes and join up patches of habitat. Filling the gaps in hedges, for example, is really important, for all these reasons.
Turning to my anxiety, it took ages to establish whether there was going to be a statutory instrument to fill the gap left by the demise of cross-compliance, and it then took some time for that to come forward. In a way, my great regret is that we have not used this opportunity. For heaven’s sake, the benefits of leaving Europe are few enough, but improving the situation for hedges would have been one of them. I would have preferred it if the Government had removed the three existing exemptions: for fields under two hectares, for hedges younger than five years and for the no-cutting period. When you look at the consultation, you see that there was not really much support among the farming community for retaining them. This could have been an opportunity absolutely to re-recognise the value of hedges, particularly in fields of under two hectares, and the importance of hedges younger than five years having protection from the beginning.
Apart from lecturing the Minister on this and lying awake at night worrying about it, I simply want to ask the Minister for four things. First, will he re-examine these exemptions? We have this wretched statutory instrument, and let us get the damn thing in because, at the moment, there is no protection for these hedges; but there is an opportunity here to improve on what Europe is doing and re-examine the exemptions.
Secondly, there should be a real proposition to extend the no-cutting period beyond even that in the instrument. My own wildlife trust, of which I am patron—I declare an interest—the Wildlife Trust for Bedfordshire, Cambridgeshire and Northamptonshire, has done a big hazel dormouse project that shows that there are multiple active nests during the period from September to October. If hedges are cut at that point, it prevents the population really thriving, and this is a very threatened species.
Maintaining hedges and not cutting them for even longer provides valuable berries and other food for winter wildlife and, as the Minister said, for farmland birds that are really in decline, such as the turtle dove, linnet, cirl bunting and yellowhammer. Bedford used to be the yellowhammer capital of the world, as far as I could tell, and you would be very hard put to find one at all now. In these species, late broods are disproportionately important. If they can get a third brood away, the population has a greater chance of increasing rather than standing still or declining. Again, extending the no-cutting period is something farmers would appreciate.
Thirdly, I ask the Minister to think about two matters not connected to hedgerows, but whereby we lose as a result of losing cross-compliance: water body buffers and soil erosion conditions, which are absolutely vital. They are hot in the public mind at the moment, particularly in the light of water pollution. Will he undertake to look at them and produce statutory instruments to reinstate them?
Lastly, I know that the Minister likes to tell me when I ask him things that are not particularly germane to the subject in hand, that are not his brief or are above his pay grade—or he will have another way of sending me away with a sore heart—but I hope that he might bump into his DLUHC colleagues and look in a concerted way at not just hedgerows that are subject to agricultural practice but those threatened by development. I know that one should not take personal examples as the norm, but I cannot help feeling that, in both the planning applications against which I have fought in the last two years, the local planning authority chose to ignore the hedgerow regulations in the planning advice. It destroyed hedgerows that not only are vital for carbon and wildlife but have huge historic lineage. If he were to bump into the noble Baroness, Lady Scott, in order to tell her that, it would be extremely helpful.
The Earl of Leicester (Con)
My Lords, I declare my farming interests as laid out in the in the register. I congratulate Defra and the Government; a lot of thought has gone into this. It was said that we have not had any regulations protecting hedgerows since we came out of cross-compliance, but I would just like to big up farmers, I suppose. Years and years ago, nearly every single hedge would be cut every year. Then, they were encouraged to cut them every second year; then, a further development was to cut one side a year and maybe leave the other for three years. Now, a lot of farmers in the regenerative movement and others are barely cutting hedges. As the noble Baroness, Lady Young, said, that provides many more berries, habitats and suchlike. So, the fact that we have not had any regulations for six months or so is not the end of the world; I do not think we have lost any great hedges.
I take issue with the noble Baroness, Lady Young, suggesting that we should continue not cutting hedges after 31 August. Two or three weeks later and we will be in autumn; all nesting birds will have nested well by then.
My question is very simple and follows on from what the two noble Baronesses said. It is about really small fields; I am talking now about private householders. While all the farmers are obeying the law and not cutting between 1 March and 31 August, you can drive out anywhere in the countryside or in small towns and villages and you will see plenty of householders cutting their own garden hedges. So, does this rule apply to them? If it does, I suspect that it will be very hard to enforce. I am sure there are plenty of gardeners becoming more aware of the importance of their hedgerows as habitats for nesting birds and suchlike, but I would be very interested to have an answer on this if my noble friend the Minister has one.
Lord Teverson (LD)
My Lords, I declare my interest as chair of the Cornwall & Isles of Scilly Local Nature Partnership, and I will come back to a particular regional issue in a minute.
I agree with the Minister on the emotion and feeling concerning hedges. Cornwall was one of five—I think—pilot local nature recovery strategy areas. We went through a long process of consultation with the public on the priorities for local nature recovery and habitat. Hedges came out top by far. People feel very strongly about them emotionally, but exactly as the noble Baroness, Lady Young of Old Scone, has said, they are an essential part of our rural habitat, particularly in connecting areas of environmental importance.
I want to ask some straightforward, short questions on issues that I did not understand. First, the instrument refers to “the Regulator”. Maybe the Minister explained this, but I am not clear: who is the regulator? I presume that this comes back to one of the Acts referred to in the statutory instrument.
Also, who is the enforcer? I was quite surprised to understand from the Minister that the enforcer is probably the RPA, which has a role in payments for SFIs and some other Countryside Stewardship schemes. I am not sure about that, but there is some confusion over environmental regulation and who things should be reported to. Occasionally, it is Natural England but usually, strangely, in relation to most environmental and countryside regulations, it is the police.
As the noble Lord just said, farmers are very good at complying with such regulations because they value their own hedges. If a member of the public happens to see someone transgressing them, who should they telephone or get on to? Is it the RPA, the police, or Natural England? This is something we are going through in Cornwall, making the position clear on environmental infringement. I would not expect this to be a huge issue, but who should they go to?
My final question is on a matter very close to our hearts in the far south-west: Cornish hedges, which are a hybrid between the stone walls that you might find in Yorkshire and hedges as we would normally understand them. They are the key way to create field divisions in Cornwall. I do not quite understand whether Cornish hedges are included in this selection.
I agree absolutely with the noble Baroness, Lady Young of Old Scone, particularly regarding the exemptions. I cannot understand the five-year rule. It seems to me even more vital that young hedges are protected, so I encourage the Minister to bring forward yet another statutory instrument to change that.
Earl Russell (LD)
My Lords, we too welcome these regulations. This instrument was noted by the Secondary Legislation Scrutiny Committee. Hedges are a crucial part of our historic landscape, living landscape and biodiversity, so anything we can do, cross party, to improve and promote them is extremely important.
These draft regulations propose new legal requirements for the management and protection of hedgerows on all agricultural land in England. The Explanatory Memorandum notes that the new rules will “broadly replicate” the previous cross-compliance requirements under the EU’s common agricultural policy, which linked the management and protection of hedgerows with subsidy payments.
The cross-compliance system ended on 31 December 2023, as part of the Government’s wider agricultural reforms in England and the transition to domestic schemes after Brexit. This instrument will finally close the gap in protections since 31 December 2023, requiring farmers and land managers to maintain green-cover buffer zones of 2 metres from the centre of the hedgerow, prohibiting cultivation or the application of pesticides or fertilisers and reintroducing a ban on cutting or trimming of hedgerows between 31 March and 31 August to protect wildlife during the bird nesting season.
The Secondary Legislation Scrutiny Committee reports that it asked Defra whether any cross-compliance requirements would not be replicated, and the department replied that the SI was described as “broadly” replicating
“because it is not an exact replica of those rules”.
The Minister has spoken to the fact that the SI extends the scope of the requirements to some hedgerows that did not fall under the previous cross-compliance rules. Cross-compliance rules applied only to those farmers in receipt of the common agricultural policy direct payments.
Under this SI, the requirements on hedgerow management will apply to all agricultural land, as defined, including some land which was not subject to direct payments—such as allotments and land with horses—and, as we have heard, farms of less than 5 hectares which had previously been exempt from cross-compliance. As a result, the SI in effect offers greater compliance for our hedgerows.
The broadening of hedgerow protection is welcomed; indeed, the consultation showed 95% support. However, will the Minister confirm that that understanding of “broadly” is indeed correct? Further, as has been mentioned already, paragraph 5.2 of the Explanatory Memorandum states:
“These requirements will protect hedgerows that are deemed ‘important’ in this instrument for the purposes of the power to regulate in respect of hedgerows in section 97 of the Environment Act 1995”.
Will the Minister explain the meaning of the word “important” in this sentence? I ask the Minister to consider, as others have mentioned, the exemption of fields under 2 hectares and hedgerows less than 5 years old and the possible need to extend the cutting period. Will he keep them in the department’s sights to see whether these regulations will, in time, need further reform or strengthening?
The SI covers only hedgerows on agricultural land, as defined. Do the Government have any intention to extend these protections to hedgerows managed by local authorities, such as on golf courses? A lot of our hedgerows are not on farmland; they are also in other places.
Regarding paragraph 8 of the Explanatory Memorandum, can the Minister give a clear indication of when he expects the department to publish guidance on enforcement, and what information and funds will be disseminated to ensure that it is understood and properly enforced? Will he provide some estimate of the proposed cost of fines based on the financial benefit derived from any offences under the SI?
Finally, paragraph 11 of the Explanatory Memorandum notes that the SI will come into force “the day after” today. I welcome that, to minimise the gap in compliance. Is the Minister aware of whether there has been any damage to our hedgerows as a result of the gap in the legislation? Has the department done any checks on that? If not, will it do so to see whether any damage to hedgerows has happened in that period?
Baroness Lawlor (Con)
My Lords, I rise briefly to say that I welcome these regulations very much. I am very glad that the department is taking its responsibilities to hedgerows seriously, but I think we could be encouraged to do a little bit better than the EU. I echo what noble Lords have said about extending the period, perhaps, or encouraging alternate sides of the hedgerow. Are there are any plans to do so? I say this not just because of the shelter they give wildlife or the food for birds over the winter but because there are some birds, such as the blackbird, that can have a late brood in August. After 31 August, these fledglings may seek shelter on the ground beneath the hedgerows. I think that maybe we could think of extending the period in certain parts.
I also echo the question about whether there is any requirement on local authorities; will the regulations extend to local authorities or just to privately owned land? I leave it at that, but I would be very grateful to hear any thoughts.
Baroness Hayman of Ullock (Lab)
My Lords, we welcome this statutory instrument. We have heard that a regulatory gap arose when cross-compliance was withdrawn at the beginning of this year. Our concern is that the SI was not progressed more quickly, because the no-cutting period it covers is from 1 March to 31 August, so cutting has been permitted that is not going to be permitted next year and has not been permitted in previous years, so getting this new system in place as quickly as possible must be a priority. I was interested in the question asked by the noble Earl, Lord Russell, about whether there is any evidence of what damage has been done in the meantime and, if so, what will be done to mitigate that.
My noble friend Lady Young of Old Scone said that this is a bit of a missed opportunity because we could have done better than the former EU protections, and she went into some information about that. We have heard that the main issue is the three exemptions from the former cross-compliance—fields under two hectares, hedgerows younger than five years and exemptions to the no-cutting period—so I will not go into detail around that. Despite the fact that some noble Lords, particularly the noble Earl, Lord Leicester, who is no longer in his place, mentioned that farmers and landowners on the whole follow best management practice, and we do not want to undermine the work that farmers do, the exemptions should have been carried across wholesale into the new regulations because otherwise hedgerows are not protected. It is important that we have those protections in place in law for sound environmental reasons.
The noble Earl, Lord Russell, mentioned enforcement. The SI embraces a different approach to enforcement that we have been seeing across farming more broadly. In other words, it is now advice-led, which will improve trust and drive better outcomes. Interestingly, the SI allows a defence of mistake when regulations have not been followed, whereas cross-compliance always said a breach is a breach, even if that breach was a mistake. I think we would in principle support that because there is no point in punishing farmers if they have made a genuine mistake, but it takes more time and resources for the Environment Agency to implement the new approach. The noble Lord, Lord Teverson, asked who enforces this. My understanding is that it is the Environment Agency, but perhaps the Minister could confirm that. How is that slightly more complex enforcement going to be resourced and managed? One of the reasons for asking is because new data has shown that the majority of deadlines that were issued as part of this new advice to farmers to improve the environment were missed. It is just about making sure that it all comes together and works effectively.
Martin Lines, from the Nature Friendly Farming Network, who we all know well, said in an article that he thinks large food corporations bear significant responsibility for this. Does the Minister agree with that? Where has the evidence come from?
Lord Douglas-Miller (Con)
Again, I thank all those who contributed because, from my perspective, this has been a really interesting debate to listen to.
I start by picking up on the issue of ash trees, disease and stuff like that. Like the noble Baroness, I take the train—up to and down from Scotland most weeks. If you look out, you see that things are really horrifying right now. All the leaves are out, and there is dead tree after dead tree. It illustrates the importance of our wider biosecurity. I know that the BTOM has not been to everybody’s approval. Frankly, as we all know, if you are in government, you cannot get this right whichever way you go because some people think that you have not done enough and others say that you have done too much. However, this is a really important issue; on ash trees, it is just a horror.
Keeping some of the pests and diseases that affect our flora and fauna out of the UK is absolutely key. If noble Lords get a chance to go to the Chelsea Flower Show, I recommend that they go to the APHA site. It is based on Asian hornets and is absolutely incredible. It just shows you what we are up against every day of every week. At this time of year, everything is coming alive, and it is all on its way over here. The Defra team and the wider Defra family do an unbelievable amount of work to stop a lot of this stuff coming in. I forget exactly what the cost of ash dieback across the country will be, but it is in the tens of billions; it is going to leave great holes in our hedges and in our woods. The noble Baroness, Lady Hayman, makes a great point: what are we going to do to fill that gap? Perhaps we need to start thinking about that more.
I was really interested in the debate started, I think, by the noble Baroness, Lady Young, on this conflict between farmers and environmentalists—if I may phrase it as crudely as that. Several speakers implied that, because we have had a few months without these regulations, somehow we will be ripping out hedgerows two to the dozen, because we could do that without the regulations. I do not understand that mindset at all; I have never come across it anywhere. I do not know whether the noble Earl, Lord Russell, has; we could perhaps have a conversation afterwards it that is happening, but I have never come across it anywhere and I think most farmers would take proper exception to it being implied. Again, I would be delighted to have a wider conversation.
To answer the specific point, I have heard nothing to suggest that any farmer would remove any hedgerow. On the contrary, there has been a huge increase in people wanting to do better, which is where the farming community comes from.
However, the debate was interesting, because it touched on a few other issues about exemptions, exceptions and so on. There was talk about why we are not protecting young hedges, as if not applying the buffer zone would have a negative impact on young hedges. I do not know if your Lordships have ever planted and looked after a hedge, but it takes quite a long time to get settled in and a lot of careful work each year to keep it there. Buffer zones would overwhelm a young hedge; the weeds would overwhelm it and you would get a properly scrawny hedge with high leaf cover because the understorey would have been taken out completely. I appreciate that some of the exceptions may be counterintuitive, but it is important to do the homework and understand the reasons for some of these things before suggesting that they are somehow improper or not correct. People put a lot of effort and energy into this sort of stuff, so it is perhaps good to appreciate that more widely.
Soil erosion and water body buffers were other issues that the noble Baroness, Lady Young, and others raised. Perhaps I could take them both away, come back with some more information and write to her.
There were quite a lot of questions on people cutting hedges in their gardens. Why can they do that when farmers have to obey the rules? How does that extend to golf courses, public authorities and all the rest of it? Again, this is a pretty challenging area. We do not live in a police state; we are trying to do our best. Education, not enforcement, is the best way of solving this problem. We are consulting on wider issues with hedges. We are just about to start that consultation, which will be an interesting exercise, because the practicalities of enforcing against someone cutting their garden hedge are pretty challenging and I am not sure that we want to get into that space.
A number of noble Lords raised specific issues with the timing of when you can cut a hedge and when you cannot. It is a trade-off between farming and the wider environment. Farmers have other things to do and, by the time we are into September, they are planning for next year and have a lot of other tasks. Sometimes there is a little gap when this can be done. I do not have information on the specific example of a dormouse, but 99% of species have fledged and gone by early September.
Baroness Young of Old Scone (Lab)
I think the noble Lord needs to look at the latest information about the impact that climate change is having on extending breeding seasons. It is notable; I will send him some.
Lord Douglas-Miller (Con)
I have not looked at that and I appreciate that these dates are moving, but we have to start somewhere and those dates have been chosen for the moment.
The noble Baroness, Lady McIntosh, quizzed me on two-acre fields or less, and why they might be exempt. I hope everybody can understand that, if you have a smaller field, taking up a two-metre buffer zone around the edge of it will have a disproportionate impact. The Government recognise that and it came through pretty clearly in the consultation.
Baroness McIntosh of Pickering (Con)
Just to clarify, the question was why under five hectares was being brought in under the de minimis rule.
Lord Douglas-Miller (Con)
That was to try to include as many of our precious hedges as we can; that is still quite a big space. Again, through the consultation, it did not seem to cause a great deal of alarm, so it seemed perfectly sensible to include it.
The noble Lord, Lord Teverson, asked a number of questions about who is accountable, who is the regulator and who is the enforcer. The regulations will be enforced by the Rural Payments Agency on behalf of the Secretary of State. The Rural Payments Agency has a history of enforcing the hedgerow maintenance requirements under cross-compliance rules. It is well placed to develop and implement the new enforcement regime for all these regulations. The RPA will be taking an advice and guidance-led approach to enforcement.
On his supplementary question of who you should ring if you are driving along and you see someone doing damage to a hedgerow, I guess that question has always been there. Presumably, people will ring the police in the first instance if they see something going wrong, and they will guided by them to the appropriate agency. In this case, it is the RPA.
The noble Earl, Lord Russell, enquired about the definition of “important” hedgerows. The definition used for these regulations is designed to allow them to replicate as closely as possible the requirements for hedgerow management under cross compliance. For this reason, it was not practicable to use the same definition as is used in the Hedgerows Regulations 1997.
There were a number of slightly more detailed supplementary questions on which I will write to the noble Earl.
I am grateful for the thoughts and questions raised in today’s debate. They underline the value that so many of us place—
Lord Teverson (LD)
Forgive me—I do not want to take up the time of the Grand Committee or the Minister; we have taken up a fair bit of time. However, I would value a clarification on Cornish hedges, which are very specific, at some point.
Lord Douglas-Miller (Con)
My apologies—I think I can answer that question. Those are not covered by these regulations but they are being consulted on under the new ELMs model, so they will be included there.
In conclusion, I hope your Lordships will support these important regulations. I commend them to the Committee.
Procurement Regulations 2024
(7 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Neville-Rolfe
That the Grand Committee do consider the Procurement Regulations 2024.
Relevant document: 21st Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Cabinet Office (Baroness Neville-Rolfe) (Con)
My Lords, this statutory instrument represents a significant legislative step in implementing the Procurement Act 2023, which seizes the opportunity following Brexit to develop and implement a new public procurement regime for more than £300 billion-worth of public contracts. The new regime helps deliver the Prime Minister’s promise to grow the economy by creating a simpler and more transparent system that will deliver better value for money, reduce costs for business, especially small business, and improve the public sector. I thank colleagues across the Committee for the work that we did together on the Procurement Act.
These regulations bring to life and set out the practical detail necessary for the functioning of many of that Act’s provisions. Many of the measures set out the detail required by the Act to enable contracting authorities to conduct their public procurement in an open, transparent and informative manner. These include the content of various notices that will be used to communicate opportunities and details about forthcoming, in-train and completed procurements. Such contents would typically include the contact details for the contracting authority, the contract subject matter, key timings for the procurement process and other basic information about a particular procurement that interested suppliers would need to know. The provisions also cover the digital measures that authorities must follow when publishing notices, such as putting them on a central digital platform and what to do in the event that the platform is unavailable.
The transparency measures will help to open up opportunities with the public sector to a greater range of businesses, helping drive down price and increase innovation. They will provide contracting authorities with the data they need to collaborate better, drive value for money and identify cost savings in their procurements, and they will give Ministers, legislators and auditors detailed information to monitor for signs of waste and inefficiency.
Other provisions to supplement the Act include various lists in the Schedules so that procurers can identify which obligations apply in a particular case. These include a list of light-touch services that qualify for simplified rules and a list of central government authorities and works which are subject to different thresholds. The regulations disapply the Procurement Act in relation to healthcare services procurements in scope of the NHS provider selection regime introduced in January this year. These enable the procurement of NHS patient treatment services, such as NHS paramedical services or cancer treatments, to be governed by the free-standing regulatory scheme that was specifically designed for those services.
The regulations also set out how devolved Scottish contracting authorities are to be regulated by the Act if they choose to use a commercial tool established under the Act or to procure jointly with a buyer regulated by the Act. They also amend the Act to provide that reserved Northern Irish private utilities are not required to publish preliminary market engagement notices. This is because the Government do not wish to regulate the procurement of private utilities any more than is necessary. The regulations apply to reserved procurement in England, Wales, Northern Ireland and Scotland and to procurement by a transferred, that is to say devolved, contracting authority in Northern Ireland. The Welsh Government have laid similar secondary legislation which will apply in respect of devolved procurement in Wales and elsewhere if the devolved body carrying out that procurement operates mainly in Wales.
The Government have consulted fully with stakeholders throughout the reform process and we published our response to the formal public consultation on these regulations on 22 March 2024. The consultation evoked a good response from the various representative sectors and confirmed that the proposed regulations generally worked as intended. Many stakeholders urged that certain matters be clarified and explained in guidance and training, which is a key part of the implementation programme that we are rolling out across the UK. We have listened to feedback and our response confirms a number of areas where the consultation led to technical and drafting improvements.
Contracting authorities and suppliers have made it clear that they will need time once this instrument has been laid to adapt their systems and processes before we go live, so the Government have provided six months’ advance notice of the new regime before the regulations come into force on 28 October 2024. Noble Lords should also be aware that the instrument has been corrected to remove drafting references and a couple of typographical errors which crept in during the publishing processes. I beg to move.
Lord Fox (LD)
From the attendance, we have established that more people are interested in hedgerows than procurement. I have participated in all of what I would call the post-Brexit plumbing legislation. Although this was not the most controversial part of that legislation, it has certainly taken a long time for us to get here. The Second Reading in your Lordships’ House was just five days short of two years ago, and we have to wait another six months for these rules to be implemented, so it will take two and a half years.
Hopefully, we have improved it. As some noble Lords will remember, the Minister was at that time a Back-Bencher, before she was propelled meteorically to her current role. I thought this correction was an homage to the original Bill when it was published. It arrived very quickly, with hundreds and hundreds of government amendments, which is part of the reason why it took so long for us to get here. But we have got here. One important thing that the Minister touched on, which was stressed very early in the process, was the central importance of the central digital platform. It would be helpful if she could confirm that that platform is 100% ready to go—I think we would all hope so.
In Regulation 11, the list of the “connected person information” is huge. Although the Minister said that this makes it simple for smaller companies, it will require a great deal of effort initially. Can she confirm that this is a one-off effort that those companies have to make? Will this central digital platform be able to replicate that information—copy and paste—or will people have to enter the same information, as they do now on a variety of digital platforms, often handfuls and sometimes dozens of times? Can the Minister confirm that that is how the new system will work and that it will work that way on day one?
Contracting authorities are clearly vital and their understanding of this big set of rules will be central to the functioning of this. Can the Minister tell us in some detail how they are being brought up to speed with what is required of them to make this work? In particular, how will they bring SMEs into the picture, where they have not been before? How will the contracting authorities engage SMEs? How will SMEs know that they are now in with a shout and have an opportunity? What information will go out to our SMEs so that they can properly participate in public procurement? The Minister did a lot of work, as both a Back-Bencher and a Minister, to put these rules in place, and it is important that her work is now properly propagated out to the market.
I should remember the answer to this, because I am sure we went into it, but utilities are treated substantially differently and there are different processes here. The Explanatory Notes say that we will create a “utilities dynamic market”. I do not have the faintest idea what that is, so can the Minister please say what it is and why we should celebrate it?
At the end of her speech, the Minister talked about the position of the NHS. She would be surprised if I did not bring that up. Perhaps she tried to pre-emptively head it off at the pass. There was a lot of debate and my noble friend Lady Brinton very much led on that. We were not happy, in a sense, with the way that health services were disapplied.
Regulation 43 talks about the disapplication of “regulated health procurement”. That is not the phrase that the Minister just used, so can she again define “regulated health procurement” for the record? She listed the fact that there is a custom-made process for those services in the NHS, but we should not be too complacent, because the first test of the new NHS rules on competition and procurement found against the NHS. The rules that were being vaunted just now are not being used properly within the NHS. The first review panel set up to oversee commissioning decisions found against the commissioner and advised it to abandon its procurement of ADHD services; it was the Cumbria integrated care board that failed to do this properly.
I know that the NHS falls under a different department, but the Cabinet Office is uniquely interested in procurement right across government. There should be no complacency about the system that is now being used with the NHS. The experts on procurement exist within the Cabinet Office and I would like the Minister to say now that the Cabinet Office will engage those experts to advise health boards on how to use their own rules properly—otherwise, we will waste a ton of money on appeals and rulings against health boards. It is quite clear that they do not have the capability to apply their own rules and that they need help. They will not get that from their own people, because it is not there; the expertise for procurement is within the Cabinet Office. So I want the Minister to say that it will step in and make sure that health boards know how to apply their own rules. With that, as it has been a long time coming, let us get this going.
Baroness Chapman of Darlington (Lab)
My Lords, we supported the introduction of the Procurement Act and we recognise that, following our departure from the EU, the opportunity arose to reshape the way that procurement is regulated in the UK. There are some steps that we particularly welcome, such as the transparency measures in the central digital platform, and steps to make procurement more straightforward for smaller businesses and social enterprises.
However, as my friend Nia Griffith MP, the shadow Minister in the Commons, said when this was discussed there last week, we maintain the view that this Act was something of a missed opportunity. Can the Minister outline for us what, in this new flagship procurement legislation, would prevent scandals such as the PPE VIP lane from happening again in the future?
I listened carefully to the questions from the noble Lord, Lord Fox, about NHS procurement and the need to share the expertise of the Cabinet Office with the Department of Health and Social Care. I would be interested in the Minister’s response to that, as it speaks to issues with working across government and between departments, which we understand can be tricky. However, in this instance, there seems to be a special role for the Cabinet Office to assist in preventing problems from arising in the future. We never want to see a repeat of the situation in which friends and party donors are given the first bite of the cherry, while decent, skilled local businesses are denied the same opportunity. It is difficult to see anything in the regulations that would specifically prevent these problems, so it would be useful to hear from the Minister. I assume, because I expect she was asked this repeatedly during passage of the Bill, that she can outline her Government’s position on this point.
Although we are disappointed on that specific issue, we hope that the Act serves what is probably a shared aim across all parties: to simplify and encourage more involvement from businesses that are the backbone of our economy, especially in the regions and nations of the UK where access to government contracts has been more challenging. We want to see wealth shared more fairly across the country, with businesses that employ local people and spend in their local economies given the same chance as other large businesses.
Baroness Neville-Rolfe (Con)
My Lords, I am grateful to the two noble Lords who spoke in this debate. I well remember moving from poacher to gamekeeper and working across the House to try to improve what was a very important Bill, not least because of the scale of procurement that it reached. Indeed, the Act embodies our ambition to open public procurement up to a more diverse supply base, making it easier for new entrants such as small businesses—the noble Lord, Lord Fox, rightly mentioned them; indeed, all speakers mentioned them—and social enterprises. Remember that we added social enterprises during the passage of the Act, as well as measures to improve prompt payment for small businesses—those help small businesses—and the transparency of opportunities on a single platform. The Act also enables basic supplier details to be submitted only once, which picks up on the question asked by the noble Lord, Lord Fox.
In response to expert discussion in the House, I introduced additional measures during the passage of the Act. These included a new duty on contracting authorities to have regard to the particular barriers facing SMEs and to consider what can be done to overcome them, as well as 30-day payment terms on defence and utility contracts and through the supply chain. We removed unnecessary obstacles relating to audited accounts and insurance as conditions of participation—the noble Lord, Lord Mendelsohn, put down amendments on those issues, I think—which can prevent SMEs winning public contracts.
The Act introduces a new centralised debarment regime, including a public debarment list, and allows the Government to investigate supplier misconduct, including taking action to protect the public supply chain. Of course, the procurement review unit will manage the new debarment regime, including investigating suppliers, while the new national security unit for procurement will manage the investigation of national security-related debarment cases. Importantly, the PRU will also oversee compliance with the new regime and will have the power to investigate non-compliance. These reforms will shape the future of public procurement in this country for many years to come, ensuring a modern and flexible procurement regime that will deliver better outcomes for taxpayers, service users and business.
I turn to the questions posed by the noble Lord, Lord Fox. In respect of the information that suppliers have to provide for connected persons, I am happy to advise that, as long as the information remains consistent, suppliers will have to supply this information only once when they register on the online system, which they can do at any time. When bidding for a procurement, they will need merely to confirm that the information they previously provided in respect of connected persons is still current, in the spirit of One Login.
A key objective of the Act and regulations made under it is to reduce the burden on suppliers by enabling them to store core supplier information in one place; that is called the supplier information service. The core information will then be provided to contracting authorities by each supplier who wishes to participate or bid. This reduces the time taken by suppliers to bid for public procurement opportunities by ensuring that common data can be submitted efficiently and effectively, without having to duplicate core information. This is of real benefit to business, particularly SMEs.
A utilities dynamic market is a pre-approved list of suppliers from which utilities can call off. Unlike a regular dynamic market, contracts are advertised only to members of the market. The online system will be operational and ready for use when the new regime comes into force on 28 October. We are working with e-procurement system providers to ensure their readiness. New notices will be phased, with the timings set out in the commencement regulations, which will be made shortly and will set out when relevant obligations will take effect. This reflects consultation. The phasing of the notices has been designed so that notices used in the planning, tender and award phases of a procurement will all be available from the outset. There will be a natural lag until later notices are required, so those will be brought in in phases.
I also mention the work that the Cabinet Office, which obviously co-ordinates all this, will do to support the new regime. It took me through it this morning. I know that the noble Lord, Lord Fox, was interested in the detail. There are four key elements. First, there are knowledge drops, which are a range of on-demand presentations providing an overview of all the changes in the legislation.
Secondly, there are e-learning modules, which consist of 10 one-hour modules and conclude with a skilled practitioner certificate. This core training product is open to all staff from contracting authorities and named individuals who regularly undertake procurement activity on their behalf. I will take away the point that was made about health experts and see whether it is possible for them to access some of this training material, as that seemed a good point to me.
Thirdly, there will be an advanced course of deep dives—a three-day intensive course for a smaller group who have completed the e-learning modules. They are the advanced commercial practitioners who will need to become experts. Fourthly, we are supporting communities of practice, building on good online practice, where practitioners can support each other by sharing, discussing and reflecting on best practice and the challenges and opportunities within the regime.
Noble Lords will know of my passion for helping small businesses. Clearly, we will keep an eye on the training, which starts with the contractors, to make sure that we get feedback from small businesses so that we know that the regime is working well.
The concept of dynamic markets is a good one. It means that suppliers can know in advance that they will be eligible to bid. You will get several suppliers who can all bid, and it makes the system quicker and more efficient, without undermining the safeguards that we need.
The Procurement Act has improved and strengthened safeguards, with, for example, the ability in Section 42 for the Government to set out in regulation specific public contracts that can be awarded directly for a limited time for the protection that might be needed. There are new transparency notices in Section 44, as detailed in Regulation 26, and more detailed conflict of interest provisions, including the preparation of a conflict assessment under Section 83. We discussed this at great length because we had the backdrop of PPE, and I remember well how we learned from that experience. That is one of the reasons why there are lots of different transparency measures and controls in these regulations. Even if we had to move to direct awards because of some national crisis, the controls would be applied in an appropriate way. We have tried very hard to work at that.
On healthcare, where I very much understand the noble Lord’s point, I should offer to write because he raised a point about a Cumbrian example that I am not familiar with. I made it clear at the beginning that I very much understood that in some areas, the NHS will be doing its own thing, but in other areas such as the construction of hospitals, it will be subject to the broad procurement rules. I have also said that I will take a look at ensuring that the health side takes advantage of the excellent training and online briefing that the Cabinet Office team has worked so hard on.
Lord Fox (LD)
I thank the Minister for her point on the NHS and the health service and I look forward to receiving that letter.
There are just two things. I asked a specific question about the readiness of the central digital platform. I listened very hard indeed. I turned my hearing aid up, and I did not hear the Minister say that it is ready. In fact, I heard I heard her say that the department is working with contractors, and then she started talking about phases. That worries me, because of the centrality of this system in order for the Procurement Act to work. Can the Minister give some more detail on that? When will it be 100% ready?
Baroness Neville-Rolfe (Con)
I was trying to be open and honest, as I always am, by emphasising what will be clearly ready and where we are bringing other things in in phases. The first stages will obviously be ready, and that is why we are bringing the arrangements in at the end of October, which fits into our deadlines, and then there will be other material coming through. However, with luck, the system we have set up for online briefing will ensure that people know where they are, and I think it will be like other policies I have been involved in. You get a sort of bell curve. To begin with, the new and innovative people use the system; and then gradually, as more material comes on and it gets around that actually, it is really good, you will get more people coming in and more SMEs. I am very keen to work with them to make sure that the share of the cake that SMEs have in procurement, which has gone up in the past couple of years, will continue to rise, and rise very substantially.
I repeat that the online system will be operational from 28 October. The notices will be phased, and timing will be set out in commencement regulations. Obviously, the notices required from 28 October will be available and ready to use. That confirms what I have said, but it gives the extra information that there will be commencement regulations. We will make sure that noble Lords who are interested are aware of them when they are finalised.
I repeat my thanks to all involved in the work. Actually, there is a succession of Ministers whom I have to thank. There are noble Lords right across the House who have been hugely helpful by challenging us and supporting us when we are right. I also thank the officials because it has been a very, very long slog. The new procurement regime starts on 28 October, and after that they will obviously have even more to do. Thank you very much. Please join me in supporting the regulations.
Armed Forces (Court Martial) (Amendment) Rules 2024
(7 months ago)
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The Earl of Minto
That the Grand Committee do consider the Armed Forces (Court Martial) (Amendment) Rules 2024.
The Minister of State, Ministry of Defence (The Earl of Minto) (Con)
My Lords, the statutory instrument before us today amends the 2009 court martial rules by introducing a new procedure for the court to view sentences under new Sections 304D and 304E of the Armed Forces Act 2006.
With the leave of the Committee, I will set out the provisions to which the statutory instrument relates. Section 304D enables a person who has been sentenced by the court martial to have their sentenced reviewed to take account of assistance that they have given, or offered to give, to an investigator or prosecutor under an agreement of the Director of Service Prosecutions. A case may be referred for such a review only if the Director of Service Prosecutions believes such a referral to be in the interests of justice. The review in court may reduce the sentence in return for the assistance given or offered.
A person who received a sentence that was fixed by law—for example, a life sentence for murder—may have that sentence reviewed only if they pleaded guilty to the offence for which they received that sentence. A review may further discount a sentence that has already been discounted or reduced if the person sentenced gives or offers to give further assistance. Conversely, Section 304E provides for the sentence of a person to be reviewed if that person received a discounted sentence in return for assistance offered to an investigator or prosecutor and then failed to give that assistance.
If the review in court is satisfied that the person knowingly failed to give the assistance, the provision allows the court to increase the sentence to take account of that failure. However, it can be increased only up to a term not exceeding the level that the court indicated would have been the sentence had there been no agreement to provide assistance. Again, a case may be referred for such a review only if the Director of Service Prosecutions believes such a referral to be in the interests of justice. These provisions closely follow those contained within the Serious Organised Crime and Police Act 2005, which applied to the civilian criminal justice system.
I draw the Committee’s attention to the right of appeal contained in both 304D and 304E, providing for appeals for any decision coming out of a sentence review. This appeal mechanism is available for a person whose sentence has been reviewed as well as the Director of Service Prosecutions who may also appeal against a decision on review. The Armed Forces (Appeal Against Review of Sentence) Regulations 2024, which were laid before Parliament on 13 May and is subject to the negative procedure, regulates Section 304D and 304E appeals.
The statutory instrument is somewhat technical in nature. It inserts a new Part 14A into the 2009 court martial rules to set out the basic court rules governing review of sentence proceedings. It also notes various technical amendments to the general provisions of the court martial rules so that they apply to review of sentence proceedings. For example, Rule 6 of these rules amends Rule 23 of the 2009 rules, so that if the court martial dealing with a review of sentence proceedings decides to substitute the original sentence with a new one, that substituted sentence must form part of the record of proceedings.
As your Lordships will see, the changes are technical, but they are needed to ensure that Sections 304D and 304E work as intended. I beg to move.
Baroness Buscombe (Con)
My Lords, I respond to the regulations by saying that I very much support the proposals. I do so having compared the process for court martial with that for discharge from the Royal Navy on medical grounds. The latter is the most inhumane and unfair process that I have ever come across. I ask the Committee’s leave to bear with me for a few moments so that I can put on record why I am unashamedly using this opportunity to speak on court martial to alert the Minister to the truth about the process applied to serving personnel who may not be operating at full capacity in the Navy due to an illness, an illness that was most likely contracted or occurred while in service.
The key point is that a court martial allows serving personnel to be represented and the opportunity to make his or her case to rebut the charges in person. In contrast, the Royal Navy’s employability board acts behind closed doors, even when someone has asked, with detailed reasons and letters of support from others within the Navy and the medics, for his or her case to be reviewed. Instead of an interview with serving personnel in person, in the first instance, the board sends out what it calls a signal, which means an alert for a line manager to call an individual and say, “You’re discharged”. The line manager then informs that individual that they are discharged and because the line manager most probably does not know what the process is because he or she has not been told, he or she unknowingly gives the individual incorrect advice about an appeal process and timing.
No reasons or explanation for the discharge are given at that point, so an individual who wishes to appeal that decision is up against a time limit and cannot know what they are appealing against. Eventually—too late—a letter couched in the most appalling, unpleasant language arrives in the Navy post. It basically writes someone off, even if that individual has skills, experience and capabilities of which we know the Navy is in dire need. The result is that years of training, service, commitment and adaptability are wasted, and an individual who has served his or her country is devastated, on the floor. No one has even bothered to sign that letter.
If the individual asks for their case to be reviewed and submits detailed reasons, again, there is no interview by the employability board and no consideration of a possible transfer to other branches to utilise experience and capabilities, attributes that may be supported by others in the Navy who work with and know the applicant. No reference is made where an individual who has moved heaven and earth to return to 100% fitness, most probably at their own expense, confirms a marked improvement or an expectation of full recovery in the short term. No reasons are given in the event that the review is unsuccessful. Another signal just goes out to the line manager stating “no change”.
Will the Minister therefore take time to meet me so that I can share in more detail this unacceptable and frankly shocking truth? I believe it sends a terrible message, not least to all those who have signed up to the Armed Forces covenant. In a court of law, that message would not stand up to the most basic principles of transparency and fairness, coupled with the accountability of the board.
I close by confirming that no armed forces personnel, serving or veteran, are aware of my decision to make this statement today.
Lord Thomas of Gresford (LD)
My Lords, it is a privilege to follow the noble Baroness’s speech. I hope that she has my success in dealing with the Navy. Many years ago, I put down a Question to the noble Lord, Lord Bach, who was then in the Ministry of Defence, about the practice of marching the defendant in a court martial into the court at the point of a cutlass. I thought that that was perhaps not appropriate when there is the presumption of innocence and that it was not appropriate in our day and age. Between putting down the Question and getting the Answer, the ancient custom was abolished for all time.
It is a privilege to be debating with the noble Earl, Lord Minto. I am sure he does not remember this, but we last exchanged words at the gate of his home, Minto House in Scotland. He may remember that I expressed my huge admiration for his ancestor, the first Earl of Minto, who was a very liberal governor-general of India and a wonderful politician for whom I have the greatest respect and about whom I have written a lot. So it is a pleasure to be in the noble Earl’s company again.
I declare an interest as the president of the Association of Military Court Advocates, although I am not speaking on its behalf and the views I express are not the considered view of that association.
As the noble Earl said, this draft SI derives from Sections 304D and 304E, which were inserted into the Armed Forces Act 2006 by the Armed Forces Act 2016. That was eight years ago, not now, so perhaps the Minister can explain why it has taken eight years for the appropriate secondary legislation to be put in place.
Section 304D applies where the review is to consider a reduction of a sentence for co-operation or assistance. Section 304E applies where a person has been given a discount on sentence but has failed to co-operate. In my experience in the Crown Court, the common law position was that, where a convicted person wished to take advantage of any assistance he may have given or was offering to the prosecution, a “text”—it was commonly called that—was prepared by the police or the prosecution and handed to the judge in chambers. This was a secretive procedure, and usually the defendant had to rely upon the good faith of the police or the security services. He did not see the text and the judge did not refer to it in court. Your Lordships will appreciate that giving assistance to the investigating authorities is positively dangerous for a person who has been sentenced and is serving a prison sentence.
This clandestine procedure was given statutory force in the Serious Organised Crime and Police Act 2005, as amended by the Sentencing Act 2020. I note that the Explanatory Memorandum does not refer to the 2020 Act, and I wonder whether it was prepared in 2016, in the light of the Armed Forces Act, prior to the amendments to SOPA.
The civilian provisions in SOPA introduced the possibility of a review of a sentence after it had been passed and while it was being served. They involve a careful series of steps to be taken by prosecutors, and the consideration of a number of factors by the court. To qualify for a review of his sentence, the offender may offer to give King’s evidence, as it is called, in a subsequent trial of his associates, or he may simply provide intelligence of their activities, or both. In most cases, the anonymity of the prisoner is maintained for obvious reasons. Copious and lengthy guidance notes for prosecutors are published by the Crown Prosecution Service, covering a variety of topics, including the criteria for allowing a review, the obtaining of a written agreement, the conduct of interviews, the need to inform the police or other investigating authority of the proposal, the documents to be supplied to the court and so on. My first question is: will the Service Prosecuting Authority or the Director of Service Prosecutions rely on those guidance notes, or will specific Service Prosecuting Authority guidance be published?
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I remind the Committee of my entry in the register of interests, specifically my roles with the Royal Navy. I thank the Minister for his comprehensive introduction to this piece of secondary legislation. Subject to what we have heard from the noble Lord, Lord Thomas, this is straightforward and I do not plan to delay the Committee for long. As my friend in the other place, Luke Pollard, made clear, His Majesty’s Opposition do not object to this legislation, but we do have some questions pertaining to the detail and government policy.
The outlined rules are not controversial and Labour Party policy is clear that we would like to see more, not less, criminal activity explored through the civilian courts—not least murder, manslaughter and rape. Given that these amendments bring the service justice system further in line with the criminal justice system, is it not time that MMR committed in the UK by service personnel should be included in the civilian justice system? This is all the more important given recent scandals.
Can the Minister expand on the decision to limit the jurisdiction of these amendments? Why do they not apply to Gibraltar? There is a growing body of Armed Forces legislation that applies to UK personnel everywhere except Gibraltar. Why should offences committed in Gibraltar be treated in a different and out-of-date fashion, not in line with what we now consider to be best practice?
The Minister in the other place, Dr Murrison, was asked to expand on the rationale of the eligibility criteria. He opted not to do so. Can the Minister assure the Committee that consideration will be given to previous service when considering the eligibility criteria? Will relationships built during years of service but not at the time of the alleged offence be considered? This is not in the Explanatory Memorandum. What about the role of sustained joint operations? Will people who serve in a sister unit still be eligible to sit on a relevant court martial?
Broadly, this is a welcome update. I look forward to hearing from the Minister on those points of clarification. Before I finish, I also thank the noble Baroness, Lady Buscombe, for raising the challenges surrounding medical discharge. I am sure the Minister heard her testimony and will seek further details on the circumstances that she raised.
The Earl of Minto (Con)
My Lords, I thank noble Lords who have contributed to this debate, in particular my noble friend Lady Buscombe for her unsettling but powerful speech. I am more than happy to meet her and discuss in full detail the points she raised. Given the conversations we have had in the Chamber about forces numbers, recruitment and retention, it is extremely disturbing to hear that this is dealt with, as she said, in an inconsiderate and inhumane way. It is not acceptable and we will take that up.
I will probably catch most of the questions. I do not think I am particularly suited to the issues in law that the noble Lord, Lord Thomas of Gresford, raised, so, if I may, I will write in full detail to him about them.
The question of why it has taken so long has been addressed, but I fully agree that eight years is a very long time to get to this point. There has been activity for some while but there has been a certain amount of toing and froing and the process could have been speeded up. As I said, we are not intending to alter the process; we are just following up the existing one. That is one of the key points.
The noble Lord, Lord Thomas of Gresford, asked how this will work in practice. It is important to note that a review itself is not an appeal against a sentence but an entirely separate process that takes place because new circumstances have arisen. The review process will not be inhibited by the fact that the Court Martial Appeal Court may already have heard or decided against the original sentence or whether the sentence was varied on appeal. Again, it is a separate process. I fully understood the noble Lord’s point about the sensitivity of some of these issues concerning whether these reviews should take place in person rather than virtually, on Zoom. We will certainly consider that.
Although the equivalent measures in the criminal justice system are rarely used, they are still an important feature of the justice system, as noble Lords will agree. There will be cases where the evidence from a witness or offender/defendant could be crucial but fears about self-incrimination might stop an individual coming forward and providing essential information. As with any case, prosecutors need to consider competing public interest issues, which, in these types of cases, include issues relating to the victim of the original offence.
The commencement of these provisions from 2016 is well overdue and, as the noble Lord, Lord Thomas of Gresford, said, this brings a sensible improvement to the service justice framework. I am sure the Committee will appreciate that it is not appropriate for me to speculate on how and when these provisions may be used in the future.
The Armed Forces Act does not extend to Gibraltar, so the statutory instruments made under the Act do not extend there either. The extent is simply the jurisdiction in which Armed Forces legislation forms part of the local law. Gibraltar is referenced as an exception, as Armed Forces legislation extends to all other British Overseas Territories. I do not know—I will find out and write—but I imagine that it is a historical quirk from some point in the past.
Finally, the whole question of MMR is contained within this, and it is an extremely important and valid point. We are trying to align these amendments with what is currently in the civil criminal law.
I hope the Committee will agree that, although these measures are technical, they are necessary to improve the functioning of the military justice system, and I therefore commend this instrument to the Committee.
Securitisation (Amendment) Regulations 2024
Lord Roborough
That the Grand Committee do consider the Securitisation (Amendment) Regulations 2024.
Lord Roborough (Con)
My Lords, this SI forms part of the Government’s ambitious programme to deliver a smarter regulatory framework for financial services and to replace areas of assimilated law, formerly known as retained EU law, in financial services with an approach to regulation that is tailored to the UK. That includes the EU law relating to securitisation. In January this year, Parliament agreed to establish a new legislative framework to replace the assimilated securitisation regulation of 2017. This included revoking regulations from UK legislation to enable the UK financial services regulators, the PRA and the FCA, to make rules for securitisation. This framework will come into effect from commencement on 1 November 2024.
Occupational pension schemes are also subject to securitisation due diligence rules. Occupational pension schemes are supervised by the Pensions Regulator. However, the Pensions Regulator does not have equivalent statutory rule-making powers to the PRA and the FCA and so cannot make the necessary rules for occupational pension schemes. These rules need to be created in legislation instead. Therefore, this instrument restates due diligence requirements for occupational pension schemes which invest in securitisations. HM Treasury’s approach is necessary to avoid a regulatory gap after the coming into force of the revocation of the securitisation regulation of 2017 and to ensure consistency in due diligence requirements for institutional investors, whether subject to forthcoming FCA and PRA rules or supervised by the pension scheme regulator.
This instrument maintains the Government’s existing approach whereby most rules governing occupational pension schemes investors are set through legislation. Legislating for these changes now has allowed the Government to reflect the outcome of the regulators’ consultations and final policy views on due diligence requirements for other financial services firms. The approach also ensures that occupational pension schemes face the same rules as other firms. These restated due diligence requirements include targeted adjustments to ensure that they are more principles-based and proportionate—for example, streamlining the amount of information required to assess risks and clarifying responsibility for due diligence requirements where investment decisions are delegated. This should reduce regulatory burdens on occupational pension schemes and support their participation in the UK securitisation market.
This SI designates the FCA as responsible for supervising any occupational pension schemes that are acting as originators, sponsors or special purpose entities for securitisations. This aligns the supervision of occupational pension schemes with other firms which are undertaking these activities. In practice, HM Treasury envisages that the impact will be minimal as neither my department nor the regulators is aware of any occupational pension schemes engaged in these activities. However, the Government wish to anticipate the possibility and deal with it.
This SI also makes two changes to make the investor protection framework in the UK more effective and competitive. It restates the prohibition on transacting securitisations through securitisation special purpose entities in high-risk jurisdictions. These are the three jurisdictions subject to FATF measures, namely Iran, Myanmar and North Korea. The SI modifies the prohibition in two ways. It expands this restriction to investors in securitisations as well as originators and sponsors of securitisations. However, it streamlines the requirement, reducing regulatory burdens by removing a redundant prohibition on engaging in securitisations in jurisdictions which do not comply with certain OECD model tax agreements. This also removes ambiguity from the requirement.
HM Treasury published a draft SI and policy note on these changes in July 2023 which received generally positive industry feedback on the principles-based approach to restated provisions. Together, the changes made by this SI will ensure the consistency and integrity of UK securitisation regulation for institutional investors in securitisation, whether subject to regulator rules or restated provisions. The changes also ensure that the UK’s requirements are more proportionate, streamlined and principles-based, whether for due diligence requirements on occupational pension schemes as institutional investors or for compliance with prohibitions on securitisations in high-risk jurisdictions. I hope that the Committee will join me in supporting these regulations. I beg to move.
Lord Sharkey (LD)
My Lords, we welcome this SI and will support it today. Its provisions are clearly necessary and are mostly explained clearly in the accompanying documentation. I would be grateful, however, if the Minister could say a few words about commencement and address a few questions.
Two provisions seem to come into force when the instrument is made, and the rest on 1 November later this year. As I read it, this arrangement aims, in essence, to correct a mistake in January’s SI and to give the regulators time to introduce the envisaged new rules on the repeal of existing EU law on 1 November. Is that correct? I would be happy to wait for an answer.
We have a few questions arising from HMT’s policy note of July last year, dealing with this SI. In paragraph 4.8, HMT says that
“the FCA will be provided with a specific rulemaking power to make due diligence requirements for small, registered UK AIFMs who are institutional investors”.
What progress is being made in this area? When can we expect to see the necessary draft SI?
I turn to paragraph 4.13, which explains that,
“where an OPS delegates its investment management decisions and due diligence obligations for investing in a securitisation to another institutional investor (whether they are another OPS, an FCA firm, or a PRA firm), sanctions for failure to comply would be imposed on the managing party, and not the delegating party”.
This does not appear to work the other way round. Paragraph 4.14 says:
“Where an institutional investor who is an FCA firm or a PRA firm delegates its investment management and due diligence obligations to an OPS, sanctions for failure to comply would not be imposed on the OPS as the managing party”.
Does this not let the OPS off rather lightly? Why should it not operate to the same standards of due diligence as FCA and PRA firms?
Paragraphs 4.16 and 4.17 deal with matters to which the FCA and the PRA must have regard. Paragraph 4.16 says that
“the Sec Reg contains a requirement for the originator, sponsor, or original lender of a securitisation to maintain a material net economic interest in the securitisation of at least 5% … Once the Sec Reg is repealed, the FCA and the PRA are expected to make rules covering some of the same areas, such as risk retention, for different sets of firms”.
It explicitly acknowledges:
“This risks fracturing the regime which currently exists and increasing complexity”.
The next paragraph, paragraph 4.17, proposes what seems to be intended as a remedy. It acknowledges the importance of the regime being “clear and coherent” and says that
“this SI requires the FCA and the PRA to have regard to the coherence of the overall framework for the regulation of securitisation when making rules relating to securitisation”.
It is not immediately obvious that this rather loose and third-order requirement will prevent the risk of fracturing the current regime and increasing complexity. Replacing a simple, generally applicable risk retention scheme by a layered and necessarily more complicated scheme seems a retrograde step. Can the Minister say what the current thinking is and, if we remain committed to this approach, why?
I acknowledge that I have asked some rather detailed questions. Of course, I would be happy if the Minister were to write to us in response.
Lord Livermore (Lab)
My Lords, I am grateful to the noble Lord for introducing this SI and setting out its purpose. I welcome him to his place.
As the noble Lord noted in his opening remarks, this statutory instrument forms part of a wider programme to deliver a smarter regulatory framework for financial services. We support this SI as it closes a potential gap in regulation. We believe that it is part of an important package of reform aimed at developing in our country a securitisation market that contributes to growth in the real economy.
I have just two questions. First, I understand that the FCA and the PRA expect to consult on further changes to their securitisation rules in Q4 2024 and Q1 2025. Is the Minister confident that those timelines will be met? Secondly, in the event of a Dissolution of Parliament, will the regulators be under any rule-making restrictions during the regulated period? Does the Treasury have a clear schedule of SIs that require consideration by Parliament in the remainder of the current Session? I thank the noble Lord in advance for his answers.
Lord Roborough (Con)
My Lords, I am grateful for the contributions to this short debate. I will try to answer some of the detailed questions that were asked as well as I can but I will have to write on some of them, I am afraid.
Let me first respond to some of the points made by the noble Lord, Lord Sharkey. On timing, we expect that commencing the regulations on 1 November will give the industry time to prepare for the PRA’s and the FCA’s new rules, which regulators will consult on. There will be no further legislation. The regulators are consulting on rules to complement the securitisation SIs.
This will not specifically answer the question on risk retention but the UK’s approach currently aligns with the recommendations from the International Organization of Securities Commissions on; we therefore consider this to be best practice internationally at the moment. However, I understand that the noble Lord’s question went further than that, so I will address that.
This SI represents an important step in finalising the UK’s new financial services framework for securitisation. It complements the Securitisation Regulations 2024 by ensuring consistency on due diligence requirements for all firms participating in the securitisation market. It restates an important prohibition on securitisations in high-risk jurisdictions. The SI was scrutinised by the Secondary Legislation Scrutiny Committee, which made no comment on it and did not draw it to the special attention of the House. A de minimis impact assessment was published alongside this SI; it indicates that, on an ongoing basis, the SI should reduce occupational pension schemes’ compliance costs by making the rules more proportionate.
I will need to reply to the noble Lords, Lord Livermore and Lord Sharkey, on some of their detailed questions but I thank both of them for contributing to this debate, which I hope the Committee has found informative. I hope that the Committee will join me in supporting the regulations.
Product Safety and Metrology etc. (Amendment) Regulations 2024
(7 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Offord of Garvel
That the Grand Committee do consider the Product Safety and Metrology etc. (Amendment) Regulations 2024.
Relevant document: 23rd Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Offord of Garvel) (Con)
My Lords, to put this SI into context, in order to place many manufactured goods, ranging from toys to machinery, on the market in Great Britain, manufacturers must ensure that products comply with the requirements of product regulations. Following EU exit, many EU product regulations were integrated into UK law, and we introduced the UK conformity assessed regime—UKCA—as our product regulation approach in Great Britain.
Since 1 January 2021, UKCA has been in use alongside recognition of the EU’s CE and reversed epsilon markings. This recognition of the EU’s CE and reversed epsilon markings is due to end on 31 December 2024, meaning that manufacturers of products in scope of this instrument would have no choice but to meet UKCA requirements to sell their products in Great Britain legally. The Government know that businesses currently face increasing burdens, with cost of living pressures and global supply chain challenges. As part of our smarter regulation programme, we are looking to minimise regulatory burdens where feasible to reduce business costs and help grow the economy. That is why we are introducing this instrument to continue the recognition of EU requirements using powers under the retained EU law Act 2023.
Lord Fox (LD)
My Lords, I thank the Minister for this important announcement. I do not think that the Minister was in your Lordships’ House when we discussed the retained EU law Bill. If he was, he was very wise not to be on the Front Bench at the time. As your Lordships will recall, we were marched forcibly three-quarters of the way up the hill only to be marched back down again.
This statutory instrument is very much indicative of the position that we arrived at after we had marched back down the hill and is infinitely more sensible than where we would have been had we enacted the original retained EU law Bill, and for that the Government and Ministers need some credit.
I have a slight concern—I may have misunderstood. My understanding is that the deadline for recognition of CE is pushed to one side and that CE will be recognised indefinitely, except the Government retain the right to impose non-CE regulations if they decide that they want to do so. That leaves an air of uncertainty, so it would be interesting to hear a response to that.
The Minister hinted at the overall future of CA. Industry has been pushing hard not to have a dual standard, and the department has done well to bow to that. However, the point that was not being made—which we were trying to make at the time—was that it would be expensive. It is good to hear that it would have cost half a billion pounds for industry to conform to that and it is glad that it did not have to do so. Why are we retaining CA? How much resource will the Government commit to the process of having a separate standard, even though the market will inevitably drive most of the players into the CE camp for accreditation? I would like some more clarity around the future of CA.
The Minister mentioned the product safety review. I think we would all like to know when it will be published, as it was promised some time ago and is still not among us. It would be really interesting to know when it will be. I have one final question around Northern Ireland. My assumption is that this solves any potential cross-border issues between the Republic and Northern Ireland, but could the Minister confirm that?
Lord Leong (Lab)
My Lords, I thank the Minister for introducing this SI and setting out its purpose and the noble Lord, Lord Fox, for his contribution. I, too, was not in the House when the retained EU law Bill was debated, although I read sections of Hansard in preparation for today’s debate.
It would be churlish of me not to welcome this instrument, which effectively extends indefinitely the looming deadline of 31 December 2024—a deadline already extended twice since it was first legislated for in 2020. Business will welcome this move. It will save it time and money by not having to comply with two different and, in some cases, largely completely overlapping regulatory regimes. Consumers will welcome this move too. It removes the potential double whammy of higher prices and less choice for GB consumers that would have resulted from some manufacturers deciding it was not worth their while or the cost to meet the additional bureaucracy of the UKCA regime.
Of course, the Government have welcomed their own move. It is estimated that this SI will save businesses more than £500 million in the next decade, as the Minister stated. At the risk of being churlish, I must observe that attempts to present this as an example of their being a great friend of business stretch credulity somewhat. One would not herald the captain’s decision to change course at the last minute to avoid sailing into an iceberg that everyone else knew had been looming for a long time as a “titanic success”.
This instrument will mean that businesses can now use either CE or UKCA markers when placing goods on the GB market—although not, of course, in Northern Ireland because of its unique situation. The Venn diagram of the CE regime and the UKCA regime will become concentric circles, with the former completely enclosing the later. Despite this, paragraph 6.8 of the Explanatory Memorandum states:
“The UKCA requirements which are not, however, treated as being satisfied by the above steps are the manufacturer’s obligations to … Draw up a UK Declaration of Conformity … and … Apply UKCA product marking”.
Perhaps the Minister can explain why this remains necessary for goods which are sold in the GB market. Is this not a textbook example of meaningless rubber-stamping?
Not unrelated to this, what is the Minister’s response to conformity assessment bodies that have raised concerns with the Department for Business and Trade that demand for their services in respect of the UKCA mark will fall due to this statutory instrument? How does he intend to work with the sector to support a domestic route to market for relevant UKCA marked products?
Finally, as the Minister knows, SMEs are always at the forefront of my concerns. They will have been disproportionately affected by the costs of now unnecessary preparation for conformity to a regime that was due to come into force in less than eight months’ time. While we welcome this SI, can the Minister say if there has been any assessment of the costs that will already have been incurred across different sectors, especially those with longer lead times, and SMEs in particular? There seems little value in trumpeting potential savings if the businesses that may have benefited have already scaled down, or even closed down, their export capacity.
While we welcome this sensible SI, I do hope the Minister can illuminate the Committee with answers to my questions.
Lord Offord of Garvel (Con)
I thank the noble Lords, Lord Fox and Lord Leong, for their contributions. No, I was not here at the time of REUL, but I have been involved its implementation in the last 12 months at the Department for Business and Trade, and I am very proud to say that 1,400 pieces of legislation have been revoked—about 20% of the statute book. I am also very proud that we in Britain are taking, as usual, a pragmatic approach: where we can use the same legislation to effectively adopt sensible regulation, we can do that at the same time as repealing those we want to remove from the statute book. On the question of how long this will last, this is an indefinite extension, but it will be a dynamic situation going forward; it does not imply automatic divergence or indeed convergence in the future. We will assess that regulation by regulation and, in doing so, will therefore get the benefit of choosing the best route for our businesses.
Let me respond to the question of why we are retaining UKCA, raised by both noble Lords. The Government are committed to making sure that UKCA remains a viable route for businesses to sell products in Great Britain. It is important that we have our own approach because, as I said before, we may need to do something in the future that we consider to be in the interests of UK businesses and consumers that may require some divergence from the EU. We will cross that bridge when we get there. We are already, for example, using our current autonomy by having the UKCA regime introduce digital labelling, which is giving us and businesses more flexibility. In answer to the question from the noble Lord, Lord Fox, I can also confirm that this means we will recognise CE in both Great Britain and Northern Ireland for the majority regulations, again making it easier for businesses to sell products across the whole UK market.
Turning to the good point made by the noble Lord, Lord Leong, about the conformity assessment market, we have put in place a regime that we will build in future, but we will continue to work with UKAS to understand the capacity of the conformity assessment market and make sure there is sufficient capacity to ensure that the domestic route to market is still available. Although in the short term, it may require a less immediate standard, that capability will build in the future as we move forward.
To give a high-level summary, this legislation will provide industry with a path of certainty and clarity to continue placing goods on the Great British market, removing the 31 December deadline. It will reduce duplicative costs, as we have said. It will save UK businesses a significant amount of money over the next 10 years. We think that approximately 9,600 UK manufacturers will benefit from reduced conformity marking and labelling burdens, and some 2,000 UK manufacturers will not need duplicative conformity assessments. This has come about as a result of close engagement with industry. We are listening to what industry, large and small, has said; that is the role of government. We will continue to take a pragmatic approach to improving regulation in order to benefit businesses and consumers, while maintaining our commitment to high levels of protection for UK consumers.
Lord Fox (LD)
I asked about the quantum of continued public investment in CA, and whether the Minister can give an idea of how much investment will be going into what may become a dwindling standard going forward.
Lord Offord of Garvel (Con)
The noble Lord also asked about the date of review. Those are two technical issues on which, if he does not mind, I will write.
I beg to move.