Agriculture (Delinked Payments) (Reductions) (England) Regulations 2024
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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?
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.