Agriculture (Delinked Payments) (Reductions) (England) Regulations 2025
(3 days, 4 hours ago)
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21:59 - Division on Baroness Grender’s amendment - Ayes: 54 / Noes: 124 - Baroness Grender’s amendment disagreed.
22:11 - Division on Lord Roborough’s amendment. - Ayes: 28 / Noes: 123 - Lord Roborough’s amendment disagreed.
Baroness Hayman of Ullock
That the draft Regulations laid before the House on 13 February be approved.
Relevant document: 18th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, I declare an interest as I am in receipt of delinked payments. This instrument sets the reductions that will apply to delinked payments in England in 2025. These reductions are a vital part of the transition to more targeted public investment supporting farmers to boost nature and sustainable food production.
A fatal amendment has been tabled that, if approved, would mean the agricultural transition would effectively go into reverse, as no reductions at all would be applied. I want to be clear that voting against this SI would not keep payments at the level they were for 2024. Instead, it would mean that delinked payments would go back to the 2020 subsidy levels. The fatal amendment also calls for the reinstatement of applications to SFI, but, without the reductions set by this instrument, we cannot fund SFI. Indeed, payments under many of our farming schemes would need to stop completely.
The regret amendment that has been tabled expresses concern about the impact of the reductions on farm viability. This Government recognise that farmers run businesses that need to make a profit, and we understand the valuable role that these businesses play in the wider rural community. We want to support farm businesses to be more profitable and address the underlying problems so that they can thrive.
Delinked payments do not achieve that. Delinked payments do not offer and never have offered good value for money for farmers or the taxpayer. They are part of the move away from the basic payment scheme that saw 50% of money go to the top 10% of farms while doing little for food production or nature. We are now in the fifth year of the seven-year transition away from these subsidies. The reductions to delinked payments set out in this instrument were announced last October. These reductions accelerate the end of the era of payments to large and wealthy landowners simply for owning land.
However, the Government recognise the impact that these changes may have on some farmers, which is why we are trying to make them in the fairest way possible. We are applying the reductions in payment in bands, like income tax bands, meaning that those with the broadest shoulders will see the highest reductions.
I assure noble Lords that every penny released from delinked payments is staying within the sector. The planned reductions are necessary to help fund investment in the environmental land management schemes and our other grants for farmers. So our support for farmers remains steadfast. We have committed £5 billion to the farming budget over a two-year period, with £2.4 billion of this for 2025-26. That includes the largest ever budget directed at sustainable food production and nature recovery in our country’s history. We have allocated £1.8 billion in 2025-26 for environmental land management schemes. This will boost Britain’s food security and accelerate the transition to the more resilient and sustainable farming sector that we want to see. Importantly, we are on track to spend the farming budget in full.
There are record numbers of farmers in our environmental land management schemes; 50,000 farm businesses, and more than half of all farmed land in England—that is, over 4 million hectares—are now managed under these schemes. Figures for 1 March show that that includes around 38,000 live multiyear sustainable farming incentive agreements, and we expect to publish more information about our revamped SFI offer this summer, following the spending review.
The new Countryside Stewardship higher-tier offer will open for applications for invited farmers and land managers later this year. Applications for stand-alone capital grants will also reopen this summer after a short pause, and we are investing in around 50 landscape recovery projects that were awarded funding through rounds 1 and 2. In February, we announced increased payment rates for higher-level stewardship across a range of options from this year.
We are also extending the Farming in Protected Landscapes programme until March 2026. This extension will support farmers in protected landscapes to transition towards profitable food production, while at the same time delivering nature recovery and mitigating the impacts of climate change.
We are continuing to invest in farmers through our other grant offers, with up to £110 million available in new grant competitions that are starting this spring. This includes up to £47 million for Farming Equipment and Technology Fund grants, as well as up to £63 million available for Farming Innovation Programme grants. Those will help to improve productivity, trial new technologies and drive innovation in the sector. We are also expanding the animal health and welfare pathway, with more funded vet visits now available to farmers. Further, over 26,000 farmers have made use of free one-to-one business support through the Farming Resilience Fund to help them through the agricultural transition.
By investing in healthy soils, abundant pollinators and clean water, the Government are investing in the foundations that farm businesses rely on to produce high crop yields and turn over a profit. Adopting the sustainable farming practices rewarded under our schemes will also help farmers to reduce their input costs. Reducing delinked payments as planned enables us to make these investments through our other schemes, and we believe this will serve the best long-term interests of farming.
I welcome the recent appointment of the noble Baroness, Lady Batters, to lead the review of farm profitability to provide short-term, medium-term and long-term recommendations to the Government. The noble Baroness’s review will also help our development of the 25-year farming road map in order to make the sector more profitable in the decades to come.
As we set out in our plan for change, we are focused on supporting our farmers by boosting rural economic growth and strengthening Britain’s food security. This SI is an essential step in building this future. I beg to move.
Amendment to the Motion
Baroness Grender
Leave out from “that” and insert “this House declines to approve the draft Regulations as they accelerate the reduction of delinked payments made to British farmers; regrets the failure to establish alternative funding schemes; and calls on the Government to reinstate applications to the Sustainable Farming Incentive scheme.”
Baroness Grender (LD)
My Lords, I thank the Minister for her explanation of these regulations and I recognise her strong commitment to solving this vexed issue. Sadly, the instrument proposes deeply damaging and cruel cuts to the payments expected by our farmers. That is why, on behalf of these Benches, I am asking that this House decline the regulations. This is a fatal amendment because the proposals represent a potentially fatal blow to the livelihoods of countless family farmers and small agricultural businesses across England.
This dramatic acceleration of the reduction of delinked payments for 2025 was always intended to be phased out gradually as part of the agricultural transition period from 2021 to 2027. However, these regulations propose a staggering 76% reduction on the first £30,000 of a farmer’s payment and a total reduction on any amount above that threshold. For the vast majority of recipients—some 80% of the 82,000 farmers who receive these payments and whose entitlement is £30,000 or less—their direct payment will be slashed by 76%. If we compare this cut to 2024, when the reduction for this group was half, we find that this is a significantly steeper cut, applied in one brutal blow.
The Government claim that these accelerated reductions are necessary to fund the environmental land management schemes, which are meant to reward farmers for delivering environmental benefits. This principle of public money for public goods is one that Liberal Democrats have supported, in line with many environmental organisations, but the Government’s handling of this transition has been nothing short of a disaster, with a breathtaking overnight change ditching an original promise of six weeks’ notice.
Just last month, in that overnight change, the sustainable farming incentive, or SFI, was scrapped for new applications with just 30 minutes’ notice. The timing was particularly jarring as these regulations propose cuts based on the assumption of increased demand for ELM schemes. The NFU—I thank it for its briefing—is clear that it is unacceptable for the Government to remove both the old payments and the new schemes. It rightly asks that the SFI be reopened or, failing that, that these regulations to slash delinked payments be withdrawn.
The Deputy Speaker (Baroness Finlay of Llandaff) (CB)
My Lords, I should inform the House that, if this amendment is agreed to, I will be unable to call the amendment in the name of the noble Lord, Lord Roborough, by reason of pre-emption.
Lord Roborough (Con)
My Lords, I thank the Minister for a thorough introduction to this SI. I have tabled a regret amendment on behalf of my Benches, but, in reality, it is on behalf of all English farmers. Regret is too gentle a word to describe the mood among the farming community.
Before I address the issues, I first draw the House’s attention to my registered interests as a farmer and landowner. I am directly impacted by this SI, with a 90% reduction in my delinked payments. I am at least sheltered by the SFIs that I have signed up to; that is not the case for the majority of farmers.
When in government, we replaced the basic payments scheme with delinked payments based on historical BPS claims. This was intended to be gradually phased out by 2028 in favour of environmental land management schemes, where farmers and landowners receive payments only for public goods. The reductions we put in place put these delinked payments on a gradual glide path to zero in 2028. This Government have dramatically accelerated that decline. This effectively ends the seven-year transition that English farmers had been led to expect three years early, upending their budgets.
The Government promised that this abrupt reduction would release more funding for sustainable farming incentives, Countryside Stewardship schemes and large-scale landscape recovery schemes—collectively known as environmental land management schemes. Despite a commitment to give up to six weeks’ notice of a planned closure of SFI applications, the Secretary of State abruptly closed applications with 30 minutes notice at 6 pm on 11 March, as the noble Baroness, Lady Grender, has said, apparently breaking two commitments at once.
Only a minority of farmers who were previously receiving BPS had actually signed up to SFIs. Today, I am speaking particularly for two cohorts of farmers who are bearing the brunt of this SI’s excessive reduction. The delinked payments cut is particularly painful for those who were unable to apply for SFIs as they were already in environmental schemes that were less profitable but designed to work alongside this phased reduction in delinked payments. Those farmers were simply abandoned, with no compassion from anyone.
When the SFIs were closed to new applications, this affected another cohort of farmers, who were expecting to replace old environmental schemes and the delinked payments with SFIs but who had not yet completed their SFI applications. These farmers are simply in despair. There is no transparency over the timing of the payments under new SFIs, nor what their nature will be. There is certainly no confidence that they will enable these farmers to continue delivering environmental goods as they had planned, or even, potentially, to remain in business.
The Minister earlier stated that the details of revised SFIs will be released this summer. Many farm businesses are in crisis after delinked payments and the cut of SFI applications. Could the Minister please indicate how much has been identified within the existing farming support budget for these new SFIs?
Our actions in government demonstrated our commitment to paying farmers with public money for the public goods they delivered, as well as allowing them to plan ahead financially with certainty. This Government have acted in a way that allows for no financial planning by farmers and have created incentives for those farmers now so disadvantaged to compromise environmental principles and push for greater output in order to remain in business.
Farming is a competitive industry. Food production is largely commoditised, and our farmers compete not just against their neighbours but also against farmers across our country, our continent and the world. Although many of our farmers are capable of competing effectively, smaller farms, particularly in less-favoured areas, can find this competition too much. When we rightly include our high demands for animal welfare and environmental protection, this competitiveness is further undermined. Is it any great surprise that the average age of farmers is 60, and there appears to be limited interest in the next generation engaging?
Farmers in Wales, Scotland and the rest of Europe continue to enjoy much higher levels of financial support. Even the great prairie farmers of the US enjoy heavily subsidised crop insurance and the massive ethanol blending mandate supporting corn prices. Where are the hedgerows, wild birdseed belts and woodlands on these prairies, protecting and enhancing the environment? How does the Minister expect our farmers to be able to provide competitively priced food, protect and enhance the environment, and provide all the other public goods, as well as supporting their families, when the Government slash support and environmental payments at a moment’s notice?
In answer to my question on Monday in your Lordships’ House, the Minister said that diversification and improvements in the environment are two of the three central pillars of the 25-year road map that the Government are developing for farming. Cutting SFIs at a moment’s notice seems a strange way to demonstrate that commitment. My question was about how nature restoration levies in the Planning and Infrastructure Bill as drafted will go to Natural England, rather than farmers and landowners, and be used for developing its environmental development plans, potentially on land that it will compulsorily purchase. This is a prime opportunity for the Government to help farmers diversify and supplement ELMS. Why does the Minister not want this opportunity to be offered to farmers?
I am pleased to see that the party to my left have followed my regret amendment by tabling a fatal amendment. It is good to see noble Lords from many, if not all, Benches working together to support our farming community. As is the long-standing custom of this House, we on these Benches will not support the fatal amendment. In this case, this would undermine the Government’s power to control their finances and, as the Minister rightly pointed out, undo the previous transition from delinked payments to ELMS. However, I strongly urge the Minister and all members of her Government to understand the terrible position this SI is putting many farmers in, and to act quickly to help those affected. Either moderate the impact of this SI or reinstate the existing SFIs. I intend to test the opinion of the House.
Lord Cromwell (CB)
My Lords, I declare an interest in this matter, as I have been involved in UK agriculture for my whole life. Normally, I try to be helpful and even occasionally to inject some humour into my remarks—with varying degrees of success, admittedly. But I am sorry to say that, tonight, I am cross—not with the Minister, for whom I have great respect and indeed affection. But the fatal amendment and regret amendment in the names of the noble Baroness, Lady Grender, and the noble Lord, Lord Roborough—which they have so devastatingly put to us tonight—highlight the frankly chaotic and opaque financial position for UK agriculture. SFI, Defra’s flagship scheme, ran out of money and slammed shut without any warning. The House of Commons Minister called this a “cause for celebration”. I wonder what would happen if DWP ran out of money and tried announcing something like that to the House.
The Minister mentioned the existing higher-level stewardship agreements, of which my family holds one. These were acknowledged by the Defra House of Commons Minister as having punitively low rates, and it was announced weeks ago that these would be updated before now, but nothing has been heard since. I am afraid that the Minister was wrong when she told us earlier that they have been increased. I have just checked the Defra website, which says that we agreement holders will be written to “by April” with increased rates. I ask noble Lords to check their diaries: today is 30 April, and nothing has been received.
The next iteration of the SFI, we are told, will be after the spending review, which probably tells us all we need to know about it. Meanwhile, the accepted tapering down to zero, over time, of payments under the BPS, as UK agriculture exited EU support, has been out of the blue cut by a totally unexpected 76% for smaller farmers—all of this while speechifying about environmental schemes, food security and a grand-sounding 25-year plan for UK agriculture, which no farmers I have spoken to have even heard of.
I am sorry to say this, but Defra’s credibility—and I have been involved in agriculture my whole life—has never been lower in the eyes of the sector it is supposed to support, and what little trust remained has now evaporated. All that said, while these Motions are both accurate and justified, I shall, given my involvement in the industry, with great sadness abstain if they are put to the vote.
Baroness Bennett of Manor Castle (GP)
My Lords, the noble Lord, Lord Roborough, suggested that there was broad support for his Motion, and I rise to broaden that support and offer the Green Party’s support for both these Motions. I have no personal interest to declare, but the Green Party declares its great concern about food security in the UK and the state of the countryside in what is one of the most nature- depleted corners of this battered planet.
The background to this issue is the CAP scheme area payments. The Green Party has always argued against them, saying that they were deeply flawed and that those with the broadest shoulders got the biggest shovels of cash, while smaller farmers and growers got little or, in too many cases, failed to qualify at all. Our countryside was trapped in a world in which the message delivered by a series of Governments was, “Get big or get out of farming and growing”. We had the Agriculture Bill, your Lordships’ debate on which I took a substantial part in. It aimed to focus on environmental improvements and, indeed, after the intervention of your Lordships’ House, acknowledged the importance of food production. The SFI was supposed to be the scheme delivering on the environmental side of that. As we have already heard at length—I shall not track back over that ground—it was literally slammed shut. Many different metaphors could apply, but that seems a good one to me.
Many farmers are now clearly in a profoundly unsustainable position financially. They are being pounded continually by the dominance of the supermarkets and multinational food companies and are being forced to produce commodities rather than getting a fair price for their products. My particular area of concern is horticulture, vegetables and fruit, which is crucial for food security and public health.
I am not sure whether anyone has referred to the National Audit Office, which said that delay in the rollout of new schemes had made it difficult for farmers to plan their businesses and created “widespread uncertainty and risk”. That is true of many areas of our society, but particularly our farmers: if there is no possibility of planning for the future, it is essentially impossible to farm.
I have one constructive point to make, and I hope that the Minister will be able to agree with me on this, or at least accept my suggestion. She may know that there is a fast-growing campaign for a basic income for farmers as a way of supporting small farmers and growers in particular to be agricultural producers. This aims to guarantee financial security; boost mental well-being and reduce stress; promote inclusivity, innovation and ecological stewardship of the land; and strengthen local food systems and public procurement. Will the Minister agree to have a look at the basic income for farmers campaign, and perhaps arrange to meet me and the campaigners?
Lord Rooker (Lab)
My Lords, I rise to make a brief intervention. I have absolutely no interests to declare and I have no criticism of my noble friend the Minister or the Minister in the other place, the Member for Cambridge. In fact, in 14 years in opposition, he was the only shadow Minister who ever contacted me to ask me to talk about my experience of Defra and MAFF during the new Labour years of government. He listened, and that was fine—it was good to do, and I have no complaints about that at all.
However, I am reminded of a time when, at that Dispatch Box in about early 2002, when I was on my third ministry and the first in this House, I said that, in my experience to that date, the Treasury had
“wrecked every good idea I have come across”—[Official Report, 16/4/02; col. 837.]
in government. Obviously, the Chancellor was not very happy about that. The fact is that, three ministries later, before I left government, I was thoroughly justified. We have a classic example of this tonight. I am in favour of the CAP going; I have no problem with that—I am a remainer, but that is not the issue. I am in favour of reform of the CAP but, to wreck a good idea, it takes the Treasury. I do not hold Ministers responsible for this at all.
The fact of the matter is that you go back through the memories on this issue. The Minister talked about diversification. I can remember a very senior official saying to me when I was at Defra—I left Defra in 2008, so we are going back a little bit—that they did not really pay much attention to a particular farmer in the Lake District because he was not a full-time farmer, because he diversified into writing. That was what was said to me—it was because he was not a full-time farmer. Noble Lords are obviously aware of who I am referring to.
It is only my respect for this House and our procedures that prevents me walking out, because I have not the slightest intention of voting to support these regulations. I understand the rules about fatal amendments, but the Government would have to pick it up and do it again—that is the reality. We have the power, but we do not use it; as a senior Cross-Bencher said recently, powers you do not use, you lose, so there will come a time when we do not have that. I do not intend to vote to support this, so I will do exactly what my friend from the gym, the noble Lord, Lord Cromwell, said and I will abstain on both amendments. I will not hang around during the votes; I shall go.
Lord Fuller (Con)
My Lords, I add my name to those regretting these reckless regulations. I am particularly saddened, because they are just one element of a multipronged attack on our farmers, the supply trades and the entire food chain in one of the most important industries and sectors in our economy. I declare my interest in that I am involved in farming, but more particularly in the agricultural supply trade in the fertiliser industry. I therefore know more than most the damage and the harm that the Government are doing to those people who live in the sticks.
I listened carefully to the noble Lord, Lord Rooker; he said that he does not have an interest, but we all have an interest in the food industry. We have to eat every day, and food in your belly is more important than a roof over your head. The truth is that these regulations are harming a sector that needs finance in order to be sustained, to invest to grow. I do not know what rural Britain has done to deserve this metropolitan-based Government, who have turned an understandable and instinctive indifference into outright hostility. Like the noble Lord, Lord Rooker, I do not blame the Minister, because the fault lies elsewhere. She has always been most courteous and honourable and she acts with integrity in this House, which we thank her for.
The truth, however, is that this Government must be held to account because their actions are harming today’s farming profitability, which drives tomorrow’s corporation tax revenues. They are damaging the long-term capital underpinning of the industry, which harms investment, innovation and growth. This is collapsing the cash flow, that financial lifeblood that makes it all happen. I will speak to each of those three elements in turn.
On profitability, it is a shame that the noble Baroness, Lady Batters, who is meant to be leading a review for the Government, is not in her place. She would have told us, had she been here, that farmers are already under terrible, tremendous financial pressure, caught in that pincer movement between low grain prices and elevated input costs. Tighter margins are pressured by the national insurance rises, and now there are these inexplicable plans to persevere with a fertiliser tax that could add a quarter to the cost of the most expensive input, flipping even breakeven businesses over to loss.
On the balance sheet, the effect of the agricultural property relief element of the inheritance tax has been well ventilated. I will not dwell too much on that now, save to say that it is the effect on the business property relief—slightly different—that particularly harms the self-starting, innovative and entrepreneurial tenant farmers, who live by their wits because they did not have the good fortune to inherit the land, free of charge, upon which they make their living. The effect of all these in combination is to remove the long-term generational incentives to invest in the farm, develop the countryside and the landscape, protect nature and, yes, in so doing sustain wealth in our islands, particularly in the shires, where, let us not forget, 90% of businesses employ 10 people or fewer.
I have heard the argument that the IHT can take 10 years to pay, but those annual instalments over 10 years would be more than would be paid by the rent. It is just cloud-cuckoo-land.
Landed estates, for the most part, have already incorporated, in one form or another, or transferred to trusts, so once again those farmers left behind are the smaller farmers. Totally contrary to what Minister said, with these effects Labour is targeting the little guys, the sole traders, the family partnerships, particularly in the less favoured areas, while allowing those larger, more corporate farmers—the ones she says have the broadest shoulders—off the hook.
It is the summary cancellation of slurry lagoon grants that, more than anything, could help solve the problem of river pollution. It is the cancellation of those twin cabs on pickup vehicles. Let us be clear, these pickups are tools of trades. They are as good as a tractor. They are the sort of thing that a man in a factory would have as a crucial part of the plant and machinery involved in the business. It is really a spiteful misunderstanding of how investment in plant and machinery works.
All of these contribute to this £80,000 a year profit cap on aspiration, which is the number that, through EBITDA, gets you to the million quid, at which APR and BPR kick in. If we stop that aspiration, how are we going to grow an economy? This is what is happening, so, yes, I have sympathy with what the noble Lord, Lord Rooker, said: this is the Treasury holding the economy down and not letting it flourish.
As for cash flow, since we have mentioned these delinked payments, I want to put a number on this; I do not know why the number is what it is, but I have it in front of me. A specimen 680 hectare farm that would have received £160,000 in 2020 will receive just £7,200 this year, over and above all those other financial headwinds that I have mentioned. A black zero is the best that many farmers can now expect. How does that help everyone? It is particularly important because, although I do not want to dwell too much and repeat the points my noble friend Lord Roborough made from the Front Bench, there was that interplay between the delinked payments and the SFI, and by taking one away the contract between the Government, Defra, farming and the food industry, as well as the supply trades, has been broken. That has a knock-on for machinery dealers, contractors, auction marts, professionals and those family businesses disproportionately affected in the countryside.
In summary, no wonder people living outside the M25 and the conurbations think they are under attack from the cumulative effects of all these proposals in a concerted war on the countryside. The effect is also, astonishingly, to undermine the Government’s environmental objectives, because the effect of all of this is that if land is put under the plough, it must be pushed as hard as possible to get a return. I suppose that leaves more land not ploughed, for other environmental schemes. In essence, it proves that Labour does not understand the countryside, but I tell you, the countryside now understands Labour. The industry that, more than any other, meets the most basic human need—food in your belly—is being made unviable, and rural communities are paying the price.
Earl Russell (LD)
My Lords, I support the fatal amendment tabled by my noble friend Lady Grender. This fatal amendment rightly calls on this House to decline to approve the Agriculture (Delinked Payments) (Reductions) (England) Regulations, on the grounds that they accelerate the reduction of delinked payments without adequately establishing alternative funding schemes.
I will not repeat the arguments that have been made by my noble friend Lady Grender and others. We are all aware of the proposed dramatic acceleration in the reduction of delinked payments for 2025, and how this has come on top of the completely unexpected and sudden withdrawal of SFI payments. These two factors leave thousands of farmers who were in the process of applying—some 6,600 applications—frozen out of the payments system, and this is unacceptable.
This double blow of slashing established payments while closing the door to the replacement scheme has thrown thousands of farming businesses into disarray. It creates severe cash-flow crises for farmers across the country and has damaged the bond of trust between our farmers and this Government. It is particularly crippling for those who are yet to enter the agri-environmental schemes, and particularly impacts our upland and small-scale family-run farms, which are still largely excluded. The average English less-favoured area livestock farm could see its profits fall by almost half. The Government claim that the money saved from delinked payments will stay within the sector and I welcome the Minister’s guarantee to say that today.
I turn now to the arguments for the need for the fatal amendment before us today. Of course, these procedures should be used rarely or reserved for the issues of utmost importance. However, if the imminent collapse of so many of our family-run farms—which are the backbone of our farming businesses—due to unhelpful bureaucracy that is causing them to go bankrupt does not fit these conditions, I do not know what does.
The Conservative Benches have their own regret amendment on the Order Paper today. A regret amendment is too little and too late to offer our family farmers any hope of real, meaningful change that will save their livelihoods in time; it will not accomplish the meaningful change we require. The Conservative Benches have already made the argument that they do not support fatal amendments by convention. A simple look at history shows that this is simply not correct. The House of Lords Library briefing that I asked for shows that there have been 21 Divisions on fatal amendments since the start of the 2014-15 parliamentary Session.
Equally, the notion that the Conservatives do not call votes on their own fatal amendments is also historically incorrect. I remind the Conservative Benches that they called a vote on a fatal amendment—and won it, by the way—in response to the Blair Government’s proposals to prevent non-Labour candidates having an official election address at the first London mayoral elections. Other votes have been called: the noble Baroness, Lady Young, called a vote on the Prescription Only Medicines (Human Use) Amendment (No. 3) Order; Lord Dixon-Smith called a vote on the Local Authorities (Executive Arrangements) (Access to Information) (England) Regulations; Baroness Miller of Hendon called a vote on the Weights and Measures (Metrication Amendments) Regulations; Baroness Blatch called a vote on the Education Act 2002 (Modification of Provisions) (No. 2) (England) Regulations. So I appeal directly to the individual Members of the Conservative Benches to put aside their current perceptions of parliamentary procedure and stand behind our farmers in their hour of need. Vote in favour of the fatal amendment before us. As the noble Lord, Lord Roborough, said, regret is too gentle a word.
The dire financial situation our farmers face undermines the very foundations of British farming. It puts Britain’s food security at further risk and impacts our ability to fight climate change. It disproportionately affects smaller farmers, hill farmers and our vulnerable tenant farmers. Concerns have also been raised about the competitive disadvantages of our farmers against their Scottish and Welsh counterparts. It is shocking that the Government proceed without a comprehensive impact assessment that looks at the collective effects of these changes, and their cumulative impact on our farming communities. Farmers are essential custodians of our land, producing our food and caring for our environment. They need certainty, stability and fair financial support for the vital public goods they provide. The Government’s current approach offers none of this. Approving these regulations would endorse a flawed and damaging transition. I urge all noble Lords to support the fatal amendment and send a clear message to the Government that this approach is unacceptable and they must urgently change course to support our farmers properly.
Lord Grantchester (Lab)
I preface my remarks by thanking my noble friend Lord Rooker for his comments. They resonate so much with me in terms of how this Government have approached the farming sector, which is to be regretted. I will go on to say much in support of my noble friend here on the Front Bench.
I always remember that my father—who was not a farmer, by the way—used to say that the Treasury does its best to strangle every good initiative at birth. I very much concur with his comments.
I thank my noble friend the Minister for her explanation of the regulations before us today. I also thank her for her Answers to Written Questions on 3 April, where she laid out the Government’s plans for the reinterpretation of the sustainable farming incentive. I declare my interest as being in receipt of payments regarding a dairy farm.
However, after I submitted Written Questions to the Table Office, they were separated into distinct Questions. One became redrafted and reinterpreted and was thereby lost. However, in her Answers, which I am grateful for, she stated:
“Every penny of the reductions to delinked payments will stay within the sector”.
I know that was one of the concerns at the time of the SFI closure announcements, and I am glad she has reiterated it tonight. Her other replies on the Government’s intentions regarding SFI were extremely useful.
I have today resubmitted the Question and if I may will ask my noble friend tonight, so that it completes the picture regarding the intentions of the Government. This period of transition initiated on Brexit has been extremely long and arduous for farmers and growers. I was extremely critical of the previous Conservative Government cutting back on support payments under BPS over this transition period long before there was any clarity from government on environmental schemes ahead. That these have now been worked up and brought forward by this Government is to be welcomed.
The payment for environmental benefits has been made worthwhile and meaningful compared with the cost of the enterprise to undertake them. This has been reflected in the successful uptake of the sustainable farming incentive, leading to a full budget allocation, in contrast to the lack of uptake in the previous Conservative Government’s allocation.
My noble friend and her colleagues in the other place are to be congratulated. Now that there are meaningful programmes for environmental improvements, I can understand and appreciate that the Government wish to move ahead to these ELM schemes and hasten the change from the legacy systems of BPS in the transition. Now that there are these schemes, I cannot support these regret amendments.
However, the timing of the progressive withdrawal coincides with a pause in the success of the SFI scheme in bringing forward an oversupply of applications. It is imperative that this temporary pause is short-lived and that there is clarity on the way ahead, especially for the 3,000 to 6,000 applicants who were preparing to join the scheme.
So, my question which was overlooked and which I would now like to ask the Government is: is it their intention to maintain and continue with a universal scheme open to all farm types on an equal basis? We cannot and must not lose sight of the role of all farms in hitting environmental and sustainability targets. Can my noble friend the Minister assure the committee that any reinterpretation of SFI will continue to be available to all farms and continue to be worthwhile to bring the necessary changes and benefits to the UK’s agricultural land management?
The agricultural transition must continue to be inclusive. There has been a lot of complexity to navigate and the contemporary problems of overspend must not detract from fulfilling the promise of bringing forward a more sustainable agriculture, and I commend the department on how simple it is to enter the scheme.
Many of those in the process of an application may have been subject to the complex rules of the transition between an ELM or mid-tier Countryside Stewardship scheme, which were subject to five-year agreements, and the SFI incentive. Those farmers will need answers.
I realise that there are further dimensions around the policies that must be assessed with the forthcoming road map and the land use framework. However, I urge my noble friend the Minister and her colleagues in the department to bring forward a continuing and meaningful scheme as soon as possible.
The Earl of Caithness (Con)
My Lords, the present financial crisis that farmers face was an inevitability the moment we voted for Brexit—I said so at the time. It was a question only of when it was going to happen. HM Treasury knew that there was a budget set in Brussels and that it could get its sticky mitts on to it; once they did so, the farmers were going to be in trouble —and in trouble they are.
My noble friend Lord Fuller was absolutely right to say that it is a much bigger issue than the SFI and the basic payment system; it is across the board. The noble Lord, Lord Cromwell, said that Defra’s reputation is at its lowest in living memory—that is a sad thing to have to say in this House for all the farmers.
The SFI was a victim of its own success; it was too good to be true, and it was inevitable that it had to be ended or changed. Perhaps that could have been done much better, and there should have been advance warning, but, given the way it was structured, it was inevitable that the benefits were not distributed evenly.
The basic payment system, for all its faults—here I chide the Minister for portraying the beneficiaries of the basic payment system as, I think, large and wealthy landowners—was for every farm business. There was equality; it went right across the board. That is not the case for the SFI, which is one of its faults. If you look at the figures for the SFI, you will find that there are 7,800 agreements in the south-west and 1,000 agreements in the north-east. That is not an equal distribution across the country. On top of that, one needs to remember that over half of the land in England is tenant farmed—they are not large, wealthy landowners.
The need for equal distribution is an important feature for the Government to consider when adapting the scheme. We have a great opportunity now for the Government to come forward with a revised SFI scheme, but two important changes need to be made to the current scheme: first, it must be available to all on a fair basis, and, secondly, it must benefit nature.
One of the problems of the existing SFI is that it has not necessarily benefitted nature. It benefited some farmers who got in there early and made a lot of money, but the figures that I cited for the distribution of the SFI show that there were patches where nature was going to be improved and patches where nature was not getting any benefit at all. That is perhaps the only thing that I would add to my noble friend Lord Roborough’s regret amendment. I am sad that he did not include “and nature and biodiversity”, because that was part of the SFI. Yes, the farmers were going to benefit, but it was public money for public goods, and that includes biodiversity.
I will outline my particular fear, as I think this is bound to happen. A whole lot of farmers signed up to the middle tier of the Countryside Stewardship scheme in 2020, which was to last for five years. I believe that there are about 14,000 farmers in that category—the Minister might correct me if I am wrong, because it is important to get it right. Those people were the good farmers: they were ahead of the game, and they took the difficult decision to go into something that was a new idea—and new ideas tend not to work terribly well to begin with—in the expectation that, at the end of the five years, there would be another scheme for them to go into. However, what they will now find is that the doors have slammed shut: there is no scheme for those people to go into.
You can drive around the countryside, which is looking particularly good in the spring sunshine at the moment, and look at those areas of bird seed where the drills have gone down you have bird seed, leys and areas set aside for nature. Next year, they are not going to be there because those farmers have no option but to plough up all the good they have done in the last five years, put it down to corn and put the combine in. That would be a tragedy.
Baroness Coffey (Con)
My Lords, the Minister knows how much I respect her, and I also respect Daniel Zeichner in the other place. Daniel, in particular, has spent many years in that portfolio, and I am conscious that these may not have been their decisions. That aside, that is the joy of collective responsibility.
The transition that has happened as a result of leaving the European Union was set out under then Secretary of State Michael Gove, who will shortly be coming to this place. I am not pretending otherwise: I was Secretary of State and inherited a plan that was unpopular with a lot of farmers, going from certainty of income to something a bit more uncomfortable. But it was the right thing to do to have a transition, recognising, as has been pointed out by the Minister—and here I disagree with my noble friend who just spoke—that just 10% of landowners were receiving half the funds. It was important to make these changes towards a more positive environmental aspect to our agriculture, recognising a lot of the harms that had been done—not intentionally—without that understanding of what some agricultural practices had started doing to biodiversity right across the country, including polluting rivers.
Back in 2018, when I was a Minister in Defra, I signed the farming rules for water to try to make sure that we began to turn circle, so that we started to see improvements. Indeed, we have seen improvements in pretty much every river across England in the last five years, none of which, however, are necessarily meeting the ecological or chemical standards. By the way, Wales, Scotland and Northern Ireland did not adopt these regulations. Nevertheless, there has been progress: the slurry grants, for example, helped by SFI payments more recently, will continue to bring rewards.
I appreciate that there are many Liberal Democrat Peers here to support their fatal amendment. I am not going to get into the constitutional rights and wrongs of that, but I gently point out to them that when the Agriculture Act was debated in this House, they put forward an amendment to reduce the transition period from seven years to five, so as to accelerate the transition, because they wanted more money to go into the environment a lot quicker. I am really pleased they have had a damascene conversion regarding the importance of how we support farmers, but I wish they had not put forward that suggestion back in 2020, during the design of the very schemes we are discussing today.
During my time in Defra, I was concerned. When I arrived, the first option involved soil, which, by the way, is critical not only to the future prosperity and productivity of farmers and the profitability of farming, but to the prosperity of the planet. It was right that the initial focus of Defra was treating soil well and making that the fundamental cornerstone of bringing about improvements in a variety of ways.
One of the things that concerned me was that, as we started to see the escalator—or perhaps the see-saw, if you like—moving from one to the other, we saw that although many farmers could participate, we needed to offer farmers a lot more as their income from BPS fell and we eventually transitioned to delink so as to get away from the EU rules. We needed to open up the number of options more quickly to allow more farmers to look at how those options could help them achieve the outcomes that we wanted to achieve through the environmental land management scheme.
I can honestly that say a lot of thought went into this. I had been in the department from 2016 to 2019 and when George Eustice was the Agriculture Minister. We started discussions early on about how this would work, and this is where we ended up with the seven-years proposal. Not only that, in the Agriculture Act we included a power to be able to extend beyond seven years. When considering some of the options when I was Secretary of State, I deliberately chose to act against the advice of officials, who wanted to set the taper all the way to the end of the seven years. I was concerned even at that point that it was not clear to the department or to Ministers, and I was afraid that the analytical capabilities of the RPA seemed not to be up to it. I was considering extending the transition period for delinked payments beyond the seven years, to make sure that we were not in a situation where the 10% of landowners and farmers who were getting the money were getting even more of the 50%. We wanted to make sure that farms were still viable. That is why we did not set at a particular time the final few years. It was to give us flexibility, so we could see what was going on and see whether farmers were taking up the options.
As the Minister has accurately reported, we now have more farmers involved in these agricultural environmental schemes than ever before. In the times when the UK moved part 2 of the BPS up to 15%—the maximum allowed—we had even more, and that was a good thing. But it was important that we had that flexibility, which is why I am concerned. Having got farmers to look into this, we put money in to allow them a payment to consult to help them think about how they were going to use their land. We knew that that could not just come from their own pocket. That is why we initially put in a £1,000 payment and then £2,000 in order to access that.
We changed the rules, so that you did not have to have received BPS before. Many farmers around this country were not getting any BPS at all; they were actually doing environmentally friendly things but were not getting substitution income. I choose as an example Suffolk, because that is where I used to represent, where many free-range farmers were not eligible for BPS. We changed the scheme for, for example, the pig industry—the entire pig industry was not eligible. We changed that rule because we recognised that, if we wanted to reach the environmental targets that both Houses had voted on, we needed to make sure that as many farmers and landowners as possible would get involved.
We cannot expect them necessarily to do that for free. There are plenty of rich landowners who, out of the goodness of their heart, might want to do it, but as my noble friend Lord Caithness pointed out, and as I have pointed out in farming debates before, there is sadness in where we are today. I have already seen it: farmers I visited when we were discussing how to make some of these things work are now busy ploughing up the cover crops that they planted which are no longer viable to keep the family business going. That is a huge sadness.
I am conscious that the Minister today will probably share in that sadness. It is a real sense of regret. The Government must take away the fact that, for all the talk of food security, and despite the fact that more food will be produced—as I am sure it will be—that will be at the harm of having a combination of what ELMS was seeking to achieve.
Candidly, there has been a lot of talk about underspends, but I have to say that it is quite pathetic. We always knew that this transition would be a bit like a see-saw—there would probably be a bit of an underspend, though not that much in terms of the percentage of the overall budget—but, as we opened up more options, we knew that more SFI money would be needed. That is why it was carefully managed. I am concerned that we are in this situation today, as has been pointed out, despite assuring farmers that they would get six weeks’ notice of when a scheme was going to close. Ideally, we would move to a rolling option so that it would not close, but I appreciate that this was not the practice of previous years. That was designed, again, to recognise the different seasons and the different demands on farmers. To suddenly shut it was really poor—really shabby. That is why I have advised members of the NFU and farmers locally that they should first complain to Defra and then go to the parliamentary ombudsman, because I have no doubt that this is maladministration.
I am also concerned that, in the Explanatory Memorandum to the SI, the Minister has stated that there was no problem in terms of the ECHR. Under A1P1, the expectation of receiving grants is an asset, and I have no doubt that, if people were to make a legal claim against that, they would certainly get compensation too.
In terms of where to head, there is a real issue for farming. It is not just about the inheritance tax but about the agricultural APR, the BPR and all the things that farmers spend, thinking of the long term; yet all of that is being taken away. I used to think that Labour cared about the countryside, but it does not feel that this is the case. It does not feel like it cares about rural communities, which I am sure will be looking at those Members of Parliament who voted for the SI at the other end of the Corridor.
There is a bit of a trend here. I was concerned to read in Hansard that, when the Commons debated this, the impact assessment statements were not updated because they were done in 2020 with the Agriculture Act. However, the plan was very clear then: it was set out in the Bill that there would be seven years of transition. That was the expectation set by the Government at the time. It is a true matter of regret that no impact assessment was updated.
Many of us will have spoken to farmers. According to the transparency, sadly, the Agriculture Minister did not meet any farmers between October and December 2024, when this change in policy would have been considered. However, as I said, I respect Daniel. He has been a considered shadow Minister and now Minister, but we should not be in a situation where farmers are hitting a wall. The Planning and Infrastructure Bill will be killing off things such as the biodiversity metrics, which my noble friend referred to, and we will see intensification.
For those reasons, I support my party today in expressing regret. I am conscious that Members in the elected House have already made this determination, but they should do that knowing that they need farmers and landowners to produce food and that, without them, we will not achieve the environment and climate targets that have been set. It is for that reason that I support the regret amendment tabled by my noble friend.
Baroness Hayman of Ullock (Lab)
My Lords, I thank all noble Lords who have made valuable contributions to the debate. As always, I have listened very carefully to noble Lords’ concerns. As I mentioned in opening, my husband and I are in receipt of delinked payments—previously BPS—just for our small farm, but it means that I am very aware of the kinds of reductions that noble Lords have been talking about in the debate. However, delinked payments do not address the long-term challenges faced by farmers. The Government are making the decisions to try to build a profitable and sustainable farming sector so that we can deliver Britain’s food security.
As I mentioned earlier, the reductions to the 2025 delinked payments are necessary so that we can fund the spend, both committed and projected, under our other farming schemes, which support sustainable food production. We have seen increased uptake of the environmental land management schemes and unprecedented demand for our capital grants offer.
Without this SI, the spend on delinked payments in 2025-26 would increase to £1.8 billion, leaving a £1.5 billion shortfall in the farming budget. This would mean we would need to stop funding farmers through many of our other schemes, which would go completely against what seem to be the objectives of the fatal amendment.
The money released by reducing delinked payments is being reinvested in full through our other schemes for farmers and land managers. Every single penny is staying within the sector. How the farming budget has been spent for the financial year 2023-24 is set out in the latest Farming and Countryside Programme Annual Report. We will publish our next annual report later this year, as required by the Agriculture Act 2020. In March, we published on our farming blog a breakdown of how we plan to spend the £5 billion farming budget, covering 2024-25 and 2025-26.
I do understand the concerns that the House has raised regarding farm viability. There are a number of actions that we can support farmers with to improve their profitability. As well as urging them to take advantage of our existing offers, including grants that will support productivity and help them reduce their input costs, we can help farmers to diversify their income so that businesses become more resilient.
At the NFU conference, the Secretary of State announced a raft of new policies, including using the Government’s own purchasing power to back British produce wherever possible, and making £110 million available for new grant competitions to support research and innovation, technology and equipment for farmers.
I will now try to cover a number of the questions that noble Lords raised in the debate. The first is about the closure of the SFI and the concern that this will leave farms in financial distress. I confirm that every penny in all the existing SFI agreements will be paid to farmers and any outstanding eligible applications that were submitted by 11 March will also be taken forward. I also confirm that applications for the SFI have closed only temporarily and we plan to reopen the scheme for applications once the reformed SFI offer is in place.
A number of noble Lords, including the noble Baroness, Lady Grender, and my noble friend Lord Grantchester, asked what the reformed SFI offer might look like. We are working to align it with the work that we are carrying out on the land use framework and the 25-year farming road map in order to protect the most productive land and boost food security while also delivering for nature. The reformed SFI will also build in more sophisticated budget controls. As the scheme is designed and evolves, we want to listen to farmers to get their feedback to ensure that we learn from the past to improve the scheme for the future. It needs to be better targeted than previously.
On small farms, which the noble Baroness, Lady Grender, in particular, asked about, we are developing new schemes so that they work for as many different types of farm as possible, including smaller farms. There was, for example, no minimum amount of land that could be entered into the sustainable farming incentive. We will continue to work closely to make sure that the offer is properly accessible for small farms. As someone who has a small farm, I think we can improve that area, and we are working on that.
Tenant farmers were also mentioned by a number of noble Lords. The noble Baroness, Lady Grender, also mentioned the Rock review. We support the principles of the Rock review, and the department has already delivered on many of the review’s recommendations. The joint Defra and industry farm tenancy forum, which represents tenant farmers, landlords and advisers, will continue to play an active role in feeding back issues from the tenanted sector into Defra. The joint forum will help us continue to evolve our schemes to be accessible to tenants and to encourage collaboration between landlords and tenants in relation to environmental schemes. Working with the farm tenancy forum, we have also looked to remove penalties for tenants who may have to exit a scheme early if their tenancy ends unexpectedly. Our survey data shows that over a third of applications for SFI came from mixed-tenure and wholly tenanted farms.
A number of noble Lords raised the issue of farm profitability. We publish regular statistics on farm business income in England and other data related to farm businesses. For example, in March, we published the average farm business income forecasts, and our recently updated farming evidence pack sets out an extensive range of data to provide an overview of agriculture in the UK and the contribution of farm payments to farm incomes. That includes analysis by sector, location and type of land tenure. That kind of data is really important as we look forward to redesigning the schemes. The years 2021-22 and 2022-23 saw record highs in average farm business income at all farm levels, which was largely driven by higher output prices. Clearly, although there will be differences from farm to farm, we expect that the average farm was able to build some reserves to aid the ability to absorb the subsidy reductions that came in during the transition period.
Transitioning from the legacy agreements into new agreements was also mentioned. We are currently reviewing our approach to transitioning farmers from existing agreements into the new schemes. We expect to publish more information about this following the spending review. In the meantime, we have announced that we will increase the payment rates for higher-level stewardship agreement holders. To address the point made by the noble Lord, Lord Cromwell, if letters were supposed to have been sent out in April, it is clearly disappointing that there has been a delay. I have checked and this has been delayed. As the noble Lord has raised this here today, I will chase this and bring it up with the department.
The noble Earl, Lord Russell, and the noble Baroness, Lady Coffey, both talked about the impact assessment. Obviously, noble Lords are aware that one has not been produced for this instrument but, as I said, we are publishing regular statistics on farm income and other data related to farm businesses. That includes the farm business income statistics published on 14 November last year. We are looking very carefully at the income, and from that we will understand the impact on businesses as we go forward.
We are also looking to ensure fair competition across the supply chain through contractual reform. Fair competition was mentioned and it is incredibly important. All farmers should have a fair price for their products and the Government are committed to tackling unfairness in the supply chain wherever it exists. Regulations introduced last year included key reforms for contracts in the UK dairy sector. They included mandatory written contracts to require greater transparency in milk pricing. New contract rules for the UK pig sector were introduced to Parliament this month, which aim to ensure that terms are clearly set out and changes can be made only if agreed by both parties.
Similar regulations for eggs and fresh produce sectors will follow, and the Government are committed to intervene in any sectors where fairness issues exist. The regulations are enforced by the Agricultural Supply Chain Adjudicator, on behalf of the Secretary of State. Additionally, as I mentioned in my earlier remarks, the noble Baroness, Lady Batters, is leading a review of farm profitability. This important work is being supported by the newly formed profitability unit in Defra.
The noble Baroness, Lady Bennett, mentioned the basic income campaign. Of course, I would be very happy to meet the noble Baroness and any colleague she feels it appropriate to bring along to such a meeting.
We believe that this instrument is the essential next step of the transition period. The noble Baroness, Lady Coffey, pointed out the importance of the transition period. If we care about the future of farming—and clearly everybody in this Chamber very much does and feels very strongly about it, which has come across in the debate—we must not unravel the agricultural transition. This instrument will enable us to invest in that long-term future for farming while also delivering for nature.
Baroness Grender (LD)
I thank all noble Lords for speaking in this debate and providing their knowledge and experience on this issue. This is a crucial issue which deserves our full attention. I thank in particular the Minister for her response. I know that she, better than most, will be aware of the outcry that this sudden and unexpected cut has caused in so many in our farming communities.
It will not surprise noble Lords that I agree with the noble Lord, Lord Rooker, on this issue. If something like an SI falls, it goes back to the department and a new way, ideally, is found. Like him, I believe all pathways lead to the Treasury when these things go wrong. I also particularly pick out the point that the noble Lord, Lord Cromwell, made about HLS. I, too, have been in touch today with farmers who are deeply disappointed that they have not received the letter they were expecting by today. Those letters have not been received across the farming community. I thank the Minister for taking that back, but it is very significant, in addition to this regulation.
My noble friend Lord Russell described the times that the Conservative Benches have chosen to dispense with their aversion to fatal amendments. It is clearly a pick-and-mix tradition for them. I say to them that there has never been a more important vote; a chance to end this unfair cut to farmers. It is a test of their resolve on this issue and all they have to do is walk through the same Lobby as us. We all know that a regret amendment is not a sign of the greatest strength in these moments. A fatal amendment to end this measure for our farmers is a sign that we have their backs and will go down fighting for them. To do anything else is to sell them short. I ask all Members of the House to support farmers who have been hit by these cruel cuts again and again. We urge them to stand with the Liberal Democrats and reject these regulations. Therefore, in the light of what we have heard, I wish to test the opinion of the House.
Lord Roborough
At end insert “but that this House regrets that they reduce the delinked payments to farmers at a faster rate than previously expected, undermining the viability of farm businesses and harming rural communities.”
Lord Roborough (Con)
My Lords, I will be very brief. I also thank all noble Lords who spoke in this debate. Like others, I have sympathy with the Minister as there were so few words in support of this SI. I think most of us also agree with the noble Lord, Lord Rooker, that perhaps it is more to do with the Treasury; I note that her noble friend, who makes many of these decisions, is sitting in his place.
The noble Earl, Lord Russell, gave some examples decades ago of when my Benches may have supported fatal amendments. That was decades ago. It is a long-standing custom not to support fatal amendments. This is about responsible opposition. I would also note that our regret amendment has been tabled for several weeks, in contrast to the fatal amendment which appears to have been put down relatively recently.
I have put forward constructive ideas that this Government can adopt to moderate this SI or reintroduce SFIs. I hope the Benches on my left will support our regret amendment and send a clear message to the Government to consider these. I would like to test the opinion of the House.