Agriculture (Delinked Payments) (Reductions) (England) Regulations 2025
(Limited Text - Ministerial Extracts only)
Read Full debate21:59 - 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 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.