(7 years, 5 months ago)
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Baroness Scott of Needham Market
That this House takes note of the Report from the European Union Committee Responding to Price Volatility: Creating a More Resilient Agricultural Sector (15th Report, Session 2015–16, HL Paper 146).
Baroness Scott of Needham Market (LD)
My Lords, I am grateful to have the opportunity this evening to debate our report on such an important issue for our farming sector. In one way I rather regret that it has taken so long to find an opportunity to debate this, but the fact that our report predates the referendum adds a different dimension to our work. I had the privilege to chair the EU Energy and Environment Sub-Committee for three years, and I can honestly say that it was the most rewarding work I had done in my 16 years in the House. I therefore thank each of the members with whom I served, including those who, like myself, have been rotated off. However, I will mention two noble Lords in particular.
First, I thank the noble Lord, Lord Boswell of Aynho, chairman of the European Union Committee. His leadership and encouragement on the main Select Committee was invaluable, and I am certain that he will continue to be as supportive to the current EU sub-committee chairs as he was to me. His wisdom and experience will be much needed by the House as we approach this immensely complicated challenge of withdrawal from the EU. Secondly, my noble friend Lord Teverson is now chairman of the sub-committee. I have no doubt that as chairman he will lead it through these challenging times and ensure that it plays its proper role in informing the debate on Brexit. I also place on record my admiration of and thanks to the committee clerks, policy analysts and committee assistants with whom I worked. Without their skill and total commitment to the role of this House, we would not be able to function. Finally, special advisers are often the unsung heroes. In this case I thank Dr Dylan Bradley and Professor Berkeley Hill.
As your Lordships may know, the remit of the sub-committee I chaired includes not only agriculture but fisheries, environment, energy and climate change. While the topic of this report was agriculture, it went much further. Like many of the inquiries we undertake, it was cross-cutting, and the evidence led us to think as much about the environment and rural development as it did about farming.
The report was published on 16 May and its title, Responding to Price Volatility: Creating a More Resilient Agricultural Sector, summarised the motive for conducting the inquiry and our main findings. Our headline recommendation was that the European Commission should consider restructuring the common agricultural policy and focus it mainly around the provision of public goods, aiming for an eventual merger of the two pillars that currently govern direct payments on the one hand, and rural development on the other. We were of the firm view that wherever possible, agricultural policy should facilitate the provision of public goods, such as a well-managed environment. Those conclusions hold as well for life outside the EU as they do for life in it.
We found that price volatility is an inherent feature of agricultural commodities markets, and that adverse effects at farm level are caused much more by unanticipated periods of sustained low prices than by increased levels of volatility. This was a significant conclusion because it leads to different recommendations. We examined the issue of direct payments and found that although they continue to provide a degree of financial stability, helping farmers to withstand protracted periods of low prices, they can also reduce incentives for innovation and efficiency gains.
We drew another significant conclusion on insurance. We heard from some that the US insurance model could be adopted in the EU as an alternative to Pillar 1 arrangements under the CAP. I was perfectly open to this possibility, as I think other members of the committee were. However, having heard all the evidence, we strongly concluded that while insurance undoubtedly has a role to play in unexpected and catastrophic events, the case for a wider application—as a replacement for Pillar 1 or as a future outside the EU—was simply not convincing.
We highlighted that much more work needs to be done by the UK Government and the European Investment Bank in developing and adopting appropriate financial instruments, which may help farmers access much-needed finance. Significantly, we also drew attention to the desperate need to equip farmers with improved business skills and the expertise to calculate and manage their production costs and overheads. We also recommended that the UK Government work to identify the main barriers which prevent farmers exiting the sector.
The official response from the European Commission was received in July, and the Commissioner described our work as,
“a valuable input to the upcoming discussion on the Common Agricultural Policy post 2020”.
The fact that he wrote that after the referendum suggests that it really was positive, whatever the future for British agriculture. The Government’s response noted that, following our vote to leave the EU, the Government would work with the industry to,
“look at a future package of measures and support for farmers and the environment”.
Their response continued:
“It is premature to say what that might look like, but the Government will be mindful of the Committee’s recommendations as we develop a new policy and funding framework for UK farming”.
This is encouraging for the committee. I would be grateful if the Minister shed further light on how this new thinking has developed some five months later.
We were also encouraged that the response included an agreement that an agricultural policy must deliver public goods, and the assurance that the management of natural resources will be considered when the Government begin to,
“look at the future of farm support in the UK”.
It was also acknowledged that the Government recognise the concerns about barriers to exiting, as well as to new entrants to the sector. I am also told that the Minister of State, George Eustice, has since written to the committee explaining that the Government will use some of the so-called exceptional adjustment aid made available under the CAP in response to the persistent challenges faced by dairy farmers, and that they will be trained in new risk management tools and benchmarking skills, as the committee’s report suggested.
I note with interest that the Government’s response gives an assurance that they will consider the recommendations emerging from the Commission on access to financial markets and risk management tools when developing domestic alternatives to the CAP. That task force has now reported, so I would be grateful if the Minister clarified the Government’s response to that work.
There is no doubt that there are immense challenges ahead for the agricultural sector. There is uncertainty about the new UK agricultural policy and about what a trading regime for agricultural and foodstuff products with the EU and the rest of the world will look like. Together, these two concerns underline an immediate need for UK farmers to develop better resilience to future price shocks and market developments.
Reviewing and replacing the CAP could be an opportunity for the UK to develop an agricultural policy which promotes competitive and environmentally sustainable farming. It could be an opportunity to move away from direct payments towards a system that gives farmers subsidies to deliver certain public goods, such as environmental stewardship and high animal welfare standards, as suggested in the committee’s report. It could also be an opportunity to think afresh about how to create a more resilient, innovative and effective agricultural sector. There are real concerns for farmers: some 55% of total UK farm income comes from CAP support. Farmers and rural communities across the UK receive substantial and essential funding for agri-environment projects, farming and infrastructure projects from both Pillar 1 and Pillar 2. These will all need to be replaced by similar UK schemes, or they will fall away once the UK withdraws. I welcome the Chancellor’s statement on 13 August, in which he guaranteed that current levels of support would remain until 2020. That gives some short to medium-term comfort, but of course, it does not address the longer-term problems in an industry already beset by volatility.
Another challenge is that of trade in agricultural goods once the UK has left. Nearly two-thirds of UK agricultural exports measured by value go to the EU, while 70% of agricultural imports measured by value come from the EU. Food supply chains are immensely complicated nowadays. Some components of processed food products start their life cycle in the UK, are processed in another member state and then return to us for consumption. Any change arising from those trade patterns is bound to impact on UK farmers as well as the wider food processing industry.
In leaving the single market, we will leave the rules that govern our current trade arrangements with the EU and with the world. The EU’s external tariff barriers on agriculture and food are high, and in the absence of a preferential trade agreement with the EU, the UK agriculture and food sector could find itself subject to high import tariffs and reducing exports. In fact, tariffs affect the whole supply chain because they cover both imported products and inputs such as machinery, feed and fertilisers. I do not underestimate the potential for negotiating future trade agreements with the wider world but as recent examples have shown us, free trade agreements take a very long time to negotiate and are immensely complicated, particularly in the area of agricultural goods. Therefore, there will be added uncertainty for UK farmers about the future of their imports and exports post-Brexit.
The agricultural and farming sector is vital to all of us. As a society, we are dependent on a secure, affordable and high-quality food supply, as well as on the public goods which farmers deliver. Rural communities across the UK are still sustained by the agricultural sector, the funding it receives and the jobs it creates. So now, more than ever, the agricultural sector needs certainty and political clarity to strengthen its resilience. I encourage the UK Government to deliver on these points as a matter of urgency.
Baroness Byford (Con)
My Lords, it is a great pleasure to follow the introduction by the noble Baroness, Lady Scott of Needham Market. I was lucky enough to be one of the people who served under her chairmanship on several different reports. Some of the comments that come through this last report reminded me of one of our early ones, on innovation in agriculture. One of the key challenges of that was about how we get knowledge and good practice transferred from science to normal working on-farm. I was quite interested looking through the report to find that again reflected.
The noble Baroness and her committee really are to be congratulated on their report, which looked at price volatility and creating a more resilient agricultural sector. The recommendations were concluded before the June referendum result, as has been referred to, and hence the findings are even more key than they were at the time of publication, because clearly now we have an additional challenge.
Yesterday’s torrential rain can leave nobody in any doubt that climatic fluctuations are becoming a more regular feature. They are one of the causes of price volatility. When considering this, the committee felt that subsidised insurance schemes should not replace the current provision of direct income support through CAP. Following the decision to leave the EU, the Government will need to work with the industry to consider other methods for future insurance schemes, as the noble Baroness has referred to. In their response to recommendation 2, the Government confirmed that Defra has already set up the facility to give grants of up to £20,000 per farmer, available through the farming recovery fund. Could my noble friend the Minister clarify whether these payments are available immediately after a natural disaster, or whether there is a delay? My understanding is that there is sometimes a delay, which puts huge pressure on those farmers who are directly affected at the time.
Price volatility in agricultural commodity markets undermines the ability of farmers to make investment plans with confidence. Longer periods of low prices have resulted in the reduction of livestock herds, most noticeably in the dairy industry where farmers continue to exit the business, or in the switching of crops grown for food or fuel. These are some of the considerations facing farmers when taking decisions about future investments. As has been said, farmers take a long-term view. New buildings, machinery and diversification schemes all come at a price; uncertainty and lack of confidence in future profit make those decisions even harder.
I apologise; I should have acknowledged at the beginning that we have family farming interests and we receive the basic farm payment.
Neither the Commission nor the UK Government is solely responsible for providing information support. Those in the farming community, both here and in member states, have opportunities to help each other, through co-operatives, marketing products, and closer chain links between the food grown on-field and that eventually ending up on the plate. The AHDB, RASE—the Royal Agricultural Society—and its Innovation for Agriculture charity all have a part to play. If one is looking for added value, one could turn to organisations such as LEAF, of which I have had the great privilege of being president for the last year. Value is added to the goods produced and is recognised easily by the purchaser. These organisations promote high-quality, healthy food, something which all of us could aspire to.
The key to creating future resilience will come from science and technology, as referred to in the report. If anybody happened to be here last week listening to the Chief Scientific Adviser, Sir Mark Walport, as I was, they will realise what an important key to volatility and to the long-term future the whole question of science and technology can be. Within that is the question of how you manage risk.
In relation to recommendation 11, the Government’s response to funding of the agriculture sector reminds us that this Government have invested some £300 million from the public sector, alongside some £500 million being invested from the private sector. One of the things that comes out clearly from the report, which I was really pleased to see, is that it is looking to a future where both sectors work closely together. It is not a question of one source of funding being provided by the Government while farmers do the rest. There is a definite blending of the two, for the benefit of the whole.
Additionally, we have help from the UK agricultural tech strategy; £160 million is allocated to this, of which £77 million has already gone to 100 projects. It is key that the data from these projects and from other research are shared, available and passed down to farmers to enable best practice. One of the big challenges perhaps not picked up in the report, which I would like to have seen, is the question of how we get that information to the very hard-to-reach farms. So often the smaller farms—which are on their own and do not have big business plans—are the very ones needing that sort of help. Unless I missed it in the report, that was one aspect about which I thought, “I wish, I wish”.
We are obviously waiting for the Government’s 25-year plan for food and farming and their plan for the environment. I hope that the Minister may be able to say a little more about that in his winding up.
As we all accept, volatility is here to stay. The most important thing is that we build in risk provision to try to alleviate it in planning our forward businesses. The committee also quite rightly recognised the difficulty of forward planning for tenant farmers. It recommended that longer-term tenancies would aid those tenant farmers in seeking diversity and strengthening their stability. As the noble Baroness said, it also reflected on retirement schemes and equally, at the other end, on the encouragement of new entrants. To digress a little bit, I would particularly like to congratulate my noble friend Lord Plumb, who is not in his seat tonight, who has instigated a very good mentoring scheme and the welcoming and admitting of new young people into the industry. If I were looking at the other end, I would also mention the Addington fund, which helps people when they are retiring to find somewhere to retire to. At the same time, it often provides for little units in which they can continue to do some form of work. There are things going on in this country and I am sure in Europe too, which the committee could not cover. I hope the noble Baroness will not mind my having added them in my contribution tonight, because it is extremely important that we are aware of what goes on outside as well.
I mentioned science and technology. It offers us a chance of better animal breeding programmes, of tackling the big challenge of disease control with animals and with plants, of the better use of soil and water, and— if I might say it again—the ending of the appalling waste of food that we have seen. Again, I congratulate Sub-Committee D on its excellent report. A third of the food that we produce is wasted. If we are trying to restrain the amount of volatility that there is around, one good way would surely be to use the food we produce in a better way and reduce waste.
I congratulate the Select Committee. The questions that it has posed, both on the Commission and on government here, are very apt and very timely. I suspect that the response will be slightly different from what it would have been had we had this debate before the June referendum result was known. However, the use of public money and the input from our own financial institutions, the political decisions that affect volatility—I think of the Russian trade ban, which has had implications over recent years—and the way in which we can work together to produce food in the long term are all hugely important.
The noble Baroness talked about the importance of insurance and how we might deal with that, as well as the importance of future financial development. I was very pleased to get some facts and figures on the loans that our banks have been making. Some £24 billion is available to farmers, of which about £17 billion has already been called upon this year. The work of banks, including the European Investment Bank, is crucial when looking at how to build sustainable and productive farming in the future. Ultimately, the goods that we produce are not just about the environment; they are about the basic necessity to produce food for all of us to eat. The way in which we do this is hugely important if it is also to be of benefit to the environment.
The committee has done an excellent job in bringing things together for us to reflect on tonight. I am sorry that I have been able to touch on only a few of the aspects, but there is much in the report and, through the noble Baroness, I congratulate and thank the whole committee. I look forward to the Minister’s response.
Lord Teverson (LD)
My Lords, I should like to record what a privilege it is for me to take on the chairmanship of this committee and what a privilege it is to have followed my noble friend Lady Scott of Needham Market, whose reputation, work and leadership on the committee were absolutely excellent.
This report is, in a way, the last of a series of “own initiative” reports, because at the moment we have a programme of Brexit reports which are taking up all our time. I hope that we are about to complete our report on fisheries, and that will be followed by reports on the environment, agriculture and energy security. I think that that will keep us busy for the next few months.
Without wanting it to sound as though too many congratulations are being expressed around the House, I was delighted to hear that the noble Baroness, Lady Byford, had become president of LEAF, an organisation for which I have huge regard, having seen some of its work in the past in Cornwall. I wish her well in that role.
Price volatility and natural disasters and events are part of agricultural life. As the noble Baroness mentioned, in the south-west, where I have my home, we are again experiencing a series of floods, which affect the agricultural community even more than many other sectors of society.
Intervention used to be one way in which the European Communities dealt with price volatility. My business career was in supply chain management and the freight industry. I remember operating a cold store in the 1980s. We had some space in it which our contracted customers were not using, so we thought that we would put in a pitch for a bit of European intervention storage. The great thing was that we got a fantastic revenue boost from that, but that was not all, because a full cold store is far cheaper to operate than a half-empty one, so we saved costs as well. I express a public thank-you to the 1980s European taxpayer for the great amount of money that we made out of that. That is why that system had to end as a regular feature. We all remember the wine lakes, the butter mountains and the intervention milk powder that occurred at that time.
However, as my noble friend Lady Scott said, at the moment there is some emergency intervention, which has been approved by the Government. The Minister, George Eustice, came back to the committee and referred to this report, and some of the intervention money will be used in some of the more creative intervention ways. Therefore, I think that the committee has already had a success in that area, and I welcome the Government’s response in that regard. I shall not talk at great length on this issue because, although it is important, it is not my report.
I particularly liked the move towards innovation in the report. I had not even thought about the financial instruments that could be used. They may be limited, but it is important that managers in the agricultural sector think in that way, as having those tools is very important.
Management in this area, as in any business, is absolutely crucial. One particularly important thing that I have certainly seen in Devon and Cornwall is not just management and management plans, which can be very dry, but the ability to understand and deliver marketing and to understand added value, as well as the ability to find niches in markets. It is important not to be an accepter of prices for commodities within agriculture but to produce products that are special and are of added value to consumers. That is one of the key areas where there is still much to be learned.
As my noble friend said, Brexit has come through since the report was published, and there will be huge challenges. I cannot believe that we will have regular area payments much beyond 2020. I cannot see British taxpayers putting up with that system as it is at the moment. It will just have to change—the pressures will be too great—and this report is even more important in that context. Regrettably, we may not be able to take advantage of the European Investment Bank. I hope that we will, although I cannot see that we will be a shareholder and have board membership of the EIB. However, I hope that there will still be ways in which we can exercise those funds.
We really do have a challenge as we move agriculture beyond the European Union, but I think it is one area where there are huge opportunities for improvement in the Brexit settlement. That will be the subject of a report of this committee, on which I look forward to the contribution from my fellow members in due course.
The Earl of Kinnoull (CB)
My Lords, it is a pleasure to follow the noble Lord, Lord Teverson, who, as ever, was energetic and interesting. I declare my interests as set out in the register of the House, and in particular as a recipient of EU farm subsidy, both personally and as a trustee of the Blair Charitable Trust.
I also congratulate the noble Baroness, Lady Scott, her committee and their clerking staff on a very thought-provoking and excellent report. I note that all the issues teased out in the report are still very much live following the June vote. It is a wide-ranging report, but I shall make just three points tonight.
The first is in respect of recommendation 4, which would see a scheme that enables farmers,
“to save in times of plenty and withdraw in times of need”.
It was heartening to read in the Government’s response what I certainly interpreted as general enthusiasm, and certainly what seemed to be praise, for the Australian farm management deposits scheme, which goes a good deal further in providing support to protect farming than our own current tax averaging measures.
Of course, there is another volatile business operating in the UK, which has done so for hundreds of years, that is important to Britain and which has an excellent method of allowing participants to save in times of plenty: my own alma mater, Lloyd’s of London. The personal reserve funds system has been successfully in place for decades. I cannot help but think that something closer to this, rather than the tax averaging scheme, would be immensely beneficial to the farming community. It is well understood by the Revenue, and I dare say it is understood by one or two farmers as well. Can the Minister confirm that this analogous and successful situation will be considered when—and I quote from the Government’s response to the report—
“Going forward, the Government will work with industry to develop new arrangements for agricultural support”?
My second point relates to recommendations 7 to 9, which are all about new financial tools. I have spent a lifetime in the City surrounded by financial tools, and therefore I have a pretty clear idea about who often makes the money out of these tools. I am of course very worried about that. I therefore plead that any tools that are dreamed up are very simple. I must say that the vast majority of farm offices will be like ours—ours is in the kitchen and takes place usually on Sunday mornings; it is not well set up for analysis or a complicated financial tool. I certainly would be worried that these tools could be vehicles for egregious profit by the private sector. In other words, we do not want the lions of Goldman Sachs to eat the shepherds of Perthshire.
I observe that there are already two types of volatility to be addressed. The first is market volatility. I feel that the personal reserve scheme, similar to the Australian one and indeed our own Lloyd’s arrangements, would be a very good start for dealing with that. The other volatility relates to natural perils, which is a fancy way of saying storms and floods—another area I have spent a lifetime fiddling around in.
About 10 days ago, the Minister and I had a brief exchange about Flood Re, a new government-backed scheme that provides effective and cheap insurance to private home owners in flood-prone areas. The scheme only started in April this year, and the Minister has reported to the house that 53,000 policies have already been ceded to Flood Re. It is a collaborative system between the insurance industry and government. It is very interesting and, at this early stage, appears to have borne fruit. The noble Baroness, Lady Scott, touched on my second point, but would the Minister agree with me concerning Flood Re, and would he feel that this might be the basis of an approach for the farming community going forward to manage the natural perils risk?
My third and final point concerns recommendation 11. Here, the noble Baroness, Lady Byford, was ahead of me a bit. The recommendation concerns agricultural research. I note again the very warm statements in the Government’s response, and I commend them for that. I am a great believer in research.
This evening, there has been no mention of the forestry industry in the UK, with its more than 40,000 jobs, and adding, as it does, more than £1.7 billion to the UK economy every year. I should say that, only a few months ago, I would have had to declare an interest as a member of the council of the Royal Scottish Forestry Society, but I came off that just over a year ago. This industry, which I love, is greatly threatened by tree disease, pests and the grey squirrel. I have to declare another interest as the chairman of the United Kingdom Squirrel Accord, which consists of 34 UK bodies including the Governments, the main governmental bodies, and voluntary sector and private bodies, and is trying to deal with the squirrel problem. Trees between the ages of 10 and 40 are being killed off by grey squirrels ring-barking trees, and this affects up to 70% of plantations. This has effectively stopped forestry plantations of broad-leaf trees on a commercial basis in the south-east of England. The disease, pest and grey-squirrel issues are examples of issues that we can respond to through scientific research—something that I know the Minister is very well aware of and I have had many discussions with him about it.
So I close by asking the Minister whether he agrees with me about the importance of recommendation 11, and whether he would give some hope to the forestry industry that their case for research money to deal with their threats is under consideration.
Lord Trees (CB)
My Lords, it is a pleasure to contribute to this debate led by the noble Baroness, Lady Scott. I would like to acknowledge her leadership of the committee, on which I have been privileged to serve, and her leadership of this inquiry. As a new boy coming to this House, it was my first committee and she has certainly taught me how to chair a committee.
Farming is and always has been a challenging business, but the industry has been under particular pressure in recent times. This debate is not about Brexit—noble Lords may be grateful for that—and it is probably true to say that, while Brexit may focus and accelerate changes in farming, a major evolution of the industry is inevitable and would have to happen anyway.
In the EU Committee report, in which I participated, the challenges of agricultural economics divide into two issues: what I think of as macro issues, which are beyond the control of individual farmers, and micro issues, over which farmers have some control. With respect to the former, our report highlighted a number of major issues. These include, among others, politically motivated policies such as the recent sanctions against Russia, which impact international markets and adversely affect market opportunities; adverse weather events; and changes in international demand, for example the reduced demand in China for milk and milk powder. In these instances there are good reasons for Governments to intervene and introduce mitigation measures. Immediate aid may be occasionally justified—for instance, the recent EU package of €1 billion in two tranches in 2015-16, particularly for the dairy sector, which was very welcome. But, as our report recommends, they are justified only in certain situations.
There are, however, more structural measures that can be introduced to aid farmers to cope with price volatility. Tax averaging, which was announced in the 2015 Budget, is a welcome means of smoothing the adverse year-on-year fluctuations in the profitability of farming enterprises. Another measure, not yet available but which was alluded to by my noble friend Lord Kinnoull and which was highlighted in the committee’s report, is the creation of public investment deposit schemes. This is a financial measure to allow farmers to bank profits in good years, earn interest and then withdraw funds in bad years to top up income. This seems a very fair and reasonable mechanism and has, for example, been introduced in New Zealand as the income equalisation scheme and in Australia as farm management deposits. Have Her Majesty’s Government seriously considered the possibility of introducing this type of scheme here?
Certainly the biggest cushion against price volatility are the direct farm payments paid under CAP. In England, the Farm Business Survey indicated that in 2014-15, 56% of farm income was derived from direct payments under CAP. Let me make it clear that I have huge respect and admiration for the hard work and commitment of our farmers, but, as has already been said, this degree of subsidy and the reasons for which it is given are increasingly difficult to justify. It is likely that the scale and nature of this support will change post-2020 and that other solutions for coping with price volatility will be essential.
Turning to the micro issues over which farmers have some control, it was clear from our inquiries that the economic efficiency of farms in the UK is highly variable. We also heard evidence that price volatility is no bigger a problem now than it was historically; rather, the major problem recently has been sustained low prices, as the noble Baroness said. The costs of production vary substantially between enterprises, which means that the more competitive can withstand lower prices while others struggle. It was even suggested to us that the levels of subsidy have not been helpful in incentivising innovation and increases in efficiency. One notes, for example, that total factor productivity in agriculture in the United Kingdom has risen markedly more slowly over the past 20 years than in other comparable countries, including some within and others outwith the EU.
Key measures to enable greater efficiency have already been mentioned by other noble Lords. They include increased advice and information with respect to both the technical and business aspects of farming, greater communication of exemplars of best practice and the benchmarking of key parameters such as costs of production. Some of these can be achieved by farmers operating co-operatively, although we heard that on occasion there was some reluctance to share commercial data—which may be understandable but is self-defeating. Some of this knowledge transfer is achieved through national systems and consultancy services, but, where farmers have to pay for services, their uptake may be less than optimum. The example of Menter a Busnes in Wales is impressive and I note that generally the organisation does not charge farmers for its advice; it is funded by winning competitive tenders from the Welsh Government or the EU.
Notwithstanding measures to increase competitiveness, it is a sad reality that some enterprises will cease to be viable, as indeed has already happened. The chill wind of economic pressure will surely blow even harder in the coming years, but it is incumbent on us to mitigate the social consequences of that while moving to a more sustainable industry. In that respect, what are the Government doing to enable those farmers who wish to leave farming to do so with dignity and with appropriate support which recognises their profound historical contribution to our country?
Farming support from the taxpayer will increasingly move to support the important provision of other public goods, as has been referred to by several noble Lords. This will justifiably recognise and reward the crucial role of farming in the stewardship of our countryside as well as buttressing the rural economy. But we also should not lose sight of the critical role of farming in producing food of quality to high environmental and animal welfare standards. Research and the application of research into such things as GMO, improved animal health and precision farming, among other things, offer great opportunities to maintain or increase food production while freeing up land for other public good purposes.
Our food is incredibly cheap and we need to recognise that and value it more. We waste obscene amounts of food in the home—as an earlier speaker mentioned—with a report by WRAP estimating that by weight some 70% of UK post-farm gate food waste is produced by households. In the pursuit of even cheaper food it is tempting to rely increasingly on imports, but in doing that there is a risk of simply exporting poor environmental care, bad animal welfare and exploitative wages, as well as increasing political vulnerability. While we will never be self-sufficient in food, I maintain that it is strategically and economically important that we produce as much of the food we need as possible in a sustainable way, balancing the competing needs for land. That is not only good for food security but enables us to control all aspects of how our food is produced. To this end we need a dynamic, innovative and above all competitive farming industry. I am sure that we have the farmers who can deliver that and meet the challenges ahead.
Lord Selkirk of Douglas (Con)
My Lords, it is a great pleasure to follow the noble Lord, Lord Trees, who has enormous knowledge of this area, perhaps stemming from his experience as a professor of veterinary medicine. Perhaps I may say that it is also a great pleasure to follow the noble Baroness, Lady Scott of Needham Market, who has put so much of her valuable expertise into this report. I declare an interest as the chairman and director of a small family company which owns a number of fields and currently has an interest in possibly one wind turbine. In this capacity I receive a small annual salary.
I start by mentioning that at present there are somewhere in the region of 476,000 employees in the agricultural sector and other closely related areas of work, which is a substantial figure. As well as helping to provide us with a supply of safe and nutritious food, farmers also play an extremely important role in the way our land, the wider environment and the rural economy are managed. Last year, CAP payments to the United Kingdom totalled around £3 billion. After the referendum result, as has been mentioned, the Chancellor promised in August that the Government would replace any financial shortfall suffered by farmers as a result of leaving the EU until the end of the decade. However, farmers will need continuing reassurance that the Government are working on a plan that will give them reliable support into the next decade and beyond. There is also the issue of access to the single market and to the migrant labour on which many farmers depend.
In their response to our report, the Government said that it was premature to comment on what a future package of measures would look like. However, can the Minister give us an assurance that the Government will honour the commitment given by the Prime Minister that British farming, which they described in their response as,
“the bedrock of the food and drink industry”,
will remain profitable, competitive and resilient?
Perhaps I may press the Minister on two aspects of future policy planning which came to the fore as the Energy and Environment Sub-Committee took evidence on how to create a more resilient agricultural sector and formed the series of recommendations contained in the report. I want to concentrate on a subject mentioned also by the noble Baroness, Lady Byford, and the noble Lord, Lord Trees: the call for more efficient ways to spread knowledge gained from research throughout our farming communities. This involves the important issues of benchmarking against external criteria and improved delivery of IT services such as broadband throughout the country. The report recommends:
“The UK Government should identify examples of best practice of knowledge exchange and dissemination wherever it is to be found and actively support them”.
The inquiry found that facilities for the exchange of knowledge and training differed throughout the UK. On page 51 of the report, the committee states that it was impressed by the knowledge exchange services offered by Scotland’s Rural College, which encompasses many campuses within Scotland. The college combines research, education and consultation for rural clients.
Can the Minister report on what progress is being made in this area so as to ensure that when research produces results that could benefit the wider farming community it can be swiftly and effectively broadcast and used to help establish best practice? Is enough encouragement being given to the farming community to promote benchmarking? The report states:
“There is a long term business case for equipping farmers in all parts of the UK with the knowledge and expertise to calculate and manage their costs of production and overheads. Farmers should share their data with their peers to facilitate this benchmarking”.
During the committee’s inquiry we were told that Defra was working on a 25-year plan dealing with food and farming and on another, separate 25-year plan covering the environment. Other evidence received by the committee stressed that agricultural and environmental matters are strongly interlinked. The Minister at Defra, George Eustice MP, agreed that the agriculture plan would touch on environmental matters but said that the environmental plan was,
“the right place to deal with all the environmental issues, including looking at things such as soil, climate change, water resources and everything else”.
However, the committee came to the conclusion that, given the significant connections and interaction between agriculture and the environment, these two policy areas should not be treated as separate entities. It was concerned that there appeared to be insufficient understanding of the way in which the two areas were interconnected and of the value of natural capital, meaning the world’s stock of natural assets such as soil, air, water and all living things.
As a result of the referendum, we realise that there will have to be a pause in work on the 25-year plans. The Government have said that they will now take stock and consider any new arrangements. I note that in their response to the report they say that agriculture and environment policies are interconnected. Notwithstanding the change in circumstances, can the Minister assure us, in so far as he is able to today, that it will still be possible for the Government and Defra to continue to proceed on the basis of developing a highly desirable unified approach to the extremely important areas of agriculture and the environment?
Baroness Parminter (LD)
My Lords, like others, I commend the noble Baroness, Lady Scott of Needham Market, and her committee on this report. Like the noble Baroness, Lady Byford, I was rotated off the committee, but I have benefited from her chairmanship in the past. I thank her for that as I do for the report. There is always a bit of a delay in debating our committee reports. In the case of this one, some rather significant events have taken place in between and a whole new set of challenges has been put on the plate of agriculture that it will have to contend with.
As the committee says, price volatility is an inherent feature of farming and will remain a normal risk to be managed by farmers as part of their business strategy. What is clearly not a normal risk is whether we remain a member of the single market, given that if we leave the EU customs union trade will be subject to tariffs and that, after decades of tariff-free access, prices will inevitably rise.
If we leave the single market, UK farming will be particularly badly hit, given that farmers generally face tariffs that are far higher for agricultural produce than for any other types of goods. Most farms are small businesses operating on tight margins and some, especially in the livestock sector, are dependent on exports. Tariffs can be hefty: 47% on milk, 40% on cheese, 59% on beef and 40% on lamb. Arable producers face levies of 40% on unmilled wheat, and around 10% on fruit and vegetables. It is a huge issue for UK farm businesses, with 82% of our meat exports going at the moment to the EU, as do 75% of our dairy exports and 74% of our cereals.
This is to say nothing of the loss of the protection against cheap foreign imports from which UK agriculture has benefited through high EU tariffs and strict rules, such as those around the use of growth hormones. In particular, the UK beef industry benefits from the protection against imports from countries such as Argentina and Brazil. If we were to sign free trade agreements with other beef-exporting countries, those tariffs and rules would inevitably be in the mix.
Of course, the other major factor—in addition to whether we remain in the single market—that will affect the resilience of our industry in the future is, as other noble Lords have mentioned, the replacement for the CAP. The Government have promised to guarantee spending at current levels until 2020—but, given ministerial views, it seems unlikely that subsidies will be maintained at the same level indefinitely. For those of us who recognise the environmental issues around the common agricultural policy, of course it is time for a change. But for an industry with notoriously low margins—with Defra reporting that 70% of mixed and grazing livestock farms generated incomes below £25,000 in 2014-15—any rapid reduction in agricultural support would have an adverse impact on many farmers’ ability to survive. Moreover, any removal of subsidies would have to take into account the fact that European farmers would still receive generous state support, thereby giving them a competitive advantage.
The report makes some incredibly useful recommendations in the context of where the CAP moves next. This is still very pertinent as we look to what we in the UK determine for our own agricultural policy post-CAP. It highlights the failings of the current subsidies and points the way forward with, as my noble friend Lady Scott of Needham Market said, the payment for provision of public goods. It is an incredibly important recommendation that was prescient when it was made.
The report coherently argues that agriculture has a critical role in the provision of public goods, such as high food safety, animal welfare standards, environmental stewardship, woodland management and footpath management. It contends that this role should be recognised in policy and the funding framework and that the replacement of the common agricultural policy should be based mainly around the provision of public goods.
I say to the noble Baroness, Lady Byford, that I do not necessarily see such a tension between the provision of food security and public goods. If we are providing food for our nation that is healthy, from animals that are not routinely overdosed with antibiotics, and from land that is not subject to the overuse of nitrates, pesticides and other inputs, that is a provision of a public good: public good being healthy food as well as the other public goods around access to land, land management and woodland creation. So I would not say that there is necessarily a tension there, although I recognise that there are competing demands—to which the noble Lord, Lord Trees, rightly referred.
Baroness Byford
The reason I mentioned that was because, when the CAP was introduced, it was actually to encourage farmers to produce more food. Then we ended up with food mountains, and that is why the CAP’s direction changed. It really goes back to square one, because there are people who believe that we could produce food without having any subsidy and that all the subsidy, or whatever it might be, should just go for environmental development. That is why I said that, in some ways, there is a slight contretemps between the two. I do not see it as a long-term problem, but it is a real issue.
Baroness Parminter
I am very grateful for that response. I absolutely echo the noble Baroness’s understanding of the historical position and where the CAP came from. Equally, I agree that there are some elements in the current debate about the future of the common agricultural policy in the post-Brexit context who think that the money should go just to the environment. My position is that we have to have the provision of healthy food and we have to have environmental protection. It is about producing both healthy food and a healthy environment.
For me, one of the ways that this has to be explained to the public—and, as my noble friend Lord Teverson rightly said, there is not going to be any political will to deliver subsidies because a lot of people see farmers just as an industry in the same way as aerospace or the car industry are industries—is to say that farmers are receiving support for providing a new national health service, which is healthy food, healthy environments and access to the countryside. If we can get to a language that talks about farming support for a national health service, that is a way in which the public might be persuaded and political will might therefore be delivered, in order to guarantee the funding that farmers need to survive. As I mentioned, I absolutely agree that the idea that farming can survive without subsidies, particularly in areas such as the uplands, is cloud-cuckoo-land. As other Members asked, how and when will the Government consult on designing their post-2020 agriculture policy? I know we ask this question at every debate but it is important to keep reiterating it.
Another thing the report is equally clear on—it was just mentioned so eloquently by the noble Lord, Lord Selkirk of Douglas—is the need to integrate the policy with the proposed 25-year environment plan. The report well makes the case that they should dovetail so that the agricultural policy can support the delivery of the 25-year plan and display a much more explicit link between outcomes and the use of public funds. To that end, will the framework for the plan be published this side of Christmas, as has been suggested? Will it contain clear targets that will go on to be enshrined in legislation for improving the quality of our air, water, biodiversity and woodlands so that the public can support the farmers in their role as providers of the healthy food and healthy environment on which we all depend?
Lord Grantchester (Lab)
My Lords, this is an excellent report and it has been an excellent debate, and I thank all contributors. I start by declaring my interest as a dairy farmer in receipt of EU funds, a past chairman of a farmers’ co-operative and a previous owner of a farm shop.
My experience in dairy farming could be characterised as periods of sporadic profitability interspersed with frequent challenges. There is disease, where I could name foot and mouth and the current spread of TB among others. There are political challenges, due to changes in deregulation and CAP support as well as the present Brexit uncertainty. There is severe weather, such as storms and climate change experiences over the past few winters. “Quite normal then”, I expect your Lordships are thinking.
The agricultural market could be characterised as one where the farmer generally has little influence in the supply chain, the market does not really work for anybody, cost and price in commodities are largely decoupled, world trade is distorted by differing support for agriculture by all Governments, and environmental and international developments drive wider and deeper challenges. Some of this analysis was mentioned by the noble Lord, Lord Trees, and I am grateful to him for drawing attention to the various smoothings in the volatility of returns over the years.
While no one is proposing a return to product price support, the result has been that the prices of agricultural produce have been driven down below costs of production, whereby direct income support through the BPS has become a larger and larger percentage of overall returns. This has not been conducive to investment. Where there have been periods of profit, this has often resulted in oversupply, initiating another downturn, sharp price reductions, another loss of good people and skills, poor levels of behaviour in the supply chain and further unfair shifting of business risk. This makes improving the ability of farm businesses to cope with unpredictable price and cost movements a key priority.
I thank the committee for this excellent and timely report, and thank the chairman, the noble Baroness, Lady Scott of Needham Market, for her comprehensive introduction to our debate. One significant conclusion is that adverse effects at farm level are caused more by unanticipated periods of sustained low prices than increases in levels of price volatility.
The UK’s decision to leave the EU will bring additional uncertainty to an already volatile marketplace. Following the vote, the weakening of the pound has supported farm output prices but risks the increase in costs of key inputs such as fertiliser which are themselves globally traded commodities. Inflation generally is likely to increase by 3% next year. Interestingly, the Agriculture and Horticulture Development Board has produced an analysis that examines five possible trading relationships between the EU and the UK.
The noble Baroness, Lady Parminter, spoke of the huge impact of tariffs following Brexit. I am grateful that the Government have announced that current levels of support will continue until 2020, as was also welcomed in the remarks by the noble Lord, Lord Selkirk of Douglas, while ongoing challenges in the level of support were highlighted by the noble Baroness, Lady Parminter. This support will provide a steady state, to a certain degree, allowing serious consideration of the issues raised in this report following the Brexit vote.
The report contributes by providing answers to the main challenge of designing a new architecture needed to replace the CAP and to provide shape to the Government’s 25-year strategy for agriculture. This challenge represents a unique opportunity to rethink the UK’s food system to make it fully responsive to the exacerbating predicaments of inadequate nutrition and unfairness in the supply chain, as well as to the environment and the impacts of food production on climate. This is highlighted in recommendation 14 of the report.
I congratulate the noble Baroness, Lady Byford, on becoming president of LEAF. I very much value the words of the noble Earl, Lord Kinnoull, and those of the noble Lord, Lord Selkirk, on the interlink between the environment and agriculture.
The UK certainly needs a comprehensive and coherent food and farming policy. The backdrop of a more sustainable agriculture will be provided by continuing to move from direct income support towards a better recognition of public goods being adequately valued and rewarded, as proposed by recommendation 15 and debated tonight between the noble Baronesses, Lady Byford and Lady Parminter.
Concurrently with this, improving the competitiveness of agriculture within the marketplace, and capturing these returns, certainly needs to be addressed. This cannot be overstressed. I urge the Minister and the Government to consider this most carefully, and I draw attention to the recent report of the Agricultural Markets Task Force, set up by the Agriculture Commissioner, Phil Hogan, entitled Improving Market Outcomes: Enhancing the Position of Farmers in the Supply Chain. There is a strong need to assess relationships along the whole supply chain. Farmers should not be the main shock absorbers in the supply chain. Unfair trading practices have to be identified and targeted by an effective regulatory framework.
An example of this recently came in a letter, from the food processor Müller Wiseman, introducing a new supply contract with such an element. The European Commission report of 29 January 2016 on unfair business-to-business trading practice in the food supply chain states that,
“one party should not unduly or unfairly shift its own costs or entrepreneurial risks to the other party”.
Although it is not within the Minister’s department’s responsibilities, the extension of the groceries adjudicator role to being able to examine relationships along the whole supply chain could be vital and build on the very successful monitoring of the practices of the retail supermarkets. I look forward to the Government’s response, following the closure of the call for evidence on 10 January.
The supply chain also needs to look at value chain integration, with effective value-sharing mechanisms between each element along the supply chain, to establish a fairer link between producer prices and the added value accruing along the chain. The supply chain needs more diversity, innovation and incentives for improvement. I am glad that the noble Lord, Lord Teverson, in his remarks, drew attention to marketing and adding value.
Co-operation and competition law is another key area for the Government to consider. While the dairy farmers’ processors combined, following the severe crash in farm prices after foot and mouth, to raise the wholesale price to more sustainable levels, the competition authorities found suppliers guilty of combining against the interests of the consumer, who could have had lower prices. The Minister’s department needs to consider carefully the taskforce’s recommendation that,
“the Commission should unambiguously exempt joint selling … from competition law if carried out by a recognised producer organisation or association of producer organisations”.
A large element of all recent reports and recommendations—included here under recommendations 6, 7, 8 and 9—is the promotion of finance instruments to manage the risk and volatility of farmer pricing. The Government’s response is, quite rightly, to proceed most carefully following the anticipated report from EKOS Limited. Availability and expense could prove difficult, coupled to the added risk that is once again pushed on to the farmer. I share here the concerns expressed by the noble Earl, Lord Kinnoull.
Key elements of the report are contained in recommendations 11, 12 and 13, which concern research, training and benchmarking, which were highlighted in the remarks of the noble Baroness, Lady Byford, and the noble Earl, Lord Kinnoull, and data sharing and transfer, referred to by the noble Lords, Lord Trees and Lord Selkirk. The Government’s response is to be welcomed, especially in their commitment to fulfil a broadband universal service obligation by 2020, even though this falls somewhat short of ambition.
A key recommendation of the report is recommendation 3: that the Government,
“should consider how Rural Development funding can be used to accelerate structural change and create opportunities for new entrants into farming”.
The industry and some rural organisations have been slow to recognise this and rise to the challenge of providing advice and schemes to encourage and progress this development, although the noble Baroness, Lady Byford, mentioned some excellent schemes which are just beginning. The noble Lord, Lord Trees, also drew attention to an orderly exit process.
The greater challenges are to create pride and trust in the agricultural industry, to improve its perception and image for the public and to provide attractive career paths and increase the quality of the delivery model. I look forward to the ongoing dialogue over the challenges ahead and welcome the remarks of the noble Baroness, Lady Parminter, that this timetable may be adhered to by the Government. My one question to the Minister is: what are his key elements that are going to deliver change?
Baroness Byford
Before the noble Lord sits down, perhaps I could just correct him. Two noble Lords have mentioned as a fact that I am president of LEAF. I must have expressed myself badly: I have been president of LEAF for the last 10 years and very proud to have been so. I have just handed over to Her Royal Highness the Countess of Wessex, as I am moving on to become patron. I did not want this not to be corrected at some stage but did not like to interrupt either of the noble Lords.
Lord Grantchester
I thank the noble Baroness, Lady Byford, for correcting us. I always had the impression that she was closely involved with LEAF and I apologise for not realising that sooner.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Gardiner of Kimble) (Con)
My Lords, I too congratulate the noble Baroness, Lady Scott, on securing this debate and I acknowledge warmly all that she has achieved during what I might call her term of office. Her committee has produced an excellent report on price volatility and the steps that could be taken to help farmers adapt. The report draws on the experiences of farmers, banks and academia and, as we know, it was published before the result of the referendum. I am conscious that any discussion of the CAP and long-term opportunities for British farming now take place against a very different backdrop. I should at this juncture declare my own farming interests as set out in the register and say that our farming partnership is the recipient of CAP funds.
Farmers in the UK grow the ingredients that underpin our biggest manufacturing sector. Collectively, food and farming contribute £109 billion to the economy, including more than £10 billion from farming directly. British farmers are renowned for the quality of their products, the highest standards of animal welfare, and the traceability and transparency that gives confidence to consumers. They also play a vital role in managing our countryside.
I acknowledge the considerable price volatility that farmers endure. In the last two years the dairy sector has been particularly hard hit, experiencing the challenges of global overproduction, falling demand and the effects of the Russian embargo. These have pushed down milk prices and reduced farm incomes. Some farmers have taken the painful decision to stop producing milk. Others have cut back their production or their plans for new investment. In recent weeks, as part of these volatile market conditions, some processors have substantially raised their farm-gate milk price. Some farmers are receiving more than 30p a litre if they sell direct to supermarkets and specialist cheesemakers. Others are struggling with prices below 20p. The market is complex, with considerable uncertainty for many farmers.
The Government take volatility and low prices extremely seriously. Volatility remains a feature of agricultural markets and I have no doubt there will be further challenges. My noble friend Lady Byford asked about the farm recovery fund. In the last two years the Government have made substantial funding available to help farmers get back on their feet following the severe flooding. Indeed, last year the Government appointed a special envoy at ministerial level to work on the ground with affected farmers in Cumbria and Yorkshire to ensure that support was rapidly delivered and any practical problems could be resolved. I well understand what my noble friend is saying. It is very important that we are as rapid as we can be in helping farmers get back on their feet. The Government will continue to support hard-hit farmers in difficult circumstances, as my noble friend mentioned.
The Government have already taken steps to help producers in one way. We have introduced a new system of extended tax averaging which applies from April 2016. Indeed, in reading the report I note that the committee felt that this was a “positive development”. I am grateful to the noble Lord, Lord Trees, for also highlighting this. This system enables farmers to spread their profits for income tax purposes over five years. These reforms provide extra security to enable farmers to plan and invest for the future. All farmers are eligible and the scheme has been designed to be as simple as possible to operate.
I am grateful to the noble Lord, Lord Grantchester, for his support. My noble friend Lord Selkirk referred to the Chancellor’s confirmation on 13 August this year that to provide more certainty for the agricultural sector all structural and investment fund projects, including agri-environment schemes, signed before the Autumn Statement will be fully funded, even when these projects continue beyond the UK’s departure from the EU. In addition, he guaranteed that the current level of agricultural funding under CAP Pillar 1 will be upheld until 2020, as part of the transition to new domestic arrangements.
The noble Lord, Lord Teverson, asked about a number of points. A further package of EU funding was agreed by Ministers in July. The share of funds allocated to the UK was €30 million. Reflecting the committee’s advice, we are looking to direct some of these funds to support risk management training for livestock farmers to help improve their resilience. We will keep the committee in touch with our plans, including the outcome of the risk management training and the level of engagement by farmers. I think that is a very positive message.
The noble Baroness, Lady Scott, asked about the Government sharing their plans to develop domestic alternatives to the CAP. Early guarantees on funding have been made. Supporting our farmers and protecting the environment will be an essential part of our exit from the EU and I look forward, as do all my ministerial colleagues, to working with industry, rural communities and the wider public to shape our plans for food, farming and the environment outside the EU. We will be launching a major consultation on what that future is to look like. I am not yet in a position to oblige the noble Baroness, Lady Parminter, with the exact timing, but we are well seized of the importance of this work—more about that in a moment.
British producers are dedicated to their farms, their industry and their way of life. I know many of your Lordships from the countryside know how much dedication there is. There is also huge dedication to their livestock. One of the things that we at Defra are remarking to ourselves is the huge importance of animal welfare standards. We think this is an essential part of brand Britain. At home we have 65 million consumers on the farmers’ doorsteps who I believe increasingly value the high-quality food that is here. Indeed, there is a growing global appetite for UK food and drink as populations in major developing countries become more affluent.
As we negotiate the terms of our exit, we need to grasp the opportunities it presents to secure a vibrant future for British farming. I believe a desire for a strong farming sector and a well-managed environment are compatible, and we will work towards that end. Indeed, I reassure my noble friend Lord Selkirk and the noble Baroness, Lady Scott, that the need for a joined-up bold vision is what has inspired the 25-year plans that we will publish for food and farming and the environment. Defra and its organisations such as the Environment Agency, APHA, the RPA and Natural England will in future be more integrated, operating towards clear long-term goals.
As the noble Baroness’s report has shown, science and technology have huge long-term potential to boost efficiency and profitability on farms. Indeed, my noble friend Lady Byford stressed this with impressive figures for both public and private investment. We in this country are fortunate that we have some of the most visionary scientists in the world at research centres such as Rothamsted Research and the John Innes Centre. I say to the noble Earl, Lord Kinnoull, that I was delighted to see the research at John Innes that had been commissioned by Defra on disease-resistant ash trees. I believe this will be part of the research that is going to be so beneficial to us. As Minister with biosecurity responsibilities, I am very conscious of tree diseases and pests, whether insects or mammals. We want a glorious treescape in this country, and the work we are doing on tree resilience and tree health is an indication of the importance we place on this. We also have world-famous colleges and universities like Cirencester and Harper Adams training a new generation of farmers.
As has been mentioned by my noble friend Lady Byford, the Government are putting £160 million into the agritech strategy to make the UK a world leader. Innovation centres for livestock, crop health, precision engineering and data will help to transfer the latest knowledge and techniques from laboratory to farm. We are developing a food innovation network to ensure that ambitious entrepreneurs are linked up to the latest scientific knowledge. We want our farmers to have access to the best technology available so that they can remain competitive and contribute to the growth of the rural economy. In addition, we are improving our resilience to animal disease by investing in state-of-the-art laboratories and the upgrade of our biocontainment facilities at Weybridge—I am going to visit Weybridge on Friday—which will strengthen our ability to fight diseases like swine fever and avian flu.
In a world of volatility but also great opportunities, the people who will reap the fullest advantage will be those with skills, innovation, investment and indeed ambition. The best managers in farming are investing in developing expertise, adopting the best available techniques and harnessing the right technology to boost productivity and profits. We would like to see this practice spread right across the industry, which I hope will give reassurance to my noble friend Lord Selkirk.
The Government are seeking to raise skills levels across the workforce by trebling the number of apprentices in food and farming. We need to examine new models of farming such as share farming or franchises, which will allow new people and ideas to come into the industry. I am so pleased that my noble friend Lady Byford mentioned my noble friend Lord Plumb. My goodness me, what a friend he has been to agriculture and the countryside throughout his long life. The report raised some valuable questions about tenancies. We want a viable future for all farm businesses—including owner occupiers and tenants—as part of a strong, dynamic and flexible British farming industry.
The report makes an excellent case for exploring new financial instruments—something that the noble Lord, Lord Teverson, also highlighted in his speech, and I welcome him to his new post. These could help farmers access new forms of funding to modernise and invest. We need more capital going into the right investments to improve productivity and resilience in farming and throughout the food chain. As has been mentioned, the Government have appointed EKOS Ltd to identify the potential for loans, guarantees and equities in UK farming. We expect to receive its report within the next few weeks.
The noble Earl, Lord Kinnoull, and the noble Lord, Lord Trees, referred to wider international models such as the Australian farm management deposit scheme, which was highlighted in the committee’s report. I also note the Canadian scheme. The noble Earl also highlighted Flood Re as a template. It was undoubtedly a successful outcome of government working with industry, and we are keen to look at whether insurance schemes could be used to benefit the farming industry.
As the committee recommends, the Government have worked closely with the AHDB and the financial sector to explore the potential for futures markets in UK farming and other tools for managing risk. As was mentioned by the noble Baroness, Lady Scott, and the noble Lord, Lord Grantchester, on 14 November the EU markets task force published a report aimed at helping farmers absorb the shock of price volatility or prolonged periods of low prices. In order to stimulate futures markets, it recommends more awareness-raising and training in the farming community and farmers’ organisations and more reliable market data in which the markets will have confidence and faith. We will study the report with interest, assessing with the industry which elements would be most helpful for British farmers. Again, spreading knowledge of this will be immensely important.
My noble friend Lord Selkirk and the noble Lord, Lord Grantchester, referred to broadband. As I am a member of the technical skills task force, I am very conscious of the importance of this to rural areas. Public investment in improving broadband is nearly £1.7 billion. My department is working closely with DCMS and its delivery body to press for improvements in coverage, and I am personally well aware of enhancing in rural areas both mobile connectivity and broadband. We also need to be improving planning and regulatory conditions for rural businesses. This would help to create a highly skilled rural workforce, creating strong conditions for rural business growth and making it easier to live and work in rural areas, particularly by overcoming housing constraints and improving access to affordable childcare for working parents.
Farmers should receive a fair price for their produce, and the Groceries Code Adjudicator has an important role to play in changing behaviours in the supply chain—the noble Lord, Lord Grantchester, referred to this. The Government have launched a call for evidence to explore the case for extending the adjudicator’s remit. This recognises the concerns raised by other suppliers in the grocery sector—particularly primary producers and farmers—who are not covered by the code. The Government want to do all we can to help these businesses, and we look forward to hearing their views and others from right across the agrifood supply chain.
The noble Baroness, Lady Parminter, and the noble Lord, Lord Teverson, in speaking about the post-Brexit era, raised the importance—the supreme importance—of international trade to our country. Indeed, it is at the heart of our approach. Growth in world trade and prosperity will bring substantial opportunities to sell our high-value, high-quality food and drink as long as we are at our most resilient and competitive. That is why, in the coming weeks and months, Ministers will be crossing the globe banging the drum for great British food and drink. Indeed, my honourable friend the Secretary of State returned from China only last weekend, where she emphasised the importance of our trading relationship and promoting the quality and safety of British food. She also met Chinese food businesses to promote our food industry and support inward investment.
Last month, in Paris, the Secretary of State launched an ambitious new action plan to increase exports and bring a £2.9 billion boost to the UK economy. The new international action plan for food and drink identifies nine markets across 18 countries with the best potential for growth, including India, the USA and Canada, China and the Gulf. Across these countries, work is under way to secure new access—notably, market access for beef and poultry to Japan, lamb and beef to the USA, and pork to China. Together, over the next five years the Government and industry will help exporters sell more overseas and provide business support, mentoring and training to give new companies the confidence and skills to start exporting.
I am conscious of what we owe the noble Baroness and her committee members for their invaluable report. It was very encouraging to hear that my ministerial colleagues have already been picking up and running with it—George Eustice has responsibility for food and farming in particular. I think this shows the importance of the work of this House and your Lordships in this regard. The issues that have been raised are central to securing a resilient and competitive UK farming industry for the longer term. Farming is the backbone—that was my word, although I do not mind bedrock—of rural Britain, producing food and the stewardship of the countryside, and importantly the environment. This Government are absolutely clear about the importance of vibrant and sustainable rural communities that are sustained on a strong economy, making them great places to live, work and visit. Our task is to put our shoulder to the wheel to ensure that we leave the European Union in the best way we can for our country. We must ensure that Britain’s agricultural and horticultural sectors have a positive and vibrant future.
Baroness Scott of Needham Market
My Lords, I thank everyone who has participated in this debate. I had not thought about it until my noble friend Lord Teverson mentioned it, but this might be the last proactive report of the sub-committee. It has been a tribute to the huge amount of farming experience that exists both in this House and in the committee. Nowhere could that be better seen than in the noble Lord—who I will describe as my noble friend, because I think he is—Lord Curry of Kirkharle, without whom I think our committee report would have been much poorer. Unfortunately, he was unavoidably detained on his way to the debate this evening and was unable to take part. I think we are the poorer for that.
I was very heartened to hear about the Government’s commitment to the agritech strategy because this general theme of the importance of research, data-sharing, knowledge transfer and innovation was recurring through every speech. When members of the sub-committee went on a site visit to see a young farmer brimming full of ideas and innovation, we asked him where he was getting them and learning and he said “YouTube”. His ideas are coming from around the world. It is a very good example of the importance of good rural broadband and what you can do with it, as opposed to broadband which takes eight hours to download a two-minute video. Good, superfast broadband is essential.
With regard to financial measures, I hear and have a lot of sympathy with the point made by the noble Earl, Lord Kinnoull—that most farmers are small businesses and complex financial instruments are simply not going to be of help to them. On the other hand, there may be others that do, so it is about the appropriate level of tools. It is certainly almost an extension of the tax-averaging into something like a New Zealand, Australian or Canadian deposit system, which seemed to have support from around the House on the Joseph’s lean-and-fat-years principle.
The Minister has heard the very strong feelings from across the House about the need to integrate the 25-year environment and farming plans. It does seem odd that the same department cannot integrate the two plans, because to us they are inextricably linked. That is particularly important as we move into the post-Brexit environment. If farmers are to receive considerable financial support from the public, the Government will have to make the case and explain why the money is going to them rather than the health service, education or anything else. That can only be done by framing the debate within this whole question of public goods. The Minister will have heard the very strong views about that. I again thank the Minister and everyone else for participating in this debate.