Rules for Direct Payments to Farmers (Amendment) Regulations 2020

Baroness Bakewell of Hardington Mandeville Excerpts

Tuesday 3rd March 2020 Grand Committee

[Lord Jones (Lab)]

My Lords, it is good to follow the noble Baronesses, Lady McIntosh and Lady Byford. I thank the Minister for his considered introduction to these detailed and complex SIs.

It is clear that the department has gone to some trouble to be helpful in its Explanatory Memorandum. Thanks should be given for that, but to the uninitiated lay man these SIs remain complex. For example, the explanation of Article 21, such as it is, goes from page 6 right through to page 7 of the instrument. Page 15 of the Explanatory Memorandum refers to the challenging horizontal regulation, which the Minister tangentially referred to. He might wish to give further explanation to those who might not know about the horizontal regulation. Page 26 of the instrument refers to the 67 permitted varieties of hemp. My challenge to the Minister is: which one does he recommend? Is it Fedora or Silvana? He does not have to answer that, but he has so much insight into the industry that he or his officials might have a recommendation.

These SIs affect the day-to-day lives of thousands of our farmers. They might farm few or many acres. Bearing in mind the humanity of the situation and the personal anxieties that have occurred or might well occur, do he or his officials have an estimate of the total overall direct payments annually? Does he know how much money is made over to farmers in a given, and the most recent, year? How many farmers receive payments—one presumes thousands? Does he have a figure regarding these questions for Wales?

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords I am grateful to the Minister for setting out so clearly the details of these two statutory instruments and for his time, and that of his officials, in providing a briefing last week. I have listened to the knowledgeable contributions of other noble Lords; this is a complex issue and one of the few where I wish I were a farmer. During our debate at Second Reading, we strayed into areas covered by the Agriculture Bill which had relevance to direct payments. I do understand that, due to the Brexit date of 31 January, the made affirmative process is needed to ensure that farmers get the payments they deserve, and are relying on, in a timely manner. Many of your Lordships would not have started from here, but here we are. We must make the best of it and ensure that our farmers do not suffer financially this year.

The EU makes CAP payments in arrears, to the UK Government and not to farmers themselves. As the noble Baroness, Lady Byford, has said, the euro to pound exchange rate is important during this process: I understand that this has previously been set in September each year. However, we were told at the briefing that this exchange rate will be calculated “soon”. Can the Minister be more specific on when soon will be? There are a number of aspects to these payments, including the young farmers’ scheme to encourage new entrants into farming. Farming is a vital industry on which we all rely, not only for the management of the land but to provide some of the food we eat. Despite what government advisers may think, farming, and indeed fishing, is a vital component in both social and economic prosperity. The basic payment awarded to young farmers, classified as newcomers under 40 years of age and established in the previous five years, is increased by 25% for the first five years and 2% of the national budget allocation is used to finance this supplement. This payment comes on top of other measures young farmers can benefit from under previous rural development programmes. Under the EU, this payment was mandatory for member states. Can the Minister give reassurance that this payment will continue, despite the leaked information over the weekend? I welcome the changes to guidance for young farmers, and the removal of the need for new entrants to produce a yearly certificate of proof of their youth. This change in the bureaucracy is welcome and I look forward to more of this in the Agriculture Bill.

At Second Reading, we debated the environmental land management schemes which are currently being piloted and are due to begin rollout in 2024. Under the previous EU regime, the greening scheme gave the farmers involved, in addition to the basic payment or the single area payment, an additional payment per hectare for using climate-friendly and environment-friendly farming practices. This was previously 30% of the national funding allocations for this greening payment. As the Committee has already heard, this included crop diversification, maintaining existing permanent grassland and maintaining an “ecological focus area” of at least 5% of the arable land. I am sure all noble Lords are aware that stiff penalties existed for failing to meet these greening requirements. Are these previous greening schemes the ones now being replaced by the environmental land management schemes? Is the money received under ELMS by farmers who previously participated voluntarily in the greening schemes likely to be equivalent to, more than or less than what they could have expected to receive previously?

Lastly, I understand that the payments due to be made under the Bew review do not form part of these two statutory instruments. Scottish and Welsh farmers are keen to know when these payments are likely to be made. When will the Bew review money pass through the statutory process and arrive with farmers? I look forward to the Minister’s response to this debate and am happy to approve these two statutory instruments.

[Lord Grantchester (Lab)]

My Lords, I thank the Minister for his clear introduction to the order before the Committee today. I also thank him for making himself available for the meeting he convened with the noble Baroness, Lady Bakewell of Hardington Mandeville, and myself in connection with these instruments. The regulations on the working of the CAP can have certain peculiarities. I am aware of many of these and declare my interest as a farmer in receipt of EU funds.

As the Minister explained, through the parent Act, the Direct Payments to Farmers (Legislative Continuity) Act 2020, and the withdrawal agreement, these regulations put the existing EU payment schemes into UK law to maintain continuity in the agricultural sector for the year 2020, pending the introduction of the Government’s new regime in the Agriculture Bill, presently in the other place. As he emphasised, this will not entail any changes in policy but will merely put the regulations on a UK basis, correcting inoperabilities and providing necessary continuity and certainty to the agricultural sector. Any disruption could have a severe impact on farmers’ financial viability, especially in Wales and other more disadvantaged areas, as my noble friend Lord Jones highlighted. One or two explanations necessarily need further clarity, which it would be helpful if the Minister provided. The noble Baroness, Lady Bakewell, and others drew attention to many of these at our meeting.

The noble Baronesses, Lady Byford and Lady McIntosh, brought up the dreaded three-crop rule and the necessary financial disciplines being maintained by the RPA. To avoid the UK being drawn into the multiannual EU budget cycle, the withdrawal agreement disapplies the 2020 claim year from the implementation period. The payments will become the responsibility of the Treasury, yet the payment exchange rate, normally set each year in September, has yet to be set. Given that the EU will no longer be reimbursing the UK Government, could not the same payment in pounds be maintained as was implemented in 2019? Would that not provide further simplicity and clarity?

One of the challenges that Defra endured every year was having to make payments and then see them being examined by the EU, which led to disallowance from retrospective reimbursements when the EU determined that a member state had not made payments in conformity with the regulations. The Minister will confirm that this often came to many millions of pounds each year. I am sure that the Minister’s department will rejoice at disallowance disappearing; nevertheless, these are public funds and must be administered effectively. The memorandum accompanying the regulations does not entirely clarify whether there will be a distinct, similar process conducted over the year 2020 payments, other than stating that existing domestic public accountability frameworks will apply. I understand that the Rural Payments Agency will still maintain the scheme’s disciplines and infringement penalties, but will there be anything comparable to the specific auditing conducted by the EU, and will that operate this year? How will any potential operability shortcomings be satisfied? Any pursuit of scheme applicants would be a clear departure from previous policy.

A key feature of BPS is the distinguishing of Pillar 1 payments from Pillar 2 payments for rural development, whereby the EU scheme allows member states to convert up to 15% of Pillar 1 payments to Pillar 2—known as modulation. Will the Minister confirm that the Government will continue to apply a modulation rate of 12% for the 2020 year? Can he indicate whether the devolved Administrations will or will not depart from the rate they set in 2019? It would be helpful to have explicit reference today. Pillar 2 payments contribute to various multiannual schemes such as the Countryside Stewardship Scheme, which was the focus of questions from the noble Baroness, Lady McIntosh. Can the Minister clarify that such schemes, and any new applications that may come forward this year, will continue to operate and be funded for the remainder of their respective terms, up to proposals yet to be implemented following the passage of the Agriculture Bill? Would any termination clause be in this year’s applications, should new measures become features of the new policy of reward for public goods? Can the Minister provide details of any pilot scheme under consideration?