Agricultural Sector (EUC Report)

Baroness Byford Excerpts

Tuesday 22nd November 2016 Lords Chamber

[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.

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[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.