Agriculture (Delinked Payments) (Reductions) (England) Regulations 2024

Debate between Earl Russell and Baroness Hayman of Ullock

Monday 20th May 2024 Grand Committee

[Earl Russell (LD)]

My Lords, on these Benches we have real concerns and questions in relation to these regulations. This instrument was debated in the Chamber of the other place. The Explanatory Memorandum states:

“This instrument sets the percentage reductions which will be applied to delinked payments in England for 2024. Delinked payments were introduced on 1 January 2024 in place of Direct Payments to farmers under the Basic Payment Scheme … in England … As part of moving away from the Common Agricultural Policy, the Government has been gradually phasing out Direct Payments in England. It is doing this over an agricultural transition period (2021 to 2027), as provided for in its Agriculture Act 2020”.


We support the overall approach, so we will not be opposing the SI, but we have concerns about the process of transition of farm payment mechanisms in general, the resultant department underspend to date and the impacts that these are having on farmers, their economic welfare and, in many cases, their very economic survival.

The debate today so far has largely mirrored that which happened in the other place, most people being supportive of the long-term transition and policy objectives, but equally being deeply concerned about the implementation of that transition. These changes need to be assessed against the broader implementation of the whole package of measures. The truth be told, our farmers are really struggling to survive financially.

As has been said, we have had one of the wettest winters since 1836. In many cases, winter and spring crops have not been planted and livestock farmers have also suffered. The NFU farming confidence survey, published just a few weeks ago, showed that mid-term confidence is at its lowest since records began in 2010. Because of a lack of confidence, production intentions are plummeting within all farm sectors. That cannot be good for farmers or our food security. Also, the relentless wet weather has caused farmers real hardship: 82% of respondents to the NFU survey said that their business had suffered, which cannot be good either. We are increasingly seeing the impacts of climate change and I ask the Government and the Minister to be more flexible and responsive to the impacts of climate-related events on our farmers. The Government must recognise the role that farmers play in flood prevention and adequately reward them for the important work that they do in mitigating floods and protecting us from further flooding.

We have this £200 million underspend in Defra and are now four years into a seven-year transition under the SFI. The NFU survey also found that profitability had fallen for 65% of respondents. We have this big period of transition, weather events and real economic hardship for our farmers, so questions must be asked about the impact of these regulations against this overall background.

The Explanatory Memorandum states that

“compared to applying no reductions at all, the 2024 reductions set in this instrument will release around £970 million to £1,010 million”.

These are huge amounts of money, and we are worried about the impact of this change. The Government must be in possession of an overall impact assessment of the transition to ELMS to date, but this information has not been published. I ask them to be more open and flexible with the information they provide.

The Minister in the other place said of the overall budget that it is the same cake and that budgets are not being reduced. Against this, some of the slices have not been eaten because there were underspends, the department is undertaking new and more complex sets of measures around supporting farmers to undertake environmental stewardship, with a greater number of schemes being developed overall, and new organisations are now eligible for payments. Added to this, we have had the rise in inflation, which means that the budgets were not as large as set out.

All of this is adding increased financial impact; farmers are being asked to do more and there are more schemes, so the money is being subdivided to a greater extent. Given that no impact assessment is included with this SI, how does the Minister expect us to make adequate judgments about the money being provided and the decisions that lie behind that? What is the factual basis for the figures the Government have put forward? How confident are they that they have the right figures, that they are set at the right rates and that they are capable of achieving the policy objectives?

Finally, what is Defra doing to improve the situation for our farmers? What assessment has it made of the overall support that farmers need and how best it should be provided at speed and at scale? What other problems has it had to date with the implementation of the present system? What is being done to support small farmers and tenant farmers, in particular to make applications? The Minister proudly stated that half of farmers have made applications; by that same logic, half have not engaged with these schemes as yet, so how can we do more to bring them into these schemes and make them work more effectively?

[Baroness Hayman of Ullock (Lab)]

My Lords, we do not oppose this SI, as we did not oppose the agricultural transition plan, but we think that the implementation of ELMS and the agricultural transition away from the BPS need to work much better and the Government need to look at how they can provide better support for farmers while this transition takes place. The noble Baroness, Lady McIntosh of Pickering, asked specific questions about small farms and tenancies; they are having particular challenges, so it would be good to hear from the Minister on that.

We have heard a lot today about how climate change continues to threaten farmers’ livelihoods. I am sure the Minister is aware that the NFU has suggested delaying ELMS while certain things are sorted out. While we have some sympathy because of the struggles farmers have had recently, delaying the implementation of ELMS and the phase-out of basic payments is not the solution.

Policy-driven agricultural practices have been one of the single biggest drivers of wildlife loss in the UK over the past 50 years. We are concerned that, if you start delaying the ELMS rollout, all you will do is create more uncertainty at a time when farmers desperately need certainty. They need to be able to plan—and to plan to farm in a way that provides food but also benefits nature. As my noble friend said, we will not reach net zero or be able to tackle species decline and biodiversity loss without the widespread adoption of nature-friendly farming practices. We have also heard that the biggest long-term risk to our food security comes from climate change and environmental degradation. That is why it is important that we get these schemes to work effectively for farming.

My understanding is that there is almost a £1 billion funding gap for agriculture to meet existing nature-recovery and net-zero targets. I do not expect the Minister to pull £1 billion out of his back pocket, but it demonstrates that this is a huge problem that needs addressing. Instead of doing what the NFU has suggested and pausing ELMS, have the Government thought about using the emergency financial measures available to them in Section 21 of the Agriculture Act? There are powers to add an additional emergency fund on top of SFI for farms that are suffering the greatest climate damage. Have the Government looked at that as a way of supporting farmers? Given the terrible weather we have had, including flooding, would that be an option?

I want to look at some of the farmers’ concerns, because the NFU is clearly not happy with the way things are at the moment. The noble Earl, Lord Russell, talked about many of the concerns in the NFU’s latest annual farming survey, which gives a good overview. It shows the lowest level of confidence in at least 14 years, and extreme weather and the phasing out of subsidies are cited as the primary drivers. Tom Bradshaw, the new president of the NFU, said his concern was that,

“if members don’t have confidence, then we as a country can’t deliver food security”.

That is a real worry.

One factor in that is the weather, about which we have heard a lot, but what was quite striking about the survey was that mid-term confidence had been hit harder than short-term confidence. That is striking because it shows that farmers are losing trust in the Government’s ability to support them through this transition period and during the challenges of climate change. Will the Minister comment on that? How are the Government working to bring back farmers’ trust? It is very important.

On the weather, analysis by the non-profit Energy and Climate Intelligence Unit forecast that crops could be down by nearly one-fifth as a result of the wet weather, and that it was likely that prices for bread, beer and biscuits, for example, would rise. Has Defra made any forecast of the impact of continued bad weather on inflation and on harvests, for example?

The NFU is concerned that the combination of the BPS being down by 50% and all these extra pressures will mean that farmers are more likely to borrow. Borrowing is more expensive, and the NFU is concerned that, as Tom Bradshaw, put it, we are facing

“the perfect storm of events”.

This is about looking at the bigger picture of how the Government will support farmers. What steps are they taking, or proposing to take, to support farmers with those extra costs?

We know that red diesel has been a particular problem, but I am not expecting the Minister to answer the difficult questions around red diesel today. I have spoken before about the benefit that family co-operatives can bring when costs are high. Have the Government looked at that, particularly around investing in new machinery, which can help to mitigate some of the difficulties that farmers are facing?

Finally, we completely agree that we need a fairer system of payments based on the principle of public support for public goods, which ELMS is bringing in, but the Government need to grasp that more must be done to make the system work much more effectively than it does at present for farmers and the environment.