Subsidy Control Bill

Lord Bruce of Bennachie Excerpts

Lords Hansard - Part 1 & Report stage
Tuesday 22nd March 2022 Lords Chamber

Moved by

[Lord Bruce of Bennachie]

4: Schedule 1, page 53, line 6, at end insert—
“Agricultural subsidies
H_ Subsidies for agriculture should, in addition to being connected to the purposes under section 1 of the Agriculture Act 2020, take particular account of areas of agriculture disadvantage and levels of marginality of land.”Member’s explanatory statement
This amendment would require agriculture subsidies to take particular account of areas of agriculture disadvantage and levels of marginality of land.

[Lord Bruce of Bennachie (LD)]

My Lords, I shall speak to Amendment 4 in the name of my noble friend Lady Randerson and myself. As has already been reported, my noble friend is unfortunately self-isolating with Covid, but we are cosignatories of this amendment.

I hope to have a short but important debate about the role of agriculture in the context of this Bill. In Committee, we moved for the removal of agriculture from the Bill, and it remains our view that it is not appropriate for agriculture to feature in it. The European Union and World Trade Organization, as well as most countries and other organisations, keep agriculture as a completely separate administration, for all kinds of good reasons to do with issues such as food security and the environment. It is also important for the social and economic life of rural communities. In that context, given that the Government have made it clear that they are determined to keep agriculture in the Bill, we have tabled this amendment to try to ensure that the criteria by which agriculture is treated give some comfort—and, more than comfort, substance and reality—to how our marginal farming areas can prosper in future.

It is no secret that there is real concern among farming communities not only about the consequences of leaving the EU and its agricultural regime but about the trade agreements that the Government are signing with Australia and New Zealand, which open up our market to competitive imports—and without a subsidy regime for our marginal areas, we will simply not be able to compete. For example, 86% of the land area of Scotland is designated as less favoured; it is marginal and difficult to farm. It has mostly been dependent, therefore, on a range of different subsidy regimes, whether that is headage or area payments, market intervention or price support. All of those mechanisms have been designed to ensure that farming can be viable in those communities, and that the rural economy of those areas can be sustained.

Therefore, our amendment would put it into the Bill that particular account should be taken of areas of agricultural disadvantage and the levels of marginality of the land. I have cited the figures for Scotland; I do not have the exact figures for Wales, but it involves a significant proportion of the land area of Wales—and it is important for parts of England, such as the border country with Scotland, the Lake District, Cumbria and the ridge of the Pennines. Left to a completely open market and no subsidy support, agriculture on those hills would pretty well disappear. While it may be that the return of wilding is currently supported, it cannot maintain a viable community if there is no activity on that land that can be sustained.

In simple terms, we ask the Government to recognise that marginal land and land that is agriculturally disadvantaged should be explicitly stated as deserving of support. If the Government recognise that, they will give a degree of assurance to farmers across the areas identified, which they desperately need. It is already clear that subsidies are being reduced, and the marginality of those farms gives rise to real concern that they will not be viable in future—and the whole of our landscape will change.

This is a serious issue. It really matters to our hill farmers that they survive, and it matters to our rural culture that they survive, and this amendment would help to ensure that they do.

[Lord Wigley (PC)]

My Lords, I am delighted to support this amendment. I wish the noble Baroness, Lady Randerson well; it is a shame that she is missing this debate as her heart would very much be in it. She has quoted figures for Wales regarding the marginality of land.

In the context of European funding, which this regime is now replacing, the reality in Wales was that many of the schemes to help rural areas were under European grant systems rather than under specific agricultural systems. There is a coming together of the agricultural support and the support for the rural communities in which those agricultural businesses must exist, and both must work together if they are to underpin the future of the small farms, the hill farms, in Wales. There are many uncertainties at present, as the Minister answering this debate is aware. She has met the farming unions in Wales, and she knows their worries. One way of at least giving some hope for the future is to pass an amendment along these lines; if the Government cannot accept the exact words here, they can come back at Third Reading with an amendment that ensures that there is no inhibition, no prevention, in the new system of helping those rural communities in such vital matters.

--- Later in debate ---

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, before I turn to this amendment, I want to take this opportunity to correct the record. During the fourth Committee session of the Subsidy Control Bill on 9 February, I stated that data for England from the Rural Payments Agency showed

“that 99.5% of subsidies given to the agriculture industry in the UK would not fall within the remit of the subsidy”.—[Official Report, 9/2/22; col. GC 428.]

This figure was also provided in a letter dated 8 February responding to the points raised by several noble Lords during the third Committee session on 7 February. Late last week, the data was reviewed, uncovering a calculation error. In reality, Rural Payments Agency data for England shows 96.4% and not 99.5% of farm payment recipients are paid below the level of the minimal financial assistance threshold. I wish to clearly correct that for the record today.

But my conclusion still stands. The vast majority of agricultural subsidies will indeed fall below the MFA threshold and will not be subject to the substantive subsidy control rules, including the principles. It is only the largest subsidies, many of which will be to relatively large and well-off landowners, that will need to be assessed to ensure they comply with the common sense principles in this regime.

I turn to Amendment 4, tabled by the noble Baroness, Baroness Randerson—I wish her a speedy recovery—which was so ably introduced by the noble Lord, Lord Bruce of Bennachie. It seeks to add an additional principle to Schedule 1 that would require agricultural subsidies to be connected to the purposes listed under Section 1 of the Agriculture Act 2020. It would also require subsidies for agriculture to take particular account of areas of agricultural disadvantage and levels of marginality of land.

The subsidy control principles set out in Schedule 1 to the Bill are designed to apply equally to all strands of the UK economy. Their central purpose is to help protect domestic competition and investment, as well as trade and investment between the UK and other countries, from undue distortion which can arise from the giving of subsidies. This amendment, however, would radically depart from this. It would create a new principle which is not aimed at reducing distortion to competition, investment, or trade and is of no relevance to most types of subsidies.

The noble Lord, Lord Wigley, is quite correct: I am fully aware of the concerns of the farmers’ unions—particularly those in Wales, whose representatives I have met—and indeed those of the noble Lord, Lord Whitty. I reassure both noble Lords, however, that nothing in the new system will work against the granting of subsidies because, building on what the noble Lord, Lord Wigley, said, both agricultural and non-agricultural subsidies have much in common and need to work together to support rural economies.

The Bill establishes a clear, flexible framework for granting subsidies and will not inhibit public authorities from taking into account areas of agricultural disadvantage if they wish to do so. Agriculture is of course an area of devolved policy under the devolution settlements of Scotland, Wales and Northern Ireland. Spending decisions on agriculture are for the UK Government on behalf of England, and the three devolved Administrations in the areas in which they exercise their responsibilities. It is for them alone to take these spending decisions, so long as they are compliant with their domestic and international obligations, including the subsidy control regime. I cannot accept an amendment that would have the effect of putting further constraints on how devolved authorities exercise their powers.

My noble friend the Duke of Montrose rightly mentioned that the existing agricultural schemes and subsidies will be able to continue. The Bill provides broad and flexible grandfathering provisions for legacy schemes. Subsidies and schemes in existence prior to the Subsidy Control Bill coming into force may continue indefinitely if provided for under the original terms of the scheme. The Bill does not require subsidies made under legacy schemes to carry out an assessment of compliance against the subsidy control principles.

In particular, I cannot accept a reference to the Agriculture Act in this Bill. This section of the Agriculture Act is an excellent list of legitimate reasons to give financial assistance, many examples of which will be considered subsidies under the definition in the Bill. But I do not know whether my counterparts in the Scottish and Welsh Governments and the Northern Ireland Executive would welcome the application of this largely England-only legislation to their own agricultural policy, when it was never intended to serve that purpose.

The Bill has been designed to support public authorities in giving subsidies in line with their policy goals and the specific circumstances of their areas of responsibility, and the subsidy control principles are conducive to that. Principle A, for example, sets out that subsidies or schemes must be designed to remedy a market failure or address an equity concern. A subsidy designed to address agricultural disadvantage could certainly fall under one or both of these categories, depending on the type of disadvantage meant. Indeed, the Government’s amendment to add “local or regional disadvantage”, as an example of an equity rationale, underlines that.

Marginality of land may also need to be factored into the design of the subsidy or scheme where it is relevant. The subsidy control principles require a public authority to design their subsidies and schemes to change the economic behaviour of the beneficiaries, and to limit the subsidy to what is necessary to bring about the policy objective. It may very well be relevant to take into account the marginality of land to ensure that these principles are met. Fundamentally, however, it is not for the subsidy control regime to dictate whether agricultural subsidies—whether given by Defra, the devolved Governments or another authority—should account for less favourable pastoral land. In many cases it may well be appropriate for agricultural subsidies to factor in unfavourable conditions faced by farmers. However, this is for the public authorities themselves to determine and to incorporate into the terms and conditions of their own schemes.

The noble Lord, Lord McNicol, mentioned the common frameworks. The new domestic subsidy control arrangements and the UK common framework on agriculture are complementary. The inclusion of agriculture in the domestic subsidy regime will minimise the risk of distortions to UK competition and investment and ensure consistency across sectors. The common UK frameworks will enable policy proposals to be discussed and areas of disagreement resolved.

I hope I have managed to reassure noble Lords and, for the reasons I have set out, I ask the noble Lord, Lord Bruce of Bennachie, to withdraw the amendment on behalf of the noble Baroness.

[Lord Bruce of Bennachie (LD)]

My Lords, I thank the Minister for her response and all noble Lords who have taken part in this important and useful debate. There are just two or three things that need to be picked up. The noble Duke, the Duke of Montrose, started off with some sympathy for what we were saying but then turned against it, citing the continuation of the existing schemes. As the noble Lord, Lord Whitty, pointed out in his intervention, however, the world is changing—rapidly—and it may well be that, in the coming years, new schemes may be introduced and therefore that assurance would not have validity. Indeed, there is a general concern that marginal farms could be bought up by big institutions and squeezed out of existence.

I take the Minister’s point about the Agriculture Act, but we just wanted to make sure that we could add into the Bill the very good principles in the Act. I accept that it applies to England, but it would be very surprising if the Government of Scotland took issue with the principles in it. The point, nevertheless, is that farmers want an assurance that the support that they have had under various schemes since the Second World War is likely to continue in some form or other. There is a very real worry that that is not the direction of travel in which the Government are heading. That the matter is devolved does not preclude it also costing a significant amount of money, which previously came from the European Union’s common agricultural policy and now has to fall on the budget of the devolved Administrations.

I hope the Minister will understand, therefore, that the reason we are trying to put this in the Bill is to set out an explicit assurance that marginality will be a criterion that will be encouraged, just as a minor detail. Moreover, if that is in the Bill, it will make it more difficult for New Zealand or Australia, for example, to suggest that the subsidy is somehow incompatible with a trade agreement. Speaking with the experience of an MP for a farming constituency, I can assure the House that the suckler cow premium and the hill farmers have been the basis of building up the pre-eminence of Scotch beef and Aberdeen Angus beef. It is a system that has worked extremely well. Take the subsidies away from the hill farmers and prime Scotch beef will be much harder to deliver economically. The same applies to lamb in Wales and in Scotland. The hills of Scotland, Wales, the Borders and the Lake District without lambs and sheep would not be the attraction that they have been in the past.

I regret to say that I do not think that the Minister’s assurances go far enough, and I would like to test the opinion of the House.