Direct Payments to Farmers (Reductions) (England) Regulations 2023

Baroness Bakewell of Hardington Mandeville Excerpts

Tuesday 28th March 2023 Lords Chamber

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[Baroness Bakewell of Hardington Mandeville]

Leave out all the words after “that” and insert “that this House declines to approve the Direct Payments to Farmers (Reductions) (England) Regulations 2023 as they would reduce the direct payments made to farmers for the 2023 year of the Basic Payments Scheme; considers that the implementation of this reduction in payments, combined with rising input and energy costs to produce food, risks the livelihoods of British farmers as they transition their businesses to producing food and public goods like environmental protection; and calls on His Majesty’s Government to accelerate urgently the roll-out of the Environmental Land Management scheme”.

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I thank the Minister for his introduction. Needless to say, I have a different view and feel that he somewhat overstates his case. The statutory instrument reduces the money that farmers get from the CAP through the basic farm payments by at least a further 35%. After Brexit, the then Minister assured the House that as the Government phased out BPS payments on a sliding scale, the environmental land management scheme would replace payments, but on a different basis. The Minister gave assurances that the total sum of money—£2.4 billion, as mentioned—that had been allocated under the CAP would be maintained and reallocated under ELMS during the seven-year transition period.

The Minister at the time believed that, and I believed him. What has actually happened in somewhat different. The money may well be there, but it has not been allocated in a way that farmers can easily access. The Direct Payments to Farmers (Reduction) (England) Regulations 2022, which came into force on 15 April 2022, made the following reductions in direct payments: to those farmers receiving £30,000 or less, 20%; to those receiving more than £30,000 but less than £50,000, 25%; to those receiving between £50,000 and more than £150,000, 35%.

That is what the SI said. I believe it should have read, “those between £50,000 and no more than £150,000”, as the next category is those above £150,000—40%, on top of the previous year’s reductions. The SI we are debating today would make additional reductions as follows: for £30,000 or less, 35%; above £30,000 and no more than £50,000, 40%; above £50,000 and no more than £150,000, 50%; and above £150,000, 55%.

We can see immediately that the cumulative effect is very harsh indeed. Now, this would not matter if farmers were able to replace this lost income through ELMS. There are some excellent ELMS strands which have been rolled out, as the Minister has listed, but many are still in the pilot stage. Others have yet to see the light of day in a form which farmers can easily assimilate and assess how this would fit in with their business plans and models.

Farmers are struggling. They have seen significant cuts to their basic payment already: at least 5% in December 2021 and at least 20% in December 2022. Meanwhile, input costs have increased significantly. Energy bills are sky high, and the costs of fertilisers and animal feeds are also significantly up. Farmers are struggling to recruit people to pick produce, leaving food rotting in the fields, despite Ministers encouraging our population to move to areas where this type of work is available. The avian flu crisis is leading to egg shortages. The weather in Spain has led to major shortages of produce in supermarkets. This latter is clear evidence of climate change and an excellent example of why the UK needs to transition faster.

While farmers are struggling with all these factors, the Government are cutting energy support for them from this April by about 85%. The energy bills support scheme is being replaced by the energy bills discount scheme. Under the support scheme, farmers, like all other businesses, benefited from an absolute cap on the cost of electricity and gas per kilowatt hour. Under the new discount scheme, which starts on 1 April, businesses will get a discount: a small proportion of the bill covered. This means that farmers are likely to see energy support drop by 85%. So not only are farmers losing BPS this year, they are seeing this help cut—all during a food shortage crisis.

Farms are no longer to be classed as energy-intensive businesses, robbing them of more support. Minette Batters, president of the NFU, wrote to the Chancellor ahead of the Budget, asking him to prioritise food production. This request was ignored. Ms Batters said

“the NFU was clear that greater support is needed for the thousands of farm businesses which are trying, but struggling, to keep our nation fed amidst soaring production costs. It’s therefore extremely frustrating that the Energy and Trade Intensive Industries scheme was not extended to include energy intensive sectors such as horticulture and poultry”.

Farmers are being undermined by the new trade deals that allow food to be imported from Australia and New Zealand which, despite ministerial reassurances, is not produced to animal welfare and environmental standards currently existing in the UK. If this SI is agreed and another 35% reduction in farmers’ basic payments goes through, food production is likely to drop even more as farmers make decisions now about what to plant and produce next year. We are seeing the increased cost of both fertiliser and energy leading to tomato plantings in the UK dropping off dramatically.

Farmers should be able to replace the money lost through access to new and better environmental land management schemes. We on these Benches support ELMS. However, the Government have not handled the transition at all well. It has been somewhat botched. There was even a threat back in September, under the premiership of Liz Truss, that ELMS would be dropped altogether.

Cambridgeshire farmer Martin Lines, the chairman of the Nature Friendly Farming Network, which promotes sustainable farming, said that any delay to the ELMS would deny farmers crucial support to adapt to a changing climate. He said:

“If the government is stalling ELMS, it is failing any duty of leadership in maintaining momentum and building resilience”.


No wonder farmers are not rushing to take up those ELMS already launched.

We are six years after the Brexit vote, and two years after the start of the reduction in basic payments. On 5 January this year at the Oxford Farming Conference, Minister Spencer announced more money for farmers and landowners through both the countryside stewardship and the sustainable farming incentive schemes. As the Minister has already said, this change means that farmers could receive up to a further £1,000 per year for taking nature-friendly farming action through the sustainable farming incentive—SFI. This new management payment will be made for the first 50 hectares of farm, at £20 per hectare, in an SFI agreement, to cover the administrative costs of participation and to attract smaller businesses—many of which are tenant farmers—that are currently underrepresented in the scheme.

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I will just make a final point about the amendment in the name of the noble Baroness, Lady Bakewell. You cannot have it both ways: you cannot say you want to accelerate ELMS and then revert to the old scheme. I absolutely am prepared to accept the noble Baroness’s commitment to farming, but the wording of her amendment would have the effect of removing £700 million of investment in farming businesses this year and would disincentivise all the uptake of the schemes that we want to see. I hope noble Lords will reject the amendment. I commend the draft regulations to the House.

[Baroness Bakewell of Hardington Mandeville (LD)]

I thank all noble Lords who have taken part in this debate, and I am grateful to the Minister for his response. It is undoubtedly true that the reduction in the BPS was well trailed and consulted on and appeared reasonable. As other noble Lords have said, change is always difficult, but as others have also said, it could have been handled better.

What was not anticipated by farmers was the extremely slow rollout of ELMS. The initial pilots should have been held before the beginning of the reduction of the BPS. Had this been done earlier, there could have been a faster and more efficient rollout of ELMS across the farming community. The noble Earl, Lord Caithness, referred to the uncertainty farmers are currently feeling.

Most farmers are keen to take part and improve their land quality, contribute to net zero, improve biodiversity and restore habitats. However, they need to make a living at the same time. The Minister has extolled the virtue of the SFI, which last year spent only 0.44% of the overall budget on that scheme.

The noble Lord, Lord Grantchester, referred to the many debates we had during the progress of the Agriculture Act, and to the long-term nature of farming. We made those points over and again, but they were not listened to. Energy price hikes and fertiliser shortages have not helped. Changing to a different method of fertiliser takes time, and the shortage of fodder for animals has also had an impact. All this has had a cumulative effect on farm profitability.

Like the noble Baroness, Lady Hayman of Ullock, and the noble Duke, the Duke of Wellington, we fully support the ethos and rollout of ELMS. The noble Baroness, Lady Boycott, made some very important points on the reward that farmers get for their produce, saying that it is so small and unsustainable. She promotes escalating ELMS, and we fully support her in this. What we are asking for is a pause in the reduction of the BPS. ELMS is vital and needs to speed up to catch up with the gap that the BPS has created.

Some 70% of land in the country is managed by either agriculture, horticulture or open countryside. The land needs and deserves to be managed in a sustainable way. We must ensure farmers are still here to achieve this. Some 44,000 farmers have left farming in the last four years; that is an undeniable fact. I do not believe that the whole House is on a very different page; we just do not agree on the way this should go forward. I understand and appreciate that others do not support this amendment. Nevertheless, I would like to test the opinion of the House.