Agriculture (Financial Assistance) (Amendment) Regulations 2023

Baroness McIntosh of Pickering Excerpts

Tuesday 14th March 2023 Grand Committee

[The Minister of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)]

My Lords, in moving the regulations I declare my farming interests as set out in the register.

This is the third year of the seven-year agricultural transition period. The new financial assistance schemes under the Agriculture Act are an important part of this transition as farmers move away from direct payments. They will help to ensure that sustainable food production and the delivery of improved environmental outcomes go hand in hand. Indeed, we are investing in the very foundations of food security—healthy soils, clean water and abundant pollinators—to support a prosperous long-term future for the sector.

We are due to meet at a later date to debate the statutory instrument that sets the reductions to farmers’ 2023 direct payments. I want to be clear to anyone who is minded to support the fatal Motion tabled by the Liberal Democrats about exactly what they would be voting for. First, that vote would be against small farms. We are replacing unfair and ineffective area-based payments with targeted payments. Some 50% of the direct payments budget went to the largest 10% of recipients, so by seeking to stop the agricultural transition the movers of this Motion are voting for that unfairness to continue. Secondly, that vote would be against food security. Support for that Motion would be a vote for the EU’s area-based subsidies to continue, and they did very little for farming, food production or the environment. The link between food production and the common agricultural policy was substantially severed in 2005.

If the fatal Motion on the other regulation is successful, the effect would be insufficient funding to deliver current plans. Specifically, we would have to cancel all the agreements or plans under Countryside Stewardship 2023, the sustainable farming incentive, landscape recovery, farming in protected landscapes, support for producer organisations, the future farming resilience fund, the livestock information programme, the animal health and welfare pathway, and the Institute for Agriculture and Horticulture. This would mean immediately stopping work on projects to restore nearly 400 miles of river and to protect and provide habitat for 263 species—such as water vole, otter, pine marten, lapwing, great crested newt, European eel and marsh fritillary—across 40,000 hectares. We must therefore continue our move away from direct payments and the legacy of the EU’s bureaucratic common agricultural policy, which did little for farming, food production or the environment. I hope that, with that little taster of the debate in a week or two, I have persuaded noble Lords who were minded to table that Motion to rethink.

The regulations that we are debating today provide the legal framework for Defra and its delivery bodies to enforce and monitor the financial assistance schemes and to publish data about grant payments. This instrument makes technical amendments to those regulations to support the continuing transition to new schemes. Through this instrument, the definitions of three financial assistance schemes from the 2021 regulations have been removed. This change does not impact the schemes, which have already been launched, or their funding. It is so that the Government can be more flexible in adapting schemes to suit farmers’ needs. For example, the Government will be launching the animal health and welfare grants through the farming investment fund, which were previously defined as separate schemes.

The data publication requirements are amended so that the Secretary of State may exempt financial assistance schemes awarded to improve the health or welfare of livestock or plants if full publication would hinder the scheme’s purpose. For example, identifying a land manager who has received grants related to diseases in livestock could be damaging to their business and deter them reporting future cases. Similarly, the Government will continue to exempt the tree health pilot and animal health and welfare review from the full publishing requirement to protect the interests of affected parties. The Government have continued to name these schemes in this instrument to provide certainty to existing beneficiaries. However, as with all exempted schemes, the aggregated data for these payments will be published.

The Government are making sure that the taxpayer still knows where the funding is going. This instrument amends the data publication requirements so that, where the Secretary of State is required to publish the aggregate of financial assistance paid under a scheme, they must also publish the number of agreement holders who received financial assistance under that scheme.

These amendments will allow the financial assistance schemes to run more efficiently and effectively for farmers and help to achieve their intended benefits under the Agriculture Act while still making sure that there is accountability to the public. Therefore, this instrument is an essential step in ensuring that farmers can help build and maintain resilient businesses by spending public money in a way that helps us to secure the public good. I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, I am grateful to my noble friend the Minister for setting out the detail of and background to the regulations before us today. I simply want to probe him on a couple of points, if I may, including on how these regulations will apply, especially to English farmers, and particularly tenant farmers.

The guidance was published in March 2022, and the path to sustainable farming was set out earlier. Has the guidance been updated since 2022? I do not see that in the Explanatory Memorandum, paragraph 11. If they are just technical changes, that may not be so important.

Why was no impact assessment done? As my noble friend said, this is year three of the seven-year transition and where the finances will start to bite quite dramatically. I state at the outset that English farmers will feel unfairly treated. My understanding is that the direct payments will continue in Scotland, so those farms in North Yorkshire, Durham, Cumbria and Northumberland will look across the Scottish border and see a slightly more familiar scheme to that which they have now and which is being taken away from them. Is that something that concerns my noble friend the Minister?

My real concern is the transition from basic farm payments to ELMS. My noble friend concentrated very heavily on the advantages to the environment. I press him on how this will impact on hill farmers, upland farmers and small farmers everywhere, in particular those who produce grazing stock such as spring lambs and, indeed, fatstock cattle.

In a Financial Times article on 5 March, it is calculated that a drop in farm business income—a measure of net profit—of almost two-thirds is expected in this financial year. That amounts to a drop in profit of £16,300. When I was an MP next door—as indeed was my noble friend—I worked very closely with the graziers. I would hazard a guess that that £16,000 per grazier was their total income. The question is this: what alternative money will they seek? They tend to have the rights in perpetuity but they tend to be tenant farmers elsewhere. If they do not get direct farm payments because the landowner, where they farm elsewhere, is taking it then obviously they will not be getting any compensation.

My noble friend the Minister will be familiar with the work of Julia Aglionby, a Professor of Practice at the University of Cumbria’s Centre for National Parks and Protected Areas. Her projection is that income will recover to £22,900 in two years before slumping back to £16,700; this would place it at just above a third of its 2021-22 level. I understand that of particular concern to the president of the NFU is the fact that at the heart of this squeeze on government payments is the decision to calculate payments on the basis of income foregone plus costs, meaning paying for green improvements at rates aimed at recompensing farmers for the resulting fall in agricultural income.

According to the president of the NFU, Minette Batters, for some farms that took part at the pilot stage, the work was simply not cost effective. As my noble friend the Minister will be aware, upland farms are particularly affected because they tend to produce less food than lowland sites, meaning that they are considered to have foregone less income and are paid lower rates. As I understand it, most farmers will receive £151 a hectare for managing grassland with minimal fertiliser, but those doing the same work in so-called severely disadvantaged areas or upland farms will be paid only £98. That is a severe drop in income and this is only the third year of seven.

Can my noble friend the Minister address those points? How are these farmers meant to survive? What are the department’s projections for the fourth, fifth, sixth and seventh years? Where the farmers in the uplands are tenant farmers, as many of them will be—I appreciate the fact that, in North Yorkshire, where I served as an MP, and in County Durham, where I grew up in the Pennines, probably 50% of the farming community is made up of tenant farmers—what hope do they possibly have of farming in future if they are not eligible for food production grants going forward? I realise that they will get money for stonewalling, which is a tradition that we want to keep, but they are hardly contributing to food security or sourcing more food—as the Prime Minister would like them to do—for our schools, hospitals and local garrisons. What future does my noble friend see, even in this coming year, for upland farmers and, separately, for tenant farmers?

[Lord Grantchester (Lab)]

I declare my agricultural interests as recorded on the register, in that I own agricultural land and am in receipt of payments. I thank the Minister for his introduction to the regulations before the Committee and welcome my noble friend Lady Anderson of Stoke-on-Trent to her new Defra responsibilities.

I had thought that we would be debating two instruments today: this one and the one on direct payments to farmers. The disastrous mess being created by the Government on food production is evidenced by the loss of that second instrument today; it is to be debated later this month through separate fatal and regret Motions.

These amendment regulations, albeit seemingly on technical administrative measures, have the potential to add greater confusion for food producers while taking away parliamentary oversight and giving more powers to Ministers. The regulations will minimise the references to specific financial assistance schemes and definitions in the original 2021 regulations to allow future changes to be made to the design of specific schemes, seemingly without due consideration and process and without the need for amendments to have parliamentary approval. Seeming to be subject to constant flux cannot instil confidence in the agricultural community to align long-term business planning with the perceived lack of consistency of government objectives on environmental sustainability. Are there are guidelines regarding the duration period? How many reinterpretations of schemes might the Minister’s department pursue without necessitating a fresh mandate? Will the Government commit to undertaking consultations on every change?

The instrument proposes extending exemptions for agricultural holders, under animal and plant welfare measures, to have to publish certain information. This administrative ease brings added complexity if an agreement holder is only partly involved in such schemes, as well as others. Can the Minister give an assurance that all agreement holders will be notified in advance of all the information to be published? Will that notification be subject to challenge?

On the wider issue, will changes of personnel within an agreement holder—for example, in the case of farm partnerships—necessarily have to be notified to Defra for legitimacy and the maintenance of agreements? I presume that this would have implications where the Secretary of State is required to publish the aggregate of financial assistance paid under the schemes, necessarily adjusted for exemptions.

--- Later in debate ---

[Baroness McIntosh of Pickering (Con)]

I feel I may have confused my noble friend. I did not mention area payments. I said that there is envy of what the Scots are being paid. My concern is that the way that the calculation has been done—income forgone plus costs—is leading to this perverse situation of a fall in incomes.

[Lord Benyon (Con)]

I will seek to address those points as I go through my remarks. We want to make sure that the £2.4 billion is spent more fairly. That means a greater incentive for smaller farmers to receive more of the pie because they have been hard done by under the common agricultural policy. I will come on to talk about this as I address other points.

The noble Lord, Lord Grantchester, raised some important points. I make no apologies for the fact that we have amended the schemes. He quite rightly asked about consultation. The schemes are indicative. We want to make sure that, as we work through not only our tests and trials but the implementation of these schemes, we are listening to farmers. This has probably been the largest consultative process that I have experienced in my time in Defra. The food, farming and countryside team has attended agricultural shows, done webinars, visited clusters of farmers, attended the vast majority of farmers’ social gatherings that can possibly be imagined and responded to concerns raised. We will continue to do that through our standard routine engagement with organisations such as the NFU, the TFA, the CLA and others and also directly with farmers. I have been able to put farmers who have raised particular points with me straight through to the director concerned and she has been able to answer their questions, so the answer to the noble Lord’s question about continued consultation is absolutely yes.

Agreement holders will have to be notified. On the noble Lord’s point about changes in farm tenure and ownership, these will be considerably simpler under the schemes. There should be no deterrent effect to being able to transfer the schemes if, for example, a partner in a farming partnership arrangement changes and there should be no bureaucratic barrier more than a notification, if required, in those schemes. There are issues relating to the time left of a farm business tenancy, for example. If it is less than three years, I think, it can be rolled over but it needs to be notified.

We are measuring the impact on the environment of the uptake of these schemes. We will also be measuring the impact on the environment of farmers and land managers accessing private sector green finance, and making sure that we are working to strategies through our Countryside Stewardship, which now has more than 30,000 farmers in the scheme. We have raised the payments by 40% and have increased the amount of support for farmers to go into those schemes. We want to make sure that local nature recovery strategies are doing what Professor Sir John Lawton did in his ground-breaking paper, Making Space for Nature: seeking to connect environments where possible.

The noble Baroness, Lady Bakewell, talked about the exemptions. It is important that we get this right. Whether it is a perception or not, perceptions are reality in this case. If there is a perception about making public the fact that you are taking part in an animal health and welfare grant scheme or you might have tree diseases on your land, and that will be a barrier to farmers taking part in the schemes, then I think we are right to seek that exemption.

As the noble Baroness points out, there have been cases where certain animal rights organisations have targeted farmers. On the question of African swine fever, it is a notifiable disease, so somebody not notifying the Government would be breaking the law, but that is an absolute nightmare prospect. In all our border security measures, biosecurity and everything that we seek to do, the risk of that sort of disease coming into our farming community is at the forefront of our minds. We are tracking what happens and where it is spreading across Europe and making sure that, with people coming to this country, in this globalised world in which we live, we seek to minimise the chance of that disease happening here.

The noble Baroness, Lady Anderson, raised the issue of food shortages. The principal cause of the headline-grabbing shortages was strange climatic conditions in southern Spain and Morocco, from where we receive most of our tomatoes at this time of year. It is a warning to us, but also to retailers, that we can expect strange climatic conditions. Our supply chains, which are resilient and were proved to be so during the pandemic, need to be prepared for such risks so that we can continue to see the food that we want to see on our shelves.

The noble Baroness’s question on resources is a good one. We in Defra are putting enormous resources into this; I can assure her that other issues we are seeking to deal with at the same time will not have an impact on the importance of rolling out these schemes, explaining them to farmers, getting as many as possible to sign up to them and making sure that we are supporting our farmers to produce food. We want them to produce food sustainably but we also have hungry mouths to feed. Food security remains an absolute priority for my department and the Government.

I will tackle other points as they have arisen and hope that I will cover all the questions. One point raised was on how we are helping farmers who will become unprofitable as a result of direct payment reductions. There are a number of ways in which farmers can be profitable without direct payments, including farm efficiency improvements, diversification and receiving money under new schemes. The actions taken will depend on the particular farm. The future farming resilience fund provides farmers with free advice from an independent provider to help them work out what to do for their business, including how best to improve business practices.

The impact on farmers of the phasing out of direct payments is obviously at the forefront of our minds. There is evidence showing that the scope—