Agriculture Bill (Second sitting)

Danny Kruger Excerpts

Committee stage & Committee Debate: 2nd sitting: House of Commons
Tuesday 11th February 2020 Public Bill Committees

[Kerry McCarthy (Bristol East) (Lab)]

Q This is probably a question specifically for David Goodwin. What role do you see county farms playing, given that the Government and the Minister have in the past expressed support for reversing the decline in county farms? Is that something your members would be interested in?

David Goodwin: Yes, very much so. County farms have been a shining light for getting younger people into holdings. In the counties where it works well, it works very well. Obviously, there are counties where there are challenges and more pressures on estates. Unfortunately, we see those in the news regularly at the moment. There are some good examples. The number of county estate farms is very small, compared with the number of people who are perhaps looking for opportunities. Some of those individual holdings are very small and do not always offer the stepping stone that is needed. Going on from there, there is still a lack, particularly with tenanted farms, of progressional farms to go on to from a county starter farm.

[Danny Kruger (Devizes) (Con)]

Q Mr von Westenholz, the suggestion of insisting in the Bill that we only import food produced to the same standards as our farmers produce is absolutely the right principle, and the Government are committed to that in principle, but can you just talk us through the practicalities of what the relevant change to the legislation would be? I am just concerned about what it actually means to insist on equivalent standards. How would that be articulated in the Bill? Is that insistence not more appropriate to the trade negotiations, which will get into the actual detail of different sectors, important exports and so on? How would you frame that piece of legislation in a way that did not just open the door to all sorts of challenges on a concept that is not well defined?

Nick von Westenholz: It is a fair point, because the question of how you compare standards in this country with those in other countries is very complicated. I think there is a way that you can still build requirements into the Bill that address those concerns. Basically, you can provide safeguards to the Government’s stated aim on these issues. I should add that that is one reason that we very strongly called for a commission with the Government, stakeholders and industry to be set up that would examine these very difficult issues and make clear recommendations for precisely how the Government can safeguard our standards in future.

In terms of the Bill, you could require the Government to produce a register, for example, of what our food and farming standards are, or certainly the ones that we are keen to safeguard. We can then put in a requirement that imports should meet those standards or should have to demonstrate that they do, and possibly some sort of reporting mechanism to demonstrate whether imports are meeting those standards. There have been several amendments to this Bill and the last Bill to attempt to address that.

You could introduce amendments that are much more explicit. For example, they could set out the sorts of veterinary medicines—whatever it might be—that are prohibited and would not be allowed to be put on the market, as well as goods treated with those medicines that could not be put on the market in this country. That would be a very clear and straightforward legislative safeguard on standards, but you would be looking at quite a lot of text if you were to go completely across the board. There are a number of options.

[Thangam Debbonaire]

Q I am not quite sure, but this question is possibly to both witnesses. The Bill is to a great extent an enabling Bill, and the words “the Secretary of State may” appear frequently. I wonder whether, were you going through the Bill with a red pen, you would change any of those mays to musts. In particular, I am looking at how we make the move from having been a full member of the EU and part of the WTO by virtue of that to completely being just on sole membership terms with the requirements of the agreement on agriculture. I am looking at any mays to musts and how to get to compliance with the agreement on agriculture.

Nick von Westenholz: I think as a point of principle, we would not just argue that any mays need to be turned into musts. We recognise that this is an enabling Bill and the merit of the Government’s having legislation that gives them flexibility. There would probably be some points where we would be more forceful than others, such as the powers around exceptional market conditions. At the moment, there is a “may” power for Government intervention when exceptional market conditions are adversely impacting agriculture—this speaks to that point I was making about volatility, as agriculture, probably more than other economic sector, can be subject to climate volatility, weather volatility, market volatility and so on—but we think there should be a trigger there that requires a “must” for intervention. I know some have argued that there should be more of a “must” clause around the financial assistance powers. I am not sure whether that would do the trick, because it could still be an inadequate amount of financial assistance that is provided.

The new clauses addressing multi-year financial plans and reporting are important and we are pleased to see them; we think that those, alongside the Government’s guarantee on the total budget, are just as important in giving farmers certainty and the ability to plan for the long term.

I did not quite understand the question on the WTO agreement.

--- Later in debate ---

[Mr Goodwill]

Q From what you have just said, it appears that the structure of UK agriculture, with larger units, does not lend itself particularly well to co-operatives; whereas, on the continent, you have lots of small farmers who, for example, never get a fertiliser salesman on their farm for the size of their operation.

Do you think that, under the old system as part of the European Union, we have in many ways been trying to squeeze a square peg into a round hole, and fit what is going on here into the way that we can access funds? How do you think in future we can actually produce a system to encourage co-operatives, of the sort that would maybe work in the UK, rather than trying to emulate those across the water?

Richard Self: Generally, we have some very good co-operatives out there. The governance angle of co-operatives is the key thing. If we get that right, and get them well managed at the leadership level, that will help to address the sort of thing that we have had in the past.

We have large farmers in our country, compared with some of the others, but in fact it is the small farmers who do not tend to collaborate so much. I think the larger farmers tend to be very professional in what they are doing, and they are looking at this as a business arrangement, as opposed to the smaller farmers, who want to do things themselves. The evidence I have seen basically says that we need to target smaller farmers probably more than we do the larger farmers.

[Danny Kruger]

Q You have pretty much answered my question. Perhaps you could elaborate a bit more on how to do that. If it is a question of larger farmers naturally combining because they are more professional, as you imply, is it just a question of education and making clear the opportunities that are there? Information, not education, sorry—that was patronising.

Richard Self: No; that was a good point. Education is good point. I looked at this last year. I looked at our universities and colleges, and they do not do anything on the co-operative business model and how it works round the world, and how farmers benefit from getting engaged. Last year, the Royal Agricultural University did some work for us. It highlighted the lack of understanding of how the business model works and brings benefit back to the farmers—it is about adding and capturing that value and bringing it back. Some farmers have said to me, “Is there any point in us adding value, because someone else captures it?”, whereas a co-operative makes sure that that value is brought back.

We need to educate—“inform” might be a better word in some ways. We do proper case studies and show how, around the world, co-operatives are used in such an effective way, and how their use continues to be developed as they go forward. We were doing quite a lot of work after the Curry Commission report. I was involved in Share to Grow initiatives to get production collaboration going, and we were making some good ground, but then 2008 happened and the cash—the support—stopped. Since then, progress has basically stopped. We have probably moved backwards, if anything, since then in terms of the level of collaboration and co-operation. External support is required to make this happen; it will not happen without that external support to carry it through.

[George Eustice]

Q One of the criticisms of the fruit-and-veg PO regime in particular was that, apart from being very litigious because of the way in which the legislation was drafted, support could only be given to predominantly marketing co-operatives—marketing had to be their primary function. Some groups such as the British Growers Association and others have said that that is wrong. Would you support an approach with support for co-operatives to come together to do research and development, or as buyer groups, but not necessarily marketing in the traditional sense?

Richard Self: Obviously, marketing and consolidating products to make efficiencies in the supply chain are really important, but as we move forward, there are lots of other opportunities for co-operatives to get involved and for farmers to work together. Data is one—we talk about “big data”—and co-operatives are in an excellent position to harvest that data and to use it, not just for their benefit, but for the benefit of the whole supply chain. It will be important, going forward, that we have really efficient supply chains, so that we compete with external supply chains. Working with a co-operative at the centre of that, at the production level, is important both upstream and downstream. If we can have PO schemes that run across different areas and different sections of that supply chain, it would be good.

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[Fay Jones]

Q I have a question about risk management. I had to step out of the room, so I apologise if this has been covered. Often, farmers are at the very end of the supply chain and bear all the risk. We have a good example with the beef price at the moment, which is down very heavily at farm gate level but not so much at retail level. Could there be more in the Bill to provide more risk management support in the event of market volatility?

Richard Self: On risk management, the problem is that you put your crops in the ground or start to produce your animals well ahead, and you do not know what you will get for them. Mechanisms to control those risks against unforeseen events and so on are really important. If they could be built in, that would be very useful. Again, co-operatives have a role in that: you can pool your crops or your fertiliser payments to average out prices within a co-operative. That is the sort of thing that helps to manage risk. If you have a known price for a thing, or you get an average price over a period, you do not get hit hard if the price suddenly goes up or down.

[Danny Kruger]

Q That sounds very sensible. A huge advantage of a co-op system is that it can help its members share its red risk. It would be good for me, at another time, to understand more about the extent to which your members provide that kind of assurance mechanism for their members, but that is not my question. More abstractly, where do you think the opportunity is for a strengthened co-op movement in the regime that is to be introduced? Is it in enabling co-ops to partake in national and global markets, or in strengthening local production for local markets? I bet you are going to say both.

Richard Self: I would say both.

[Danny Kruger]

Q Do you have a sense of where there is more opportunity? Are you part of the local, anti-food-miles movement, or do you say, “No, we can take part in the global economy”?

Richard Self: I think there are some wins there for local things, but if we really want to make a difference, it has to be about getting a good market share of UK supply chains and then working with those groups to see how we can develop export markets around the world for high-value, high-welfare, quality products. There are some opportunities for that. It is a difficult area to get into—obviously, it is highly competitive—but with the story we have through our production methods and so on, we should be able to do that. Again, the point is that you need the right business model to add that value but then capture it back to the primary producer. The problem is that when a farmer produces something and it just goes off on a lorry and they do not know where it is going, they are price-takers and somebody else is capturing the value they have created. That is why we need to get the business model right for those groups.

[The Chair]

If there are no more questions, I thank Mr Self, and we will move on to the next panel.

Examination of Witnesses

Graeme Willis, Jim Egan and Jake Fiennes gave evidence.

--- Later in debate ---

[Daniel Zeichner]

Q Do you envisage that measures in the Bill will affect the lengths of tenancies that are negotiated?

George Dunn: There is nothing in the Bill that will affect the lengths of tenancies per se. Obviously there is the welcome inclusion of soil health within the public payments for public goods element of the Bill, which might encourage people to go for longer tenancies, depending on how the ELMS fits into that, but there is nothing specific that will do anything about the lengths of tenancies.

The Tenancy Reform Industry Group made a suggestion, because one of the things that landlords are concerned about is how they get land back if the tenant goes into breach. We are not interested in protecting tenants who are in breach. If we had easier-to-use provisions that allowed landlords to take land back if they had let for a long period of time, that might make them freer to do that.

There is also a need to look at the taxation framework, which goes beyond the Bill, but we hope that the Chancellor might say something about that on 11 March.

Judicaelle Hammond: Interestingly enough, we would support the introduction of provisions that enabled landlords, as you might expect, to get possession of the land in the case of breach. The question for us is whether there should be a threshold on that. Our answer would be that two years or more would be better than any arbitrary longer threshold. That is certainly an additional provision that we could support if there were not an arbitrary threshold.

George Dunn: Our view would be that there would be no public policy use for such a short-term clause. If we are looking at longer tenancies, we need to find a way of encouraging them, so it needs to apply to tenancies that are of 10 years or more.

[Danny Kruger]

Q It is very good to hear that you both support the direction of travel of the Bill. We heard earlier from witnesses who were explaining how, under the direct payments system, it is often possible for the landlord to simply hold the subsidy and for the tenant not to receive the benefit. Do you think that the new system will align your interests? Can you give us an example where, possibly, the landlord and the tenant might disagree about an improvement? Perhaps the tenant wants to gain some support for sequestration or planting trees or whatever, but the landlord is in disagreement. Do you think that we are setting up conflict between landlord and tenant? Perhaps, Ms Hammond, you could imagine a really bad tenant and, Mr Dunn, you could imagine a really bad landlord. What would you be fighting over?

Judicaelle Hammond: It is really important to understand that, in most cases, we would expect agreement to be found. I think the reason why we do not like one of the particular provisions in schedule 3, which has to do with arbitration in case of disputes, is that at the moment it very much looks at the interests of the tenants, who might be gaining financially quite a lot, without necessarily having a balance of the interest of the landlord.

I will give you a few examples of why landlords might withhold consent. It might be about landscape protection. For example, the National Trust will have properties where they want to make sure that the landscape continues to be enjoyed as it is. Or it might be that something does not fit with the business planned for the whole of the holding—in particular, if you are looking at other areas of the holding that are currently in hand or are farmed by somebody else, which might be better suited to planting trees, because trees cannot grow very well in all places. Or it might be about putting buildings on land in order to create new activities.

As drafted, the schedule would mean that, in the case of a dispute, it would go to an arbitrator, and then the decision is binding on the landlord. That means that there could be really long-term and possibly irreversible decisions being imposed on the landlord. We see that as a really fundamental infringement of property rights, and that worries us. It is the absence of balance that worries us.

[Danny Kruger]

Q Do you mean that there should be an appeals mechanism, or do you think ultimately that you should not have to take the ruling of the arbitration at all?

Judicaelle Hammond: Ideally, we would not want this in the Bill at all. Certainly, if it were to stay in the Bill, we would want to see assurances that would redress that imbalance.

George Dunn: Just to correct something that you might have said in your question, for the basic payment scheme, which is being phased out, in 99.9% of the cases that would be going to the tenant, the occupier, who has the land at their disposal.

Obviously, within some of the newer farm business tenancies under the 1995 Act—which I referred to earlier, following the Minister’s question—a landlord might expect to receive at least the basic payment scheme in rent, plus more, in terms of the tenant’s willingness to pay rent on that basis, so there is a secondary move of the payment to the landlord, but the claimant is the tenant, and that is what the regulations say.

The bigger area that we have concerns about is the agri-environment scheme, where there has been this idea that you could have dual use, where a landlord could claim countryside stewardship and environmental stewardship while the tenant is claiming the BPS. We think that is wholly inappropriate, and we will ask for amendments to the Bill to define the rightful recipient of some of this money. It should be the active farmer who is in occupation of the land.

Responding to what Judicaelle said about the need for tenants to have access, all of Judicaelle’s members will be entirely reasonable and will give consent to our members to go into these things, but we are looking for those beyond the CLA’s membership, who are not always as reasonable. Sadly, we do see landlords withholding reasonable consent very frequently. “Reasonable” is the key word here. We are looking for a set of regulations. The Bill provides that there should be regulations, and those regulations will set out what are the reasonable terms upon which a tenant should be able to apply and insist upon a consent, for either fixed equipment or for access to a scheme.

If we take the issue of trees, for example, trees are normally reserved out of tenancy agreements. It is the landlords who hold the trees, so if there are any carbon credits available under the Bill, they will not be accessible by the tenant because those trees are reserved to the landlord. Perhaps that is something that needs to be thought through, if trees are going to be a really important part of the Government’s policy going forward.

[Simon Jupp (East Devon) (Con)]

Q How much confidence does the Bill and the general direction of travel give your members to renew tenancies?

George Dunn: The majority of my members are looking for longer terms; they want security. The average length of term on a farm business tenancy today is 2.9 years. Think of agriculture in terms of its long-term need to look at soil management, agri-environment schemes and so on. If you take land that has buildings it goes up to about seven, if you have land with housing, it is up to about 10 or 11, but we would expect those later ones to be even longer than that. Our members consistently ask for greater length of security of tenure. For example, if you go to a bank to borrow money to invest in your business and you can only show a three-year or a four-year time horizon, why would the bank lend you money to do any substantial investment if it only has a four-year period to pay that back? Even those tenancies that the CLA often claim get renewed year after year, are only for annual security. How do you go to a bank asking for support for something where you have annual security? We think there is a great deal of appetite for longer-term tenancies.

Judicaelle Hammond: I think my members want good tenants who look after the land and can pay their rents. They want tenants who are willing to innovate and continue to develop their business. It requires flexibility on both sides. I understand the appetite for longer tenancies and that can be agreed. However, what we do not want is a third party determining how two parties who are free to contract, contract.

Rolling tenancies happen and I therefore think that the figure of 2.9 years is a little misleading. We want a system that works for both parties, particularly in times of uncertainty. I would add that an awful lot of my members are somebody else’s tenant. They have land of their own, but they might add to it, for scale, for example.

George Dunn: In a situation where we have 90% of all farm business tenancies in England now being let for periods of five years or less, there is market failure here, which the Government need to address.