Direct Payment to Farmers (Reductions) (England) Regulations 2022

Duke of Montrose Excerpts

Monday 21st March 2022 Grand Committee

[Lord Carrington (CB)]

My Lords, I declare my interests as a farmer and landowner, as set out in the register. I am broadly supportive of the Agriculture Act and the introduction of the new system of public funds for public goods, but I need to hear what the Government have to say about the very different circumstances that apply today from when the Act was passed.

Like other noble Lords, and this was referred to by the noble Baroness, Lady McIntosh, I am most concerned with how the Secretary of State is reported to have said that rising input prices will be matched by rising output prices. This demonstrates a lack of understanding, particularly of businesses. The consultant Andersons has calculated that, whereas the average rate of inflation for consumers is 5.5%, it is 10% for farmers, when it is recognised that their principal inputs are fuel, feed, fertiliser, seeds and labour.

The Financial Times reported yesterday that the European Union is

“reviewing the bloc’s sustainable food strategy after a concerted push against the planned reforms by national governments, farmers and the agriculture industry.”

Is this debate happening here? Surely, in the unfolding circumstances of inflation and Ukraine it would be sensible, as a minimum, to delay the planned cuts in BPS payments for this year and maybe next. This would not involve additional government funding, only a delay to the introduction of the new schemes.

The new sustainable farming incentive support is, after all, a fraction of what farmers are due to lose in the BPS. This is important for smaller farmers with weaker balance sheets, as the stronger cash flow provided by the BPS would enable them to purchase inputs, such as fertiliser, on a more timely basis.

In this country, the Food and Drink Federation is now calling for a national food security council, which could work alongside the industry to enable a collective response to supply chain disruptions caused by immediate issues such as rising energy, CO₂ and fertiliser prices. Please could the Minister give us some indication of what the Government are doing to address all these important issues?

Finally, on the regulation on lump sum payments, I believe the payment is totally inadequate to encourage farmers to retire. It is also a disincentive for new farmers to enter the industry. A payment of up to £100,000 is attractive only if the farmer owns his own house, particularly in the south of England. This excludes most tenant farmers. Nothing is achieved if the farmer rents from the landowner the farmhouse he has been living in, at an open market rent, as this could be the same or more than his farming rent.

As a means to free up land for new farmers, this scheme suffers from the basic problem that the BPS is not available any more, while the other funding that is available is much smaller. The only likely “beneficiary”—in inverted commas—both from the reduction of the BPS and from the lump sum scheme is the well-financed larger farm. From a farming, environmental and social point of view, this is not what we want to achieve.

[The Duke of Montrose (Con)]

My Lords, I thank my noble friend the Minister for galloping us through these measures. The challenge for us in this Committee is not to detain him too long, so as to allow him to resume all the work he is doing. I echo much of what the noble Lord, Lord Carrington, said. I declare my peripheral interests; my agriculture and land are all in Scotland so I am not directly involved.

The rationale for this process of cuts is the same as when this was carried out in New Zealand. All input costs and other things—my noble friend the Minister mentioned rents—dropped in parallel with the cuts in government funding. In the current economic situation, there is no way that fertiliser companies have the slack to cut prices. They are being forced up, as my noble friend the Minister will know, by 200% or more. Will the Government be monitoring how this works out in practice and will they create powers to delay the introduction? It will stretch the lump sum payments if they are the only remedy that is available, and people are going to be forced out of business.

My noble friend the Minister has promised that there will be no reduction in payments to farmers, and I am sure he believes that, but what proportion are the Government expecting to go to conservation projects that are not related to farming? Will that considered to be part of the payment or are they going to be financed from elsewhere?

[The Duke of Wellington (CB)]

My Lords, I declare my agricultural interests as detailed in the register, although they are not particularly relevant to the point I want to make.

I do not think the Minister was in this House when we considered the Agriculture Bill in 2019—I cannot quite remember but I hope I am right about that. During the passage of that Bill, there was quite a lot of comment from many parts of the House about the position of smaller farmers, particularly hill and livestock farmers, most of whom are marginally profitable, if at all, and nearly all of whom depend wholly or almost wholly on the public subsidy that they receive. I made a plea at that point for the Government to consider not reducing the lowest band of the direct payments because those are directed only at the relatively small farmer.

I see in the regulations in front of us that, in fact, the smaller farmers—that is, those receiving £30,000 or less—are to receive a cut of 20%. That seems rather harsh. Although I am perfectly aware that there is no possibility of this regulation being amended, I wonder whether the two Ministers here would discuss with their ministerial colleagues the state of the small farms in this country. I do not believe that this Conservative Government really want to see small farms eased out of business. I am really worried about them.

The larger farms will get by. They have efficiencies, they are usually better capitalised; they will probably be all right under changed circumstances. But the small family farms, in many cases tenanted farms and/or livestock farms, are struggling and will struggle even more with these proposed cuts. I just do not feel that Ministers are sufficiently sympathetic to the position of small farmers at the moment. I would be grateful if the Minister could comment on that.