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

Earl of Caithness Excerpts

Tuesday 28th March 2023 Lords Chamber

[Baroness Hayman of Ullock (Lab)]

My Lords, I first declare my interest, as set out in the register, as president of the Rare Breeds Survival Trust. The statutory instrument on direct payments that we are considering today is very short, and should be straightforward, but I have tabled an amendment, as we have some reservations about how the agricultural transition is being managed. This was done with no intention to confuse farmers.

Farm businesses have been facing increased volatility, uncertainty and instability and have been expressing concerns about the phase-out of direct payments against a backdrop of huge cost inflation. The noble Baroness, Lady Bakewell of Hardington Mandeville, talked about the huge extra costs being faced. According to the NFU, agricultural inputs have risen by almost 50% since 2019. It says that fertilisers are up by 169%, energy by 79% and animal feed by 57%.

During a time of fresh food shortages, it is worrying that the production of salad ingredients such as tomatoes and cucumbers is expected to fall to the lowest levels since records began back in 1985. Is Defra talking to supermarkets about the need to support British farmers? The NFU survey of livestock producers found that 40% of beef farmers and 36% of sheep farmers are planning to reduce, with input costs given overwhelmingly as the main reason.

Following the survey results, and with the SI reducing payments to farmers by between 35% and 55%, I was perturbed by paragraph 12 of the Explanatory Notes, headlined Impact, which states:

“There is no or no significant impact on business, charities or voluntary bodies”.


How can there not be an impact? I also draw attention to paragraph 7.6 of the Explanatory Memorandum, which indicates that the Government intend this to be last year of the current direct payment scheme in England. It is being replaced by the delinked payment. Will that process require a further SI, or will what is in front of us today be sufficient to make that transition?

I would also appreciate clarification of the claims in paragraph 7.2, which states that direct payments are untargeted, can inflate land rent prices and can stand in the way of new entrants to the farming industry. These are quite sweeping assertions. What is the evidence base for this and what impact has the reduction in basic payments so far had on land prices and new entrants?

As the Minister knows, we have always supported the introduction of new ELM schemes and we clearly want to see them succeed, but between 2018 and 2022, Defra struggled to provide farmers with sufficient information. This unsurprisingly led to concerns, particularly against the backdrop of changes to our trading relationship with Europe, the Covid-19 pandemic, the impact of the war in Ukraine and the cost-of-living crisis.

There has been a huge number of differing pressures and uncertainty. It is no surprise that farmers are concerned and worried about all the changes that are happening. But it was very welcome that in January this year, Defra finally published the details of the three ELM schemes and provided much needed clarity to the farming sector. As we have heard, this includes a sustainable farming incentive, an expanded countryside stewardship scheme and a further round of the landscape recovery pilots.

It is important for the different options to be attractive to farmers, enabling them to produce food while helping to protect and enhance our natural environment. We have heard that this year, Defra has increased countryside stewardship payment rates and removed the caps, so that farmers can access more capital to invest in farm infrastructure, improve air and water quality and restore habitats. This is very welcome, but we believe that Defra could go further in offering support. One way could be to increase access to the higher tier options, including for hill farmers. Currently, only about 300 to 500 farmers a year benefit from this, but it has the potential to provide a flexible, effective and more attractive offer to many more farmers. Is this something the department would perhaps consider? Defra has stated that it will manage the budget in a flexible and transparent way but has not made firm allocations to each scheme. When is that information likely to be available?

We know that the successful rollout of ELMS is critical to meeting our domestic and international commitments to tackle the nature and climate crisis we face. Following COP 15, we now have international commitments to pursue more nature-friendly farming. So, while we have concerns about the lack of long-term certainty about the future that farmers are struggling with, and we still need to know details of how all this will work in practice, we do not support the amendment in the name of the noble Baroness, Lady Bakewell of Hardington Mandeville.

Analysis by the Green Alliance has demonstrated that a two-year delay to the phase-out of direct payments would halve the contribution of ELMS to the fifth carbon budget, leaving a substantial gap in the UK’s net zero plans. The analysis also found that retaining the previous EU scheme for an extra two years would mean that at least £1.2 billion—that is £770 million in 2023—would continue to be spent on the wealthiest farms in England: in other words, those already receiving more than £100,000 each in public subsidy in exchange for carrying out no public goods whatsoever.

Unfortunately, the Government have dithered for a number of years over the future of ELMS, which has been significantly delayed from the original start date of 2020. There was also uncertainty when Liz Truss even looked at axing it. So, January’s announcement was very helpful, but everything has been moving far too slowly, both for farmers and for our environment. Many farmers are also concerned about a gap in funding as they work out which schemes they are eligible to apply for.

My colleague in the other place, Daniel Zeichner MP, said:

“Unfortunately, it’s hard to imagine the money that’s been lost in direct payments will now be replaced through environmental schemes. Farmers are losing thousands and thousands. Labour is committed to making these schemes work and unfortunately it appears there is no such commitment from this government”.


I know that the Minister is personally very committed.

The extra £1,000 that has been mentioned is not exactly a huge sum for struggling farmers, but this SI is part of the next stage in the transition to the “public money for public goods” approach to agricultural support. We strongly support that transition, and we want it to work. We need to move to a more environmentally friendly and nature-positive food production system, but we remain concerned that the complexity of the schemes currently proposed may hamper take-up. The noble Baroness mentioned the slow uptake of the scheme so far. In terms of food supply and environmental gain, that is something we simply cannot afford. We support the Government’s aims, but they just need to get on now with delivering what both our farmers and the environment so badly need.

[The Earl of Caithness (Con)]

My Lords, this has been an interesting discussion so far. Both noble Baronesses talked about farmers in general, as if all farmers are struggling. That is not the case. A number of farmers in this country are doing very well at the moment because of the nature of the land. There are roughly 45 million acres of farmable land in the UK. Of that, 15 million acres constitute very good land, and its farmers are able to adapt and grow high-value crops at good yields. There are about 15 million acres of moderate land, and they are a serious problem; my noble friend and Defra are tackling it, and ELMS will undoubtedly help. There are 15 million acres of hill land, which again present a very difficult problem. The challenge facing my noble friend and Defra is sorting out the two less productive areas. The way they are going with ELMS is absolutely the right direction.

The noble Baroness, Lady Bakewell of Hardington Mandeville, who up until today has been a great supporter of the farmers, said that the high cost of fertiliser is causing farmers a lot of problems. She is right in one way, but quite wrong in another. It is entirely due to the high cost of fertiliser that more and more farmers are putting in leys and cover crops, and hill farmers are looking, probably for the first time, at soil quality—the most important thing for farmers and for us. So the situation is not all bad.

I share some of the concerns that have been raised. One reason that there has not been greater take-up—although, as my noble friend rightly said, the Countryside Stewardship scheme has just about doubled in the past three years—is that it is quite natural for farmers to think there is a better scheme coming in the next couple of months. That is causing a lot of farmers to sit back and wait to the last possible moment. I hope that my noble friend the Minister will make as clear as possible to farmers what the situation is. If farmers know what the schemes are and what the payments are going to be, they will make a decision. They have to be moved from the position where they think that a better scheme will come in a few weeks’ time.