Common Agricultural Policy and Agriculture and Horticulture Development Board (Amendment etc.) (EU Exit) Regulations 2019

Earl of Erroll Excerpts

Wednesday 20th March 2019 Grand Committee

[Lord Beith (LD)]

My Lords, far from going round the houses, the noble Baroness, Lady Byford, has done us a service by going through the instruments so thoroughly and raising some really important questions—the Minister will have quite a lot to answer. I will say something about these instruments, but I do not want to forget to thank the Minister and his officials for the extremely helpful briefing they gave to opposition parties.

There are five instruments, and their titles are so confusingly similar that the only way to deal with them is the way in which the noble Baroness, Lady Byford, did—as first, second, third, fourth and fifth, which is the order in which they appear on the Order Paper. They deal with very important matters related to farming and rural communities, particularly funding issues. They are interrelated, which is why I think it was sensible to take them together.

The instruments are also interrelated with the Agriculture Bill—the elephant that is not in the room, because we do not have it yet—which interacts with these instruments in a number of respects. The Agriculture Bill gives huge and unacceptably wide order-making powers to Ministers. Some of those duplicate some of the powers exercised in these statutory instruments, so it is quite difficult to view them separately. If the Agriculture Bill ever becomes an Act, it will come into force probably in the middle of a period in which these instruments are in force, or while we are still waiting for the instruments to come into force at the end of an implementation period.

We accept that these instruments are a necessary means of ensuring that we have continuity in what would otherwise be an even more difficult situation for the farming community. They are no-deal instruments primarily; the Minister explained that they will still be necessary even if there is an agreement, but that would not be until the end of the implementation period. They would therefore lie dormant during an implementation period, and that would have to be achieved in the withdrawal agreement Bill, which would be necessary in those circumstances. Of course, we do not know when exit day will be—whether it will be next Friday, 30 June, or some other date—or indeed if it will be. By the time we get to it, these instruments will need to be amended because things will have changed, either during the delay, or during the implementation period, or both. It is hard to imagine that the form in which these instruments are now will serve all purposes in perhaps 20 months’ time, as would be the case after an implementation period.

What on earth are farmers supposed to make of all this? It is bad enough when your work is at the mercy of the weather and fluctuating market prices; but, frankly, it has been easier to forecast the weather—and even market prices—than the Government’s management of the Brexit exercise. That adds another huge dimension of uncertainty and these five instruments would at least provide continuity in the event of a no-deal Brexit.

There are a few issues I want to pick up. The Minister mentioned an intriguing point on the first instrument: the red meat levy paid on imported animals slaughtered within two or three months of import would be extended from EU states to the rest of the world. That sounds like a policy change, and a policy change ought to be dealt with differently, or at least drawn to our attention. Its significance diminishes, however, when you discover that—in the words of the Explanatory Memorandum—the amount of the levy currently collected is “probably nil”. That is a rather interesting phrase to use; perhaps the Minister can explain why it is only “probably nil”, as though nobody knows whether it has been collected at all.

The second and fourth instruments puzzled me—and officials when I asked them—for a different reason. Unlike all the others, they do not necessarily come into force on exit day, whereas most EU exit regulations do come into force on exit day—whenever that turns out to be. If the Minister chooses not to lay either the second or the fourth instrument until some later date, they will not come into force until the day after that. Why the difference, and do the Government envisage the orders not being brought into force at the same time as the others?

The third and fourth instruments abandon the mechanism known as the EU crisis reserve. That relies on deductions from the direct payment pot to create a central reserve for times of crisis in EU agriculture. It is another mechanism that has never been used; farmers have received reimbursement for the deductions in the funding scheme. It clearly makes little sense in a UK-only context—I suppose one could have a scheme for the four jurisdictions within the UK, but it makes a great deal less sense. We have to refer to a different statutory instrument, the next one in the group, to see the accountability mechanism for dealing with it.

It is also in the third instrument that we find that euros will remain the currency on which the whole system of agricultural support is calculated and accounted for. However, I understand that provision may be included in the Agriculture Bill for a switch to sterling. We need to clarify that; I was reassured when I received briefing from officials that neither farmers nor the taxpayer would in the long run be placed in a very different position by currency fluctuations because support is decided at a fixed point in the year. However, it would be helpful to have clarified the Government’s intention in relation to a later switch to sterling.

The fifth order is essential to continue the exemption of various agricultural and fisheries projects and funding streams from EU state aid rules. To the extent that state aid rules continue to have effect post exit, such an exemption is necessary. It of course begs the question of how many state aid rules we will have post exit. The Minister could perhaps clarify; there will be rules that extend because they are in the withdrawal agreement—there may be things which we decide to continue and do not remove because we want to restrain undesirable interference with the market by various forms of state aid. It left me slightly puzzled as to the extent of its impact.

The decision about the future of state aid rules is one of the hundreds of policy decisions which we will have to come to later if exit goes ahead. The battle will then be between those who thought that Brexit meant a bonfire of rules and those who see that many issues in the rules have been developed while we have been in Europe and are valuable to us and we do not want to lose them. That again creates more uncertainty for farmers, because they have been told by the ardent Brexiteers, “Oh, we’ll get rid of all those EU rules; you don’t have to worry about them”, whereas in practice, as the Government have indicated on many issues already, a lot of the things we observe in Europe are things that we believe to be right, and that we advocate and intend to do anyway.

We have had a foretaste of the problems and uncertainties with the publication of the tariff regime only two weeks before it was planned to come into force. While the sheep sector, which is so valuable in areas such as that which I come from, has retained its tariff protection but still faces the problem of potentially heavy tariffs on its exports, eggs, cereals, fruit and vegetables will have no tariff protection. Farmers Weekly called it policy devised on the hoof by a Government struggling to cling on to power.

My last point was raised the noble Baroness, Lady Byford, but it looks forward. Can the government machinery cope with the complex transfer of functions provided by these orders? The noble Baroness raised the question in the context of the Rural Payments Agency and delays to payments. The RPA and Natural England have 14,000 historic environmental stewardship payments outstanding. The RPA says that it is concentrating not on the 2018 so-called advance payments—we can hardly call them advance in 2019—but on the 2017 final payments. Its target is still only to complete 95% of them by July. Tenant farmers with rents to pay need those payments to be made in a timely fashion, and they have a big impact in rural communities on suppliers of farm machinery and materials for agriculture. The system cannot cope at present, so a series of quite complex changes gives rise to worry as to how the system will cope.

The complexity of this is illustrated by the Minister’s admission that there is a small error in one of the sets of regulations before us today. That can obviously be corrected, but one has to bear in mind that this extremely complex process is taking place in an industry that faces a great deal of uncertainty and many other complexities. It is pretty worrying.

[The Earl of Erroll (CB)]

My Lords, I want to say just a couple of things. I am married to a farmer and in the evenings I have to try to sort out some of the paperwork, mapping, basic payment systems—

[Baroness Vere of Norbiton (Con)]

I do not believe that the noble Earl was here at the start of the debate and therefore it is not really possible for him to take part.

[The Earl of Erroll]

I am sorry. I was only going to make a point about the RPA workload.

[Baroness Vere of Norbiton]

Perhaps the noble Earl might speak to the Minister afterwards.

[Baroness Bakewell of Hardington Mandeville (LD)]

I am sorry to intervene, but the noble Earl was sitting over there at the beginning of the debate.

[The Earl of Erroll]

Not quite; I missed the first couple of minutes.

[Lord Grantchester]

I may well bring up the points that the noble Earl intended to make, so I will hope to cover some of his anxieties. To continue, I am grateful to the Minister and his team for the very constructive way in which his department has engaged with Peers on these regulations.

By and large, the Explanatory Memorandums have commonality across the regulations, as the bundle today transfers the functions necessary to transfer the complexities of the CAP schemes, including the basic payment scheme, to the UK on the UK’s exit from the EU. Last week, the Committee examined and approved the statutory instruments pertinent to rural development that are also managed under the subject of this week’s regulations.

I certainly approve of the instruments, but it would be useful to have the Minister’s clarification and confirmation of several aspects of their provisions and some amendments give rise to the need for further explanation. I am very clear about the CAP schemes. I apologise if some of my queries go beyond the technicalities of the regulations, but to a large extent they expand on the queries already raised by other noble Lords.

The regulations have been introduced to maintain continuity and consistency and bring about a smooth transition to the UK’s new regime proposed in the forthcoming Agriculture Bill. Can the Minister confirm that the instruments will become operable in the event of no deal, whenever that might be, and, under the scenario that the UK leaves with any deal at the end of the transition period up to the end of the present Parliament, which is still expected to be in 2022, when the Agriculture Bill may be implemented?

In so far as there might be an extension of the date under Article 50, will this result in a commensurate end date for the transition period under the outcome with a deal? Would that then necessarily shorten the time when these regulations would operate before the new Agriculture Bill provisions became operable at the end of the Parliament? I assume that, because of these complexities, no end date can be written into these regulations. As further payments for the EU will continue under the extension of Article 50, will this be relevant to the £39 billion due from the UK to the EU on exit?

Turning to what the regulations mean for present practice, can the Minister confirm certain features? First, and very importantly—this might be the point that the noble Earl, Lord Erroll, wished to bring up—is the Rural Payments Agency capable of administering the added totality of these schemes, bearing in mind two aspects? First, it manages the schemes already from a UK perspective so, prima facie, it should. However, secondly, whenever there have been any fresh iterations of CAP regimes, the RPA has traditionally struggled to cope, with resulting delays and confusions. It is struggling now to incorporate the environmental schemes transferred to it last year. What can the Minister say to reduce anxiety over the management of these changes?

--- Later in debate ---

[Lord Gardiner of Kimble]

My Lords, I should have at the very outset declared my farming interests as well, as set out in the register. I should probably do that at every Defra occasion because of the interconnection with agriculture, the environment, and so forth, but I think all noble Lords know of my agricultural background and all that goes with it. I am most grateful to all noble Lords; it is so nice to see the noble Lord, Lord Beith, who has a Dispatch Box before him, and my noble friend Lady Byford, who is forensic. I will endeavour to answer as many questions as I can today, but for those that are intricate, perhaps a letter would be a more fulfilling experience. Some of them go slightly off the core of the discussions on these instruments, but they quite clearly go into wider agricultural matters, which are important.

First, your Lordships have agreed that these regulations are so important to ensure payments are made to farmers, land managers and fishers, to comply with state aid rules, and to have that operability. There are quite a number of questions, so it is important that I answer as many of them as I can. My noble friend Lady Byford asked about stewardship schemes and the issue of new applicants, and, in reference to paragraph 7.4 of the EM of the first statutory instrument, how our commitment fits in with this—the noble Lord, Lord Grantchester, also referred to these matters. The environmental stewardship scheme in this SI is closed to new applicants; current agreement holders will continue to receive payments under the Treasury guarantee following EU exit, which I mentioned in my opening remarks. The Countryside Stewardship Scheme has replaced environmental stewardship in England; this is open to applicants and is covered again by the Treasury guarantee. The noble Lord, Lord Carrington, raised this issue at Questions yesterday; indeed, I had an opportunity of raising this with the Minister of State today. We accept entirely that there needs to be an improvement in the level of payments experienced with both the environmental stewardship and Countryside Stewardship schemes. That is why we have transferred it from Natural England—rather than the EA, which was managing these matters —to the RPA because, candidly, we thought it is the organisation to deal with payments and the BPS payments following the first year of the change of CAP. We are at 90%-plus of payments on BPS and, as my noble friend said, the last few per cent are often because of probate cases, cross-border issues or inspections.

I will take back from today the very helpful remarks made at the beginning, which relate to Countryside Stewardship—I do not have to declare an interest in this particular point. I am well aware that farmers have paid money to engage in the Countryside Stewardship or environmental stewardship schemes and that they are now waiting for money. For some, that wait goes back to 2016, so I am not content about that matter. I am always prone to understatement, so I hope your Lordships will understand what I mean when I say that “I am not content” with the current arrangements.

[The Earl of Erroll]

I think I am allowed to intervene quickly. Maybe interest payments could be looked at, because real costs to farmers arise from non-payment.

[Lord Gardiner of Kimble]

I have heard the noble Earl and respect his tenacity in putting that point. I had better not say anything more on the record, but that is clearly one area where the question is how we get a better situation. That is why I assure your Lordships that the RPA is geared up to deal with this, and the Secretary of State and all the ministerial team are looking for progress.