Agriculture Bill (Second sitting)

George Eustice Excerpts

Tuesday 23rd October 2018 Public Bill Committees

[The Chair]

Thank you for taking the trouble to join us. We have until 2.30 pm for this line of questioning. I am sorry we are running slightly late, but there were some domestic issues that had to be discussed. The first question is from the Minister.

[The Minister for Agriculture, Fisheries and Food (George Eustice)]

Q 25 Thank you, Mr Clark. Do you agree with the central premise of the Bill, which is that the end state should be that we phase out direct area subsidy payments, and instead support agriculture in a different way, helping it to invest in productivity and deliver environmental outcomes and other public benefits?

Andrew Clark: We certainly agree with the central premise that we should move to a new state. We believe that the transition period of seven years is probably the right timescale at the moment. However, we are concerned that it is difficult to predict the circumstances we will find ourselves in during that seven years—or even next week. During those seven years, while moving to a situation where public goods are the primary reward for farm businesses, there should be an opportunity for Ministers to pause, reflect and review that transition, and to vary payments.

[George Eustice]

Q So you support the power to extend the transition during the transition.

Andrew Clark: We would like to widen that power slightly to allow Ministers and future Governments to vary the transition according to economic circumstances and the ability of farm businesses to deliver on the public goods that you want to achieve.

[George Eustice]

Q You have talked about food security being an objective of policy. What do you deem to be the correct level of self-sufficiency?

Andrew Clark: It is a good question. For starters, we are very clear in our mind that food security is a public good. It is in the public interest to ensure that there is a sufficient level of food supply from domestic sources. One of the changes to the Bill that we would like is clarification that it is a particular objective of the Government to achieve food security. We believe this should be a direction of travel, rather than wanting a particular level. Clearly, for different crops, there are different levels of food security. In some crops, we could be 100% self-sufficient; in others, such as bananas and aubergines, we probably never will or should be. We believe food security should be an objective of the Bill and should be in there with public goods.

[George Eustice]

Q Finally on this point, do you think the fact that sectors such as poultry, pigs and soft fruit—the ones that have traditionally received no support—are the ones in which we are most self-sufficient slightly undermines the argument that direct payments of one sort or another are essential to deliver food self-sufficiency?

Andrew Clark: Our objective would be to ensure that there was intervention to assist all businesses, in whatever sector, in contributing towards food security and sustainable management of the land. Every sector has a contribution to make to that. Pigs and poultry indirectly benefit from the fact that they take feedstocks from other parts of the farm economy—notably cereal farmers—that receive direct payments.

[George Eustice]

Q Finally—I know we are short of time—part 2 of the Bill gives the Government powers to simplify and improve the legacy basic payment scheme system. What would your organisation most like to see changed during that transition period?

Andrew Clark: That is a good question. One of the things we would like to see is a simplification of the approach. The objective of simplifying and improving is laudable. One of the concerns about the transition relates to untangling the bureaucracy we find currently with greening—the detail of measurement and that type of thing. In terms of outcomes, however, some of those greening measures potentially have good benefits for farm businesses and the sustainable management of land and soils, and we would be disappointed if the existing benefits from agriculture production were lost during the transition period.

[Dr David Drew (Stroud) (Lab/Co-op)]

Q Very quickly, what other worries have you got about this Bill?

Andrew Clark: There are a number of worries. The Bill is fairly silent on three crucial areas that we think need to be addressed. Ministers have rightly made a lot of points about farmers’ proud record on caring for the environment and, in particular, animal welfare and health. It seems to us that the Bill should give greater provision to protecting and retaining farming standards, environmental standards and animal health and welfare standards, in the face of the new trading environment. We would like to see some measures, and perhaps some amendment, relating to that.

As the Minister has pointed out, the long-term commitment is for farming to continue to deliver a contract around environmental and land management. That is a multi-annual commitment, and we believe that there should be a multi-annual budget to go along with that, rather than just a year-to-year budget. We would like to see something that reflects the long-term nature of the farming community’s expectations in the Bill.

The final thing is that we feel that there is not quite enough agriculture in the Agriculture Bill. Although it sets out clearly what types of things can be done—perhaps not how they will be done—it does not say who will benefit from those payments. We think it is important that it is the active land manager, the farmer and the food producer. It should be seen through the prism of food production and the active management of land.

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[The Chair]

We start on the same basis. Minister, do you wish to open?

[George Eustice]

Q 43 We have both landlords and tenants being represented on this panel. One of the key things we want to ensure in the new Bill is that tenant farmers can access these schemes. How do you think that can best be delivered?

George Dunn: In relation to the eligibility for tenants to get into the schemes you are envisaging, we have already shared our personal concerns with you, which were that there was no section of this Bill bringing forward the Tenancy Reform Industry Group changes that were agreed last October, and have been extant for a year now. We are particularly concerned to ensure that tenants are not disenfranchised. Often there are provisions within a tenancy agreement that say that you must have agricultural use only of your land, and there may also be requirements to the effect that tenants must seek the consent of landlords for investment in fixed equipment on the holding, which may not always be forthcoming.

We would very much like to see an amendment to the Bill that provides assurance to tenant farmers that they can seek changes to tenancy agreements if they need to in order to get into new schemes. We also want a definition within the Bill that gives a clear view of what constitutes a potential beneficiary. That beneficiary has to be someone in active management of land of which they are in occupation, as well as taking on day-to-day management control of that land.

[The Chair]

Thank you, Mr Dunn. Do you wish to add to that, Mr Price?

Christopher Price: I would add to that and contradict some points. The Country Land and Business Association is very much behind the Bill. We have called for a shift to paying public money for public goods for the last 20 years or so. We fully support the core thrust of what the Government are trying to do. Our response to your question follows on from that.

Whoever is delivering the public goods should be the one that gets the money, and if that is the tenant, then so be it; if it is the landlord, then so be it. George Dunn mentioned including the Tenancy Reform Industry Group provisions. I would dispute that these provisions are agreed. They were not. There was still a lot to argue over, and we suggest that if the Government are minded to look at reforming agricultural tenancy legislation in further detail, they should do so through some other mechanism than this Bill. There is some important stuff that needs to be discussed in the context of this Bill, and we would not want time to be restricted, or the big picture to be lost, by talking about what we would regard as ancillary matters of tenancy reform.

[George Eustice]

That is it for now.

[Dr Drew]

Q 44 Will the Bill bring forward younger farmers, and if we have that as a central point—given the farming community’s present average age—how could it be further improved to bring forward even more younger farmers?

George Dunn: The important thing is to see that this Bill is a scaffold, not a building, so until we see the shape that the Government decides upon for building the building around the scaffold, then it is difficult to tell exactly what will happen. But we are certainly encouraged by the facility within the general framework to have both de-linking and consolidation of payments, which we believe could speed up retirement and restructuring within the sector, to make holdings available to new entrants.

Many of our tenants who let land under farm business tenancies, unlike those who let under the Agricultural Holdings Act 1986 with secure tenancies, would say to us that the basic payment scheme is a cost on their business, because they have to pay that in rent to the owners of the land, whom they want to take the land from. So long as we have a strong arm on the productivity side of this Bill, which focuses on the new entrants and the progression point, we think there is great hope.

Christopher Price: I would agree with a lot of that. Inevitably, if we shift away from basic payments to a more market-facing world, it will create some churn within the sector. Older farmers are likely to decide to move on. That is why it is so important that there is sufficient investment in productivity, so that those who want to start on the farming ladder can get the necessary skills, not just farming skills, but business and marketing skills, which are so important in this sector now.

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[The Chair]

Minister, this may have to be the final line of questioning, because the Minister is on his feet in the Chamber and we might find ourselves interrupted.

[George Eustice]

Q One of the key premises behind the Bill is that, rather than subsidising farmers because there is a profitability problem in the industry, we should try to correct the causes of that poor profitability through grants and fairness in the supply chain. Can you give us some examples of the types of practices that undermine farmers’ position in the supply chain, whether it is hidden charges, hidden clawback costs from abattoirs and unfair contracting by dairy companies—the type of things that you would like to see addressed here and might make a difference to your members?

George Dunn: The overarching position is that we already have the Groceries Code Adjudicator, which looks at the direct contracts between suppliers and retailers. Our concern is that it is not looking below that at the relationships between farmers and first purchasers. The Bill seeks to correct that. We are concerned about the fact that the weight of responsibility on the retailers is not fully shared, because there is nobody looking at the bottom end of the supply chain. We see processors that want to retain their contracts and are willing to take more and more restrictions from retailers or even from food service, and are not pressured enough to get better terms that they can then share with the farmers and those who are supplying them. We want the eyes to be right across the supply chain so everybody acts fairly.

We have seen all sorts of things. If you want a specific example, I was speaking to a lettuce grower who had a contract for a certain number of heads of lettuce at a certain price the day before. He went out to cut them the next day, and then received a call to say that those lettuces were no longer required at the same price and in the same quantity, and yet he had already made the decision to cut.

We want to ensure that there are better and fairer contracts in the supply chain, but this needs to be looked at from farm to table, not in the piecemeal way in which the Bill seeks to do it. It leaves the Groceries Code Adjudicator looking at direct supply chain issues, and it provides another body—it suggests the RPA, which we disagree with—for the other stuff. We think that the adjudicator should have a role over the whole gamut.

[George Eustice]

Q On the concern about the RPA, at the moment it is responsible for things such as carcase classification. Although its brand may have been tarnished by trying to implement a very difficult and bureaucratic EU scheme, it has a breadth of knowledge about everything from school milk schemes right the way through to carcase classification. If the GCA were to do it, it would be funded by a levy, which would have to be funded by the industry itself. What is your concern about the RPA specifically?

George Dunn: You are right that the RPA runs certain supplier schemes, so we are not saying that it is completely unsighted on this stuff, but it has got no history or skill, in terms of contracts, so how do we see it playing a role within the contract environment? It has got no skill or expertise in looking at how supply chains operate from field to plate. Although it might have had a glimpse of certain aspects of it, we do not think it has got the expertise across the piece.

Christopher Price: In addition, the powers that the Secretary of State proposes to give himself under the Bill are really quite strong. I cannot think of many other areas in which a Minister has such powers as the Secretary of State will gain under the Bill. We were pleasantly surprised that the Government proposed taking them. It seems to us that the powers are so significant that it is unreasonable to say that they should be exercised by a non-departmental public body. I would have thought that they are so significant that they are the sort of thing that a Minister ought to be deciding, not someone further down the hierarchy.

[Deidre Brock]

Q We could talk about that for a long time—that is very interesting. You mentioned the drop in rents. Does that imply that you expect a big drop in rural land values?

George Dunn: No.

Christopher Price: No. A couple of per cent.

George Dunn: For the reasons that I stated earlier, the return on capital is only 2% from agriculture anyway, so there are other things driving the capital value of land.

Christopher Price: If you compare changes in the CAP with changes in land values over the last 30-odd years, there is very little correlation, which you would expect there to be. Also, the European Commission has done two reports on this topic in the last 15 years and both said it was impossible to show any direct link between the two.

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[George Eustice]

Q This is obviously an Agriculture Bill and its primary focus is around schemes to replace the common agricultural policy. Can you confirm whether there are any clauses that you feel undermine your independent ability to do the independent job you have to do? Can you explain the other pieces of legislation from which you draw your authority to implement food standards independently?

Jason Feeney: There is nothing in the Bill that we feel impinges on our independence. Committee members may not be aware we are an independent Government Department, non-ministerial and directly accountable to Parliament. We do our parliamentary work either directly, like this, or through Health Ministers. There is nothing in the Bill that causes us to have any concerns. There are elements that we think are positive and helpful. As you know, Minister, we are very strong around the openness and transparency with which we conduct our business. Our board meetings are held in public. All the papers are published and they are transmitted live on the internet. The collection and more open aspects of data, and the sharing of data, to help to improve standards, quality and safety are things that we are very supportive of.

On the other part of your question, we were set up in the late ’90s in response to the BSE crisis. The Food Safety Act 1990 gives us our primary remit, role and authority.

[Tonia Antoniazzi (Gower) (Lab)]

Q Does the Bill fail to legislate to ensure that food imported into the UK post-Brexit is produced to the equivalent standards? Will the Food Standards Agency ensure that that happens?

Jason Feeney: In a post-exit world, it is helpful to think about food imports in three different categories. First, there is the food that we import from third countries—non-EU countries. For those high-risk products, which are mostly products of animal origin, but are also certain defined products not of animal origin, we are pre-notified of their arrival and an inspection regime applies. That is EU-driven, and post-exit we will continue, at the point at which we leave—

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[Dr Drew]

Q Does that worry you?

Dr Fenwick: Hugely. They are untried, untested and un-modelled. We have not had an impact assessment. From a legal point of view, I have grave concerns that they may contravene WTO rules. It was concerning to hear our own Cabinet Secretary—last week, I believe—read her response to a written question from the shadow agricultural spokesman for the Conservatives, Andrew R. T. Davies, in which she said that it was not appropriate to inquire whether what was being proposed is legal or not for the World Trade Organisation. That is a grave concern and we are well aware of the sort of problems that can crop up when it comes to the WTO. It is going on with regards to the USA, China and Europe at the moment, including with regard to agricultural goods.

[George Eustice]

Q As a point of clarity, agriculture policy is devolved, so perhaps I can clear up the mystery as to how the Welsh Government did it. They simply asked us to include a schedule in the Bill. Northern Ireland did the same and Scotland was the only part of the UK not to. There was no lobbying exercise or debate. It was a request that was duly accommodated.

I want to probe this point about the WTO. What is it in particular that concerns you? We obviously have an amber box allocation in which we could do market-distorting support if we wanted to, and it is largely accepted that the proposals would be green box. Just explain your concern about the WTO.

Dr Fenwick: Specifically, annex 2 of the agreement on agriculture sets out strict rules in relation to “Payments under environmental programmes”, which prohibit payments that are over and above costs incurred and income forgone. That is an explicit disallowance of such payments, superficially at least. I am not a barrister or a lawyer, but it certainly seems fairly black and white. That is a grave concern given that we have asked for clarification and have not received it as explicitly as we might have liked.

I do not want to imply that it is not legal, but there is an ambiguity around it— payment for public goods is effectively environmental payments, which is what annex 2, paragraph 12 of the agreement on agriculture deals with. It raises concerns that, even if it was legal, it could be used as a vehicle for other countries spuriously to raise barriers to trade and so on. That could trigger a lengthy dispute that goes on for years and has adverse impacts on us. We know from experience that countries tend to use such tools where they become available.

John Davies: A major part of the support for public goods is dependent on moving in that direction in terms of the boxes. That has never been done by any other country before and we are obviously concerned. We need to see some proof that that has been properly researched and is achievable.

Huw Thomas: I do not have anything to add to that.

[George Eustice]

Q Just a second point on the issue of fairness in the supply chain. Obviously the premise behind the Bill, which the Welsh Government seem to have also adopted through the schedule, is that we should, in the long term, have the objective to move away from an arbitrary, area-based subsidy payment and instead correct the causes of low profitability in farming by strengthening our position in the supply chain. Could you give us your thoughts on that section of the Bill?

John Davies: Obviously we are very keen to see a functioning marketplace. We are keen to see it moved in an orderly fashion. Dr Fenwick referred to our main competitors. Obviously, Europe is a fairly major competitor. It will reserve at least 70% of its budget into direct payments. We are keen to maintain some form of direct payments in Wales because that will allow us to invest in the environment and give us the confidence to invest in productivity and resilience schemes.

We need a balance and to have the opportunity in what is a very changeable marketplace at the present time. We have a great deal of uncertainty and believe there is a need for stability. When we have a functioning marketplace that pays a fair price for what we produce, we are very keen to take advantage of it but, at present, we are some distance from that.

Dr Fenwick: Anything that improves the supply chain has to be welcomed and there are certainly elements of the Bill, from that point of view, that we absolutely welcome, including issues such as farmers working in co-operation. That is a separate issue to the issue of support, which is a grave concern given that a shift even over what superficially appears to be a lengthy period of seven years could effectively just slow down something that has a huge adverse impact, not just for farmers but for those who rely on farms.

Average incomes over the last five or six years for Welsh farms would be maybe £24,000, and yet those farms have turnovers of around £80,000 or £90,000. That money is effectively going out to local businesses that are not themselves farmers but which are reliant on the agriculture supply chain. We have said for the past two years that any such radical changes to agricultural policy should be investigated thoroughly in terms of their impact on the wider, broader and longer supply chains. We live in areas where up to 28% of the working population is employed in agriculture. That is not the number of people who are farmers; that is the number of people employed in agriculture. Any disruption could have a catastrophic impact, which is why we have argued for that impact assessment to take place.

Huw Thomas: I do not have much to add to that other than to offer the comment that it is suggested that the Rural Payments Agency could be the agency overseeing the fairness in the supply chain issue. I am not sure whether NFU Cymru are sure that the RPA might be the best placed agency to do that. I also make the point that the existing principles around exempting producer organisations from competition law need to be rolled forward as well.

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[Simon Hoare]

Q Quite a lot of Wales is covered by a national park designation, so we have the national park, the Welsh Assembly and Westminster and the Department for Environment, Food and Rural Affairs. Do you see the national parks as being a useful string to the bow in terms of fostering and supporting agriculture, or are they a potential irritant? [Interruption.] I can tell by the whispering that I have hit a chord.

Dr Fenwick: I was asking Mr Davies whether he farms in the national park—I could not remember.

John Davies: I am adjoined with the military base, so we are just outside it. I think there is a need for best practice, which is in place in some national parks, to be replicated throughout Wales, because they must be a support for the communities in which they are based rather than a hindrance. There is a real need to get policy aligned throughout Wales and considerable improvement could be made in some of the national parks. I will not comment much further than that.

[George Eustice]

Q I want to ask specifically about the Bill and the difference between the schedule for Wales and the main Bill, which, when you boil it down, is paragraphs 1(2)(a) and 1(2)(c) of schedule 3. I do not need anyone to look it up—I can explain where it is. Broadly speaking, all that does is give Wales the power to support businesses or communities in rural areas and also to support persons involved in anything from the processing, marketing, or distribution of products derived from agricultural activity. Coming back to Dr Fenwick’s point, are you pleased with these additions or not? You talked about the importance of an active farmer test and making sure that the money goes to farmers, but the additional measures in the Welsh schedule open up the possibility to give money to post offices or any other type of rural community business. Do you support that or not?

Dr Fenwick: If that is the case, that is welcome. Those pieces that effectively reflect the English text appear to be, as John described it, one-dimensional in terms of facilitating a movement from the current system to a payment for public goods system. That is the main focus of the Welsh proposals that are currently being consulted on and, indeed, the English proposals that are now in the Bill. Obviously, we have concerns about that, because effectively it is revolution as opposed to evolution. It is not an evolution if it is a transition to something that is, effectively, revolutionary and has never been done before. As I say, I am not a barrister or a lawyer, but there are big questions about how much that ties the Welsh Government down, if they were to decide to take a different course and perhaps reflect what is happening at an EU level or what is happening in Scotland or Northern Ireland.

[George Eustice]

Q Have the Welsh Government given you an indication of how they intend to use those additional powers? It could mean giving direct payments to farmers, or giving grants and money to people who make jam or cider or other novelty food process products.

Dr Fenwick: In fairness to the Welsh Government, their focus is quite rightly on their consultation at the moment. That is the best indication we have of what they would like to do in Wales, which has an element of that type of direct support for businesses or economic resilience, as they call it. Clearly, the main focus is on moving away from support for farmers to a payment for public goods. On that issue I would highlight a major concern that we have, which is that Wales currently has a cap on its payments. As a union, we have supported capping agricultural payments since 2007, since the CAP Health Check.

At the moment it does not appear that capping is going to feature in England or Wales as regards public goods payments, whereas on the continent in the EU they are looking at bringing in lower caps to try and push money down to family farms. Our concern is that not having capping will move money away from family farms to private individuals, large companies, charities and so on, with no cap on how much money those businesses or charities—or whatever they are—can receive. We believe that it is absolutely the wrong direction of travel.

[George Eustice]

Q It is an interesting point. The additions in the Welsh schedule could be read both ways. If you are worried about an active farmer test, then arguably you would not want that.

Huw Thomas: They can be. The powers throughout the Bill are pretty broad, enabling powers. There is always an element of risk with such powers as to how they are utilised by Ministers. A lot of policy discretions are conferred upon Ministers, including financial discretions. The devil will be in the detail, as always, but there is not much detail in the Bill. It has to be read in conjunction with the consultation and the further policy statements from the Welsh Government next year, as well as the direction of travel they are wishing to take. It is difficult to say at the moment, but I do take your point.

[Ben Lake (Ceredigion) (PC)]

Q I have two questions, if I may. You have already mentioned the powers granted in the Bill to UK Ministers. Do you have any thoughts about the impacts that some of these powers might have on Welsh Government, and their ability to formulate agricultural policy? Are there any aspects that you welcome? Are there any aspects about which you have concerns?

Huw Thomas: I think the part 7 clause 26 powers around the WTO, for example, could be concerning, because potentially they will artificially constrain the type and level of support that a devolved Administration might be able to pay because of considerations around the WTO. That may be one issue where there is potentially something that risks becoming contestable or contested in the future between the UK and the devolved Administrations.

John Davies: Obviously a UK framework is vital, not by imposition but by agreement. We need to get to the dispute resolution part of that, and clearly work out how those issues might be resolved. At the present time there is not that much clarity.

Huw Thomas: It is a proposal to take powers into the centre. It is not the common consent common framework that we, as NFU Cymru, always envisaged and espoused. We always said that we recognised the need for common frameworks, and that limits needed to be set on certain things, but they need to be decided by common consent, not imposed from the centre. With respect to the WTO provisions in part 7, the UK Government and the devolved Governments need to get together and agree between them, rather than having this quite heavy-handed approach that involves proposing to take these powers into the centre, and accepting the Secretary of State for DEFRA as the ultimate arbiter of who gets to do what.