Agriculture

George Eustice Excerpts

Monday 13th May 2024 Commons Chamber

[George Eustice (Camborne and Redruth) (Con)]

I, too, draw attention to my entry in the Register of Members’ Financial Interests: I am a trustee of shares in Trevaskis Farm Ltd, our family business.

I disagree with my hon. Friend the Member for North Herefordshire (Sir Bill Wiggin), who questioned the wisdom of bringing the statutory instrument to the Floor of the House. I think it important that the Government have signified that this is an important issue—it is an issue that matters to farmers and that therefore warrants proper consideration on the Floor of the House. I also note that it has flushed out a consensus—somewhat unlikely, so close to an election—among all the major parties. Everyone now seems to accept that area payments, which are subsidies for land ownership, have no place in the future, and that the general thrust of the Government’s plan, although everyone has articulated their differences on it, is indeed the right one. It is welcome that we have that cross-party consensus on the overall direction, because this is a long-term endeavour and it is important that all parties, to a greater or lesser extent, buy into the journey that we are on.

It is also important for us to understand why the Government decided to get rid of direct payments—payments for the ownership of land, which is what the basic payment scheme and, before it, the single payment scheme essentially were. This dates back to fairly recent history in the mid-2000s. In 2005, there were negotiations on reform of the common agricultural policy, and as part of the so-called Fischler reforms, there was a great deal of talk about decoupling farm subsidies from production. Economists throughout the European Union, and here in our own Treasury, were obsessed with the need to get rid of what they called production subsidies, which they regarded as being market-distorting, but they only ever intended the payments for the ownership of land to be temporary. Indeed, when this was discussed by the European Union in the early 2000s, it was mooted that the direct payments, or area payments, would be phased out by about 2020.

However, what we really did by introducing direct payments was to replace one subsidy—for production, which was market-distorting—with another, which was equally distorting. There is a fair amount of evidence that within the first two to three years of the introduction of direct payments for the ownership or tenure of land, about half the entire BPS budget disappeared in inflated land rents, which meant that those who owned land were able to charge higher rents to those who needed to rent land in order to farm. That is a classic example of what happens when we introduce a market-distorting subsidy, which is what the BPS payment was.

It is sometimes said that the BPS payment is an income support payment—that it helps to support farm incomes, and that it has a value almost as a social security payment—but I think that is absolute nonsense, and I did look at the issue carefully during my time at DEFRA. The truth is that 50% of the BPS budget goes to about 10% of the wealthiest landowners in the country. If we were seeking some sort of income support mechanism to help farmers who could not afford to carry on, and we wanted to keep them in the landscape that they were in for social reasons, we would means-test that benefit. We would not have a system whereby the vast majority of the budget went to the wealthiest landowners while some of those trying to make a living in marginal landscapes received nothing, or next to nothing.

It is often said, too, that the BPS helps to support food security. Again, that is absolute nonsense. By its very definition, the introduction of a subsidy for land ownership was, as it was described at the time, a decoupled payment. It was explicitly delinked from any food production. Look at the way the BPS payment worked in the last 10 years or so of its life. Look at the big sectors in the UK that produce most of the agricultural output. Look at horticulture, the top-fruit industry and companies such as G’s, which produces a big proportion of this country’s salads. Look at the pig and poultry sectors. None of those sectors gained anything whatsoever from the BPS payments, even though they were the backbone of food production in this country.

There would probably have been thousands of people across the country who were able to claim BPS payments just because they had more than 5 hectares of land, even though in many cases they were messing around with a few ponies and not producing any food at all. When I was in DEFRA, I discovered a rather extraordinary statistic: 30% to 40% of sheep farmers never received BPS payments. The reason is that the landowner kept the BPS payment and got the sheep farmers to act on a grazing licence, making them ineligible to claim the payment. The sheep farmers producing the food got nothing, because the landowners who were renting out the land captured the BPS payment. For all those reasons, it made sense to get rid of area subsidies.

Some people have said that, in a year when a lot of weather events have brought into sharp focus the risks associated with agriculture, maybe we need something like the BPS to help mitigate the risk. Again, that makes no sense whatsoever, because the sectors that really shoulder the risk are those involved in veg production and top-fruit production, and the BPS payment is a drop in the ocean in their accounts; it is not a significant part of their business model. In my constituency, I have some of the biggest brassica growers—growers of cauliflowers—in the country. They have had a horrendous year, but the few tens of thousands of pounds that they get from the BPS payment is neither here nor there in the scheme of things.

There is a final reason why the SI is absolutely right: this House has already taken the decision to delink the legacy payments from the need to own land, and we now have a fixed reference period, which is what the delinked payments between now and 2028 will be based on. It makes no sense to delay the trajectory of winding down those payments, given that some farmers might have exited agriculture altogether, and others might have come into agriculture as new entrants and will not be eligible for the BPS payment. Having delinked payments from the need to own or have tenure of land, we must now stick to the programme and move forward.

I disagree with the caricature by the Opposition Front Benchers that we have not stuck to the plan for the introduction of the phase-out, ELMS and the agricultural transition. I have to say to the hon. Member for Croydon North (Steve Reed) that that is nonsense. The truth is that the agricultural transition plan of 2019 set out, with great clarity, the eight-year transition that we would follow. We would gradually reduce the BPS payments and then delink them in 2024, because we recognise the financial dependence that some farmers had on such payments. Even earlier than that, we made it explicit in the Agriculture Act 2020 that there would be an agricultural transition over eight years. Indeed, when the Bill was first introduced to the House in 2018, we made it explicit that we would have such a transition. In Committee, we debated at some length whether that was the right length of transition. The Government have absolutely stuck to the plan that has been set out since at least 2018, and they deserve credit for doing so.

For all the reasons I have given, we got rid of BPS altogether and decided to move away from area subsidies for land ownership. Not every part of the UK did that. The Labour Government in Wales decided to keep a partial direct payment—an area subsidy—but to add lots of additional conditions to it, including the requirement to plant trees on 10% of a farmer’s land. That has led to protests in Wales, because it is a deeply unhelpful policy and is counter to the interests of Welsh farmers. We should give farmers a choice about how much they do on the environment, not dictate to them that they must act and then give them just a partial slice of the BPS payment they used to have. For the same sorts of reasons, the European Union has had huge difficulties and huge protests. Again, it has tried to retain a subsidy for the ownership of land, which makes no sense. To try to justify it to the public, the EU loaded even more conditions on to it, bringing all sorts of contradictions to the fore.

I believe that it was absolutely right for the Government to take a different approach. We should stop talking about subsidies, because there will no longer be any subsidies to farmers in the future. The Government have statutory targets under the Environment Act 2021—notably, for the delivery of species abundance—and they are a market player. They are paying farmers and landowners for the delivery of ecosystem services, and those services attract a margin. We are no longer just paying farmers a subsidy for owning land, and we are no longer saying to farmers who do a good turn for the environment, “We’ll give you income foregone—we’ll compensate you for your loss.” We are now saying to farmers, “We have targets that we want to hit, and we will allow you to make a profit margin on the delivery of ecosystem services that will help the Government to meet their environmental objectives.”

The hon. Member for Westmorland and Lonsdale (Tim Farron) referred to a 40% reduction in incomes. He was talking about a reduction in the BPS payment, but there is a difference between farm income and that payment, which I will come on to. My hon. Friend the Member for North Herefordshire invited the Minister to ask His Majesty’s Revenue and Customs to collect data on farm incomes. The Farming Minister and the Secretary of State will know that DEFRA already does that, and the farm business survey, run by the Department, is very long running. It shows unequivocally that since 2016, when we had a devaluation of sterling against the euro, farm incomes have been boosted considerably. It shows that dairy farms saw sharp increases in profitability between 2016 and 2023, and the same is true of arable farms. To a lesser extent, the same is true of some beef sectors, although in less favourable areas—suckler beef production has remained quite marginal. The potato sector and others have not done so well but, overall, farm business income has seen a sustained boost.

None of that takes away from the fact that this is an appalling year. Farmers will lose money because they have suffered dreadful weather and dreadful crop losses, which I completely understand and acknowledge. As we contemplate future policy, however, we must see this in the context of overall farm profitability over the eight years since the referendum result. The truth is that, overall, farm incomes have been stronger than they were previously.

I welcome the fact that the Government have brought forward this statutory instrument. I know that reducing the BPS payment is obviously not popular with many farmers, but as a point of coherent policy, it is absolutely the right thing to do. Ministers deserve credit for sticking to the programme.