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

Lord Benyon Excerpts

Tuesday 28th March 2023 Lords Chamber

Moved by

[Lord Benyon]

That the draft Regulations laid before the House on 31 January be approved.

[The Minister of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)]

My Lords, I declare my farming interests as set out in the register.

This instrument is a fundamental part of the vital reforms we are making over the agricultural transition period in England. These reforms support the prosperous long-term future of the sector to produce high-quality, nutritious food, and protect and enhance the environment for future generations. The Government committed to maintain the same budget for farming, totalling £2.4 billion per year, but to move it away from the EU’s common agricultural policy, which did so little for food production or the environment, and towards investing in the foundations of food security: healthy soils, abundant pollinators, and clean and plentiful water.

This instrument applies progressive reductions to direct payments made to farmers in England for the 2023 scheme year. It puts into law the reductions which the Government first announced in their agricultural transition plan in November 2020. The reductions are being applied in a fair way, with higher reductions for amounts in higher payment bands. Therefore, this is a process that favours smaller farmers over larger ones. The reductions are calculated to be replaced pound by pound with investment in our new and existing schemes. This is the third year of the seven-year agricultural transition period, during which direct payments are gradually being phased out as we invest in targeted schemes.

The Labour Party has put a regret amendment before the House, and my concern is that this will send a confusing message to farmers. We are seeing farmers feel less confident about the agricultural transition due to previous political uncertainty, but we have made great progress since then, with the provision of more details about our improved countryside stewardship and sustainable farming incentive offers.

According to the Farmer Tracker Opinion for England, which was published last October, farmers on 81% of holdings said that Defra paying for environmental outcomes would be very or moderately important to their business in future, so this opinion supports the need to continue our agricultural transition.

I turn now to the fatal amendment from the Liberal Democrats. The Government remain convinced that direct payments are not the right way to support farmers and improve the environment. Let me set out clearly what the fatal amendment means and what the Liberal Democrats are asking the House to vote on this evening. First, if the House supports this amendment, it will be voting against the interests of small farming businesses. In England, historically, half the direct payments money went to the largest 10% of recipients. I cannot believe that anyone in this House would want that to continue. Meanwhile, our new schemes benefit small farms with a new management payment under the sustainable farming incentive of £20 a hectare for the first 50 hectares. This means that farmers can receive up to £1,000 extra to cover costs, so that is one way in which we are weighting this budget to smaller farmers. There is no minimum amount of land that can be entered into the scheme.

Secondly, support for this amendment would be a vote against maintaining our food security. The EU’s area-based subsidies were substantially de-linked from food production in 2005. Indeed, they have inhibited productivity improvements. Meanwhile, our schemes invest in the very foundations of food security: from productivity to innovation, soil fertility and beyond. We set out our plan for this very clearly in the Government’s food strategy, and I have yet to see a clear plan from other parties.

Thirdly, supporting this amendment would be against the public’s demand for a better environment. Many in this House want, for example, to see our rivers restored. If the amendment was successful, many measures which directly restore water quality in our rivers would have to be shelved. We would be incentivising farmers to remove herbal leys and habitat-rich pastures that they may have planted alongside watercourses, and that would clearly be a crazy move to have to make because of how the amendment is worded.

Voting for this is not voting just to maintain the status quo; it is voting to stop any direct payments being released for new schemes. This would mean that we would have to stop landscape recovery projects, which are restoring more than 400 miles of river. We would have to stop the slurry infrastructure grant, which helps farmers to utilise their nutrients, which are such a valuable input but, when misused, can cause real pollution. We would need to cancel the existing 30,000 Countryside Stewardship schemes, which saw a 94% increase in uptake since 2020. Last but by no means least, support for the amendment would be a vote to keep farmers locked into a bureaucratic system that has worn them down with endless tedious red tape.

If certain Members of this House—the Liberal Democrats in particular—are serious about addressing urgent matters, such as the decline in our rivers or the crisis of species decline, what on earth is their game? That is the point: it is not a game; it is a desperately serious matter which should not be part of some cheap political campaign. We should be united in the ambition to support and incentivise our farmers to drive real change.

The basic payment system burdened our farmers with complex rules about the maximum width of a gateway or whether a cabbage and cauliflower were the same for the purpose of the three-crop rule. We have already scrapped those draconian rules and the related penalties to work with farmers rather than against them.

Let us be clear. This can be dressed up however noble Lords want, but the British people and our farmers will see straight through this. This amendment would keep rewarding people just on the basis of the land they manage, not what happens to that land, and it cruelly cuts the legs out from those who are doing the right thing. Those who support it do not support the many farmers who are embracing change, investing in their productivity, or building their resilience for the long term from the shocks from drought or pest outbreaks. They do not support the farmer who is putting a buffer of wildflowers alongside the river to protect it from run-off and retain vital nutrients on their farm and being rewarded for any revenue forgone.

I have a healthy respect for the noble Baroness, Lady Bakewell: she is a formidable parliamentarian and a valued member of the Secondary Legislation Scrutiny Committee, and I know that this is probably not of her doing but has probably been pushed by someone at the other end of the building. I hope that she has the decency not to push this to a vote. In my two years in this House, I have seen that this is a place that takes its responsibilities seriously. We know that change is worrying for farmers. On top of this world of change are the effects of international events that have seen spikes in input costs. Let us not play this game: let us leave that to others and show that we want to get on with delivering for farming, our countryside and the millions who mind about it.

We will continue to accelerate the rollout of the sustainable farming incentive, with six additional standards being added this year. We will make it more attractive by introducing a new management payment of up to £1,000 per year, and this will help to drive uptake in the scheme among all farms, but particularly smaller ones. We will continue to simplify Countryside Stewardship, under which there are now more than 30,000 agreements across England, continue our planned increase to payment rates to help farmers who are already enhancing the environment to keep up with rising input costs, continue to offer grants for equipment to increase productivity, boost environmental sustainability and improve animal health and welfare.

Under round 1, the Government have already paid out £31.5 million, supporting more than 3,000 farmers with their investment plan, and a further round of the fund opened last month. We will continue to provide free business advice to help farmers to adapt and build their businesses. These are just some of the ways in which the funding being released from direct payments is being used. Other examples include the slurry infrastructure grant, which helps farmers to invest in better storage, the new entrants’ pilot, which will help to bring new talent into farming and land-based businesses, and the tree health pilot, which helps farmers to tackle tree pests. All these would be at risk if this fatal amendment passed tonight. This instrument is essential so that we can free up funds to continue to support farmers to build and maintain resilient businesses while delivering improved environmental outcomes and supporting sustainable food production. I beg to move.

Amendment to the Motion

Moved by

--- Later in debate ---

[Lord Benyon (Con)]

My Lords, I thank everybody for their valuable contributions to the debate. It has been a great opportunity to highlight the important work the Government are doing to invest properly in our farming sector.

Sometimes people refer to farmers as being very conservative with a small “c”. I speak as one, and sometimes we are backwards in coming forwards; but when we get the idea of policy taking us in a certain direction, no group of people in the country can be more dynamic and better embrace change, innovation and all the other factors. Farmers are embracing change. I have seen some remarkable experiences around the country, and no doubt other noble Lords have too.

It is important that we press ahead with our planned reforms. Direct payments have held farmers back and are fundamentally unjust. Continuing to apply reductions to direct payments means that we can fund our other schemes, which deliver better policy outcomes and which we are designing with farmers so that they work on the ground. Our new schemes are designed to support farmers to be profitable and resilient.

We have recently updated the payment rates for Countryside Stewardship to reflect cost increases. There was an average increase of 10% for revenue payment rates for ongoing activity, and an average increase of 48% for capital payment rates. By continuing to invest in our new schemes, we will be providing support to farmers to help them reduce costly inputs and increase productivity.

The noble Baroness, Lady Hayman, asked whether we were talking to the supermarkets—or it may have been the noble Baroness, Lady Boycott, or both. I assure her that we are, on an almost weekly basis. Particularly through the UK Agriculture Market Monitoring Group, we work very closely to make sure that all the supply chain difficulties experienced through Covid and then as a result of the Ukraine war, as well as other lumps in the road such as avian influenza, are dealt with, and we work with them. The point that the noble Baroness, Lady Boycott, made struck home to me. As you drive past my local supermarket, you see photographs of farmers with chickens under their arms, in an idyllic scene. It is very much part of their marketing operation. We want to make sure that this is reflected in the farm gate prices offered and that we have a food supply chain system that reflects the work that has gone into producing that, as well as our need for good food security and the reasonable intention of the retailer to make a margin, but not one that is at the expense of anyone else.

We have a new entrants scheme to encourage new, young and diverse people into the farming industry—but also recognise that, for some people, this transition is not for them. A dignified exit scheme is up and running and allowing people to move on. But I hope that the scheme will bring in a new, younger generation, so that the average farmer is not me, a 62 year-old white man—it is a younger person, bringing new ideas into farming.

We will lay another statutory instrument to deal with payments later this year. I think that that answers another point that was made.

The noble Baroness, Lady Bakewell, talked about Martin Lines of the Nature Friendly Farming Network. I am his greatest fan. He is helping farmers alongside the scheme that we are paying for and alongside the Prince’s Farm Resilience Programme and other organisations. On his farm, he is farming 11% less land, which he has put into environmental schemes, but he is producing more food off the rest; that is an example of where this can be of such benefit.

The noble Baroness, Lady Rock, produced a very good report, which we are working through. We are making sure that these schemes are accessible for the tenants and in the main do not require landlords’ consent—but also making sure that they are freely available to every part of the farming industry. Tenure is, of course, much in our minds.

The noble Baroness, Lady Boycott, talked about accelerating the process of instigating ELMS. We think that we have this about right. We have worked on this on an iterative basis, so we have changed schemes where we have had to, and we have increased payments—such as when the Ukraine war happened and there were spikes in prices. We are working with the Groceries Code Adjudicator to make sure that there is a fair deal for farmers.

On the noble Baroness’s point about the land-use framework, I was always opposed to it. To go back a decade, I thought that it was a sort of Soviet-style, tractor-plan piece of top-down centralisation. I now have the zeal of the convert. The House of Lords report on this is really important; it is driving Defra forward. We will produce a land-use framework, which absolutely is needed, if we are to square the circle of all the different requirements that we need from our land to make sure that that happens.

I thought that the noble Duke, the Duke of Wellington, was uncharacteristically gloomy in his assessment. Farmers in Scotland have no idea what their Government are going to do; they are living in a fog. At least the fog of the transition is starting to clear south of the border, and we are showing farmers here the direction that we are taking and they are embracing it. In Scotland, it is an absolute mess. We are helping farmers here, whereas Scotland is continuing to pay an unfair area payment, whereby 55% of the money goes to the largest 10% of the farmers.

On complexity, I shall just say that, as a former land agent, I do not want this to be something that lines the pockets of land agents. I want it to be as easy as possible. The average time that it takes to sign up to the sustainable farming incentive is between 20 and 40 minutes. It is not something that requires a land agent to do it for you—although perhaps the noble Duke does require a land agent to do it. I am talking about the average farmer. Countryside Stewardship is more complicated, but we are simplifying it and linking it to the sustainable farming incentive, so you do not need different maps. Of course, there are over 200 different options under stewardship.

The right reverend Prelate talked about take-up. The new standards in SFI go live in July and I hope that we will then see farmers embracing it. The free advice we are giving to farmers shows them how they can access it. The noble Lord, Lord Grantchester, talked about Countryside Stewardship as if no one was going into it. We have seen a 96% increase in it and I totally reject his rejection of revenue forgone as a concept: it is vital that farmers see that if they are asked to do something different, if they are asked to reduce the stocking rate, they are rewarded for doing that. Also, we are not just assisting the large landowners, big NGOs, the National Trust and others; this is going into farmers’ pockets.

The noble Baroness, Lady Bennett of Manor Castle, talked about the minimum area. Five hectares is what we are talking about here. I am open to all sorts of ideas for new designations, but horticulture, which was unable to access the basic payment scheme, is able to access a great many areas of these schemes. On the point of my noble friend Lord Lucas, hand-holding sounds a bit patronising, but it is vital to support farmers in this, and that is why we are offering free advice. We will continue to do this. There is not a farmer in this country who could not, if they wanted to, have met a member of the Defra team, at shows, at marts or other agricultural events. They could have gone on a webinar or an event with the NFU or another organisation—we really have tried to do this.

There are roughly 500 actions, grants and advice offers that farmers can access right now to support their profitability, to help them to grow food and to protect the environment. I hope that that person the noble Baroness, Lady Boycott, talked about will be able to access it and see that her level of profitability can be sustained. I urge everyone to take a look at the offer available and the improvements we have made, directly responding to farmer feedback. It can take as little as 20 minutes, as I said, to sign up to the sustainable farming incentive.

We have a comprehensive offer for the uplands, which we have developed in partnership with upland farmers. They have formed the landscape that underpins tourism in these areas and so much more, and we want to see them sustained, we want to see these landscapes farmed and we want to support them in doing so. We include in an expanded offer increased payment rates for Countryside Stewardship. We have significantly increased payments for upland options, such as low-input grassland, which has increased from £16 to £98 a hectare. The SFI has tailored options for the uplands, including the moorland standard, and this goes alongside other options that are applicable to upland farmers. All the standards we are introducing in 2023 are open to upland farmers if they have relevant land and features. Our offer for the uplands also includes the opportunity to apply for landscape recovery funding, farming in protected landscapes grants, animal health and welfare advice and grants, as well as grants to help boost productivity. Most of this offer is already available.

The “income forgone plus costs” approach to sustainable farming incentive payments delivers the largest profit margins on the least productive land. Upland farms, which have typically lower income than the median, are well placed to benefit. This is because the majority of actions for which upland farmers will be able to apply have a single payment rate, which is costed at a national level based on the median farm eligible for the action. Our historic agri-environment schemes use this approach and are popular in the uplands: around three-quarters of commercial upland farmers are already in agri-environment schemes.

To finish, I want to add that in January we updated the offers for schemes. Our Countryside Stewardship increased by 10% on average; the amounts we are offering in our grants in Countryside Stewardship have increased by 46%; our sustainable farming incentive management rate has increased; and the Countryside Stewardship higher tier is getting more farmers involved. We are reflecting the pressures that farmers are feeling because of costs.

We have introduced more flexible rules to allow farmers in legacy higher level stewardship to extend these agreements or to apply for Countryside Stewardship. That flexibility did not exist before. They can also choose to have a Countryside Stewardship agreement alongside their higher level stewardship agreement. Our schemes have been designed to complement each other. Farmers can enter the sustainable farming incentive alongside their Countryside Stewardship agreement, provided that the actions they are taking are compatible and they are not being paid twice for the same actions.