Agricultural Sector (EUC Report)

Lord Gardiner of Kimble Excerpts

Tuesday 22nd November 2016 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Gardiner of Kimble) (Con)]

My Lords, I too congratulate the noble Baroness, Lady Scott, on securing this debate and I acknowledge warmly all that she has achieved during what I might call her term of office. Her committee has produced an excellent report on price volatility and the steps that could be taken to help farmers adapt. The report draws on the experiences of farmers, banks and academia and, as we know, it was published before the result of the referendum. I am conscious that any discussion of the CAP and long-term opportunities for British farming now take place against a very different backdrop. I should at this juncture declare my own farming interests as set out in the register and say that our farming partnership is the recipient of CAP funds.

Farmers in the UK grow the ingredients that underpin our biggest manufacturing sector. Collectively, food and farming contribute £109 billion to the economy, including more than £10 billion from farming directly. British farmers are renowned for the quality of their products, the highest standards of animal welfare, and the traceability and transparency that gives confidence to consumers. They also play a vital role in managing our countryside.

I acknowledge the considerable price volatility that farmers endure. In the last two years the dairy sector has been particularly hard hit, experiencing the challenges of global overproduction, falling demand and the effects of the Russian embargo. These have pushed down milk prices and reduced farm incomes. Some farmers have taken the painful decision to stop producing milk. Others have cut back their production or their plans for new investment. In recent weeks, as part of these volatile market conditions, some processors have substantially raised their farm-gate milk price. Some farmers are receiving more than 30p a litre if they sell direct to supermarkets and specialist cheesemakers. Others are struggling with prices below 20p. The market is complex, with considerable uncertainty for many farmers.

The Government take volatility and low prices extremely seriously. Volatility remains a feature of agricultural markets and I have no doubt there will be further challenges. My noble friend Lady Byford asked about the farm recovery fund. In the last two years the Government have made substantial funding available to help farmers get back on their feet following the severe flooding. Indeed, last year the Government appointed a special envoy at ministerial level to work on the ground with affected farmers in Cumbria and Yorkshire to ensure that support was rapidly delivered and any practical problems could be resolved. I well understand what my noble friend is saying. It is very important that we are as rapid as we can be in helping farmers get back on their feet. The Government will continue to support hard-hit farmers in difficult circumstances, as my noble friend mentioned.

The Government have already taken steps to help producers in one way. We have introduced a new system of extended tax averaging which applies from April 2016. Indeed, in reading the report I note that the committee felt that this was a “positive development”. I am grateful to the noble Lord, Lord Trees, for also highlighting this. This system enables farmers to spread their profits for income tax purposes over five years. These reforms provide extra security to enable farmers to plan and invest for the future. All farmers are eligible and the scheme has been designed to be as simple as possible to operate.

I am grateful to the noble Lord, Lord Grantchester, for his support. My noble friend Lord Selkirk referred to the Chancellor’s confirmation on 13 August this year that to provide more certainty for the agricultural sector all structural and investment fund projects, including agri-environment schemes, signed before the Autumn Statement will be fully funded, even when these projects continue beyond the UK’s departure from the EU. In addition, he guaranteed that the current level of agricultural funding under CAP Pillar 1 will be upheld until 2020, as part of the transition to new domestic arrangements.

The noble Lord, Lord Teverson, asked about a number of points. A further package of EU funding was agreed by Ministers in July. The share of funds allocated to the UK was €30 million. Reflecting the committee’s advice, we are looking to direct some of these funds to support risk management training for livestock farmers to help improve their resilience. We will keep the committee in touch with our plans, including the outcome of the risk management training and the level of engagement by farmers. I think that is a very positive message.

The noble Baroness, Lady Scott, asked about the Government sharing their plans to develop domestic alternatives to the CAP. Early guarantees on funding have been made. Supporting our farmers and protecting the environment will be an essential part of our exit from the EU and I look forward, as do all my ministerial colleagues, to working with industry, rural communities and the wider public to shape our plans for food, farming and the environment outside the EU. We will be launching a major consultation on what that future is to look like. I am not yet in a position to oblige the noble Baroness, Lady Parminter, with the exact timing, but we are well seized of the importance of this work—more about that in a moment.

British producers are dedicated to their farms, their industry and their way of life. I know many of your Lordships from the countryside know how much dedication there is. There is also huge dedication to their livestock. One of the things that we at Defra are remarking to ourselves is the huge importance of animal welfare standards. We think this is an essential part of brand Britain. At home we have 65 million consumers on the farmers’ doorsteps who I believe increasingly value the high-quality food that is here. Indeed, there is a growing global appetite for UK food and drink as populations in major developing countries become more affluent.

As we negotiate the terms of our exit, we need to grasp the opportunities it presents to secure a vibrant future for British farming. I believe a desire for a strong farming sector and a well-managed environment are compatible, and we will work towards that end. Indeed, I reassure my noble friend Lord Selkirk and the noble Baroness, Lady Scott, that the need for a joined-up bold vision is what has inspired the 25-year plans that we will publish for food and farming and the environment. Defra and its organisations such as the Environment Agency, APHA, the RPA and Natural England will in future be more integrated, operating towards clear long-term goals.

As the noble Baroness’s report has shown, science and technology have huge long-term potential to boost efficiency and profitability on farms. Indeed, my noble friend Lady Byford stressed this with impressive figures for both public and private investment. We in this country are fortunate that we have some of the most visionary scientists in the world at research centres such as Rothamsted Research and the John Innes Centre. I say to the noble Earl, Lord Kinnoull, that I was delighted to see the research at John Innes that had been commissioned by Defra on disease-resistant ash trees. I believe this will be part of the research that is going to be so beneficial to us. As Minister with biosecurity responsibilities, I am very conscious of tree diseases and pests, whether insects or mammals. We want a glorious treescape in this country, and the work we are doing on tree resilience and tree health is an indication of the importance we place on this. We also have world-famous colleges and universities like Cirencester and Harper Adams training a new generation of farmers.

As has been mentioned by my noble friend Lady Byford, the Government are putting £160 million into the agritech strategy to make the UK a world leader. Innovation centres for livestock, crop health, precision engineering and data will help to transfer the latest knowledge and techniques from laboratory to farm. We are developing a food innovation network to ensure that ambitious entrepreneurs are linked up to the latest scientific knowledge. We want our farmers to have access to the best technology available so that they can remain competitive and contribute to the growth of the rural economy. In addition, we are improving our resilience to animal disease by investing in state-of-the-art laboratories and the upgrade of our biocontainment facilities at Weybridge—I am going to visit Weybridge on Friday—which will strengthen our ability to fight diseases like swine fever and avian flu.

In a world of volatility but also great opportunities, the people who will reap the fullest advantage will be those with skills, innovation, investment and indeed ambition. The best managers in farming are investing in developing expertise, adopting the best available techniques and harnessing the right technology to boost productivity and profits. We would like to see this practice spread right across the industry, which I hope will give reassurance to my noble friend Lord Selkirk.

The Government are seeking to raise skills levels across the workforce by trebling the number of apprentices in food and farming. We need to examine new models of farming such as share farming or franchises, which will allow new people and ideas to come into the industry. I am so pleased that my noble friend Lady Byford mentioned my noble friend Lord Plumb. My goodness me, what a friend he has been to agriculture and the countryside throughout his long life. The report raised some valuable questions about tenancies. We want a viable future for all farm businesses—including owner occupiers and tenants—as part of a strong, dynamic and flexible British farming industry.

The report makes an excellent case for exploring new financial instruments—something that the noble Lord, Lord Teverson, also highlighted in his speech, and I welcome him to his new post. These could help farmers access new forms of funding to modernise and invest. We need more capital going into the right investments to improve productivity and resilience in farming and throughout the food chain. As has been mentioned, the Government have appointed EKOS Ltd to identify the potential for loans, guarantees and equities in UK farming. We expect to receive its report within the next few weeks.

The noble Earl, Lord Kinnoull, and the noble Lord, Lord Trees, referred to wider international models such as the Australian farm management deposit scheme, which was highlighted in the committee’s report. I also note the Canadian scheme. The noble Earl also highlighted Flood Re as a template. It was undoubtedly a successful outcome of government working with industry, and we are keen to look at whether insurance schemes could be used to benefit the farming industry.

As the committee recommends, the Government have worked closely with the AHDB and the financial sector to explore the potential for futures markets in UK farming and other tools for managing risk. As was mentioned by the noble Baroness, Lady Scott, and the noble Lord, Lord Grantchester, on 14 November the EU markets task force published a report aimed at helping farmers absorb the shock of price volatility or prolonged periods of low prices. In order to stimulate futures markets, it recommends more awareness-raising and training in the farming community and farmers’ organisations and more reliable market data in which the markets will have confidence and faith. We will study the report with interest, assessing with the industry which elements would be most helpful for British farmers. Again, spreading knowledge of this will be immensely important.

My noble friend Lord Selkirk and the noble Lord, Lord Grantchester, referred to broadband. As I am a member of the technical skills task force, I am very conscious of the importance of this to rural areas. Public investment in improving broadband is nearly £1.7 billion. My department is working closely with DCMS and its delivery body to press for improvements in coverage, and I am personally well aware of enhancing in rural areas both mobile connectivity and broadband. We also need to be improving planning and regulatory conditions for rural businesses. This would help to create a highly skilled rural workforce, creating strong conditions for rural business growth and making it easier to live and work in rural areas, particularly by overcoming housing constraints and improving access to affordable childcare for working parents.

Farmers should receive a fair price for their produce, and the Groceries Code Adjudicator has an important role to play in changing behaviours in the supply chain—the noble Lord, Lord Grantchester, referred to this. The Government have launched a call for evidence to explore the case for extending the adjudicator’s remit. This recognises the concerns raised by other suppliers in the grocery sector—particularly primary producers and farmers—who are not covered by the code. The Government want to do all we can to help these businesses, and we look forward to hearing their views and others from right across the agrifood supply chain.

The noble Baroness, Lady Parminter, and the noble Lord, Lord Teverson, in speaking about the post-Brexit era, raised the importance—the supreme importance—of international trade to our country. Indeed, it is at the heart of our approach. Growth in world trade and prosperity will bring substantial opportunities to sell our high-value, high-quality food and drink as long as we are at our most resilient and competitive. That is why, in the coming weeks and months, Ministers will be crossing the globe banging the drum for great British food and drink. Indeed, my honourable friend the Secretary of State returned from China only last weekend, where she emphasised the importance of our trading relationship and promoting the quality and safety of British food. She also met Chinese food businesses to promote our food industry and support inward investment.

Last month, in Paris, the Secretary of State launched an ambitious new action plan to increase exports and bring a £2.9 billion boost to the UK economy. The new international action plan for food and drink identifies nine markets across 18 countries with the best potential for growth, including India, the USA and Canada, China and the Gulf. Across these countries, work is under way to secure new access—notably, market access for beef and poultry to Japan, lamb and beef to the USA, and pork to China. Together, over the next five years the Government and industry will help exporters sell more overseas and provide business support, mentoring and training to give new companies the confidence and skills to start exporting.

I am conscious of what we owe the noble Baroness and her committee members for their invaluable report. It was very encouraging to hear that my ministerial colleagues have already been picking up and running with it—George Eustice has responsibility for food and farming in particular. I think this shows the importance of the work of this House and your Lordships in this regard. The issues that have been raised are central to securing a resilient and competitive UK farming industry for the longer term. Farming is the backbone—that was my word, although I do not mind bedrock—of rural Britain, producing food and the stewardship of the countryside, and importantly the environment. This Government are absolutely clear about the importance of vibrant and sustainable rural communities that are sustained on a strong economy, making them great places to live, work and visit. Our task is to put our shoulder to the wheel to ensure that we leave the European Union in the best way we can for our country. We must ensure that Britain’s agricultural and horticultural sectors have a positive and vibrant future.