My Lords, it is a pleasure to follow the noble Baroness, Lady McIntosh of Pickering, whose analysis I almost completely agree with, although my conclusion is a little different. I declare my interests as a farmer and landowner, as set out in the register, and that I have been a recipient of the basic payment over several years.
I tabled Amendment 144, to which my noble friend Lord Curry of Kirkharle has kindly attached his name, and Amendment 145 in order to address the problem of the likely gap that will affect farmers as direct payments are reduced in 2021, while the revenue from the joining of any new environmental land management schemes will not arrive until 2024—although this will be mitigated for some farmers who have existing countryside stewardship schemes. This is no small issue. As we have heard in the debates on the Bill, the BPS accounts for some 58% of farm business income, varying from sector to sector, and around 25% of farms are unprofitable without it.
Although the industry has been aware for several years that the Bill was coming and that its major feature would be public money for public goods, rather than an area-based subsidy, the details of the replacement scheme have been few and still remain a work in progress. Adjustments to a new world have therefore been understandably slow because options have been limited. Diversification of businesses into non-farming activities has been done by some farmers, but this has to an extent been dependent on the tenure of their farm—owned or tenanted—their location and their ability to access funds. Some have looked at selling their produce directly to local shops to improve on the low margins imposed on farmers by the power of supermarkets. Others have cut costs to the bone, affecting their family and lifestyle. Others have attempted to raise productivity, but, once again, this has often depended on their ability to borrow. Still others have emulated Micawber and are waiting for something to turn up. Furthermore, like everyone, all farmers face the uncertainties of Brexit, the new trade agreements and, of course, Covid-19.
It therefore seems fair and reasonable to address the problem of the gap between the BPS cuts and the introduction of the environmental land management scheme, particularly since a solution is suggested in Amendment 144 that would not hold up the transition period and would come with no additional cost to the Government. Under current plans, the Government intend to introduce a cut to BPS in 2021 of a minimum of 5%, with progressive increases in the cuts to the largest recipients of BPS amounting to 25%. No details are given as to what percentage cuts will be made in succeeding years, which is highly regrettable from a business planning point of view. I would be interested to hear the Minister’s response on this point.
Based on these percentages, it is entirely possible that some farmers, both owner and tenant, will see their BPS cut by more than 50% in 2021 before they have access to the environmental land management scheme, which might address some of the shortfall. The amendment therefore proposes that no farmer should have his BPS payments cut by more than 25% until the environmental land management scheme becomes available. I think that we all wish to see a thriving farming industry in this country. The amendment should help in this respect, particularly because the farming businesses likely to be most affected by the BPS cuts, according to the AHDB, are commodity arable producers and lowland livestock farmers, since these are known to be heavily reliant on direct payments.
Furthermore, this solution to covering the gap between the introduction of the ELMS and the reduction of BPS would bring England more into line with Wales and Scotland. I believe that Wales will make no cuts to BPS until 2022 and Scotland until 2024. The amendment would help to level the competitive playing field.
Finally, I will make one further comment on the environmental land management scheme. The Minister is well aware of my frustration about the lack of detail at this late stage. We all hope for the success of this policy. However, there is an irony in the announced reward formula of covering farmers’ costs as well as profit foregone in that it surely would mean a return to the much-condemned area-based payment, since averages rather than farm specific figures will be used in most cases in tier 1. Furthermore, farmers would also hope that income foregone from BPS will be taken into account in the calculation of income foregone.
Amendment 145 is a technical amendment to ensure that regulations made under Amendment 144 would be subject to the affirmative procedure.