My Lords, I am grateful to all noble Lords who have spoken in this debate. It is always challenging when one noble Lord decides on one timeframe and another noble Lord chooses another. Sometimes the Government must make decisions on their position. Our position has been undertaken through a lot of consideration. I declare my farming interests as set out in the register. I thank the noble Lord, Lord Teverson, for his Amendment 130, which seeks to reduce the length of the first multiannual financial assistance plan.
We are all agreed that the nature of farming is a long-term affair. For that reason, we felt that having clarity of funding across multiple years was of paramount importance. As drafted, Clause 4 requires that the first planned period will run for seven years. This is designed to match the length of the agricultural transition period, which is a key time for the development of government policy. Schemes will be tested and piloted. As my noble friend Lord Inglewood said—I was not in a position to reply to my noble friend Lord Lucas—the purpose of tests, pilots and trials is to iron out what has not worked particularly well and find those schemes that come forward as the most dynamic and the best value for money for the taxpayer. The findings from these experiences will inform the development of future schemes and strategic objectives. We believe that shortening the period covered by the first plan would hinder our ability to assess schemes and take a considered view of what works and what does not.
The majority of the amendments in this group address the length of the agricultural transition period. I will address Amendments 142 to 146, on the subject of direct payment reductions. The planned agricultural transition period allows a gradual transition from the existing area-based payments to the future system, where public money will be paid for public goods. We deliberately made this time to avoid a cliff edge for farm businesses. Following an extensive consultation, we believe that seven years strikes the right balance between signalling the end of area-based payments and giving farmers time to adjust. Shortening the transition period would mean steeper rates of payment reductions, which we believe would put undue pressure on farmers who are currently reliant on direct payments at a time when they are adapting to a future without them.
I think that most of us agree that direct payments offer poor value for money. Appropriate reductions to these payments will free up funds that can be used to fund new countryside stewardship agreements, introduce the Environmental Land Management national pilot in 2021 and introduce schemes to boost industry productivity, through which grants will be available so that farmers can invest in equipment, technology and infrastructure. The reductions for 2021 will be modest. As I was reminded, there are within the margin of what would often be currency rate changes in previous regimes. They will be no more than 5% for around 80% of farmers, based on the 2018 scheme data. I will look at Hansard because I think that the noble Lord, Lord Carrington, spoke about a minimum; my understanding is that it will be no more than 5% but I would like to clarify that point.
A seven-year transition period gives enough time to ensure that ELM is fully up and running before direct payments end. The Government are undertaking a large stakeholder-led programme of tests and trials for certain elements of the scheme design. We plan to pilot our approach in 2021 ahead of the rollout of ELM in 2024. In their election manifesto, the Government guaranteed the current annual budget in every year of this Parliament. We have also published the maximum reductions that we intend to apply in the first year of transition. These were first announced in September 2018 to give farmers sufficient notice. The Government will set out further information on funding for the early years of the agricultural transition period, including direct payments, in the autumn.
Having declared my interests, I should say that I well understand that many of my neighbouring farmers—indeed, all the farmers I know—are very keen to know more on this. I appreciate that. I assure noble Lords that the point is hoisted and that I know why it is important. I look forward to that information coming forward in the autumn.
While direct payments currently form an important contribution to income on many farms in England, we believe that they can hamper productivity growth in the agricultural sector. That is why, within the sum that will be released, that money will be diverted into countryside stewardship and productivity grants so that farmers can start, through their business interests, to take advantage of the money that will move from direct payments into these other areas of support.
While I have been at the Dispatch Box, there have been varying years relating to the RPA. It is interesting, and I think my noble friend Lord Northbrook is correct. The payment profile of the RPA has very much improved since my first exercises on this in 2015. We have seen considerable advance in rates of payment; indeed, this has been a very strong priority of the ministerial team.
Defra’s ELM programme will lead and be accountable for the delivery of the national pilot, working with our delivery partners: the Environment Agency, the Forestry Commission, Natural England, the Joint Nature Conservation Committee and the Rural Payments Agency. We are working with the RPA to ensure that it has capacity to deliver the pilot, and we are confident that it will be able to do so. This is on the relationship in this first stage of the pilot.
Another concern which the noble Lord, Lord Clark of Windermere, and my noble friend Lord Holmes of Richmond raised was computer programmes. Again, we have all been scarred by computer programme issues. Defra digital, data and technology specialists are currently working to ensure that the IT needs of the national pilot and ELM will be in place on time, and they are focusing on the ability to make accurate payments on time, on which I place enormous importance. We are confident in our ability to deliver these IT schemes.
The noble Duke, the Duke of Wellington, tabled Amendment 149 relating to upland farmers, and I am struck by what my noble friend Lord Randall said about lowland farmers as well. The Government recognise that upland farmers play a vital role in looking after the countryside. We believe that they already provide many environmental benefits, and so will be very well placed to deliver environmental outcomes—and incomes—which will be rewarded under the ELMS.
Therefore, I say in particular to the noble Baroness, Lady Bakewell of Hardington Mandeville, that we are fully seized of the importance of small upland and lowland farmers who have contributed so much, not only to communities but to the landscape more widely. It is really important that they are part of the ELMS, and I believe that what they will provide for the nation will be very considerable. The Government will apply reductions to the payments in a fair way, and smaller farmers will initially experience lower reductions than larger farmers.
Turning to Amendments 150 to 152, we recognise in Part 2 of the Bill that in exceptional market conditions it is right for the Government to be able to intervene. Clause 8 allows for the extension of the agricultural transition period, should it be necessary. The Government believe that seven years is enough time for an agricultural transition, however we may need to act swiftly and robustly in unforeseen circumstances that warrant an extension.
I say particularly to the noble Lord, Lord Grantchester, but also to my noble friend Lady Rock, that, regarding how delinked payments will work, the Government have made clear that they intend to delink direct payments during the transition period. When that happens, the recipient of delinked payments would not need to remain a farmer to receive them. When delinked payments are introduced, they will replace the current basic payment scheme entirely and for all farmers. The basic payment scheme and delinked payments cannot and will not coexist.
Eligibility for delinked payments will be based on a reference period. For example, it may be necessary to have claimed, or been eligible, under the direct payment scheme in a particular year or years. This is also important: we will consult with farmers before setting this reference period in regulations, and it will be subject to affirmative resolution procedure. I say particularly to my noble friend Lady Rock that timescales for basic payment scheme payments are already set out within the retained EU regulations.
With regard to Amendment 153, when we introduce delinked payments, we may wish to move away from the current approach of making a single payment per year and issue payments more frequently instead; Clause 12 gives this flexibility. We believe that more frequent payments would help farmers’ cash flow, and this has been mentioned by your Lordships.
We will publish details of how and when delinked payments will be paid, following a consultation with farmers on the design of the scheme. Specifying payment timescales and regulations could hinder our ability to adapt the arrangements, in light of experience, in the future. We want to move away from the rigidity of the CAP, so that we can offer a better, more responsive service to farmers.
Turning to Amendments 147, 148 and 154, I say to the noble Baroness, Lady Jones of Moulsecoomb, that the Government are committed to maintaining the UK’s position as a world leader in animal welfare. What I say now is because of the way that regulations and legislation are drafted, so it may seem a bit technical.
Clauses 9 and 14 provide the Secretary of State with powers to modify retained EU legislation governing the basic payment scheme and the common agricultural policy, known as the horizontal regulations for specified purposes. Those purposes aim to make the scheme simpler and improve it for farmers. The underlying animal welfare standards, to which all farmers must adhere, are not found in this basic payment scheme legislation or in the horizontal regulations; they are found instead in underlying domestic and retained EU law, which Clauses 9 and 14 do not allow us to change. I hope that helps the noble Baroness to understand why her very legitimate issues are not placed within these clauses.
It has been a very interesting debate, and I am fully seized of the points made about what has been described as “the gap”. I hope I have set out what we intend to do with the fairly modest sums—I think it is a maximum of £150 million out of £1.8 billion—that would be spent on these new schemes, which are about moving us forward, both with the ELMS and pilots and in productivity. I am fully seized of the importance of that, and the autumn announcement will therefore be very important, not only for your Lordships but, in particular, for farmers and how they work through these changes.
I repeat to the noble Lord, Lord Teverson: the Government felt that seven years was a responsible length of time for the multiannual financial plan and for an agricultural transition. We want this to be a success for farmers, because they provide us with so much; the noble Lord, Lord Carrington, spoke about this in one of our debates, which now seems a little while ago. We ask the farmer to do a lot, and that is why I think, and the Government feel, that seven years is an appropriate period.
With those points, I hope that the noble Lord will feel able to withdraw his amendment.