My Lords, I declare my interests as a farmer, as set out in the register, and that water abstraction is used on my land to grow crops such as potatoes. I am also a member of the National Farmers’ Union, which has supported me in the tabling of my amendments. While moving Amendment 64, I shall speak also to Amendments 65 to 69 in my name, and to Clause 84 regarding the revocation of water abstraction rights without the payment of compensation, and the need to raise and clarify the evidential bar before revocation or variation. I shall then speak on Amendments 70 to 74, on the refinement of circumstances in which excess headroom can be removed.
By way of background, I think it important to focus your Lordships’ attention on the use and users of water abstraction licences, and to emphasise that farmers are not advocating the over-abstraction of water; they thoroughly understand that this damages the environment and are happy to work with the Environment Agency to ensure that this does not happen. Water abstraction is used by farmers to grow food crops; it is not something done for fun. The noble Baroness, Lady Bloomfield of Hinton Waldrist, said in Committee that farmers hold more abstraction licences than any other sector, so a higher number of farmers are affected than other sectors. However, this is because of the number of individual licence holders; it has nothing to do with the volume of water abstracted. In fact, farmers account for just 2% of all water abstracted.
We should remember again that this is used for the production of our food, not for a car wash or a water slide. On the whole, water abstraction is used to produce high-value crops such as potatoes and vegetables, as well as fruit and certain horticultural products, on some of our most productive land. It involves very expensive investment in irrigation equipment, specialist storage and processing equipment. Investment decisions are carefully made on the basis of long-term planning, which includes availability of water and other inputs, together with market demand. Investment decisions of this sort are not taken lightly, as in most cases there is need for recourse to bank or other finance, requiring repayment at points in the future.
I do not wish to repeat what I said in Committee but would like to answer and clarify certain statements that were made. One noble Lord opposed the amendment on the basis that water is a resource that we must all share and that farmers’ historic water abstraction rights are historic happenstance and can be inequitable in their impact on the environment and other water users. This may well be historic, but so is the production of the food to which they relate, and I hope we are not talking about the revoking of food production.
Let us be clear: farmers are not advocating over-abstraction, only that those licences should not be revoked or varied as a result of arbitrary and undefined definition of damage by the Environment Agency. We do not oppose changes to licences, but we do oppose the ability to remove a licence without compensation. Payment of compensation is a hugely important point, and not just a legal one. It represents not only a long-standing property right but is a valuable business asset. It provides a degree of certainty for food production and manufacturing, together with the confidence to make important investment decisions. The overriding purpose of compensation is to enable farmers to make the necessary adjustment to their business if that licence is varied or revoked. In Committee, noble Lords encouraged the greater use of reservoirs. Surely this measure, together with any move to precision irrigation systems, is the perfect reason why compensation is necessary to enable farmers to reorder their business.
The Minister—the noble Baroness, Lady Bloomfield —informed us that only 10% of permanent extraction licence holders would be affected. But those holders were given legal rights when their applications were considered, determined and approved by the regulatory authorities. The goalposts have moved through no fault of the farmer. Surely all farmers deserve a clear definition of what the damage that has caused the revocation or variation is, in order to ensure that provisions are transparent and applied consistently going forward. Such information would also allow them to plan better for the future if a breach was likely. This is the purpose of Amendment 67, which tightens the ground for the revocation of licences.
The noble Baroness, Lady Bloomfield, also told us that the Government wanted
“the Environment Agency to continue to work closely with abstractors to explore all voluntary solutions to unsustainable” water abstraction. She said:
“I do not agree that this is a blunt regulatory process; rather, it is the last resort in a collaborative process.”—[Official Report, 7/7/21; col. 1324.]
This is excellent news. In a letter to the noble Lord, Lord Colgrain, and me, the Minister—the noble Lord, Lord Goldsmith—wrote that the Government would set out in guidance that they would expect the Environment Agency to seek collaborative non-licence change, such as habitat restoration and mutually agreeable voluntary solutions where possible. He continued:
“Responsibility for demonstrating that a licence is damaging or risks damaging the environment will lie with” the Environment Agency. The Minister wrote that guidance to the Environment Agency would be issued and helpfully set out the expectations of the agency, which cover many of the farmers’ concerns, including, I hope, how long farmers will have between being notified that their licence is under threat and enforcement.
I thank most warmly the Minister for his further letter to the noble Lord, Lord Colgrain, and me, which we received this morning. His letter confirms a lot of what has already been said, in particular, the expectation of a collaborative process with the Environment Agency and that new powers should be used as a last resort. He also promised discussions with all stakeholders before the publication of the guidance. The confirmation of this today by the Minister would be much appreciated, together with an idea as to the timing of the publication.
The purpose of Amendments 70 to 74 is to make the removal of excess headroom from abstraction licences without compensation more appropriate to the real world of farming and consequences of the British weather. It is a question of maths—I am sorry, it is quite late for maths. But if you can grow potatoes on the same field only every seventh year, yet you lose headroom if you fail to use it in a 12-year cycle, it only needs a very wet year when you are growing those potatoes and therefore do not need to abstract for you to lose that right. Therefore, you have no ability to abstract when you next grow spuds. This makes business planning and investment in this crop a major gamble that farmers are unlikely to accept.
Turning back to the importance of compensation, I have referred to compensation being a source of funding to alter the business model to, say, replace river extraction with building and using a reservoir or more precision irrigation equipment and other mitigation measures. However, we also need to acknowledge that revocation could lead to a loss of profit and loss of land value and other asset value, such as equipment loss. For most farming businesses these are no small matters and could result in significant loss and danger to the farm’s viability.
Although the building of reservoirs is an obvious solution for some, it is not as easy as it sounds. Some can be built under permitted development rights, but they are not cheap or easy to build. The planning process is often lengthy and costly, so a proper transition period from river abstraction is required. The lovely idea of a shared reservoir presents even more challenges, with the need for complicated legal agreements governing not only whose land the reservoir is on but what rights need to be granted to allow access on land not owned, how much can be abstracted, remedies for breaches, responsibility and cost of maintenance.
The adoption of Clause 84 unamended would do serious damage to part of our farming industry that is at the high value-added end of the food chain. The proposed amendments take account of the need to vary and revoke licences when the need is clearly and openly proven. The industry looks forward to seeing the Government’s promised guidelines so that sensible business plans can be adopted to mitigate any adverse effects of revocation or variation of licences.
Finally, the suggestion of no compensation should be reconsidered as it is so important to the funding of any mitigation measures, together with any losses incurred. The production of sustainable, world-class food in this country is paramount and not something that should be risked. I beg to move.
My Lords, I thank the noble Lord, Lord Carrington, for the introduction to his various amendments. As he said, Clause 84 removes the need, from 2028, to pay compensation to the holders of environmentally damaging abstraction licences when those damaging licences are amended or revoked. Although we have listened carefully to the concerns expressed by the noble Lord, we believe that we should put the needs of the environment first.
The requirement to pay compensation has been a barrier to action to protect waterways, including vulnerable chalk streams, which we considered earlier today and which in some cases have dried up completely, from the impacts of unsustainable abstraction. Over the years, a number of schemes have been introduced to identify and amend the most damaging and unsustainable licences, but the need to pay compensation to licence holders when those damaging licences are amended or revoked has been a significant barrier to progress.
The Water Act 2003 removed the requirement to pay compensation to the holders of licences causing “serious damage”, but this is an extremely high bar and is therefore rarely invoked, so in practice has provided little protection to our vulnerable waterways. The Water Act 2014 recognised this and removed the requirement to pay compensation for water company licence changes altogether. This has set a clear precedent for the removal of damaging licences without compensation. It is also important to recognise that 5% of surface water bodies and 15% of groundwater bodies are at future risk, where existing licence holders not currently using their licences in full could legitimately increase abstraction, thereby causing further damage to the environment.
The timescales proposed by the Government for this change provide ample time for catchment solutions to be identified and implemented wherever possible, with licence changes considered as a last resort. We must not curtail the ability of the Environment Agency to take action to protect and improve our rivers and wetlands, but instead should increase its ability to do so effectively.
In Committee, the noble Lord, Lord Cameron of Dillington, hit the nail on the head when he said,
“the days when you can be compensated for not causing environmental degradation have, in my view, long since gone”.—[
We on these Benches could not agree more; we cannot support the noble Lord’s amendments, but instead believe that the Government have got it right in Clause 84.
I am grateful for both contributions and for the support of the noble Baroness opposite. I thank the noble Lord, Lord Carrington, for his amendments, and for not only meeting with my noble friend Lord Goldsmith and officials over the summer to discuss his concerns but for this constructive engagement.
The measures which we are introducing in Clause 84 are absolutely necessary to protect the environment from further damage and from over-abstraction. Members of this House have spoken of the necessity of protecting our water environment, including the fish and invertebrates which live within it, as well as of the need to protect our internationally important chalk streams, on which we have already heard from the noble Lord, Lord Chidgey, and others. Ending unsustainable abstraction is essential if we are to achieve this. But as I said in Committee, we also know that abstraction is vital for food production.
The Government recognise the impacts that these changes will have on permanent abstraction licence holders and are taking all steps possible to implement the changes fairly. The changes will not take effect until
I reassure the noble Lord, Lord Carrington, that, by contrast, water companies can already have their extraction licences varied or revoked without the payment of compensation. I hope I can also reassure him when I say that this is not, as he termed it, an arbitrary or undefined process. Excess headroom will be assessed over each year of a 12-year period, to allow for weather variations and crop rotations, and to align with the abstraction licensing strategy timeframe. The Environment Agency will assess licences within scope on a case-by-case basis, considering all relevant factors including business needs and existing and future water resource needs, as the noble Lord mentions in his Amendment 73, before deciding what action is proportionate, as the noble Lord raises in Amendment 65.
We expect the Environment Agency to use this power as a last resort, once all other options have been exhausted. But if those options have been exhausted, it is simply not right that unsustainable abstraction and environmental damage should be allowed to continue. That is why this power is necessary. Should that decision be taken, the licence holder will have a right of appeal to the Secretary of State, as is currently the case. They can put forward expert evidence should they wish to do so, which was also a concern raised in Amendment 64.
The noble Lord, Lord Carrington, asked about timing. We are working with partners, including the National Farmers’ Union, on the guidance and will publish this guidance as soon as possible. The Government have worked, and will continue to work, extremely hard to ensure that these new powers are reasonable, proportionate and just. We will continue to work closely with a wide range of stakeholders to ensure that their implementation is a smooth and fair process.
I hope that the noble Lord recognises that the Government have endeavoured to put in place necessary safeguards. We can go no further without undermining the very purpose of this clause, which is to protect the environment. I acknowledge his comments about the long-term planning for the necessity of new reservoirs. I am afraid that I have no further details and can only acknowledge that this is a long-term solution. I hope that he agrees with the necessity of that purpose and will withdraw his amendment.
My Lords, I thank the Minister very much indeed for the very considered response. Although I do not totally agree on the compensation issue—but I was never going to—I accept all the assurances and the work that has been done by Defra to help ease our concerns. I have no hesitation in withdrawing my amendment, although I will continue on the compensation issue in future discussions. I beg leave to withdraw the amendment.
Amendment 64 withdrawn.
Amendments 65 to 74 not moved.