Amendment to the Motion

Agriculture (Delinked Payments and Consequential Provisions) (England) Regulations 2023 - Motion to Approve – in the House of Lords at 5:17 pm on 13 December 2023.

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Baroness Hayman of Ullock:

Moved by Baroness Hayman of Ullock

At end insert “but that this House regrets that the draft Regulations 2023 will revoke Basic Payment Scheme cross-compliance provisions regarding environmental, animal welfare and other standards before a new compliance scheme has been completely established; and notes the risk of (1) regulatory gaps, and (2) increasing uncertainty for farmers and landowners.”

Photo of Baroness Hayman of Ullock Baroness Hayman of Ullock Opposition Whip (Lords), Shadow Spokesperson (Environment, Food and Rural Affairs)

My Lords, the Minister has explained clearly in his introduction that the draft regulations propose to introduce the delinked payments to replace direct payments, so I will not go into the detail of that. They also propose to revoke the law relating to the basic payment scheme, including the associated cross-compliance requirements, which is what much of our discussion will be about. The delinking of agricultural payments was clearly advertised in the agricultural transition plan, so this is no surprise to anybody. We also believe that it is a necessary step to move to a new, fairer system of payments based on the principle of public money for public good, so we will not oppose this instrument.

However, I have brought forward the regret amendment because I am concerned, as is the Secondary Legislation Scrutiny Committee, about whether all relevant cross-compliance requirements that will be revoked by this instrument are replicated fully in domestic legislation, and whether there will be any regulatory gaps. Existing cross-compliance policy is being removed prior to the complete establishment of the new regulatory framework, yet some elements of the new compliance regime are still work in progress, and other cross-compliance requirements will be set out in guidance, codes of practice or, indeed, incentive schemes. To us, this raises questions as to whether they can be enforced as effectively as the current statutory requirements. Is the Minister confident that this will be the case?

Regarding concerns about the regulatory gap related to the legacy payments element of the changes, Defra has stated, as the Minister has just assured the House, that the majority of rules under cross-compliance are already in domestic law. We suggest that this still means that, with the removal from 1 January, there will be regulatory gaps across hedgerows, soil cover and watercourse buffer strips that will not be covered by the farming rules for water. We are also concerned that it risks enforcement gaps on compliance with regulations, such as the domestic public rights of way, that benefit from the conditionality for payments. Again, that falls away from 1 January.

I acknowledge that Defra has made some really good progress on hedgerows. There was a consultation on new protective requirements in summer 2023, but this has not been undertaken in sufficient time to prevent the regulatory gaps between 1 January next year and the enactment of additional protections. We also do not believe that the consultation on hedgerows was expansive enough to cover other gaps in cross-compliance such as soil and watercourses protection. In its August response to the SLSC, Defra notes that there are existing measures to provide ongoing protections, but there have been continued delays, lack of clarity and uncertainty, and we believe that these undermine the potential effectiveness of these measures.

I will briefly look at the impacts if these gaps are not dealt with. From January, agriculture hedgerows will be left unprotected from inappropriate management, removing the obligation to leave a buffer between hedgerows and cultivated areas and to cut only outside bird nesting season. Our concern is that this could endanger threatened hedgerow-reliant farmland species—the corn bunting springs to mind—and risk carbon release through hedgerow damage.

I am aware, as I said, that Defra has consulted on the gaps relating to hedgerow protection, but it has not yet introduced the provisions to avoid any potential damage next year, including during the bird breeding season. Defra has said that there are no other gaps, but this has been disputed by a number of groups, including in a report produced by the Institute for European Environmental Policy, which also points out:

“It is notable that many of the identified gaps (i.e. in relation to soil management) have implications for water pollution”.

I am sure that the Minister would not want to see further water pollution.

That brings me on to rivers. There will no longer be a requirement to create buffers that protect rivers and streams from agricultural pollution or to keep a farm map that marks water sources, apart from in the nitrate-vulnerable zones. We are concerned that this could expose already overloaded watercourses to increased nutrient and chemical pollution and, again, further have the impact of degrading habitats and wildlife.

Finally, most requirements to prevent soil erosion could also be lost, with only minimal protection afforded by the farming rules for water. Removing the obligation to keep green cover such as crops and grass on soils over winter risks increasing the amount of soil lost through wind erosion and leading to degrading overall soil health, on which our farmers depend. Many of these domestic standards are guidance and voluntary frameworks that do not apply to all farmers, so we do not consider them to be appropriate replacements for enforceable rules under regulatory conditionality. We are also concerned that an unlevel playing field will be created between farmers, with a risk that those who comply with voluntary standards are then disadvantaged commercially.

The absence of a formal impact assessment for the removal of cross-compliance and regulatory conditionality is also a problem. I ask the Minister whether he thinks that an impact assessment should have been carried out, alongside a habitats regulations assessment and a strategic environmental assessment, to look at those particular issues.

The NFU, which I know has been working very closely with the Government on this and has made some good progress in areas of concern, has also raised concerns about supporting farming businesses with the need for a form of stability payment, for example. But it is also very concerned about how farmers will be inspected, how sanctions will be applied and how inspections will be co-ordinated after the end of this year when cross-compliance ends. We could end up with a range of different Defra farm bodies going out on to the farms on an unco-ordinated basis using their own selection criteria for what they are looking at. It is important for the Minister to outline how Defra sees inspections being co-ordinated going forward, as this will be of concern to a number of farmers.

My final concern is on enforcement. While it is true, of course, that some standards under cross-compliance will continue to apply to farm activities through various bits of independent domestic legislation, the way in which this is monitored and enforced in the future is likely to be undermined by this SI and others that are linked to it. Under cross-compliance, the Government have a legal obligation to establish an effective monitoring and enforcement scheme to ensure that these standards are adhered to by payment recipients. Current RPA-led inspections and enforcement penalties that result from cross-compliance breaches arguably act as the primary deterrent to breaching environmental regulatory standards on farms. By their very nature, they protect important environmental features from harm over much of England. I would be interested to hear what the Minister thinks about this, but our concern is that the effect of the SI could well be to remove this important RPA-monitoring enforcement role in ensuring compliance with environmental regulatory standards on farms. It would be good to understand better how the department sees that going forward. When Defra responded to the SLSC’s concerns on this, it said that

“Existing regulators will continue to be responsible for monitoring, inspection and enforcing”.

The concern, however, is that there is no further detail. What is the ongoing role going to be of the RPA, for example? Is the role going to be passed on or added to other regulators—the Environment Agency, for example? We want to get a better understanding in order to allay people’s concerns in this area.

One of the biggest changes will be the move away from penalties being applied for non-compliance. For example, due to cross-compliance ending, there will be no more penalties applied to direct payments or agri-environmental payments for farmers. How will enforcement be conducted? Presumably, that will be through education and support in the early instances, which makes sense, with penalties being reserved for more serious or unco-operative individuals—presumably, criminal prosecution will still remain for the most severe violations of domestic rules. It would be interesting if the Minister could provide more clarity about how the management of, for example, hedges and animal health and welfare matters are going to be enforced through the new system.

Any new system of farm regulation needs to support farmers, while also protecting the rural environment by reducing our agricultural pressures on soil, water, air, landscape features, hedgerows and stone banks—the Minister is very aware of this and I know he believes that this is very important. But one other thing that has come up is the lack of general awareness within the farming community about the transition from BPS to delinked payments. Again, it would be interesting to know, as we move into the new system, how the Government are looking to raise awareness of farmers’ obligations under the new system. Farmers need clarity, and they need to know how to plan for the future, so I am looking to the Minister for further assurance that the instrument will neither lead to a reduction of proper enforcement nor introduce regulatory gaps that could result in undermining our existing environmental protections. I beg to move.

Photo of Earl Peel Earl Peel Crossbench 5:30, 13 December 2023

My Lords, I declare an interest as the manager of an upland estate in North Yorkshire. I am grateful to the Minister for explaining the new regulations, although, like many other people, I still find them vague and difficult to comprehend. The noble Baroness, Lady Hayman, raises some fundamental issues. Under the previous regulations—under the basic payment scheme and Pillar 1—there was a general standard of environmental well-being throughout the countryside, which was generally welcomed by most farmers. Under the new ELMS arrangement, that will be lost. It strikes me that a lot of public money has gone into Pillar 1 under the original system that will now be lost, and I cannot see that that is good value for money. My question is this: under the new ELMS system, is there any way to have a basic standard of cover, like the original standards under the basic payment scheme, so that that money is not perceived to be lost and the general standards are maintained throughout the countryside? There are some interesting developments under the new scheme, which will be worthy of the countryside, but my main concern is around this loss of basic standards throughout under the new scheme. If the Minister could give us some assurance that that could be covered through the new ELMS, I would be extremely grateful.

Photo of Baroness McIntosh of Pickering Baroness McIntosh of Pickering Conservative

My Lords, I thank my noble friend the Minister for bringing these regulations before us this afternoon in what has been a particularly busy week for him at COP 28. Most of the concerns that I was going to raise regarding the potential for regulatory gaps have been covered at some length; I am grateful to the noble Baroness, Lady Hayman of Ullock, for that. I am delighted to follow the noble Earl, who also resides in North Yorkshire.

I am a frequent visitor to the mart at Thirsk. I have a small number of shares in it; no one else was going to buy them so I thought that they must be good value and that I should buy them. I suppose that I must declare an interest: I have one lot—not a lot but one lot—of shares in Thirsk mart, of which I am immensely proud. North Yorkshire has one of the two largest fat-stock marts in the whole of England and plays a pivotal role in livestock production, not just in the north of England but in Scotland and other parts of the UK. The message that I get from farmers when I visit the mart and other parts of North Yorkshire is that they are deeply concerned about one aspect of the changes being made. In preparing for this SI, I consulted the Tenant Farmers Association in particular, which believes that the Government have carried out what they committed to do in implementing the regulations in a way that protects the value of payments to tenant farmers. My noble friend the Minister will be aware that that is one of my main concerns.

Increasingly, however, whether they are landowners, tenant farmers or farmers on small family farms, farmers need certainty and clarity—this is the point that I think my noble friend the Minister must tell us—about when we are going to have more detail on the sustainable farming initiative. That is what is holding back a lot of investment that might otherwise be made. In his introductory remarks, my noble friend clearly stated that the delinking and the new payments that he is bringing forward through these regulations, which are welcome for the most part, mean that farmers face a situation where direct payments will be phased out before they know the real content of the SFI and all the other payments. I leave my noble friend with a thought—indeed, a plea. Can we have this information and the details at the earliest possible stage, either in another SI or just in some document that he can release to all the farmers affected?

Photo of Baroness Bakewell of Hardington Mandeville Baroness Bakewell of Hardington Mandeville Liberal Democrat Lords Spokesperson (Environment, Food and Rural Affairs)

My Lords, I thank the Minister for his introduction to these regulations. The noble Baroness, Lady Hayman of Ullock, set out her arguments extremely well and I agree with the comments she has made. While the Government gave sufficient notice of their intention to delink payments from the BPS, there are some issues which need probing. Having said that, I support this SI. I am grateful to the Wildlife and Countryside Link, ClientEarth and the NFU for their briefings. I have also read the Secondary Legislation Scrutiny Committee’s third report, which covers this issue.

The whole thrust of the Government’s funding for agriculture has been to move away from BPS and on to ELMS. I welcome this, as a system which rewards farmers simply for the amount of land they manage does little to encourage innovation and environmental schemes. However, I was slightly concerned to find in the Explanatory Memorandum that delinking payments from ownership of land could, in Defra’s words, mean that:

“There will be no requirement for the recipient to continue to have land”.

I understand that the delinked payment relates to activity that has been conducted in previous years, but if the farmer does not have or rent any land, how is he or she contributing to agriculture and thus entitled to a payment into the future? The SLSC asked Defra the rationale for delinking financial assistance from ownership or use of land. Defra’s answer covered phasing out the BPS and referred to the consultation conducted in 2018. However, I am afraid I did not feel that the question asked by the SLSC had really been answered.

The Rural Payments Agency is calculating the delinked payments, as it has all the information to hand on what farmers have been paid during the relevant years. I was somewhat dismayed to see that, should a mistake in calculating the delinked payments be made, Defra would recover any overpayments with interest. It is not so long ago that farmers were really struggling to make ends meet, due to the RPA being extremely tardy in making payments to farmers, sometimes with extremely lengthy delays. I do not remember that farmers received any interest on their income which was delayed by the RPA, despite it causing severe hardship in many cases. While it is important to taxpayers for overpayments to be recovered, the mistakes are likely to occur with the RPA calculating the payments, not with the farmers. A level playing field is needed for this new system to operate fairly.

I turn to the removal of cross-compliance, which has been covered very adequately by the noble Baroness, Lady Hayman. This had been clearly trailed in the agricultural transition plan. However, there are concerns that there could be regulatory gaps in this cross-compliance, including soil, water, air and landscapes with hedgerows and stone banks. All these are key elements of the rural environment and farmland. I am sure the Minister will tell the House that the majority of rules under cross-compliance are already in place in UK law. However, to quote the Wildlife and Countryside Link:

“‘Majority’ is doing a lot of heavy lifting in this explanation”.

Defra believes that the code of practice for plant protection and the sustainable farming incentive are sufficient to protect cross-compliance, but many of these do not apply to all farmers. While many farmers will wish to comply voluntarily with the code of practice, there will be others for whom their economic situation may mean they choose to ignore compliance. As Defra was not able to produce a full transition plan on farm regulation on upholding regulatory protections, can the Minister please tell the House just how environmental protections will be secured, especially when hedgerows and stone banks are key habitats for those species of mammals, reptiles and birds that are at risk and on the list of possible biodiversity loss?

The removal of cross-compliance could lead to regulatory gaps in environmental protections that are presently ensured via several good agricultural environment conditions—GAEC. This includes GAEC 1, on the protection of watercourses, which requires farmers to protect green cover and bans the use of pesticides near watercourses; GAEC 4, on soil protection; and GAEC 7, on the protection of hedgerows, again requiring the protection of green cover and not cultivating or applying pesticides or fertilisers on land near hedgerows.

The strategic environmental assessment regulations—SEA—and the habitat regulations have a role in ensuring cross-compliance and should be rigorously adhered to. Can the Minister reassure the House that this will happen? Unlike Defra, DAERA in Northern Ireland ensures that an element of cross-compliance is maintained and that all environmental assessments have been completed, as DAERA is legally obliged to do. Can the Minister give assurance that Defra will follow suit and do the same?

Finally, when reading all the relevant documents—the EM and Defra’s response to the Secondary Legislation Scrutiny Committee—I got the overwhelming impression that Defra is trying to encourage farmers to take a lump sum and leave the land, thereby encouraging larger co-operatives and conglomerates. I hope I have the wrong impression, because it is the rich pattern of both large and smaller farms, many specialising in rare breeds or growing different crops, that makes the English countryside such a jewel in the crown of the UK. I hope the Minister can tell me that I have the wrong impression.

Photo of Lord Benyon Lord Benyon The Minister of State, Department for Environment, Food and Rural Affairs, Minister of State (Foreign, Commonwealth and Development Office) 5:45, 13 December 2023

I thank all noble Lords for their valuable contributions today. I will try to respond to all the points raised. I welcome that there seems to be unanimity of understanding that we need to make the transition we are making. That is of great comfort to the farming community. Regardless of the electoral cycle, there is a basic understanding that the payment system under the common agricultural policy had malign incentives.

As has been said, I have just come back from COP, where one of the things we were trying to do was remove the malign incentives and malign subsidies on production and move more towards incentives that will support nature and carbon sequestration, and lower carbon and greenhouse gas emissions. What the Government are trying to do is very much in that context. At the heart of that is having a farming sector producing food of high quality, in a regulatory framework it can understand, and which trusts the sector to make the right choices, but which also has a regulatory framework for the odd occasion that someone does break the rules. I will come on to talk about that in more detail.

As I have said exhaustively at this Dispatch Box, this Government have set rigorous targets on nature restoration. By 2030, we will see no net loss of species in England. That is in our environmental improvement plan; it is written into law. That is something we are determined to achieve. Six years is a heartbeat in nature, and we have set ourselves a target that is stretching but possible. We will not achieve it, even if we double the number of people employed in our agencies and double the amount of money available for regulation, without working with the farming community. They are the people who will deliver the reversal of the decline of species and deliver on so many of our targets.

We think now is the right time to introduce delinked payments. By 2024, we will be over half way through the agricultural transition period, during which direct payments in England are being phased out. The rules and administration currently associated with the land-based basic payments scheme would be entirely disproportionate. I note that there is an understanding of that in this House.

Replacing the scheme with delinked payments reduces that administrative burden for farmers and, undoubtedly, a serious burden for the taxpayer. The basic payment scheme did little for food production. In fact, decoupling of payments from food production took place over 15 years ago. Delinking will free up farmers to focus on running their businesses and feeding the nation while protecting the environment. It will have no impact overall on the food security of our country. The Government committed to broadly maintain the current level of food we produce domestically, in the food strategy White Paper published in June 2022. We want to see our food security increase and the proportion of food we consume that is produced here increase. The next UK food security report, which will include updated information on where food consumed in the UK is produced, will be presented to Parliament by the end of 2024.

I would also say that the basic payment scheme did little to encourage farmers to take meaningful environmental action. The introduction of delinked payments and the end of cross-compliance is a further step in directing government spending in England to deliver more environmental benefits through our new farming schemes. When cross-compliance in England ends, farm standards will be maintained. Existing regulations will continue to protect the environment, animals and plants, and we have consulted on new hedgerow protections. We will continue to assess the impact of farming activities on the environment.

We are working closely with regulators to make sure that the regulatory system is fair, more supportive and effective at changing farmers’ behaviour. For example, the Environment Agency has been working with farmers to support them back to compliance, expanding from around 300 visits per year to over 4,000 from 2022-23. We have also written to all basic payment scheme applicants so they are clear on the need to continue to meet farm standards when the cross-compliance system ends. The rules they need to meet are on the “Rules for farmers” page on GOV.UK.

I will come back later to the point the noble Baroness, Lady Bakewell, raised about whether this was going to see an inexorable move to larger farms, but the basic payment scheme did nothing for small farmers as over 50% of the money went to 10% of the largest farmers. If anything, it has seen that drift away. We feel that the system can now support small farmers and that they will have a continuing vital role. Whether they own the land or rent it—as was raised by my noble friend Lady McIntosh—they will have a future in our farming sector.

Our expanded 2023 sustainable farming incentive has attracted over 15,000 expressions of interest and, in the two months since the application window opened for the 2023 scheme, there have been over 4,000 applications. This is more than were submitted in the whole of last year. Now with over 32,000 agreements, a 94% increase since 2020, our Countryside Stewardship scheme continues to be popular. This shows that our schemes are working for farmers and delivering for the environment. The first round of our landscape recovery scheme had 22 schemes and 34 schemes are shortlisted for our second round, many of them having food production at the heart of what they seek to do.

The noble Earl, Lord Peel, raised an important point about standards, and I will come on to talk about that. I know that the way he manages land knocks the environmental improvement plan targets out of the park by precisely the kind of management we want right across the country. It is vital that he and others understand that these standards will be maintained. In response to a point raised by the noble Baroness, Lady Hayman, I say that compliance with farm standards will be monitored by the existing statutory bodies. We are working with the Environment Agency to support farmers to undertake farming activities in a way that minimises risks to environmental outcomes; with Natural England to help farmers protect and enhance protected sites and biodiversity; the Rural Payments Agency and the Animal and Plant Health Agency to protect the health of our plants and animals and to maintain biosecurity; and the Forestry Commission to help farmers protect and enhance our trees and woodlands.

Hedgerows have been mentioned in this debate. There are existing legal protections for them outside of cross-compliance. The Hedgerows Regulations 1997 prohibit the removal of countryside hedgerows without first seeking approval from the local planning authority. The Wildlife and Countryside Act 1981 contains protections for nesting birds—precisely the point that the noble Baroness raised. We have also recently consulted on the best way to maintain and improve protections after the end of cross-compliance, as well as our approach to enforcement. We will shortly publish a document summarising responses, including our next steps.

It is worth noting that in many areas there are now more hedgerows than there were before farmers got paid to take them out, in the 1970s. In our lifetime, that extraordinary perverse incentive in a drive for production is now being reversed, mainly driven by schemes, whether Countryside Stewardship or others. We are seeing farmers planting hedgerows on a grand scale—and they are vital for carbon sequestration and biodiversity.

The farming rules for water will continue to protect watercourses. This includes provisions for not applying fertilisers and manure 2 metres from a watercourse. The Code of Practice for Using Plant Protection Products also requires land managers to not apply pesticides within 2 metres of a watercourse. Furthermore, the Environmental Protection Act 1990, the Water Resources Act 1991 and the Environmental Permitting (England and Wales) Regulations 2010 protect against a land manager causing water pollution.

Our domestic farming rules for water require farmers to take reasonable precautions which prevent soil erosion, such as establishing cover crops and grass buffer strips. This helps to prevent or limit agricultural diffuse pollution of inland or coastal waters from farming and horticultural activities. Added to that, the sustainable farming incentive scheme rewards farmers for sustainable farming practices. This includes introducing herbal leys and grass-legume mixtures or cover crops that help to provide soil cover and prevent soil erosion by binding the soil, in a way that perhaps was not happening before.

The question of an impact assessment was raised, but one has not been prepared for this instrument because it is not a regulatory provision. However, the Government have already published evidence providing in-depth assessments of the impacts of removing direct payments and assessments of delinking. This includes the farming evidence compendiums published in 2018 and 2019, and our 2018 assessment of the impact of removing direct payments. We also published 2021 and 2022 Agriculture in the UK evidence packs.

A very good question was also raised about public money going to farmers who are not actually farming. Delinking the payments from the land means that there will be no requirement to continue to be a farmer to receive the payments as they are phased out. However, the vast majority of delinked payment recipients will continue to farm. Delinking the payments will benefit those who continue to farm, as well as those who choose not to. For example, recipients will not have to worry about the basic payments scheme land eligibility rules and associated paperwork. When farmers choose to leave the industry, this should create opportunities for other farmers who wish to expand and for new entrants.

It is vital to make this point. A few years ago, the average farmer was me. My friend the Farming Minister Mark Spencer burst out laughing when I said that, and he said, “No, you are not the average farmer”. What I meant was that I am 63. But actually, in recent years, that age has started to fall, and it is a welcome fact that we are now seeing a younger and more dynamic group of people starting to look at farming as a career. We need to assist that.

We have a new entrant scheme. We are working hard to see whether we can develop that hand in glove with an exit scheme that assists those who feel that the new world is not for them. They need to be allowed to retire with dignity and to feel that their contribution has been made but now is the opportunity for new ideas, new techniques and new innovations to come in. Our farm innovation grants, new entrant schemes and much of the support that we are providing are targeted at those groups of people who want to see a sustainable, profitable farming business in their lives. That is what we are trying to do.

We are developing our new scheme so that there is an offer for all farm types, including smaller farms. I have already stated why the system that we are moving away from militated against smaller farms. For example, there is no minimum amount of land that can be entered into the sustainable farming incentive. From January 2023, we introduced a new management payment for the sustainable farming incentive which gives £20 per hectare for the first 50 hectares and supports the administration costs for entering the scheme.

I have done my best to address the points that have been raised, and I hope that I have answered the point about a regulatory gap. There is plenty of provision to make sure that the small minority of farmers who break the rules are still able to be sanctioned. Where we think there may be a gap, and to be absolutely sure, we are very happy to have a belt-and-braces approach—for example, in the protection of hedgerows—and we will make those changes if they are necessary. We want to work with the farming community and want to see farmers succeed in an environment of trust that allows them to run their businesses in a way that has the least impact, compared with the bureaucratic systems that have operated hitherto.

Introducing delinked payments is an important milestone in our agricultural reforms. It reaffirms the Government’s commitment to move away from untargeted subsidies and to continue with our planned reforms, which will better support farmers and the environment. I commend these regulations to the House and hope that I can persuade the noble Baroness not to press her regret amendment.

Photo of Baroness Hayman of Ullock Baroness Hayman of Ullock Opposition Whip (Lords), Shadow Spokesperson (Environment, Food and Rural Affairs)

My Lords, I apologise, as I should have declared my interest as president of the Rare Breeds Survival Trust at the start of the debate. I thank all noble Lords who have taken part and thank the Minister for his very thorough response. I also congratulate him on his resilience and commitment in coming straight from COP to this debate.

I beg leave to withdraw my amendment.

Amendment to the Motion withdrawn.

Motion agreed.