Power to provide for phasing out direct payments and delinked payments

Agriculture Bill – in a Public Bill Committee at 3:30 pm on 1st November 2018.

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Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs) 3:30 pm, 1st November 2018

I beg to move amendment 103, in clause 7, page 5, line 12, leave out “either or both of”.

Photo of Roger Gale Roger Gale Conservative, North Thanet

With this it will be convenient to discuss Government amendment 91.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

Again, this is fairly technical stuff, but there will be some genuine repercussions if we do not get it right. I spoke previously, and I might say more about it when we get to the next group, about this relationship between the current system and what we are moving towards. It makes eminent sense that the de-linking happens pretty speedily through the transition process. Again, it has to happen in an ordered manner, with the regulations that the Secretary of State may make—we want that to be as clear as possible—fully understood by those upon whom the new system will be imposed.

Our amendment, which would clarify things by leaving out “either or both of”, is probing. The Minister has his own amendment, which will rephrase paragraph (b), but will he explain clearly how he understands the de-linked payments will be introduced in place of the direct payments? How will things operate over time?

The worry is that the new scheme will not necessarily be as accessible as the basic payments scheme. There will understandably be some losers, and the earlier they know that they will have to try to save some of the money, the better. The Government have made a big play of the advice that will be made available, but we still question who that advice will come from and who will pay for it. The more the situation is clarified at this stage, the better it will be for those who are being asked to pay an enormous amount.

The Minister has made a point about lots of people already having environmental schemes, but many do not. Those who have not got those schemes will have to quickly get someone to advise them on how they can fundamentally change their business operation. That is going to test smaller and tenant farmers.

Photo of George Eustice George Eustice The Minister of State, Department for Environment, Food and Rural Affairs

This debate links to a discussion we had earlier about setting a clear direction during the transition period. I understand that the purpose behind the amendment is to try to tease out a bit more what we have in mind when it comes to the de-linking of payments.

We believe that many farmers—sometimes they are in upland areas, sometimes they are on tenancies; often they are in their 70s, sometimes they are even older—who probably should face the decision to retire should have support in doing so, but it is not always easy for them. Sometimes they will have some residual debt or an overdraft and always be hoping that next year might be the good year that will put them in a better position.

If we want to have a vibrant, profitable farming industry in the future, we think it is right to support new entrants and put in place the right schemes that will help some farmers retire with dignity. We will de-link the payment from the need to farm the land and for it to be connected to the land. There is provision in a separate part of the Bill for us to bundle up several years of payments into one lump sum. Through those measures, that 70-something farmer who probably should retire, or would retire if he felt he was financially able to, may take a lump sum as a voluntary exit package to sort out some of his liabilities, pay off his creditors and take that decision to retire with dignity. In doing that, we will create an opportunity for new entrants who are coming in while, equally, helping to safeguard good retirements for those farmers for whom it is right to step back. That is one of the thoughts behind de-linking.

Also, in the final stages of the transition period it might be the right thing to de-link everyone’s payments from needing to be linked to the land. Through that, people can have complete freedom over what they do with that money, whether they invest it in new equipment, choose to retire or put it into some crisis reserve to give them a buffer. We want to free them up to do that as we prepare for the move to a new system.

Photo of Robert Goodwill Robert Goodwill Conservative, Scarborough and Whitby

On the point the Minister raised regarding the farmer who might want to retire and take three years’ payments, one question we tried to explore during the evidence sessions was what would happen to the new entrant coming on to that farm, who perhaps for the first two years on that farm would not receive any support, which might make it difficult for him to establish that business.

Photo of George Eustice George Eustice The Minister of State, Department for Environment, Food and Rural Affairs

I understand my right hon. Friend’s point, but of course we must view all this in the context of a seven-year transition period, at the end of which it is our objective and our vision that there will be no basic payment scheme as it is known today. What we would envisage happening in those scenarios is that we would free up land for new entrants to come in, who would get used to working in a different way from the start.

It would be quite possible, for instance, to prioritise the roll-out of a new scheme to those new entrants coming on to land that had been exited and was no longer eligible for the BPS payment. I would also envisage that some of those new entrants coming on to that land would also be likely to qualify for the productivity support. We have to see all this in the context of the fact that we do not want a single farm payment to be carrying on forever. We have set a clear pathway to move to a different approach over a seven-year transition period.

Photo of Martin Whitfield Martin Whitfield Labour, East Lothian

Is not the situation that the Government envisaged one where, by using this de-linking, some farmers may release themselves from land that they see as being less profitable in the future, take advantage of the de-linking, retain land that is more profitable and then continue to claim for that—in other words, make a profit by reducing their business to shape it for what will make money for them again in the future?

Photo of George Eustice George Eustice The Minister of State, Department for Environment, Food and Rural Affairs

Broadly speaking, although, as I said, one of our key thoughts behind the concept of de-linking is that it will be a tool to assist people with retirement. Because we do not want multiple systems—a new system emerging, a legacy system and a de-linked system—we have drafted this in such a way that, once someone takes the decision to de-link, it will apply to everyone and we will not have that problem. It will be a bold policy to help to support structural change and give farmers the freedom to invest that money as they deem right.

Government amendment 91 is another technical amendment that simply reflects the way the current direct payment regulations operate. There has been no change to our policy of trying to de-link payments, but the current direct payment regulation only contains financial provisions known as “ceilings” until the end of the 2020 scheme year. Introducing de-linking in 2021 means that ceilings under the direct payments will not be set for 2021. The existing basic payments will therefore automatically end in 2020 and we will not need to terminate such payments. The amendment reflects that. Other than that, the intent is exactly the same as originally drafted, but the amendment makes it clear, crucially, that de-linked payments cannot be made alongside the direct payments under the basic payment scheme, in line with clause 7(3)(b).

This is a technical amendment simply to deal with a similar point to the one I addressed with respect to one of the new clauses, which is that the ceilings expire and we might want to be able to make those de-linked payments based on a direct payment and not necessarily on the old BPS payment. Again, this is a technical issue that has its genesis in the way that EU payment ceilings and budgets are wired. I hope I have given the Committee a good explanation of what we seek to achieve through the amendment.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

I do not think farmers need agronomists; they need lawyers to go through some of this and work out whether they are entitled to various payments. It is a wee bit complicated, but maybe it will all be clearer when it comes out in the wash. As I have said to the Minister, I have always supported a retirement scheme for farmers. For too long, too many people have tried to stay farming when it is really not good for them or for their holdings. I welcome the fact that there is now a mechanism by which they can leave the land, by managing to take the payments over time.

Photo of Sandy Martin Sandy Martin Labour, Ipswich

The mechanism might exist for farmers who have been in farming for a long time and own their own land and want to come out of it, but how will that operate for tenant farmers? Will there be any complications for the relationship between the tenant farmer and landowner?

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs) 3:45 pm, 1st November 2018

That is a very pertinent point. In a sense, we are talking about trying to balance what the state might provide in support payments against the farm business tenancy. For a lot of farmers, trying to make that judgment is going to be quite difficult. One wants people to go out with dignity, and that means that we want them to go out with a sum that they can invest, which may be in other uses of the land or may be to buy themselves a cottage, or more probably, to rent a cottage in view of their impecunious state. These are real personal stories and we have to be careful that we are not just rushing through and making things unduly complicated, so that people do not really understand what they are entitled to.

I understand where the Minister is trying to get to, but I think this will have to be explained in a much more simplistic way, so that people can take advantage of it. There is no point having a de-linking scheme to enable people to leave the land and get new entrants if people do not see that it is appropriate for them, or do not understand it or think that they will lose out financially. My hon. Friend the Member for Ipswich is absolutely right about the farm business tenancies. We need to look at the links and we have to have a debate on some of the Tenant Reform Industry Group recommendations, which sadly do not feature in this legislation. We very strongly think that they should, given that a third of our farms are tenant farms. It is an important part of our farm economy, yet it does not feature in the Bill, which we think is a lacuna.

I worry that there is potential for policy drift here. We start with the de-linking process for one reason, but it ends up doing something that is not intended—it is the law of unintended consequences. I can see people wanting to access the money without necessarily pursuing what we want them to do, which is to improve their land; the danger is that they will take the money and then new entrants will not be able to take over the holding because it is in a poor state.

These are real-life questions, and I worry about some of my tenant farmers. The quality of the farms they are holding is not good due to generations of underinvestment. This is all well and good, and we are potentially paying less money to do the things that we used to pay out to do, yet farmers are expected to make good with other environmental schemes, which is obviously going to be difficult given that they have limited time, and we are expecting them to improve the quality of the land. There is a bit of a question mark against that.

This is a probing amendment. I am sure will we have more definitive things to say in the next stage. The Minister needs to be aware that this debate is fine at one level, but when the schemes get out there and are interpreted by people, there could be some difficulties. I put him on notice that we will look at this again, and I hope he will reflect on some of the things that have been said. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: 91, in clause 7, page 5, line 16, leave out paragraph (b) and insert—

“(b) making delinked payments in relation to England with respect to the whole or part of that period (in place of direct payments under the basic payment scheme in relation to England).”—

Clause 7(1)(b) enables regulations to introduce delinked payments in place of direct payments under the basic payment scheme for the whole or part of the agricultural transition period for England. This drafting amendment ensures that clause 7(1)(b) works as intended even if those direct payments have terminated otherwise than by virtue of the regulations introducing delinked payments. In that case the regulations would not need to make provision for the termination of those direct payments, as suggested by the current text. They would however be able to revoke the spent legislation about the basic payment scheme.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

I beg to move amendment 107, in clause 7, page 5, line 36, at end insert—

“(e) make provision setting out rules for determining the status in relation to those persons who have received delinked payments where the agricultural transition period has been extended in accordance with section 5(2).”.

This amendment would clarify the status of claimants (in terms of whether they would be entitled to return to receiving direct payment) if the direct payments scheme is extended and therefore creating the possibility (under such regulation) to enable those who have opted to take de/inked payments to return, or otherwise.

Photo of Roger Gale Roger Gale Conservative, North Thanet

With this it will be convenient to discuss amendment 108, in clause 7, page 6, line 16, at end insert—

“(8A) Regulations under this section must set out explicit timescales for the payment of the direct payments or delinked payments that are due to entitled persons.”.

This amendment would ensure that those entitled to payments received those payments within guaranteed timescales to help ensure certainty of cash flow.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

With your forbearance, Sir Roger, I will link this discussion to the clause stand part debate. They are contingent and, with your agreement, I will talk to clause stand part as well.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

The amendment is really a probing amendment, to consider where we are in relation to setting rules for the de-linking process. The Minister has already talked about that. I have just asked how this will work in practice. It is unclear, at least in my mind; maybe people are ahead of me on that. However, I think there is a need for further work in that regard.

What would happen if the Minister introduced a de-linked payment, but then made use of the powers to extend the transition period in accordance with clause 5(2)? The status of the farmer who has taken a de-linked payment is uncertain—we have identified that. He may be locked out of the system for longer than envisaged. This is really contingent on our previous debate. So, in taking the money—what? They then can use their opportunity on the land? The status of the person will be defined in law, but again it is a matter of how the process works in practice.

Under the CAP, there are payment windows, and—dare I say it?—and this is all laid down for those who receive payments for work they have done. So things are not as clear in this new proposal. All of us who have rural constituencies know that the Rural Payments Agency is not very good at making the payments on time, for the right reasons or in the right amounts. So there are some question marks about the extant process and where we are now going to. If anything, it is going to be quite a complicated change. So it is really about whether farmers will be entitled to payments on guaranteed timescales, because again—dare I say it?—we do not have a good history.

Photo of Robert Goodwill Robert Goodwill Conservative, Scarborough and Whitby

It strikes me as well, of course, that the farmer could take the payment but then his wife could establish a new business, in which case perhaps there would not really be a fundamental change; it was just a mechanism. I wonder if the hon. Gentleman shares my concerns and whether the Minister could comment on that situation.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

This did come up quite a lot on Second Reading. I think my hon. Friend the Member for Bristol East had something to say on it, or somebody else referred to succession planning. Farmers could take the money and then another member of the family could decide to carry on with the holding.

Photo of Jenny Chapman Jenny Chapman Shadow Minister (Exiting the European Union)

It is an irritant for me that every time farmers have been referred to in this Committee so far—I have not mentioned this so far—they have been referred to as “he”. But the right hon. Member for Scarborough and Whitby went an extra stage and said, “The farmer and his wife”—[Laughter.] There is a line. I just think we can do a little bit better than that.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

I stand suitably admonished and we will be hit by the towels later.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

The right hon. Gentleman can dig himself out of that hole now.

Photo of Robert Goodwill Robert Goodwill Conservative, Scarborough and Whitby

It is particularly difficult, because as I am down here doing this job, my wife is minding the farm, although I am the one who signs the forms when I make claims, so it is often difficult to distinguish the person who is farming from the person who signs the form—[Interruption.]

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

I am not sure whether that helped or hindered. [Laughter.] We will move on.

Amendments 107 and 108 really try to tease out how this process is going to work in practice. I do want to say some things that are effectively for the stand part debate, but they link in directly with the clause. The issue is the way in which this phasing-out of direct payments and the de-linked payments will work. This is the clause that, if you like, executes that, so we need to look at it quite carefully.

A number of important issues arise, some of which have already been identified through the EFRA Committee, where I gather the Minister had quite a difficult time in answering questions about exactly how this process was going to work. It is important that he puts on the record again how he thinks it is going to work.

We are talking about considerable sums of money. We are talking about considerable sums of money. If three years’ worth of payments for a reasonably sized holding are wrapped up into one, we are talking about tens of thousands of pounds, so we have to get the accountability of the process right. The average direct payment in 2016 was £20,000, but 10% of recipients received something in the order of £6.5 billion. The bigger landholders have traditionally received quite large sums of money through the single area payment scheme, so the mechanism through which we make that change is very important. Multiplying that over seven years, which is what the transition period will be, we are talking about large sums of money. It would be useful to know that in accepting this use of public money, the Minister can justify the larger sums involved.

As I referred to, the policy statement explains how the tapering down will operate. It would be good to know that there will be some further explanation of what that means for particular holdings. Let us look at some figures from real holdings, rather than the rather abstract figure that we have at the moment. What can those lump sum payments be used for? One can understand a tenant needing to acquire property, or to have sufficient money to pay the rent. Will recipients be limited to some use or reuse of the land, or will they basically have a free choice about what they do with that money? My notes refer to Lib Dem pensions Ministers and Maseratis; I think Steve Webb will always regret having made that point.

I have quite a lot of interesting evidence from the Landworkers’ Alliance and from the Tenant Farmers Association. Those are the people who represent smaller farmers and new entrants. The Landworkers’ Alliance is keen to know what that lump sum can be used for, how much flexibility there will be in the purposes outlined in clause 1(1), and whether—dare I say it?—the payments will be linked to the productivity of the farm or farmland. Could farmers, for example, put that money into a community land trust and collectivise those payments? That is an interesting point, because there are those who do not want to farm a holding in isolation, but want to do so on a more collective basis. Is the scheme flexible enough to allow that to take place?

The Tenant Farmers Association has written to me to support the concept of de-linking, because it thinks that farmers should be able to retire. However, although the money is of significant assistance to farmers who wish to retire, the question of what subsequently happens to that money, and any bar on what they can do if they have taken the money, are of keen interest. Those farmers might want to re-invest that money in another holding, or enable another member of the family to take that money and start a new holding. These things matter, because people have to start planning their businesses now. I know that I have stretched the Chair’s patience by moving away from the amendments, but my comments are part of our stand part contribution. We are asking the Minister to spell out in a little more detail what, in practice, these de-linked payments are and are not available for, because people are going to have to plan for that.

Photo of Roger Gale Roger Gale Conservative, North Thanet

Before we continue, let me make it clear that I am very relaxed about the manner in which stand part debates are conducted. They can be contained within the debate, or they can take place at the end of the debate. I am also clear that Members cannot have both.

Photo of Philip Dunne Philip Dunne Conservative, Ludlow 4:00 pm, 1st November 2018

Thank you for the clarity of your guidance, Sir Roger. I rise to speak to clause stand part and to pose some questions to the Minister following the comments of the hon. Member for Stroud. The proposal is very complex and the explanatory notes make it clear that this is a novel system. The concept of de-linking payments is welcome, but because it does not exist at the moment, it is hard for us to get our minds around it, so when the Minister responds, I encourage him to give us as much clarity as he can about the intent of how the de-linking scheme might work.

First, hon. Members have raised several challenges about how the structure of ownership and tenure of land might be affected by such a de-linking payment, which is designed to facilitate the transfer between one generation of a farming family or of a farming business and another. Farming businesses are very diverse, however, as is the nature of all businesses in this country, so it is difficult to assume that they will all fit in a neatly prescribed and, dare I say, bureaucratically designed structure.

My right hon. Friend the Member for Scarborough and Whitby referred to his farming business with his wife. My farming business is in partnership with my wife too, but I was previously a partner with my father. The advantage of a partnership structure is that it allows generations to come in and to retire in the same business. If the scheme is not capable of coping with that kind of structure, it will not apply to several family-run farming businesses. We need clarity about how the scheme will be designed to cope with the business structure.

Secondly, it is unclear to me, although I might not have picked it up in the drafting, whether the de-linking payments will cover the entire transitionary period or just a number of years that are yet to be determined and spelt out through the regulations. Any clarity about whether they are likely to be for a limited number of years or the entire period would be helpful.

Thirdly, it would be helpful to understand whether, when the regulations are proposed, the way the transition payments are reduced over the period will be determined through regulation and fixed, or whether they will be capable of adjustment. If they are adjustable payments, that will not provide the clarity that would help somebody to make a decision about whether to accept the de-linking payment at the beginning of the period, or whenever it is first allowable, because they will not know whether that is the right judgment to make.

Fourthly, if a payment is made in relation to a farming business, does that make the land to which it relates sterile in relation to other payments in future? Does that land become eligible only for public goods payments under the new scheme, or is there flexibility? If a business is sold, and the land is sold to an existing or neighbouring farmer, will that preclude them having any access to the transition payments? Those are my main points and I look forward to hearing what the Minister has to say.

Photo of Sandy Martin Sandy Martin Labour, Ipswich

I do not particularly want to address the amendments or the whole de-linking scheme in detail, but we need to bear in mind one or two basic principles. Obviously, if we support the movement to payment for public goods, and a tricky transition, people who have farm businesses that will be involved in that transition need to understand what will happen to them before they get there.

We do not want large numbers of farmers to move out of the business involuntarily. Subsection (7) provides the opportunity for support for somebody who has voluntarily decided to leave the business. However, there is a problem with small farmers in particular, who might have extremely delicate finances. They need to know before they get to the year in which they might find themselves unable to continue financially—indeed, they would need to know three or four years before—whether they are going to get there. They need to know that before deciding whether to take the lump sum payments under subsection (7). If they do not know whether they will be financially viable under the new payments regime more than three years before, that might become a fatal position for them. They might take the payment and go anyway, even though it might turn out that they would have been better off and happier continuing to farm under the new payment for public goods system, rather than the current system.

Photo of Martin Whitfield Martin Whitfield Labour, East Lothian

To return to a point mentioned in evidence that we have raised a number of times, this is very much a situation where we see scaffolding but nothing underneath it. The problem for the farmers is that they have no certainty about what is coming down the line. We are approaching the transition period very quickly and they need the time to decide.

Photo of Sandy Martin Sandy Martin Labour, Ipswich

I totally agree. Whether or not we can see what will go around the scaffolding might be annoying to us, or it might feed our fears that an awful lot of work will be done without any democratic control of oversight, but it is far more important for those involved in farming to know what will be put on that scaffolding, because they might well be making decisions without knowing.

Subsection (7) is like an offer that those farmers cannot refuse—not because they know that the consequences of refusal will be dire, but because they do not know and will therefore just go for the easy option. We do not want large numbers of smaller farmers to face going out of business or choosing to take payments under subsection (7), leaving the field clear for those with more money and resources and a better understanding of the complicated regime that the Government are thinking of introducing.

Photo of Robert Goodwill Robert Goodwill Conservative, Scarborough and Whitby

I want to raise one point with the Minister, which I hope he will be able to cover. We have heard already that about a third of the farm land in this country is farmed through tenancies. Indeed, a tenancy is probably the only way that many new applicants can get into the industry, other than marrying into money or winning the lottery. However, there may be situations where taking these payments is attractive to the tenant, but where the landlord is unwilling for that to happen, particularly as the basic payments underwrote the rent in many cases, as we heard in evidence. Indeed, we heard that in many cases the rent was basically dictated by the basic payments.

My question for the Minister is, will the consent of the landlord be required before a tenant can take one of these multi-annual exit schemes? If not, might we then have the landlord looking at the small print of the tenancy agreement and going into the whole dilapidations situation? Many people leaving a tenancy can find clauses requiring the guttering to be painted or the gateposts to be straightened. Often, tenants find that they cannot leave because of the dilapidations. Where the landlord wants a tenant to leave, he will waive the dilapidations, so a lot of these payments might get mopped up by angry landlords demanding dilapidations at the end of tenancies.

Photo of Chris Davies Chris Davies Conservative, Brecon and Radnorshire

I have a query, which I am sure the Minister will be able to answer easily, relating to the decoupling of cross-border farms. There are many on the Welsh-English border, as there are on the English-Scottish border, that will own land in both England and Wales, or both England and Scotland. I can give many examples of farmers in my constituency who own land in Herefordshire or Shropshire—well, not much of Shropshire, because my hon. Friend the Member for Ludlow owns most of Shropshire.

Photo of Chris Davies Chris Davies Conservative, Brecon and Radnorshire

None in Shropshire, all in Herefordshire—all in Wales.

Photo of Chris Davies Chris Davies Conservative, Brecon and Radnorshire

There are many farmers in Herefordshire and Shropshire who will own land 30, 40 or 50 miles into Wales, so does Minister foresee any difficulty with decoupling in cross-border schemes if both devolved areas end up with different schemes?

Photo of George Eustice George Eustice The Minister of State, Department for Environment, Food and Rural Affairs

We have had a comprehensive debate, and I want to pick up on some of the points that were made.

The Opposition’s amendment 107 is about making provisions for determining the status of those persons who have received de-link payments where the agricultural transition period has been extended. That links to the point that I addressed earlier. We are setting a clear course here, and if a decision is made under clause 7 to de-link all payments, as far as we are concerned there will be no turning back at that point. It will be possible, under subsection (1)(a), to continue with the basic payment scheme and make a decision to extend, but if at a later stage of the transition period a decision is taken to de-link all payments, from our point of view it is not possible at that point to turn back, nor would we want to do so. If at that point we decided that we still wanted an old-style subsidy system, the right thing to do would be to pass new primary legislation because that would be a major departure from what we envisage in the Bill.

I was asked about de-linking and about what will happen at the end and whether we will put conditions on what people can spend the payment on. During the transition, we envisage there being a progressive, year-on-year phasing down of the BPS payment. Alongside that, we will roll out new grants for such things as productivity, and we will roll out the new environmental land management scheme.

There is already a huge amount of bureaucracy, inspection and tedious form filling behind the BPS payment. If in year three, four or five the BPS payment is considerably smaller than it is now, farmers will rightly say, “Isn’t this a sledgehammer to crack a nut? Our BPS payment is much smaller, yet we still have this extraordinary inspection regime, we still have to employ agents to fill out all the forms, and we still have to have someone from the Rural Payments Agency come to walk our fields and inspect everything.” At that point, people will rightly ask whether the enforcement architecture surrounding the BPS payment fits the size of the payment, given that it is necessarily being phased out.

That is why our view is that if we de-link the payment we will not attempt to put conditions on that, because it will be a diminishing sum of money anyway towards the latter part of transition. We have not decided when to de-link. That might come later; it could be at the beginning—that is provided for. We would consult on that, but my expectation is that for a period we would phase down the existing BPS payment. A point would then come when, frankly, having all the architecture that we have now to enforce it would cease to be justifiable, and simply de-linking to get the system closed down would be the right thing to do.

The answer to the Landworkers Alliance, the members of which generally complain to me that they are ineligible for the BPS payment at the moment anyway, is that in so far as some of them might be eligible, if they took a de-linked payment they would be able to spend it on anything they wanted, as would any other farm.

A slightly separate provision—although it is linked, and they overlap in some respects—is clause 7(7), which creates a parallel power for us effectively to do what I described earlier: make a rolled-up payment of several years to a farmer who might be deciding to leave the land. We may exercise that whether or not we had de-linked. It will be open to us to run a scheme basically to make an exit payment to farmers, with several years rolled up in one, even if we are proceeding on the basis of clause 7(1)(a)—that is the phase-down. It will also be open to us to do it under subsection (1)(b), but if we were using subsection (1)(b) towards the end of the process to free everyone from the need to have their payment linked to the land, it might be less attractive at that point as an exit package.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

I have some fairly basic questions. Who makes the decision, and is it capped? Lots of farmers might say, “Great—we’ll take the money now. We’ve always wanted to retire.” The average age is somewhere between 60 and 65. Is the figure capped or could, effectively, thousands of farmers decide that now is the time to go?

Photo of George Eustice George Eustice The Minister of State, Department for Environment, Food and Rural Affairs

Any regulations will be under the affirmative resolution procedure. We will work with industry and others on the precise scheme designs. We will not do it in a hurry. We think there is a great logic to de-linking payments towards the end of the scheme. We also think that having a scheme that supports retirement with dignity and voluntary exit is useful. That is why we have provided for that to be done under subsection 7(7).

I turn to the point raised by my hon. Friend the Member for Ludlow, who also asked about the timing of de-linking. The Bill provides for us to de-link at any point during the transition period. As I have said, my expectation is that it would be run under subsection 1(a) in a phasing down of the basic payment scheme in the early years, but we would probably deploy de-linking in the closing stages once we were confident that all the successor policies were in place and we were ready to go for the try line, as it were, and reach the end of that transition. We have the option and the flexibility to do both—to go early or to go late—and that will be determined in future regulations.

My hon. Friend also asked who would be eligible for the new scheme. Again, that could be defined in the regulations. To answer the shadow Minister’s point, if we were worried that every single farmer in the country was going to retire, we could impose some conditionality to ensure that we targeted that option to people over retirement age for whom it made most sense, in order to keep a dynamic flow of new entrants coming into the land.

My hon. Friend and my right hon. Friend the Member for Scarborough and Whitby raised a concern, which the NFU and the Tenant Farmers Association have also raised, about tenants. There are sometimes agreements—somewhat extraordinarily—that require the tenant to pay their BPS payment direct to the landlord as a condition of their tenancy. One concern is this: if somebody were to take either a lump sum payment or a de-linked payment, would it have to go to the landlord? Under subsection 3(c), we will be able to specify who is entitled to the de-linked payment, and we can specify that it would be a tenant. In so far as there are some tenancy agreements that require the BPS payment to go to the landlord, they would not apply in these situations, since the payments would be in lieu of the BPS payment; they would not be the BPS payment. Therefore, we can design the regulations in such a way as to ensure that the payment goes to the intended recipient.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs) 4:15 pm, 1st November 2018

I think the Minister has answered the hon. Member for Ludlow well, but the trouble is that that is just the theory. My tenant may suddenly get tens of thousands of pounds. If he has left the farm in a very poor state, he may leave the holding. That is a potential legal minefield, which the Government need to look at. The general view is that rents will decrease after the area payments scheme goes. I was at a farm on Friday, however, and the farmer I spoke to was very clear that once the area payments scheme goes, the landowner will want to put the rents up because they will believe that they are losing out and the tenant could pay more. There are some complications here.

Photo of George Eustice George Eustice The Minister of State, Department for Environment, Food and Rural Affairs

I would almost say the opposite. If the market is such that a number of people choose to retire and there is no longer the inflationary pressure of a BPS payment driving up rents, rents might decline in some areas. That is not necessarily a bad thing. If rents go down, it is not great for landlords, but it creates opportunities for new entrants to come in with lower overheads and produce food for the country. There is a problem with the BPS scheme, which has inflated rents and made it difficult for entrepreneurs to get on to the land and make a sensible living.

Amendment 108, which was also tabled by the shadow Minister, puts explicit timescales on payments. I understand the frustration of many hon. Members who have had farmers coming to them in recent years and complaining that they have been unable to get the payment. We address the issue in a number of ways. First, under retained EU law, the existing timescales already set out in EU law would come across. I know that farmers will generally take the view that unless they are paid in December their BPS payment is late. In fact, the payment window opens at the beginning of December and closes in June, so there is quite a wide payment window under EU law. That will come across through retained EU law, but we have made some improvements in recent years in terms of getting money to farmers as quickly as possible. Last year more than 90% got to farmers by the end of December.

Photo of Robert Goodwill Robert Goodwill Conservative, Scarborough and Whitby

Of course, in the past when payments have been delayed, fines have been payable to the European Commission. Under the new scheme, presumably there would be nobody to pay a fine to.

Photo of George Eustice George Eustice The Minister of State, Department for Environment, Food and Rural Affairs

That is absolutely correct, but the scrutiny of Parliament will demand action. I was going to say that one of the strong features of the Bill is the fact that it gives the Government the power to act to sort out the dysfunctional EU auditing processes that create late payments.

Clause 9 gives us powers to sort out what is called the horizontal regulation. That is the regulation that sets out all the conditions on payment and the plethora of audit requirements, which often duplicate one another and are unnecessary. The primary cause of the problem we had last year in the BPS system was that under EU law we were forced to remap 2 million fields in one go, to try to get their area accurate to four decimal places. If we had not done, that we would have had a fine from the European Commission of more than £100 million, so we had to attempt the exercise. However, it inevitably caused problems on some farms. Many hon. Members will have had farmers reporting to them that fields had disappeared, or, in some cases, their neighbour’s fields had ended up on their holding. That is what happens when we try to remap 2 million fields. We would not have had to do that, had we had the powers to strike down those requirements.

Secondly, the issues we have at the moment with the countryside stewardship scheme are largely due to the fact that the EU, under horizontal regulation, introduced a new requirement that every single agreement must commence on the same date; so whereas we used to spread the burden of administration across the year, with people able to start in any month, everyone had to start in January. That meant a huge pile of application forms coming in at the same time. Our agencies had to employ lots of temps to try to process the work; and we all know what happens if there is a surge of temporary agency workers to process work. There were inevitably errors and problems. Again, we could remove those rather ludicrous requirements that the European Union imposes on us—in that case under clause 11.

I hope that I have been able to provide some further information about how we would intend to use the clause 7 powers, both to de-link and to make lump sum payments available. I hope I have also reassured hon. Members that the answer to the problem of late payments lies in clauses 9 and 11, not in an amendment to clause 7.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

I do not intend to press the amendment to a vote. I just urge the Minister yet again to look at how the measure will work in practice, and really deliberate on ways in which we can at least look at pilot schemes to see how it will work.

Photo of Chris Davies Chris Davies Conservative, Brecon and Radnorshire

As the Minister has had a very busy day and has overlooked answering my question, I wonder whether the hon. Gentleman—whose constituency is, of course, not far from the border—shares my concerns about cross-border land ownership, and areas where there are devolved Governments, where decoupling could cause a problem.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

We need some lawyers in England, but we will need some multilingual lawyers when it is a matter of England and Wales. That is an absolutely fair point, and perhaps the Minister will want to intervene on me to give clarity—or not, as the case may be.

Photo of George Eustice George Eustice The Minister of State, Department for Environment, Food and Rural Affairs

I must apologise for missing my hon. Friend’s important point, which links to a number of others that have been made about how we treat cross-border applications. In effect, what we will be doing is putting in place administrative agreements with Wales and the other devolved Administrations to ensure that where we have cross-border farms—we have similar arrangements in place now—we will have an agreement about how to approach these things to make sense of them and to ensure that things are done in a joined-up way.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

Whatever is happening with England and Wales, we have Scotland and Northern Ireland. This is going to be quite a complicated issue. There will be farmers in Northern Ireland who farm on both sides of the border; they will have whatever the common agricultural policy is and whatever the Northern Ireland policy is within the framework of the United Kingdom policy. That will greatly determine what they intend to farm, how they intend to farm and whether they wish to stay in farming.

Photo of Martin Whitfield Martin Whitfield Labour, East Lothian

Obviously, in the schedule for Wales, de-linking is discussed, but we do not have a schedule for Scotland.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

That is absolutely true, but I am not sure that that helps me.

Photo of Deidre Brock Deidre Brock Shadow SNP Spokesperson (Devolved Government Relations), Shadow SNP Spokesperson (Environment and Rural Affairs), Shadow SNP Spokesperson (Wales)

I am sure the hon. Gentleman will be aware of the fact that different schemes already operate across the UK in the different jurisdictions, so I am sure that dealing with this is not beyond the wit of man or woman. I am assured by the Minister’s reference to administrative agreements. I am sure that something could be found along those lines to help to sort out the whole issue.

Photo of Robert Goodwill Robert Goodwill Conservative, Scarborough and Whitby

As a member of the Northern Ireland Affairs Committee, I can say that this is not just a problem in agriculture. There is no devolved Government there and it is very difficult for civil servants to second-guess what might be done, because it has been a long time since decisions were made on which they could base their activities. For those in Scotland, the policy seems to be to stick their fingers in their ears, sing “la la la la” and pretend that it is not going to happen.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

I will not go down that line. The Chairman will be relieved to hear that I am not going to get involved in devolved politics. I think this has been a very useful debate that has been far and wide in scope. It has not really been about the amendments, but the stand part has allowed us to look at some of the possibilities of what will happen—2021 is not very far in the future. People will be doing their planning now, particularly if they have it in mind to leave their holding, and they will need security, certainty and some very good advice on whether that is the right thing to do. I beg leave to withdraw the amendment, but I am grateful for the discretion of the Chair, which has allowed us to get through this issue.

Amendment, by leave, withdrawn.

Clause 7, as amended, ordered to stand part of the Bill.

Clause 8 ordered to stand part of the Bill.

Clause 9