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Examination of Witnesses

Agriculture Bill – in a Public Bill Committee at 2:00 pm on 11th February 2020.

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Ivor Ferguson and Norman Fulton gave evidence.

Photo of Graham Stringer Graham Stringer Labour, Blackley and Broughton 2:01 pm, 11th February 2020

We will now hear oral evidence from the Ulster Farmers Union and the Department of Agriculture, Environment and Rural Affairs. Thank you very much for coming today. We have until 2.30 pm for this session. I would be grateful if you introduced yourselves for the record.

Norman Fulton:

My name is Norman Fulton. I am deputy secretary within the Department of Agriculture, Environment and Rural Affairs for Northern Ireland. I head up the food and farming group within the Department.

Ivor Ferguson:

I am Ivor Ferguson, the president of the Ulster Farmers Union. We are an organisation in Northern Ireland with roughly 11,500 members spread across all sectors.

Photo of Thangam Debbonaire Thangam Debbonaire Opposition Whip (Commons)

I am sorry, but I wonder if we could ask the witnesses to speak up slightly.

Photo of Graham Stringer Graham Stringer Labour, Blackley and Broughton

The acoustics in this room are appalling, which is nobody’s fault apart from the architect’s. If witnesses and members of the Committee could speak up, we would all be grateful. Thank you.

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

Q39 Schedule 6 to the Bill has Northern Ireland-specific provisions, principally an ability and power to modify the legacy basic payment scheme—the common agricultural policy scheme. Will you explain what your priorities are to simplify and improve the legacy scheme? Secondly, do you have any emerging thoughts about future policy that you might make through your own Northern Ireland legislation?

Norman Fulton:

Our motivation in drafting the schedule was to retain options for incoming Ministers—obviously this was done in the absence of an Executive—so we developed it to be able to preserve the ability to continue to make payments to farmers under pillar 1 and to enable us both to continue to deliver schemes under pillar 2, until such a time as Ministers wish to change those measures, and to keep pace with appropriate changes elsewhere in the UK. So it was really to provide that framework for incoming Ministers but not really to set out any particular direction in policy, which is clearly something that Ministers will need to take a lead on. There is some scope for simplification in the powers we propose, but it is really for Ministers to decide which of those powers they might want to move forward on.

In terms of the future direction of policy, we engaged with our major stakeholders from the farming, food and environmental sides, and we produced a draft outline framework for agriculture, which we published for consultation in August 2018, really around the four pillars of resilience, environmental sustainability, productivity and supply chain functionality. It is a very high-level document and it received a good response from our stakeholders. Now that we have a Minister and an Executive in place, we need to work to flesh that out and to start to chart a way forward in the longer term.

Ivor Ferguson:

From the farmers’ point of view, we had negotiations with our farmers and discussions on how we would like to see payments going forward. We produced a discussion document. We felt that we were quite happy for farmers to be rewarded for activity, whether that be agricultural production or environmental activity. We were quite happy with that because a large number of farmers were not fully happy with area-based payments, in that they felt that the landlord or people who owned vast areas of land received most of the benefit. Our farmers will be quite happy to have money directed to people who are engaged in activity, be it production or environmental.

Having said that, we would not want to see area-based payments disappear completely. We would like to keep that in the form of a resilience or volatility payment, bearing in mind that we have a land border with the Republic of Ireland where they will still receive land-based payments. We could not be disadvantaged in any way with our farming colleagues in southern Ireland.

From that point of view, we would like to see some form of a resilience or volatility payment. If we look at the recent farm income figures for Northern Ireland, the profitability figure has fallen from well over £300 million down to £290 million. That is a similar figure to what comes in in farm support to Northern Ireland. It is a stark reminder of how dependent some sectors are on basic payments.

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

Q You mentioned that the rationale for an area payment might be resilience or as a risk-management tool, but it is ultimately a subsidy on land tenure or land ownership, so is it the best tool to deal with those issues? Or is it a straightforward market intervention—crisis payments when there is a slump in the market or a severe weather event, when you could intervene using the other crisis powers that are in the other part of the schedule?

Ivor Ferguson:

If there were vast changes in the market for whatever reason, we would certainly need more support. This resilience payment would be much less than the payment today—perhaps 30%, 40% or at the most 50%. We have not put a figure on that yet; it is something we would have to discuss with our farmers fairly quickly now.

Photo of Daniel Zeichner Daniel Zeichner Labour, Cambridge

GoodQ afternoon, Mr Stringer. In the written evidence supplied, Mr Fulton, you raise a number of issues around divergence, both now and in future. Could you say a bit more about those issues? Could Mr Ferguson also comment on divergence?

Norman Fulton:

This is certainly an issue of concern to us. We have to be mindful of the fact that we now have the Ireland/Northern Ireland protocol under the withdrawal agreement, which means we will need to align with the European systems, whereas those in the rest of the UK could diverge. Therefore, we would be concerned that, within what will be the single UK market, there could be different approaches to marketing standards, for example. Obviously, that is something that we will all need to be mindful of. I suppose it will be managed through common frameworks across the UK. A lot of work needs to go into thinking through how we will operate across the UK, to ensure that the UK market is not distorted in any way and there is a level playing field for all players in that market.

Photo of Daniel Zeichner Daniel Zeichner Labour, Cambridge

Q That is extremely diplomatic but I am not sure how that works. You are in either one system or another, are you not? Where is the halfway house?

Norman Fulton:

Well, we are very clearly in one system, so we do not have the scope to change under the protocol. In the schedule, you will see that on marketing standards, for example, we have taken the ability to set standards, but that was drafted in advance of the withdrawal agreement, so it would not be enabled. At some point in the future, if we ever left the protocol, it could be brought into play. For now, our future is pretty much mapped out when it comes to marketing standards, but that is not the case elsewhere in the UK. Although we know what our standards will be, they may change elsewhere. That will create the issue of how we ensure that there is a level playing field within the UK/GB, which remains our biggest market.

Ivor Ferguson:

As Norman just said, it is our most important market. At least 50% of what we farmers in Northern Ireland produce goes to the mainland GB market, and in some sectors it is 70% or 80%. If we were to diverge and the standards were to lower in the GB market, lower standards means lower cost of production, and we would be tied to the cost of production within the EU system in Northern Ireland, so it would be very difficult for us to compete in that market. From that point of view, it would be a disaster for us if the standards changed or diverged a great deal away from where we are today.

Photo of Daniel Zeichner Daniel Zeichner Labour, Cambridge

Q When you say disastrous, what do you mean?

Ivor Ferguson:

Take the beef sector in Northern Ireland. All the products that we produce, or 95% of them, are produced to Red Tractor quality-assured standards. A lot of them go to the major retailers in the UK, which support us well with the Red Tractor standards. For beef production in Northern Ireland, the returns to farmers are down in the last 12 months by £36 million, so there is no profit in the job at the present time. We could not accept a lower price for product, so a lot of our farmers at the moment are finding it very difficult to stay in business. If there were a lowering of the price in the marketplace, that would be a disaster for us.

Photo of Fay Alicia Jones Fay Alicia Jones Conservative, Brecon and Radnorshire

I repeat my declaration of interest: I was an employee of the National Farmers Union, and indeed of the Ulster Farmers Union when I was working in its office in Brussels a few years ago. I want to pick up on the points that were raised about divergence. On the point you just Q made about maintaining an area-based payment in case of volatility, what would be the consequence of different agricultural payment schemes operating throughout the UK?

Norman Fulton:

Again, this is something that all Administrations need to be very mindful of in the choices they make. Agriculture is a devolved matter, so each of the Administrations can set their own policy direction and agenda. Under the protocol, which we will now be operating under, certain restrictions will apply in the case of Northern Ireland. We will have an overall envelope for state aid cover, but within that a percentage will have to be green box. That will put certain restrictions on the choices we make in future policy. That does not necessarily apply elsewhere in the UK. Scotland, Wales and England will all be able to set their own policy choices.

Again, we need to be careful that we do not start to open up distortions in competition, which could arise from all this. Although these matters are devolved, GB/UK is our domestic market, and we need to make sure we do not end up trying to undercut each other by using our support mechanisms to facilitate that. There is a great deal of responsibility on all the Administrations on this matter.

Ivor Ferguson:

I fully agree with Norman. If we take Northern Ireland at the moment, we would like to think that we will have the same level of support. We will certainly need the same level of support. The fact that it is paid in a different way should not distort our market all that much, if there is the same level of money that comes in. We have to be mindful that our farming colleagues in southern Ireland will have a basic payment too, so we need a level playing field. We have to be very mindful of that going forward.

Photo of Thangam Debbonaire Thangam Debbonaire Opposition Whip (Commons)

Q This question may be just for Mr Fulton, but both of you may care to comment. Agriculture is devolved, as you said, but the World Trade Organisation requirements for the agreement on agriculture are deemed to have been reserved. Will you comment further on whether schedule 6 gives DAERA the powers you need to meet the flexible requirements for Northern Ireland’s specific needs? Do you have anything to add to your comments in answer to the question from Fay Jones on how that regional variance will play out?

Norman Fulton:

The schedule is primarily about rolling forward what we have, with options for simplification and options to keep pace with potential changes that may have happened elsewhere. It is not really about setting our future policy direction, which is something that we now need to take forward ourselves in the Northern Ireland Assembly, now that Ministers are back and we have an Executive.

On the WTO issue, yes, that is a reserved matter, but there is nothing in the Bill that we feel will constrain our ability to set our policy agenda. For example, there are no restrictions on green box support in WTO rules, and none at this time on blue box support—for example, headage payments. Hopefully, the UK’s share of the amber box coming out of EU will be well in excess of what any region, or the UK as a whole, could ever hope to spend on agriculture, so we do not see that as a practical restriction on our room to manoeuvre in any way.

Your final point was around distortion in the UK?

Photo of Thangam Debbonaire Thangam Debbonaire Opposition Whip (Commons)

Q You started to comment in response to Fay’s question about regional variations. Is there anything you want to add to that?

Norman Fulton:

It is something we all need to recognise. For example, if a region were to decide to go back to something we had in the past, a slaughter premium, you could easily see how that could attract animals for slaughter into that area. You would be starting to distort the movement and processing of livestock. A region probably would not want to do that because you would end up spending your regional support to support farmers located outside your region. Those are the types of things that could happen in theory, but I hope in practice they will not.

Photo of Thangam Debbonaire Thangam Debbonaire Opposition Whip (Commons)

Q You mentioned the word “hope” twice there. I am also hopeful, but we are here to deal with legislation. Do you think anything else needs to be added to the legislation to reduce the reliance on hope? Is the hope about negotiating aims, or is there something that should be in the Bill that currently is not?

Norman Fulton:

That is a very difficult question, because at the end of the day agriculture policy is devolved, so all the Administrations have the flexibility to deploy the budget that is at their disposal. I do not think there is a lot more you can do in the Bill to address that. It is more in the area of the common frameworks that govern how the regions co-operate across this area .

Ivor Ferguson:

I will just add that we are mindful of regional variations across our areas. The future trade policy to be worked out will have an effect on that. If we diverge a lot, product coming from Northern Ireland into the GB market and vice versa will have added costs with the border inspection posts, or whatever you want to call them. There will be added costs. That is something that, if a trade deal did not go for us, or if there was a large-scale divergence, that would add a lot to our costs and we would need extra funding. We are very aware of that.

Photo of Robert Goodwill Robert Goodwill Conservative, Scarborough and Whitby

I seem to recall that in Northern Ireland, unlike in England, BPS payments have a maximum cut-off. That means that, although I assume you have to have cross-compliance on your entire holding, there is a maximum payment you can get. Might switching to more agri-environmental schemes result in some farms not delivering the public goods that they could deliver, because you would be limited in the amount you could give them? Do you think that, at that point, it would be worthwhile getting rid of the cap and allowing farms to participate fully on the all the land they have?Q

Norman Fulton:

There is an overall cap on the current area-based system, but very few holdings hit that limit at this point in time. Again, those are the sorts of things we will need to consider in relation to the architecture we put in place. Certainly, if you were talking about large areas of land that needed to be brought back into good management and good condition, you would want that to be encouraged and incentivised, and any disincentive that might arise from a cap would have to be considered very carefully. At this point in time, there is no cap on agri-environment—well, there are caps on the amount that individual farmers can get. I know it is an issue that some farmers want to do more, and that is something we will have to consider in our next iteration of agri-environment.

Photo of Robert Goodwill Robert Goodwill Conservative, Scarborough and Whitby

Q I suppose most farmers favour a cap as long as it is just over the amount they get paid. You also have a scheme where young farmers under the age of 40 who farm less than 90 hectares get a 25% additional payment. How effective is that? Has that just resulted in farmers passing on their farms early? Are farms tailoring their businesses to meet the rules, or do you see genuine benefits in having a young farmer payment?

Norman Fulton:

It is a bit of a mixed picture. Certainly, it has encouraged conversations around the farm table that would not otherwise have happened. We actually put in place in addition—it was an optional addition to that measure—a requirement for the young farmer to have a level 2 qualification in agriculture, so it was a way of bringing young farmers into the whole area of technology transfer. Some, who had perhaps gone out and got jobs in other professions or trades, were coming back to the farm but did not really have the agricultural training in place, so this got them on to the stepladder. Quite a proportion then decided they would go on and take on further training and qualifications, so it was very positive from that perspective as well. The motivations on that one were good, but I think we could improve on it by looking at the restrictions and issues facing young farmers, and at how we can tailor a package to help generational renewal on farms.

Photo of Robert Goodwill Robert Goodwill Conservative, Scarborough and Whitby

Q Is that your experience as well, Mr Ferguson, from a farmer’s perspective?

Ivor Ferguson:

Yes indeed. Coming back to the discussion document we produced after some consultation with our farmers, our idea was that when we moved away from the basic payment to a payment for productivity and environmental measures, it would mean that some of the farmers who wanted to do extra environmental schemes on their farms would be able to avail themselves of a grant to do that, so it would encourage environmental measures as well as production measures. That is something we are very happy about.

On the young farmers scheme, as Norman said, some young farmers certainly benefited from the scheme and it does encourage young farmers. However, going a bit further, we would like to see a succession plan put in place for older farmers to pass on to the next generation, and we would like to see some incentives, like they have in southern Ireland, such as tax incentives and that sort of thing. That would make the transition from the older generation to the next generation a lot easier, and it would be more encouraging for our young farmers.

Photo of Deidre Brock Deidre Brock Shadow SNP Spokesperson (Wales), Shadow SNP Spokesperson (Environment, Food and Rural Affairs)

Q With regard to the regulatory and policy divergences between the four nations of the UK, I am lucky enough to have been on the Agriculture Bill Committee twice in the last two or three years, and I think I am right in saying that we heard from all the NFUs in the previous iteration of this Bill Committee. I recall all the NFUs being at pains to say that they currently operate different schemes and policies between themselves, as you would expect from organisations in devolved Administrations. There were discussions around common frameworks and how they would work once Brexit occurs; those organisations currently operate in Europe under common frameworks. However, the details of the future frameworks must be agreed, not imposed—I think that that was said right across the board by all the different NFUs. Is that something that you recognise and agree with?

Norman Fulton:

Yes. I think the frameworks will be important. Up to now, we have operated within a regulatory framework, the CAP, which gave us a degree of flexibility, although it was ultimately constrained. Going forward, we will no longer have that regulatory framework. It then comes back to the politics of devolution and the fact that agriculture is fully devolved. I think all the devolved Administrations will jealously preserve that flexibility, but they will also need to recognise that we will operate within a single market, and that there will therefore have to be ground rules—

Norman Fulton:

Of the UK, yes, which is obviously of utmost importance for everyone.

Ivor Ferguson:

I agree. For us in the Ulster Farmers’ Union, we would certainly have to have some ground rules. We meet our colleagues in the NFUs in England, Scotland and Wales on a regular basis, and we certainly discuss all those matters. We fully agree that we will have to have some ground rules, but we do keep in touch with farmers in the other regions.

Photo of Deidre Brock Deidre Brock Shadow SNP Spokesperson (Wales), Shadow SNP Spokesperson (Environment, Food and Rural Affairs)

Q The impression I got was that the relationship between the four NFUs is very good, and that you speak regularly about these sorts of thing.

Ivor Ferguson:

Yes.

Photo of Graham Stringer Graham Stringer Labour, Blackley and Broughton

I am afraid that this will have to be the last question.

Photo of Ruth Jones Ruth Jones Labour, Newport West

I will be very quick. What are your thoughts on the food security reports? The current Bill talks about them being produced every five years. Do you have any thoughts on the frequencyQ ?

Ivor Ferguson:

We certainly would not be happy at all with a review every five years. We would certainly want to see this reviewed at least once a year. Especially in the transition, as we move forward, we would think that five years would be far too long a period, and that it will have to be reviewed a lot sooner than that—at least annually.

Photo of Graham Stringer Graham Stringer Labour, Blackley and Broughton

If there are no further questions, we have finished two minutes early. Thank you for your time.