Agriculture (Delinked Payments and Consequential Provisions) (England) Regulations 2023

Motion to Approve

That the draft Regulations laid before the House on 7 November be approved.

My Lords, I declare my farming interest as set out in the register. This instrument is part of our agricultural transition in England away from the common agricultural policy towards our environmental land management schemes. It introduces delinked payments in 2024, which are a simpler type of payment, in place of direct payments under the existing basic payment scheme in England.

Unlike the basic payment scheme, delinked payments will not be based on the amount of land someone has. Instead, they will be based on the basic payment scheme payments, made in a reference period. This will reduce administrative burdens as we phase out the payments by the end of 2027. There will be no need for an annual application form, as the Rural Payments Agency will already hold the data needed to check eligibility for the payments. This will mean that farmers have to spend less time filling in forms compared to the current scheme.

Delinked payments will be made to those farmers who claimed and were eligible under the basic payment scheme in England in 2023. The payments will be based on a reference amount. This will be the average payment made to the business for the 2020-22 basic payment scheme. To provide flexibility for farmers, we are allowing reference amounts to be transferred between businesses. They can do this during a transfer window from February to May next year.

This will particularly help businesses that have changed their structure since the start of the reference period. For example, if two or more businesses have merged, the reference amount could be transferred from the original businesses to the current business. Special rules apply to inheritance cases. The Government intend to reduce the payments each year by applying percentage reductions to gradually phase the payments out. This will continue to free up money to be invested in our new farming schemes. The reduction percentages will be set in future secondary legislation, which will be debated by the House. We intend to make the payments in two instalments each year to help cash flow. Ending the basic payment scheme also means that the associated cross-compliance system no longer applies; this is a system that our farmers have widely disliked as being over-bureaucratic.

Moved by

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.”

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.

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.

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.

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?

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.

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.