Common Agricultural Policy (Cross-Compliance Exemptions and Transitional Regulation) (Amendment) (EU Exit) Regulations 2022

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Common Agricultural Policy (Cross-Compliance Exemptions and Transitional Regulation) (Amendment) (EU Exit) Regulations 2022.

My Lords, I declare my farming interests as set out in the register.

These regulations apply to retained EU law relating to the common agricultural policy, specifically: rural development; the common organisation of the markets, known as the CMO; and the underlying cross-compliance rules that farmers and land managers must follow on their holding if they are claiming certain rural payments. The instrument, made using the powers of the withdrawal Act, is extremely limited in scope. It makes no policy changes to retained EU law and no provision for future funding.

This instrument corrects a number of requirements to make notifications to the European Commission, references to “member states”, references to EU funding and EU policies, reports to be prepared by the European Commission and references to prospective EU legislation not yet made. These references came into force in the EU through Regulation 2020/2220, which the European Commission published and brought into force only in December 2020. This was too late for Defra to address prior to the end of the transition period, therefore the references were brought into retained EU law in the UK at the end of that period.

These references are redundant or deficient in a domestic context. They would, if possible, have been amended or removed from the statute book by Defra’s 2020 EU exit SIs had the EU regulation that introduced them been made earlier. The provisions being amended add little to domestic law, place unnecessary requirements on the UK to comply with EU policies that the UK does not share, or actively contradict amendments that Defra and the devolved Administrations have already made to provide for the future of agriculture in the UK.

Leaving these references in force would leave an apparent ambiguity in domestic agricultural rules as it would give the misleading impression that the UK remained a member state of the EU; would receive EU funding for domestically funded schemes; was complying with the EU’s common agricultural policy strategic plans; would carry out EU reports; would make notifications to the European Commission; or would seek authorisation for programme modifications from the European Commission. This might be a source of potential confusion for some stakeholders.

This statutory instrument also amends Schedule 3 to the domestic Common Agricultural Policy (Control and Enforcement, Cross-Compliance, Scrutiny of Transactions and Appeals) Regulations 2014—a snappy title—which set out the circumstances under which a breach of the standards of good agricultural and environmental condition set out in Schedule 2 to those regulations is not a non-compliance with the cross-compliance rules.

The domestic Common Agricultural Policy (Control and Enforcement, Cross-Compliance, Scrutiny of Transactions and Appeals) Regulations 2014 implemented certain aspects of the common agricultural policy. Section 3 ensures that, where a farmer is carrying out an obligation, restriction or action under a domestic management agreement or measure, and where that conflicts with cross-compliance rules, this will not be considered a non-compliance—if noble Lords understand the double negative.

The amendment made by Regulation 2 of this instrument extends the list of management agreements and measures in Schedule 3 to the domestic common agricultural policy of the same regulations. This is in order to include new domestic scheme agreements made under Section 98 of the Environment Act 1995 and Section 1 of the Agriculture Act 2020, ensuring that the status quo prior to the end of the transition period as regards domestic agri-environment schemes continues going forward and that farmers engaging in new environmental land management schemes, for example, are not placed at unfair risk of penalisation for complying with scheme requirements.

The amendments made by this instrument to remove European references apply in England and Northern Ireland only, except for the amendments made by Regulation 4 of the instrument, which are UK-wide. This is because, with the exception of the amendments made by Regulation 4 of the instrument, Scotland and Wales chose to review and correct these remaining European references using their own legislation in 2021. The amendments made by Regulation 2 of this instrument to Schedule 3 to the common agricultural policy of the same regulations are England-only in scope, reflecting the England-only scope of these regulations. The instrument has been developed in close consultation with the devolved Administrations and laid with their consent. This instrument does no more than is appropriate to remove or correct inoperable European references and cross-compliance exemptions, and is predominantly technical in nature.

I beg to move.

My Lords, I greatly enjoyed my noble friend’s presentation of the instrument before us. I think that paragraphs 7.7 and 7.8 set out exactly what my noble friend said. I would just like to ask for a point of clarification. We were informed last week about this dashboard. I have had great amusement trying to find the dashboard and identify the 570—I am told—Defra regulations, of which I assume this is one.

Is my noble friend of the view that this instrument will come back before us within the next year? That would greatly help me. A close reading of today’s House of Lords Business will show that I have tabled a Question to help me to understand. If 570 Defra items are listed on the retained EU law dashboard, published on 22 June, which relate to phytosanitary, plant or animal health, welfare and hygiene measures? Presumably we will have the opportunity to consider each in turn when they come before us, but as a general rule many of them will fall because, like this one, they fall within a transitional period. As the CAP comes to a close and Brexit kicks in to a greater extent there will presumably be retained EU legislation such as this that will fall. Will we come back to this particular instrument in the next year or two for those purposes?

There must be other pieces of retained EU legislation that we spent hours going through in this very Room or remotely to see how they would apply, many of which I imagine we would wish to retain. Do we have to wait for the Brexit freedoms Bill—I am not quite sure what it is called—to come before us, or will we approach this on an ad hoc basis? It would certainly help me to understand, since I committed so many hours to my greater knowledge and understanding of what the EU retained legislation was at the time, what the situation will be with this and other instruments.

It strikes me that it will take up an inordinate amount of Defra officials’ time to go through this exercise. If such instruments will fall anyway, will we have to meet physically to confirm that they are redundant and that they have fallen out of use or will that happen naturally? Will we be required to go through every single regulation that we adopted as part of our retained EU law that we wish to keep on the statute book?

My Lords, I thank the Minister for his introduction to this SI and for the helpful briefing beforehand. I accept that the majority of these changes are technical in nature.

First, although it is not ideal, I understand why the changes to EU regulation 2020/2220 could not be made at this time, given that it was passed so close to the end of the transition period. It therefore makes sense to take this opportunity to remove the provisions to minimise ambiguity and potential confusion. I also accept that it is helpful to remove redundant references to the EU and member states where they no longer apply in UK law.

Secondly, with regard to the changes to cross-compliance regulations, I can see why it might be necessary to widen the scope of the existing cross-compliance exemptions as set out in Schedule 3. However, I have some specific questions about this. These new exemptions to the schedule are very specific and refer only to the specific changes we made to Section 98 of the Environment Act 1995 and Section 1 of the Agriculture Act 2020. Can we be sure that these two provisions are the only two occasions where exemptions to the cross-compliance rules should be necessary?

I am struggling with some of the detail here, but I do not think many farmers will be operating exclusively under those agreements. That raises the question of what happens if, for example, their environmental work is, say, 20% but also has a direct impact on other activities, such as food production, at 80%. Would they be penalised, or is there an element of discretion? If so, what would that look like? In other words, what is the interface between the old cross-compliance and the new arrangements? How much discretion is there in all that or is it absolutely fixed in stone?

I still do not feel, having read the SI several times, that the application of the cross-compliance rules is clear, notwithstanding double negatives and so on. I would not relish being a farmer and having to try to understand and apply them. To be absolutely clear about this, are they to be applied only to claims under the old basic payment scheme? Therefore, will the cross- compliance rules be phased out as any claims under the old CAP scheme are phased out?

I am grateful to the noble Baroness and my noble friend for their contributions; I will try to answer their questions.

On the dashboard, these regulations and all retained EU law will be carefully reviewed as we go through the next few months. The Bill text is yet to be finalised. We are working closely with the Cabinet Office on what will be required in Defra-retained legislation. My noble friend Lady McIntosh is right to point out that we are coming to the end of the transition period, which is why we are doing all this stuff now. The tidying-up operation we are bringing in is because the sunset element of the EU withdrawal Act will be later this year and we want to get these matters resolved.

My noble friend asked how this instrument relates to the Brexit freedoms Bill. This instrument was an EU exit instrument made using the powers of the European Union (Withdrawal) Act 2018. As such, it makes no policy changes and does no more than is appropriate to make this common agricultural policy legislation fully operable now that the transition period with the EU has concluded. The Brexit freedoms Bill makes it easier to amend or remove outdated retained EU law from the statute book, ensuring that the UK continues to seize the benefits of Brexit and utilise our regulatory freedoms. Future regulation will be in line with our new regulatory principles. This answers some of the points that the noble Baroness, Lady Jones, made. Our rules will be proportionate and create a collaboration with business to help spur on economic growth.

I would just say, to her final point on ELMS, that we are trying to generate a culture change within agriculture. The cross-compliance rules of the common agricultural policy were tedious—I speak with the scars on my back from having to fill in the IACS forms and all their successors—and you could feel the dead hand of government on your shoulder regulating every aspect of what you do. We are transferring to a system that trusts farmers to draw down from a list of possible actions they might like to take and treats them rather like we do taxpayers. We taxpayers fill in our tax returns and the Government trust us unless they have reason not to. Occasionally, they will do an inspection. Occasionally, they will do a risk-based, intelligence-based assessment of whether somebody is at risk of breaking those rules. If they do break those rules, there are sanctions, but we want to be working with farmers much more, encouraging them into the new schemes and seeing the benefits that will come from that.

The guidance includes information on how the scheme interacts with others, and the system will automatically show people which areas of their land are eligible for the sustainable farming incentive. The department’s “Future Farming” blog has quick links to all its schemes, and its future farming and countryside engagement teams run fortnightly show-and-tell demonstrations with the top three farming organisations so that they can cascade the information to their members. I saw them in action at Groundswell last week, where they were explaining these schemes to farmers. They are going round all the shows and making themselves available by all means, electronic and physical, to convey the new regime that we want and to make sure that farmers and other stakeholders understand it in the future.

I will look through Hansard to see whether there are further points that I have missed, but without knowledge of any further points, I beg that this motion be agreed.

I am sorry, I do not normally interrupt the Minister, but can this be right? I think the Minister said, which I did not expect him to, that when the basic payment scheme is phased out, as it will be, cross-compliance will carry on after that. Is that the correct understanding of what he said?

There is some conditionality on the scheme. If you say that you are going to plant a headland, you have to plant a headland with wild flowers, and it is the same if you are doing something that comes under the heading of “public goods” that we are pushing through our new schemes under the SFI. However, as I said, we want to do this with a light touch. We want farmers to be trusted to do it. The cross-compliance elements will remain as the schemes are phased out, but then we want to move to a system that is more trusting of farmers to do the right thing.