My Lords, I declare my farming interests as set out in the register.
This instrument is a fundamental part of the vital reforms we are making over the agricultural transition period in England. These reforms support the prosperous long-term future of the sector to produce high-quality, nutritious food, and protect and enhance the environment for future generations. The Government committed to maintain the same budget for farming, totalling £2.4 billion per year, but to move it away from the EU’s common agricultural policy, which did so little for food production or the environment, and towards investing in the foundations of food security: healthy soils, abundant pollinators, and clean and plentiful water.
This instrument applies progressive reductions to direct payments made to farmers in England for the 2023 scheme year. It puts into law the reductions which the Government first announced in their agricultural transition plan in November 2020. The reductions are being applied in a fair way, with higher reductions for amounts in higher payment bands. Therefore, this is a process that favours smaller farmers over larger ones. The reductions are calculated to be replaced pound by pound with investment in our new and existing schemes. This is the third year of the seven-year agricultural transition period, during which direct payments are gradually being phased out as we invest in targeted schemes.
The Labour Party has put a regret amendment before the House, and my concern is that this will send a confusing message to farmers. We are seeing farmers feel less confident about the agricultural transition due to previous political uncertainty, but we have made great progress since then, with the provision of more details about our improved countryside stewardship and sustainable farming incentive offers.
According to the Farmer Tracker Opinion for England, which was published last October, farmers on 81% of holdings said that Defra paying for environmental outcomes would be very or moderately important to their business in future, so this opinion supports the need to continue our agricultural transition.
I turn now to the fatal amendment from the Liberal Democrats. The Government remain convinced that direct payments are not the right way to support farmers and improve the environment. Let me set out clearly what the fatal amendment means and what the Liberal Democrats are asking the House to vote on this evening. First, if the House supports this amendment, it will be voting against the interests of small farming businesses. In England, historically, half the direct payments money went to the largest 10% of recipients. I cannot believe that anyone in this House would want that to continue. Meanwhile, our new schemes benefit small farms with a new management payment under the sustainable farming incentive of £20 a hectare for the first 50 hectares. This means that farmers can receive up to £1,000 extra to cover costs, so that is one way in which we are weighting this budget to smaller farmers. There is no minimum amount of land that can be entered into the scheme.
Leave out all the words after “that” and insert “that this House declines to approve the Direct Payments to Farmers (Reductions) (England) Regulations 2023 as they would reduce the direct payments made to farmers for the 2023 year of the Basic Payments Scheme; considers that the implementation of this reduction in payments, combined with rising input and energy costs to produce food, risks the livelihoods of British farmers as they transition their businesses to producing food and public goods like environmental protection; and calls on His Majesty’s Government to accelerate urgently the roll-out of the Environmental Land Management scheme”.
My Lords, I thank the Minister for his introduction. Needless to say, I have a different view and feel that he somewhat overstates his case. The statutory instrument reduces the money that farmers get from the CAP through the basic farm payments by at least a further 35%. After Brexit, the then Minister assured the House that as the Government phased out BPS payments on a sliding scale, the environmental land management scheme would replace payments, but on a different basis. The Minister gave assurances that the total sum of money—£2.4 billion, as mentioned—that had been allocated under the CAP would be maintained and reallocated under ELMS during the seven-year transition period.
The Minister at the time believed that, and I believed him. What has actually happened in somewhat different. The money may well be there, but it has not been allocated in a way that farmers can easily access. The Direct Payments to Farmers (Reduction) (England) Regulations 2022, which came into force on 15 April 2022, made the following reductions in direct payments: to those farmers receiving £30,000 or less, 20%; to those receiving more than £30,000 but less than £50,000, 25%; to those receiving between £50,000 and more than £150,000, 35%.
That is what the SI said. I believe it should have read, “those between £50,000 and no more than £150,000”, as the next category is those above £150,000—40%, on top of the previous year’s reductions. The SI we are debating today would make additional reductions as follows: for £30,000 or less, 35%; above £30,000 and no more than £50,000, 40%; above £50,000 and no more than £150,000, 50%; and above £150,000, 55%.
We can see immediately that the cumulative effect is very harsh indeed. Now, this would not matter if farmers were able to replace this lost income through ELMS. There are some excellent ELMS strands which have been rolled out, as the Minister has listed, but many are still in the pilot stage. Others have yet to see the light of day in a form which farmers can easily assimilate and assess how this would fit in with their business plans and models.
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This is hardly going to compensate farmers for the income they are about to lose with a 35% reduction in basic farm payments. I am not supporting the CAP. It was not a nuanced scheme and badly needed reforming. But the reduction in the BPS began before the Government had fully fleshed out their plans for the replacement ELMS.
Data from the Rural Payments Agency revealed in the Observer under the Freedom of Information Act shows that a total of £10,692,415 was paid out under the SFI scheme in the 2022 calendar year. This is out of a budget of £2.4 billion, meaning that only 0.44% was spent on the new schemes. Farmers are not likely to rush to sign up for ELMS and could continue with schemes which are not likely to increase biodiversity or tackle climate change. Many of them could go bankrupt.
The number of farms is decreasing. In 2019, there were 137,800; in 2020, 123,300; in 2021, 104,100; and in 2022, 92,100. We simply cannot afford to see the farms across our country going out of business at this rate. The war in Ukraine has shown us that we need more food production from our farmers, not less. If the Government press ahead without listening to farmers, they risk undoing all the good ELMS has so far achieved and is supposed to achieve into the future.
The Liberal Democrats back British farmers and that is why we are opposing this SI today. I agree with the Minister: it is not a game; it is deadly serious. I beg to move.
My Lords, I inform the House that if this amendment is agreed to, I will be unable to call the amendment in the name of the noble Baroness, Lady Hayman of Ullock, by reason of pre-emption.
My Lords, I first declare my interest, as set out in the register, as president of the Rare Breeds Survival Trust. The statutory instrument on direct payments that we are considering today is very short, and should be straightforward, but I have tabled an amendment, as we have some reservations about how the agricultural transition is being managed. This was done with no intention to confuse farmers.
Farm businesses have been facing increased volatility, uncertainty and instability and have been expressing concerns about the phase-out of direct payments against a backdrop of huge cost inflation. The noble Baroness, Lady Bakewell of Hardington Mandeville, talked about the huge extra costs being faced. According to the NFU, agricultural inputs have risen by almost 50% since 2019. It says that fertilisers are up by 169%, energy by 79% and animal feed by 57%.
During a time of fresh food shortages, it is worrying that the production of salad ingredients such as tomatoes and cucumbers is expected to fall to the lowest levels since records began back in 1985. Is Defra talking to supermarkets about the need to support British farmers? The NFU survey of livestock producers found that 40% of beef farmers and 36% of sheep farmers are planning to reduce, with input costs given overwhelmingly as the main reason.
Following the survey results, and with the SI reducing payments to farmers by between 35% and 55%, I was perturbed by paragraph 12 of the Explanatory Notes, headlined Impact, which states:
“There is no or no significant impact on business, charities or voluntary bodies”.
How can there not be an impact? I also draw attention to paragraph 7.6 of the Explanatory Memorandum, which indicates that the Government intend this to be last year of the current direct payment scheme in England. It is being replaced by the delinked payment. Will that process require a further SI, or will what is in front of us today be sufficient to make that transition?
My Lords, this has been an interesting discussion so far. Both noble Baronesses talked about farmers in general, as if all farmers are struggling. That is not the case. A number of farmers in this country are doing very well at the moment because of the nature of the land. There are roughly 45 million acres of farmable land in the UK. Of that, 15 million acres constitute very good land, and its farmers are able to adapt and grow high-value crops at good yields. There are about 15 million acres of moderate land, and they are a serious problem; my noble friend and Defra are tackling it, and ELMS will undoubtedly help. There are 15 million acres of hill land, which again present a very difficult problem. The challenge facing my noble friend and Defra is sorting out the two less productive areas. The way they are going with ELMS is absolutely the right direction.
The noble Baroness, Lady Bakewell of Hardington Mandeville, who up until today has been a great supporter of the farmers, said that the high cost of fertiliser is causing farmers a lot of problems. She is right in one way, but quite wrong in another. It is entirely due to the high cost of fertiliser that more and more farmers are putting in leys and cover crops, and hill farmers are looking, probably for the first time, at soil quality—the most important thing for farmers and for us. So the situation is not all bad.
I share some of the concerns that have been raised. One reason that there has not been greater take-up—although, as my noble friend rightly said, the Countryside Stewardship scheme has just about doubled in the past three years—is that it is quite natural for farmers to think there is a better scheme coming in the next couple of months. That is causing a lot of farmers to sit back and wait to the last possible moment. I hope that my noble friend the Minister will make as clear as possible to farmers what the situation is. If farmers know what the schemes are and what the payments are going to be, they will make a decision. They have to be moved from the position where they think that a better scheme will come in a few weeks’ time.
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Another important point, which I made during the Agriculture Bill, is that farmers need to have their hand held during this transition. Any change is difficult, particularly when the situation is affecting the whole of Europe because of low yields of wheat in France and the problems with water in Spain, but at the end of this dark tunnel will be a better farming system. Some of the big farmers will adapt more quickly; it is the smaller farmers that I am worried about. I hope that my noble friend can reassure me that his ELM scheme will give a helping hand to smaller farmers and to the agents trying to help them, who are still a bit confused as to what the final picture will look like. Having said that, I firmly support the direction in which the Government are heading, and I hope that the House will resoundingly defeat any attempt to divide on either of these amendments.
My Lords, I too support the ELM scheme, and, broadly, I support everything that the noble Baroness, Lady Hayman of Ullock, said. I understand what the noble Baroness, Lady Bakewell, said, but I do not believe for a second that we should effectively cancel the ELM scheme at this moment.
I think it is important to put another point of view, to do with the food price situation. The noble Earl, Lord Caithness, talked about when we were progressing the then Agriculture Bill and we debated the ELM scheme. It was decided that sustainable food growing would not be classed as something that could get any sort of payment. It was thought that if you grow food, you have a means of making money; that is fundamentally correct but, at that time, the reckoning was that about 8p in every pound got to the farmer; the rest disappeared into supermarket profit, packaging, production, processing and all the different things up the chain. New figures that have come through in the last year—compounded by issues that the noble Baroness, Lady Hayman, set out to do with the war in Ukraine and energy costs—reveal that UK farmers receive less than 1% of the retail price for goods that go through our main supermarkets.
That is not a percentage on the production cost but a percentage of the total price; it is pathetic and tiny. For example—I am referring to the research—for a wrapped, sliced loaf of bread, a cereal farmer will spend 9.03p yet will receive a negligible profit of 0.09p on something sold as a unit for £l.14. If they sold it as a loaf of “real bread” through an independent bakery they would make 0.5p profit; that is not much but it is something. For four beefburgers, the processor gains 10 times the profit of the beef farmer. A carrot grower spending about 14p per bag and selling to the supermarket will get virtually no money in return.
This leaves them with nothing to fund the transition. We all know that we need to have this transition. The agri-food sector currently makes up a third of UK greenhouse gas emissions, while agriculture accounts for 10% or possibly more. Farming drives 70% of terrestrial biodiversity loss. Intensive livestock farming poses a serious threat to climate change—we have debated many times in this House what industrial chicken farming does—and 85% of our land is used to graze livestock or produce crops to feed animals rather than feed us.
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Secondly, support for this amendment would be a vote against maintaining our food security. The EU’s area-based subsidies were substantially de-linked from food production in 2005. Indeed, they have inhibited productivity improvements. Meanwhile, our schemes invest in the very foundations of food security: from productivity to innovation, soil fertility and beyond. We set out our plan for this very clearly in the Government’s food strategy, and I have yet to see a clear plan from other parties.
Thirdly, supporting this amendment would be against the public’s demand for a better environment. Many in this House want, for example, to see our rivers restored. If the amendment was successful, many measures which directly restore water quality in our rivers would have to be shelved. We would be incentivising farmers to remove herbal leys and habitat-rich pastures that they may have planted alongside watercourses, and that would clearly be a crazy move to have to make because of how the amendment is worded.
Voting for this is not voting just to maintain the status quo; it is voting to stop any direct payments being released for new schemes. This would mean that we would have to stop landscape recovery projects, which are restoring more than 400 miles of river. We would have to stop the slurry infrastructure grant, which helps farmers to utilise their nutrients, which are such a valuable input but, when misused, can cause real pollution. We would need to cancel the existing 30,000 Countryside Stewardship schemes, which saw a 94% increase in uptake since 2020. Last but by no means least, support for the amendment would be a vote to keep farmers locked into a bureaucratic system that has worn them down with endless tedious red tape.
If certain Members of this House—the Liberal Democrats in particular—are serious about addressing urgent matters, such as the decline in our rivers or the crisis of species decline, what on earth is their game? That is the point: it is not a game; it is a desperately serious matter which should not be part of some cheap political campaign. We should be united in the ambition to support and incentivise our farmers to drive real change.
The basic payment system burdened our farmers with complex rules about the maximum width of a gateway or whether a cabbage and cauliflower were the same for the purpose of the three-crop rule. We have already scrapped those draconian rules and the related penalties to work with farmers rather than against them.
Let us be clear. This can be dressed up however noble Lords want, but the British people and our farmers will see straight through this. This amendment would keep rewarding people just on the basis of the land they manage, not what happens to that land, and it cruelly cuts the legs out from those who are doing the right thing. Those who support it do not support the many farmers who are embracing change, investing in their productivity, or building their resilience for the long term from the shocks from drought or pest outbreaks. They do not support the farmer who is putting a buffer of wildflowers alongside the river to protect it from run-off and retain vital nutrients on their farm and being rewarded for any revenue forgone.
I have a healthy respect for the noble Baroness, Lady Bakewell: she is a formidable parliamentarian and a valued member of the Secondary Legislation Scrutiny Committee, and I know that this is probably not of her doing but has probably been pushed by someone at the other end of the building. I hope that she has the decency not to push this to a vote. In my two years in this House, I have seen that this is a place that takes its responsibilities seriously. We know that change is worrying for farmers. On top of this world of change are the effects of international events that have seen spikes in input costs. Let us not play this game: let us leave that to others and show that we want to get on with delivering for farming, our countryside and the millions who mind about it.
We will continue to accelerate the rollout of the sustainable farming incentive, with six additional standards being added this year. We will make it more attractive by introducing a new management payment of up to £1,000 per year, and this will help to drive uptake in the scheme among all farms, but particularly smaller ones. We will continue to simplify Countryside Stewardship, under which there are now more than 30,000 agreements across England, continue our planned increase to payment rates to help farmers who are already enhancing the environment to keep up with rising input costs, continue to offer grants for equipment to increase productivity, boost environmental sustainability and improve animal health and welfare.
Under round 1, the Government have already paid out £31.5 million, supporting more than 3,000 farmers with their investment plan, and a further round of the fund opened last month. We will continue to provide free business advice to help farmers to adapt and build their businesses. These are just some of the ways in which the funding being released from direct payments is being used. Other examples include the slurry infrastructure grant, which helps farmers to invest in better storage, the new entrants’ pilot, which will help to bring new talent into farming and land-based businesses, and the tree health pilot, which helps farmers to tackle tree pests. All these would be at risk if this fatal amendment passed tonight. This instrument is essential so that we can free up funds to continue to support farmers to build and maintain resilient businesses while delivering improved environmental outcomes and supporting sustainable food production. I beg to move.
Amendment to the Motion
Farmers are struggling. They have seen significant cuts to their basic payment already: at least 5% in December 2021 and at least 20% in December 2022. Meanwhile, input costs have increased significantly. Energy bills are sky high, and the costs of fertilisers and animal feeds are also significantly up. Farmers are struggling to recruit people to pick produce, leaving food rotting in the fields, despite Ministers encouraging our population to move to areas where this type of work is available. The avian flu crisis is leading to egg shortages. The weather in Spain has led to major shortages of produce in supermarkets. This latter is clear evidence of climate change and an excellent example of why the UK needs to transition faster.
While farmers are struggling with all these factors, the Government are cutting energy support for them from this April by about 85%. The energy bills support scheme is being replaced by the energy bills discount scheme. Under the support scheme, farmers, like all other businesses, benefited from an absolute cap on the cost of electricity and gas per kilowatt hour. Under the new discount scheme, which starts on 1 April, businesses will get a discount: a small proportion of the bill covered. This means that farmers are likely to see energy support drop by 85%. So not only are farmers losing BPS this year, they are seeing this help cut—all during a food shortage crisis.
Farms are no longer to be classed as energy-intensive businesses, robbing them of more support. Minette Batters, president of the NFU, wrote to the Chancellor ahead of the Budget, asking him to prioritise food production. This request was ignored. Ms Batters said
“the NFU was clear that greater support is needed for the thousands of farm businesses which are trying, but struggling, to keep our nation fed amidst soaring production costs. It’s therefore extremely frustrating that the Energy and Trade Intensive Industries scheme was not extended to include energy intensive sectors such as horticulture and poultry”.
Farmers are being undermined by the new trade deals that allow food to be imported from Australia and New Zealand which, despite ministerial reassurances, is not produced to animal welfare and environmental standards currently existing in the UK. If this SI is agreed and another 35% reduction in farmers’ basic payments goes through, food production is likely to drop even more as farmers make decisions now about what to plant and produce next year. We are seeing the increased cost of both fertiliser and energy leading to tomato plantings in the UK dropping off dramatically.
Farmers should be able to replace the money lost through access to new and better environmental land management schemes. We on these Benches support ELMS. However, the Government have not handled the transition at all well. It has been somewhat botched. There was even a threat back in September, under the premiership of Liz Truss, that ELMS would be dropped altogether.
Cambridgeshire farmer Martin Lines, the chairman of the Nature Friendly Farming Network, which promotes sustainable farming, said that any delay to the ELMS would deny farmers crucial support to adapt to a changing climate. He said:
“If the government is stalling ELMS, it is failing any duty of leadership in maintaining momentum and building resilience”.
No wonder farmers are not rushing to take up those ELMS already launched.
We are six years after the Brexit vote, and two years after the start of the reduction in basic payments. On 5 January this year at the Oxford Farming Conference, Minister Spencer announced more money for farmers and landowners through both the countryside stewardship and the sustainable farming incentive schemes. As the Minister has already said, this change means that farmers could receive up to a further £1,000 per year for taking nature-friendly farming action through the sustainable farming incentive—SFI. This new management payment will be made for the first 50 hectares of farm, at £20 per hectare, in an SFI agreement, to cover the administrative costs of participation and to attract smaller businesses—many of which are tenant farmers—that are currently underrepresented in the scheme.
I would also appreciate clarification of the claims in paragraph 7.2, which states that direct payments are untargeted, can inflate land rent prices and can stand in the way of new entrants to the farming industry. These are quite sweeping assertions. What is the evidence base for this and what impact has the reduction in basic payments so far had on land prices and new entrants?
As the Minister knows, we have always supported the introduction of new ELM schemes and we clearly want to see them succeed, but between 2018 and 2022, Defra struggled to provide farmers with sufficient information. This unsurprisingly led to concerns, particularly against the backdrop of changes to our trading relationship with Europe, the Covid-19 pandemic, the impact of the war in Ukraine and the cost-of-living crisis.
There has been a huge number of differing pressures and uncertainty. It is no surprise that farmers are concerned and worried about all the changes that are happening. But it was very welcome that in January this year, Defra finally published the details of the three ELM schemes and provided much needed clarity to the farming sector. As we have heard, this includes a sustainable farming incentive, an expanded countryside stewardship scheme and a further round of the landscape recovery pilots.
It is important for the different options to be attractive to farmers, enabling them to produce food while helping to protect and enhance our natural environment. We have heard that this year, Defra has increased countryside stewardship payment rates and removed the caps, so that farmers can access more capital to invest in farm infrastructure, improve air and water quality and restore habitats. This is very welcome, but we believe that Defra could go further in offering support. One way could be to increase access to the higher tier options, including for hill farmers. Currently, only about 300 to 500 farmers a year benefit from this, but it has the potential to provide a flexible, effective and more attractive offer to many more farmers. Is this something the department would perhaps consider? Defra has stated that it will manage the budget in a flexible and transparent way but has not made firm allocations to each scheme. When is that information likely to be available?
We know that the successful rollout of ELMS is critical to meeting our domestic and international commitments to tackle the nature and climate crisis we face. Following COP 15, we now have international commitments to pursue more nature-friendly farming. So, while we have concerns about the lack of long-term certainty about the future that farmers are struggling with, and we still need to know details of how all this will work in practice, we do not support the amendment in the name of the noble Baroness, Lady Bakewell of Hardington Mandeville.
Analysis by the Green Alliance has demonstrated that a two-year delay to the phase-out of direct payments would halve the contribution of ELMS to the fifth carbon budget, leaving a substantial gap in the UK’s net zero plans. The analysis also found that retaining the previous EU scheme for an extra two years would mean that at least £1.2 billion—that is £770 million in 2023—would continue to be spent on the wealthiest farms in England: in other words, those already receiving more than £100,000 each in public subsidy in exchange for carrying out no public goods whatsoever.
Unfortunately, the Government have dithered for a number of years over the future of ELMS, which has been significantly delayed from the original start date of 2020. There was also uncertainty when Liz Truss even looked at axing it. So, January’s announcement was very helpful, but everything has been moving far too slowly, both for farmers and for our environment. Many farmers are also concerned about a gap in funding as they work out which schemes they are eligible to apply for.
My colleague in the other place, Daniel Zeichner MP, said:
“Unfortunately, it’s hard to imagine the money that’s been lost in direct payments will now be replaced through environmental schemes. Farmers are losing thousands and thousands. Labour is committed to making these schemes work and unfortunately it appears there is no such commitment from this government”.
I know that the Minister is personally very committed.
The extra £1,000 that has been mentioned is not exactly a huge sum for struggling farmers, but this SI is part of the next stage in the transition to the “public money for public goods” approach to agricultural support. We strongly support that transition, and we want it to work. We need to move to a more environmentally friendly and nature-positive food production system, but we remain concerned that the complexity of the schemes currently proposed may hamper take-up. The noble Baroness mentioned the slow uptake of the scheme so far. In terms of food supply and environmental gain, that is something we simply cannot afford. We support the Government’s aims, but they just need to get on now with delivering what both our farmers and the environment so badly need.
Everyone in this House agrees that we have to reform the farming sector, but if we are to reform it through the ELM system, people will need some reason to put in the herbal leys and they need to make some decent money out of food. This is driven by our commercial and rubbish food system dominated by supermarkets, which are driving farmers—especially small farmers—completely out of business.
So I have three small ideas: accelerate ELMS—madly so, putting more money in—introduce a land use framework that supports farm diversity, and support the transition to agroecological farming. Farming can be nature-friendly; it does not need to be industrial. We are pushing big farmers in the middle of England towards being more industrial rather than thinking, “I will grow some hedgerows”.
The Government should set up new, legally binding sector-based supply chain with codes of practice and use data to help farmers deliver more public goods and get supermarkets to help by giving farmers a much fairer deal. Given what we know about the two big supermarkets that recently distributed £1 billion to their shareholders, we could do something; we could have some higher prices paid to the farmers.
Given all that we have learned from recent shortages in fruit and vegetables, the UK must have a coherent and ambitious horticulture strategy to improve our nutritional food security. We are already importing large amounts of fruit and veg from climate and water-stressed countries. As it worsens, this threatens our own food security. As many people have said, we need to support our small and family farmers; but we need also to support our big farmers so that they see a proper advantage in transitioning out of industrial farming methods that cause so much damage.