Rules for Direct Payments to Farmers (Amendment) Regulations 2020

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Rules for Direct Payments to Farmers (Amendment) Regulations 2020.

My Lords, I declare my farming interests as set out in the register. I hope that it will be helpful to your Lordships if I speak to both the Rules for Direct Payments to Farmers (Amendment) Regulations 2020 and the Financing, Management and Monitoring of Direct Payments to Farmers (Amendment) Regulations 2020, given the close connection between the two instruments. These instruments amend retained EU law governing the direct payment schemes for farmers for the 2020 scheme year. This EU law was brought into domestic law on exit day by the Direct Payments to Farmers (Legislative Continuity) Act 2020, which, as noble Lords will remember, we have debated.

These statutory instruments address operability issues in retained EU law so that it can continue to function effectively in the United Kingdom for the 2020 scheme. The instruments make purely technical amendments to fix inoperabilities, and I should emphasise that they do not make policy changes. They use the affirmative procedure and I would like to explain why this was necessary. They could not have been made any sooner as they could be made only after the parent Act received Royal Assent, which was just before exit day. The instruments needed to be in force on exit day, at the same time as the relevant direct payments legislation was brought into UK law. This has ensured a seamless transition from EU law to UK law. It has meant that the Government and the devolved Administrations can continue to operate effectively the 2020 scheme, which began on 1 January, therefore avoiding any disruption to farmers. Significantly, these instruments ensure that the UK Government can meet their commitments to funding in the agriculture sector. The Government have announced nearly £3 billion in funding for direct payments to UK farmers for the 2020 scheme year.

The Rules for Direct Payments to Farmers (Amendment) Regulations 2020 make operability amendments to the retained EU Regulation 1307/2013, which is the main direct payments regulation establishing the high-level framework required to make direct payments to farmers. It also amends two delegated and implementing Acts under this regulation which together set the detailed scheme rules for direct payments. Finally, it makes minor operability amendments to an existing statutory instrument related to direct payments in England. It is worth making it clear that the direct payments legislation being amended by this regulation was brought into UK law only for the 2020 scheme year, not for prior years, so this instrument makes amendments only in relation to 2020 direct payments.

The Financing, Management and Monitoring of Direct Payments to Farmers (Amendment) Regulations 2020 make amendments to the retained EU Regulation 1306/2013. This is the main “horizontal” regulation that sets the overarching framework for how the CAP is administered, including direct payments. It also amends four delegated and implementing Acts under the main regulation, which together set the detailed rules necessary to finance, manage and monitor the delivery of the CAP schemes. Finally, it makes minor operability amendments to an existing statutory instrument in relation to direct payments in England.

My Lords, I thank the Minister for introducing the regulations. I thank him, too, for the Government’s commitment to give £2.852 billion to ensure that the programme continues. I should declare a family interest in farming in Suffolk, where we are recipients of basic farm payments and stewardship funding.

The instruments speak for themselves. I have no queries with them; the legislation as it stands is fine. However, is the Minister confident that the payments will be made at the right time and in the full amount? I refer not just to the basic payments but to payments on the stewardship side, which has not had a good record in recent times. I understand from farming colleagues around the country that they are still waiting for some of those payments to be made. Perhaps the Minister can tell us how many are outstanding and when they will be paid. My worry is that the Government will find that fewer people enter those schemes because they fear that they will not be paid at the right time. That would be a great shame because we are trying to encourage a greater number of environmental projects within food production.

Given the flexibility within the instruments, might the Government rethink their stance on the three-year crop rule in the light of recent circumstances? I have in mind particularly the flooding that we have had. At the moment, we are supposed to rotate crops within a three-year period, but given the flooding—which remains a key issue in Lincolnshire, Yorkshire and other areas where crops are still standing in the fields, with little chance of farmers getting them out or being able to plant spring crops—is there flexibility within the system to make any allowances for that?

I have a direct question for the Minister on flooding. I know that emergency payments are allowed, and that some may have already been paid of which I am not aware. Within these rules, may some flooding assistance be given to the farmers who are in such dire straits at the moment?

I noticed in particular Regulation 7(10). I think the exchange rates are undecided at this time. Can the Minister tell us whether the exchange rates will be honoured in the same way between the four devolved Administrations? Clearly, it would surely be wrong to have one system in England and another in Wales and in Scotland. Will he comment on that?

On Regulation 7(6), I see that the Government of Wales have paid an amount to small farmers, and in Scotland beef and sheep farmers have been given assistance. Where will that balance take us? Are there plans to assist farmers in England, who are not represented in that way?

My Lords, I am grateful to the Minister for bringing forward these regulations; it would be a very brave man who stood between the farmer and his payments this year. I am also very grateful to my noble friend Lady Byford for setting out her concerns.

Anybody who has travelled from Scotland or the north of England down to London by train or car will have seen the amount of damage caused by the floods. Like my noble friend Lady Byford, I make a special plea for a sense of urgency on the three-crop rule. I hate to say this in mixed company, but I pay tribute to a previous Secretary of State, under a different Administration, Hilary Benn. He visited the Great Yorkshire Show and, on the same day, went back to London and lifted a similar provision that prevented farmers going on the land. The circumstances were similar, although it was a different time of year—July—and I forget which year it was.

My understanding is that the Government are actually discouraging anybody from applying for a specific force majeure provision. There is a very real concern that, eventually, the RPA will be inundated with potentially thousands of applications, given the scale of the problem this year.

I also understand that those who are seeking farming recovery fund financing are experiencing delays. I appreciate how hard my noble friend and his department are working at the moment—he was in the Chamber until very late yesterday, as indeed we all were—but anything that his department can do would be appreciated.

My noble friend will be aware that Flood Re had limited financial capacity, and that no businesses, particularly small businesses, were included. This means that no farm can make an application for financing or insurance cover under Flood Re. Can that be looked at in some shape or form?

I know that this issue might be raised by others, but another statutory instrument is coming down the tracks to implement the Chancellor’s funding statement of 30 December. I do not know whether my noble friend can put a date on that.

I echo my noble friend Lady Byford’s concerns about Countryside Stewardship Scheme, because the RPA seems to have improved. I know that my noble friend was patron of the Institute of Agricultural Secretaries and Administrators for 10 years. The responsibility falls to me to be its parliamentary patron, which is a great honour. It is very concerned about the late payments by the Rural Payments Agency, particularly in England. Could my noble friend use his good offices in this regard? My main plea, obviously, given that farmers now have great difficulties getting on to the land, is this: could my noble friend seek a derogation from the three-crop rule as a matter of urgency to spread the load? Could he tell us when the remaining SI will come before us? A highlight of something we might expect to see in the Budget this year would be extremely welcome.

My Lords, it is good to follow the noble Baronesses, Lady McIntosh and Lady Byford. I thank the Minister for his considered introduction to these detailed and complex SIs.

It is clear that the department has gone to some trouble to be helpful in its Explanatory Memorandum. Thanks should be given for that, but to the uninitiated lay man these SIs remain complex. For example, the explanation of Article 21, such as it is, goes from page 6 right through to page 7 of the instrument. Page 15 of the Explanatory Memorandum refers to the challenging horizontal regulation, which the Minister tangentially referred to. He might wish to give further explanation to those who might not know about the horizontal regulation. Page 26 of the instrument refers to the 67 permitted varieties of hemp. My challenge to the Minister is: which one does he recommend? Is it Fedora or Silvana? He does not have to answer that, but he has so much insight into the industry that he or his officials might have a recommendation.

These SIs affect the day-to-day lives of thousands of our farmers. They might farm few or many acres. Bearing in mind the humanity of the situation and the personal anxieties that have occurred or might well occur, do he or his officials have an estimate of the total overall direct payments annually? Does he know how much money is made over to farmers in a given, and the most recent, year? How many farmers receive payments—one presumes thousands? Does he have a figure regarding these questions for Wales?

My Lords I am grateful to the Minister for setting out so clearly the details of these two statutory instruments and for his time, and that of his officials, in providing a briefing last week. I have listened to the knowledgeable contributions of other noble Lords; this is a complex issue and one of the few where I wish I were a farmer. During our debate at Second Reading, we strayed into areas covered by the Agriculture Bill which had relevance to direct payments. I do understand that, due to the Brexit date of 31 January, the made affirmative process is needed to ensure that farmers get the payments they deserve, and are relying on, in a timely manner. Many of your Lordships would not have started from here, but here we are. We must make the best of it and ensure that our farmers do not suffer financially this year.

The EU makes CAP payments in arrears, to the UK Government and not to farmers themselves. As the noble Baroness, Lady Byford, has said, the euro to pound exchange rate is important during this process: I understand that this has previously been set in September each year. However, we were told at the briefing that this exchange rate will be calculated “soon”. Can the Minister be more specific on when soon will be? There are a number of aspects to these payments, including the young farmers’ scheme to encourage new entrants into farming. Farming is a vital industry on which we all rely, not only for the management of the land but to provide some of the food we eat. Despite what government advisers may think, farming, and indeed fishing, is a vital component in both social and economic prosperity. The basic payment awarded to young farmers, classified as newcomers under 40 years of age and established in the previous five years, is increased by 25% for the first five years and 2% of the national budget allocation is used to finance this supplement. This payment comes on top of other measures young farmers can benefit from under previous rural development programmes. Under the EU, this payment was mandatory for member states. Can the Minister give reassurance that this payment will continue, despite the leaked information over the weekend? I welcome the changes to guidance for young farmers, and the removal of the need for new entrants to produce a yearly certificate of proof of their youth. This change in the bureaucracy is welcome and I look forward to more of this in the Agriculture Bill.

My Lords, I thank the Minister for his clear introduction to the order before the Committee today. I also thank him for making himself available for the meeting he convened with the noble Baroness, Lady Bakewell of Hardington Mandeville, and myself in connection with these instruments. The regulations on the working of the CAP can have certain peculiarities. I am aware of many of these and declare my interest as a farmer in receipt of EU funds.

As the Minister explained, through the parent Act, the Direct Payments to Farmers (Legislative Continuity) Act 2020, and the withdrawal agreement, these regulations put the existing EU payment schemes into UK law to maintain continuity in the agricultural sector for the year 2020, pending the introduction of the Government’s new regime in the Agriculture Bill, presently in the other place. As he emphasised, this will not entail any changes in policy but will merely put the regulations on a UK basis, correcting inoperabilities and providing necessary continuity and certainty to the agricultural sector. Any disruption could have a severe impact on farmers’ financial viability, especially in Wales and other more disadvantaged areas, as my noble friend Lord Jones highlighted. One or two explanations necessarily need further clarity, which it would be helpful if the Minister provided. The noble Baroness, Lady Bakewell, and others drew attention to many of these at our meeting.

The noble Baronesses, Lady Byford and Lady McIntosh, brought up the dreaded three-crop rule and the necessary financial disciplines being maintained by the RPA. To avoid the UK being drawn into the multiannual EU budget cycle, the withdrawal agreement disapplies the 2020 claim year from the implementation period. The payments will become the responsibility of the Treasury, yet the payment exchange rate, normally set each year in September, has yet to be set. Given that the EU will no longer be reimbursing the UK Government, could not the same payment in pounds be maintained as was implemented in 2019? Would that not provide further simplicity and clarity?

During the passage of the Direct Payments to Farmers (Legislative Continuity) Act 2020, it was said that payments, especially to certain of the devolved Administrations, will be enhanced in accordance with the Bew review. I understand that this will be subject to yet another piece of secondary legislation. When might that be forthcoming and will any additional funds also be subject to modulation, or merely be made as Pillar 1 supplementary payments? Will the instrument be under the negative or affirmative procedure? It would be helpful if the Minister could indicate how many instruments his department is planning to bring forward in this 2020 year, so that a complete picture can be forthcoming as soon as possible.

The Explanatory Memorandum also states that, as a continuity measure, no consultation, other than notifying the direct payments working group, and no impact assessment have been undertaken as this measure changes nothing. No concerns have been raised. I do not see any difficulties in this technical departure from normal practice on statutory instruments. The memorandum also states, at paragraph 11.1, that the department

“is not producing any specific guidance on these instruments”.

Will the Minister clarify whether that will apply to his department’s normal practice of issuing a Guidance to Farmers booklet, normally sent to qualifying farmers each year to explain any amendments or changes from previous conditions? In this instance, while there may not be changes, it would be helpful again to produce a booklet for the agriculture industry to answer the many questions that may arise in this one-off year, and to explain that all the features of the BPS scheme, such as cross-compliance, greening and others, may remain.

Finally, does the Minister have any information for the Committee about measures regarding future years, specifically 2021, and when will further announcements be forthcoming?

I am pleased to approve the regulations before the Committee today.

My Lords, I thank all noble Lords for this contributing to this debate, because it reflects what we are all most concerned about: the importance of food production, the people who enable the consumption of food at home and abroad, and their simply excellent produce.

I remind your Lordships that we are the Department for Environment, Food and Rural Affairs, so I intend, in declaring my farming interests, to champion food production and farmers. The noble Baroness, Lady Bakewell, was absolutely right to refer to young farmers. Those of us who farm do not want to be the last generation of farmers. We need to ensure that the next generation produces food for us and enhances our environment, with 70% of our land farmed in the farmers’ custodianship.

I will seek at a brisk gallop to answer a number of questions. My noble friends Lady Byford and Lady McIntosh asked about payments on time. The Rural Payments Agency has worked hard to improve payment performance, as I think has been acknowledged. For farmers, by 20 January the RPA had issued in England £1.69 billion of BPS payments, about £101 million for environmental stewardship and just under £8 million for countryside stewardship. As is recognised in the department, the RPA is now focusing on paying remaining claims as soon as possible. I am well aware of the importance of prompt payments, an issue which the ministerial team places great importance on for future confidence.

The noble Lord, Lord Jones, referred to the intricacy of the instruments. I always go to the Explanatory Memorandum—I find looking at the statutory instrument alone very confusing. Indeed, sometimes, the Explanatory Memorandum needs some explaining too.

However, it is important to record that the Government’s funding for direct payments, announced on 30 December, matches the total funding for direct payments available for 2019. The Government have committed a total of £2.852 billion to UK farmers—£1.843 billion for England, £523 million for Scotland, £243 million for Wales and £294 million for Northern Ireland. This is in addition to the £216.6 million of funding awarded since the spending round to support the farming sector in Scotland and Wales, following the Bew review on farm funding allocations.