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House of Commons Hansard
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Draft Direct Payments Ceilings Regulations 2020

Direct Payments to Farmers (Amendment) Regulations 2020
29 June 2020

The Committee consisted of the following Members:

Chair: Mr Laurence Robertson

Betts, Mr Clive (Sheffield South East) (Lab)

Bradshaw, Mr Ben (Exeter) (Lab)

† Campbell, Sir Alan (Tynemouth) (Lab)

Eagle, Ms Angela (Wallasey) (Lab)

† Johnston, David (Wantage) (Con)

† Jones, Fay (Brecon and Radnorshire) (Con)

Jones, Ruth (Newport West) (Lab)

† Longhi, Marco (Dudley North) (Con)

† Morris, James (Lord Commissioner of Her Majesty's Treasury)

† Mullan, Dr Kieran (Crewe and Nantwich) (Con)

† Prentis, Victoria (Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs)

† Robinson, Mary (Cheadle) (Con)

† Sambrook, Gary (Birmingham, Northfield) (Con)

† Smith, Greg (Buckingham) (Con)

Thompson, Owen (Midlothian) (SNP)

† Wild, James (North West Norfolk) (Con)

† Zeichner, Daniel (Cambridge) (Lab)

Rob Page, Committee Clerk

† attended the Committee

Second Delegated Legislation Committee

Monday 29 June 2020

[Mr Laurence Robertson in the Chair]

Draft Direct Payments Ceilings Regulations 2020

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Before we begin, I remind Members about social distancing rules. The spaces available for Members are marked; please do not sit in between those spaces. If Government Members wish to sit on the Opposition side of the Committee Room, that is perfectly okay. Hansard would be grateful if you could send any speaking notes to hansardnotes@parliament.uk.

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I beg to move,

That the Committee has considered the draft Direct Payments Ceilings Regulations 2020.

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With this it will be convenient to consider the Direct Payments to Farmers (Amendment) Regulations 2020 (S.I. 2020, No. 576).

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It is a pleasure to serve under your chairmanship, Mr Robertson. The draft Direct Payments Ceilings Regulations 2020 were laid before this House on 9 June. The two instruments have been grouped together for debate because they both amend retained EU law. The statutory instruments largely maintain the status quo from the 2019 scheme, and thus provide continuity for farmers. They do not change the rules that farmers have to meet. Both instruments are UK-wide and have been made with the consent of the devolved Administrations.

Before I explain a little more about each SI, I would like to explain why the Direct Payments to Farmers (Amendment) Regulations 2020 are subject to the made affirmative procedure. The procedure is specified in the Direct Payments to Farmers (Legislative Continuity) Act 2020. That procedure was required because the EU law under that Act became domestic law on exit day, and amendments to make that law operable were also needed by exit day. That avoided a legislative gap in the direct payment schemes for this claim year. The instrument makes some further operability amendments using the same powers, and they, too, need to be made without delay. That will avoid any ambiguity that would result from the statute existing longer than is necessary.

The draft Direct Payments Ceilings Regulations 2020 amend the UK national ceiling and net ceiling for this claim year, 2020. Those financial ceilings are used to calculate payments to farmers under the direct payment schemes. The amendments to ceilings take into account previous policy decisions made by the Government and devolved Administrations, such as the transfer of funds from direct payments to rural development. Each part of the UK has decided to make the same level of transfer in previous years. The amendment to the national ceiling and the net ceiling also reflect the findings of the Bew review and the subsequent funding decisions made by the Scottish Government and the Welsh Government.

The Welsh Government have decided to use the additional funds allocated to them for 2020-21 for their 2020 direct payment schemes. They have been added to the national ceiling and the net ceiling to account for that. The Scottish Government have decided not to use any of the money allocated to them following the Bew review for their 2020 direct payment schemes. We understand that they are still considering how they wish to use the money allocated to them for 2020-21, but it will be ring-fenced to be spent on farms in Scotland.

The net ceiling has also been amended to take account of the decisions made by the Government and devolved Administrations on the level of reductions to be applied to large payments. They are existing reductions that are separate from the phasing out of direct payments in England, which will not begin until 2021 under the Agriculture Bill. Each part of the UK has decided to maintain the same approach to the existing reductions as in previous years.

A key purpose of the Direct Payments to Farmers (Amendment) Regulations 2020 is to confirm what the euro-to-sterling exchange rate for payments will be for the 2020 direct payment schemes. The Government and the devolved Administrations have decided that it should be the same as for 2019. We are confirming that exchange rate three months earlier than happened under the common agricultural policy. That is to provide extra certainty for our farmers.

This instrument also addresses other, minor operability issues arising from the UK’s exit from the EU that were not fully dealt with at the time. For example, it removes redundant cross-references to provisions that are not part of retained EU law. It clarifies that, in some instances, the EU legislation being referred to is the version that had effect immediately before exit day. It removes some remaining references to the European Commission and makes other minor drafting amendments.

These amendments will enable the law governing the 2020 direct payment schemes to operate effectively in the UK, with no ambiguity. I commend the two sets of regulations to the Committee.

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It is a pleasure to serve under you in the Chair, Mr Robertson, and a pleasure to continue this fascinating, if occasional, dialogue with the Minister about how we ensure a regular and healthy supply of food to our fellow citizens by helping our farmers financially. I am sure that the Minister enjoyed as much as I did going back to EU regulation 1307/2013 over the weekend, which is where we started the conversation some months ago.

We are of course in a transitional phase, and it may be lengthy. It struck me, in preparing for this Committee, that we could be coming back year after year to discuss such statutory instruments—in 2021, ’22, ’23, ’24—who knows? But I am sure each iteration will prove yet more illuminating.

May I say how pleased I was to see that the environment land management scheme consultation is back open? That is relevant to today’s discussion, because of course it is the potential replacement system. However, I am slightly disappointed to see that the closing date remains the end of July, so the consultation period has effectively been halved. Could the Minister comment on that and explain the thinking? We are talking about a major change—as the Government says, the cornerstone of the system. I suspect that the reason for the closing date is probably that there is now some urgency because, as the Opposition warned earlier this year, things do not always go as smoothly as one hopes.

My next question for the Minister follows from that. I want to check that my understanding is correct, and that we will indeed repeat this exercise each year until basic payments are completely removed from the system. Today’s statutory instruments are for scheme year 2020. As I recall, clause 10 of the Agriculture Bill outlines what happens for future years, and as I understand it, measures under that clause will also be subject to affirmative resolution. While we continue to struggle with applying what is now considered an out-of-date system, the EU of course has moved on—to an ambitious goal of 25% organic by 2030. I fear that while it is doing that, we will be in the slow lane, toiling away at those “oven-ready” basic payments.

Be that as it may, today we have two fairly routine items to consider, which would formerly not have required decision and would have been handled in the normal structures of the European Union: a decision on the exchange rate to be used to calculate payments; and the distribution of those funds between the nations, and allocations between pillar one and pillar two, essentially to fund rural development programmes. As has been said, there is also an adjustment to take account of the recommendations of the Bew review.

All this ties back to EU regulation 1307/2013, which we enjoyed back in January, and the Direct Payments to Farmers (Legislative Continuity) Act 2020, which we also enjoyed discussing earlier this year. I am sure that hon. Members will be relieved to hear that these measures are not controversial and we will not oppose them. But I am duty bound to note, as I have done before, that for all the Government’s claimed green zeal, the opportunity to divert funds from pillar one to pillar two in England has once again been passed over. Control may be taken back, only for us to carry on as before. The area payment system that the Government are so keen to dismantle in the Agriculture Bill carries on unchanged for another year in England.

Meanwhile, the environmental and social schemes funded under pillar two, the stewardship-type schemes that the Government rightly wish to promote, get no additional funding. Labour Wales uses the maximum 15% allowed; Conservative England does not. Perhaps once again the Minister could explain why the Government continue not to take the opportunities on offer.

The ceiling has been adjusted to reflect the outcomes from the Bew review, as the explanatory memorandum helpfully explains at paragraph 7.6. The Welsh Government have opted to pass money on to their farmers, but, as the Minister has explained, it appears that the Scottish Government are taking a different path. I noted her comments, but would be interested to hear her views on how the additional €60.43 million is to be further allocated.

We also see from the helpful explanatory note, at paragraph 7.7, that although caps apply to basic payments in Scotland above €600,000, in Wales above €300,000 and in Northern Ireland above €150,000, there are no such caps in England, but merely the 5% over €150,000 required by the EU. Happy days continue for some. Perhaps the Minister can explain what thought was given to moving some funds from those very big payments into more environmentally and socially friendly schemes, and will she confirm that it could be done now? It is a political choice.

I appreciate that modulation has long been unpopular with influential farmers in England, but I would also gently reflect that we will see something remarkably similar introduced under ELMS; based just on the information for next year, we can see that some of the larger payments will indeed be reduced substantially. I am bound to ask: why is that right for ELMS, but not for direct payments? And also the converse: will there be similar scope to ensure that payments under ELMS can be capped, as effectively happens now in Wales, Scotland and Northern Ireland?

SI 2020 No. 576 mainly establishes the mechanism to be used for calculating the exchange rate to be used. It also tidies up some minor points that I suspect were left over from earlier changes. It is not controversial, although I am puzzled—I do not expect the Minister to have the answer today—as to why paragraph 6 of article 46 in regulation (EU) No. 1306/2013 needs to be taken out. Perhaps I am being over-suspicious, but the fact that it refers to intervention measures makes me wonder whether the Government are quietly removing one of the tools that may yet be needed if times get tougher ahead. Will the Minister clarify? I am also struck that this SI seems to be in some cases amending the amendments made in SI 2020 No. 90, which makes some of this quite hard to follow. That certainly seems to be the case for regulation 2, in which regulation (EU) No. 1306/2013 is being further revised.

Mr Robertson, you and the Minister will no doubt be glad to hear that I have no further substantive queries on the remaining amendments, although I cannot help wryly noting that one or two of the tidy-ups to regulation (EU) No. 639/2014 had to do with points that were raised when we discussed SI Nos. 91 and 90 earlier this year. It is good to know that our time here discussing these things is not wasted. We are content for the regulations before us to proceed, and we look forward to the next round.

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Of course our time here is not wasted, Mr Robertson. The instruments before us do omit some redundant provisions that we have previously discussed and cross-referenced. Part of the purpose of the transition period is that events move on. We hope for a full free trade agreement. In fact, we hope for a number of them. We now need to omit some of the regulation-making powers relating to EU financing rules, which are not necessary for domestically funded schemes, and some of the rules on the European Commission’s budgetary management, but I look forward to looking more closely with the hon. Gentleman at the specifics of the measures that he referred to.

We are providing farmers with a good deal of certainty; that is the aim, partly, of the changes we are making today. The Government announced on 30 December nearly £3 billion of funding direct payments for 2020, which matches the funding that was available last year. The instruments that we are debating are consistent with that announcement. More broadly on funding, the Government’s manifesto guaranteed the current annual budget in every year of this Parliament; that, too, is designed to give certainty and comfort to farmers. This will enable the Government to provide financial support to farmers in England for the purposes set out in the Agriculture Bill.

We have been clear, consistent and as transparent as possible about the maximum reductions in the direct payments in 2021. We first announced those in September 2018 so that farmers would have time to prepare. We will throughout this transition period continue to consult genuinely as we conduct our tests and trials of ELMS and as the policy continues, quite properly, to evolve. We will provide much more information about our plans for the agricultural transition both in July and September this year—something we announced fairly recently—so there will be considerable flesh on the bones of the hon. Gentleman’s favourite ELMS policy document. Our new schemes will be a more effective way of rewarding farmers for the work they do, and will help them to prepare for the future.

We remain committed to introducing new schemes that reward farmers for producing goods that are valued by the public. That is why the ELMS discussion is going ahead at pace—and, yes, we want to conclude the first part of it next month. I know that the hon. Member for Cambridge will be keen to engage with that discussion. We recognise that farmers and land managers need certainty, which is why we have committed to a seven-year transition. During that time, we will free up money so that we can continue to offer an improved country stewardship scheme.

We are already working closely with the devolved Administrations to find approaches to the framework to co-ordinate agricultural support after 2022. We will at this point be using the money in slightly different ways—but all to the benefit of farmers. Rural development projects, through which we will channel the money in England, can of course include funding for hedgerows, which are critical to the way in which we feel ELMS will probably develop in the next few years. It would be wrong to say that that money is being sent elsewhere. It will be used for the benefit of English farming.

Farmers need stability, certainty and a smooth transition, so we will not switch off direct payments overnight. During the transition period, we will offer financial assistance to enable growers to invest in their equipment, technology and infrastructure; to improve their productivity; to manage the environment sustainably; and to deliver other public goods.

The statutory instruments make the necessary amendments to enable the Government and devolved Administrations to pay 2020 direct payments to farmers in line with the approach taken in previous years.

Question put and agreed to.

Direct Payments to Farmers (Amendment) Regulations 2020

Resolved,

That the Committee has considered the Direct Payments to Farmers (Amendment) Regulations 2020 (S.I. 2020, No. 576).—(Victoria Prentis.)

Committee rose.