Skip to main content

England Rural Development Programme (Closure of Project-Based Schemes) Regulations 2006

Volume 686: debated on Monday 6 November 2006

rose tomove, That the Grand Committee do report to the House that it has considered the England Rural Development Programme (Closure of Project-Based Schemes) Regulations 2006 [45th Report from the Merits Committee.]

The noble Baroness said: I start by thanking members of the Merits Committee, which, in its 45th report, as always, made a splendid job of highlighting the effect of regulations and drawing the House’s attention to things that it thinks are particularly worrying. In this report, they talk about the continuing uncertainty of the start date for funding under the new rural development programme following the closure of the old programme through these regulations. They say that the new funding may well not come on stream until significantly beyond January 2007. The reason for bringing forward a debate on these regulations is to reinforce the committee’s worries about the timescale, and I seek to draw those out in the hope that the Minister may be able to allay our fears. If not, I want at least to put on the record some of the issues.

Rural development is taking three blows at the moment, two of which affect England only and one of which is UK-wide. The first is the £22 million sucked out of the rural economy this year by the delay in Rural Payments Agency payments to farmers. We have debated that issue before and no doubt we will do so again. At best, it has created a climate of uncertainty and, at worst, it has caused hardship across swathes of England, but I shall not dwell on that today. The second blow is the regulation which will bring to a close four rural development programmes. The closure of these schemes is the result of a new rural development programme due to start in 2007 and run until 2013. The third blow was announced by the Government in a Written Statement on 1 November. The rural development programme for 2007 will in practice be delayed for so long that it is unlikely to start before 2008, despite the fact that the regulations we are considering this evening will result in the closure of the old schemes. For rural areas, that will mean that vast numbers of projects important both to the economy and the environment will be put on hold.

The new rural development programme, when it finally does start, will move from being delivered by Defra as part of the Rural Enterprise Scheme to being delivered by the regional development agencies. This is what was suggested by the noble Lord, Lord Haskins, and we supported the streamlining of such delivery, but I am sure the Minister is aware that delivery by the regional development agencies of their own schemes, known as Rural Renaissance, has proved—particularly in the south-west—to be such a nightmare of appraisal boards and more boards appraising those appraisal boards that almost no new projects have started up since 2003. My question to the Minister is: what lessons has Defra learnt, especially given the RPA débâcle and the reallocation of payments, about making the switch from the Rural Enterprise Scheme within Defra to schemes administered by the regional development agencies?

I turn now to the four schemes being closed under these regulations. The first is the Rural Enterprise Scheme, which is perhaps the most important. It is a myriad of small, valuable projects that help to introduce innovation and diversification in order to aid the economy and the environment. I shall briefly run through a list from Defra’s own website of what is involved: agricultural water resources management—projects aimed at improving the management of water resources, which, as the House will be aware, we debated recently as a matter of great importance; and protection of the environment in connection with agriculture, forestry and landscape—I believe these are equally important and the Government have said as much several times. The Rural Enterprise Scheme also covers basic services for the rural economy and population, including out-of-school childcare projects, information and technology links and all sorts of other infrastructure developments for dispersed rural communities, all of which are essential for rural development. The list also sets out a number of other things, including the marketing of quality agricultural products, the renovation and development of villages, the protection and conservation of our rural heritage, diversification of agricultural activities, the development and improvement of infrastructure connected with the development of agriculture, and encouragement for tourism and craft activities. That embraces pretty much everything that is important to rural development, to jobs and to the environment.

That is the first scheme that is closing. The second is the vocational training scheme, which updates skills in agriculture and hopes also to give skills to people who want to diversify out of those and expand their skills base. Again this is extremely important, particularly for remoter rural areas where access to mainstream training may be very difficult to access.

The third scheme is the processing and marketing grant, which covers all the sorts of things that might come into localising food chains—something that is now dear to the Government’s heart. I declare an interest as chairman of Somerset Food Links. The grant includes adding value to agricultural products and, I believe, meeting the public procurement goals for food falls into this category. It is the sort of work that will help the Government to achieve the increased purchase of local food for consumption that is now very much part of the school meals agenda.

Fourthly, the energy crops scheme encourages the planting of miscanthus and short rotation croppice. It is particularly depressing that, even though co-firing with biomass has been shown to be one of the most effective routes now available for carbon reduction, the scheme was closed to new entrants a month before the Stern report was published. So one of the few schemes that are actually producing some carbon-cutting results has been closed.

All the above schemes have just closed and there will be no new projects. My question is: for how long? Will this just be a blip or is it a yawning great hole? My fear is that it is the latter. There will effectively be no programme for rural development next year. Rural development is off for 2007 because, in December 2005, Tony Blair agreed a budget that left it the under-funded poor relation of the EU Budget. Effectively, rural areas paid the price for an agreed EU budget, but no one decided exactly what price that would be.

CAP reform was, of course, a worthy goal and is rightly moving in a direction from direct reduction subsidy to environmental and development schemes, but the EU has yet to decide exactly the size and shape of the new programme. That depends on how much the receipts are and at what level modulation is set. That raises two matters: the amount of money likely to be available and the timescale. Historically the UK—and this goes back to the Conservative Government, who did not invest in rural areas at all in the way they should have done—has spent a pitiful amount on rural development. The new programme is based on that historical spend.

Although rural areas may have 8 per cent of the population, we will only get 3.5 per cent of the funds. That has been confirmed at about £1.3 billion over the period I have specified. However, that allocation does not include any domestic matched funding, voluntary modulation receipts or state-aided funded elements. So far the Government have made no commitment to match-fund the modulated amount. When will the Minister be in a position to make an announcement about that? Until the Government at least make an announcement, it will be impossible for people in rural areas to make plans on any basis of financial certainty. Not only are we waiting for the decisions from Brussels that were the subject of the Statement on 1 November, but we are also waiting for the Government to make up their minds on what they will match-fund, and how much.

When is the earliest possible date that rural development programmes could start again? The Government’s Statement on 1 November says it is unlikely to be concluded before spring 2007. The UK Government say that, until the regulation is in place, they cannot submit a UK programme to Brussels, although we find it hard to see why they cannot submit a draft programme that can be rubber stamped after that, which would at least gain several months. When the regulation is in place, the UK Government will need time to finalise the UK programme; say, at least two months—eight weeks—if they work really quickly. That takes us to June 2007, if all goes smoothly. Once the programme is submitted, the Government say that it will be at least six months until it is approved, so there we are: that is at the end of 2007, if everything goes really smoothly.

It is unlikely, therefore, that anything will happen for new rural development schemes before 2008. We in rural areas do not have time to stall in this way. It is much harder to get something started again once it has stalled. The entire rural development programme is at great risk. It needs the Government to put all their effort behind it. These regulations give us the opportunity to debate the issue.

Finally, I must refer to the correctness of the remarks of the noble Lord, Lord Wakeham, that other people were interested in taking part in this debate but did not realise that they had to put their names down because it was taking place in the Moses Room. He raised an important point, because several other people share that thought.

That is fine. In that case, there was some confusion. In the mean time, I look forward to hearing the other contributions, and to the Minister’s reply. I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the England Rural Development Programme (Closure of Project-Based Schemes) Regulation 2006 [45th Report from the Merits Committee].—(Baroness Miller of Chilthorne Domer.)

I apologise to the House if my voice conks out on me. I am grateful to the noble Baroness, Lady Miller of Chilthorne Domer, for raising this important short debate on the order. I think that we are all very disappointed to find ourselves in this situation, and I am sure the Minister himself will reflect that as well. The noble Baroness, Lady Miller, has set out seven issues. I do not propose to repeat them, because she so clearly stated her reasons for raising them. I remind the House of my family farming interest. I also have a close interest in what goes on in the rural countryside.

I shall pick up where the noble Baroness left off. It was indeed last December, I think, when Tony Blair tried to put forward the proposition to EU member states and made the move that we would go down this route ourselves anyway, only to find that the other member states were not going to follow us. That is why we are in this predicament today. I have one or two specific questions to ask the Minister. I follow the noble Baroness: my calculation is that we would be lucky to have anything before the autumn of next year at the earliest, and that is probably being a little ambitious. In the little notes I made, I was querying why the EU had to be further involved in the receipts from voluntary modulation when our country had, rightly or wrongly, decided to go down that route. Are there implications that the UK may have to negotiate over how much money it keeps, or is the amount of money agreed and settled and so will not be challenged?

I pick up on the noble Baroness’s comment about the RDAs being the delivery body. She will remember well that as a party we continue to question the view of the noble Lord, Lord Haskins, that delivery should go through the RDAs. I still have great concerns about that. The RDAs themselves will have priorities within their own areas about how they will spend their funding. My worry was then, and still is now, that in the East Midlands area, for example—thearea I come from—very rural Lincolnshire may well lose out to the bigger conurbations of Derby, Nottingham, Leicester and Northampton. If we go down that route, we need to ensure that they are not jeopardised just because there are fewer voices having a say on the things that are important to that area. It is an old chestnut, but it is still with us.

Does the Minister anticipate further delays in addition to those we already know about? Are there ongoing discussions between the UK Government and the EU on voluntary modulation? To pick up on the noble Baroness’s point, could the Minister tell us more about what has been agreed on domestic matched funding?

The Merits Committee’s excellent report mentions the figure of £1.3 billion for the United Kingdom. The order is only England-based, so I would be grateful if the Minister would break down that figure and tell me how much money is relevant only to England rather than the whole of the United Kingdom.

On the specific and detailed points, what happens to the farms that are cross-border with Wales or Scotland? There have been implications for the single farm payment with regard to cross-border payments. What would happen in those circumstances and how would the Government deal with that?

I know that this point is a little further from the noble Baroness’s direct contribution, but it is about the uplands areas. Will this affect the hill-farming payments which are already either late or have not been paid? The Minister will correct me if I am wrong about that. Will any people who might have looked to some of these schemes find themselves doubly hard done by? That is dreadfully bad English, but I think the Minister will get my drift.

Can we have further clarification with regard to anybody who has proposed a scheme which is not yet in being but which has been accepted into the thinking part of that scheme? Will that definitely not be considered as a possible scheme? I understand that the Government have undertaken to fulfil the agreements that are already in being—from where I am not sure and would be glad of clarification—but that no new schemes will be considered. Existing schemes will be able to go ahead, but in the mean time, will other schemes in the process of going forward be considered or will they have to wait another full year before anything happens? I hope that I am not being too wide of the mark, because I am trying to keep my comments within the restrictions of the order, but will that affect higher-level and entry-level schemes or are they further from what we are considering tonight?

I hope that I have added a little to our discussion. We are grateful to the Minister, as always, for the conscientious way in which he responds to our queries. As he will be aware, however, one thing that has suffered enormously, looking at it purely from the farming side, has been the lack of hope for farmers who are looking to diversify, as some of them know that they have to do, to succeed in going forward. That uncertainty has caused so much distress. Any clarification that we can receive tonight will only be good; even if people fear the worst, at least they know whence they are starting.

Lastly, I move away from agriculture per se and ask the Minister how he sees the effect of these new orders and the gap—it looks like we may have a gap year—on the actual expansion or diversification of rural businesses which might wish to diversify, outside the pure farming businesses. We sometimes try to raise the issue but it falls within rural affairs, which are not always easy to cover. I suspect that some of them will fall within these orders. Again, I seek clarification of some of the questions that I and the noble Baroness have raised this afternoon.

I am grateful for the opportunity to respond. Without causing myself further problems, I must say that this is a sorry tale. While I shall do my best to respond to the detailed questions, I shall not be able to go much beyond the detailed Written Statement we issued on 1 November, at cols. WS14-15 of Hansard.

There will clearly be a delay in the launch of the next rural development programme. We greatly regret that, which is why we issued the Statement last week. The key reason is the budget. We have always stressed that the final shape and size of the England programme depends on the availability of receipts from voluntary modulation. I shall seek to obtain the breakdown of the £1.3 billion that the noble Baroness asked for. That £1.3 billion is the approximate UK allocation for seven years but does not include domestic matched funding, voluntary modulation receipts or state-aided elements. To give a total for the programme budget is currently very hard, but I shall give as much information as possible. The receipts are absolutely essential if we are to achieve our rural development ambitions, such as environmental stewardship.

Our preparations for new programmes are well advanced but, until voluntary modulation negotiations are concluded at European Union level, we cannot reach our own decisions on the total programme. The programme for 2007-13 must be approved by the Commission before we can start. As the noble Baroness will realise from our Statement, the Commission will have up to six months to approve the programmes after formal submission. That means that UK programmes will start late, and I deeply regret that I cannot say when. It is wholly out of my control. In some ways, it is currently out of Defra’s control for the reasons set out in the Statement. That is deeply disappointing to me, the department and the Government as a whole. I am afraid, in this case, the first port of call for farmers, land managers and other rural beneficiaries is Defra. I am not passing the buck to the European Union, but I have little control over what is happening and the delay on this.

We are discussing contingency arrangements with the Commission. The recently adopted transitional regulation gives us legal cover to pay existing commitments under the current programme. So the one thing I can be positive about is that beneficiaries’ agreements under existing programmes will continue to be honoured, notwithstanding the delay. Clearly, some programmes will have a spill-over into 2007, but they will continue to be honoured. Our officials are working closely with the European Commission and delivery bodies to achieve this. In our Statement last week, we have committed to keeping Parliament fully informed.

For the avoidance of doubt, and for those outside who listen to our proceedings: we cannot open the current project-based schemes. That is not a practical proposition. The current England programme will of course close when the EU rural development regulation is repealed on 31 December. There is no legal basis for new agreements under project-base schemes after that date. This was, of course, the consequence of a difficult decision taken much earlier this year, and announced in February, to close new applications for entry to the schemes as of 30 June this year. We wanted to allow sufficient time for applications before the programme closed and get an orderly handover to ongoing commitments. This enabled the Rural Development Service to make some funding decisions on the continuity of service to deliver schemes before Natural England emerged on1 October 2006. The main aim of that transition period was to minimise the risk that customers would be disrupted because of this changeover and to reduce margins of error in administration. I can report to my noble colleagues that the handover appears to have gone well.

The rural development agencies—I note the point the noble Baroness made about them—took responsibility for the legacy project based on schemes from 1 October and are managing the live projects handover. The RDAs authorise the payments and undertake the European Union-required inspections for approximately 1,600 projects across the country. Before the new programmes are agreed, the rural development agencies, plus the regional partners and stakeholders, have to finalise priorities, discuss funding possibilities and work with local action groups. We are working closely with the RDAs on the next programme.

I know there is some underlying criticism of the RDAs—not so much because of their rationale but because when they were first set up they looked very much like urban priority organisations. That is not the case now. As the years have gone by, they have been reaffirmed. The week before last, I met with the chair of the RDA for the east of England, the lead RDA on Defra issues, and I have arranged to meet in January all the members of the RDA boards who hold the rural brief. In fact, I hope to do so in the convivial surroundings of the House of Lords—so there is such a thing as a free dinner, I suppose.

I take this very seriously. While I can see the chairs of the RDAs at any time during their regular six-weekly meetings at the DTI in Victoria Street, I want to see the people who have the responsibility for the rural programme at board level on the RDAs. While I have to leave it to the RDAs to execute the job and the details as and when the programmes arrive—I must not be an interfering Minister—I am not a hands-off Minister. At the end of the day, I am the one who must stand at the Dispatch Box answering questions, not the RDA chairs or chief executives. So, to that extent, I want to reach the people with that responsibility and emphasise that I wish to work in partnership with them but that we want effective action on the rural programme.

The RDAs are working closely together. Indeed, in my travels in the country—limited though they have been in the past few weeks because of the obvious necessity of being London-based—the chief executives a couple of RDAs spoke to me about some of the rural programmes they had been working on outside these particular programmes. They wanted to talk about it because they were keen to assure me that they were seized of the issue. One would have been classed as one of the most urban smokestack RDAs when it was set up. Nevertheless, it is responsible for huge areas of the countryside, including some of the least densely populated county in England. That is important.

The voluntary modulation proposals will allow UK receipts to remain within the UK, which is what we want. That is one of the advantages of the proposals and is why the EU is involved here. I understand that the legal basis for voluntary modulation expires after the single farm payments for 2006 have been made, so we need a new EU regulation. We are currently considering the intra-UK allocations, but in the absence of a voluntary modulation regulation, it is difficult to do that. I hope to provide details in this respect as soon as possible.

At the Royal Show, my right honourable friend the Secretary of State confirmed our intention to run the hill farm allowance in 2007; he made that absolutely clear. We are making every effort to run the schemes as planned and we will publish details of the contingency arrangements as soon as possible. The noble Baroness will also appreciate that we have been consulting on the allowance and further work is going on.

During the past few days I have discussed these issues with stakeholder colleagues from the industry, in particular the NFU, and with colleagues in Defra. I want a satisfactory solution, but what I do not want is unnecessary disruption to hill farmers for a couple of years before something new starts. We will look at the options. I know that there have been a few stories in the farming press, but, nevertheless, our task is to ensure that we pass on maximum aid to hill farmers, perhaps using slightly different arrangements, but with a commitment to keep it for 2007 although it may go on for a little longer to prevent future disruption. We will report back as soon as possible, but I cannot go beyond what I have said at present. I am sorry about that. We want to target areas of need rather than respond to the loudest voices, but I appreciate the difficulties in the hills and how classification means that payments are made at different rates.

Although I know that this is important in terms of the programmes which are the subject of this order, Defra is already putting some £73 million into rural development through the RDAs. These schemes are vital. I have brought with me the glossy leaflets kindly provided during a briefing last week. I have to say that it all looks like a bit too much red tape when you read all the bullet points and rules, but it is public money and we have to be careful of the EU auditors. Nevertheless, as the noble Baroness made clear when she listed them, these are real and practical schemes that are vital to the rural economy. This is a very important issue.

In our response to the Biomass Task Force report, we made clear our principled support for energy crops within the new rural development programme and we will outline this in greater detail as soon as possible. The 2005 farming budget deal, if I can put it that way, was a complicated process. I looked at it from afar, I may add—from across the water in Northern Ireland. At the time the UK held the EU presidency. Sometimes it can be a disadvantage to be in the chair, to put it mildly. You cannot fix things for yourself, you must almost stand aside to win concessions and promote negotiations for the greater good of the club. The deals have to be secured and we did that, but we were not able to fix it for the UK. Holding the presidency means that you have a few fingers tied behind your back—not exactly a whole hand, but there is that difficulty. Ministers in the other place understand this problem when they realise that they cannot deal with constituency arrangements because that would be totally wrong. They have to act ministerially, just as we had to act presidentially.

The provisions for voluntary modulation allow us to top-up spending. I have the impression that virtually every government department is in daily contact with the Treasury on a range of issues. That is not a buck-pass, but certainly that is the case as far as we are concerned. Unlike most departments, we are governed very much by our membership of the Common Agricultural Policy and the EU. That is crucial and the way it should be. Nevertheless, we are in constant touch with the Treasury. Until we know about the voluntary modulation, it is difficult for us to say what will happen about match funding. I much regret that; I am standing up but I am not able to give positive responses to anybody in the countryside except to say that the schemes will arrive. I hope that we will not lose any money; the breakdown of the money has not arrived, so I will have to write to colleagues about that. But because of the delay, although I cannot give the total now, we can see how the pot of money is made up. The delay should not affect the totality, because it could run to several months next year. Once we have agreed voluntary modulation, looked at match funding and talked to our colleagues in the Treasury on those and other matters and then gone back to the EU with a programme, that will take six months.

The Written Statement of 1 November said that, at present,

“the progress of the regulation is stalled in the European Parliament”.—[Official Report, 1/11/06; col. WS 14.]

It is completely outside our control and, in some ways, outside the Commission’s while it is stalled in the European Parliament. I do not know the exact details, but if Euro MPs are worth anything, that is where they should be lobbying. As a UK Minister, I cannot interfere with the European Parliament—that is simply not possible.

The Minister is being very constructive. If, for any reason, the European Parliament says no to us again, have the Government considered changing their mind? At present, we are the only country to go down the voluntary modulation road, and that will be a competitive disadvantage to English farmers. So if the question comes up again and the answer is still no, where do we go from there?

That is a very good question but I will have to come back on it at the time. We have to have some contingency plans, but we hope that that will not happen. We are in constant touch with Brussels. I do not want to be negative, but I will face the situation when it arises. If it does happen, though, I hope it will not be a surprise and that we have a plan B. We want to do it this way and we have to look at other aspects of voluntary modulation for Scotland, Wales and Northern Ireland. It is vital to them. It is a consequence of historical decisions that have been made in the past. We freely admit in this country that we did not spend and prioritise as much in the past on rural programmes, which is the root cause of our losing out on the totality of funds. That was a mistake. Some 25 per cent of the population live in rural areas. They may not work in rural areas and they do not depend on agriculture, but the spin-off for the rural economy is enormous. We are paying the price for past errors, but we must do the best we can to get an early decision and then make sure we can get schemes up and running as soon as possible.

I will write about the detailed issues and the breakdown. It may not be possible; as I said, the figure is £1.3 billion, but I cannot give the breakdown for England. I will write to confirm if that is the case.

I thank the Minister. He has replied with his normal courtesy and frankness to the questions to which he was able to reply. As he said, some of this is completely out of his hands. I very much enjoyed his description of Rural Development Agency projects as live projects. I hope that he will bear that phrase in mind when he sees the members who carry the rural brief from the boards. That was one of the most interesting parts of his reply, and I am very glad that he has taken that initiative.

I hope he will be able to discuss with them the outcomes from projects, as opposed to the tick-box mentality, which has run how they have acted until now. Also, how they allocate projects should be closely tied to rural areas of deprivation—not necessarily where it is easiest to develop projects, but where they need to happen. I refer to some projects that do not necessarily apply to farming but are critical, such as childcare and ICT. They need to consider the hard-to-tackle areas. I congratulate him on the initiative of getting in those board members because, as he rightly says, much responsibility stops with them to bring those issues to the attention of the board.

Given that there will be that hiatus in rural development programming, the other important message must be that, once the funding comes on-stream again, they must be ready to get up and running quickly with the programmes and that staff have not drifted off in other directions and are no longer thinking about rural development. I look forward to further developments on this front.

On Question, Motion agreed to.

The Committee adjourned at twenty-four minutes before seven o'clock.