Considered in Grand Committee
My Lords, I declare my farming interests as set out in the register. The matters in these instruments are closely related, as they are the first produced using the powers of the Agriculture Act 2020. They lay the groundwork for our new agricultural policy.
First, the Agriculture and Horticulture Development Board (Amendment) Order 2020 assigns additional functions to the Agriculture and Horticulture Development Board, or AHDB, enabling it to run the new livestock information service—LIS—effectively. The LIS will operate in England, while the AHDB will be able to collect, manage and make available information regarding the identification, movement and health of animals, and to allocate unique identification codes for the means of identifying animals.
Livestock are currently identified through three separate livestock traceability services: one for cattle, one covering sheep and goats, and one for pigs. As existing systems are species-specific, keepers with more than one species of livestock must switch between databases. The LIS replaces these separate systems with a single multi-species system. The existing sheep service in England is expected to transition to the new arrangements in spring 2021. Cattle and pig services are due to transition in 2022. The service will be more cost-effective and user-friendly; it will allow faster, more accurate livestock traceability, enabling us to manage disease and protect human health better, giving confidence to trading partners. The LIS will use cloud-based IT infrastructure, ensuring that the system has capacity to scale up response when user demand is high.
Although the LIS operates in England, an important part of the service is working with the devolved Administrations to ensure that we can share data, allowing seamless livestock movement and traceability throughout the UK. Defra and the devolved Administrations will enter into an agreement to control and share data. Each territory’s traceability systems will be able to communicate with each other, supporting day-to-day business operations such as cross-border moves. This is called the UK view. The ability for veterinary officials across the UK to be able to access the UK view is essential to ensuring a rapid, targeted response in disease-control situations.
The AHDB will also run a unique number identification service on behalf of England and Wales, controlling the issuing of official individual identification numbers to animals. The new system will also allow for value-added services where submitted data can be used to generate information in wider areas, such as livestock productivity and disease management.
The Direct Payments to Farmers (England) (Amendment) Regulations 2020 amend and update direct payments legislation as it applies in England. The legislation governing direct payment schemes contains financial ceilings to calculate direct payments to farmers. However, it only includes financial ceilings up to and including the 2020 claim year. This instrument specifies how the Secretary of State will set financial ceilings for England beyond 2020. Once these provisions on financial ceilings have come into force, 2021 ceilings for England can be set. This will be done by the end of this year. Ceilings for future years will be equivalent to England’s share of the 2020 UK national ceiling. This is because the ceilings are the starting point for payment calculations, before any reductions are applied to payments to phase them out.
The regulations also make minor changes to ensure that schemes continue to work effectively in England beyond 2020. This includes replacing dates specific to the 2020 scheme year with equivalent dates that are not year specific. The regulations also remove rules that are not applied in England, such as those relating to voluntary coupled support, which is operated in Scotland.
No substantive policy changes are made by these regulations. They ensure that direct payment schemes in England can continue beyond the end of the 2020 scheme and are largely technical. The Government remain committed to beginning to phase out direct payments from 2021 as part of their ambitious agricultural reforms in England. We will bring forward a separate instrument to apply reductions to the payments so that we can phase them out over a seven-year transition period. Devolved Administrations plan to make their own legislation in relation to their direct payment schemes.
The World Trade Organisation Agreement on Agriculture (Domestic Support) Regulations 2020 are UK-wide. The instrument ensures that after the end of the transition period, the UK continues to comply with its international obligations under the WTO Agreement on Agriculture in relation to classification and notification of domestic support and its commitment to reduce its aggregate measurement of support. Compliance with the agreement was previously managed by the EU on the UK’s behalf. This instrument is limited in scope to ensuring continued compliance with the agreement. This is a reserved issue because individual nations of the UK do not have legislative competence to act in these matters for other parts of the UK.
The Agreement on Agriculture divides domestic support into “green box”, “blue box” or “amber box”, depending on the potential to distort trade. Under the agreement, each country must limit the amount of trade-distorting amber box domestic support given to agricultural producers. The UK’s overall amber box spending limit remains unchanged after EU exit. These regulations specify the amounts of amber box payments that may be given in each UK nation. Limits have been set, following consultation with devolved Administrations, at a level not constraining policy choices, meaning that there will be no impact on farmers.
The regulations also outline the procedure for classifying such schemes and permit the Secretary of State to request information from devolved Administrations where needed to enable the UK to satisfy Agreement on Agriculture obligations. The regulations outline the transparent and objective process by which UK constituent nations will share information on proposed support schemes in order to establish their classification and ensure timely and accurate notification of domestic support to the WTO.
These instruments implement provisions provided for by the Agriculture Act 2020 and I beg to move.
My Lords, I declare an interest as the owner of 40 acres of woodland registered with the Forestry Commission, the owner of a small vineyard of 100 vines and a member of the winegrowers’ association.
I want to focus on the Agriculture and Horticulture Development Board regulations. It is not immediately obvious from paragraph 7.1 of the Explanatory Memorandum what horticulture is doing here. Is there an equivalent measure for horticulture to the statements made about animal movement? Where does the arboreal dimension fit into this? Does the instrument cover poultry? Poultry is not mentioned. Does it cover bees? Both are important parts of livestock more broadly for people in the UK.
I do not yet read anywhere that we are picking up the opportunity that this country has with horticulture. One way or the other, things will change in a few weeks. We know the history of horticulture in the UK. We have lost out to Holland, principally because of the cost of energy. You only have to drive round Bedfordshire and associated counties that were big in horticulture to notice a substantial reduction. There is a huge, once-in-a-lifetime opportunity for import substitution, so that we can see better performance from horticulture and pick up on the development work that was being done and may still be done on fruit trees and fruit bushes, as well as vegetables in general—all geared up to import substitution. While I am not clear where the horticulture sector is outlined in the document, it seems relevant, as horticulture is mentioned in the title.
The document talks about the Scottish Government and the Department of Agriculture, Environment and Rural Affairs. Having been deeply involved in the internal market Bill and the challenges for liaison between the centre and the devolved Governments, I would like to know what happens if the Scottish Government or the Northern Irish department of agriculture decide to disagree with the centre on their own unique identification codes. Is there a mechanism whereby difficulties in this area can be put to rest?
Broadly in this area, the department has put out a helpful leaflet. I refer in particular to the annexe summary of new schemes on page 22, which I studied over the weekend. On the Forestry Commission incentives, applications are apparently open all year. Are these the existing ones, which have been going for a long time? The leaflet says that they start in 2020. As a registered owner, I am not aware of having received any communication from the Forestry Commission about new incentives.
The tree health pilot, which the Minister has mentioned before, is important because of the problems with ash and elm. It starts in October next year. When will this be communicated fully? Are we sticking to April 2021, as the document says? On the tree health scheme, which is also important, I see that further information is not expected until 2024. It is difficult to understand why the delay should be so long.
The World Trade Organization regulations are important. There is not a lot to ask other than to pick up on one point. We are a founding member of the WTO, which I hope is to our benefit. On paragraph 6.1, what has been the reaction from the devolved assemblies to the amber box support? If there is a difference of opinion, who will make the decision? It is not entirely clear from the document. Finally, I would be grateful for an explanation in more depth of paragraph 6.4, which also refers to disagreements. That is all I want to say. I do not want to make any reference to the direct payments.
I call the next speaker, the noble Lord, Lord Bhatia. Oh, Lord Bhatia, we cannot hear you. We will go to the next speaker and try to come back to you if we possibly can. I call the noble Baroness, Lady Bakewell of Hardington Mandeville.
My Lords, I thank the Minister for his introduction to these three statutory instruments and apologise for missing the briefing which he so kindly provided. The Agriculture and Horticulture Development Board (Amendment) Order 2020 is very short and concise. It moves the functions of identification, movement and health of animals and allocating identification codes from the AHDB to a new livestock information service, the LIS.
It is essential that animals should be able to move around and be accurately tracked. The LIS will make it much easier to track animals as they will all be on one database, instead of three separate databases under the current AHDB. However, if there are 165,000 keepers of farmed livestock and nearly 60,000 keep more than one species, that is a lot of livestock being combined from three databases into one. Has this database been fully tested? In other words: does it work? While it is extremely advantageous for farmers to visit only one database to look at their cattle, pigs and sheep instead of one for each species, it will be necessary that the computer systems work. Is Livestock Information Ltd a private company, or does it operate under the auspices of Defra? Track and trace for animals is vital to prevent disease outbreaks and controlling disease once outbreaks have occurred. Like so many things in life, if the computer system fails then chaos results. I would be grateful for the Minister’s reassurance on this point.
The Direct Payments to Farmers (England) (Amendment) Regulations 2020 ensure that farmers will receive their direct payments from January 2021 and set out financial ceilings used to calculate farmers’ direct payments. However, I could find no information on what these ceilings were in the actual instrument. As with a lot of statutory instruments, unless you have the original legislation in front of you it is very difficult to interpret what is proposed. The devolved Administrations have their own legislation which deals with these issues, so this SI relates solely to England. Can the Minister say whether after January 2021 all four Administrations, including England, will pay their farmers at the same rate for the same activities? If not, I foresee difficulties with cross-border trade.
The direct payment covers basic payments, greening payments and young farmer payments. It is my understanding that the direct payments are on a sliding scale and reduce over the period of the transition from CAP to ELMS, but there is no mention of this in the instrument, which states that the seven-year transition information is not covered in this SI. Where will this sliding scale of support under the withdrawal from direct payments be covered?
The Government have committed to maintain the same financial support for farmers as they previously enjoyed, at £1.8 billion annually. I am pleased to note that in future payments will not be made in euros, so farmers will not be subject to the vagaries of exchange rates. However, in paragraph 7.7 of the Explanatory Memorandum, the text states that the SI
“removes the need for recipients of Direct Payments to meet ‘active farmer’ requirements”.
What is meant by “active farmer”? Does this mean that an inactive farmer—one who no longer manages land or livestock—will receive a direct payment?
The World Trade Organisation Agreement on Agriculture (Domestic Support) Regulations 2020 ensure that the UK continues to comply with its obligations under the WTO Agreement on Agriculture, the AoA. This ensures reductions in its aggregate measurement of support, a key measure used by the WTO to assess domestic support for agricultural commodities. This SI also deals with UK obligations on “amber box” payments with trade-distorting effects, to which the Minister has referred. Defra says that this instrument specifies the amounts of amber box payments that may be given in each country of the UK; they are limited under the AoA, and the aim is to reduce them over time. The Secondary Legislation and Scrutiny Committee has published a paragraph on this instrument, which allows for each UK Administration to design and implement their own agricultural support schemes within an amber box spending envelope set by this instrument.
I would like to ask the Minister about the limits of support at Paragraph 4 of the instrument, which refers to how the total sum is calculated but does not give any indication of what the total will be. However, it states that England will get 49.2%, Northern Ireland 7.49%, Scotland 12.6%, and Wales 6.83%. This does not include the reserve. Are these percentages permanent or will they change each year? I assume these percentages are for the year 2021, but can the Minister please confirm?
The instrument also indicated that spending from the reserve may be used on amber box domestic support in a Crown dependency. Does this include all Crown dependencies or only some? I look forward to the Minister’s response to my questions and those of other noble Lords taking part in this debate.
My Lords, after the noble Baroness, Lady Jones of Whitchurch, I shall call the noble Lord, Lord Bhatia, to speak.
My Lords, I thank the Minister for his introduction to these SIs and the helpful briefing beforehand. I shall deal with the SI on the Agriculture and Horticulture Development Board first.
It obviously makes sense to have a streamlined and digitalised system for recording the movement of animals around the UK. This is crucial to manage and control any outbreak of disease or the spread of invasive pests. We know from painful experiences of the past the devastation that diseases such as foot and mouth can cause. That can be exacerbated by the movement of animals around the country. On the face of it, setting up a separate body in England to provide a multi-species traceability system will be a welcome and progressive move, and I note that it is broadly supported by the stakeholder organisations and devolved Administrations that were consulted. However, I just have a few questions about the status and operation of the livestock information service being established as a subsidiary of the AHDB.
The estimated cost of delivering the new service is £32 million over three years, and the net benefit over 10 years is estimated to be £30 million. However, as it is a limited company, does this mean that it will also be a for-profit company? Will it have directors, and to whom will they report? Farmers currently pay a levy to use the ADHB service. Will they have to pay for the new LIS service, and how do the anticipated charges for farmers compare to the current costs?
If the new service is intended to begin in spring next year, can I echo the question asked by the noble Baroness, Lady Bakewell, about the state of the new IT system? Is it already functioning and has it been properly stress-tested? Has it been tested to deal with the quantity of data to which she referred? Will the existing and the new systems run in parallel for a period of time, or is it proposed to have a D-day switch from one to the other? If there subsequently prove to be errors in the data collection, who will be responsible? There could be catastrophic results, if that was the case.
I also ask about the devolved implications. This is an England-only scheme. As the EM points out, Scotland and Northern Ireland intend to operate their own schemes, issuing identification numbers for animals that would allow them to be traced. Are they all proposing their own digital services and, if so, will they be compatible with the English version? Will the data generated be shared across the four devolved nations? Obviously, animals can and do move across the borders quite frequently. Is it proposed that the English data system will be able to identify and track the unique identification codes issued by the devolved nations?
Turning to the second SI on direct payments to farmers, the Minister will know that when we were dealing with the direct payments to farmers Bill earlier this year, I and others pressed him on why that Bill had a sunset clause which allowed for the extension of the basic farm payment scheme for one year only. The Minister’s response at the time was that the provisions of the Agriculture Bill would then kick in. But I said then that we would need some persuading that the transitional arrangements envisaged in the Agriculture Bill would be ready to be implemented on 1 January next year—and so it has come to pass.
Since the SI was published, we have seen the Government’s plan for sustainable farming announced this week. It confirms a cut of 5% in the direct payments next year, with further cuts thereafter, so when will we see a separate set of regulations confirming the cuts in these payments? Will it be necessary before the end of the year? Has Defra undertaken an impact assessment on the impact on different sectors and farm sizes? What financial support will be made available for farmers whose livelihoods are threatened by these proposals? These proposals are for England only, so has Defra done an assessment of the impact of different levels of farm subsidies being paid across the four devolved nations and the consequences for prices and the internal market of any divergence from a standard set of prices?
Finally, I will just say a few words on the WTO SI. Again, these have significant implications for relations with the devolved nations, as we discussed during consideration of the Agriculture Bill. At that time, there were concerns that the Bill gave the Secretary of State too much power to decide how farm support payments anywhere in the UK should be classified in relation to WTO rules and to set limits on those payments.
The EM says that these regulations were drafted in consultation with the devolved Administrations and that the majority of their comments were accommodated. Can the Minister say a little more about the nature of these discussions and what areas of dispute remain with the devolved Administrations? Paragraph 6 of the EM says that any devolved nation which wants to make changes to a scheme must notify the others. But what happens if another devolved nation is unhappy with these actions, and what would be the consequences if it followed that through?
I look forward to the Minister’s response to these questions.
This SI has been prepared by the Department for Environment, Food and Rural Affairs. It amends the Agriculture and Horticulture Development Board Order 2008 to assign additional functions to that board. These functions relate to collecting, managing and making available information regarding the identification, movement and health of animals and allocating unique identification codes to the means of identifying animals. This would provide a multi-species traceability system in England and facilitate the tracing of livestock movements across the UK.
The department has established a subsidiary company named Livestock Information Ltd. This company will be accountable to Defra. The company will provide services to six agricultural and horticultural sectors, including the beef, sheep and pig industries in England and the milk industry in Great Britain. Of the 165,000 people who farm livestock today, only 60,000 keep more than one species. The nature of this industry is such that the livestock move across the UK, and this service will provide a unique number for each animal, which will ensure disease management.
Food standards are extremely important, and this regulation will ensure that food quality is monitored on an ongoing basis. There has been a press report recently which said that science has now produced a man-made product that does not require animals, thereby having an impact on this industry. Can the Minister give some information on whether the department is making an impact assessment of this new product, as it is likely to affect the whole industry, thereby making thousands of people redundant?
My Lords, I thank all noble Lords for contributing to this debate. I think we all regret that my noble friend Lord Naseby was not in the earlier consideration debate on plant health and plant products. I agree with him that there is considerable opportunity for growing in Britain. What I would say is that this particular instrument relates to adding further functions for the AHDB, but of course the AHDB currently serves six agricultural and horticultural sectors. From that point of view, today’s work is about the livestock information service specifically. Bees and poultry are not engaged in this order, and in fact the existing AHDB order does not include bees or poultry.
I turn to some of the questions, particularly on the governance structure. The noble Baronesses, Lady Jones of Whitchurch and Lady Bakewell of Hardington Mandeville, raised this. The LIS will be run by Livestock Information Ltd—LI Ltd—a subsidiary body of the AHDB. LI Ltd is wholly separate from AHDB levy schemes, and it is not funded by them. LI Ltd is a not-for-profit company, limited by guarantee by the AHDB and Defra. It will not charge fees to keepers for providing livestock traceability services. Movement reporting is a statutory requirement, and the service will be fully paid for by Defra, as existing services are now. LI Ltd may in the future charge for offering value-added services above and beyond statutory requirements. Any such services would be agreed with industry. It could thus include services which could help reduce or eradicate endemic disease.
I absolutely understand the point the noble Baronesses made about a new system and its readiness. The underpinning information technology has been in development over a longer time period ahead of the new company launching in October 2019. Defra receives regular updates, and LI Ltd is currently on track to lead with live services in spring 2021. Defra actively monitors delivery and would not decommission existing traceability services until the new one was ready. Indeed, I say to both noble Baronesses that the transition to the new service will be incremental, so there will be periods with old and new systems running. All changes will be carefully managed so that keepers will have to enter their data only once; in other words, a pragmatic solution.
My noble friend Lord Naseby and the noble Baroness, Lady Jones of Whitchurch, asked about the separation of traceability services for each Administration, and I absolutely agree: they need to be compatible, and I confirm that this is the case. Any livestock movement between UK nations should allow the full continuity of traceability. Defra is working closely with devolved Administrations and data-sharing agreements will govern information moving with the animals.
I turn to the direct payment instrument. The noble Baroness, Lady Jones of Whitchurch, asked about the direct payment legislation, the 2020 scheme and the earlier legislation. Indeed, the Direct Payments to Farmers (Legislative Continuity) Act 2020 provided continuity of payments for the 2020 scheme year. The Act was focused on providing direct payments for farmers as the UK left the EU, not on extending the scope of the regulations beyond 2020. This instrument uses powers in the Agriculture Act 2020, always designed as the vehicle for our agricultural reforms, including making substantive amendments to retained EU law. That allowed post-2020 changes, including the power to extend direct payments beyond 2020, to be debated together. To those who asked whether we will need new statutory instruments for direct payments each year, I say that the changes made via this instrument are not specific to 2021. It will not be necessary to lay further instruments to continue existing direct payment schemes for future years.
The noble Baroness, Lady Bakewell, and other noble Lords asked about the reductions in 2021 and thereafter. We intend to legislate for the reductions to 2021 direct payments in an affirmative statutory instrument early next year. Simplifications to the scheme will be made through a separate statutory instrument that was laid on 1 December.
The EU rules on active farmers have not been applied in England since 2017. They were thought to have added burdens and caused confusion for farmers. This statutory instrument does not change the requirement that you must be a farmer in order to claim direct payments.
Forgive me for being so punctilious about the impact assessment, but this statutory instrument allows existing direct payment schemes in England to continue beyond 2020. An impact assessment of this instrument is not necessary as the instrument does not introduce changes for farmers, make policy changes or set reductions for phasing out the payments for agricultural transition. I will take questions on this in a separate statutory instrument debate, but it is important to say it here.
The noble Baroness, Lady Jones, also asked about the UK internal market. We all know that agriculture is devolved. The approach to direct payments in each UK nation is a matter for each Administration. Direct payments are largely decoupled from production and should not, therefore, distort trade. There are already significant differences in the implementation of direct payment schemes within the United Kingdom.
On the WTO instrument, the noble Baroness, Lady Jones of Whitchurch, and my noble friend Lord Naseby asked about disputes between any of the UK nations. These regulations set out a transparent and objective decision-making process for classifying schemes according to WTO definitions. The devolved Administrations will be able to design their own policies and schemes, propose WTO classifications for these schemes and provide evidence in support of the proposed classifications. All four UK Administrations will then discuss their proposed support schemes and how to reach agreement on their classification according to WTO criteria before they are introduced. The provisions allow for a dispute resolution process, but this would be used only in the unlikely event that agreement could not be reached on classification of a new and amended domestic support scheme. If agreement cannot be reached there is provision for the Secretary of State to make the final decision. I should emphasise that it is expected that the vast majority of issues will be agreed. The objective is that any disputes should be resolved through discussion and collaboration between the four Administrations.
The noble Baroness, Lady Bakewell, asked how limits are calculated. The “amber box” limits are equivalent to the average annual level of all domestic support—green, blue and amber—given to agricultural producers in England, Wales, Scotland and Northern Ireland between 2014 and 2017. The amber box limits therefore accommodate current levels of green, blue and amber box support, meaning that policy choices in England, Wales, Scotland and Northern Ireland are not constrained. The limits are expressed as a percentage of the current UK aggregate measurement of support, as set out in the UK goods schedule at the WTO.
The noble Baroness, Lady Bakewell, also asked about direct payments. The English share of the UK direct payments financial ceiling is €2.07 billion, which equates to £1.8 billion and will be used as the basis for setting the direct payment financial ceiling in future years. Since agriculture is devolved, it will be up to each devolved Administration to determine their own approach to the direct payment schemes.
I will look at Hansard in case there are other points which I have missed. The noble Lord, Lord Bhatia, made one or two other remarks to which I shall attend. In the meantime, these instruments are worthy of your Lordships’ support. I beg to move.