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Public Bill Committee Debates

Common Agricultural Policy Single Payment and Support Schemes (Cross-compliance) (England) (Amendment) Regulations 2006

The Committee consisted of the following Members:

Chairman: Mr. David Wilshire
Eagle, Angela (Wallasey) (Lab)
Gardiner, Barry (Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs)
Gerrard, Mr. Neil (Walthamstow) (Lab)
Goodman, Helen (Bishop Auckland) (Lab)
Huhne, Chris (Eastleigh) (LD)
Kirkbride, Miss Julie (Bromsgrove) (Con)
Lancaster, Mr. Mark (North-East Milton Keynes) (Con)
Marsden, Mr. Gordon (Blackpool, South) (Lab)
Penrose, John (Weston-super-Mare) (Con)
Prentice, Mr. Gordon (Pendle) (Lab)
Pritchard, Mark (The Wrekin) (Con)
Simon, Mr. Siôn (Birmingham, Erdington) (Lab)
Tipping, Paddy (Sherwood) (Lab)
Vaz, Keith (Leicester, East) (Lab)
Watts, Mr. Dave (Lord Commissioner of Her Majesty's Treasury)
Wiggin, Bill (Leominster) (Con)
Williams, Mr. Roger (Brecon and Radnorshire) (LD)
Emily Commander, David Weir, Committee Clerks
† attended the Committee

Sixth Delegated Legislation Committee

Thursday 8 February 2007

[Mr. David Wilshire in the Chair]

Common Agricultural Policy Single Payment and Support Schemes (Cross-compliance) (England) (Amendment) Regulations 2006

2.30 pm
Bill Wiggin (Leominster) (Con): I beg to move,
That the Committee has considered the Common Agricultural Policy Single Payment and Support Schemes (Cross-compliance) (England) (Amendment) Regulations 2006 (S.I., 2006, No. 3254).
May I say what a pleasure it is to serve under your chairmanship, Mr. Wilshire? The amendments should simplify matters for farmers, not complicate them. The regulations are already restrictive and bureaucratic and, if anything, the amendments would do nothing but make matters worse. With the statutory instrument, the Government had an opportunity to reduce the number of forms that farmers had to fill in and eliminate some of the complexities of the system. However, there is nothing in the amendments to simplify cross-compliance or reduce its bureaucracy.
Instead, the amendments will give the state further powers to micro-manage our farming industry and burden farmers with more red tape. It is misleading to say that cross-compliance requirements just reflect existing law. If a landowner breaks the new welfare of farmed animals regulations and the state veterinary service prosecutes, the SVS will have to convince the Crown Prosecution Service and then a court that the farmer is guilty beyond reasonable doubt and that it is in the public interest that he is convicted.
Under cross-compliance, the state veterinary service has to satisfy itself, as an administrative exercise and without the evidence being tested, that a requirement has been breached. If it does, a proportion of the farmer’s single payment is withheld. There will therefore be a temptation to enforce legislation through cross-compliance rather than through the courts. State officials will now be able to remove anything that they believe to be evidence of non-compliance, with no apparent procedure for appeal.
When the Minister responds to the debate, perhaps he can let the Committee know how farmers can lodge an appeal when they dispute the actions of state officials. Can an authorised person come along without warning, disagree with what the farmer is doing and remove various items? What reasons can an authorised person give for doing so and who will check the position? Under the amendment, an authorised person can “remove anything”. That would include property and animals. What would then become of them?
I am sure that members of the Committee can picture an Environment Agency inspector telling a farmer who has farmed a field since the 1950s that he has prepared his seed bed in the wrong way and that it is too wet. Let us suppose that the old boy loses his temper, as a result of which the spotty youth confiscates his tractor and harrow. The Minister must explain what appeal process he has put in place.
In addition, the amendments would hand over more responsibility to the Environment Agency. Farmers have complained previously that the inspection regime of the Rural Payments Agency was heavy-handedand bureaucratic. Last week in the other place, speaking on behalf of the Government, Baroness Farrington of Ribbleton confirmed that the statutory instrument transfers responsibilities
“from the RPA to the Environment Agency.”—[Official Report, House of Lords, 1 February 2007; Vol. 689, c. 437.]
What possible assurances can the Minister give us that, under the Environment Agency, the inspection regime will be less heavy-handed and bureaucratic?
The Environment Agency will now have the same statutory powers under the changes as the Secretary of State to authorise people to act in matters relating to the regulations, and relevant Council and Commission regulations. Will that mean that the Secretary of State will no longer be responsible or accountable for what happens? What qualifications, if any, will an authorised person need?
In the other place, Baroness Farrington commented that there were times
“where the RPA cannot be trained in highly specialist fields.”—[Official Report, House of Lords, 1 February 2007;Vol. 689, c. 436.]
The RPA currently carries out the majority of inspections, but what guarantees can the Minister give that, in future, inspectors acting on behalf of the RPA, the Environment Agency, the state veterinary service, Natural England or, indeed, any other delegated agency are sufficiently trained?
Under the regulations, the Government will be able to rely on Natural England to carry out the spot checks for cross-compliance. However, the regulations do not give the slightest suggestion of how many visits a farmer can expect each year. I hope that the Minister will take the opportunity to provide us with such information. Furthermore, given that the Chancellor of the Exchequer and the Department for Environment, Food and Rural Affairs are in the process of slashing budgets, can the Minister confirm that extra resources will be available for the extra responsibilities to be carried out by the Environment Agency and Natural England or will they be self-funding?
When carrying out inspections, does the Minister think that it may be more convenient for the inspectors to give farmers warning of their inspection? I ask that because, when on-the-spot inspections are carried out, farmers can end up wasting their time and that of the inspectors by rounding up animals for checks and preparing equipment. Gathering large numbers of cattle to check ear-tag numbers is both hard work and dangerous. A young steer can turn in an adult cattle race, and being hit by an angry bullock can be fatal. Does the Minister consider that it is reasonable to ensure that that type of risk is kept to a minimum?
Moreover, the farmer may not have the staff present at a particular moment to be helpful. Would it not be more practical for all concerned if notice was given at least for the first time that an inspection is carried out, or when the farmer has a good compliance record?
The Minister may also be aware that farmers have deep concerns about the way in which cross-compliance is enforced. Conservative Members, along with the farming community, would argue that it would be more beneficial for inspectors to make greater use of informal warning letters rather than to rush straight in to take penalising measures, so as to allow farmers the time and opportunity to rectify any infringements. Does the Minister agree that penalising the farmer of a herd of 200 animals for a single ear-tag non-compliance offence, when his other records are in order, would be unfair and disproportionate? No one here would dispute the need to punish those who deliberately and regularly flout the rules, but suspected minor breaches should be dealt with in a practical, common-sense manner, and not by excessive bureaucracy and punishment.
Non-compliance will generate a penalty of 1 per cent., which means that a missing ear tag will carry a different fine according to the size of the farm. That is unusual, and it strikes me as being unfair. Every time a cattle tag is deemed missing, the UK has another black mark against its name and record, which will lead to a requirement for another 50 per cent. increase in the number of inspections to be carried out. It will also mean that any fine will be different. A secondary tag would potentially be in use. It would be much more sensible that, for whatever failure of compliance takes place, the fine accords to the crime rather than to the size of a farm.
A 1 per cent. penalty for a 1,000 acre farm would be considerably greater than that for a 50 acre farm, because the single farm payment would be different. We need to look at the way in which the Irish allow for minor and inadvertent infringements. This is perhaps one of the most important questions: who will get to keep the money when a farmer is penalised? Will it go to the European Union or into the clunking fist of the Chancellor? We need to know.
Another example of the bureaucratic growth visible in the regulations relates to the soil protection review, which provides farmers with yet more forms to fill in. The regulatory impact assessment for those regulations, prepared in 2005, stated:
“The Soil Protection Review (SPR) is part of an evolutionary approach to soil management that was agreed with Ministers in 2004 and incorporated within the 2004 RIA. It builds on existing soil management standards. This standard is designed to allow farmers to use their own expertise in identifying appropriate soil protection measures, and is more efficient, less restrictive and less burdensome than setting blanket or prescriptive rules”.
That sounds tremendous and helpful, so well done. However, under the regulations, the Secretary of State will be able to give farmers written directions on how to manage their soil. Will the Minister tell us what kind of advice will be given to farmers, and the basis on which their soils will be classified as poorly managed?
A farmer who has completed a review on or before1 September 2006 must now keep that review available for inspection, so there are not only forms to fill in but they must be filed as well. The modern farmer needs to be a genius, not only at farming, but as an office keeper, secretary, and farm guide, so that he can show yet more inspectors around as they come along. The measure is another example of the intense micro-management that the Government are imposing on farmers. DEFRA seems to be more concerned with creating more boxes for farmers to tick; producing more procedures to hold them back; and fabricating ever-increasing volumes of paperwork and forms for them to fill in morning, noon and night.
Angela Eagle (Wallasey) (Lab): Does the hon. Gentleman not agree that there has to be some reasonable form of control over an industry that claims £3 billion of public subsidy, which is more than all the other industries in the country put together?
Bill Wiggin: I think that the hon. Lady will find that the figure is £1.6 billion, but her point is no less valid. Of course there has to be proper control, but there is a difference between control and micro-management. What we saw—I quoted from it quite helpfully—were the good intentions with which the soil protection review started in 2004. However, the idea that the Secretary of State will write to farmers, giving them written directions on how to manage their soil, strikes me as an exact example of how micro-management goes too far. We need to tag our cattle so that we can have accountability, and we need to make sure that the food is safe as it goes through the food chain, but knocking 1 per cent. off somebody’s income because a cow has pulled its ear tag out, as they do frequently and can do during the course of the inspection, strikes me as overly prescriptive. I hope that that helps the hon. Lady.
Angela Eagle: The hon. Gentleman was complaining about farmers having to file. It seems entirely appropriate in the system of subsidy that there should be a filing cabinet in the odd farm.
Bill Wiggin: There is a difference between filing one’s records and having to show them as part of the procedure. I am not sure that the hon. Lady has read the cross-compliance handbook. It is 140 pages long; it is quite hard to find; and I am sorry that it is not on the table for her to look at today. One of the most extraordinary parts is the requirement to keep records. It does not say for how long, but it says that a 1 per cent. fine will be levied on farmers who do not show the correct form that they filled out and filed away during a spot check.
I think that the hon. Lady would agree that if one of her constituents wanted to see her records, that would be absolutely fine. I am sure that she would have them in her constituency office. However, the fact that she needed to show them on the day the constituent turned up and would lose 1 per cent. of her income if she could not find the file would strike her, as it does me, as unnecessarily bureaucratic. Of course, farmers should file and be able to produce those documents, but the fact that they are going to be penalised 1 per cent., which is not a fixed amount, if they cannot find the particular file is draconian. I am sure that she agrees with me. If she does not, I will give way at any time during the rest of my speech.
The 2007 cross-compliance handbook for England has been issued in three separate tranches and totals a mammoth 140 pages. How did those 140 pages balloon from the mere 13 lines regarding good agricultural and environmental conditions specified in the appropriate European regulations? The 2007 handbook will not be enough, as it states that
“plans are now being made for a full 2008 manual, including a new design and foreword”.
I am sure that that will gladden the hon. Lady’s heart. Will that handbook be larger or smaller than in 2007? Will the regulations be amended again when the 2008 handbook is produced? One cannot help but feel that farmers should be producing our food rather than continually filling in forms and reading through and implementing endless and intrusive regulatory changes imposed by the Government.
The other place’s Merits of Statutory Instruments Committee suggested:
“The House may wish to seek assurances from the Government that the arrangements for cross-compliance in agriculture are being kept under review, and that efforts are being made to purge them of undue complexity”.
However, with the regulations before us, the cross-compliance arrangements become more complicated, more restrictive and more intrusive, and a one-way street. While we are here debating this extraordinary document, 19,000 single farm payment claimants still have disputed claims. Another £15 million has been taken back in 45,551 penalties from a further 19,673 farmers. That is a tidy sum, and we deserve to know where the money went. That income is adding to the paperwork, and it is critical that the Minister confirms that the new team of empowered Environment Agency and Natural England inspectors will not collect more than the £15 million in penalties from our hard-pressed farmers this year.
2.45 pm
Mr. Roger Williams (Brecon and Radnorshire) (LD): Thank you, Mr. Wilshire. It is always a great pleasure to serve under your chairmanship. Some of the amendments are relatively minor, although one or two relating to the power of appropriate people to enter land are a bit draconian.. However, my main complaint is that the regulations add to an already excessive list of requirements that businesses must accommodate. They are additional, and we would like them to be reduced.
The hon. Member for Leominster referred to the 147-page cross-compliance handbook but not the four single payment brochures, which come to 126 pages. Then there is the cross-compliance guidance for management of habitats and landscape features, which my noble Friend Lord Greaves called
“a very good document in many ways”.—[Official Report, House of Lords, 1 February 2007; Vol. 454, c. 427.]
It has 51 pages. There is also the cross-compliance guidance for soil management, which has 40 pages. After that comes the “Set-aside Handbook and Guidance for England, 2006”, which comes to 44 pages, plus another 10 pages for the new set-aside supplement, which comes as a little extra. All in all, that is 500 pages for businesses, many of them single-person businesses, to wade through in order to get some idea how they should be managing their land before they set out to produce anything.
It is that sheer volume and burden of paper that so many people find difficult to accommodate. When people are inspected against those 500 pages, it is hardly surprising that sometimes they have not managed to achieve a perfect resolution of the matters concerned. My noble Friend made the point in the other place that some of the documents should be available to farmers on the internet, and that their production and printing itself causes the destruction of a lot of habitat. The question that he asked and that I ask today is whether, if we must have so much information, it can be made available in a more sustainable and environmentally friendly form.
I asked the Minister how many cross-compliance inspections were undertaken in the 2005 application year. He replied:
“For the 2005 scheme year, 243 full cross-compliance inspections were carried out in England. Of these RPA have applied a financial penalty to 91 Single Payment Scheme (SPS) claimants.
In one case, the full SPS claim was rejected for failing to allow a cross-compliance inspection to take place on the holding.”—[Official Report, 28 November 2006; Vol. 453, c. 494W.]
I am not complaining about that. If somebody enters the scheme, they must make their facilities available. The question is whether they must make them available immediately or whether notice should be given of an inspection. The hon. Member for Leominster made a good point about health and safety. Gathering animals together at short notice is not very helpful in that respect.
The Minister also replied to me when I asked him whether there was a required minimum number of inspections for any member state. He replied:
“European Commission guidance on the percentage of SPS applications which require cross-compliance checks is set out in Article 44 paragraph 1 of Commission Regulation (EC) 796/2004 which states:
‘The competent control authority shall, with regard to the requirements or standards for which it is responsible, carry out checks on at least 1 per cent. of all farmers submitting aid applications.’”—[Official Report, 12 December 2006; Vol. 454,c. 953W.]
It seems to me that England has fallen below EU requirements in this matter. It appears that it should have carried out 1,200 inspections and has in fact carried out only 243. Does the Minister believe that DEFRA will suffer financial penalties from the European Union, and will that result in further cuts to the DEFRA budget and a further lack of finance for other organisations for which it has responsibility?
The other issue is that the 91 penalties amounted to £555,230, which means that the average penalty was more than £4,000. That seems quite a high figure for penalties incurred by what are relatively small businesses. Are the penalties proportionate, given the problems that farmers are having with cross-compliance issues? This was the first year that they had to comply with the scheme and with cross-compliance, and there should have been a little more understanding of the problems and burdens that they were experiencing.
I have already dealt with on-the-spot inspection and health and safety, but are the inspections random, or are they directed at businesses that, in the Department’s experience, do not comply with regulations? Businesses that comply with regulations should be subject to a lighter touch and a lighter burden, and their efforts to comply should be rewarded.
In the next two years, we will come to what is known as the “health check” on the common agricultural policy. I urge the Minister to ensure that regulation is kept to a minimum. I do not disagree with cross-compliance—it is a good system that requires agriculture to become sustainable and environmentally friendly—but surely there is a balance to be struck in what is required and the way that it is expressed to farmers. I hope that the Minister will take the opportunity that the health check offers to consider that and to ensure that other member states have the same burdens imposed on them, and that they comply in the same way.
I would like the Minister’s opinion on a particular issue. On over-grazing and suitable supplementary feeds, the regulations state:
“The Secretary of State may give a farmer written directions concerning the management of land which is, in his opinion, subject to...overgrazing.”
That seems a hugely subjective decision to take. It would be helpful if some criteria were included to give farmers some idea about what over-grazing is and how the Secretary of State will decide, so that they could alter their management to make compliance easier and not be liable to penalties. The same applies to unsuitable supplementary feeding methods.
Bill Wiggin: The hon. Gentleman will be aware that one of the phenomena of modern farming is that people from the Ministry, the Environment Agency or Natural England may turn up and measure the width of the set-aside. If it is not exactly 2 m—let us say that it is 1.9 m—a penalty would be issued. Obviously, on a 20,000-acre farm, that would involve a huge amount of money. On a tiny holding such as mine, it is of no consequence.
Does the hon. Gentleman understand my fear about the Government measuring the length of grass to discern whether over-grazing has taken place? That is something that we do not want them to do. If they could understand that the regulations, by their nature, will bring about such absurdities, they could row back in some way so that we could have environmental benefits without absurd measuring, and everybody would win.
Mr. Williams: The only thing that I would say about the margins on arable fields is that one can actually measure them—they can take an objective view as to whether the farmer is complying. In the case of over-grazing, the regulations refer to the Secretary of State’s opinion. That is the key issue. That seems highly subjective, and more guidance would be helpful.
I urge the Minister to take the opportunity over the next few years, when the CAP is considered again, to take on board my comments and those of the hon. Member for Leominster about the sheer volume of the regulations and to ensure that British farmers do not suffer a different, exaggerated burden from other farmers in other EU nations.
2.56 pm
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Barry Gardiner): It is a great pleasure to serve under your chairmanship, Mr. Wilshire. It is the first time that I have had that privilege. I look forward, in so far as I am able, to responding to the Opposition’s questions.
This amending statutory instrument does not, contrary to what the hon. Member for Leominster said, introduce any new standards. Its key functions are restricted in the following ways. First, it relates to establishing inspection and enforcement arrangements for animal health and welfare statutory management requirements, which we are required to include within cross-compliance from 1 January this year. There is a significant risk attached if we do not enforce those standards. Secondly, it involves making changes to inspection and enforcement arrangements for existing standards to deliver more efficient and better-targeted checks and controls. I understood that he was asking for that, not pleading against it.
Thirdly, the statutory instrument clarifies cross-compliance requirements to provide for unusual circumstances and to give some small additional flexibility to farmers, specifically in connection with soil management requirements from 2007 onwards. I had thought that the hon. Gentleman was asking for that, too, not praying against it. The statutory instrument introduces that greater degree of flexibility. Fourthly, the statutory instrument reflects changes resulting from newly implemented domestic legislation—for example, so that farmers do not have to meet two different standards as a result of recent changes to the law on sites of special scientific interest and as a result of the establishment of Natural England.
Let me reassure the hon. Gentleman and, through him, anyone with a wider stakeholding interest in such matters, that the full intention of the regulations is to make life simpler, not more difficult. Cross-compliance is an EU requirement that all Parliaments must meet to qualify for their single payment. That point was ably made by my hon. Friend the Member for Wallasey. Compliance receives, as the hon. Member for Leominster said, £1.6 billion of public funds. The hon. Member for Brecon and Radnorshire rightly accepted that inspections should take place and should be conducted properly and fairly, because this is about accounting for public money.
Most cross-compliance is existing law or good farming practice—a requirement for farmers entering into agri-environment schemes under the previous rural development regulation. There are two elements with which farmers comply. The first is the statutory management requirements, comprising obligations under a number of articles from 19 new directives and regulations that are, I stress, applicable to all farmers throughout the EU. Those measures are set by the EU and are all existing legal requirements that have been subject to a rolling introduction from 2005, culminating in the introduction of the final three SMRs in 2007. The animal welfare SMRs—16 to 18—for which this statutory instrument appoints the state veterinary service as a competent control authority, cover the welfare of all farm animals and include specific requirements for calves and pigs.
The second element is good agricultural and environmental conditioning, which relates to the protection and maintenance of soils, habitats and landscape features, which member states have limited discretion in setting. Again, however, the majority reflect existing requirements. The regulations do not introduce additional good agricultural and environmental condition requirements, but clarify when new claimants, or those taking on additional land, need to complete a soil protection review, implement it and update it. They also clarify the existing provision for the Secretary of State to give farmers specific guidance and to allow him to give directions where soils are particularly badly managed. We intend that the guidance will be geared to help farmers to understand and deal with problems, especially in cases where it might otherwise be difficult for them to do so unless they possess a high level of soils expertise. I stress that the direction will be used only where soils are particularly badly managed and normally when a farmer has not taken proper account of the Secretary of State’s guidance in the first place.
The intention is to improve the management of soil, which is a vital asset for farmers and for society as a whole. It is the essential growing medium for our food, it helps to clean the water we drink and the air that we breathe, and it contains large hidden reservoirs of biodiversity. Poor management of soil can result in erosion, compaction and loss of soil organic matter. Estimates have suggested that those problems can lead to combined costs of up to £305 million a year to society, through damage to soil structure and fertility and to water courses, increased levels of flooding and, of course, loss of carbon to the atmosphere.
Although the hon. Member for Leominster was quite good humoured and jovial in his remarks about plooky youths—or spotty teenagers, as I think he called them—and flooded fields, I hope that he appreciates that the problem has serious implications because it costs up to£305 million a year if we get it wrong.
Bill Wiggin: What assurances can the Minister give us that the people doing the inspections will have a better understanding than the farmer himself?
Barry Gardiner: I shall happily respond to that in due course. In fact, I hope that I will take account of all the questions about the quality of the standards and procedures in which the inspections will take place a little later.
It has been asked why we introduced a soil protection review. It is a requirement that must be implemented on the ground from 1 January of this year following completion of the plan last September. It will help farmers to think about the management of their soils and, where necessary, to improve that management. The SPR is a template that provides a simple and easy tick-box method of analysing and recording. It necessarily has to offer a wide range of options to reflect the varied farming environments in England. It is designed to meet the needs of all farms, and so not all the sections will be relevant to all farms.
The SPR was developed after consultation with the industry to minimise the work involved and farmers need only complete those sections that are relevant to their holdings. It is backed by detailed guidance on good husbandry. Where necessary, the guidance and directions will be provided by Natural England on behalf of the Secretary of State and in accordance with the cross-compliance guidance on soil management. I hope that that goes some way towards addressing the remarks made by the hon. Member for Brecon and Radnorshire about the potentially subjective nature of the advice that will be given. A service level agreement between the RPA and Natural England has been put in place to ensure that the processes involved in providing guidance will run smoothly and that relevant information is exchanged in a timely manner.
On inspection arrangements, inspections do not just happen when someone turns up at the farm gate;48 hours’ notice is given. Inspections are planned to allow farmers to gather their animals together. The idea was put forward that somehow the first a farmer will hears about an inspection is when someone turns up and knocks on his door, but that is not the case. There is a 48-hour notice period so that the relevant material and documents can be assembled, as well as the animals.
Concerns have been raised about the changes to inspections and the additional competent control authorities. The statutory instrument redefines “authorised persons” to include Environment Agency inspectors. However, the EA has been undertaking inspections of three of the SMRs—ground water, sewage sludge and nitrate vulnerable zones—as an RPA-delegated agent since cross-compliance began in 2005. The EA will now be a competent control authority in its own right, allowing it to integrate inspections with its own domestic programme, leading to efficiency savings and focusing inspections on high-risk locations.
Additions are also made to the list of inspectors’ powers to provide for the enforcement of the new animal welfare statutory management requirements. Powers for inspectors under cross-compliance replicate those under animal welfare legislation. That is necessary so that state veterinary service inspectors can use those powers for a different purpose—for cross-compliance—and where necessary, so that reductions can accordingly be made to SPS payments.
Much has been made of the complexity of standards introduced previously, but I stress that that is not a result of this statutory instrument. Although I have said that many standards are existing law, the requirements are reasonable. They are baseline standards, and are no more than common-sense farming practices. Indeed, some organisations promoting responsible farming have been advocating many of those standards for a number of years. In comparison with some insurance schemes, they are quite light touch. For example, some private sector insurance schemes have many more standards—150-plus in the red tractor horticultural scheme alone.
It is worth noting that the SI also introduces new flexibilities, such as that concerning the post-harvest management of land and removing the requirement to retain soil management guidance. That reduces the burden on farmers without negating any of the environmental gains of cross-compliance.
Bill Wiggin: Does the Minister accept that the difference between the red tractor scheme and this statutory instrument is that if a farmer does not qualify because he does not fulfil the criteria, nobody takes his money away? That is the fundamental difference: this scheme is backed by penalties and will cost farmers at least 1 per cent.—up to 4 per cent.—of their single farm payment. Of course, the farm assurance schemes can be stringent and tough, and it is right that they should be. We have nothing but praise and admiration for the assurance schemes, but this is not an assurance scheme; it is a penalty scheme, which is why it is so fundamentally different.
Barry Gardiner: I must disagree. Assurance schemes are intrinsically linked to income in that many or most of them are run by those to whom farmers wish to sell their produce, and to whose scheme they have to comply in order to get any income whatever. The hon. Gentleman seems repeatedly to be making the mistake of thinking that the farmer’s income is the single payment, but that is one small element of his income. I am sure he would accept that the assurance schemes are there to guarantee that the farmer can sell his produce in the marketplace to which he wants to sell it. Not complying with them has an equal financial penalty, in exactly the same way as the single payment scheme at present.
Bill Wiggin: There is a fundamental mismatch between the two schemes, and it is essential that we are clear on this. If a farmer subscribes to any of the assurance schemes, it is a scheme that he wants to be a part of, and he foresees the criteria and fulfils them. If he does not, he does not qualify for being part of that assurance scheme. The SI is altogether different. Instead of the inspectors qualifying the farmer to continue to be part of the single farm payment scheme, this scheme inflicts a penalty on those who subscribe to it. It is a negative scheme. The Minister laughs, but that is true. It is not even a particularly equitable negative penalty scheme, because if a farmer fails to comply, the size of the penalty depends on the size of his holding. Now—
The Chairman: Order. The intervention is becoming a speech.
Barry Gardiner: Thank you, Mr. Wilshire, for keeping us in order.
Let me make the position absolutely clear. The hon. Gentleman says that we have to take account of the fact that assurance schemes are something that farmers wilfully enter into. It may have escaped his attention that it is exactly the same with the single payment scheme. A farmer does not have to come into the SPS if he does not want to. He comes into it in the full knowledge that there are benefits if he does, in exactly the same way as he goes into an assurance scheme. The difference with an assurance scheme, as the hon. Gentleman rightly points out, is that if somebody comes along and finds that a farmer is not up to scratch, it is not just 1 per cent. of his income that is in danger of disappearing—it could be the lot because he would not be compliant with the requirements of that scheme and would not be able to sell his produce into the market that he had anticipated for it. When it comes to voluntarism, the hon. Gentleman really must understand what is going on.
Questions were raised about whether the inspections were risk-based or not. Farmers are selected for inspection according to risk criteria. However, there is a random element, too, in order to achieve genuine random checking. That comprises about 20 per cent. of the inspection. The hon. Member for Brecon and Radnorshire was right to say that this should be on a risk basis and that those whom the inspectors have reason to believe were not complying on previous occasions, or who for some other reason might be prone to failure, receive a proportionately greater number of checks. That is only right.
I want to nail the common misapprehension that was doing the rounds about a single missing ear tag on an animal resulting in an automatic non-compliance. I stress that missing ear tags do not count as a breach of cross-compliance until 28 days after they have been identified as missing. That gives a very adequate threshold for farmers to replace missing ear tags before they trigger non-compliance. I have no doubt the hon. Member for Leominster has heard some of these myths. On occasion, he should dig into them a little more closely to find out the facts.
Bill Wiggin: Does the Minister believe that it is the case that in 2005 close to 50 per cent. of cattle-keepers were in breach of the cattle identification stipulations in SMR 7 and 8 on cattle identification?
Barry Gardiner: I have no reason to dispute the hon. Gentleman’s figures, but I notice that he did not wish to dispute mine. There are 28 days for a farmer to replace a missing ear tag on one of his stock before a penalty for non-compliance falls into place. That is the issue that we are discussing; not how many farmers did not then comply with those regulations.
Much has been made about the number of pages in the handbook. We can all have fun with statisticsin that way. There are only about 74 pages of requirements, of which the majority refer to the statutory management requirements. That is existing law. It seems that whenever we set out requirements in full, we are criticised for so doing, but had we left them in disparate pamphlets, pages, Bills and so forth, we would equally be accused of presenting farmers with a panoply of confusing documents from different sources which it would be impossible to find one’s way through. The 74 pages are the requirements collected together, in one place. It is a responsible means of saving farmers from having to refer to a wide variety of legal texts and publications.
I wish to impress on the Committee that that has been greatly welcomed by farmers. They have told us that it is a helpful mechanism. In a recent survey, 75 per cent. of farmers said that their knowledge of cross-compliance had improved in 2006 and 70 per cent. found the cross-compliance handbook itself useful. Therefore, while it is always amusing in Committee to bat these things around, the fact that it has been gathered together in one place as an easy reference guide for farmers is helpful, is recognised as such by farmers and, in their own estimation, has improved their understanding.
There were further questions about the money, who keeps the penalties and when they are applied. Some75 per cent. goes to the EU and the Commission and only 25 per cent. to the Treasury. I think that 1,200 farmers, which is 1 per cent. of farmers, are inspected per year—except, perhaps, in respect of cattle—but if that should prove inaccurate, I will obviously write to the Committee to clarify it.
Mr. Williams: The last thing I want to do is incite him to have more inspections but it does seem to me that if DEFRA failed to meet the target then, through no fault of the farming community, inspections are going to increase because the Department will be penalised by the European Union, even so far as disallowance and more financial penalties are concerned.
Barry Gardiner: I understand exactly what the hon. Gentleman is saying and might refer to that in my later remarks.
Bill Wiggin: Of the £15 million that was taken back in the 25,500 penalties from the 19,673 farmers this year, is the hon. Gentleman saying that the 25 per cent. retained by the Treasury does not go to DEFRA, that farmers do not see it recycled in some other form, but that it goes straight to the Treasury?
Barry Gardiner: I shall certainly write to the hon. Gentleman letting him know precisely where all these funds end up. My information is that 75 per cent. goes to the Commission and 25 per cent. goes to the Treasury, but if that should prove inaccurate in any way, I will write to him and correct that.
I turn now to the Committee’s concerns about failures in inspections. In the light of a range of scaremongering reports and often baseless estimates, I am pleased to reassure hon. Members that the cross-compliance inspections show that the majority of farmers are meeting virtually all of the standards. Based on the 2005 cross-compliance inspection figures, and excluding animal identification and movement requirements, less than 15 per cent. had any breaches. The very large majority of these failures are minor and result only in a warning letter or a 1 per cent. deduction.
It is important to stress that this is not a scheme that has a Procrustean approach to the application of penalty; it is one in which there is flexibility if these are deemed to be minor breaches, between 1 and 3 per cent. For more serious infractions, particularly if they are intentional, that figure would go from 20 to 100 per cent. Therefore, it would be wrong to present this as a very firm, unbending and inflexible imposition of penalties. It certainly is not. Many warning letters are given out and many penalties reduced to the 1 per cent. level.
Even with the inclusion of the 2005 animal identification and movement failures, non-compliance has resulted in deductions of less than 0.035 per cent. of the single payment, which is a tiny fraction of the £1.6 billion paid. Payment deductions are largely the result of cattle identification non-compliances, which have been a continuing concern for many years and existed prior to the introduction of cross-compliance.
Bill Wiggin: I may have missed what the Minister said, and I would be grateful for clarification. Did he just say that the tiny percentage that he read out was the amount of money penalised and that the majority of it came from cattle identification failures?
Barry Gardiner: No, I did not say that. I separately gave the percentage figure of deductions from the£1.6 billion—0.035 per cent.—and said that the largest proportion of non-compliances related to cattle identification.
DEFRA has established considerable scope for derogations for justifiable agronomic and environmental reasons, including exemptions for small fields of2 hectares or less. The hon. Member for Leominster asked whether it would make a difference if a zone were only 1.9 m rather than 2 m wide. Given that thatis where 70 per cent. of the biodiversity lies, andbecause of the risk of contamination, it is significant that cross-compliance should mean exactly what is set out.
Bill Wiggin: I do not dispute the Minister’s fundamental point. I cited the example of a huge, 20,000 acre farm incurring a 1 per cent. penalty. That penalty would be a large sum, possibly more than the tractor driver who made the mistake was being paid. Yet if the same mistake were made on a very small holding such as mine, the penalty would be of no consequence at all. Can he think of any other matter on which a penalty is so disproportionate for the same mistake?
Barry Gardiner: The answer is that it is not. The point is surely that the farmer is paid for environmental benefit. The benefit on an extremely large farm with lots of hedgerow is proportionately greater than that for a farmer on a small farm. Therefore, if the hedgerows are at 1.5 m on the large farm, a quarter of that benefit is being lost, just as it would be on a small farm. The farmer is being paid for the benefit; therefore, the penalty is a percentage deduction on what he is being paid for that greater benefit. It seems tremendously logical for that to be the case.
An issue that has recurred in our discussions is why rules differ between set-aside and cross-compliance. We have ensured that cross-compliance and set-aside conditions are closely aligned; in the few circumstances where they overlap, the cross-compliance legislation sets out which takes precedence. Though set-aside conditions generally over-ride cross-compliance, it needs to be borne in mind that the two measures, while complementary, were conceived at different times, for different purposes, and to address different issues, cross-compliance having both an agricultural and environmental remit, while set-aside focused on production control.
DEFRA’s position is that the EU should dispense with set-aside as soon as possible. There are indications that this view will prevail in Europe. Should set-aside continue in the long term, we will look to furtheralign these requirements with cross-compliance, which would require widespread consultation within the farming industry and with other stakeholders. Initial consultations with the industry have shown little appetite for that exercise, with the National Farmers Union and others regarding it as being an insufficient problem to warrant the work involved over theshort period when set-aside is expected to remain in force.
Finally, were this statutory instrument not to be in place then the flexibilities and clarifications that it introduces will be lost. Most importantly, the UK would be at serious risk of disallowance of EC funds for not having appropriate mechanisms in place to administer and enforce the new 2007 animal welfare statutory management requirements, which are mandatory for the single payment scheme. On that basis, I urge the Committee to ensure that the regulations pass into statute as early as possible.
3.27 pm
Bill Wiggin: I am grateful to the Minister for his responses and for the answers that he gave to some questions. The hon. Member for Brecon and Radnorshire made the case clearly by totting up the number of pages to somewhere near 500. I have yet to meet a farmer who said, “You know, the reason I wanted to be a farmer was to spend all of my time in the office, reading pages about cross-complianceand filling out forms.” It is a great shame that, despite the Government’s good intentions, this is the end result.
We have had to find out why this is such an important statutory instrument. Unfortunately, its value is very much lost. A clarifying and simplifying statutory instrument would have been useful, but instead we have layers on top of rules that were already there. There is a fundamental misunderstanding in the Government about the difference between assurance schemes and the single farm payment. There is little that I can do to help the Minister—he has huge numbers of civil servants who will explain the difference for him. I hope he will go away and try to understand why people need to be part of the single farm payment scheme for the capital value oftheir holdings, whereas they may or may not wish to be part of the farm assurance scheme. There aremore significant differences when it comes to the penalties.
There is real unhappiness among the farming community. That is not because farmers do not want to look after the soil, or do not want to comply, or because they have bad intentions in any way. There is unhappiness because most people want to farm, rather than spend their time making sure that they have ticked all the boxes. I am sure that the Minister goes to the countryside from time to time to see how it is. If so, he will understand that a farmer has the best subjective view of the soil. I initially referred to the principles that were laid down in 2004. Unfortunately, I do not think that the statutory instrument covers them.
Barry Gardiner: I recall that in this part of my remarks, I gave way to the hon. Gentleman becausehe wished to assure me that he understood that up to £305 million per annum was lost precisely because of the subjective opinion of the farmer as to how to manage the soil. That is precisely why these regulations are being put in place—to remedy and to ensure that we do not sustain that loss, to our farming, our farms or UK society as a whole.
Bill Wiggin: I must, of course, accept the Minister’s figures. I am not sure that the way he has put it andthe way that the statutory instrument deals with the problem will save us that money—far from it. The complexity may make the matter worse. Looking at my notes, I see he said that if we took the rules and boiled them down, there were only 74 pages of requirements. I find that quite staggering. Obviously one has to bear in mind the fact that the Government have driven agriculture towards this. It is a great shame.
The Minister also tried to clarify the situation on ear tags. What he did not go on to say, when I challenged him with an intervention, was that because of the cattle movement regime and the ear tag problem Britain has had to increase the number of inspections by a further 433. At every stage, any infringement has repercussions for the countryside. It is simply wrong to say that ear tags are not part of the problem.
I loved the bit where the Minister said that this was welcomed by farmers. I have yet to meet one farmer who welcomed cross-compliance issues. Instead, I have found a genuine fear and sense of isolation among my constituents. They want to do the right thing but let us not forget that they have to go through 74 pages to make sure that they get it right. If they do not, they lose a significant proportion of their income. The Minister says, “No, no, that is not how it works.” I would ask him to look at EBLEX’s figures on cattle and sheep. He will see that the subsidy element of a farmer’s income is the difference that allows them to go on farming.
Barry Gardiner: Would the hon. Gentleman care to say what the figures say is the percentage of a farmer’s income?
Bill Wiggin: The figures from EBLEX show the margins on cattle and sheep. They do not say exactly what percentage of the farmer’s income the value of each cow or sheep makes up. That would obviously depend on the individual farmer. What the figures do show is that without the subsidy the beef farmer or shepherd would be losing money. I hope that helps the Minister. If he read his own Department’s paperwork, it would help the Committee, although I understand that, with at least 500 pages, that is very difficult for him to do.
I was most alarmed to find that 25 per cent. of the penalties went to the Treasury. At a time when DEFRA has been in all sorts of budgetary difficulties—let me be no harsher than that—we find that approximately £4 million, according to my poor mathematics, go to the Treasury. That money would have made a big difference to British Waterways, the state veterinary service and various other agencies, which have had to look at their budgets recently.
The Minister talked about warning letters. I was delighted to hear that the Department was issuing warning letters as a first choice. I would like to encourage him to ensure that it proceeds in that way. One of the more insidious parts of today’s procedure is that people who have a penalty of sorts do not necessarily get told about it on the day by the inspector. If the Minister takes something away from the statutory instrument, I hope it will be that inspectors who find a fault should tell the farmer there and then, so that the farmer knows what is wrong, rather than find later that he has been penalised.
I brought a case to the attention of the Minister’s noble Friend Lord Rooker. One of my constituents found that he had lost a significant amount of his single farm payment but, to this day, has no idea why because he was told by the inspector that his farm was fully compliant. There are difficulties there and I think it would be helpful if the Minister continued to presshis Department to ensure that people are told on the spot.
The Minister talked a bit about hedgerows. Again, I do not think that he fully understood our position, so perhaps I could clarify it. In order for a failure of compliance to take place, the measurement must be2 m from the centre of the hedge. I am sure that I have got that right. We understand that the payment is for compliance. He said that the proportionality was right, but I suggest that if 1 per cent. of the farm was out of kilter, that should be the size of the penalty, but that is not how it works. One mistake causes a 1 per cent. penalty, irrespective of the size of the mistake. It does not have to be every field on a huge farm that does not comply—one field will be enough. The proportionality is therefore out of kilter.
Barry Gardiner: Will the hon. Gentleman give way so that I can correct him?
Bill Wiggin: The Minister looks like he has had some help, but I am happy to listen.
Barry Gardiner: What the hon. Gentleman said is unfortunately—well, fortunately—not the case. It is not the case that a single instance of non-compliance would automatically trigger a penalty. In fact, a sample of fields is taken and thresholds are used to determine the penalty, and the margin normally has to be less than 1.5 m before any financial penalty is triggered. The RPA also measures the lengths—trivial distances will be ignored, as in the corner of fields. The penalty is proportionate and is not simply applied if one point of umpteen miles worth of hedgerow falls below the 2 m margin. That would not trigger the penalty. Common sense and proportionality are applied.
We have not had a satisfactory set of answers from the Minister about the complexity of the measures, but that is not because of his ill intentions. The issue is too difficult for the regulations to address. I am sorry that he does not agree with me. I am therefore obliged to vote against the regulations, although we have had a full and helpful discussion, to register my disapproval and that of the Conservative party about the depth of Government intervention in farming. I want farmers freed up from the burden of red tape—to have even74 pages, rather than 500, is unhelpful. I want to make sure that we have proper accountability, but I do not think the regulations go the right way about it. Looking around me, I see it is unlikely that I will win this afternoon, but for the sake of the farmers it is important that we put on the record our unhappiness with the nature of the intervention in British agriculture.
The Chairman: Before I put the question—the rules prevent me from saying anything after a Division—I wish to say that I hope everybody has a safe journey back to their constituencies on an afternoon and evening such as this.
Question put:—
The Committee divided: Ayes 7, Noes 3.
Division No. 1 ]
Gardiner, Barry
Gerrard, Mr. Neil
Goodman, Helen
Prentice, Mr. Gordon
Simon, Mr. Siôn
Tipping, Paddy
Watts, Mr. Dave
Kirkbride, Miss Julie
Lancaster, Mr. Mark
Wiggin, Bill
Question accordingly agreed to.
That the Committee has considered the Common Agricultural Policy Single Payment and Support Schemes (Cross-compliance) (England) (Amendment) Regulations 2006 (S.I. 2006, No. 3254).
Committee rose at twenty minutes to Four o’clock.

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