Agriculture Bill

Written evidence submitted by the NFU (AB20)

Introduction

1. This document forms the NFU’s submission to the Agriculture Public Bill Committee inquiry. The Agriculture Bill is crucially important for the farming sector. It seeks to provide continuity and stability for farmers as we leave the European Union (EU) and its passage will pave the way for a bold and ambitious new approach to domestic agricultural policy that can be designed specifically for the needs, and recognising the unique characteristics, of UK agriculture once we leave the Common Agricultural Policy (CAP).

Backing British Farming

2. The NFU believes that maintaining a robust and resilient domestic agricultural sector is in the nation’s interest and that future agricultural policy must support farmers in their role as producers of food alongside other goods and services. In particular, by maintaining a strong and profitable primary production base in the UK, the nation benefits from:

· A sufficient degree of self-sufficiency. It is a matter of strategic national interest to ensure that our country can feed itself, and a high level of domestic production in a volatile world is a critical aspect of food security. This is the first time in more than 40 years that a Secretary of State has been directly responsible for the nation’s food security.

· A safe and traceable supply of domestic food. Short supply chains and more direct oversight of food safety processes allow greater control of, and trust in, the food we deliver to consumers, meeting a clearly expressed desire for British food by the British public. A reduction in domestic production would also mean greater reliance on imports from other parts of the world, where we have no control over production standards, so exporting and likely increasing our environmental footprint and impact on animal welfare.

· Support for jobs, investment and growth. British farmers and growers are an important part of rural economies, providing jobs and driving growth both in food production and in diversified industries such as renewable energy and tourism. UK agriculture is also the bedrock of a domestic food industry that employs over 3.9m people and, as the UK’s largest manufacturing sector, generates £113bn in value for the UK economy.

· High standards of welfare and environmental goods. Viable farm businesses mean farmers are better able to deliver positive environmental and animal welfare outcomes. Businesses that are struggling financially to survive will find it almost impossible to devote the time and resource to these important elements of our future policy. With agriculture occupying over 70% of the UK landmass, viable farm businesses play an irreplaceable role in looking after our cherished natural landscapes.

The Agriculture Bill

3. The NFU sees the Bill primarily as "enabling" legislation, providing fairly broad powers to current and future governments to provide financial assistance and make other policy interventions around land use and agriculture in the future. This briefing set out how the Bill can be improved to ensure it provides a framework in which government can support farmers as productive and sustainable food producers – with all the accompanying benefits that has for their effectiveness in delivering public goods.

An "agricultural" Agriculture Bill

4. In pursuit of clarity of purpose, there should be explicit and clear overarching agricultural objectives on the face of the Bill – it is after all an Agriculture Bill. The government has stated that it intends to use Brexit to establish a new system of farm support, having criticised financial assistance under the CAP on a number of grounds. Instead, it has said it wants farm support to be provided where farmers deliver public goods, alongside additional measures to improve the productivity and resilience of UK agriculture.

5. The NFU supports this approach, but in order to meet these goals the provisions in the Agriculture Bill must focus specifically on agriculture, underpinning a farming model in the UK that is sustainable, productive and plays an active role in delivering food production and public goods. If non-agricultural objectives are supported, the opportunity to facilitate the development of a sustainable farming model – sustainable both environmentally and economically – will be missed.

6. This is also important for confidence in government policy-making, both for industry and the wider public. Budgetary expenditure under the Agriculture Bill must be clearly connected to agriculture, or misunderstandings will arise as to the purpose of financial assistance, confusing debate about appropriate levels and justifications for support.

7. Nevertheless, as the Bill stands, there is a real risk that financial assistance will be provided for schemes that have no connection with farming or farmland, particularly as relates to broader environmental purposes. It is of course right and proper that the government pursues a range of environmental objectives through public policy – whether related to agriculture or not. However, if government and industry are to develop a farming model that integrates profitable food production with high environmental and animal welfare standards, policies pursued under the Agriculture Bill should be focused on agriculture, and government should seek to pursue other environmental objectives through other legislation.

8. The NFU believes that the Bill should, in the first clause, state the ultimate objectives (as opposed to general purposes) to which any financial assistance should contribute. This should relate explicitly to agricultural activity, farm businesses or farmland. This remains consistent with the wide range of purposes for which financial assistance can be provided, as stated in clause 1 of the current draft of the Bill. But it will ensure that those purposes are connected to agriculture – for instance ensuring farm practices protect soils, water and air or improve agricultural productivity. It would preclude programmes being designed which would be unrelated to agriculture (e.g. on golf courses or airfields) and which would draw support away from incentivising and rewarding good agricultural practice – the stated aim of this government.

Promoting the nation’s strategic priorities

9. The NFU believes that supporting domestic agriculture to ensure food security and stability of food supply should be included in the purposes to which financial assistance can be directed under clause 1 of the Bill. The government has a strategic interest in ensuring a sufficient level of domestic food production, and the Bill should provide government powers to support UK agriculture so it can continue to meet these expectations.

10. It’s interesting to note that the powers provided under the landmark Agriculture Act 1947 were in pursuit of "a stable and efficient agricultural industry capable of producing such part of the nation's food and other agricultural produce as in the national interest it is desirable to produce in the United Kingdom", and among the objects of the Treaty of Rome which establishes the CAP are the stabilisation of markets, the availability of supplies and reasonable prices for consumers. This demonstrates a recognition, by different governments in different jurisdictions in different eras, of the important requirement for any government to serve the interests of its people by investing in domestic food production where required, to ensure stability and security in the provision of a safe and affordable domestic supply of food.

11. Farm businesses also have an important role to play in other strategic priorities the government may wish to promote. For instance there are growing concerns about the UK’s energy security in an uncertain geo-political environment. Alongside the desire to move away from fossil fuels towards cleaner, renewable sources of energy, this demonstrates an important ongoing role for farmers in contributing to the nation’s green energy requirements. Water security will also increasingly become a concern in the years ahead, and again this is an area in which farmers can help to provide solutions. The Bill should therefore also include energy and water security as further purposes under clause 1’s financial assistance provisions.

Competitiveness and financial resilience

12. There are many aspects of the Bill which will impact on the resilience and competitiveness of farm businesses which will need to be examined closely during its legislative passage.

· Scope of powers for Financial Assistance (clause 1): The NFU welcomes provisions within the Bill to assist farmers to improve their productivity. Alongside this, the NFU believes that ministers should have scope to introduce financial assistance to increase the competitiveness and financial resilience of farm businesses. This would give ministers the tools to help farmers better manage risk, times of poor market returns and to help build more productive, competitive and resilient businesses. We believe the simplest way of achieving this would be for the powers conferred on Welsh ministers (schedule 3, paragraph 1 (2)) to be replicated in clause 1 for ministers exercising England-only powers, which allows financial assistance to support "persons who are involved in the production, processing, marketing or distribution of products deriving from an agricultural, horticultural or forestry activity." Not only would this provide flexibility for provision of support to English farmers, it would also put English and Welsh farmers on an even footing, reducing the chance for internal market distortions through different legal frameworks for agricultural support.

· Delinking (clause 7): The provisions on de-linking require further detail on how they will be used and what alternative arrangements will be introduced in place of the current conditions attached to receipt of direct payments. The Bill also allows the government to discontinue the EU Fruit and Vegetable Aid Scheme (clause 10), although the government has indicated that existing programmes will continue to run until completion. We are keen to understand more details from government about the successor scheme it intends to introduce under the powers in the Bill.

· Phase out (clause 7): Government has set out its intentions for reducing direct payments in the first year of the agricultural transition, with a heavier reduction for larger claimants – something the NFU strongly opposed in the Health and Harmony consultation reflecting the feelings of our members on the issue. These details are not included in the Bill itself, but we expect the government’s intentions to be set out and debated during its passage. We are pleased that the government will be able to extend the period relating to the phase out of direct payments if necessary, something the NFU strongly argued for. Nevertheless, we are concerned that, should the coming years prove particularly challenging for farming – whether due to political, commercial or climactic circumstances – the Bill does not provide sufficient scope in England for government to make the necessary interventions. The extension of Welsh ministers’ powers in 2(i) above would help resolve this shortcoming.

· The Bill is currently drafted in such a way that ministers have the power to proceed with, and in essence pause, the phase out of direct payments during the agricultural transition period. We believe that the scope of ministers’ powers should be extended to include provision to reverse any steps taken during the transition period to phase out direct payments. This would be particularly important in a scenario where payments to farmers had been reduced, but where the funds "freed up" had not been spent on alternative programmes, and so remained unused. The Bill must enable government to return unspent funds to farmers as direct payments if they are not being used for other purposes. It would also allow ministers to change tack and reverse reductions in direct payments if they were found to be having a detrimental impact on the nation’s ability to produce food.

· Exceptional market conditions (clauses 17 and 18): We welcome the provision of powers for minsters to respond to exceptional market conditions which will provide a vital safety net for farmers at times of crisis. As it stands, however, the powers are somewhat limited and in our view, clause 17 needs to be amended so that the two conditions in 17(2) are alternatives (not cumulative); the ‘exceptional market conditions’ should include ‘significant’ rather than ‘severe’ disturbances; and finally the ‘exceptional market conditions’ should include disturbances to input costs and/or costs of production, as well as disturbances to agricultural markets/prices.

Valuing and protecting of our standards

13. The NFU wants to see an approach to UK international trade policy, once we have left the EU, which supports our farmers to grow their businesses and to grow food for Britain and beyond. The Bill should ensure that British farmers can continue to produce food to the current high environmental and animal welfare standards of which they are proud whilst being able to compete on a level playing field with producers elsewhere in the world and without being undermined by cheaper imports produced to lower standards.

14. Specifically, government must ensure that future trade deals always contain provision to prevent agricultural products and food which does not meet our environmental, animal welfare and food safety standards from entering the country. But this does not address the wider issue of how, outside specific trade agreements, government intends to stick to its promise not to allow food produced to lower food safety, environmental and animal welfare standards – and it is important to note the distinction between all three – that could undermine the government’s broader ambitions for a productive and sustainable UK farming industry.

15. The Bill should contain provisions to require all food imported into the UK be produced to at least equivalent standards, as they relate to animal welfare, environmental protection and any other legitimate public policy concerns associated with food production, as those required of producers in the UK. A failure to do so would undermine the principles that should be at the very heart of the Bill - an efficient, productive, profitable UK farming sector meeting the needs and expectations of the British public, both in terms of the food they eat and the public goods they value.

Budgetary cycles

16. Whilst not on the face of the Bill itself, the NFU welcomes the government’s commitment to maintain cash total for farm support funding until the end of this Parliament (expected in 2022, but possibly sooner). Longer term we believe that the current levels of public investment in agriculture should be maintained.

17. We believe that the Agriculture Bill should establish a multi-annual budgetary framework that provides certainty for famers and allows them to plan and invest for the future, under clause 33 (Financial Provision). Budgetary cycles should be independent of the parliamentary cycle to reflect the need for long term planning and investment and to avoid the agricultural budget becoming politicised and subject to annual discretionary spending decisions. There should be scope within the Bill for minsters to "carry over" any monies left unspent at the end of a particular budget year for spending in subsequent years.

Strengthening farmers’ position in the supply chain

18. The NFU believes the Bill should establish the right operating conditions for farming to thrive in a competitive environment that is fair, transparent, responsive and equitable. We therefore welcome the provisions relating to the establishment of producer organisations, fairness in the supply chain and the collection and sharing of data. The NFU believes these are vital components of the Bill and will help farmers to better respond to market demands and work in greater collaboration with the supply chain, with risks and rewards better balanced across all parties. However we do have concerns about elements of the current drafting as follows;

· Collection and sharing of data (clauses 12-16): Farmers need access to robust market data, which the provisions in the Bill would contribute to. Clear market signals on price and volumes traded can improve responsiveness to demand, allowing farmers to adjust output accordingly. Furthermore, greater market transparency is required for better uptake and use of risk management tools that can help to tackle market volatility. However, as currently drafted we are concerned that the powers conferred on ministers would go well beyond what is needed for these purposes.

· Producer Organisations (clauses 22-24): The NFU welcomes the powers in the Bill that establish a UK-focused approach to producer organisations. We believe that the existing principles that underpin producer organisations should be retained including exemption from competition laws. Producer organisations should also have the ability to access financial assistance.

· Fair Dealing with agricultural producers (clause 25): The NFU believes that any contract terms that farmers sign up to should be clear, fair and equitable and that the risk that farmers bear under those contracts should be fairly allocated and appropriately balanced with the reward obtained. The powers to impose obligations on first purchasers of agricultural products in relation to contracts with producers are very welcome. The lists of matters that may be specified under such contracts should be as wide as possible and certainly not exclusive; the government should be able to specify contract terms in regulations as necessary. The NFU is concerned that in the Bill’s accompanying explanatory notes, the government anticipates that the Rural Payments Agency (RPA) would oversee and enforce the regulations relating to contract terms. We believe that the RPA, as a payment agency whose role is to administrate and make payments under the existing and highly prescriptive CAP regime, is not the appropriate agency to undertake this role. It does not currently carry out the type of qualitative assessment that would be necessary to establish the fairness or otherwise of agricultural contracts. This role would be much better suited to an office which has the capacity and capability to assess the fairness or otherwise of contractual arrangements in agricultural supply chains.

UK Frameworks: Maintaining a level playing field

19. Ministers must ensure that the Bill adequately addresses the issues stemming from devolution, maintaining a level playing field amongst the home nations and respecting the devolution settlements, the UK internal market and the United Kingdom’s international obligations.

20. Ministers must ensure fairness with regard to the powers made available to devolved governments within the UK in supporting farmers so that the potential to distort trade in the UK domestic market is reduced. It is therefore concerning that the scope for minsters in Wales to provide important assistance to farmers, rural businesses and companies is not replicated for England. We call on parliament to simply replicate the Welsh powers set out in Schedule 3 (paragraph 1(2)) within clause 1 of the Bill.

Appropriate use of ministerial powers

21. The Bill does not incorporate on its face all of the details of a future agricultural support regime. Instead, much of the detail will be established in future under delegated legislation. It is important that these powers to create secondary legislation are used effectively to help create the right operating conditions for farming to thrive in a competitive environment – one that is fair, transparent, responsive and equitable.

22. The NFU believes there is a balance to be struck between how much detail appears on the face of the Bill and the acceptance of delegated powers to Ministers. There must be appropriate checks and balances in place however, and a clear commitment from government to ongoing stakeholder consultation and where appropriate co-design of future support measures with the farming industry.

Reducing the administrative burden on farming

23. The NFU welcomes the provisions in the Bill that seek to reduce the administrative burden on farming. We call on ministers to use their powers to minimise bureaucracy and administrative complexity and to put fairness and proportionality at the heart of enforcement mechanisms (including appropriate sanction regimes and an effective independent appeals system). The future system must have the aim of regulating to compliance, not regulating to penalise, and it must recognise non-regulatory approaches such as earned recognition as part of enforcement regimes.

Government policy

24. Alongside the Bill, the government has published a policy statement and explanatory notes that provide an indication of how Ministers intend to use the powers conferred through the Bill.

25. The NFU has some significant concerns about the declared intentions of the government that accompanied the publication of the Bill – in particular:

· The apparent oversight of the importance of food production as a central part of future policy.

· The failure to acknowledge the potential for disruption to the agri-food sector as a result of a disorderly Brexit, and the need to ensure agricultural policy is flexible enough to accommodate a range of future scenarios.

· The approach to phasing out direct payments that discriminates on the basis of size of claim.

26. Furthermore there is much work to be done in developing the government’s flagship successor to the CAP support schemes, the new Environmental Land Management system, and there needs to be much greater clarity about how existing environmental schemes will operate alongside the introduction of new arrangements. There are also concerns about the operation of payments during the agricultural transition, in particular that transitional payments may discriminate against tenant farmers wishing to retire if they are required to pass on any lump sum payment to their landlord in accordance with their tenancy agreement.

27. All of these critical issues (and more), although extraneous to the provisions of the Bill, are an integral part of future policy, and we urge MPs to explore and interrogate them fully during the passage of the Bill.

October 2018