Agriculture Bill

Written evidence submitted by Cornwall Council (AB47)

1. Introduction - Cornwall Council is the largest rural unitary authority in the country, serving a population of just over half a million. Cornwall has a strong identity and the benefit of a straightforward, single geography with the majority of our key public sector partners focused exclusively on serving the people of Cornwall.

1.1 The agriculture and food processing sectors are crucial for the Cornwall and Isles of Scilly (CIoS) economy. In 2016 total GVA from Agriculture was £217 million, equal to 2.3% of total output. Food processing accounted for £248 million or 2.6% of total output. Both sectors are more important to CIoS than for England as a whole in percentage terms.

1.2 In addition the role of farmers and land managers play in managing our environment is crucial as the quality of our environment is the number one reason why we have such a buoyant tourism industry with over 5 million visitors a year.

1.3 It is therefore imperative for Cornwall that a reformed agricultural and land management policy supports the future productivity and prosperity of these two important sectors. Overall we welcome the Agriculture Bill which is broadly in line with our views, and the intention to develop an ambitious UK Agricultural policy independent of the EU.

1.4 We are glad to see that cuts to basic payment regime are phased in during a transition period of 7 years (rather than the 5 years originally proposed in the consultation) and that the biggest cuts are made to those who are the biggest recipients of basic payments as this will help farmers and land managers in our area adapt to the new policy environment.

2. Summary of key points - Alongside many farming organisations Cornwall Council believes that maintaining a robust and resilient domestic agricultural sector is in the nation’s interest and, as it represents a large proportion of the economy of CIoS, it is of critical importance to our long term economic position. Future agricultural policy must support farmers and land managers in their role as producers of food alongside other goods and services. By maintaining a strong and profitable primary production base we benefit from:-

2.1. 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.

2.2. 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 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.

2.3. Support for jobs, investment and growth. Farmers and growers are an important part of the economy of a rural area, providing jobs and driving growth both in food production and in diversified industries such as renewable energy and tourism.

2.4. High standards of welfare and environmental goods. Viable and profitable 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 80% of our landmass, viable farm businesses play an irreplaceable role in looking after our cherished natural capital.

2.5. Wider Rural Development - we are concerned about the lack of reference to the wider "rural development" activity currently funded by Pillar 2 of the CAP and would seek assurances that the proposed UK SPF as well as being fully rural proofed will fund activity in this respect to ensure that support for wider rural development is catered for.

3. Recommendations - looking through the detail of the Bill and considering any points where we would like to see changes made we have the following comments:-

3.1. An "agricultural" Agriculture Bill - 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.

3.2. Cornwall Council supports this approach, which is in line with our Environmental Growth Strategy. However, we think it is important that in addition to the environmental objectives proposed through the new policy, the Agriculture Bill must also state specific objectives for agricultural production. By stating these dual objectives the Bill will help to underpin a farming model in the UK that is sustainable, productive and plays an active role in delivering food production and public goods.

3.3. If the bill is framed entirely in terms of the environmental and public good objectives and does not outline the vision for farming in the UK, the opportunity to facilitate the development of a sustainable farming model – sustainable both environmentally and economically – will be missed. 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.

3.4. 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.

3.5. 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).

3.6. We support the NFU position 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 and how these activities can contribute to environmental objectives.

3.7. Competitiveness and financial resilience - 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. These include the following:-

3.7.1. Scope of powers for Financial Assistance (clause 1): We welcome provisions within the Bill to assist farmers to improve their productivity. Alongside this, we believe 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.

3.7.2. Not only would this provide flexibility for provision of support to rural areas 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. We would also like to see an addition to the Bill that outlines the importance and value of independent business advice provided to farmers.

3.7.3. The Bill includes the possibility of farmers receiving a Lump sum rather than payments throughout the transition period. While this may be a helpful option for some farmers it requires careful consideration and in many cases independent financial advice. The risk is that the lump sum payment could be used to propping up an unviable business rather than a planned generational handover or exit from the industry. Crucial that we ensure that independent financial advice is available in advance of the lump sum payment option being available to players in the sector.

3.7.4. Within the transition period there are huge decisions to be made for individual farmers and land managers and independent business advice is needed in order to ensure the right long term decisions are made. 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 as well as wider rural development activity (as current supported by LEADER type delivery) in rural communities."

3.7.5. 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.

3.7.6. 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. We support this approach. We are also pleased that the government will be able to extend the period relating to the phase out of direct payments if necessary. 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 England would help resolve this shortcoming.

3.7.7. 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. 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.

3.7.8. 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.

3.7.9. 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.

3.8. Valuing and protecting of our standards – we want 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.

3.9. 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.

3.10. 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.

3.11. In addition we would also like the provision to be extended to cover Protected Food Names (e.g. Cornish pasty and Cornish Clotted Cream). We believe that the Bill is a good opportunity for the government to confirm its commitment to existing Protected Food Names and to looking at how Protected Food Names can be used as an active policy instrument to promote high quality regional food products.

3.12. Budgetary cycles - Whilst not on the face of the Bill itself we welcome the government’s commitment to maintain cash total for farm support funding until the end of this Parliament (expected in 2022). Longer term we believe that the current levels of public investment in agriculture and wider rural development activity should be maintained.

3.13. We believe that the Agriculture Bill should establish a multi-annual budgetary framework that provides certainty for farmers, land managers and rural communities 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 budget becoming politicised and subject to annual discretionary spending decisions. In addition 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.

3.14. Strengthening farmers’ position in the supply chain - we believe 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. 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;

3.14.1. 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.

3.14.2. Producer Organisations (clauses 22-24): We support the NFU in welcoming 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.

3.14.3. Fair Dealing with agricultural producers (clause 25): we believe that 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.

3.14.4. 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.

3.14.5. However, 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.

3.14.6. 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 e.g. the Grocery Adjudicator.

3.15. UK Frameworks: Maintaining a level playing field - 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. 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.

3.16. 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.

3.17. Appropriate use of ministerial powers - 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.

3.18. We believe 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. A clear commitment from government to ongoing stakeholder consultation and where appropriate co-design of future support measures with the farming industry should be made.

3.19. Reducing the administrative burden on farming – we welcome the provisions in the Bill that seek to reduce the administrative burden on farming, food and rural businesses. We call on ministers to use their powers to minimise the bureaucracy and administrative complexity of applying for and delivering funds/projects and to put fairness and proportionality at the heart of enforcement mechanisms (including appropriate sanction regimes and an effective independent appeals system).

3.20. 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.

3.21. Wider Government policy - 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. Alongside organisations such as the NFU we have some significant concerns about the declared intentions of the government that accompanied the publication of the Bill – in particular:

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

3.21.2. 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.

3.21.3. 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.

3.21.4. 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.

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.

Annexe 1 – overview of the economic importance of agriculture and food processing for Cornwall and the Isles of Scilly

In Cornwall and the Isles of Scilly in 2016 total GVA from Agriculture was £217 million, equal to 2.3% of total output. Food processing accounted for £248 million or 2.6% of total output. Both sectors are more important to Cornwall and the Isles of Scilly than for England as a whole in percentage terms. The location quotients being 4.7 and 1.9 respectively.

Agriculture – 2016

Cornwall and the Isles of Scilly = ( ). Figures for England = [ ].

A total workforce of 11,180, broken down into farmers 7,495 or 67% [57%], and employees 2,464 or 22% [28%], and casual workers 1,221 or 11% [15%]. The labour force profile for Cornwall is different to that for England with a higher percentage of farmers – both full-time 35% [29%], and part-time 32% [28%], but a lower percentage of full-time regular workers – 10% [15%].

In total there are 4,571 holdings – 39% [38%] below 20 hectares, 17% [24%] were holdings of 100 hectares or more. Holdings below 20 hectares accounted for 6% [4%] of the farmed area, those over 100 hectares for 56% [74%]. Half of holdings, 50% [42%] were engaged in grazing livestock, followed by general cropping at 17% [ 17%] and dairy at 9% [6%].

In terms of land use, 45% [29%] were engaged in grazing livestock, followed by general cropping at 17% [17%] and dairy at 9% [6%]. Altogether over 80% of the land mass of Cornwall is farmed, with two-thirds owned and one third rented. On the Isles of Scilly over 90% is farmed with the majority rented.

Permanent grass is the dominant land use across Cornwall, accounting for 53%, [36%], followed by Arable crops & uncropped arable land/ bare fallow at 21% [45%], and Temporary grass at 15% [7%] and Forestry 3%. 331,365 cattle were recorded, with dairy accounting for 38% and beef for 32%. Other livestock included 484,438 sheep, 47,313 pigs and 747,077 poultry.

[Defra, Farm survey].

Agricultural output at sector level

Total agricultural output in 2015 was estimated at £477 million. Animal outputs accounted for £311 million (65%) and crop output £166 million (35%). Three-quarters of output is derived from five categories: Milk £143 million (30%); Cattle £109 million (22.8%); Plants and flowers £54 million; (11.3%); Sheep and goats £30 million (6.2%); and Fresh vegetables £27 million (5.8%). [Eurostat, Economic accounts for agriculture by NUTS 2 regions]

Food processing

A total of 205 workplaces (does not include food service or hospitality) were identified in 2017 and many source the majority of their ingredients from local supply chains. The main categories were: Manufacture of bread; manufacture of fresh pastry goods and cakes = 50; Manufacture of beer = 30; and Processing and preserving of meat = 15. In terms of size, Cornwall and the Isles of Scilly had a lower share of medium and large workplaces compared to the English average, 9.8% compared to 12.2%. [UK Business counts].

A total of 6,000 were employed in food processing in 2016. This accounted for 2.7% of employment compared to an England average of 1.3%. The main categories were: Manufacture of bread; manufacture of fresh pastry goods and cakes = 2,000; Production of meat and poultry meat products= 900; Processing and preserving of meat = 800; Manufacture of rusks and biscuits; manufacture of preserved pastry goods and cakes = 600; and Operation of dairies and cheese making = 500. [BRES].

In monetary terms the Common Agricultural Policy (Pillar 1 and Pillar 2) current brings into Cornwall and the Isles of Scilly approx. £100 million annually in the form of various grants and payments.

Whilst farmers and land managers are the recipients of these funds they are not the sole beneficiaries of them as it can be argued that CAP receipts help to keep food prices lower than they would be without the CAP support and that the general public also benefit from the "public goods" provided by the agri-environment schemes.

Prepared by:

Cornwall Council

Economic Growth Service

12 November 2018   

 

Prepared 13th November 2018