Scrutiny of the Agriculture Bill Contents

2Leaving the Common Agricultural Policy

Phasing out direct payments

13.The explanatory notes accompanying the Bill state that:

UK agriculture receives around €4.0 billion in support from the EU every year via the CAP [Common Agricultural Policy], which the UK Government also funds as part of its membership of the EU. The CAP is comprised of two “pillars”. Pillar 1 provides Direct Payments, accounting for about 88% of total payments (€3.2 billion in the UK in 2016). […]Pillar 2 accounts for the remaining 12%, supporting environmental outcomes, farming productivity, socio-economic outcomes and rural growth (€0.8 billion in 2016).

There are three direct payment schemes in England: the basic payment scheme (BPS), greening and the young farmer payment. The three schemes combine to give each farmer applying a single direct payment for the scheme year, which runs from 1 January to 31 December.19

14.Chapter 1 (Clauses 4–8) of the Agriculture Bill provides for these direct payments in England to be modified and phased out over an agricultural transition period of seven years from 2021.20 Defra stated that direct payments would be paid for the 2019 scheme year on the same basis as now, and that money would be allocated for 2020 in a similar manner, with some simplifications.21 The Bill was amended at committee stage to specify that in 2020, the direct payments ceiling can be reduced for England by up to 15%.22 From 2021, “payment reductions will be applied in a fair way, with higher reductions initially applied to amounts in higher payment bands”.23 Defra stated that it would “reduce farmers’ Direct Payments by up to the following percentages”:

Direct Payment band**

Reduction percentage

Up to £30,000

5%

£30,000 - £50,000

10%

£50,000 - £150,000

20%

£150,000 or more

25%

** For example, for a claim worth £40,000, a 5% reduction would be applied to the first £30,000 and a 10% reduction would be applied to the next £10,000.24

15.Defra estimated that this “could free up to around £150 million to reinvest into the delivery of public goods - piloting new schemes, investing in research & development and providing support for farmers during the transition”.25 Defra stated that “these reduction percentages will be increased over the transition until the final payments are made for the 2027 scheme year” and that it would:

set the reduction percentages taking account of our detailed plans for future schemes and wider decisions about government spending. We will maintain the same cash total funding for the sector until the end of this parliament, expected in 2022.26

No further information has been provided about what might happen to direct payments after 2022.

Public money for public goods

16.The Bill proposes a new system of agricultural support on the principle of “public money for public goods”, mooted in Defra’s Health and Harmony consultation in early 2018.27 The Bill itself does not refer to or define the term “public good” but Part 1 states that:

[Clause 1] (1) The Secretary of State may give financial assistance for or in connection with any of the following purposes—

a)managing land or water in a way that protects or improves the environment;

b)supporting public access to and enjoyment of the countryside, farmland or woodland and better understanding of the environment;

c)managing land or water in a way that maintains, restores or enhances cultural heritage or natural heritage;

d)mitigating or adapting to climate change;

e)preventing, reducing or protecting from environmental hazards;

f)protecting or improving the health or welfare of livestock;

g)protecting or improving the health of plants.

(2) The Secretary of State may also give financial assistance for or in connection with the purpose of starting, or improving the productivity of, an agricultural, horticultural or forestry activity.28

The explanatory notes provide some explanation and examples of what kind of activities might be included:29

Purposes eligible for financial assistance

Extra Information given in the Explanatory Notes

Specific examples and benefits given in the Explanatory Notes

Clause 1 (a) managing land or water in a way that protects or improves the environment;

Delivery of Environmental outcomes such as clean air and water.

Incentivising tree planting to capture ammonia emissions and protect sensitive habitats from damaging nitrogen deposition.

Clause 1 (b) supporting public access to and enjoyment of the countryside, farmland or woodland and better understanding of the environment;

Will also include assistance to support understanding about the environmental benefits that land can provide.

Incentivise foresters to provide facilities for educational visits for schools and contributing to their learning and engagement with the environment.

Clause 1 (c) managing land or water in a way that maintains, restores or enhances cultural heritage or natural heritage;

Can include building a monument, site, place, area or landscape identified as having a degree of significance, due to its archaeological, architectural, artistic, historic or traditional interest. Includes geological assets and designated cultural heritage assets.

Can include the maintenance of historic farm buildings, dry stone walls and conservation of limestone pavement. Contributing to research, education, recreation and tourism with societal benefits of: beauty, heritage and engagement with the environment.

Clause 1 (d) mitigating or adapting to climate change;

Incentivise peatland restoration, in order to protect the existing carbon store and reduce emissions of carbon dioxide to the atmosphere.

Clause 1 (e) preventing, reducing or protecting from environmental hazards;

This includes hazards to, or caused by, the environment.

Could be used to reduce flood risk by incentivising good soil management, leading to a reduction in soil compaction.

Clause 1 (f) protecting or improving the health or welfare of livestock;

Can support action by farmers, vets and other organisations to improve animal health and welfare, reduce endemic disease and keep livestock well maintained and healthy.

Could include measures to incentivise participation on health or disease control schemes, supporting the financing of testing for a particular disease or strengthening animal welfare outcomes, such as reducing the impact of health conditions and ensuring animals have access to materials that allow them to express their natural behaviours.

Clause 1 (g) protecting or improving the health of plants.

This includes: wild plants, agricultural crops, trees, and bushes.

This can include support for measures across the forestry and horticulture sectors which reduce the risk of introduction and spread of harmful plant pests and disease thereby protecting their health and increasing biosecurity.

Clause (2) ….for or in connection with the purpose of starting, or improving the productivity of, an agricultural, horticultural or forestry activity.

This could be used to enable a farmer to invest in equipment that would both increase productivity and deliver environmental benefits.

This could include giving a farmer a grant or loan to enable the purchase of precision application equipment for slurry. This would allow the farmer to reduce the quantity of fertilisers used, reducing costs as well as reducing ammonia emissions.

17.In order to deliver financial assistance for these purposes, Defra stated that “the government will work with farmers and land managers who wish to improve the environment by entering into environmental land management contracts, which could span several years”.30 It added:

we will work with potential participants to design, test and trial elements before piloting it widely and then rolling it out nationally. This will include new and innovative delivery mechanisms, like payment by results and reverse auctions. Trials will also be used to find out what advice participants in schemes need to succeed […]

We will work with the private sector to explore the scope for public-private finance partnerships […]We will implement the new system in phases. This will allow for flexibility as we develop the system and enable us to deliver a system that is valued and participated in by farmers and land managers.31

18.We put to the Secretary of State a concern that it was not possible to deduce how much money would be paid for the delivery of public goods and what proportion each may receive. He responded:

That is a fair point. You cannot know—we cannot know—with absolute certainty at this stage, but one of the things we propose to do […]is to pilot and bring forward schemes in collaboration with the sector to ensure there is a proper understanding of what the Government can provide through public money to support farm businesses.32

Food production and public health

19.Submissions to our inquiry demonstrated differing views on what should constitute a public good under Clause 1(1) of the Bill, with several suggested additions. There was a particular focus on whether food production was adequately recognised in Part 1 of the Bill. The Potato Processors Association was concerned that “the Agricultural Bill, as currently proposed, does not recognise that the production of food, and therefore food security, is actually a Public Good”.33 The NFU believed “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” because “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”.34

20.In addition, there were calls from the Food Foundation for “the delivery of public health outcomes beyond environmental hazards, access to nature and animal and plant health” to be included.35 The CLA also suggested that “consideration should also be given to the specific inclusion of rural vitality and national health and wellbeing as a public good for England (it is already included in Wellbeing Act in Wales)”.36

21.Others disagreed that production and the delivery of public health outcomes should be included under Clause 1 of the Bill at all. Tom Lancaster, representing the Wildlife and Countryside Link coalition, stated that:

the basic premise of public money for public goods is where it is justifiable to pay farmers and use public money to incentivise farmers to do certain things where there is market failure. In terms of the Treasury logic around these things, food as a marketable commodity does not fall into that category, because it is inherently rival and excludable, effectively. It does not make sense to pay farmers public money once through the tax system and then again at the till. There is something inherently inequitable about that approach.

In terms of how we can incentivise the uptake and consumption of healthier food to address issues such as obesity, […]paying farmers specifically to produce food when there is no way then to determine how that food as a raw product is processed and ends up in the supply chain is not an efficient way of guaranteeing food supplies or of guaranteeing the supplies of certain types of food.37

22.In June, the Secretary of State acknowledged that “people wanted Defra to play a bigger role in the public health debate” and told us that Defra would produce a food strategy “which will look at everything from improving Government procurement to considering what the right steps are in order to help lead to more responsible and sustainable food production, and to help encourage people towards a better diet”.38 Further correspondence from the Secretary of State clarified that the forthcoming National Food Strategy would “build on the work already underway in the Agriculture Bill, the Environment Bill, the Fisheries Bill, and the Childhood Obesity Plan to create an overarching, integrated food strategy for government”.39 A formal launch is expected “early next year”.40

23.The list of purposes (public goods) under Clause 1 of the Bill is sufficiently broad that most environmentally beneficial activities could qualify for funding. However, we are disappointed that this Clause does not explicitly recognise the important balance that must be struck between food production and the environment.

24.We are also concerned that there was no indication provided by the Government about how much financial assistance might be allocated to each public good or how they might be prioritised. Overall this will not give enough clarity to recipients about where to focus their efforts in order to qualify for financial assistance. The Government should explain how it envisages the listed public goods would be prioritised when competing for a limited pot of funding.

Funding during the transition period

25.The evidence we received suggested widespread support for a seven-year transition period, with the exception of Compassion in World Farming, which considered that seven years “should be an absolute maximum” and suggested that “this is tightened to five years of transition” because “it would be a major missed opportunity if the payments for ‘public goods’ only start in seven years”.41 However, there were concerns about the lack of certainty about what would happen after 2022. The RSPCA noted that “the Bill has no funding attached to it and the Government has only agreed funding to 2022, five years prior to when the new system is fully operational”.42 The Country Land and Business Association (CLA) stated that:

The Government is yet to provide further details beyond 2021, and while there is recognition that direct payments should be phased out over time for England, there is a serious risk to businesses if there are further significant cuts in 2022 and 2023 before the planned full introduction of the new Environmental Land Management System and animal welfare schemes available to all eligible parties by 2024.43

Tim Breitmeyer, President of the CLA, stated that:

If we are to move to a system of transiting away from the [Basic Payment Scheme], we must make sure that the alternative mechanisms that the Government intend to put in place are available and ready to work. […]Our huge fear at the moment is that whether it be a productivity and a comprehensive package or whether it be the new public good scheme, neither will be sufficiently worked up, they will not necessarily have the support and the knowledge that farmers know that those schemes are there. Thirdly, there may well not be an institution in place that is capable of delivering something that is far more complex. […] I strongly feel that some sort of a check and balance and a stocktake in 2020, before we start taking money away from the industry in 2021, is very necessary.44

26.The Government should, before 2020, outline how it would phase out direct payments over the entire transition period, in order to give some certainty to those who currently receive direct payments under the CAP.

27.In 2020, before direct payments are reduced, the Government should conduct a review of whether the new environmental land management schemes are sufficiently advanced to begin replacing the direct payment system. The review should also assess whether farmers and land managers are aware of the new scheme and how to access it.

28.There was widespread support from witnesses representing the farming sector for multiannual budgets to provide further certainty about funding in the long term. Minette Batters, NFU President, considered that a multiannual budget was “essential for the future” and that it would be “paramount” to the success of a domestic agricultural policy.45 George Dunn, TFA, told us the TFA was supporting the NFU’s amendment regarding a multiannual financial framework and added “we need to have a process for every five or so years deciding what the budget is”.46

29.It is reasonable to expect the Government to outline a long-term financial commitment to agriculture. The Government should amend the Bill to require it to establish a multiannual financial framework before the agricultural transition period commences. We propose the following wording:

Clause 36, page 27, line 29, at end insert–

“(2) No payment may be made under this Act unless the Secretary of State has made regulations in accordance with subsection (3) to implement a multiannual financial framework setting out the sums available under Parts 1 and 2 of this Act during the agricultural transition period.

(3) Regulations made under subsection (2) shall be made before the beginning of the agricultural transition period and shall be subject to affirmative resolution procedure.”


19 Explanatory Notes to the Agriculture Bill [Bill 266 (2017–19) -EN], paras 8–9

20 Agriculture Bill, Clauses 4–8; The Delegated powers memorandum includes a power to extend the transition period more than once, see Agriculture Bill: Delegated Powers Memorandum from the Department for Environment, Food and Rural Affairs to the Delegated Powers and Regulatory Reform Committee [Bill 266 (2017–19)]

21 Department for Environment, Food and Rural Affairs, Health and Harmony: the future for food, farming and the environment in a Green Brexit - policy statement, Updated 14 September 2018

23 Department for Environment, Food and Rural Affairs, Health and Harmony: the future for food, farming and the environment in a Green Brexit - policy statement, Updated 14 September 2018

25 Department for Environment, Food and Rural Affairs, Health and Harmony: the future for food, farming and the environment in a Green Brexit - policy statement, Updated 14 September 2018

26 Department for Environment, Food and Rural Affairs, Health and Harmony: the future for food, farming and the environment in a Green Brexit - policy statement, Updated 14 September 2018

27 Department for Environment, Food and Rural Affairs, Health and Harmony: the future for food, farming and the environment in a Green Brexit - policy statement, Updated 14 September 2018

28 Agriculture Bill, [Clauses 1–2]

29 Explanatory Notes to the Agriculture Bill [Bill 266 (2017–19) -EN]; The Agriculture Bill (2017–19), Briefing Paper CBP 8405, House of Commons Library, 25 October 2018

30 Department for Environment, Food and Rural Affairs, Health and Harmony: the future for food, farming and the environment in a Green Brexit - policy statement, Updated 14 September 2018

31 Department for Environment, Food and Rural Affairs, Health and Harmony: the future for food, farming and the environment in a Green Brexit - policy statement, Updated 14 September 2018

33 Potato Processors’ Association Ltd (SAB0017), page 1

34 National Farmers’ Union (SAB0068), para 9

35 The Food Foundation (SAB0016), para 1

36 Country Land and Business Association (CLA) (SAB0008), page 3

38 Oral evidence taken on 13 June 2018, HC (2017–19) 321, Q 119

39 Letter from Michael Gove to the Chair on the Government’s planned food strategy, 30 October 2018

40 Letter from Michael Gove to the Chair on the Government’s planned food strategy, 30 October 2018

41 Compassion in World Farming (SAB0018), paras 24–25

42 RSPCA (SAB0009), para 10

43 Country Land and Business Association (CLA) (SAB0008)

44 Qq211–212 [Tim Breitmeyer]

46 Q230 [George Dunn]




Published: 27 November 2018