Brexit and Agriculture in Northern Ireland Contents

2Financial support for agriculture in Northern Ireland

46.In this chapter we consider how agricultural policy might support Northern Ireland’s farmers in the future. We examine:

Direct support for farmers in Northern Ireland

47.Under the CAP some farmers are eligible for financial support. Support payments made under the CAP have two main components, known as “pillars”: Pillar 1 payments (Direct Payments) are direct income support payments to farmers based on the amount of land they farm and how they farm it; Pillar 2 payments are tied to rural development objectives such as improving competitiveness in agriculture and managing the natural environment, and are administered through Rural Development Programmes. Pillar 1 funding in the UK is administered via the Basic Payment Scheme (BPS), although farmers who meet certain criteria can also qualify for additional funding streams such as the Young Farmers Payment. In 2017 farmers in Northern Ireland received £313.2 million in Direct Payments, £195 million of which was awarded through the Basic Payment Scheme.90 The total allocation of CAP funds to Northern Ireland during the CAP period 2014–20 was €2,526 million, 9% of the UK’s total allocation. Of Northern Ireland’s allocation, €2,299 million (91%) was Pillar 1 funding.91

48.Farmers in Northern Ireland receive, on average, higher levels of direct support than farmers in other areas of the UK.92There are several reasons for this. A large proportion of farms in Northern Ireland are located in “Less Favoured Areas” (LFAs), defined as areas where the natural environment or climate makes agricultural production difficult. Farmers who operate on these areas are entitled to additional support under the LFA payment scheme, which exists to incentivise the continued use of such land. Northern Ireland also has a much higher proportion of cattle and sheep farms—which receive some of the highest levels of subsidy within the agriculture sector—than other regions of the UK.

49.As a result of the structure of Northern Ireland’s agriculture sector, a large number of farms in Northern Ireland are dependent on direct support in order to survive. DAERA’s analysis of farm incomes shows that the average Direct Payment received by farms in Northern Ireland is higher than the average Farm Business Income (the Government’s standard measure of farm income). For LFA cattle and sheep farms, Direct Payments equate to 150% of Farm Business Income.93 However, there are significant variations in the amount of support received, and not all sectors are reliant on direct support. For example, DAERA’s figures show that, on average, Direct Payments to pig farms equate to just 25% of their Farm Business Income.94 We also heard that the mushroom and horticulture industry receives little in the way of direct support.95

50.We heard broad support for the continuation of direct payment to farmers in some form. Ian Stevenson of the Livestock and Meat Commission told us that continued direct support would be “absolutely critical” for cattle and sheep farmers in marginal areas, particularly as such operations were likely to be smaller than other farms.96 He added that:

If we find ourselves going off on a totally different policy direction with reduced support and across the border there are farmers receiving large amounts of support under the CAP, then our suppliers are going to be at a significant disadvantage.97

Allan Chambers, an arable farmer from East Down, said that cereal production would not survive without the continuation of some form of payment:

What I have checked out with contacts in the Republic, the review of the Common Agricultural Policy [ … ] is that area payments will continue. Farmers, my counterparts in County Louth, will continue to get the same support that they are getting, which is about £100 an acre. [ … ] That equates to about £30 a tonne. How can I survive? How can my business continue to thrive and expand when my neighbour down the road is getting the equivalent of £30 a tonne more than I am?98

Peter Gallagher, a cattle and sheep farmer in Fermanagh, stressed the importance of support to farms on more marginal land, noting that production on these farms is often less intensive, but nonetheless valuable because it is environmentally sustainable and delivers benefits for the natural landscape and environmental tourism. He told us:

I would be afraid that post-Brexit and without some of the protection that Europe currently gives to those regions, we will see a massive shift in concentration of all production and everything into isolated pockets of Northern Ireland, with 60% of the land mass more or less forgotten and abandoned. That is where I think we need to be careful in how we develop our policy.99

51.Witnesses told us about the benefits of tying future support to environmental and rural development objectives, and told us that the CAP had not always delivered the environmental benefits promised. Nature Matters NI—a campaign group led by a coalition of environmental organisations in Northern Ireland—emphasised the importance of environmental outcomes, and told us that while aspects of the CAP had delivered public benefits (namely the Rural Development Programmes contained within Pillar 2) Direct Payments to farmers had failed to deliver wider benefits. They told us the CAP had “ultimately failed to deliver the benefits expected of a publicly funded policy.”100 The UFU and the Northern Ireland Meat Exporters Association (NIMEA) told us that there was scope for improving productivity on many farms, and NIMEA noted that existing direct support did not require farms to improve their productivity.101

The Government’s proposals for direct support

52.Health and Harmony sets out the Government’s proposals for the future of Direct Payments in England. The Government argues for a move away from Direct Payments, saying they have been poor value for money, have undermined farmers’ competitiveness and have created market distortions. It therefore proposes that direct income support for farms should be replaced with payments for delivering specific outcomes and funding for investments in farm businesses. However, the Government said it also recognises that Direct Payments provide stability and support to farmers in the short-term, and therefore proposes a phased reduction in Direct Payments, with a view to eliminating them completely over time.102 Health and Harmony therefore proposes using the Basic Payment Scheme in 2019 under the present rules, before beginning an “agricultural transition” period from 2020 during which reductions to Direct Payments would be applied.103 The Agriculture Bill changed the proposed date for the start of the agricultural transition to 2021.104 Health and Harmony states that the total level of cash funding for the sector would be maintained for the remainder of this Parliament (currently expected to last until 2022), but that this funding would be allocated differently.105

53.Health and Harmony proposes that following the phasing-out of Direct Payments, funding for agriculture will be underpinned by the principle of “public money for public goods”.106 Examples of public goods suggested in Health and Harmony are:

The new scheme would be funded from the reduction in Direct Payments during the agricultural transition. The Government proposes several options for how these reductions might be applied, including progressive banded reductions to payments above £25,000 and a cap on the largest payments.108 The Minister also told us that there would be flexibility for the devolved administrations to implement reductions in ways that suit their circumstances.109

54.The Agriculture Bill empowers the Secretary of State to make payments to farmers, to modify the rules of the payment scheme, and to specify an agricultural transition period over which Direct Payments can be phased out.110 The Bill states that the agricultural transition period would last from 2021–27.111 These powers apply to England only.112 The Explanatory Notes to the Bill state that the Bill will allow the Government to pursue a policy of “public money for public goods” as set out in Health and Harmony.113 Schedule 4 confers on DAERA the power to modify legislation governing its own Direct Payments scheme.114

55.DAERA’s consultation paper suggests it would take advantage of this opportunity to continue to pay Direct Payments during the 2020 and 2021 scheme years. It says that the Department “will seek the legal authority to maintain the status quo during these years, enabling it to continue to implement the Direct Payment schemes as if they were still operating under EU rules.”115 Although the Department suggests that “limited changes” could be made during this period, this would mean in effect that farmers in Northern Ireland would continue to receive Direct Payments under EU rules until the end of the 2021 scheme year, two years longer than their counterparts in England would under the Health and Harmony proposals.116

56.It is not clear whether DAERA’s proposal to maintain EU rules includes maintaining alignment with any changes to the CAP that come into effect in the 2021 scheme year. The current CAP agreement will expire in 2020 and will be replaced by a new agreement, currently being negotiated. It is therefore possible that the EU rules for Direct Payments will change for the 2021 scheme year. DAERA could choose either to keep the scheme rules that currently exist, or to change the scheme to maintain alignment with the reformed CAP, but it is not clear which course it will take in the absence of ministerial direction. The former approach would give farmers in Northern Ireland certainty about the level of support they would receive during 2021 (in comparison to farmers in the EU, who will not know how the scheme will operate in 2021 until the new CAP arrangements are finalised) while the latter would ensure that farmers in Northern Ireland are not placed at a competitive disadvantage by any changes that might be in the post-2020 round of CAP reform.

57.In August the Government published guidance for farmers to help them prepare for a scenario in which no deal is reached with the EU.117 The guidance confirms that “eligible beneficiaries will continue to receive payments under the terms of the UK government’s funding guarantee.” The powers transposed into UK law under the European Union (Withdrawal) Act will enable the Government to continue to deliver payments in line with existing CAP rules, and the payment scheme will continue to operate on these terms until a future agricultural policy is introduced. The Government has also confirmed that its commitment to maintain total funding for farm support will still be met in a no deal scenario.118 The Government also restated that Rural Development Programme projects will continue to be funded for the projects’ full lifetime.119 The proposed no deal arrangement is not materially different from the approach outlined in Health and Harmony and the Agriculture Bill; it is therefore expected that farm payments will not be disrupted in the event of a no deal.

58.DAERA has stated that its objective for the 2020–2021 scheme years will be:

to ensure that the share of the UK agricultural budget made available to Northern Ireland will reflect Northern Ireland’s current combined CAP Pillar 1 and Pillar 2 share and that it will be sufficient to deliver the outcomes sought under this framework.”120

This objective is potentially compatible with the Government’s commitment to maintain overall levels of agriculture spending until the end of the current Parliament, as set out in Health and Harmony. If DAERA is able to achieve this objective, it states that it will be able to continue implementing Direct Payment schemes on current terms until the end of the 2021 CAP scheme year.121

59.Witnesses broadly welcomed the principle of “public money for public goods.” However, it was pointed out that this approach was neither new nor a significant departure from the direction of policy being pursued by the EU.122 We heard a range of views on what might be considered public goods. The UFU suggested that food security was a public good that is not included in Health and Harmony, and the Northern Ireland Meat Exporters Association expressed concern that this issue was not given sufficient priority in the consultation document.123 DAERA’s consultation paper mentions food security as a “highly important strategic context within which agricultural policy must operate.”124

60.Prior to the publication of DAERA’s consultation, some witnesses told us that the Government’s plans would be unsuited to Northern Ireland, and that the policy suggested for England in Health and Harmony would not be able deliver the same rate of investment in agriculture and provision of public goods in Northern Ireland. For example: Dr Viviane Gravey told us that, as payments in Northern Ireland are already capped at €150,000—a fact not acknowledged in Health and Harmony—the proposal to cap payments would not free up money to fund the agricultural transition in Northern Ireland, as it would in England.125 The Minister told us that Northern Ireland would have the power to apply CAP reductions at its own pace and would be able to “proceed cautiously with the transition over a period of years” if it so chose.126 However, Northern Ireland could only take such a decision if it had the funding to do so, and the Government has so far made no guarantee that funding for agricultural support will be maintained beyond the end of this Parliament.

61.We heard mixed views on the extent to which Health and Harmony’s proposal to rebalance funding away from Direct Payments and towards capital grants would benefit farmers. Ian Duff, of the Northern Ireland Stakeholder Potato Promotion Group, told us that the Republic of Ireland had introduced a subsidy scheme to encourage capital investment in its potato sector. He said he believed a similar strategy could enable the potato and horticulture sectors in Northern Ireland to grow.127 By contrast, Allan Chambers told us that his cereal farm was not large enough to justify the high up-front cost of investments in technology like drones and driverless tractors. He suggested that the grant schemes available to arable farmers were skewed towards large-scale, high-tech farming of the kind more commonly found in England.128

62.Some witnesses warned that many small farms are already marginal businesses and dependent on Direct Payments for survival. Dr Mary Dobbs told us that the extra money Health and Harmony proposes making available for agri-environmental schemes would be most likely to benefit farms which already had capital to invest; she said that for smaller farms Direct Payments were still required “just to get by, day by day.”129 Professor Joseph McMahon of University College Dublin argued that a move away from Direct Payments, as envisaged in the Defra consultation paper, could “threaten the continuing viability of small farms and impact negatively on the development of rural areas.”130

63.DAERA’s consultation notes that Direct Payments have in the past provided a degree of stability for farms and helped to guard against the volatility that threatens some of the more marginal businesses in the sector.131 It sets out a number of options for how agricultural policy might foster resilience in the future, including: incorporating a basic farm resilience payment into the package of support offered to farmers; income insurance measures, potentially requiring contributions from farmers; and fiscal measures such as the deposit schemes currently operated in Australia, which allow farmers to credit income to an account in profitable years that can later be drawn on during lower income periods.132

64.Nature Matters NI told us that transitioning away from direct income support to an outcome-based payment system was necessary to prevent the degradation of the natural environment, but could also help farms become more resilient and protect farmers’ livelihoods in the long term. They noted that in Wales, where the agricultural sector has structural similarities to Northern Ireland’s, the Welsh Government has proposed an agricultural transition similar to that envisaged in Health and Harmony. The Welsh Government’s proposal will phase out Direct Payments by 2025 in favour of a system of public funding for public goods.133

65.Our witnesses emphasised that farmers needed clarity on the future of Direct Payments as soon as possible. Sarah Baker of the Agriculture and Horticulture Development Board told us that farming is a sector with very long planning cycles, and that the transition from one policy environment to another would be a slower process than in other industries. She said that the transition period was welcome for this reason, but that it should not be seen as a “breathing space” and instead as “a critical time to allow the industry time to make those necessary adaptations to survive post-Brexit.”134 She told us that investment in cereal growers’ businesses had already declined because of uncertainty around future policy.135 The Livestock and Meat Commission took a similar view, and told us that investment in that sector had recently declined because of uncertainty about the future of direct support.136

66.Direct Payments are essential to the viability of much of the agriculture sector in Northern Ireland, and the level of support available to Northern Ireland farms must not be reduced following Brexit. Northern Ireland’s agricultural funding should be maintained until at least 2022. The UK Government must bring forward, as a matter of priority, plans for the allocation of funding for agricultural support post-2022, to ensure that the devolved administration has a basis for planning its own future agricultural policies and support mechanisms.

67.We are concerned that, in the absence of a specific objective to maintain farm income and if the Government’s agricultural policy were applied to Northern Ireland, it would mean many farms would become unsustainable due to the large number for which subsidies are of existential importance. This would have serious consequences for rural communities and the rural landscape. We urge the responsible department to ensure that the definition of “public goods” it uses when considering future agricultural policy includes the survival of farms as essential rural assets.

68.While incentives to invest in modern and more efficient farming practices are welcome, we recognise that such innovations are not always appropriate or efficacious for smaller farming businesses. In recognition of the fact that the vast majority of farms in Northern Ireland are small businesses and do not have the same scope for intensification and mechanisation as their larger counterparts, area payments should be retained as an element of agricultural support beyond 2022.

69.DAERA’s consultation document on future agricultural policy provides a welcome indication of how the Department intends to deliver Direct Payments if no Executive is formed before exit day. The Department has confirmed that it will “seek the legal authority to maintain the status quo” for 2020 and 2021. However, there is some ambiguity over whether it would maintain alignment with CAP rules during the 2021 scheme year (potentially altering Direct Payments to mirror the post-2020 CAP settlement) or continue to make payments under the existing rules. DAERA should clarify whether—in the 2021 scheme year—it will seek authority to continue to pay Direct Payments under the current CAP rule or maintain alignment with the CAP.

Bespoke support schemes

70.In addition to Direct Payments, we heard of more specialised schemes that supported specific subsectors or incentivised certain types of investment, which witnesses were keen to see either continue or be reinstated. For example, Northway Mushrooms told us that they received funding through the EU’s Producer Organisation Scheme, which had enabled them to dramatically increase the scale of their growers’ production.137 Chief Executive Elaine Shaw told us that they were investing in a new compost yard facility, but that their ability to access finance going forward might be compromised if they were no longer able to participate in the scheme.138 Northway said that the current Producer Organisation Scheme programme was due to continue until 2022, but that it was unclear whether they would be allowed to continue as part of the scheme after Brexit.

71.We were told that the absence of a Northern Ireland Executive meant some existing grants and support schemes could not be renewed, leaving farmers and processors unable to access funding. Elaine Shaw and Ian Duff told us that the Food Processing Grant scheme, a successor to the Processing and Marketing Grant Scheme which provided £23.5m of capital grants to agri-food businesses across Northern Ireland between 2008–2013, had not been implemented by DAERA.139 Mr Duff told us that potato packers in Northern Ireland would benefit from this scheme but were unable to access it.140 The Department has stated that it “has no plans to launch the proposed scheme in the absence of a Minister”.141

72.Witnesses reported that Northern Ireland farmers’ and processors’ inability to access grant and support schemes was placing the agri-food sector at a disadvantage, both compared to agri-food in other parts of the UK and in the Republic of Ireland. For example, Conall Donnelly of the Northern Ireland Meat Exporters Association told us that a Food Processing Grant Scheme was operating in Scotland and Wales, meaning businesses there could receive support worth up to 40% and 20% of capital costs respectively. He warned that that the processing sector in Northern Ireland was “losing out” in comparison.142

73.We heard from several witnesses that the Republic of Ireland had invested heavily in improving agricultural productivity through schemes like the Beef Data and Genomics Programme and capital grants like the Targeted Agricultural Modernisation Scheme. Ian Duff told us that in the potato sector, this meant the Republic was “better equipped and mechanised than we would be at the minute.”143 William Irvine—a dairy farmer in Country Armagh—told us that, irrespective of the amount of funding available, the Republic of Ireland “seem to be more farmer-friendly in how they support their farmers and encourage them to grow and develop” making the process of applying for grants less complicated for farmers.144

74.Some witnesses suggested that, following Brexit, it would be possible to design support schemes better suited to the circumstances of Northern Ireland. Ian Duff told us that the development of a new farm subsidy programme could allow for “specifically tailored schemes” for the potato sector.145 Elaine Shaw told us that there was scope to expand participation in the Producer Organisation Scheme for fruit and vegetable growers by changing the aspects of the EU’s scheme that have been barriers to participation.146 DAERA’s consultation document proposes that farm businesses should have access to “targeted investment aid that supports innovation and new technology uptake that is aligned to other strategic objectives, notably environmental performance.” The document suggests that, in addition to capital grants, alternative financial instruments such as loan funds or loan guarantees could be used to help farms access finance to invest in their businesses.147

75.The Minister told us that he recognised that farmers operated in different circumstances in Northern Ireland, and that there would be scope for designing bespoke support schemes for Northern Ireland:

When it comes to the design of future policy, so support policies, incentive policies and grant policies to encourage productivity and the like, it will be very much for devolved administrations to design and it will be for a future Northern Ireland administration to design its own scheme.148

However, he did not explain—nor does Health and Harmony make clear—what support would be available to farmers in Northern Ireland post-Brexit should an Executive not be formed by that time.

76.Schedule 4(4) of the Agriculture Bill enables DAERA to modify legislation governing rural development schemes in Northern Ireland.149 This would enable DAERA to allocate funding for rural development in a different way to England, and to retain or modify aspects of existing EU legislation that are transposed into Northern Ireland law.

77.Part 6 of the Agriculture Bill provides for the creation of Producer Organisations.150 The Explanatory Notes to the Bill state that the European Union (Withdrawal) Act will convert existing EU rules regarding POs into UK law, and that through the powers in the Agriculture Bill “a domestic PO regime will be created under which any new PO will be recognised and to which existing POs will eventually transition.”151 Schedule 2 of the Bill amends the Competition Act 1998 to create similar exemptions for POs to those that exist under current EU rules.152

78.We are concerned that it is considerably more difficult for agricultural businesses in Northern Ireland to access EU derived/approved capital funding than it is for their counterparts in the Republic of Ireland. This distorts the market across the island of Ireland and harms the competitiveness of farm businesses in Northern Ireland. The problem has been exacerbated by the lack of a functioning Executive and the inability of DAERA, without ministers, to renew existing schemes and authorise new ones. We find this completely unacceptable. Post-Brexit, it will be possible to design a wider range of schemes for farm support and rural development that are tailored to the specific environmental and economic circumstances of Northern Ireland. The Government should proactively engage with the Northern Ireland Civil Service, farmers and the agri-food sector to identify opportunities for targeted funding which would bring most benefit, and identify at-risk sectors in need of priority assistance. The Government can no longer rely on an imminently restored Executive. It must now take the lead, working with DAERA to develop an approach that allows farmers in Northern Ireland to access funding streams to develop their businesses, in a way equivalent to their counterparts in other parts of the UK and to erase the competitive disadvantage with the Republic.

Regulation and compliance

79.Farmers who receive Direct Payments under the CAP have to demonstrate “cross-compliance” with EU rules designed to preserve the natural environment and maintain animal and plant health standards. Farms and produce can be subject to inspection, and non-compliance can result in payments being partly or wholly withheld.

80.We heard criticism of the way that cross-compliance requirements are enforced. The UFU told us that penalties were disproportionate and that this had turned many farmers against the scheme.153 Dr Viviane Gravey added that compliance placed greater pressure on smaller farms; while larger businesses can employ professional consultants to help them meet the required standards, this option is not always available to smaller operations.154

81.Farmers told us that EU rules are sometimes seen as being too prescriptive, to the extent that they created perverse incentives for farmers resulting in sub-optimal practices. William Irvin, told us that EU rules were often designed with the circumstances of farmers in Mediterranean countries in mind, and that it was not practical for those same rules to be applied to farmers in areas like Northern Ireland.155 One common complaint we heard related to rules on the spreading of slurry. EU rules state slurry must not be spread within specified dates (known as the “close period”) in order to minimise water pollution. Mr Irvine told us that such restrictions were counterproductive:

On the slurry issue, and what is referred to as the close period [ … ] it is very frustrating to try to farm to the calendar when Mother Nature is busy doing her own thing. You could have a dry November when you should be doing it. For me, it is not actually delivering for the environment because and instinct of farmers is to get the tanks emptied before the close period. Sometimes we empty those tanks even though the ground is not, strictly speaking, suitable.156

The UFU told us that this focus on process, rather than outcomes, was a source of frustration for many farmers.157

82.The Health and Harmony consultation paper acknowledges farmers’ concerns about the culture of regulation under the CAP. In a section entitled “Changing regulatory culture” it says that “the current system puts excessive burdens on farmers and can be very rigid in its application.”158 This is consistent with the concerns we heard from farmers. The UFU told us that minor infractions could result in the loss of 3% of a farmer’s Direct Payment, a significant amount in an industry where margins are slim.159 Chief Executive Wesley Aston told us that the industry was optimistic about the Government’s ability to deliver a “common sense approach” and an “outcome-based process, as opposed to a regulatory environment.”160

83.The Government has commissioned a review of farm inspection and regulation, led by Dame Glenys Stacey,161 which published an interim report in July 2018.162 The review’s preliminary findings identified that requirements are complex and unclear, that enforcement is rigid, and that regulations incentivise particular behaviours rather than outcomes.163 The review intends to publish its final report later this year.

84.The Rt. Hon Michael Gove MP, the Secretary of State for the Environment, has said that the Government was committed to maintaining—and potentially raising—standards in these areas.164 The EU has proposed including a “non-regression clause” in any future trade deal between the EU and the UK, but the Environment Secretary has indicated that the UK would not accept such a clause, saying he does “not think it is necessary” for maintaining high standards.165 Health and Harmony’s chapter on “Fulfilling our responsibility to animals” says that there is “scope to raise [the] regulatory baseline, whilst also simplifying and improving enforcement.”166

85.Some of our witnesses highlighted the tension between the aims of simplifying regulation and preserving high standards in UK farming. They cautioned against the view that having an independent UK policy would necessarily entail a great reduction in the level of regulation. Sarah Baker of the Agriculture and Horticulture Development Board told us the perception that the EU was the primary driver of agricultural regulation was “somewhat misguided”. She told us:

If we have a new agricultural policy with very new schemes, the Public Money for Public Goods, that has to be robust and examinable and provide evidence that presumably will require inspections at some level. I think [Dame Glenys] has a very challenging job on her hands looking at that.167

Ian Duff told us that simplifying regulation was a popular concept, but was easier said than done.168 We heard similar views from the Horticulture Forum for Northern Ireland, who told us that “once public funding becomes involved audit requirements and the need to demonstrate value for money will increase the complexity and scrutiny requirements.”169

86.The farmers we spoke to noted that the Government was not the only body enforcing high farming standards, and that industry-funded food quality assurance schemes like Red Tractor, as well as supermarkets themselves, had their own standards and could suspend farmers from supplying produce if standards were not met.170 Thomas Douglas, a poultry farmer from County Tyrone, told us:

If you get a Red Tractor inspection and there is something wrong on the farm, you have a month, I think, to send them in the information that you have fixed that. If after that period of time you are suspended from the scheme, your product can go nowhere.171

87.We heard from farmers that the interpretation of environmental regulations by DAERA had made it difficult for some businesses to make improvements to their farms. A number of planning applications made under the Farm Business Improvement Scheme for new pig units or to expand milking parlours have been challenged on the grounds that they would lead to unacceptable increases in ammonia emissions. We heard that this was because rules on emissions were being interpreted more strictly in Northern Ireland than in other areas of the UK. As a result, farmers in Northern Ireland were being denied permission to proceed with applications which would be approved in England, Scotland or Wales.172 There was a perception that regulations in Northern Ireland were “gold plate[d]” to the extent that they became “unworkable.”173

88.EU farming regulations have been frustrating for farmers, and at times counterproductive. Brexit is an opportunity to redesign farming regulation and inspection to simplify compliance and to reflect the circumstances in which Northern Ireland’s farmers operate. The Government’s ambition is to introduce smarter regulation and enforcement, but we heard that this may be easier said than done. There is also a tension between reducing regulatory burdens and maintaining the high environmental and animal welfare standards that the public expects. We therefore welcome the Government’s decision to commission the Stacey Review to look at the future of regulation and enforcement in a comprehensive way.

89.When designing the post-Brexit system of agricultural regulation and enforcement, the Government should seek to reduce the regulatory burden on farmers where it is possible to do so without compromising standards or risking reduced compliance. At a minimum, the new system should be no more burdensome than that which already exists.

90.Farmers in Northern Ireland should be able to compete on a level playing field with their counterparts in other regions of the UK, and should not be put at a disadvantage because common rules are interpreted differently across different jurisdictions. The Government should work with the devolved administrations to investigate whether existing environmental regulations are being interpreted consistently across the UK Prior to exit day, it should set out how it intends to ensure consistent application of the UK’s regulatory regime following Brexit.

Land leasing

91.We heard evidence that the management of agricultural land in Northern Ireland was inhibiting the development of agricultural businesses. Several witnesses highlighted the use of “conacre” agreements in Northern Ireland as an obstacle to the development of agricultural land. Conacre agreements are a unique feature of land letting in Northern Ireland and the Republic of Ireland that developed during the 19th century. Under a conacre agreement, holdings are let on an eleven-month or 364-day basis; which is enough time for a crop to be grown and harvested. In practice many conacre agreements are renewed each year, but the system puts farmers in a less secure position than those on longer-term tenancies.

92.Witnesses told us that the conacre system was a disincentive to making agricultural land more productive. Allan Chambers told us that there was little incentive for an individual farmer to invest time, effort and resources in improving the productive capacity of land when there was no guarantee that they would be farming it in a year’s time.174 Peter Gallagher told us that conacre agreements made forward planning much more difficult for businesses: He gave an example of a typical dilemma for a cattle or sheep farmer:

You are sitting in the month of February going, “Should I sell this stock or not? Will I have the ground come April/May to release the animals to, or will I have to go to market with them?” That determines how you treat them and feed them over the winter and everything else.175

William Irvine added that without the security of a longer-term tenancy, there was little reason for farmers to invest in improvements to land which might make it more productive.176

93.We heard that fiscal policy can be used to incentivise landlords to grant longer-term tenancies for agricultural land.177 The Republic of Ireland has already employed this approach: in 1985 it introduced tax-free allowances on income from agricultural land, which increase based on the length of the lease. The level of relief was subsequently increased, most recently in 2014.178 The latest figures available from the Republic’s Revenue Commissioners show that the number of landowners taking advantage of this relief increased from 3,980 in 2012 to 8,490 in 2016, suggesting that landowners are increasing their use of longer-term tenancies.179

94.DAERA’s consultation paper on agricultural policy raises the connection between land tenure and investment, and proposes steps that could encourage a transition away from conacre arrangements to longer term leases. The consultation paper supports the view that longer term leases can enable “longer term perspectives” and create “improved opportunities for participation in agri-environment schemes.”180 DAERA suggested that fiscal and tax measures could create incentives for landowners to offer longer tenancies to tenant farmers, adding that “Northern Ireland needs to ensure that it has a mechanism to make its voice heard in the setting of UK fiscal policy.”181

95.Health and Harmony’s proposals are for England, where conacre agreements do not exist, and so the consultation does not consider this issue directly. The paper does state that the Government “will explore new business models and the scope for reforming agricultural tenancy laws to support succession planning and remove barriers to investment.”182 The Minister told us that the Office for Tax Simplification is currently examining agricultural property relief, but noted that tax policies designed to incentivise certain behaviours could also have unintended consequences. He also said that some sectors benefit from the flexibility of having a short-term let, giving the examples of potatoes and short-term grazing.183

96.We heard that the use of short-term conacre agreements makes it difficult for farmers in Northern Ireland to plan for the future, inhibiting the development of agricultural land. The evidence we heard from farmers in these sectors was strongly in favour of reform. We consider that reform is long overdue. The Government and DAERA should pilot approaches for incentivising the use of longer term tenancy agreements for agricultural land in Northern Ireland, including tax reliefs for landlords who grant longer term tenancies. These pilots should be ready to run during the 2019–20 financial year.

91 Defra, UK CAP allocations announced, 8 November 2013

92 Q2

93 DAERA, Farm Incomes in Northern Ireland 2016/17, March 2018, p 16,

94 Ibid. p 16,

95 Northway Mushrooms (AGR0007)

100 Nature Matters NI (AGR0006)

103 Ibid., p 20

104 Agriculture Bill, Clause 5

105 Ibid., p 7

106 Ibid., p 20

107 Ibid., p 32–35

108 Ibid., p 21

111 Ibid., Clause 5

112 Ibid., Clause 5

113 Explanatory Notes to the Agriculture Bill [Bill 266, (2017–19)—EN]

114 Agriculture Bill, Schedule 4

116 Ibid., p 13

117 Department for Environment, Food and Rural Affairs, Guidance: Farm payments if there’s no Brexit deal, 23 August 2018; Department for Environment, Food and Rural Affairs, Guidance: Receiving rural development funding if there’s no Brexit deal, 23 August 2018

122 Dr Viviane Gravey and Dr Mary Dobbs (AGR0002), p 2; Professor Joseph McMahon (AGR0015), p 2

125 Q2; Prof. Joseph McMahon (AGR0015), p 2

130 Prof. Joseph McMahon (AGR0015)

132 Ibid., p 29–31

133 Nature Matters NI (AGR0016), p 3

141 HC Deb, 9 July 2018, Col 784 [Commons Chamber]

149 Agriculture Bill, Schedule 4(4)

163 Farm Inspection & Regulation review, July 2018 Interim report, p 4–8

169 Horticulture Forum for Northern Ireland (AGR0003)

178 Department of Agriculture, Food and the Marine, Income Tax Measures, Accessed 30 July 2018

181 Ibid., p 26

Published: 22 October 2018