Brexit: priorities for Welsh agriculture Contents

5Agricultural policy post-Brexit

49.The EU has been instrumental in setting agricultural policy—most importantly through the Common Agricultural Policy—for more than 50 years. The EU is currently considering the next round of reforms and financial settlement for CAP, which will determine future policy and funding across the EU. The UK’s withdrawal from the EU will mean that powers over agricultural policy will return to the UK, and decisions made by the EU will therefore not apply to the UK or Wales. Decisions will therefore need to be made about future agricultural policy across the UK, including for Wales.

Future policy

50.The detail of future agricultural policy for Wales will largely be a matter for the Welsh Government, subject to any common frameworks which are agreed between the UK and Welsh Governments. Nevertheless, the UK Government’s agricultural policy will still be of interest to Wales, particularly when it comes to the movement of agricultural produce between England and Wales. Indeed, at the Winter Fair, we met cross-border farmers with land in both England and Wales, who were particularly concerned about the need for consistency in regulations.

51.The Secretary of State for Environment, Food and Rural Affairs has expressed his desire—which was expanded upon in the Government’s Health and Harmony White Paper—to develop an agricultural policy for England that provides public money for public goods and incentivises innovation and environmental protection.75 He has contrasted this with the past operation of the Common Agricultural Policy, which has been criticised for focusing too much on direct payments for agricultural production.76 The UK Government’s February 2018 consultation paper stated:

For more than forty years, the EU’s Common Agricultural Policy (CAP) has decided how we farm our land, the food we grow and rear and the state of the natural environment. Over that period, the environment has deteriorated, productivity has been held back and public health has been compromised. Now we are leaving the EU we can design a more rational, and sensitive agriculture policy which promotes environmental enhancement, supports profitable food production and contributes to a healthier society.77

52.The consultation paper states that “leaving the European Union (EU) provides a once-in-a-generation opportunity to reform Agriculture”, and sets out “a range of possible paths to a brighter future for farming”. These include:

a)Incentivising methods of farming that create new habitats for wildlife, increase biodiversity, reduce flood risk, better mitigate climate change and improve air quality by reducing agricultural emissions;

b)Ensuring that public money is spent on public goods, such as restoring peat bog and measures which sequester carbon from the atmosphere; protecting dry stone walls and other iconic aspects of our heritage; and

c)Reducing disease through new initiatives that better monitor animal health and welfare.78

The Welsh Government Cabinet Secretary told us that, while the UK Government’s consultation on future agricultural policy was “for England”,79 that was not to say that there was nothing there which was of interest to Wales.80 The Cabinet Secretary noted that there were parts of Wales which were comparable to parts of England, and that while she expected agricultural policies for England, Wales, Scotland and Northern Ireland to differ, she told us that they probably would not “wildly” diverge.81

53.The Welsh Government is considering what future agricultural policy should apply in Wales, and has said that it “needs to address the substantial challenges of exiting the CAP and the Common Fisheries Policy through working closely with industry, communities and other partners to create dynamic, forward-looking Welsh agriculture and fisheries policies.”82 In February 2018 the Welsh Government Cabinet Secretary outlined five core principles that would underpin the vision for a new Welsh land management policy. These are set out below.

Box 2: Core principles for the Welsh Government’s post-Brexit land management policy

We need to keep farmers on the land. Welsh land must be managed by those who know it.

We need to ensure our agricultural sector can be prosperous and resilient in a post-Brexit future, whatever that may be.

Our new policy should centre on Welsh land delivering public goods for all the people of Wales.

Our system of support should be accessible to all. That means giving farmers the opportunity to continue to make a living from the land.

We must not turn our backs on food production. Where sustainable production is viable, we must help our farmers compete in a global marketplace.

Source: Welsh Government, Lesley Griffiths outlines her vision for land management in Wales post Brexit, 20 February 2018

The Cabinet Secretary added that the nature of farming and rural communities in Wales was different to other parts of the UK, and that “there is no one size that fits all”. She stated that she wanted to “start detailed discussion with stakeholders about the details and to get their input on what works.” To achieve this, she has “launched a new phase of intensive stakeholder engagement to work collaboratively on the details”, and would “establish new working groups to consider how best to deliver the principles”. She stated that this would enable the Welsh Government to “bring forward initial proposals for reform by summer recess”.83 In her evidence to us, the Cabinet Secretary stated that the future agricultural policy brought forward by the Welsh Government would focus on landscape, culture and communities.84 She also told us the Welsh Government was aiming for future agricultural policy to focus on public goods and public services, but that they were also looking at economic activities.85

Aims of future agricultural support payments

54.Post-Brexit, the UK will no longer be governed by the Common Agricultural Policy and associated support payments, and will be able to decide how much it spends on agricultural support, and towards what ends this is directed. We have heard that while the existing levels of subsidy may be necessary to protect farm income in the short term, in the longer term it would be important to ensure that the wellbeing of the agricultural sector and associated supply chains are sustained by healthy production, a strong domestic market, and world-wide trade.86 The Secretary of State for Environment, Food and Rural Affairs has expressed his desire to develop a subsidy regime for England that moves away from direct payments for land and provides public money for public goods and incentivises innovation and environmental protection.87 This approach would build on the approach already taken by the Common Agricultural Policy—where various streams of financial support are contingent on environmental measures or rural development goals.

55.There is clearly a desire within the agricultural sector for farms to profit from their produce, and not subsidies. John Davies, Deputy President of NFU Cymru, told us that it would be “absolutely great if the market delivered a fair return, and that is obviously our ambition going forward.”88 Responding to Mr Gove’s proposals for linking future agricultural support to public goods, Gwyn Howells, Chief Executive of Hybu Cig Cymru, told us that “there is a wide portfolio of public goods that farmers provide, not least of which is producing food for our nation.”89

56.Representatives of Young Farmers Wales also favoured a subsidy system geared more towards public goods, and argued that a new system could better support innovation. Jacob Anthony told us that in future agricultural payments should be structured so that they were “rewarding the people […] who are looking after the land and giving the public good back.”90 He said that the current system did not do that to its full potential. Cennydd Jones told us that he would “love to be able to farm without being reliant on subsidies”, because this would mean having a more efficient farm.91 Laura Elliott said that future support would have to “reward innovation and those farmers who are willing to be brave and try new things and push the industry forward”.92

57.We were also told that there was a need to challenge those who demonise farmers for receiving support payments. Jacob Anthony told us that farmers were putting this money “back into the communities, keeping the Welsh language going and supporting employment in areas that would have, quite frankly, nothing if it wasn’t for farmers.”93

58.While the UK Government has set out its intentions for future support for farmers in England, the Minister for Agriculture was clear that the design of future agricultural support for Welsh farmers would be a matter for the Welsh Government, telling us that “the Welsh Government will have a free hand to design their own schemes”.94

59.Welsh agriculture and particularly livestock farms are heavily dependent on income from the Common Agricultural Policy. While it is widely acknowledged that CAP is not without flaws, it has been very important to a lot of Welsh farmers, and this must be acknowledged. In the long-term we believe that farm income in Wales should be underpinned by strong domestic demand, world-wide export markets, care for the environment and responsible use of land, but it is clear that in the short-term ongoing financial support will be essential to sustain the agricultural sector in Wales.

60.We have heard evidence in favour of the principle of moving away from direct support to linking subsidies to public goods. It is, nevertheless, important that the public goods which are rewarded by future support mechanisms cover all of the contributions made by the agricultural sector. Future subsidies must also be designed around the UK’s long-term trade arrangements and be reactive to the market effects that external tariffs may have on exports and imports. Transitioning to a new system will need to be done in a way which ensures that farmers do not face a cliff-edge with regard to financial support.

The distribution of funds for agricultural support

61.Welsh agriculture, and livestock farms in particular, are far more dependent upon payments from the Common Agricultural Policy (CAP) than their English counterparts—in some cases this can account for 80% of farm income in Wales, as compared to an average of 55% for the whole of the UK.95 For the most recent round of allocations England, Northern Ireland, Wales and Scotland received the same proportion of the CAP budget as they did in the previous round. These allocations are set out below.

Table 1: UK CAP allocations, 2014–20 (€ million)

	UK	England	Scotland	Wales	NI
Pillar 1	25,061	16,421	4,096	2,245	2,299
Pillar 2	2,580	1,520	478	355	227
Total	27,641	17,941	4,574	2,600	2,526
% of total		65%	17%	9%	9%

Source: Department for Environment, Food and Rural Affairs, UK CAP allocations announced, November 2013

62.While the UK Government has been clear that future support mechanisms for Welsh agriculture will be a matter for the Welsh Government, almost as important as the design of the subsidy system is the amount of money which will be available to the Welsh Government to fund it. The UK Government has guaranteed that total spending on agricultural support will remain the same until the end of the current Parliament, under the expectation that this will be 2022,96 and has said that this will involve paying the “same cash funds”. The Minister for Agriculture told us that it was not clear what the total level of UK funding for agricultural support would be post-2022, but told us that total UK spending on agricultural support would be a spending decision for the UK Government.97

63.Addressing the distribution of funds within the UK, in November 2017 the Minister for Agriculture said that the Government was “committed to delivering an approach that works for the whole of the UK and reflects the needs and individual circumstances of Scotland, Wales and Northern Ireland.”98 He told us:

the strong representations that we are getting from the industry and, indeed, from the devolved Administrations, are that the preference is for a dedicated ring-fenced agricultural fund, rather than a Barnettised approach. We understand the preference of both industry and the devolved Administrations.99

The Barnett Formula is used to determine funding for Wales in other areas, and is based on population share. The Minister said that he would not rule out any change to the allocations across the UK, but for the short-term said that these would “remain in a similar ballpark”. He did acknowledge that “it will be important that we work out how [funding] is allocated around the UK, so that each Administration has the funding it needs to implement its schemes and to fund a transition from the current scheme […] to wherever they want to end up.”100

64.The Welsh Assembly’s Climate Change, Environment and Rural Affairs Committee heard evidence from various environmental and agricultural interest groups arguing that funding should not be subject to the Barnett Formula.101 NFU Cymru told that Committee that using the Barnett Formula to allocate agricultural funding would result in 40% less funding for Wales.102 Similarly, the Welsh Government Cabinet Secretary told us “we obviously do not want it to be Barnettised”, but said that she thought that the prospect of the Barnett formula applying to agricultural support was probably a red herring.103 The Cabinet Secretary confirmed that “any funding that comes back from the UK Government will be ring-fenced for agricultural support”.104

65.At present funding from the Common Agricultural Policy is set by the EU for 7-year periods, which provide farmers with a clear indication of the level of support they are likely to receive over the coming years. These funding allocations are made at an EU level, meaning the commitments are not affected by UK parliamentary elections or budget decisions. The current Government has confirmed that agricultural support will remain the same for the duration of the current Parliament, but it remains to be seen how future funding settlements will be set, how many years they will cover, and when devolved administrations would receive their share of these funds. Uncertainty about future funding is clearly a concern for the sector, as evidenced by farmers at the Winter Fair who called for clarity about future funding allocations. This is a point which was reinforced by the Cabinet Secretary.105

66.In terms of arrangements for ensuring that funds transferred to the Welsh Government in respect of agricultural support are spent on this area, the UK Agricultural Minister noted that “the strong representations that we are getting from the industry and, indeed, from the devolved Administrations, are that the preference is for a dedicated ring-fenced agricultural fund”.106 When we asked the Welsh Government Cabinet Secretary about this, she told us: “Both the First Minister and myself have said publicly that any funding that comes back from the UK Government will be ring-fenced for agricultural support, which I think reassured the sector.”107

67.It is essential that, post-Brexit, Wales receives its fair share of funding for agricultural support. We welcome the reassurances from the UK Government that allocations for agricultural support will remain broadly the same over the next few years, but work needs to be undertaken as a matter of urgency to determine how future agricultural support will be distributed across the UK. We recommend that—before Committee stage of the Agriculture Bill in the House of Commons—the UK Government agree with the devolved administrations a mechanism for future allocations of funding for agricultural support.

68.We welcome the commitment from the Welsh Government that any funding that is provided by the UK Government will be ring-fenced for agricultural support. This ring-fencing will be essential to ensure that farmers in Wales do not lose out compared to farmers in other parts of the UK.

69.Farmers and the businesses they operate depend upon certainty, and it is critical for the future of Welsh farming that they can plan for the long term. Post-Brexit, it will be important that farmers and the devolved administrations have a similar level of certainty about future agricultural support as is currently provided under the Common Agricultural Policy. Urgent consideration needs to be given to how this will be achieved, particularly in relation to the process for making budgetary commitments at a UK level, and providing funds to the devolved administrations for devolved areas of spending. We recommend that the UK Government set out, in its response to this Report, how this certainty will be provided.