Defra committee suggests changes to farm policy

The House of Commons Defra Committee has some sensible and politically feasible suggestions in relation to recent Government farming policy.  Full report is accessible here: https://committees.parliament.uk/work/8722/the-future-of-farming/publications/

'Closing the Sustainable Farming Incentive 2024 (SFI24) without notice affected confidence in the Environmental Land Management Schemes (ELMS). This must be repaired to secure their future success. An alternative funding mechanism should be put in place to fill the gap in funding for those who missed out on the SFI24, and the Government should set out details of the next iteration of SFI as a priority. 

 We support the Government’s objective of reforming agricultural property relief (APR) and business property relief (BPR) to close the loophole that has encouraged wealthy investors to buy agricultural land to avoid inheritance tax. We are concerned, however, that no consultation, impact assessment or affordability assessment was conducted before the announcement of the reforms. 

The lack of proper evaluation of the impact of these changes 1 means that the scale and nature of its impact on family farms, land values, tenant farmers, food security and farmers in the devolved administrations is disputed and unclear. This comes with a considerable risk of negative unintended consequences. 

 Alternatives to the Government’s approach have been proposed, which may achieve the same policy outcomes while protecting vulnerable farmers. We are not in a position to assess the merits of each alternative but there is sufficient time for the Government to do so. Stakeholder concerns about the Budget’s taxation proposals have made it difficult for Government to articulate and deliver its wider vision. 

A pause in the implementation of the reforms would allow for better tax policy to be developed and the Government to convey a positive long-term vision. The Government should delay announcing its final APR and BPR reforms until October 2026, to come into effect in April 2027. This would also provide farmers with more time to seek appropriate professional advice.'

Farmers are unfortunately notoriously poor at succession planning and they need more time to adjust.

This time farmers have a justified grievance

Under the CAP farmers received a 'basic payment' with larger scale farmers getting more.  How this was spent was only loosely constrained so in practice it could be used for consumption as well as investment in the farm business.

Michael Gove came up with the idea of 'public money for public goods'.  In other words, farmers should be subsidised to farm more sustainably and benefit the environment.   (Note that we are talking just about England, policy in the devolved regions is different).

It took far too long to get the Sustainable Farming Incentive up and running and now it has been closed without the required six weeks notice because the money (£1.8 billion) has run out.   Uptake covers just 50 per cent of funding against a 70 per cent target.

Defra is not a 'protected' department and the Government is short of money as it tries to ramp up defence expenditure.  Nevertheless, some calculations suggest there could be headroom of £400m in the Defra budget.  Perhaps some extra money could be found, certainly wildlife groups hope so.   For a fuller critique: https://www.thetimes.com/article/510e633d-69f1-40fc-bba8-78ef0ce8d9c4

I think that farmers are increasingly realising that the Treasury is not going to back down on the changes to inheritance tax.   Some farmers are talking of going 'full French', but any government that surrenders to direct action risks its authority.

Personally I would have looked at reducing or eliminating the capital gains tax rollover relief for farmland sold for development, but that might be seen at odds with housing policy.

Farmers will still pay half the prevailing rate of inheritance tax and get 10 years back to pay the bill free of interest, a privilege the rest of us don't get.

Plenty of holes in Defra Farming and Countryside plans

The National Audit Office has reviewed Defra's Farming and Countryside programme and has a number of criticisms to make.   

The Farming and Countryside Programme aims to fundamentally change England’s farms. The stakes are high for the environment, food production and the viability of the sector. To achieve the Programme’s objectives, many farmers need to transform the way they farm, and Defra’s modelling shows the extent of productivity improvements that are needed for farm businesses to maintain viability.

Take-up of schemes is rapidly increasing, but some of what Defra is paying for now are actions that, for many farmers, do not result in significant immediate change to farming practices. Instead, they are expected to encourage farmers to do more for the environment in the long-term.

Defra expects the removal of direct payments to stimulate most of the required productivity improvements. It says it has seen some improvements already as farmers adapt to life without direct payments, but the evidence is inconclusive on whether the scale of change needed will be achieved.

Farmers need quality advice and support to adapt, but Defra has not yet ensured that they can access what they need. Around half of England’s farmers say they are not at all positive about their future in farming.

The Programme will continue to change, but Defra has not yet provided a long-term view of how it expects the Programme to develop, for example, in terms of the balance of funding between SFI and more ambitious schemes.

Defra’s iterative approach to Programme design makes it difficult for farmers to plan their businesses to remain viable, to continue to produce the food we need and to achieve the Programme’s environmental objectives. Currently, gaps in the Programme’s data on environmental outcomes is limiting Defra’s ability to fully understand the impact on the environment, or whether it is on track to achieve value for money.

Full report here: https://www.nao.org.uk/wp-content/uploads/2024/07/farming-and-countryside-programme-1.pdf

Defra's digital failures reveal wider problems

A critical House of Commons Public Accounts Committee report on how Defra is struggling to upgrade its ageing IT systems highlights broader problems in the department: https://committees.parliament.uk/publications/39847/documents/194104/default/.

The report notes: 'At the same time as addressing the challenges posed by legacy IT, Defra is undertaking a business transformation process which includes potentially major structural changes to Defra and its arm’s-length bodies. Defra does not currently have a vision of how the transformed Department and its organisations will operate.'

Defra has a reputation as one of Whitehall's weakest departments, in part because of ministerial turnover.  Ambitious ministers use it as a way station while others are put there as a parking spot for those out of favour.   Officials and lobby groups recently told the Financial Times that the department was becoming 'increasingly dysfunctional'.

A National Audit Office report in December found that  'Across government, risks to public services posed by ageing technology have been allowed to build up over many years and Defra has been affected more than most departments. Its systems and services are out of date, creating high risks of operational failure and cyber-attack, inconvenience for service users and additional staff and maintenance costs.' 

The NAO found that Defra did not have a plan for the wider digital transformation that was needed: https://www.nao.org.uk/reports/modernising-ageing-digital-services-defra/

Defra as a way station

The appointment of Therese Coffey as Defra secretary confirms that the department is a way station for ministers on their way up or on their way out.  Coffey lost her high prestige if somewhat meaningless job as deputy prime minister and, more importantly, the key role of health secretary.

Rishi Sunak wanted to make sure he included some Truss supporters in his government and no one was closer to Truss than Coffey.   The fact that Coffey represents a rural constituency is little consolation.

Some of the crucial decisions will be made elsewhere and not just at the Treasury.   Labour shortages in agriculture create a need for more seasonal visas, but Suella Braverman is unlikely to look on that need favourably given her views on migration.

Defra is something of a peripheral department in government, one of the last to be announced along with the likes of Welsh Secretary.   It lacks the clout it needs for some important tasks.

Profiling new Defra minister

The latest Defra secretary has no direct experience of agriculture: https://www.fwi.co.uk/news/farm-policy/ranil-jayawardena-announced-as-new-defra-secretary

The Minister of State does have a farming background: https://www.farminguk.com/news/former-chief-whip-mark-spencer-appointed-defra-farming-minister_61090.html

Eustice hardly impressed despite the farming connections he often referred to, but will this be another case of up or out?

Cabinet row over Australian trade deal

A battle royal is in progress in Cabinet on whether Britain should agree a tariff free trade deal with Australia.  Brexiteers think that if a trade deal cannot be concluded with Australia no deals will be possible for the new 'Global Britain'.

However, farmers - already reeling from the phasing out of support payments - are concerned that it could hit their markets and be a precedent for future deals, particularly those with the US and New Zealand.

On one side of the argument is international trade secretary Liz Truss.   On the other side is Defra secretary of state George Eustice, backed up by Michael Gove.   Gove is concerned that rural areas in Wales and Scotland would be hard hit, further undermining the union.   Reports are suggesting that Boris Johnson may come down in favour of the deal.

Beef and sheep meat would be the main commodities affected, although Australia is also interested in exporting more cheese.   There is a 20 per cent tariff on beef at present which would be phased out over 15 years.   

Australian farmers benefit from greater economies of scale, allowing them to undercut on price.  The writer well remembers visiting a huge drylot beef farm in New South Wales.

The RSPCA said Australia had lower standards on chlorinated chickens, sow stalls that confine pregnant pigs and growth hormone treatment for beef.

Farming's brave new world

Defra secretary of state George Eustice has set out government plans for the future of farming after Brexit: https://www.gov.uk/government/speeches/path-to-sustainable-farming

There is a lot of detail to absorb, but the key question is whether farms will be able to stay in profit.

NFU president Minette Batters commented on the agricultural transition roadmap: 'The rate at which direct support reductions will take place, which we understand will not be applied in other parts of the UK, leaves English farmers with significant questions. These payments have been a lifeline for many farmers especially when prices or growing conditions have been volatile and will be very difficult to replace in the first four years of this transition. Can Ministers be sure that new schemes will be available at scale to deliver redirected BPS payments?'

Government seeks to reduce emissions from urea fertilisers

The government has launched a consultation today seeking views on reducing ammonia emissions from solid urea fertilisers used for growing plants and crops.

Ammonia emissions are harmful to natural habitats and our rivers and lakes, as well as to human health, with 87% of the UK’s ammonia emissions coming from farming. The Government has committed to reducing ammonia emissions by 8% of 2005 levels by 2020, and a 16% reduction by 2030.

Taking action on solid urea fertilisers has the potential to reduce pollution caused by:

• Ammonia reacting with other pollutants – nitrogen oxides and sulphur dioxide – to form particulate matter (PM2.5) which is harmful to cardiovascular and respiratory health.
• Nitrogen deposited on sensitive habitats such as peat bogs. This leads to excess nitrogen in soils that damages the growth of certain plant species.
• Nitrogen leaching through the soil and surface run-off which pollutes water courses, causing harm to plants and animals and impacting on water quality.

The consultation presents three cost effective options:

• A total ban on solid urea fertilisers
• A requirement to stabilise solid urea fertilisers with the addition of a urease inhibitor - a chemical that helps slow the conversion of urea to ammonium
• A requirement to restrict the spreading of solid urea fertilisers so they can only be used from 15 January to 31 March While each of these options will support the Government’s commitment to reducing ammonia emissions, a ban on solid urea fertilisers would achieve around 31% of the ammonia reduction target by 2030.

Reducing ammonia emissions will significantly reduce nitrogen deposition to land and in turn help reduce damage to peat bogs, which are an important carbon sink, thereby helping to tackle climate change.

Up to half of the fertiliser evaporates, causing ammonia emissions that react with other pollutants to produce fine particles whose microscopic size allows them to penetrate the lungs and enter the bloodstream, making them the most dangerous form of air pollution.

Public Health England attributed the serious smog episode in London in April 2014 partly to agricultural ammonia emissions.

The fertiliser also causes excess nitrogen in soil which promotes growth of brambles, nettles and hogweed that then crowd out wild flowers like harebell and bird's-foot trefoil. Almost nine out of ten designated wildlife sites in England are damaged by excessive nitrogen.

Defra expects farmers to switch to using more ammonium nitrate fertiliser, which is dearer but causes less evaporation and which crops absorb more efficiently.

The ban is expected to cost farmers £132 million up to 2030 and result in an additional 388,000 tonnes of ammonium nitrate being required per year, according to Defra’s impact assessment.

Clear Air in London stated: 'Many more technical measures and lifestyle changes will be needed if we are to reduce ammonia emissions from cattle and agriculture generally which are a major cause of particle air pollution episodes in spring.'

Is it useless Eustice?

Despite his farming background new Defra secretary George Eustice got a rough ride at the NFU conference last week when he was booed by angry farmers. Farmers Weekly commented that 'Reassuringly, Mr Eustice already owns a pair of wellies, and knows his way around a farm.' In fact his practical farming involvement was some time ago and I own some wellies and make farm visits quite often, but that doesn't qualify me to be a Defra minister.

As Farmers Weekly admitted, the Defra secretary has tasks other than being a MAFF style spokesperson for farming. (Anyone interested in the history of MAFF and Defra's relations with farmers can have a copy of an unpublished paper I wrote on the topic). FW noted, 'Questions have also been raised over whether he is the big hitter farming needs … Whether Mr Eustice can hold his own against Cabinet heavyweights remains to be seen.' More generally they said, 'Too often in the past the Department has been a dumping ground for ministers of mediocre ability.'

Farmers were particularly annoyed that Mr Eustice was not prepared to relax the notorious 'three crop rule' other than through individual applications claiming force majeure.NFU president Minette Batters said farmers were hugely frustrated. 'We have left the EU, half the country is under water and [yet] we are still going to abide by the three-crop rule and process thousands of force majeure applications. It just seems absolutely extraordinary.'

However, we are still in the transition period and Mr Eustice has no powers to set aside what he rightly described as a 'barking' rule despite shouts of 'rubbish' at the conference. To me it is a classic example of the CAP's ability to come up with poorly designed policy instruments: the relationship with the intended outcome (improving biodiversity) was poor and the transaction costs high. The rule requires farmers with more than 30 hectares of arable land to grow at least three different crops.

Perhaps more importantly, he declined to commit the Government to upholding existing UK food standards in future trade deals with countries, such as the US, that have weaker regulations. 'I can't provide any such assurances,' he said.

A House of Lords amendment to the agriculture bill would bar the Government from signing trade deals that do not require imported foods to meet UK standards on food safety, animal welfare and the environment.

Defra sets out its stall

Defra has provided more details on how direct payments will be phased out in England and how the future Environmental Land Management Scheme will function, although arrangements after 2021 remain unclear: Plans for future greener farming

ELMS will have a three tier entry scheme. As far as the basic payment is concerned, farmers making a claim of more than £150,000 will be subject to a 25 per cent reduction in 2021, while those making a claim of up to £30,000 will be subject to just a five per cent reduction.

I welcome proposals on productivity and research and development. From 2021, new government grants will help farmers to invest in equipment and technology which will help them to increase their productivity and deliver environmental benefits. From 2022, Defra will support research and development projects to help our farming industry benefit from innovation, enabling farmers to produce food more efficiently and sustainably with lower emissions.

As far as smaller investments are concerned, 'Grants will be available for equipment, technology, and small infrastructure investments that will make an immediate difference to farm performance, including investments that help farmers use less inputs, reduce emissions, and cut waste, which will also benefit the environment.' These will be for specific, pre-determined items - in other words the devil is in the detail.

As far as larger investments (sum not specified) are concerned, 'These grants will be for higher-value or more complex investments, with the potential to bring transformational improvements to business performance. Eligible investments could allow for more efficient use of labour, provide opportunities to switch to alternative or more efficient production methods, reduce environmental impact or create opportunities for new business models and alternative ways of selling produce directly to customers.' These will be for priority outcomes, including the use of automation and robotics.

Cornish MP is new Defra secretary

George Eustice has been promoted from Minister of State at Defra to be the new Secretary of State. He is the MP for Redruth and Camborne.

Coming from a farming background, his family still run a fruit farm, restaurant and farm shop in Cornwall where they also have a herd of South Devon cattle and the country’s oldest herd of the rare breed of pig, the British Lop.

His appointment has been welcomed by the NFU.

The British Association for Shooting and Conservation (BASC) says the appointment of George Eustice as environment secretary signals the arrival of a ‘real countryman’ at the heart of government.

Christopher Graffius, BASC’s executive director of communications and public affairs, said: 'George Eustice is a farmer with a sound knowledge of the environment and rural affairs. His appointment means that we have a real countryman at the helm and this can only be of benefit to conservation, shooting and rural affairs.'

Dysfunctional CAP on its way out, but can farming meet climate change challenge?

The Agriculture Bill which will provide the basis for farm policy in England after Brexit has been published: A boost for the environment and food production

In line with the new policy approach developed by Michael Gove when he was secretary of state at Defra, it is claimed that 'It sets out how farmers and land managers in England will in the future be rewarded with public money for “public goods” – such as better air and water quality, higher animal welfare standards, improved access to the countryside or measures to reduce flooding. This will contribute to the government’s commitment to reaching net zero emissions by 2050, while at the same time, helping to boost farmers’ productivity.' [Farm productivity has been growing slowly.]

'This will replace the current subsidy system of Direct Payments which pays farmers for the total amount of land farmed, skewing payments towards the largest landowners rather than those farmers delivering specific public benefits.' Farmers have been highly reliant on those subsidies to keep their farms viable and the new form of payment is likely to generate a less certain income stream. Overall farm funding will be maintained at current levels, but not adjusted for inflation, for the duration of the current Parliament, i.e., potentially until 2024.

The main concern of farmers is not the domestic legislation but the prospect of imports of cheap food, produced to lower standards, as the result of trade deals: NFU president Minette Batters.

Much of the future for British farming will depend on the adoption of new technological innovations with the prospect of a digital revolution in farming that deserves to be encouraged by appropriate government funding.

Few of us will mourn the disappearance of the dysfunctional CAP which was not well adapted to British farming. However, the ability of British farming to adapt to climate change and reduce greenhouse gas emissions will be a big challenge for farmers. Recent extreme weather events in the UK including both droughts and floods have brought home the reality of climate change to the farming community.

Farmers concerned about lack of Defra continuity

The lack of ministerial continuity at Defra following the replacement of Michael Gove by Theresa Villiers concerns farming leaders: Farming reaction

She is the sixth Defra secretary of state since 2010.

Michael Gove had a very clear agenda in terms of emphasising public goods and environmental benefits in future payments to farmers. Whether Theresa Villiers will continue with this agenda remains to be seen.

Farmers have, however, welcomed the appointment of Norfolk MP Liz Truss, a former Defra minister, to the post of international trade secretary.

Therese Coffey, the MP for Suffolk Coastal, has been promoted to minister of state in the department.