Twelfth Special Report

The Environment, Food and Rural Affairs Committee published its Sixth Report of Session 2017–19, The future for food, farming and the environment (HC 870), on 6 June 2018. The Government response was received on 18 September 2018 and is appended to this report.

Appendix: Government Response

Introduction

The Government welcomes the Environment, Food and Rural Affairs Committee’s report, ‘The future for food, farming and the environment’.

We are pleased that the Committee welcomed the level of ambition in Defra’s ‘Health and Harmony’ consultation document and that it supports the proposal for a new funding system based on the principle of ‘public money for public goods’.

During our consultation we asked for views from those in the industry to make sure our future land management system reflects the reality of life for farmers and food producers. Over forty thousand responses were received, all of which were analysed and will be used to inform future policy. The Agriculture Bill (‘the Bill’) was introduced on 12 September.

Among the proposals set out in the consultation document the Government sought views on:

• Options for gradually phasing out Direct Payments;
• The range of public goods that will qualify for funding under new schemes;
• Measures to move toward a more efficient and fairer inspection and enforcement regime; and
• New business models and incentives for industry to support innovation and increase profitability.

The aim of the consultation document was not to outline detailed policy on the areas set out above and those raised in the Committee’s report, but to set a clear direction for future farm support in England—our proposal to spend public money on the things which have public value—without being overly prescriptive about how this would be achieved.

During the consultation period, the Government engaged with a wide range of stakeholders to ensure that we elaborate an agriculture policy which benefits British farmers, the environment, animal welfare, consumers, taxpayers and the wider rural community. In addition to the written responses to the consultation, officials from Defra, Natural England, the Rural Payments Agency, the Forestry Commission and the Environment Agency facilitated 17 regional stakeholder events in England across a six-week period, each co-hosted by Defra with a stakeholder organisation. Over 1,250 people attended these events, including a mix of farmers, land owners, agronomists, environmental specialists and other interested stakeholders.

We were delighted with the level of engagement we received during the consultation period and the Government is committed to continually involving these stakeholders in all stages of policy design.

The Agriculture Bill, sets the foundations for a future agriculture policy underpinned by the payment of public money for public goods, to deliver policies that seize the opportunities of EU Exit and work for industry in their crucial role as food producers. The Bill will enable us to continue to support a farming sector that is competitive, productive and profitable; to protect our precious natural environment for future generations; and to deliver on the manifesto commitment to set foundations for future policy as we exit the EU.

This Government response addresses the recommendations made in the Committee’s report in turn.

Leaving the Common Agricultural Policy

1.The evidence from a range of agricultural businesses indicates that their sectors will face significant impacts from the proposed withdrawal of Direct Payments. The level of impact will vary by sector as the economics of each are so different. There are likely to be particularly damaging effects on grazing livestock, cereal and mixed farms and the withdrawal of support and any subsequent closures of businesses could have wide reaching impacts on the rural economy and its communities. As in our Brexit: Trade in Food report, we were disappointed that these impacts have not been thoroughly assessed by Defra on a sector-by-sector basis, to then inform future agricultural policy. (Paragraph 34)

2.We recommend that Defra produces a thorough sectoral assessment of the withdrawal of Direct Payments in response to this Report. Production of this assessment will allow Defra to better target the additional support that will be required by small and medium-sized farms and businesses in especially vulnerable sectors. (Paragraph 35)

On 13 September Defra published an ‘Analysis of the impacts of removing Direct Payments’ and an ‘Analysis and Economic Rationales for Government Intervention’ following introduction of the Agriculture Bill. These assess the costs and benefits of proposed changes to the Direct Payments system, including impacts on businesses in the farming sectors. Further information on our proposal on the reduction for Direct Payments and the introduction of the new environmental land management system is covered within our responses to recommendations 4 and 5.

3.We are concerned to hear that there have been minimal discussions between Defra and the Treasury over the future funding of the new agricultural policy. There was a legitimate fear among our witnesses that without early commitments to funding levels, well in advance of 2022, promises on funding levels following the transition period cannot be “guaranteed”. Any new stewardship scheme must be sufficiently resourced to achieve the Government’s commitments to restoring the natural environment. The Government should commit, in response to this Report, to fully fund the future agricultural policy and ring-fence the funds that are released from the withdrawal of Direct Payments to fund the rural economy and the environment. (Paragraph 36)

It is incorrect to say that there have been minimal discussions between Defra and the Treasury over the future funding of the new agricultural policy. We have been in regular contact with HMT at both ministerial and official level. We will continue to work closely with the Treasury and Devolved Administrations on the longer-term agriculture funding arrangements that will apply post 2022.

We are committed to moving to an agriculture policy through which public money will be given for the provision of public goods, to make our environment a better, richer place that can be enjoyed for generations to come. This Government has pledged to continue to commit the same cash total in funds for farm support until the end of the parliament, expected in 2022. This is a greater level of security and certainty for farmers and landowners than anywhere else in the EU, where funding is guaranteed only to 2020. We have also confirmed we will pay the 2019 Basic Payment Scheme on the same basis as we do now.

By phasing out Direct Payments we will free up funding to reinvest into the delivery of public goods. We will introduce the new land management system gradually, as part of a planned and controlled transition. This will help farm businesses become increasingly resilient, internationally competitive and better equipped to protect our environment.

4.The consultation lacks specifics. We have noted above the absence of a thorough analysis of the effect of the withdrawal of Direct Payments and Defra’s seeming lack of urgency in ensuring guaranteed funding for agriculture after 2022. We trust that these weaknesses will be remedied in the Government’s response to this Report. (Paragraph 37)

5.In addition, to promote clarity in English agriculture, we recommend that Defra confirms as soon as possible:

• The timing and length of the “agricultural transition” period that gives farm businesses a reasonable time to plan and adapt;
• the status of cross-compliance and “greening” conditionality during the transition period; and
• that all existing environmental schemes will be supported to their completion. (Paragraph 38)

We know farmers need stability, certainty and a smooth transition to a new system and our ‘Health and Harmony’ consultation sought views on the length of the transition and the conditions that should be attached to Direct Payments during this period. Clause 5 (agricultural transition) of the Agriculture Bill sets out that the agricultural transition will last for a period of seven years from 2021.

We plan to start reducing Direct Payments in 2021 and for them to be completely phased out by the end of the transition, with the last payments being made for the 2027 scheme year. This seven year agricultural transition will give farmers sufficient time to adapt and prepare for the new environmental land management system, which will be piloted and rolled out during the transition.

The Government wants to send a clear message that we are leaving behind the Common Agricultural Policy and the system of Direct Payments. Over the transition period we will simplify the application of the current CAP cross compliance requirements, within the rules of the implementation period. We will delink payment from the land, giving farmers much greater freedom over how they use the funding they receive from Direct Payments.

The Agriculture Bill will enable us to continue to run Rural Development (Pillar 2) legacy schemes. The Government has committed to continue to make payments and honour, where they continue to offer good value for money, those agreements farmers have entered into under Pillar 2 schemes that will extend beyond EU Exit.

Clause 11 (rural development) of the Bill provides the Secretary of State with the power to modify retained EU legislation relating to Rural Development in England. This will allow for the early introduction of improvements to the operation of existing schemes, based on lessons learned while operating under the CAP, such as the introduction of more flexible start dates for new agreements or simplification of how schemes are enforced. This will simplify the application process and make schemes easier to run. Clause 1 (financial assistance) can be used to introduce new schemes once these have run to completion.

Increasing farm competitiveness

6.Productivity in agriculture is falling behind many of the UK’s competitors and improving this will be vital to deliver on the Government’s ambitions. As drafted, the consultation fails to address this and the other barriers limiting farm productivity. (Paragraph 57)

7.We recommend that the Government produces a farm productivity plan by May 2019 at the latest. This could include, but should not be limited to:

• A review of the requirement for the rationalisation of existing advice centres for the dissemination of independent evidence, advice and knowledge to improve on farm uptake of new technologies;
• a thorough investigation of new tax breaks to assist farmers to invest in technology in conjunction with the measures already announced;
• further details on what measures could be funded under capital grant support;
• funded facilitation for farmers working together and leading projects;
• closer work between Defra and DCMS to improve mobile and digital infrastructure which will be critical to the success and development of the rural economy; and
• clarify the form and funding of the successor to the agri-tech fund. (Paragraph 58)

We have a bold ambition for the future of food, farming and the environment, where farmers, growers and foresters continue to produce high-quality food in a flourishing natural environment. Producing food and plants can go hand-in-hand with effective management of the land and delivery of other public goods, including improved water and soil quality, clean air, and increased biodiversity.

The policy statement published on 13 September in response to our ‘Health and Harmony’ Consultation sets out our path for English agriculture for the next ten years and outlines how we intend to support food producers to sustainably improve productivity while effectively managing the land.

Across the industry there are opportunities for food producers to improve productivity in a way which leaves the land in a better state for future generations. We will support sustainable productivity improvements, pioneering the use of farming techniques that use resources more efficiently, and reduce emissions, pollution, waste and soil erosion.

In line with this, subsection (2) of clause 1 (financial assistance) of the Agriculture Bill will enable the Secretary of State to give financial assistance for improving the productivity of agricultural, horticultural and forestry activities. This could be used to enable farmers to invest in equipment to both increase productivity and deliver environmental benefits, such as grants or loans to enable purchase of precision application equipment for slurry. Equipment that would enable farmers to reduce the quantity of fertilisers used, thus reducing costs as well as reducing ammonia emissions.

The Policy Statement outlines our proposals for how we will do this, including by working with the industry to improve the dissemination of knowledge, supporting on-farm investments to make better use of resources, facilitating farmers to work together, and investing in agri-tech research and development.

Supporting the industry to improve skills and share knowledge and advice

The Government established the Food and Drink Sector Council to work in partnership with industry to improve productivity and sustainability across the sector. We will continue to support the Sector Council’s Agricultural Productivity Working Group as they build a coordinated knowledge exchange and skills system, and explore further opportunities for promoting benchmarking and farmer to farmer learning.

Enabling investment

We recognise that the ability to make investments is crucial for farmers to be able to increase their productivity through more efficient techniques and use of resources. Between 2017 and 2018 Ministers announced £120 million of funds made available for projects in England which improve productivity in the farming and forestry sectors.

During the transition into the new system, we will also provide support for farmers to invest in equipment, technology and infrastructure that will help them to deliver public goods, improve their productivity and resilience, and put them in a strong position to take up offers through environmental land management.

Encouraging farmers to work together

We want to encourage a stronger culture of cooperation, transparency, and fair dealing as part of a modern, 21st century food chain. In February 2018, Ministers announced that up to £10 million of funding will be made available to support projects which enable farmers and growers to improve their efficiency and competitiveness, access new markets, and strengthen their position in the supply chain through cooperation.

We also intend to continue to recognise Producer Organisations (POs) and retain existing competition law exemptions under clause 22 and clause 23 of the Agriculture Bill respectively. Under the current EU regulation, recognised POs benefit from a number of exemptions from competition rules which enable farmers to collaborate in ways that make markets work in the interests of producers and consumers (for example through joint production planning and processing). Existing EU regulations will be converted into domestic law by the European Union (Withdrawal) Act 2018 in order to minimise disruption for existing POs. A domestic PO regime will be created under which any new PO will be recognised and to which existing POs will eventually transition.

The conditions that will apply to groups of producers wishing to apply for recognition under the new domestic regime are laid out in clauses 22–24 of the Agriculture Bill. These have been kept broadly consistent with the substance of the existing regime, and the Bill includes powers for the Secretary of State to specify the details of these conditions. These clauses also establish, through amendments to the Competition Act 1998, the exemptions from competition law that are available to recognised organisations.

Improving mobile and digital infrastructure

Defra already works closely with DCMS over improvements to broadband and mobile connectivity in rural areas. The Secretary of State for Environment, Food and Rural Affairs has regular discussions with the Secretary of State for Digital, Culture, Media and Sport including on how the Future Telecoms Infrastructure Review should address the need for greatly improved digital connectivity in rural areas. The review was published on 23 July and contains ambitious proposals for improving connectivity in rural areas. In addition, Defra Ministers attend the Digital Implementation Taskforce and the Department is also represented on a number of groups including the Cross Whitehall Telecoms Strategy Board, Barrier Busting Taskforce Project Board and Local Connectivity Group.

A successor to the AgriTech fund

The AgriTech strategy was launched in 2013 and has stimulated businesses and academia to work together on over 100 research and development projects to improve agricultural productivity.

In the future, we want to give farmers a greater say in the strategic direction of research funding to improve take-up of technology on farms. We will work with industry and other partners to develop ambitious new approaches to R&D that build on the AgriTech Strategy and the Transforming Food Production initiative under the Industrial Strategy. We will focus on developing R&D funding to support high quality research, through:

• targeted support for collaborative R&D in priority areas, including environmental outcomes and soil health;
• industry-led research syndicates, with groups of farmers coming together to deliver practical solutions and commission research projects with academia that improve the translation of R&D onto farms; and
• encouraging short experimental projects, such as funding for trialling new ideas for different varieties and methods.

Public money for public goods

8.We heard widespread support for the inclusion of animal health and welfare within the new policy of public money for publicgoods. We recommend that Defra commits to exploring how the funding of animal health and welfare as public goods could be achieved through trials during the agricultural transition period. (Paragraph 75)

We will continue to be a world leader in animal welfare after we leave the EU by maintaining and strengthening the UK’s already world-class welfare standards. We want to work with stakeholders to define enhanced standards that go beyond our legislation, focusing on quality of life indicators as well as safeguarding health and welfare. As part of this we will consider ways to encourage farm management methods that enhance animal welfare. We also want to work in partnership with industry and the veterinary profession to reduce the impact of endemic diseases and health conditions. We want to develop a range of actions and tools in partnership with industry and vets, sharing our expertise to ensure that interventions are effective.

Subsection (1)(f) of clause 1 (financial assistance) will enable the Secretary of State to support action by farmers, vets and other organisations to improve animal health and welfare, reduce endemic disease and keep livestock well maintained and healthy. Examples of how this could be given include, measures to incentivise participation in 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.

9.The consultation paper lacks discussion of wider food policy and has failed to link agricultural policy to wider public health goals and reducing diet-related diseases. Healthy food makes a wider contribution to public health, which is in the public good and we recommend it should be supported as such under the new model of awarding payments to farmers. (Paragraph 76)

We agree that the consumption of healthy food makes an important contribution to public health. We also recognise the role of farmers in producing high-quality food while also protecting our countryside. Our future policy will allow farmers to continue to provide a supply of healthy, home-grown produce made to high environmental and animal welfare standards. Not only can the way in which our food is produced improve our air, water, soil and biodiversity but it can also support healthy food production. Defra is aware of various research reports and industry initiatives, for example, which support the view that pasture based livestock systems can lead to higher levels of Omega 3 and lower levels of saturated fats in red meat. This would be an example of where policies to support certain production systems could contribute to positive health outcomes.

However, eating healthily is ultimately a consumer choice, and we have put in place a range of measures to promote and enable this. This includes enforcing high food standards and promoting information for consumers, such as statutory nutritional labelling and public health campaigns to promote ‘five a day’ and balanced diets. Other measures to support demand for healthy food including subsidising fresh fruit for children in schools.

We take the view that the market remains the best way to reward the production of good-quality food. Paying farmers to produce healthy food would not necessarily result in the desired outcome of a wider contribution to public health. Farmers may be the wrong target to incentivise consumers to eat healthy food, especially where primary produce travels through the supply chain via food processors and manufacturers before it is turned into the final product that consumers purchase.

Our future agriculture policy will encourage the provision of environmental public goods, which are not provided by the market, and which can play a vital role in improving the physical and mental health of the nation. This is enabled by clause 1 (financial assistance) of the Agriculture Bill. For example, maintaining and improving the quality of our water not only underpins sustainable food production, but also protects our supply of clean drinking water, improving public health. Public access to the natural environment can improve mental health and reduce stress, anxiety and depression. It can support good physical health by encouraging physical activity and boosting the immune system. Enabling children to explore nature and have a relationship with the outdoors and help foster a greater understanding of where their food comes from, which could support better dietary choices in the future.

10.Defra should work to bring forward changes to Government Buying Standards to ensure greater use of healthy, affordable, British food in Government procurement. Defra should report back to us on progress in this area in six months’ time.(Paragraph 77)

On 25 June 2018 the Childhood Obesity Plan Chapter 2 was launched by the Department of Health and Social Care (DHSC) and supported by Defra. Schools have a fundamental role to play in helping equip children with the knowledge they need to make healthy choices for themselves, and in creating a healthy environment for children to learn and play. We remain committed to delivering the actions in our 2016 plan which set out our commitment to supporting all children with high quality nutrition and at least 30 minutes of physical activity per day while at school. To further support schools in their role we will:

• Be bold in our update of the School Food Standards to reduce sugar consumption. The update will be coupled with detailed guidance to caterers and schools so they are well prepared to adapt to the changes.
• Consult, before the end of 2018, on strengthening the nutrition standards in the Government Buying Standards for Food and Catering Services, to bring them into line with the latest scientific dietary advice.

Defra launched the Plan for the Public Procurement of Food and Catering Services in July 2014. The Plan sought to use the leverage afforded by the public sector’s £2.6bn annual spend on food and catering to improve standards without driving up costs. The Plan included a balanced scorecard approach to assessing the value of contract bids, taking into account the sustainability, quality and nutritional content of food used. The effect of the balanced scorecard is to encourage procurers to meet the voluntary elements of the Government Buying Standards for Food and Catering Services (GBSF). The balanced scorecard rewards producers and suppliers who exceed the minimum standards by, for example, serving seasonal food with a limited number of food miles, and promoting a wider choice of ‘healthy options’ in canteens.

Food and catering contracts agreed since 2014 must meet the mandatory elements of the GBSF. Returns from Departments indicate that all contracts renewed from that year up to the end of 2017 comply with the GBSF. However, a small number of sites where services are delivered via older contracts (those agreed before 2011) do not meet all of the minimum criteria. This will be addressed when these contracts are re-tendered.

Defra is planning a review of the GBSF and balanced scorecard to coincide with DHSC’s work to strengthen their Minimum Nutritional Standards (the existing standards already form part of the GBSF). We would be happy to provide a report of our progress in this work to the Committee.

11.We welcome the Minister’s assurance that the new environmental land management scheme will look to extend the success of existing schemes, such as those accredited by UKAS, and involve a wide range of organisations with experience of delivering environmental stewardship. We are further pleased to hear that the new land management system will be delivery-focused and non-bureaucratic. However, Defra has a huge task to ensure a lead agency and national framework are in place to start delivering its policy based on public goods. (Paragraph 89)

12.In response to this Report, Defra must assess which current public bodies are suitable to provide the coordination of its new environmental land management system. Given past performance of delivering rural payments and stewardship schemes, this must include an assessment of what additional skills and resources this body will require. (Paragraph 90)

The Government agrees with this recommendation. Under the CAP, the Forestry Commission, Natural England and the Rural Payments Agency all have roles to play in delivering agri-environment schemes. In designing the Environmental Land Management (ELM) system, we will draw on these experiences and capabilities, but are also likely to need new capabilities reflecting the new features of the new arrangements. One of the objectives of our testing and trials approach will be to test how the ELM system should best be delivered, learning from transformational programmes across Government and beyond to create a business model. This new system needs to be deliverable, operationally efficient, straight-forward for applicants and enable farmers and other land managers to provide significant and sustainable environmental benefits in return for payments.

13.Ensuring an effective minimum baseline of regulation will be vital to delivering the Government’s proposals to use public money to support public goods. Moves towards self-regulation and potential de-regulation following EU exit must not allow a ‘race to the bottom’. (Paragraph 97)

14.Without adequate funding to police an independent inspection regime, any system of ‘public money for public goods’ is flawed from the start. Separate from any increased funding made available to farmers and land owners to deliver public goods, the Environment Agency or equivalent public body must also receive a commensurate increase in funding to ensure public money is being legitimately spent under the new scheme; if needs be, a proportion of that increase could be funded through civil sanctions and fines to support a hypothecated catchment fund. (Paragraph 98)

Through ‘Health and Harmony’ the Government set out an intention to improve the effectiveness of inspection and enforcement. This is key to maintaining high standards post EU Exit and as recognised, underpins the objective of public money for public goods. Dame Glenys Stacey is currently conducting an independent review of farm inspection and regulation in support of the Government’s objectives.

We need both a clear regulatory baseline that is clear easy to understand and comply with, and an appropriate control regime to ensure that public money is spent appropriately to support farmers to deliver greater outcomes under our new Environmental Land Management system.

There are opportunities to improve the proportionality of enforcement by using a full range of tools and penalties, including new civil sanctions. The overall budget for inspections and enforcement will be considered in developing the business case for delivering the future agriculture policy.

Trade and labelling

15.We welcome Defra’s involvement in agri-food trade negotiations and the Minister’s statement that a trade agreement which did not allow beef to enter the UK if it did not meet UK standards is “quite possible to put together”. We recommend that, in response to this Report, Defra clearly states that it is Government policy that trade agreements should always contain provision to prevent food which does not meet our environmental, animal welfare and food safety standards from entering the country. (Paragraph 105)

Any future trade agreements must work for consumers, farmers, and businesses in the UK. We will not water down our standards on food safety, animal welfare and environmental protection as part of any future trade deals.

16.We reiterate our previous recommendation that the Government improves country of origin labelling following the UK’s departure from the EU and introduces mandatory method of production labelling. (Paragraph 106)

Country of origin information is required for unprocessed beef, pork, sheep, goat and poultry, fruit and vegetables, olive oil, fish and shellfish (whether pre-packed or loose), wine and honey. Origin labelling is additionally mandatory whenever omission might mislead consumers as to the true country of origin or place of provenance of the food.

Government and industry developed a set of voluntary principles for country of origin labelling and the majority of pre-packed food is now accurately labelled.

The UK Government has supported, in Europe, additional rules such that where an origin for a food is given, and the origin of the primary ingredient is different, consumers will be told either the origin of the primary ingredient or at least that it is not the same as that of the food. We will consider, following our exit from the EU how we can ensure full transparency for consumers about the food they buy, including how we improve origin labelling.

We already have some of the highest standards of animal welfare, underpinned by existing legislation and farm animal welfare codes. For example, the methods of production for eggs such as ‘free range’ and ‘barn’ and poultry meat (‘extensive indoors’, ‘free range’) are defined in law.

For pig meat, industry have produced a code of practice to clarify the pig production terms used on labels such as ‘outdoor reared’ and ‘outdoor bred’ which are widely used in the UK. Several of the main supermarkets voluntarily support and have signed up to ensuring that their labels are compliant with the code. Additionally, some supermarkets have dairy products where the cows spend a minimum amount of time outside and this information is provided to consumers.

This Government has made clear that we intend to retain our existing environmental and animal welfare standards once we have left the EU. The EU (Withdrawal) Act will convert the existing body of EU environmental and animal welfare law into UK law.

We are committed to maintaining our high animal welfare standards and to keep improving where possible. It was clear from the ‘Health and Harmony’ consultation that greater clarity on welfare standards and marketing terms would help consumers make informed choices, and the Government will look at options for this.

Devolution

17.After exit from the EU, each constituent part of the UK will be able to determine its new agricultural policy to address itsspecific needs. There may be areas where a common approach is helpful, such as in determining standards for plant and animal health and welfare. Regulatory alignment in these areas will support the functioning of the UK single market. Where these UK wide agreements are made, they must be agreed, following consultation, and with the support of the Governments of theconstituent parts of the UK. (Paragraph 113)

Leaving the European Union gives us the opportunity to determine the most appropriate level of government for powers that return from the EU, ensuring that decision making sits closer to the people of the UK than ever before. It is our intention that each administration has the freedom to design policies that support their farming sectors and enhance their environment.

Outside of the Common Agricultural Policy we can have an agriculture and land management policy that works for the whole of the United Kingdom. Intrinsic to our approach will be as much flexibility as possible for each devolved administration to design policies to meet their own circumstances as long as they are not detrimental to other parts of the UK.

The Agriculture Bill sets out primary legislation mostly for England. Following close engagement with the Devolved Administrations, the Bill will legislate for the Welsh Government and Department of Agriculture, Environment and Rural Affairs in Northern Ireland until they pass primary legislation in their own Administrations. Beyond the UK-wide provisions in the Bill ensuring the UK can comply with its WTO obligations, recognise Producer Organisations and establish Statutory Industry Codes, we will continue to work with the devolved administrations on non-legislative frameworks. Our aim is to have these in place before the end of the Implementation Period.