Common Agricultural Policy Single Payment and Support Schemes (Cross-compliance) (England) Regulations 2005

My Lords, I thank both noble Lords for their comments. They will forgive me if I make two speeches into one. I am grateful to the noble Baroness for speaking to the two sets of regulations together. As regards organic farming, this week I attended an organic arable farmers conference and it is clear that the Government have given them some help. They are not the biggest part of the organic market, which has much more to do with livestock. However, the answer to the noble Lord’s question is, ““Yes””. The statutory instrument on cross-compliance consolidates those made for the first year of cross-compliance, 2005, and makes some amendments. It amends the original statutory instrument by clarifying certain of the standards of good agricultural and environmental condition as well as providing for further exceptions to ensure additional flexibility for farmers in meeting the standards. Secondly, it introduces an additional good agricultural and environmental condition standard—GAEC—which requires farmers to prepare a soil protection review—a simple soil management plan—in accordance with the Secretary of State’s decision in 2004 and following consultation with the industry. A soil protection review requires farmers to identify soil-related problems on their holding and to select, using their own experience and guidance from Defra, appropriate means for tackling them. This is less restrictive and burdensome than setting down blanket requirements, and it allows farmers to use their knowledge and expertise. Thirdly, it designates the necessary competent control authorities—inspection bodies, in other words—to enforce the other part of cross-compliance, which is the new statutory management requirements. Under EC regulations, we are obliged to put in place the necessary mechanisms for enforcement. That includes having the competent control authorities in place as of January this year. In June 2003, the EU council of agriculture Ministers agreed what amounts to the most important reform of agricultural policy in generations. Key to that reform was the introduction of the single payment scheme in 2005 that gives farmers greater freedom to farm to meet the demands of the market by decoupling subsidies from agricultural production. It also helps to reduce the negative impact of farming on the environment by removing artificial incentives to intensify production. It simplifies the subsidy system by consolidating 11 previously separate CAP payment schemes into one. SPS claimants in England have to meet a new base-line standard for agriculture, known as cross-compliance, in return for some £1.6 billion of public money each year. Cross-compliance sets standards for farmers that have public benefit and contribute to a range of government objectives, such as improving compliance with environmental standards, public and animal health, animal welfare and promoting other aspects of good farming practice. These standards aim to reduce the negative impact of farming. They support the protection of well loved features of the English countryside, such as hedgerows, and introduce a safeguard for stonewalls, which are a characteristic feature of many of our uplands. In addition to these benefits, the single payment scheme is estimated to lead to an economic benefit to the farming industry of up to £100 million as a result of improved market orientation of farm businesses and farmers being freed from many of the rules and distortions associated with production-linked subsidies. It is also estimated that, when it is up and running, it will contribute to an average reduction of 15 per cent in paperwork for farmers. The noble Baroness and I share the view that there is too much paperwork for farmers at present. The cross-compliance measures that we have introduced in England are consistent with the EU Commission’s requirements. They build on existing legislation and good farming practice standards and aim to optimise the environmental benefit without resulting in any undue burden on farmers. Statutory management requirements comprise a number of articles from 19 EU directives and regulations applicable to farmers. They cover the environment, public, plant and animal health and animal welfare. Member states have no flexibility over the introduction of the SMRs; most were already in force in England prior to cross-compliance taking effect. Standards of good agricultural and environmental condition offer some scope for national or regional discretion by member states within an EC regulations framework, but it is limited to the setting of requirements that avoid land abandonment, protect soils and maintain habitats. Since agriculture is a devolved matter in the UK, the GAC standards that we have developed apply to England. However, we have worked closely with the devolved authorities to ensure that the standards are as consistent as possible, while reflecting regional priorities. The statutory management requirements will affect all the devolved administrations, but the GAC standards, where there is some discretion, apply to England. We believe that the devolved administrations will have similar standards. The standards in England set simple, common-sense standards for farming practice and have been developed in close liaison with the industry and stakeholders, including a full public consultation. Many of them reinforce existing law or codify existing guidance, but some cover new ground that has not been traditionally regulated; for example, the management of soil and of hedgerow and watercourse margins. Member states have limited flexibility under the regulations in setting up the inspection and enforcement system for cross-compliance, including provisions on penalties. The regulations require member states to carry out on-farm inspections on at least 1 per cent of the single payment scheme claimants each year to check for adherence with the full range of cross-compliance standards. Inspections must be made by competent control authorities with the expertise necessary to carry out the effective controls. Penalties are applied in a proportionate way, according to the extent, severity and permanence of the breach, in line with the framework set out in the EC regulations. We attempt to use a light touch. Warning letters rather than penalties are issued where appropriate. But I have to tell the House that a recent EU audit asked why there were not greater penalties in our scheme. We think it is important, while behaving within the regulations, to use as light a touch as possible in this field. Without these statutory instruments we would, of course, face a risk of disallowance of Community funds for not having the appropriate mechanisms in place to administer and enforce the new 2006 cross-compliance requirements. On set-aside, which is the next statutory instrument we are debating, I shall be as short as I possibly can and I will try not to repeat myself. These changes follow the department’s review of the set-aside management rules during the first year of operation of the single payment scheme and the new cross-compliance requirements. We have been able to incorporate a number of changes suggested by stakeholders. The rules relating to set-aside represent, as they always have, one of the more complex elements of, in this case, the single payment scheme. We provided a guidance booklet for farmers to assist them in understanding and complying with their obligations. We will do everything we can to help if further clarification and flexibilities are sought as the scheme beds in over the next couple of years. It has been suggested that compulsory set-aside is incompatible with a fully decoupled system. We can see the logic in that argument. During the CAP reform negotiations, we fought hard for compulsory set-aside to be discontinued, but, at the end of the day, it formed part of the reform deal, which we think brought many benefits. While compulsory set-aside continues to exist, we will seek to maximise the environmental benefits it can deliver—in particular, the use of set-aside strips alongside hedges, watercourses and SSSIs, which provide food and habitat for farmland hedgerow birds and protect water quality. I will not repeat what I had to say about the single payment scheme. The noble Baroness said that we would pay the bulk of the single payment scheme in February and the rest in March. What I have always said, and what I announced on 31 January, was that we would begin the payments in February and pay the bulk by the end of March. I hope I have answered some of the points made. On waterlogging, the standard is the same as last year. We do not believe we are gold-plating. We are trying to stay within the regulations but not to gold-plate. With regard to standards in devolved areas, those are similar in Scotland, Wales and Northern Ireland.