My Lords, the matters in the five instruments are closely interrelated; I hope it will be helpful to your Lordships if I speak to all five together.
With a number of small exceptions, which I shall explain, these regulations make purely technical amendments, which are necessary to address European laws being brought on to the UK’s statute books in a partially inoperable form, and enable the policies behind the common agricultural policy, the Agriculture and Horticulture Development Board, and state aid legislation to continue to function as they do today. These instruments are not required solely in a no-deal scenario; in the event of an agreement—which of course the Government sincerely wish for—they will ensure that the current legislation remains operable at the end of any implementation period.
The instruments on the common agricultural policy make largely technical and operability changes to ensure that the UK Government are able to meet their commitments to funding in the agriculture sector. The Government have pledged to continue to commit the same cash total in funds for farm support until the end of this Parliament, expected in 2022; this includes all funding provided for farm support under both Pillar 1 and Pillar 2 of the current CAP. This commitment applies to the whole of the UK.
The UK Government have guaranteed that the current level of agricultural funding under CAP Pillar 1 will be upheld until 2020, as part of the transition to new domestic arrangements. The UK Government have also guaranteed that any rural development projects for which funding has been agreed before the end of 2020 will be funded for their full lifetime.
As noble Lords are well aware, agriculture and fisheries are devolved policy areas and are of special importance for all parts of the United Kingdom. We have worked closely with the devolved Administrations to produce these instruments; they place great importance on them and have given their consent to these instruments.
I will now outline the CAP statutory instruments. They enable the regulations to continue to operate effectively, do not introduce new policy and preserve the current regime for supporting CAP beneficiaries. The amendments in these instruments include omitting redundant references to the “European Commission” and “member states” and amending references to “Union law” throughout, so that the retained EU regulations continue to operate effectively as part of national law.
One purpose of these modifications is to ensure continuity and clarity as to who is responsible for the implementation and administration of the CAP schemes. The obligations and discretions placed on member states will continue to be exercised after exit by relevant authorities in the UK. In this context, “relevant authority” means the Secretary of State, Scottish Ministers, Welsh Ministers and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland.
The Common Agricultural Policy and Agriculture and Horticulture Development Board (Amendment etc.) (EU Exit) Regulations 2019 make operability amendments to domestic regulations made under the European Communities Act implementing certain provisions of the EU common agricultural policy.
First, I draw your Lordships’ attention to a minor correction which is needed to the Explanatory Memorandum for this instrument. In paragraph 4, “Extent and Territorial Application”, the amendments to the AHDB order 2008 are given as applying to the UK. In fact, while parts of the AHDB order 2008 apply to the UK, the amendments proposed in this instrument apply to Great Britain in relation to horticulture, and to England only in relation to the red meat levy. That reflects the territorial coverage that the levy body, the AHDB, has for those specific sectors. We shall withdraw and re-lay the EM in the coming days, with the territorial application of the AHDB order amendments corrected. Correcting this has no impact other than aligning the EM with the instrument we are debating today. I apologise for any inconvenience this causes to your Lordships, but when I heard of it, I wanted your Lordships to know immediately.
As well as operability changes to domestic regulations under the European Communities Act, this SI also amends one order concerning the Agriculture and Horticulture Development Board. This is to address two operability issues arising from the United Kingdom leaving. In one case, this has required us to make a small policy change. Currently, there is a minor levy exemption applying to livestock which is imported from “another member state” and slaughtered in England within two to three months of being imported. For continuity, we retain this exemption, and to ensure that we are then in line with WTO rules and are not favouring the EU, we also extend the exemption to cover any such livestock imported from the rest of the world. We expect this minor policy change to have little or no impact on the ground, given the very low levels of live imports from beyond the EU.
The Common Agricultural Policy (Financing, Management and Monitoring Supplementary Provisions) (Miscellaneous Arrangements) (EU Exit) Regulations 2019 make technical amendments to the supplementary regulations which set out detail on the financing, management and monitoring arrangements for the CAP schemes. This instrument ensures the operability of five different pieces of EU law. These ensure that the management and monitoring aspects of the retained EU legislation maintain the current standards after exit. This includes setting out further detail on how checks to beneficiaries should be carried out and how penalties should be applied to those found to be in breach of the legislation.
The instrument also attends to five other pieces of retained EU law where references to EU audit and accounting systems would clearly no longer be appropriate. These would be replaced by the domestic system, which currently operates in parallel to the EU system, to provide equivalent assurances to our Parliament. Four of these are implicitly tied to EU audit and accounting systems, which, as I say, will be replaced with the existing domestic equivalent. The final revoked piece of EU law relates to the EU policy monitoring system, which, again, will be replaced by our existing domestic policy evaluation process.
I turn to the Common Agricultural Policy (Financing, Management and Monitoring) (Miscellaneous Amendments) (EU Exit) Regulations 2019. This instrument amends the retained EU law which sets out the overarching framework for how CAP schemes function, governing the financing, managing and monitoring arrangements which underpin schemes. It removes the EU audit and accounting regime, which, as I already mentioned, operates alongside the existing equivalent domestic regime and would no longer be required for Exchequer-funded payments. Current levels of checks and scrutiny over CAP payments will remain under the domestic system until domestic policy reform can be delivered through a new domestic agricultural policy.
I turn to the Agriculture (Legislative Functions) (EU Exit) Regulations 2019. They amend five different EU regulations which give the European Commission power to change existing legislation relating to the financing, managing and monitoring of the CAP; direct payments; the rural development programmes; and fisheries programmes funded by the EMFF.
These five regulations work together to provide the necessary powers to ensure the smooth functioning of the CAP and EMFF-funded fisheries schemes in the light of economic, scientific and environmental changes. For example, the Commission is currently empowered to make legislation adding to a list of practices equivalent to crop diversification in the light of developments in the sector. These powers also provide powers to, for example, update the model we use to estimate the net revenue of an EMFF or rural development project, if a more accurate model becomes available.
As its title suggests, this instrument makes amendments to confer existing legislative powers on the appropriate authorities: either the Secretary of State or the relevant
Administration for each home nation. These amendments consist largely of replacing references to the “Commission” with “appropriate authority” or “Secretary of State”.
The instrument also contains operability changes relating to the EU financial discipline mechanism. The financial discipline mechanism ensures that the Pillar 1 budget, which comprises spending on direct payments and on schemes under the common market organisation, is not exceeded. It works by reducing the value of direct payments if forecast expenditure on Pillar 1 exceeds a predetermined budget.
This SI makes changes to make the financial discipline mechanism operable in England. As agriculture is devolved, each Administration has assessed what amendment is appropriate to remedy the inoperability. Devolved Administrations have chosen to omit the financial discipline mechanism, while England has chosen to use the powers contained in the withdrawal Act to make financial discipline operable on an England-only basis. For England, operability amendments are made to financial discipline provisions to ensure the mechanism will work properly in a domestic context and on an England-only basis. This does not constitute a new policy, as the mechanism currently applies in the EU.
I turn finally to the State Aid (Agriculture and Fisheries) (Amendment) (EU Exit) Regulations 2019. State aid rules govern the way subsidies can be given, and exist to stop companies gaining an unfair advantage over their competitors. This instrument amends specific retained EU state aid regulations relating to agriculture and fisheries. It does not make provisions for the broader domestic state aid framework. That is addressed in the State Aid (EU Exit) Regulations 2019, which were debated and approved by this House on Thursday 14 March.
Agriculture and fisheries schemes have long benefited from exemptions to the state aid rules. This instrument maintains these agriculture and fisheries exemptions, allowing government to continue to support these industries and provide stability as we leave the EU.
The instrument will have three main effects. First, it corrects references to state aid rules in some of the CAP regulations. This makes sure that the state aid exemptions, which flow from the agriculture and fisheries state aid exemption in the Treaty on the Functioning of the European Union, continue to apply to direct payments and rural development programme payments. This will allow these crucial payments to continue after exit.
Secondly, the instrument will continue to exempt certain categories of agricultural and fisheries aid which are deemed compatible with state aid rules. These are known as the “block exemptions”. For example, this will ensure that the Rural Payments Agency can continue to make payments for forest environment commitments covered by the agricultural block exemption regulation under the forestry elements of countryside stewardship. For fisheries, payments to the sector which support, for example, the sustainable development of fisheries, the protection and restoration of marine biodiversity, and innovation in aquaculture will continue to be able to be made under the block exemption regulation.
Finally, the instrument provides that funding under certain financial de minimis thresholds will continue not to constitute state aid. For example, the Calderdale
natural flood management grant scheme, a critical flood defence project, is covered by this exemption, and this instrument ensures that we will be able to continue to support schemes such as that one.
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This instrument makes no policy changes. It ensures that agriculture and fisheries schemes, such as direct payment schemes, that currently benefit from state aid exemptions will continue to benefit from them. I hope noble Lords will agree that transposing legislation and maintaining the exemption of certain aid from the state aid rules is necessary to support our vital agriculture and fisheries sectors.
These five instruments aim to ensure continuity with current EU legislation through operability changes. Government and the devolved Administrations have liaised with stakeholders regarding plans to make both CAP and state aid-retained EU law and existing domestic legislation operable at the point of EU exit. With regard to financial discipline, Defra is currently liaising with stakeholders through a targeted engagement exercise to discuss the proposed new guidance, which will set out how Pillar 1 spend should be apportioned to England.
These statutory instruments provide important and necessary continuity for stakeholders and beneficiaries. They will provide guarantees for the future by ensuring that farmers, fisheries and land managers continue to receive payments that support their vital work. I beg to move.