I thank all noble Lords who have contributed to the debate. I will do my best to answer the many questions that have been put to me without exceeding my time slot.
The noble Baroness, Lady Bakewell, asked a number of questions in relation to the reduction of direct payments. We do not plan to consult further on the reductions, but the Government have published an evidence paper, updated in September 2019, setting out the expected impacts of removing those direct payments, and that included an analysis by sector, location and type of land tenure. It provided an analysis of how farm businesses across all sectors can offset the impact of reductions in direct payments. An update to that analysis was due to be published shortly, and it has been delayed—only slightly, I hope—in light of what is happening in Ukraine and the impact this will have on farm business incomes; that point was made by a number of noble Lords. We are reviewing this to ensure that the analysis remains fit for purpose.
All funding released from reductions in direct payments in England is being reinvested into delivering other schemes for farmers and land managers in this Parliament. I hope that is some reassurance to the noble Baroness, Lady Jones, as well.
The noble Baroness raised other issues about reductions to direct payments. A small number of farmers leave the industry each year; that has been the case for some years now. They do so for a whole variety of reasons. According to the data we have from the Rural Payments Agency, in 2020 around 1,000 basic payment scheme claimants in England can be assumed to have exited the industry. It is too soon to produce equivalent data following the 2021 scheme year, but for the basic payment scheme 2021, the reductions for most farmers were modest. Around 80% of claimants would have received a reduction of around 5%, which is within the scope of the year-to-year variance experienced historically in any case due to currency fluctuations.
On the impact on the internal market from phasing out direct payments, these payments are largely decoupled from production and therefore they should not be trade distorting. Within the UK, there are already significant differences in the implementation of direct payment schemes, and while direct payments currently form an important contribution to farm income, as the noble Duke, the Duke of Wellington, said, in many cases it is critical—the reason they are still in business. They can nevertheless hamper productivity growth in the agriculture sector and drive up land rental prices. Removing them should raise our agriculture sector’s productivity across the board, leaving our farmers in a better position to compete.
The noble Baroness, Lady Jones, also asked what tests would have to be met before the Government agreed to deviate from the rollout of the basic payment cuts. Defra regularly gathers and publishes statistical data on the current state of the industry; for example, the results from the 2021-22 Farm Business Survey, which will cover the first year of progressive reductions, will be published this autumn. Data is also gathered through bodies such as the Animal and Plant Health Agency and the Rural Payments Agency, and that includes information on various aspects of the sector, such as the impact of reductions in direct payments. That allows the Government to monitor the sector and to make better decisions on the future of farming.
The Government are committed to phasing out untargeted direct payments. We do not believe that they are the best way to support farmers, as I tried to explain in my introductory remarks. The noble Baroness also asked about the savings being made from the first year of the basic payment reductions. For 2021, approximately £178 million was freed by reductions to the payments. This is being redirected into delivering other schemes for farmers.
The noble Baroness, Lady Jones, also asked for reassurance, as I think did my noble friend Lady McIntosh, that none of the allocated money from direct payment reductions has been reclaimed by the Treasury. All the funding released from reductions in the direct payments is being reinvested into delivering other schemes for farmers and land managers during this Parliament; it is not being hoarded for long-term future use. That amounts to an average of £2.4 billion a year over the period 2021-22 to 2024-25.
We have been clear all along that we will spend money where it delivers for the environment, alongside food production, and we need to support changes across the entire farm landscape to deliver those broad and connected ambitions. That is why we have increased the countryside stewardship payments by an average of 30% and introduced the sustainable farming incentive. Direct payments are not about food production. The decoupling of payments from food production took place around 15 years ago. Our evidence suggests that the removal of direct payments in England would have only a marginal effect, if any, on overall food production.
With regard to the Agriculture (Financial Assistance) (Amendment) Regulations 2022, a shared enforcement framework was previously established by the Agriculture (Financial Assistance) Regulations 2021, ensuring that powers of entry will be exercised, and inspections carried out consistently across the schemes. This instrument extends that framework to cover additional new financial assistance schemes and broaden the investigative powers of the Secretary of State, in a manner consistent across the different schemes. Training and guidance will also be provided to those authorised with powers of entry or to carry out inspections to ensure that these are exercised in a consistent way.
The noble Baroness, Lady Bakewell, asked about the tree health pilot scheme and the annual health and welfare reviews being exempt from publication requirements; she wanted to know why that was the case. Specific location details and personal information identifying a land manager or landowner in relation to tree pest and disease findings will not be published. This information is considered to be sensitive and potentially damaging to the individuals or businesses concerned. It could also inhibit the reporting of future cases of pest and disease outbreaks. We will, however, publish aggregated data for these payments.
The noble Baroness, Lady Bakewell, also asked about the level of fraud in the farming community and overpayments. These regulations offer a range of enforcement measures to deal with fraud or breaches of scheme rules, including the withholding of financial assistance, recovering financial assistance previously awarded, and prohibiting a person from receiving financial assistance for up to two years. Appropriate
sanctions will be available and applied where there are clear cases of misuse of public funds; for example, through neglect, serious cases of non-compliance or fraudulent behaviour. The noble Baroness asked for specific numbers but I am afraid I will have to get back to her on that because I do not have them, but the point she made, echoed by the noble Baroness, Lady Jones, will have been heard loud and clear.
The noble Baroness, Lady Bakewell, asked when the guidance will be published for each financial assistance scheme. I understand the importance of giving farmers as much time as possible to plan. Detailed guidance for stakeholders will be published in good time ahead of each scheme being launched, giving farmers support to implement the standards and understand the new rules. This guidance will be written in plain English, which will set out and explain the detailed scheme rules and requirements. Some schemes, such as countryside stewardship and landscape recovery, are already live and appropriate guidance has been published. For other schemes, guidance will be published in good time ahead of their launch. For example, for the SFI scheme, we will publish final details of the offer for 2022 and scheme information later this spring—some might say we are in spring now, so shortly—ahead of opening for applications later in the year.
Without the Agriculture (Lump Sum Payment) (England) Regulations 2022, we will not be able to meet our public commitment to offer farmers a lump sum exit scheme this year. This would limit the options we can provide farmers as direct payments are phased out; it would also limit structural change in the farming sector. We believe that the calculation of the lump sum payment is fair. Our calculation means that, for most farmers, the lump sum will be approximately equivalent to the amount they might otherwise receive in direct payments for the years 2022 to 2027, as these are phased out over the remaining years of the planned agricultural transition.
The noble Baroness, Lady Bakewell, asked about the rationale behind the stipulation to retain five acres. Well, farmers will be able to keep up to five hectares of agricultural land. This allows, for example, a farmer to keep some land around or near their farmhouse. We feel this flexibility will help with uptake of the scheme, which will create more opportunities for new entrants and expanding farmers. In relation to the question that she asked about trees, all publicly subsidised planting has to comply with the UK forestry standards. They are based on a UN-sanctioned approach to sustainable forest management. The UK forestry standards are, in effect, a live document that is being updated all the time. At the moment, the emphasis is placed heavily on the need to use public money to deliver the maximum possible public good. This means not just having monoculture conifer plantations, but ensuring we have a genuine yield in biodiversity and numerous other public benefits, such as flood management and flood prevention. As it happens, the overwhelming majority of woodland creation supported by the Nature for Climate Fund grant schemes will be native broadleaf. That can be judged by the applications coming in, even though this very new fund is in its first year.
Returning to a question put to me by the noble Baronesses, Lady Bakewell and Lady Jones, which I realise I did not answer, we think that the lump sum exit scheme will free up land for new entrants and expanding farmers. It is about providing opportunities for farmers, rather than aiming for a particular balance between those entering the sector and existing farmers who wish to expand. We recognise the importance of providing additional support for new entrants alongside that lump sum exit scheme. Attracting new talent into food and farming is vital, if we want a sustainable and productive agricultural sector.
As set out in our agricultural transition plan for 2021 to 2024, we will provide funding to create lasting opportunities for new entrants to access land, infrastructure and support to establish successful and innovative businesses. In January this year, the Secretary of State announced the development of incubator pilots for new entrants, with council farms playing a key role. The details of the pilots are currently being designed and we hope to launch the pilot scheme later this year.
The noble Baroness, Lady McIntosh made a number of comments and raised questions, some of which overlapped with points made by the noble Duke, the Duke of Wellington, particularly on small and tenant farmers. At the end of January this year, the Secretary of State announced an independent review, chaired by the noble Baroness, Lady Rock, dedicated to looking at how Defra schemes can better support the tenanted sector, as farming in England is reformed to be more sustainable. The review period is expected to be six to nine months, and it will publish its findings and recommendations later this year. I will not go into all the details on the group of experts—who has been selected and how, or who they represent—but it is a broad range and I am happy to provide that information if the noble Baroness would like me to. I could tell her now, if she asks, but I am worried about the time.
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The tenancy working group, as it is called, will collect evidence and bring forward recommendations on a whole range of issues: how scheme design can facilitate the participation of and benefit to tenant farmers in the new environmental land management schemes; what policy initiatives will secure the long-term sustainability of England’s tenant farming; how best to foster positive and long-term tenant/landlord relationships; ways to minimise any potential loss of land from the tenanted sector to avoid damaging its resilience; why it might be necessary to look for new legislative or regulatory powers in the future—I shall stop there, because the list is rather long.