Agriculture (Delinked Payments) (Reductions) (England) Regulations 2026

Monday 27th April 2026 Lords Chamber

Motion to Approve

19:15

Moved by

[Baroness Hayman of Ullock]

That the draft Regulations laid before the House on 10 March be approved.

Relevant document: 56th Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)]

My Lords, I declare an interest as I am in receipt of delinked payments. This instrument sets the reductions that will apply to delinked payments in England for the years 2026 and 2027. In doing so, it delivers our commitment to phase out these subsidies by the end of the seven-year agricultural transition period, as we redirect funding to our other schemes for farmers; 2027 will be the last year of delinked payments.

A regret amendment has been tabled expressing concern about the impact on farmers. The Government are committed to supporting our farmers and the vital role that they play. We will continue to invest in our farmers and land managers to make their businesses, food production and our country more sustainable and resilient for the years ahead. Reducing delinked payments is essential so that we can fund our other schemes which help us to achieve this.

Delinked payments do not address the underlying challenges affecting farm profitability. They do not support the healthy soils, abundant pollinators and clean water that is needed to produce good food. They do not promote innovation and do not provide good value for money.

The reductions to delinked payments will complete the move away from the previous scheme, which rewarded land ownership, with 50% of payments going to the largest 10% of farms. We are applying the reductions fairly, with higher reductions to amounts in the higher payment band. We announced the reductions last June to help farmers to plan.

The money released from delinked payments is being reinvested in the sector. Farmers and land managers will benefit from an average of £2.3 billion a year over the period 2026-27 to 2028-29 through the farming and countryside programme, and up to £400 million from additional nature schemes, including those for tree planting and peatlands. This includes increasing annual funding for the environmental land management schemes, from £1.8 billion in 2025-26 to more than £2 billion by 2028-29. This means that we are backing farmers with the largest nature-friendly budget in history to support them to help restore nature and boost farm productivity. Some 50,000 farm businesses and half of all farmed land are now managed under our environmental land management schemes.

Earlier this year, we announced plans for our new sustainable farming incentive offer, which will ensure that more farmers can access funding. A range of improvements will be introduced to make SFI26 simpler, more streamlined and easier to navigate. The new offer will continue to support sustainable farming by strengthening the environmental foundations of farm profitability and our long-term food security.

Last September, the new Countryside Stewardship higher tier opened for applications to those who have been invited to apply, have received pre-application advice and have completed any preparatory work. Landscape recovery projects that were awarded development funding in rounds 1 and 2 are continuing to progress towards the delivery phase. Plans for a third round will be confirmed in due course.

The latest round of the environmental land management capital grant offer will open in July this year, backed by £225 million in funding. That is 50% more than was available in 2025. We have also announced plans for £120 million in innovation and productivity grants for 2026-27. Such grants can help the sector access cutting-edge technology and techniques, such as robotic weeders, which reduce chemical use in our countryside and help farmers grow more food. This funding forms part of the Government’s commitment to invest at least £200 million in agricultural innovation by 2030 to improve productivity and trial new technology as part of the UK’s modern industrial strategy.

We will be spending up to £30 million over three years on a new approach to farm collaboration and advice. We are working with Dr Hilary Cottam to develop a place-based approach for upland communities. We have also extended the farming and protected landscapes programme for another three years, until March 2029. We want to continue to work in partnership with the sector. We have established a farming and food partnership board, which brings together voices from farming, food, retail and finance to drive profitability, building on the recommendations in the Farming Profitability Review by the noble Baroness, Lady Batters.

We have also been engaging with farmers and stakeholders on a 25-year farming road map, which will set up the Government’s long-term vision for farming, giving farmers the clarity they need to plan ahead. This Government want farm businesses that are productive, profitable and resilient, while contributing to food security and nature recovery. The reductions to delinked payments are essential to enable us to make the planned investments in the future of farming and the countryside.

Amendment to the Motion

Moved by

[Lord Roborough]

At end insert “, but this House regrets that the draft Regulations will likely result in further financial difficulties for farmers, who have not had enough time to plan for them in advance; and that it remains unclear how the savings from the reductions to delinked payments will be reallocated to support farmers.”

[Lord Roborough (Con)]

My Lords, I first draw the House’s attention to my registered interests as a farmer and landowner who is also in receipt of delinked and other government payments. I am very grateful to the Government Chief Whip for moving this debate to a civilised time this evening; I think that is much appreciated by all noble Lords. I thank the Minister for outlining this SI, although we regret its introduction. Indeed, it is now at the end of this Session that we are about to lose significant agricultural expertise from this House, which keenly understands the impact of legislation such as this on the ground and in our close-knit communities.

When in government, we replaced the basic payment scheme with delinked payments based on historic BPS claims. We intended this to be gradually phased out by 2028 in favour of environmental land management schemes, where farmers and landowners receive payments only for public goods, as outlined by the Minister. The reductions we put in place put these delinked payments on a gradual glide path to zero in 2028. This Government dramatically accelerated that decline last year and have continued at a similar rate this year. This, in effect, ends the seven-year transition well before the 2028 deadline that farmers had been led to expect, undermining their budgeting.

We support the long-term transition, but not at this accelerated pace. Conflict in the Middle East has caused uncertainty over fuel prices and fertiliser and a shortage of industrial CO₂. Grain prices remain at low levels, undermining profitability for our arable farmers. However, it is not just external factors that are adding pressure to farmers. Deliberate choices made by this Government have left farmers more vulnerable. The early closure of the SFI application window last year, the family farm and business tax, increased employer national insurance, and the Government’s refusal to consider our cheap power plan to lower energy costs all have a cumulative impact.

I note that the Government are set to spend £100 million to reopen the Ensus bioethanol plant in Teesside to mitigate CO₂ disruptions. But this might not have been necessary had the Prime Minister not, in effect, sold out the UK’s bioethanol industry at the last minute in the UK-US trade deal. These plants provided a valuable source of demand for our farmers producing wheat. Closing them down to benefit American ethanol producers means that we are now supporting American maize or corn farmers at the expense of our own farmers. The deal reduced British tariffs on a quota of 1.4 billion litres of US ethanol, when the total market size for bioethanol in the UK was coincidentally 1.4 billion litres. These are not events outside the UK’s control; these are government choices. This SI reduces the direct financial support farmers receive at a time they need it most.

Ultimately, this SI does not help farmers precisely at a time when global events and this Government’s choices threaten their viability—let alone profitability. I beg to move.

[Lord Redwood (Con)]

My Lords, I would like to support my noble friend and challenge the Government on how they are going to spend the money they are going to allocate. While I can understand the wish to have a transition, it is right that it has to be done at a sensible pace. The really big disappointment of the farming community is that the alternative schemes the Government are bringing in are not the kind of schemes that are particularly attractive to many farmers or that promote the production of more domestic food.

I would hope that the Government will have a rethink now. Do the Government not understand there is currently a crisis in world trade and the supply of food in the months ahead because of the difficulties of getting fertiliser out of the Gulf area, the damage being done to chemical and fertiliser plants by more than one war and by the very acute trade disruption with no immediate signs of being resolved? Those I have heard from in the farming industry tell me that not only are fertiliser prices extremely high but there is no visibility as to when they will be able to buy serious quantities of fertiliser again at sensible prices. As we know, without proper fertiliser applications, yields will plunge and there will be a further shortage in food provision.

It is a tragedy that this century there has been a big decline in the amount of home-produced food that farms have been able to make because of the grant choices of the EU and successive United Kingdom Governments. I would have thought that now is a wonderful opportunity for a rethink to place at the very centre of agricultural subsidy policy, in line with many other countries around the world, the need for more domestic, reliable supply and production.

The Minister reminded us that some small pots are available for those important topics of innovation and new technology. I agree that there can be a new agrarian revolution; it was this country that launched the original one. There is now huge scope for mechanisation with robotics and drones and all the other things that can come in. However, the amount of money being offered in these small grant schemes is very small and unambitious. We have some great farms and some great farmers. Many of them would like to have access to serious money for that big investment and that pioneering technology that could start to make the difference.

I urge the Government to think again: put food production as the central issue that we need to deal with; understand the urgency of the collapse both in British farming and in the wider world market because of the interruptions to fertiliser and other chemicals; and do something to make available the money they are saving by the rundown of the existing ground system in a more intelligent and purposeful way, so that farmers can get decent money to rebuild their ability to feed us.

[The Earl of Devon (CB)]

My Lords, my maiden speech in 2019 was on the impact of Brexit on food and agricultural produce, with a focus consistent with my interests as a Devon farmer on the Devon cream tea. It is fitting that my final words are on matters agricultural and the delinked payments regulations—the final decoupling of our agricultural subsidy regime from the common agricultural policy.

When I joined the House, one of the silver linings of the Brexit storm clouds was the promise of autonomy over agricultural policy, which we sought to deliver through the Agriculture Act—scrutinised largely online during those dark days of the pandemic. The birth of environmental land management and the sustainable farming incentive promised a brave new world of public money for public goods, under which the blunt instrument of CAP area payments would be replaced by the agile deployment of Defra’s budget to allow British farming to increase productivity and sustainability in equal measure.

During the passage of that Bill, this House reiterated multiple times the long-term nature of agricultural business and the need for certainty and continuity in government policy to enable farmers to adjust their business models at an appropriate pace, consistent with the annual harvest cycle, their very narrow margins and their necessarily long-term investment strategies. Despite the hard work of many at Defra and the Rural Payments Agency, that continuity has not materialised. Farm and food businesses have been battered not only by the pandemic and by wars in Ukraine and Iran, but by extreme climatic events, drought, flooding and government policy that has become even less clement than the weather.

19:30

The IHT fiasco, coupled with the abrupt closure of the SFI 2025 applications window, has forced farmers’ trust in government to an all-time low—mistrust that is not helped by the criminalisation of traditional rural pursuits while an epidemic of rural crime rages unabated. It is against this backdrop that this regrettable and precipitous reductions in delinked payments must be considered. They are, in my view, regrettable and should be delayed, as they will only further push already stressed farming businesses into the red at the worst possible time.

On top of this, the Government’s manifesto commitment to abolish hereditary Peers has the regrettable impact of removing from Parliament a cohort of rural Britain’s most supportive voices. From Caithness and Dundee to Devon and Leicester, there will be a deafening silence. Who can replace the noble Lord, Lord Carrington, on farm productivity or the noble Duke, the Duke of Wellington, on water? Add to that the well-earned retirement of the noble Lord, Lord Curry, Northumberland’s tireless agricultural champion, and our Parliament will be hugely diminished in the expertise necessary to scrutinise and support rural and agricultural policy of the long term, just as a 25-year farming strategy is being launched. There can be no other policy sector so damagingly impacted by the loss of hereditary Peers, and I urge the Government to do all they can to remedy this sad imbalance.

That is not to say that rural champions will not remain. I hope that the noble Lord, Lord Roborough, will find a reprieve. I thank him and the usual channels for securing this debate. The noble Baroness, Lady Batters, and the noble Lord, Lord Cameron, on our Cross Benches are as experts as they come. Of course, the Minister, the noble Baroness, Lady Hayman, from Cumbria, will champion rural interests. I hope that they can find the support they need to fight on behalf of rural Britain against the ever-spreading strain of urbanisation.

Given that I will not speak again, I will just take a moment to thank all the clerks, the doorkeepers, Black Rod and his security team, the Convenor of the Cross Benches’ office and the myriad remarkable public servants, from the Libraries to the finance team to the kitchens, who allow us so seamlessly to do what we do with grace, dedication and bravery. I also thank my family, colleagues and teams at Michelmores and Powderham for supporting me in my years of service while I profess to run a business and maintain a career in private practice.

To finish where the Earl of Devon started, I remind the House that Ordwulf, my Saxon predecessor, farmed in Devon and first served cream teas to the rebuilders of Tavistock Abbey after the Viking invasion of 997 AD. I look forward, therefore, to returning to Devon and purveying cream teas while helping to rebuild our rural economy of our dear county once more.

[Lord Swire (Con)]

My Lords, as somebody who lives in Devon, I look forward to a long period of the cream teas of the noble Earl, Lord Devon, for which he will regrettably have more time to produce as a result of the delinking of the hereditary peerage and the legislative process of this country.

I listened carefully to the Minister’s statement, and several things strike me. The first is that this assault on the rural community and the farming community is not a perception but a reality. We have seen farm incomes shrinking year on year, rapid increases in costs—not least, as we heard from my noble friend Lord Redwood, the problems we now confront with fertiliser, which are very serious indeed—as well as the tremendous growth in bureaucracy, the chopping and changing of government policies, and the bringing forward of this latest government policy, which creates huge amounts of paperwork for farmers who should be out there farming.

The missed opportunity presented by this rethink on farming in this country concerns me. At a time when we should be looking long term at food security and food production, we seem to be thinking in the short term. Can the Minister say what the Government are doing to encourage younger people to come into the industry just at a time when we are seeing it getting older, with more and more people giving up—or wanting to give up—their farms? What hope can she hold out to a younger generation that there is a career and a life in farming for them as well? What more can she do to encourage the land-based colleges up and down the country, which have often suffered from very poor financial support, to get younger people into the industry? Only in that way will we preserve the landscape in the way that she envisages.

We can divert every kind of subsidy into all these initiatives—I have no problem with some of those at all—but, at the end of the day, it is a manmade landscape that we enjoy. It is made and preserved by the land managers and the farmers. Without them, it will not continue to exist, and nor will the food on which we have come to depend.

[Lord Curry of Kirkharle (CB)]

My Lords, like the noble Earl, Lord Devon, this is my final speech in the Chamber, so it is a rather poignant moment. It feels rather odd speaking on this topic today—as if, after 24 years, I have come full circle. I found this rather interesting report when I cleared my desk last week, which was written by a chap called Curry in 2002. Let me read a sentence from page 23:

“The guiding principle must be that public money should be used to pay for public goods that the public wants and needs: remaining price supports and associated production controls must go; direct payments should be phased out as quickly as possible”.


Here we are, 24 years later, completing that process.

The journey to this point has been anything but straightforward. I must say that, 10 years after leaving the European Union and 10 Secretaries of State in Defra later, successive Governments have failed to provide the leadership that the farming industry deserves. We had a unique opportunity, whether or not one agreed with Brexit, to write a new script and to design a plan to deliver all the public goods that

“the public wants and needs”,

to use the phrase in the report. What we have had is 10 years of dithering, indecision and procrastination. Of course we had Covid to disrupt the process, but here we are, still with no plan, vision or clarity on our future ambitions for this crucial industry of ours. To give the current Government some credit, we now have a land-use framework after five years of gestation, and the promise of a farming road map, which the Minister mentioned. Meanwhile, farmers are left in limbo, unclear of what is expected of them. The transition journey is ending with this debate, but the train does not have a destination.

What, therefore, are the public goods that the public need and want, which farmers and land managers can deliver? We have wrestled with this definition of public goods, and with which public goods require government intervention because there is no functioning market for them. Carbon markets are still immature, and natural capital is still a great idea, but most environmental outcomes still require government intervention: restoring and maintaining habitats, cleaning up and managing water, carbon sequestration and so on. We need clean air, clean water and healthy soils. One outcome that farmers can deliver, and are delivering, successfully is renewable energy. We certainly do not need any further financial inducements to deliver that, particularly solar. I hope that the Secretary of State for Energy and Climate Change has read the land-use framework document and begins to think about it before completely ignoring local opinion when he blindly signs off every large solar application to cross his desk.

The $64,000 question is about food, as the noble Lord, Lord Redwood, has stated. If, as the Government have recognised, food security is national security, what does this mean? Food is the outcome from the management of the countryside that most farmers want to deliver; it is why they came into farming. So if it is a public good—I think the Government now accept that it is—is there a functioning market that supports the production of food at a price that provides farmers with an adequate return without government intervention? This, it seems to me, is the fundamental question, and it was of course the challenge given to the noble Baroness, Lady Batters. We wait with keen interest for the Government’s response to her important report.

Two factors are important. For the market to function well, it requires fair competition, so there is a need for an adjudicator to oversee a market dominated by powerful players. I welcome the move of the GSCOP adjudicator to Defra. I hope this will lead to much stronger links to the sectoral adjudicators and a more forensic monitoring of market behaviour. The wider scheme also ought to include the processing sector, which it does not at present.

The second factor is that a well-functioning market requires a level playing field, with imports being produced to the same or equivalent standards as we have here. Despite regular reassurances that the new trade deals are robust, I am still concerned about this. The only way to be satisfied is to carry out a thorough and regular audit of supply chains in countries of origin, which requires resources and audit not only of food safety standards but of environmental measures and animal welfare standards so that trade can compete fairly.

Having satisfied ourselves on supply chain relationships and achieved a level playing field on imports, is it possible to produce food profitably without subsidisation? The most efficient farmers can—at least some of the time. Skills, training and technical knowledge are important. TIAH has been established to help with skills. Access to scientific knowledge is important, as are benchmarking, having excellent business skills, adding value wherever possible, applying risk management tools, and so on. Producing what the market wants is critical, particularly having access to local markets and the public sector. All these need to be in place, and the Government need to help.

Do we need to reconsider our attitude to subsidies? I do not think we should go back to direct subsidisation of food production. It distorts markets, distorts behaviour and puts developing countries at a serious disadvantage. However, there is much more we could do to assist farmers in their commitment to produce food, which is also in the nation’s interest. I have been struck recently, when rummaging through old documents, by how influential the development grant schemes were that I and most farmers took advantage of in the 1960s, 1970s and into the 1980s to improve our facilities and build fences, buildings, equipment, et cetera.

To extend the SFI application process to embrace and include productivity support, rather than a separate productivity grant scheme—to help improve business efficiency, alongside environmental management and environmental protection measures—would deliver multiple outcomes from a multifunctional landscape through a combined scheme. With today’s online technology, it would not cost much more to administer than the current complex mix of schemes we have. Every farm business should have the opportunity to participate, either individually or through a combined collaborative scheme. This should include tax allowances appropriate for investments. The Treasury should recognise the critical importance of this industry of ours and the importance of producing food.

After introducing the entry-level scheme following this report, we achieved over 70% participation in stewardship schemes. We have regressed since then. The current uncertainty and stop-start processes with the SFI will not deliver the landscape improvements in environmental management, including the species improvement and restoration that we need. Whole catchments need to be included and every farm needs to engage. All the agencies need to work together—all of them—to agree plans for the Wye Valley, the Tees Valley, the chalk streams and, importantly, the Tyne Valley. The list goes on.

We need to be bold in developing a new vision for farming and the management of the countryside that is agreed in partnership with the sector—I hope the Minister will confirm that the new partnership board will be given the authority it needs to develop that—not imposed upon it by government, so that it has ownership and buy-in: a vision that gives every farmer the opportunity to deliver the vital outcomes that the countryside is capable of, including wholesome and healthy food. In fact, most of it is in this report.

I add my thanks, as the noble Earl, Lord Devon, did, to the whole team here in the House of Lords: the doorkeepers, the clerks, the staff and the restaurant staff—everybody who has made my life very easy. It has been a pleasure to work with them and to have their support, and a great honour to be a Member of this House.

19:45

[Baroness McIntosh of Pickering (Con)]

My Lords, I would like to pay a personal tribute to the noble Lord, Lord Curry of Kirkharle. Along with my sponsor, the late Lord Plumb, of Coleshill, he has long stood out as being so knowledgeable about farming and the countryside. He has given immense and dedicated service to this House over so many years, and he is a local lad who has done his county proud. We shall all miss him greatly, and we thank him for his great service.

I also pay tribute to the outgoing hereditary Peers and their knowledge, which passes through generations, as we have heard from the noble Earl, Lord Devon. I am probably the first and last member of my family who will enter Parliament or politics, so I am in awe of those who have served with such longevity. They have all made a massive contribution and will be greatly missed.

I echo the thoughts of the noble Lord, Lord Curry of Kirkharle, on the impact that the clean energy proposals will have on farming and the countryside, taking probably about 10% of land each year out of food production. As we heard from my noble friend Lord Redwood, farming is essential. We are only 60% self-sufficient in this country, and in certain fruit and vegetable cases we are only 55% self-sufficient, so it is a diminishing asset if we lose the land to clean energy proposals.

Last week the Minister responded to a Question from me on the SFI and whether farmers would benefit. I am not entirely convinced that she grasped the point—just made by the noble Lord, Lord Curry of Kirkharle—about recognising this as a public good and rewarding farmers for temporarily storing floodwater on farmland. We cannot expect them to do it; they are not operating as a charity. They are trying to make money in very difficult circumstances—we are potentially facing another drought this year, given the rainfall this month—so we need to have a defined understanding of how their contribution will be recognised through the SFI.

I have particular concerns about these regulations, and I am delighted that my noble friend Lord Roborough brought the amendment for debate. I am concerned about two aspects in particular. First, before 1 January 2025, approximately 83,000 farm holdings were receiving the basic payment scheme before the change to delinked payments in England came into effect. After 1 January 2025, there were 32,200 active SFI agreements, with a growing number of businesses having more than one agreement due to how the scheme is administered by the RPA. That immediately demonstrates that there are probably fewer farmers with SFI agreements than even that number suggests. My second concern is about the lack of clarity we can expect when SFI 2027 comes into effect. The Minister is very aware of rural issues, given her previous constituency representation. There will be real hardship, as my noble friend Lord Roborough indicated, and I will address that.

I represented quite a large upland area for the last five years I was in the other place, and I am currently patron of Upper Teesdale Agricultural Support Services. I make a plea to the Minister to be as absolutely clear as the Government can be as to how the schemes will apply for common land, to upland farmers and to tenant farmers. In north Yorkshire in particular, about 48% of the farms are tenanted and, when a solar panel scheme takes a big chunk of the tenanted farm out of production, that leaves them with very little area on which they can claim. I hope that the Minister, in summing up, will look carefully at the gap between the existing schemes remaining in force, and the fact that if you are in an existing scheme, you are probably unable to apply: you are locked out of an environmental scheme until early 2028 at the earliest.

The pace at which basic farm payments are declining and the rate at which the new schemes are coming into effect will pose very real issues of hardship for farmers. I hope that that is an aspect that the Minister will address when she sums up the debate on these regulations.

[Lord Carrington (CB)]

My Lords, I cannot compete with the noble Earl, Lord Devon. First of all, I declare my farming interests in Buckinghamshire and Lincolnshire, and my receipt of delinked payments.

The first Lord Carrington, the third Lord Carrington and the sixth Lord Carrington were all Ministers of agriculture. The most famous of them was the third Lord Carrington, a Liberal, who introduced a policy of smallholdings for farmers during the Boer War and the First World War. That policy seems to be the guiding light for what the Government are currently doing on the SFI payments—concentrating on the small farmers with 50 hectares or less, rather than the larger farmers, who will be capped, if they get money at all, at £100,000.

I am speaking very much as a working, hands-on farmer, and I must say that I have never seen anything quite like it in all the 50 or more years that I have been involved in farming. I want to just bring to the attention of the House some of the real horror stories that are going on, even as we speak. They are based on what we are doing on our farm. We have decided for the first time ever not to plant spring crops, because we cannot risk the weather remaining as dry as it is, and therefore the crops not germinating. We are having tremendous trouble not so much in getting fertiliser, as the noble Lord, Lord Redwood, mentioned, but in getting red diesel. The price of red diesel is the real crucifier of most farmers in this country at the moment. Then, of course, we have the prices for the commodities that we are producing, all of which make leaving the land fallow the best option for us.

In East Anglia, in Norfolk, I gather, crops of wheat are currently being irrigated. That is a very expensive exercise for a crop that is not going to produce a great deal of money. We grow potatoes, and we have reduced our potato acreage considerably due to prices. We had a very good harvest last year, but prices worldwide are terrible. Now we have the potential problem of the SPS agreement. Under the SPS agreement, certain chemicals are going to be banned. If you buy a packet of crisps, that crisp will actually have been taken from a potato three years ago, and the chemicals that will have been used will be banned under the new SPS agreement, unless the Government get a waiver. That means, of course, that those potatoes will go straight into an anaerobic digester, if they cannot be sold.

A similar problem exists for sugar beet. Sugar beet is very susceptible, as everyone knows, to virus yellows; it is estimated that 60% of all sugar beet grown in this country is affected by virus yellows. There are very few other profitable break crops, which means that the following year you will not be able to get the yields you want out of wheats, and so on and so forth. So it is a pretty drastic situation out there.

I am a very lucky farmer, as we are fortunate to live in the murder capital of England. We have filming for “Midsomer Murders” going on even as we speak, and that is much more profitable than a crop of wheat. I am also in a part of the country where we can grow houses. I am lucky, but others are not so fortunately placed in the farming world.

All this, of course, makes the Government’s byline, “Food security is national security”, almost worthless. I am therefore going to ask just one question of the Minister. It is driven by the fact that farmers need to plan, and what we are getting at the moment is not nearly sufficient to enable us to plan for the future. Can the Minister reassure the House on how Ministers and the department are supporting farmers to business plan now by providing forward plans of the SFI and countryside stewardship higher-tier schemes, as they are offered in both 2027 and 2028? Only with that information can we make sense of our farming.

Like everybody else, I thank noble Lords very much for all the support they have given us hereditaries. I will still be here, but sitting on the steps of the Throne rather than in the Chamber.

[Lord Fuller (Con)]

My Lords, I rise to declare my interest as a member of a farming company and also involved in the fertiliser industry, which was mentioned a little earlier. Fertilisers and fuel are farmers’ most expensive costs, and we see unprecedented increases ahead of them, on top of three bad harvests in a row.

I want to dwell for a moment on the SFI and the capped payments. What capped payments do is reward inefficiency; they militate against investment, efficiency, productivity, progress and scale. All the things that farming over many generations has contributed to this nation are at risk of being thrown away carelessly by the capped payments that these regulations will impose.

The noble Lord, Lord Curry, mentioned the land use framework. It is going to be a disaster for farming and terrible for food security. It contemplates in table 1 that fully 1.7 million hectares of productive land will be removed from agriculture, out of a total of 9.6 million hectares. That is about a fifth—and, at £2,000 per hectare gross income, which is what, on average, a mixed farm would hope to gain, it represents a £3.4 billion hit to the rural economy. We cannot afford this in terms of food security and we cannot afford it economically. That £3.4 billion loss is out of a £13.9 billion total gross value added from agriculture. It is between one-fifth and one-quarter of the entire economic output of agriculture in our islands, in all its forms: arable, livestock, fruit, veg, grains and so forth. It is a fantasy to think that somehow, magically—it is magical thinking—we are going to have a 20% efficiency improvement. This adds to further insults with the APR/BPR issue, and the fact that farmers can have their land compulsorily purchased from under them, under the NSIP regime for solar, destroying the credibility and capacity of farms already under pressure: pressures aggravated by the cash flow problems from SFI.

It is hard to get fertiliser as it is in this nation—it is my trade; I know how difficult it is to secure the cargoes, fighting off the rest of the world—yet this Government, by choice, are going to make it even harder to get fertiliser delivered to this nation to support our farmers and underpin our food security with the introduction of insane carbon taxes that will add rocket boosters to the food price inflation that is already barrelling down the tracks.

20:00

I would like to amplify the point about the SPS. Our farmers will be naked in their defence or in their armoury against black grass. Let black grass get a foothold in one year, and it will take us 10 years to get rid of it. I know from personal experience, having sat on the combine, that when you go through a black-grass infestation in wheat, as an example, the yield monitor goes from 10 tonnes to 1 tonne.

All these insults adding together culminate in a simple message: this nation—in fact, any society—is no more than three meals away from anarchy, and a Government who forget that, deserve everything that is coming to them.

[Lord Inglewood (CB)]

My Lords, listening to this debate, it becomes apparent just how diverse our nation’s agriculture is. For every remark by one speaker, there is probably someone who knows about agriculture in a different part of the country, in a different sector, where it is not directly relevant. But the message that comes across—and I declare my interests in agriculture in Cumbria, which the Minister knows about—has the same effect: what ought to be a profitable activity, providing public goods, which is not merely food but a whole range of other things, becomes unsustainable quite simply because it does not pay. It does not matter how you look at this; at the end of the year, if income and expenditure do not balance, then that enterprise cannot survive for all that long.

I think that government has an important role to play in every advanced western society. The Government provide a framework around which farming, agriculture and land use functions, not least because the consequences of what is done are so important in widely varying ways to other parts of the economy. What worries me about the debates on agriculture in this country is that, if agriculture is not sustainable and if the businesses, be they big or small, become unsustainable and cannot survive on their own commercial terms, either because they cannot generate enough revenue from husbandry or other land use activities that they carry out, or, equally important, because of the incidence of tax that they will have to pay—it is no good thinking that an inheritance tax is a kind of one-off thing; the reality is that you have to put aside money year on year in order to build up a reserve or, alternatively, borrow money which then has to be paid off over a long period to pay off the debt that is owed to the state—we will continue in a world where many of those who are operating in a smaller way in the agricultural sector are on standards of living below those promised to the employed sector by the minimum wage.

That is not the basis for a long-term, sustainable, rural, agricultural food sector. I believe that we will end up, if we are not careful, in those kinds of circumstances, because the analysis that is necessary behind working out what the policy needs to be is not the kind of thing that is simply learned in an economics course or an agricultural economics course at a university. It depends on an understanding of the realities of what carrying out this business entails. My concern about the context of the debate this evening is that policy is not being made with sufficient understanding and recognition of the realities of what is underlying this whole part of the economy. If you do that, it will not work. Already in agriculture, the rate of return that people expect is probably 2% or 3%. Who in the commercial world—I have chaired some commercial companies—will invest getting the rates of return that you get from agriculture?

I listened carefully to what the Minister said. It was fine; they are good words. But good words are not enough here. As the noble Lord, Lord McNally, who normally sits across the Chamber, said on a number of occasions, “Fine words butter no parsnips”. The litmus test for agricultural policy, like every other policy, is: is it engendering a sector of the economy that is working in the public interest? I am deeply concerned that the way in which it is being approached by the present Administration is not going to bring that about.

Finally, as somebody who is also about to leave, I would like to add my sentiments to what a number of others have said about the way in which the whole infrastructure of the House has supported my work here. I make a particular reference to the nurse, whose name I never knew, who identified that I got sepsis and sent me straightaway to hospital.

[Baroness Grender (LD)]

Sorry, I was so fascinated—I was pondering the thought.

I thank the Minister for setting out with such clarity this statutory instrument and the noble Lord, Lord Roborough, for bringing forward his regret amendment, which has created an opportunity for a much broader-ranging and, I think we can agree, interesting debate. It has been an absolute privilege to be here for the last speeches by, for instance, the noble Lords, Lord Curry and Lord Inglewood. I had the great privilege of working with the noble Lord, Lord Carrington, on various issues—sometimes we did not agree on one or two of them, it must be said—and with my colleague on the Conduct Committee, the noble Earl, Lord Devon, which is a fairly typical in-the-background public service to protect the reputation of this place, for which he should be thanked and we should be enormously grateful. It is fitting that we have heard from so many experts, particularly on this area.

On the regulations before us, the Liberal Democrats have long accepted the case for moving away from the basic payment scheme, a system based largely on land ownership, which was never the right long-term foundation in our view for supporting agriculture. We support the principle of transition towards a system that rewards farmers for the delivery of public goods, restoring nature, improving soil health and strengthening resilience in the face of the climate emergency. However, support for reform cannot mean a blank cheque for the way that it is implemented. In a way, the question before us tonight is not whether the change is needed but whether this stage of the transition is being managed in a way that is fair, predictable and sustainable for those most affected; we have heard evidence that it is not.

The first concern is the pace and scale of the reductions. Delinked payments were intended to provide a degree of stability during a period of significant change, yet many farmers, as we have heard from this debate, now face a position in which support is being reduced more quickly than they are able to plan for and than viable alternatives are becoming available. For businesses operating on tight margins, that creates enormous pressure on cash flow and on long-term planning. A transition, as we know, that is too abrupt, risks undermining the very resilience it is expected and hoped to build.

Secondly, there is the question of where the money is going. I appreciate that the Minister set out some of this in her opening remarks, but the NFU—I thank it for its briefing—has made clear that there are some concerns about where the money is being allocated from these changes. It says that there remains a lack of clarity, and in some cases confidence, about whether funding is reaching farmers in practice at the scale and pace required.

Thirdly, there is the impact on different types of farm. Smaller and family-run farms are often less able to absorb sudden changes in income or navigate complex new schemes. If this transition is not carefully managed, there is a risk that support will become unevenly distributed, with some farms better placed than others to adapt. We have heard already about the economic consequences of that.

There is the wider point about the link between agricultural support and environmental outcomes. We believe the shift away from direct payment is justified in part by the promise of a more sustainable and environmentally focused system, but that promise depends on delivery. If funding gaps, uncertainty or administrative complexity prevent farmers participating fully in new schemes, we risk weakening farm viability and environmental progress at the same time. The position of these Benches is therefore balanced; we support the direction of travel towards a more sustainable and environmentally grounded system of agricultural support, but we share the concerns of this Chamber that the current approach risks getting the transition wrong.

I have three brief questions but, as we are nearly at the end of the Session, if the Minister wishes to answer in writing, I would be more than happy to receive that. First, what assessment have the Government made of the cumulative impact of these reductions on farm incomes over the next two years? What safeguards are in place to prevent otherwise viable farms being pushed into financial difficulty? Secondly, can the Minister provide a clear and transparent account of how savings from reduced delinked payments are being reallocated, including how much has reached farmers through environmental schemes to date? Thirdly, what specific steps are being taken to ensure that smaller farmers are not disproportionately disadvantaged in this transition? I particularly refer the Minister to paragraph 78 of the 56th report of the Secondary Legislation Scrutiny Committee, which suggests that we ask her

“about the financial impact of the transition to the new support schemes, especially on small farmers”.

These are very practical questions.

In closing, I return to the noble Lord, Lord Roborough. It has been an absolute honour working with him on opposite Benches. We had a bit of a reminisce about a mean old fatal Motion that I chucked his way about a year ago on exactly this issue—I reminisced more fondly than he did. Having these kinds of amendments and ensuring that this kind of discussion takes place is critical for the issues we have heard about this evening, so I thank him for raising this.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank everyone for their valuable contributions to this debate. A number of broad concerns have been raised that I will do my best to address now. For any outstanding specific questions, we will look at Hansard and ensure that we write to noble Lords with more detailed responses.

The Government remain convinced that delinked payments are not an effective way to support our farmers, protect food security or restore nature. We should continue to invest in the environmental land management schemes and the range of grants and other support for farmers which deliver public goods, reward sustainable farming and boost productivity.

Concerns were raised about farm profitability and the impacts on farmers of the phasing out of direct payments. I will go over some of this. We recently published our 2025 farming and countryside programme evaluation report, which sets out an assessment of the impacts of the first three years of phasing out direct payments. It includes a detailed look at the key transition channels for the sector, which include rents, diversification income, income from agri-environment schemes and productivity improvements.

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We also publish regular statistics on farm business income in England and other data related to farm businesses. For example, on 12 March we published average farm business income forecasts, including the projected contribution of delinked payments and agri-environment payments to farm incomes in 2025-26. Our recently updated farming evidence packs set out an extensive range of data to provide an overview of agriculture in the UK and the contribution of farm payments to farm incomes. This includes analysis by sector, location and type of land tenure. All this is available for noble Lords to look at. If any noble Lord would like to know something specific but cannot find it—often, digging through government websites can be an interesting exercise—they are welcome to contact with me and I will be happy to send links and more information.

Despite the direct payments withdrawal, average farm business income for the latest available years of the transition period—2022-23 to 2024-25—was approximately £75,000 in real terms. That was higher than the pre-transition average calculated in 2018-19 to 2020-21, which was approximately £60,500 in real terms. To confirm, as I said earlier, the money released by reducing delinked payments is not being lost to the sector; it is being reinvested through our other schemes for farmers and land managers. We are transparent about how the money is being used. As I say, we publish an annual farming and countryside programme, which shows in detail how the farming budget has been spent. Last year’s was published in September and we will publish the next one later this year.

We have also provided a breakdown of how we plan to spend the average of £2.3 billion a year through the farming and countryside programme. That shows the planned spend for the years 2026-27 and 2028-29. However, as has come across incredibly clearly in this debate, we will not achieve either our environmental goals or our food security goals if farm businesses are not profitable. By increasing investment in our environmental land management schemes, we are helping farmers to protect the environmental and business foundations of farming: soil, water and pollinators. This will help reduce input costs and boost profitability.

While I am on the subject of profitability, I am delighted to see the noble Baroness, Lady Batters, sitting in on the debate, because her Farming Profitability Review is an incredibly important part of how we are trying to move farms into profitability. We published the noble Baroness’s independent review last December. It highlights the strong need for closer collaboration between farming, industry and Government, and—as the noble Lord, Lord Carrington, pointed out—greater clarity and certainty for farmers looking to grow and invest. The noble Baroness’s review offers a clear assessment of the challenges, of which we have heard many details tonight, alongside the 57 recommendations for strengthening farm businesses. We are already responding to a number of those recommendations, and we are looking at the other recommendations and how we would like to move forward. It is important that farmers have the right support to access the tools and opportunities to succeed.

One of the recommendations that we said we are taking forward is the formation of the Farming and Food Partnership Board, which is really important and I know was a key part of the noble Baroness’s recommendations. We are also continuing to consult other farmers and businesses to ensure that any implementations from the review are done properly so that they actually make the difference they are designed to make.

The noble Lord, Lord Fuller, asked about pesticides and the EU. The Government are extremely aware of the concerns of the farming community and farming businesses around alignment with the EU on pesticides. Obviously, I cannot talk about the kinds of discussions that we have been having with the EU, but I reassure noble Lords that we are very aware of the considerations that farmers are concerned about.

We are aware that the bioethanol industry has faced significant challenges for some time. Although the economies for bioethanol production in the UK are challenging today, that is not to say that, in the coming months and years, those challenges will stay the same. Again, the Government are very aware that we need to look at the challenges faced by bioethanol.

The noble Lord, Lord Carrington, made a point about certainty in planning. The main SFI offer will remain stable from now until the end of the Parliament, meaning that it will no longer be subject to the major annual changes that have been taking place since SFI began in 2022. We may need to make some small adjustments if necessary. For example, if we have put something in place and it is not attractive, so nobody is taking it up, then we will need to look at how to adapt it. Apart from that sort of situation, however, we plan to keep it stable.

The Middle East came up in the debate, obviously. The Middle East conflict is having impacts in all sorts of different areas. Although there is no suggestion that consumers will see impacts to supplies, we are continuing to work hand in hand with farmers, suppliers, retailers and international partners to ensure that markets function fairly and to protect the UK’s food security. We will also look, if necessary, at further government action in this space. We already work with industry and across government to monitor any potential risks that may arise. We have a resilient food system, and if concerns arise from the Middle East conflict, we will look to address them as best we can.

The issue of red diesel and fuel supplies for farmers came up. We are aware that developments in the Middle East could well have an impact on the long-term supply and prices of red diesel. At the moment, it is a short-term issue that we hope will be resolved fairly quickly. We benefit from strong, diverse sources of energy supplies, including red diesel. We know that we are well stocked for all fuel types at the moment, and Fuels Industry UK has been clear that fuel production and imports are continuing across the UK as usual. Importantly, however, the Competition and Markets Authority has also put the industry on notice that it is monitoring petrol and diesel prices closely so that people do not take advantage and put up prices in an unfair way.

On fertiliser, the conflict in the Middle East is continuing to impact global fuel and energy prices, including fertiliser prices. We know that there has been a lot of market volatility around fertiliser prices, which have increased by around 30% to 40%. Again, we are working with industry to monitor the situation and see what we can do. At the beginning of the month, we asked farmers and land managers in England to complete a short fertiliser survey so that we can best understand how fuel and energy prices are impacting fertiliser usage. That will help us to build a better picture of what is happening and inform how we shape any future support, if that is deemed necessary.

I was asked by the noble Lord, Lord Redwood, about support for new entrants. The Government want to see a thriving farming industry that is attractive to new entrants. We are working hard to address the underlying challenges facing the sector, including through supply chain reform, planning reform and the 25-year farming road map, which builds on the farming profitability review. Clearly, we need a farming industry that is buoyant and strong enough to attract people to want to go into it.

The Government have also launched Skills England to ensure there is a comprehensive suite of apprenticeships, training and technical qualifications for individuals and employers to access that are aligned with skills gaps and are what employers are looking for. Succession planning has been a challenge in farming for many years. One of the key things is that if we can start to turn around farms that are not profitable to make them profitable, it becomes a much more attractive position for young people to want to move into.

The uplands were mentioned. Obviously, living in an upland area myself, like the noble Lord, Lord Inglewood, I am very aware of the challenges that upland farms face. They can be very challenging to bring into profitability, to be blunt. It is not always easy, which is why I am really pleased that the department has been working with Hilary Cottam on what we can do in upland farming areas to try to look for the best way to increase profitability and to support farmers and communities. There are two projects going forward in this space—the first will be in Dartmoor and the second in Cumbria—which we can then look to learn from.

Common land was also mentioned. Noble Lords are aware—we have discussed this previously at Question Time—that common land was not included in the SFI offer that came out. It is a particular issue for Cumbria, where I live, where we have more common land than anywhere else. This has been discussed, and the RPA is now looking at how common land could be brought into SFI payments.

The noble Baroness, Lady Grender, asked about small farms. We are developing the new schemes so that they work for as many different types of farm as possible—that includes smaller farms. For example, farms of between three and 50 hectares will be given priority access to apply for the SFI agreement from June this year, and we are also trying to make the new SFI offer simpler for all farmers, which might help particularly with small farms. As someone who has a very small farm, I should say that is incredibly helpful. When you have only a very small farm and you cannot necessarily afford to pay for a land agent to do your return or your application, it can become incredibly time-consuming, to the point that you actually wonder why you are bothering. I completely get that, which is why I am really pleased that we are looking to support small farms better.

I hope I have covered most of the issues that were raised. We want to help farmers improve their productivity and profitability, and to collaborate with farmers on delivering positive environmental change. We believe that continuing to phase out delinked payments will enable us to invest in the long-term future of farming. We want to make sure that the funding is targeted to where it is going to have the greatest impact.

Having said all that, I would like to particularly address those noble Lords who have spoken who will be leaving us shortly: the noble Earl, Lord Devon, and the noble Lords, Lord Curry, Lord Carrington and Lord Inglewood. They have all made very valuable, knowledgeable contributions to today’s debate. We will miss their contributions—as the Defra Minister, I certainly will. I thank them for all the time they have put into considering the different policies and pieces of legislation we have put forward from Defra. I thank them for their knowledge and expertise, and for the collaborative way in which they have always worked with me, now as Minister and previously as shadow Minister. I also personally thank them for their friendship.

The other thing I would just like to end with is to say that you do not have to be a Member of this House to offer advice or support, or to whisper in an ear that, “Maybe you could do this in a better way”. You also do not have to be a Member of the House to come in and have a cup of tea with a friend.

[Lord Roborough (Con)]

My Lords, it has been a pleasure to hear the final contributions of departing noble Lords who have been such stalwart supporters of the rural economy. It is a huge loss both to the House and to the rural economy, which will have a much-diminished voice in debates in this place, when there is limited representation in the other place.

The noble Lord, Lord Curry of Kirkharle, has had a most distinguished record in this House since 2011 and outside it. The Curry commission report in 2002 was remarkable in that the Government accepted 101 of the 105 recommendations, and it marked the beginning of the shift towards environmental stewardship and sustainable farming. I am also personally grateful to the noble Lord for following my maiden speech and making kind comments without any preparation or indeed ever having met me before, after my listed follower failed to make it to the Chamber in time.

The noble Lord, Lord Carrington, will also be much missed for his contributions to rural economy debates in this House. Within my own brief tenure, among many other things, he won an important amendment to the Renters’ Rights Act, ensuring that farm businesses are able to continue offering accommodation. It is also a great shame that we are losing the Lord Great Chamberlain from full membership of this House.

The noble Earl, Lord Devon, took his place only shortly before I took mine. I have enjoyed his erudite contributions to debate, displaying not just his keen interest in the rural economy but his formidable legal brain, which was on display again today. The noble Earl’s family is one of the longest serving in Parliament and has been a consistent and powerful voice for my native Devon.

It has been evident to me in my brief tenure that the noble Lord, Lord Inglewood, has been a similar voice for Cumbria. Of course, the Minister remains a stalwart Cumbrian resident and spokesperson.

I am grateful to the Minister for her reply. It has been a wide-ranging debate about the rural economy. Her reply demonstrated her sympathy and empathy with the issues in the rural economy, and I think that we are all much heartened by the fact that she is in her place, within a Government who perhaps do not have all those sympathies themselves.

I make just one point in closing. The long-term road maps are all very well, but the farming industry, and particularly the arable sector, is in crisis at the moment. The figures that were quoted for the two fiscal years ending 2023 and 2024 were generally quite good years for the industry, and 2025 and 2026, particularly for the arable sector, will look very different.

I am grateful to all who have contributed to this debate, and I beg leave to withdraw my amendment.

Amendment to the Motion withdrawn.

Motion agreed.

[Lord in Waiting/Government Whip (Lord Katz) (Lab)]

My Lords, next we are due to consider the English Devolution and Community Empowerment Bill, which has come from the other place. The window for tabling amendments will be open until 9.10 pm. We will adjourn during pleasure until a point announced on the annunciator.

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Sitting suspended.